The Consortium Report

Botching the Bailout

The Bush administration is squandering hundreds of billions of dollars on incompetence, again.

In a House Domestic Policy Subcommittee hearing on Friday, Rep. Dennis Kucinich, D-Ohio, took Interim Assistant Treasury Secretary for Fianancial Stability Neel Kashkari (read: bailout chief) to task over the Treasury’s decision to spend every cent of the first $350 billion in bailout funds buying up preferred stock in Wall Street icons and other banks, while allowing troubled borrowers to fend for themselves.

Kashkari did his best to deflect the outrage, but his task would have been easier had the Treasury’s position been defensible. In a Senate Banking Committee hearing the day before, both consumer-protection advocates and banking executives endorsed an anti-foreclosure initiative devised by FDIC Chairman Sheila Bair that would create strong incentives for the private sector to cut borrowers some slack. Despite the plan’s broad appeal, both Paulson and Kashkari refused to devote any Treasury funds to the program, making the bailout chief sound like, well, a chump, when he insisted that Treasury is doing everything in its power to keep people in their homes.

The whole thing is beginning to look a little too much like Iraq. Bush administration officials steamroll both chambers of Congress with warnings of a dire emergency and are rewarded for their efforts with unprecedented authority and funding. Shortly afterwards, it becomes clear that the initiative has been squandered on meaningless giveaways to huge corporations without any corresponding social benefits. Naomi Klein of The Nation details the corruption parallels in an illuminating piece for Rolling Stone.

Laissez-faire lunacy

Most depressing is the bailout’s complete impotence with regard to providing broader economic support. Paulson and Kashkari have succeeded in keeping the U.S. financial sector afloat for the time being, but despite an enormous injection of taxpayer funds, banks are not lending money out into the broader economy. One part of the problem is the fact that President Bush & Co. took years to acknowledge that the country was in fact facing disaster (remember Paulson’s 2007 talking point that the subprime mortgage crisis was “contained”?). Now that the Treasury is finally taking action, it is doing so in an environment where there simply are not many good loans to be made. The other roadblock is Paulson’s refusal to require banks who accept public money to put it to use for the public good, as Joshua Holland explains for Alternet.

That desperate attempt to adhere to some kind of free-market principle—not forcing companies to do anything with billions of dollars allocated to partially nationalize them—was on display Friday at a speech Bush gave in New York. It sounds like a sick joke. After demanding $700 billion to save Wall Street, Bush is still warning against the evils of government intervention, claiming that free-market systems have a monopoly on “social justice and human dignity.”

“The greater threat to economic prosperity is not too little government involvement in the market,” he said. “It is too much government involvement in the market.”

Matthew Rothschild skewers this absurdity over at The Progressive.

“You can’t have social justice and human dignity with mass unemployment, rampant foreclosures, high rates of poverty and food insecurity, and a health care system that leaves almost 50 million people uninsured,” Rothschild writes.
Bush did make a few nods to sanity during his speech, arguing that markets need to be “more transparent,” but the claim was a little perplexing amid reports that the Federal Reserve is refusing to disclose who it is granting about $2 trillion in emergency loans.

“Where is the ridicule?” Dean Baker asks in a blog for the American Prospect, arguing that Paulson and Bernanke are looking more like “crony capitalists” every day.

Going green, going global

Bush’s speech was designed to frame the debate surrounding the meeting of leaders from the world’s 20 largest economies to address problems in the global financial architecture. Fortunately, President Bush does not have final authority to sign an agreement for the U.S., that task will be left to Barack Obama in April of next year. Over at oneworld.net, Gary Gardner and Michael Renner note the opportunity not just for a New Deal to refashion the U.S. economy, but to ink a Green Deal that does away with global dependence on fossil fuels and provides for a fairer distribution of wealth across the globe.

At the moment, U.S. economic policy remains dominated by how to handle the bailout. How Democrats seek to proceed with lashing Detroit automakers to that $700 billion debacle will say a great deal about the majority party’s governing intentions heading into the next Congress.

“It’s time to think big,” Andrew Leonard writes for Salon.com. “A Manhattan Project-scale plan to move the U.S. into an energy-sustainable future should start with a complete restructuring of the automotive industry,” according to Leonard.

The sagas of the financial and automobile industries have more in common than meets the eye. Both have lobbied heavily against new regulations for decades, and the lax oversight has left both in dire straits. While conservatives are quick to point to labor union contracts that make workforces at GM, Ford and Chrysler pricier than for foreign manufacturers, the fact is that the Big Three have drastically lost market share in recent years by failing to make cars people actually want to buy. In a video produced for American News Project, Garland McLaurin details how Detroit spent millions lobbying Congress against raising fuel economy standards while failing to develop cars that achieve high gas mileage.

Millions of people could be out of a job if the Big Three go under, but if Democrats hurl money at the companies with no strings attached, they’re no better than the current administration’s set of bailouteers.

This post features links to the best independent, progressive reporting about the economy. Visit economy.newsladder.net for a complete list of articles on the economy. And for the best progressive reporting on critical immigration and healthcare issues, check out Immigration.NewsLadder.net and Healthcare.NewsLadder.net.

This is a project of The Media Consortium, a network of 50 leading independent media outlets, and created by NewsLadder.

See more tagged with: Congress, dennis kucinich, global warming, government accountability, media consortium, mortgage crisis, Mother Jones, NewsLadder, renewable energy, the economy and Truthdig

Kicking the Wall Street Habit

by ZachCarter, The Media Consortium: Tue., Nov 11, 2008
Filed under: NewsLadder • Economy • Uncategorized

As Barack Obama readies himself to lead the United States through what appears to be a scathing recession, he faces a choice between feeding the political sphere’s Wall Street addiction and investing in economic progress. Two key former Clinton cabinet officials could determine which course he takes.

It was more than a little startling to hear a U.S. leader who sounded like (gasp!) an economist at the president-elect’s first press conference last week, after years of Bush speeches that treated economic policy as a realm defined exclusively by tax cuts and bailouts. But without policy specifics, we still do not know which voices of the many men and women flanking Obama at the event will impact the next administration’s economic platform. Mother Jones notes that several of the names included on the list of Obama’s economic advisers represent schools of thought that brought us directly to the current crisis. Two of the alleged experts, former Clinton Treasury Secretaries Robert Rubin and Lawrence Summers, signed off on major financial deregulatory moves in the latter half of the Clinton years. The two sided often with former Federal Reserve Chairman Alan Greenspan on policies that included a refusal to place government oversight on the credit derivatives market, which eventually ballooned into the $60 trillion quagmire that destroyed AIG in September (who got another $40 billion from taxpayers on Monday).

Summers has successfully sparked controversy on several occasions, and while some of the scandals haven’t received a fair hearing in the court of public opinion, others are of genuine concern. In 2005, Summers said he believed innate inferiorities were more responsible for the under-representation of women in science and engineering fields than either discrimination or socialization. Writing for the Women’s Media Center, Veronica Arreola demonstrates how advancing gender equality would improve the broader U.S. economy, and expresses well-founded doubts about Summers’ commitment to Obama’s campaign pledge to implement equal pay for equal work legislation.

But not all Clinton cabinet officials are of the same stripe, and hopes for serious economic progress under Obama may rest largely on what position he gives former Clinton Labor Secretary Robert Reich. Reich feuded frequently with Rubin during Clinton’s first term, urging that more energy be spent addressing inequality than balancing the budget. Sadly, Reich lost that battle and left the administration in 1997, but he remains one of the most impressive economic voices of the day. John Nichols writes in The Nation that it was “reassuring” to see Reich and organized labor ally David Bonior on stage with the president-elect last week.

Reich himself penned a piece that ran in Talking Points Memo this weekend, placing emphasis on one side of the economic equation that has all but disappeared from public discourse amid the Wall Street meltdown: demand. Stretched to their limits by decades of deepening inequality, consumers are cutting back on everything except basic necessities amid a mountain of high-interest debt and the increasing likelihood of losing their jobs. With consumers reeling, Reich says the government needs to step in as the spender of last resort.

There are still people who oppose increasing government spending in a recession. They are called Republicans, because one has to turn to backward political ideology to oppose a measure that has been understood as a basic economic fact for more than 70 years. There simply are no serious economists who disagree. Reich notes that even former Reagan advisor Martin Feldstein now favors adopting government infrastructure projects to stimulate the economy.

But a glance at the Friday edition of The Washington Post reveals that the anti-spending mythology remains popular. House Republican Leader John Boehner charged that “Democrats are proposing hundreds of billions of dollars in new government spending masquerading as ‘economic stimulus.’”

There is no masquerading involved. Reich is quite explicit that it will take hundreds of billions of government dollars to fend off a “Mini Depression.” By singling out socially important projects– a health care overhaul, green energy investments and and new child care programs– that spending can help make the economy even stronger once it rebounds. But consumers simply are not capable of shouldering the burden alone.

Dean Baker hammers the point home for The American Prospect. The housing bubble’s aftermath has hampered the supply of credit, Baker argues, but the more severe economic problem is the massive loss of housing wealth for consumers, who now have less money to spend and invest. The U.S. has encouraged homeownership as means of forced saving for decades. Those savings have now evaporated.

Housing woes are far from over. Mary Kane lays out the mortgage landscape for a piece in the Washington Independent, noting that while the economy has paid a price for the subprime debacle, the Alt-A nightmare is just beginning. Alt-A loans are exotic mortgages that do not require borrowers to document their income or employment information. Many Alt-A loans are adjustable-rate mortgages that allow borrowers to pay nothing but the interest on the loan for a few years before the monthly payments “reset” up to 63% higher, Kane writes. Banks pushed the most reckless of these “option-ARM” loans in the years leading right up to the housing market’s implosion, 2006 and 2007, and the lion’s share of unaffordable rate resets are scheduled for 2009. It’s a dire situation—just check out the stock price of option-ARM lenders in hard-hit housing markets like California.

Obama’s fiscal stimulus package should provide a window into his governing philosophy. After eight years of squandered opportunities, let’s hope he gets us moving in the right direction.

This is a project of The Media Consortium, a network of 50 leading independent media outlets, and created by NewsLadder.

See more tagged with: 2008 presidential election, Barack Obama, Bill Clinton, department of labor, gender gap, health care, media consortium, Mother Jones, NewsLadder, president bush, renewable energy, The American Prospect, the economy and The Nation

Electing the New Economy

by ZachCarter, The Media Consortium: Tue., Nov 4, 2008
Filed under: NewsLadder • Economy • Uncategorized

Welcome to the Media Consortium’s Economy MediaWire project! Check this space every Tuesday for a discussion of the best economic coverage available on the information superhighway.

This Tuesday, of course, is no ordinary Tuesday, but the day of the most important U.S. election in generations. Poll after poll has shown the economy to be the top concern for voters this year, as an epic financial crisis and the bursting of the housing bubble have ensured that the next president will have his hands full come January.

But while there is plenty of bad news to go around of late, Ezra Klein notes for the American Prospect that economic downturns can be extraordinary opportunities to overhaul national infrastructure, as the government steps in to fund projects that support what the private sector can no longer afford.

“Right now, there’s something damn close to political consensus for a transformational investment package,” Klein writes, arguing that, “the next president should be thinking hard indeed about how to make the most of the opportunity.”

During Congressional hearings over the last two weeks, two influential economists have urged the government to embark on major infrastructure projects as a means to stimulate the economy. Both Nobel Prize-winner Joseph Stiglitz and NYU Professor Nouriel Roubini, who accurately predicted nearly every development in the recent Wall Street implosion, argued that the best way to ease economic malaise is to pour money into green energy projects. Preventing a recession appears out of the question, but why not set our sights on something “transformational,” in Klein’s words, that could fend off ecological destruction even more comprehensive than the recent financial hemorrhaging?

David Morris emphasizes the potential for environmentally friendly infrastructure development for Alternet, suggesting that a President Barack Obama may “institute a massive public works program focusing on infrastructure that lends itself to a green orientation.”

Morris notes several frightening parallels between today’s green energy movement and that of the early 1980s, when environmentalist momentum from the Carter administration collapsed under the weight of the most wrenching recession since the Great Depression. We have witnessed a similar drop-off in green interest this fall, according to Morris, as the financial crisis has deepened and gas prices have declined dramatically. But renewable energy industries are a much stronger political force today than they were in the early Reagan years, and Morris believes the sheer efficiency of green projects will give the next president more bang for his outlay bucks than other programs. Environmentally conscious investments can sharply reduce operating costs, while creating armies of new jobs.

Writing for The Nation, James S. Henry and Jim Manzi claim that it is time not only for the government to boost research and development, but to “nurture a national culture that reminds young people of their country’s innovation heritage and encourages them to become engineers, designers and scientists, rather than just lawyers, accountants and bankers.”

Beyond infrastructure, The Progressive’s Matthew Rothschild discusses research from Mark Zandi of Moody’sEconomy.com, which reveals that many traditional lefty priorities are also among the most efficient methods for stimulating economic growth. Expanding food stamps programs and unemployment benefits puts money in the hands of people who will actually spend it, instead of making long-term investments that keep the funds out of the general economy, Rothschild writes. Priorities touted by conservatives this election cycle, like slashing the capital gains tax and lowering income tax rates for the wealthiest corporations, are much less effective.

Speaking of throwing money at big corporations, the Treasury Department is currently funneling hundreds of billions of dollars to banks in an effort to boost lending so other firms can borrow money buy supplies, pay workers and fund research. It’s not a terrible concept, except, as Robert Kuttner notes back at the Prospect, Treasury Secretary Henry Paulson isn’t actually requiring banks to lend the money out, and the banks would rather use the cash to finance acquisitions and pay dividends.

This is, of course, an outrage, but it is far from inevitable. Kuttner cites Franklin Delano Roosevelt’s “yardstick competition” programs, where a public entity would compete with the private sector and provide products oriented toward the general social good, creating incentives for industries to offer better products.

Under Roosevelt, the government invented the long-term fixed-rate mortgage, which was so effective that it quickly came to dominate the private marketplace. Taxpayers would get better results from their present bailout burden if the government would actually takeover one institution outright and have it make new loans without wasting money on dividends, Kuttner argues. Other banks would have to boost their own lending activities in order to keep from losing market share to the government, and billions of taxpayer dollars wouldn’t be squandered.

Jim Hightower has an excellent breakdown of the five greatest villains of the current financial crisis here.

With President George W. Bush set to host an economic summit with international leaders on the financial meltdown this month, OneWorld.net carries an excellent story by Jim Lobe on a call from almost 600 non-governmental organizations for fundamental economic reforms aimed at protecting the most vulnerable members of the global economy. Bush is widely expected to oppose reforms to the International Monetary Fund and the World Bank, which many NGOs claim have imposed policies that have benefited Western companies at the expense of the international poor.

This is a project of The Media Consortium, a network of 50 leading independent media outlets, and created by NewsLadder.

See more tagged with: 2008 presidential election, Barack Obama, Ezra Klein, gasoline prices, global warming, media consortium, NewsLadder, the economy and The Nation

Bullets Can’t Stop Beutler From Cracking Wise

by addiestan, The Media Consortium: Wed., Jul 2, 2008
Filed under: Media Consortium: journalism project • Blogroll

Funny thing about being a journalist: your job is to write about people and mayhem and trauma, but let any of those touch you directly, and it becomes a different game. With that caveat, allow me to recount my brief visit today with my colleague, Brian Beutler, whose sign-off is a familiar one on this site, and has come to define the reporting of The Media Consortium’s syndicated reporting project.

I was just about to leave the house this morning to meet with Brian when I got word through a mutual colleague of ours that he had been shot in Washington, D.C., in an aborted mugging.

I found him at Washington Hospital Center, where his good friend, Matt Franklin, sat vigil through the night as Brian underwent major surgery. By the time I got there, Brian was in recovery, and Matt and I were shown to his bedside.

Perhaps foremost among the topics about which Brian writes in his coverage of national security and civil liberties issues is FISA, the Foreign Intelligence Surveillance Act, the Bush administration’s circumvention of the original 1978 legislation, and subsequent legislative attempts to widen the powers of the executive branch to spy on U.S. citizens. The entity of choice for such spying by the Bush administration has been the National Security Agency.

This morning, Brian and I had planned to go over the story he had just delivered about efforts by Sen. Russell Feingold to stop the latest version of FISA legislation from getting through the Senate. As his editor, I had promised our members that we would deliver the piece today.

When I stepped up to Brian’s hospital bed, he smiled through the clear, plastic mask covering his mouth, and said in a quiet, hoarse voice, “Sorry. I left you high and dry.”

What could I do but laugh?

After some housekeeping conversation about his level of comfort (not great, as you might imagine), he piped up, “I have a theory about the shooting.” He smiled, impishly.

“Oh, yeah?” I said.

“It was the NSA,” he said, with a deadpan look.

(Actually, it was two teenage boys who thought they wanted Brian’s cell phone.)

Matt laughed.

The good word is that Brian is expected to make a full recovery. Please be patient as we await his return to his beat. Nobody covers FISA and the rest of his beat quite like Brian Beutler. I know that his passion for his work will bring him back to the Hill in good time.

–Adele M. Stan

See more tagged with: Brian Beutler, media consortium and syndicated reporting project

Botching the Bailout

Kicking the Wall Street Habit

Electing the New Economy

Bullets Can’t Stop Beutler From Cracking Wise

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