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Moochers Against Welfare - NYTimes.com
Moochers Against Welfare - NYTimes.com:
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OP-ED COLUMNIST
Moochers Against Welfare
By PAUL KRUGMAN
Published: February 16, 2012
First, Atlas shrugged. Then he scratched his head in puzzlement.
Fred R. Conrad/The New York Times
Paul Krugman
Related News
Even Critics of Safety Net Increasingly Depend on It(February 12, 2012)
Readers’ Comments
Modern Republicans are very, very conservative; you might even (if you were Mitt Romney) say, severely conservative. Political scientists who use Congressional votes to measure such things find that the current G.O.P. majority is the most conservative since 1879, which is as far back as their estimates go.
And what these severe conservatives hate, above all, is reliance on government programs. Rick Santorum declares that President Obama is getting America hooked on “the narcotic of dependency.” Mr. Romney warns that government programs “foster passivity and sloth.” Representative Paul Ryan, the chairman of the House Budget Committee, requires that staffers read Ayn Rand’s “Atlas Shrugged,” in which heroic capitalists struggle against the “moochers” trying to steal their totally deserved wealth, a struggle the heroes win by withdrawing their productive effort and giving interminable speeches.
Many readers of The Times were, therefore, surprised to learn, from an excellent article published last weekend, that the regions of America most hooked on Mr. Santorum’s narcotic — the regions in which government programs account for the largest share of personal income — are precisely the regions electing those severe conservatives. Wasn’t Red America supposed to be the land of traditional values, where people don’t eat Thai food and don’t rely on handouts?
The article made its case with maps showing the distribution of dependency, but you get the same story from a more formal comparison. Aaron Carroll of Indiana University tells us that in 2010, residents of the 10 states Gallup ranks as “most conservative” received 21.2 percent of their income in government transfers, while the number for the 10 most liberal states was only 17.1 percent.
Now, there’s no mystery about red-state reliance on government programs. These states are relatively poor, which means both that people have fewer sources of income other than safety-net programs and that more of them qualify for “means-tested” programs such as Medicaid.
By the way, the same logic explains why there has been a jump in dependency since 2008. Contrary to what Mr. Santorum and Mr. Romney suggest, Mr. Obama has not radically expanded the safety net. Rather, the dire state of the economy has reduced incomes and made more people eligible for benefits, especially unemployment benefits. Basically, the safety net is the same, but more people are falling into it.
But why do regions that rely on the safety net elect politicians who want to tear it down? I’ve seen three main explanations.
First, there is Thomas Frank’s thesis in his book “What’s the Matter With Kansas?”: working-class Americans are induced to vote against their own interests by the G.O.P.’s exploitation of social issues. And it’s true that, for example, Americans who regularly attend church are much more likely to vote Republican, at any given level of income, than those who don’t.
Still, as Columbia University’s Andrew Gelman points out, the really striking red-blue voting divide is among the affluent: High-income residents of red states are overwhelmingly Republican; high-income residents of blue states only mildly more Republican than their poorer neighbors. Like Mr. Frank, Mr. Gelman invokes social issues, but in the opposite direction. Affluent voters in the Northeast tend to be social liberals who would benefit from tax cuts but are repelled by things like the G.O.P.’s war on contraception.
Finally, Cornell University’s Suzanne Mettler points out that many beneficiaries of government programs seem confused about their own place in the system. She tells us that 44 percent of Social Security recipients, 43 percent of those receiving unemployment benefits, and 40 percent of those on Medicare say that they “have not used a government program.”
Presumably, then, voters imagine that pledges to slash government spending mean cutting programs for the idle poor, not things they themselves count on. And this is a confusion politicians deliberately encourage. For example, when Mr. Romney responded to the new Obama budget, he condemned Mr. Obama for not taking on entitlement spending — and, in the very next breath, attacked him for cutting Medicare.
The truth, of course, is that the vast bulk of entitlement spending goes to the elderly, the disabled, and working families, so any significant cuts would have to fall largely on people who believe that they don’t use any government program.
The message I take from all this is that pundits who describe America as a fundamentally conservative country are wrong. Yes, voters sent some severe conservatives to Washington. But those voters would be both shocked and angry if such politicians actually imposed their small-government agenda.
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GOP Confusion Over the First Amendment
GOP Confusion Over the First Amendment:
o state what should be obvious but is apparently not, liberties – even those cited in the Bill of Rights – are not absolute and indeed many liberties that Americans hold dear are inherently in contradiction. Since the nation’s founding, it has been a key role of government to seek out acceptable balances in this competition of interests.
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GOP Confusion Over the First Amendment
02 March 12
o state what should be obvious but is apparently not, liberties – even those cited in the Bill of Rights – are not absolute and indeed many liberties that Americans hold dear are inherently in contradiction. Since the nation’s founding, it has been a key role of government to seek out acceptable balances in this competition of interests.For instance, the Bill of Rights guarantees freedom of speech, but not to cry "Fire!" in a crowded theater. The press is protected, but that does not mean that newspapers can do whatever they want. If they print malicious lies against a citizen, they can be subject to libel laws – because it is accepted that people also need some protection against losing their reputations unfairly.
Sen. Roy Blunt, R-Missouri
It also would be illegal under federal law to hack into a person’s cell phone as Rupert Murdoch’s media empire did in Great Britain. In the United States, there is a constitutional expectation of some personal privacy.
Similarly, you can make the claim that the Second Amendment gives you the right to have a gun for self-protection, but you’d be on a lot shakier ground if you insisted that your "right to bear arms" justified your possession of a surface-to-air missile or a tactical nuclear bomb. Then, the competing right of others in society to expect a reasonable level of safety would trump your weapons right.
Churches, too, were afforded broad protections under the Bill of Rights, but they still must abide by civil laws. For instance, a religion that practices pedophilia or polygamy or fundraising fraud cannot simply assert a blanket right under the First Amendment to do whatever it wants.
Yet, today we’re being told by the Right that religious liberty is boundless and that any moral or religious objection by an employer against giving an employee some specific health benefit trumps the employee’s right to get that medical service. In other words, the religious freedom of the employer should trample the rights of the employee who may have a different moral viewpoint.
A compromise from President Barack Obama on whether a religious-owned institution can deny women employees access to contraceptives in health plans (Obama shifted the costs for that coverage directly to the insurance companies) has failed to satisfy the Catholic bishops who continue to protest the plan as an infringement on their religious dogma against birth control, although many other Catholic groups have praised Obama’s compromise.
In this campaign year, Republicans have denounced Obama’s plan as an unconstitutional infringement on religious freedom. Sen. Roy Blunt of Missouri proposed an amendment that would allow any employer to cite a moral objection in denying insurance coverage for any medical service. That raised the prospect that some owner who, say, considers AIDS a judgment from God against immoral behavior could exclude that expensive coverage for employees.
Appeals to the Founders
On the Senate floor on Thursday – as his proposal was facing a narrow defeat – Blunt said "this issue will not go away unless the administration decides to take it away by giving people of faith these First Amendment protections."
Senate Minority Leader Mitch McConnell of Kentucky claimed to be speaking for the nation’s Founders: "It was precisely because of the danger of a government intrusion into religion like this one that they left us the First Amendment in the first place, so that we could always point to it and say no government – no government – no president has that right. Religious institutions are free to decide what they believe, and the government must respect their right to do so."
The Blunt amendment also tapped into the "hate-government" message of the Tea Party, that "guv-mint" shouldn’t be imposing regulations that impinge on "liberty," either for individuals or the states. But these propaganda themes rely on a revisionist founding narrative of the United States, pretending that the Founders opposed a strong central government and wanted a system of states’ rights and unrestrained personal liberty.
This narrative - pushed by Tea Partiers and libertarians - always skips from the Declaration of Independence of 1776 to the U.S. Constitution of 1787, while ignoring the key government document in between, the Articles of Confederation, which was in force from 1777 to 1787. The Articles represent an inconvenient truth for the Right since they created a system of a weak central government with independent states holding almost all the cards.
Key Founders, such as Virginians George Washington and James Madison, regarded the Articles as unworkable and dangerous to the nation’s survival. They decided to reshuffle the deck. So, in 1787, operating under a mandate to propose amendments to the Articles, Washington, Madison and others engineered what amounted to a coup against the old system. In secret meetings in Philadelphia, they jettisoned the Articles and their weak central government in favor of the Constitution and a strong central government.
Madison, the Constitution’s chief architect, was also the author of the Commerce Clause, which bestowed on the central government the important power to regulate interstate commerce, which many framers recognized as necessary for building an effective economy to compete with rivals in Europe and elsewhere.
Fooling the Tea Partiers
Today’s Right leaves out or distorts this important chapter because it undercuts the message that is sent out to the Tea Partiers - that they are standing with the Founders by opposing a strong central government. This propaganda has proved to be a very effective way to deceive ill-informed Americans about what the true purpose of the Constitution was.
The Founders also spoke and wrote frequently about the necessity of trading off some liberty for a functioning society. Contrary to the Right’s founding myth, the Founders were not absolutists for liberty (beyond the obvious fact that many were slaveowners); they had read the works of political philosophers who recognized that civilization required some constraints on individual actions.
The Founders also were mostly practical men who wanted a vibrant and successful nation – recognizing that only such a country could protect the independence that had just been won at a high price in blood and treasure. To make the Founders into caricatures of religious zealotry, who would place the dogma of any religion over the decisions of individual citizens, is a further distortion of what the leading framers were thinking at the time.
Some of Madison’s key allies in the fight for the Constitution and later enactment of the Bill of Rightswere Virginian Baptists who believed fiercely in the separation of church and state. Thus, the First Amendment begins by prohibiting establishment of an official religion before barring interference in religious practices. Nothing in the First Amendment says churches are exempt from civil law or that the government must help them impose their doctrines on citizens.
So, what is this coordinated attack on the federal government really all about? Clearly, the Right does not truly care about Americans having freedom of conscience on religious matters. Otherwise, we wouldn’t be seeing all these attacks on women’s access to contraception and abortion services. The Right has no compunction against intruding on the religious beliefs of those women.
Demonizing the New Deal
Which gets us to the key point about the orchestrated hostility toward any action by the U.S. government when its supports the welfare of the average American. What we are watching is a class war – as billionaire Warren Buffett has rightly noted –and that the wealthy are winning. As part of that war, the wealthy and their operatives have developed what might be called a "united front" against government, with poorer Americans drawn in by the so-called "cultural issues."
The wealthy understand that in the absence of government intervention on behalf of common citizens, nearly all power would accrue to corporations and to the rich. The average American would become, at minimum, a second-class citizen with far fewer meaningful rights and, in some ways, a virtual slave to the powerful.
What many Americans seem to have forgotten is that the Great Middle Class wasn’t a natural outgrowth of the nation’s economic system; it was the creation of the federal government and especially the New Deal. After the Great Depression – brought on largely by vast income inequality and rampant stock speculation – President Franklin Roosevelt launched the New Deal, pitting the federal government against the titans of business.
The New Deal’s goal was to spread the wealth of the country more equitably by legalizing unions and investing public funds in building the nation, while simultaneously reining in reckless financial practices and restraining the power of the rich. Inevitably, that meant intruding on the "liberty" of the wealthy to do whatever they wanted. It meant allowing workers to engage in collective bargaining and to strike. It meant imposing higher taxes on the rich so the national infrastructure could be expanded and modernized.
Those efforts grew in the post-World War II era with veterans benefiting from the GI Bill to go to college and buy homes. And later, with projects like the Interstate Highway system, which sped goods to markets, and the Space Program, which spurred technological advances. Even more recently, the government-created Internet introduced dramatic growth in productivity.
These innovations generated great national wealth – and combined with high marginal tax rates on the rich – created a much more equitable society, both economically and politically. But many of the rich never accepted the social contract implicit in the New Deal, that all Americans should share in the nation’s bounty and that a strong middle class was good for everyone, including fair-minded businessmen who benefited from larger markets for their products.
Instead, many rich Americans wanted to keep their money for themselves and to pass it on to their progeny, creating what would amount to an aristocracy, a class that would essentially own and govern America. Of course, they couldn’t exactly express it that way; they had to dress up their greed in different clothing. After all, even the dumbest American wasn’t likely to sign on to a program for restoring the Gilded Age under an unrestrained financial system that had led to the Great Depression.
The rich had to sell their new era of plutocratic dominance as a "populist movement," essentially as "liberty" from government. The national government, in particular, had to be transformed from the defender of the middle class and the promoter of a broad-based prosperity into an oppressor holding back "enterprise" and restricting "freedom."
That required building a powerful propaganda megaphone with angry voices blaring out messages that exploited the frustrations of average Americans. Instead of blaming the rich for shipping jobs overseas and for eroding middle-class incomes, the villain had to become the "guv-mint." The answer had to be giving money and power back to corporations and their allies.
In some ways, the Blunt amendment fits into this pro-corporate philosophy (albeit with a religious twist of empowering the Catholic Church’s hierarchy as well as company bosses with moral qualms). The GOP plan would have transferred even more power to employers over their employees’ lives, down to their choices of medical services.
The Senate rejected the Blunt amendment, 51-48, but Republicans vowed to make it an issue in the presidential campaign.
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FOCUS | BofA: Raging Hurricane of Theft and Fraud
FOCUS | BofA: Raging Hurricane of Theft and Fraud: "
here are two things every American needs to know about Bank of America.
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BofA: Raging Hurricane of Theft and Fraud
29 March 12
here are two things every American needs to know about Bank of America.The first is that it's corrupt. This bank has systematically defrauded almost everyone with whom it has a significant business relationship, cheating investors, insurers, homeowners, shareholders, depositors, and the state. It is a giant, raging hurricane of theft and fraud, spinning its way through America and leaving a massive trail of wiped-out retirees and foreclosed-upon families in its wake.
The second is that all of us, as taxpayers, are keeping that hurricane raging. Bank of America is not just a private company that systematically steals from American citizens: it's a de facto ward of the state that depends heavily upon public support to stay in business. In fact, without the continued generosity of us taxpayers, and the extraordinary indulgence of our regulators and elected officials, this company long ago would have been swallowed up by scandal, mismanagement, prosecution and litigation, and gone out of business. It would have been liquidated and its component parts sold off, perhaps into a series of smaller regional businesses that would have more respect for the law, and be more responsive to their customers.
But Bank of America hasn't gone out of business, for the simple reason that our government has decided to make it the poster child for the "Too Big To Fail" concept. Because it is considered a "systemically important institution" whose collapse would have a major, Lehman-Brothers-style impact on the economy, two consecutive presidential administrations have taken extraordinary measures to keep Bank of America in business, despite a staggering recent legacy of corruption schemes, many of which were simply overlooked by regulators.
This is why the question of whether or not Bank of America should remain on public life support is so critical to all Americans, and not just those millions who have the misfortune to be customers of the bank, or own shares in the firm, or hold mortgages serviced by the company. This gigantic financial institution is the ultimate symbol of a new kind of corruption at the highest levels of American society: a tendency to marry the near-limitless power of the federal government with increasingly concentrated, increasingly unaccountable private financial interests.
The inevitable result of that new form of corruption is this bank, whose continued, state-supported existence should naturally outrage all Americans, be they conservative or progressive.
Conservatives should be outraged by Bank of America because it is perhaps the biggest welfare dependent in American history, with the $45 billion in bailout money and the $118 billion in state guarantees it's received since 2008 representing just the crest of a veritable mountain of federal bailout support, most of it doled out by the Obama administration.
For instance, with its own credit rating hovering just above junk status, Bank of America has been allowed to borrow tens of billions of dollars against the government's credit rating using little-known bailout programs with names like the Temporary Liquidity Guarantee Program. Since the crash of 2008, it's also borrowed billions if not trillions in emergency, near-zero interest rate loans from the Federal Reserve - it took out $91 million in rolling low-interest financing from the Fed on just one day in January, 2009.
Conservatives believe that a commitment to free market principles and limited government will lead us out of our economic troubles, but Bank of America represents the opposite dynamic: a company that is kept protected from the judgments of the free market, and forces the state to expand to take on its debts.
Last summer, for instance, the Bank - in order to satisfy creditors who were nervous about the enormous quantity of risky assets on its balance sheet - decided to move some $73 trillion (that's trillion, with a T) in exotic derivative bets from one end of the company into the federally-insured, depository side of the bank.
This move, encouraged by the Obama administration, put the American taxpayer on the hook for an entire generation of irresponsible gambles made by another failed investment firm that should have gone out of business, but was instead acquired by Bank of America with $25 billion in taxpayer help - Merrill Lynch.
When did we make it the job of the taxpayer to buy failed companies, and rescue companies from their own bad decisions? How is that conservative?
Meanwhile, if you're a progressive, Bank of America is the ultimate symbol of modern predatory capitalism. This company has knowingly sold hundreds of billions of worthless securities to unions and pension funds (New York state filed two different lawsuits against Bank of America and its subsidiaries on behalf of its pension fund, one of which was settled for $624 million) brazenly overcharged its depositors (it was forced to pay customers $410 million in restitution for bogus overdraft charges), and repeatedly lied to its shareholders (most notoriously, it lied about billions in losses on Merrill Lynch's books before asking shareholders to approve its merger with the firm).
Moreover, Bank of America has ruthlessly preyed upon millions of homeowners, throwing them out on the street on the strength of doctored, "robosigned" paperwork created through brazenly illegal practices they helped pioneer - the firm sped struggling families to foreclosure court using perjured affidavits produced in factory-like fashion by the hundreds or thousands every day, with full knowledge of management. Through the firm's improper use of an unaccountable private electronic mortgage registry system called MERS, it also systematically evaded millions of dollars in local fees, forcing some communities to cut services and raise property taxes.
Even when caught and punished for its crimes by the authorities, Bank of America has repeatedly ignored court orders. It was one of five companies identified in two separate investigations earlier this year that were caught continuing the practice of robosigning, even after promising to stop in a legally binding consent decree. Last summer, the state of Nevada sought to terminate a settlement over mortgage abuses it had entered into with Bank of America after it found the company was brazenly violating the agreement, among other things raising payments and interest rates on mortgage customers, despite the fact that the settlement only allowed them to modify loans downward.
Over and over again, we see that leveling fines and punishments at this bank is not enough: it simply ignores them. It is the very definition of an unaccountable corporate villain.
Companies like Bank of America are a direct threat to national security, for many reasons. For one thing, they drive smaller, more honest banks out of business: since the market knows the federal government will never let Bank of America fail, it charges less to lend the bank money. That gives Bank of America, despite its near-junk credit rating, a competitive advantage over a smaller, regional bank that might have a better credit rating, but doesn't have the implicit support of the federal government.
Worse still, stock market investor dollars that normally would go to more customer-friendly, more creative, and more commercially dependable firms will instead continue to flow to Too-Big-To-Fail behemoths like Bank of America, as buying stock in a company with implicit state support will be considered almost a safe-haven investment, like buying gold or Treasury bills.
This robs more deserving and ingenious entrepreneurs of scarce capital, and also encourages existing companies to pour resources not into better performance and increased productivity, but into lobbying and government influence. The result will be fewer Googles and Apples, more bad banks, and more campaign contributions for politicians.
Moreover, we've seen throughout our history that when criminal organizations are not punished, they tend to be encouraged to commit more crimes. Five years from now, our government's decision to avoid jailing Bank of America executives for their roles in the vast robosigning program may result in a situation where no court document of any kind can be trusted, as companies will realize that it is cheaper and easier to simply invent legal affidavits than to draw them up properly and accurately.
What will your defense be against a future lawsuit for a credit card debt or a foreclosure, when your bank walks into court with a pile of invented documents? Will you wish then that you'd fought harder for Bank of America to be punished now?
And the state's decision to allow Bank of America to pay a middling, $137 million fine for the rigging of bids for five years of municipal bond issues - a very serious crime that robbed taxpayers of millions in revenue, and incidentally is exactly the sort of thing we used to put mobsters in jail for, when the rigged contracts were for cement instead of bonds - may mean that down the road, all municipal bond issues will be rigged.
In recent years, Too-Big-To-Fail banks like Bank of America and Chase and Wells Fargo have been caught rigging the bids for financial services in dozens of municipalities nationwide. Worse, these same banks have repeatedly been let off the hook by regulators, who rarely seek jail sentences for the offenders, and more often simply apply fractional fines to the companies caught. This behavior, if left unchecked, will ultimately mean that we will all have to pay more for our roads, our traffic lights, our sewers, in fact all public services, as the banker's secret bonus will soon become an institutionalized part of the invoice. And it'll be our fault, because we didn't do anything about it now.
The only way to prevent this kind of slide to total lawlessness is to break this unhealthy relationship between bank and government. It would be a great sign of America's return to healthier capitalism if we could allow one of the worst of public-private monsters, Bank of America, to sink or swim on its own, in the free market.
We don't want Bank of America to fail. Our position is, it already is insolvent, and already has failed - and only our tax dollars, and our government's continued protection, is keeping that failure from becoming more common knowledge. There are many opinions about the nature of modern American capitalism. Some think the system is no longer able to meet the needs of ordinary people and needs to be radically overhauled, while others like it just the way it is.
But one thing that everyone on this spectrum of beliefs can agree upon is that our system doesn't work when corrupt companies, companies that should fail in the free market, are kept alive by the government. When we allow that, what we get is a system that is neither capitalism nor socialist, but somewhere more miserably in between - a bureaucratic state in which profit is not tied to performance, but political power.
We have to break that cycle, and we can. Even with the enormous levels of state support, Bank of America has been teetering on the edge of collapse for years now. In December of 2011, its share price briefly dipped below $5, a near-fatal event in the firm's history. The market has reacted violently to bad news about the bank on multiple occasions in the last year - after news of layoffs, after hints that the government might not bail the bank out completely in the event of a collapse, and after significant new lawsuits were filed. Each of these corrections nearly sent the company into a tailspin, but it was always rescued in the end by the widespread belief that Uncle Sam would bail it out in the event of a collapse.
We need to put a dent in that belief. We need to convince politicians and investors alike to allow failure to fail.
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FOCUS | BofA: Raging Hurricane of Theft and Fraud
FOCUS | BofA: Raging Hurricane of Theft and Fraud:
here are two things every American needs to know about Bank of America.
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Taibbi speaking at an Occupy Wall Street day of action, February 29th, 2012. (photo: Foreclose The Banks)
BofA: Raging Hurricane of Theft and Fraud
29 March 12
here are two things every American needs to know about Bank of America.The first is that it's corrupt. This bank has systematically defrauded almost everyone with whom it has a significant business relationship, cheating investors, insurers, homeowners, shareholders, depositors, and the state. It is a giant, raging hurricane of theft and fraud, spinning its way through America and leaving a massive trail of wiped-out retirees and foreclosed-upon families in its wake.
The second is that all of us, as taxpayers, are keeping that hurricane raging. Bank of America is not just a private company that systematically steals from American citizens: it's a de facto ward of the state that depends heavily upon public support to stay in business. In fact, without the continued generosity of us taxpayers, and the extraordinary indulgence of our regulators and elected officials, this company long ago would have been swallowed up by scandal, mismanagement, prosecution and litigation, and gone out of business. It would have been liquidated and its component parts sold off, perhaps into a series of smaller regional businesses that would have more respect for the law, and be more responsive to their customers.
But Bank of America hasn't gone out of business, for the simple reason that our government has decided to make it the poster child for the "Too Big To Fail" concept. Because it is considered a "systemically important institution" whose collapse would have a major, Lehman-Brothers-style impact on the economy, two consecutive presidential administrations have taken extraordinary measures to keep Bank of America in business, despite a staggering recent legacy of corruption schemes, many of which were simply overlooked by regulators.
This is why the question of whether or not Bank of America should remain on public life support is so critical to all Americans, and not just those millions who have the misfortune to be customers of the bank, or own shares in the firm, or hold mortgages serviced by the company. This gigantic financial institution is the ultimate symbol of a new kind of corruption at the highest levels of American society: a tendency to marry the near-limitless power of the federal government with increasingly concentrated, increasingly unaccountable private financial interests.
The inevitable result of that new form of corruption is this bank, whose continued, state-supported existence should naturally outrage all Americans, be they conservative or progressive.
Conservatives should be outraged by Bank of America because it is perhaps the biggest welfare dependent in American history, with the $45 billion in bailout money and the $118 billion in state guarantees it's received since 2008 representing just the crest of a veritable mountain of federal bailout support, most of it doled out by the Obama administration.
For instance, with its own credit rating hovering just above junk status, Bank of America has been allowed to borrow tens of billions of dollars against the government's credit rating using little-known bailout programs with names like the Temporary Liquidity Guarantee Program. Since the crash of 2008, it's also borrowed billions if not trillions in emergency, near-zero interest rate loans from the Federal Reserve - it took out $91 million in rolling low-interest financing from the Fed on just one day in January, 2009.
Conservatives believe that a commitment to free market principles and limited government will lead us out of our economic troubles, but Bank of America represents the opposite dynamic: a company that is kept protected from the judgments of the free market, and forces the state to expand to take on its debts.
Last summer, for instance, the Bank - in order to satisfy creditors who were nervous about the enormous quantity of risky assets on its balance sheet - decided to move some $73 trillion (that's trillion, with a T) in exotic derivative bets from one end of the company into the federally-insured, depository side of the bank.
This move, encouraged by the Obama administration, put the American taxpayer on the hook for an entire generation of irresponsible gambles made by another failed investment firm that should have gone out of business, but was instead acquired by Bank of America with $25 billion in taxpayer help - Merrill Lynch.
When did we make it the job of the taxpayer to buy failed companies, and rescue companies from their own bad decisions? How is that conservative?
Meanwhile, if you're a progressive, Bank of America is the ultimate symbol of modern predatory capitalism. This company has knowingly sold hundreds of billions of worthless securities to unions and pension funds (New York state filed two different lawsuits against Bank of America and its subsidiaries on behalf of its pension fund, one of which was settled for $624 million) brazenly overcharged its depositors (it was forced to pay customers $410 million in restitution for bogus overdraft charges), and repeatedly lied to its shareholders (most notoriously, it lied about billions in losses on Merrill Lynch's books before asking shareholders to approve its merger with the firm).
Moreover, Bank of America has ruthlessly preyed upon millions of homeowners, throwing them out on the street on the strength of doctored, "robosigned" paperwork created through brazenly illegal practices they helped pioneer - the firm sped struggling families to foreclosure court using perjured affidavits produced in factory-like fashion by the hundreds or thousands every day, with full knowledge of management. Through the firm's improper use of an unaccountable private electronic mortgage registry system called MERS, it also systematically evaded millions of dollars in local fees, forcing some communities to cut services and raise property taxes.
Even when caught and punished for its crimes by the authorities, Bank of America has repeatedly ignored court orders. It was one of five companies identified in two separate investigations earlier this year that were caught continuing the practice of robosigning, even after promising to stop in a legally binding consent decree. Last summer, the state of Nevada sought to terminate a settlement over mortgage abuses it had entered into with Bank of America after it found the company was brazenly violating the agreement, among other things raising payments and interest rates on mortgage customers, despite the fact that the settlement only allowed them to modify loans downward.
Over and over again, we see that leveling fines and punishments at this bank is not enough: it simply ignores them. It is the very definition of an unaccountable corporate villain.
Companies like Bank of America are a direct threat to national security, for many reasons. For one thing, they drive smaller, more honest banks out of business: since the market knows the federal government will never let Bank of America fail, it charges less to lend the bank money. That gives Bank of America, despite its near-junk credit rating, a competitive advantage over a smaller, regional bank that might have a better credit rating, but doesn't have the implicit support of the federal government.
Worse still, stock market investor dollars that normally would go to more customer-friendly, more creative, and more commercially dependable firms will instead continue to flow to Too-Big-To-Fail behemoths like Bank of America, as buying stock in a company with implicit state support will be considered almost a safe-haven investment, like buying gold or Treasury bills.
This robs more deserving and ingenious entrepreneurs of scarce capital, and also encourages existing companies to pour resources not into better performance and increased productivity, but into lobbying and government influence. The result will be fewer Googles and Apples, more bad banks, and more campaign contributions for politicians.
Moreover, we've seen throughout our history that when criminal organizations are not punished, they tend to be encouraged to commit more crimes. Five years from now, our government's decision to avoid jailing Bank of America executives for their roles in the vast robosigning program may result in a situation where no court document of any kind can be trusted, as companies will realize that it is cheaper and easier to simply invent legal affidavits than to draw them up properly and accurately.
What will your defense be against a future lawsuit for a credit card debt or a foreclosure, when your bank walks into court with a pile of invented documents? Will you wish then that you'd fought harder for Bank of America to be punished now?
And the state's decision to allow Bank of America to pay a middling, $137 million fine for the rigging of bids for five years of municipal bond issues - a very serious crime that robbed taxpayers of millions in revenue, and incidentally is exactly the sort of thing we used to put mobsters in jail for, when the rigged contracts were for cement instead of bonds - may mean that down the road, all municipal bond issues will be rigged.
In recent years, Too-Big-To-Fail banks like Bank of America and Chase and Wells Fargo have been caught rigging the bids for financial services in dozens of municipalities nationwide. Worse, these same banks have repeatedly been let off the hook by regulators, who rarely seek jail sentences for the offenders, and more often simply apply fractional fines to the companies caught. This behavior, if left unchecked, will ultimately mean that we will all have to pay more for our roads, our traffic lights, our sewers, in fact all public services, as the banker's secret bonus will soon become an institutionalized part of the invoice. And it'll be our fault, because we didn't do anything about it now.
The only way to prevent this kind of slide to total lawlessness is to break this unhealthy relationship between bank and government. It would be a great sign of America's return to healthier capitalism if we could allow one of the worst of public-private monsters, Bank of America, to sink or swim on its own, in the free market.
We don't want Bank of America to fail. Our position is, it already is insolvent, and already has failed - and only our tax dollars, and our government's continued protection, is keeping that failure from becoming more common knowledge. There are many opinions about the nature of modern American capitalism. Some think the system is no longer able to meet the needs of ordinary people and needs to be radically overhauled, while others like it just the way it is.
But one thing that everyone on this spectrum of beliefs can agree upon is that our system doesn't work when corrupt companies, companies that should fail in the free market, are kept alive by the government. When we allow that, what we get is a system that is neither capitalism nor socialist, but somewhere more miserably in between - a bureaucratic state in which profit is not tied to performance, but political power.
We have to break that cycle, and we can. Even with the enormous levels of state support, Bank of America has been teetering on the edge of collapse for years now. In December of 2011, its share price briefly dipped below $5, a near-fatal event in the firm's history. The market has reacted violently to bad news about the bank on multiple occasions in the last year - after news of layoffs, after hints that the government might not bail the bank out completely in the event of a collapse, and after significant new lawsuits were filed. Each of these corrections nearly sent the company into a tailspin, but it was always rescued in the end by the widespread belief that Uncle Sam would bail it out in the event of a collapse.
We need to put a dent in that belief. We need to convince politicians and investors alike to allow failure to fail.
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Sunday, April 8, 2012
FOCUS: ALEC, Walmart and Trayvon Martin?
FOCUS: ALEC, Walmart and Trayvon Martin?:
Our apologies. We originally posted this piece as having been authored "by Bill Moyers." In fact the author is "Lauren Feeney" and it was originally published on Bill Moyers' website BillMoyers.com. So the correct author is Lauren Feeney and the original publisher is BillMoyers.com. Entirely our mistake, so sorry.
hat does Walmart have to do with the tragic death of 17-year-old Trayvon Martin? The answer starts with Florida’s 2005 Stand Your Ground law, promoted across the country as "model legislation" by the American Legislative Exchange Council, or ALEC — "a corporate-backed organization that has managed to keep a low profile even as it exerts vast influence," as Paul Krugman of The New York Times explains:
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ALEC, Walmart and Trayvon Martin?
29 March 12
Our apologies. We originally posted this piece as having been authored "by Bill Moyers." In fact the author is "Lauren Feeney" and it was originally published on Bill Moyers' website BillMoyers.com. So the correct author is Lauren Feeney and the original publisher is BillMoyers.com. Entirely our mistake, so sorry.hat does Walmart have to do with the tragic death of 17-year-old Trayvon Martin? The answer starts with Florida’s 2005 Stand Your Ground law, promoted across the country as "model legislation" by the American Legislative Exchange Council, or ALEC — "a corporate-backed organization that has managed to keep a low profile even as it exerts vast influence," as Paul Krugman of The New York Times explains:Despite claims that it’s nonpartisan, it’s very much a movement-conservative organization, funded by the usual suspects: the Kochs, Exxon Mobil, and so on. Unlike other such groups, however, it doesn’t just influence laws, it literally writes them, supplying fully drafted bills to state legislators.
The citizen’s advocacy group Common Cause has an explanation as to why it believes ALEC, which mostly promotes corporate interests, has campaigned for Stand Your Ground laws nationwide. The National Rifle Association is a longtime funder of ALEC. The NRA pushed for the Florida bill’s passage and one of its lobbyists then asked a closed-door meeting of ALEC’s Criminal Justice Task Force to use the law as a template for other state legislatures. At the time, that task force was co-chaired by Walmart, America’s largest seller of guns and ammunition. In September 2005, the bill was adopted by ALEC’s board of directors.
Since then, more than two dozen states have passed laws based on Stand Your Ground (also known as the Castle Doctrine). In Wisconsin, The Nation reports, an unarmed 20 year old named Bo Morrison was shot and killed while hiding on a neighbor’s porch after fleeing an underage drinking party broken up by the police. Last week, the district attorney announced that the shooter was protected from prosecution by the state’s new Castle Doctrine law.
Bo Morrison and Trayvon Martin aren’t the only victims — according to the Florida Department of Law Enforcement, the number of "justifiable homicides" has nearly tripled since the Stand Your Ground law went into effect.
An online petition posted by Martin’s parents demanding further investigation and prosecution of his murder has gathered more than 2 million signatures. Color of Change, a group working to make government more responsive to the concerns of Black Americans, has a related petition protesting another ALEC campaign, this one for what critics say are discriminatory voter ID laws.
Krugman writes, "If there is any silver lining to Trayvon Martin’s killing, it is that it might finally place a spotlight on what ALEC is doing to our society — and our democracy."
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