New Articles as of January 21, 2010

Coakley's Loss: Pie in the President's Face

by WILLIAM GREIDER

The Nation  January 20, 2010

Barack Obama went to Boston to rally voters and got a pie in the face. He lost his innocence as the valiant young president and also lost his sixty-vote majority in the Senate. Now we will find out what the man is made of--either a true political leader or just another show horse. Dozens of explanations are being offered for why the Dems were humiliated in Massachusetts. Democrats incline to grab easy answers. The president, if he is tough enough, will instead face the hard message of this political fiasco.
The special election displayed monumental miscalculations by which Obama has governed, both in priorities and political-legislative strategies. It may seem perverse and unfair, but the president's various actions for reform generated a vaguely poisonous identity. Amid the general suffering, Obama is widely seen as collaborating with two popular villains--the me-first bankers and over-educated policy technocrats of the permanent governing elite. Obama made nice with the bankers and loaded up his administration with Harvard policy wonks who really don't know the country. These malignant associations gain traction because people see there are grains of truth in observable reality.
On Sunday, I listened on the radio to Obama's soaring speech at Northeastern University and remembered again why his oratory first took the nation to the mountaintop. His attack lines lashing bankers and insurance companies were fluid and tough, shouted repetitively over the rising cheers. His diction was loosely colloquial. He dropped the hard g's to get down with the folks. Too little, too late, I figured. He is still masterful, but this is performance, not substance. People grasp the difference between the two. This gulf will imprison Obama as a stereotype for weakness, a joke on late-night TV, if he doesn't change.
The humiliation, I decided, could become a good thing for this presidency if it forces Obama to rethink his political strategy and rearrange his governing order. For all his brains and talent, for all the brainy people around him, the Obama White House seems tone-deaf and blind on many aspects of the popular reality. Too full of itself to listen closely. Too condescending to recognize the rage and fear are about more than right-wing frothers.
On healthcare, Obama played coy while his White House aides cut private deals with the drug industry and other sectors. The legislative process was drawn out month after month in an addled bargaining marathon with hostile Republicans (who stiffed him in return) and industry-leaning Democrats (who got whatever they demanded). The liberal base was conned, ignored and bullied, as its vital issues were one by one discarded. Labor unions were stroked and intimidated by the White House, then double-crossed as Obama's reform extracted greater costs from union members than it demanded from the drug makers. People at large were confused, then frightened. They could not understand what reform would do for them, and some of their doubts were well-founded. The longer it went on, the more people wondered why Democrats weren't talking about their problem--jobs and incomes.
Obama's mild-mannered faith in bipartisan deal-making seemed strangely out of touch. Didn't he realize Republicans were going to maul him at every turn?
The bankers, meanwhile, did their own tap dance on the new president, putting a paw on his shoulder while gobbling up public resources. Obama kept holding meetings with them, urging them to do the "right thing." They practically laughed in his face.
People were meanwhile agitated by the swelling budget deficits and easy prey for right-wing propaganda. Instead of explaining the economic necessity of deficit spending in a straightforward way, Obama adopted these worries as his own. He has promised to reduce spending, but he cannot deliver on this if he truly expects recovery.
Obama's style became an inadvertent formula for sapping the life out of the political majority that elected him, deflating the reach of reform and turning off the electoral base that came together in 2008. Democrats are being told (and telling themselves) that they over-reached, but what became clear as the months dragged on is the Democratic party under-achieved, and so did its president.
Obama's most disturbing quality is that he evidently intended this from the start. Soaring rhetoric notwithstanding, he managed the presidency as a pragmatist in search of the possible. The real goals for change were minimalist, not visionary. This has to change and soon, if he is to revive his presidency.
Obama, in other words, has to change himself. That may sound too wishful and maybe it is. But we know he is a brilliant politician, astute in his political vision. The great politicians, when faced with new circumstances, revise themselves. We will see if Obama can.
First, he has to clear out the cobwebs of his hopeful aspirations and take on the fight. To do so, he also has to clear away a lot of the people around him. If Rahm Emmauel was the chief strategist, the guy who made the private deals and told the senators what they could accept, he failed big-time and should be replaced. Find a new manager whose thinking was not shaped by cynical triangulation in the Clinton era.
The president chose Larry Summer and Timothy Geithner to speak for the administration on the economy. Can you imagine finding anyone less convincing? Both are active advocates of the Wall Street status quo, neither has any feel for what's happening in the country. The bean counters led the president into the trap he now faces. Permissive bailouts created flush financial giants that sit on their profits and ignore the public need for lending. Dump the bean counters now.
Obama's turn-around speech would declare--honestly--that he misjudged the situation. The damage is far worse than he originally realized. Some deeper structural changes are required. The political opposition is more than ever blindly resistant than he had hoped. But now Obama can promise to govern nose-to-nose against the political forces blocking everything he attempts. He may not prevail, he concedes. But he is going to throw himself at them and he asks the people to join him in the fight.
If comprehensive healthcare reform is out of the question, Obama Democrats can break it down into smaller pieces and try to pass worthy measures one by one. A bill to prohibit insurance companies from banning people with pre-existing ailments? Pass it the House and try to pass it in the Senate. If Republicans want to filibuster, make them filibuster. A measure to allow cheaper drug imports from Canada? Let Republicans vote against that. Repealing the antitrust exemption for insurance companies--Democrats support it. Democrats need to start a fight on taxes too. Do Republicans want to tax Wall Street banks or not? Obama has proposed it, let's have a roll call. The attack strategy will focus on all the reforms people want and need and create a new political dynamic.
At the same time, Obama has to change the subject by refocusing reform actions on jobs and the structure of the faltering economy. Do something concrete and visible. If it doesn't work, try something else. If it's real, people will respond. If it doesn't succeed, people will understand. A governing agenda that creates a sense of action and shared commitment does not require cerebral policy wonks. Go anywhere in America and you will hear fresh thinking about how to get the country out of the ditch.
Obama needs to locate some seasoned politicians and bring them into the White House--people with a less cynical view of the Democratic party and deep experience in how to mobilize substantive political support. That includes the active citizens who do not mess with elections because they consider them a waste of energy. People who want big change are all over this country, nurturing new ideas and waiting to be asked.
Barack Obama is a cool character, not given to impulsiveness. But he needs to accept that the political assumptions with which he began his presidency are malfunctioning. I can't be sure he will be brave enough to change things. I do say he cannot wait for his second term.

About William Greider

National affairs correspondent William Greider has been a political journalist for more than thirty-five years. A former Rolling Stone and Washington Post editor, he is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The Soul of Capitalism (Simon & Schuster) and, most recently, Come Home, America. more...

Published on Wednesday, January 20, 2010 by Environment News Service
Thirst for Oil Imperils South America's Most Biodiverse Wilderness
by Environment News Service
QUITO, Ecuador - Yasuní National Park, located in the core of the Ecuadorian Amazon, is the most biodiverse area in all of South America, a team of Ecuadorean, American, and European scientists concludes in the first major peer-reviewed study of life forms in the park, published today.
But the 13 scientists warn that proposed oil development in Yasuní threatens to destroy one of the world's last high-biodiversity wilderness areas.
An agreement between the Ecuadorian government and the United Nations for a $3 billion trust fund that would compensate Ecuador for protecting the most vulnerable area of Yasuní by leaving the oil underground has begun to unravel.
"Yasuní is at the center of a small zone where South America's amphibians, birds, mammals, and vascular plants all reach maximum diversity," said co-author Dr. Clinton Jenkins of the University of Maryland. "We dubbed this area the 'quadruple richness center.'"
"This quadruple richness center has only one viable strict protected area - Yasuní. The park covers just 14 percent of the quadruple richness center's area, whereas active or proposed oil concessions cover 79 percent," the authors write in the open-access scientific journal PLoS ONE, where the study appears today.
"One of our most important findings about Yasuní is that small areas of forest harbor extremely high numbers of animals and plants," said lead author Margot Bass, president of Finding Species, a nonprofit with offices in Quito and Maryland. "Yasuní is probably unmatched by any other park in the world for total numbers of species."
Yasuní contains 28 endangered vertebrates on the IUCN Red List of Threatened Species. These include large primates such as the white-bellied spider monkey and Poeppig's woolly monkey and aquatic mammals such as the giant otter and Amazonian manatee, as well as and hundreds of regional species found nowhere else on Earth.
An average upland hectare (2.47 acres) in Yasuní contains 655 tree species, more than are native to the continental United States and Canada combined. The number of tree species rises to over 1,100 for an area of 25 hectares.
"In just one hectare in Yasuní, there are more tree, shrub, and liana [woody vine] species than anywhere else in the world," said Gorky Villa, an Ecuadorian botanist working with both the Smithsonian Institution and Finding Species.
A single hectare of forest in Yasuní is projected to contain 100,000 insect species, the highest estimated diversity per unit area in the world for any plant or animal group, says eminent entomologist Dr. Terry Erwin.

Yasuní National Park is an UNESCO Biosphere Reserve and World Heritage Site. The extraordinary diversity of this rainforest is best exemplified at the 6.5 square kilometer Tiputini Biodiversity Station, located on the northern edge of the park.
"The Tiputini Biodiversity Station is home to 247 amphibian and reptile species, 550 bird species, and around 200 mammal species, including 10 primates and an array of large predators," said Dr. Kelly Swing of the University of San Francisco in Quito.
"In addition, the station is the richest site in the world for bats," said researcher Dr. Thomas Kunz of Boston University. "We estimate that over 100 different bat species inhabit this small area."
"What makes Yasuní especially important is its potential to sustain this extraordinary biodiversity in the long term," said co-author Dr. Matt Finer of Save America's Forests, a nonprofit advocacy organization based in Washington, DC. "For example, the Yasuní region is predicted to maintain wet, rainforest conditions as climate change-induced drought intensifies in the eastern Amazon."
The paper concludes with science-based policy recommendations including a moratorium on new oil exploration or road construction within the park, and creating areas off-limits to large-scale development in adjacent northern Peru.
The scientists warn that oil can not be extracted without significant and irreversible negative ecological impacts, particularly in the remote and relatively intact oil rich northeast corner of Yasuní National Park which contains oil blocks 31 and ITT.
The Ecuadorian government has been promoting an innovative plan, known as the Yasun&iacute-ITT Initiative, which would leave the park's largest oil reserves in the ITT block permanently underground in exchange for international donations of US$3 billion over the next 10 years.
Under the Yasuní-ITT Initiative, 900 million barrels of oil, worth US$6 billion would not be extracted as a contribution to fighting climate change.
But this initiative has started to fall apart. Ecuadorian and UN Development Programme officials were expected to sign the trust fund documents at the UN climate summit in Copenhagen in December, but in the event nothing was signed.
President Rafael Correa revealed in his radio address to the nation on Saturday that he ordered his team in Copenhagen not to sign the detailed Terms of Reference for the UN Development Programme trust fund because of what he called the "shameful" conditions set up by the trust fund.
Correa said Saturday some countries had attached many too conditions to their donations - conditions that were "unacceptable," because they harmed Ecuador's sovereignty and dignity.
In the days following President Correa's radio broadcast, Ecuadorian Foreign Minister Fander Falconi and two other high level members of the Ecuadorian negotiating team resigned in protest of Correa's attacks, disputing his negative characterization of the trust fund terms.
The president said the committee negotiating the Yasuní-ITT Initiative has until June to close a deal or his government will begin to explore the oil reserves.
In his resignation statement, Falconi opposed the six-month time limit on the talks.
Dr. Finer said today, "If the Yasuní-ITT Initiative does not succeed, the tragic reality will be drilling for oil in the core of the most biodiverse rainforest on Earth."

Published on Wednesday, January 20, 2010 by TruthDig.com
What Massachusetts Got Right
by Robert Scheer
The president got creamed in Massachusetts. No amount of blaming this disastrous outcome on the weaknesses of the local Democratic candidate or her Republican opponent's strengths can gainsay that fact. Obama's opportunistic search for win-win solutions to our health care concerns and our larger economic problems is leading to a lose-lose outcome for the president and the country.
The two issues that mattered on Election Day were the economy, which Obama has sold out to Wall Street-as quite a few disgruntled voters pointed out-and his plea to save health care reform, which the voters who had backed him for the presidency with a huge majority now spurned. It is significant that it was the voters of Massachusetts who have now derailed the Democrats' efforts to revamp the country's health care system by denying them the necessary 60th vote in the Senate, for these voters know the subject well.
The federal proposal is based on their own state's model requiring people to obtain health insurance without the state doing anything to effectively control costs through an alternative to the private insurance corporations. Lacking a public option, the cost of health care in Massachusetts, already the highest in the nation at the time of the plan's implementation, has spiraled upward. Services have been curtailed, and many, particularly younger people, feel they are being forced to sacrifice to pay for a system that doesn't work.
Instead of blindly following the failed Massachusetts model, Obama should have insisted on an extension of the Medicare program to all who are willing to pay for it. He squandered the opportunity to bring about meaningful health care change that the public would have supported had it been kept simple and just. Instead, Obama gave away the store to medical profiteers. They, in turn, hopelessly muddied the waters with well-funded scare advertising tactics that principled leadership on Obama's part could have thwarted.
A mere seven months ago, The New York Times/ CBS poll found that 72% of Americans "supported a government-administered insurance plan-something like Medicare for those under 65-that would compete for customers with private insurers." Even half of those identified as Republican said they would back such a public plan, as would three out of four independents and 90% of Democrats. Instead of heeding that call by endorsing a serious extension of Medicare, along with increased subsidies for those who could not afford it, Obama played to the conservatives in Congress-and they rolled him.
If he wasn't prepared to make a breakthrough in health care, and that meant a reform program that would begin sooner rather than later, he should have put it on a back burner. The furor over a very unsatisfactory plan drew attention from the far bigger crisis concerning the meltdown of the nation's economy. By accepting and indeed expanding the Bush administration's strategy of throwing money at Wall Street, Obama ceded the populist label to the Tea Party Republicans who now pretend that a banking mess brought about by their radical deregulatory philosophy is not of their making.
It is the economy, stupid, and the sooner Obama grasps that, the better for his and the nation's prospects. A new Wall Street Journal/NBC poll finds that "Americans ranked job creation and economic growth as their clear top priority for the federal government, well above national security and deficit reduction. Health care, Mr. Obama's top domestic priority in 2009, now ranks fourth, closely trailing the deficit and government spending."
Of course, the public is right. In the midst of the worst economic crisis in 70 years, why waste enormous political capital battling to pass a health care plan that is modeled on a proven failure in Massachusetts, as voters there clearly registered? Meanwhile, the president has dropped the ball in the effort to make bankers act responsibly by forcing them to forego outrageous bonuses and help homeowners stay in their homes.
Again quoting the message of that Wall Street Journal/NBC poll: "The president's focus on health care amid heightened job concerns could be hurting his ratings. At the one-year mark of his presidency, 35% of Americans said they were ‘quite' or extremely' confident he had the right priorities to improve the economy, down from 46% at midyear." The Journal noted that a majority disapproved of the government's response to the financial crisis, adding, "The related problem for Mr. Obama is the public's lingering anger about the bailouts of 2008 and 2009, which helped boost bank profits even as unemployment grew-a toxic political problem."
To salvage his presidency, Obama must reverse course and make solving the "toxic political problem" of Wall Street greed that's bankrupting the country his highest priority. 

Published on Tuesday, January 19, 2010 by Mother Jones
Copenhangover: Rallying for Next Steps
by Bill McKibben
Depending on how you look at it, the Copenhagen climate talks ended either in ignominious failure, or vanilla failure, or just-about-but-not-quite-that-bad failure. The Swedes: a "disaster." UK leader Gordon Brown : "at best flawed, at worst chaotic." The financial markets, when they opened the following Monday, sent clean-tech stocks plummeting. You can judge the extent of the debacle by the quick attempts to deflect blame: "British Minister Blames China for Opposing Copenhagen Deal," the Times of India reported . "China Rejects Blame for Copenhagen Failure," responded the New Statesman a few days later. "EU Blames Others for 'Great Failure' On Climate," the New York Times noted . In the days following the conference's end (delegates were shooed out of the vast convention center to make way for a design show), a few inside-the-Beltway environmentalists insisted it had been a success after all, because at least China and the US were talking, or because it paved the way for something to happen in the Senate, or because whatever. But the president himself, speaking a few days after his return from the Danish capital, seemed more able to deal with reality: "I think that people are justified in being disappointed about the outcome in Copenhagen," he told PBS. "At least we kind of held ground and there wasn't too much backsliding from where we were."
The failure might be defined this way: The world came together and looked climate change fairly straight in the eye, and then its most powerful nations blinked.
Civil society did a remarkable job forcing that stare-down-it managed to make an atmospheric carbon target of 350 parts per million the synonym for seriousness. (I helped organize one such effort at 350.org ). One hundred and twelve nations endorsed that target during the Copenhagen meeting-but not the US and not China. Both had severe political constraints: For Obama it was 60 votes in the Senate and the power of the fossil fuel lobby; for Beijing, hundreds of millions of poor people looking for the easiest way out of their poverty. Both, for now, chose political realism over scientific realism; neither were willing to bet their futures on a dramatic transition away from coal and oil.
And so the climate change movement-arguably now the most widespread global movement ever-needs to figure out what comes next. Copenhagen has passed, and with it what seemed the perfect moment to take bold action. How now to build pressure, how now to force change?
In some ways, it's too early to say for sure, especially since we don't know how the minimalist accord Obama negotiated at the end of the conference will play out. There may be more international meetings this year, leading up to another Conference of the Parties in Mexico City next December. But it's hard to imagine it turning into the same kind of spectacle. Meanwhile, green technology continues to spread-but by most accounts too slowly to alter the planet's fate, barring a change in global policy that would accelerate the process. So there's no rest in sight.
If any international accord is ever to succeed, American campaigners will have to make more progress within our own borders-the inability of the world's greatest economic power to break with fossil fuel holds back every other nation. But that's easier said than done-not only is the opposition fierce, but the American movement is fractured in powerful, perhaps dangerous ways. So here's an early attempt to block out some of the action we can expect in the months ahead:
1) The Senate Bill
Known originally as Kerry-Boxer, and now Kerry-Boxer-Graham-Lieberman-and-whoever-else-might-be-the-60th-vote-and-hence-can-name-their-price, this is the "economy-wide cap-and-trade" bill that the administration has been working with its allies on Capitol Hill to craft since Obama took office. In its simplest form, it sets "caps" on the amount of carbon that utilities and the like can emit, and then allows them to trade those allowances, theoretically producing reductions in carbon emissions at the lowest possible cost. It's modeled on legislation that helped reduce sulfur and nitrogen pollution from power plants over the last few decades; the Europeans have tried a similar system with mixed results to meet their Kyoto targets; and there are regional attempts at such a scheme in the US already, most notably in the northeast.
The bill is embraced by most of the big national green groups, either because they really like the cap-and-trade idea, or because they see it as the most politically realistic approach-that is, they think it can "count to 60." Its initial targets are feeble-by 2020 America would have cut its emissions only 7 percent below 1990 levels, even as scientists say 40 percent would be more appropriate. But, writes Joe Romm, the indefatigable climate blogger who works for the very administration-connected Center for American Progress, it still would "create the institutions and the technology deployment capability so that come 2020ish, if the world gets appropriately desperate, we can act appropriately desperately."
Romm predicts that Congress will be able to pass some version of the cap-and-trade bill-in the wake of Copenhagen he wrote, "I am more confident than ever we will see a serious economy-wide climate and clean energy bill pass in 2010"-if, that is, the president gets actively involved. Once such a bill passes, he says, China will be on the spot: "They've been behind a wall for a long time, and they haven't had to demonstrate leadership to maintain credibility." And over time, what seems controversial now will seem inevitable. "If Obama wins a second term, there won't be a Republican coming in till 2017, and by then global warming will be painfully obvious. I have difficulty believing this bill will still be a contentious political issue."
For the moment, though, it's about as contentious as it gets, which is why not everyone is as convinced that a cap-and-trade bill will pass this year. As Sen. Joe Lieberman (I-Conn.) told the Washington Post's Juliet Eilperin, "I don't think the Senate has an appetite for another such epic, polarized legislative war this session." Especially one where the beneficiaries include the big bankers who would be figuring out how to trade carbon derivatives.
Which is why there's suddenly a little more attention being paid to:
2) The Other Senate Bill
This one is short-about 40 pages to the 1,200 in the Kerry etc. omnibus-and in certain ways far more novel. Instead of starting by giving away pollution permits to the big utilities, it makes all the big fossil energy users pay a stiff price for the right to pour carbon into the atmosphere. And then it takes most of that money and uses it to send a check to every American every month, a kind of payment for their share of the sky. ExxonMobil would, of course, be passing on its new costs-the price of gas at the pump, or electricity at the meter, would go up. But the monthly check should cover most of that-indeed, lower income Americans, or those who are frugal with energy, should come out even or ahead. And the conceptual beauty of the plan is that it would make it politically easier to steadily tighten the cap on carbon as the science demanded it-every turn of the screw would mean not just a higher electric bill but also a larger monthly check. And Americans like getting checks, as Sarah Palin might attest-like every governor of Alaska, she distributed a share of oil revenues every year to the state's residents.
This so-called 'cap and dividend' bill is the brainchild of Peter Barnes, founder of the progressive money-fund company Working Assets (now Credo Mobile), who considers it a Plan B should Kerry-Boxer-etc. fail. Because the bill would send 75 percent of proceeds straight back to taxpayers and has, if anything, weaker initial targets than Kerry-Boxer, it might have a chance of picking off some moderate Republicans-it was introduced in the Senate in December by Maria Cantwell (D-Wash.) and Susan Collins (R-Maine). Nobody seems to actively dislike the idea-even Romm says it would be a decent idea "if it were politically feasible." But he thinks it's not because it would put more of a burden on consumers in the Southeast and Midwest, plus utilities would fight it tooth and nail. Still Barnes insists that the White House has not actually shot the idea down. "The president has shown he's a political pragmatist. He'll get to 60 any way he can. If he can at all."
3) The Technologists
Unlike other problems-racism, say-global warming is clearly, at least in part, a technological problem. Which means that many of the people looking at solutions find themselves backing one form of silver bullet or another. I get emails daily from exasperated people wondering why their favorite-biochar, biomass, high-altitude wind, community-scale wind, nuclear , concentrated solar, dispersed solar, tidal power, carbon farming, vegetarianism, grass-based pasturing-hasn't become the agreed-upon fix. The answer is that no one thing can replace coal and gas and oil: Highly concentrated, easy to get at, simple to transport, they really are magic fuels. More than silver bullets, we're likely to get silver buckshot-a mix of alternatives.
The basic theory behind cap-and-trade and cap-and-dividend is that the key to getting those alternatives in place is to increase the price of fossil fuel-solar and wind will naturally soar as oil gets more expensive, the way you would buy strawberries for your cereal if the price of bananas skyrocketed. But that assumes that solar energy is just like strawberries, just sitting there on the shelf. There are those who think politicians will never drive the cost of fossil fuel up enough to make renewables competitive-that we should spend our energy on funding basic research instead of capping carbon. "We're techno-pessimists," says Ted Nordhaus, the chairman of the Breakthrough Institute and one of the loudest proponents of this argument. "We don't have good, scaleable, cheap substitutes for fossil fuels now," he contends. The Germans, he says, are leading the world in installing rooftop solar reactors-because they're paying what he estimates is the equivalent of $500 a ton to reduce carbon, "ten times what we're talking about in Congress."
More R&D spending (way more R&D spending-the Institute has used the figure $10.5 trillion-with-a-T) is therefore a chief priority. They've proposed a National Institute of Energy, much like the NIH; the Brookings Institution has talked about building Silicon Valley-like "energy innovation hubs" around the country. And as these new discoveries come to light, the government would have to drive demand by buying up the technology at a high enough price-much, Nordhaus contends, as the Defense Department did with semi-conductors.
Almost everyone agrees that more technology would help. But the technologists have often been scornful of political action to control carbon. (Thomas Friedman, in last year's best-selling Hot, Flat, and Crowded, argues for deploying technology as the first priority by saying "a truly green America would be more valuable than fifty Kyoto Protocols.") The trouble is, as Romm points out, to really bring global warming under control you also have to close existing coal-fired power plants. "And all the R&D in the world will not make clean energy cheaper than coal plants you've already built. You've got to have to have a rising price for CO2 and a shrinking cap." Indeed, Nordhaus agrees that a "modest" carbon cap would help move new technologies the final mile toward deployment-but he thinks there's a far longer voyage first, while the CO2-reduction-first crowd believes current technology could go a long way, given an economic tailwind.

US Corporations, Private Mercenaries and the IMF Rush in to Profit from Haiti's Crisis

By Benjamin Dangl, Toward Freedom
Posted on January 19, 2010, Printed on January 20, 2010
http://www.alternet.org/story/145279/

US corporations, private mercenaries, Washington and the International Monetary Fund are using the crisis in Haiti to make a profit, promote unpopular neoliberal policies, and extend military and economic control over the Haitian people.
In the aftermath of the earthquake, with much of the infrastructure and government services destroyed, Haitians have relied on each other for the relief efforts, working together to pull their neighbors, friends and loved ones from the rubble. One report from IPS News in Haiti explained, "In the day following the quake, there was no widespread violence. Guns, knives and theft weren't seen on the streets, lined only with family after family carrying their belongings. They voiced their anger and frustration with sad songs that echoed throughout the night, not their fists."
Bob Moliere, an organizer within the popular political party Fanmi Lavalas was killed in the earthquake. His wife, Marianne Moliere, told IPS News after burying her husband, "There is no life for me because Bob was everything to me. I lost everything. Everything is destroyed," she said. "I'm sleeping in the street now because I'm homeless. But when I get some water, I share with others. Or if someone gives some spaghetti, I share with my family and others."
It is not this type of solidarity that has emerged in the wake of the crisis - and the delayed and muddled response from the international community - that most corporate media in the US have focused on. Instead, echoing the coverage and calls for militarization of New Orleans in the wake of Katrina, major media outlets talk about the looting, and need for security to protect private property.
One request from Erwin Berthold, the owner of Big Star Market in Petionville, Haiti, reflects this concern for profit over people. Berthold told the Washington Post about his supermarket, "We have everything cleaned up inside. We are ready to open. We just need some security. So send in the Marines, okay?"
That militarization is already underway. This week the US is sending thousands of troops and soldiers to the country. The Haitian government has signed over control of its capital airport to the US. Brazil and France have already lodged complaints that US military planes are now being given priority over other flights at the international airport.
Venezuelan President Hugo Chavez responded to the US troop deployment. "I read that 3,000 soldiers are arriving, Marines armed as if they were going to war. There is not a shortage of guns there, my God. Doctors, medicine, fuel, field hospitals, that's what the United States should send," Chavez said. "They are occupying Haiti undercover." The Venezuelan President pledged to send any necessary amount of gasoline needed to the country to aid with electricity and transport.
A Heroic History in Washington's Backyard
There is also little mention in the major news outlets' coverage of how the US government and corporations helped impoverish Haiti in the first place, creating the economic poverty that makes disasters like this so extensive. Nor is there mention of the country's heroic struggle against imperialism and slavery. Fidel Castro pointed out in a recent column, "Haiti was the first country in which 400,000 Africans, enslaved and trafficked by Europeans, rose up against 30,000 white slave masters on the sugar and coffee plantations, thus undertaking the first great social revolution in our hemisphere. ... Napoleon's most eminent general was defeated there. Haiti is the net product of colonialism and imperialism, of more than one century of the employment of its human resources in the toughest forms of work, of military interventions and the extraction of its natural resources."
University professor Peter Hallward, writing in the Guardian Unlimited, criticized Washington for its responsibility in creating the suffering it is now pledging to alleviate in Haiti. "Ever since the US invaded and occupied the country in 1915, every serious political attempt to allow Haiti's people to move (in former president Jean-Bertrand Aristide's phrase) ‘from absolute misery to a dignified poverty' has been violently and deliberately blocked by the US government and some of its allies. Aristide's own government (elected by some 75% of the electorate) was the latest victim of such interference, when it was overthrown by an internationally sponsored coup in 2004 that killed several thousand people and left much of the population smoldering in resentment. The UN has subsequently maintained a large and enormously expensive stabilization and pacification force in the country."
Brian Concannon, the director of the Institute for Justice and Democracy in Haiti told Hallward of the root causes for the overpopulation of neighborhoods in the city of Port-au-Prince that were hit so hard by the earthquake. "Those people got there because they or their parents were intentionally pushed out of the countryside by aid and trade policies specifically designed to create a large captive and therefore exploitable labor force in the cities; by definition they are people who would not be able to afford to build earthquake resistant houses." Unnatural crises such as this made the earthquake much more devastating.
Disaster Capitalism Comes to Haiti
As Noami Klein thoroughly proved in her book The Shock Doctrine: The Rise of Disaster Capitalism, throughout history, "while people were reeling from natural disasters, wars and economic upheavals, savvy politicians and industry leaders nefariously implemented policies that would never have passed during less muddled times." This push to apply unpopular neoliberal policies began almost immediately after the earthquake in Haiti.
In a talk recorded by Democracy Now!, Klein explained that the disaster in Haiti is created on the one hand by nature, and on the other hand "is worsened by the poverty that our governments have been so complicit in deepening. Crises-natural disasters are so much worse in countries like Haiti, because you have soil erosion because the poverty means people are building in very, very precarious ways, so houses just slide down because they are built in places where they shouldn't be built. All of this is interconnected. But we have to be absolutely clear that this tragedy, which is part natural, part unnatural, must, under no circumstances, be used to, one, further indebt Haiti, and, two, to push through unpopular corporatist policies in the interests of our corporations."
Following the disaster in Haiti, Klein pointed out that the Heritage Foundation, "one of the leading advocates of exploiting disasters to push through their unpopular pro-corporate policies," issued a statement on its website after the earthquake hit: "In addition to providing immediate humanitarian assistance, the U.S. response to the tragic earthquake in Haiti earthquake offers opportunities to re-shape Haiti's long-dysfunctional government and economy as well as to improve the public image of the United States in the region."
The mercenary trade group International Peace Operations Association (IPOA) immediately offered their services to provide "security" in Haiti to its member companies, according to Jeremy Scahill. Within hours of the earthquake, Scahill wrote, the IPOA website announced, "In the wake of the tragic events in Haiti, a number of IPOA's member companies are available and prepared to provide a wide variety of critical relief services to the earthquake's victims."
Kathy Robison, a Fortune 500 executive, formerly with Goldman Sachs Companies,wrote of the earthquake disaster in Haiti. "The business leaders I have been meeting with have seen enough disappointment and suffering," she wrote. "What Haiti needs is economic development and the building of a true middle class. ... There is much we are planning as far as creating new and innovative ways of using international aid and government support to promote private investment."
On January 14, the International Monetary Fund (IMF) announced a $100 million loan to Haiti to help with relief efforts. However, Richard Kim at The Nation wrote that this loan was added onto $165 million in debt made up of loans with conditions "including raising prices for electricity, refusing pay increases to all public employees except those making minimum wage and keeping inflation low." This new $100 million loan has the same conditions. Kim writes, "in the face of this latest tragedy, the IMF is still using crisis and debt as leverage to compel neoliberal reforms."
The last thing Haiti needs at this point is more debt; what it needs is grants. As Kim wrote, according to a report from the The Center for International Policy, in 2003 "Haiti spent $57.4 million to service its debt, while total foreign assistance for education, health care and other services was a mere $39.21 million."
In the midst of the suffering and anguish following the earthquake, many Haitians came together to console and help each other. Journalist David Wilson, in Haiti during the time of the earthquake, wrote of the singing that followed the disaster. "Several hundred people had gathered to sing, clap, and pray in an intersection here by 9 o'clock last night, a little more than four hours after an earthquake had devastated much of the Haitian capital." A young Haitian American commented to Wilson on the singing, "Haitians are different," he said. "People in other countries wouldn't do this. It's a sense of community."
If these elements of the "relief" efforts continue in this exploitative vein, it is this community that will likely be crushed even further by disaster capitalism and imperialism.
While international leaders and institutions are speaking about how many soldiers and dollars they are committing to Haiti, it is important to note that what Haiti needs is doctors not soldiers, grants not loans, a stronger public sector rather than a wholesale privatization, and critical solidarity with grassroots organizations and people to support the self-determination of the country.
"We don't need soldiers," Patrick Elie, the former Defense Minister under the Aristide government told Al Jazeera. "There is no war here." In addition to critiquing the presence of the soldiers, he commented on the US-control of the main airport. "The choice of what lands and what doesn't land, the priorities of the flight[s], should be determined by the Haitians. Otherwise, it's a takeover and what might happen is that the needs of Haitians are not taken into account, but only either the way a foreign country defines the need of Haiti, or try to push its own agenda."

Published on Tuesday, January 19, 2010 by The Guardian/UK
The War Against Nature Resumes
by George Monbiot
There's a story that almost all of us believe: that beyond a certain state of development, we relearn a respect for nature. It is true that some of the excesses of the early modern age - attempts by gamekeepers to kill all competing species, mass slaughter by white hunters in the colonies, the grubbing up of hedgerows and ancient woodlands - have lessened, though we still eat endangered fish and buy timber from clear-cut rainforest. It is also true that we give more money to conservation projects and spend more time watching wildlife films than we have ever done before. But as soon as we perceive that our economic interests are threatened, our war against nature resumes.
2010 is the International Year of Biodiversity. The Welsh assembly is celebrating the occasion by launching a project to exterminate the badger . I won't pretend that this story ranks alongside the catastrophe in Haiti or the meltdown in Afghanistan, but it casts an interesting light on humanity's continuing impulse to conquer nature, and shows how, even when cloaked in the language of science, our relations with the natural world are still governed by irrationality and superstition.
Last week the Welsh rural affairs minister, Elin Jones , announced what her government calls "a proactive non-selective badger cull" in west Wales. What this means is the elimination of the species, beginning when the cubs emerge from their burrows in May. Badgers carry the bacterium which causes bovine tuberculosis. The purpose of the experiment is to discover whether the number of cows with the disease is reduced when the badger is exterminated. It it works, the method might be applied elsewhere. But even before the experiment begins, I can tell you that it's a waste of time and money.
In 2007, after nine years of research, the Independent Scientific Group on Cattle TB sent its final report to the UK government. It discovered that "badger culling cannot meaningfully contribute to the future control of cattle TB in Britain". Rather than suppressing the disease, killing badgers appears to spread it.
The researchers had killed badgers across 30 areas, each of 100 square kilometres. They found that when the badgers were culled in response to local outbreaks of TB, the slaughter "increased, rather than reduced" the incidence of the disease in cattle: the level of infection rose by some 20%. When badgers were killed proactively (culled annually, regardless of whether cattle were infected), the incidence of TB inside the killing zone was reduced by 23% - but the incidence outside increased by 25%. The reason is that the killing changes the behaviour of the badgers: they travel more and mix more, either to escape the slaughter or to investigate the ecological space it opens up. The economic costs of proactive culling, the study found, were 40 times greater than the benefits.
But the old reflex dies hard. As the scientific group pointed out, "agricultural and veterinary leaders continue to believe, in spite of overwhelming scientific evidence to the contrary, that the main approach to cattle TB control must involve some form of badger population control". It noted "considerable reluctance to accept and embrace scientific findings". The Welsh government shares this reluctance. In announcing her extermination policy last week, Elin Jones claimed that the cull would be conducted according to "the requirements outlined by the Independent Scientific Group". But the ISG couldn't have made itself clearer: badger culling of any kind won't work. Instead, governments should do more to control the way that cattle are kept, tested and moved. This was a message that farmers and the Welsh government didn't want to hear.
The policy Elin Jones announced last week is even worse than this suggests. Her culling experiment is actually testing two variables: exterminating badgers and better management of cattle. Yet there are no experimental controls (study areas in which one or both methods are not being tried), so there is no means of telling which of the two measures is working, or whether changes in the incidence of the disease have anything to do with the experiment. There's a scientific term for a study that simultaneously tests two variables while using no controls: worthless. The Welsh experiment has nothing to do with science and everything to do with appeasing farmers.
The Farmers' Union of Wales has been furiously demanding that time and money should be wasted in this fashion. It has lobbied the assembly government for a scheme that will damage its members' interests and alienate the people who buy their milk and butter and cheese. It appears to be impervious to evidence or reason: last week it announced that "badger culling works. Any talk about farming practices being a significant factor are unfounded ."
But even if extermination did work, the effect could be sustained only by killing any badgers that re-entered the area: in other words, rendering the species extinct there. Were the same approach to be rolled out across a wider area (the policy the experiment is designed to test), the badger would have to become extinct not only across that zone, but also in all neighbouring zones. Because badgers will move into areas from which the species has been erased, the only logical outcome of this approach is to exterminate the badger throughout the United Kingdom. As this is politically unacceptable, the Welsh experiment is pointless as well as worthless.
This exercise in wilful stupidity betrays an approach to the natural world that has scarcely altered since the dark ages. We still act as if we have been granted dominion over it. Those with an economic interest seem to regard any species that might compete or conflict with them as a threat not only to their income but also to their power. They still treat the natural world as fungible: nothing is too precious, too great a source of wonder and delight to liquidate. There appears to be no point of regret beyond which we won't venture, no lesson in ecological collapse that we are prepared to learn. The ­Christian worldview, which places humankind at the apex of creation, is hard to shake, even in the most secular nation on earth.
All industries strive not only towards monopoly but also towards mono culture: domination of the natural or cultural landscape. This is what George Orwell meant when he remarked that "the logical end of mechanical progress is to reduce the human being to something resembling a brain in a bottle". Industry, if left unchecked, tolerates no deviance. It seeks to shrink both the range of human experience and the wonders of the natural world until they fit into the container it has made for them.
We could lose badgers and - except for those of us who spend summer evenings watching them as they shuffle out of their setts - suffer few tangible losses. But the urge to destroy them springs from the same pathological instinct for power which would deprive us of almost everything.
© 2010 Guardian News and Media Limited
George Monbiot is the author of the best selling books The Age of Consent: a manifesto for a new world order and Captive State: the corporate takeover of Britain . He writes a weekly column for the Guardian newspaper. Visit his website at www.monbiot.com

Translating David Brooks

Matt Taibbi
True Slant, January 18, 2010
A friend of mine sent a link to Sunday’s David Brooks column on Haiti, a genuinely beautiful piece of occasional literature. Not many writers would have the courage to use a tragic event like a 50,000-fatality earthquake to volubly address the problem of nonwhite laziness and why it sometimes makes natural disasters seem timely, but then again, David Brooks isn’t just any writer.
Rather than go through the Brooks piece line by line, I figured I’d just excerpt a few bits here and there and provide the Cliff’s Notes translation at the end. It’s really sort of a masterpiece of cultural signaling — if you live anywhere between 59th st and about 105th, you can hear the between-the-lines messages with dog-whistle clarity.  Some examples:
This is not a natural disaster story. This is a poverty story. It’s a story about poorly constructed buildings, bad infrastructure and terrible public services. On Thursday, President Obama told the people of Haiti: “You will not be forsaken; you will not be forgotten.” If he is going to remain faithful to that vow then he is going to have to use this tragedy as an occasion to rethink our approach to global poverty. He’s going to have to acknowledge a few difficult truths.
The first of those truths is that we don’t know how to use aid to reduce poverty. Over the past few decades, the world has spent trillions of dollars to generate growth in the developing world. The countries that have not received much aid, like China, have seen tremendous growth and tremendous poverty reductions. The countries that have received aid, like Haiti, have not.
In the recent anthology “What Works in Development?,” a group of economists try to sort out what we’ve learned. The picture is grim. There are no policy levers that consistently correlate to increased growth. There is nearly zero correlation between how a developing economy does one decade and how it does the next. There is no consistently proven way to reduce corruption. Even improving governing institutions doesn’t seem to produce the expected results.
The chastened tone of these essays is captured by the economist Abhijit Banerjee: “It is not clear to us that the best way to get growth is to do growth policy of any form. Perhaps making growth happen is ultimately beyond our control.”
TRANSLATION: Don’t bother giving any money, it doesn’t do any good. And feeling guilty about not giving money doesn’t do anyone any good either. In fact, you’re probably helping by not doing anything.
The second hard truth is that micro-aid is vital but insufficient. Given the failures of macrodevelopment, aid organizations often focus on microprojects. More than 10,000 organizations perform missions of this sort in Haiti. By some estimates, Haiti has more nongovernmental organizations per capita than any other place on earth. They are doing the Lord’s work, especially these days, but even a blizzard of these efforts does not seem to add up to comprehensive change.
TRANSLATION: I, David Brooks, am doing my Christian best right here at home. Look, I even used a capital “L” in the word “Lord.” And I wrote that thing about Obama’s Christian Realism a few weeks ago. So I‘m doing my part. Of course I’d volunteer to help, but intellectually I just don’t think volunteering really helps. I mean, there are studies and everything.
Third, it is time to put the thorny issue of culture at the center of efforts to tackle global poverty. Why is Haiti so poor? Well, it has a history of oppression, slavery and colonialism. But so does Barbados, and Barbados is doing pretty well. Haiti has endured ruthless dictators, corruption and foreign invasions. But so has the Dominican Republic, and the D.R. is in much better shape. Haiti and the Dominican Republic share the same island and the same basic environment, yet the border between the two societies offers one of the starkest contrasts on earth — with trees and progress on one side, and deforestation and poverty and early death on the other.
As Lawrence E. Harrison explained in his book “The Central Liberal Truth,” Haiti, like most of the world’s poorest nations, suffers from a complex web of progress-resistant cultural influences. There is the influence of the voodoo religion, which spreads the message that life is capricious and planning futile. There are high levels of social mistrust. Responsibility is often not internalized. Child-rearing practices often involve neglect in the early years and harsh retribution when kids hit 9 or 10.
We’re all supposed to politely respect each other’s cultures. But some cultures are more progress-resistant than others, and a horrible tragedy was just exacerbated by one of them.
TRANSLATION: Although it is true that Haiti was just like five minutes ago a victim of a random earthquake that killed tens of thousands of people, I’m going to skip right past the fake mourning period and point out that Haitians are a bunch of lazy niggers who can’t keep their dongs in their pants and probably wouldn’t be pancaked under fifty tons of rubble if they had spent a little more time over the years listening to the clarion call of white progress, and learning to use a freaking T-square, instead of singing and dancing and dabbling in not-entirely-Christian religions and making babies all the fucking time. I know I’m supposed to respect other cultures and keep my mouth shut about this stuff, but my penis is only four and a third inches long when fully engorged and so I’m kind of at the end of my patience just generally, especially when it comes to “progress-resistant” cultures.
Fourth, it’s time to promote locally led paternalism. In this country, we first tried to tackle poverty by throwing money at it, just as we did abroad. Then we tried microcommunity efforts, just as we did abroad. But the programs that really work involve intrusive paternalism.
These programs, like the Harlem Children’s Zone and the No Excuses schools, are led by people who figure they don’t understand all the factors that have contributed to poverty, but they don’t care. They are going to replace parts of the local culture with a highly demanding, highly intensive culture of achievement — involving everything from new child-rearing practices to stricter schools to better job performance.
It’s time to take that approach abroad, too. It’s time to find self-confident local leaders who will create No Excuses countercultures in places like Haiti, surrounding people — maybe just in a neighborhood or a school — with middle-class assumptions, an achievement ethos and tough, measurable demands.
The late political scientist Samuel P. Huntington used to acknowledge that cultural change is hard, but cultures do change after major traumas. This earthquake is certainly a trauma. The only question is whether the outside world continues with the same old, same old.
TRANSLATION: The best thing we can do for the Haitians is let them deal with the earthquake all by themselves and wallow in their own filth and shitty engineering so they can come face to face with how achievement-oriented and middle-class they aren’t. Then when it’s all over we can come in and institute a program making the survivors earn the right to keep their kids by opening their own Checkers’ franchises and completing Associate’s Degrees in marketing at the online University of Phoenix. Maybe then they’ll learn the No Excuses attitude real life demands, so the next time something like this happens they won’t be pulling this “woe is us” act and bawling their fucking eyes out on CNN while begging for fresh water and band-aids and other handouts. Maybe that will happen, or maybe we’ll just keep sending money, fools that we are, so that they can keep making more of those illiterate ambitionless babies we’ll have to pull out of the next disaster wreckage.
p.s. Did I miss anything? Because I think that’s pretty much it. One would have thought a column on the Haitian’s lack of an achievement culture could maybe wait until after the bodies were cold, but… hey, who am I to judge?
p.p.s. I’ve got to put this comment up on the main piece, since so many people seem to have missed my point.
Again, unlike Brooks, I actually lived in the Third World for ten years and I admit it — I’m not exactly in the habit of sending checks to Abkhazian refugees, mainly because I’m not interested in buying some local Russian gangster a new Suzuki Samurai to tool around Sochi in. And I’ve actually seen what happens to the money people think they’re giving to Russian orphanages goes, so no dice there, either.
But you know what? Next time there’s an earthquake in Russia or Georgia, I’m probably going to wait at least until they’re finished pulling the bodies of dead children out of the rubble before I start writing articles blasting a foreign people for being corrupt, lazy drunks with an unsatisfactorily pervasive achievement culture whose child-rearing responsibilities might have to be yanked from them by with-it Whitey for their own good.
An earthquake is nobody’s fault. There’s nothing to do after a deadly earthquake but express remorse and feel sorry. It’s certainly not the time to scoff at all the victim country’s bastard children and put it out there on the Times editorial page that if these goddamned peasants don’t get their act together after a disaster this big, it might just be necessary to start swinging the big stick of Paternalism at them.
I mean, shit, that’s what Brooks is doing here — that last part of the piece is basically a threat, he’s saying that Haiti might have to be FORCED to adopt “middle-class assumptions” and an “achievement ethos” because they’re clearly incapable of Americanizing themselves at a high enough rate of speed to please Brooks. That’s this guy’s immediate reaction to 50,000 people crushed to death in an earthquake. Metaphorically speaking, he’s standing over the rubble and telling the people trapped under there that they need more of a “No Excuses” culture, which is insane on many different levels.
Brooks’s implication that the Haitians wouldn’t have died in such great numbers had they been Americans is the kind of thing that is going to come back to bite us the next time we have a nuclear accident or a hurricane disaster or a 9/11 and we’re looking to the rest of the world for sympathy and understanding.

Wall Street’s Power Grab
The Financial Crisis Inquiry Commission Hearings

By Michael Hudson

Global Research, January 18, 2010

You almost could hear the bankers heave a sigh of relief when Haiti’s earthquake knocked the Financial Crisis Inquiry Commission hearings off the front pages and evening news broadcasts last week. At stake, after all, is Wall Street’s power grab seeking to centralize policy control firmly in its own hands by neutralizing the government’s regulatory agencies. The first day – Wednesday, January 15 – went innocuously enough. Four emperors of finance were called on to voice ceremonial platitudes and pro forma apologies without explaining what they might be apologizing for. Typical was the statement by Goldman Sachs chairman Lloyd C. Blankfein: “Whatever we did, it didn’t work out well. We regret the consequence that people have lost money.”

Their strategy certainly made money for themselves – and they made it off those for whom the financial crisis “didn’t work out well,” whose bad bets ended up paying Wall Street’s bonuses. So when Paul Krugman poked fun at the four leading “Bankers without a clue” in his New York Times column, he was giving credibility to their pretense at innocent gullibility. (http://www.nytimes.com/2010/01/15/opinion/15krugman.html?scp=5&sq=Krugman&st=cse),

Recipients of such enormous bonuses cannot be deemed all that clueless. They blamed the problem on natural cycles – what Mr. Blankfein called a “100-year storm.” Jamie Dimon of JPMorgan Chase trivialized the crisis as a normal and even unsurprising event that “happens every five to seven years.” It was as if the crash is just another business cycle downturn, not aggravated by any systemic financial flaws, but, if anything, by liberal government planners being too nice to poor people, by providing cheap mortgage credit to the uninitiated who could not quite handle the responsibility.

I think the Wall Street boys are playing possum. Why should we expect them to explain their strategy to us? To understand their game plan, the Commissioners had to wait for the second day of the hearings, when Sheila Bair of the Federal Deposit Insurance Corp. (FDIC) spelled it out. Their first order of business is to make sure that the Federal Reserve Board is designated the sole financial regulator, knocking out any more activist regulators – above all the proposed Consumer Financial Products Agency that Harvard Professor Elizabeth Warren has helped design. Wall Street also is seeking to avert any thought of restoring the Glass-Steagall Act in an attempt to protect the economy from having merged retail commercial banking with wholesale investment banking, insurance, real estate brokerage and kindred arms of high finance.

The Wall Street executives were careful not to blame the government. This was not just an attempt to avoid antagonizing the Congressional panel. The last thing Wall Street wants is for the government to change its behavior. Perception – and exposure – of this fact is what made the second day’s hearing (on Thursday) so important. From Sheila Bair down to state officials, these administrators explained that the problem was structural. They blamed government and the financial sector’s short-run time frame.

The past few years have demonstrated just how thoroughly the commercial and investment-banking sector already has taken control of government. Having succeeded in disabling the Securities and Exchange Commission (SEC) to such an extent that it refused to act even when warned about Bernie Madoff, deregulators did not raise a protest against the junk accounting that was burying the financial system in junk mortgages and kindred accounting fraud.

The Comptroller of the Currency blocked local prosecutors from moving against financial fraud, citing a small-print rule from the Civil War era National Bank Act giving federal agencies the right to override state agencies. Passed in the era of wildcat banking, the rule aimed to prevent elites from using crooked local courts to protect them. But in the early 2000s it was Washington that was protecting national banking elites from state prosecutors such as New York attorney general Eliot Spitzer and his counterparts in Massachusetts and other states. This prompted Illinois Attorney General Lisa Madigan to remind the Angelides Commission that the Office of the Comptroller of the Currency and the Office of Thrift Supervision were “actively engaged in a campaign to thwart state efforts to avert the coming crisis.”[1]

By far the major enabler was the Federal Reserve Board (FRB). Acting as the banking system’s lobbying organization, its tandem of Alan Greenspan and Ben Bernanke fought as a free-market Taliban against attempts to introduce financial regulation. Working with the Goldman Sachs managers on loan to the Treasury, the Fed managed to block attempts to rein in debt pyramiding.

Mr. Bernanke ignored the very first lesson taught in business schools. This was the lesson taught by William Petty in the 17th century and used by economists ever since: The market price of land, a government bond or other security is calculated by dividing its expected income stream by the going rate of interest – that is, “capitalizing” its rent (or any other flow of income) into what a bank would lend. The lower the rate of interest, the higher a loan can be capitalized. At an interest rate of 10%, a $10,000 annual income is worth $100,000. At 5%, this income stream is worth $200,000; at 4%, $250,000. Mr. Bernanke thus rejected over three hundred years of economic orthodoxy in testifying recently that the Fed was blameless in fueling the real estate bubble by slashing interest rates after 2001. Financial fraud also was not to blame. Anointed with the reputation for being a “student of the Great Depression,” he showed himself to be clueless.

He is not really all that clueless, of course. His role is to play the “useful idiot” whom financial elites can blame to distract attention from how they have gamed the system. Wall Street’s first aim is to make sure that the Fed remains in control as the government’s central regulator – or in the present case, deregulator, able to disable any serious attempt to check Wall Street’s drive to load down the economy with yet more debt so as to “borrow its way out of the bubble.”

Public relations “think tanks” (spin centers adept in crafting blame-the-victim rhetoric) use simple Orwellian Doublethink 101 tactics to call this “free market” policy. Financial self-regulation is to be left to bankers, shifting economic planning out of the hands of elected representatives to those of planners drawn from the ranks of Wall Street. This centralization of authority in a public agency “independent” from control by elected representatives is dubbed “market efficiency,” with an “independent central bank” deemed to be the hallmark of democracy. The words “democracy,”  “progress” and “reform,” are thus given meanings opposite from what they meant back in the Progressive Era a century ago. The pretense is that constraints on finance are anti-democratic, not public protection against today’s emerging financial oligarchy. And to distract attention from the road to debt peonage, financial lobbyists accuse governments strong enough to check the financial interest” of threatening to lead society down “the road to serfdom.”

Avoiding regulation by having the Fed “regulate,” with neoliberal deregulators in charge

All that is needed is to reduce the number of regulators to one – and to appoint a deregulator to that key position. The most dependable deregulator is the commercial banking system’s in-house lobbyist, the Federal Reserve. This requires knocking out potential rivals. But at the Federal Deposit Insurance Corporation (FDIC), Sheila Bair is not willing to relinquish this authority. Her testimony last Thursday was buried on the back pages of the press, and her most trenchant written arguments lost in the hubbub caused by the earthquake in Haiti. Not reported by the media-of-record, her testimony should have been welcomed as intellectual dynamite, but was not.

For Ms. Bair the task requires blocking three key battles that the financial sector is waging in its war to control and extract tribute from the “real” economy of production and consumption. Her first policy to get the economy back on track is to ward off any plans that politicians might harbor to keep Wall Street unregulated. “Over the past two decades, there was a world view that markets were, by their very nature, self-regulating and self-correcting – resulting in a period that was referred to as the ‘Great Moderation’ [Mr. Bernanke’s notorious euphemism]. However, we now know that this period was one of great excess.”[2]

Banks are using the ploy familiar to readers of the Uncle Remus stories about B’rer Rabbit. When the fox finally catches him, the rabbit begs, “Please don’t throw me in the briar batch.” The fox does just that, wanting to harm the rabbit – who gets up and laughs, “Born and bred in the briar patch!” and hops happily away, free. This is essentially what the financial scenario would be under Federal Reserve aegis. “Not only did market discipline fail to prevent the excesses of the last few years, but the regulatory system also failed in its responsibilities. There were critical shortcomings in our approach that permitted excessive risks to build in the system. Existing authorities were not always used, regulatory gaps within the financial system provided an environment in which regulatory arbitrage became rampant …”

No more damning reason could be given for Congress to reject Mr. Bernanke out of hand, if not indeed to set about restructuring the Fed to bring it back into the Treasury, from which it emerged in 1914 in one of the most unfortunate Caesarian births of the 20th century. In detail, she explained how the Fed had acted as an agent of the commercial banks perpetrating fraud, protecting their sale of toxic mortgage products against consumer interests and indeed, the solvency of the economy itself. Nobody can read her explanation without seeing what utter folly it would be to put Creditor Fox in charge of the Debtor Henhouse.

Blocking creation of a Consumer Protection Agency

Ms. Bair’s second aim was to counter Wall Street’s attempt to block enactment of the Consumer Protection Agency. Its lobbyists have had a year to disable any real reform, and Washington obviously believes that it can be safely jettisoned. But Ms. Bair spelled out just how willful and egregious the Fed’s refusal to use its regulatory powers – and indeed, its designated responsibilities – has been.“Federal consumer protections from predatory and abusive mortgage-lending practices are established principally under the Home Ownership and Equity Protection Act (HOEPA), which is part of the Truth in Lending Act (TILA). TILA and HOEPA regulations are the responsibility of the Board of Governors of the Federal Reserve System (FRB) and apply to both bank and non-bank lenders,” she explained. “Many of the toxic mortgage products that were originated to fund the housing boom … could have been regulated and restricted under another provision of HOEPA that requires the FRB to prohibit acts or practices in connection with any mortgage loan that it finds to be unfair or deceptive, or acts and practices associated with refinancing of mortgage loans that it finds abusive or not otherwise in the interest of the borrower.”

This was not done. It was actively thwarted by the Fed:

Problems in the subprime mortgage market were identified well before many of the abusive mortgage loans were made. A joint report issued in 2000 by HUD and the Department of the Treasury entitled Curbing Predatory Home Mortgage Lending … found that certain terms of subprime loans appear to be harmful or abusive in practically all cases. To address these issues, the report made a number of recommendations, including that the FRB use its HOEPA authority to prohibit certain unfair, deceptive and abusive practices by lenders and third parties. During hearings held in 2000, consumer groups urged the FRB to use its HOEPA rulemaking authority to address concerns about predatory lending. Both the House and Senate held hearings on predatory abuses in the subprime market in May 2000 and July 2001, respectively. In December 2001 the FRB issued a HOEPA rule that addressed a narrow range of predatory lending issues.

It was not until 2008 that the FRB issued a more extensive regulation using its broader HOEPA authority to restrict unfair, deceptive, or abusive practices in the mortgage market.

This was closing the barn door after the horses had fled, of course. “The rule imposes an ‘ability to repay’ standard in connection with higher-priced mortgage loans. For these loans, the rule underscores a fundamental rule of underwriting: that all lenders, banks and nonbanks, should only make loans where they have documented a reasonable ability on the part of the borrower to repay. The rule also restricts abusive prepayment penalties.”

Warning that “the consequences we have seen during this crisis will recur,” Ms. Bair reiterated a recommendation she had earlier made to the effect that “an ability to repay standard should be required for all mortgages, including interest-only and negative-amortization mortgages and home equity lines of credit (HELOCs). Interest-only and negative-amortization mortgages must be underwritten to qualify the borrower to pay a fully amortizing payment.” The Fed blocked this common-sense regulatory policy. And by doing so, it became an enabler of fraud.

As the private-label MBS [Mortgage-Backed Securities] market grew, issuances became increasingly driven by interest-only, hybrid adjustable-rate, second-lien, pay-option and Alt-A mortgage products. Many of these products had debt-service burdens that exceeded the homeowner's payment capacity. For example, Alt-A mortgages typically included loans with high loan-to-value ratios or loans where borrowers provided little or no documentation regarding the magnitude or source of their income or assets. Unfortunately, this class of mortgage products was particularly susceptible to fraud, both from borrowers who intentionally overstated their financial resources and from the mortgage brokers who misrepresented borrower resources without the borrower’s knowledge.

As Paul Volcker recently suggested, financial “innovation” did not contribute much to production. Packaging junk mortgages and organizing CDO swaps made real estate more debt-leveraged, while adding higher debt balances to the economy’s homes and office properties. But “the regulatory capital requirements for holding these rated instruments were far lower than for directly holding these toxic loans,” Ms. Bair explained. “Many of the current problems affecting the safety and soundness of the financial system were caused by a lack of strong, comprehensive rules against abusive lending practices applying to both banks and non-banks.”

Improved consumer protections are in everyone's best interest. It is important to understand that many of the current problems affecting the safety and soundness of the financial system were caused by a lack of strong, comprehensive rules against abusive practices in mortgage lending. If HOEPA regulations had been amended in 2001, instead of in 2008, a large number of the toxic mortgage loans could not have been originated and much of the crisis may have been prevented. The FDIC strongly supported the FRB’s promulgation of an “ability to repay” standard for high priced loans in 2008, and continues to urge the FRB to apply common sense, “ability to repay” requirements to all mortgages, including interest-only and option-ARM loans.

The absence of proper consumer protection was a major contributing factor to the present financial meltdown, for “it has now become clear that abrogating sound state laws, particularly regarding consumer protection, created opportunity for regulatory arbitrage that resulted in a regulatory ‘race-to-the-bottom.’” Mortgage fraud became rife as bank regulators failed to protect consumers or the economy at large. This is why an independent agency is needed rather than hoping that the Federal Reserve somehow can change its spots. “If the bank regulators are not performing this role properly, the consumer regulator should retain backup examination and enforcement authority to address any situation where it determines that a banking agency is providing insufficient supervision.”

Summarizing her 54-page written testimony orally, Ms. Bar commented that, “looking back, I think if we had had some good strong constraints at that time, just simple standards like … you've got to document income and make sure they can repay the loan . . . we could have avoided a lot of this.”[3] But the same day on which her testimony was capsulized, the Wall Street Journal leaked the story that “Senate Banking Committee Chairman Christopher Dodd is considering scrapping the idea of creating a Consumer Financial Protection Agency … as a way to secure a bipartisan deal on the legislation,” that is, a deal with “Richard Shelby of Alabama, who has referred to the Consumer Financial Protection Agency as a ‘nanny state.’ … The banking industry has spent months lobbying aggressively to defeat the creation of the CFPA. ‘One of our principal objections all along is that you would have a terrible conflict on an ongoing basis between a separate consumer regulator and the safety and soundness regulator, with the bank constantly caught in the middle,’ said Ed Yingling, chief executive of the American Bankers Association trade group.”[4] The idea is that a “conflict” between an institution seeking to protect consumers – and indeed, the economy – from an in-house banking lobbying institution (the Fed), backed by the Treasury safely in the hands of Goldman-Sachs caretakers on loan is “inefficient” rather than a necessary democratic safeguard! But the paper gave more space crowing over the likely defeat of the Consumer Financial Protection Agency than it did to Ms. Bair’s eloquent written testimony!

Avert any thought of re-enacting Glass-Steagall

On the institutional level, Wall Street’s managers want to ward off any threat that the Glass-Steagall legislation might be revived to separate consumer deposit banking and money management from today’s casino capitalism. This is what Paul Volcker has urged, but it is now obvious that Pres. Obama appointed him only for window dressing, much like that of Pres. Johnson said of Robert McNamara: he would rather have him inside his tent pissing out than outside pissing in. Appointing Mr. Volcker as a nominal advisor effectively prevents the former Fed Chairman from making hostile criticisms. Pres. Obama simply ignores his advice to re-instate Glass-Steagall, having appointed as his senior advisor the major advocate of the repeal in the first place – Larry Summers, along with the rest of the old Rubinomics gang taken over from the Clinton administration.

Ms. Bair explained why Wall Street’s preferred “reforms” along the current line – maintaining the “too big to fail” financial oligopoly intact, along with the Bush-Obama deregulatory “free market” ideology – threatens to return the financial system to its bad old ways of crashing. To Wall Street, of course, this is the “good old way.” Wall Street is consolidating the finance, insurance and real estate (FIRE) sector across the board into oligopolistic conglomerates “too big to fail.”

But being realistic under the circumstances, Ms. Bair avoided taking on more of a battle than likely can be won at this time. “One way to address large interconnected institutions,” she proposed, “is to make it expensive to be one. Industry assessments could be risk-based. Firms engaging in higher risk activities, such as proprietary trading, complex structured finance, and other high-risk activities would pay more” for their deposit insurance, to reflect the higher systemic risks they are taking. This suggestion is along the lines of proposals (made for over half a century now) to set different reserve requirements or capital adequacy requirements for different categories of bank loans.

Alas, she acknowledged, the Basel agreements regarding capital adequacy standards are being loosened rather than tightened. “In 2004, the Basel Committee published a new international capital standard, the Basel II advanced internal ratings-based approach (as implemented in the United States, the Advanced Approaches), that allows banks to use their own internal risk assessments to compute their risk-based capital requirements. The overwhelming preponderance of evidence is that the Advanced Approaches will lower capital requirements significantly, to levels well below current requirements that are widely regarded as too low.” She criticized the new, euphemistically termed “Advanced Approach” as producing “capital requirements that are both too low and too subjective.” The result is to increase rather than mitigate financial risk.

The need for tax reform to accompany financial reform

Beyond the scope of the FDIC or other financial regulatory agencies is the symbiosis between financial and fiscal reform.

For example, federal tax policy has long favored investment in owner-occupied housing and the consumption of housing services. The government-sponsored housing enterprises have also used the implicit backing of the government to lower the cost of mortgage credit and stimulate demand for housing and housing-linked debt. In political terms, these policies have proven to be highly popular. Who will stand up to say they are against homeownership? Yet, we have failed to recognize that there are both opportunity costs and downside risks associated with these policies. Policies that channel capital towards housing necessarily divert capital from other investments, such as plant and equipment, technology, and education—investments that are also necessary for long-term economic growth and improved standards of living.[5]

The problem is that U.S. financial and fiscal policy has institutionalized the financial sector’s short-term outlook,“ distorting decision-making away from long-term profitability and stability and toward short-term gains with insufficient regard for risk.” For example, money managers are graded every three months on their performance against the norm. Ms. Bair focused on how employee compensation in the form of stock options tended to promote short-termism. “Formula-driven compensation allows high short-term profits to be translated into generous bonus payments, without regard to any longer-term risks. Many derivative products are long-dated, while employees' compensation was weighted toward near-term results. These short-term incentives magnified risk-taking.” In sum, “performance bonuses and equity-based compensation should have aligned the financial interests of shareholders and managers. Instead, we now see – especially in the financial sector – that they frequently had the effect of promoting short-term thinking and excessive risk-taking that bred instability in our financial system. Meaningful reform of these practices will be essential to promote better long-term decision-making in the U.S. corporate sector.”

Conclusion: Pushing the economy even deeper into debt beyond the ability to pay

The banking system’s marketing departments have set their eyes on the economy’s largest asset, real estate, as its prime customer. The major component of real estate is land. For years, banks lent against the cost of building, using land (tending to rise in value) as the borrower’s equity investment in case of downturn. This was the basic plan in lending 70%, then 80% and finally 100% or even more of the real estate price to mortgage borrowers. The effect is to make housing even more expensive.

Suppose that Wall Street succeeds in its strategy to re-inflate the Bubble Economy. Will this create even larger problems to come, by making the costs of living even higher as labor and industry become even more highly debt leveraged? That is the banking sector’s business plan, after all. The aim of bank marketing departments – backed by the Obama administration – is to steer credit to re-inflate the bubble and thus save financial balance sheets from their current negative equity position.

This policy cannot work. One constraint is the balance of payments. The competitive power of U.S. exports of the products of American labor is undercut by the fact that housing costs absorb some 40% of labor’s family budgets today, other debt 15%, FICA wage withholding 12%, and various taxes another 20%. U.S. labor is priced out of world markets by the economy’s FIRE sector overhead even before food and essential needs of life are bought. The “solution” to the financial sector’s negative equity squeeze thus threatens to create even larger problems for the “real” economy. Ms. Bair appropriately concluded her written testimony by commenting that the context for the present discussion of financial reform should be the fact that “our financial sector has grown disproportionately in relation to the rest of our economy,” from “less than 15 percent of total U.S. corporate profits in the 1950s and 1960s … to 25 percent in the 1990s and 34 percent in the most recent decade through 2008.” While financial services “are essential to our modern economy, the excesses of the last decade” represent “a costly diversion of resources from other sectors of the economy.”

This is the same criticism that John Maynard Keynes levied in his General Theory, citing all the money, effort and genius that went into making money from money in the stock market, without actually contributing to the production process or even to tangible capital formation. In effect, we are seeing finance capitalism autonomous from industrial capitalism. The problem is how to restore a more balanced economy and rescue society from the financial sector’s self-destructive short-term practices.

Notes 

1 Sewell Chan, “A Call for More Regulation at Fiscal Crisis Inquiry,” The New York Times, January 15, 2010. William Black provides the classic narrative in The Best Way to Rob a Bank is to Own One. He documents how the FBI’s anti-fraud teams and those of other agencies were reduced to merely skeleton levels, overseen by do-nothing deregulatory ideologues of the sort who served as enablers to Wall Street’s Bernie Madoffs.
2 Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation on the Causes andCurrent State of the Financial Crisis before the Financial Crisis Inquiry Commission; Room 1100,Longworth House Office Building, January 14, 2010. http://www.fdic.gov/news/news/speeches/chairman/spjan1410.html. SEC Chairman Mary Shapiro made a similar point that the financial sector has been growing at the expense of the economy, in an extractive manner rather than contributing to productivity.
3 Tom Braithwaite, “Deposits regulator points finger of blame at Fed,” Financial Times, January 15, 2010.
4 Damian Paletta, “Consumer Protection Agency in Doubt,” Wall Street Journal, January 15, 2010.
5 The Wall Street Journal cut this passage from the on-line version of Friday’s article by John D. McKinnon and Michael R. Crittenden, “Financial Inquiry Widens to Include Past Regulators,” January 15, 2010.