naked capitalism
By John Bougearel, Director of Futures and Equity Research at Structural Logic.
The core of America is the middle class. And Harvard Law Professor and chair of the Congressional Oversight Panel COP ( the COP is to oversee TARP, the Troubled Assets Relief Program) Elizabeth Warren tells us that the core of America is being carved up, hollowed out. In her words, “I Believe Middle Class is Under Terrific Assault…Middle class became the turkey at the Thanksgiving dinner” of the financial elite. Elizabeth Warren is more than just right.
Call it for what it is. It has more names than Satan. Call it plundering. Call it pillaging. Call it extortion, Call it fraud. Call it racketeering. Call it the financial raping of the middle class. Call it criminal. Consider the following. Middle class never consented to this financial rape. They vehemently protested it when the gov’t first proposed a $700 bailout of the financial system called TARP in Septermber 2008. Yet what did Congress and our government do? They went ahead and did it anyway. This boils down to one thing, taxation without representation. Our votes do not matter anymore.
This is happening because the US government is allowing it to happen. It is one thing for the government to raise the social safety nets for the poor, elderly and such. It is entirely another to raise the social safety nets for the financial elitists at taxpayer expense. But that is exactly what the government has done in the past year. They have rescued a financial system at the expense of everyone else. Mythical constructs and messages that financial companies are Too Big to Fail, systemic risk is too great, No More Lehman Brothers have been created by the powers that be. And it is in the name of No More Lehman Brothers and Too Big to Fail that Middle Class America is being carved up and hollowed out.
Appearing in Michael Moore’s “Capitalism: A Love Story, Michael Moore asks Elizabeth Warren (regarding the $700 billion dollar taxpayer funded bailout of the financial elite) “Where’s are money? And Warren takes a deep breath, looks briefly over her left shoulder (as if she might find it there), and exhales “I don’t know.”
Washington Post’s Lois Romano asked Elizabeth Warren, “Why don’t you know?”
WARREN: We don’t know where the $700 billion dollars is because the system was initially designed to make sure that we didn’t know. When Secretary Paulson first put this money out into the banks, he didn’t ask for ‘what are you going to do with it.’ He didn’t put any restrictions on it. He didn’t put any tabs on where it was going to go. In other words, he didn’t ask…
US Secretary of the Treasury Hank Paulson did not ask the banks what they were going to do with our taxpayer money. The US treasury, given Congressional blessing, simply gave the banksters hundreds of billions of taxpayer dollars with no questions asked. This is wholesale taxation without representation.
So Romano asks Warren, “Are we, as an [economy] are we better off systemically now? Have we put things in place to prevent this from happening?” Warren replies “This really has me worried.” And it should have Warren worried because our Humpty Dumpty financial system had a great fall, and Humpty was put together again by all the King’s horses (read the US Treasury and Congress) and all the King’s men (read Uncle Sam’s taxpayers), Yet, Humpty Dumpty is still the same old fragile egg he was when he sat on a wall right before he had his great fall.
WARREN: A year ago the big concern was systemic risk and how to deal with ‘too big to fail’ firms…the big are bigger, we wiped out a lot of small folks and there’s more concentration” in the banking system.
And it is not just the Humpty Dumpty financial system that is so fragile.
WARREN: The way I see it is that the financial system itself is quite fragile, and that the underlying economy, the real economy, jobs, housing, household wealth, is still in a very perilous state.
So Lois Romano asks Warren, “Are we going to look back in two or three years at this TARP expenditure and say well, it worked.”
WARREN: “What is so astonishing about the first expenditures under TARP was that taxpayer dollars were put into financial institutions that were still, um, left all of their shareholders intact, that were still paying dividends, that paid their creditors 100 cents on the dollar. We put taxpayer money in without saying ‘you’ve got to use up everyone else’s money first.’ And once that’s the case, I don’t know how you ever put the genie back in the bottle. I don’t know how you ever persuade either a large corporation or the wider marketplace that if you can just get big enough and tie yourself to enough other important people, institutions, that if something goes wrong, the taxpayer will be behind you
That’s a game-changer. That is a whole different approach than any we’ve ever used before.
ROMANO: What more can we be doing to protect the middle class, to protect what Michael Moore refers to as the American Dream?
WARREN: “You know, the answer is we’re in trouble on so many fronts. In the 1950s and the 1960s, coming out of World War II, we said as a government and as a people, ‘what can we do to support the middle class?’ That’s what, FHA was to help people get into homes, right? VA, uh, G.I. loans on education. We looked at policies by whether they strengthened and support the middle class. Somewhere that began to change in the late 1970s and early 1980s, and the middle class instead became like a resource to be pulled from. They became the turkey at the Thanksgiving dinner. Who could carve off a piece, who could get this little piece, who could make a profit from this piece and that piece or squeeze down on the wages? And, the middle class has gotten shakier and shakier, hollowed out.
The consequences of that are far more than economic. The middle class is what makes us who we are. It affects the poor. A strong and vital middle class is a middle class that can offer a helping hand to the poor. A strong and vital middle class is a middle class that has room, is creating new jobs to, basically to suck the poor up out of poverty and into middle class positions. The middle class is what gives us political stability. It’s what gives us an America that’s all bought in to the whole process. That what we do is not just about a handful of folks at the top who profit from it. We all profit from it. And that’s why we work, and that’s why we vote, and that’s why we accept the outcome of elections, and, that’s why we’re safe to walk our streets, because we have a middle class for which this ultimately works, this country.
And every time we hollow that out. Every time we take away a little piece of that. We run the risk that some of what we understood as America, some of what we know as America, begins to die.
That’s what scares me.
Aaron Task interviewed Elizabeth Warren at The Economist’s Oct 15-16 “Buttonwood Gathering“ In that interview, Warren says,
The big banks always get what they want. They have all the money, all the lobbyists. And boy is that true on this one. There’s just not a lobby on the other side.
This is a moment when all around the country people are saying we’ve had it about up to here with these large financial institutions that want to write the rule then take our money. I find it astonishing that they have the nerve to show up and say, ‘I’m a big financial institution. I took your money. And now I’m going to lobby against anything that might offer some protection to ordinary families in this marketplace.
“This might be the time that the rules change.
The Buttonwood Gathering event took place over the weekend following Q3 earnings announcements from the big banks. Because of the taxpayer bailout of these big banks, some of them, namely JPM and GS are now enjoying record profits and will enjoy record bonuses this season. The irony is overwhelming that this is happening in 2009. Because of the failure of the financial system, more than 7 million middle class jobs have been lost, and the US economy is confronting double digit unemployment for the first time since 1982. Without taxpayer dollars, these record profits and record bonuses in 2009 would not even be possible for the big banks. Hell, without taxpayer dollars zombifying them with congressional and White House sanctioning, they’d have gone the way of the dinosaurs, the way of the buggy whips. That is the way history should have gone. But no, that is counterfactual now. There is something very wrong in America, the very way it is being run by government, and run over by the big banks. It is high time for middle class America to push back, precisely because our elected officials have not only failed to do so, but have legislated all of this to make it happen. Our government has become an active agent in the gutting of the middle class.
Commenting on Wall Street’ record 2009 bonuses Elizabeth Warren says she is
Wordless, Speechless. I do not understand how financial institutions could think they could take taxpayer money and turn around and act like it’s business as usual…I don’t understand how they can’t see that the world has changed in a fundamental way – it’s not business as usual.
While these critical interviews with Elizabeth Warren have been taking place in recent days, Naked Capitalism’s Yves Smith has been picking up threads of some push-back and and within Wall Street itself and amongst professionals on the periphery of WS, regarding the abuses of the financial elite awarding themselves record bonuses while the rest of the country goes to hell in a handbasket. From Yves,
There is a group of varying sizes, depending on the topic, that e-mails among itself, mainly professional investors, analysts, economists (I’m usually on the periphery but sometimes chime in). I never saw such an angry, active, and large thread about the Goldman BS fest today. Now if people who have not suffered much, and are presumably benefiting from the market recovery are furious, it isn’t hard to imagine that what looks like complacency in the heartlands may simply be contained rage looking for an outlet.
But per the social psychology research, this “you are in a minority, you are wrong” message DOES dissuade a lot of people. It is remarkably poisonous. And it discourages people from taking concrete action. I was surprised that some people bothered to comment on a post I put up yesterday, calling on people in the Chicago area to attend some peaceful demonstrations against the banking industry during the American Bankers Association national meeting, October 25 through 27. Some people weighed in, saying (basically) “don’t bother”.
I suppose it makes a difference whether one is old enough to remember the 1960s. Because people in large numbers got out and protested, two sets of changes that seemed impossible came about: civil rights for blacks and an end to the US involvement in Vietnam (if you read the histories, the military and intelligence experts were on the whole persuaded it was an unwinnable war, but it was seen as too costly to US prestige for America to withdraw).
And even if the effort you make narrowly is not successful (does any one person’s effort have much impact?) it breeds apathy and cynicism to suggest that doing nothing is the best course of action. If nothing else, it is better for one’s psyche to do what one can, however small, to make a difference.
Now America does not have a tradition of taking to the streets; demonstrations and rallies historically are working class affairs. But the middle class is on a path of downward mobility while the elites continue to take the cream. The widening gap might waken some impulses that have been dormant in the American psyche.
I happened to grow up in the sixties, on Sheridan Avenue in Chicago, and watched the protests march right past our homes. We stood on the street corner as kids and watched. We were too young to understand fully what was going on, but these were civil rights protests led by Martin Luther King. From Wikipedia:
The Chicago Freedom Movement, the most ambitious civil rights campaign in the North, lasted from mid-1965 to early 1967. It represented the alliance of the Southern Christian Leadership Conference (SCLC) and the Coordinating Council of Community Organizations (CCCO). In 1965, SCLC, led by Martin Luther King, Jr., was looking for a site to prove that nonviolent direct action could bring about social change outside of the South. Since 1962, the CCCO, a coalition of local civil rights and community groups, had responded to rising anger over racial inequality, especially in the public schools, in the city of Chicago to build the most sustained local civil rights movement in the North. The activism of the CCCO pulled SCLC to Chicago as did the work of Bernard LaFayette and James Bevel, two veterans of the southern civil rights movement, on the city’s west side.
In the early summer of 1966, it focused its attention on housing discrimination. By late July it was staging regular marches into all-white neighborhoods on the city’s southwest and northwest sides. The hostile response of white residents and the determination of civil rights activists to continue to crusade for open housing alarmed City Hall and attracted the attention of the national press. In mid-August, high-level negotiations began between city leaders, movement activists, and representatives of the Chicago Real Estate Board. On August 26, after the Chicago Freedom Movement had declared that it would march into Cicero , site of a fierce race riot in 1951, an agreement, consisting of positive steps to open up housing opportunities in metropolitan Chicago , was reached.
The Summit Agreement was the culmination of months of organizing and direct action. It did not, however, satisfy all activists, some of whom, in early September 1966, marched on Cicero . Furthermore, after the open-housing marches, the Chicago Freedom Movement lost its focus and momentum. By early 1967, Martin Luther King and SCLC had decided to train their energies on other targets, thus marking the end of this striking campaign.
The Chicago Freedom Movement helped train a spotlight on housing discrimination and thus shaped national debate that led to the federal Fair Housing Act of 1968. And a number of new organizations-such as the Kenwood-Oakland Community Organization, Operation Breadbasket (later Rainbow/PUSH Coalition), and the Leadership Council for Metropolitan Open Communities)-continued to fight against racial injustice.
Yves post on the anger within the financial industry this week sparked a lot of comment from her readership.
K Ackermann says:
“The public is not powerless. It is just unwilling. There is a huge difference, and I hope people like yourself start taking up the meme.”
K’s comment is interesting because he or she acknowledges in one sentence that the middle class is not powerless, just unwilling, and then in the next sentence hopes that someone else will take up the “meme.” First off this is not a “meme.” This is a cause, and clearly Ackermann is unwilling to partake in the cause.
Another commenter supports old-fashioned activism but fears “activism now is like shouting into the storm.” This is a good analogy of futility. But guess what, did MLK consider his cause futile, did not he have a raging storm against which he had to make his voice heard? Do we not have the same responsibility as middle class Americans to make our voices heard above the raging storm? Do we not have a Dylan Thomas onus of responsibility to not go gently into the night and rage against the dying of the light (read middle class America)?
Francois T says ”Why no mass protests? It’ll come; but only when the threats to survival become much more immediate, like barely any food on the table for entire tranches of citizens.
And even then; look at Mexico. The amount of poverty down there is pretty staggering by our own standards. See any mass protests?
Nope!
Ironically, I believe only a dedicated group of powerful renegades* could change something, like financing and make legit a 3rd party.
Now, THAT would be some change.
*I’m willing to bet my last n’gwee that there are quite a few very wealthy/powerful Americans that looks at the actual socio-economic landscape with a bewildered “WTF is going on here?” amazement mixed with deep disquiet. Whether they’re willing to do anything about it is another matter, but the first step to action is to become conscious of your surroundings.
Daniel de Paris wrote,
As a reader of Tocqueville and a complete parochial Frenchy, I believe that the effective American way – politically speaking – is local and grass-root.
There is practically no political action possible at Washington-level except for external affairs. Wars started in Washington can and have to be stopped in Washington.
The chances of the US are at grass-root level. Grass-root movements à la sixties to stop these crazy military budgets and grass-roots justice action for financial crime.
Skippy chimed in on Yves comments to juxtapose the difference between protest and pseudo-protest, , and to juxtapose the non-violent protest advocated by MLK vs the violent protest advocated by Malcolm X in the 1960s.
http://blogs.myspace.com/index.cfm?fuseaction=blog.view&friendId=62478301&blogId=364528702
“As you know, the non-violent protests MLK organized were starkly different from the riots celebrated and encouraged by Malcolm X. And there was also a huge difference in effectiveness. MLK’s civil rights movement changed the face of America, whereas the riots left in their wake bitterness and destruction and no concrete improvement. As MLK wrote in Where do we go from here: Chaos or Community: “If a method is not effective, no matter how much steam it releases, it is an expression of weakness, not of strength.”
On pseudo-protests Skippy quotes from Richard Bernstein’s Dictatorship of Virtue
The fact is that assaulting the establishment, declaiming against the racism and sexism of society, reiterating the approved phrases about oppression and exclusion, promising to uncover previously neglected worlds, these require not a jot of courage these days. These are the sanctioned activities of the counterestablishment, the gestures and idioms that gain approval and lead to good opportunities, to jobs, to prizes, to book contracts, to prominence in American life… There is no risk in smashing the icons. There are millions of dollars in foundation grants available for people who claim they are doing so.
Skippy continues:
“All of this government and private largess lavished on protesters and protest groups remained somewhat of a quandary for me until I moved to Mexico, where political theater has evolved into a most highly refined art form. Here the plutocrats fund the unions, the protesters, the press and the putative opposition party. You name it, they pay for it all. So I began to put two and two together about how that might work in the US as well.
But on the US scene, perhaps it was Hannah Arendt who was quickest to grasp what was going on:
No doubt, “violence pays,” but the trouble it pays indiscriminately, for “soul courses” and instruction in Swahili as well as for real reforms. And since the tactics of violence and disruption make sense only for short-term goals, it is even more likely, as was recently the case in the United States, that the established power will yield to nonsensical and obviously damaging demands—such as admitting students without the necessary qualifications and instructing them in non-existent subjects—if only such “reforms” can be made with comparative ease, than that violence will be effective with respect to the relatively long-term objective of structural change.
–Hannah Arendt, Crises of the Republic
We were all quick to pick up on the fact that the tea partiers and healthcare protesters were not protesters but pseudo-protesters. According to James Q. Wilson, writing in Political Organizations, pseudo-protest concerns itself not so much with concrete objectives as it does with venting frustrations and moral outrage. Pseudo-protest has as its goal the articulation of a broader cause, vision of the world, or ideology; whereas protest seeks more palpable rewards such as jobs, decent living wages, the end of segregation or the right to vote.
Protest is a moral act and an extremely effective agent of change. Pseudo-protest is therapy for persons with a chip on their shoulders or a job for the growing ranks of professional protesters. It is impotent or even an impediment to change.”
Skippy makes an important distinction, up until now, most of the protest with regard to the abuses heaped upon the middle class by Wall Street and the US government has mostly been of the “therapeutic-pseudo” kind. But real protest is, as Skippy says and MLK (and Ghandi and others) have proved, a moral act and an extremely effective agent of change. The 1960s was a civil rights movement for blacks and it worked for effective lasting change. A new civil rights movement is afoot today, but today its a civil rights movement for the middle class.
If we are to take up a civil rights movement for the middle class Richard Kline points out that we must dispel the illusions, deception, and lies from MSM and that one of “the function[s] of a citizen is first, to understand that the official view is certain to be a spun-sugar bouffant of lies, and then second, to gather information which tests its accuracy. This is not, actually, that hard to do, because real information about the world and its venal, sad, hilarious ways lies everywhere by the roadside for the taking. —But even that is too much of an effort for homo Americanus. The fact that most Americans get their ‘news’ from television, a substantiall fact-free action video, tells the story in words few enough to fit on a postcard. “La-La Land, wish you were here. XOXOXO, the Family.” *hmmphh*
Craazyman noted that the middle class crisis and issues that we are confronting today is very difficult to get our arms around, and so it leads to resignation amongst the middle class.
“The primary problem, I think, is a lack of a clear and convincing alternative economic approach to the one we now have.
The issues of central banking, credit, regulation and capital ratios are so esoteric and so remote that few Americans can really build a world view around them. Not out of lack of intelligence but simply because it’s a completely foreign language.
In Vietnam the body bags and grainy video from the jungle were so emotionally brutal that they had the force needed for change. Waterhosing the children of Alabama, the ugly angry mobs of hatefilled faces, they shocked anyone of good conscience. And the ideological foundation of the American political system was the rocket fuel for social equality.
But when it comes to money and wealth, there’s a strong historical sense that “our system” — loosely defined as government-supported and managed free market free trade capitalism — has proven itself better than all the alternatives. This is quite subjective in the particulars and details, but the big picture — compared to communist Russia, China, the third world, Africa and even the slightly sclerotic “old Europe” or the sort of strange and rough post-communist Europe. None compete in the popular mind as an attractive alternative.
“If a few executives in New York make millions pulling the levers of our way of life, then, well, it’s a shame and they’re a bunch of assholes, but at the end of the day, what can we do about it?” This, I think, is sort of a distillation of the communal mind’s point of view at a subliminal level.
There is nothing in this crisis to grab on to — intellectually and ideologically — for most people. Just a stewing frustrated rage that something isn’t right with the big picture. And so we have a bewildering range of targets for rage including too much government, too little government, taxes too low, taxes too high, not enough bank lending, too much bank lending.
There’s no center, no point of communal traction that could be sloganeered into a reference point to rally around.
And so people acquiesce to a state of affairs that they know is messed up, but they don’t know quite why or what to do about it– other than tune out the morons on TV and try to survive the night in the jungle. And they don’t want to risk a wholesale upheaval that might make things worse.
It’s truly a policy wonk’s crisis. A crisis that requires some real statesmen and women who have political power, to step up and steer. Sadly, they seem few and far between.”
Picking up on Craazyman’s thread, Downsouth said,
“Ah, the sewing of hoplessness and disillusionment so thte people turn to defeatism or nihilism: It’s a method of social control as old as the hills, the ruling classes having deployed some of their finest thinkers to its engenderment and perpetuation.
It is a testament to the intelligence and thoroughness of the ruling elite that the ancient tactics of social control, long used in religion, have now been extended to the world of “science,” infusing the academe with pseudo-scientific dogmas such as the “finding” that nothing possibly can be done to correct the problem of free-riding in society.
“Rage is by no means an automatic reaction to misery and suffering as such;” Arendt observes in Crises of the Republic, “no one reacts with rage to an incurable disease or to an earthquake or, for that matter, to social conditions that seem to be unchangeable.”
Arendt thus gives us the reason why, first through religion and then later through “science,” the ruling elite hoped to persuade us that the city of this world is a “compact of injustice,” that “society is consigned to the devil” and that the social problem is “insoluble on any ethical basis”.
To reiterate what Yves said in her post
“I suppose it makes a difference whether one is old enough to remember the 1960s. Because people in large numbers got out and protested, two sets of changes that seemed impossible came about: civil rights for blacks and an end to the US involvement in Vietnam…”
Cullpepper wrote: Ho, ho, ho, Look out Yves, you just became the new face of the neo-populist movement.” I would not go so far as to say Yves is the face of the populist movement. There many faces on the populist movement to effect change. Elizabeth Warren is a far more visible persona and champion of the middle class. In fact, Warren has written two books on why the middle class never had it so bad!
And then there is the documentarist Michael Moore and journalists Lois Romano, Aaron Task, and so many countless others. Many folks are simply beginning to act in concert and at the same time. The catalyst for a middle class civil rights movement has arrived.
To that end, economists William Black and Dean Baker are hosting a demonstration in Chicago to remonstrate against Wall Street on Oct 25-27 in Chicago at the American Bankers Association annual meeting.
The sessions are organized by a coalition of community, consumer and labor organizations and are called “Showdown in Chicago“.
A number of commentators are planning a series of related posts and hopefully op-ed and news articles around this time. I will be attending, too and I look forward to seeing everyone there who can attend.
The Forgotten Man
This is the time to stand up for ourselves and be heard. Who are we? We are the Forgotten Man that Yale professor and sociologist William Graham Sumner wrote about at the end of the nineteenth century:
“The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C’s interests, are entirely overlooked. I call C the Forgotten Man.”
“As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X, or in the better case, what A, B, and C shall do for X…. [W]hat I want to do is to look up C…. He is the man who never is thought of.”
“He works, he votes, generally he prays–but he always pays. . . .”
In closing, I leave you with a quote from Michael Moore’s documentary to ponder:
“There has got to be some kind of rebellion between the people who have nothing and the people who have got it all.” Think about that and come on out this weekend!
Go to The Showdown website subtitled, “The American People vs Wall Street Banks.” , it is very cool. Clipped from their website:
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