Posts tagged with 'The Real News'
Weekly Mulch: Will Copenhagen be Enough?
Filed under: 
By Raquel Brown, Media Consortium Blogger
Ed. Note: In honor of the Cop15 summit, we will be running the Mulch three times a week from Dec 7-18. Stay tuned!
The world series of climate change is just around the corner. Next week, global leaders will convene in Copenhagen to discuss how the world will address climate change. The United States and China, who together exhaust 40% of the world’s emissions, have already committed to reducing their carbon output. But will it be enough? In an interview with Paul Jay of The Real News, British environmental writer George Monbiot, argues that the cuts major leaders are proposing don’t match up with what the science demands. (Video below) (more…)
Weekly Mulch: Countdown to Copenhagen
By Raquel Brown, Media Consortium Blogger
On Wednesday, President Obama pledged to cut U.S. carbon emissions “in the range of” 17% below 2005 levels by 2020. Obama also confirmed that he will attend the international climate conference in Copenhagen next month, as Aaron Wiener notes for the Washington Independent. But here’s the catch: It’s a one-day deal. Obama is only planning to stop by Copenhagen on Dec. 9 before flying to Oslo to accept his Nobel Peace Prize. The climate talks, on the other hand, span Dec. 7 to Dec. 18.
Still, Steve Benen of the Washington Monthly writes that “Obama’s in-person lobbying efforts will give the talks a boost, and signal to the world that the United States intends to lead.” (more…)
Weekly Mulch: No Treaty in Copenhagen?
By Raquel Brown, Media Consortium Blogger
Last weekend in Singapore, President Barack Obama acknowledged that a comprehensive international climate deal will not be reached during the climate change summit in Copenhagen. While many might view this as a letdown, lowering expectations might actually be a good thing, as Matthew Yglesias notes for the American Prospect. According to Yglesias, the conference can now be framed as a relative success whatever happens, and that will keep the momentum for climate action going after Copenhagen. (more…)
Weekly Audit: Saying ‘No’ to Corporate America
By Zach Carter, Media Consortium Blogger
By proposing financial reforms that won’t curb Wall Street excess, U.S. policymakers have offered an unacceptably weak response to our enormous financial crisis. If voters don’t demand that their elected representatives help workers and consumers instead of simply boosting corporate profits, the economic downturn will last for several more years and leave the economy vulnerable to another bank-induced meltdown. (more…)
Weekly Pulse: Problems for the Public Option
By Lindsay Beyerstein, Media Consortium Blogger
The House released a final version of the health reform bill. It has a public option all right, but not the robust version progressives were hoping for. The public plan would only cover 2% of Americans and premiums will cost more than anticipated.
Meanwhile, Sen. Joe Lieberman (I-CT) continued to threaten to join a Republican filibuster of a health care bill with a public option. A lot of people still think he’s bluffing. Realistically, the public option probably faces more serious threats from inside the Democratic caucus. It’s been whittled down at an alarming rate. (more…)
Weekly Audit: Power to the People’s Republic
by Sara Luckow, TMC MediaWire Blogger
In the past few years, the economic relationship between the United States and China has changed dramatically. As Tim Fernholz writes in the American Prospect: “Chastened U.S. officials who once lectured their counterparts in [China] on financial liberalization are now humbled in front of their largest creditor, reduced to offering promises of fiscal responsibility.” It’s a strange state of affairs. Fernholz rightly argues that:
“The common interest of the peoples, rather than the economic elite, ought to be the driving motivation behind the two countries’ interactions. There is no doubt that economic openness has brought wealth to both countries, and the Obama administration is happy to laud the Chinese for bringing millions out of poverty. But in a relationship between “capitalism with American characteristics” and “socialism with Chinese characteristics,” sometimes the people—whether they be workers losing jobs in the United States or the millions of Chinese living without political freedom or prosperity—have interests other than the elites. Today, we’re in an economic crisis, and pragmatism overrides all else. But as recovery continues, the U.S. will require more thought on the strategic track, and perhaps in a few years our discussions with China, as they should be with all our friends, will be more frank.”
But our current economic relationship with China pre-dates President Obama’s “talk first” style of diplomacy. As Robert Scheer of The Nation writes: “Don’t blame any of this on peacenik liberals. The new conciliatory—nay, deferential—tone toward China precedes the Obama administration, having begun in bilateral talks during the last years of the Bush administration as the U.S. economy began its ignominious downfall. It was George W. Bush’s treasury secretary, Henry Paulson, who set the course when the former Goldman Sachs chairman realized how dependent were his Wall Street buddies on Chinese goodwill.”
Strange relations with China aside, things aren’t going so well at home. Rick Wolff, an economist from the New School, says the stimulus package has big problems in a discussion with The Real News. Wolff also notes that we shouldn’t take Wall Street chatter about an economic upswing too seriously. “I think the first thing to remember is the people who are celebrating where we are now are the same people who could not imagine, did not imagine, did not foresee the problem we had last year,” Wolff says.
But what’s going on with our favorite bailout recipients? Talking Points Memo takes on the case of former Federal Pension Guarantor Charles Millard, who exploited his personal ties with employees at BlackRock Capital and Goldman Sachs while choosing firms to manage the Pension Benefit Guaranty Corporation. At this point, both firms “may have run afoul of federal contracting rules in how they courted Millard.”
Goldman Sachs and BlackRock are also on the lookout for the next big economic bubble. Salon reveals that both firms are diversifying their portfolios to include agriculture, in addition to government contracts. “Food is becoming the new oil,” especially since the world’s population is expected to crest nine billion by 2050. And a lot of land is necessary to grow enough food for nine billion people. Phillipe Heilberg, founder of American investment firm Jarch Capital, is hedging his bets on farmland in distressed countries. “Instead of buying stocks, the former banker is now speculating on the political future of South Sudan, which he insists will be an independent country in 10 years, at which point land will be far more expensive than it is today.”
It’s abundantly clear that we can’t rely on the economic elite to represent the people’s interests. Tomorrow’s economic structure must be drastically different if the United States is going to thrive. Put simply, we’re going to have to seriously reevaluate our economic priorities and decide who calls the shots. Here’s hoping that everyday people have a say.
This post features links to the best independent, progressive reporting about the economy and is free to reprint. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.
Weekly Audit: Why the Rich Can’t Afford to Get Richer
by Zach Carter, TMC MediaWire Blogger
If we want our economy to be strong and stable, we have to start thinking about it as a product of community—not a get rich quick scheme. As unemployment escalates and the housing crisis deepens, ordinary people are feeling the economic pinch. In the meantime, corporate executives and shareholders are coasting above the storm. If we want to tear down the useless casino that is Wall Street, our wealthiest citizens will have to pitch in when times get tough.
Salon carries an excellent three-part email exchange between Simon Johnson, former Chief Economist for the International Monetary Fund, and John Talbott, a reformed Goldman Sachs investment banker. Taken together, the emails constitute a thorough, in-depth analysis of the causes of the economic crisis, needed reforms and political hurdles to making policy changes. Johnson’s basic argument is as frightening as it is accurate: Bankers line our elected representatives’ pocketbooks, convincing them to re-write regulations that made big bonuses for bankers and a catastrophe for everyone else.
Some of Talbott’s most interesting observations concern Wall Street’s epic transformaiton. Over the past three decades, our financial sector has morphed from a kind of economic rebar to a wrecking ball. Once upon a time, the financial industry provided loans to businesses and entrepreneurs and funded constructive enterprises. Today, almost all of this activity has been replaced by hedge fund speculation. As a result of excessive deregulation, a wild array of complex transactions called derivatives have developed on Wall Street. Many derivatives, including the credit default swaps that brought down AIG, are intended to provide insurance against losses.
But this readily available “insurance” has removed any sense of risk from the minds of U.S. financiers. All kinds of casino experiments have come in play over the last several years because traders could insure any bet, however crazy, against losses. The whole point of a financial sector is to make sure that good ideas get funding. Instead, we’ve guaranteed that risky ideas gets funding, even when the idea is socially destructive and financially unsound, like, say, subprime lending.
As David Sirota emphasizes in Truthdig, this financial recklessness has only deepened existing economic inequality. The wealthiest 1% of U.S. citizens have the greatest share of the nation’s income since 1929, the onset year of the Great Depression. That’s not just a coincidence. When economic inequality is out of control, the economy itself becomes unstable. If everybody is broke, no one has enough to buy the stuff that makes the economy go-round.
There’s a paradox buried in all the instability. Even though outrageous inequality is bad for business, it’s not necessarily bad for businessmen (Yes, businessmen. Women are still largely excluded from the top tier of corporate decision-making). When the whole economy pays the price for executive excess, the executives themselves don’t actually take the hit. Even when elites lose their jobs, they stay rich. When people who depend on their paychecks for survival get the axe, it’s a life-altering, often devastating, experience.
There’s something we can do about this, Sirota notes. We need to treat the rich like members of a community, rather than an isolated special interest whose demands must be balanced against other special interests. When a community needs to pay for something, the people who can afford to pay pony up. We have real problems right now. There’s nothing wrong with taxing the wealthy to fund them.
But why worry? The bailout is working, and banks on the mend, right? Maybe not so much. The Real News explains how bank profits don’t always equal economic progress. Wells Fargo just booked a massive second-quarter profit, but the numbers are largely divorced from any economically useful activity.
Foreclosures are soaring, and bank lending is way down. Even though the banks are booking big profits, they aren’t putting much money into the economy. How is this possible? Well, banking basically involves two steps. First, the bank borrows money at a low interest rate. Then, it makes a loan at a higher interest rate. The difference is the profit. Right now financing costs for banks are next to nothing, thanks to a host of government programs. Even if you don’t make many loans, it’s hard to lose money when you can borrow it for free.
As Steve Benen emphasizes for The Washington Monthly, using the stock market as as measure of economic vitality has proven pretty silly over the past few years. Back in February, just about every conservative pundit was screaming that the decline in the Dow Jones Industrial Average was purely a result of President Barack Obama’s economic policies.
Obama’s economic record is not perfect. He has continued the Bush administration’s bank bailouts, and his stimulus package wasn’t nearly big enough to fight this recession. But some of Obama’s reform ideas have been very good, and he actually got a stimulus package through a very reluctant Congress. Now that the Dow is back on the ascent, are any of those conservative talking heads cheering Obama’s proposal to create a new financial regulator focused on protecting consumers? Well, no. As it turns out, the stock market is pretty fickle. Its daily and weekly movements can rarely be attributed to individual economic policies. The things that make stocks advance don’t necessarily create new jobs.
That new consumer regulator is by far the best part of Obama’s financial regulatory overhaul. Harvard Professor and bailout watchdog Elizabeth Warren explains why in this video, available at AlterNet. They’ve also published a piece I wrote on the bank lobby’s insane assault on the plan.
But even if the entire crazy bailout actually does work, the solution won’t last without other major economic reforms. In The Progressive, Naomi Klein argues that the surreal boom-and-bust cycle of U.S. capitalism is an awful lot like a Sarah Palin fairy tale, a world in which the most outrageous structural imbalances never result in problems for ordinary people because a new dose of market magic swoops in at the last minute to save the day.
“What Palin was saying is what is built into the very DNA of capitalism: the idea that the world has no limits. She was saying that there is no such thing as consequences, or real-world deficits. Because there will always be another frontier, another Alaska, another bubble. Just move on and discover it. Tomorrow will never come,” Klein writes.
If we want to get away from this predatory cycle, we have to give ordinary citizens more influence over the legislative process. As Talbott noted in Salon, that means demanding our due.
This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.
Weekly Audit: Radical Inequality Fueled the Wall Street Meltdown
Now that Treasury Secretary Timothy Geithner isn’t going to impose pay restrictions on bailed out Wall Street executives, it’s critical to remember that severe economic inequality was a major factor in the financial meltdown. Our tax code funnels money into the hands of our wealthiest citizens, which means that our financial system protects the interests of the affluent—not the the average citizen. The broad divergence between our core democratic values and the existing U.S. economic structure must become part of the public debate over financial reform.
As Les Leopold notes in a roundtable discussion with GritTV’s Laura Flanders, much of the Wall Street meltdown can be traced to a steady redistribution of wealth to the wealthy dating back to the Reagan years. Poor people, after all, do not have money to invest in the Wall Street speculation machine. By 2007, the financial world accounted for over 40% of U.S. corporate profits, an astounding percentage for a business intended to facilitate the operation of other industries. According to Leopold, we need to find constructive ways to shrink the financial sector, like taxing Wall Street transactions to move money into the real economy or imposing meaningful pay caps on financial jobs.
Pay for citizens who live outside the executive class has been steadily falling for decades. As Chuck Collins and Sam Pizzigati note for AlterNet, weekly wages for average Americans are now below 1970s levels after adjusting for inflation, while CEO payouts have exploded. So far, President Barack Obama has been hesitant to fight economic inequality at either end of the spectrum. Remember the promises he made to curb extravagant CEO pay on Wall Street back when the AIG bonuses were generating outrage back in February? Treasury Secretary Timothy Geithner has already made them irrelevant, eliminating a $500,000/year salary cap.
While we’ve heard quite a bit about how Wall Street excess wreaked havoc for homeowners, relatively little attention has been paid to the plight of renters, who often face personal catastrophe when their landlord is foreclosed on. Under a new law passed by Congress, when a bank or new owner takes control over a foreclosed property, they have to give renters living in the home at least 90 days notice before evicting them. But the law does nothing to address other injustices renters face. If your landlord is foreclosed on, for instance, you can forget about getting your security deposit back, even if the house is in top condition.
Banks also are not required to hire property managers to maintain homes they take over, which means they often let houses deteriorate despite objections from tenants. Writing for The Colorado Independent, Martha White explains that these problems are easy to correct, if Congress actually wanted to: Require landlords to put security deposits in a special account that cannot be raided by creditors in bankruptcy and force banks to hire managers to maintain the properties they foreclose on. The latter policy would also discourage banks from foreclosing in the first place by making ownership of the property more expensive for the bank.
Obama recognizes the need for change, which is why he’s proposed a major overhaul of the government’s Wall Street oversight. But in many ways, his plan identifies the wrong problems and offers the wrong solutions. The Real News features a great video spot with commentary by University of Massachusetts at Amherst Economist Robert Pollin. One of the key reforms involves granting the Federal Reserve broad powers to oversee systemic risk in the economy, but the Fed already has similar authority.
“The problem is, the Fed has already had an enormous amount of regulatory power, they just don’t exercise that power,” Pollin says.
Instead of granting the Fed more power, we should be finding ways to hold its leaders accountable. By subjecting top officials at the Fed to democratic elections, we could help ensure that the top regulatory body in the U.S. answers to the people it is supposed to be protecting.
Other creative new approaches to combating the economic crisis are featured in the most recent issue of Yes!, which is devoted entirely to economic reforms. From tips on investing locally to overhauling our broken monetary system to empowering workers, the issue emphasizes solutions that rely on democratic structures, rather than the corporate status quo (full disclosure: I’ve got an article in there on community banks).
It’s time to put some political firepower behind those ideas. Ordinary people simply have no serious voice in the policy debate surrounding Wall Street. In The Nation, Christopher Hayes describes the banking lobby’s total domination over financial reform proposals.
“On the other major legislative battles—healthcare, climate change, the Employee Free Choice Act—there is an organized, mobilized permanent infrastructure to push lawmakers in a progressive direction,” Hayes writes. “They may be underdogs, but at least it’s a fight.”
Changing the too-big-to-fail financial sector must become a priority. If we defer to the banking lobby or advisers like Larry Summers, who helped create the crisis by backing wildly deregulatory laws during the Clinton years, we can guess what the end result will look like. If we want our economy to answer to us, we have to do something about it. Income inequality and unaccountable regulators were a major part of the financial collapse. Addressing those problems has to be part of the economic solution.
This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.
Weekly Audit: Workers will build the recovery, not Wall Street
With new bailout plans for Wall Street being unveiled almost every week, it’s easy to forget that nearly all of the work that fuels our economy takes place outside of Manhattan. While reviving the financial sector is an important part of recovery, any lasting economic solution must also empower American workers and protect them from corporate abuses.
Workers’ rights are a core issue for our democracy, as progressive icon Noam Chomsky argues in an interview with Paul Jay of The Real News. The discussion covers the current economic crisis and its implications for the democratization of the U.S. economy. It’s a fascinating exchange. In the video below, Chomsky advocates for a much broader palette of reform than a simple clean-up the financial sector.
Chomsky notes that while the recent bank bailouts have brought a great deal of attention to the disconnect between public investment and private profit, it has become routine for the taxpaying public to foot the bill for important research that eventually creates big corporate profits. To ensure that we all reap the benefits of our investments, it is essential to make institutions accountable to their communities, rather than exclusively dedicated to maximizing shareholder returns.
The first step in democratizing the U.S. economy, according to Chomsky, is promoting unionization by enacting the Employee Free Choice Act, which makes it easier for workers to organize.
“The Employee Free Choice Act is always misrepresented,” Chomsky says. “It’s described as an effort to avoid secret elections. It’s not that. It’s an effort to allow workers to decide whether there should be secret elections, instead of leaving the decisions entirely in the hands of employers.”
EFCA would give workers more control over their circumstances, leading to improved wages and living standards for laborers. In a column for The American Prospect, Terence Samuel points out that even if Treasury Secretary Timothy Geithner’s plan to bailout Wall Street succeeds in stabilizing the banking sector, banks can do little to bring about recovery if U.S. citizens are all broke. If we want to get out of the bubble-and-bust cycle, we must establish a middle class that has money to spend. Fundamentally, that means raising wages.
Robert Eshelman puts the plight of today’s workers into focus in a devastating piece for Salon. Even where clear, straightforward laws to protect laborers from predatory employers exist, major corporations have been able to use the fear of being fired to push employees into “voluntarily” working under illegal conditions (Wal-Mart just agreed to pay out $640 million to settle charges that it intimidated its own employees into skipping mandatory breaks and accepting pay rates below the minimum wage).
“If corporations were able to exert such coercive power when the unemployment rate was around 5 percent, what can they do in a job market in which 14.8 percent of the population can’t find adequate work?” Eshelman asks.
Under the Bush administration, the U.S. Department of Labor systematically ignored its duty to enforce labor laws. Writing for Colorlines, Michelle Chen highlights a report from the Government Accountability Office that takes the Department to task for failing to even return phone calls from workers who complained about employer abuses.
Millions of jobs are hanging in the balance as President Barack Obama formulates his rescue plan for the U.S. auto industry. But while the administration has insisted that factory workers at GM and Chrysler have to accept wage cuts, they’ve almost bent over backwards to funnel bonus money to executives at failed insurance giant AIG. General Motors’ CEO Rick Wagoner has stepped down at the Obama administration’s request, and while it’s hard to feel sorry for an executive who lobbied aggressively against the environment and ran his company into the ground, his ousting reflects Wall Street’s privileged status in Washington. As Josh Marshall highlights in Talking Points Memo, it is astonishing that executives at Bank of America and Citigroup, who have put taxpayers on the hook for far greater sums of bailout money than GM and Chrysler, have not been subjected to the same treatment as Wagoner.
We’ve all seen the grim statistics indicating how severe the current economic crisis really is, but the proliferation of roving tent, shack and lean-to communities along U.S. railways underscores the true costs of the recession more grimly than any consumer spending metric or gross domestic product projection. All over the United States, people who cannot afford even rental housing are living in makeshift structures without access to basic amenities. It’s much like the rise of Hoovervilles in the late 1920s and 1930s, where out-of-work laborers took up residence anywhere they could.
While these squatter communities are growing as the crisis deepens, the worst part of the whole phenomenon is that they were common before the current downturn, as Scott Bransford notes for High Country News.
Whatever happens on Wall Street, fixing the economy will mean making sure ordinary people have access to basic amenities, and guaranteeing that workers have the power to prevent abuses from corporate America’s executive class.
This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.
Weekly Audit: Budget Good, Bailout Bad
President Barack Obama rolled out his highly anticipated federal budget proposal on Thursday, and while the plan represents a dramatic departure from the priorities of the Bush administration, its ultimate impact may be crippled by a counterproductive bank bailout.
First, the good news: The budget is awesome.
“Obama would raise taxes on the wealthy to pay for healthcare for the uninsured; cap pollution emissions; put billions more dollars into infrastructure and new technology; … invest in new education programs; and roll back the U.S. troop presence in Iraq,” Mike Madden writes for Salon. “There were proposals to save money by modernizing the healthcare system … and by eliminating federal farm subsidies to the biggest and wealthiest recipients.”
While it’s refreshing to see a set of priorities that put economic stability ahead of entrenched corporate interests, Obama’s call to reduce the federal deficit comes as a bit of a surprise. He has inherited a massive recession and defecit. Over at The American Prospect, Ezra Klein highlights an analysis of spending by Media Consortium alum Brian Beutler. Both bloggers agree that government debt is not a major problem, provided that borrowed funds are used to invest in something meaningful.
“Debt can be good if you expect that spending will offer a greater return than saving,” Klein writes. “And right now, because Treasury bonds are the last safe investment, it’s the cheapest it’s been for the government to borrow money in 50 years.”
Republicans are screaming about the enormous deficit that Obama’s budget requires, but most of that debt was passed down by President George W. Bush. Obama has actually taken cues from Congressional Republicans to find funding for financial shortfalls. Steve Aquino of Mother Jones notes that Obama’s move to raise premiums on Medicare received by wealthy Americans is a longstanding Republican priority. Additionally, Obama’s move to cap the itemized deduction tax subsidy at 28 cents on the dollar would re-establish Reagan-era levels.
But the line items missing from Obama’s budget are just as noteworthy. The Washington Monthly’s Steve Benen dissects the Republican angst over Obama’s refusal to push for cuts in Social Security benefits. During his speech before Congress last week, Obama breezed right by the alleged Social Security crisis without asking elderly Americans, who have already seen their 401k plans cut in half over the past year, to take further cuts in their retirement income.
That’s a good thing, because as Matthew Rothschild explains for The Progressive, Social Security’s looming implosion is a Republican myth. “Social Security isn’t going bankrupt,” Rothschild writes. “It’s fully funded until 2041, and could remain so for many more years simply by making the wealthiest Americans kick in their share.”
The income limit for Social Security taxes is $105,000 a year, so billionaires pay the same Social Security as those making $105,000 annually. If Social Security ever does run into trouble, it can be easily fixed by charging rich people more for the program.
On to the bad news.
The government bailed out Citigroup and its shareholders for the third time on Friday, converting $25 billion in preferred stock into ordinary, run-of-the-mill, we-own-this-company common stock. But while Citi’s stock market value was hovering around $13 billion at the time, taxpayers only received a 36% stake in return for their largesse.
The Real News has a great interview with economist William Engdahl about the banking lobby’s ability to exercise control over public policy, despite the industry’s self-inflicted collapse. Engdahl argues persuasively that it is time for the government to stop propping up bank shareholders under the hope that “market prices” will magically appear for worthless assets. “Write those assets, those toxic assets, down to zero,” Engdahl says. “Only the state can do that at this point. You don’t find the market price for these things.”
The government has been playing for time for the last 18 months in hopes that the financial crisis could iron itself out. Rather than reward investors who put money into bad companies, Engdahl says Obama needs to wipe out the shareholders of failed banks and kick out the management teams that steered their companies into catastrophe.
Playing for time was the central economic strategy of Henry Paulson’s tenure as Treasury Secretary, but as Lagan Sebert and David Murdoch make clear in the below video for The American News Project, Paulson also managed to slip in major giveaways to big U.S. banks in the process.
The Troubled Asset Relief Program (TARP) allowed the government to inject capital into banks, but Paulson charged them a much lower than market rate of return on the investment. As a result, taxpayers missed out on about $78 billion that they could have expected to receive in interest payments had their money been managed by, say, Warren Buffett instead of Paulson. To put that number in perspective: President Obama’s entire plan to avert foreclosures will cost taxpayers $75 billion.
The U.S. banking system is completely broken and will need an enormous taxpayer commitment to return to any semblance of health. But there are good ways and bad ways to go about doing that. A bailout should be accompanied by control over how a bank is managed.
The banking industry is working very hard to portray TARP as something other than a bailout. When Northern Trust, for example, throws decadent parties after receiving taxpayer funds, its executives justified those lavish expenditures by claiming that their company was not “bailed out,” but merely received capital which it is paying for. The pricing of TARP was so favorable to banks and so disadvantageous for taxpayers that this claim cannot be taken seriously. Northern Trust got a bailout, and even if they pay back their TARP funds ahead of time, the interest they are paying is so far below market rates that the company will still be coming out ahead.
Obama’s budget shows that he knows what it takes to turn the economy around, but his financial policy indicates that he lacks the political will to shake off the banking lobby and do what is necessary to save ordinary Americans from disaster.
This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.