Robert Scheer: Return of the Great Triangulator

The sight of Bill Clinton back on the White House podium defending tax cuts for the super-rich was more a sick joke than a serious amplification of economic policy. How desperate is the current president that he would turn to the great triangulator, who opened the floodgates to banking greed, for validation of the sorry opportunistic hodgepodge that passes for this administration's economic policy? A policy designed and implemented by the same Clinton-era holdovers whose radical deregulation of the financial industry created this mess in the first place.

As a candidate running against Hillary Clinton, Barack Obama quite accurately excoriated the economic policies of the Clinton years when the Democratic president united with congressional Republicans, led by Senate Banking Committee Chairman Phil Gramm, to obliterate sensible regulations of the New Deal. The result, as candidate Obama noted in March 2008, has been chaos:

"Unfortunately, instead of establishing a 21st century regulatory framework, we simply dismantled the old one--aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so, we encouraged a winner-take-all, anything-goes environment that helped foster devastating dislocations in our economy."

These dislocations were authorized when Clinton signed off on the Gramm-Leach-Bliley Act, which reversed the Glass-Steagall Act's separation between the high rollers of investment banking and the properly conservative, insured and regulated activities of commercial banks entrusted with the life savings of ordinary folks. With a stroke of a pen that he then presented as a gift to Citigroup CEO Sandy Weill, Clinton opened the door to the too-big-to-fail monstrosities that have caused so much misery.

Back in 1999, even though he had been warned of the coming financial instability, foreshadowed by the collapse of Long-Term Capital Management, Clinton was giddy in signing the bill: "Over the past seven years we have tried to modernize the economy," he enthused. "And today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority."

A year later Clinton signed off on the Commodity Futures Modernization Act, advanced most fiercely by his treasury secretary, Lawrence Summers, who has been the dominant personality setting economic policy for Obama. Titles 3 and 4 of that act summarily exempted from the surveillance of any existing regulatory agency or laws all of the newfangled financial gimmicks -- the collateralized debt obligations and credit default swaps -- that have proved so toxic to the jobs and homes of tens of millions of Americans.

In his rambling and somewhat incoherent comments on the economy at the White House last week, Clinton attempted to explain away the failure of the banks to use the money that the government has made available to them to shore up housing and create jobs. As an aside, in commenting on community banks, Clinton touched on the mortgage security mess that his law enabled, but he still doesn't seem to get his connection with the problem: " ... some of them may have a few mortgage issues unresolved, most of that mortgage debt has been offloaded to Fannie Mae and Freddie Mac or has vanished into cyber-sphere with those securitized subprime mortgages. I don't like the securities, but they happened."

What gibberish. The mortgage-backed securities didn't just happen. Clinton signed legislation freeing those securities from any effective government regulation. Most Americans' homes, which represented their dreams and savings, were turned into gambling chips in the Wall Street casino on a scale unknown and indeed unthinkable before the Clinton presidency. What has vanished is the equity of homeowners. As for the offloading to Fannie Mae and Freddie Mac, that represents at least a $700 billion burden on taxpayers who have had to bail out those government-sponsored agencies that became totally corrupt on Clinton's watch.

The bottom line on the Clinton legacy is that the census now finds an all-time high of 44 million Americans living under the poverty line, bringing us back, as a percentage of the population, to Bill Clinton's first two years in office. One big difference is that thanks to Clinton's so-called welfare reform program, there is no longer a significant federal anti-poverty program, and the plight of the poor is now a problem for the state governments, which also have been impoverished thanks to the bursting of the Clinton bubble.

As a candidate, Obama laid responsibility for the meltdown on the bipartisan deregulation of the Clinton years: "This loss has not happened by accident. It's because of decisions made in boardrooms, on trading floors, and in Washington. Under Republican and Democratic administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices. We let the special interest put their thumbs on the economic scales."

That's the path Clinton followed after his party's electoral reversal after he had been in office two years, a fact that made it all that more ominous to witness the great triangulator back on a White House podium.

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Robert Scheer: Hillary Gets Wiki-Served

Hillary Clinton should cut out the whining about what the Obama administration derides as "stolen cables" and confront the unpleasant truths they reveal about the contradictions of U.S. foreign policy and her own troubling performance. As with the earlier batch of WikiLeaks, in this latest release the corruption of our partners in Iraq and Afghanistan stands in full relief, and the net effect of nearly a decade of warfare is recognized as a strengthening of Iran's influence throughout the region.

Do we as voters not have a need to know that our State Department says that Ahmed Wali Karzai, the half brother of the Afghan leader we are backing and himself the head of government in the most contested province, "is widely understood to be corrupt and a narcotics trafficker"? Or that authorities working with our Drug Enforcement Administration discovered Afghanistan's then-vice president smuggling $52 million in cash out of his country, a nation that U.S. taxpayers are bankrolling?

In the cable discussing Ahmed Wali Karzai, or AWK as he is called, there is a pithy description of the basic folly of our attempt to control the uncontrollable land of Afghanistan: "The meeting with AWK highlights one of our major challenges in Afghanistan: how to fight corruption and connect the people to their government, when the key government officials are themselves corrupt."

The cables make a hash of claims that our invasion of Iraq--where al-Qaida could not operate when Saddam Hussein was in power--was helpful in the war on terror. Recall that 15 of the 9/11 hijackers came from Saudi Arabia. Yet the WikiLeaks documents reveal, as The New York Times reported, that "Saudi donors remain the chief financiers of Sunni militant groups like Al Qaeda, and the tiny Persian Gulf state of Qatar, a generous host to the American military for years, was the 'worst in the region' in counterterrorism efforts, according to a State Department cable last December."

While the great threat is now said by Clinton's State Department to emanate from Iran, the cables make clear that Iranian power was much enhanced by the U.S. overthrow of Saddam, who had fought a long, bloody war against the ayatollahs. The result of our invasion is an Iraqi government run by Prime Minister Nouri al-Maliki, described in the cables as being much under the influence of Iran, which orchestrated his deal with the Iranian-backed Sadrists that kept him in power. The cables report King Abdullah of Saudi Arabia dismissing Maliki as no more than an "Iranian agent."

This material refutes the stated anti-terrorist purposes of the two wars we are fighting, and that is the prime reason it is classified. If any of the information was so sensitive, why was none of it labeled "top secret" as is the practice with content that would risk our nation's security? And why was this vast trove placed in computer systems to which low-ranking personnel had access? The real problem with the release of the dispatches, particularly the kind labeled "noforn," meaning it shouldn't be shared with foreign governments, is that it is politically embarrassing--which is why we, the public, have a right to view it. That is certainly the case with the revelation that Secretary Clinton destroyed the once-sacred line between the legitimate diplomat deserving of universal protection and the spies that governments could be justified in arresting.

Instead of disparaging the motives of the leakers, Hillary Clinton should offer a forthright explanation of why she continued the practice of Condoleezza Rice, her predecessor as secretary of state, of using American diplomats to spy on their colleagues working at the United Nations. Why did she issue a specific directive ordering U.S. diplomats to collect biometric information on U.N. Secretary-General Ban Ki-moon and many of his colleagues?
As the respected British newspaper The Guardian, which obtained the WikiLeaks cables, said in summarizing the matter: "A classified directive which appears to blur the line between diplomacy and spying was issued to US diplomats under Hillary Clinton's name in July 2009, demanding forensic technical details about the communications system used by top UN officials, including passwords and personal encryption keys used in private and commercial networks for official communications."

The Guardian pointed out that the Clinton directive violates the language of the original U.N. convention, which reads: "The premises of the United Nations shall be inviolable." The spying effort derived from concern that U.N. rapporteurs might unearth embarrassing details about the U.S. treatment of prisoners in Guantánamo as well as in Iraq and Afghanistan. One of the directives demanded "biographic and biometric" information on Dr. Margaret Chan, the director of the World Health Organization, as well as details of her personality and management style. Maybe she's hiding bin Laden in her U.N. office.

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Robert Scheer: Fail and Grow Rich on Wall Street

Welcome to the brave new world of post-bailout capitalism. The Commerce Department announced Tuesday that corporate profits are at their highest level in U.S. history, and the Fed released minutes of an early November meeting in which officials predicted a stagnant economy and continued high unemployment.

The lead on the New York Times story read like a line from a Dickens novel: "The nation's workers may be struggling, but American companies just had their best quarter ever." What the Times story neglected to mention is that the bulk of the increase in corporate profits was nabbed by the financial industry rather than manufacturing and other productive sectors. A whopping $33.3 billion out of the total corporate profits increase of $44.4 billion went to the banks and investment houses that those same workers had bailed out with their tax dollars.

Much of the rest of the corporate profit, in the non-financial sector, was also taken out of the hides of workers through increased "productivity" growth--meaning they had produced more for less personal income. Case in point: the plant that GM is reopening in Orion Township, Mich., where, under a deal negotiated with the beleaguered UAW union, 40 percent of the workers crawling through cars on the assembly line will be paid 15 bucks an hour. That's about half the traditional UAW wage.

The Obama administration now feels totally vindicated for bailing out GM. Such a deal. Let's offer up half a clap for the news that GM came back from bankruptcy to mount a successful IPO and pay something back to the taxpayers, which is better than nothing. Some jobs were saved, and that prospect was why folks like me supported this bailout in the first place.

Don't call it a success story: The government unloaded some of its GM stock holdings at a $10.67 loss over the average per-share price it paid for its $49.5 billion investment. As the Bloomberg news service noted, "The Treasury, which is taking a loss on its portion of the sale, will break even only if the shares climb more than 60%," referring to the GM shares the Treasury still holds.

Nor should we ignore the fact that GM is a shadow of its former self and its rosier prospects for long-term survival depend primarily on job creation in China, where GM is already a major presence. Or that GMAC, the carmaker's former credit operation, is still majority-owned by the U.S. government and is busily foreclosing on the homes of people they hustled into subprime and otherwise dubious mortgages.

GMAC was no different from others in the financial industry in securitizing mortgages that it should have known were toxic. Restructured as Ally Financial, the company was split off from GM, taking along its burdened debt obligations and benefiting from $17.2 billion in bailout money. Like the other financial outfits, Ally has enjoyed a range of government support through the Federal Reserve and Treasury. Not so the folks to whom GMAC sold crappy mortgages that are being foreclosed at an alarming rate.

The assumption of both the Bush and Obama administrations was that what was good for the banks would be good for the general economy, but just the opposite has happened. While the financial sector flourishes, the economy stagnates. As The Wall Street Journal reported in its story on the release of the Fed minutes: "Federal Reserve officials downgraded their outlook for the U.S. economy ... projecting that the jobless rate could exceed 8% for two more years and that it won't return to its former vitality for five years or more."

Guess what? The financial benefits are not trickling down. Throwing money at the banks has been as effective as pushing on a string, and the result has been what former Fed Chairman Paul Volcker has excoriated as a "liquidity trap." No serious government pressure has been brought to bear on the banks to help homeowners stay in their homes through mortgage payment adjustments.

What has occurred is what former International Monetary Fund chief economist Simon Johnson referred in The Atlantic back in May of 2009 as "The Quiet Coup," in which the financial industry is fully in charge of the government's response to our economic problems. The result, he noted, is "the reemergence of an American financial oligarchy" that had been broken by the banking regulations imposed during the New Deal in response to the Great Depression. Franklin Delano Roosevelt's sensible regulations were gutted by Bill Clinton and George W. Bush, and tragically Obama has failed to restore them. The Wall Street lobbyists got their way and unfettered greed prevails. How else to explain last quarter's outrageous profit figures?

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Robert Scheer: The Life and Times of Bush the Clueless

It takes a Harvard MBA to raze an economy. Perhaps that is too narrow a judgment given that a law degree from that institution or from Yale University seems to serve as well. But the Harvard MBA is the degree that George W. Bush and his last treasury secretary, Henry Paulson, had in common, and their shared ignorance as they presided over the collapse of the U.S. economy is on full display in the former president's newly published memoir.

Bush makes clear that the economic crisis came late to his attention and that it was not until March of 2008, as the Wall Street investment firm Bear Stearns was tottering, that it dawned on him that something was seriously amiss: "I was surprised by the sudden crisis. My focus had been kitchen-table economic issues like jobs and inflation. I assumed any major credit troubles would have been flagged by the regulators or rating agencies." He assumed that because he had signed off on the Sarbanes-Oxley Act "[i]n response to the Enron accounting fraud and other corporate scandals."

It is instructive that this is the only reference in the memoir to Enron, a company headed by his old friend Ken "Kenny Boy" Lay, who chaired Bush's presidential campaign finance committee the year before Enron collapsed. The grief caused by Enron's contrived electrical blackouts and the lost jobs and savings following its collapse did not make for one of the "Decision Points" worthy of examination by Bush in his book of that title. Had he done so he might have discovered that the primary problem with Enron was not its fraudulent accounting but rather the wild trading practices in derivatives and other suspect financial gimmicks that had brought the company to its knees and which the accounting trickery was designed to conceal.

Enron was the dead canary, ignored by Bush, that predicted the banking meltdown. The "Enron loophole" in the Commodity Futures Modernization Act that Republicans pushed through the Congress and Bill Clinton signed into law in the last months of his administration opened the door to the collateralized debt obligations and other financial devices that proved so toxic to Wall Street. The securitization of housing debt in such packages spiraled out of control throughout Bush's watch, but he was clearly unaware of the problem until that market collapsed.

Even then he did not have the foggiest idea of what the crisis was all about, any more than did Treasury Secretary Paulson, who admits in his own memoir that he did not know that mortgages were at the heart of the derivatives causing all of the trouble. Of course he should have known since Goldman Sachs, the company he headed earlier, had been in the forefront of packaging and selling the assets that turned out to be malignant.

In his book, Bush indicates similar denial when he writes of Bear Stearns' impending collapse that "the problem was not a lack of regulation by government; it was a lack of judgment by Bear executives." But the problem in finding a buyer for Bear Stearns was those unregulated derivatives, as Bush writes: "Executives at JPMorgan Chase were interested in acquiring Bear Stearns, but were concerned about inheriting Bear's portfolio of risky mortgage-backed securities."

Bush goes on to justify the deal he and Hank Paulson concocted with Fed Chair Ben Bernanke, whom he had appointed, to guarantee the sale of Bear Stearns: "With Ben's approval, Hank and Tim Geithner, the President of the New York Fed [currently President Barack Obama's treasury secretary], devised a plan to address JPMorgan's concerns. The Fed would lend $30 billion against Bear's undesirable mortgage holdings," a development that cleared the way for the sale.

That was just a warm-up for the much larger deal to bail out AIG that the same cast of characters hatched when, as Bush writes, the firm with its tentacles spread wide in pension funds, municipal bonds and 401(k)s "was somehow on the brink of implosion," and had to be saved through a $180 billion infusion of government funds, leaving U.S. taxpayers today with 92 percent ownership of the company. "It was basically a nationalization of America's largest insurance company," writes the former leader of the political party that routinely labels the current occupant of the White House as a socialist. "My friends back home in Midland [Texas] are going to ask what happened to the free-market guy they knew," Bush laments. "They're going to wonder why we're spending their money to save the firms that created the crisis in the first place."

The answer to that question, raised far beyond the confines of Midland, is evidently the main thing Bush learned in the Harvard MBA program: "The well-being of Main Street was directly linked to the fate of Wall Street." Not exactly. They are linked--but inversely.

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Robert Scheer: Payback at the Polls

Let's not shoot the messenger. Yes, the tea party victors are a mixed bag espousing often contradictory and at times weird positions, the source of their funding is questionable and their proposed solutions are vague and at times downright nutty. But they represent the most significant political response to the economic pain that has traumatized swaths of the nation at a time when so-called progressives have been reduced to abject impotence by their deference to a Democratic president.

Barack Obama deserved the rebuke he received at the polls for a failed economic policy that consisted of throwing trillions at Wall Street but getting nothing in return. His amen chorus in the media is quick to blame everyone but the president for his sharp reversal of fortunes. But it is not the fault of tea party Republicans that they responded to the rage out there over lost jobs and homes while the president remained indifferent to the many who are suffering.

At a time when, as a Washington Post poll reported last week, 53 percent of Americans fear they can't make next month's mortgage or rent payment, the president chirped inanely to Jon Stewart that his top economics adviser, Lawrence Summers, who was paid $8 million by Wall Street firms while advising candidate Obama, had done a "heckuva job" in helping avoid another Great Depression. What kind of consolation is that for the 50 million Americans who have lost their homes or are struggling to pay off mortgages that are "underwater"? The banks have been made whole by the Fed, providing virtually interest-free money while purchasing trillions of dollars of the banks' toxic assets. Yet the financial industry response has been what Paul Volcker has called a "liquidity trap"--denying loans for business investment or the refinancing necessary to keep people in their homes.

Instead of meeting that crisis head-on with a temporary moratorium on housing foreclosures, as more than half of those surveyed by the Post wanted, the president summarily turned down that sensible proposal. Instead he attempted to shift the focus to his tepid health care reform and was surprised that many voters didn't think he did them a favor by locking them into insurance programs not governed by cost controls. Health care reform was viewed by many voters with the same disdain with which they reacted to the underfunded and unfocused stimulus program. Neither seems relevant to turning around an economy that a huge majority feels is getting worse, according to Election Day exit polls.

That is a problem that is not obvious to the power elites whom the leaders of both political parties serve or to the high-paid media pundits who cheer them on. The tea party revolt, ragged as it is, fed on a massive populist outrage that so-called progressives had failed to respond to because of their allegiance to Obama. As a result the Democrats squandered the hopes of their base, which rewarded the party with a paltry turnout at polling stations.

But it now remains for the tea party victors to prove that they are a viable alternative, or by the next election they too will find that their base of support has evaporated. This should be of great concern to the libertarian wing of that movement, which scored a considerable victory and a much-enhanced national presence with Rand Paul's Senate victory in Kentucky. Will he stick to his promise to hold the Federal Reserve accountable and oppose the continuing favors to Wall Street that he has blasted as "a transfer of wealth from those who have earned to those who have squandered"?

The tea party is now in the awkward position previously occupied by the Obama hope crusade of having to deliver and will suffer a similar political fate if it fails to deal with the economic crisis. In particular, the Republicans who will control the House, thanks to the tea party, must come up with proposals to solve the housing crisis or they will stand exposed as political opportunists who intend to exploit rather than deal with the economic anxiety felt not only by their base but much of the country.

Some Democratic leaders will urge Obama to follow President Bill Clinton's lead after his party's electoral reversal in the 1994 election and move even further to the right to strengthen his prospects for re-election. It was that opportunistic shift by Clinton that led to his signing off on the radical deregulation of the financial industry that caused the economic meltdown. If Obama follows such advice it will spell further disaster for the nation.

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