DO REPUBLICAN REPRESENTATIVES ELECTED FROM THE RANKS OF THE TEA PARTY KEEP THEIR PROMISES TO THOSE WHO ELECTED THEM? NOPE!

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Cenk Ugyur & Josh Israel Talk About The Tea Party Bankrolling

http://www.youtube.com/watch?v=HgQGGDOdYIU&feature=colike

Published on May 22, 2012 by jasondavis13

www.thinkprogress.org

By Josh Israel and Adam Peck on May 21, 2012 at 3:45 pm

The 15 freshmen Republican representatives in the House Tea Party Caucus each ran in 2010 on a populist anti-Wall Street message, highlighting their opposition to bank bailouts like the 2008 Troubled Asset Relief Program (TARP) and criticizing Washington for enabling the banking sector as it became "Too Big to Fail." After winning, all fifteen received significant PAC contributions from the banking industry — and have become a reliable vote and mouthpiece for the financial industry, a ThinkProgress analysis of campaign contributions, voting records and public statements reveals.

Rather than campaigning on a typical pro-business platform, the Tea Party freshmen tapped into public resentment of big banks and bailouts. For example, then-candidate Sandy Adams (R-FL) said on her campaign website that she "opposes government bailouts" and "would have voted against TARP and the auto bailout." Jeff Landry (R-LA) said bailouts of private businesses had "corrupted our free market system by rewarding the irresponsible and penalizing the responsible," blasting "bank bailouts, which led to taxpayer money directly or indirectly going into multi-million dollar bonuses."

But in Congress, the Tea Party has toed the line for big banks. Eleven of the 15 have become co-sponsors of H.R. 3461, a top priority for the ABA. According to Americans for Financial Reform, the legislation would "tilt the playing field further in the direction of excessive deference to industry interests and tie the hands of regulators attempting to protect the public interest." The bill would make it harder for bank examiners to do their job, giving regulatory responsibilities to an industry that's already shown it can't police itself.

The lone Tea Party freshman member of the Financial Services Committee, Rep. Stephen Fincher (R-TN), has consistently voted with the industry and the Republican majority for weaker regulation of the sector.

And of the 15, all but McKinley and Rep. Tim Huelskamp (R-KS) voted for the GOP's 2013 budget proposal, which included the repeal of a key component of the financial sector regulation.

Their rhetoric has also become extremely friendly to the financial industry. Rep. Joe Walsh (R-IL) famously yelled at a constituent: "Don't blame banks, and don't blame the marketplace for the mess we're in right now! I am tired of hearing that crap! This pisses me off!" Rep. Diane Black (R-TN) bashed financial regulations as "part of a pattern of government interference in the private sector." Rep. Blake Fahrenthold (R-TX) warned "excessive regulations will hurt our financial institutions." Rep. David McKinley (R-WV) said that by regulating banking and financial institutions, "what they're doing is getting into our lives. And many of us are trying to find a way to get them to pull back." And several of the freshmen criticized Dodd-Frank's regulations for limiting credit availability for small businesses.

PULLING BACK THE CURTAIN ON THE WALL STREET MONEY MACHINE

Ellen Brown
December 7, 2011
www.webofdebt.com/articles/pulling.php

On November 27, Bloomberg News reported the results of its successful case to force the Federal Reserve to reveal the lending details of its 2008-09 bank bailout. Bloomberg reported that by March 2009, the Fed had committed $7.77 trillion in below-market loans and guarantees to rescuing the financial system; and that these nearly interest-free loans came without strings attached.

The Fed insisted that the loans were repaid and there have been no losses, but the Bloomberg report said the banks reaped a $13 billion windfall in profits; and “details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.”

The revelations provoked shock and outrage among commentators. But in a letter to the leaders of the House and Senate Committees focused on the financial services industry, Fed Chairman Ben Bernanke responded on December 6^th that the figures were greatly exaggerated. He said the loans were being double-counted: short-term loans rolled over from day to day were counted as separate cumulative loans rather than as a single extended loan.

Bloomberg was quick to rebut, denying any exaggerated claims. But either way, the banks were clearly getting perks not available to the rest of us. As Alan Grayson observed in a December 5th editorial:

The main, if not the sole, qualification for getting help from the Fed was to have lost huge amounts of money. The Fed bailouts rewarded failure, and penalized success. . . .

During all the time that the Fed was stuffing money into the pockets of failed banks, many Americans couldn’t borrow a dime for a home, a car, or anything else. If the Fed had extended $26 trillion in credit to the American people instead of Wall Street, would there be 24 million Americans today who can’t find a full-time job?

All in the Name of Liquidity

It was all explained, said Grayson, with “the Fed’s all-time favorite rationale for everything it does, ‘increasing liquidity.’” In 2008, bank liquidity dried up after Lehman Brothers collapsed, and the banks could not get the cheap, ready credit on which their lending scheme depends. The Fed then stepped in as “lender of last resort,” doing what it had to do to keep the banking scheme going.

Left unexplained is why the banks’ need for “liquidity” justifies such extraordinary measures. Why do banks need cheap and ready access to funds? Aren’t they the lenders rather than the borrowers of funds? Don’t they simply take in deposits and lend them out?

The answer is no. Today when banks make loans, they extend credit FIRST, then fund the loans by borrowing from the cheapest available source. If deposits are not available, they borrow from another bank, the money market, or the Federal Reserve.

Rather than loans being created from deposits, loans actually CREATE deposits. They create deposits when checks are drawn on the borrower’s account and deposited in another bank. The originating bank can then borrow these funds (or others created by the same process at another bank) at the Fed funds rate—currently a very low 0.25%. In effect, a bank can create money in the form of “bank credit,” lend it to a customer at high interest, and borrow it back at very low interest, pocketing the difference as its profit.

If all this looks like sleight of hand, it is. The process has been compared to “check kiting,” defined in Barron’s Business Dictionary as:

[An] illegal scheme that establishes a false line of credit by the exchange of worthless checks between two banks. For instance, a check kiter might have empty checking accounts at two different banks, A and B. The kiter writes a check for $50,000 on the bank A account and deposits it in the bank B account. If the kiter has good credit at bank B, he will be able to draw funds against the deposited check before it clears, that is, is forwarded to bank A for payment and paid by bank A. Since the clearing process usually takes a few days, the kiter can use the $50,000 for a few days and then deposit it in the bank A account before the $50,000 check drawn on that account clears.

Setting Things Right

As suspicious as all this appears, the economy actually needs an expandable credit system, and an expandable credit system needs a lender of last resort. What is wrong with the current scheme is that it discriminates against Main Street in favor of Wall Street. Banks can borrow very cheaply, while individuals, corporations and governments pay “whatever the market will bear.” The banker middlemen take their cut in a scheme in which money is actually manufactured in the process of lending it. The profits are siphoned off to the 1% at the expense of the 99%.

To fix the system, the profits need to be returned to the 99%. How that could be done was suggested by Thom Hartmann in a recent editorial:

Have the central bank owned by the US government and run by the Treasury Department, so all the profits . . . go directly into the Treasury and you and I pay less in taxes . . . .

For a model on the local level, he pointed to the Bank of North Dakota:

The good people of North Dakota . . . established something very much like this—the Bank of North Dakota—and it’s kept the state in the black, and kept its farmers, manufacturers and students protected from the predations of New York banksters for nearly a century. It’s time for every state to charter their own state bank, just like North Dakota did, and for the Treasury Department to either buy the Fed from the for-profit banks that own it, or simply nationalize it.

We have been distracted here and in Europe by a sudden panic over our “sovereign debt” crises, when the real crisis is that our debt is NOT sovereign. We are indentured to a Wall Street money machine that creates our money and lends it back to us at interest, money our sovereign government could be creating itself, with full democratic oversight and accountability to the people. We have forgotten our roots, when the American colonists thrived on a system of money created by the people themselves, debt-free and interest-free. The continued dominance of the Wall Street money machine depends on that collective amnesia. The fact that this memory is surfacing again may be the machine’s greatest threat—and our greatest hope as a nation.

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Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com.

The Fed has created $12.3 trillion to bail out the banks, but has no intention of creating $140 billion to bail out the states (which would put back to work all those fired teachers, police, and firemen). It's all taxpayers' money. So why are we being denied even such a paltry share?

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THE FED HAS SPOKEN: NO BAILOUT FOR MAIN STREET

Ellen Brown, January 12th, 2011
http://www.webofdebt.com/articles/nobailout_mainstreet.php

The Federal Reserve was set up by bankers for bankers, and it has served them well. Out of the blue, it came up with $12.3 trillion in nearly interest-free credit to bail the banks out of a credit crunch they created. That same credit crisis has plunged state and local governments into insolvency, but the Fed has now delivered its ultimatum: there will be no “quantitative easing” for municipal governments.

On January 7, according to the Wall Street Journal, Federal Reserve Chairman Ben Bernanke announced that the Fed had ruled out a central bank bailout of state and local governments. "We have no expectation or intention to get involved in state and local finance," he said in testimony before the Senate Budget Committee. 

The states "should not expect loans from the Fed."

So much for the proposal of President Barack Obama, reported in Reuters a year ago, to have the Fed buy municipal bonds to cut the heavy borrowing costs of cash-strapped cities and states.

The credit woes of state and municipal governments are a direct result of Wall Street’s malfeasance. Their borrowing costs first shot up in 2008, when the “monoline” bond insurers lost their own credit ratings after gambling in derivatives. The Fed’s low-interest facilities could have been used to restore local government credit, just as it was used to restore the credit of the banks. But Chairman Bernanke has now vetoed that plan.

Why? It can hardly be argued that the Fed doesn’t have the money. The collective budget deficit of the states for 2011 is projected at $140 billion, a mere drop in the bucket compared to the sums the Fed managed to come up with to bail out the banks. According to data recently released, the central bank provided roughly $3.3 trillion in liquidity and $9 trillion in short-term loans and other financial arrangements to banks, multinational corporations, and foreign financial institutions following the credit crisis of 2008.

The argument may be that continuing the Fed’s controversial “quantitative easing” program (easing credit conditions by creating money with accounting entries) will drive the economy into hyperinflation. But creating $12.3 trillion for the banks -- nearly one hundred times the sum needed by state governments -- did not have that dire effect. Rather, the money supply is shrinking – by some estimates, at the fastest rate since the Great Depression. Creating another $140 billion would hardly affect the money supply at all.

Why didn’t the $12.3 trillion drive the economy into hyperinflation? Because, contrary to popular belief, when the Fed engages in “quantitative easing,” it is not simply printing money and giving it away. It is merely extending CREDIT, creating an overdraft on the account of the borrower to be paid back in due course. The Fed is simply replacing expensive credit from private banks (which also create the loan money on their books) with cheap credit from the central bank.  

So why isn’t the Fed open to advancing this cheap credit to the states? According to Mr. Bernanke, its hands are tied. He says the Fed is limited by statute to buying municipal government debt with maturities of six months or less that is directly backed by tax or other assured revenue, a form of debt that makes up less than 2% of the overall muni market. Congress imposed that restriction, and only Congress can change it.

That may sound like he is passing the buck, but he is probably right. Bailing out state and local governments IS outside the Fed’s mandate. The Federal Reserve Act was drafted by bankers to create a banker’s bank that would serve their interests. No others need apply. The Federal Reserve is the bankers’ own private club, and its legal structure keeps all non-members out.  

Earlier Central Bank Ventures into Commercial Lending

That is how the Fed is structured today, but it hasn’t always been that way. In 1934, Section 13(b) was added to the Federal Reserve Act, authorizing the Fed to “make credit available for the purpose of supplying working capital to established industrial and commercial businesses.” This long-forgotten section was implemented and remained in effect for 24 years. In a 2002 article called “Lender of More Than Last Resort” posted on the Minneapolis Fed’s website, David Fettig summarized its provisions as follows:

- [Federal] Reserve banks could make loans to any established businesses, including businesses begun that year (a change from earlier legislation that limited funds to more established enterprises).

- Reserve banks were permitted to participate [share in loans] with lending institutions, but only if the latter assumed 20 percent of the risk.

- No limitation was placed on the amount of a single loan.

- A Reserve bank could make a direct loan only to a business in its district.

Today, that venture into commercial banking sounds like a radical departure from the Fed’s given role; but at the time it evidently seemed like a reasonable alternative. Fettig notes that “the Fed was still less than 20 years old and many likely remembered the arguments put forth during the System's founding, when some advocated that the discount window should be open to all comers, not just member banks.” In Australia and other countries, the central bank was then assuming commercial as well as central bank functions.

Section 13(b) was repealed in 1958, but one state has kept its memory alive. In North Dakota, the publicly owned Bank of North Dakota (BND) acts as a “mini-Fed” for the state. Like the Federal Reserve of the 1930s and 1940s, the BND makes loans to local businesses and participates in loans made by local banks.

The BND has helped North Dakota escape the credit crisis. In 2009, when other states were teetering on bankruptcy, North Dakota sported the largest surplus it had ever had. Other states, prompted by their own budget crises to explore alternatives, are now looking to North Dakota for inspiration.

The “Unusual and Exigent Circumstances” Exception

Although Section 13(b) was repealed, the Federal Reserve Act retained enough vestiges of it in 2008 to allow the Fed to intervene to save a variety of non-bank entities from bankruptcy. The problem was that the tool was applied selectively. The recipients were major corporate players, not local businesses or local governments. Fettig writes:

Section 13(b) may be a memory, . . . but Section 13 paragraph 3 . . . is alive and well in the Federal Reserve Act. . . . [T]his amendment allows, "in unusual and exigent circumstances," a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions.

In 2008, the Fed bailed out investment company Bear Stearns and insurer AIG, neither of which was a bank. John Nichols reports in The Nation that Bear Stearns got almost $1 trillion in short-term loans, with interest rates as low as 0.5%. The Fed also made loans to other corporations, including GE, McDonald’s, and Verizon.

In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill:

Only Broad-Based Facilities Permitted. Section 13(3) is modified to remove the authority to extend credit to specific individuals, partnerships and corporations. Instead, the Board may authorize credit under section 13(3) only under a program or facility with “broad-based eligibility.”

What programs have “broad-based eligibility” isn’t clear from a reading of the Section, but long-term municipal bonds are evidently excluded. Mr. Bernanke said that if municipal defaults became a problem, it would be in Congress’ hands, not his.

Congress could change the law, just as it did in 1934, 1958, and 2010. It could change the law to allow the Fed to help Main Street just as it helped Wall Street. But as Senator Dick Durbin blurted out on a radio program in April 2009, Congress is owned by the banks. Changes in the law today are more likely to go the other way. Mike Whitney, writing in December 2010, noted:

So far, not one CEO or CFO of a major investment bank or financial institution has been charged, arrested, prosecuted, or convicted in what amounts to the largest incident of securities fraud in history. In the much-smaller Savings and Loan investigation, more than 1,000 people were charged and convicted. . . . [T]he system is broken and the old rules no longer apply.

The old rules no longer apply because they have been changed to suit the moneyed interests that hold Congress and the Fed captive. The law has been changed not only to keep the guilty out of jail but to preserve their exorbitant profits and bonuses at the expense of their victims.

To do this, the Federal Reserve had to take “extraordinary measures.” They were extraordinary but not illegal, because the Fed’s congressional mandate made them legal. Nobody’s permission even had to be sought. Section 13(3) of the Federal Reserve Act allows it to do what it needs to do in “unusual and exigent circumstances” to save its constituents.

If you’re a bank, it seems, anything goes. If you’re not a bank, you’re on your own.

So Who Will Save the States?

Highlighting the immediacy of the local government budget crisis, The Wall Street Journal quoted Meredith Whitney, a banking analyst who recently turned to analyzing state and local finances. She said on a recent broadcast of CBS's "60 Minutes" that the U.S. could see "50 to 100 sizable defaults" in 2011 among its local governments, amounting to "hundreds of billions of dollars."

If the Fed could so easily come up with 12.3 trillion dollars to save the banks, why can’t it find a few hundred billion under the mattress to save the states? Obviously it could, if Congress were inclined to put non-bank lending back into the Fed’s job description. Then why isn’t that being done?

The cynical view is that the states are purposely being kept on the edge of bankruptcy, because the banks that hold Congress hostage want the interest income and the control.

Whatever the reason, Congress is standing down while the nation is sinking. Congress must summon the courage to take needed action; and that action is not to impose “austerity” by cutting services, at a time when an already-squeezed populace most needs them. Rather, it is to create the jobs that will generate real productivity. To do this, Congress would not even have to go through the Federal Reserve. It could issue its own debt-free money and spend it on repairing and modernizing our decaying infrastructure, among other needed works.  Congress’ task will become easier if the people stand with them in demanding action, but Congress is now so gridlocked that change may still be long in coming.

In the meantime, the states could take matters in their own hands and set up their own state-owned banks, on the model of the Bank of North Dakota. They could then have their own very-low-interest credit lines, just as the Wall Street banks do. Rather than spending or selling off valuable public assets, or hoarding them in massive rainy day funds made necessary by the lack of ready credit, states could LEVERAGE their assets into a very strong and abundant local credit system, following the accepted business practices of the Wall Street banks themselves.

The Public Banking Institute is being launched on January 13 to explore that alternative. For more information, see http://PublicBankingInstitute.org.

Ellen Brown is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.

TO ROB A COUNTRY, OWN A BANK

March 19, 2010
To rob a country, own a bank

William Black, author of "Best way to rob a bank is to own one" talks about deliberate fraud on Wall Street, Parts 1 through 5.











Bio

William K. Black, associate professor of economics and law at the University of Missouri, Kansas City, teaches White-Collar Crime, Public Finance, Antitrust, Law & Economics. A former financial regulator, he held several senior regulatory positions during the S&L debacle. Black is the author of The Best Way to Rob a Bank Is to Own One (2005) which focuses on the role of “control fraud” in financial crises. Black developed the concept of "control fraud" — frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined.

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The Only Road to Economic Recovery is Increased Government Spending. Will Obama Cave to Wall Street and Do the Opposite?

January 26, 2010

Which Economy is Obama Talking About?

Myths of Recovery

By MICHAEL HUDSON

The State of the Union address is in danger of purveying the usual euphemisms. I expect    Obama to brag that he has overseen a recovery. But can there be any such thing as a jobless recovery? What has recovered are stock market averages and Wall Street bonuses, not disposable personal income or discretionary spending after paying debt service.

There is a dream that what can be “recovered” is something so idyllic as to be mythical: a Bubble Economy enabling people to make money without actually working, by borrowing and riding the tide of asset-price inflation to make capital gains. Corporate Democrat Harold Ford Jr. writes nostalgically that Bill Clinton’s eight years in office created 22 million jobs, “balanced the budget and left his successor with a surplus. This can be done again,” if only Obama moves further to the right (which Ford calls the center, meaning the Bayhs and Republicans).

It can’t be done again. Pres. Clinton’s administration balanced the budget by “welfare reform” to cut back public spending. This would be lethal today. Meanwhile, his explosion of bank credit and the dot.com boom (rising stock prices and bonuses without any earnings) fueled the early stages of the Greenspan bubble. It was a debt-leveraged illusion. Instead of the government running budget deficits to expand domestic demand,  Clinton left it to banks to extend interest-bearing credit-debt pollution that we are still struggling to clean up.

The danger is that when  Obama speaks of “stabilizing the economy,” he means trying to sustain the rise in compound interest and debt. This mathematical financial dynamic is autonomous from the “real” industrial economy, overwhelming it economically. That is what makes the present economic road to debt peonage so self-defeating.

Debts that can’t be paid, won’t be. So defaults are rising. The question that  Obama should be addressing is how to deal with the excess of debt above the ability to pay – and of negative equity for the one-quarter of U.S. real estate that has a higher mortgage debt than the market price is worth. If the hope is still to “borrow our way out of debt” by getting the banks to start lending again, then listeners on Wednesday will know that Obama’s second year in office will be worse for the economy than his first.

How realistic is it to expect the speech to make clear that “we can’t go home again”?  Obama promised change. “We simply cannot return to business as usual,” he said on Jan. 21, introducing the “Volcker plan.” But how can there be meaningful structural change if the plan is to return to an idealized dynamic that enriched Wall Street but not the rest of the economy?

The word “recession” implies that economic trends will return to normal almost naturally.

Any dream of “recovery” in today’s debt-leveraged economy is a false hope. Yet high financial circles expect Obama to insist that the economy cannot recover without first reimbursing and enriching Wall Street. To re-inflate asset prices, Obama’s team looks to Japan’s post-1990 model. A compliant Federal Reserve is to flood the credit markets to lower interest rates to revive bank lending –- interest-bearing debt borrowed to buy real estate already in place (and stocks and bonds already issued), enabling banks to work out of their negative equity position by inflating asset prices relative to wages.

The promise is that re-inflating prices will help the “real” economy. But what will “recover” is the rising trend of consumer and homeowner debt responsible for stifling the economy with debt deflation in the first place. This end-result of the Clinton-Bush bubble economy is still being applauded as a model for recovery.

We are not really emerging from a “recession.” The word means literally a falling below a trend line. The economy cannot “recover” its past exponential growth, because it was not really normal. GDP is rising mainly for the FIRE sector – finance, insurance and real estate – not the “real economy.” Financial and corporate managers are paying themselves more for their success in paying their employees less.

This is the antithesis of recovery for Main Street. That is what makes the FIRE sector so self-destructive, and what has ended America’s great post-1945 upswing.

There are two economies – and the extractive FIRE sector dominates the “real” economy

When listening to the State of the Union speech, one should ask just which economy  Obama means when he talks about recovery. Most wage earners and taxpayers will think of the “real” economy of production and consumption. But    Obama believes that this “Economy #1” is dependent on that of Wall Street. His major campaign contributors and “wealth creators” in the FIRE sector – Economy #2, wrapped around the “real” Economy #1.

Economy #2 is the “balance sheet” economy of property and debt. The wealthiest 10 per cent lend out their savings to become debts owed by the bottom 90 per cent. A rising share of gains are made in extractive ways, by charging rent and interest, by financial speculation (“capital gains”), and by shifting taxes off itself onto the “real” Economy #1.

John Edwards talked about “the two economies,” but never explained what he meant operationally. Back in the 1960s when Michael Harrington wrote The Other America, the term meant affluent vs. poor America. For 19th-century novelists such as Charles Dickens and Benjamin Disraeli, it referred to property owners vs. renters. Today, it is finance vs. debtors. Any discussion of economic polarization betweens rich and poor must focus on the deepening indebtedness of most families, companies, real estate, cities and states to an emerging financial oligarchy.

Financial oligarchy is antithetical to democracy. That is what the political fight in Washington is all about today. The Corporate Democrats are trying to get democratically elected to bring about oligarchy. I hope that this is a political oxymoron, but I worry about how many people buy into the idea that “wealth creation” requires debt creation. While wealth gushes upward through the Wall Street financial siphon, trickle-down economic ideology fuels a Bubble Economy via debt-leveraged asset-price inflation.

The role of public spending – and hence budget deficits – no longer means taxing citizens to spend on improving their well-being within Economy #1. Since the 2008 financial meltdown the enormous rise in national debt has resulted from the reimbursing of Wall Street for its bad gambles on derivatives, collateralized debt obligations and credit default swaps that had little to do with the “real” economy. They could have been wiped out without bringing down the economy. That was an idle threat. A.I.G.’s swap insurance department could have collapsed (it was largely in London anyway) while keeping its normal insurance activities unscathed. But the government paid off the financial sector’s bad speculative debts by taking them onto the public balance sheet.

The economy is best viewed as the FIRE sector wrapped around the production and consumption core, extracting financial and rent charges that are not technologically or economically necessary costs.

Say’s Law of markets, taught to every economics student, states that workers and their employers use their wages and profits to buy what they produce (consumer goods and capital goods). Profits are earned by employing labor to produce goods and services to sell at a markup. (M – C – M’ to the initiated.)

The financial and property sector is wrapped around this core, siphoning off revenue from this circular flow. This FIRE sector is extractive. Its revenue takes the form of what classical economists called “economic rent,” a broad category that includes interest, monopoly super-profits (price gouging) and land rent, as well as “capital” gains. (These are mainly land-price gains and stock-market gains, not gains from industrial capital as such.) Economic rent and capital gains are income without a corresponding necessary cost of production (M – M’ to the initiated).

Banks have lent increasingly to buy up these rentier rights to extract interest, and less and less to promote industrial capital formation. Wealth creation” FIRE-style consists most easily of privatizing the public domain and erecting tollbooths to charge access fees for basic necessities such as health insurance, land sites, home ownership, the communication spectrum (cable and phone rights), patent medicine, water and electricity, and other public utilities, including the use of convenient money (credit cards), or the credit needed to get by. This kind of wealth is not what Adam Smith described in The Wealth of Nations. It is a form of overhead, not a means of production. The revenue it extracts is a zero-sum economic activity, meaning that one party’s gain (that of Wall Street usually) is another’s loss.

Debt deflation resulting from a distorted “financialized” economy

The problem that Obama faces is one that he cannot voice politically without offending his political constituency. The Bubble Economy has left families, companies, real estate and government so heavily indebted that they must use current income to pay banks and bondholders. The U.S. economy is in a debt deflation. The debt service they pay is not available for spending on goods and services. This is why sales are falling, shops are closing down and employment continues to be cut back.

Banks evidently do not believe that the debt problem can be solved. That is why they have taken the $13 trillion in bailout money and run – paying  it out in bonuses, or buying other banks and foreign affiliates. They see the domestic economy as being all loaned up. The game is over. Why would they make yet more loans against real estate already in negative equity, with mortgage debt in excess of the market price that can be recovered? Banks are not writing more “equity lines of credit” against homes or making second mortgages in today’s market, so consumers cannot use rising mortgage debt to fuel their spending.

Banks also are cutting back their credit card limits. They are “earning their way out of debt,” making up for the bad gambles they have taken with depositor funds, by raising interest rates, penalties and fees, by borrowing low-interest credit from the Federal Reserve and investing it abroad – preferably in currencies rising against the dollar. This is what Japan did in the “carry trade.” It kept the yen’s exchange rate down, and it is lowering the dollar’s exchange rate today. This threatens to raise prices for imports, on which domestic consumer prices are based. So easy credit for Wall Street means a cost squeeze for consumers.

The President needs a better set of advisors. But Wall Street has obtained veto power over just who they should be. Control over the President’s ear time has been part of the financial sector’s takeover of government. Wall Street has threatened that the stock market will plunge if oligarch-friendly Fed Chairman Bernanke is not reappointed.    Obama insists on keeping him on board, in the belief that what’s good for Wall Street is good for the economy at large.

But what’s good for the banks is a larger market for their credit – more debt for the families and companies that are their customers, higher fees and penalties, no truth-in-lending laws, harsher bankruptcy terms, and further deregulation and bailouts.

This is the program that    Bernanke has advised Washington to follow. Wall Street hopes that he will be kept on board. Bernanke’s advice has helped bolster that of Tim Geithner at Treasury and Larry Summers as chief advisor to convince Pres. Obama that “recovery” requires more credit.

Going down this road will make the debt overhead heavier, raising the cost of living and doing business. So we must beware of the President using the term “recovery” in his State of the Union speech to mean a recovery of debt and giving more money to Wall Street Jobs cannot revive without consumers having more to spend. And consumer demand (a hateful, jargon word, because only Wall Street and the Pentagon’s military-industrial complex really make demands) cannot be revived without reducing the debt burden. Bankers are refusing to write down mortgages and other debts to reflect the ability to pay. That act of economic realism would mean taking a loss on their bad debts. So they have asked the government to lend new buyers enough credit to re-inflate housing prices. This is the aim of the housing subsidy to new homebuyers. It leaves more revenue to be capitalized into higher mortgage loans to support prices for real estate fallen into negative equity.

The pretense is that this is subsidizing the middle class, but homebuyers are only the intermediaries for government credit (debt to be paid off by taxpayers) to mortgage bankers. Nearly 90 per cent of new home mortgages are being funded or guaranteed by the FHA, Fannie Mae and Freddie Mac – all providing a concealed subsidy to Wall Street.

Obama’s most dangerous belief is in the myth that the economy needs the financial sector to lead its recovery by providing credit. Every economy needs a means of payment, which is why Wall Street has been able to threaten to wreck the economy if the government does not give in to its demands. But the monetary function should not be confused with predatory lending and casino gambling, not to mention Wall Street’s use of bailout funds on lobbying efforts to spread its gospel.

Deficit reduction

It seems absurd for politicians to worry that running a deficit from health care or Social Security can cause serious economic problems, after having given away $13 trillion to Wall Street and a blank check to the Pentagon. The “stimulus package” was only about 5 per cent of this amount. But    Obama has announced that he intends on Tuesday to close the barn door by proposing a bipartisan Senate Budget Commission to recommend how to limit future deficits – now that Congress is unwilling to give away any more money to Wall Street.

Republican approval would set the stage for Wednesday’s State of the Union message promising to press for “fiscal responsibility,” as if a lower deficit will help recovery. I suspect that Republicans will have little interest in joining. They see the aim as being to co-opt their criticism of Democratic spending plans. But in view of the rising and well-subsidized efforts of Harold Ford and his fellow Corporate Democrats, the actual “bipartisan” aim seems to be to provide political cover for cutting spending on labor and on social services.    Obama already has sent up trial balloons about needing to address the Social Security and Medicare deficits, as if they should not be financed out of the general budget by taxpayers including the higher brackets (presently exempted from FICA paycheck withholding).

Traditionally, running deficits is supposed to help pull economies out of recession. But today, spending money on public services is deemed “bad,” because it may be “inflationary” – that is, threatening to raise wages. Talk of cutting deficits thus is class-war talk – on behalf of the FIRE sector.

The economy needs deficit spending to avoid unemployment and poverty, to increase social spending to deal with the present economic shrinkage, and to maintain their capital infrastructure. The federal government also needs to increase revenue sharing with states forced to slash their budgets in response to falling tax revenue and rising unemployment insurance.

But the deficits that the Bush-Obama administration have run are nothing like the familiar old Keynesian-style deficits to help the economy recover. Running up public debt to pay Wall Street in the hope that much of this credit will be lent out to inflate asset prices is deemed good. This belief will form the context for Wednesday’s State of the Union speech. So we are brought back to the idea of economic recovery and just what is to be recovered.

Financial lobbyists are hoping to get the government to fill the gap in domestic demand below full-employment levels by providing bank credit. When governments spend money to help increase economic activity, this does not help the banks sell more interest bearing debt. Wall Street’s golden age occurred under Bill Clinton, whose budget surplus was more than offset by an explosion of commercial bank lending.

The pro-financial mass media reiterate that deficits are inflationary and bankrupt economies. The reality is that Keynesian-style deficits raise wage levels relative to the price of property (the cost of obtaining housing, and of buying stocks and bonds to yield a retirement income). The aim of running a “Wall Street deficit” is just the reverse: It is to re-inflate property prices relative to wages.

A generation of financial “ideological engineering” has told people to welcome asset-price inflation (the Bubble Economy). People became accustomed to imagine that they were getting richer when the price of their homes rose. The problem is that real estate is worth what banks will lend – and mortgage loans are a form of debt, which needs to be repaid.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, mh@michael-hudson.com

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Health Care Reform DOA: Triumph of the Money Party

17 December, 2009 08:32:00 Michael Collins

There are many of us who have anywhere from serious to desperate need of health care reform. How surprised are you that the current effort is about to collapse under its own weight? There should be no surprise at all. We are going off to an undeclared war again, bankers reap profits while the real rate of unemployment is 17% at least, and there's no rush to restore the Constitutional rights stripped from us over the past years. It's The Money Party 24/7 as greedy and rapacious as they've ever been.


by Michael Collins

Dr. Howard Dean, MD, just said pull the plug on the current health care reform effort. The cure is worse than the disease, according to the good doctor.

Why the surprise?

Last week the president announced that he's sending 30,000 troops to Afghanistan without a declaration of war by Congress and without Afghanistan posing a direct threat to the United States violating both the United States Constitution and international law at the same time.

The bailed out Wall Street failures are paying back just enough of their loans to the Treasury Department to allow a new round of huge bonuses. At the same time, they continue to get tons of cash through the Federal Reserve. Pay back a few billion; get 7 trillion dollars in credit. Not a bad deal.

Congress failed to pass a bill to help with foreclosures. We're at eight million so far since 2008 with another four million predicted for 2010. The beat goes on.

The Justice Department and Congress failed to seriously investigate massive mortgage fraud from the very top on down to loan officers during the real estate bubble.

The White House and Congress forgot to include a cap on credit card rates in its credit card bill of rights. How unfortunate since the credit card companies jacked rates way up shortly after the bill passed.

The official unemployment rate of 10 percent is far below the true unemployment rate of about 17 percent or higher. Why? Because it might upset us to know that we're at Great Depression levels of unemployment.

Poverty is rising at a rapid rate with no end in sight but you'd never know it for all the attention it gets. Let the markets take care of it.

The people who made the financial mess on Wall Street are now running the U.S. Treasury. The key players, Secretary of the Treasury Geithner and insider extraordinaire Larry Summers, were appointed right after the inauguration.

The constitutional rights stolen by the previous administration are still missing in action with no real effort underway to restore them. The Patriot Act is alive and well. The feds can still tap your phone and email. They can get at any of your financial data they want and it's all done in secret. But we still haven't had a real investigation of 911.

Congress is about to consider an international treaty of copyright that will turn anyone with a public blog or web site into a cop required to enforce the new laws or face prosecution.

Throughout it all, not one member of Congress or the financial elite will miss a meal, worry about their health care, lose their house, or ever face prosecution for destroying the economy of the United States.

Their Ponzi scheme is literally too big to fail. If there were ever the least bit of concentrated scrutiny on the various wars and financial rip offs over just the past decade, it would be the end of all of them.

But The Money Party is a permanent fixture in our lives. It dominates politics, the media and the economy. It's a self-fulfilling prophecy that is always accurate. Rig the game so only those with money can run for office. Hold elections with invisible ballots on electronic voting machines that nobody really understands. Allow all sorts of legal bribes for legislators. And never allow the term election fraud to be mentioned anywhere but on a few internet web sites.

Marginalize the poor, ethnic groups, immigrants, and anyone who protests the system. Kill the unions. Then intimidate those who have the courage to show up and protest with SWAT teams decked out for a serious beat down.

Take all you can from the middle class to support the big casino in banking and on Wall Street. Make husbands and wives work two jobs and be grateful for the opportunity. Provide children a lousy education that costs more every year while you talk about how much you love education.

Create false issues that pit one group against another -- race against race, class against class -- so that the great horror is never realized -- a unified public movement to demand freedom, dignity, and respect in our personal and public lives and a chance to earn a decent living in return for our hard work.

The Money Party has no ideals or goals other than to take as much as they can, at every turn, all the time and never let up.

Blame citizens for the fraud committed by the financiers.

Turn a blind eye as people lose their homes, savings, health care and jobs.

Blame humanity for pollution when it's just a few industries that create the filth that's threatening us daily.

Create side shows not worthy of a second rate carnival that you call politics and never mention that changes in administrations are really cosmetic and stylistic, not substantial. Meet the new boss, not exactly the same as the old boss, but close enough.

It's all good if you're at the top or on the take. The river keeps flowing, filthy as it is, in your direction with more and more based on the real work and the real economy of citizens who, despite all of this, strive to improve their lives and contribute to the larger good.

If things get too hot, you can just stage a big drama, get everybody upset, and make people feel grateful that they have the opportunity to be perpetual victims of the most rapacious, relentless, and callous scheme around to transfer wealth from the many to the very few.

It's only class war when we fight back and they're ready with their distracting dramas and debates on issues where the two sides are separated by just a few degrees of difference. Then demand bipartisan solutions where compromise is routinely used to break major campaign promises.

They don't care if we live or die although they do want us to be as productive as possible up to the end, as long as we don't expect to retire or enjoy the fruits of our labor.

We are nothing to them.

Michael Collins publishes Election Fraud News. His articles can also be found on Scoop Independent News, The Daily Censored  and The Smirking Chimp, among others.
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Greatest Overview of History's Greatest Heist

2009 US Economy: Largest Transfer of Wealth to Financial/Political Elite in Global History
Amped Content, Posted on Thursday, October 22nd, 2009
By Carl Herman, Examiner

Political “leadership” of the two oligarchy parties spin their economic policy as being for the public benefit. Professional economists increasingly cast economic policy in unprecedented harsh criticism, even calling for public demonstrations against what they claim as gross violations of financial law. Let’s consider current facts of high importance:

• Transfer of somewhere over $3 trillion with a total potential of $23.7 trillion to banks and financial institutions for the socialization of their gambling losses on illegal sub-prime mortgages and credit default swaps. We know the sub-prime lending was illegal because the FBI concluded 80% of all sub-prime criminal fraud originated from the lenders.

• A so-called bailout designed to give money to the banksters without accountability of where the money is going. This is according to testimony of Elizabeth Warren, Harvard law professor appointed to oversee the bailout for Congress, with video explanation below. The bankster-bailout was chosen rather than simply protecting depositors and reorganizing the banks under standard bankruptcy procedure. The two oligarchy political parties denied Congressional hearings for the bankster-bailout, which should have considered cost-benefit analysis for public banks rather than private banks. An important fact that would have come out of the hearings is that the total market capitalization of all the major US banks was less than $300 billion; meaning that the government could have outright bought all of them for less than a tenth of the amount given away. Think about that.

• A 2009 record payout to bank employees, including lucrative bonuses, on pace for $140 billion. Goldman Sachs, with three recent CEOs who have also been Secretary of the US Treasury, is doubling their bonuses from 2008.

• Depression-level unemployment, with the government’s “official figures” understating true unemployment by half.

• 100,000 laid-off teachers with class sizes expanding to over 40 students per class, and over a million homeless US students.

• The economic crushing of the American middle class, as explained by Elizabeth Warren in her video.

• Record high home foreclosures. An alternative policy to the bankster-bailout would have been to have the banks write-down the value of the mortgages they fraudulently wrote, and reset that lower value as the new loan amount for the homeowner. This could have been a preliminary move to creating non-profit mortgage rates for the public benefit.

• Record federal budget deficit of $1.4 trillion.

• Record federal debt of $12 trillion with annual interest payments of ~$450 billion every year. The oligarchy has no policy to ever pay the national debt, only to make the minimum interest payment. They don’t even try to defend that the national debt is in the public good and never discuss monetary reform to end the debt.

• Record total US debt from all sources of over $70 trillion.

• US military recruitment hitting targets because young Americans have no other options for work. These men and women will feed the expansion of illegal US Wars of Aggression.

Dylan Ratigan of MSNBC’s show, “Morning Meeting,” calls the economic “bailout” and subsequent policy, “the largest theft and cover-up ever,” “the worst deal since the Indians sold Manhattan,” “the ‘Masters of the Universe’ are on the take from the taxpayers,” “the biggest transfer of money in the history of the world,” and “No one, the Pharaohs, you pick ‘em, no one even comes close to how much the banks and politicians have stolen from us.” His video is also below.

Paul Craig Roberts, Assistant Secretary of the Treasury during President Reagan’s first term, Associate Editor of the Wall Street Journal, and Senior Research Fellow at the Hoover Institution of Stanford University simply writes, “The rich have stolen the economy.”

If it’s any comfort, remember that America was born from recognition that our government was playing us, exploiting our labor for their financial gain and not for the public good. Remember that our government labeled Thomas Jefferson, John Adams, Benjamin Franklin, George Washington, James Madison, and all the Founding Fathers as “traitors” when they didn’t blindly and stupidly believe the empty spin that the government was acting in the public good. They also predicted that future generations would have to fight to retain the liberty they wrested from lying political whores who murdered the public good in exchange for personal wealth, fame and power.

If you ever wondered how educated Germans could ever believe Nazi propaganda, all you have to do is look around the US today.

The good news is that the structural economic change for the public good is simple. Monetary reform ends the banks from creating money, shifts this power to the Treasury for the direct payment of public goods and services and minimizing the peoples’ cost of credit (think 1% interest-rate mortgages). Real regulation will end casino capitalism with exotic derivatives betting on future economic outcomes that produce no public benefit in the gambling. Taking money out of elections and politics will limit political corruption. Breaking up the five corporations that currently serve as the propaganda arm of the oligarchy will help; the so-called mainstream media, or sheepstream media corpse as I like to call it.

To get from here to the good news is a formidable task. I suggest a Truth and Reconciliation process to exchange our getting the complete truth and ending all criminal and damaging political and economic acts for the perpetrators’ cooperation and return of public assets. I’d even allow them a stipend to facilitate their surrender of our government and economy; what the oligarchy presently consider their own twisted private playground.

The two interviews are necessary education for the public to see the economy for what it is. They are 6-minutes and 7-minutes.

As always, please share this article with all who say they want economic competence and want to be responsible citizens. If you appreciate my work, please subscribe by clicking under the article title. Please feel free to peruse my archive of work here.

GRAND THEFT -- NATIONAL ECONOMY

There was a warning long before this mega-crime was committed, but it was ignored.
FRONTLINE gives you the little known history.

Professor Chossudovsky tells you how the scam works.

From here on, no more "socialist" government taking our hard-earned tax money to aid the poor. No! The new privatized U.S.A. will socialize the gambling losses of the big banks, taking money from the poor -- soon to include the former middle class -- to "aid" the super rich.

The U.S. Economy, 75% Based on Consumption, Is 100% Broken by Bankers Who, after a Bailout of $12 TRILLION, Are Still Stealing from Consumers!

Blogger’s Note: Below I reprint recent blogs by Robert Reich and Jim Hightower, which combine to tell a tale of unbounded greed by the few, leading to a dismal future for the many. N.B. Reich is correct that the U.S. GDP is 70% consumption, if real estate is excluded. However, home sales have normally accounted for another 5%. “But the traditional housing market, the one that involves willing buyers and sellers, is still dead, with transactions lower than they have been for decades.”

When Will The Recovery Begin? Never.

by Robert Reich, posted July 09, 2009

The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape.

Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. The reason is asset values at bottom are so low that investor confidence returns only gradually.

That's where the more sober U-shapers come in. They predict a more gradual recovery, as investors slowly tiptoe back into the market.

Personally, I don't buy into either camp. In a recession this deep, recovery doesn't depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.

Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.

Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.

My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.

The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.

Robert Reich’s Latest book, "Supercapitalism," is now out in paperback. For copies of articles, books, and public radio commentaries, go to www.robertreich.org. This blog is available as an RSS feed.

Big Bankers Mounting Sneak Attack on Consumers

by Jim Hightower, AlterNet. posted July 10, 2009.

Have you received your thank-you note? I'm still waiting for mine.

More than a year into the Wall Street bailout, I've yet to get any sort of "thank you" from even a single one of the big banks that you and I propped up with $12 trillion in direct giveaways, indirect giveaways, government guarantees and sweetheart loans. You'd think their mommas would've taught them better. But I've begun to think that waiting on a simple gesture of banker gratitude is like waiting on Donald Trump to have a good hair day -- ain't gonna happen.

Far from showing appreciation, the largest banking chains are now going out of their way to stiff us. Instead of nice notes, they are quietly slipping new gotchas into our monthly credit card bills and bank statements. In June, for example, Bank of America abruptly raised its fee for a basic checking account by 50 percent. Citibank jacked up the interest rate on some of its cards to 29.99 percent. And JPMorgan Chase more than doubled the required minimum payment on its cards.

Across the board, fees have skyrocketed to their highest levels on record, including assessments for such common occurrences as overdrafts (as high as $39), stop-payment actions ($39 -- double what it was 10 years ago), balance transfers (up more than 50 percent in the past year) and ATM use (nearly doubled in 10 years).

To add insult to injury, the banks blame us for their rate increases. Because the economy is such a wreck (massive job losses, falling incomes, millions of home foreclosures and other unpleasantness), industry spokesmen say there is a greater risk that customers will bounce checks or fall behind on their credit-card payments. Thus, claim purse-lipped bankers, they must protect themselves from us by ratcheting up rates and fees. "There is an increased riskiness around repayment because of the recession," spaketh one lobbyist for the financial giants.

Glade doesn't make enough "Spring Lilac" to cover up the stench of this argument. Come on -- it was the greed and incompetence of Mr. Jolly Banker that wrecked our economy, caused the recession and forced the odious bailout on us. They want us to pay for that?

The truth is, they are socking it to their customers for two reasons: 1) they can, and 2) fee hikes are a shifty way to snatch enormous levels of new income for themselves without doing anything to earn it.

These are the geniuses who made an ugly mess of the core business of banking -- which is to make good loans. To make up for their huge losses in that business, bankers have essentially been reduced to flim-flam fee-scammers. Last year, assessment of consumer fees became the main business of banks, totaling 53 percent of the industry's income!

That was before the current outbreak of fee frenzy. In the first three months of this year, for example, Bank of America's fee income rose 50 percent above the same period of 2008 -- an extra $4 billion in revenue for the bank.

"Fees 'R' Us" is what big banks have become. This is why they are panicked by reforms presently coming out of Washington. Already, President Obama has signed a bill to restrict credit-card gouging, and Bank of America, Citigroup and JPMorgan (which control about 58 percent of the nation's credit-card market) are scrambling to jack up their rates and fees before the new law takes effect next February.

Now, the bankers are lobbying frantically to kill Obama's plan to create a Consumer Financial Protection Agency, which would have regulatory power to prohibit a wide range of finance-industry abuses. For the first time, we consumers would have our own seat at the regulatory table -- an agency with the independence and clout to counter the Federal Reserve and other agencies that primarily serve big banks.

From the bailout to the explosion in fees, we've seen that Wall Street's financial titans won't control their greed. For the sake of the economy, the well-being of America's majority and the advancement of our nation's democratic values, we must do it for them. For more information, contact Americans for Financial Reform: www.ourfinancialsecurity.org.

To find out more about Jim Hightower, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

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