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Can 147 people perpetuate economic injustice – and make it even worse? Can they subvert the workings of democracy, both abroad and here in the United States? Can 147 people hijack the global economy, plunder the environment, build a world for themselves that serves the few and deprives the many?

There must be some explanation for last week’s economic madness. Take a look:

Cyprus: The European Union acted destructively – and self-destructively – when it tried to seize a portion of the insured savings accounts of the citizens of Cyprus. They were telling anyone with a savings account in the financially troubled nations of the Eurozone: Forget your guaranteed deposits. If we need your money in order to bail out the big banks – banks which have already gambled recklessly with it – we’ll take it.

That didn’t just create a political firestorm in Cyprus. It threatened the European Union’s banking system, and perhaps the Union itself. The fact that the tax on deposits has been partially retracted doesn’t change the basic question: What were they thinking?

The Grand Bargain: The President and Congressional Republicans reportedly moved closer to a deal that would cut Social Security and Medicare while raising taxes – mostly on the middle class – without doing more to create jobs. A “Grand Bargain” like that would run counter to both public opinion and informed economic judgement.

Who would impose more economy-killing austerity when there’s so much evidence of the harm it does? Why would the White House want to become the face of a deal to cut Social Security, killing its own party’s political prospects for a generation?

There’s more:

Him again: Washington reporters once again sought the opinion of Ex-Wyoming Senator Alan Simpson, a vitriolic blowhard with no discernable knowledge of either economics or social insurance, and then wrote up his opinions on those topics in flattering pieces like this one.

Derivatives, the Sequel: Four short years after too-big-to-fail banks nearly destroyed the world economy, as the nation continues to suffer the after-effects of the crisis they created, a Congressional committee moved to undo the already-insufficient safeguards in the Dodd/Frank law.

Within days of a Senate Report which outlined the mendacity, extreme risk, and potentiality criminality surrounding JPMorgan Chase’s “London Whale” fiasco, the House Agriculture Committee approved new bills that would legalize trades like the “Whale’s.”

Above the Law: The Attorney General of the United States remained silent as the controversy continued over his recent admission that banks like Dimon’s were too big to face prosecution. And yet there were no moves to change either Holder’s policy or the size of these institutions. Politico, the Washington insiders’ tip sheet, ran a piece entitled “Why Washington won’t break up the big banks.”

Dimon Unbound: The Senate report also provided evidence that JPMorgan Chase’s CEO, Jamie Dimon, failed to manage his bank’s risk and concealed information about its losses from regulators. We learned last week that regulators lowered their rating of Dimon’s bank after chastising the bank’s leadership for management failures that included inadequate safeguards against money-laundering, poor risk management, and failure to separate the banks’ own investments from those of its customers.

Illegalities during Dimon’s tenure as CEO have cost his shareholders billions in settlements and fines. Poor risk management (and additional potential illegalities) cost it another $6.2 billion in Whale-related losses. And yet last week Dimon’s own Board “strongly endorsed” his dual role as CEO and Board Chair, an unusual concentration of power at what is (by some measurements) the world’s largest bank, and commended itself in a proxy filing for the “strength and independence” of its oversight, adding: “The Firm has had strong performance through the cycle since Mr. Dimon became Chairman and CEO.”

All this, in just seven days. Has the world gone insane? What is everybody thinking?

That’s where the number “147″ comes in.

Anthropologist Robin Dunbar tried to find out how many people the typical person “really knows.” He compared primate brains to social groups and published his findings in papers with titles like “Neocortex size as a constraint on group size in primates.”

Dunbar concluded that the optimum number for a network of human acquaintances was 147.5, a figure which was then rounded up to 150 and became known as “Dunbar’s Number.” He found groups of 150-200 in all sorts of places: Hutterite settlements. Roman army units. Academic sub-specialties. Dunbar concluded that “there is a cognitive limit to the number of individuals with whom any one person can maintain stable relationships.” (more…)

Why won’t Mitt Romney explain his Swiss bank account and offshore investments?

Just when you thought Wall Street couldn’t sink any lower — when its myriad abuses of public trust have already spread a miasma of cynicism over the entire economic system, giving birth to Tea Partiers and Occupiers and all manner of conspiracy theories; when its excesses have already wrought havoc with the lives of millions of Americans, causing taxpayers to shell out billions (of which only a portion has been repaid) even as its top executives are back to making more money than ever; when its vast political power (via campaign contributions) has already eviscerated much of the Dodd-Frank law that was supposed to rein it in, including the so-called “Volcker” Rule that was sold as a milder version of the old Glass-Steagall Act that used to separate investment from commercial banking — yes, just when you thought the Street had hit bottom, an even deeper level of public-be-damned greed and corruption is revealed.

Sit down and hold on to your chair.

What’s the most basic service banks provide? Borrow money and lend it out. You put your savings in a bank to hold in trust, and the bank agrees to pay you interest on it. Or you borrow money from the bank and you agree to pay the bank interest.

How is this interest rate determined? We trust that the banking system is setting today’s rate based on its best guess about the future worth of the money. And we assume that guess is based, in turn, on the cumulative market predictions of countless lenders and borrowers all over the world about the future supply and demand for the dough.

But suppose our assumption is wrong. Suppose the bankers are manipulating the interest rate so they can place bets with the money you lend or repay them — bets that will pay off big for them because they have inside information on what the market is really predicting, which they’re not sharing with you.

That would be a mammoth violation of public trust. And it would amount to a rip-off of almost cosmic proportion — trillions of dollars that you and I and other average people would otherwise have received or saved on our lending and borrowing that have been going instead to the bankers. It would make the other abuses of trust we’ve witnessed look like child’s play by comparison. (more…)

An editorial in my local paper is a good example of how we trivialize our public discussion of globalization and trade policy.

The editorial follows this logic: Trade is good. All trade is good. More trade is better than less trade. Maximum possible trade! Anyone who disagrees is protectionist or resentful.

I can immediately correct one misunderstanding. Everyone I know is in favor of trade. I am 100 percent in favor of trade. The issue is not “trade.” The issue is good trade policy, which raises my standard of living, or bad trade policy, which lowers it.

Similarly, I am in favor of capitalism. Even so, we can have real, significant, meaningful, legitimate debates about good rules for capitalism and bad rules for capitalism.

I am in favor of banks. We deserve serious policy debates about banking. (more…)

“As a group,” the economist Robert Lekachman wrote in 1976, “economists are slightly more entertaining than bankers and a trifle duller than lawyers.” Bankers, please note, were the dullest of all. And while Lekachman (with John Kenneth Galbraith, the wittiest economist of his generation) authored many books and papers well outside his profession’s mainstream, his assessment of bankers was not intended to provoke controversy and didn’t. In America before Reaganomics, banking was dull.

That’s one reason Jimmy Stewart’s George Bailey in the classic “It’s a Wonderful Life” feels so thwarted and dissatisfied. Running Bailey Building and Loan was pretty humdrum stuff, though it was a boon to Bedford Falls.

With the deregulation of finance, however, bankers’ capital — financial, social and cultural — soared. And as they accumulated a steadily larger share of the nation’s wealth, Wall Street traders and executives became market-makers for not just securities but also Fifth Avenue duplexes, townhouses in Mayfair, Caribbean islands and high-priced hookers. They were celebrated in print and television journalism. Mega-wealth transformed them: They were dull no more.

Which, I suspect, may be one reason JPMorgan Chase chief executive Jamie Dimon — a man who could give hubris classes to Oedipus — went out of his way not simply to criticize the “Volcker rule,” which would restrict banks from making risky proprietary trades and swaps, but to attack Paul Volcker personally. Volcker, 84, is an old-school banker unimpressed by the financial “innovations” that led to Wall Street’s ascent over the rest of the economy. Its sole innovation that actually helped real people, he famously remarked in 2009, was the ATM.

After the 2008 crash, Volcker proposed legislation restricting depositor banks from funneling their own funds into chancy investments. Wall Street erupted. Well, it would have erupted if it had had any credibility left, but Dimon — the one banker who came out of the panic with his bank and his credibility intact — erupted on behalf of his bank and the street. In recent months, as JPMorgan lobbyists sought to weaken the Volcker-derived provisions of the Dodd-Frank financial reform, Dimon fairly oozed contempt for Volcker, whom he depicted as an old duffer out of his depth.

“Paul Volcker by his own admission has said he doesn’t understand capital markets,” Dimon told Fox Business in February. “Honestly, he has proven that to me.” At a private dinner in Dallas last month, the New York Times’ Gretchen Morgenson recently reported, he called Volcker’s criticisms “infantile.” (more…)

Mr. President, we heard what you said last week in Kansas — about the dangers to our economy and democracy of the increasing concentration of income and wealth at the top.

We agree. And many of us are prepared to work our hearts out to get you reelected — as long as you commit to doing what needs to be done in your second term:

– Raise the tax rate on the rich to what it was before 1981. The top 1 percent has an almost unprecedented share of the nation’s wealth and income yet the lowest tax rate in 30 years. Meanwhile, America faces colossal budget deficits that have already meant devastating cuts in education, infrastructure, and the safety nets we depend on. The rich must pay their fair share. Income in excess of $1 million should be taxed at 70 percent — the same rate as before 1981.

– Raise capital gains taxes to the same level. It’s absurd that the 400 richest Americans — whose wealth exceeds the wealth of the bottom 150 million Americans put together — should pay an average 17 percent tax on their incomes, the rate day laborers and child-care workers pay. That’s because so much of the income of the super-rich is considered capital gains, now taxed at only 15 percent. Close this loophole. (more…)

Wall Street banks, largely spared from the economic ruin felt by millions of Americans since the financial crisis of 2008, have returned to profitability, generating higher profits in the two-and-a-half years since the crisis than they did in nearly eight years preceding it. But that hasn’t stopped them from seeking new ways to generate revenue — like Bank of America’s proposed $5-a-month debit card fee or the millions banks have made from charging consumers to receive unemployment benefits or food stamps.

If all this makes Americans feel like Wall Street banks only view them as money-making tools, well, that’s because the banks apparently do. According to David Mooney, a former JPMorgan Chase employee, Wall Street banks see consumers as an “income stream” to exploit for profit-making purposes, Reuters reports:

(more…)

Republicans have made quite the show of disparaging the Dodd-Frank financial reform law, calling for its repeal, refusing to provide regulators with the funds to implement it, and blocking nominees for key regulatory positions. Rep. Scott Garrett (R-NJ) took the latest step in that campaign yesterday, introducing a bill that would repeal an important Dodd-Frank safeguard for the financial system.

One of the key factors that led to the housing bubble’s boom and bust was the ability of subprime mortgage lenders to make a loan and then turn around and sell the entire loan to Wall Street. As the Center for Public Integrity wrote, “lenders were selling their loans to Wall Street, so they wouldn’t be left holding the deed in the event of a foreclosure. In a financial version of hot potato, they could make bad loans and just pass them along.” This fueled a dramatic decline in lending standards and gave subprime lenders every incentive to push loans onto people, since the lenders could divorce themselves from all the risk associated with a loan that didn’t pan out.

Dodd-Frank requires that lenders retain at least five percent of their loans, so that they have some “skin in the game.” Republicans on the House Financial Services Committee — following Financial Service Committee Spencer Bachus’ (R-AL) call to “serve the banks” — want to the repeal that requirement:

(more…)

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This is a fateful week for financial regulation and the financial system.

European leaders are trying to reach a consensus on how to give Greece some breathing room to salvage its economy and to recapitalize the continent’s banks. Since the banks are heavily invested in Greek bonds, the more relief the Europeans give Greece, the more they will have to spend recapitalizing their own banks.

Meanwhile, on this side of the Atlantic, regulators are grappling with two momentous issues: how to implement the so-called Volcker Rule, which seeks to limit the ability of federally insured banks to engage in inherently speculative trading activity; and how to carry out another key section of the Dodd-Frank Act, which gives regulators the authority to take over large failing financial institutions.

The Financial Stability Oversight Council, a body created by Dodd-Frank made up of senior bank regulators, is meeting today on the issue of how to deal with failing banks. Meanwhile, the Federal Deposit Insurance Corporation is issuing regulations to carry out the Volcker Rule. (more…)