Politicians in Washington are mesmerized by Wall Street campaign dollars and terrified by being branded “socialists”. That seems to be the most likely explanation for the failure of the Congress to pass a second stimulus bill despite continuing high levels of unemployment -especially long-term unemployment - that are absolutely catastrophic for millions of families.
In fact, politicians are leaning in the other direction. Instead of a jobs bill, they are promoting deficit reduction. Instead of promoting stimulation of the economy there has been a stunning revival of Herbert Hoover financial orthodoxy: hard money, balanced budget, and deficit reduction.
Yes, long-term fiscal responsibility is important but cutting spending in the midst of a recession is more likely to lead to deflation of prices, business activity and jobs than to the inflation that worries the financial elite. Social stability is promoted by full employment policies, diminishing crime, sickness and chronic unhappiness. Didn’t we learn from bitter experience?
The same politicians have just completed a financial overhaul bill that will be known as the Dodd - Frank Act. The outcome of this so-called reform is particularly relevant to taxpayers who spent and pledged trillions of dollars to bail out the banking system, especially the five US banks with the most assets: Bank of America $2.34 trillion, J.P. Morgan Chase $2.14 trillion, Citigroup $2 trillion, Wells Fargo $1.2 trillion, Goldman Sachs $0.88 trillion. The 10 largest banks have $10.4 trillion in assets, equivalent to 80% of the gross domestic product of the entire US
The most important failing of the Dodd-Frank Act is that it does not resolve the biggest problem and the greatest danger in the recent financial crisis.. If any one of the largest banks falls into serious financial trouble, by mistakes or by excessive risk, the federal government would be compelled to rescue to prevent collapse of the entire financial system. The concentration of wealth and power is the greatest danger to our capitalist system.
The Act reduces proprietary trading and regulates derivatives but we have had regulators and regulations for 100 years of ineffectiveness as low paid civil servants are overcome by the richest financial institutions in world history. There are two ways to reduce the risk of “too big and too powerful to fail”. First, cut the enormous and interconnected financial firms down to size by requiring them to sell off their various divisions. Alternatively, let them remain large but have the federal government take them over to be treated as public utilities run by salaried employees without the tempting bonuses realized by anti-social risks and gambling with other people’s money. If the taxpayer assumes the ultimate risk by bailout, he should have the ownership as well as the profits generated by the rise and fall of the various markets, often manipulated by the big boys in their seats of power
Showing posts with label congress. Show all posts
Showing posts with label congress. Show all posts
Thursday, July 1, 2010
Thursday, June 17, 2010
Jobs or Derivatives?
The United States needs another stimulus package to increase domestic economic activity which will generate more jobs and eliminate the remnants of the “Great Recession”. However, the Congress hesitates to pass the necessary legislation because the members are spooked by the rise of a competing worry, the federal deficit, now at $12.3 trillion and increasing by over $1 trillion for this year and the next.
These are not unimportant numbers but they should be placed in context: the accumulated deficit is equal to the lost revenues of the George W. Bush tax cuts plus the cost of the George W. Bush wars in Iraq and Afghanistan. Without these very questionable expenditures there would be no federal deficit.
The proposed jobs bill is not questionable. It is required by the very high unemployment rate now almost 10% according to federal statistics but actually nearer to 15% when it includes the workers who have stopped looking for work, the workers who are forced to work part-time, and those working at jobs well below their training. As a result, we have a serious jobs crisis, a family crisis, and a humanitarian crisis that requires immediate amelioration before it leads to a social explosion.
The US economy and the federal government have other obligations, current and potential, that make the federal deficit look like small change. The Wall Street Journal reported on June 16, 2010, in an inside section indicating minimum importance, that, “Right now, US banks, mostly a few giants, have $276 trillion in over-the-counter derivatives….. Most of these derivatives are within commercial bank subsidiaries that enjoy federal deposit insurance. Thus, the banks effectively enjoy a government subsidy that likely distorts prices and allows them to hold too little capital against the derivatives…. The top derivative banks are so big the government would almost certainly rescue them - and their derivatives affiliates - if they are collapsed….”
The frightening $276 trillion threat posed by the derivatives is not getting the attention of the media and the Congress commensurate with the danger, nowhere near the worry about the $12 trillion threat and that's a pity. The $12 trillion threat is being used to prevent passage of a $1 trillion jobs bill that would boost jobs and business activity as it did during the Great Depression of the 1930s.
These contrasting choices highlight the most important issues this election year. There is no obligation for the federal government to guarantee any derivative investments (aka gambling). There is an obligation for the federal government to promote social and family stability through gainful employment policies.
Will the candidates for the U.S. Senate and the House of Representatives respond to the political contributions of the bankers or the agonies of the workers and their families? Stay tuned.
These are not unimportant numbers but they should be placed in context: the accumulated deficit is equal to the lost revenues of the George W. Bush tax cuts plus the cost of the George W. Bush wars in Iraq and Afghanistan. Without these very questionable expenditures there would be no federal deficit.
The proposed jobs bill is not questionable. It is required by the very high unemployment rate now almost 10% according to federal statistics but actually nearer to 15% when it includes the workers who have stopped looking for work, the workers who are forced to work part-time, and those working at jobs well below their training. As a result, we have a serious jobs crisis, a family crisis, and a humanitarian crisis that requires immediate amelioration before it leads to a social explosion.
The US economy and the federal government have other obligations, current and potential, that make the federal deficit look like small change. The Wall Street Journal reported on June 16, 2010, in an inside section indicating minimum importance, that, “Right now, US banks, mostly a few giants, have $276 trillion in over-the-counter derivatives….. Most of these derivatives are within commercial bank subsidiaries that enjoy federal deposit insurance. Thus, the banks effectively enjoy a government subsidy that likely distorts prices and allows them to hold too little capital against the derivatives…. The top derivative banks are so big the government would almost certainly rescue them - and their derivatives affiliates - if they are collapsed….”
The frightening $276 trillion threat posed by the derivatives is not getting the attention of the media and the Congress commensurate with the danger, nowhere near the worry about the $12 trillion threat and that's a pity. The $12 trillion threat is being used to prevent passage of a $1 trillion jobs bill that would boost jobs and business activity as it did during the Great Depression of the 1930s.
These contrasting choices highlight the most important issues this election year. There is no obligation for the federal government to guarantee any derivative investments (aka gambling). There is an obligation for the federal government to promote social and family stability through gainful employment policies.
Will the candidates for the U.S. Senate and the House of Representatives respond to the political contributions of the bankers or the agonies of the workers and their families? Stay tuned.
Saturday, September 8, 2007
The Democrats in Congress
The Democrats in Congress
By Jerome Grossman
If the Democrats in Congress argue about the details of the Bush war strategy in Iraq, they will validate the illegal war.
If the Democrats in Congress argue about the size of American troop cuts, they will concede that some troops can remain in Iraq.
If the Democrats in Congress argue for an American residual force in Iraq, they will be defending the occupation.
If the Democrats in Congress argue about the degree of success of the military "surge", they will be accepting the right of U.S. forces to fight in Iraq.
If the Democrats in Congress argue about the performance of the Iraqi government, they will be treating it as a puppet.
If the Democrats in Congress accept a partial reduction in U.S. forces in Iraq, they will be accepting the remainder as legitimate occupiers.
If the Democrats in Congress accept the responsibility for training Iraqi troops and police, they will confirm U.S. control of the country.
If the Democrats in Congress support retaining any military bases in Iraq, they will confirm a policy of permanent occupation and control.
If the Democrats in Congress fail to insist on a firm date for total troop withdrawal, they will be accepting a long U.S. occupation.
If the Democrats in Congress accept a token troop withdrawal, they will give President Bush a clever victory: sending 30,000 troops, then withdrawing 10,000; diminishing the public pressure for withdrawal, the occupation goes on.
By Jerome Grossman
If the Democrats in Congress argue about the details of the Bush war strategy in Iraq, they will validate the illegal war.
If the Democrats in Congress argue about the size of American troop cuts, they will concede that some troops can remain in Iraq.
If the Democrats in Congress argue for an American residual force in Iraq, they will be defending the occupation.
If the Democrats in Congress argue about the degree of success of the military "surge", they will be accepting the right of U.S. forces to fight in Iraq.
If the Democrats in Congress argue about the performance of the Iraqi government, they will be treating it as a puppet.
If the Democrats in Congress accept a partial reduction in U.S. forces in Iraq, they will be accepting the remainder as legitimate occupiers.
If the Democrats in Congress accept the responsibility for training Iraqi troops and police, they will confirm U.S. control of the country.
If the Democrats in Congress support retaining any military bases in Iraq, they will confirm a policy of permanent occupation and control.
If the Democrats in Congress fail to insist on a firm date for total troop withdrawal, they will be accepting a long U.S. occupation.
If the Democrats in Congress accept a token troop withdrawal, they will give President Bush a clever victory: sending 30,000 troops, then withdrawing 10,000; diminishing the public pressure for withdrawal, the occupation goes on.
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