Coastal Post Online
MARIN COUNTY'S NEWS MONTHLY - FREE PRESS
(415)868-1600 - (415)868-0502(fax) - P.O. Box 31, Bolinas, CA, 94924
June, 2009
De-worming The Capitalist Apple
By Edward W. Miller
"Thou hast taken usury and increase, and thou hast greedily gained of thy neighbors by extortion, and thou hast forgotten me saith the Lord."-Ezekiel 22:12 (King James Version)
"I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country." -Thomas Jefferson
The ongoing failure of millions of "sub-prime" mortgages with 4 million more threatened foreclosures across the country, the increasing lack of "affordable housing", along with a consumer debt of over $2.52 trillion, and a non-farm payroll employment which continues to decline (in April -539,000), raising the US unemployment rate from 8.5 to 8.9 percent (U.S. Department of Labor), are contributions of a major economic recession which stretches today across the industrial world.
These statistics, and the associated economic and personal tragedies which they represent, come as no great surprise to those who have been watching our Congress over the past half century surrender again and again to Wall Street and other "big business" lobbying.
In 1980 the five largest firms controlled 7% of the mortgage market. By 2007 they controlled 46 percent. After Bank of America's 2008 merger with Countrywide, the top three servicers -arms of Bank of America, Wells Fargo and Chase- controlled 48% of the nation's $11.5 trillion in mortgages. (The NATION, 18 May, 2009)
The first major step down the economic ladder, which attracted only moderate public attention, took place on June 23rd, 1947, when a newly elected Republican Congress passed the Taft-Hartley Act over president Truman's veto. Truman, who had sold clothes in a haberdashery before he entered politics, understood all too well the value of the dollar and the importance of strong unions to balance the political power, and thus the economic power, of big industry. Hence his attempt to stop the Bill by his veto.
The results of this assault on American labor appeared gradually over the years. Beginning in 1972, statistics began to show that wages were already falling below the daily costs of living for the American middle class. American dads, who for years had fed and clothed their families, bought a house, educated their kids and provided a safe retirement, found their paychecks no longer covered all the bills, and began to accept 50 or 60 hour weeks or found a second job. A few years later mother pitched in to bring home extra cash, and not too many years passed before the percentage of women in the American workforce far exceeded that of any other industrialized country. The income of the great American middle class has been falling farther and farther behind the rising cost of living.
Another factor in the economic downslide was the subtle onslaught of the Credit-Card industry which began mailing their plastic cards out by the millions to the unwary shoppers who, lacking enough cash at the Safeway checkout, found it increasingly easy to run that pretty piece of plastic through the machine." In 2006 banks were sending out 8 billion credit card applications, a 30% increase over 2005. Credit card companies spend an average of $56 to sign up a new customer and since 1996 when the Supreme Court struck down limits on credit card fees, the average late penalty has jumped 102% and the average fee for exceeding credit card limits is up138%.
Back in 2004, after DISCOVERY charged a woman more than $9000 in interest, penalties and fees, on an initial bill of $1900, an Ohio judge erased her debt, slamming the company for being "unreasonable, unconscionable, and unjust." (Mother Jones) Today, millions of Americans find themselves with billions more in credit-card debt.
As I was writing this column (20 May), the Washington Post reported that "The House had approved a more diluted credit card reform bill last month but chose today to send the stronger Senate version to the president instead." A version which Obama had promised to sign as a campaign promise.
Added to American families credit card debt, the temptation to borrow at pay day to cover household expenses, has been adding another tremendous load of personal indebtedness to many Americans while creating a new and usury-supported industry. The Pay Day Loans Companies, which today represent a $40 billion industry in the US with interest rates sometimes as high as 200%. American's Household Debt was $13.8 trillion in 2008, up $2 Trillion over 2005. Of the $13.8 trillion, $10.5 trillion was for mortgages and most of the balance for credit purchases (America Debt Report).
Before evidence of economic slowdown was beginning to appear at home, big manufacturing began chasing cheap labor with total disregard for their loyal local employees in towns and cities across the country. Quietly closing their manufacturing plants, only to re-assemble them, first across the border in Mexico and, a few years later, in China, India and Malaysia, while at the same time, as Congress was paid to look the other way, many of those very same companies, avoiding their patriotic responsibility to support their country's economic base, were establishing tax-exempt entities (tax havens) on off-shore islands and distant lands.
While big business was busy lobbying against labor and moving manufacturing overseas, Wall Street was lobbying Congress to remove those remaining reins of financial oversight, passed during Roosevelt's "New Deal."
After thirty years of Congress' piecemeal deregulation of our financial markets, starting with Reagan, (Economist Paul Kurgan told the TV audience on the Charlie Rose Show, that "Deregulation started with Reagan") this process culminated, during the Clinton Administration.
As columnist Robert Scheer pointed out (March 2008, SF Chronicle): "The Clinton-backed Gramm-Leach-Baily Act of 1999 called the "Financial Services Modernization Act," permitted banks, stock brokers, and insurance companies to merge and was exacerbated by
Bush's appointment of rapacious corporate foxes to watch the corporate hen house." They will take care of their own." The Glass-Steagall Act had been a major regulatory achievement of the New Deal.
Alex Cockburn, noted (THE NATION, Oct. 13,2008) that a year after The Clinton-backed GRAMM-LEACH-BAILY ACT was signed into law: "Gramm, chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill right before Senate recess. Gramm's amendment became the Commodity Futures Modernization Act which ok'd deregulation of investment banks, exempting most over-the-counter derivatives, credit derivatives and credit default swaps from Congress' regulatory scrutiny." Congress' weak attempt to rein-in Wall Street's reckless pursuit of sub prime money with the 1994 HOME OWNERSHIP AND EQUITY PROTECTION ACT, supposedly writtento police high-interest loans, proved, as critics had warned, to be ineffective.
The willingness of banks to accept sub-prime mortgages had begun over ten years ago as
deregulation led to corporate theft in both Republican and Democratic administrations. In the past, mortgage holders who faced problems might go to their banker and negotiate changes in term limits or interest rates. Today their banker, who has bundled that mortgage along with a thousand others and is gambling with it on the international roulette wheel of "derivatives, "hedge funds," and "credit default swaps," may say: "Sorry, I just can't lay my hands on your mortgage papers."
Unlike Franklin D. Roosevelt, who faced the 1930s depression with no wars and a well-funded US treasury, and thus was able to pit millions of unemployed to work in a vast array of public works projects, Obama has inherited a government trillions in debt and losing two wars. Hopefully, Congress, while it redesigns the Federal Reserve to more honestly meet America's needs, must also halt the hemorrhaging of tax revenue by closing overseas tax shelters, revoke the Bush Jr. tax loopholes for the rich, and take the cap off Social Security contributions, thus forcing the wealthy to shoulder their fair share of our nation's financial support. A tariff on all goods manufactured abroad, no matter who owns the company, as the EU countries all do, would encourage the return of a much-needed manufacturing base to our shores.
Not one politician campaigning for the 2009 election, except Ralph Nader, mentioned repeal of the Taft-Hartley Act. If our present congress won't repeal Taft-Hartley, lobby your representatives to pass EFCA, the Employee Free Choice Act, to strengthen unions.
American big business, the US Chamber of Commerce, as well as Wall Street are opposed to EFCA and will lobby against it.
The $787 billion economic recovery package Obama signed into law in February 2009 gave states billions of dollars to provide extended benefits to the unemployed. Obama directed Labor Secretary Hilda Solis and Education Secretary Arne Duncan to implement the changes. Both departments also have launched a Web site: http://www.opportunity.gov
This sounds impressive, but George Will in the Washington Post and others have questioned whether it will meet our economic challenges. During the 1930's depression, Franklin Roosevelt put Harry Hopkins to work managing the WPA. Hopkins and the WPA put together almost 1.5 million projects and created jobs for 8.5 million people. Some have advised Obama to find a modern day, Harry Hopkins, especially
since 1930 the US population has increased from 122,775,046 to today's 306,414,171. (May 12, 2009 ...
US Census Bureau). Before this recession is over, Obama may have to come up with well over 8 million jobs.
Although, like Franklin Roosevelt, Obama is s bailing out some banks, and has nationalized both Fannie May and Freddie Mac, and supported the AIG, stipulations regarding the use of these taxpayer's funds has not been as specific as in England where Britain's prime minister, Gordon Brown, while urging nations to "tackle economy together," in bailing out Britain's largest banks specified that the bailout money be spent on loans to business rather than buyouts and stock dividends to the bank's investors.
Some economists point out that it is cheaper to save a business, with its trained employees, manufacturing facilities and community and business relations, than start from scratch. They would rather have had Obama save Chrysler and General Motors with their vast array of factories, suppliers, trained workers and thousands of dealerships, than spend money starting new businesses.
And finally, a suggestion from Ralph Nader: "Speculators buy $500 trillion of securities derivatives each year and don't pay one penny. A mere 1/10 of 1 percent sales tax on purchases of these derivatives would raise $500 billion per year to pay for their bailout. Let the speculators fund their own bailout."
It's going to be a long recession.
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