Crisis R USA
The plain truth is that we are in the longest war of our history, looking more and more like a prelude to the next world war; our income is more unequally distributed than any industrial nation in the world; we are in an economic recession nearly as long as the war, and in an environmental disaster signaled by mass extinctions and global warming.
Two of the many reasons for this situation are the myth of progress, which equates the convolutions of history with the progress of knowledge in the natural sciences. This error is in large part responsible for the absolute babble of talking heads on TV trying to explain the present political situation and obfuscating politicians trying to conceal it. There is no progress in that area; there is only reaction, from the left and the right. Perhaps that's the reason comments from the president in the depths of the Great Depression make more sense than anything out of the mouths of the candidates today, one repeating in deadly abstraction the progressive program, the other a fatuous plutocrat.
The other main reason is that corporations feed on governments. from local to national. In big business, we have the perfect expression of progress, eternal growth, and constant expansion that crushes human liberty and American democracy.
The idea that history, like science, records a cumulative unfolding of human capacities and that modern civilization is heir to all the achievements of the past ran counter to common sense -- that is, to the experience of loss and defeat that makes up so much of the texture of daily life. "Are there no calamities in history?" Orestes Brownson demanded. "Nothing tragic?" Brownson and other opponents of "improvement" found little evidence of cumulative enlightenment. Officially discredited concepts like nemesis, fate, fortune, or providence seemed to speak more directly to human experience, in their view, than the concept of progress. -- Christopher Lasch, The True and Only Heaven: Progress and Its Critics, p. 530.
“The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism -- ownership of government by an individual, by a group, or by any other controlling private power.... Among us today a concentration of private power without equal in history is growing.” -- Franklin D. Roosevelt
Chalmers Johnson Quotes:
“History teaches us that the capacity for things to get worse is limitless.” (origin unknown)
“It is time to realize, however, that the real dangers to America today come not from the newly rich people of East Asia but from our own ideological rigidity, our deep-seated belief in our own propaganda.”
― Blowback: The Costs and Consequences of American Empire
Los Angeles Times
California treasurer sanctions Wells Fargo over fake-accounts scandal
James Rufus Koren and Jim Puzzanghera
Founded during the gold rush as a place that could be trusted with your money, Wells Fargo & Co. has deep California roots and remains one of the state’s largest and oldest institutions.
But on Wednesday, the state’s treasurer announced he was cutting some business ties to the San Francisco bank over its mushrooming fake-accounts scandal — which may do little to dent its bottom line but is a stark illustration of how the bank with the quaint stagecoach logo has quickly become a symbol of corporate villainy.
“How can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who have placed their financial well-being in its care?" Treasurer John Chiang asked in a letter sent to Chief Executive John Stumpf and the bank’s board of directors.
Specifically, Chiang informed the bank that for the next year, his office will not invest in Wells Fargo securities, use the bank to buy stocks or bonds, or appoint the bank to underwrite certain bond offerings.
In response, Wells Fargo spokesman Gabriel Boehmer said that the bank is working hard to rectify any problems at the institution.
“We certainly understand the concerns that have been raised. We are very sorry and take full responsibility for the incidents in our retail bank,” he said. “We have already taken important steps, and will continue to do so, to address these issues and rebuild your trust.”
The stinging rebuke came on yet another difficult day for Wells Fargo — and one day before a Capitol Hill hearing that’s likely to amount to another public pummeling of the bank’s CEO.
Members of the House Financial Services Committee, who will grill Stumpf on Thursday, demanded on Wednesday that Federal Reserve Chairwoman Janet L. Yellen punish Wells Fargo for creating as many as 2 millions accounts without customers’ permission. She declined to commit to any regulatory penalties.
Meanwhile, speaking at a news conference in San Francisco, Chiang, a Democrat who plans to run for governor in 2018, outlined specific sanctions that will remain in place for a year and target Wells Fargo's “most highly profitable" relationships with his office. Still, the loss of the state’s business in the three areas specified are immaterial to the giant bank.
Deputy Treasurer Tim Schaefer estimated the bank earned about $1.75 million in underwriting fees dating to the beginning of 2015 and perhaps as much as a few million dollars in brokerage fees during the most recent fiscal year. Those are tiny figures for a bank that recorded $22 billion in revenue and $5.6 billion in profit in this year’s second quarter alone.
Chiang also said he will work with the state's pension funds, which collectively own about $2.3 billion in Wells Fargo stock and bonds, to push for reforms to Wells Fargo's corporate governance. Chiang sits on the governing board of the nation’s two largest public pension funds — the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.
He said he will push for the separation of the bank's chairman and chief executive roles, both now held by Stumpf, and for the bank to review its compensation policies and possibly rescind more pay from executives linked to the fake-accounts scandal.
On Tuesday, Wells Fargo said Stumpf will forfeit compensation worth about $45 million, while Carrie Tolstedt, the executive in charge of the division in which much of the activity took place, will give up about $19 million worth of stock. Chiang said those clawbacks don’t go far enough and that it would be appropriate for Stumpf to resign.
As Chiang was detailing his sanctions against the bank, lawmakers on Capitol Hill were pressing Yellen to punish the institution.
“Two million phony accounts. Break them up!” Rep. Brad Sherman (D-Porter Ranch) told Yellen during her appearance before the House Financial Services Committee on the Fed’s regulatory responsibilities.
Sherman said Wells Fargo’s widespread improper sales tactics indicated the giant San Francisco-based bank was too big to manage. He asked Yellen whether she would “at least seriously consider breaking up Wells Fargo” using the Fed’s authority to downsize banks that pose a risk to the financial system.
“We will hold the largest [financial] organizations to exceptionally high standards of risk management, internal controls and consumer protection,” she said.
After Sherman said that the Fed hasn’t been able to do that with Wells Fargo, Yellen responded, “We believe it is possible, even though it is extremely challenging.”
When violations do occur, Yellen said that bank executives should face consequences.
“I think it is very important that senior management be held accountable,” she said.
Wells Fargo agreed Sept. 8 to pay $185 million to settle investigations by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and Los Angeles City Atty. Mike Feuer into an aggressive sales culture that pushed bank employees to open as many as 2 million accounts that customers didn’t authorize.
It also has said it has fired 5,300 employees since 2011 for improper sales practices.
However, that settlement and the bank’s response to the scandal continued to irritate lawmakers Wednesday at the hearing. Rep. Keith Ellison (D-Minn.) said senior executives needed to pay a price for the sales culture they created.
“How can line-level workers be held accountable to the degree they clearly have been and yet nobody in mid-level or upper-level management seems to be taking responsibility for it,” he said. “I mean, they haven’t lost their jobs.”
Rep. Stephen Lynch (D-Mass.) criticized the settlement because the bank did not admit any wrongdoing.
“If it didn’t happen here, how we can even imagine ever that a bank might be required to take responsibility?” Lynch said. “It blows my mind that they’re getting away with this and they’re paying a little slap-on-the-wrist fine.”
The Fed supervises the holding company of Wells Fargo and the largest U.S. banks. Last week, Yellen said the Fed would look into the procedures at those banks to make sure they were complying with consumer protection laws and other regulations.
Yellen recommitted to that review Wednesday.
“We are undertaking a look comprehensively, not only in the consumer area but in compliance generally, because there has been a very disturbing pattern of violations,” she said. Among the areas where those have occurred are mortgages and foreign exchange trading, Yellen said.
Yellen also said she’s hopeful the Fed and other financial regulators soon would finish new rules for incentive-based compensation that would try to reduce risk-taking, such as requiring large banks to defer at least half the bonus payments to executives for four years.
Rep. Michael Capuano (D-Mass.) said Wells Fargo has faced 16 enforcement actions over the last five years, including an $85-million fine from the Fed in 2011 for mortgage lending abuses.
That fine was “laughable” to a bank the size of Wells Fargo, he said.
“Don’t you think it’s time the Fed does something" in light of the recent scandal? Capuano asked. “How long does this stuff go on before you get outraged and take action?”
Rep. Maxine Waters (D-Los Angeles) said “the enormous failure of risk management at Wells Fargo” could pose a threat to the financial system.
“Fraudulent retail banking practices may not, in and of themselves, pose systemic risk, but they surely indicate mismanagement that could be catastrophic in riskier and more complex divisions of a bank holding company,” Waters said. “Supervisors and law enforcement must continue to hold both institutions and individuals accountable.”
The Brennan Center for Justice
Durbin: The Banks Own Capitol Hill
The Washington Post reported recently that top TARP recipients paid a collective $22 million dollars to lobby Congress over the previous six months. In a recent interview, Assistant Majority Leader, Senator Dick Durbin observed wryly that, "the banks—hard to believe in a time when we're facing a banking crisis that many of the banks created—are still the most powerful lobby on Capitol Hill. And they frankly own the place..."
Commondreams.org/Beat the Press
Economists Keep Getting It Wrong Because the Media Coverup Their Mistakes
Most workers suffer serious consequences when they mess up on their jobs. Custodians get fired if the toilet is not clean. Dishwashers lose their job when they break too many dishes, but not all workers are held accountable for the quality of their work.
At the top of the list of people who need not be competent to keep their job are economists. Unlike workers in most occupations, when large groups of economists mess up they can count on the media covering up their mistakes and insisting it was just impossible to understand what was going on.
This is first and foremost the story of the housing bubble. While it was easyto recognize that the United States and many other countries were seeing massive bubbles that were driving their economies, which meant that their collapse would lead to major recessions, the vast majority of economists insisted there was nothing to worry about.
The bubbles did burst, leading to a financial crisis, double-digit unemployment in many countries, and costing the world tens of trillions of dollars of lost output. The media excused this extraordinary failure by insisting that no one saw the bubble and that it was impossible to prevent this sort of economic and human disaster. Almost no economists suffered any consequences to their career as a result of this failure. The "experts" who determined policy in the years after the crash were the same people who completely missed seeing the crash coming.
We are now seeing the same story with trade. The NYT has a major magazine article on the impact of trade on the living standards of workers in the United States and other wealthy countries. The subhead tells readers:
"Trade is under attack in much of the world, because economists failed to anticipate the accompanying joblessness, and governments failed to help."
Of course many economists did not anticipate the negative impact of trade, but of course many of us did. The negative impact was entirely predictable and predicted. (Here are a few from CEPR, there are many more books and papers from my friends at the Economic Policy Institute.) The argument is straightforward: trade policy has been designed to put manufacturing workers in direct competition with low paid workers in the developing world. This costs jobs and puts downward pressure on the wages of these workers. It also puts downward pressure on the wages of less-educated workers more generally, as displaced manufacturing workers seek jobs in retail and other sectors. Stagnating wages and increasing inequality are the predicted result of this pattern of trade, not a surprising outcome.
If economists were like custodians and dishwashers, the failure to recognize this obvious outcome of trade policy would have put them out on the street. Instead, we get major news outlets like the New York Times, telling us this is all a remarkable surprise. No one could have seen that trade would have bad outcomes for large segments of the workforce. Rather than lose their jobs, economists can still draw comfortable six figure salaries as they tell reporters how it was impossible for them to understand the economy.
Economic theory tells us that if economists don't face consequences for completely messing up on the job then they have no incentive to get things right. If the custodian never pays any price for not cleaning the toilet, then they won't clean the toilet. In the same way, if the media and the country always grant a "who could have known" amnesty to large chunks of the economics profession when it gets things completely wrong, then there is no reason to expect that economists will ever get things right. All they have to do is say the same things as other elite economists say, and if it turns out to be wrong, the NYT will just run major news articles explaining that no one could have known better.
There is one other important point that needs emphasis here. There was nothing inherent to trade that required growing inequality, it was the structure of trade policy that gave us this result. There are millions of very bright ambitious people in the developing world who would be very happy to study to meet U.S. standards and work as doctors, dentists, lawyers and other professionals in the United States. We could have designed trade agreements to facilitate this process.
The result would be massive economic gains in the form of lower cost health care, dental care, legal services and other professionals services. In the case of physicians alone, if the increased supply brought the pay of our doctors down to the levels of Western Europe and Canada, we would save close to $100 billion a year. This comes to roughly $700 a year in savings for every family in the United States. And, this would lead to a reduction in inequality.
Our elite economists have chosen not to discuss this sort of trade opening. (They also rarely discuss reducing rather than increasing protectionist barriers like patents and copyrights.) These issues are discussed in more depth in my forthcoming book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer (coming to a website near year in October). But the key point here is that economists should know better, and if they were doing their job, they did.