Where Are The Prosecutions?
SEC Lets Citi Execs Go Free After $40 Billion Subprime Lie
Saturday 31 July 2010
by: Zach Carter | AlterNet | News Analysis
What is the penalty for bankers who tell $40 billion lies? Somewhere between nothing and a rounding-error on your bonus.
The SEC just hit two Citigroup executives with fines for concealing $40 billion in subprime mortgage debt from investors back in 2007. The biggest fine is going to Citi CFO Gary Crittenden, who will pay $100,000 to settle allegations that he screwed over his own investors. The year of the alleged wrongdoing, Crittenden took home $19.4 million. That’s right. Crittenden will lose one-half of one percent of his income from the year he hid a quagmire of bailout-inducing insanity from his own investors. That’s it. No indictment. No prison time. Crittenden doesn’t even have to formally acknowledge any wrongdoing.
In 2007, as financial markets were freaking out about the subprime situation, Citi repeatedly told its investors that it owned just $13 billion in subprime mortgage debt. It was true—if you didn’t count an additional $40 billion in subprime debt that the company was also holding onto.
Citi’s CEO at the time, Chuck Prince, has not been charged with anything. As Yves Smith emphasizes, all of the top financial officers of every major corporation are responsible for the accuracy of their quarterly financial statements. Lying on those statements is a federal crime. This is the sort of thing that securities fraud cases are built around.
The SEC’s own statements about what went on at Citi are damning. If the agency can make this kind of information public, they ought to be pursuing criminal prosecutions. The SEC says that senior Citi management had been collecting information about the company’s subprime situation as early as April 2007, but repeatedly cited the $13 billion figure to investors over the next six months, waiting to acknowledge the additional $40 billion in subprime debt until November 2007. The SEC also says that Crittenden knew the “full extent” of Citi’s subprime situation by September at the latest, but the company continued to cite $13 billion in earnings reports through October.
Citi’s subprime shenanigans had consequences for taxpayers, pushing the company to the brink of total collapse and prompting one of the biggest bailouts of 2008.
Phil Angelides and the Financial Crisis Inquiry Commission deserve a lot of credit for highlighting the absurdity of Citi’s actions in a hearing on April 7 of this year (the key passage starts on page 368 of this pdf transcript). Angelides’ line of questioning revealed that even Citi’s board knew that the subprime exposure was much greater than what the company was claiming in public. Citi’s board at the time included Robert Rubin, former Treasury Secretary and architect of much of the deregulation that lead to the current crisis who took home $120 million for his work at Citi.
Either the SEC or the Justice Department could be pursuing criminal cases against Citi executives. What does it take to get the Justice Department’s attention on a financial fraud case? You have to launder $380 billion in drug money, and even then, DOJ lets you off with a slap on the wrist. The DOJ caught Wachovia doing just that, and the bank is getting off with a minor fine that won’t even make a dent in it’s second-quarter profits.
The Citi settlement is worse than a get-out-of-jail free card for Crittenden, Prince and their cohorts. The SEC actually fined Citi’s shareholders $75 million for the alleged wrongdoing of their executives. For some varieties of corporate misconduct, like Wachovia’s drug money laundering, hitting shareholders with the fine is appropriate. Wachovia’s money laundering operations directly enriched the company and its shareholders. This was not the case with Citi’s subprime scandal. Citi’s executives were hurting their own shareholders. Instead of meting out serious punishment to those executives, the SEC is fining Citi’s shareholders, the very people wronged in the incident.
This deference to the elites who wrecked the economy just keeps playing out. When Bank of America lied to its shareholders about billions of dollars in bonus payments it was about to make, the SEC decided to fine BofA shareholders and let the firm’s executives off the hook. The decision-makers at Wachovia who allowed the firm to funnel drug money despite repeated warnings by whistleblowers have not been indicted. Nobody at Washington Mutual has been indicted despite clear evidence of rampant mortgage fraud at the firm. Lehman Brothers’ repo 105 accounting scam is going unpunished, as are similar schemes at other banks including Bank of America. After much public relations flogging, the SEC let Goldman Sachs off easy.
More than 1,100 bankers went to jail in the aftermath of the savings and loan crisis. Massive financial crises simply do not occur without widespread fraud. The failure to prosecute that fraud poses systemic risks for the global economy. With too-big-to-fail behemoths dominating the financial landscape, the prospect of prison is the only serious check on executives interested in cannibalizing the economy for personal gain. If the SEC and the Department of Justice continue to let executives get away with outrageous acts without even taking the case to court, our financial system is doomed to repeat the same excesses and abuses we’ve seen over the past decade. If Crittenden did what the SEC claims he did, he screwed over his own investors and scored a huge bonus in the process. Everybody on Wall Street understands the implications: breaking the law is a great way to make a lot of money. When a class of elites can thumb its nose at the law with impunity, the result is not only a threat to the efficiency of our economy, but a threat to the basic functioning of our democracy.
Zach Carter is AlterNet's economics editor. He is a fellow at Campaign for America's Future, and a frequent contributor to The Nation magazine.
Tuesday, August 3, 2010
Monday, May 10, 2010
Wall Street's attempt to cut Social Security and Medicare
Derailing the Wall Street Attack on Social Security
Monday 10 May 2010
by: Dean Baker, t r u t h o u t | Op-Ed
Emboldened by the fact that none of them have gone to jail for their role in the financial crisis, the Wall Street gang is now gunning for Social Security and Medicare, the country's most important safety net programs. Led by investment banker Pete Peterson, this crew is spending more than a billion dollars to convince the public that slashing these programs is the only way to protect our children and grandchildren from poverty.
Peterson has so much money to spend on this crusade that he can't even use it all up in the normal practice of buying think tank studies that support his position. Therefore he has sought out other mechanisms to support his attack. For example, he has funded a nationwide propaganda push called "America Speaks," which is designed to get ordinary citizens to agree with his Social Security slashing plans by giving them such a limited range of options to deal with scary deficit projections that they have no alternative [http://usabudgetdiscussion.org/]
Peterson is also funding a high school curriculum in the hopes of indoctrinating the nation's young with his quest. He has even created a news service called the "Fiscal Times". The Fiscal Times intends to plant deficit scare stories in newspapers that are desperate for copy now that they have downsized their news staffs. Peterson's son assembled the staff from the large group of journalists displaced by the collapse of the newspaper industry.
Peterson even funded the creation of a game "budget ball" to convince young people that taking away grandma and grandpa's Social Security and Medicare can be fun. Of course we haven't said a word about all the politicians of both political parties that this crew owns.
When kids get scared watching a horror flick, we tell them to repeat: "it's only a movie." As the Peterson gang ramps up its anti-Social Security and Medicare crusade, it is important to remember: "it's just Wall Street propaganda."
They have lots of ways to make the deficits and debt look really really scary. Remember, these are professionals, just like the folks that make those Hollywood horror flicks. But, knowledge of some basic facts will protect you and your children.
First, there are no remotely plausible projections that do not show that our children and grandchildren will be far wealthier on average than we are today. The standard projections from the Congressional Budget Office show that real wages will be more than 50 percent higher in 2040 (after adjusting for inflation) than they are today. This means that even if our children faced a huge 5 percentage point increase in taxes, they would still be left with 40 percent more income on average than do workers today.
Insofar as our children face a threat of declining living standards it is from the growing inequality, which is redistributing most income gains upward. If the trend towards increasing inequality continues than many young people will have lower standards of living than their parents. However, intra-generational inequality gets little attention from Pete Peterson and his Wall Street gang.
The near-term (next 10 years) budget projections show deficits that will be comparable to what we had in the 80s and early 90s, once the economy recovers from the collapse of the housing bubble. The deficits projected for late in this decade are largely attributable to the wars in Afghanistan and Iraq and the extra interest burden created by borrowing for these wars and the Bush tax cuts, as well as the deficits needed to boost the economy out of recession. The story of profligate spending – apart from on these wars – is an invention of the Wall Street gang.
Finally, the really big deficit horror stories coming from this crew are derived from projections that our broken health care system just keeps getting worse. The United States already spends more than twice as much per person on health care as the average for other wealthy countries. This gap to projected to grow ever larger over coming decades.
More than half of all health care spending is paid for through government programs like Medicare and Medicaid, therefore if these health care projections prove accurate, we will have very serious budget problems. Of course, we will also have enormous economic problems since no one will have any money left over after paying for their health care.
This situation should emphasize the urgency of fixing the health care system, but the Peterson Wall Street gang instead sees it as a reason to yelp about the budget deficit. Fixing the health care system would mean hurting the insurance industry, the pharmaceutical industry and other powerful interest groups aligned with the Wall Street gang. It is easy to design policies that would substantially reduce costs. However, the Peterson Wall Street gang would rather take away Medicare and Social Security benefits from retired workers than take away profits from the insurance and pharmaceutical industries.
As we get further into the year, the Wall Street crew is planning to escalate their propaganda. But don't let them scare you – the problem is that too much money is going to people like them, not Medicare, Social Security and other key programs that support the public.
http://www.truthout.org/derailing-wall-street-attack-social-security59340
Monday 10 May 2010
by: Dean Baker, t r u t h o u t | Op-Ed
Emboldened by the fact that none of them have gone to jail for their role in the financial crisis, the Wall Street gang is now gunning for Social Security and Medicare, the country's most important safety net programs. Led by investment banker Pete Peterson, this crew is spending more than a billion dollars to convince the public that slashing these programs is the only way to protect our children and grandchildren from poverty.
Peterson has so much money to spend on this crusade that he can't even use it all up in the normal practice of buying think tank studies that support his position. Therefore he has sought out other mechanisms to support his attack. For example, he has funded a nationwide propaganda push called "America Speaks," which is designed to get ordinary citizens to agree with his Social Security slashing plans by giving them such a limited range of options to deal with scary deficit projections that they have no alternative [http://usabudgetdiscussion.org/]
Peterson is also funding a high school curriculum in the hopes of indoctrinating the nation's young with his quest. He has even created a news service called the "Fiscal Times". The Fiscal Times intends to plant deficit scare stories in newspapers that are desperate for copy now that they have downsized their news staffs. Peterson's son assembled the staff from the large group of journalists displaced by the collapse of the newspaper industry.
Peterson even funded the creation of a game "budget ball" to convince young people that taking away grandma and grandpa's Social Security and Medicare can be fun. Of course we haven't said a word about all the politicians of both political parties that this crew owns.
When kids get scared watching a horror flick, we tell them to repeat: "it's only a movie." As the Peterson gang ramps up its anti-Social Security and Medicare crusade, it is important to remember: "it's just Wall Street propaganda."
They have lots of ways to make the deficits and debt look really really scary. Remember, these are professionals, just like the folks that make those Hollywood horror flicks. But, knowledge of some basic facts will protect you and your children.
First, there are no remotely plausible projections that do not show that our children and grandchildren will be far wealthier on average than we are today. The standard projections from the Congressional Budget Office show that real wages will be more than 50 percent higher in 2040 (after adjusting for inflation) than they are today. This means that even if our children faced a huge 5 percentage point increase in taxes, they would still be left with 40 percent more income on average than do workers today.
Insofar as our children face a threat of declining living standards it is from the growing inequality, which is redistributing most income gains upward. If the trend towards increasing inequality continues than many young people will have lower standards of living than their parents. However, intra-generational inequality gets little attention from Pete Peterson and his Wall Street gang.
The near-term (next 10 years) budget projections show deficits that will be comparable to what we had in the 80s and early 90s, once the economy recovers from the collapse of the housing bubble. The deficits projected for late in this decade are largely attributable to the wars in Afghanistan and Iraq and the extra interest burden created by borrowing for these wars and the Bush tax cuts, as well as the deficits needed to boost the economy out of recession. The story of profligate spending – apart from on these wars – is an invention of the Wall Street gang.
Finally, the really big deficit horror stories coming from this crew are derived from projections that our broken health care system just keeps getting worse. The United States already spends more than twice as much per person on health care as the average for other wealthy countries. This gap to projected to grow ever larger over coming decades.
More than half of all health care spending is paid for through government programs like Medicare and Medicaid, therefore if these health care projections prove accurate, we will have very serious budget problems. Of course, we will also have enormous economic problems since no one will have any money left over after paying for their health care.
This situation should emphasize the urgency of fixing the health care system, but the Peterson Wall Street gang instead sees it as a reason to yelp about the budget deficit. Fixing the health care system would mean hurting the insurance industry, the pharmaceutical industry and other powerful interest groups aligned with the Wall Street gang. It is easy to design policies that would substantially reduce costs. However, the Peterson Wall Street gang would rather take away Medicare and Social Security benefits from retired workers than take away profits from the insurance and pharmaceutical industries.
As we get further into the year, the Wall Street crew is planning to escalate their propaganda. But don't let them scare you – the problem is that too much money is going to people like them, not Medicare, Social Security and other key programs that support the public.
http://www.truthout.org/derailing-wall-street-attack-social-security59340
Sunday, May 2, 2010
"SHOW US YOUR PAPERS"
"SHOW US YOUR PAPERS", is downright UN-AMERICAN!
It's wrong in Arizona (click here to take action to protest Arizona's new immigration law) and it would be wrong for the rest of the county too:
Dems spark alarm with call for national ID card
By Alexander Bolton - 04/30/10
A plan by Senate Democratic leaders to reform the nation’s immigration laws ran into strong opposition from civil liberties defenders before lawmakers even unveiled it Thursday.
Democratic leaders have proposed requiring every worker in the nation to carry a national identification card with biometric information, such as a fingerprint, within the next six years, according to a draft of the measure.
The proposal is one of the biggest differences between the newest immigration reform proposal and legislation crafted by late Sen. Edward Kennedy (D-Mass.) and Sen. John McCain (R-Ariz.).
The national ID program would be titled the Believe System, an acronym for Biometric Enrollment, Locally stored Information and Electronic Verification of Employment.
It would require all workers across the nation to carry a card with a digital encryption key that would have to match work authorization databases.
“The cardholder’s identity will be verified by matching the biometric identifier stored within the microprocessing chip on the card to the identifier provided by the cardholder that shall be read by the scanner used by the employer,” states the Democratic legislative proposal.
The American Civil Liberties Union, a civil liberties defender often aligned with the Democratic Party, wasted no time in blasting the plan.
“Creating a biometric national ID will not only be astronomically expensive, it will usher government into the very center of our lives. Every worker in America will need a government permission slip in order to work. And all of this will come with a new federal bureaucracy — one that combines the worst elements of the DMV and the TSA,” said Christopher Calabrese, ACLU legislative counsel.
“America’s broken immigration system needs real, workable reform, but it cannot come at the expense of privacy and individual freedoms,” Calabrese added.
The ACLU said “if the biometric national ID card provision of the draft bill becomes law, every worker in America would have to be fingerprinted.”
A source at one pro-immigration reform group described the proposal as “Orwellian.”
But Senate Democratic Whip Dick Durbin (Ill.), who has worked on the proposal and helped unveil it at a press conference Thursday, predicted the public has become more comfortable with the idea of a national identification card.
“The biometric identification card is a critical element here,” Durbin said. “For a long time it was resisted by many groups, but now we live in a world where we take off our shoes at the airport and pull out our identification.
“People understand that in this vulnerable world, we have to be able to present identification,” Durbin added. “We want it to be reliable, and I think that’s going to help us in this debate on immigration.”
Implementing a nationwide identification program for every worker will be a difficult task.
The Social Security Administration has estimated that 3.6 million Americans would have to visit SSA field offices to correct mistakes in records or else risk losing their jobs.
Angela Kelley, vice president of immigration policy at the Center for American Progress, a liberal think tank, said the biometric identification provision “will give some people pause.”
http://thehill.com/homenews/senate/95235-democrats-spark-alarm-with-call-for-national-id-card
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It's wrong in Arizona (click here to take action to protest Arizona's new immigration law) and it would be wrong for the rest of the county too:
Dems spark alarm with call for national ID card
By Alexander Bolton - 04/30/10
A plan by Senate Democratic leaders to reform the nation’s immigration laws ran into strong opposition from civil liberties defenders before lawmakers even unveiled it Thursday.
Democratic leaders have proposed requiring every worker in the nation to carry a national identification card with biometric information, such as a fingerprint, within the next six years, according to a draft of the measure.
The proposal is one of the biggest differences between the newest immigration reform proposal and legislation crafted by late Sen. Edward Kennedy (D-Mass.) and Sen. John McCain (R-Ariz.).
The national ID program would be titled the Believe System, an acronym for Biometric Enrollment, Locally stored Information and Electronic Verification of Employment.
It would require all workers across the nation to carry a card with a digital encryption key that would have to match work authorization databases.
“The cardholder’s identity will be verified by matching the biometric identifier stored within the microprocessing chip on the card to the identifier provided by the cardholder that shall be read by the scanner used by the employer,” states the Democratic legislative proposal.
The American Civil Liberties Union, a civil liberties defender often aligned with the Democratic Party, wasted no time in blasting the plan.
“Creating a biometric national ID will not only be astronomically expensive, it will usher government into the very center of our lives. Every worker in America will need a government permission slip in order to work. And all of this will come with a new federal bureaucracy — one that combines the worst elements of the DMV and the TSA,” said Christopher Calabrese, ACLU legislative counsel.
“America’s broken immigration system needs real, workable reform, but it cannot come at the expense of privacy and individual freedoms,” Calabrese added.
The ACLU said “if the biometric national ID card provision of the draft bill becomes law, every worker in America would have to be fingerprinted.”
A source at one pro-immigration reform group described the proposal as “Orwellian.”
But Senate Democratic Whip Dick Durbin (Ill.), who has worked on the proposal and helped unveil it at a press conference Thursday, predicted the public has become more comfortable with the idea of a national identification card.
“The biometric identification card is a critical element here,” Durbin said. “For a long time it was resisted by many groups, but now we live in a world where we take off our shoes at the airport and pull out our identification.
“People understand that in this vulnerable world, we have to be able to present identification,” Durbin added. “We want it to be reliable, and I think that’s going to help us in this debate on immigration.”
Implementing a nationwide identification program for every worker will be a difficult task.
The Social Security Administration has estimated that 3.6 million Americans would have to visit SSA field offices to correct mistakes in records or else risk losing their jobs.
Angela Kelley, vice president of immigration policy at the Center for American Progress, a liberal think tank, said the biometric identification provision “will give some people pause.”
http://thehill.com/homenews/senate/95235-democrats-spark-alarm-with-call-for-national-id-card
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Saturday, April 10, 2010
Marijuana Legalization by David Sirota
Marijuana Legalization: The Pay-Any-Price Principle
Saturday 10 April 2010
by: David Sirota, t r u t h o u t | Op-Ed
No doubt this was why the economic case against the Iraq invasion failed. To many, the war debate seemed to pose a binary question: debt or mushroom clouds? And when itís a scuffle between money arguments and security arguments (even dishonest security arguments), security wins every time.
Call this the Pay-Any-Price Principle -- an axiom that has impacted all of America's wars, and now, most poignantly, its War on Drugs. When faced with criticism of budget-busting prosecution and incarceration costs, law enforcement agencies and private prison interests have successfully depicted their cause as a willingness to pay any price to jail dealers of hard narcotics.
Of course, data undermine that story line. In 2008, the FBI reported that 82 percent of drug arrests were for possession -- not sales or manufacturing -- and almost half of those arrests were for marijuana, not hard drugs.
Fortunately, these numbers are seeping into the public consciousness. Gallup's latest survey shows record support for marijuana legalization, as more Americans see the Drug War for what it really is: an ideological and profit-making crusade by the Arrest-and-Incarceration Complex against a substance that is, according to most physicians, less toxic than alcohol.
Considering both the public opinion shift and the facts about marijuana, this should be the moment that drug policy reformers drop their budget attacks and flip the security argument on their opponents -- specifically, by pointing out how safety is actually compromised by the status quo.
The good news is that some activists are making this very case.
Last week, students at 80 colleges asked their schools to reduce penalties for marijuana possession so that they are no greater than penalties for alcohol possession. It's a request with safety in mind: According to the National Institute on Alcohol Abuse and Alcoholism, alcohol use by college kids contributes to roughly 1,700 deaths, 600,000 injuries and 97,000 sexual assaults every year. By contrast, "The use of marijuana itself has not been found to contribute to any deaths, there has never been a single fatal marijuana overdose in history (and) all objective research on marijuana has also concluded that it does not contribute to injuries, assaults, sexual abuse, or violent or aggressive behavior," as the group Safer Alternative For Enjoyable Recreation notes.
"It's time we stop driving students to drink and let them make the rational, safer choice to use marijuana," said one student.
Now the bad news: Not every reformer is on message.
In California, where polls show most citizens support cannabis legalization, The New York Times reports that backers of a legalization ballot measure "will not dwell on assertions of marijuana's harmlessness" but "rather on (the) cold cash" pot can generate for depleted state coffers.
The problem is not these advocates' facts -- California officials confirm that legal marijuana could generate more than $1 billion in tax revenue. The problem goes back to the Pay-Any-Price Principle.
By downplaying the argument about giving society a safer alternative to alcohol, California's legalization advocates are letting drug warriors reclaim the language of security, to the point where even liberal Democratic Sen. Barbara Boxer's campaign now trumpets her opposition to the initiative on the grounds that "she shares the (safety) concerns of police chiefs, sheriffs and other law enforcement officials."
A career politician, Boxer understands that if this battle reverts to the old tax-revenue-versus-safety fight, voters will choose safety. In other words, she gets the Pay-Any-Price Principle.
To maximize this opportune moment for drug policy changes, every reformer must appreciate that principle, too -- and finally confront it head on.
David Sirota is the author of the best-selling books "Hostile Takeover" and "The Uprising." He hosts the morning show on AM760 in Colorado and blogs at OpenLeft.com. E-mail him at ds@davidsirota.com or follow him on Twitter @davidsirota.
Copyright 2010 Creators.com
Marijuana Legalization by David Sirota
Marijuana Legalization: The Pay-Any-Price Principle
Saturday 10 April 2010
by: David Sirota, t r u t h o u t | Op-Ed
No doubt this was why the economic case against the Iraq invasion failed. To many, the war debate seemed to pose a binary question: debt or mushroom clouds? And when itís a scuffle between money arguments and security arguments (even dishonest security arguments), security wins every time.
Call this the Pay-Any-Price Principle -- an axiom that has impacted all of America's wars, and now, most poignantly, its War on Drugs. When faced with criticism of budget-busting prosecution and incarceration costs, law enforcement agencies and private prison interests have successfully depicted their cause as a willingness to pay any price to jail dealers of hard narcotics.
Of course, data undermine that story line. In 2008, the FBI reported that 82 percent of drug arrests were for possession -- not sales or manufacturing -- and almost half of those arrests were for marijuana, not hard drugs.
Fortunately, these numbers are seeping into the public consciousness. Gallup's latest survey shows record support for marijuana legalization, as more Americans see the Drug War for what it really is: an ideological and profit-making crusade by the Arrest-and-Incarceration Complex against a substance that is, according to most physicians, less toxic than alcohol.
Considering both the public opinion shift and the facts about marijuana, this should be the moment that drug policy reformers drop their budget attacks and flip the security argument on their opponents -- specifically, by pointing out how safety is actually compromised by the status quo.
The good news is that some activists are making this very case.
Last week, students at 80 colleges asked their schools to reduce penalties for marijuana possession so that they are no greater than penalties for alcohol possession. It's a request with safety in mind: According to the National Institute on Alcohol Abuse and Alcoholism, alcohol use by college kids contributes to roughly 1,700 deaths, 600,000 injuries and 97,000 sexual assaults every year. By contrast, "The use of marijuana itself has not been found to contribute to any deaths, there has never been a single fatal marijuana overdose in history (and) all objective research on marijuana has also concluded that it does not contribute to injuries, assaults, sexual abuse, or violent or aggressive behavior," as the group Safer Alternative For Enjoyable Recreation notes.
"It's time we stop driving students to drink and let them make the rational, safer choice to use marijuana," said one student.
Now the bad news: Not every reformer is on message.
In California, where polls show most citizens support cannabis legalization, The New York Times reports that backers of a legalization ballot measure "will not dwell on assertions of marijuana's harmlessness" but "rather on (the) cold cash" pot can generate for depleted state coffers.
The problem is not these advocates' facts -- California officials confirm that legal marijuana could generate more than $1 billion in tax revenue. The problem goes back to the Pay-Any-Price Principle.
By downplaying the argument about giving society a safer alternative to alcohol, California's legalization advocates are letting drug warriors reclaim the language of security, to the point where even liberal Democratic Sen. Barbara Boxer's campaign now trumpets her opposition to the initiative on the grounds that "she shares the (safety) concerns of police chiefs, sheriffs and other law enforcement officials."
A career politician, Boxer understands that if this battle reverts to the old tax-revenue-versus-safety fight, voters will choose safety. In other words, she gets the Pay-Any-Price Principle.
To maximize this opportune moment for drug policy changes, every reformer must appreciate that principle, too -- and finally confront it head on.
David Sirota is the author of the best-selling books "Hostile Takeover" and "The Uprising." He hosts the morning show on AM760 in Colorado and blogs at OpenLeft.com. E-mail him at ds@davidsirota.com or follow him on Twitter @davidsirota.
Copyright 2010 Creators.com
Thursday, March 25, 2010
Protect the Humboldt Brand
Protect the Humboldt Brand
Richard Salzman/For the Times-Standard
05/15/2009
Governor Schwarzenegger said he is open to hearing the debate on legalizing marijuana for adults, and Assemblyman Tom Ammiano has a bill (AB 390) pending before the California Legislature to do just that.
There will certainly be much debate here in Humboldt around this issue, particularly on its effects on our local economy. If and when legalization comes, the best-case economic scenario for local growers and our local economy may be a model similar to that of the wine industry, where there is a market for small-scale operations to compete with larger commercial growers, based on vintage and variety.
Knowing that such a market is even a possibility should motivate our elected officials to act now to protect the Humboldt name or brand, in the way that the name Champagne is protected, and not to let the name fall into the public domain or to take on a generic meaning. In Europe and elsewhere, for a product to be called Champagne, the wine must come from that region of France -- and this distinction is protected by international laws and treaties going back as far the 1891. There is also the “Protected Designation of Origin” (PDO), as defined in European Union law and recognized in other countries, to protect the names of regional foods. That law from 1992 ensures that only products genuinely originating in a region are allowed in commerce as such.
A more recent example, but without the legal teeth, is Napa's “Declaration on Place,” which
is essentially an agreement among winegrowers internationally, similar in scope to the PDO.
I hope our county supervisors and state and federal representatives will explore our options to protect the Humboldt name -- as others are already planning to profit, by having trademarked variation on the name Humboldt, and we should limit its use to products actually produced in Humboldt County.
Richard Salzman
Sunny Brae
http://www.times-standard.com/othervoices/ci_12376676
Richard Salzman/For the Times-Standard
05/15/2009
Governor Schwarzenegger said he is open to hearing the debate on legalizing marijuana for adults, and Assemblyman Tom Ammiano has a bill (AB 390) pending before the California Legislature to do just that.
There will certainly be much debate here in Humboldt around this issue, particularly on its effects on our local economy. If and when legalization comes, the best-case economic scenario for local growers and our local economy may be a model similar to that of the wine industry, where there is a market for small-scale operations to compete with larger commercial growers, based on vintage and variety.
Knowing that such a market is even a possibility should motivate our elected officials to act now to protect the Humboldt name or brand, in the way that the name Champagne is protected, and not to let the name fall into the public domain or to take on a generic meaning. In Europe and elsewhere, for a product to be called Champagne, the wine must come from that region of France -- and this distinction is protected by international laws and treaties going back as far the 1891. There is also the “Protected Designation of Origin” (PDO), as defined in European Union law and recognized in other countries, to protect the names of regional foods. That law from 1992 ensures that only products genuinely originating in a region are allowed in commerce as such.
A more recent example, but without the legal teeth, is Napa's “Declaration on Place,” which
is essentially an agreement among winegrowers internationally, similar in scope to the PDO.
I hope our county supervisors and state and federal representatives will explore our options to protect the Humboldt name -- as others are already planning to profit, by having trademarked variation on the name Humboldt, and we should limit its use to products actually produced in Humboldt County.
Richard Salzman
Sunny Brae
http://www.times-standard.com/othervoices/ci_12376676
In Defense of Deficits by Galbraith
In Defense of Deficits
by JAMES K. GALBRAITH
March 4, 2010
The Simpson-Bowles Commission, just established by the president, will no doubt deliver an attack on Social Security and Medicare dressed up in the sanctimonious rhetoric of deficit reduction. (Back in his salad days, former Senator Alan Simpson was a regular schemer to cut Social Security.) The Obama spending freeze is another symbolic sacrifice to the deficit gods. Most observers believe neither will amount to much, and one can hope that they are right. But what would be the economic consequences if they did? The answer is that a big deficit-reduction program would destroy the economy, or what remains of it, two years into the Great Crisis.
For this reason, the deficit phobia of Wall Street, the press, some economists and practically all politicians is one of the deepest dangers that we face. It's not just the old and the sick who are threatened; we all are. To cut current deficits without first rebuilding the economic engine of the private credit system is a sure path to stagnation, to a double-dip recession--even to a second Great Depression. To focus obsessively on cutting future deficits is also a path that will obstruct, not assist, what we need to do to re-establish strong growth and high employment.
To put things crudely, there are two ways to get the increase in total spending that we call "economic growth." One way is for government to spend. The other is for banks to lend. Leaving aside short-term adjustments like increased net exports or financial innovation, that's basically all there is. Governments and banks are the two entities with the power to create something from nothing. If total spending power is to grow, one or the other of these two great financial motors--public deficits or private loans--has to be in action.
For ordinary people, public budget deficits, despite their bad reputation, are much better than private loans. Deficits put money in private pockets. Private households get more cash. They own that cash free and clear, and they can spend it as they like. If they wish, they can also convert it into interest-earning government bonds or they can repay their debts. This is called an increase in "net financial wealth." Ordinary people benefit, but there is nothing in it for banks.
And this, in the simplest terms, explains the deficit phobia of Wall Street, the corporate media and the right-wing economists. Bankers don't like budget deficits because they compete with bank loans as a source of growth. When a bank makes a loan, cash balances in private hands also go up. But now the cash is not owned free and clear. There is a contractual obligation to pay interest and to repay principal. If the enterprise defaults, there may be an asset left over--a house or factory or company--that will then become the property of the bank. It's easy to see why bankers love private credit but hate public deficits.
All of this should be painfully obvious, but it is deeply obscure. It is obscure because legions of Wall Streeters--led notably in our time by Peter Peterson and his front man, former comptroller general David Walker, and including the Robert Rubin wing of the Democratic Party and numerous "bipartisan" enterprises like the Concord Coalition and the Committee for a Responsible Federal Budget--have labored mightily to confuse the issues. These spirits never uttered a single word of warning about the financial crisis, which originated on Wall Street under the noses of their bag men. But they constantly warn, quite falsely, that the government is a "super subprime" "Ponzi scheme," which it is not.
We also hear, from the same people, about the impending "bankruptcy" of Social Security, Medicare--even the United States itself. Or of the burden that public debts will "impose on our grandchildren." Or about "unfunded liabilities" supposedly facing us all. All of this forms part of one of the great misinformation campaigns of all time.
The misinformation is rooted in what many consider to be plain common sense. It may seem like homely wisdom, especially, to say that "just like the family, the government can't live beyond its means." But it's not. In these matters the public and private sectors differ on a very basic point. Your family needs income in order to pay its debts. Your government does not.
Private borrowers can and do default. They go bankrupt (a protection civilized societies afford them instead of debtors' prisons). Or if they have a mortgage, in most states they can simply walk away from their house if they can no longer continue to make payments on it.
With government, the risk of nonpayment does not exist. Government spends money (and pays interest) simply by typing numbers into a computer. Unlike private debtors, government does not need to have cash on hand. As the inspired amateur economist Warren Mosler likes to say, the person who writes Social Security checks at the Treasury does not have the phone number of the tax collector at the IRS. If you choose to pay taxes in cash, the government will give you a receipt--and shred the bills. Since it is the source of money, government can't run out.
It's true that government can spend imprudently. Too much spending, net of taxes, may lead to inflation, often via currency depreciation--though with the world in recession, that's not an immediate risk. Wasteful spending--on unnecessary military adventures, say--burns real resources. But no government can ever be forced to default on debts in a currency it controls. Public defaults happen only when governments don't control the currency in which they owe debts--as Argentina owed dollars or as Greece now (it hasn't defaulted yet) owes euros. But for true sovereigns, bankruptcy is an irrelevant concept. When Obama says, even offhand, that the United States is "out of money," he's talking nonsense--dangerous nonsense. One wonders if he believes it.
Nor is public debt a burden on future generations. It does not have to be repaid, and in practice it will never be repaid. Personal debts are generally settled during the lifetime of the debtor or at death, because one person cannot easily encumber another. But public debt does not ever have to be repaid. Governments do not die--except in war or revolution, and when that happens, their debts are generally moot anyway.
So the public debt simply increases from one year to the next. In the entire history of the United States it has done so, with budget deficits and increased public debt on all but about six very short occasions--with each surplus followed by a recession. Far from being a burden, these debts are the foundation of economic growth. Bonds owed by the government yield net income to the private sector, unlike all purely private debts, which merely transfer income from one part of the private sector to another.
Nor is that interest a solvency threat. A recent projection from the Center on Budget and Policy Priorities, based on Congressional Budget Office assumptions, has public-debt interest payments rising to 15 percent of GDP by 2050, with total debt to GDP at 300 percent. But that can't happen. If the interest were paid to people who then spent it on goods and services and job creation, it would be just like other public spending. Interest payments so enormous would affect the economy much like the mobilization for World War II. Long before you even got close to those scary ratios, you'd get full employment and rising inflation--pushing up GDP and, in turn, stabilizing the debt-to-GDP ratio. Or the Federal Reserve would stabilize the interest payouts, simply by keeping short-term interest rates (which it controls) very low.
What about indebtedness to foreigners? True, foreigners do us a favor by buying our bonds. To acquire them, China must export goods to us, not offset by equivalent imports. That is a cost to China. It's a cost Beijing is prepared to pay, for its own reasons: export industries promote learning, technology transfer and product quality improvement, and they provide jobs to migrants from the countryside. But that's China's business.
For China, the bonds themselves are a sterile hoard. There is almost nothing that Beijing can do with them. China already imports all the commodities and machinery and aircraft it can use--if it wanted more, it would buy them now. So unless China changes its export policy, its stock of T bonds will just go on growing. And we will pay interest on it, not with real effort but by typing numbers into computers. There is no burden associated with this, not now and not later. (If the Chinese hoard the interest, they also don't help much with job creation here. So the fact that we're buying a lot of goods from China simply means we have to be more imaginative, and bolder, if we want to create all the jobs we need.) Finally, could China dump its dollars? In principle it could, substituting Greek bonds for American and overpriced euros for cheap dollars. On brief reflection, no Beijing bureaucrat is likely to think this a smart move.
What is true of government as a whole is also true of particular programs. Social Security and Medicare are government programs; they cannot go bankrupt, and they cannot fail to meet their obligations unless Congress decides--say on the recommendation of the Simpson-Bowles Commission--to cut the benefits they provide. The exercise of linking future benefits and projected payroll tax revenues is an accounting farce, done for political reasons. That farce was started by FDR as a way of protecting Social Security from cuts. But it has become a way of creating needless anxiety about these programs and of precluding sensible reforms, like expanding Medicare to those 55 and older, or even to the whole population.
Social Security and Medicare are transfer programs. What they do, mainly, is move resources around within our society at a given time. The principal transfer is not from the young to the old, since even without Social Security the old would still be around and someone would have to support them. Rather, Social Security pools resources, so that the work of the young collectively supports the senior population. The effective transfer is from parents who have children who would otherwise support them (a fairly rare thing), to seniors who don't. And it is from workers who do not have parents to support, to workers who would otherwise have to support their parents. In both cases this burden sharing is fair, progressive and sustainable. There is a healthcare cost problem, as everyone knows, but that's not a Medicare problem. It should not be solved by cutting back on healthcare for the old. Social Security and Medicare also replace private insurance with cheap and efficient public administration. This is another reason these programs are the hated targets, decade after decade, of the worst predators on Wall Street.
Public deficits and private lending are reciprocal. Increased private lending generates new tax revenue and smaller deficits; that's what happened in the 1990s. A credit collapse kills the tax base and generates more spending; that's what's happening now, and our big deficits are the accounting counterpart of the massive decline, last year, in private bank loans. The only choice is what kind of deficit to run--useful deficits that rebuild the country, as in the New Deal, or useless ones, with millions kept unnecessarily on unemployment insurance when they could instead be given jobs.
If we could revive private lending, should we do it? Well, yes, up to a point there is good reason to have a robust private lending sector. Government is by nature centralized and policy driven. It works by law and regulation. Decentralized and competitive private banks have much more flexibility. A good banking system, run by capable people with good business judgment who know their clients, is good for the economy. The fact that you have to pay interest on a loan is also an important motivator of investment over consumption.
But right now, we don't have functional big banks. We have a cartel run by an incompetent plutocracy, with its long fingers deep in the pockets of the state. For functional credit to return, we'll have to reduce the unpayable private debts now outstanding, to restore private incomes (meaning: create jobs) and collateral (meaning: home values), and we'll have to restructure the big banks. We need to break them up, shrink the financial sector overall, expose and prosecute frauds, and create incentives for profitable lending in energy conservation, infrastructure and other sectors. Or we could create a new parallel banking system, as was done in the New Deal with the Reconstruction Finance Corporation and its spinoffs, including the Home Owners' Loan Corporation and later Fannie Mae and Freddie Mac.
Either way, until we have effective financial reform, public budget deficits are the only way toward economic growth. You don't have to like budget deficits to realize that we must have them, on whatever scale necessary to restore growth and jobs. And we will need them not just now but for a long while, until we've shaped a strategic program for investment, energy and the environment, financed in part by a reformed, restored and disciplined financial sector.
It's possible, of course, that all the deficit hysteria is intended to divert attention from the dysfunctions of private banking, and so to help thwart calls for financial reform. Is that giving them too much credit? Maybe. Maybe not.
About James K. Galbraith
James K. Galbraith is the author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. He teaches at the LBJ School of Public Affairs at the University of Texas and is a senior scholar at the Levy Economics Institute.
This article appeared in the March 22, 2010 edition of The Nation.
http://www.thenation.com/doc/20100322/galbraith/print
by JAMES K. GALBRAITH
March 4, 2010
The Simpson-Bowles Commission, just established by the president, will no doubt deliver an attack on Social Security and Medicare dressed up in the sanctimonious rhetoric of deficit reduction. (Back in his salad days, former Senator Alan Simpson was a regular schemer to cut Social Security.) The Obama spending freeze is another symbolic sacrifice to the deficit gods. Most observers believe neither will amount to much, and one can hope that they are right. But what would be the economic consequences if they did? The answer is that a big deficit-reduction program would destroy the economy, or what remains of it, two years into the Great Crisis.
For this reason, the deficit phobia of Wall Street, the press, some economists and practically all politicians is one of the deepest dangers that we face. It's not just the old and the sick who are threatened; we all are. To cut current deficits without first rebuilding the economic engine of the private credit system is a sure path to stagnation, to a double-dip recession--even to a second Great Depression. To focus obsessively on cutting future deficits is also a path that will obstruct, not assist, what we need to do to re-establish strong growth and high employment.
To put things crudely, there are two ways to get the increase in total spending that we call "economic growth." One way is for government to spend. The other is for banks to lend. Leaving aside short-term adjustments like increased net exports or financial innovation, that's basically all there is. Governments and banks are the two entities with the power to create something from nothing. If total spending power is to grow, one or the other of these two great financial motors--public deficits or private loans--has to be in action.
For ordinary people, public budget deficits, despite their bad reputation, are much better than private loans. Deficits put money in private pockets. Private households get more cash. They own that cash free and clear, and they can spend it as they like. If they wish, they can also convert it into interest-earning government bonds or they can repay their debts. This is called an increase in "net financial wealth." Ordinary people benefit, but there is nothing in it for banks.
And this, in the simplest terms, explains the deficit phobia of Wall Street, the corporate media and the right-wing economists. Bankers don't like budget deficits because they compete with bank loans as a source of growth. When a bank makes a loan, cash balances in private hands also go up. But now the cash is not owned free and clear. There is a contractual obligation to pay interest and to repay principal. If the enterprise defaults, there may be an asset left over--a house or factory or company--that will then become the property of the bank. It's easy to see why bankers love private credit but hate public deficits.
All of this should be painfully obvious, but it is deeply obscure. It is obscure because legions of Wall Streeters--led notably in our time by Peter Peterson and his front man, former comptroller general David Walker, and including the Robert Rubin wing of the Democratic Party and numerous "bipartisan" enterprises like the Concord Coalition and the Committee for a Responsible Federal Budget--have labored mightily to confuse the issues. These spirits never uttered a single word of warning about the financial crisis, which originated on Wall Street under the noses of their bag men. But they constantly warn, quite falsely, that the government is a "super subprime" "Ponzi scheme," which it is not.
We also hear, from the same people, about the impending "bankruptcy" of Social Security, Medicare--even the United States itself. Or of the burden that public debts will "impose on our grandchildren." Or about "unfunded liabilities" supposedly facing us all. All of this forms part of one of the great misinformation campaigns of all time.
The misinformation is rooted in what many consider to be plain common sense. It may seem like homely wisdom, especially, to say that "just like the family, the government can't live beyond its means." But it's not. In these matters the public and private sectors differ on a very basic point. Your family needs income in order to pay its debts. Your government does not.
Private borrowers can and do default. They go bankrupt (a protection civilized societies afford them instead of debtors' prisons). Or if they have a mortgage, in most states they can simply walk away from their house if they can no longer continue to make payments on it.
With government, the risk of nonpayment does not exist. Government spends money (and pays interest) simply by typing numbers into a computer. Unlike private debtors, government does not need to have cash on hand. As the inspired amateur economist Warren Mosler likes to say, the person who writes Social Security checks at the Treasury does not have the phone number of the tax collector at the IRS. If you choose to pay taxes in cash, the government will give you a receipt--and shred the bills. Since it is the source of money, government can't run out.
It's true that government can spend imprudently. Too much spending, net of taxes, may lead to inflation, often via currency depreciation--though with the world in recession, that's not an immediate risk. Wasteful spending--on unnecessary military adventures, say--burns real resources. But no government can ever be forced to default on debts in a currency it controls. Public defaults happen only when governments don't control the currency in which they owe debts--as Argentina owed dollars or as Greece now (it hasn't defaulted yet) owes euros. But for true sovereigns, bankruptcy is an irrelevant concept. When Obama says, even offhand, that the United States is "out of money," he's talking nonsense--dangerous nonsense. One wonders if he believes it.
Nor is public debt a burden on future generations. It does not have to be repaid, and in practice it will never be repaid. Personal debts are generally settled during the lifetime of the debtor or at death, because one person cannot easily encumber another. But public debt does not ever have to be repaid. Governments do not die--except in war or revolution, and when that happens, their debts are generally moot anyway.
So the public debt simply increases from one year to the next. In the entire history of the United States it has done so, with budget deficits and increased public debt on all but about six very short occasions--with each surplus followed by a recession. Far from being a burden, these debts are the foundation of economic growth. Bonds owed by the government yield net income to the private sector, unlike all purely private debts, which merely transfer income from one part of the private sector to another.
Nor is that interest a solvency threat. A recent projection from the Center on Budget and Policy Priorities, based on Congressional Budget Office assumptions, has public-debt interest payments rising to 15 percent of GDP by 2050, with total debt to GDP at 300 percent. But that can't happen. If the interest were paid to people who then spent it on goods and services and job creation, it would be just like other public spending. Interest payments so enormous would affect the economy much like the mobilization for World War II. Long before you even got close to those scary ratios, you'd get full employment and rising inflation--pushing up GDP and, in turn, stabilizing the debt-to-GDP ratio. Or the Federal Reserve would stabilize the interest payouts, simply by keeping short-term interest rates (which it controls) very low.
What about indebtedness to foreigners? True, foreigners do us a favor by buying our bonds. To acquire them, China must export goods to us, not offset by equivalent imports. That is a cost to China. It's a cost Beijing is prepared to pay, for its own reasons: export industries promote learning, technology transfer and product quality improvement, and they provide jobs to migrants from the countryside. But that's China's business.
For China, the bonds themselves are a sterile hoard. There is almost nothing that Beijing can do with them. China already imports all the commodities and machinery and aircraft it can use--if it wanted more, it would buy them now. So unless China changes its export policy, its stock of T bonds will just go on growing. And we will pay interest on it, not with real effort but by typing numbers into computers. There is no burden associated with this, not now and not later. (If the Chinese hoard the interest, they also don't help much with job creation here. So the fact that we're buying a lot of goods from China simply means we have to be more imaginative, and bolder, if we want to create all the jobs we need.) Finally, could China dump its dollars? In principle it could, substituting Greek bonds for American and overpriced euros for cheap dollars. On brief reflection, no Beijing bureaucrat is likely to think this a smart move.
What is true of government as a whole is also true of particular programs. Social Security and Medicare are government programs; they cannot go bankrupt, and they cannot fail to meet their obligations unless Congress decides--say on the recommendation of the Simpson-Bowles Commission--to cut the benefits they provide. The exercise of linking future benefits and projected payroll tax revenues is an accounting farce, done for political reasons. That farce was started by FDR as a way of protecting Social Security from cuts. But it has become a way of creating needless anxiety about these programs and of precluding sensible reforms, like expanding Medicare to those 55 and older, or even to the whole population.
Social Security and Medicare are transfer programs. What they do, mainly, is move resources around within our society at a given time. The principal transfer is not from the young to the old, since even without Social Security the old would still be around and someone would have to support them. Rather, Social Security pools resources, so that the work of the young collectively supports the senior population. The effective transfer is from parents who have children who would otherwise support them (a fairly rare thing), to seniors who don't. And it is from workers who do not have parents to support, to workers who would otherwise have to support their parents. In both cases this burden sharing is fair, progressive and sustainable. There is a healthcare cost problem, as everyone knows, but that's not a Medicare problem. It should not be solved by cutting back on healthcare for the old. Social Security and Medicare also replace private insurance with cheap and efficient public administration. This is another reason these programs are the hated targets, decade after decade, of the worst predators on Wall Street.
Public deficits and private lending are reciprocal. Increased private lending generates new tax revenue and smaller deficits; that's what happened in the 1990s. A credit collapse kills the tax base and generates more spending; that's what's happening now, and our big deficits are the accounting counterpart of the massive decline, last year, in private bank loans. The only choice is what kind of deficit to run--useful deficits that rebuild the country, as in the New Deal, or useless ones, with millions kept unnecessarily on unemployment insurance when they could instead be given jobs.
If we could revive private lending, should we do it? Well, yes, up to a point there is good reason to have a robust private lending sector. Government is by nature centralized and policy driven. It works by law and regulation. Decentralized and competitive private banks have much more flexibility. A good banking system, run by capable people with good business judgment who know their clients, is good for the economy. The fact that you have to pay interest on a loan is also an important motivator of investment over consumption.
But right now, we don't have functional big banks. We have a cartel run by an incompetent plutocracy, with its long fingers deep in the pockets of the state. For functional credit to return, we'll have to reduce the unpayable private debts now outstanding, to restore private incomes (meaning: create jobs) and collateral (meaning: home values), and we'll have to restructure the big banks. We need to break them up, shrink the financial sector overall, expose and prosecute frauds, and create incentives for profitable lending in energy conservation, infrastructure and other sectors. Or we could create a new parallel banking system, as was done in the New Deal with the Reconstruction Finance Corporation and its spinoffs, including the Home Owners' Loan Corporation and later Fannie Mae and Freddie Mac.
Either way, until we have effective financial reform, public budget deficits are the only way toward economic growth. You don't have to like budget deficits to realize that we must have them, on whatever scale necessary to restore growth and jobs. And we will need them not just now but for a long while, until we've shaped a strategic program for investment, energy and the environment, financed in part by a reformed, restored and disciplined financial sector.
It's possible, of course, that all the deficit hysteria is intended to divert attention from the dysfunctions of private banking, and so to help thwart calls for financial reform. Is that giving them too much credit? Maybe. Maybe not.
About James K. Galbraith
James K. Galbraith is the author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. He teaches at the LBJ School of Public Affairs at the University of Texas and is a senior scholar at the Levy Economics Institute.
This article appeared in the March 22, 2010 edition of The Nation.
http://www.thenation.com/doc/20100322/galbraith/print
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