Mr. Potter Has Won?

My perennial Christmas Missive, returns after a 4 year (can your believe it) hiatus. And who would have thought 5 years after the Great Meltdown produced the Great Recession, , 5 years into the age of Obama and a purported move away from supply-side economics pretty much nothing has changed to reign in the very things – excessive income inequality, unfettered financial speculation and moral hazard policies that reward the affluent investor over the struggling worker—that drove us to the brink Great Depression II, setting us up nicely for another round of financial mayhem within the decade.  Meanwhile 5 years into a recovery plan that has produced recovery for the richest  10% of the population who now take in more than half of all income (up by over 50%) and even more so the top 1% who raked in  over 90% of the gains from the recovery, middle class and working families are enduring stagnant or declining incomes that haven’t seen significant real increases since the dawn of 1980s supply side economics.    I was apparently naively optimistic when I wrote: Perhaps by Obama Christmas II the tides may turn. For now, let us at least raise a voice of prayer and a glass of cheer to the fact the Potters aren’t adding as much to their winning totals as they used to.Who knew Morning In America actually meant a sunset for  middle class expansion and an American Dream  deferred.. And yes, Virginia, income inequality DOES matter as any Feudal peasant or lord could have told you and as a brief glance at a map of global income inequality also tells you.  Excessive income inequality produces and exacerbates  poverty and  authoritarianism.  Period.  But at least there is hope in the coming year, what with that Marxist in The White House (as we always knew, thank you Fox News) and one now in the Vatican (thank you Rush Limbaugh for that bit of analysis), that national and global attention and conversation may actually turn to a meaningful discussion of inequality and—beyond the social justice issues and even bad for capitalism issues (true capitalism being antithetical to monopolies of power and wealth) the anti-democratic tendencies it fosters.  Until then,  let us hope that the Mister Potters haven’t won – for once they do it won’t be the same America we were born in.  Merry Christmas and best hopes for the future.  CL

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I watched the perennial holiday chestnut, “It’s a Wonderful Life,” the other day. There was George Bailey, as he is every year, struggling to keep the old Savings and Loan afloat. There was the malicious Mr. Potter, a truly covetous old sinner, trying to put Bailey out of business.  There was Clarence the angel showing, once again, that our world is a better place for the George Bailey’s amongst us.  It’s too bad that in today’s world the Potters are beating the Baileys, hands down.

Old man Potter dismissed the Bailey Savings and Loan as a kind of privatized social welfare program for dumb poor workers who couldn’t cut it on their own. “And what does that  get us,” he asked?  “A discontented, lazy rabble instead of a thrifty working class.  And all because a few starry eyed dreamers stir them up and fill their heads with a lot of impossible ideas? Don’t the  Rush Limbaughs or Tom Delays say the same thing today?

Labor laws, social welfare, retirement benefits, guaranteed healthcare, workplace safety laws, consumer protection–all are dismissed by our modern Potters as so much misplaced sympathy offered to the undeserving by the foolishly starry eyed, thinking that is at best naïve and at worst dangerous.  Any mention of social welfare on AM radio is now associated with Bolshevik Socialism – want to give workers a guaranteed living wage or put any limits at all on the worst excesses of the market and you’re labeled as an advocate of Gulags and death camps.

George, of course, argued back.  “Just remember this, Mr. Potter,” he retorted, “that this rabble you’re talking about, they do most of the working and paying and living and dying in this community.  Well is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?”  Today he could add: is it too much to have them work and pay and live and die with decent healthcare, affordable housing, quality education for their kids and the sure knowledge that when old age comes, there will be some comforts to look forward to?

We don’t have that many George Bailey’s today. Few stand up to our Potters when they tell us workers can’t expect job security, no one is entitled to healthcare and decent pay is whatever the most desperate amongst us is willing to work for.  Even the Democrats, the party of dreams for the working stiff, have fallen in line with the rhetoric of balanced budgets and smaller government (except, of course, if deficits are required to provide tax cuts to the richest Americans) even if the cost are reduced programs to help the disadvantaged.

Can’t anyone makes the simple point George made that helping the least amongst us is not simple altruism, it is Capitalist self interest at it’s best? “Your all business men here,” he reminded the S&L board members thinking of supporting Potter, “don’t it make them better citizens? Doesn’t it make them better customers?”  Heck, wasn’t it that old socialist Henry Ford’s idea to raise worker pay, not because it was the moral thing to do but because it made them better participants in the Capitalist market place?   Like Old Man Potter, much of American corporate business has become warped and frustrated by ruthless competition and now sees its workers only as cattle to be milked for as long as possible before being sent to the layoff slaughterhouse.

Frank Capra understood that the Potters amongst us seldom lose, though the more public-minded like old George could, on occasion, battle them to a draw. Notice that, while George Bailey ultimately survived his battle with Potter, the old man survived unscathed too, his own crime of theft of the Bailey’s deposits unpunished. There have always been the Potters amongst us, those who pursue personal gain at any cost, be they a grasping banker like fictitious  Potter or the greedy executives of a massive corporations like Enron or WorldCom. What’s regrettable is that there are fewer and fewer George Bailey’s speaking up for the little guy.

In the real world the Bailey S&L would have been bought out by the 1980s by PotterCorp, a huge transnational Financial Services leviathan. A PotterCorp holding company would have bought out Bedford Fall’s chief industry, the plastic’s factory old Hee-Haw Sam Wainwright had built at George’s urging and shipped the jobs to Third World sweatshops. Downtown Bedford Falls would now be a ghost town with shops shuttered by a massive PotterMart selling cheap slave-labor produced products to the town’s poorly paid service employees.   Yes, least be there any doubt, in the world of today Mister Potter would have won.  And, least there be any doubt, Mr. Potter voted Republican.

 

Posted in Barack ObamaSupply-Side Economics. Tags: Healthcare ReformIt’s a Wonderful LifeMr. PotterLeave a Comment »

Let Them Eat Cake? They Don’t Even Get No Stinkin’ Cake.

While perusing my morning NYT last week two articles jumped out at me.  The pair perfectly capture the Wilted Gilded Age we find our selves in.  The first dealt with the interesting little irony that the rich are actually and calculatingly walking away from more mortgages than average households.  It would appear that the WSJ’s moralizing about moral hazards moralizing ends somewhere west of the Hamptons.  The second article dealt with how the ivy covered towers of Academe are now being turned into the country clubs of the kids of the ruling classes, complete with spa-quality student centers.  Now public schools and community colleges are also spending more on student services  according to the article.  But they are doing so to deal with a) a vast backlog of repair and expansion work that has been sidelined for decades; and b) the crush of lower-income students trying to ride out the Great Recession in a classroom.  (Note to students: choose a major that will take 20 years to complete. If the economy hasn’t recovered by then maybe an elder relative will have kicked off in the interim and left you a small bequest….).  Private schools are putting in tapas bars.  Oh, such a world of difference

College Daze

All you need to know about the disconnect between the scions of  Wall Street and us mere peons on Main Street can be found on  page 61 of Andrew Sorkin’s tome to moral torpidity, Too Big To Fail.

In talking about then New York Fed Chief Timothy Geithner contemplating whether or not to take the position of Citigroup’s CEO, Sorkin writes:

“For the following week, however, the prospect was practically all he could think about—the job, the money, the responsibilities. He talked it over with his wife, Carole, and pondered the offer as he walked their dog, Adobe, around Larchmont, a wealthy suburb about an hour from New York City.  They already lived a comfortable life—he was making $398,200 a year, an enormous sum for a regulator—but compared with their neighbors along Maple Hill Drive they were decidedly middle-of-the-pack.  His tastes weren’t that expensive, save for his monthly $80 haircut at Gjoko Spa & Salon., but with college coming up for his daughter, Elise, a junior in high school, and his son, Benjamin, an eighth grade behind her, he could certainly use the money.”

I’ve got four daughters,  two through college (one working on her second masters, the other on her first), one in college and one on the way.  If a man making $398,200  (let’s just say a tad—if tad means many factors—greater than my salary) a year has to worry about putting two kids through college, I must really be screwed.

And, given that my salary as a college professor is higher than the median income, that means most of the denizens of Main Street must be really, really screwed.  That is, if they want to send their kids to college which, we’ve been told for decades, is a must if you want your kids to enjoy a comfortable middle class life anymore.

When I went to USD thirty years ago the tuition was around $3k a year.  When my eldest went there four years ago it was more than twelve times that.  So, my daughter will have to pony up $500k + a year to send her kid there?  Just when will such college costs finally break the backs of the American middle class?  (And will it happen before or after our backs are broken by health care, retirement and housing costs?)

Meanwhile, it’s amazing that a person making $398,200 could worry about being middle of the pact anywhere.  No wonder the power elite of Wall Street and Washington, worried about making ends meet on their six, seven and eight figure incomes, haven’t been able to work up a decent sweat addressing the concerns of all the five digit income folk.

Viva la middle class devolution.

History is (de)Bunk

I am soooo relieved.  The pension crisis is all but resolved.  San Diego fiscal failure is almost certainly now averted.  The SS San Diegotanic, only inches from the belly-ripping ice berg of municipal debt has abruptly changed course and now heads for safe and serene waters.  All, now, is well at last.  At least that’s what your Captain, Gentleman, who told all you passengers on his fiscal ship in last Sunday’s UT.   Thanks to the bold actions of his administration, San Diego (just forty-nine months after his taking office mind you, but a nothing in glacial time) has  enacted the needed reforms  to solve the pension crisis, reign in the costs of government and avoid the false salvation of bankruptcy. 

Indeed, to hear his Honor tell it, its actually been these false prophets of fiscal futility, these nattering nabobs of bankruptcy negativity, who have been holding the City back from the promised land.  “In my view, the bankruptcy con job is nearly as irresponsible as the schemes that dug us into a financial hole in the first place,” Sanders said.  And bravo to that.  It was most certainly that Mike Aguirre (remember him?) and his constant whining about the fact that the pension deficit was getting worse every year despite the claims of the Mayor and the council to the contrary, that meddlesome maniac Mike and his dropping the “B” word in polite conversation, that’s kept San Diego on the fiscal ropes.  It’s been people like Pat Shea—the Igor to Aguirre’s  Dr. Frankenstein building the monster of municipal bankruptcy—who have systematically derailed real change by—gasp—talking about bankruptcy as an option to the City’s woes:

“For too long, progress in closing San Diego’s structural budget deficit has been sidetracked by a disinformation campaign that contends, against all evidence, that the city would be better off if it filed for bankruptcy… But the truth is talk of bankruptcy impedes progress on real substantive pension reform, and it poisons the climate for thoughtful solutions to our structural deficit. “

That’s right.  It hasn’t been the wholesale unwillingness of the Council, the Mayor or the people of San Diego to face fiscal facts and embrace substantial cuts to services and significant increases sources of revenues that’s kept the city out of budgetary whack.  It’s been the discussion of bankruptcy.  Oh, to have back all those hours all of us in San Diego have wasted talking about the dreaded “B.”  Why, its gotten so we can’t even have a discussion around the family dinner table about American Idol without someone or other sidetracking the conversation with a detailed analysis of Orange County’s old bankruptcy filing.  It’s a wonder the Mayor and the Council have had time to get anything else done at all.

Just one small point, though.  What is it that has changed since I talked about the danger of bankruptcy  here, here, here or even here that has actually changed in real terms over the Mayor’s watch?   How is the city budget and the pension plan on a truly more sustainable path than it was when Dick “Such a Lousy Thing to Happen To Such A Nice Guy” Murphy was being run out of town on a rail?  But, of course, as the Mayor says, any lingering fiscal unpleasantries  should be laid at doorstep of those suggesting a discussion of Plan B. 

Me thinks His Mayoralship does protest too much.  Why should Sanders go out of his way to bring up and bash the bankruptcy option—an option he pretty much says he settled back with his election in ’05 and reelection in ’08—unless that option really is potentially back on the table in a big way. 

But at least San Diegans can take solace. George W. Bush may have been the decider but Jerry Sanders is the “Debunker,” taking on all rival narratives to his overarching theme that it’s morning in San Diego.   Thank goodness. Now we can go proudly into the future completely forgetting about the past.  By golly,.  Jerry Sanders is our own Henry Ford.

What the DIckens?

So Citigroup repaid the Feds billions last week ahead  of schedule.  They did so to get out from under the cap on executive pay that came part and parcel with taking the greatest  taxpayer windfall bailout in human history.  Citigroup wanted to get out from under the pay cap so they could pay their executives the gazillions of dollars Wall Street says it must pay its senior executives   And when one  says “Wall Street” one really means the  senior executives  of Wall Street firms are saying that they, the senior executives , must receive gazillions of dollars in compensation otherwise they won’t work for they, the senior executives.   And, oh the sweet irony of it all, Citigroup raised the money to pay back the Feds by dumping its own stock sending its embarrassingly low OTC-quality share price  even  lower, thereby putting the shaft to its own stockholders.  And now, because Citigroup has so watered  down its share value that the Federal government is going to have to sit on the shares it still owns longer to keep from sending the stock down even further (necessitating another bailout in the TARP that never ends.)

OK, I watch the actions of Citigroup  have to put on my Columbo hat to ask the painfully dump, plain questions.  Excuse me, but aren’t the Wall Street senior executives who claim that Wall Street senior executives must be paid gazillions of dollars the same Wall Street  senior executives  who drove their Wall Street banks—and the rest of the nation—into the financial ditch last year?  And, let me get this right,  now these same Lords of Finance have tanked their own share price to pay them selves high-fiving bonuses of the sort they paid themselves while driving the economy into the ditch last time?  And aren’t this the same Wall Street executives who, after getting gazillions in bailouts and paying themselves gazillions in bonuses who are still sitting on their money and not loaning to consumers and small business?

And, I don’t want to be a bother about this but I’m just trying to get it straight– no-ones saying a peep about it?  Not one Citigroup executive has been dumped by the Board of Directors over this yet?  No Citigroup shareholders are filing the Mother of all shareholder lawsuits?   Not even one puny Citigroup VP has been lynched from a Central Park tree by a posse of homeless Citigroup shareholders?

Wow.

In the immortal cinematic masterpiece  “History of the World Part I” the Roman emperor is saluted by his centurions with the cry “F- the Poor.” Citigroup ought to change its letterhead to read “F- America.”  I mean, these cats really, really don’t care. 

At this festive time of the year I give my students several holiday-related extra credit writing opportunities.  (For instance,  “Were the Maccabees  freedom fighters or terrorists?”) One sterling classic question concerns  that immortal man of business, Ebenezer  Scrooge: “Was Scrooge a better capitalist before or after the visitation of the three Christmas spirits?”  I personally feel he was a much better capitalist after the visitation  when he spent more on his clerk and the poor than before when he miserly hoarded his money.  You see, the spirits taught Scrooge something about capitalism and money that he didn’t understand: putting a ton of cash into a handful of pockets is not capitalism—its feudalism by another name.

As Dolly Levi used to say, “Money is like manure—it’s not worth a thing unless it’s spread around.  Otherwise she might have added, its just a big, stinking pile of….well, of manure.   And my,  do those Citibank execs, sitting on their pile of bonus manure, smell like do-do or what?

So my final Columbo question of this yuletide is,  “And you me to tell me, after they screwed their government, screwed the American people and screwed their shareholders, Citigroup executives really think they are going to get an uninterrupted nights sleep this Christmas Eve, sans ghosts?

 If there are any spirits of Christmas past, present and future hanging around this year with nothing better to do, might I suggest they make a stop in at the Hamptons a remind a few Citigroup executives how truly replaceable they actually are, least they mend their evil ways?

Calling all ghosts.  Citigroup’s management  needs the Dickens scared out of them.

Throwing Worse Money After Bad

This morning the Obama administration fessed up to what out side critics have been saying for some time:  its efforts to date to stem the mortgage foreclosure crisis hasn’t worked.  “Making Home Affordable” was a seventy-five billion dollar incentive to the financial industry to deal with the fact the a quarter or more  of Americans are now upside down in their homes and millions are facing potential foreclosure in no small part because of actions by the financial industry. 

The Great Double-Ought Bubble was the product of many blowing lips: the irrational monetary exuberance of the Greenspan Fed cutting interest rates to give-away rates; foolishly greedy homeowners and buyers looking to turn hearth and home into equity ATMs; rapacious realtors looking for the next commission come what may.  But the biggest lips blowing up the bubble were those of the financial industry which, from financing ridiculous rates for subprime mortgages complete with their own bubble clauses to the slicing, dicing and splicing of mortgage-backed securities spread the risks of their reckless realty practices far and wide.

So who’d a thunk that the same Wall Street suits sitting in Board Rooms and Fed meeting rooms who came up with the Foreclosure Fiasco would chose to not  sit on their hands—and the throats of homeowners—when it comes to cleaning up the festering mess?  The Obama Administration, of course.  Talk about the audacity of hope.  The “Making Home Affordable” plan relied on financial institutions to take up front risks and forego “lucrative fees”  to help out underwater  homeowners based on an appeal to do the right thing by the government.  So they didn’t, simple as that.   Who’d a thunk that? Oh, right.

Today the Administration now promises to get tough with financial firms by not paying them the cash incentives promised in exchange for modifying distressed mortgages until those mortgages be permanently de-distressed.   That would be the cash incentives that were not big enough to tempt financial institutions to modify a significant number of mortgages in the first place. 

Right.

Six or twelve  months and three or four million more home foreclosures from now, what will the Administration do?  Get really, really tough on the financial industry by halting all deliveries of cappuccinos to their walnut-paneled offices until more mortgages are modified?  That threat might actually work better. Unfortunately, by then, the country might well find itself deep in the second dip of the Great Recession and the Obama administration may find itself facing its own potential pink slip in 2012.

The real scary fact of this great meltdown  has been that, step by step, everyone involved in it, from consumers to businessmen to government officials, essentially took rational, intelligent actions in pursuing their own self interest under the system of the time.  The real scary fact of this great meltdown is that there is no one bad guy—no Enron or AIG or Michael Milken or even a good old Gordon Gecko to blame this all on.  The great meltdown has been the product of systemic failure which has resulted, amongst other things, in the tying of the mortgage industry into a Gordian knot of conflicting interests. 

Only the terrible swift sword of government action can cut through that not.

Relying on the private sector to sort out a housing crisis that it a) made; b) doesn’t fully understand; and c) has no short-term interests in fixing is taking audacious hope to the point of simple blind foolishness.  Government must use the  power of law to modify the very mortgages the financial industry refuses to do.  Without such bold, truly audacious action the  foreclosure crisis threatens to spike again, dragging the housing and financial sectors back down and dropping the entire economy back into the swirling porcelain bowl.

Last year I suggested the government pursue an aggressive National Fair Mortgage Act to, by the power of law,  reset mortgage principals back to pre-bubble assessed home values and structure these mortgages on a 30 year fixed, 4%-5% rate, with mortgage holders being compensated through tax breaks and direct government compensation for any losses.  (See the plan here.)  As foreclosures continue to soar, the economy continues to falter and the latest efforts by the Obama administration to get the banks to fix bad mortgages fail,  the powers that be might want to chew on  this idea a bit.

Continuing to try and get banks to fix loans they have no interest in fixing, however, remains throwing worse money after bad.

Go Fish

fish-in-newspaperFish left such a thoughtful comment to my last post that I had to take the time to address in an illustrious fashion.

Dear Fish,

You smell like a three-day-left-in-the-sun-real-world-version-of-your-online-avatar.

Sincerely,

Lunacy

No, no. that’s not what I really meant to say.  As far as I know Mr. Fish (who should really pal around with Mr. Chips) is a paragon of hygiene and Body Shop botanical splendor, the mental images of sub par dentistry and grimy fingernails his less than genteel online manor suggests notwithstanding.   A serious statement (or as close to one as Fish seems capable of tapping out with a solitary finger) deserves serious response.

What did then Candidate Obama mean –and his supporters hope for—when promising change?   That would be Change from the worst economy produced by any two term president in modern history?  (And no, this is not the Obama recession any more than the first two years of the Gipper’s Administration are called the Reagan Recession.)  This is not the verdict of left wing hippy type intellectuals.  Check out former Bush speech writer David Frum’s comments last week in which he pointed out:

In terms of income growth and poverty reduction, Bush performed worse than any two-term president of the modern era. Even in the best year of his presidency, 2007, the typical American household still earned less after inflation than in the year 2000. The next year, 2008, American households suffered the worst income drop since record-keeping began six decades ago.

Or maybe it’s change from a litany of some of the biggest mistakes made by any modern administration as summarized  by Craig Newmark, a list which includes:

• Going to war on false premises;

• The greatest disaster relief failure in American history;

• Controversial (and, one might add, potentially dangerous and often unconstitutional assertions of Executive Power;

• Becoming the first administration in modern US history to overtly condone torture;

• Unprecedented politicization of the departments of the Executive Branch (can you say Justice) and political patronage appointments of demonstrably incompetents (see number 2 above) ;

• Fiddling while Wall Street burned and then putting out the fire with a trillion dollars in public money; and

• Gutting environmental policy while exposing millions of Americans to increased health and quality of life risks.

Or how about change in simply ending what an overwhelming numbers of professional historians (more than any other president at this point in the post-presidency) call one of the worst administrations in history.

Of course my own personal favorite bit of change:  having a president who can now use the language of Shakespeare without making the Bard want to switch to French.

Fish,  read a book.  Read history.  Read SOMETHING other than right wing blogs perused while listening to right wing talk radio.  Obama is not the best thing since sliced bread.  He is not the Messiah.  He is making plenty of what I consider to be significant mistakes which all into question his ability to produce the change his supporters hoped for.  But by any objective standard he is so far performing better than his predecessor.  That is a good thing.  Democracy worked.  The people spoke and maybe things improve.

So Fish, I sign off with YAJSCIIYLKJARRWTIJWTDYIMY.EHOC.*

Best, Lunacy

(*You are just so cute in your little knee-jerk and rude reactionary ways that I just want to dip you in my coffee.  Extra hot, of course.)

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