Ellen Brown
January 24, 2011
www.webofdebt.com/articles
Bills were introduced on January 18 in both the House and Senate of the Washington State Legislature that add Washington to the growing number of states now actively moving to create public banking facilities.
The bills, House Bill 1320 and Senate Bill 5238, propose creation of a Washington Investment Trust (WIT) to “promote agriculture, education, community development, economic development, housing, and industry” by using “the resources of the people of Washington State within the state.”
Currently, all the state’s funds are deposited with Bank of America. HB 1320 proposes that in the future, “all state funds be deposited in the Washington Investment Trust and be guaranteed by the state and used to promote the common good and public benefit of all the people and their businesses within [the] state.”
The legislation is similar to that now being studied or proposed in states including Illinois, Virginia, Hawaii, Massachusetts, Maryland, Florida, Michigan, Oregon, California and others.
The effort in Washington State draws heavily on the success of the 92-year-old Bank of North Dakota (BND), currently the only state-wide publicly-owned U.S. bank. The BND has helped North Dakota escape the looming budgetary disaster facing other states. In 2009, North Dakota sported the largest budget surplus it had ever had.
The Wall Street Credit Crisis Is Crippling State and Municipal Governments
That state budget deficits are reaching crisis proportions was underscored in the January 19 New York Times:
[A]lmost everywhere the fiscal crisis of states has grown more acute. Rainy day funds are drained, cities and towns have laid off more than 200,000 people, and Arizona even has leased out its state office building. . . .
“It’s the time of the once unthinkable . . . ,” noted Lori Grange, deputy director of the Pew Center on the States. “Whether there are tax increases or dramatic cuts to education and vital services, the crisis is bad . . . .”
The “once unthinkable” includes not only draconian cuts in services, increases in taxes, and sale of public assets, but now filing for bankruptcy. States are not currently allowed to go bankrupt, but a move is afoot in Congress to change all that. Bankruptcy proceedings would allow states to escape pension and other contractual obligations, following the dubious lead of such megacorporations as General Motors and Continental Airlines.
Meanwhile, fears of state bankruptcy have caused state and municipal bond values to plummet and borrowing costs to soar. As with Greece and Ireland, rumors of bankruptcy become a self-fulfilling prophecy, bringing out the hedge funds and short sellers that turn prophecy into reality.
Addressing the Problem at Its Source: The North Dakota Model
While drastic spending cuts are being proposed and implemented, the states’ woes are not the result of over-spending. Rather, they were caused by loss of revenues and increased borrowing costs resulting from the Wall Street banking crisis. Jammed with toxic assets, derivatives, and the subprime mortgage debacle, the Wall Street credit machine ground to a halt in the fall of 2008 and has still not recovered.
And it is here, in generating credit for the state, that the Bank of North Dakota has been spectacularly successful. By providing affordable, low interest credit for business expansion, new businesses and students, the BND has helped North Dakota sidestep the credit crisis altogether.
The BND partners with private banks, providing a secondary market for mortgages; offers “wholesale” banking services such as check clearing and liquidity support to private banks; and invests in North Dakota municipal bonds to support economic development. In the last ten years, the BND has returned more than a third of a billion dollars to the state’s general fund. North Dakota is one of the few states to consistently post a budget surplus.
Unlike private banks, public banks don’t speculate or gamble on high risk “financial products.” They don’t pay outrageous salaries and bonuses to their management, who are salaried civil servants. The profits of the bank are all returned to the only shareholder - the people.
Washington State Representative Bob Hasegawa, a prime sponsor of the Washington legislation, called the proposal for a publicly-owned bank “a simple concept that will reap huge benefits for Washington.” In a letter to constituents, he explained, “The concept (is) to keep taxpayers’ money working here in Washington to build our economy. Currently, all tax revenues go into a ‘Concentration Account’ held by the Bank of America. BoA makes money off our money and we never see those profits again. Instead, we can create our own institution and keep taxpayers’ dollars here in Washington, working for Washington.”
Hasegawa said a key feature of the Washington banking institution is that it will work in partnership with financial institutions, community-based organizations, economic development groups, guaranty agencies, and others. He said the Washington Investment Trust will offer “transparency, accountability, and accuracy of financial reporting,” a welcome change from the accounting tricks common among the large Wall Street money center banks today.
A public hearing on HB 1320 is scheduled for Tuesday, January 25th, at 1:30pm. The bill is assigned to the Business and Financial Services Committee in the House and the Financial Institutions, Housing & Insurance Committee in the Senate.
For more information on the movement for publicly-owned banks, see http://PublicBankingInstitute.org.
Monday, January 24, 2011
Thursday, January 13, 2011
Public Banking Institute Launched
Seeks to Rescue U.S. Public Finances
There is mounting evidence that the public finances of the United States are verging on collapse.
The national debt has burdened the American people with a debt service – the cost of interest – that threatens to swallow the entire federal budget in years ahead.
States from New Jersey to Illinois, Texas and California are grappling with immense budget deficits. At least fifteen major U.S. cities are reported on the verge of bankruptcy. In a desperate attempt to stave off calamity, state and municipal governments are taking measures that many view as a worse calamity.
Police, firefighters, health care providers and teachers are being laid off. City street lights are turned off at night, responses to 911 calls are provided on a “fee for service” basis, public parks are abandoned and infrastructure vital to commerce is left to decay to third world status. Unemployment is chronic and home foreclosures roll on.
Americans are wondering if there is a way out of what now appears to many as a decades long and accelerating decline of the fortunes of the once fabled American middle class.
A diverse group of American educators, entrepreneurs and businesspeople, local government officials and civic leaders, economists, writers, lawyers and others think they have identified the central problem.
They have banded together to form the Public Banking Institute (PBI), a not-for-profit educational organization that hopes to explain to the American people how a national network of publicly owned banks can revive the American economy.
Ellen Hodgson Brown, founder of the Public Banking Institute is the author of “Web of Debt,” a groundbreaking and frequently cited diagnostic and prescriptive analysis of the American money system. In her view, American banking and finance have been turned upside down.
“We are in an era where the public is being required to lend to private banks, even though banks were originally supposed to lend to the public. What we have now is a system where bank profits are privatized but bank losses are shared by the public.
“We’ve bailed out banks because we know credit is essential to society, like a public utility such as electricity and water – without it, our economic system fails. So, in essence, the supply of credit has more to do with public and governmental services and less to do with private enterprise.”
Brown notes that public banks were introduced by the Quakers in the original colony of Pennsylvania.
“The Quakers were known as the ‘Society of Friends.’ Their public banking concept was a fore-runner of the PSFS – the Philadelphia Savings Fund Society. The word ‘society’ is telling. We want to put the needs and economic aspirations of the whole of the American society back into the banking picture.
“The Public Banking Institute will explore how credit is created using public resources, how to price it competitively, and how to use it as a low-cost alternative that benefits the free market and the public.”
Marc Armstrong is a self described “Philly Boy” who thinks that Quaker legacy offers a lesson and a way forward for the nation.
A former IBM Finance account manager specializing in wholesale banking and a communications expert, Armstrong led the team that created the PBI website (www.publicbankinginstitute.org). He is now organizing a Public Banking Conference that will bring together the thinking, ideas and efforts underway in more than a dozen states to get public banking more widely established in the U.S.
The model that the PBI points to is the public Bank of North Dakota (BND), formed just after the creation of the Federal Reserve as an alternative to control of money and credit by the Fed and major Wall Street banks.
The web site Armstrong helped create makes repeated reference to the contributions the bank has made to the prosperity of North Dakota, one of the few states to run a budget surplus, where unemployment is low and wages and have been rising, bucking the national trend.
The BND makes low interest loans to students, start-ups and existing small and mid-sized businesses, provides a market for municipal bonds and a secondary market for mortgages, and in the past ten years has contributed over $400 million to the state’s general fund.
“And that is in a small state,” Armstrong is quick to observe. “Imagine what can be accomplished with public banking in larger states, with larger populations and greater volumes of economic activity.”
He explains that one of the first tasks of the PBI “is to help people understand what public banking is, and as important, what it is not.” Armstrong ticks off major points from the PBI web site.
“Public banks are owned and operated as public institutions in the governmental jurisdiction in which they are created. They are operated by professional bankers and not as boondoggles for bank executives. Rather, their employees are salaried public servants paid with a transparent pay structure and are not rewarded with bonuses, commissions or fees for generating loans and financial gimmicks. Pubic banks are not speculative ventures that risk failure to maximize profit. Public banks are able to offset tax increases with returned credit income to the community and are ready sources of credit for local governments, eliminating the need for large ‘rainy day’ funds. The costs of public projects financed by public banks are also greatly reduced, because public banks do not need to charge interest to themselves. Eliminating interest has been shown to reduce the cost of such projects, on average, by 50%.”
As quickly, Armstrong makes one other point, perhaps looking to head off critics that see competition for private banks.
“Public banks partner with and compliment the private banks and provide traditional wholesale banking services, like check clearing. There are more private banks per capita in North Dakota than any state in the nation.”
I asked Ellen Brown if it all didn’t sound just a little too good to be true?
“It’s amazing, isn’t it? I think the Bank of North Dakota is a better kept secret than the codes that follow the president to launch nuclear weapons. But the facts speak for themselves. The job of the PBI is to get those facts out, bring together all the best ideas around public banking, and equip people of states, or cities or counties to review the information and decide which way to go.”
It’s pretty clear which way the PBI hopes to take banking in the United States.
“Public banks are in our interest as a nation, so they must be in our future,” says Ellen Brown.
There is mounting evidence that the public finances of the United States are verging on collapse.
The national debt has burdened the American people with a debt service – the cost of interest – that threatens to swallow the entire federal budget in years ahead.
States from New Jersey to Illinois, Texas and California are grappling with immense budget deficits. At least fifteen major U.S. cities are reported on the verge of bankruptcy. In a desperate attempt to stave off calamity, state and municipal governments are taking measures that many view as a worse calamity.
Police, firefighters, health care providers and teachers are being laid off. City street lights are turned off at night, responses to 911 calls are provided on a “fee for service” basis, public parks are abandoned and infrastructure vital to commerce is left to decay to third world status. Unemployment is chronic and home foreclosures roll on.
Americans are wondering if there is a way out of what now appears to many as a decades long and accelerating decline of the fortunes of the once fabled American middle class.
A diverse group of American educators, entrepreneurs and businesspeople, local government officials and civic leaders, economists, writers, lawyers and others think they have identified the central problem.
They have banded together to form the Public Banking Institute (PBI), a not-for-profit educational organization that hopes to explain to the American people how a national network of publicly owned banks can revive the American economy.
Ellen Hodgson Brown, founder of the Public Banking Institute is the author of “Web of Debt,” a groundbreaking and frequently cited diagnostic and prescriptive analysis of the American money system. In her view, American banking and finance have been turned upside down.
“We are in an era where the public is being required to lend to private banks, even though banks were originally supposed to lend to the public. What we have now is a system where bank profits are privatized but bank losses are shared by the public.
“We’ve bailed out banks because we know credit is essential to society, like a public utility such as electricity and water – without it, our economic system fails. So, in essence, the supply of credit has more to do with public and governmental services and less to do with private enterprise.”
Brown notes that public banks were introduced by the Quakers in the original colony of Pennsylvania.
“The Quakers were known as the ‘Society of Friends.’ Their public banking concept was a fore-runner of the PSFS – the Philadelphia Savings Fund Society. The word ‘society’ is telling. We want to put the needs and economic aspirations of the whole of the American society back into the banking picture.
“The Public Banking Institute will explore how credit is created using public resources, how to price it competitively, and how to use it as a low-cost alternative that benefits the free market and the public.”
Marc Armstrong is a self described “Philly Boy” who thinks that Quaker legacy offers a lesson and a way forward for the nation.
A former IBM Finance account manager specializing in wholesale banking and a communications expert, Armstrong led the team that created the PBI website (www.publicbankinginstitute.org). He is now organizing a Public Banking Conference that will bring together the thinking, ideas and efforts underway in more than a dozen states to get public banking more widely established in the U.S.
The model that the PBI points to is the public Bank of North Dakota (BND), formed just after the creation of the Federal Reserve as an alternative to control of money and credit by the Fed and major Wall Street banks.
The web site Armstrong helped create makes repeated reference to the contributions the bank has made to the prosperity of North Dakota, one of the few states to run a budget surplus, where unemployment is low and wages and have been rising, bucking the national trend.
The BND makes low interest loans to students, start-ups and existing small and mid-sized businesses, provides a market for municipal bonds and a secondary market for mortgages, and in the past ten years has contributed over $400 million to the state’s general fund.
“And that is in a small state,” Armstrong is quick to observe. “Imagine what can be accomplished with public banking in larger states, with larger populations and greater volumes of economic activity.”
He explains that one of the first tasks of the PBI “is to help people understand what public banking is, and as important, what it is not.” Armstrong ticks off major points from the PBI web site.
“Public banks are owned and operated as public institutions in the governmental jurisdiction in which they are created. They are operated by professional bankers and not as boondoggles for bank executives. Rather, their employees are salaried public servants paid with a transparent pay structure and are not rewarded with bonuses, commissions or fees for generating loans and financial gimmicks. Pubic banks are not speculative ventures that risk failure to maximize profit. Public banks are able to offset tax increases with returned credit income to the community and are ready sources of credit for local governments, eliminating the need for large ‘rainy day’ funds. The costs of public projects financed by public banks are also greatly reduced, because public banks do not need to charge interest to themselves. Eliminating interest has been shown to reduce the cost of such projects, on average, by 50%.”
As quickly, Armstrong makes one other point, perhaps looking to head off critics that see competition for private banks.
“Public banks partner with and compliment the private banks and provide traditional wholesale banking services, like check clearing. There are more private banks per capita in North Dakota than any state in the nation.”
I asked Ellen Brown if it all didn’t sound just a little too good to be true?
“It’s amazing, isn’t it? I think the Bank of North Dakota is a better kept secret than the codes that follow the president to launch nuclear weapons. But the facts speak for themselves. The job of the PBI is to get those facts out, bring together all the best ideas around public banking, and equip people of states, or cities or counties to review the information and decide which way to go.”
It’s pretty clear which way the PBI hopes to take banking in the United States.
“Public banks are in our interest as a nation, so they must be in our future,” says Ellen Brown.
Wednesday, January 12, 2011
Targeting Public Employees
By: Robert Reich
View this story online at: http://www.alternet.org/story/149435/
In 1968, 1,300 sanitation workers in Memphis went on strike. The Rev. Martin Luther King, Jr. came to support them. That was where he lost his life. Eventually Memphis heard the grievances of its sanitation workers. And in subsequent years millions of public employees across the nation have benefited from the job protections they’ve earned.
But now the right is going after public employees.
Public servants are convenient scapegoats. Republicans would rather deflect attention from corporate executive pay that continues to rise as corporate profits soar, even as corporations refuse to hire more workers. They don’t want stories about Wall Street bonuses, now higher than before taxpayers bailed out the Street. And they’d like to avoid a spotlight on the billions raked in by hedge-fund and private-equity managers whose income is treated as capital gains and subject to only a 15 percent tax, due to a loophole in the tax laws designed specifically for them.
It’s far more convenient to go after people who are doing the public’s work - sanitation workers, police officers, fire fighters, teachers, social workers, federal employees – to call them “faceless bureaucrats” and portray them as hooligans who are making off with your money and crippling federal and state budgets. The story fits better with the Republican’s Big Lie that our problems are due to a government that’s too big.
Above all, Republicans don’t want to have to justify continued tax cuts for the rich. As quietly as possible, they want to make them permanent.
But the right’s argument is shot-through with bad data, twisted evidence, and unsupported assertions.
They say public employees earn far more than private-sector workers. That’s untrue when you take account of level of education. Matched by education, public sector workers actually earn less than their private-sector counterparts.
The Republican trick is to compare apples with oranges — the average wage of public employees with the average wage of all private-sector employees. But only 23 percent of private-sector employees have college degrees; 48 percent of government workers do. Teachers, social workers, public lawyers who bring companies to justice, government accountants who try to make sure money is spent as it should be - all need at least four years of college.
Compare apples to apples and and you’d see that over the last fifteen years the pay of public sector workers has dropped relative to private-sector employees with the same level of education. Public sector workers now earn 11 percent less than comparable workers in the private sector, and local workers 12 percent less. (Even if you include health and retirement benefits, government employees still earn less than their private-sector counterparts with similar educations.)
Here’s another whopper. Republicans say public-sector pensions are crippling the nation. They say politicians have given in to the demands of public unions who want only to fatten their members’ retirement benefits without the public noticing. They charge that public-employee pensions obligations are out of control.
Some reforms do need to be made. Loopholes that allow public sector workers to “spike” their final salaries in order to get higher annuities must be closed. And no retired public employee should be allowed to “double dip,” collecting more than one public pension.
But these are the exceptions. Most public employees don’t have generous pensions. After a career with annual pay averaging less than $45,000, the typical newly-retired public employee receives a pension of $19,000 a year. Few would call that overly generous.
And most of that $19,000 isn’t even on taxpayers’ shoulders. While they’re working, most public employees contribute a portion of their salaries into their pension plans. Taxpayers are directly responsible for only about 14 percent of public retirement benefits. Remember also that many public workers aren’t covered by Social Security, so the government isn’t contributing 6.25 of their pay into the Social Security fund as private employers would.
Yes, there’s cause for concern about unfunded pension liabilities in future years. They’re way too big. But it’s much the same in the private sector. The main reason for underfunded pensions in both public and private sectors is investment losses that occurred during the Great Recession. Before then, public pension funds had an average of 86 percent of all the assets they needed to pay future benefits — better than many private pension plans.
The solution is no less to slash public pensions than it is to slash private ones. It’s for all employers to fully fund their pension plans.
The final Republican canard is that bargaining rights for public employees have caused state deficits to explode. In fact there’s no relationship between states whose employees have bargaining rights and states with big deficits. Some states that deny their employees bargaining rights - Nevada, North Carolina, and Arizona, for example, are running giant deficits of over 30 percent of spending. Many that give employees bargaining rights — Massachusetts, New Mexico, and Montana — have small deficits of less than 10 percent.
Public employees should have the right to bargain for better wages and working conditions, just like all employees do. They shouldn’t have the right to strike if striking would imperil the public, but they should at least have a voice. They often know more about whether public programs are working, or how to make them work better, than political appointees who hold their offices for only a few years.
Don’t get me wrong. When times are tough, public employees should have to make the same sacrifices as everyone else. And they are right now. Pay has been frozen for federal workers, and for many state workers across the country as well.
But isn’t it curious that when it comes to sacrifice, Republicans don’t include the richest people in America? To the contrary, they insist the rich should sacrifice even less, enjoying even larger tax cuts that expand public-sector deficits. That means fewer public services, and even more pressure on the wages and benefits of public employees.
It’s only average workers – both in the public and the private sectors – who are being called upon to sacrifice.
This is what the current Republican attack on public-sector workers is really all about. Their version of class warfare is to pit private-sector workers against public servants. They’d rather set average working people against one another – comparing one group’s modest incomes and benefits with another group’s modest incomes and benefits – than have Americans see that the top 1 percent is now raking in a bigger share of national income than at any time since 1928, and paying at a lower tax rate. And Republicans would rather you didn’t know they want to cut taxes on the rich even more.
Robert B. Reich has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He also served on President Obama's transition advisory board. His latest book is Supercapitalism.
View this story online at: http://www.alternet.org/story/149435/
In 1968, 1,300 sanitation workers in Memphis went on strike. The Rev. Martin Luther King, Jr. came to support them. That was where he lost his life. Eventually Memphis heard the grievances of its sanitation workers. And in subsequent years millions of public employees across the nation have benefited from the job protections they’ve earned.
But now the right is going after public employees.
Public servants are convenient scapegoats. Republicans would rather deflect attention from corporate executive pay that continues to rise as corporate profits soar, even as corporations refuse to hire more workers. They don’t want stories about Wall Street bonuses, now higher than before taxpayers bailed out the Street. And they’d like to avoid a spotlight on the billions raked in by hedge-fund and private-equity managers whose income is treated as capital gains and subject to only a 15 percent tax, due to a loophole in the tax laws designed specifically for them.
It’s far more convenient to go after people who are doing the public’s work - sanitation workers, police officers, fire fighters, teachers, social workers, federal employees – to call them “faceless bureaucrats” and portray them as hooligans who are making off with your money and crippling federal and state budgets. The story fits better with the Republican’s Big Lie that our problems are due to a government that’s too big.
Above all, Republicans don’t want to have to justify continued tax cuts for the rich. As quietly as possible, they want to make them permanent.
But the right’s argument is shot-through with bad data, twisted evidence, and unsupported assertions.
They say public employees earn far more than private-sector workers. That’s untrue when you take account of level of education. Matched by education, public sector workers actually earn less than their private-sector counterparts.
The Republican trick is to compare apples with oranges — the average wage of public employees with the average wage of all private-sector employees. But only 23 percent of private-sector employees have college degrees; 48 percent of government workers do. Teachers, social workers, public lawyers who bring companies to justice, government accountants who try to make sure money is spent as it should be - all need at least four years of college.
Compare apples to apples and and you’d see that over the last fifteen years the pay of public sector workers has dropped relative to private-sector employees with the same level of education. Public sector workers now earn 11 percent less than comparable workers in the private sector, and local workers 12 percent less. (Even if you include health and retirement benefits, government employees still earn less than their private-sector counterparts with similar educations.)
Here’s another whopper. Republicans say public-sector pensions are crippling the nation. They say politicians have given in to the demands of public unions who want only to fatten their members’ retirement benefits without the public noticing. They charge that public-employee pensions obligations are out of control.
Some reforms do need to be made. Loopholes that allow public sector workers to “spike” their final salaries in order to get higher annuities must be closed. And no retired public employee should be allowed to “double dip,” collecting more than one public pension.
But these are the exceptions. Most public employees don’t have generous pensions. After a career with annual pay averaging less than $45,000, the typical newly-retired public employee receives a pension of $19,000 a year. Few would call that overly generous.
And most of that $19,000 isn’t even on taxpayers’ shoulders. While they’re working, most public employees contribute a portion of their salaries into their pension plans. Taxpayers are directly responsible for only about 14 percent of public retirement benefits. Remember also that many public workers aren’t covered by Social Security, so the government isn’t contributing 6.25 of their pay into the Social Security fund as private employers would.
Yes, there’s cause for concern about unfunded pension liabilities in future years. They’re way too big. But it’s much the same in the private sector. The main reason for underfunded pensions in both public and private sectors is investment losses that occurred during the Great Recession. Before then, public pension funds had an average of 86 percent of all the assets they needed to pay future benefits — better than many private pension plans.
The solution is no less to slash public pensions than it is to slash private ones. It’s for all employers to fully fund their pension plans.
The final Republican canard is that bargaining rights for public employees have caused state deficits to explode. In fact there’s no relationship between states whose employees have bargaining rights and states with big deficits. Some states that deny their employees bargaining rights - Nevada, North Carolina, and Arizona, for example, are running giant deficits of over 30 percent of spending. Many that give employees bargaining rights — Massachusetts, New Mexico, and Montana — have small deficits of less than 10 percent.
Public employees should have the right to bargain for better wages and working conditions, just like all employees do. They shouldn’t have the right to strike if striking would imperil the public, but they should at least have a voice. They often know more about whether public programs are working, or how to make them work better, than political appointees who hold their offices for only a few years.
Don’t get me wrong. When times are tough, public employees should have to make the same sacrifices as everyone else. And they are right now. Pay has been frozen for federal workers, and for many state workers across the country as well.
But isn’t it curious that when it comes to sacrifice, Republicans don’t include the richest people in America? To the contrary, they insist the rich should sacrifice even less, enjoying even larger tax cuts that expand public-sector deficits. That means fewer public services, and even more pressure on the wages and benefits of public employees.
It’s only average workers – both in the public and the private sectors – who are being called upon to sacrifice.
This is what the current Republican attack on public-sector workers is really all about. Their version of class warfare is to pit private-sector workers against public servants. They’d rather set average working people against one another – comparing one group’s modest incomes and benefits with another group’s modest incomes and benefits – than have Americans see that the top 1 percent is now raking in a bigger share of national income than at any time since 1928, and paying at a lower tax rate. And Republicans would rather you didn’t know they want to cut taxes on the rich even more.
Robert B. Reich has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He also served on President Obama's transition advisory board. His latest book is Supercapitalism.
Wednesday, January 5, 2011
Public Banking
We can help ourselves or wait for Washington
A tidal wave of home foreclosures has battered the United States since the onset of the Second Great Depression. There is more damage to come.
The industry trade group Realty Trac reports that foreclosures in 2009 "shattered all records... jumping 21 percent from 2008 and 120 percent from 2007."
Realty Trac reports that 6,285 Pennsylvania properties were foreclosed in October of 2010 - one in every 875 Pennsylvania housing units. That is a 9 percent increase from the previous month and 13 percent above the level reported in October 2009.
Mark Zandi, chief economist at Moody's Analytics, estimates that when the December figures are in, there will be 1.8 million foreclosed homes in the United States in 2010 and that the number will reach 2.1 million in 2011.
In Bucks County, 307 homes were foreclosed in only December of 2010 - a month when the foreclosure mill slows down. But it will be back to business now.
One consequence of home foreclosures is of course homelessness. And while not every family that loses a home winds up on the streets, sleeping in their cars or in tent cities and abandoned buildings (Some can move in with family or friends), many do.
Estimates of the number of homeless vary. The U.S. Department of Housing and Urban Development (HUD) authorizes a "point in time count ," a once and done snap shot taken by social service providers, police departments and other agencies, and estimates that 1.5 million Americans are living on the streets today.
But many are skeptical and believe that like estimates of the unemployed by the federal Bureau of Labor Statistics, the official count of the homeless at best underestimates the scale of the problem, or at worst is meant to disguise it.
Researchers like Jay Levy, author of "Homeless Narratives," put the number at between 2.5 and 3.5 million. It is a number unheard of in modern times, in any of the developed nations of the world. And it will grow in the year ahead.
Dietrich Bonheoffer, the German theologian murdered by the Nazis at the close of World War II once observed, "You can see the sin of respectable people in their flight from responsibility."
Bonheoffer was remarking on the way in which millions of decent, god fearing German Christians closed their eyes and walked away from the evil of the Holocaust that ultimately claimed the lives of 6 million Jews.
But the evil that men do does not always come in the outsized scale of the horror of the Nazis. Sometimes it creeps up on a society, incrementally, bit by bit, at the rate of 2 million foreclosures a year.
But it is no less an evil. Or, if evil sounds too much like a pretext for some do-good, bleeding heart, liberal, tax and spend proposal to help the homeless, try approaching it as a problem for middle class home owners.
The annualized number of foreclosed homes in Bucks County will top 4,000 in 2011, to be added to the thousands of the preceding two years.
There are a lot of unoccupied homes in Bucks County. Who shovels the snow from the sidewalks, or will mow the lawns, or repair a broken shutter or falling down porch?
What do these unoccupied houses do for the already depressed value of the other homes in the neighborhood - in your neighborhood?
And are these homes actually unoccupied, or have they been invaded by the homeless, or become bases of operation for petty crooks and punks, or more sophisticated gangs, criminals and drug dealers, as is being widely reported from Long Island to Arizona to Los Angeles?
Got your attention?
The federal government proposes to do to little either to halt the tidal wave of foreclosures, assist the homeless or save your neighborhood from this growing blight. But there is something that can be done.
The Federal Reserve can pump billions - trillions - into the purchase of municipal bonds, at the same no interest, low interest terms it gave Wall Street. And agencies like the Bucks County Housing Authority can issue those bonds, buy up every foreclosed property in the county at fair market value - residential and commercial both - put crews of the unemployed to work to maintain them, and work with other county agencies to do the job Washington will not, and put people back in those homes and businesses back in the commercial properties.
And if the Fed will not, then a public Bank of Pennsylvania or Bank of Bucks County can be the market for those bonds, just as the public Bank of North Dakota is a market for municipal bonds in that state.
This is one example of what public banks can do for the economy and the American people, and why activity is now under way in more than a dozen states to see how the lessons learned and the success achieved in North Dakota can be shared across the United States.
Or we can wait for Washington.
A tidal wave of home foreclosures has battered the United States since the onset of the Second Great Depression. There is more damage to come.
The industry trade group Realty Trac reports that foreclosures in 2009 "shattered all records... jumping 21 percent from 2008 and 120 percent from 2007."
Realty Trac reports that 6,285 Pennsylvania properties were foreclosed in October of 2010 - one in every 875 Pennsylvania housing units. That is a 9 percent increase from the previous month and 13 percent above the level reported in October 2009.
Mark Zandi, chief economist at Moody's Analytics, estimates that when the December figures are in, there will be 1.8 million foreclosed homes in the United States in 2010 and that the number will reach 2.1 million in 2011.
In Bucks County, 307 homes were foreclosed in only December of 2010 - a month when the foreclosure mill slows down. But it will be back to business now.
One consequence of home foreclosures is of course homelessness. And while not every family that loses a home winds up on the streets, sleeping in their cars or in tent cities and abandoned buildings (Some can move in with family or friends), many do.
Estimates of the number of homeless vary. The U.S. Department of Housing and Urban Development (HUD) authorizes a "point in time count ," a once and done snap shot taken by social service providers, police departments and other agencies, and estimates that 1.5 million Americans are living on the streets today.
But many are skeptical and believe that like estimates of the unemployed by the federal Bureau of Labor Statistics, the official count of the homeless at best underestimates the scale of the problem, or at worst is meant to disguise it.
Researchers like Jay Levy, author of "Homeless Narratives," put the number at between 2.5 and 3.5 million. It is a number unheard of in modern times, in any of the developed nations of the world. And it will grow in the year ahead.
Dietrich Bonheoffer, the German theologian murdered by the Nazis at the close of World War II once observed, "You can see the sin of respectable people in their flight from responsibility."
Bonheoffer was remarking on the way in which millions of decent, god fearing German Christians closed their eyes and walked away from the evil of the Holocaust that ultimately claimed the lives of 6 million Jews.
But the evil that men do does not always come in the outsized scale of the horror of the Nazis. Sometimes it creeps up on a society, incrementally, bit by bit, at the rate of 2 million foreclosures a year.
But it is no less an evil. Or, if evil sounds too much like a pretext for some do-good, bleeding heart, liberal, tax and spend proposal to help the homeless, try approaching it as a problem for middle class home owners.
The annualized number of foreclosed homes in Bucks County will top 4,000 in 2011, to be added to the thousands of the preceding two years.
There are a lot of unoccupied homes in Bucks County. Who shovels the snow from the sidewalks, or will mow the lawns, or repair a broken shutter or falling down porch?
What do these unoccupied houses do for the already depressed value of the other homes in the neighborhood - in your neighborhood?
And are these homes actually unoccupied, or have they been invaded by the homeless, or become bases of operation for petty crooks and punks, or more sophisticated gangs, criminals and drug dealers, as is being widely reported from Long Island to Arizona to Los Angeles?
Got your attention?
The federal government proposes to do to little either to halt the tidal wave of foreclosures, assist the homeless or save your neighborhood from this growing blight. But there is something that can be done.
The Federal Reserve can pump billions - trillions - into the purchase of municipal bonds, at the same no interest, low interest terms it gave Wall Street. And agencies like the Bucks County Housing Authority can issue those bonds, buy up every foreclosed property in the county at fair market value - residential and commercial both - put crews of the unemployed to work to maintain them, and work with other county agencies to do the job Washington will not, and put people back in those homes and businesses back in the commercial properties.
And if the Fed will not, then a public Bank of Pennsylvania or Bank of Bucks County can be the market for those bonds, just as the public Bank of North Dakota is a market for municipal bonds in that state.
This is one example of what public banks can do for the economy and the American people, and why activity is now under way in more than a dozen states to see how the lessons learned and the success achieved in North Dakota can be shared across the United States.
Or we can wait for Washington.
Tuesday, December 28, 2010
Pace on Earth, American Style
While once fairly regular in church attendance, President Obama now has little occasion to join others at church services. He prefers to worship in private, it is said in large part to spare others the “disruption” of his attendance.
I should think so.
First of course, the church would have to be searched and swept from top to bottom, and the priest or pastor and lay leaders vetted by the FBI.
Then there is the problem of the other worshipers. Who knows who might be lurking in the congregation? It might be tough to spot an Islamic terrorist in a crowd of American Southern Baptists or Roman Catholics.
The terrorists are very clever. It is reported that there are training camps in Afghanistan where, at this moment, Islam fanatics are being taught to sing Amazing Grace, sign themselves with the cross and genuflect.
And as you or I, ordinary citizens are at daily risk from the terrorists swarming America, imagine the threat to the president.
Homeland Security would insist that worshipers arrive to the church parking lot at least two hours prior to the service, and then proceed to the church door no less than forty- five minutes prior to the service, with documents in hand.
“Please remove your shoes and have your baptismal certificates out and ready for inspection.”
Again, it would be unthinkable that parishioners, choir members and all the other possible threats not be subject to the full body scan, pat down and – if necessary – strip search, although like airline pilots, pastors would probably get an expedited clearance.
I mean, what kind of signal would it send to the American people if the president were seen not to fully appreciate the dangers and set the proper example?
“What’s that your wearing ma’m? It looks kind of foreign.”
“It’s a choir robe.”
“Right. Step over here.”
Then there is the problem of the Host, should there be a communion or mass. Exceptions are dangerous. We can’t let our guard down one moment. It would almost certainly be necessary to national security that the wine and wafer or bread be brought into the church clearly visible in plastic bags, 500 ml of liquid to the plastic bottle.
“What’s this, padre?”
“Communion wine.”
“Right. And that?”
“It’s a chalice.”
“It’s metal.”
“Yes, it is.”
“Sorry, we’ll have to confiscate that. Could be used as a weapon.”
And of course a cross for the procession would be absolutely out of the question. I mean, talk about a weapon.
Now, you may think I’m being facetious. Not a bit. If aircraft are targets for Islamic fanatics, it’s only a matter of time until they start to target Christian churches. It’s only logical.
And by that same logic, it has already been proposed that these security measures and the body scanners and staff and budget that go with them be introduced in railway, bus terminals and subway stations.
The scanners are sold at about $500,000 each by a company represented by the former head of Homeland Security.
A few days ago, it took really bad weather to bring the northeast to a standstill. But with constant vigilance and an absolute determination to crush the ever expanding network of terrorists in the United States now infiltrating our cub scouts, senior citizens and churches that welcome anybody (for God’s sake !!), we can do that every day, and all do our part to keep Americans safe in the homeland, while we keep blasting apart villages of mud huts in Afghanistan.
Peace on earth, American style.
I should think so.
First of course, the church would have to be searched and swept from top to bottom, and the priest or pastor and lay leaders vetted by the FBI.
Then there is the problem of the other worshipers. Who knows who might be lurking in the congregation? It might be tough to spot an Islamic terrorist in a crowd of American Southern Baptists or Roman Catholics.
The terrorists are very clever. It is reported that there are training camps in Afghanistan where, at this moment, Islam fanatics are being taught to sing Amazing Grace, sign themselves with the cross and genuflect.
And as you or I, ordinary citizens are at daily risk from the terrorists swarming America, imagine the threat to the president.
Homeland Security would insist that worshipers arrive to the church parking lot at least two hours prior to the service, and then proceed to the church door no less than forty- five minutes prior to the service, with documents in hand.
“Please remove your shoes and have your baptismal certificates out and ready for inspection.”
Again, it would be unthinkable that parishioners, choir members and all the other possible threats not be subject to the full body scan, pat down and – if necessary – strip search, although like airline pilots, pastors would probably get an expedited clearance.
I mean, what kind of signal would it send to the American people if the president were seen not to fully appreciate the dangers and set the proper example?
“What’s that your wearing ma’m? It looks kind of foreign.”
“It’s a choir robe.”
“Right. Step over here.”
Then there is the problem of the Host, should there be a communion or mass. Exceptions are dangerous. We can’t let our guard down one moment. It would almost certainly be necessary to national security that the wine and wafer or bread be brought into the church clearly visible in plastic bags, 500 ml of liquid to the plastic bottle.
“What’s this, padre?”
“Communion wine.”
“Right. And that?”
“It’s a chalice.”
“It’s metal.”
“Yes, it is.”
“Sorry, we’ll have to confiscate that. Could be used as a weapon.”
And of course a cross for the procession would be absolutely out of the question. I mean, talk about a weapon.
Now, you may think I’m being facetious. Not a bit. If aircraft are targets for Islamic fanatics, it’s only a matter of time until they start to target Christian churches. It’s only logical.
And by that same logic, it has already been proposed that these security measures and the body scanners and staff and budget that go with them be introduced in railway, bus terminals and subway stations.
The scanners are sold at about $500,000 each by a company represented by the former head of Homeland Security.
A few days ago, it took really bad weather to bring the northeast to a standstill. But with constant vigilance and an absolute determination to crush the ever expanding network of terrorists in the United States now infiltrating our cub scouts, senior citizens and churches that welcome anybody (for God’s sake !!), we can do that every day, and all do our part to keep Americans safe in the homeland, while we keep blasting apart villages of mud huts in Afghanistan.
Peace on earth, American style.
Tuesday, December 14, 2010
Democracy on the ropes
Patsies in power, democracy on the ropes
By: MIKE KRAUSS
Bucks County Courier Times
Political power follows money. The wealth of America is now concentrated in the hands of the few as never before. Those few govern. Democracy in America is on the ropes.
So powerful is this concentration of wealth in America, that the only way to ensure that millions of the unemployed are not abandoned to despair at Christmas was for the Congress to agree not to raise the taxes on the income of wealthy Americans, and further reduce taxes on the estates their low taxes help create.
You can see the logic. I mean, having funneled trillions of dollars to Wall Street, American corporations and even foreign banks to rescue the global club of parasites in pinstripes, what sense does it make to take some of that back in taxes? Duh!
And I do mean trillions of dollars.
As reported only days ago after a year of concealment by the Federal Reserve, the hundreds of billions of dollars the U.S. Congress funneled to the barons is "chump change," compared to the many trillions of dollars it provided, all to the account of the American people.
As reported in this newspaper, "Newly released documents show that the most (Fed) loan money over time went to Citigroup ($2.2 trillion), followed by Merrill Lynch ($2.1 trillion), Morgan Stanley ($2 trillion), Bank of America ($1.1 trillion), Bear Stearns ($960 billion), Goldman Sachs ($620 billion), JPMorgan Chase ($260 billion) and Wells Fargo ($150 billion)."
The banks which got these fantastic sums argue that much of it has been "paid back." How, exactly?
One strategy was to take this no-interest and low-interest money and loan it out at higher rates. The banks biggest customer? The U.S. Treasury.
Another was to trade it for assets the banks held. Which assets? According to the Financial Times of London, their junk.
"More than 36 percent of the cumulative collateral pledged ... in return for overnight funding under the Primary Dealer Credit Facility was equities or bonds ranked below investment grade. A further 17 percent was unrated credit or loans, according to a Financial Times analysis of Fed data released this week. Only 1 percent of the collateral was Treasury bonds, which are normally used in transactions between banks and the monetary authorities."
As the president observed, the barons are indeed "savvy" businessmen. Of course, it helps to have patsies in positions of political power.
Independent U.S. Sen. Bernie Sanders of Vermont was instrumental in forcing the release of the Fed records. He has raised some "issues."
"At a time when big banks have nearly a trillion dollars in excess reserves parked at the Fed, the Fed did not require these institutions to increase lending to small and medium-sized businesses as a condition of the bailout.
"At a time when large corporations are more profitable than ever, the Fed did not demand that corporations that received this backdoor bailout create jobs and expand the economy once they returned to profitability.
"...these secret Fed loans in some cases turned out to be direct corporate welfare to big banks that used these loans not to reinvest in the economy but rather to lend back to the federal government at a higher rate of interest...
"At a time when millions of Americans are paying outrageously high credit card interest rates, why didn't the Fed require credit card issuers to lower interest rates as a condition of the bailout?
"The four largest banks in this country (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) issue half of all mortgages in this country... How many Americans could have remained in their homes, if the Fed required these bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans?"
The senator is of course being rhetorical. He knows the answer to the questions he has posed.
There are now about 14,000 federal lobbyists. In the decade 1998 to 2008 the finance industry alone provided its lobbyists more than $3.2 billion to buy influence in the halls of Congress, the offices of regulators and the White House. This does not include campaign contributions.
How much did you spend?
In the last election, the Supreme Court let loose in the elections a wave of direct corporate spending and anonymous contributions that will grow to tidal wave proportions for 2012.
It is already producing results. The barons, hedge fund managers and corporate execs who live like kings on the stolen prosperity of the American people will not have their taxes raised.
It is often observed that diversity is the enduring strength of the United States. But that is true only so long as that diversity is enabled, given means and opportunity to express itself.
Democracy is the enabler. Today, democracy in the United States is on the ropes.
For the sake of America, the American people must democratize the economy, bypass the Fed and Wall Street and assume control of the supply of money and credit by the creation of public banks at the state and local level.
For the sake of America, the American people must democratize their politics and government, and build a majority in Congress to serve their interests by writing and enforcing the rules for campaigns for Congress which Congress will not.
Mike Krauss, an international logistics executive and writer, is a former officer of county and state government and former director of the Pennsylvania Republican Party. E-mail: mike@mikekrausscomments.com
December 09, 2010 02:30
By: MIKE KRAUSS
Bucks County Courier Times
Political power follows money. The wealth of America is now concentrated in the hands of the few as never before. Those few govern. Democracy in America is on the ropes.
So powerful is this concentration of wealth in America, that the only way to ensure that millions of the unemployed are not abandoned to despair at Christmas was for the Congress to agree not to raise the taxes on the income of wealthy Americans, and further reduce taxes on the estates their low taxes help create.
You can see the logic. I mean, having funneled trillions of dollars to Wall Street, American corporations and even foreign banks to rescue the global club of parasites in pinstripes, what sense does it make to take some of that back in taxes? Duh!
And I do mean trillions of dollars.
As reported only days ago after a year of concealment by the Federal Reserve, the hundreds of billions of dollars the U.S. Congress funneled to the barons is "chump change," compared to the many trillions of dollars it provided, all to the account of the American people.
As reported in this newspaper, "Newly released documents show that the most (Fed) loan money over time went to Citigroup ($2.2 trillion), followed by Merrill Lynch ($2.1 trillion), Morgan Stanley ($2 trillion), Bank of America ($1.1 trillion), Bear Stearns ($960 billion), Goldman Sachs ($620 billion), JPMorgan Chase ($260 billion) and Wells Fargo ($150 billion)."
The banks which got these fantastic sums argue that much of it has been "paid back." How, exactly?
One strategy was to take this no-interest and low-interest money and loan it out at higher rates. The banks biggest customer? The U.S. Treasury.
Another was to trade it for assets the banks held. Which assets? According to the Financial Times of London, their junk.
"More than 36 percent of the cumulative collateral pledged ... in return for overnight funding under the Primary Dealer Credit Facility was equities or bonds ranked below investment grade. A further 17 percent was unrated credit or loans, according to a Financial Times analysis of Fed data released this week. Only 1 percent of the collateral was Treasury bonds, which are normally used in transactions between banks and the monetary authorities."
As the president observed, the barons are indeed "savvy" businessmen. Of course, it helps to have patsies in positions of political power.
Independent U.S. Sen. Bernie Sanders of Vermont was instrumental in forcing the release of the Fed records. He has raised some "issues."
"At a time when big banks have nearly a trillion dollars in excess reserves parked at the Fed, the Fed did not require these institutions to increase lending to small and medium-sized businesses as a condition of the bailout.
"At a time when large corporations are more profitable than ever, the Fed did not demand that corporations that received this backdoor bailout create jobs and expand the economy once they returned to profitability.
"...these secret Fed loans in some cases turned out to be direct corporate welfare to big banks that used these loans not to reinvest in the economy but rather to lend back to the federal government at a higher rate of interest...
"At a time when millions of Americans are paying outrageously high credit card interest rates, why didn't the Fed require credit card issuers to lower interest rates as a condition of the bailout?
"The four largest banks in this country (Bank of America, JP Morgan Chase, Wells Fargo, and Citigroup) issue half of all mortgages in this country... How many Americans could have remained in their homes, if the Fed required these bailed-out banks to reduce mortgage payments as a condition of receiving these secret loans?"
The senator is of course being rhetorical. He knows the answer to the questions he has posed.
There are now about 14,000 federal lobbyists. In the decade 1998 to 2008 the finance industry alone provided its lobbyists more than $3.2 billion to buy influence in the halls of Congress, the offices of regulators and the White House. This does not include campaign contributions.
How much did you spend?
In the last election, the Supreme Court let loose in the elections a wave of direct corporate spending and anonymous contributions that will grow to tidal wave proportions for 2012.
It is already producing results. The barons, hedge fund managers and corporate execs who live like kings on the stolen prosperity of the American people will not have their taxes raised.
It is often observed that diversity is the enduring strength of the United States. But that is true only so long as that diversity is enabled, given means and opportunity to express itself.
Democracy is the enabler. Today, democracy in the United States is on the ropes.
For the sake of America, the American people must democratize the economy, bypass the Fed and Wall Street and assume control of the supply of money and credit by the creation of public banks at the state and local level.
For the sake of America, the American people must democratize their politics and government, and build a majority in Congress to serve their interests by writing and enforcing the rules for campaigns for Congress which Congress will not.
Mike Krauss, an international logistics executive and writer, is a former officer of county and state government and former director of the Pennsylvania Republican Party. E-mail: mike@mikekrausscomments.com
December 09, 2010 02:30
Saturday, December 4, 2010
The Federal Reserve
This three column series was first published in November in the Bucks County Courier Times, and on line in a three newspaper edition, www.phillyburbs.com.
The Federal Reserve
Part I: A dagger to the heart of democracy.
Voter turnout in many congressional districts was far greater than in many years. It is the enduring myth of American democracy - the people speaking out in free and fair elections to make known and enforce their will on their elected representatives.
But it is a myth. Federal elections in the United States are no longer either free or fair, and the results will have little impact on the economic policies that will determine the future well being or, alternatively, misfortune of the American people.
For several decades, the reforms of the political parties, election and campaign finance laws meant to empower ordinary Americans (“open up” the political process) have had the opposite effect.
Vast sums of money now flow not through the political parties accountable to the American people, but instead through a maze of pseudo-political organizations, accountable to no public constituency, donors increasingly anonymous or untraceable, to select the candidates for federal office, buy their votes and keep them bought.
And no one spends more money in U.S. politics than the people who have it.
This is the reality of America almost never discussed, much less taught in American schools: there are only two classes of Americans, those who have money and those who do not, and they have always been at war. And those Americans who have no money – the great majority of the American people - are getting clobbered.
While it has always been the case that the great majority of Americans have no money, it has not always been the case that their economic circumstances were so dire, or their chances to move up to the ranks of the “moneyed” class were so limited.
To understand how this is so requires an understanding of what “money” is in the language of American politics and economics.
Money is not the bills in your wallet or purse, or the coins in your pocket or the balance in your checking or savings account, which is all the money most Americans have. Money in political and economic terms is accumulated wealth, the surplus beyond the costs of living that an individual or family can invest and bequeath.
This distinction has always been the one important divide that defines the two classes of Americans. And today, the money in America, accumulated wealth, is concentrated as never before in the hands of a few, managed by their agents in the finance industry and protected by the Federal Reserve.
The Federal Reserve was created in 1913 by act of Congress after a series of banking crisis from the 1800s through 1907 wiped out farms, businesses and banks and at one time left one in six Americans unemployed. At a time when 6 in 10 Americans lived on farms, the liquidation of those farms had the same effect as the current wave of foreclosures in the suburbs and cities – a lot of Americans lost their homes and moved down the ladder.
These were crisis of “liquidity” – there was not enough money in circulation or reserve to meet the needs of large portions of the economy. The legislation to address this ongoing problem was supported by an unlikely combination of the Wall Street barons and populists. The latter were ardent democrats.
The barons realized that the U.S. economy had grown so large that the capital formation required to support it meant taking risks that they could no longer cover if they failed. They wanted an agency to be available to cover their bets when they crapped out.
The populists – mostly from the predominantly agricultural south and west – realized that without available and affordable credit, the cycle that every farmer knows is a part of the inherent risk of agriculture would keep on wiping them out: in the bad years of crop failure, or the hopeful years when they acquired expensive debt to increase production, or years of overproduction, accompanied by depressed crop prices and predatory pricing from banks, grain storage facility and railroad operators.
Both preached the same solution: federal regulation of the supply of money and its cost. But the solution of President Wilson and the experts who had come to power in America in a wave of “progressive” thinking that sought to lessen the “corrupt” practices of elected American politicians, was to take the regulation out of the hands of politicians elected by and accountable to the people – the Congress and president - and give it to a newly created, autonomous and independent central bank, the Federal Reserve.
It was a dagger to the heart of democratic government in the United States.
The Federal Reserve
Part II: The rich get richer
The legislation that created the Federal Reserve is intentionally vague as to its purposes. But from the beginning, bankers and a few astute politicians understood the enormous power conferred in the authority to control the nation’s supply of money and its cost.
This control impacts on every decision made by the American people to loan, borrow, invest, buy or sell. It determines winners and losers.
The Federal Reserve creates money with a data entry, adding debt to the American people, and provides this money to the banks at low interest or no interest. These banks then loan it to their customers at higher interest rates. One of their biggest “customers” is the Federal government. What a racket!
Yet the Fed operates apart from the elected government of the people and is accountable to no one. Unlike the central banks of most developed nations, no one from the elected government of the United States has a voice in its deliberations or a vote among its governors.
The Fed raises its own revenue and neither its budget nor its multi-billion dollar transactions are reviewed by the Congress or audited by any other agency of the elected federal government.
The Fed operates in great secrecy. Minutes of many important meetings are released only years after the fact. For some of the most important, no minutes of any kind are kept!
And its public pronouncements are made in the deliberately obfuscating language of the pseudo-science of modern economics that most Americans do not speak or understand
I say pseudo-science because, pretend as modern economic experts will that their profession is a science, the hallmark of science is the ability to predict according to fixed laws, and the Fed consistently fails this test, doing damage control after the economy crashes.
But while the Fed may be accountable to no one, it nevertheless has a constituency.
This was made brutally clear by former Fed Chairman Paul Volcker, when in the midst of the crushing recession brought on by the Fed’s anti-inflation campaign of the early Reagan presidency, a group of state legislators from some of the most distressed farm states came to plead for relief.
Volcker heard them out and turned them down saying, “Look. Your constituents are unhappy, mine aren’t.”
Critics often charge that the Fed is owned by the banks and point to the fact that local banks are all shareholders in the regional Federal Reserve Banks. This ownership of shares is not about control, it is about cover.
The power in the Fed is held by the seven governors in Washington appointed by the president to fourteen year terms. And the five other governors selected on a rotating basis from among the presidents of the fifteen regional reserve banks, while sometimes willing to pull in different directions, do not have the votes, and in fact are excluded from voting on crucial matters.
But, when the Fed is sometimes attacked by critics in the Congress of one party or the other, the governors can rally the “shareholder” banks and local bankers to apply pressure – and campaign cash – directly to the complaining member of Congress.
Nevertheless, the characterization of the Fed as “owned” by the banks is apt, and it works to protect the accumulated wealth which they represent. The Fed’s never ceasing fight against inflation is but one example.
Americans are taught that inflation is a bad thing. This is always true for accumulated wealth. It is not always true for those hoping to acquire wealth.
Home ownership, until recently one of the few opportunities of the vast majority of Americans to acquire wealth is an example.
If you buy a home with a thirty year fixed mortgage and there is any significant inflation, over time that fixed monthly payment of say $1,000 becomes worth progressively less each month in constant dollars, and you may be making that $1,000 payment with only $800 worth of dollars – for years. Conversely, if you are the lender, with inflation your monthly $1,000 income from the loan becomes worth only $800.
So the Fed can use its power as it did in the 1980s to restrict the money supply or drive up interest rates, which protects the value and income earning potential of existing wealth, but restricts the ability to prosper for the vast majority of Americans who have no accumulated wealth to invest.
Sometimes the contractions induced by the Fed are severe, and millions lose their jobs or homes, as businesses throughout the real economy cut back or fold in manufacturing, mining, agriculture, retail and virtually every sector of the real economy.
The Fed defends these hurtful decisions in the impenetrable language of their pseudo-science, but the message is always the same: “Don’t blame us. This disaster for millions is the result of ‘market forces’ over which we have no control.”
It is a complete sophistry. Human beings, the governors of the Fed and each with a vote make the call, and in fact unleash those forces. And they have historically sided with accumulated wealth, which is the past.
The Fed is like the dead hand of the past laying on the future of most Americans, snuffing out hope and opportunity as it insures that the rich get richer.
The Federal Reserve
Part III – Reverse the flow
It was the era of “trickle down” economics. Congress and the administration “devised tax credits, refunds and abatements to benefit private corporations, and they enacted four major reductions in income tax rates, skewed to benefit the upper income brackets.”
Inflation was defeated and the stock market roared. But there were signs of trouble.
Families “were working longer hours for the same wages and borrowing more heavily to keep up… the struggling labor movement was decimated; unions lost nearly 30 percent of their membership.”
It reads like recent history, but is in fact a description of the 1920s, when the term trickle down was coined, the decade before the First Great Depression.
Then as now, the Fed failed.
Prior to each failure, money was flowing up in the U.S. to its richest citizens. With the New Deal, FDR and his newly appointed Fed Chairman, a Republican banker from Utah, reversed the flow and the nation began to recover.
They understood that the spending of the rich few cannot sustain a great economy. The sale of thousands of $500 a pair sneakers and $300,000 cars cannot generate the same volume and velocity of money moving through the economy – economic activity - as the sale of millions of less expensive shoes or cars.
That flow of money to the many was the foundation of the remarkable prosperity of post World War II America . It lasted until Ronald Reagan, with the support of a Democratic Congress and the Fed combined to shut it down.
Reagan and Congress revived regressive tax cuts for the wealthy and trickle down economics, allowed the combinations that led to “too-big-to-fail” banks and legalized usurious interest rates on consumer credit.
The Fed crushed inflation with interest rates that devastated the real economy but protected accumulated wealth, and bailed out Wall Street when their bubble of bad loans to the third world burst.
Historically, when the Fed thinks the wealthy will not be unduly burdened and decides to expand the economy or overcome an economic contraction, one of its tools is to “flood the street with money;” that is, to pump a lot of cash into the system where it is loaned, used, circulated and exchanged in the many millions of transactions that add up to a recovery.
With the crash of 2008, the Congress and the Fed did indeed “flood the street.” But the money never got past Wall Street to your street. This was intentional.
As the Fed pumped trillions into the banks and finance companies, it risked massive inflation in the U.S. (remember that inflation destroys accumulated wealth). The remedy to this threat was to simultaneously keep interest rates low. But much of the rest of the world’s major and developing economies have higher interest rates.
The money that flows through the world’s financial system has a property similar to liquid, and like water money seeks its own level. And the level money seeks is the highest interest and rate of return
So the money of America has been flowing in a massive flight of capital into the rest of the world, protecting accumulated wealth while beggaring the future of most Americans.
The Ford Motor Company is about to open its newest and most modern plant – in China, where the government is raising wages and pumping billions into infrastructure; while across America workers are forced to accept wages cuts to keep their jobs and infrastructure begins to resemble the third world.
What to do? Reverse the flow.
Interest rates in the U.S. must rise from their historic lows to attract capital and investment in the U.S. Funds must flow massively into jobs creating, taxpayer creating, revenue creating U.S. infrastructure. The first stimulus was unfocused and insufficient. The president’s proposal for a $50 billion transportation infrastructure initiative is inadequate.
A fair share of the accumulated wealth of America must be made to flow down into many more hands. Income, capital gains and inheritance must be taxed at higher rates. The argument that this will choke investment is a patent fraud. That wealth has been protected from meaningful taxation for decades, but do you see a new washing machine or tractor plant going up nearby?
The out-of-control U.S. military must be disciplined. Wars and by some reports as many as a thousand U.S. military bases in 152 foreign nations are a huge flow of dollars and tax revenue out of the U.S.
Federal taxes on gasoline must be increased. There will be an immediate reduction in the import of foreign oil and the massive out-flow of dollars to buy it. But exempt, subsidize and invest in all mass transit systems (including school bus fleets), and rebate the mostly suburban, auto dependent middle class.
But above all, the Federal Reserve must be brought inside the American democracy and Constitution and made part of the Treasury Department, its accounts audited, so that the elected government of the United States may assume the authority and responsibility for the decisions about money that determine the future well being of every American man, woman and child.
This is what must be done, but will not soon be done. The new Congress will be as bought as the current Congress; because there is one other flow that must be halted - the tidal wave of lobbying and campaign cash that buys and sells U.S. federal elections for America ’s established, accumulated wealth.
The Federal Reserve
Part I: A dagger to the heart of democracy.
Voter turnout in many congressional districts was far greater than in many years. It is the enduring myth of American democracy - the people speaking out in free and fair elections to make known and enforce their will on their elected representatives.
But it is a myth. Federal elections in the United States are no longer either free or fair, and the results will have little impact on the economic policies that will determine the future well being or, alternatively, misfortune of the American people.
For several decades, the reforms of the political parties, election and campaign finance laws meant to empower ordinary Americans (“open up” the political process) have had the opposite effect.
Vast sums of money now flow not through the political parties accountable to the American people, but instead through a maze of pseudo-political organizations, accountable to no public constituency, donors increasingly anonymous or untraceable, to select the candidates for federal office, buy their votes and keep them bought.
And no one spends more money in U.S. politics than the people who have it.
This is the reality of America almost never discussed, much less taught in American schools: there are only two classes of Americans, those who have money and those who do not, and they have always been at war. And those Americans who have no money – the great majority of the American people - are getting clobbered.
While it has always been the case that the great majority of Americans have no money, it has not always been the case that their economic circumstances were so dire, or their chances to move up to the ranks of the “moneyed” class were so limited.
To understand how this is so requires an understanding of what “money” is in the language of American politics and economics.
Money is not the bills in your wallet or purse, or the coins in your pocket or the balance in your checking or savings account, which is all the money most Americans have. Money in political and economic terms is accumulated wealth, the surplus beyond the costs of living that an individual or family can invest and bequeath.
This distinction has always been the one important divide that defines the two classes of Americans. And today, the money in America, accumulated wealth, is concentrated as never before in the hands of a few, managed by their agents in the finance industry and protected by the Federal Reserve.
The Federal Reserve was created in 1913 by act of Congress after a series of banking crisis from the 1800s through 1907 wiped out farms, businesses and banks and at one time left one in six Americans unemployed. At a time when 6 in 10 Americans lived on farms, the liquidation of those farms had the same effect as the current wave of foreclosures in the suburbs and cities – a lot of Americans lost their homes and moved down the ladder.
These were crisis of “liquidity” – there was not enough money in circulation or reserve to meet the needs of large portions of the economy. The legislation to address this ongoing problem was supported by an unlikely combination of the Wall Street barons and populists. The latter were ardent democrats.
The barons realized that the U.S. economy had grown so large that the capital formation required to support it meant taking risks that they could no longer cover if they failed. They wanted an agency to be available to cover their bets when they crapped out.
The populists – mostly from the predominantly agricultural south and west – realized that without available and affordable credit, the cycle that every farmer knows is a part of the inherent risk of agriculture would keep on wiping them out: in the bad years of crop failure, or the hopeful years when they acquired expensive debt to increase production, or years of overproduction, accompanied by depressed crop prices and predatory pricing from banks, grain storage facility and railroad operators.
Both preached the same solution: federal regulation of the supply of money and its cost. But the solution of President Wilson and the experts who had come to power in America in a wave of “progressive” thinking that sought to lessen the “corrupt” practices of elected American politicians, was to take the regulation out of the hands of politicians elected by and accountable to the people – the Congress and president - and give it to a newly created, autonomous and independent central bank, the Federal Reserve.
It was a dagger to the heart of democratic government in the United States.
The Federal Reserve
Part II: The rich get richer
The legislation that created the Federal Reserve is intentionally vague as to its purposes. But from the beginning, bankers and a few astute politicians understood the enormous power conferred in the authority to control the nation’s supply of money and its cost.
This control impacts on every decision made by the American people to loan, borrow, invest, buy or sell. It determines winners and losers.
The Federal Reserve creates money with a data entry, adding debt to the American people, and provides this money to the banks at low interest or no interest. These banks then loan it to their customers at higher interest rates. One of their biggest “customers” is the Federal government. What a racket!
Yet the Fed operates apart from the elected government of the people and is accountable to no one. Unlike the central banks of most developed nations, no one from the elected government of the United States has a voice in its deliberations or a vote among its governors.
The Fed raises its own revenue and neither its budget nor its multi-billion dollar transactions are reviewed by the Congress or audited by any other agency of the elected federal government.
The Fed operates in great secrecy. Minutes of many important meetings are released only years after the fact. For some of the most important, no minutes of any kind are kept!
And its public pronouncements are made in the deliberately obfuscating language of the pseudo-science of modern economics that most Americans do not speak or understand
I say pseudo-science because, pretend as modern economic experts will that their profession is a science, the hallmark of science is the ability to predict according to fixed laws, and the Fed consistently fails this test, doing damage control after the economy crashes.
But while the Fed may be accountable to no one, it nevertheless has a constituency.
This was made brutally clear by former Fed Chairman Paul Volcker, when in the midst of the crushing recession brought on by the Fed’s anti-inflation campaign of the early Reagan presidency, a group of state legislators from some of the most distressed farm states came to plead for relief.
Volcker heard them out and turned them down saying, “Look. Your constituents are unhappy, mine aren’t.”
Critics often charge that the Fed is owned by the banks and point to the fact that local banks are all shareholders in the regional Federal Reserve Banks. This ownership of shares is not about control, it is about cover.
The power in the Fed is held by the seven governors in Washington appointed by the president to fourteen year terms. And the five other governors selected on a rotating basis from among the presidents of the fifteen regional reserve banks, while sometimes willing to pull in different directions, do not have the votes, and in fact are excluded from voting on crucial matters.
But, when the Fed is sometimes attacked by critics in the Congress of one party or the other, the governors can rally the “shareholder” banks and local bankers to apply pressure – and campaign cash – directly to the complaining member of Congress.
Nevertheless, the characterization of the Fed as “owned” by the banks is apt, and it works to protect the accumulated wealth which they represent. The Fed’s never ceasing fight against inflation is but one example.
Americans are taught that inflation is a bad thing. This is always true for accumulated wealth. It is not always true for those hoping to acquire wealth.
Home ownership, until recently one of the few opportunities of the vast majority of Americans to acquire wealth is an example.
If you buy a home with a thirty year fixed mortgage and there is any significant inflation, over time that fixed monthly payment of say $1,000 becomes worth progressively less each month in constant dollars, and you may be making that $1,000 payment with only $800 worth of dollars – for years. Conversely, if you are the lender, with inflation your monthly $1,000 income from the loan becomes worth only $800.
So the Fed can use its power as it did in the 1980s to restrict the money supply or drive up interest rates, which protects the value and income earning potential of existing wealth, but restricts the ability to prosper for the vast majority of Americans who have no accumulated wealth to invest.
Sometimes the contractions induced by the Fed are severe, and millions lose their jobs or homes, as businesses throughout the real economy cut back or fold in manufacturing, mining, agriculture, retail and virtually every sector of the real economy.
The Fed defends these hurtful decisions in the impenetrable language of their pseudo-science, but the message is always the same: “Don’t blame us. This disaster for millions is the result of ‘market forces’ over which we have no control.”
It is a complete sophistry. Human beings, the governors of the Fed and each with a vote make the call, and in fact unleash those forces. And they have historically sided with accumulated wealth, which is the past.
The Fed is like the dead hand of the past laying on the future of most Americans, snuffing out hope and opportunity as it insures that the rich get richer.
The Federal Reserve
Part III – Reverse the flow
It was the era of “trickle down” economics. Congress and the administration “devised tax credits, refunds and abatements to benefit private corporations, and they enacted four major reductions in income tax rates, skewed to benefit the upper income brackets.”
Inflation was defeated and the stock market roared. But there were signs of trouble.
Families “were working longer hours for the same wages and borrowing more heavily to keep up… the struggling labor movement was decimated; unions lost nearly 30 percent of their membership.”
It reads like recent history, but is in fact a description of the 1920s, when the term trickle down was coined, the decade before the First Great Depression.
Then as now, the Fed failed.
Prior to each failure, money was flowing up in the U.S. to its richest citizens. With the New Deal, FDR and his newly appointed Fed Chairman, a Republican banker from Utah, reversed the flow and the nation began to recover.
They understood that the spending of the rich few cannot sustain a great economy. The sale of thousands of $500 a pair sneakers and $300,000 cars cannot generate the same volume and velocity of money moving through the economy – economic activity - as the sale of millions of less expensive shoes or cars.
That flow of money to the many was the foundation of the remarkable prosperity of post World War II America . It lasted until Ronald Reagan, with the support of a Democratic Congress and the Fed combined to shut it down.
Reagan and Congress revived regressive tax cuts for the wealthy and trickle down economics, allowed the combinations that led to “too-big-to-fail” banks and legalized usurious interest rates on consumer credit.
The Fed crushed inflation with interest rates that devastated the real economy but protected accumulated wealth, and bailed out Wall Street when their bubble of bad loans to the third world burst.
Historically, when the Fed thinks the wealthy will not be unduly burdened and decides to expand the economy or overcome an economic contraction, one of its tools is to “flood the street with money;” that is, to pump a lot of cash into the system where it is loaned, used, circulated and exchanged in the many millions of transactions that add up to a recovery.
With the crash of 2008, the Congress and the Fed did indeed “flood the street.” But the money never got past Wall Street to your street. This was intentional.
As the Fed pumped trillions into the banks and finance companies, it risked massive inflation in the U.S. (remember that inflation destroys accumulated wealth). The remedy to this threat was to simultaneously keep interest rates low. But much of the rest of the world’s major and developing economies have higher interest rates.
The money that flows through the world’s financial system has a property similar to liquid, and like water money seeks its own level. And the level money seeks is the highest interest and rate of return
So the money of America has been flowing in a massive flight of capital into the rest of the world, protecting accumulated wealth while beggaring the future of most Americans.
The Ford Motor Company is about to open its newest and most modern plant – in China, where the government is raising wages and pumping billions into infrastructure; while across America workers are forced to accept wages cuts to keep their jobs and infrastructure begins to resemble the third world.
What to do? Reverse the flow.
Interest rates in the U.S. must rise from their historic lows to attract capital and investment in the U.S. Funds must flow massively into jobs creating, taxpayer creating, revenue creating U.S. infrastructure. The first stimulus was unfocused and insufficient. The president’s proposal for a $50 billion transportation infrastructure initiative is inadequate.
A fair share of the accumulated wealth of America must be made to flow down into many more hands. Income, capital gains and inheritance must be taxed at higher rates. The argument that this will choke investment is a patent fraud. That wealth has been protected from meaningful taxation for decades, but do you see a new washing machine or tractor plant going up nearby?
The out-of-control U.S. military must be disciplined. Wars and by some reports as many as a thousand U.S. military bases in 152 foreign nations are a huge flow of dollars and tax revenue out of the U.S.
Federal taxes on gasoline must be increased. There will be an immediate reduction in the import of foreign oil and the massive out-flow of dollars to buy it. But exempt, subsidize and invest in all mass transit systems (including school bus fleets), and rebate the mostly suburban, auto dependent middle class.
But above all, the Federal Reserve must be brought inside the American democracy and Constitution and made part of the Treasury Department, its accounts audited, so that the elected government of the United States may assume the authority and responsibility for the decisions about money that determine the future well being of every American man, woman and child.
This is what must be done, but will not soon be done. The new Congress will be as bought as the current Congress; because there is one other flow that must be halted - the tidal wave of lobbying and campaign cash that buys and sells U.S. federal elections for America ’s established, accumulated wealth.
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