Category Archives: Politics

Michael Hudson: Whither Greece? Without a National Referendum Iceland-Style, EU Dictates Cannot be Binding

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

The fight for Europe’s future is being waged in Athens and other Greek cities to resist financial demands that are the 21st century’s version of an outright military attack. The threat of bank overlordship is not the kind of economy-killing policy that affords opportunities for heroism in armed battle, to be sure. Destructive financial policies are more like an exercise in the banality of evil – in this case, the pro-creditor assumptions of the European Central Bank (ECB), EU and IMF (egged on by the U.S. Treasury).

As Vladimir Putin pointed out some years ago, the neoliberal reforms put in Boris Yeltsin’s hands by the Harvard Boys in the 1990s caused Russia to suffer lower birth rates, shortening life spans and emigration – the greatest loss in population growth since World War II. Capital flight is another consequence of financial austerity. The ECB’s proposed “solution” to Greece’s debt problem is thus self-defeating. It only buys time for the ECB to take on yet more Greek government debt, leaving all EU taxpayers to get the bill. It is to avoid this shift of bank losses onto taxpayers that Angela Merkel in Germany has insisted that private bondholders must absorb some of the loss resulting from their bad investments.

The bankers are trying to get a windfall by using the debt hammer to achieve what warfare did in times past.

Republican Lynch Mob Looking Awfully Hard to Find Rope With Which to Hang Elizabeth Warren

I’ve been keeping an eye on the Elizabeth Warren beat, although my expectation is that the skirmishes now will pale in significance compared to whatever does or does not happen on what the Republican hope will be her ritual execution at the full committee hearing of the House Oversight committee on July 14.

This situation has become an intriguing bit of political theater. The Republican have increasing become one-trick ponies. Their strategy has been to take an extreme position, scream like bloody murder, act like they have no intention of negotiating, and watch the Dems capitulate. But particularly with Obama, capitulation is tantamount to throwing Br’er Rabbit in the briar patch: it’s exactly where the Democrats like to go, but they need political cover for selling out their badly abused “base”.

The hyperventilating and bullying strategy backfired spectacularly last month in subcommittee hearings with Warren chaired by Patrick McHenry. But the Republicans have convinced themselves that if they double down, they’ll come out winners. I don’t know how much of this is reptile brain reflex on overdrive, in that they are capable only of fight or flight and even flight is no longer an option.

OCC Gives Banks Another Blow Job

The acting head of the Office of the Comptroller of the Currency, John Walsh, has unwittingly revealed himself to be running a heretofore stealth operation: The Ministry of Truth According to Banks. In the past, his remarks have had just the right combination of occasional intersection with the truth plus lots of nebulous phrasemaking for him to be able to sound dimly plausible as a regulator, provided you were on reader craazyman’s preferred cocktail of Xanax and Jack Daniels.

Of course, what Walsh really has going for him is the optics: he is the straight-out-of-central-casting image of the head of a largish financial firm somewhere in the heartlands. Given that no one who has been awake in America in the last five years trust banks, and most people have already reasoned from that that a banking regulator who sounds a lot like a banker is probably not such a hot idea either, Walsh’s looking so much the part ought to set off alarm bells. But the conditioning of seeing well preserved middle aged white men with gravitas and decent tailoring as trustworthy has been so deeply programmed into most Americans that it is pretty hard to overcome.

Two Supreme Court Rulings Give Big Companies “Get Out of Liability Free” Cards

If you had any doubts that the US has become a corpocracy, two fresh rulings by the Supreme Court should seal any doubt. They are stunningly bad, in that they reduce or gut the reach of well-settled law over large companies, to the degree that it will take very little in the way of effort for companies to organize their affairs so as to escape liability for their actions in areas that affect large numbers of citizens.

The through line in both rulings is the creative and selective use of the notion of corporate “personhood”. That personhood has been the basis for the extension of a whole raft of rights to corporations, including, perversely, the Constitutional right of free speech. Yet the same notion which has been used to confer privileges that companies lack in other countries is at the same time being construed so as to vitiate accountability, when ordinary people find it mighty hard to escape the consequences of their actions. I’m certain the Founding Fathers, who were wary of concentrated power, would be spinning in their graves at the logic and effect of recent decisions on this front.

Alex Andreou: Democracy vs Mythology – The Battle in Syntagma Square

By Alex Andreou, a successful lawyer turned actor living in London. Cross posted from SturdyBlog

I have never been more desperate to explain and more hopeful for your understanding of any single fact than this: The protests in Greece concern all of you directly.

What is going on in Athens at the moment is resistance against an invasion; an invasion as brutal as that against Poland in 1939. The invading army wears suits instead of uniforms and holds laptops instead of guns, but make no mistake – the attack on our sovereignty is as violent and thorough. Private wealth interests are dictating policy to a sovereign nation, which is expressly and directly against its national interest. Ignore it at your peril. Say to yourselves, if you wish, that perhaps it will stop there. That perhaps the bailiffs will not go after the Portugal and Ireland next. And then Spain and the UK. But it is already beginning to happen. This is why you cannot afford to ignore these events.

Eurozone Brinksmanship: Ministers Walk Back Greek Rollover Commitment, Demand Austerity Measures First

One of the interesting features of the seemingly unending Eurozone crisis is that the half life of rescue measures is decreasing.

The elephant in the room, which we will put aside to focus on the current state of play, is that everyone knows the Greek debts must be restructured. To have Greece pay out punitive rates on past debt will simply grind the economy into a deeper hole, worsening its debt to GDP ratio and eroding its physical and human infrastructure. All the delay of the inevitable does is allow for more extend and pretend while Western financial firms strip the economy for fun and profit. And this is terribly inefficient looting; their profits from this pilferage will be small relative to the pain inflicted on the Greek populace.

Late last week, various commentators made a bit too much of the clearing of one obstacle to the extension of yet another short lifeline to Greece, namely, that Angel Merkel had relaxed one of conditions that stood in the way of a planned €12 billion credit extension. She had wanted private creditors to share in the pain, and agreed that a rollover of currently maturing debt would do. Before she had insisted on a full bond exchange, which would have resulted in a much more significant hit to investors.

This concession did not go over well in Germany.

Durbin Bill Designed to Throw Wrench in Wall Street Infrastructure Heist

Since we so seldom have positive news to report on NC, we thought it was important to highlight a promising development. Senator Richard Durbin has introduced legislation that would considerably complicate the effort of Wall Street players to ~~pillage~~ privatize state and government assets for fun and profit.

It is key to understand what a bad deal these transactions are for ordinary citizens

Michael Hudson: Free Money Creation to Bail Out Financial Speculators, but not Social Security or Medicare

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

Financial crashes were well understood for a hundred years after they became a normal financial phenomenon in the mid-19th century. Much like the buildup of plaque deposits in human veins and arteries, an accumulation of debt gained momentum exponentially until the economy crashed, wiping out bad debts – along with savings on the other side of the balance sheet. Physical property remained intact, although much was transferred from debtors to creditors. But clearing away the debt overhead from the economy’s circulatory system freed it to resume its upswing. That was the positive role of crashes: They minimized the cost of debt service, bringing prices and income back in line with actual “real” costs of production. Debt claims were replaced by equity ownership. Housing prices were lower – and more affordable, being brought back in line with their actual rental value. Goods and services no longer had to incorporate the debt charges that the financial upswing had built into the system.

Financial crashes came suddenly. They often were triggered by a crop failure causing farmers to default, or “the autumnal drain” drew down bank liquidity when funds were needed to move the crops. Crashes often also revealed large financial fraud and “excesses.”

This was not really a “cycle.” It was a scallop-shaped a ratchet pattern: an ascending curve, ending in a vertical plunge. But popular terminology called it a cycle because the pattern was similar again and again, every eleven years or so. When loans by banks and debt claims by other creditors could not be paid, they were wiped out in a convulsion of bankruptcy.

“A Security and Finance State that Dominates the American People”

I’m a bit late to this Real News Network interview with Lawrence Wilkerson is a retired United States Army soldier and former chief of staff to United States Secretary of State Colin Powell. It’s the last in a series, and seeing this one might motivate you to view the earlier ones (here and here) It’s pretty strong stuff.

What Happens if the Consumer Financial Protection Bureau Has No Director By Its Start Date?

A useful article in CNN Money (hat tip SA) describes what happens if the Consumer Financial Protection Bureau does not have a director in place by its official start-up date, July 21. That outcome looks certain, given that the House Oversight Committee has scheduled its ritual flogging of its defacto head, Elizabeth Warren, for July 14, and Senate Republicans have vowed to nix any candidate lest they get to strangle the agency by controlling its budget.

Even if Obama were to have a brain transplant and do something so out of character as to get in a fight with banks and the Republicans, the logical window of opportunity for breaking the Senate’s planned pro-forma sessions (a device to forestall a recess appointment) would be the four week end of summer Congressional break. That starts August 8. So it looks like a sure bet that the CFPB will go past July 21 with no chief in place.

Contrary to popular opinion (and bank lobbyist fond hopes) the CFPB is not stymied if a director has not been installed. What would happen is:

Inept Obama “Anybody but Warren” Stance Reveals Fundamental Bank v. Middle Class Fault Line

It is obvious that Elizabeth Warren should head the Consumer Financial Protection Bureau. No less than our favorite NC nemesis, the staunch Administration defender Economics of Contempt, has said she is “tailor made” for the job. In the face of increasingly vocal bank opposition to the notion of an effective bank watchdog for consumers, she’s done better than anyone anticipated. And despite the Republican bluster about using a pro forma session to keep the Senate in business to block a recess appointment, the Democrats could break that maneuver if they wanted to.

So why does Team Obama try to hide its choice not to appoint her behind silly “compromises” like its trial balloon of serving up the CFPB’s number two, Raj Date, as a candidate to lead the agency? The Republicans have already said they will approve no one unless they can cut off CFPB’s air supply by controlling its budget. You can’t negotiate with someone who won’t negotiate. Your options are to defy them or capitulate.

So this “compromise” is an inept sleigh of hand to shift responsibility for the Adminsitration’s refusal to appoint Warren on the Republicans.

The failure of the Team Obama to move beyond this impasse is revealing. It isn’t merely, as we have repeatedly mentioned, a sign that the Administration is in bed with the banksters. That’s a given. We predicted that Warren would not get the job.

But what is astonishing is how she has managed to out maneuver them and how Team Obama has failed for months to come up with responses. It isn’t as if this crowd feels any compunction to hide the contempt it has for the idea of keeping prior promises; just look for some of many examples, at this video Lifting the Veil, from 7:00 to 13:00, or at Glenn Greenwald’s discussion of how in mere weeks what was promised to be a mere fly over exercise in Libya is now turning into another nation-building exercise.

The Warren fiasco reveals deeper layers of the Administration’s character defects: its indifference to the plight of the middle class and its tactical incompetence

Michael Hudson: The Financial Road to Serfdom – How Bankers are Using the Debt Crisis to Roll Back the Progressive Era

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College. Cross posted from CounterPunch.

Financial strategists do not intend to let today’s debt crisis go to waste. Foreclosure time has arrived. That means revolution – or more accurately, a counter-revolution to roll back the 20th century’s gains made by social democracy: pensions and social security, public health care and other infrastructure providing essential services at subsidized prices or for free. The basic model follows the former Soviet Union’s post-1991 neoliberal reforms: privatization of public enterprises, a high flat tax on labor but only nominal taxes on real estate and finance, and deregulation of the economy’s prices, working conditions and credit terms.

New York Attorney General Schneiderman Investigating Validity of Mortgage Transfers at Bank of America (Updated: Trustees Bank of New York and Deutsche Bank Also Being Probed)

The mortgage industry defenders are looking more and more like fools or liars.

Last year, a case called Kent v. Countrywide created a firestorm because both Bank of America’s attorney (who was admittedly just a typical foreclosure mill type) and a senior executive from Countrywide’s servicing unit said that Countrywide as a matter of business practice retained mortgage notes. That was the wrong thing to say in court. From a November post:

We’ve had a series of posts (see here, here, and here) on the judge’s decision in a case called Kemp c. Countrywide, which provided what appeared to be the first official confirmation of what we’ve long suspected and described on this blog: that as of a certain point in time post 2002, mortgage originators and sponsors simply quit conveying mortgage notes (the borrower IOUs) through a chain of intermediary owners to securitization trusts, as stipulted in the pooling and servicing agreements, the contracts that governed these deals. We say “appeared to be” because Bank of America’s attorney promptly issued a denial, effectively saying that the employee whose testimony the judge cited in his decision, one Linda DeMartini, a team leader in the bank’s mortgage- litigation management division. didn’t know what she was talking about. As we discussed, this seems pretty peculiar, since she was put on the stand precisely because she was deemed to be knowledgeable about Countrywide’s practices….

If true, this has very serious implications. As we’ve indicated, it means that residential mortgage backed securties are not secured by real estate, or as Adam Levitin put it, they are “non mortgage backed securities….With the ramifications so serious, expect industry denials to continue apace until the evidence becomes overwhelming.

That time has arrived.