I am trying to help the anti-Rick-Santorum movement by linking my blog to the site SpreadingSantorum.com.
Santorum is one of the most dislikeable Republican fundamentalists and gay bashers on the scene.
For some further background on him and the above website, here is an article from Mother Jones magazine.
Friday, February 25, 2011
Don't lose elections!
I've been talking with some Democrats who are applauding the Wisconsin senators on the lam. Somehow there is the perception that as all the facts about the bill under consideration come out, opposition will grow. (Yes, I know that the bill allows public power plants to be sold off without bid and other yadda yadda. ) Ain't gonna happen -- or at least, not enough to make any difference in the foreseeable future.
In fact, the contents of the bill are known to the people who count: the elected Republicans of Wisconsin. I haven't seen any evidence that there is pressure on them to change, and I don't think they will. They have the votes, they have the ideology, and they have the Koch money. They will eventually pass this outrageous bill. That's because they won in Wisconsin and the Democrats lost. The senators will eventually slink back, as they always have in this kind of confrontation, and have their noses rubbed in it.
The Democrats lost because they still don't understand that they need discipline and principle and toughness, both in Wisconsin and nationally. They refused to pursue attacks on the Republicans once they and Obama won in 2008: that was the time to press their advantage and start investigations and play hardball, putting the blame for the economic crisis on Wall Street and the PTR. But no. They and Obama got all lovey-dovey about non-partisanship and working together "across the aisle." The Republicans started knifing them over and over, and now the Dems are starting to get hit in vital places. But it's too late.
And, of course, the Dems are still paying back Wall Street for the large contributions made just before 2008. People forget that Goldman-Sachs gave more to the Dems in 2008 than it gave to the PTR: Wall Street knew what was coming and invested accordingly. They were rewarded with Geitner et. al. and a no-strings-attached bailout. No one went to jail, though a few execs had their bonuses put off for a while.
The "liberals", in love with the Dems, are like the proverbial husband: always the last to know.
Losing elections has consequences: for local ordinances, for contracts and cabinet appointments, and for the courts. You can't let up for a moment. The Republicans are intellectually and morally beneath contempt, true enough, but they still have the political chops.
The unions, of course, are pissed, but it will take more than banging drums and offering guest rooms to fleeing Wisconsin senators. They are going to have to make their pitch all over again. They are going to have to re-organize workers -- maybe starting with the millions of unemployed. They are going to have to put the screws to the Democrats or maybe organize a labor party: something militant, with a clear understanding of the actualities of American political life. (They might even take a few pages from the Tea Screamer playbook.) In short, they are going to have to go back to their roots and do a lot of the old hard work over again. It's really too bad that we don't have an international Communist movement (or "Menace") to throw some fear into their Big Business opponents, and provide them some serious backbone-stiffening support. I'm afraid that liberals simply won't do that job.
At this point, I'm beginning to think that that the near-dead labor movement may be our only hope in avoiding an America totally dominated by corporations and the wealthy.
In fact, the contents of the bill are known to the people who count: the elected Republicans of Wisconsin. I haven't seen any evidence that there is pressure on them to change, and I don't think they will. They have the votes, they have the ideology, and they have the Koch money. They will eventually pass this outrageous bill. That's because they won in Wisconsin and the Democrats lost. The senators will eventually slink back, as they always have in this kind of confrontation, and have their noses rubbed in it.
The Democrats lost because they still don't understand that they need discipline and principle and toughness, both in Wisconsin and nationally. They refused to pursue attacks on the Republicans once they and Obama won in 2008: that was the time to press their advantage and start investigations and play hardball, putting the blame for the economic crisis on Wall Street and the PTR. But no. They and Obama got all lovey-dovey about non-partisanship and working together "across the aisle." The Republicans started knifing them over and over, and now the Dems are starting to get hit in vital places. But it's too late.
And, of course, the Dems are still paying back Wall Street for the large contributions made just before 2008. People forget that Goldman-Sachs gave more to the Dems in 2008 than it gave to the PTR: Wall Street knew what was coming and invested accordingly. They were rewarded with Geitner et. al. and a no-strings-attached bailout. No one went to jail, though a few execs had their bonuses put off for a while.
The "liberals", in love with the Dems, are like the proverbial husband: always the last to know.
Losing elections has consequences: for local ordinances, for contracts and cabinet appointments, and for the courts. You can't let up for a moment. The Republicans are intellectually and morally beneath contempt, true enough, but they still have the political chops.
The unions, of course, are pissed, but it will take more than banging drums and offering guest rooms to fleeing Wisconsin senators. They are going to have to make their pitch all over again. They are going to have to re-organize workers -- maybe starting with the millions of unemployed. They are going to have to put the screws to the Democrats or maybe organize a labor party: something militant, with a clear understanding of the actualities of American political life. (They might even take a few pages from the Tea Screamer playbook.) In short, they are going to have to go back to their roots and do a lot of the old hard work over again. It's really too bad that we don't have an international Communist movement (or "Menace") to throw some fear into their Big Business opponents, and provide them some serious backbone-stiffening support. I'm afraid that liberals simply won't do that job.
At this point, I'm beginning to think that that the near-dead labor movement may be our only hope in avoiding an America totally dominated by corporations and the wealthy.
Wednesday, February 23, 2011
Dream on, blogmeister
How's about we file some public petitions or referendums. For example:
1. All articles of incorporation are suspended. Previous corporations and new applicants can incorporate only when they post a binding statement explaining how their limited liability is necessary and in the public interest. Permission to incorporate will take a 2/3 vote of all houses of the legislature [of the state in which they are incorporating]
2. Same as above, except re-incorporating will require a public referendum in each case.
I'd be glad to take around petitions for either of these referendums in Massachusetts. Let's get the unions to help out circulating them.
1. All articles of incorporation are suspended. Previous corporations and new applicants can incorporate only when they post a binding statement explaining how their limited liability is necessary and in the public interest. Permission to incorporate will take a 2/3 vote of all houses of the legislature [of the state in which they are incorporating]
2. Same as above, except re-incorporating will require a public referendum in each case.
I'd be glad to take around petitions for either of these referendums in Massachusetts. Let's get the unions to help out circulating them.
Lies conservatives tell: part 387
"Municipal (government) workers make more than workers in the private sector."
You hear this every day now, and it is baloney. The standard statistic supposedly reporting this is that the average salary of a municipal worker is higher than the average salary of a non-municipal worker. This is a highly misleading comparison, since municipal workers are almost all selected for particular skills and/or educational levels. It's a little like saying that professional architects earn more than general workers, or that college grads make more, on average, than the population at large. Most municipal workers must take civil service exams or show evidence that they have completed special training. Examples are obvious: fire-fighters, teachers, police, EMTs lawyers.
There are many sources evaluating these statistics; below is a quote from the Michigan Municipal League:
"Two studies, one released by the Snyder Administration [Michigan Gov. Rick Snyder] and another by a group of public employee unions give conflicting views in comparing public employee compensation to private sector compensation.
The Snyder Administration study, conducted by the Anderson Economic Group, shows that over the last decade, public sector workers have been compensated more than double private sectors workers. However, Governor Synder admitted that the report did not compare similar jobs in the public and private sectors, nor the educational attainment levels required for those jobs. The governor urged caution in the analysis of those numbers, agreeing it was not an apples-to-apples comparison.
However, a second study, released by Citizens for Accountability and Reform and the Economic Policy Institute found that after correcting for education levels, state workers have total compensation 9.67 percent less than their private sector counterparts.
After correcting for education levels, state workers have total compensation nearly 10 percent less than their private sector counterparts.
In fact, we've all heard high-ranking "public servants" claim that they are leaving their posts because they can make much more in the private sector. Politicians say this all the time, except when they are trying to bash government workers.
It is true that municipal workers have somewhat better job security than workers in the private sector. This is because municipal workers are more organized into unions, and unions protect workers. As usual, conservatives try to use this as a way of seeding resentment and thus dividing salaried workers. It is another one of "management's" sneaky tools, which include exploiting racism, sexism, and religious prejudice. The appropriate response is: "If union members get treated with respect, maybe I should join a union."
The same people who underwrite the spread of these statistical fairy tales are the same wealthy and conservative people whose incomes have soared since Ronald Reagan's administration -- while the rest of us have seen our purchasing power essentially remain flat.
Oh, and one other thing. It was WALL STREET, not wage workers of any kind -- government or private sector -- which caused the mess we're in now. Wall Street cheated millions out of their savings and investments, and cheated states out of their retirement funds. And it is exactly Wall Street that the conservatives have protected every step of the way.
MAKE WALL STREET PAY.
Saturday, February 19, 2011
Next stop: Cairo, Texas
Historically, Egyptians have gotten the short end of the stick, as have so many of the peoples of the Middle East. The recently departed regime of Hosni Mubarak was just the latest to preside over an enormous gap in prosperity and prospect between enormously rich upper classes and the unhealthy, underemployed and bleak-futured masses.
Kind of like Texas...
The Lone Star State, headed by the out-of-touch rightist regime of Governor Rick Perry, is on the verge of bankruptcy, in spite of its very rich elite of oilmen, government contractors and high tech millionaires. Texas has a third-world child mortality rate, a top-down rigid educational system that produces one of the highest state illiteracy rates in the U.S., and a medieval, pro-football-anti-science Christian-oid fundamentalism comparable to Pakistan's madrassas.
(See Gail Collins' fine column in the NY Times: here.)
Texas, unfortunately, may be a model for where the U.S. is moving. In spite of Republican screams about "European" (gasp!) socialism, the folks in the old world are not doing so badly. (They're not, of course, all Marxists). Here are some of the 2010 unemployment rates, for comparison:
What about debt? Certainly those free-spending Europeans must be awash in red ink (get it?). Well, not actually: check this out:
OK, I'll stop being cute. The point of today's blog is to present some statistics which I dug out with the aid of search engines; I deliberately avoided the Leninist press, of course. Here's some more:
Once again, the red-white-and-blue greatest-economic-system in the world is verging on the greatest system in the third world.
Finally, Charles Blow from the NY Times presented the following table comparing some measures of U.S. quality of life with that of other countries:
(To be fair, the U.S. has a very diverse population, so comparisons with some of the homogeneous populations of Europe may be misleading. On the other hand, we certainly aren't doing a very good job living up to our stated ideals about equality and opportunity. Furthermore, our healthcare system is a disgrace by any measure, as is our chauvinist reluctance to study and learn from the successful examples of others; we could easily and profitably copy France's hybrid public/private system, for example.)
BTW: I mentioned the Kochs in yesterday's blog. Here's the link to Jane Mayer's fine New Yorker article about them: Covert Operations (8/30/2010).
Kind of like Texas...
The Lone Star State, headed by the out-of-touch rightist regime of Governor Rick Perry, is on the verge of bankruptcy, in spite of its very rich elite of oilmen, government contractors and high tech millionaires. Texas has a third-world child mortality rate, a top-down rigid educational system that produces one of the highest state illiteracy rates in the U.S., and a medieval, pro-football-anti-science Christian-oid fundamentalism comparable to Pakistan's madrassas.
(See Gail Collins' fine column in the NY Times: here.)
Texas, unfortunately, may be a model for where the U.S. is moving. In spite of Republican screams about "European" (gasp!) socialism, the folks in the old world are not doing so badly. (They're not, of course, all Marxists). Here are some of the 2010 unemployment rates, for comparison:
What about debt? Certainly those free-spending Europeans must be awash in red ink (get it?). Well, not actually: check this out:
OK, I'll stop being cute. The point of today's blog is to present some statistics which I dug out with the aid of search engines; I deliberately avoided the Leninist press, of course. Here's some more:
Once again, the red-white-and-blue greatest-economic-system in the world is verging on the greatest system in the third world.
Finally, Charles Blow from the NY Times presented the following table comparing some measures of U.S. quality of life with that of other countries:
(To be fair, the U.S. has a very diverse population, so comparisons with some of the homogeneous populations of Europe may be misleading. On the other hand, we certainly aren't doing a very good job living up to our stated ideals about equality and opportunity. Furthermore, our healthcare system is a disgrace by any measure, as is our chauvinist reluctance to study and learn from the successful examples of others; we could easily and profitably copy France's hybrid public/private system, for example.)
BTW: I mentioned the Kochs in yesterday's blog. Here's the link to Jane Mayer's fine New Yorker article about them: Covert Operations (8/30/2010).
Obama snookered again
Why can't the President understand that the Republicans are not going to play nice -- not going to be "non-partisan" adults? How many times does one have one's face shoved into the sidewalk before one understands what's happening?
The PTR and its Tea Screamer friends are going to gut every program he holds dear, and will try to undercut anything that might redound to his favor in 2012. They will do this regardless of the worth of the programs, and regardless of the cost. That's because they want to win next election. Pigs like the Kochs and Murdoch are not going to compromise, and have absolutely no interest in what's good for the vast majority of Americans or for America itself. Their goal is to cut all regulation of corporate activity and profit.
So what does Obama do? He helps their cause by "pre" cutting programs like community block grants and home-heating assistance for the poor. These have nothing to do with budget deficits, but everything to do with making life reasonable for the non-wealthy. He has gained nothing by selling out so many of the powerless. It's like cutting off your neighbor's fingers in order to appease a hungry tiger. If he believes it will buy him good will, he's a fool; if he doesn't, than what's the point?
Meanwhile, the Republicans want to set back workers' rights about a century. I have no doubt that if and when they control the federal government again, they and their pals on the Supreme Count will have no compunctions about totally destroying collective bargaining (as well as environmental protection, drug and meat inspections etc.) Then working people will have to re-organize all over, but with much more formidable opposition from a high-tech police state and corporate control over campaign finance. I am still waiting for Obama to signal some real outrage at what's happening in Wisconsin. I'm still waiting for some real mass opposition from unions throughout the U.S. Haven't heard too much.
When the Air Traffic Controllers' Union was busted by Reagan, no one really complained -- after all, they were highly paid, right? The hard-working UPS employees managed to eke out an important win in 1997, but most unions have declined in the past half-century. The news hacks have been reporting gleefully how the percentage of union members in the labor force has been declining until it's nearly in the single digits (see THIS from the Bureau of Labor Statistics). Municipal workers, including teachers, firefighters and the police, who have the highest rate of union membership, are currently under attack by Republican governors and legislatures; if they are busted, every working person in the U.S. had better start being very nervous.
Hardly anyone remembers what it was like before unions won the important battles against sweatshops, child labor and oppressive and dangerous working conditions. Guess what? We're headed back to those days.
I don't think Obama and the Dems are going to protect us very much: they're too busy waiting for a non-partisan pat on the back. Snookered again.
The PTR and its Tea Screamer friends are going to gut every program he holds dear, and will try to undercut anything that might redound to his favor in 2012. They will do this regardless of the worth of the programs, and regardless of the cost. That's because they want to win next election. Pigs like the Kochs and Murdoch are not going to compromise, and have absolutely no interest in what's good for the vast majority of Americans or for America itself. Their goal is to cut all regulation of corporate activity and profit.
So what does Obama do? He helps their cause by "pre" cutting programs like community block grants and home-heating assistance for the poor. These have nothing to do with budget deficits, but everything to do with making life reasonable for the non-wealthy. He has gained nothing by selling out so many of the powerless. It's like cutting off your neighbor's fingers in order to appease a hungry tiger. If he believes it will buy him good will, he's a fool; if he doesn't, than what's the point?
Meanwhile, the Republicans want to set back workers' rights about a century. I have no doubt that if and when they control the federal government again, they and their pals on the Supreme Count will have no compunctions about totally destroying collective bargaining (as well as environmental protection, drug and meat inspections etc.) Then working people will have to re-organize all over, but with much more formidable opposition from a high-tech police state and corporate control over campaign finance. I am still waiting for Obama to signal some real outrage at what's happening in Wisconsin. I'm still waiting for some real mass opposition from unions throughout the U.S. Haven't heard too much.
When the Air Traffic Controllers' Union was busted by Reagan, no one really complained -- after all, they were highly paid, right? The hard-working UPS employees managed to eke out an important win in 1997, but most unions have declined in the past half-century. The news hacks have been reporting gleefully how the percentage of union members in the labor force has been declining until it's nearly in the single digits (see THIS from the Bureau of Labor Statistics). Municipal workers, including teachers, firefighters and the police, who have the highest rate of union membership, are currently under attack by Republican governors and legislatures; if they are busted, every working person in the U.S. had better start being very nervous.
Hardly anyone remembers what it was like before unions won the important battles against sweatshops, child labor and oppressive and dangerous working conditions. Guess what? We're headed back to those days.
I don't think Obama and the Dems are going to protect us very much: they're too busy waiting for a non-partisan pat on the back. Snookered again.
Tuesday, February 15, 2011
An informative interview on budgets, and some comments
Merrill Goozner, who's blog GoozNews I've recommended several times, recently gave a very interesting interview to Washington Journal on C-span. You can get to the video HERE. I wrote some comments on this which I reproduce below.
Mr. Goozner,
Mr. Goozner,
I watched your C-Span interview with great interest. You were, it seems to me, too fair toward both political parties — especially the Republicans. However, that’s probably what has to be done on C-Span.
What was absent from the discussion was the issue to tax increases. No one wants to “de-stimulate” the economy, but certain taxes, it seems to me, fall rightly and squarely on non-productive income. First of all are two proposed taxes that Make Wall Street Pay. The first of these is elimination of capital gains treatment of income for hedge-fund managers, who are risking only their clients’ assets. (Actually, I rather support elimination of the capital gains discount for everyone, but that is another argument). The second, and even more important, is a tax on stock transfers — say 1/2% on sale and 1/2% on purchase for every transaction. This would make speculators pay a “sales tax” on their non-productive churning activities. It would also raise a lot of money and would have no effect on our nascent economic recovery. The general rubric here is “Tax the Parasites.”
We should return to higher taxes on the wealthy, but that is probably impossible in the current rightist atmosphere. I’ve never seen any evidence that these higher rates for higher income have adversely affected the economy — they don’t in other industrialized countries. Our tremendous gap between haves and have-nots can hardly be beneficial, since other countries with more modest gaps seem to be doing far better in this recession.
Of course we all know that Social Security can be safely preserved for several generations simply by extending FICA to all incomes (or even leaving a non-taxed gap between say $110,000 and $200,000).
The problem of healthcare is much more complex. Health insurance is a huge drag on our economy, since it is a major expense for many employers, who must compete with foreign companies that don’t have to pay for it. We should have had single-payer or some sort of Medicare buy-in (formerly supported by some Republicans). But we didn’t. We still could move toward a hybrid system such as they have in France. Instead, we really have nothing very innovative at the moment; certainly nothing beyond a hope that universal care will include enough preventative medicine to slightly lower the chronic disease rate. Republicans have absolutely no serious input in this discussion.
I enjoyed your interview, but had hoped that you would include some of these tax issues in it.
Tuesday, February 8, 2011
Ronald Reagan's 100th
Here's a nice cartoon someone sent me about Ronald Reagan, whose 100th birthday was just observed (click on it to see it more sharply):
Sunday, February 6, 2011
Reform in finance?
In recent decades -- and culminating in the recent financial bust -- the interests of investment bankers has diverged more and more from the interests of their clients. Nowhere was this more evident than at Goldman-Sachs, which rescued itself from its disastrous speculation in the subprime mortgage bubble by eventually betting (selling short) against its customers.
In order to show the public that it's contrite and takes their interest to heart, G-S and other companies promised to tie its top executives' compensation (or at least part of it) to the value of its stock. Thus, some execs received their bonuses as either stock directly, or as options to buy the stock (over a period of a few years) at a fixed price.
However, the NY Times reports that the greedy investment bankers have been gaming even this very modest "reform." They do this by "hedging" their stock compensation.
Suppose, for example, that as part of your company's compensation package, you are given the option of purchasing a certain amount of the company's stock at a certain price, let's say $90 per share, over a period of say a year. Often this price is actually below the current market price -- say $100 -- but you are not allowed to exercise the option immediately. Supposedly this will make your interests identical with that of your company (and any other shareholders of your company). However, you may be allowed, in turn, to sell an option to buy these shares (at a certain price for a certain time) to someone else, if you think the shares may go down (possibly as a result of your own actions!). For example, you might arrange a contract with someone where, in exchange for paying you $10 a share, you promise to sell that person, over that same year, if they wish, a hundred shares of the stock, at an agreed-upon price -- say the current market price of $100. If the stock doesn't go up any over that year (or goes down), then the person will not exercise the option to buy, so you will pocket the $1000 total fee he pays you. If the stock goes up to $115 he will exercise his option, but you can still buy it at $90 (through your company's option) and sell it for $100, so you make $1000 plus his fee of $1000.
Selling this kind of hedge, or contract, in which you think the stock will go down, so agree to buy it later at a fixed price, is referred to as selling a call. There is an inverse hedge as well, called a put, in which you agree, for a fee, to purchase shares at an agreed upon price.
As you can see from this simple example, you can protect yourself somewhat from a decline in your company's stock; thus, you can sidestep some of the supposed tie-in of your bonus with the performance of your company.
A few high-ranking executives are forbidden to make hedges on their bonuses, and companies, presumably, don't allow their employees to actually sell the company stock short (i.e. bet against the stock in the open market).
However, even if hedging isn't allowed, it doesn't seem likely that this kind of nudge on the wrists will change much of the anti-social nature of modern investment banking. After all, it was Goldman itself which saved its stock prices by selling short its own customers. Investment bankers who bundled subprime mortgages into securities called CDOs (or virtual CDOs) had no intention of keeping these as investments; rather, they unloaded them as quickly as possible on their clients, which included private investors, pensions funds, charities, etc. They were able to do so because of faulty or phony evaluations of their worth by corrupt or incompetent ratings firms -- of which there never seems to be a shortage.
(All of this has been thoroughly documented in the dozens of books that have been published describing the recent sub-prime debacle. "The Big Short"is one of my favorites.)
What is needed is not some industry-sponsored indirect "reform", tying compensation to stock-prices, but direct regulation of the investment banks. Banks should, first of all, be forbidden to speculate using their depositors' assets (as in the old Glass-Steagall Act). Derivatives such as CDOs (Collateralized Debt Obligations) and CDS (Credit Default Swaps) need to be completely transparent -- investors need to know what's "in them" and have available ratings and evaluations prepared by licensed and disinterested ratings agencies. Some important steps have been taken in this direction in the new Financial Protection Law, and the Consumer Financial Protection Agency (CFPA) now being assembled by the President's special adviser Elizabeth Warren.
Even more should be done. Wall Street must be made to pay for killing savings and jobs and many businesses. Taxing speculative capital gains the same as ordinary income will help eliminate the widening gap between whose who create value (workers, researchers, inventors, entrepreneurs) and those who play the market solely for personal gain. We should also make Wall Street pay by enacting a fee on stock transfers, similar to the sales tax: see my blog on The Parasite Tax.
Let's hope that Obama doesn't confuse working with business with working with speculators. He seemed to require a lot of nudging to get him to recognize Elizabeth Warren as the right person to set up the CFPA; we can only hope that she isn't marginalized in his new-found love of corporate America.
(BTW: Warren has been suggested as a possible opponent against Scott Brown in the 2012 fight for the second Senate seat in Massachusetts. At the moment I like Michael Capuano, but Warren might be good also; I simply don't know how she is as a political candidate. She'd have to be better than Martha Coakley ...)
In order to show the public that it's contrite and takes their interest to heart, G-S and other companies promised to tie its top executives' compensation (or at least part of it) to the value of its stock. Thus, some execs received their bonuses as either stock directly, or as options to buy the stock (over a period of a few years) at a fixed price.
However, the NY Times reports that the greedy investment bankers have been gaming even this very modest "reform." They do this by "hedging" their stock compensation.
Suppose, for example, that as part of your company's compensation package, you are given the option of purchasing a certain amount of the company's stock at a certain price, let's say $90 per share, over a period of say a year. Often this price is actually below the current market price -- say $100 -- but you are not allowed to exercise the option immediately. Supposedly this will make your interests identical with that of your company (and any other shareholders of your company). However, you may be allowed, in turn, to sell an option to buy these shares (at a certain price for a certain time) to someone else, if you think the shares may go down (possibly as a result of your own actions!). For example, you might arrange a contract with someone where, in exchange for paying you $10 a share, you promise to sell that person, over that same year, if they wish, a hundred shares of the stock, at an agreed-upon price -- say the current market price of $100. If the stock doesn't go up any over that year (or goes down), then the person will not exercise the option to buy, so you will pocket the $1000 total fee he pays you. If the stock goes up to $115 he will exercise his option, but you can still buy it at $90 (through your company's option) and sell it for $100, so you make $1000 plus his fee of $1000.
Selling this kind of hedge, or contract, in which you think the stock will go down, so agree to buy it later at a fixed price, is referred to as selling a call. There is an inverse hedge as well, called a put, in which you agree, for a fee, to purchase shares at an agreed upon price.
As you can see from this simple example, you can protect yourself somewhat from a decline in your company's stock; thus, you can sidestep some of the supposed tie-in of your bonus with the performance of your company.
A few high-ranking executives are forbidden to make hedges on their bonuses, and companies, presumably, don't allow their employees to actually sell the company stock short (i.e. bet against the stock in the open market).
However, even if hedging isn't allowed, it doesn't seem likely that this kind of nudge on the wrists will change much of the anti-social nature of modern investment banking. After all, it was Goldman itself which saved its stock prices by selling short its own customers. Investment bankers who bundled subprime mortgages into securities called CDOs (or virtual CDOs) had no intention of keeping these as investments; rather, they unloaded them as quickly as possible on their clients, which included private investors, pensions funds, charities, etc. They were able to do so because of faulty or phony evaluations of their worth by corrupt or incompetent ratings firms -- of which there never seems to be a shortage.
(All of this has been thoroughly documented in the dozens of books that have been published describing the recent sub-prime debacle. "The Big Short"is one of my favorites.)
What is needed is not some industry-sponsored indirect "reform", tying compensation to stock-prices, but direct regulation of the investment banks. Banks should, first of all, be forbidden to speculate using their depositors' assets (as in the old Glass-Steagall Act). Derivatives such as CDOs (Collateralized Debt Obligations) and CDS (Credit Default Swaps) need to be completely transparent -- investors need to know what's "in them" and have available ratings and evaluations prepared by licensed and disinterested ratings agencies. Some important steps have been taken in this direction in the new Financial Protection Law, and the Consumer Financial Protection Agency (CFPA) now being assembled by the President's special adviser Elizabeth Warren.
Even more should be done. Wall Street must be made to pay for killing savings and jobs and many businesses. Taxing speculative capital gains the same as ordinary income will help eliminate the widening gap between whose who create value (workers, researchers, inventors, entrepreneurs) and those who play the market solely for personal gain. We should also make Wall Street pay by enacting a fee on stock transfers, similar to the sales tax: see my blog on The Parasite Tax.
Let's hope that Obama doesn't confuse working with business with working with speculators. He seemed to require a lot of nudging to get him to recognize Elizabeth Warren as the right person to set up the CFPA; we can only hope that she isn't marginalized in his new-found love of corporate America.
(BTW: Warren has been suggested as a possible opponent against Scott Brown in the 2012 fight for the second Senate seat in Massachusetts. At the moment I like Michael Capuano, but Warren might be good also; I simply don't know how she is as a political candidate. She'd have to be better than Martha Coakley ...)
Tuesday, February 1, 2011
Mubarek
At this point, Obama's call for Mubarek not to run again -- which Mubarek has apparently agreed to -- is about the minimum reponse that he could have made under the circumstances. Obama might as well have asked Mubarek to resign now, since he had already committed the U.S. to oppose Mubarek as President. In fact, it probably would have been the correct move since the Egyptian oppositioin is demanding that Mubarek step down now, and, given the non-support of even the military, he will more than likely have to accede to this demand.
As I have suggested in a recent blog, the U.S. has managed to be on the wrong side of many popular movements to institute democracy. Even in Egypt, we probably could have had Nasser as a friend if we hadn't, as was usual for us, identified him as undependably nationalist, unaligned, and possibly leaning toward the U.S.S.R. This policy decision of J. F. Dulles turned out to be, at least partially, self-fulfilling, as Nasser turned around and accepted economic aid from the Soviets.
If Mubarek remains in office until September, it would give him time for all sorts of election-rigging, possibly in favor of his son. He should resign now, there should be a caretaker government, and internationally supervised elections in the Fall. The U.S. should take this position while there is still time -- before events overtake us.
As I have suggested in a recent blog, the U.S. has managed to be on the wrong side of many popular movements to institute democracy. Even in Egypt, we probably could have had Nasser as a friend if we hadn't, as was usual for us, identified him as undependably nationalist, unaligned, and possibly leaning toward the U.S.S.R. This policy decision of J. F. Dulles turned out to be, at least partially, self-fulfilling, as Nasser turned around and accepted economic aid from the Soviets.
If Mubarek remains in office until September, it would give him time for all sorts of election-rigging, possibly in favor of his son. He should resign now, there should be a caretaker government, and internationally supervised elections in the Fall. The U.S. should take this position while there is still time -- before events overtake us.
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