Alex Cockburn on the fall of Neo-liberalism

Alex Cockburn lays the blame for the lending/finance crisis on the bipartisan-backed move to de-regulation, and on Phil Gramm (as I have suggested for the last week or so). Bill Clinton, however, signed off on ALL of it. Cockburn can be fairly offensive and hotheaded on occasion, but he wields a fairly wicked Maratian plume:

"....And if you want to identify symbolic figures in the legislated career of deregulation, there are no more resplendent culprits than the man at McCain’s elbow, Phil Gramm, and the man standing at Obama’s elbow at his press conference, Robert Rubin.

Take Gramm first.

In 1999 John McCain’s friend and now his closest economic counselor, then a senator from Texas, was the prime Republican force pushing through the Gramm-Leach-Bliley Act. It repealed the old Glass-Steagall Act, passed in the Great Depression, which prohibited a commercial bank from being in the investment and insurance business. President Bill Clinton cheerfully signed it into law.

A year later Gramm, chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill, voted on by Congress right before a recess. The amendment received no scrutiny and duly became the Commodity Futures Modernization Act which okayed deregulation of investment banks, exempting most over the counter derivatives, credit derivatives, credit defaults, and swaps from regulatory scrutiny. Thus were born the scams that produced the debacle of Enron, a company on whose board sat Gramm’s wife Wendy. She had served on the Commodity Futures Trading Commission from 1983 to 1993 and devised many of the rules coded into law by her husband in 2000.

Somewhat stained by the Enron debacle Gramm quit the senate in 2002 and began to enjoy the fruits of his own deregulatory efforts. He became a vice chairman of the giant Swiss bank UBS’ new investment arm in the US, lobbying Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006, urging Congress to roll back strong state rules trying to crimp the predatory tactics of the subprime mortgage industry. UBS took a bath of about $20 billion in write offs from bad real estate loans this year.""

Gramm's the real Richard III of the lending/finance/GSE scam, though Clinton may be just as responsible, given his rubber-stamping of the GOP/Gramm schemes. At the same time, the loan sharks and underwriters themselves (whether corp., or cowtown) should also be held accountable, certainly from a business standpoint. A Gramm or Dodd or Barney Mac did not sign the notes: JP Morgan/AIG/G-Sach/Wachovia does.


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Trials and Tribulations (Obama on Bailout).

Obama shows his Demopublican colors (the link to Obama's words via a Fox article implies neither support for GOP or McCaint-- or Fox-- except to DyslexiCrats):

“Democrats and Republicans, step up to the plate. Get it done,” Obama said, addressing his remarks to lawmakers in Washington. “And understand even as you get it done to stabilize the markets, we have more work to do to make sure that Main Street is getting the same kind of help that Wall Street is getting.”

Obama was 40 minutes late taking the stage, telling the crowd he’d been talking with Treasury Secretary Paulson and Speaker Pelosi following the bill’s defeat. “They are still trying to work through this rescue package. And obviously this is a very difficult thing to do. It’s difficult because we shouldn’t have gotten here in the first place,” he said.

“Democratic and Republican leaders have agreed, but members have not yet agreed. And there are going to be some bumps and trials and tribulations and ups and downs before we get this rescue package done,” Obama said. “It’s important for the American public and for the markets to stay calm because things are never smooth in Congress, and to understand that it will get done.”

Obama the insider, like his mentor Bill Clinton, apparently has no problem affirming the Bush-led bailout (McCaint also approves) and working alongside America's financial elite, though, yes, he does anticipate "trials and tribulations". (nothin' like a quote from the Book of Revelation to inspire the masses. Brutha be representin', y'all).


Obamaites often repeat the Accountability mantra of the PC left, not without some reason: BushCo should be held accountable, at least for IWE. Accountability would, presumably, also apply to economics and financial dealings. The New Deal legislation addressed to banking and speculation--the Glass Steagall Act, FHA, Fannie Mae, FDIC, etc.-- upheld the principle of Accountability as well, arguably. The GOP worked for years to overturn that legislation; it was Nixon who signed into effect FHLMC aka Freddie Mac, which privatized the older FanMae.

With De-regocrat Bill Clinton at the helm, the Gramm/Gingrich led GOP finally managed to overturn the New Deal regs completely, thereby allowing the JP Morgans, AIGs and G-Sachs to convert Americans' mortgage and retirement savings into a fat stack of chips to be used at the speculator’s poker table. Given his support of Bush/Paulsen's corporate welfare plan, Mr. Obama has himself, at least implicitly, pulled up a chair at the speculator's table. (DFV).

While Mike Whitney doesn't quite match Prez-elect BO in terms of biblical invocation (or Comrade Cockburn's invective) Whitney believes the US "is headed into its worst recession in 60 years":

"Indeed, the $700 billion is just part of a massive "pump and dump" scheme engineered with the tacit approval of the US Treasury and the Federal Reserve. Once the banksters have offloaded their fraudulent securities and crappy paper on Uncle Sam, they will do whatever they need to do pad the bottom line and drive their stocks up. That means they will shovel capital into hard assets, foreign currencies, gold, interest rate swaps, carry trade swindles, and Swiss bank accounts. The notion that they will recapitalize so they can provide loans to US consumers and businesses in a slumping economy is a pipedream.

The US is headed into its worst recession in 60 years. The housing market is crashing, securitization is kaput, and the broader economy is drifting towards the reef. The banks are not going to waste their time trying to revive a moribund US market where consumers and businesses are already tapped out. No way; it's on to greener pastures. They'll move their capital wherever they think they can maximize their profits. In fact, a sizable portion of the $700 billion will likely be invested in commodities, which means that we'll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices into the stratosphere. Ironically, the taxpayers’ largesse will be used against them, making a bad situation even worse."

Yikes. Paranoia as Praxis. Whitney makes one important point: investment and speculation has some relation to the "real economy" of jobs and production (Samuelson's words), usually a negative relation for middle and lower class citizens (the great depression itself evidence of that relation). In effect the provisions of the bailout allow for a few dozen boxcars' worth of chips (700 billion dollars worth) to be doled out to the state-sponsored gamblers at the commodity casino, and Whitney believes that "means that we'll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices into the stratosphere." Es posible.