Thursday, May 21, 2015

The Coming Crash

Trapped between the Fed and Congress

By Mike Krauss

Despite the never ending assurances of the Federal Reserve that happy days are almost here again — the same tune the Fed has sung for nearly seven long years — there is mounting evidence that the U.S. is headed for another economic crash. It will be more terrible than the last.

The Washington Post headlined, “U.S. economic growth slows to 0.2 percent, grinding nearly to a halt.”

Fox News reported the real story of unemployment: the official, good news government figure of 5.4 percent is a fiction, achieved by not counting the millions who have given up looking for work, and those who can find only part-time work.

Fox was playing catch-up. That story has been out there for years, but ignored by the corporate media and clueless politicians.

Tyler Durden reports in his blog, Zero Hedge, that year-on-year sales at the big retailers have taken a precipitous drop. Most Americans have no disposable income to dispose of, after they pay the food bill, mortgage, rent and utilities.

Wholesale trade has fallen like a stone, dropping more than $100 billion over four months. Wholesalers provide the goods that retailers sell. If retail demand is off, wholesale trade is off. The last time it dropped like that was in 2008-2009. Post crash. Then it took seven months to go from the high to the low; now, only four.

New manufacturing orders indicate the future. Not good. In only one of the last seven months has there been growth in new orders. Things were not that bad during the 18-month-long credit crunch of late 2008 through 2009.

Poverty in the U.S. is off the charts. The number of children living in poverty is nothing less than shocking.

For almost seven years, seniors have seen their savings and pensions eaten alive.

Public and private debt are at record levels.

Durden reports that the median net worth of the American people is down 40 percent from where it was before the last collapse.

Tens of millions of Americans who are far worse off today than they were seven years ago will be brought to their knees in the next crash, while the wealthy will rest easy on an even greater cushion of wealth.

The people who know are running scared.

Former Fed Chairman Ben Bernake — now cashing in as an adviser to a couple of hedge funds — has sounded the alarm which he failed so spectacularly to sound before the last crash. Apparently, Fed chairs may speak the truth only after they have done their bit for Wall Street and the 1 percent.

The root cause of this terrible distress is the failure of Congress to do what everyone in Washington promised to do, talks endlessly about doing, but never gets around to actually doing: creating good paying jobs in the obvious place — infrastructure.

The need was obvious in 2008. It was obvious in 2012. It is obvious today. Jobs at a good wage are everything and infrastructure is the obvious place to start.

This is what the suddenly alert Bernake now urges: “…a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive.”

But it is not going to happen. The Fed, which pumped upwards of $20 trillion into Wall Street after the last crash, has steadfastly refused to make even a fraction of that available to state and municipal governments — a move that could have stopped the “Great Recession” in its tracks seven long years ago.

And the GOP Congress will do nothing that might make President Obama and the Democrats look good before the next elections — like improve the lives of more than 300 million Americans by putting the nation back to work..


The American people are trapped between a Fed that works for Wall Street and a GOP Congress that can’t decide who it works for: Wall Street, the American people or itself.

The Trans Pacific Partnership

Another dagger to the heart of democracy

By Mike Krauss
Bucks County Courier Times

Thirty years ago I had my first experience of marketing for a corporation. I learned that the most often used word in marketing and advertising is “free.”  I recall this lesson as I follow the debate on the “Trans Pacific Partnership” (TPP), which is being sold as a “free” trade agreement. “Free” sells.

What exactly is being sold in the TPP ? To answer that question, you need to read the fine print. But you can’t.  TPP has been negotiated in almost total secrecy by a team of about 600 lawyers, working for the major trans-national corporations.

The text of the treaty has been classified as “Secret” by U.S. negotiators. Even members of Congress are not permitted access. The deal will be presented to Congress on a “fast track” – no opportunity for Congress to modify the details. One vote, yes or no on the entire  treaty as presented – a done deal.

But thanks to one or two alert member of Congress and WikiLeaks, which think that information about the deal should also be free to the people of the nations who will be bound by the treaty’s terms, there is some news.

What is being sold is not the duty free importation of goods and services across national boundaries; but instead, how the movement of these goods and services, and most especially finance and capital is managed, and by who.

It should surprise no one that a treaty negotiated by lawyers working for the major trans-national corporations stipulates that international commerce should be managed (regulated) by lawyers representing the trans-national corporations.

The purpose is not “free” trade; but rather, to protect and increase the profits of trans-national corporations. How does that work? Like this.

An industry wants to set up shop in your community. But you decide, based on your local zoning, where they can and cannot operate. Or you decide that their product or service is harmful to your health and welfare, and want to limit adverse impacts; or that female workers deserve some paid time off during pregnancy.

Whatever the issue, you want a say in what happens in your community. Democracy.

The public interest clashes with the private interest and costs the corporation money. So the private interest turns to the international tribunals set up to manage these disputes that get in the way of “free” trade. These tribunals are staffed by representatives from the corporations, because they are “experts.”

Guess who they rule for?

Outrageous, you say? Undemocratic? Yes and yes. But it doesn’t matter what you say, because your Congress has voted for our nation to abide by the “free” trade pact.

It’s already happening.

In an attempt to limit smoking and the related deaths and health care costs smoking causes its people, little Uruguay decided to increase the size and visibility of the anti-smoking messages on packs of cigarettes and in other public health advertising.

Under the terms of a “free” trade deal negotiated between Uruguay and Switzerland, where Phillip Morris moved its corporate office from the U.S., the tobacco company is suing Uruguay to be paid the anticipated profits it may lose because of lower sales.

As reported in the U.K. newspaper The Independent, “The litigation is allowed to be done in tribunals known as international-state dispute settlements (ISDS), ruled upon by lawyers under the auspices of the World Trade Organization.”

In a similar case, Bolivia (also little) is being sued by the giant international corporation Bechtel because Bolivia cancelled a contract with Bechtel for a privatized water system, when rates skyrocketed far above those that Bechtel had advertised, forcing already poor people to pay even more for their water.
 
Bechtel is suing Bolivia in the International Centre for the Settlement of Investment Disputes (ICSID), another tribunal that is part of the World Bank. The ICSID holds all of its meetings in secret. Neither the media nor the people affected may even witness the proceedings.

As CorpWatch reported, “The company filed the case with ICSID under a bilateral investment treaty between the Netherlands and Bolivia. Although Bechtel is a U.S. corporation, its subsidiary [which did the Bolivian water deal] recently established a presence in the Netherlands in order to make use of the treaty.”

Corporations can shop for places to do business and move money easily around the world for the best deal. People, on the other hand, find it more difficult, often impossible and sometimes life threatening to change countries.

There is a price tag for “free” trade agreements like the TPP: democratic government and the right of people to govern themselves in their own communities is sold out.

Wednesday, March 25, 2015

Congress at work

The two year temper tantrum
  
In January the GOP took control of the U.S. Congress and immediately got down to business: a two year temper tantrum.

The Republicans in Congress don’t like President Obama. I mean, really don’t like the man,and they just can’t miss an opportunity to make that clear.

There are obvious differences, of course. The biggest may be generational. Even the “young turks” in the GOP leadership seem somehow so  –  yesterday.

Race is of course a part of the divide. It plagues the GOP in Congress, as it does the nation. The sins of the fathers – slavery, Jim Crow and segregation – visited on the children.

The GOP Religious Right was born when mostly southern segregationists abandoned the Democratic Party after the 1964 Civil Rights Act, to take up residence in the GOP, and that legacy has shaped GOP policy ever since.

Over the next two years progress on domestic issues will be next to impossible; except the care and feeding of Wall Street, of course. When it comes to Wall Street, there is no division in Washington.

But the rest of the domestic agenda – jobs, better paying jobs, affordable education and health care, the income divide, the wealth chasm, an end to the immigration wars – forget about it.

For example, the U.S. needs a new Attorney General. The AG is a member of the president’s cabinet. Used to be, presidents got who they wanted. No more.

The nominee for AG, who seems to me as well qualified or better than some recent selections, expressed an opinion that the president’s executive actions in the area of immigration were quite legal.

And that was that. Almost the entire GOP went on the warpath.  And now that nomination is in Washington “limbo” – held up to see what damage can be done in the interim to hamper the president and his administration.

The delay in confirmation hearings, says the GOP Senate leadership, is because they want first to “take up” a human trafficking bill, to attack human slavery and the sex trade. Who could object?  Shouldn’t take more than six hours to pass that bill and move on.

Not a prayer. The GOP tacked on to the human trafficking bill an extraneous, anti abortion provision ; and it’s back to the partisan, religious wars that so engage the many learned theologians in the Congress. And the Justice Department can wait.

This intense determination to stick it to the president has now spilled over into vital matters of our foreign policy, national security, international alliances and matters that have since the nation’s founding – and for good reason – been principally the responsibility of our presidents.

The GOP House Speaker invited the Israeli Prime Minister to Washington to directly challenge the foreign policy of the President of the United States in a manner calculated to offend the president.

Juvenile.

A majority of the Republicans in the Senate then attempted to sabotage U.S. led international efforts to get some kind of deal going with Iran over its aspirations to develop nuclear energy and weapons capability.

The president agrees Iran is trouble, with a capital “T.” He wants to get the government there into some kind of discussion, dialogue, diplomacy to unwind that coiled spring. The GOP alternative leads only to more conflict and war.

Like we don’t have enough problems in that part of the world and elsewhere.

Juvenile and dangerous.

You can make an argument that American presidents over-reach the powers granted them by the Constitution. Obama is not the first, and he will not be the last. And you can argue that the Congress needs to reassert its role as the law maker of the land.

And it can, any time it wants. And if the Congress would pass the laws needed to address the destruction of the American middle class and our democracy, it would be applauded and honored across the nation.

But it now seems likely that what the American people are going to get from the GOP Congress for the next two years will amount to little more than a GOP temper tantrum - members holding their breath, stamping their feet, pulling off stunts and sending out self congratulatory newsletters until Obama leaves office.


This does not serve the American people.

Wednesday, January 28, 2015

Congress at work

Looking out for Wall Street

By Mike Krauss
Bucks County Courier Times

The Wall Street crash of 2008 was brought on by unprecedented self-serving and risk taking that went undetected by the regulators — the cops on the beat — to whom the American people entrust the job of insuring honest markets and honest dealing in the banking and finance industry.

Since the Reagan administration, Congress and presidents of both parties have been bowing to Wall Street and billions of dollars of lobbying and campaign contributions in a system of legalized bribes. They have steadily reduced the manpower and resources of the regulators and put Wall Street insiders in charge of their agencies; even as the global wheeling and dealing of the finance industry they are charged to police has become ever more complex and opaque.

The lessons to be learned are obvious. Wall Street cannot be trusted to regulate itself. The rewards of fraud have trumped honesty and morality. The regulators are out-gunned. The crooks run circles around the cops.

And the remedy is equally obvious. Limits must be placed on Wall Street’s risk taking and the cops on the beat — the Securities and Exchange Commission in particular — must be given the tools and authority to do their job, detect catastrophic risk, take action to avert another crash and protect the American people.

But Congress and the president have done just the opposite.

In December, a Wall Street friendly Congress and president got together to enact legislation to allow Wall Street banks to place their riskiest assets — almost $300 trillion of derivatives holdings — in the business units that enjoy FDIC protection, setting up a back door bail out via the FDIC in the next crash.

Republican Mike Fitzpatrick, who represents Bucks County, was one of seven votes that made the difference to pass the legislation in the House. Now, Fitzpatrick is leading the charge for more favors for the parasites in pin stripes.

He has introduced legislation to further roll back the already weakened safeguards put in place after 2008 to protect Main Street from Wall Street’s greed and recklessness.

Can the congressman and so many of his colleagues have forgotten the lessons of 2008? Or is it that Congress just can’t see the forest for the green of all that Wall Street campaign and lobbying cash?

But if Congress has no memory, not so Wall Street, which knows that one trader making a bad bet can take down a bank. While Congress may have forgotten the “London Whale,” the trader who took a loss that blind-sided JP Morgan two years ago, the banksters remember.

They remember way back to 1995, when one trader bet wrong and took down Barings, one of the oldest merchant banks in the world.

Wall Street is getting ready for the next crash.

First, the global banking cartel used the G20 to set up a “bail in” — a confiscation of deposits — to insure the cash on hand to survive the next bad bet. Then the barons got the Wall Street-friendly Congress and president to set up another insurance policy, the back door bail out via the FDIC.

Two bail outs are better than one.

Fitzpatrick’s constituents may not be pleased to learn that he is so eager to serve Wall Street that he cannot remember the horrendous damage done only six years ago. Kevin Yoder, the Kansas Republican and Wall Street errand boy who slipped the back door bail out into last year’s legislation, got hammered by the Kansas media and constituents posting on his Facebook page.

One called Yoder the “lowest of the low” and added, “Hope you burn in hell.” Another called Yoder “one greedy immoral coward.”

Gotta love Kansas. Direct.

Which may explain why Fitzpatrick was selected to quarterback Wall Street’s latest play — he’s not running for re-election. So whatever heat he may take for his services to Wall Street, he’s fire-proof.

Give Wall Street credit. They look out for their own.

Who in Congress is looking out for the American people? Mr. Fitzpatrick, the vice chairman of the House Financial Services Subcommittee on Oversight and Investigation, who favors protecting Wall Street from the oversight that might prevent another crash?

Mike Krauss is chair of the Pennsylvania Project and a director of the Public Banking Institute. www.publicbankingpa.org / Email: mike@mikekrausscomments.com


Wednesday, December 17, 2014

Anything goes

Wall Street learns a lesson

It is a matter of public record, established by the Senate Select Committee On Investigations, federal and state attorneys, regulators like the Securities and Exchange Commission and tireless investigative reporters like Pam Martens and Matt Taibbi: the serial fraud and violations of banking and securities law that crashed the American and global economy continue to this day. Wall Street and the global banking cartel party on.

Is anyone surprised?

On the novel theory that no individuals rigged the mortgage market, the municipal bond market, the commodities markets, intentional interest rates and foreign exchange markets, the response of federal law enforcement officials, most notably the U.S. Department of Justice and Attorney General Eric Holder, has been to enforce fines on the banks, but not the banksters.

The banksters skate away scot-free, no indictments or prosecutions such as occurred in the Savings and Loan and Enron scandals, their millions and billions of effectively stolen wealth untouched.

The Obama administration taught the banksters a lesson: anything goes. Small wonder it continues.

As a nation, we need to consider the corrosive effect of this lesson on the ancient standards of honest dealing in the market place and between citizens that is the bedrock of a moral and just society.

Christians and Jews will be familiar with the Book of Deuteronomy — which means “Second Law” and was attributed to Moses, who delivered the first law, the Ten Commandments — in which there is an exhortation to maintain honest and true weights and measures.

It is why thousands of American state or local governments have departments of weights and measures: to insure you get the gallon of gas or a pound of beef you pay for.

But now, we have cause to wonder. We wonder for example if the Wall Street firms managing our IRAs, pensions and public funds are looking out for us, or themselves.

Billions of dollars of public pension funds are now managed by Wall Street firms. Increasingly, the fees and commissions paid are being kept secret.

As David Sirota and others have reported, state officials in Kentucky have kept secret the agreements between the Kentucky Teachers’ Retirement System and the Wall Street firms that are managing the system’s money.

Last month, Illinois officials denied an open records request for information identifying which financial firms are managing that state’s pension money.

In Rhode Island, the then treasurer and now governor, a former hedge fund manager and darling of Wall Street, declared that financial firms have the right to “minimize attention” around their compensation.

And just in case elected officials actually want to represent those who elected them and provide the information about how their money is managed and at what cost, Wall Street is ready.

In Iowa, the private equity firm KKR warned officials that if they release information about the fees that Iowa taxpayers are paying to Wall Street, the financial industry may retaliate by excluding Iowa from future private equity investments.

Wall Street has learned a lesson: anything goes. The lesson is not lost on America’s best and brightest young people.

As reported by Pam Martens in Wall Street on Parade, “a graduate of George Washington University Law School, applying for a job at JP Morgan, attempted to set himself apart from the competition by advertising at the very top of his resume that during a previous job in power procurement at Southern California Edison, he had ‘identified a flaw in the market mechanism Bid Cost Recovery that is causing the CAISO [the California grid operator] to misallocate millions of dollars’ In case that was too subtle, the young job applicant went on to note that he had ‘showed how units in reliability areas can increase profits by 400%.’ ”

In plain language, how to rig the market.

It worked. The person who would become this young man’s boss at JP Morgan, Francis Dunleavy, advised his colleagues, “Please get him in ASAP.”

Martens reports, “Within three months of JP Morgan hiring the law grad in July 2010, he was actively engaged in developing manipulative bidding strategies for JP Morgan in California electric markets. A few months later, the plan was deployed. By fall of the same year, JP Morgan was estimating that the strategy “could produce profits of between $1.5 and $2 billion through 2018.”


This is the lesson the nation’s “best and brightest” are now taught. On Wall Street and at the highest levels of responsibility in the nation, anything goes.

Monday, November 24, 2014

The scheme to seize depositors' money

What will Congress do?
Recently, the heads of state of the G20, the developed nations, met in Brisbane, Australia. One piece of business was the advancement of new banking rules that will allow what were called the Too Big to Fail Banks, and are now called Global Systemically Important Banks (G-SIBs) to seize depositors money to save themselves in the next crash.

The scheme has been orchestrated by the Bank for International Settlements (BIS), the Financial Stability Board (created by the BIS) and the usual crowd of central bank bureaucrats in the banksters’ international cartel.

The official report from the meeting does not, of course, say that in the next crash deposits will be confiscated. The scheme is only alluded to in the official statement by the citation of a report from the FSB, titled Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution.

The summary provided on the G20 web site states that G-SIBs “must have sufficient loss absorbing and recapitalization capacity available in resolution to implement an orderly resolution that minimizes any impact on financial stability, ensures the continuity of critical functions, and avoids exposing taxpayers to loss.”

Pure obfuscation.

Worried that the politicians they have bought won’t stay bought, that their nerve may fail them when confronted with a demand for trillion dollar bail outs in the next crash and that democratic government might assert itself, the banksters have a Plan B: an automatic “bail in.”

This is what the FSB calls “robust arrangements for dealing with stress in the financial system.”

In this soon to be global paradigm, as one commentator explained, “banks [will] no longer recognize your deposits as money, but as liabilities and securitized capital owned and controlled by the bank or institution, just part of a commercial bank’s capital structure.”

In the next crash, depositors will be subordinated to other creditors and will be pushed down through banks’ capital structure to a position of “material capital risk” — just another creditor fighting for a share of the assets of a failed bank, forced to settle for maybe pennies on the dollar.

Small deposits in the U.S. have until now been guaranteed by the Federal Deposit Insurance Corporation (FDIC). But as has been reported, total FDIC reserves are dwarfed by the amount of deposits at risk and the more than $200 trillion exposure to derivatives of the banksters’ cartel.

But municipal deposits are not guaranteed by anything, except the liquidity of the bank that holds them. Cities, counties and states all across America have perhaps several trillion dollars on deposit.

Unprosecuted, unreformed, unregulated and unrepentant, Wall Street parties on. Those deposits are at increasing risk.

You might not see it coming. State and municipal treasurers who manage government deposits might not see it coming. Members of Congress might not see it coming. But central bankers like those of the Fed know it is coming.

So does the FDIC. Months ago it laid out this new scheme to protect Wall Street in a policy document prepared jointly with the central bank of the U.K., the Bank of England.

“Wait a minute,” you say. “Why would the FDIC participate in a scheme to raid the deposits it insures? The FDIC works for the American people.”

Wrong. The FDIC was created in 1933 to calm a jittery public after the 1929 crash, head off runs brought on by panicked depositors and save banks, not depositors.

This may strike you as hard to believe, as prior to the Great Depression Americans thought the ownership of gold and silver was inviolate, almost sacred. But in 1933 the federal government confiscated gold and silver to bail out the banks and Federal Reserve.

The American people must recognize that history can and does repeat itself, that the money we thought was our own, protected in our checking and savings accounts could be taken in an instant should there be a financial crisis even remotely similar to that of 2008.

I said “could be.” In the United Sates these policies must be enacted and signed into the law by the Congress and the president. Whose side are they on?

President Obama calls the banksters “savvy businessmen” and his “friends.” He pushed the 2008 bail out through Congress, surrounded himself with Wall Street advisers and put Wall Street agents in charge of the regulatory agencies.

That may leave it up to Congress to protect Main Street from Wall Street and the banksters in the next crash.

What are the odds? Main Street, we have a problem.


Wednesday, November 12, 2014

Should President Obama resign


Time to shuffle the deck

By Mike Krauss
Bucks County Courier Times

You have to feel at least a little sorry for President Obama. Once compared to Lincoln and FDR and sure to take his place in the pantheon of great American presidents, he is now risks being remembered as another James Buchanan or Herbert Hoover – arguably the most failed presidents in our nation’s history.

Mr. Obama is hurting from a self inflicted wound. No president in modern history came to the office with more good will and political capital, or more promptly threw it away.

The American people did not like the Wall Street bail out – not at all. Obama helped push it through the Congress.

The outgoing Secretary of the Treasury, Henry Paulson suggested to president elect Obama that, for the sake of fairness, some of the bail out billions ought to go to foreclosure relief. 

Obama said “the market” would take care of that.

Then Obama populated his administration with Wall Street agents, the social catastrophe let lose by the Wall Street collapse rolled on, the rich got richer, life got tough for most Americans, has only gotten better for the already well-to-do, and that was that for his administration.

Had the president taken the side of the American people – Main Street, instead of Wall Street  – he could have written the kind of universal health care bill the American people support on the back of a cereal box and delivered it to Congress attached to a kite, and it would have sailed through to passage. Greatness beckoned.

But he did not and his presidency began to unravel, a slow and painful drama that has now delivered  both houses of Congress to the GOP, which has a really unhealthy dislike of the president.

Now what? What can this president and that Congress agree on? The only things they ever agree on: Wall Street and war.

The care and feeding of Wall Street has been the preoccupation of every American president since Ronald Reagan, and the system of legalized bribes showered on the Congress has insured its support.

And more war seems to suit everyone in Washington just fine; although to his credit Mr. Obama seems to be trying to avoid plunging the U.S. into a third war in the Middle East quagmire.

But the American people need more than that. Americans need good paying jobs, lots of them. Americans need affordable health care, investments in infrastructure, secure retirement for our seniors, world class public education and college education that does not condemn our young to decades of crushing debt.

And Americans want out from the hopeless pathologies of the Middle East, the never ending War on Terror and a life of constant fear and anxiety.

 Climate change. Help! Ebola. Watch out! We’re being foreclosed. Oh, God! Where are the kids? Call 911! Terrorists under the bed. The government spying on your every mail and phone call. Make it stop, please!

Two more years. Say it ain’t so. But it will be. Unless.

President Obama should accept the results of the elections for what they were – a resounding vote of no confidence – and resign.  He would be succeeded by Vice President Biden, who unlike the president is a veteran of the Congress and has the skill set and temperament to at least attempt a working relationship with that august body.

It would leave a venomous GOP with nowhere to sink its fangs.

And it would upset the apple cart of Hilary Clinton’s march to her coronation as the next president in the Wall Street dynasty. A President Biden would automatically be a contender for the nomination of the Democratic Party.

That alone ought to tempt the president.

What are the odds? Slim to none, I suppose. It’s nice being president. You and your family get treated really well, if you don’t mind the occasional lunatic over the White House fence and the ones in the Congress and half the world’s capitols.

Nevertheless, the president ought to think about this long and hard. It would change everything, shuffle the deck and give the American people a new deal.

But if not to resign, what? Two years of standoffs, shut-downs and speeches no one wants to hear? Is there an alternative?  One comes to mind. Fight.

The president could fight for those things Americans want, deserve and so urgently need. And maybe the president can claw his way back to greatness, as the American people claw back their stolen prosperity, security and peace.

It’s a thought.