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No Comment (Harper’s Magazine)

y Scott Horton

January 7, 12:29 PM

Wall Street Sponsorship for the 112th Congress

The 112th Congress is the first since the Supreme Court decision in Citizens United. How has that decision—which effectively opened the gates for corporate spending in election campaigns—shaped Congress? MSNBC’s Michael Isikoff and the Center for Public Integrity’s Peter Stone make an important early contribution to this question in a piece they published on Wednesday.

A small network of hedge fund executives pumped at least $10 million into Republican campaign committees and allied groups before November’s elections, helping bankroll GOP victories that this week will change the balance of power in Washington, according to a review of campaign records and interviews with industry insiders by the Center for Public Integrity and NBC News. Bitterly opposed to President Barack Obama’s economic and regulatory policies — including proposals to increase taxes on some of their profits — top Wall Street hedge fund moguls were unusually energized during last year’s election. They held multiple fundraisers and coordinated strategy to direct what appear to be unprecedented sums into the coffers of GOP and allied political committees, according to industry and GOP fundraising sources. Many substantial donations from the hedge fund executives escaped public notice either because they were made late in the campaign (and therefore weren’t reported until after the election) or were funneled through third-party groups, obscure “joint fundraising committees” and newly created political nonprofits that are not required to disclose donors.

Proponents of Citizens United argued that campaign contribution regulations could force disclosure of funding sources. In other words, an astute voter could know who had paid for that barrage of campaign ads that shaped the debate in the last weeks of the campaign. As Isikoff and Stone demonstrate, however, there are a number of ways that skillful funders can avoid being discovered before an election. One is using aggregation mechanisms like Concerned Taxpayers of America or the Republican Governors Association. Another is timing payments so that they come in the vital last days of the campaign. As the report shows, the source of the money probably cannot be kept secret indefinitely, but it can be kept secret from the voter as he enters the voting booth.

The Wall Street hedge fund moguls studied by Isikoff and Stone aren’t a Republican base constituency by any stretch of the imagination. Some of them have a record of giving to Democrats. But their giving is clearly carefully linked to their immediate economic interests. While the amount of money given wasn’t enormous, it was dispensed with tactical acumen.

A prime example is Rep. Scott Garrett, a little known Republican from northern New Jersey who this week is slated to become the new chairman of the House Financial Services subcommittee on capital markets, a key panel that has direct oversight of the industry. A staunch foe of the regulation of Wall Street, Garrett has threatened to cut funding for the Securities and Exchange Commission and roll back some provisions of Dodd-Frank.

There’s no doubt that the Dodd-Frank Act is a particular target of these givers. The question is now how their donations influence votes on financial industry reform issues generally, and the effort, already announced, to repeal Dodd-Frank in particular.

via harpers.org

The Bill Daley Problem from Simon Johnsn

Top bankers, including Bill Daley, have pulled off a complete snow job – including since the crisis broke in fall 2008.  They have put forward their special interests while claiming to represent the general interest.  Business and other groups, of course, do this all the time.  But the difference here is the scale of the too big to subsidy – measured in terms of its likely future impact on our citizenship and our fiscal solvency, this will be devastating.

Most smart people in the nonfinancial world understand that the big banks have become profoundly damaging to the rest of the private sector.  The idea that the president needed to bring a top banker into his inner circle in order to build bridges with business is beyond ludicrous. 

Bill Daley now controls how information is presented to and decisions are made by the president.  Daley’s former boss, Jamie Dimon, is the most dangerous banker in America – presumably he now gets even greater access to the Oval Office.  Daley is on the record as opposing strong consumer protection for financial products; Elizabeth Warren faces an even steeper uphill battle.  Important regulatory appointments, such as the succession to Sheila Bair at the FDIC, are less likely to go to sensible people.  And in all our interactions with other countries, for example around the G20 but also on a bilateral basis, we will pursue the resolutely pro-big finance views of the second Clinton administration.

Top executives at big U.S. banks want to be left alone during relatively good times – allowed to take whatever excessive risks they want, to juice their return on equity through massive leverage, to thus boost their pay and enhance their status around the world.  But at a moment of severe financial crisis, they also want someone in the White House who will whisper at just the right moment: “Mr. President, if you let this bank fail, it will trigger a worldwide financial panic and another Great Depression.  This will be worse than what happened after Lehman Brothers failed.”

Let’s be honest.  With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout.  The risk inherent to our financial system is now higher than it was in the early/mid-2000s.  We are set up for another illusory financial expansion and another debilitating crisis. 

via baselinescenario.com

Very persuasive. I hope Daley will be a tough negotiator for the president, not for the banks. But looks like the fix is in.

Simon Johnson: The Bill Daley Problem

In the latest available data (Q3 of 2010), the big 6 had assets worth 64 percent of GDP. This is up from before the crisis — assets in the big six at the end of 2006 were only about 55 percent of GDP. And this is up massively from 1995, when these same banks (some of which had different names back then) were only 17 percent of GDP.

via huffingtonpost.com

not good.

Good climate summaries

Climate Change 101

Trio of articles re-cover some global warming basics

By Curtis Brainard

via cjr.org

The emergence of complex differences of opinion and fact about climate in the lat year has, on the good side, three effects

1. it shows the weakness of journalism to deal with complexity
2. it has raised new and interesting, even vital, questions about how the climate and ecology work.
3. It has brought some clarity to the problem of dialog in the scientific community. Balancing possibilities, probabilities and proposals is not easy. We have all larned to be more careful

Bernanke voices greater confidence in recovery | Reuters

(Reuters) – The U.S. economy may finally be hitting its stride even if growth remains too weak to put a real dent in the nation’s jobless rate, Federal Reserve Chairman Ben Bernanke said on Friday.

via reuters.com

That is, the economy is continuing to split into two, with the top half retaining what is paying off and jettising the rest.

Foreclosed housing drag

by CalculatedRisk on 1/03/2011 10:15:00 PM

From CNBC: Home Prices Will Decline for Years: Zuckerman (ht Scott)

Mort Zuckerman … blamed the continuing price decline on the so-called shadow inventory of foreclosed homes that’s yet to come on the market.

via calculatedriskblog.com

It would have been much cheaper all around to let people stay in those houses. Then no excess inventory. Can this be modeled?

Krugman also wants growth

Jobs, not G.D.P. numbers, are what matter to American families. And when you start from an unemployment rate of almost 10 percent, the arithmetic of job creation — the amount of growth you need to get back to a tolerable jobs picture — is daunting.

First of all, we have to grow around 2.5 percent a year just to keep up with rising productivity and population, and hence keep unemployment from rising. … Now do the math. Suppose that the U.S. economy were to grow at 4 percent a year, starting now and continuing for the next several years. Most people would regard this as excellent performance…

Yet the math says that even with that kind of growth the unemployment rate would be close to 9 percent at the end of this year, and still above 8 percent at the end of 2012. We wouldn’t get to anything resembling full employment until late in Sarah Palin’s first presidential term.

via economistsview.typepad.com

this suggests that growth is necessary for jobs and jobs are necessary for families. This s another piece of logic that has to be rethought. If we have an economy that does not need workers, even if it is growing, we need to think of other ways of distributing income. 30 hours a week? Sabbaticals? Come on leaders, we need some real imagination here.

Third Inaugural Address – Jerry Brown

I will meet not only with the leaders of energy companies but with executives from a broad range of California business and industry to work on common problems and break down barriers that hold us back. We live, after all, in the eighth largest economy in the world. Over the last decade, California has outpaced the nation in the growth of our gross domestic product and in our productivity per capita.

via sacbee.com

You should read the whole, and t si really quite good. I am saddened however by the need to stick with growth ahead of sustainability, as if this is a totally to be avoided alternative. I happen to think that lower growth with more development (reusing what we have in new ways) can actually be MORE attractive.