Thursday, October 6, 2011

Hey hey, ho ho, corporate rule has got to go

What's the single clear message of Occupy Wall street? End corporate rule. Is that simple enough for talking heads on tv?

I have written before on James Fallows who has been advancing the view that corporate money is poisoning the US by poisoning its politics. Now he is joined by  Lawrence Lessig:
What is surprising -- indeed, terrifying, given what it says about this democracy -- is what happened after the collapse. That even after the worst financial crises in 80 years, and even after the lions share of responsibility for that crisis had been linked to finance laissez faire, and even after the dean of finance laissez faire, the great Alan Greenspan, expressly confessed that it was wrong, and that he "made a mistake," nothing changed. A president elected with the spirit of Louis Brandeis ("[We have to stop] Wall Street from taking enormous risks with 'other people's money'"), who promised to "take up that fight" "to change the way Washington works," ("for far too long, through both Democratic and Republican administrations, Washington has allowed Wall Street to use lobbyists and campaign contributions to rig the system and get its way, no matter what it costs ordinary Americans"), and who was handed a crisis (read: opportunity) and a supermajority in Congress to make real change, did nothing about this root to our financial collapse. The "financial reform bill" is the reason the English language invented the scare quote: As every financial analyst not dependent upon the corruption that is Wall Street has screamed since the bill was passed, financial reform changed nothing. We are more at risk of a major financial collapse today than we were a decade ago. And the absolutely obscene bonuses of an industry that pays twice its pretax profits in salaries are even more secure today.
How could this possibly be? Never in the history of this nation have the agents of financial collapse so effectively avoided a regulatory response to that collapse. How is it that now they have not only avoided reform, but have effectively cemented their Ponzi scheme into the core of American law?
The protesters #occupy(ing)WallSt are looking for answers to that question. They should look no further than the dollar bills that they are taping to their mouths. The root to this pathology is not hard to see. The cure is not hard to imagine. The difficult task -- and at times, it seems, impossibly difficult task -- is to imagine how that cure might be brought about.
The arrest of hundreds of tired and unwashed kids, denied the freedom of a bullhorn, and the right to protest on public streets, may well be the first real green-shoots of this, the American spring. And if nurtured right, it could well begin real change.
 Lessig has a new book out, on ending the corruption of politics and the rule of money. I am putting it on my 'to be read sooner rather than later' list.

One short piece worth reading right away:  Alex Pareene's proposal to reboot the economy by debt forgiveness for the 99%:

So my immodest proposal is simply this: Individuals and households in the bottom 99 percent who owe debt to any large financial institution that received federal government support during and after the 2008 crisis should see their debt forgiven. That would certainly stimulate the economy, as most people would suddenly find themselves with a great deal more money to spend on iPads (and food, and clothing, and housing, and healthcare). The debt can be forgiven by decree or if the government really wants to it can step in to pay it itself; I don’t much care either way. (Though it’d be nice to see it just wiped off the books, to enrage the banks.)
Let’s wipe the debt of the 99 percent off the books, tell the financial sector to eat it, and get on with our lives.
I’m by no means the first person to come up with this demand. David Graeber, author of “Debt: The First 5,000 Years,” proposed the idea on “Democracy Now” last month.
David Graeber's book is also on my 'to be read sooner rather than later' list.


  1. I had my car and school loans paid off by the time I was 27. So, how about this. How about everyone who played along with the big lie from the financial industry that money is free and that it will never run out and that you deserve everything right now pay me a couple thousand dollars.

  2. The trouble is that with the collapse of the financial system (and we are in the middle of that collapse) but with the continuation of the debt system, there is increasingly less access to the money that would allow anyone to pay their debts. This continues to slow the circulation of the money that allows the economy to actually function, shrinking paid employment and pay for employment, which further cripples the money flow, in a downward spiral of depression. By forgiving debt, even though it is unfair, we can break out of this spiral, and everyone benefits.

  3. I sympathize with those who have run into financial problems in the squeeze, but the forgiveness of debt at the consumer level in addition to the corporate level is two wrongs adding up to a broken currency. Would the government print more money to pay the lenders up front, thus devaluing the currency and increasing the economic squeeze? Would the government increase taxes or go into more debt to foot this bill, netting a similar eventuality? Would the debt be written off and forgotten entirely? Surely that could mean severely tightened lending standards and a new set of unintended consequences.

    If the idea is that we tax the top 1% to pay for a loan-forgiveness program, I could find it in my heart to play along. I don't think the political might is there to get it done, and, really, I think most people find it distasteful to ask Uncle Moneybags for a favor. Our populist outrage wouldn't taste as sweet.

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  5. When we are looking at systemic failure of the financial systetm and systemic impoverishment of the population, coupled with systemic economic depression/recession, we have to avoid moralizing about which individuals are deserving or not fault but look for solutions which most efficiently reboot the financial and economic systems and improve the lives of millions. So serious economists seem to be coalescing around the view that a debt jubilee would work to accomplish those ends.
    As for who pays: it is not clear that the banks would need any payment. Think of this as a way to make banks actually acknowledge the worthlessness of a lot of the loans they carry on their books as assets. Those banks with too heavy a worthless asset load will finally fail, as they should.

  6. I think that argument might appeal to people who have never looked at balance sheets. Banks list credit card loans by how late they are down the month, and when they exceed more than a few months, they classify them as broken loans. Mortgages are laid out in a similar fashion.

    Mortgage-backed securities, on the other hand, tend to complicate matters. But somewhere someone is expecting to be paid some money they put into the housing market, and I imagine that often enough that someone is a fund holding the retirement savings of middle class workers.

  7. It's ridiculous to assert that middle class people who managed their money soundly and wish to keep the value of that money in tact would be "moralizing" against wiping the economic slate clean.

    Should mismanaged banks be allowed to fail? Sure. But my debt isn't in there. My money is. And I'm going to need it back at one point.

    This Kabuki drama of account holders playing along with the banks when times are good and then losing our minds when times are bad doesn't serve anyone in the long term.

  8. Interestingly, economists and finance experts are the ones pushing the idea of the debt jubilee. Here's one in Forbes:

    Imflation is also a way to accomplish debt forgiveness, since the inflated money used to pay off creditors has less value than the money borrowed. However, interest rates are currently below zero and there are signs of deflation, which won't help. So the debt jubilee idea is gaining more support.

  9. That's funny. That guy identifies himself with the tagline "I write about American politics and culture." Not "I am a financial expert and economist"

  10. But he is expressing the view of well known economists and finance experts, including Barry Ritholtz (you do read his blog The Big Picture, regularly, don't you? You should.)