Thursday, January 31, 2013

About Defense Nominee Chuck Hagel...

Chuck Hagel and the American Empire
Hagel's legislative record belies his potential role as bit player on the stage of the American empire, unlikely to wield the kind of influence suggested by the controversy over his nomination.
Wednesday, 30 January 2013 00:00
By Mike Lofgren, Truthout | Op-Ed

Ideological elements of both the Left and the Right have inflated the nomination of Chuck Hagel for Secretary of Defense to symbolize far more than he can possibly achieve in office, good or bad. The controversy over his nomination is based on a handful of his comments and valedictory Senate addresses. His actual legislative record is a lot thinner. From my time as a Senate staffer, I do not remember any significant legislation he was personally responsible for, nor did he involve himself to any great extent in floor debates on authorization or appropriation bills having to do with national security.
His supposedly inflammatory statements on Iraq, in particular, are after-the-fact criticisms of Bush administration policy that belie his actual legislative behavior when it counted. In October 2002, after the debate on the Authorization for Use of Military Force Against Iraq, he dutifully lined up to vote in its favor like all but one of his GOP colleagues. Perhaps Hagel felt the Bush administration had deceived him with faked evidence, as many another Senator has claimed thereafter. But as the casualties piled up, he was not quick to join critics of the war - at least not until March 2007, four years after the invasion, when Hagel supported legislation to begin withdrawing from Iraq in 120 days. That was already after the 2006 electoral debacle for the GOP, and at the point when most thinking people had long since sought an exit strategy. He also voted for the Patriot Act that progressives and libertarians alike abhor, and for the 2001 and 2003 Bush tax cuts which, along with the Iraq war, have left us in our present fiscal hole.
The controversy over Hagel's opinions about Israel and Iran is probably contrived, not so much to derail his nomination, but simply to rough him up a bit, so that when and if he becomes Secretary of Defense, he will likely be very circumspect about making any pronouncements about either country that deviates from the party line.
Exposing his record isn't meant to denigrate Hagel as a person - he did resign as deputy administrator of the Veterans Administration in 1982 over a matter of principle. And he saw the elephant in Vietnam, which elevates him far above most of the chickenhawks who attack him. But when the stakes are truly high, as they are in the maintenance of the status quo for the Pentagon, and all the enormous cash flows that go with it, it takes a person of extraordinary qualities to resist being assimilated by the military-industrial-congressional complex. Since the end of the Second World War, the National Security State has co-opted and de-fanged whichever potentially reformist public figures had managed to survive the winnowing process that excludes the vast majority of them from ever being considered for positions of power.
Harry Truman made his bones as a senator in World War II presiding over the Truman Committee, exposing waste fraud and abuse in military contracts - but he ended up, as president, adopting NSC 68, a planning document recommending a grotesquely hypertrophied garrison state that became a perpetual bonanza for military contractors. For good measure, he also ordered, with the stroke of his pen, the unjust and grossly unconstitutional Loyalty Program, which destroyed far more reputations than did Joseph McCarthy's later misuse of senatorial investigatory power. But all the while, Truman was attacked from the Right for being soft on defense against the "threat," setting a pattern for the following 60 years. Since Truman's presidency, the National Security State has stabilized and consolidated around what has amounted to two right-wing parties.
John F. Kennedy was skeptical of the claims of the military, but his concrete actions, as opposed to his private comments, furthered the goals of the military-industrial-congressional complex. He may well have distrusted the military and the CIA for getting talked into the Bay of Pigs invasion in 1961, but he continued the folly by authorizing Operation Mongoose - an equally idiotic program to subvert Cuba that went far afield of his original intentions. Lyndon Johnson knew full well that Vietnam was going to demolish his pride and joy, the Great Society - but he went ahead and let Vietnam destroy it anyway, for transparently shortsighted tactical political reasons. He rationalized his actions ex post facto in a self-pitying mock confession to Doris Kearns Goodwin to the effect that he was "bound to be crucified either way I moved."
Jimmy Carter is now almost universally viewed as a pacifist and a peacenik, but he let his national security advisor Zbigniew Brzezinski engineer provocations in Afghanistan in 1979 to lure the Soviets to invade the country, as Brzezinski bragged to Nouvel Observateur in 1998. That was surely the most consequential national security decision of the last 40 years - and the most disastrous, because it created both al-Qaeda and a perpetual series of wars in the Islamic regions. He also invoked the Carter Doctrine that bound us for eternity to protect by military force every feudal Middle Eastern satrapy that happened to have oil. Yet Carter is forever branded as a peacenik wimp in the national memory.
What has all this to do with Chuck Hagel? Just this: Does anyone think that Hagel, as a future subordinate of a president who orders drone strikes, authorized the Afghanistan surge and claims the power to be judge, jury and executioner of US citizens, will meaningfully alter the course of the US National Security State? More likely, the Pentagon bureaucracy will isolate him, play to his reported demand for sycophancy by his staffers when he was a Senator, and send him on an endless round of speeches and inspections. Meanwhile, the Joint Staff will run the show.

Friday, January 18, 2013

Antidote to a Dysfunctional Banking System

Public Banking: antidote to a dysfunctional banking system
Region's Business
January 17, 2013

As a result of the Wall Street bailout and the Dodd Frank “reforms,” the concentration of assets and deposits in the “too-big-to-fail banks” is now greater than it was before they failed and were rescued.

The St. Louis Federal Reserve reported that at the end of 2011, five Wall Street firms controlled 48 percent of total U.S. banking system assets: $8.5 trillion, equal to 56 percent of the U.S. economy. The other 7,307 banks held the remaining 44 percent.

A more recent published report puts the assets of only nine of the largest banks at $11.5 trillion, or seventy-five percent of all bank assets in the U.S. Much of that was  contributed in the never-ending bail-out by American taxpayers and the Federal Reserve.

At the same time, affordable credit that is the life blood of any modern economy remains largely unavailable or prohibitively expensive for the small (and not so small) businesses that can power economic development and jobs creation.
The Wall Street–Federal Reserve banking system fails to provide the effective allocation of capital into the productive economy. Investment is directed away from the production of new goods and services which create jobs, and into "financial products" which produce few jobs.

And it is going to get worse.

A recent article in the American Banker described the remaining smaller and community banks as under siege, forced to comply at a cost they can’t survive with the new capital requirements and regulations of Dodd Frank.

Which is of course what Wall Street wanted and got, with its army of lobbyists and an ever helpful Congress.

It is estimated the nation will lose more than 2,000 of its remaining community banks within the next two years. The concentration in Wall Street will grow ever greater.

Local businesses banking with Wall Street firms will find themselves talking to little more than “paper pushers,” with decisions being made somewhere up the org chart in regional centers, by people who know little of the businesses and have no stake in the local communities and economies of which they are a vital part.

Pam Martens writes on her blog, Wall Street on Parade, “That level of concentration should be a wake-up call to a country that was brought to the brink of financial collapse because of a systemically corrupt culture on Wall Street.”

As Nobel Laureate Joseph Stiglitz and others have warned, this corruption and unprecedented lawlessness – mortgage fraud from bottom to top, compromised rating agencies, rigged Libor rates and municipal bond markets, laundered billions from Mexican and Columbian drug lords and, according to a U.S. Senate investigation, clients with terrorist ties – is having a corrosive effect on our economy: crowding out honest investment and further distorting markets.

David M. Sachs at the Psychoanalytic Center of Philadelphia explained how these abusive practices and unchecked individual criminal behavior are destroying trust and effect markets. “Normal expectations of what is safe and dependable [are being] shattered.”

In a recent op-ed in the Washington Post, GOP stalwart and the author of two books on the Reagan presidency, Craig Shirley wrote: “Wall Street is too fearsome and corrupt for anyone’s good. We should find a way to create 50 Wall Streets, so that money can stay in the states and corruption can be kept to a minimum and law enforcement to a maximum.”

What Shirely, Martens and a growing army of problem solving Americans are talking about is public banking.

Public “partnership” banks use public funds to capitalize a bank which assists community banks to get affordable credit into the economy, for economic development and jobs creation – and grow their profits and market share.

The profits of the public bank come back to the state, city or county that charters the bank as non-tax revenue for the general fund.

And a public bank can underwrite municipal bonds, at substantially reduced interest and debt service borne by taxpayers.

As of today only one state, North Dakota has its own bank. Over the past decade the Bank of North Dakota (BND) has generated an average of $30 million a year in non tax revenue for the state and its people, and has a current commercial loan portfolio of more than $2.9 billion invested in the state’s economy through its community banks  — in a state with a population no larger than some suburban Philadelphia counties.
The bank is run by civil servants on civil servants’ salaries – no bonuses or commissions as incentive to speculate or take undue risk. The bank is overseen by a board whose members are all bankers. It is publicly audited.

The BND has been instrumental in supporting perhaps the strongest banking industry in the nation: not one failure as the economy collapsed, and more than double the national average of bank offices per capita.

The Center for State Innovation concludes: “The extra leveraging ability that the state bank provides through participation loans, the increase in municipal deposits from letters of credit, and the other supports that a state bank can provide as a ‘banker’s bank’ are all critical in helping to strengthen small and/or young banks.”

In a recent conference call with other bank CEOs around the nation, the CEO of one small North Dakota bank had this to say: “When the crash hit, the BND never blinked and kept the credit flowing.” The CEO of a large, regional North Dakota bank said this: “With the support of the BND, we can go toe-to-toe with the big boys.”

Community banks in North Dakota are taking back market share from Wall Street, while in most of the nation they continue to lose market share.

Twenty states and an increasing number of municipalities are considering creation of public banks. A national network of public banks, providing locally generated credit for locally directed economic development and jobs creation is the long overdue alternative to a dangerously concentrated and dysfunctional banking system and the distorted markets it has produced.

Friday, January 11, 2013

Public banks and unions

Public Banks: helping workers by helping people.

By Mike Krauss

In the decades after World War II, the American people built up the greatest and most broadly shared prosperity the world had ever seen. But for about the past forty years, the vast wealth of America has been steadily concentrated among a relative handful of our citizens.

This period of declining prosperity for the 99 percent has corresponded exactly with the decline of American unions. It does not take a rocket scientist to understand that strong unions are vital to a broadly prosperous and democratic America.

As the son of a steelworker, I know what a strike is like, in the winter, when your family is forced to choose between heating oil and electricity. My dad retired with the dignity and security of a pension and good health care. I know first-hand what unions did for my family and millions like it.

Today, many millions of Americans are daily making the choices our family made only during a strike: forced to choose between the mortgage or rent, and food or medicine, between health care or education, keeping the car in good repair or clothing.

How can the political muscle of unions be restored?

To answer that question, it is important to understand that political power flows from wealth; and as wealth is concentrated, so too is political power.

Today in the United States and Europe, the concentration of wealth and political power has become so grotesque as to threaten the very survival of democratic government.

But Americans are awakening to the threat, and there is a growing movement to challenge and break the greatest and most lawless concentration of wealth and power: the “too-big-to-fail” and “too-big-to-jail” private banking cartel of Wall Street and the Federal Reserve.

The tool needed to get that job done is the creation of a network of “public” banks, modeled on the hugely successful Bank of North Dakota (BND).

Public banks at the state, county or municipal level are capitalized with public funds, which are then leveraged in partnership with local, community banks and municipal governments to provide the sustained and affordable credit that is essential for economic development and jobs creation in the modern economy.

The profits of such a bank are returned to its one and only shareholder – the people – as non tax revenue. These banks are managed by civil servants who receive no outsized salaries, bonuses or commisions – no incentive to take the reckless risks that crashed Wall Street.

And as the Public banking Institute (PBI) chairperson, Ellen Brown has explained, public banks can take a huge bite out of the interest – the debt service borne by taxpayers – on the financing of capital and infrastructure projects; such as schools, highways and bridges and water treatment facilities.

Finally, public banks will correct a dangerously dysfunctional private banking system.

It is reported that nine banks now hold 75 percent of all assets in the U.S. banking system: $11.5 trillion. The balance of assets is held by the remaining 7,307 banks; a number forecast to be reduced in the next two years by 2,000, as the rules of Dodd Frank, written by the big banks, take effect.

Assets will be even more dangerously concentrated in a banking system that already fails in its basic function: the efficient distribution of capital and credit into the productive economy.

Through the 1980s the finance industry accounted for no more than 16 percent of U.S. domestic profits. By 2008 that figure had more than doubled to 40 percent. Financial “products” which create few jobs are crowding out the investment in providing goods and services, which does create jobs.

A network of American pubic banks will dramatically alter the banking landscape. As public banks are established, all the tax revenues and assets of the chartering government can be deposited in its bank, instead of on Wall Street.

And as credit creation is decentralized and economic development is locally funded and locally directed, as prosperity is once again broadly shared, so too will be political power.

Main Street or Wall Street. That’s the choice.

This is a task vital to our democracy, and a historic opportunity for unions to bring to the battle something unions still have plenty of – money.

It is in the pension funds.

For example, examining the public employee pension funds described in the Consolidated Annual Financial Report (CAFR) of the Commonwealth of Pennsylvania, and reviewing other published analyses, we discover that while these pension funds need returns of above 8 percent to keep abreast of future liabilities, they are earning only about 4 percent, or less.

And at a substantial cost paid in fees to advisors and fund managers.

Not only that, but a significant portion of these pension funds, collected from the paychecks of union members, is not invested in Pennsylvania, and not even in the United States. That is indicated in a footnote to the CAFR that describes how the funds manage the risk of investments in more than 30 foreign currencies!

No doubt, a thorough examination of pension funds across the United States would uncover many other examples of how contributions from the paychecks of union members to their pension funds are being exported, along with their jobs.

The public Bank of North Dakota is consistently returning 17 percent to 25 percent on equity. This suggests that as public banks are created, a union equity position, supported by some percentage of the pension funds would be a prudent and profitable investment.

But more importantly, if unions are seen to drive a broad, economic recovery through their investment in pubic banks, unions will make a lot of new friends.

This is what AFL CIO President, Richard Trumka’s grandfather was telling him, those many years ago: “If you want to help workers, you first need to help people.”

This is the kind of new thinking for the labor movement outlined in Sarah Jaffe’s article on AlterNet, “Six Ways to Juice Up the Labor Movement.”

In this collection of essays, Stephen Lerner, architect of the Justice for Janitors Campaign wrote: "We need bargaining not to just be about workers, but what's good for the community, so that we're bargaining for broader issues, especially in the public sector. So that it's not bargaining for the few, it's bargaining for the many."

Union support for creation of public banks in states, and more importantly in cities and counties all across America will help a lot of Americans back to prosperity, and the unions back to a position of political power that is vital to safeguarding the prosperity of all American workers, union or not, so that it is never again stolen away.

Mike Krauss is a director of the Public Banking Institute and the Pennsylvania Project. He is a former officer of Pennsylvania county and state government executive director of the Pennsylvania Republican Party.

Thursday, January 10, 2013

The Banksters

Laundering the rule of law

By Mike Krauss
Bucks County Courier Times
The Wall Street bail-out was sold as one time, emergency relief to save Wall Street and rescue the American economy from collapse. Ransom paid, the economy collapsed; but the bail out continues as a never ending, multi-trillion dollar give away.
Now we know that many, if not all the largest banks were engaged in a decades long criminal enterprise, knowingly embraced by their officers, who even the capitalist cheering publication The Economist headlined as “Banksters.”
Bottom-to-top fraud in the mortgage industry. Compromised ratings agencies that gave AAA grades to junk investments. Rigged U.S. municipal bond markets, rigged international interest rates and interest rate swaps that cost borrowers, consumers, school boards and municipalities billions, maybe trillions of dollars.
Most recently revealed is a decade long, systematic laundering of billions of dollars of cash from Mexican and Columbian drug lords and clients with links to terrorist suspects.
The U.S. government has responded with nothing more than a few well publicized investigations and fines that are little more than chump change to the fabulously wealthy banksters.
No criminal prosecutions of the high level individuals responsible for actions that have devastated the lives of tens of millions of Americans and eaten up trillions of dollars of their former wealth: lost jobs, lost homes, lost savings, lost investments, lost futures and lost lives.
While the administration and Federal Reserve provide damage control and mountains of cash to the banksters in what has become a never-ending bailout, they feed propaganda to the American people.
“Let them eat headlines.”
The failure of the U.S. Attorney General to bring criminal charges against the individual banksters for their criminal conduct is a shameful betrayal of justice.
There is a lot of shame to go around.
Instead of duty to their oaths of office and subpoenas from the Senate and House committees which have oversight of the Justice Department, the American people get – silence.
Instead of a daily, coast to coast barrage of outraged editorials, demanding the firing of the U.S. Attorney General, the people get – silence.
Instead of a chorus of righteous support for the rule of law from the dean of every  law school, district attorney and prosecutor in the nation, we get – silence.
It is shameful, and it is dangerous.
The rule of law is central to the survival of any civilized nation. Without it, there is only the amoral government of the predators and the slow decline to tyranny and ruin.
The decline may not be so slow.
One result of the on-going bail out of the banksters is, of course, that their mega banks keep getting bigger and more dangerous.
Writing a few days ago in Rolling Stone, Matt Taibbi noted that nine largest banks now control a reported 75 percent of the assets in the American banking system, nearly $11.5 trillion; up from about 48 percent and $8.5 trillion only a few years ago -  9 banks out of more than 7,000.
Taibbi noted that the six largest U.S. banks now have a combined 14,420 subsidiaries, placing them effectively beyond regulation. He cited a recent study by the Kansas City Fed, which calculated that it would take 70,000 examiners to inspect these banks “with the same level of attention normally given to a community bank.”
And what is the result of the near impossibility of effective regulation? Business as usual on Wall Street. Very bad business, which Taibbi describes as a “dangerous shift in banking behaviour.”
He writes: “With an apparently endless stream of free or almost-free money available to banks - coupled with a well-founded feeling among bankers that the government will back them up if anything goes wrong - banks have made a dramatic move into riskier and more speculative investments, including everything from high-risk corporate bonds to mortgage ­backed securities [Again!] to payday loans, the sleaziest and most disreputable end of the financial system. In 2011, banks increased their investments in junk-rated companies by 74 percent.”
The bail out and failure to prosecute – to hold the banksters accountable – is not only subverting the rule of law and destroying the trust of the people in their elected representatives – the trust which is essential for the survival of democracy – it has put the U.S. banking system right back where it was before the last crash and headed for another.
Is there any way to avoid this fate?
Firing the U.S. Attorney general is the first step. Breaking up the big banks is a second.  Creating a public banking system to support local banks and local economies, its actions fully transparent and its officers fully accountable to the people, is a third. De-authorizing the Federal Reserve and taking it into the U.S. Treasury as a much scaled-down advisory body on interest rates and money supply is a forth.
This last action should include replacing Federal Reserve notes, erroneously referred to as “the U.S. dollar,” with actual U.S. dollars issued by the U.S. Treasury, without the interest paid to the bankster owners of the Fed.
Of these measures, only the creation of public banks does not require an action of the administration or Congress and can be undertaken by the people locally, and is therefore the one to pursue now.

Mike Krauss is a former officer of PA county and state government and chairman of the Pennsylvania Project. Email: