A thought for Sunday: one step from despair
Dan here…another re-post today, this one from NDD at Bondadd blog.
by New Deal democrat
A thought for Sunday: one step from despair
[Who said: “I believe that our Great Maker is preparing the world, in His own good time, to become one nation, speaking one language, and when armies and navies will be no longer required” ? Hint: not a hippie. Answer at the bottom.]
This was a horrible week for what I once thought were American values.
First we find out that letter that state officials are submitting as official “comments” to federal legislation, were in fact dictated almost word-for-word by energy companies. Then we find out that the CIA enthusiastically embraced torture – not even to extract actionable information, but to make sure that nothing was left, or even to induce false information that could be used politically.
Finally a multi-billion dollar gift is delivered from Congress to Wall Street, repealing a provision of the Dodd-Frank Act that prohibited Wall Street banks from gambling on derivatives with their FDIC-insured deposits. On this last bit, fully 1/3 of all Democrats in the House voted in favor, Senate Democrats are expected to follow, and President Obama is expected to sign the bill into law.
Let’s be clear about one thing: not a single word has been uttered by any lawmaker as to why this repealer is economically necessary. Wall Street banks are already making record profits. By definition we are not talking about a farmer, industrialist, or merchant hedging against adverse contingencies. This is strictly about gambling – with deposits that are backed up ultimately by the US taxpayer. It is also “moral hazard” at its absolute worst. Gains will be distributed as profits. Catastrophic losses will be bailed out. There is every incentive to swing for the fences.
And 1/3 of the supposed protectors of the middle/working class voted in favor?
But wait, we are told soberly by, among others, Barack Obama. Here’s what the democrats got out of deal, according to Kevin Drum at Mother Jones:
In 20 years of being on the appropriations bill, I haven’t seen a better compromise in terms of Democratic priorities. Implementing the Affordable Care Act, there’s a lot more money for early-childhood development — the only priority that got cut was the EPA but we gave them more money than the administration asked for….There were 26 riders that were extreme and would have devastated the Environmental Protection Agency in terms of the Clean Water and Clean Air Act administration; all of those were dropped. There were only two that were kept and they wouldn’t have been implemented this fiscal year. So, we got virtually everything that the Democrats tried to get.
The … full-year appropriations legislation for most Government functions [ ] allows … authorities and funding provided to enhance the U.S. Government’s response to the Ebola epidemic, and to implement the Administration’s strategy tocounter the Islamic State of Iraq and the Levant, as well as investments for the President’s early education agenda, Pell Grants, the bipartisan Manufacturing Institutes initiative, and extension of the Trade Adjustment Assistance program.
In other words, the democrats got funding – for one year – for favored programs. The republicans permanently killed a provision keeping Wall Street from gambling with FDIC-insured deposits.
Imagine you want to throw a party for your graduating senior. You expect the party to get a little raucous, and you don’t want trouble, so you go to your difficult neighbor and ask him to agree. He agrees, but only if you agree to deed over to him 5′ of your yard. You got something temporary. He got something permanent. Sound like a deal? Well, that’s akin to what those guardians of the little guy and gal just agreed to.
Mark my words, those same cuts will be demanded by the GOP next year. And the protection against gambling with FDIC insured deposits will still be gone, so another demand will be made of the democrats to save the cuts.
When it comes to American history, the scales fell from my eyes long ago. Andrew Jackson and Manifest Destiny virtually defined the 19th Century. If native tribes had to be slaughtered, well, too bad for them. The effort to expand slavery West and South (to Cuba, Mexico, and the Caribbean) were centerpieces of the Jacksonian dogma.
And torture? Been there, done that, in the Phillippine – American War of 1899 – 1902. Just an example:
To force information from a Filipino mayor believed to have been covertly helping insurgents, American soldiers resort to what they call the “water cure.” After tying the mayor’s hands behind his back and forcing him to lie beneath a large water tank, they pry his mouth open, hold it in place with a stick and then turn on the spigot. When his stomach is full to bursting, the soldiers begin pounding on it with their fists, stopping only after the water, now mixed with gastric juices, has poured from his mouth and nose. Then they turn on the spigot again.
The disgust felt by many, such as Mark Twain, was unpersuasive.
In World War 2, many Americans at home wanted all Nazi and Japanese POW’s killed. They were restrained by the military, which pointed out that American POWs were also being held by Germany and Japan.
But I digress. A couple of weeks ago, I wrote that the Presidency of George W. Bush might turn out to be as influential as that of Andrew Jackson. That torture – even if not effective – is viewed as a legitimate tool of government, that Wall Street should unquestioningly be given what it wants – are now topics of “legitimate” discussion, even “bipartisan” approval. The entire range of acceptable policies has been moved a full standard deviation to the right, and remained so during the presidency of the man who ran on “Hope” and “Change.”
And the GOP hasn’t officially taken control of the Senate yet.
I am one step from despair. But despair will never be an option.
You want hope? Here is the answer to the question I posed at the outset of this post. That sentence was uttered by President Ulysses S. Grant, the General who had saved the Union, in his second inaugural speech, 1873. There is no record of outrage from Washington insiders in response.
Torture, free fire zones, kill anything that moves, all existed during the cold war and were evident in SE Asia where US used ‘body count’ as measure of success toward keeping the rot in power in Saigon.
Petraeus applied “phases” of differing targets for the body count forsecuring our rot in the new counter insurgency manual!
Maybe the ‘www’ makes US more squeemish when caught?
Timeinduced amnesia will work.
Wall Street banks [which banks fall into this categorization?] from gambling on derivatives with their FDIC-insured deposits.
“Wall Street banks” to the extent that they were categorized before Gramm-Leach-Bliley (affectionately known as the repeal of Glass-Steagall) were non-deposit-taking institutions. The prominent “Wall Street banks” that went under or needed to be rescued prior to TARP legislation during the financial crisis were Bear Stearns and Lehman Brothers. Neither of these were retail banking franchises (i.e., if they even had FDIC-insured deposits – and I don’t think they did – they were an insignificant component of their liability structure). Goldman Sachs and Morgan Stanley also fell into this category. Merrill Lynch was strategically moving towards taking deposits, and Citibank was a pure hybrid. But even post Gramm-Leach-Bliley, customer deposits were by law, separated from market-making activities and principal activities (including derivatives), but note that principal activities are shareholder not depositor capital. Dodd-Frank did have provisions to prohibit taking principal risk, but it’s hard to differentiate between holding inventory for expected market making activity and directional speculative trades.
And your point is we will not have to bail them out?
My points are (1) the progressive talking points that the reason banks were (or will be) bailed out had (has) to do with risk-taking with depositor funds is incorrect and manipulative, likely for political reasons; (2) other progressive talking points that are typically associated with (1) (e.g., Glass-Steagall repeal as a proximate cause) are similarly incorrect and manipulative, and (3) the next financial crisis is extremely unlikely to look like the last financial crisis, so I have no idea whether they’ll need to be bailed out, neither does anybody else, but I do know that depositor funds aren’t at risk unless institutions are violating existing laws that have nothing to do with and were on the books well before Dodd-Frank.
Are you a secured creditor? Do you have super – priority over all other claims? If not either than you are at risk if your bank fails. You are at risk even if you are a secured debtor. Your claim of being manipulative and incorrect is at best misleading and you are construing again. The next go around “may” not include a public funds bailout. By the way, banks were violating laws in place.
Written by Citigroup lobbyists, this puts taxpayer funds behind future bank bailouts if banks make more bad bets on complex financial derivatives, such as packaged junk mortgage loans.
Critics have focused on how there must be a loser for every winner in a derivatives contract. The problem is that if banks lose, the government will bail them out just as it did in 2008.
Less attention has been paid to what happens if banks win. They will win largely in making bets against pension funds. Indeed, pension funds have not been treated well by Wall Street in recent years.
100% agree with this: “this puts taxpayer funds behind future bank bailouts if banks make more bad bets on complex financial derivatives, such as packaged junk mortgage loans.”
But this has nothing to do with the FDIC and the ONLY reason to invoke the FDIC is to manipulate your intended audience. The FDIC may eventually reach taxpayer funds, but it’s essentially a conduit collecting premiums from banks that are going concerns and paying them to depositors of failed banks.
And I know I said the next financial crisis is extremely unlikely to look like the last financial crisis, but AIG, Fannie, Freddie, New Century, Countrywide, Bear Stearns, Lehman Bros, The Reserve Fund, Goldman, etc. were in no way considered depository institutions and (without looking in greater detail) don’t think they had much [any] in the way of FDIC-insured deposits.