The Big Takeover - Mountain Buzz
 



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Old 03-27-2009   #1
 
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The Big Takeover

I highly suggest reading this article by Matt Taibbi from Rolling Stones.


The Big Takeover

It's time to wake up to some harsh realities. The shit is right in front of our faces, but for some reason people continue to keep holding onto HOPE instead of facing cold-hard-reality.

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The real question from here is whether the Obama administration is going to move to bring the financial system back to a place where sanity is restored and the general public can have a say in things or whether the new financial bureaucracy will remain obscure, secretive and hopelessly complex.
It ain't looking to bright considering the people Obama has running his economic show. You can like and hope Obama is the man all you want, but do yourself a favor and really look and check out the background of his economic team (Rubin, Summers, Geithner, et al) It might make you lose hope though, so beware.


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So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream.
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People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations. The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.
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And on the linear spectrum of capitalism to socialism, where exactly are we now? Is there a dictionary word that even describes what we are now? It would be funny, if it weren't such a nightmare.

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Old 03-28-2009   #2
 
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Excellent article.

On a side note, can someone give me the address for AIG? I figured I would do my part and save the IRS the stamp and hassle of having to forward my taxes.
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Old 03-28-2009   #3
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I'd read that article before, and it's certainly good.

Regulation is the key. Something I read the other day, and which I hope bears out as the logical consequence and societal response to this economic mess:

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One of the most powerful lessons of history was certainly played out in the 43 year period between the end of Word War II and 1988. By the end of that time, it was completely obvious that people living under communism were not doing as well as most people living under some form of capitalism (at least in Europe). This became well known to the folks living in eastern Europe and the former Soviet Union, and contributed greatly to the downfall of communism, among other factors.
For the last 21 years, we have been following a similar social experiment between different styles of capitalism: more regulated and less regulated. Several western countries including Ireland and Iceland, as well as some of the Baltic countries, got rid of many regulations, particularly regulations regarding finance. For a while, their economies were shining stars, but now they are a mess. The US and Britain, the least regulated large economies, are now suffering greatly as well from the financial bubble. While Old Europe (to steal a phrase from Don Rumsfeld) is not nearly as affected by the recent debacle.
Turns out regulation was a pretty good idea, and we can see a benefit from it now that we didn't some 70 years after the crash of 29, which happened for similar reasons.

The great destroyed myth of this crash will (hopefully!) be that the financial markets are incapable of monitoring themselves with their best interests in mind.

I know you see National Socialism in all of this, but there is an impetus to re-establish regulations, and that is neither bad, nor does that put Obama in the pocket of the Illuminati (by the way, dear Illuminati, if you're reading this, I'm doing well in grad school and would like to join your ranks, and I'm not opposed to pushing my own mother down a staircase, presuming she's insured. Drop me a line...)
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Old 03-29-2009   #4
 
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Unbelievable article, however only unbelievable from the standpoint that it was published in Rolling Stone. I let my subscription lapse after the last years complete lack of objectivity.
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Old 03-29-2009   #5
 
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Turns out regulation was a pretty good idea, and we can see a benefit from it now that we didn't some 70 years after the crash of 29, which happened for similar reasons.
Phil Gramm's twin assaults on our economic system, the 1999 Gramm-Leach-Bliley Act and the Commodity Futures Modernization Act of 2000, allowed for the creation of banking and insurance megacorporations that were "too big to fail" and created the insane, unregulated gambling in so-called derivatives. Together, this pieces of shit, er, legislation, set the stage for the collapse.

Deregulation has been beneficial in some parts of the economy, but there is no question that Phil Gramm's deregulation of the financial industry has been cataclysmic. I would like to see Congress repeal both of his stinking laws. Oh, and it would be nice to see Phil and his wife "Enron"* Wendy in chains.

* Gramm and his wife were tied to the Enron scandal when it was revealed that Wendy Gramm wrote an exemption from federal oversight for Enron while she was head of the Commodity Futures Trading Commission. Wendy Gramm essentially used her position as the head of a major government agency to stop federal investigations and oversight of Enron's shady practices. Wendy Gramm then quit the commission and took a directorship with Enron. Nice.
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Old 03-29-2009   #6
 
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I think the only good that will come out of this crisis is that more people will start to wake up to the fact that our gov't has been bought -Democrats included- and that we need a reform of our gov't as well as re-regulation of the financial system.

The debate about the definition of Fascism (National Socialism) is still raging amongst the intellectuals. Many terms of political discourse generally aren't well defined. Capitalism, socialism, trade, democracy, pick any one... they are pretty loose terms. But, whatever... If you look at what is happening you will see that Geithner and the Obummer admin are first and foremost taking care of the bankers and corporations in the name of "we have no choice" and "too big to jail, I mean fail." There are plenty of other choices, they just don't care about them. They would prefer to hold onto and concentrate their power and continue to prop up a system that is seriously flawed - possibly fatally flawed. Sure, this system has brought us many great things... but at a HUGE COST to our planet -most of which we are just beginning to understand. Now, for all of you hard-core capitalists, I am not saying we need to trash the entire system, but I think we need to go beyond just fixing the symptoms and focus on some of the root causes of its problems. (Namely this idea of continual economic growth at the expense of raping our planet.) There are a lot of great things about capitalism, but there are some pretty crappy things too.

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As for President Obama, "I understand his political dilemma. And I sympathize with it. But he's trying to govern by convincing people that we will be able to get the old good times back. And my view is that the good times ain't comin' back. For lots of reasons -- including the ecological crisis and global warming and the weakness of our economy. This is the hard part. The sooner the country comes to terms with that, acknowledges it as fact, not just fear, then we can start this great era of reform and revitalizing the country and society." -William Grieder
Anyway... back to the re-regulation thing:


Obama recently said, "Bankers and executives on Wall Street need to realize that enriching themselves on the taxpayers' dime is inexcusable, that the days of outsized rewards and reckless speculation that puts us all at risk have to be over." And, yet, he continues to do nothing besides bail them out! "This is inexcusable, don't do it again, and here is your taxpayer money." WTF?!?!?!?

On Tuesday Geithner announced more bank bailouts... then on Thursday he came out and said he has "sweeping plans" to re-regulate the financial industry. Great... but how far do these sweeping plans to re-regulate go?

Do these "sweeping plans" jail any of the Wall Street crooks? Do these sweeping plans involve paying back the taxpayers in the future? Do these sweeping plans keep bankers from using the "revolving door" to go back and forth from banks to the gov't and back to the banks? (Geithner included!) Do these sweeping plans involve reforming our gov't and kicking out the corporations? Do these sweeping plans decentralize the power of mega-banks? Pretty much no to all of these questions... and there are so many more questions that need to be asked but aren't allowed to be asked. It looks as if these sweeping plans will actually centralize power and give more authority to the Federal Reserve!!

I recently read this interesting thing about oppression and domination. It talked about how at any particular point in history people have not understood what oppression and domination are. It's something you learn. For example: Women back in the mid-nineteenth century had no idea that they were being oppressed. The patriarchal way of life didn't feel like oppression, but rather it was just the normal way of life. Well, through learning, raising the level of consciousness and womens' activists struggles they started to learn in fact that they were being oppressed. There are so many more examples of this throughout history...

What I'm getting at is that at this moment in history it is becoming obvious -at least to me- that a small group of powerful men are oppressing and dominating the majority. They are ripping me off while at the same time telling me that it is necessary. They are trampling my liberties while telling me it is necessary for my security. They are telling me that we have democracy and yet they -for the most part- ignore the majority. (A recent example: 85% of Americans -including over 200 of the most prominent US economists - were against TARP, and yet the bill sailed right through Congress while completely ignoring the majority)

Now, I am aware that this oppression and domination are pale in comparison to the past centuries and that I have a pretty sweet little life. I am also aware that this is just "how it's been throughout the ages" and that our world today is obviously much better than the former days, but could it be better? Shouldn't we always be striving to improve our society and our world? Why should I help pay for bailing out rich bankers and crooks? Why should I help pay for 2 wars that I don't believe in? Is this freedom? I don't think so. Because if I choose to stop paying taxes because of my disagreements with the gov't, I will go to jail. Is that really freedom? Not to me, I think it's a form of oppression and domination. Maybe to somebody else it's fine, just the way it is, and that's okay too, but I'm not buying it anymore... and that's not up for debate. You know, I would be happy to pay 20-something percent of my taxes if they went to a better use (schools, infrastructure, etc)

Anyway... that's my rant for the week.
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Old 03-30-2009   #7
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REQUIRED READING

I don't disagree, Marko.

You should read this piece in The Atlantic (which to me is the most reputably unbiased publication in the US today, FWIW).

The Quiet Coup - The Atlantic (May 2009)

It affirms much of what you're speaking to. My main point of disagreement with you is that you seem to presume oligarchs are self-aware of and unashamed of their own kleptocratic agenda.

"Your enemy is never a villain in his own eyes."

Some money quotes for people who SHOULD read that link, but might not.
Quote:
The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.
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Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.


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The financial sector of the US economy is responsible for 41 percent of all corporate profit "this decade" (I'm not precisely sure what years are being referenced.)

Someone has said that the US economy is driven by flipping burgers and exchanging pieces of paper. That's not a recipe for continued national well-being.

More quotes:
Quote:
A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true. Alan Greenspan’s pronouncements in favor of unregulated financial markets are well known. Yet Greenspan was hardly alone. This is what Ben Bernanke, the man who succeeded him, said in 2006: “The management of market risk and credit risk has become increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks.”

Of course, this was mostly an illusion. Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling underpriced insurance on complex, poorly understood securities. Often described as “picking up nickels in front of a steamroller,” this strategy is profitable in ordinary years, and catastrophic in bad ones. As of last fall, AIG had outstanding insurance on more than $400 billion in securities. To date, the U.S. government, in an effort to rescue the company, has committed about $180 billion in investments and loans to cover losses that AIG’s sophisticated risk modeling had said were virtually impossible.
So Marko, I interpret this passage as affirmation of my theory that legislators think they are doing something good for the country as a whole. And there is ample evidence that a variety of deregulation has in fact helped raise the standard of living in this country, driven growth within the country (and outside of it, which isn't necessarily bad on the whole, but the debate about the consequences of outsourcing is long from understood and ended).

It turns out that the theories advanced by Wall Streeters and entering Washington on the last decade were simply: wrong. Is it necessary to allocate malfeasance to it? I argue it is neither necessary, nor helpful to do so. I am not nearly so interested in assigning blame, even if crimes have been committed, as I am trying to steer the country toward plausible solutions.
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Old 03-30-2009   #8
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Continuing from the above article:

Herein is where I think Marko and I are in strong (if not pure) agreement:

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The response so far is perhaps best described as “policy by deal”: when a major financial institution gets into trouble, the Treasury Department and the Federal Reserve engineer a bailout over the weekend and announce on Monday that everything is fine. In March 2008, Bear Stearns was sold to JP Morgan Chase in what looked to many like a gift to JP Morgan. (Jamie Dimon, JP Morgan’s CEO, sits on the board of directors of the Federal Reserve Bank of New York, which, along with the Treasury Department, brokered the deal.) In September, we saw the sale of Merrill Lynch to Bank of America, the first bailout of AIG, and the takeover and immediate sale of Washington Mutual to JP Morgan—all of which were brokered by the government. In October, nine large banks were recapitalized on the same day behind closed doors in Washington. This, in turn, was followed by additional bailouts for Citigroup, AIG, Bank of America, Citigroup (again), and AIG (again).

Some of these deals may have been reasonable responses to the immediate situation. But it was never clear (and still isn’t) what combination of interests was being served, and how. Treasury and the Fed did not act according to any publicly articulated principles, but just worked out a transaction and claimed it was the best that could be done under the circumstances. This was late-night, backroom dealing, pure and simple.
There is the problem that our ("our") government is acquiescing (although I would strongly disagree it is "kowtowing") to the financial sector "expertise."

My contention with this is that these idiots have already proven themselves incapable of risk-management on the two critical sides of any risk-management dilemma. First, they don't understand the probabilities associated with various outcomes, and second, they don't understand the negative consequences and most especially, ramifications associated with bad outcomes.

it continues to bother me that the Obama administration is throwing money at problems when NO DATA WHATSOEVER is available at this point in time to determine if earlier expenditures have had the desired effect. In my study of statistics and regression analysis, that's the clearest problem with all strategies right now, and it's confirmed (in my mind) by the various and divergent points of view about what should be done right now by economists who are much smarter in banking issues than I ever can be: we don't have enough data to draw any meaningful correlation between spending policy and economic stability (let alone recovery).
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Old 03-30-2009   #9
 
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Originally Posted by heliodorus04 View Post
It affirms much of what you're speaking to. My main point of disagreement with you is that you seem to presume oligarchs are self-aware of and unashamed of their own kleptocratic agenda.

"Your enemy is never a villain in his own eyes."
First off, it's nice to have a few agreements with each other.

Let me address your main point of disagreement.

I don't think that the oligarchs are running around fully aware and unashamed of being criminal assholes and dare I say it... evil-like.

Here is how I actually see it.

If I have my jackboot on somebody's neck and am crushing their windpipe, I don't tell myself that I am an asshole and a criminal and I most definitely don't see it as wrong. I tell myself that I am doing this for their own good because I am right and they need to learn a lesson. It's simply a formula for rationalizing away the things which others might see as wrong. At no point while I am crushing their windpipe do I feel ashamed of my actions. You know, when the colonists were expanding into Native American lands they did exactly this. They told themsleves, "We are the civilized and righteous people" and "they are the barbaric, ass-backwards people and killing them and taking their land away is for their own good. They need to learn to be civilized, like us, or die." At no point - and I'm assuming - did they feel ashamed or fully aware that what they were doing was probably wrong.

The same thing applies to the oligarchs. I just don't think they care about anything but themselves and they must feel righteous and justified in their actions... Afterall, we are the stupid majority - the bewildered herd - and they need to tell us what to do because they are the "experts" and the "righteous."


Quote:
So Marko, I interpret this passage as affirmation of my theory that legislators think they are doing something good for the country as a whole. And there is ample evidence that a variety of deregulation has in fact helped raise the standard of living in this country, driven growth within the country (and outside of it, which isn't necessarily bad on the whole, but the debate about the consequences of outsourcing is long from understood and ended).
I agree, that the standard of living was raised, but not by creating real wealth... it was created by debt creation and inflating assets. The majority of this wealth creation wasn't real. It was an asset bubble. It would have been real IF the assets were able to stay inflated -forever. The dude in Florida who had a $300,000 house felt wealthy at one point, but now his asset has deflated and he has a $300,000 mortgage with a house valued at $90,000. His wealth is gone, and he his F$#kED and deeply in debt! Now, we are seeing economists and the Obama admin trying to find ways to re-inflate the system. If they can't then a lot of the living standards that were raised will disappear.


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Old 03-30-2009   #10
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Crushing the windpipe may be a bit extreme of an example. I prefer the cop busting Caspermike because CM had 1/8 oz. of fine Casper Chronic.

The cop's motivations are all noble (backstep: we presume he's a cop for honest reasons, not malicious ones). The cop in this instance stands against drive-by shootings. Busting CM sends the message that possession is a crime for which his jurisdiction has no leniency and no tolerance, because even 1/8 oz. is fueling the drug war. CM (and I, for the record) see the cop's actions as a futile perpetuation of the seedy side of prohibition. It furthers the black market practices of prohibition, and creates violent crime where none would exist were the Chronic legal.

Life is in the shades of gray.
The issue I want to draw in the metaphor above is that both sides have equal claim to validity in the abstract. China dealt with its illegal drug trade effectively through intolerance to criminal dealings. Amsterdam has dealt with the black market crime issue through legalization. Both policies had down-sides (China killed and imprisoned tons; Amsterdam is a pretty seedy city even today).

Deregulation under Reagan produced two insanely beneficial revolutions in how human beings exist: the personal computer revolution and the telecommunications revolution.

Where I agree with you about deregulation is that over the last 10 years-(ish) there has been no real middle class economic growth. The rich have certainly benefited, and certain industries boon in those situations. I've seen the yachts plying out the intercoastal in Ft. Lauderdale. God bless all of them their fortunes and especially the industrious ship-builders who capitalized on that market. That is in and of itself, cool.

That being said, the ranks of the unemployed have grown, the ranks of the impoverished have grown, and the middle class has lost actual spending power. These things destabilize society. I see deregulation of the financial sector as an experiment that now has clearly shown that it has utterly failed.

Where I also agree with you is that the notion that the world economies can continue to grow forever at double-digit pace is absurd on the facts themselves (those facts being that we have an ever-increasing population competing for a set of finite planetary resources). Unless we get off the planet viably, or we limit populations to a fixed number, cataclysm awaits us at some point. It's not likely to be in my lifetime, but it might be.

I understand why washington is looking to the 'experts' in the financial sector for ideas: they know the system best, and it's logical to start with those people. It's the prudence of not waiting that concerns me. And it bothers most people that the idiots (and the greedy) are the ones being protected in this mess. I don't think alternatives to throwing money at the problem have been considered enough.

In defense of the idiots and the greedy, there's only one truly similar episode in history from which to draw conclusions about outcomes, and they're extrapolating from sound schools of reason.

There's a real problem in that the solutions being bandied about focus exclusively on short-term results with assumptions about mid-term consequence and no real ability to hypothesize about long term consequence. What will happen when short-term implementation fails to produce beneficial near-term results is what worries the hell out of me.

As for Obama, I'm pleased that he seems willing to deal with systemic problems even in the midst of this. He's willing to discuss re-regulation. He's willing to tackle entitlement and military spending growth. And he recognizes the need to use this opportunity to make meaningful institutional change. I'm hopeful about the political process adapting to new imperatives. I'm less hopeful about financial practices adapting to the higher good of the middle class.
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