Economic and political analysis-Window on culture-Media criticism

Tuesday, January 26, 2010

Support for Bernanke and health care "reform" damaging Obama

I've been reading with considerable chagrin the seemingly endless well of support Obama has for Bernanke. This from HuffPo:
"'He has my strongest support. I think he's done a good job,' Obama told ABC News.
"What we need is somebody at the Federal Reserve who can make sure that the progress that we've made in stabilizing the economy continues. I think Bernanke is the best person for that job,' the president said."

I may not be the greatest of political minds, but I don't see how Obama can tap popular political sentiments by supporting Bernanke. Obama seems to be apologist-in-chief for Wall Street and its shameless plug for public aid. I don't know where the President gets his news, but he must not know that Wall Street recorded record profits and bonuses last year.

Much advantage came out of sweetheart loans and credit facilities offered by the Federal Reserve, which dwarf the $700 billion TARP. Dumping toxic debt for US Treasuries is a great money-making proposition for Friends of the Fed, a group of private bankers spearheaded by Geithner. In these exchanges, taxpayers are left holding the losses, which are socialized. The profits, meanwhile, go to Geithner's and Bernanke's cronies on Wall Street.

Obama couldn't offer a juicier political plumb to the Republicans than his enduring support for Wall Street and its agents in his administration. The more difficult the economy, the more contrasting the opulent lifestyle of the New York banking elite with the mainstream popular consciousness. As millions go jobless and homes foreclose, the Bernie Madoff-type gamblers who control the Fed's money-making machine are feeding major discontentment. The scene from Gangs of New York where the homes of wealthy Upper West Siders are raided comes to mind...

Projecting infinite support for the bankers' allies inflames nearly infinite popular rage bubbling under the surface. In the past, this anti-incumbency may have been limited to groups like the tea-baggers. Yet the Republicans have considerable experience hijacking popular movements, and could easily direct the anti-Washington emotions into a far broader political force to use against the Demos.

According to the article, McCain advocates holding Bernanke to account. The Republicans' reaction to the bailout crisis has been shrewd. They've picked at Obama's close connections to Wall Street, without directly criticizing him they can take shots at Bernanke at Geithner, who really do make ideal punching bags, being insiders. Should any attempt at in the real economy recovery fail, the Republicans will be able to blame Obama's policies as favoring the elite Wall Street bankers at expense to the general public. Rather than create distance between himself and Wall Street, Obama's become their apologist. Obama received many millions from Wall Street, and the quid pro quo has been protection for their profits through the crisis, which was a product of their unchecked greed.

Bernanke was at the heart of the creation of the mess, the creation of the housing bubble.Bernanke and his predecessor Alan Greenspan encouraged easy money policies that allowed so much capital to flow into already inflated mortage securities markets. As chairman of the New York Fed, Geithner protected the interests of Wall Street prior to his selection as Treasury Secretary.

In one sense it doesn't matter whether Bernanke averted a larger crisis. The amount of money which flowed into privileged Wall Street firms like Goldman Sachs is a tremendous political liability. The American people are tired of being treated as second-class citizens and made to fork over billiosn for what's essentially a bankers' mistake (although of course the MSM packaged the collapse as a purely subprime phenomena--waiters getting McMansions--when in fact the derivatives trading based on mortgages was fifty times larger. Even today, the total notational amount of derivatives exceeds $260 trillion, I believe, an amount no bailout can cover in the event of default. Yes, you could argue that such a massive pile of IOUs constitutes a risk of systemic collapse, but not if the shadow banking system hadn't been created which made permissable such huge over-leveraged bets.

Already a year into his administration, perhaps Obama can no longer draw on Bush ineptness to blame for economic problems. Bush and his laissez faire regulatory policies may have helped set the circumstances that allowed mortgage fraud, but Congress--majority Democratic since '06--gutted the regulatory environment and Glass-Steagall.

Obama likely wants to keep Geithner around because their replacements create even more uncertainty, which Wall Street certainly doesn't like. It's highly unlikely that the political liability Obama created by supporting Bernanke will be worth whatever support Wall Street can provide in terms of future campaign donations. If however Obama is willing to sacrifice himself politically for the bankers, he will leave as his one-term legacy a new low in bowing to the corporate interest over his own.

The best summation of the case against Bernanke's re-nomination comes from Webster Tarpley (his website is here.) Tarpley includes a letter to be sent to one's Senators here.

So thorough has the Senate been compromised to Wall Street, I'm not sure if Bernanke can be opposed. According to another HuffPo article, through bureaucratic maneuvering Democratic Senators are lowering the bar to only 50 votes required for re-confirmation.

I am guessing a vote in support of Bernanke nomination might cost incumbents 5 points or more if they face election this year. That's assuming of course that they face populist opponents, or rivals who aren't as compromised in their loyalties to Wall Street. As we saw with Goldman Sachs, Wall Street insiders have a habit of winning no matter who wins.

Terrorizing the stock market

Geithner's threat that the stock markets would go down if Bernanke weren't re-nominated (video) has generated a myth central to the mainstream media's reporting on the crisis. The idea, just one in a tapestry of misinformation, is that Bernanke is good for stocks. With relentless spin, the financial media casts each day's market performance on the idea that Bernanke's will be re-nominated. When performance is bad, it's blamed on the "uncertainty" associated with Bernanke's failure to be confirmed.

A market so soft as to require coddling by the chairman of the Federal Reserve can't be so strong. Actually rejecting risky banking practices actually represents a helpful step towards economic self-healing. If we are to believe the economy needs more liquidity--i.e., the Fed purchasing more Treasuries--then the market is surely incapable of generating growth independent of the price of money--a bearish sign indeed. Constantly adding more debt--the dollar is really an IOU by the Fed--creates a bubble as those "assets" flow into markets, reinflating them.

It may be testament to how frail our economy has become that we rely on so much "production" in the form of GDP from our financial services sector. If we had an economy making things, perhaps the Fed, or even interest rates--wouldn't be so vital. Instead, as our manufacturing economy has declines, it's been replaced with the service sector--a euphanism for underpaying, menial jobs, and the financial sector, whose share of GDP has risen to 40% or from approximately 15% in 1980. Not surprisingly, with this shift in economic priorities has come a media habit of Fed watching, reading the proverbial tea-leaves to divine the future direction of the economy.

Enough of all that. As I'm sure you know, things have gotten worse for all but the richest of Americans. It is worth noting the role the media plays in glossing over the real state of our economic decline, which of course ushers in greater apathy and complacency.

Health Care Reform spun by media

It's worth noting the media spun the Coakley defeat in the Massachusetts Senate race as a referendum on health care reform. Yet the health care reform presented to the Senate could hardly be considered progressive. The massive build-up in forcing people to buy private health insurance is better considered a coup for the for-profit insurance industry. Look no further than Evan Bayh (D-IN) for an indication of where health reform stands. Bayh's wife serves on the Board of Wellpoint, the largest health care insurance company in the U.S.. If Bayh supports the bill, it can hardly mean it threatens the status quo, or Wellpoint's profits.

I did read one article that properly characterized the Massachusetts vote as criticism of the so-called health care "reform." The Republican victor in the race, Scott Brown "built his entire surge against Coakley around his promise to be the 41st senator to block the bill -- this in Ted Kennedy's Massachusetts. He must be pretty confident that the bill has become politically radioactive, and he's right." (Robert Kuttner, "A Wake Up Call from Massachusetts", HuffPo 1-18-10)

Kuttner goes on to bring up Senator Byron Dorgan, who "began the year more than twenty points ahead in the polls of his most likely challenger, North Dakota Governor John Hoeven. By the time he decided to call it a day, Dorgan was running more than twenty points behind. The difference was the health bill, which North Dakotans oppose by nearly two to one."

I'd read that many progressives had stayed away from the polls. Participation was down. Also, as Bev conover points out, the hand-count favored Coakley. Black box voting means there's always a chance of election fraud.

In the end, health care pseudo-reform poses as a measly, inadequate replacement for a public option. Rather than represent real reform, the Obama compromise is weak, overpriced, and friendly to insurers. Posing as reform, the health care bill's demise represents a victory for common sense and a rejection of spiraling health care costs.

I do think we need reform, as do many Americans, so I'm not opposed to it outright like some are. I've heard many people, coincidentally those with jobs and health insurance, complain about "Obamacare." They've been thoroughly propagandized by hate radio and the Right to believe they're better off paying for it themselves, at least until they're 65 and Medicare will be there--theoretically--for them.

I wonder if the anti-Obamacare people will like paying these bloated costs when they're older. While they can complain about the inadequacies of the reforms, few are in a position to bear the costs of their retirement, much less the burdens associated with gaps in government-paid health care. While they're young and employed, they detest government-provided care. When they're old, less employable, will they so eagerly shun the safety net?

Looking at the numbers, there's no way Medicare will be able to cover all the projected health care expenses for the Baby Boomers. Coupled with worsening state budget situations, and a freeze on domestic spending proposed by Obama, a major crisis looms and hole in the safety net widens.

Already, a bigger and bigger chunk of Social Security payments go to feed the gap between what Medicare pays and what supplemental insurance provides. (Just check out an older's person's annual Social Security return.) Retirees will have to eat more and more of their own health care costs. All that money they'd paid into Social Security and Medicare has simply been absorbed.

Without cost controls and a major effort at wellness, the total costs of health care will continue to zoom. As a result premiums will increase. Theoretically, bringing more people onto health care insurance rolls can reduce the burden on Medicaid. Then again, if Massachusetts--the only state with mandatory health care insurance for all--is an example, premiums will sky-rocket.

The costs of health care are simply too high to be borne by the elderly. They will be met by higher taxes. In the absence of real change, get braced for the giant health care ripoff. Don't fret, just get ready to go abroad for treatment, if you can afford it.


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Thursday, January 07, 2010

Goldman Sachs directed TARP funds

I've been consistent in my criticism of the Federal Reserve and Treasury Secretary Geithner. Relying on alternative news resources--not the mainstream--I was able to put together a highly accurate analysis of last fall's bailout months before the conclusions I reached made it to the mainstream. (This story is breaking. For more, see addendum below.)

The mainstream media has been so heavily consolidated, corporatized, its content dumbed down--you probably knew that already. What's less obvious is the role it plays in obfuscating vital issues and denying the American people the information they need to reach conclusions that might contradict the status quo.

Just read this on HuffPo about Treasury Secretary Geithner, in an article titled "Geithner's New York Fed Pushed AIG To Keep Sweetheart Deals Secret" by Shahien Nasiripour:
"An arm of the Federal Reserve, then led by now-Treasury Secretary Timothy Geithner, told bailed-out insurance giant AIG to withhold key details from the public about overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs." [Huffington Post]

Goldman Sachs is a poster child for cronyism. As I've reported, the company fills key Congressional staffer and White House economic adviser positions election after election. It's also used flash trading to make 2009 a banner year.

The nexus between Goldman and those in power reaches so deep that the company directly formulates federal policy. When AIG was at risk of failing, a huge bailout was made not to save the banks, but rather to assure Goldman that its investments in AIG wouldn't disappear. Former Goldman CEO Paulson, Treasury Secretary at the time, made dozens of calls to then Goldman CEO Blankfein during the negotiations phase that preceded the bailout. The big answer is why: Goldman hadn't been in trouble at the time. Of course later, during the cover-up phase which continues to this day, Paulson's replacement Geithner denied that Goldman was the intended recipient of TARP funds, through the so-called counterparty risk posed by an AIG failure.

So corrupt has our government become that the White House takes its marching orders from those with the most money on Wall Street. But I guess you knew that. What you didn't know, thanks to the media, is how far the cronyism goes, or how total Goldman's control over our government is. You, the concerned taxpayer, have no ability whatsoever to shape economic policy. Instead the decisions are made in back rooms, far beyond any public scrutiny or legal accountability.

According to the HuffPo article, Barofsky, the Inspector General for TARP, has blasted the way that program funneled huge amounts to Wall Street insiders. More accusations are forthcoming, according to HuffPo, which must trouble the powers-to-be being that the website and its talented reporters have become quite a force for investigative journalism (the MSM has abandoned I.J.).

Specifically, the HuffPo article reports "Geithner's people told AIG to delete references on draft regulatory filings to the sweetheart deals." It goes on to cite a statement by Congressman Issa (R-Ca.): "It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information to the SEC..."

In other words, the facts were hidden. The statement continues:
"The lack of transparency and accountability is disturbing enough, but the outstanding question that remains is why the [New York Fed] didn't fight for a better deal for the American taxpayer. Clearly, the New York Fed wanted to suppress details and limit disclosure of the counterparty deal from the American people -- the only question is why?"

I'll answer why. Because the truth has to be suppressed or it will destroy all the credibility the political and monetary systems have left! If the American people really learned that the AIG bailout wasn't about a threat of systemic failure but instead a quid pro quo that exists between politicians and Wall Street, they'd surely revolt. At the very least they'd consider not paying their taxes. Not exactly the same thing as a revolution, but considering how tightly the Federal Reserve and its banks are ties to the IRS, the damage could be immense.

What's at stake is the faith and trust the people put in money and their leaders. Revealing the truth on the sweetheart deals imperils the myth that we control who governs us. The fact is that the transition to a new administration--one which purported to bring change no less--has meant business as usual.

We saw how the Bush era ushered in a new level of marketing called perception management. As long as the delivery is smooth and consistent enough, people can be fooled into believing anything. Say something often enough, long enough, loud enough, and its veracity is irrelevant. Think of it like branding--present a corporate symbol often enough through advertising, and it becomes familiar to the consumer: the mental equivalent of a brand on the hide of some domesticated livestock.
The corruption is total, and the media plays a direct role in maintaining the illusion that there's choice in who governs us when in fact everyone at the top works for the same moneyed interests. The American political system has become a sham, a facade of public perception and marketing messages with no substance behind it.

The predominantly conservative interests that really run the Capitol want to placate the masses so we go through the pageantry of an election process which is in fact nothing more than a long coronation ceremony for the pre-selected candidate favored by the Establishment.

The evidence of the corruption is far more than economic. We see our national security prerogatives managed for the benefit of a Military Industrial Complex, the ultimate tapeworm which sucks tax revenue out while providing nothing of lasting benefit. Look no farther than the full body scan machines that will be bought in the aftermath of the crotch bomber lapse. These contracts will be with companies tied to Chertoff and Ashcroft, an example of cronyism within the National Security complex.
Meanwhile our trade policy has succumbed to the very same interests which concocted the bailout--wealthy investors who felt threatened by unions and the resistance to corporate rule they presented. So we were told globalization would benefit us, that NAFTA would bring jobs. Instead it's devastated our manufacturing base, coupled with massive overseas investment and off-shoring to Asia, where labor is cheap and union-free.

Qui bono? [Who benefits?] Surely it's not those of us who now toil in the services sector, which was promoted as the savior of the American economy, alongside finance sector jobs. Financial services companies have gone from constituting under 15% of our nations GDP (a misnomer as financial profits don't constitute P--or "Product") to over 40%. Pushing piles of paper with no intrinsic value around (yes, that's what our money really is) looks good on paper, but in the real world, real men and women make real things.

The service economy and financial get-rich-quick bubble that characterized the Bush years weren't all that's burst. So too has exploded the concept that government is worthy of our trust. And so many people have lost pensions and assistance that they'll need to keep themselves comfortable in retirement, which itself has become a laughable notion for those who've got next to nothing, which is a huge mass of people labelled "useless eaters."

Don't believe me? Go to some place where older blue-collar types shop. You can literally see the worry on their face. The older employees live in terror of having a medical accident, being that so many self-employed are uninsured. The closer to retirement, the more worried they become, being that they start to see their inevitable decline in health.

The Wal-mart economy has engineered a new low in desensitivity for the plight of the employee. While young and healthy workers may not be aware of how fragile their status is, the older ones must return to work. One greeter told me she'd had a seizure, fallen, blacked out, been to the emergency room the previous day and come to work. Another, wearing the butcher's white apron, told me she couldn't afford the steak sold there. (They don't actually cut meat at Wal-mart, she'd simply been stocking shelves in the meat section.)

If American style laissez-faire, unregulated capitalism means that elderly have to work until death, and workers' right to health care and time for recovery can't be assured, we need to discard the system entirely. Maybe the system is doing it for us by failing. If things get so bad that no one is secure, and those that are don't feel secure, it'll be replaced. But how much pain will we have to endure before the pain of change is less than that of going on?

In time, we'll come to depend more and more on ourselves, and not expect handouts or help. We'll be less focused on what goes on in some distant capital and look more to local government.

The states offer more direct assistance then the federal government but the recession has hurt them badly. I just saw that California and New York are going to cut billions from their bloated budgets. As long as the federal government can borrow, or print money, the entrenched political system will be in control. The states, which provide health care for poor under 65, don't have the power to issue money like the Federal Reserve does (it's a power relegated to the Fed by Congress.) Therefore, the states have more to lose when Medicaid rolls overflow, or undocumented illegal aliens (millions in CA and NY) need health care and show up in the ER. Therefore the federal government can maintain inadequate security along our borders and avoid the consequences, unlike the states and municipalities.

The conflict of interest between the American people and federal government has reach unprecedented proportions. I think people will increasingly look to opt out, particularly from new taxing schemes and laws passed by the Federal government for the benefit of their cronies. TARP is an excellent example of this fleecing of the American people. Another is our taxation system: the revenue secured by the IRS passes to the Federal Reserve, not to our government.

While borrowing at ultra-low rates of interest, this group of private bankers gets to charge exorbitant rates of interest for consumer lending. Or it can sit back and borrow huge sums from the Federal Reserve and lend it to our government, taking no risk while receiving interest from the American people (via taxes) by lending them back their own money.

Addendum 1-8-10

This story is hot. See HuffPo's compilation on the AIG storyhere.

I mis-titled the post "Goldman directed TARP funds" because I don't build a linkage firmly enough between Geithner and Goldman. Still, I'm confident the control eminated from Goldman on the bailout. Provocative now; established fact soon enough.

I'm fully assuming that Geithner was doing as Goldman wanted. As more and more facts are revealed, this story line will flush out.

The financial motive was large enough for Goldman to cash in on its influence. HuffPo cites blogger Janet Tavakoli:
"The November 2009 TARP Inspector General's report failed to mention that Goldman originated or bought protection from AIG on about $33 billion of the problematic $80 billion of U.S. mortgage assets that AIG 'insured' with credit derivatives, about twice as much as the next two largest banks involved."

Through a cover-up, Goldman Sachs would have attempted to disguise the scope of its influence, to limit political backlash and to protect Geithner, who actions on behalf of the company would show him to be a de facto agent for the company.

I posted at truthout.org concerning another article there. Here's what I said:

"As I say in my blog, this isn't about Geithner. He's only the stooge, the puppet. If he's not in there, Goldman will just put another person in to replace him. Robert Rubin same idea. The insiders are there because Goldman has the most political influence to expend. Read Matt Taibbi for more.

...If the American people were to find out that their money was going to subsidize Goldman's losses, they'd realize that the status quo had been maintained despite the change rhetoric/facade of the duopoly's election charade."

Yeah, a little scrappy I know but sooner or later the people will have to wise up.

See also this article on Geithner at michaelmoore.com.


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