Puget Sound Liberals Weekly Newsletter #225
Enhancing Freedom, Opportunity and Cooperation in
Through informing and networking Liberals and Liberal Organizations.
Our vision is hundreds of thousands of well-informed
Our Website Our Editor To Unsubscribe Table of
Contents * Featured Articles Opportunities Petitions Communication to Our Members Addressing Washington’s Major Needs Commentaries from Our Members David James: Unscrupulous Employers Are Hypocritical Liberals and Democrats Links to the Beef Countering Citizens United Supreme
Court Ruling State and Local Links
to the Beef Richard Curtis: 2 Major Parties Distract Us from Main
Issues Nation and World Links to the Beef U.S Terrorism: Domestic or el-Qaeda Inspired? Featured Advocacy Group: Demos Our Liberal Spirit Recommended Books** Our
Political Priorities ·
Fair Clean
Elections and Open Government ·
Fair Taxes and
Competent Spending ·
Investment for
Productivity ·
Quality
Health, Education, Jobs, Income ·
Environmental
Protection and Energy Independence ·
Security and
Equal Rights ·
Justice and
Peace Everywhere ·
International
Cooperation and Leadership Conservatives oppose all of these Let’s
End Our National Nightmare
Let’s
Restore Our American Dream More on Conservative opposition to our
American Dream Washington State’s 5 Major Needs · Federal Funding for Health and Education · Substituting
a Progressive Income Tax · Replacing
Conservative Legislators Quote of the Week Even when opportunity
knocks one must still get up off his seat and open the door. Anonymous
Calendar of Events
Saturday, May 22 at 6:30 PM at Alki Congregational
United Church (61st SW and SW Hinds, Seattle) - InspireSeattle Potluck and Forum,
featuring Education – a Key for Building Peace in
Afghanistan
Opportunities
Commentaries
that have addressed major issues
Obtain
a free ‘Corporations Are Not People’ bumper sticker.
Petitions
Tell
President Obama to impose a moratorium on offshore drilling for oil.
Communication
To Our Members
Addressing Washington’s
Major Needs
Five major needs for Washington state
government to provide appropriate infrastructure and safety net are listed on
the right side of the front page of every newsletter. Including:
· Federal Funding for Health and Education
· Substituting
a Progressive Income Tax
· Replacing
Conservative Legislators
·
During 2007, our
Puget Sound Liberals championed public campaign financing.
·
During 2008, we
championed lowering
taxes for 90% of our taxpayers through requiring our high income and wealthy
people to pay their fair share of taxes. We championed doing this through substituting
a progressive income tax for some of our regressive sales, excise and property
taxes.
·
During 2009, we
championed restricting
the ability of Building Industry Association of Washington (BIAW) to retain rebates
it has obtained illegally and use money to oppose Washington government’s
ability to protect our citizens through restricting its revenue and regulatory
power.
·
We have
continually supported more consistently Liberal candidates against less consistently
Liberal candidates.
The results:
·
Our federal
government is moving toward assuming more responsibility for funding health
care, but not yet for education, both necessary to providing equitable
education to all Americans.
·
Our many
legislators who have been elected through raising and spending private campaign
donations have refused to pass public campaign financing beyond allowing local
governments to do so.
·
An initiative is
finally being promoted to add an income tax on high income people in order to
make them pay for the legal, social and physical infrastructure which enables
their incomes, to make our tax system fairer through lowering property and
business and occupation taxes and to increase revenues to support education.
·
The BIAW has been
quieter lately, but still has not been forced to repay its illegally gained
overpayments. Important is the extent to
which BIAW will attempt to influence our fall 2010 elections.
I
enthusiastically support initiative 1077 and encourage all of our members to
assist its passage. Dave Thomas
Commentaries
From Our Members
David James:
Unscrupulous Employers Are Hypocritical
Hi Dave. We've been hearing about
Arizona's new anti-immigration law, which many will fear will lead to more
unjust racial profiling. (And which I'm
afraid is already happening.) And now
Texas and Oklahoma are considering similar laws.
I have been thinking that if all U.S. citizens abided by the current
federal immigration laws, then we wouldn't have so many undocumented workers
here in the U.S. Which leads me to
wonder how many of these hard-line neoconservatives, who say they support
Arizona's anti-immigration law, are actually hiring the same undocumented
workers to save money. It's highly
probable that there are undocumented aliens who are getting much less that
minimum wage (and no health care), but are afraid to protest, for fear that
their employer will have them deported.
We should speak out against such outrageous actions by unscrupulous
employers, who then want us honest taxpayers to foot the bill for harsh
anti-immigration "enforcement".
Sincerely, David James
Liberals
and Democrats
Audit shows wide
variation in openness of government agencies
Democrats Are On A Roll
The
following events may assist Democrats to lose few if any congressional seats
this fall.
·
To avoid being
labeled as supporting Wall Street speculators instead of Main Street,
Republicans have allowed financial regulatory reform to be discussed, with the
result that financial regulatory reform may be strengthened. For more. For
more. Five regulatory
priorities.
·
Tea Party
Conservatives have forced Florida Governor Charlie
Crist to run as an Independent, making it likely that either Charlie Crist
or Democrat Kendrick Meek will win. If
Charlie Crist wins, he may vote with Democrats instead of Republicans at least
part of t he time. But elsewhere, Tea
Party candidates are losing to less consistently Conservative Republican
candidates.
·
Even if
immigration reform doesn’t succeed, Arizona’s legislation to allow law
enforcement officers to identify undocumented immigrants and turn them over to
immigration officials is invigorating Hispanics to support Democrats, which
will help Democrats to win congressional elections this fall. For
more. Undocumented immigrants
should be called heroes within our American tradition instead of illegal
immigrants.
·
The oil spill
affecting Louisiana’s coastal marshes will likely end drilling for more
offshore oil, in spite of President Obama’s unfortunate recent decision to
allow it in more places. For more. On Sunday, President
Obama visited the Louisiana coast to familiarize himself with the oil
spill, its likely impacts, and efforts to control it.
·
Democrats will
continue to emphasize the benefits of health care reform between now and the
fall congressional elections.
·
Job prospects are
improving, perhaps enough to motivate Main Street voters to support Democrats
this fall. Democrats can continue to
promote jobs bills which force Republicans to side with Wall Street speculators
or allow the jobs bills to pass.
So
Democrats may end up losing few if any congressional seats this fall.
Our President Must Attend To Many Issues
As
President Obama said to John McCain during the presidential campaign, a
president cannot just deal with one issue at a time. To cope with our present crises, President Obama
must attend to various reforms at once: regulating Wall Street speculators,
federal deficits, health care reform, reducing greenhouse gas emissions,
immigration reform, unionization reform and stimulating employment, instead
putting all his efforts into only one or a few reforms. External events affect the priorities and
sequencing of promotion of these various reforms.
In
addition, our president must react to various disasters: earthquakes (Haiti), snow
storms, floods, volcanoes (Iceland), plane crashes (Poland), Oil spills (Gulf
of Mexico), domestic terrorists, etc. It
is no wonder that President Obama finds it difficult to emphasize one or a few
priorities.
President
Obama is expected to nominate a replacement for Supreme Court Justice John Paul
Stevens this week or next. For
more.
Most
of our last week’s commentaries on health care reform, job creation, regulating
Wall Street, fiscal responsibility and countering the Citizens United Supreme
Court ruling still apply this week, and so are repeated.
Health Care Reform
Having
emphasized the benefits of health care reform immediately following its
passage, attention has shifted to regulating Wall Street speculation. But the Obama Administration will continue to
describe the benefits of health care reform before the fall elections.
Citizens in 18 states
are promoting state level single payer health care.
Job Creation
Will
positive economic indicators and increased consumer spending lead to voters
thinking job prospects are increasing?
Positive
job reports lesson pressure to pass more job creation bills. After passage of several small job creation
bills, no new ones have been proposed.
Obama
Administration and congress are still doing little to assist unionization
which enables job holders to receive earnings more in accordance with their
productivity.
President Obama has ignored various job creation
measures adopted by President Roosevelt during the 1830s, including hiring
young people to work on infrastructure projects under management of our
military and the encouragement of unionization.
While President Obama treats his cabinet members much better than
President Roosevelt did, President Roosevelt listened to a much broader array
of opinions from cabinet members who had no ties to those who contributed to
the economic collapse of the great depression.
Regulating Wall Street
In his weekly Saturday address, President Obama noted that bailing
out American automobile companies has apparently been successful. But many more jobs are needed. And Wall Street must be regulated so that it
will not again remove credit from Main Street.
For
more. The White
House blog lists 10 loopholes that Wall Street speculators want to
undermine regulation.
After the whole economy practically collapsed into a World Trade Center
like heap barely a year ago, you would think that Congress would have rushed to
put tough new reforms in place. And yet it is only in the last couple weeks
that proposals with actual merit have come forward, amendments without which
the current Senate bill would be just more worthless congressional
grandstanding, and each of these amendments should be passed:
1) Brown/Kaufman amendment to break up the too big to fail banks For
more.
2) Merkley amendment to ban conflict of interest trading by banks (PROP
Trading Act)
3) Lincoln amendment to regulate derivatives For more.
4) Paul/Sanders amendment to audit the Federal Reserve For
more. For
more.
5) Cantwell/McCain amendment to reinstate Glass-Steagall
Those who have treated our banking system like their own personal
casino, while they secretly placed their bets against the American people, have
established conclusively that lack of regulation only breeds financial
instability. Those who rail against "bailouts" must understand that
the next time there won't be enough money to save our too big to fail
institutions even if we wanted to. Congress must act now to reintroduce prudent
discipline to our financial markets. Otherwise
we are just marking time until the next Great Depression. Wall
Street speculators who used Enron-type accounting tricks should be jailed.
To limit the ability of mega-banks to do economic damage and to
politically influence their regulation, such banks must be broken
up into smaller banks. For
more.
Three attempts to pass regulatory reforms were made. To my surprise, the 41 Republican senators
unanimously refused to allow them to be passed.
They are
apparently not worried that they will be accused of siding with Wall Street to
block regulations. For more. The Republicans finally agreed to allow
discussion of regulatory reforms to proceed.
Republicans
can still attempt to delay adoption of regulatory reform. It remains to be seen whether the regulatory
reform package will be strengthened or weakened or some of both. Some package will be passed which must be
reconciled with the house version. For
more. For
more. For
more.
Fiscal Responsibility
The
Obama Administration still shows no sign of increasing taxes on Wall Street and
other high income earners in order to reduce the federal deficit, thus
continuing to be vulnerable to concerns by Tea Bag Conservatives and others
about the high deficits. For more. For
more. Without raising taxes to
reduce deficits, the emphasis is upon reducing Social Security benefits. For
more. For
more. For
more.
I
believe that fiscal responsibility requires
increasing taxes on Wall Street and other high income earners. Dave Thomas
Countering Citizens
United Supreme Court Ruling
In his weekly commentary, President
Obama promoted measures to blunt the effect of the Citizens United case.
Rep. Chris Van Hollen and Sen. Chuck Schumer are planning to introduce
legislation in both chambers next week to blunt the effect of the Citizens
United case.
According to
the summary, obtained by The Washington Post, the legislation would require
corporate chief executives or group leaders to publicly attach their names to
ads, much like political candidates are required to do.
It would also
mandate disclosure of major donors whose money is used for
"campaign-related activity." The
latter measure would require powerful trade groups such as the U.S. Chamber of
Commerce for the first time to identify the companies that fund its
political-related spending.
The measure
would also tighten political restrictions on foreign-based corporations, which
would be defined as any company that has 20 percent foreign voting shares, a
majority of foreign directors or a foreign national leading U.S. operations. If
enacted into law, that provision could affect a significant number of familiar
companies, including Budweiser, T-Mobile and Research in Motion.
Other
provisions would mandate public disclosure of political spending and would bar
companies that receive federal contracts worth more than $50,000 from spending
money to influence federal elections. For
more. For
more.
Here’s the Beef
Our
constitution should be amended to state that Corporations are not people. Money is not speech.
Populists
believe that government should do more to promote justice, not less. Tea
Party Conservatives are not populists.
State and
Local
Phone Call with Suzan DelBene
Suzan
DelBene phoned me to ask for my support for her bid for 8th Congressional
District congress member. I told her
that I doubted that people would vote for her instead of Dave Reichert due to
her lack of political experience. She
replied that many congress members had no political experience when first
elected.
I also
told her that I was skeptical of her claim that having built businesses that
create good jobs, she knows how the government can stimulate the creation of
jobs. She replied that her Microsoft
experience qualified her for helping the government stimulate employment. I didn’t say so, but I doubt that being
connected with Microsoft is a benefit, since many people resent being abused by
Microsoft through oligopolistic pricing, planned obsolescence and forced
dependence upon expensive expertise.
I
also told her that I understood that labor might reject her due to Microsoft’s
importation of cheaper foreign workers.
She said that labor is supporting her.
Dave Thomas
Richard Curtis: Two Major Parties Distract Us from
Main Issues
Greetings, the world was filled with chaos
of the racist and environmental types this week.
My campaign tried to call some attention
to the absurd and delusional position taken by the White House in reaction to
BP’s massive oil spill. The White House thinks we need to hold off deciding
whether to continue coastal oil drilling depending on what they find caused
this tragedy. “Stupid” is the word that
comes to mind. It is outrageously moronic to argue in the face of what
will be the worst environmental disaster US history that we should continue
doing the same things that caused this tragedy. You see, that would be
insane. Rational people look at this and say, “OK, clearly the risks are
much greater than we appreciated and obviously we should not do this any
longer.” That is what sane people think in the face of significant
challenges to old ways of doing things. They use reason and adapt.
But of course our political system has nothing whatsoever to do with reason, as
it is predicted entirely on corporate profits.
However that is not the only disturbing
part of the news this week. The new “immigration” law in Arizona was
setting the tone for action on the streets this week. Tens, if not
hundred of thousands of people across the country were involved in May Day protests
against this new law. The law itself is blatantly unconstitutional, and
one imagines it will never survive court challenge.
This raises some interesting and
disturbing questions about the law and the reaction to it. Immigration
has been the issue the two parties have decided they want to focus on these
days. Why? Because immigration as an issue distracts people from
the wars and the economy, the issues they don’t want to discuss. It seems to me that this is not really about
immigration at all, but about creating distractions that occupy people and keep
them from organizing a revolt against the government for mismanaging the
economy and keeping us in these criminal wars.
What is the immigration problem?
Apparently, the only problem is that people want immigration to be a
problem. I have yet to understand why anyone is worried about
immigration. I understand why people worry about how illegal immigrants
are treated. I advocate respecting the human rights of all people – all
people. What is the problem? We have illegal immigrants? Is
that the problem? No, it is as it always has been. My wife is
descended from an illegal immigrant (ironically not Mexican but via
Mexico). Many of us are. What is the problem? There is no actual immediate problem.
It is created out of thin air by the Republicans in order to give people
something to worry about that has no potential to disrupt the war
machine. It is pure distraction of no substance.
What is the problem with the new Arizona
law? Well, it is unconstitutional and that seems to be a problem.
Did thousands of people need to take to the streets to denounce a law the
courts will void anyway? Probably not. Why all the excitement
then? For exactly the same reasons the Republicans made immigration an issue
to begin with – it is an issue that will not disrupt the war machine. So
the Democrats can (and did) focus all of this anger and energy on a target that
will just go away once any judge looks at it. The Democrats managed to
make May Day – the International Workers’ Day – about something that will be
fixed in the ordinary course of a judicial challenge. Instead of May Day
being about workers’ rights and peace, which is what May Day is supposed to be
about, the Democrats (and a network of organizations they dominate) took all
that energy and effort and directed it specifically away from the issues that
matter most to working people – peace and jobs.
When you think about it they are quite
brilliant really. The level of social control, what Antonio Gramsci
called “Hegemony”, is astounding. In the midst of two illegal wars and a
depression the big parties managed to eliminate all conversation about the wars
and economy even during an election year. They are quite clever, evil,
but clever. Gramsci would be stunned at the total hegemonic control that
is exerted by our two party duopoly. Now, to be honest we are much closer
to Mussolini’s Italy than most of us want to think (the society Gramsci wrote
about). We have a network of secret prisons around the world, we actively
practice torture, we are illegally occupying two countries and are bombing a
third, while threatening a fourth. We are living Mussolini’s philosophy
of government quite literally. The Democrats promised peace and respect
for human rights – they delivered nothing. And still they control all of
the popular energy that should be going into open revolts. It is
astounding that they can control the American people so well.
This was predicted, years ago, of
course. Many astute thinkers predicted that an Obama victory would be the
death of progressivism in America. He promised so much and so many felt
such hope, and then it all comes crashing down in the reality that he never
really intended to do any of that, and as long as the Republicans can seem
outright deranged then that will keep progressive forces too afraid to
rebel – this is the pinnacle of lesser evil politics. It is the pinnacle
of Straussian politics being taken up by both political parties in what looks
like a coordinated effort to keep the American people from demanding justice
and peace.
This is tragic on many levels but not
least because we remain at war, and we are watching our society and economy
become something that looks more like the Third World than the First.
Some economists say we will look like Mexico in less than 30 years – that is
within that time the American middle class will have virtually vanished.
And what will the Democrats do to save us? Absolutely nothing because
they have no desire to save us (the middle class), they are in it for corporate
profits just like the Republicans. Is there anyone who actually believes
this is not true? The tragedy is that we, the American people, seem to
have been beaten down so completely that we do not have the energy to fight,
and then what little energy we have is deviously and maliciously diverted to
issues that do not alter the fundamental realities of American politics. The tragedy is deep and profound. God help us all! (And I don’t even
believe in a god!). Yours with sorrow, Richard
Curtis
Greens back 9 Democratic Legislators: http://blog.seattlepi.com/seattlepolitics/archives/204675.asp
Here’s the Beef
Detroit
is pioneering urban farming to provide locally raised healthy food.
If
Dino Rossi runs against Senator Patty Murray, he may be hurt by nonpayment of
taxes.
Nation
and World
Gulf of Mexico Oil Gusher
Email from activist.thepen
There is no verbal hyperbole sufficient to express the magnitude of the
environmental catastrophe now known as Deepwater Horizon. It is nothing short
of an Armageddon of Oil. Assuming we even survive this one, we must immediately
mobilize a crash program for truly renewable alternative energy resources.
Despite the gusher of lies we've heard trying to minimize the planetary
scale disaster now in progress in the Gulf, the terrifying truth is available
for those who will hear it. First they told us the "leak" was only
1,000 barrels a day, when in fact it is at least 5 times that much. Of course
it's hard to pretend an oil slick the size of New Jersey isn't there. And it
could easily blow out to 50,000 barrels a day (2,000,000 gallons) in a
heartbeat, according to a "not for public" NOAA emergency report.
This is not just a leak, it's a monster underwater oil geyser, under
upwards of 100,000 pounds per square inch of pressure, enough force to lift 50
tons with your thumb. And unless it is somehow stopped, it may spell the end of
all marine life on the planet. We are not talking about just one Exxon Valdez
size tanker spill, we are talking about one of largest oil fields ever
discovered completely venting its entire contents into the ocean, thousands and
thousands of tankers. It's THAT cataclysmic.
But assuming we miraculously dodge the literal end of the world this one
time, we need to finally do what should have been done 20 years ago, and throw
everything we've got into a crash program for alternative renewable energy, and
stop burning fossil fuels before they kill us all.
U.S. Terrorism: domestic or el-Qaeda inspired?
We have experienced various domestically based terrorist attempts from
such individuals as Timothy McVey, various foreign linked terrorist attempts
from such individuals as the Christmas shoe bomber and the recent Times Square
bomber. The foreign terrorists may be
acting with the assistance of el-Qaeda, the Taliban or may be essentially
acting on their own. When a terrorist
incident occurs, we can’t be sure which type of terrorist is involved until the
terrorist is identified. So we have to
watch out for all these types of terrorists.
Given the difficulty that Iran has in producing a nuclear capability,
it seems impossible that el-Qaeda can have the capability of producing a nuclear
weapon. So I believe than any el-Qaeda
inspired terrorism is unlikely to include use of a nuclear weapon. A terrorist incident may be able to destroy a
plane or create an explosion, which can maximally kill or harm several hundred
people, but I doubt that it can harm more than that.
Featured Advocacy Group
--------------------------------------- Demos ------------------------------------------
Demos is a non-partisan public policy research and
advocacy organization founded in 2000. Headquartered in New York City, Demos
works with advocates and policymakers around the country in pursuit of four
overarching goals:
· a more
equitable economy with widely shared prosperity and opportunity;
· a
vibrant and inclusive democracy with high levels of voting and civic
engagement;
· an
empowered public sector that works for the common good;
· and
responsible U.S. engagement in an interdependent world.
A multi-issue national organization, Demos combines
research, policy development, and advocacy to influence public debates and
catalyze change. We publish books, reports, and briefing papers that illuminate
critical problems and advance innovative solutions; work at both the national
and state level with advocates and policymakers to promote reforms; help to
build the capacity and skills of key progressive constituencies; project our
values into the media by promoting Demos Fellows and staff in print, broadcast,
and Internet venues; and host public events that showcase new ideas and leading
progressive voices.
Demos accomplishes its work through five core
programs, as well as special projects and several affiliated partners:
Core Programs
and Projects
·
The Democracy Program works to
strengthen democracy in the United States by reducing barriers to voter
participation and encouraging civic engagement. Demos supports expanded
democratic participation by conducting new research; supporting pro-voter
litigation; providing information and resources to advocates and policymakers;
and advancing a broad agenda for election reform.
·
The Economic Opportunity Program
addresses the severe economic insecurity and inequality that characterize
American society today. The program offers fresh analysis and bold policy ideas
to provide new opportunities for young adults and financially-strapped families
to achieve economic security.
·
Public Works: The Demos Center for the Public Sector
helps advocates, policymakers and community leaders across the United States
re-envision the role of government. Demos believes in a public sector that acts
effectively for the common good and plans for our future, with the public
support and resources necessary to succeed in that critical work.
·
In partnership
with CivWorld and U.S. in the World, the International Program advances
the ideals of strong democracy, shared prosperity, and effective governance at
the global level. This work challenges current patterns of globalization with
the goals of democratizing global governance; ensuring that all people benefit
from free markets and trade; and enabling immigrants to have a greater voice in
the societies in which they live. The program also develops new messages to
help build public support for responsible U.S. global engagement.
·
The Fellows Program supports scholars
and writers whose innovative work influences the public debate about crucial
national and global issues. The program offers an intellectual home and
platform for more than 20 fellows from diverse backgrounds: emerging public
intellectuals, journalists, distinguished public figures, and academics whose
research can be used to inform the policy world.
·
The Demos Books Project supports the
work of fellows, staff and affiliates who are engaging public debate by
publishing new books addressing the critical issues of our times.
·
The Demos Forum: Ideas for Change
event series features prominent authors, scholars and advocates addressing key
national and global issues.
Affiliated
Partners
·
The Building Movement Project helps
non-profit organizations integrate social justice principles into their work;
strengthen their role as centers of democratic practice; and plan for the next
generation of leadership.
·
Business for Shared Prosperity is
a network of business owners, executives and investors committed to sustainable
public policies and business practices that broaden economic opportunity,
expand wealth ownership, and reduce inequality.
·
Inequality.org is a resource
center for journalists, legislators, advocates and citizens concerned about
America's growing economic divide. Building on the work of Demos' 2004
conference and 2006 book, Inequality
Matters, Inequality.org's tools outline the magnitude, causes and
far-reaching consequences of this decades-long trend.
-------------------------------------------------------------------------------------------------------------------
Here’s the Beef
Fraud
is widespread in our political economy.
As national attempts
to curb greenhouse emissions fail, state and local governments are acting.
Besides Russia and China,
Brazil and other countries resist U.S. sanctions against Iran.
Our
Liberal Spirit
Seizing New
Opportunities
As indicated above, Democrats
are on a roll. Various events have
divided Republicans, such that Democrats have the opportunity to lose few if
any congressional seats this fall. To
benefit from these new opportunities, Democrats must push their advantage. They should attempt to strengthen financial
regulations, pass immigration reform and restrict offshore drilling, while
continuing to emphasize the benefits of even a flawed health care reform.
They could benefit further by
embracing PAYGO by increasing taxes on Wall Street speculators and other high
income people, such that our fiscal deficit is greatly reduced, without harming
job creation. In fact a greatly reduced
fiscal deficit would still allow spending to stimulate jobs. It would also be very helpful if local
governments would adopt the best practices of those who are stimulating jobs,
especially encouraging successful entrepreneurs to act as consultants to would
be entrepreneurs.
Freedoms and opportunities
are only helpful when they are used for constructive purposes.
Recommended Books – See our list of books for liberals
Simon Johnson and James Kwak, 2010, 13 Bankers.
The Wall Street Takeover and the Next Financial Meltdown
This book by Simon Johnson
who believes that Wall Street speculation must be greatly reduced or
eliminated, traces the history of financial deregulation, bubbles, their
collapse and regulation, without going into the enormous detail of the collapse
of particular banks. It is thus easy to
read.
He is critical of the bailouts
of large financial companies, which left them able to continue their
speculative activities and able to lobby against regulation. Instead these mega-banks should have been
treated as the saving and loan companies were in the 1980s and as smaller banks
are treated now. They should have been
declared bankrupt, their toxic assets transferred to a separate entity so the
bank could function normally and then be sold to private owners. Shareholders would lose their shares,
management replaced, large bonuses eliminated and lobbyists all fired. This procedure would eliminate the moral
hazard that owners could expect to be bailed out. The government would receive some funding
when the bank was sold.
With control of the toxic
assets, the government could identify the underlying mortgages that were being
foreclosed, renegotiate some of them to prevent foreclosure, turn others into
affordable housing, and allow people whose mortgages were foreclosed to
continue occupancy as renters.
Unfortunately, President
Obama continued the President Bush’s bailouts, and delayed his financial
regulatory reforms for over a year while focusing upon job creation and health
care reform. By then, the mega-banks had
become even larger through absorbing some failed banks, and had regained
political and economic strength to resist reforms. The resulting reforms will not eliminate ‘too
big to fail’ banks. And they do not
guarantee that regulators will enforce them against political pressures by the
mega-banks.
Simon Johnson claims that the
right solution is obvious. Do not allow
banks to be too big to fail. Break up
the ones that are. Separate commercial
from investment banks. Then limit banks
to 4% of GDP and investment banks to 2% of GDP, levels which banks only
exceeded during the 1990s. These limits
would affect 6 mega-banks: Bank of America (16%), JPMorgan Chase (14%),
Citigroup (13%), Wells Fargo (9%), Goldman Sachs (6%) and Morgan Stanley
(5%). The result would about 30 banks,
each having only 2% of GNP. The resulting
banks would not be too big to fail. They
would also have much less political influence.
For more. For
more.