The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed, the Associated Press reported (12/1). The administration ignored remarkably prescient warnings that foretold the financial meltdown, according to an AP review of regulatory documents. In 2005, faced with ominous signs that the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans, but delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way. The administrations blind eye to the impending crisis is emblematic of its governing philosophy, which trusted market forces and discounted the value of government intervention in the economy, APs Matt Apuzzo wrote. Its belief ironically has ushered in the most massive government intervention since the 1930s. Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid to recover from a mortgage crisis they insisted would never come. Many executives remain in high-paying jobs, even after their assurances were proved false.
Steve Benen added at WashingtonMonthly.com (12/1): Bushs record when it comes to disregarding warnings is right up there on the list of his most humiliating failures, isnt it? When warned that bin Laden is determined to strike inside the United States, the president humored the intelligence official and told him, Youve covered your ass, now. When warned that a hurricane was poised to destroy New Orleans, the president was satisfied that FEMA would handle the crisis. When warned about a looming financial crisis, Bushs White House paid more attention to the banks that told the president not to worry.
SMALL BANKS RAZZ CITI BAILOUT. Small community bank executives were not thrilled to see the federal governments $306 bln bailout of Citigroup. I guess appalled is not too strong a word, said Cindy Blankenship, who with her husband founded the Bank of the West in Grapevine, Texas, in 1986. It has grown to eight branches in North Texas with $280 mln in assets. Were sitting there taking deposits, making loans, operating on a very conservative and prudent basic banking business model, Blankenship told ABC News (11/25). We simply could not do what the big banks have done.
Camden Fine, president and CEO of Independent Community Bankers of America, said he was outraged by the Citi aid. Right now, all we see is taxpayer money ... being used to bail out incompetent management and prop up common shareholders, he said. Small banks keep ownership of their loans, unlike the big banks, he noted. So the loan of the borrower hasnt been chopped into 15 different pieces, Fine said. So there is a one-on-one relationship between the banker and the borrower. He added, Any company that is too big to fail is too big to exist.
SOCIAL SECURITY TURNS OUT GOOD INVESTMENT. The stock meltdown is making the Republican proposal to privatize Social Security look idiotic, Nathan Newman noted at TalkingPointsMemo.com (12/1), but Jason Zweig of the Wall Street Journal showed how valuable Social Security is for most families, reporting (11/29) that a 65-year-old retiree who has earned good money can expect an inflation-adjusted annuity of about $24,000 in todays purchasing power every year for the rest of his life. Zweig noted that it would take a $327,000 lifetime annuity to throw off $2,000 a month, after inflation, for the rest of the retirees life. The implicit bond of Social Security makes up about 40% of the total assets of the average household on the verge of retirement, Zweig wrote.
So most families have the equivalent of hundreds of thousands of dollars in assets that are untouched by the financial crisis, Newman noted. Social Security is 39.6% of the income of Americas over age 65, with regular earnings accounting for 23% and returns from financial assets only 15.4% of older Americans income, he noted. So while the stock market collapse is definitely hurting some groups of the elderly, the reality is that a 50% drop in the value and earnings from financial assets cuts overall income of the elderly by less than 10%, Newman wrote. Rising costs of medicine or other costs not fully captured by inflation-adjustments to Social Security may be far more critical to the financial well-being of most older Americans.
BUSHITE EDICT LETS TOXIC TOYS STAY IN STORES. Congress in August passed a landmark consumer safety law that raises standards for toys and virtually bans several hormone-like chemicals called phthalates in products for children under 12. Lawmakers wanted toys with the controversial chemicals to be off the market when the law takes effect 2/10, according to Sen. Dianne Feinstein, D-Calif., co-author of the ban. But in November, the Consumer Product Safety Commission general counsel issued an opinion that stores may continue to sell toys with phthalates, as long as those items were made before 2/10, USA Today reported (11/25). That could allow toys with phthalates to remain on the shelves for years, with no way for parents to know which toys contain the chemicals, Feinstein says.
ELECTION GOES ON. In the Senate, Democrats will have a majority of at least 58-41 next year, with one seat yet to be decided, but they wont be filibuster-proof after Sen. Saxby Chambliss (R-Ga.) defeated Jim Martin (D) in a 12/2 runoff that stacked up as a Georgia referendum on whether Republicans should be able to shut down the Senate at will. At presstime, Minnesota election officials were still recounting the Minnesota Senate race, where Sen. Norm Coleman (R) claimed a slim lead of 215 votes over challenger Al Franken (D) after the first tally; the lead got slimmer during the recount. The Franken team claimed the margin was less than 100 votes with 93% of ballots counted (12/2), but that tally does not include thousands of ballots that were challenged and will have to be decided by the state canvassing board. And in Ramsey County (St. Paul), 171 ballots that were not counted because of a machine malfunction on Election Day, then were set aside and apparently forgotten, turned up. Frankens recount attorney, Marc Elias, left open the possibility that the contest will be challenged all the way to the US Senate, which has final authority in election challenges.
In the House, the Dem majority grew to 256-175 with four seats remaining to be settled. Dems claimed a net gain of 21 seats after the Virginia Board of Elections (11/24) certified Tom Perriellos (D) 745-vote victory over Rep. Virgil Goode (R), pending a recount. Hotline noted that two other races are being recounted: In OH-15, an open seat given up by Rep. Deborah Pryce (R), state Sen. Steve Stivers (R) led Mary Jo Kilroy, but provisional ballots were expected to carry Kilroy to victory, which would be another Dem pickup. In CA-4, state Sen. Tom McClintock (R) leads Charlie Brown (D) by 1,566, pending recount, for an open seat given up by Rep. John Doolittle (R). Two runoffs in Louisiana are set for 12/6: Rep. Bill Jefferson (D) is expected to easily win in New Orleans but Dems hope for a pickup in Northwest LA-2 with socially conservative Caddo Parish (Shreveport) DA Paul Carmouche (D) vs. John Fleming (R), a physician.
Looking to 2010, Sen. Mel Martinez (R-Fla.) announced (12/2) he will not seek re-election, setting up what should be a wide-open contest to succeed him. Likely Dem contenders include US Reps. Allen Boyd, Ron Klein, Kendrick Meek, Debbie Wasserman Schultz and Robert Wexler, as well as state Sen.-elect Dan Gelber, the outgoing state House minority leader, and Alex Sink, the states chief financial officer. Former Gov. Jeb Bush is the most prominent possible GOP candidate, but party sources told CQPolitics.com Bush might not be interested.
In Pennsylvania, former Rep. Pat Toomey (R) is considering another challenge of Sen. Arlen Specter (R), who narrowly beat Toomey in a bruising 2004 primary. Toomey is president of the right-wing Club for Growth. Dems considering a race include MSNBCs Chris Matthews and US Reps. Joe Sestak, Patrick Murphy and Allyson Schwartz.
WAXMAN OUSTS DINGELL IN HOUSE COUP. Rep. Henry Waxman (D-Calif.) won an intraparty showdown with longtime Chairman John Dingell (D-Mich.) over leadership of the powerful House Energy and Commerce Committee (11/20). The 137-122 vote to replace Dingell, who has represented the Detroit area since 1955, with Waxman, whos only been in the House since 1975, was a blow for the seniority system and was seen as a victory for Speaker Nancy Pelosi, who has had run-ins with Dingell but claimed hands off. It also was a victory for environmentalists as Dingell had been allied for years with the car industry against fuel efficiency standards. As chair of the Oversight and Government Reform Committee, Waxman has been an aggressive critic of the Bush administration, particularly the EPAs assault on the Clean Air Act and he uncovered much of the administrations suppression and distortion of scientific findings and of prewar intelligence on Iraq.
Harold Meyerson noted in the Washington Post (11/19) that Waxman is probably the Houses most accomplished legislator in three issue areas that are high on the agendas of the nation and President-elect Barack Obama: universal health care, global warming and enhanced consumer protections ... Before the GOP took control of the House in 1994, as chairman of the health and environment subcommittee, Waxman strengthened the Clean Air Act, authored the legislation that expanded Medicaid coverage to the poorest children steered bills that gave rise to the generic drug industry, required uniform nutrition labels on food, heightened standards of care at nursing homes, created screening programs for breast and cervical cancer, provided health care for people with HIV/AIDS, or expanded Medicaid coverage to the working poor. In the midst of the Reagan eras cutbacks, Meyerson noted, Waxman expanded the number of working poor eligible for Medicaid a stunning 24 times. He consistently won key Republican backing for these regulatory and programmatic expansions. ... Wyoming Republican Sen. Alan Simpson once emerged from a marathon conference committee meeting and noted, Henry Waxman is tougher than a boiled owl.
Michigan observers were concerned that Dingells demotion could hurt efforts to revive the car industry, and GM and Ford stock dropped on news of Waxmans victory, but Waxman has been a consistent supporter of the United Auto Workers and one might argue that if US carmakers had followed Waxmans lead and put fuel-efficient cars in production that they developed in the 1990s, they would be in better shape to compete today. Jeff Cranson of the Grand Rapids Press noted that with Waxmans pursuit of green-collar opportunities, Long term, a focus on science and technology fits well with Gov. Granholms goals for rebuilding the economy with wind, solar and other alternative energy solutions.
ARIZONA DEMS LOSE. Democrats in Arizona werent thrilled to see Gov. Janet Napolitano (D) named to head President-elect Obamas Department of Homeland Security, because Republican Secretary of State Jan Brewer will take her place, putting the GOP in charge of state government, with majorities in the House and the Senate. Its a dreadful step, Phil Lopes, minority leader, told The New Republic (12/1). ... I do wish that she would [stay] because with us in the minority chambers, shes the only one who can put a stop to [the GOP]. Napolitano has vetoed several Republican bills, including measures denying in-state tuition and day care to illegal aliens and allowing law enforcement greater latitude to enforce immigration law. Im horrified at the thought of Napolitano abandoning the state, Amy Silverman, managing editor of Phoenix New-Times, told TNR. She has not been a perfect governor, but when it comes to the big picturebalancing out the incredibly far-right and often wing-nut state legislatureshes been a godsend.
TORTURE COST AMERICAN LIVES. A former special operations interrogator who worked in Iraq in 2005 wrote in the Washington Post (11/30) that torture and abuse of suspected terrorists has cost American lives. I learned in Iraq that the No. 1 reason foreign fighters flocked there to fight were the abuses carried out at Abu Ghraib and Guantanamo. Our policy of torture was directly and swiftly recruiting fighters for al-Qaeda in Iraq. Its no exaggeration to say that at least half of our losses and casualties in that country have come at the hands of foreigners who joined the fray because of our program of detainee abuse. The number of US soldiers who have died because of our torture policy will never be definitively known, but it is fair to say that it is close to the number of lives lost on Sept. 11, 2001. How anyone can say that torture keeps Americans safe is beyond meunless you dont count American soldiers as Americans.
The writer, who wrote under the pseudonym Matthew Alexander, adds that when he switched his teams techniques to a rapport-building method, they found enormous success. One detainee told the author, I thought you would torture me, and when you didnt, I decided that everything I was told about Americans was wrong. Thats why I decided to cooperate.
The author, who is writing a book on his experiences as an interrogator, notes that the Pentagon tried to redact non-classified information and block parts of his book. Apparently, some members of the military command are not only unconvinced by the arguments against torture; they dont even want the public to hear them, he wrote.
YES, WERE IN A RECESSION. The National Bureau of Economic Research (NBER) announced (12/1) that the US economy has been in recession since December 2007. NBERs Business Cycle Dating Committeewhich maintains a chronology of the beginning and ending dates of US recessionsexplained that a peak in economic activity occurred in the US economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.
In its release, NBER dispelled a persistent myth that was often repeated by the White House regarding the definition a recession saying that two of more quarters of declining real GDP are not necessarily needed for an economy to be in a recession. (ThinkProgress.org, 12/1)
FLAWS IN STUDY CLEARING WAL-MART OF SMALL BIZ KILLING. A widely publicized study claims there is no evidence that Wal-Mart has had a negative impact on the small business sector, but a close inspection of the data by the Institute for Local Self-Reliance (ILSR) found fatal flaws, starting with a lack of understanding of the deŪnitions used by the US Census Bureau. The keynote chart of the study, Has Wal-Mart Buried Mom and Pop? by Dr. Russell Sobel and Andrea Dean, both of West Virginia University, published in the October issue of the academic journal Economic Inquiry, shows that the number of small retail establishments, with 1-9 employees, remained virtually unchanged from 1985 to 2002, even as the number of Wal-Mart stores grew from about 700 to over 2,800.
The study has attracted significant local and national media attention and Wal-Mart has produced a fact sheet that highlights key findings, which is being distributed in communities where the company is proposing new supercenters.
But Stacy Mitchell, senior researcher for ILSRs New Rules Project, notes in Major Flaws Uncovered in Study Claiming Wal-Mart Has Not Harmed Small Business (newrules.org, Hometown Advantage News, 12/1), that an establishment is not the same as a Ūrm. The Census Bureau deŪnes a Ūrm as a single business entity. An establishment is a single business location. Starbucks, for example, is one Ūrm with thousands of establishments. Sobel and Dean, therefore, are counting not only genuine small businesses, but every corporate-owned chain store with fewer than 10 employees at that particular location. Since the goal is to measure impact on small mom and pop businesses, this is a crucial distinction. Using the correct datanumber of small retail Ūrmsone Ūnds that, between 1982 and 2002, the number of retail businesses with 1-9 employees actually fell by one-Ūfth. Whats more, when the decline is charted relative to population, the number of small retail firms with 1-4 employees per 1 mln people fell by 38%, while those with 5-9 employees declined 30%. And between 1982 and 2002, the share of the nations retail spending going to single-location businesses dropped from 35% to 23%, while the share captured by chains with 100 or more outlets climbed from 38% to 60%. Mitchell concluded that independent retail businesses declined in numbers and market share at the same time that Wal-Mart and other large-format retailers grew. Sobel and Deans sweeping conclusion that there is no evidence that Wal-Mart has had a significant impact on the overall size, growth, or profitability of the US small business sector is unfounded, Mitchell wrote.
SALES TAX SKIMMERS REAP $1B. Good Jobs First, a Washington, D.C., research center, reported in Skimming the Sales Tax (11/18) that little noticed laws in more than half the states allow retailers to keep a portion of the sales taxes they collect from shoppers. The practice costs 26 states more than $1 bln a year and benefits large chains, notably Wal-Mart. Thirteen states impose no ceiling on the amount retailers can keep. States that forego the most revenue include Illinois ($126 mln), Texas ($90 mln), Pennsylvania ($72 mln), Colorado ($69 mln), and Florida ($65 mln). This creates a windfall for giant retailers such as Wal-Mart, said Philip Mattera, Good Jobs First Research Director and principal author of the report, available at goodjobsfirst.org, which found that Wal-Mart keeps about $60 mln a year in sales taxes paid by its customers.
LIBS PLOT CANADA COUP. Conservative Prime Minister Stephen Harpers proposal to put an end to public financing for political parties managed to unite the parties of Canadas center-left and the separatist Bloc Québécois into a coalition to unseat Harper just six weeks after voters returned the Cons to power with a near-majority of 143 of 308 MPs. If the deal gets the blessing of the Governor General (the British viceroy), the Liberal caucus, which has 77 MPs, would name the new prime minister, finance minister and 17 other cabinet members. The New Democratic Party, which is farther to the left than the Liberals and has 37 MPs, would get six cabinet members. The Bloc Québécois, which has 49 MPs, would not be part of the government but agreed to support the government for 18 months. As we went to press, Harper convinced the Governor General to suspend Parliament until January. Leaders of the majority coalition said they won't have any more confidence in Harper in January than they do now.
NEW DEAL MYTH-BUSTING. Rewriting the history of the Great Depression has been a favored pastime of activists on the radical right, such as Grover Norquist, Jonah Goldberg and the Heritage Foundation. In their depiction, FDRs New Deal was not only ineffective, but was responsible for prolonging the Great Depression. Increasingly, however, this view is breaking into the mainstream, ThinkProgress.org noted (11/24). For example, conservative columnist George Will said on ABCs *This Week* (11/23), Before we go into a new New Deal, can we just acknowledge that the first New Deal didnt work? But economist Paul Krugman wrote in the *New York Times* that the New Deal brought real relief to most Americans and its shortcomings resulted from the fact that they were not bold enough over the short-term: [T]he truth is that the New Deal wasnt as successful in the short run as it was in the long run. And the reason for FDRs limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious. In short, Mr. Obamas chances of leading a new New Deal depend largely on whether his short-run economic plans are sufficiently bold. Progressives can only hope that he has the necessary audacity.
Economist Brad DeLong noted that private investment bottomed out in 1932 and recovered in a very healthy fashion as Roosevelts New Deal took effect from 1933 to 1937. The recovery was interrupted in 1937 and 1938 as Roosevelt switched to more orthodox conservative economic policies and tried to move the budget toward balance while the Federal Reserve tightened the money supply. Ultimately, Krugman wrote, What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economys needs.
GOPS MCARTHY GENE. Barry Goldwaters 1964 campaign is seen as the catalyst of the modern conservative movement, but Neal Gabler argued in the Los Angeles Times (11/30) that the real father of modern conservatism is Sen. Joe McCarthy (R-Wis.) As far as Gabler is concerned, the McCarthy gene runs deep in the GOPs DNA, and because it is genetic, it isnt likely to be expunged any time soon. He wrote, McCarthyism is usually considered a virulent form of Red-baiting and character assassination. But it is much more than that. As historian Richard Hofstadter described it in his famous essay, The Paranoid Style in American Politics, McCarthyism is a way to build support by playing on the anxieties of Americans, actively convincing them of danger and conspiracy even where these dont exist. Goldwater, an economic individualist who hated government more than he loved winning, was a diversion from McCarthy conservatism, Gabler wrote. McCarthys real heir was Nixon, who mainstreamed McCarthyism in 1968 by substituting liberals, youth and minorities for communists and intellectuals, and fueling resentments as McCarthy had. In his 1972 reelection, playing relentlessly on those resentments, Nixon effectively disassembled the old Roosevelt coalition, peeling off Catholics, evangelicals and working-class Democrats, and changed American politics far more than Goldwater ever would. He concluded, the Republican Party, despite the recent failure of McCarthyism, is likely to keep moving rightward, appeasing its more extreme elements and stoking their grievances for some time to come. There may be assorted intellectuals and ideologues in the party, maybe even a few centrists, but there is no longer an intellectual or even ideological wing. The party belongs to McCarthy and his heirs Rush Limbaugh, Sean Hannity, Bill OReilly and Palin. Its in the genes.
DAIRY PRODUCERS STRUGGLE. Domestic dairy producers have watched the prices they receive for their milk fall by nearly 30% in recent month while prices they pay for feed and other inputs remain high, the National Farmers Organization (nfo.org) reported. The price for November milk was between $15.60 and $15.75 per hundredweight, yet the block cheese price was $1.76, said National Farmers Dairy Division Director Brad Rach. That block cheese price would normally signal a $17.60 milk price, but that isnt the case this year. The pricing system isnt working, Rach said. Industry consolidation is creating new challenges, dairy producers have fewer processors competing for their milk, and that may account for prices lower than the customary formula would indicate, Rach said. The organization urges producers to market together, and consider culling cows from their herd. There are 88,000 more cows in the US this year compared to last year. NFO urges cooperatives to work together to develop a more equitable pricing system.
From The Progressive Populist, December 15, 2008
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