The Best and the Brightest (Part 2)

The Best and the Brightest (Part 2)

By Jerome Grossman



Yesterday I blamed financial leaders and gurus for the financial turmoil destabilizing our country and the world without mentioning their names.



Today's New York Times, October 9, has the errors and the perpetrators in full gory detail led by Robert Rubin, Lawrence Summers, and especially Alan Greenspan. The heroes, ignored and unacknowledged, who tried and failed to establish an adequate regulatory process were Edward Markey and Brooksley Born.



Read the story and weep, then make sure that the people who made the mistakes do not get another opportunity to repeat.

/ | October 9, 2008
The Reckoning: Taking Hard New Look at a Greenspan Legacy
By PETER S. GOODMAN
Derivatives have long had a great supporter in the former Federal Reserve Chairman Alan Greenspan

The Best and the Brightest

The Best and the Brightest
By Jerome Grossman

The current financial crisis is widely perceived as the greatest threat to the stability of the USA. This threat was

• Not caused by radical Islamic terrorists

• Not by Colombian drug lords

• Not by organized crime

• Not by radical right-wingers

• Not by radical left wingers

• Not by inner-city street gangs

This crisis was created by the best and the brightest Americans

• Educated at our finest universities

• The elite of our society by virtue of talent and riches

• The leading donors to our most deserving charities

• With the blessing of government leaders of both parties

Am I playing the blame game? You bet I am. The best and the brightest profited with enormous salaries, the adoration of the media, the perks accruing to the leaders of society. But they have failed and must step aside for new leaders. David Halberstam warned us that the best and the brightest would fight displacement by blaming others and impersonal forces for their failures as they did in the fiascos of Vietnam and Iraq. We must not allow that to happen.

A Fair Deal for the Homeowner

A Fair Deal for the Homeowner
By Jerome Grossman

Banks and other financial institutions need capital to replace losses incurred when they bought real estate mortgages that collapsed.

Homeowners need capital to replace losses incurred when they signed real estate mortgages for values that collapsed.

The United States Congress is bailing out the bankers but not the homeowners. Why? According to the Wall Street Journal 10/1/08, "A chorus of business leaders and trade groups urged Washington to enact a financial markets rescue plan…. General Electric Co.... Verizon Communications Inc.... Microsoft..... AT&T..... Caterpillar Inc...... The Business Roundtable...."

Here is a fair question. Who was lobbying for the homeowners? If the US government will buy the mortgages from the banks, mortgages that may or may not prove to be worthless, why not credit each homeowner with his/her share of the bailout to reduce the mortgage and avoid a foreclosure? The banker gets the money, the homeowner stays in the home, and the politician gets wisdom, all for the same amount of money.

Wouldn't that be fair? Wouldn't that satisfy two political constituencies instead of one? Why should one end of the failed transaction be subsidized and not the other? Is it because one has political clout and makes campaign contributions?

How to Spend One Trillion Dollars

How to Spend One Trillion Dollars
By Jerome Grossman

Why should the American taxpayer bail out selected bankers and financial institutions from the consequences of their poor economic decisions, their business mistakes?

Why should the American taxpayer bail out selected homeowners who knowingly signed mortgages they could not afford?

If our objective is to avoid an imminent recession or another Great Depression, why doesn't the United States government spend the $1 trillion by giving it away to the 300 million Americans, every man woman and child, each receiving about $3000, a better way to stimulate the economy?

That stimulus package would immediately find its way into businesses delivering goods and services or into the banks as personal savings. The impact of this money flow would support commercial activity at every level, encourage business investment, and refurbish the capital of banks in the traditional manner.

To clear the question of bank solvency, the U.S. Treasury could declare a brief bank holiday, send bank examiners to every bank to determine solvency by measuring the value of failed loans and investments against valid assets. Then the solvent banks would be given the right to borrow from the U.S. Treasury the discounted value of the failed loans and investments, the borrowed amount to be repaid within a fixed time period, and if not to lose its license.

The best way to avoid recession and economic stagnation is to put purchasing power into the hands of the entire population. We should not subsidize the people and institutions at the top of the financial pyramid. We should subsidize everybody for a jump start and to assure universal participation and quick approval.

Gambling with Other People's Money

Gambling with Other People's Money
By Jerome Grossman

I am a Democrat. I support Barack Obama. I have made substantial contributions to the party and to Obama. I am dismayed that John McCain is actually leading Obama in the presidential race in the national polls and in the Electoral College. If the Democrats cannot win the presidency after eight years of Republican incompetence, President Bush's unpopularity, the foreign and military failures, the rising unemployment, then they ought to find another line of work, fold the party, and let another group take over.

Just imagine, the party of Franklin Delano Roosevelt hasn't been able to claim the economic issue in this time of crisis. Obama cites as his models for the current emergency the administrations of Theodore Roosevelt and John F. Kennedy when America is trembling over the memory of the1929 stock market crash and the ensuing depression. Republican President Herbert Hoover said that “prosperity was just around the corner” but President FDR instituted radical reforms to restrain the bankers and protect the depositors.

In many ways, the current banking collapse echoes the business and ethical practices of the 1920s when Wall Street and the banks operated under the slogan “anything goes”, especially when it came to gambling with depositors’ money.

After the big bust in 1929, after the 1932 election that swept Herbert Hoover and the Republican Party from power, Roosevelt and the Democrats in Congress passed the Glass-Steagall Act that prevented US commercial banks from doing investment-banking business. Repeal of Glass-Steagall, in 1999 when Democrat Bill Clinton was president, allowed commercial banks to enter the securities business and to compete with companies like Bear Stearns and Merrill Lynch (may they rest in peace)……..

The model proved hard to manage particularly when virtually every financial institution gave its officers stock options that encouraged the riskiest investment strategies like packaged consumer debts, mortgages, credit card advances, student loans, etc.. Overexpansion of real estate broke the investment bubble and put the entire US banking system in jeopardy.

Why doesn't Obama offer a version of tough FDR regulation? Why doesn't he tell the voters that this is a repeat of an earlier experience, that the government must seriously regulate and restrain the bankers to save the rest of us from their appetites? Perhaps it is because Obama has the same business advisor as Bill Clinton, the same seer who engineered the end of Glass-Steagall, Robert Rubin, once at Goldman Sachs, more recently of Citigroup.

The soul of the Obama campaign is wrapped in the invocation of change. I believe he means it but is held back in applying it to current policies by fear of getting too far ahead of the electorate. But the voters are ahead of him on this issue. They are frightened about losing their savings and their jobs. They want him to clean up the banks, to keep their savings safe, to restrain the gambling with other people's money. And restoration of some form of Glass-Steagall might even win Obama the election.

Phenomenon, Phenomena

Phenomenon, Phenomena
By Jerome Grossman

When the pundits cannot explain a political development, they label it a phenomenon, often defined as an outward sign of the working of a law of nature and therefore beyond human control, or an extraordinary person or thing, and therefore deserving of our admiration and love.

Barack Obama knows about phenomenon. For a year he was regarded as a super person by supporters and detractors. The nation hung on his words, few in number, “change, hope, yes we can”, that transfixed his vast audience who attended his séances to admire his person, his voice, and his demeanor as though he was not of this world. And for a while he wasn't, until he made the mistake of offering mundane specifics instead of directions to Bethlehem.

Now from the frozen tundra comes another unknown figure capturing our imagination, as did Obama, summarizing the American dream of mysterious origin, offering youth, beauty and hidden sexuality, implying solutions but not defining them, putting our desire to adore in a tight capsule.

America is in love again, this time with two different personalities each seeking adoration. The Democrats expect the widespread infatuation with Sarah Palin to fade before Election Day. Don’t be so sure! The Republicans think their luck is an act of God and so does Sarah Palin. The contest seems to be about political hegemony but it tells us more about the culture of 21st century America: our worship of personality and youth and good looks as well as our search for messianic leaders bearing solutions to problems that overwhelm.

Race Will Decide

Race Will Decide
By Jerome Grossman

If Barack Obama had selected Hillary Clinton as his vice president, he would have unified the Democratic Party, obtained the allegiance of her 18 million voters and put the ticket on the road to a landslide victory in November. Sarah Palin would have remained an obscure Governor and John McCain would have insisted on nominating his pal, Joe Lieberman, as his running mate.

The Republican political base would still be depressed, distrustful of McCain and hostile to Lieberman as that team ran to prove they were mavericks, rebels within their parties, hoping for a miracle.

Now we have a presidential campaign fought on personality and abortion and religion. Obama may complain about the personality factor, but he should remember that he defeated Hillary Clinton because he was more likable, not because of his issue positions.

As recently as the 2000 election, McCain stood against the ideologues and moneyed interests of the GOP. His transformation in this election was intended to win the nomination and his selection of Palin was primarily to use her to attack Obama's character. Watch her target: it won't be Joe Biden. Palin will indeed rally the party base, but will that be enough?

Palin's convention speech featured biting and sarcastic partisanship in the style of Rush Limbaugh and Ann Coulter, focusing on Obama personally in an attack-dog mode. Instead of presenting herself as a trustworthy leader, she told whom she hates and why. She kept away from the bread and butter concerns of the average voter. In the GOP division of political labor that will be McCain's responsibility taking the high road, while Palin does the attacking on the low road.

The Republican plan should not work. The McCain connection with President Bush, the unpopular war in Iraq, the price of gasoline, the housing crisis, the rising unemployment, the poor economy, should lead to a Democratic victory. Transforming the election into a plebiscite on abortion and religion and race may give the GOP a chance. However, at this time the Democrats appear to have the advantage in money, intensity and organization. Republican efforts are limited by very weak forces on the ground and it will be very difficult to rebuild in less than two months. They will have to motivate supporters through the media.

Race, of course, is the prime factor in this election. Yes, America has made great strides in improving the status of African-Americans. Yes, more blacks have attained middle-class status and good jobs in business and the professions. But a form of tribalism exist in our country that affects virtually all relationships including voting. The electorate is predominantly white and some will vote accordingly. Obstacles to black voting have lessened but still exist. Polling of likely voters does not always reveal true voting intentions.

To win, Barack Obama will need to build multiracial coalitions and that is already in progress. In some ways, that effort is really a test of our society, under improving racial conditions, in support of a candidate with the personality, appearance, education, life history and ability to which most Americans aspire.

The day before the election, Obama will be ahead in the public opinion polls by seven to 10% but that will translate into a very close election as some white voters will change their minds and their votes on Election Day as they have in the recent past. Every vote will be important.

Why Sarah Palin?

Why Sarah Palin?
By Jerome Grossman

For many months, John McCain, along with millions of other Americans, regarded Barack Obama as a phenomenon in the political world, and perhaps beyond. In McCain headquarters, Obama’s name is rarely uttered as he is referred to as “The One”, a mystical title with messianic overtones. He came from nowhere, unannounced and unexpected, clothed in inexperience and a sense of mission.

How long would the Obama phenomenon last? Would it survive the fickle temper of the times, the pressures of American politics? For McCain, the Democratic National Convention was an indication that the media’s love affair with Barack would continue, that the usual Republican strategies and tactics were doomed to failure on November 4.

McCain had seen similar phenomena at the dice tables of Las Vegas where occasionally unknown rookie shooters, inexperienced in the nuances and even the odds of the game, pick up the dice and roll out a long succession of sevens and elevens, making sixes and eights in between as the crowd goes wild. McCain had seen the sly techniques used to throw the lucky shooters off their game: loud noises, a drink spilled onto the table, a manufactured argument.

The nomination of Governor Sarah Palin of Alaska for vice-president is McCain's attempt to throw Obama off his game by substituting a competing story line even more improbable than Barack’s. It is an act of political desperation, a “Hail Mary” forward pass thrown in an attempt to stave off inevitable defeat. Nominating Mitt Romney or Tom Ridge as part of a traditional political ticket would not work against “The One”, against the long accumulated guilt feelings of so many Americans, guilt feelings that can now be expressed by voting for this unthreatening assimilated African-American.
McCain's gamble is another indication of the trivialization of American politics. Serious discussion of issues and problems fades behind the attractiveness of personality. Sarah Palin is a former beauty queen and star athlete, unflappable despite her inexperience, secure in her far right conservative Republican beliefs. She will not be diverted by Jay Leno jokes that describe her as a baked Alaska or The Perils of Palin. (Notice how few jokes are told at midnight about Barack? Are the comedians afraid of eternal wrath?) And if Joe Biden patronizes or interrupts her in their debate in his usual style, he will regret the encounter.

Palin's nomination competes with Obama’s in exploiting American guilt by offering voters a choice between correcting the underrepresentation of blacks and women. Of course, the election of President Obama will be more significant than the election of vice-president Palin, but the contest does offer a choice of remedies to historic exclusions: do one now, the other later.

Will Palin attract many of the women who voted for Hillary in the primary elections? I doubt it. Most of them are feminist to some degree, feminists who will be repelled by Palin's ultra conservative positions. Equality for women may be their most important issue, but most of them have a range of liberal beliefs that Palin cannot satisfy.

And this contradiction will be made even more apparent in the campaign as Palin tries to shore up conservative support for McCain, now shaky at best, by telling them of her positions on abortion, guns, death penalty, Iraq war, etc. She cannot satisfy the conservatives and liberals at the same time.

Palin's inexperience, a heartbeat away from the presidency of a 72 year old man with a medical history, may take Obama’s similar inexperience off the political table. In fact, as Bill Clinton has said repeatedly, every new president enters office unprepared for the challenges of presiding over a nation of 300 million people. Clinton should know. His first two years as president were a disaster marked by failures in health care, gay-lesbian policies in the military, etc. culminating in loss of Democratic control of Congress for the first time in 40 years. John F. Kennedy's term began similarly with the Bay of Pigs invasion failure, nuclear war crises with the Soviet Union, and ineffectiveness in dealing with Congress. Republicans Ronald Reagan, Bush the First and Bush the Second had similar problems in mastering the presidency.

McCain fears that Obama may be unstoppable in his advance to Pennsylvania Avenue. As differences on issues fade, as personality and celebrity reach new heights of importance, as race prejudice becomes entwined with historic American guilt, the political trend is unmistakably toward Barack. Sarah Palin will not change the result any more than previous vice-president nominees. John McCain's Hail Mary pass will not prevent the election of “The One”.

Why Joe Biden?

Why Joe Biden?
By Jerome Grossman

When Barack Obama presented Joseph Biden to the Democrats of the nation as his personal choice for vice president and Biden accepted, both made verbal blunders unusual for these accomplished and well-prepared orators. Biden called Obama “Barack America” without correcting himself and Obama introduced Biden as “The next president of “The United States” before the crowd corrected him.

If Sigmund Freud had been in the audience he would have analyzed the errors as symptomatic action indicating a concealed problem, an unconscious manifestation of inner conflict, sometimes called buyer's remorse. And he might have been correct.

A senator for 35 years, Biden undermines Obama’s message of hope and change, especially generational change. When Obama confronted his Democratic rivals in the many debates during the primaries, he always pointed out that he was the one who spoke out against the Iraq War while the rival senators voted to authorize President George W. Bush to invade Iraq. Now Obama is selecting a vice president who voted with McCain for the worst blunder since Vietnam. But there was another message in that story that the raging and enthusiastic crowds picked up: that the older generation of political leaders were mired in ineffective and obsolete approaches to government and had to be replaced. That is why Obama did not need specific and detailed programs. That is why Hillary's traditional recipes did not carry the day.

Joe Biden as vice president undercuts the spirit and special nature of the inspired Obama campaign. While he has a moderate to liberal voting record in the Senate and understands the awesome dangers of nuclear weapons, he not only voted for the Iraq War but in August 2003 said he did not regret that vote. His criticisms of the Bush administration on Iraq have focused on its handling of the conflict. His energies were expended primarily on his plan to divide Iraq into three nations, Shi'ite, Sunni, and Kurd, an approach opposed by most Iraqis and one that would keep the US involved there for decades if not permanently.

While Biden voted against the first Iraq War of 1991, he was one of the strongest voices urging US and NATO intervention in Serbia, Kosovo and Bosnia. Only last week he flew to the nation of Georgia when President Sakashvili called him, then returned to urge the Congress to establish a $1 billion fund for Georgia reconstruction while calling for “The West to stand up for the rights of free people throughout the region”, using many of the same terms used by John McCain urging that Georgia be admitted to NATO. Will he be the interventionist in the Obama cabinet?

Will Biden lead the attacks on McCain as advertised? I doubt it. Edwards did not do it for Kerry, nor Lieberman for Gore, nor Bentsen for Dukakis, nor Gore for Clinton, etc. etc. The vice presidential nominees promise to do the attacking but rarely deliver, folding in the clutch, not wanting to alienate the public with rough tactics, protecting their political careers.

Will Biden bring votes to the ticket? Unfortunately, he has no political base outside of Delaware and has proven it. He has run twice for president with negligible results, forced to drop out early. As a Catholic who supports Roe v. Wade he will be denied communion by the same bishops who denied it to John Kerry, limiting his effectiveness with that group.

The selection of Joe Biden seems to square with the many centrist changes in foreign and domestic policy that Obama has made since he became the virtual nominee. It is difficult to see these tactics as flowing from a comprehensive strategy. More and more the Obama campaign slips into a traditional mode. The excitement generated by the Obama challenge has diminished as the emphasis on change has slipped.

That does not mean defeat. The country is sick of Bush and Republican incompetence. Economic recession, as well as failures in Iraq and Katrina to name just a few, ought to mean a Democratic victory in the White House as it will surely be in the Congress. But it will be in traditional political terms, not in the revolutionary concepts implied if not stated in inspirational hope and institutional changes that brought millions to the side of Barack Obama and won him the nomination.

Georgia on My Mind

Georgia on My Mind
By Jerome Grossman

During his long presidential campaign when he also had responsibilities and duties as a United States Senator, John McCain found the time to make three separate trips to the nation of Georgia, a country of less than 5 million people, whose main claim to importance was a pipeline carrying oil from wells owned by western companies in the Caspian Sea basin.

McCain chief policy adviser Randy Scheunemann and his business partner lobbied McCain or his staff on 49 occasions in a 3 1/2 year span while being paid $830,000 dollars by the government of Georgia. Scheunemann stopped lobbying for Georgia this March but retains an interest in the lobbying firm that signed a new $200,000 agreement with the Georgian government.

McCain’s time spent in Georgia is noteworthy because it affected his campaign: he has not found the time to visit a number of states in the US whose votes he will need to be elected president. Clearly he was not seeking votes in nation Georgia but perhaps he was looking for campaign contributions. Contributions from foreign governments and citizens are illegal but American oil companies may have shown their gratitude.

On August 13, McCain told reporters, “In the 21st century, nations don't invade other nations,” as he denounced the Russian invasion of Georgia. The irony of that statement was not lost on the rest of the world given the US invasion of Iraq after the United Nations refused to authorize US invasion of Iraq. The US invaded on its own. So much for the McCain version of history.

McCain insists that the Russian invasion was a “setback for democracy” because President Saakashvili had been elected twice. But he doesn't tell that that president declared martial law in Georgia last November using tear gas and rubber bullets on Georgian citizens, shutting down an opposition television station too.

US officials have stressed that the White House and State Department repeatedly warned President Saakashvili and his government against responding to Russian military provocations in ways that could spark a broader conflict. A Georgian official confirmed this. But Saakashvili took the Russian bait and made the first military move in South Ossetia, responding to small-scale local violence with heavy handed military. Saakashvili was conferring with McCain by telephone virtually every day. What kind of advice did he receive? That “We are all Georgians?” That the US would ride to the rescue?

McCain has some explaining to do. Did his interest in Georgia promote campaign contributions? Is his foreign-policy basically run by lobbyists and in some cases lobbyists for foreign governments? Does that put him in direct conflict with the US State Department and even the Secretary of Defense? How reliable is his judgment? Is he a risk taker whose first instinct is to use the military? Or promise it when he shouldn’t?