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The accolades for Timothy Geithner came on so thick and heavy in the last week that it’s necessary for those of us in the reality-based community to bring the discussion back to earth. The basic facts of the matter are very straightforward. Timothy Geithner and the bailout he helped engineer saved the Wall Street banks. He did not save the economy.

We can’t know exactly what would have happened if we did not have the TARP in October of 2008. We do know there was a major effort at the time to exaggerate the dangers to the financial system in order to pressure Congress to pass the TARP.

For example, Federal Reserve Board Chairman Ben Bernacke highlighted the claim that the commercial paper market was shutting down. Since most major companies finance their ongoing operations by issuing commercial paper, this raised the threat of a full-fledged economic collapse because even healthy companies would not be able to get the cash needed to pay their bills.

What Bernanke neglected to mention was that he personally had the ability to sustain the commercial paper market through direct lending from the Fed. He opted to go this route by announcing the creation of a Fed special lending facility to support the commercial paper market the weekend after Congress voted to approve the TARP.

It is quite likely that Bernanke could have taken whatever steps were necessary himself to keep the financial system from collapsing even without the TARP. The amount of money dispersed through the Fed was many times larger than the TARP, much of which was never even lent out. The TARP was primarily about providing political cover and saying that the government stood behind the big banks.

Of course we can never know the right counterfactual had the TARP and related Treasury efforts not been put in place, but even if we assume the worst, the idea that we would have seen a second Great Depression was always absurd on its face. The example of Argentina proves otherwise.

In December of 2001 Argentina did have a full-fledged financial collapse. In other words, all the horrible things that we feared could happen in the United States in 2008 actually did happen in Argentina. Banks shut down. People could not use their ATMs or get access to their bank accounts. (more…)

This guy, Edward DeMarco, is deliberately damaging America – promoting foreclosures, high unemployment and excessive taxes.

This guy, the acting head of the Federal Housing Finance Agency (FHFA), has aggressively denied help to eviction-imperiled homeowners.

And now he’s threatening to prevent towns from implementing their own plans to rescue underwater homeowners – those with mortgages exceeding their home values.

This guy, Edward DeMarco, has got to go. He’s a George W. Bush administration holdover and is only by default running the agency that regulates Fannie Mae and Freddie Mac, the nation’s mortgage financing giants. Handed the chance to help homeowners, as well as taxpayers, the economy and Fannie and Freddie, urged by President Obama and Treasury Secretary Timothy Geithner to seize that opportunity, DeMarco yelled, “NO, NO, NO, NO.” So he’s just gotta go.

There’s some technical glitch with outright firing this bureaucrat even though he is defying the President of the United States. Fine. Demote him. Install him in a sub-basement office somewhere. And disarm him; defang him; disqualify him from wielding power to hurt America.

Here’s what DeMarco refuses to do: He won’t allow Fannie and Freddie to reduce the principal owed by underwater, foreclosure-threatened mortgage holders. He is denying them the help, even though a study by his own agency says this:

• It would cost Fannie and Freddie $3.6 billion less than its current efforts to help homeowners.
• It would save taxpayers $1 billion.
• It could help as many as 500,000 homeowners.

In addition, another study, “The Win/Win Solution: How Fixing The Housing Crisis Will Create One Million Jobs,” found that a larger principal reduction program would save each underwater mortgage holder more than $500 a month. That money, spent by all those homeowners in their hometowns, would create a million jobs.

It would act as a stimulus to the economy – one that would cost taxpayers nothing. They have everything to gain, and bankers and Fannie and Freddie have nothing to lose. (more…)

A senior White House official has confirmed that Vice President Joe Biden will take the lead on the administration’s next phase China policy.

While the Departments of State and Treasury have held important functional roles in conducting the China-US Strategic and Economic Dialogue meetings, raising the bilateral status of US-China relations with ongoing meetings between two senior US Executive Branch officials with two of China’s most senior leaders, Vice Premier Li Keqiang and State Councillor Dai Bingguo, there has been a general sense that neither Timothy Geithner nor Hillary Clinton and her team were comprehensively driving US-China policy.

The White House official made clear that the coming shift in the locus of US-China policy management was not a critique of either Clinton or Geithner’s management of the China portfolio — but rather, the rise of Hu Jintao heir apparent and current Vice Premier Xi Jinping as the likely next President of China created certain practical challenges in dealing with him on a same-status level throughout much of 2012 until Xi’s accession to the presidency is formalized.

The view of some of the administration’s China-handlers is that management of US-China policy has become so central to a vast array of other policy challenges that the administration’s approach needs to be both broad and managed with “a deep and senior bench.”  The evolution of many functional offices at the Department of State and Treasury tasked with various line items in the China-US Strategic and Economic Dialogue has helped stabilize many aspects of the relationship and has helped to benchmark meeting to meeting progress on core concerns. (more…)

By Gilbert B. Kaplan
Former Deputy Assistant and Acting Assistant Secretary of the U. S. Department of Commerce

We have one trade problem in this country that so far surpasses every other one that it is almost not worth talking about any of the others. The problem is Chinese subsidy practices, and our resulting $260 billion sustained trade deficit with China. The problem has recently taken on a new, more dangerous bent. First, China has made it increasingly clear they are not going to do anything about their undervalued currency. One aspect of the currency problem has been much talked about — how it makes Chinese exports to the United States very cheap and our exports to China uncompetitive.

But it is now clear that the Chinese undervaluation has an even more nefarious and dangerous and long-term effect. It is a big driver forcing U.S. companies to leave the United States and relocate to China. This is because of the simple reason that a relatively “overvalued” dollar goes much further in China building plants and buying inputs and paying workers, than it does in the United States. This is not just a question of very low wages in China, it is about the additional accelerant of low cost renminbi making already low wages and cheap inputs even cheaper. So U. S. companies cannot afford to stay in the U. S. And once they leave it is very unlikely they will ever come back.

The other development is a Chinese government pronouncement late last year that they are pumping subsidies of $1.5 trillion into seven strategic industries. The money will be going to the same emerging industries that President Obama and substantially every governor in the United States touts as the “industries of the future” that will rescue the United States from its high unemployment and anemic growth. The industries include information technology, environmental protection, new forms of energy (read wind and solar), biology, and new materials. (more…)

By Scott Paul
Executive Director, Alliance for American Manufacturing

What a difference a week makes. Just last week, the Beijing government and outsourcers thought they could run out the clock and avoid a long overdue legislative reckoning on China’s currency manipulation, which serves as a drag on global growth, a siphon for American jobs and wealth, and an inflator of dangerous imbalances in the world economy.

But following a rapid succession of events this week, Congressional action on China’s cheating looks increasingly likely. The chances for passage of a bipartisan bill in Congress that would deter China from manipulating its currency have improved dramatically.

Let’s review the week’s developments:

H.R. 2378, the Tim Ryan (D-OH)-Tim Murphy (R-PA) bill on currency, gained 16 new cosponsors, including key members of the Ways and Means Committee. Meanwhile, about 100 Members of Congress–including more than 30 Republicans–urged the Speaker to schedule the bill for a vote.

In testimony before House and Senate committees on Thursday, Treasury Secretary Timothy Geithner took a much harder line on China than he had just three months ago.

House Speaker Nancy Pelosi told CNBC’s John Harwood that she supported bringing legislation to the floor, provided that it is compliant with global trade rules. (Testimony given at a hearing on Wednesday left little doubt that the legislation is, in fact, on solid legal ground.)

The Economic Policy Institute estimated that ending China’s currency manipulation could add as much 1.4 percent to economic growth in the U.S., based on calculations made by Nobel laureate Paul Krugman. That would lead to $500 billion in additional revenue–or deficit reduction.

Even the Chinese government got into the act, raising the value of its currency, the Yuan, to a new high against the dollar, definitively proving that it (a) manipulates the exchange rate, and (b) responds to political pressure from the U.S.

So what will next week bring? Predictions of trade wars, arguments for inaction or quiet diplomacy, and ridiculous defenses of Beijing’s mercantilism. We’ll look forward to tackling those myths one day at a time. Stay tuned.

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Prior to forming the Alliance for American Manufacturing (AAM), Scott Paul was the principal lobbyist for the Industrial Union Council and was a trade lobbyist at the AFL-CIO, where he led the labor movement’s legislative initiatives on international trade, manufacturing, and foreign policy issues. Mr. Paul’s Capitol Hill experience extends from 1987, when he held an internship with Senator Richard G. Lugar (R-IN), to 2001, and when he served as the chief foreign policy and trade advisor to then-House Democratic Whip David E. Bonior (D-MI). He also served on the staff of the late Rep. Jim Jontz (D-IN) and former Rep. Peter Barca (D-WI).

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This piece was first published on The Huffington Post.

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Follow Scott Paul on Twitter: www.twitter.com/ScottPaulAAM

 By Mitchell Hirsch
2010 CREDO Mobile/Netroots Nation award for Blog Activist of the Year   

What do I mean? Specifically, the U.S. private sector currently needs substantial, publicly-funded direct job-creation programs in order to get private employers to hire again on the scale needed to significantly reduce unemployment and promote a robust economic recovery.  

It’s an argument that I don’t think has been made, at least not adequately, to help advance the debate in favor of large-scale stimulus to create jobs.  

Part of the problem is the almost religious belief that the private sector, and only the private sector, can be the engine of job creation. As James Kwak wrote recently, in a somewhat different context:  

… the belief that the private sector is the answer to all our problems remains deeply rooted. One might even call it an ideology.  

  

And the problem is exacerbated by policy makers who ostensibly grasp the need to do more to boost a weak and faltering economy, but undercut that message with utterances to the effect that ‘we’ve done enough’ and ‘government can only do so much’, as Treasury Secretary Tim Geithner did recently. Now, Mr. Geithner is a smart man, who we’d hope doesn’t believe in magic. And he’s right, of course, that private investment is needed. But the fact is, it’s not happening. (more…)

By Les Leopold
Author, “The Looting of America”

My wife, a labor economist, is upset with NPR’s “The Take Away” (and many other news programs) for reinforcing the myth that somehow the unemployed are to blame for not having a job. We all should be angry as well because the jobs just aren’t there. In fact, the latest unemployment statistics show that there are five unemployed workers available for every vacant job. Why blame workers when it’s so clear that Wall Street’s reckless gambling caused the jobs crisis?

By now, you’d think we’d have buried this issue. But like Dracula it refuses to die. And so, I return to the subject with the hope of driving a stake through its heart and giving it a proper burial. Among the claims we need to put to rest:

1. Extended unemployment benefits are causing unemployment. Extending benefits for the long-term unemployed will only encourage them to sit at home on their extended derrieres and let vacant jobs go begging.

What jobs? We’re down 8 million since the start of the Great Recession. We aren’t even creating enough new jobs to keep up with population growth. So what jobs are the unemployed not taking? (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Say you’re a high government official with some responsibility for advising the president on what he should be doing and saying about the economy. You know the economy is still in a deep hole, the deepest since the Great Depression. The jobs report for May was dismal — a mere 41,000 new private sector jobs, when the economy needs at least 100,000 to keep up with population growth. The Fed projects gross domestic product, the broadest measure of economic activity, to rise about 3.5 percent this year — a pace barely above that needed to keep pace with the growth in the labor force.

You also know that consumers don’t have the buying power to get it out of the hole because they can no longer use their homes as collateral for loans, as they could before the crash of 2008, and they also have to get out from under huge debts. The housing market is still awful. You know businesses are reluctant to create new jobs if there are few customers for their goods or services. And you know export markets are drying up because of a high dollar that’s made our exports more expensive, and Europe has embarked on austerity measures to shrink its deficits. You also know state revenues are way down because of the deep economic hole, and they’re forced to raise taxes, cut services, and lay off large numbers of state workers, including teachers.

Oh, and one more thing: You know that all the boosters keeping the economy barely going now are coming to an end. The Fed can’t keep interest rates near zero for long because it’s starting to worry about inflation. It’s already stopped buying Treasury securities and mortgage bonds, and its own deficit hawks are squawking. The federal stimulus is 75 percent spent, and the money will be gone in a few months. Census workers will also be gone by the end of the summer.

So what do you do?

A) Tell the president the economy will either go into a “double-dip” recession or, at best, suffer anemic growth over the next five years — creating enormous pain and suffering for millions of Americans, and imperiling his reelection — unless he immediately champions a $300 billion jobs bill, including zero-interest loans to states and locales to prevent them from having to raise taxes and cut services, public-service jobs (cleaning up the Gulf), and a one-year payroll tax holiday on the first $100,000 of income. To sell this, he’ll need to explain to the American people why larger short-term deficits are necessary now, in order to get jobs back and the economy growing again so that long-term structural deficits (read: health care and Medicare, mostly) can be tackled.

B) Tell the president you understand the political pressures for deficit reduction are growing, and Republicans are making headway fooling the public into believing that this terrible recovery is due to to excessive government deficits. So so it’s perfectly fine for the president to bend to those political pressures. Cut the budgets of most federal agencies by 5 percent, enforce “pay-go” rules that don’t allow bigger deficits, build up expectations for the report of his “deficit commission” on December, and tell the American public that we now have to move toward fiscal austerity.

If you choose B, you shouldn’t be advising the President.

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Cross-posted from Robert Reich’s Blog

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Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.robertreich.org.

By Leo Hindery Jr.
Chairman, U.S. Economy/Smart Globalization Initiative at the New America Foundation

Last week, as the portion of the annual two-day US-China summit in Beijing regarding trade came to a close, I half-expected Treasury Secretary Geithner to tack up a banner on the wall of the Great Hall and declare “Mission Accomplished”.

While Mr. Geithner didn’t go that far, he certainly made it clear both before and after the summit that at least in his mind we’ve made great progress in reforming our deeply troubled trade relations with China.

Frankly, I couldn’t disagree more with his assessment. My doubts are bolstered by the few words of the President of China himself, who in his closing speech for the summit ovrerall uttered only a single sentence on the subject of trade. Sixteen months into the Obama administration, all that President Hu Jintao was willing to say is that “China will continue to steadily push forward reform of the renminbi exchange-rate formation mechanism in a self-initiated, controllable and gradual manner.”

And just to make sure that we in the United States know precisely what “in a gradual manner” means, President Hu had one of his vice premiers, Wang Qishan, follow up later by saying that in return for even this weak commitment, China needs to see “steps by the U.S. to improve treatment of Chinese companies investing in the U.S., and to treat China as a ‘market economy’ in trade law, which would raise the burden of proof in antidumping cases and other trade remedies sought by U.S. companies.”

This brings us to the reality that until the United States undertakes to reform the entirety of our very complicated trade relations with China, we in turn will never truly counter the entirety of China’s comprehensive industrial development policies and mercantilist practices. Yet there seems to be no political will in the administration right now to do this.

At least as long ago as December 2007, when the current Great Recession officially began, several of us were writing that without some immediate and dramatic changes soon in our trade and economic policies and practices, America’s Great Recession would prove to be China’s ‘Great Opportunity’. And sadly, we’ve indeed seen our American companies cutting their payrolls and their capital spending, thereby driving business to China, at the very same time that China, through the actions and support of its central government, is increasing the global competitiveness of its own manufacturers.

I certainly applaud President Obama for his comments on Feb. 3 when he told the Democratic Policy Committee of the Senate that one of the challenges we have to address internationally is currency rates, specifically how we make sure that our goods are not artificially inflated in price at the same time that foreign goods are artificially deflated in price. But what about everything else China is up to in its competition with U.S. manufacturers? The Chinese RMB is arguably the most visible ‘symbol’ of China’s mercantilism, but despite the fact that the renminbi is obviously undervalued, on the order of at least 25% and probably closer to 40%, it’s only the tip of China’s mercantilist iceberg. Granted, it’s a very big tip, but then it’s a very big iceberg.

Much has been written about how China has gained unfair trade advantages through its abysmally low direct labor costs, lack of meaningful environmental and labor standards, and currency manipulation, all of which is valid. Less appreciated, however, are the other measures China uses to game the system and the magnitude of these measures – these so-called ‘trade advantages’, which will allow China to dominate certain industries for years to come, include (1) regulations to block non-Chinese firms from selling their products to Chinese government agencies, (2) technical standards that prevent or at least greatly hinder the Chinese government and Chinese businesses from buying non-Chinese goods, and (3) rules that force Western companies to give up technological secrets in exchange for access to China’s markets.

The most extreme example of China’s use of its mercantilist policies to create jobs in China at the expense of jobs (and technology) overseas is China’s “Indigenous Innovation Production Accreditation Program.” The IIPA Program was promulgated on November 15, 2009, and limits all Chinese central and provincial government procurement to companies that have “indigenous” – or Chinese – “innovation.” This Program is far more restrictive than any other buy-domestic program in the world, and its adverse impacts are already being felt across all industries that seek to export to China, but especially in computers and consumer electronics, green technologies, autos, aviation and specialty materials. And if this wasn’t blatant enough, embedded in the IIPA Program is the demand that in order to sell things in China not yet manufactured there, foreign companies must first transfer and license, to Chinese companies, their latest technology for “co-innovation” and “re-innovation”.

The needed United States responses to these unfair practices and demands are actually pretty simple, if only we had the political will. We need to:

(1) Demand that the U.S. government not enter into a bilateral investment treaty with China until China makes WTO-compliant the IIPA Program, and in the interim, demand that the United States Trade Representative bring a Section 301 case against the IIPA Program;

(2) Establish and then enforce our own buy-domestic and other domestic investment requirements for federal procurement and for grants to states and local governments;

(3) Enact investment criteria for public resources not covered by buy-domestic and related laws, such as (i) the use of domestically produced parts and components, (ii) the return of idle manufacturing capacity to productive service, and (iii) locating in states with the highest number of unemployed manufacturing workers; and

(4) Assess and then address, through a joint effort among Treasury, Commerce and Defense in conjunction with Congress, the risks to the United States of planned investments by China in our militarily and otherwise critical technologies and companies.

Right now, we as a nation are tolerating very selfish behaviors that hurt our workers, trade balance and the national security of our country. We are tolerating these behaviors mostly because too many leaders in Washington are too deferential to the interests of multinational corporations and financial institutions that wield undue influence on Congress and the administration. It’s also, to be fair, because the United States is concerned about upsetting the largest purchaser of America’s ever-mushrooming debt, which of course is China.

This latter concern is not to be ignored, but it is greatly exaggerated. As Dr. Derek Scissors of The Heritage Foundation recently testified to the US – China Commission, “China has two choices: buy U.S. bonds or build a really big mattress.”

Regarding those multinational corporations which continue to overly influence our country’s trade policies in general and especially with China, the reality is that some of them and in turn some American consumers may, for the good of our nation, have to suffer some pain. For example, we saw, as an instant response to President Obama’s February 3 speech regarding currency manipulation, commercial threats from the Chinese aimed at the Boeing Company and at offshore drilling by American oil companies in the South China Sea.

As China’s biggest ‘customer’ and as the world’s only true super power, however, the United States is not without its own influence and capabilities. So, while we may have to live with some threats and maybe even some adverse actions by the Chinese for a while, this is an outcome and these are conditions that we must, and can, accept.

We know what to do, and we have known it for a very long time. So, if this administration cannot find the political will to properly and fully rebalance our trade relationship with China and do what is right for American workers and American companies, then it’s time for our representatives in Congress to step forward and exert the pressures on China that are now sorely missing.

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Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

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This piece was first published on The Huffington Post

 By Les Leopold
Author, “The Looting of America”

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal. (Berkshire Hathaway annual report, 2002)

Those were some wise words from Warren Buffett, the Will Rogers of the financial world. He used to say such things at his stockholder meetings, where tens of thousands come to savor his homilies and celebrate their own good fortune–a kind of Woodstock for people who dig money more than sex, drugs and rock n roll. His fans love to party with the iconic multi-billionaire from Omaha with the sparkle in his eyes. The guy makes people feel proud to be Americans and capitalists, big and small.

Buffett’s reputation is as a straight shooter. For years he had only contempt for fantasy finance securities that contain nothing but air and risk. He was among the first to see that if we let toxic securities like synthetic collateralized debt obligations run wild, we’d soon be engulfed in a financial crisis. (For an easy to read account of these “financial weapons of mass destruction” please see The Looting of America.)

But times have changed. Today, Buffett is all about the bottom line. He’s taken to defending the biggest shysters in the country–and argues that his own questionable derivatives should be shielded from government regulators.

If this were just about Warren Buffett, it wouldn’t be worth giving him more ink. But his betrayal comes at a time when Congress is finally realizing that most of us are truly upset with Wall Street’s looting of America. While big bank profits and bonuses are reaching record highs, April’s unemployment statistics show that there are over 29 million of us without work or forced into part-time jobs. The BLS U6 jobless rate is at 17.1 percent.

There’s a genuine populist upsurge that might force the Senate to pass legislation that would bust up the largest banks, reintroduce Glass-Steagall, control dangerous derivatives and provide consumer financial protection. Buffett has decided instead to lend his credibility to defend Wall Street against Main Street. (Hey Warren, how about that high speed trading that tore the stock market apart yesterday. Are you for that too?)

Apparently something happened on the way to the bank–or actually, on the way to the bank bailout. Good old Mr. Buffett is no dummy. When he saw the Goldman Sachs alumni and groupies in government (like Henry Paulson at Treasury and Tim Geithner at the Fed) shoveling billions (not millions) of taxpayer dollars into Goldman, one of the richest financial institutions in history, he knew where next to put his own money. (Bob Kuttner’s Presidency in Peril provides a virtual yearbook of Goldman Sachs graduates now in top government posts.)

The government, led by Paulson, the former Goldman Sachs CEO, pumped $10 billion of TARP money into Goldman Sachs at 5 percent interest. But the oracle of Omaha, put in $5 billion and got 10 percent interest plus extra goodies if the stock price rose. Now that’s a smart businessman.

Mr. Buffett also knew that Goldman Sachs would probably snag lots more ($12.9 billion, in fact) in bailout funds via AIG, which had insured billions of Goldman’s toxic assets–including a bristling arsenal of financial weapons of mass destruction. Goldman Sachs was going to get a free ride on two colossal bad bets. One bet was on complex derivatives that turned bad and festered on its balance sheet. It had been a big gamble for Goldman to hold those assets, but the returns (while they lasted) and the upfront fees were just too juicy to resist. Goldman’s second big bet was that AIG was sound enough to insure those risky derivatives against default. Wrong again. Had AIG gone into bankruptcy, Goldman Sachs would have received pennies on the dollar for their bad bets. Hey, that’s capitalism, isn’t it? Well, maybe once upon a time.

Fortunately for Goldman, their old colleagues who were now in control of the government purse strings decided that AIG was way too big to fail. So we bailed them out to the tune of about $180 billion. But the Goldman Sachs alumni went one step further. They allowed AIG to pay off its debts in full to Goldman Sachs: $12.9 billion went straight to the company’s bottom line and bonus pool. And pass those interest payments over to Mr. Buffett! If the journalists around Buffett weren’t so awestruck by his wealth and rock star status they might’ve asked him: Is this capitalism too?

So here’s Mr. Buffett holding a big fat slice of Goldman Sachs, and now the SEC comes busting in, accusing the bank of fraud. Goldman Sachs is charged with loading up investors with a package of financial transactions called Abacus that it knew amounted to toxic junk–thus enabling a hedge fund friend, John Paulson (no relation to Henry), to make a billion by betting against the Abacus deal. What kind of toxic junk are we talking about? The very same synthetic collateralized debt obligations that Buffett once called “financial weapons of mass destruction.” Mr. Buffett, Berkshire Hathaway and its delirious stockholders are now the proud owners of said weapons.

So what does Mr. Buffett do? The plain speaking dude from the Great Plains takes a stand–in defense of Goldman Sachs and its CEO Lloyd Blankfein. Then he steps smack into the financial cow pie by endorsing the Abacus financial weapons of mass destruction.

“I don’t have a problem with the Abacus transaction at all, and I think I understand it better than most.”

You betcha. Those darn critters are really kind of cute–when they’re paying off big time for Berkshire Hathaway.

Buffett didn’t stop there. He’s lobbying hard on Capitol Hill to protect his own special derivatives, which he developed just before the crash. The financial reform Congress is considering would require companies like Berkshire to set aside large sums to cover potential losses on their risky investments. But if Buffett gets his way, the legislation will include a provision to “largely exempt existing derivatives contracts from the proposed rules,” reports the Wall Street Journal. “The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.”

In other words, Mr. Buffett is following in the footsteps of AIG, which made hundreds of billions of bets without posting collateral. But what the heck, Warren is as good as gold, isn’t he?

Since Buffett says he understands these shady financial products “better than most,” maybe he can explain to us what economic value his special derivatives added to our economy. I can hear echoes of Claude Raines in Casablanca: “I’m shocked, shocked to find that gambling is going on in here!” It sure is and Mr. Buffett is now making himself quite at home at the poker tables. It seems casino capitalism is fine with him after all, even if it’s a criminal scam.

I hope Buffett’s fans realize that their dividends and capital gains are partly derived from taxpayer bailouts and from those financial weapons of mass destruction Buffett used to denounce. You know, the ones that blew up the global economy and put tens of millions of Americans out of work?

Maybe it’s time to hold our billionaires to account, even the nice ones.

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Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.