But fiscal austerity wasn’t the only reason recovery has been so disappointing. Many analysts believe that the burden of high household debt, a legacy of the housing bubble, has been a big drag on the economy. And there was, arguably, a lot the Obama administration could have done to reduce debt burdens without Congressional approval. But it didn’t; it didn’t even spend funds specifically allocated for that purpose. Why? According to many accounts, the biggest roadblock was Mr. Geithner’s consistentopposition to mortgage debt relief — he was, if you like, all for bailing out banks but against bailing out families.
“Stress Test” asserts that no conceivable amount of mortgage debt relief could have done much to boost the economy. But the leading experts on this subject are the economists Atif Mian and Amir Sufi, whose just-published book “House of Debt” argues very much the contrary. On their blog, Mr. Mian and Mr. Sufi point out that Mr. Geithner’s arithmetic on the issue seems weirdly wrong — order of magnitude wrong — giving much less weight to the role of debt in holding back spending than the consensus of economic research. And that doesn’t even take into account the further benefits that would have flowed from a sharp reduction in foreclosures.
In the end, the story of economic policy since 2008 has been that of a remarkable double standard. Bad loans always involve mistakes on both sides — if borrowers were irresponsible, so were the people who lent them money. But when crisis came, bankers were held harmless for their errors while families paid full price.
And refusing to help families in debt, it turns out, wasn’t just unfair; it was bad economics. Wall Street is back, but America isn’t, and the double standard is the main reason.
Considering that most Yale grads are going to work on Wall Street, this advice must have seemed like something from another planet. After all, the more gridlock, the better for the financial markets — none of that pesky regulation!
NEW HAVEN, Conn. (AP) — Secretary of State John Kerry urged Yale University graduates on Sunday to keep faith in government’s ability to break gridlock, even as many problems remain unsolved.
Kerry, a 1966 graduate of Yale, told students and their families, faculty and staff at the Ivy League school’s 313th commencement that some people don’t believe they can make a difference “and the sum difference of all of this is that we do not believe we can make a difference. We remain gridlocked.”
Over the years, Congress has enacted broad legislation protecting the environment and civil rights, said Kerry, a former U.S. senator from Massachusetts. But, he said, the need to reform immigration and grapple with climate change now remain undone.
“This daring journey of progress played out over years or decades,” he said. “Today, the felt needs are piling up while legislatures or foreign capitals seem frozen.”
Because we have a debt-driven economy, and people are now avoiding debt. Ha, ha! Looks like the boys on Wall Street have painted themselves into a corner!
Despite all their progress digging out of the downturn, however, U.S. consumers are displaying a heightened wariness about using credit cards or taking out new mortgages.
The amount of credit-card debt outstanding fell to the lowest levels since 2002. Credit-card balances fell $24 billion to $659 billion from the prior quarter, just slightly below the level from a year earlier. New originations of mortgages dropped for the third straight quarter to $332 billion, the lowest since the third quarter of 2011, possibly due to rising home prices in many markets that have made buying less affordable.
The figures suggest Americans are still playing it safe when it comes to borrowing, a practice that should help protect them from longer-run excesses. But the combination of weak demand for credit and slow real wage growth could bode ill for consumer spending, which accounts for more than two-thirds of economic output.
Tanya Prime and her husband are debating whether they should be borrowing more. Ms. Prime’s husband, John, owns a restaurant and catering business that is seeing business pick up substantially this year. After years in which Mr. Prime put personal funds into the business, potential investors are coming to him, making him more confident about borrowing.
But Ms. Prime said she “doesn’t feel comfortable with any large borrowing right now.” That’s because her savings were depleted after she left her non-profit job in 2012 to care for the couple’s four children.
While she is hoping to return to work, she wants to keep a lid on debt. “Borrowing for a washer or dryer is the last thing we’d do,” said Ms. Prime, 44 years old.
In some ways, it is good news that Americans are becoming more responsible about debt. An epidemic of overborrowing was a key reason for the 2008 financial crisis and recession.
So that thing of pushing companies to increase shareholder value by cutting employees isn’t working out so well, is it?
This is one of the more uplifting things I’ve heard in a while. Will the judge listen? I seem to recall there’s a mandatory minimum on the charges:
A majority of the jurors who this week convicted an Occupy Wall Street activist of assaulting a New York police officer have asked the judge in her case to not send her to prison.
Cecily McMillan was on Monday found guilty of deliberately elbowing officer Grantley Bovell in the face, as he led her out of a protest in March 2012. She was convicted of second-degree assault, a felony, and faces up to seven years in prison. She was denied bail and is being detained at Riker’s Island jail.
However, nine of the 12 jurors who unanimously reached the verdict have since taken the unusual step of writing to Judge Ronald Zweibel to request that he not give her a prison sentence on 19 May.
“We the jury petition the court for leniency in the sentencing of Cecily McMillan,” they wrote in the letter, a copy of which was obtained by the Guardian. “We would ask the court to consider probation with community service.
Finally freed from a ban on researching the case, including potential punishments, some were shocked to learn that they had just consigned the 25-year-old to a sentence of up to seven years in prison, one told the Guardian. “They felt bad,” said the juror, who did not wish to be named. “Most just wanted her to do probation, maybe some community service. But now what I’m hearing is seven years in jail? That’s ludicrous. Even a year in jail is ridiculous.”
Though it came as a surprise to some of the eight women and four men who found her guilty of second-degree assault, McMillan said that the potential prison sentence had been on her mind for the two years since she was arrested for elbowing Officer Grantley Bovell in the face at a demonstration in Zuccotti Park, where protesters had gathered to mark six months of the Occupy movement.
Still shaken by the financial crisis and rattled by personal debt and uncertain job prospects, economic security remains a dominant and vital political priority for progressives. Attendees at a recent Elizabeth Warren book event in Washington, D.C. describe why this could create a big opening for a challenger like the Massachusetts senator in the 2016 Democratic primary for president.
Thanks to confidential documents exclusively obtained by Pando, we can now see some of the language and fee structures in the agreements between the “alternative investment” industry and major public pension funds. Taken together, the documents raise serious questions about whether the government employees, trustees and politicians overseeing major public pension funds are shirking their fiduciary responsibilities under the law when they are cementing “alternative” investment deals.
The documents, which were involved in a recent SEC inquiry into the $14.5 billion Kentucky Retirement Systems (KRS), were handed to us by SEC whistleblower Chris Tobe, an investment consultant and former trustee of the KRS. Tobe has also written a book — “Kentucky Fried Pensions” — about the scandalous state of the Kentucky public pensions system.
The documents provided by Tobe (embedded below) specifically detail Kentucky’s dealings with Blackstone – a giant Wall Street investment firm which has deployed a platoon of registered lobbyists in Kentucky and whose employees are major financial backers of Kentucky U.S. Sen. Mitch McConnell (R).
The Blackstone-related documents, though, don’t just tell a story about public pensions in Kentucky. The firm, which just reported record earnings, does business with states and localities across the country. The Wall Street Journal reports that “about $37 of every $100 of Blackstone’s $111 billion investment pool comes from state and local pension plans.”
I have to say, pretty much every insider book about the Obama administration paints Obama as intellectually incurious and it sure seems that way. For this man to say this about the TPP is just plain stupid and crazy. Does he really just let the corporations tell him what to do?
Critics of the highly-secretive Trans-Pacific Partnership negotiations responded with outrage after U.S. President Barack Obama charged they have a “lack of knowledge of what is going on in the negotiations” and dismissed their concerns as “conspiracy theories.”
The president made the comments this week during a press conference in Malaysia—one of the stops on his Asia-Pacific tour, aimed at advancing the TPP and the U.S. military “pivot” to the region. His tour has been met with region-wide protests against the economic and military agenda of the U.S.
[…] Bernadette Ellorin, Chairperson of BAYAN-USA—an alliance of Filipino organizations in the U.S., told Common Dreams, “President Obama lacks knowledge of how so-called ‘free trade agreements’ impact people on the ground. The push-back he has gotten over the TPP comes from people who have long-suffered from these impacts.”
“He should go back and talk with the parent-less children in the region, whose parents had no choice but to look for work overseas because they couldn’t find work in their own country due to these so-called ‘free trade’ agreements,” she added. “He should go back and talk to the indigenous children whose parents were killed by paramilitary groups because greater foreign investment stipulations in these agreements have led to forced evacuations and militarization of their land for the purpose of large scale foreign mining.”
Wall Street deregulation, blamed for deepening the banking crisis, was aggressively pushed by advisers to Bill Clinton who have also been at the heart of current White House policy-making, according to newly disclosed documents from his presidential library.
The previously restricted papers reveal two separate attempts, in 1995 and 1997, to hurry Clinton into supporting a repeal of the Depression-era Glass Steagall Act and allow investment banks, insurers and retail banks to merge.
A Financial Services Modernization Act was passed by Congress in 1999, giving retrospective clearance to the 1998 merger of Citigroup and Travelers Group and unleashing a wave of Wall Street consolidation that was later blamed for forcing taxpayers to spend billions bailing out the enlarged banks after the sub-prime mortgage crisis.
The White House papers show only limited discussion of the risks of such deregulation, but include a private note which reveals that details of a deal with Citigroup to clear its merger in advance of the legislation were deleted from official documents, for fear of it leaking out.
“Please eat this paper after you have read this,” jokes the hand-written 1998 note addressed to Gene Sperling, then director of Clinton’s National Economic Council.
Photograph: Clinton Library
Earlier, in February 1995, newly-appointed Treasury secretary Robert Rubin, his deputy Bo Cutter and senior advisers including John Podesta gave the president three days to decide whether to back a repeal of Glass-Steagall.
In what Cutter described as “an action forcing event”, he wrote to Clinton on 21 February, telling him Rubin wanted to announce the policy before it was raised by the House banking committee on 1 March.
“In order to position Secretary Rubin – rather than any of the regulators – as the Administration’s chief spokesman on this issue, the Secretary intends to discuss the Administration’s position at a speech which will be covered by the press in New York on 27 February,” wrote Cutter on 21 February.
“It is therefore necessary to have an agreed-upon Administration position by the end of the day on Friday, 24 February.”
Photograph: Clinton Library
Podesta, who was then staff secretary but went on to become Clinton’s chief of staff, wrote a covering note telling the president that all his senior advisers backed the plan, although he noted the danger that “allowing banks to engage in riskier activities like securities or insurance could subject the deposit insurance fund to added risk”.
But Clinton’s advisers repeatedly reassured him that the decision to let Wall Street dismantle regulatory barriers designed to protect the public after the Great Depression simply represented inevitable modernisation.
“The argument for reform is that the separation between banking and other financial services mandated by Glass-Steagall is out of date in a world where banks, securities firms and insurance companies offer similar products and where firms outside the US do not face such restrictions,” wrote Podesta.
Podesta currently works at the White House as special adviser to President Barack Obama. Sperling stood down as director of Obama’s National Economic Council last month.
Along with Cutter, who worked on Obama’s transition committee, all three men were close allies of Rubin, who spearheaded the deregulation of Wall Street before joining the board of Citigroup in 1999. In 2007, he briefly became its chairman.
The closeness of Obama’s team to the deregulation policies of the late 1990s is well known and has been criticised by campaigners as a reason for the current administration’s reluctance to institute more aggressive Wall Street reforms after the banking crash.
But the new documents cast fresh light on the way the White House was first ushered toward deregulation by the tight group of Rubin allies.
A similar apparent attempt to rush president Clinton’s decision-making occurred later in the process, in 1997.
In a letter received by the president on 19 May, Clinton is again given just three days to decide whether to proceed with the deregulation agenda.
Oh, no. Hell, no. What kind of frickin’ con game is this?
What is is that the feds do not understand? We don’t care about Credit Suisse or some damned French bank that ignored sanctions. We want the bankers who crashed the economy and stole people’s homes, not the ones who sold tax shelters to the uber rich. They are so far down on the list. We want the men at the top of the mortgage casino operations, the people who ruined so many lives with a nod and a wink while their underlings did the dirty work.
Are we supposed to be impressed that the feds are throwing us what they allege to be a bone? Nothing has changed. The same banks that are too big to fail are still too big to jail:
Federal prosecutors are nearing criminal charges against some of the world’s biggest banks, according to lawyers briefed on the matter, a development that could produce the first guilty plea from a major bank in more than two decades.
In doing so, prosecutors are confronting the popular belief that Wall Street institutions have grown so important to the economy that they cannot be charged. A lack of criminal prosecutions of banks and their leaders fueled a public outcry over the perception that Wall Street giants are “too big to jail.”
[block]The new strategy underpins the decision to seek guilty pleas in two of the most advanced investigations: one into Credit Suisse for offering tax shelters to Americans, and the other against France’s largest bank, BNP Paribas, over doing business with countries like Sudan that the United States has blacklisted. [/block]
Addressing those concerns, prosecutors in Washington and New York have met with regulators about how to criminally punish banks without putting them out of business and damaging the economy, interviews with lawyers and records reviewed by The New York Times show.
The new strategy underpins the decision to seek guilty pleas in two of the most advanced investigations: one into Credit Suisse for offering tax shelters to Americans, and the other against France’s largest bank, BNP Paribas, over doing business with countries like Sudan that the United States has blacklisted. The approach applies to American banks, though those investigations are at an earlier stage.
In the talks with BNP, which has a huge investment bank in New York, prosecutors in Manhattan and Washington have outlined plans to extract a criminal guilty plea from the bank’s parent company, according to the lawyers, who were not authorized to speak publicly. If BNP is unable to negotiate a lesser punishment — the bank has enlisted the support of high-ranking French officials to pressure prosecutors — the case could counter congressional criticism that arose after the British bank HSBC escaped similar charges two years ago.
Such criminal cases hinge on the cooperation of regulators, some who warned that charging HSBC could have prompted the revocation of the bank’s charter, the corporate equivalent of the death penalty. Federal guidelines require prosecutors to weigh the broader economic consequences of charging corporations.
Economists warned after the crash that the economy would never really recover until the toxic banks were allowed to fail. The whole mess was a house of cards, and the Obama administration’s policy of “extend and pretend” simply didn’t work. The ripple effects spread through the economy, and it’s not coming back.
Can’t we at least see some of the perpetrators on trial, people like Jamie Dimon? Because if we don’t, no one should be surprised that we call this out as the farce it is.
In a boarded-up hotel along a windy country road, a couple dozen activists are gathered for a workshop. They are mostly women, and mostly over 40. The workshop is being held by Micah White, one of the instigators of Occupy Wall Street.
After the dust settled from Occupy, White packed up his bags in the Bay Area and moved here to Nehalem, a small town in one of thepoorest counties in rural Oregon. Nehalem sits on the Pacific Coast, in the shadows of popular vacation destination Manzanita. But White isn’t here for a vacation, and he came to town with a mission.
The demise of Occupy left everyone with one question: “Now what?” Almost three years later, White is helping the founders of Occupy, US Uncut, and others to launch The After Party, a new political party on “a mission to restore democracy” and occupy the ballot box in time for the 2016 elections. How? By organizing statewide ballot initiatives, ousting corrupt officials, and encouraging everyday people to run for local and county offices.
Inspired by the success of Occupy Sandy organizing efforts, The After Party also seeks to turn communities into self-sufficient hotbeds of social action. White and the After Party team want to create what they call “mutual aid flash mobs,” citizen gatherings where people can do things like start a time bank, plant urban gardens, fix local roads, organize free healthcare clinics, and build tiny houses for the homeless. Nehalem, population 267, will be a test lab.
