The Democratic Promise of Occupy Wall Street | Truthout

The Democratic Promise of Occupy Wall Street | Truthout

William Grieder

Stimulus plan is too limited : Greider

Obama's Economic Plan Is Not Going to Save Us
By William Greider, The Nation
Posted on January 22, 2009, Printed on January 22, 2009
http://www.alternet.org/story/121027/

The nation's fast-darkening circumstances define the essential dilemma of Barack Obama's presidency. His instinct is to govern by consensus, in the moderate middle ground of politics. Yet dire events are pushing the new president toward solutions more fundamental than those he had intended. The longer he resists taking more forceful action, the more likely it is that he will be overwhelmed by the gathering adversities.

Three large obstacles are blocking Obama's path. The first is one of scale: his nearly $800 billion recovery package sounds huge, but it is perhaps two or three times too small to produce a turnaround. The second is that the financial system--still dysfunctional despite the bailouts--requires much more than fiscal stimulus and bailout: the government must nationalize and supervise the banks to ensure that they carry out the lending and investing needed for recovery. This means liquidating some famous nameplates--led by Citigroup--that are spiraling toward insolvency. The third is that the crisis is global: the US economy cannot return to normal unless the unbalanced world trading system is simultaneously reformed. Globalization has vastly undermined US productive strength, as trade deficits have led the nation into deepening debtor dependence.
Read the entire post at the site: http://www.alternet.org/story/121027/

Bailout Plan a Historic Swindle

Paulson Bailout Plan A Historic Swindle
By William Greider
The Nation
September 19, 2008
http://www.thenation.com/doc/20081006/greider

Financial-market wise guys, who had been seized with
fear, are suddenly drunk with hope. They are rallying
explosively because they think they have successfully
stampeded Washington into accepting the Wall Street
Journal solution to the crisis: dump it all on the
taxpayers. That is the meaning of the massive bailout
Treasury Secretary Henry Paulson has shopped around
Congress. It would relieve the major banks and
investment firms of their mountainous rotten assets and
make the public swallow their losses--many hundreds of
billions, maybe much more. What's not to like if you are
a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an
historic swindle of the American public--all sugar for
the villains, lasting pain and damage for the victims.
My advice to Washington politicians: Stop, take a deep
breath and examine what you are being told to do by so-
called "responsible opinion." If this deal succeeds, I
predict it will become a transforming event in American
politics--exposing the deep deformities in our democracy
and launching a tidal wave of righteous anger and
popular rebellion. As I have been saying for several
months, this crisis has the potential to bring down one
or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a
brave conservative critic, put it plainly: "The joyous
reception from Congressional Democrats to Paulson's
latest massive bailout proposal smells an awful lot like
yet another corporatist lovefest between Washington's
one-party government and the Sell Side investment
banks."

A kindred critic, Josh Rosner of Graham Fisher in New
York, defined the sponsors of this stampede to action:
"Let us be clear, it is not citizen groups, private
investors, equity investors or institutional investors
broadly who are calling for this government purchase
fund. It is almost exclusively being lobbied for by
precisely those institutions that believed they were
'smarter than the rest of us,' institutions who need to
get those assets off their balance sheet at an inflated
value lest they be at risk of large losses or worse."

Let me be clear. The scandal is not that government is
acting. The scandal is that government is not acting
forcefully enough--using its ultimate emergency powers
to take full control of the financial system and impose
order on banks, firms and markets. Stop the music, so to
speak, instead of allowing individual financiers and
traders to take opportunistic moves to save themselves
at the expense of the system. The step-by-step rescues
that the Federal Reserve and Treasury have executed to
date have failed utterly to reverse the flight of
investors and banks worldwide from lending or buying in
doubtful times. There is no obvious reason to assume
this bailout proposal will change their minds, though it
will certainly feel good to the financial houses that
get to dump their bad paper on the government.

A serious intervention in which Washington takes charge
would, first, require a new central authority to
supervise the financial institutions and compel them to
support the government's actions to stabilize the
system. Government can apply killer leverage to the
financial players: accept our objectives and follow our
instructions or you are left on your own--cut off from
government lending spigots and ineligible for any direct
assistance. If they decline to cooperate, the money guys
are stuck with their own mess. If they resist the
government's orders to keep lending to the real economy
of producers and consumers, banks and brokers will be
effectively isolated, therefore doomed.

Only with these conditions, and some others, should the
federal government be willing to take ownership--
temporarily--of the rotten financial assets that are
dragging down funds, banks and brokerages. Paulson and
the Federal Reserve are trying to replay the bailout
approach used in the 1980s for the savings and loan
crisis, but this situation is utterly different. The
failed S&Ls held real assets--property, houses, shopping
centers--that could be readily resold by the Resolution
Trust Corporation at bargain prices. This crisis
involves ethereal financial instruments of unknowable
value--not just the notorious mortgage securities but
various derivative contracts and other esoteric deals
that may be virtually worthless.

Despite what the pols in Washington think, the RTC
bailout was also a Wall Street scandal. Many of the
financial firms that had financed the S&L industry's
reckless lending got to buy back the same properties for
pennies from the RTC--profiting on the upside, then
again on the downside. Guess who picked up the tab? I
suspect Wall Street is envisioning a similar bonanza--
the chance to harvest new profit from their own fraud
and criminal irresponsibility.

If government acts responsibly, it will impose some
other conditions on any broad rescue for the bankers.
First, take due bills from any financial firms that get
to hand off their spoiled assets, that is, a hard
contract that repays government from any future profits
once the crisis is over. Second, when the politicians
get around to reforming financial regulations and
dismantling the gimmicks and "too big to fail"
institutions, Wall Street firms must be prohibited from
exercising their usual manipulations of the political
system. Call off their lobbyists, bar them from the
bribery disguised as campaign contributions. Any contact
or conversations between the assisted bankers and
financial houses with government agencies or elected
politicians must be promptly reported to the public,
just as regulated industries are required to do when
they call on government regulars.

More important, if the taxpayers are compelled to
refinance the villains in this drama, then Americans at
large are entitled to equivalent treatment in their
crisis. That means the suspension of home foreclosures
and personal bankruptcies for debt-soaked families
during the duration of this crisis. The debtors will not
escape injury and loss--their situation is too dire--but
they deserve equal protection from government, the
chance to work out things gradually over some years on
reasonable terms.

The government, meanwhile, may have to create another
emergency agency, something like the New Deal, that
lends directly to the real economy--businesses, solvent
banks, buyers and sellers in consumer markets. We don't
know how much damage has been done to economic growth or
how long the cold spell will last, but I don't trust the
bankers in the meantime to provide investment capital
and credit. If necessary, Washington has to fill that
role, too.

Finally, the crisis is global, obviously, and requires
concerted global action. Robert A. Johnson, a veteran of
global finance now working with the Campaign for
America's Future, suggests that our global trading
partners may recognize the need for self-interested
cooperation and can negotiate temporary--maybe
permanent--reforms to balance the trading system and
keep it functioning, while leading nations work to put
the global financial system back in business.

The agenda is staggering. The United States is ill
equipped to deal with it smartly, not to mention wisely.
We have a brain-dead lame duck in the White House. The
two presidential candidates are trapped by events,
trying to say something relevant without getting blamed
for the disaster. The people should make themselves
heard in Washington, even if only to share their
outrage.

_____________________________________________

If the President, or someone, would tell the truth

Wall Street's Great Deflation

by William Greider

The Nation.com blogs - July 14, 2008 @ 12:38pm

http://www.thenation.com/blogs/notion/336722/print

Phil Gramm, the senator-banker who until recently
advised John McCain's campaign, did get it right about
a "nation of whiners," but he misidentified the faint-
hearted. It's not the people or even the politicians.
It is Wall Street--the financial titans and big-money
bankers, the most important investors and worldwide
creditors who are scared witless by events. These folks
are in full-flight panic and screaming for mercy from
Washington, Their cries were answered by the massive
federal bailout of Fannie Mae and Freddy Mac, the
endangered mortgage companies.

When the monied interests whined, they made themselves
heard by dumping the stocks of these two quasi-public
private corporations, threatening to collapse the two
financial firms like the investor "run" that wiped out
Bear Stearns in March. The real distress of the banks
and brokerages and major investors is that they cannot
unload the rotten mortgage securities packaged by
Fannie Mae and banks sold worldwide. Wall Street's
preferred solution: dump the bad paper on the rest of
us, the unwitting American taxpayers.

The Bush crowd, always so reluctant to support federal
aid for mere people, stepped up to the challenge and
did as it was told. Treasury Secretary Paulson (ex-
Goldman Sachs) and his sidekick, Federal Reserve
Chairman Ben Bernanke, announced their bailout plan on
Sunday to prevent another disastrous selloff on Monday
when markets opened. Like the first-stage rescue of
Wall Street's largest investment firms in March, this
bold stroke was said to benefit all of us. The whole
kingdom of American high finance would tumble down if
government failed to act or made the financial guys pay
for their own reckless delusions. Instead, dump the
losses on the people.

Democrats who imagine they may find some partisan
advantage in these events are deeply mistaken. The
Democratic party was co-author of the disaster we are
experiencing and its leaders fell in line swiftly.
House banking chair, Rep. Barney Frank, announced he
could have the bailout bill on President Bush's desk
next week. No need to confuse citizens by dwelling on
the details. Save Wall Street first. Maybe lowbrow
citizens won't notice it's their money.

We are witnessing a momentous event--the great
deflation of Wall Street--and it is far from over. The
crash of IndyMac is just the beginning. More banks will
fail, so will many more debtors. The crisis has the
potential to transform American politics because, first
it destroys a generation of ideological bromides about
free markets, and, second, because it makes visible the
ugly power realities of our deformed democracy.
Democrats and Republicans are bipartisan in this crisis
because they have colluded all along over thirty years
in creating the unregulated financial system and
mammoth mega-banks that produced the phony valuations
and deceitful assurances. The federal government
protects the most powerful interests from the
consequences of their plundering. It prescribes "market
justice" for everyone else.

Of course, the federal government has to step up to the
crisis, but the crucial question is how government can
respond in the broad public interest. Bernanke knows
the history of the last great deflation in the 1930s--
better known as the Great Depression--and so he is
determined to intervene swiftly, as the Federal Reserve
failed to do in that earlier crisis. By pumping
generous loans and liquidity into the system, the Fed
chairman hopes to calm the market fears and reverse the
panic. So far, he has failed. I think he will continue
to fail because he has not gone far enough.

If Washington wants real results, it has to abandon the
wishful posture that is simply helping the private
firms get over their fright. The government must
instead act decisively to take charge in more
convincing ways. That means acknowledging to the
general public the depth of the national crisis and the
need for more dramatic interventions.

Instead of propping up Fannie Mae or others, the
threatened firm should be formally nationalized as a
nonprofit federal agency performing valuable services
for the housing market. That is the real consequence
anyway if the taxpayers have to buy up $300 billion in
stock.

The private shareholders "are walking dead men,
muerto," Institutional Risk Analytics, a private
banking monitor, observed. Make them eat their losses,
the sooner the better. The real national concern should
be focused on the major creditors who lend to Fannie
Mae and other US agencies as well as private financial
firms. They include China, Japan and other foreign
central banks. Foreign investors hold about 21 percent
of the long-term debt paper issued by US government
agencies--$376 billion in China, $229 billion in Japan.

It is not in our national interest to burn these
nations with heavy losses. On the contrary, we need to
sustain their good regard because they can help us
recover by bailing out the US economy with more
lending. If these foreign creditors turn away and stop
their lending now, the US economy is toast and won't
soon recover.

Americans should forget about whining; it's too late
for that. People need to get angry--really, really
angry--and take it out on both parties. What the
country needs right now is a few more politicians in
Washington with the guts to stand up and tell us the
hard truth about out situation. It will be painful to
hear. They will be denounced as "whiners." But truth
might be our only way out.

[National affairs correspondent William Greider has
been a political journalist for more than thirty-five
years. A former Rolling Stone and Washington Post
editor, he is the author of the national bestsellers
One World, Ready or Not, Secrets of the Temple, Who
Will Tell The People and, most recently, The Soul of
Capitalism (Simon & Schuster).]