Privatizing Benefits, Socializing Risks: The Roots of our Economic Crisis

[Time for change]

Our nation’s elites have long disparaged the words “Communism” and “Socialism” to such an extent as to make these words almost synonymous with evil. Yet it is only one side of the equation that they hate. They hate the idea of a society or government that provides a safety net to its most vulnerable members, in an attempt to ensure that everyone has access to the basic necessities of life. Yet you don’t often hear them complain when government provides them with benefits, at the expense of the rest of society.

This attitude is the essence of the privatization and deregulation movement that came into full force in our country during the Reagan Revolution of the 1980s. Deregulation is the crux of their philosophy, and it is the very essence of privatized benefits in the face of socialized risks. They equate deregulation with freedom. But their “freedom” comes at a great cost to the rest of society: Deregulation of environmental controls means pollution of our air, water, and soil and putting our planet on the brink of a climate crisis that threatens catastrophe to billions; deregulation in the workplace means threatening the health and safety of our workers; deregulation of prohibitions against monopolies means granting control of huge areas of our economy to the wealthy few, with consequent rising costs and declining quality of goods and services for the average consumer; and deregulation of the financial industry means that our financial elites are granted the “freedom” to operate as they please, amass huge fortunes from irresponsible risky ventures, and then receive huge subsidies from the American taxpayer when things go sour – rationalized with the argument that the “services” they provide are so essential to the economy of our country that we can’t function without them.


A classic example – Robert Rubin and the Citigroup fiasco

A classic example of how privatized benefits combine with socialized risks to create vast fortunes for the few at the expense of the many is seen in the career of Robert Rubin. Rubin was Bill Clinton’s Secretary of the Treasury before he resigned in 1999. Shortly before he resigned he advocated for the repeal of the Glass-Steagall law, which protected the American people against financial fraud by prohibiting commercial banks from taking on the risky role of investment banks. Citigroup is widely considered the greatest beneficiary of the repeal of Glass-Steagall. Charles Gasparino explains the philosophy:

The theory of Citigroup was widely accepted in business circles as the future of the financial business; combining commercial and investment banking services under one roof and allowing firms to sell all sorts of products was a step forward toward "financial modernization."

With Rubin’s backing, Glass-Steagall (which was already severely weakened through years of abuse) was repealed. Within days of the repeal of Glass-Steagall, Rubin joined Citigroup, as a senior executive with the title of “Chairman of the Executive Committee”. In that capacity he strongly advocated for high risk policies which eventually contributed to Citigroup’s downfall. Gasparino describes the sequence of events:

Citigroup, with its mandate now in hand, and with Rubin approving the effort, became one of the biggest creators of mortgage bonds… With Wall Street buying these loans en mass from the banks to pack into their ever-riskier bonds, lending to so-called "subprime" borrowers became an accepted practice fully sanctioned by the federal government. When Citigroup couldn't sell the bonds to investors, it horded them on their balance sheet, earning the high interest rates the bonds threw off.

That is until reality set in, as it did last year when the entire financial system, burdened by investments in these mortgage bonds on their way to default, Wall Street, began to collapse and the economy fell into the Great Recession, now with 10.2% unemployment that shows no signs of letting up. Citigroup was the biggest casualties of the collapse; its risk takers had lost so much money that it needed tens of billions in guarantees and handouts, as well as the government becoming the bank's largest shareholder.

When the dust finally cleared, it became obvious that the demise of Glass-Steagall allowed the risk-taking traders at Citigroup to jeopardize nearly $1 trillion worth of customers’ deposits, which is the main reason the feds had to spend so much bailing it out. With that, Bob Rubin's Wall Street career was over. He was forced to resign from the Citi board and the firm itself with his reputation in tatters, but not without earning more than $100 million.

In what kind of a world does massive failure result in “earning” $100 million? Answer: a world in which the game is played with a stacked deck, in which the consequences of failure and massive financial losses are spread out (socialized) so that the American people pick up the tab for the wealthy.


The origins of Glass-Steagall

Nobel Prize winning economist Paul Krugman explains the origins of the Glass-Steagall legislation in his book, “The Return of Depression Economics – and the Crisis of 2008”. Prior to the Great Depression of the 1930s, the United States had experienced periodic severe recessions and depressions, which were due largely to an unregulated financial system. Nothing demonstrated the need for regulation of the financial sector more than the Great Depression. Krugman explains:

Because they were supposed to engage only in low-risk activities, trusts were less regulated… than national banks. However, as the economy boomed during the first decade of the 20th century, trusts began speculating in real estate and the stock market, areas from which national banks were prohibited. Because they were less regulated than national banks, trusts were able to pay their depositors higher returns. Meanwhile, trusts took a free ride on national banks’ reputation for soundness… As a result, trusts grew rapidly… and the most severe banking crisis in history emerged in the early 1930s… precipitating a series of loan defaults followed by bank runs… There’s more or less unanimous agreement among economic historians that the banking crisis is what turned a nasty recession into the Great Depression.

The response was the creation of a system with many more safe guards. The Glass-Steagall Act separated banks into two kinds; commercial banks, which accepted deposits, and investment banks, which didn’t. Commercial banks were sharply restricted in the risks they could take; in return, they had ready access to credit from the Fed… their deposits were insured by the taxpayer. Investment banks were much less tightly regulated, but that was considered acceptable because as non-depository institutions they weren’t supposed to be subject to bank runs.

This new system protected the economy from financial crises for almost seventy years.

The deregulation craze of the 1980s and the initial efforts to repeal Glass-Steagall

The presidency of Ronald Reagan ushered in the era of privatization and deregulation. Another way of saying this is that the Reagan administration ushered in the era of favoritism towards wealthy corporations and individuals at the expense of everyone else, which began a trend towards a disappearing middle class and the greatest level of incomeand wealth inequality ever seen in this country. William Kleinknecht describes what this process meant in terms of financial deregulation, in his book, “The Man Who Sold the World – Ronald Reagan and the Betrayal of Main Street America”:

The Reagan administration’s zest for financial deregulation was responsible for the boom-and-bust cataclysms of the 1980s and 1990s, the obscene inflation of executive compensation; the corporate scandals and stock market meltdown of 2000-2001; and innumerable crises in international finance, including the most devastating of them all: the subprime mortgage scandal. Deregulation corrupted financial institutions at the same time that it made them the lords of the world economy and allowed their proxies, people like Robert Rubin and Alan Greenspan, to dictate the policies of the federal government. History will marvel that these two standard-bearers of Reaganism – Greenspan and Rubin – were lionized as geniuses and visionaries at the very time they were steering the nation toward disaster….

Reagan’s plan for deregulation of the financial sector would take years to come to full fruition – what was finally left of Glass-Steagall would not finally be repealed until 1999 – but the processes he and his Republican colleagues set in motion in 1981 were the genesis of so much that is wrong with the U.S. economy in the 21st century.

Reagan didn’t have the votes in Congress to repeal Glass-Steagall. So he attacked it the same way that he attacked everything else he didn’t like about our system of government: by executive fiat. He simply neglected to fulfill his responsibility as a U.S. president to enforce our existing laws and regulations. As Kleinknecht explains:

Reagan changed the role of government from that of watchdog to lapdog without even bothering to consult the Congress. He also gave a potent political voice to the backlash against regulations, ensuring that the movement would continue to burgeon after he left office… The Reaganites went after regulatory agencies with relish, starving them of resources and staffing them with officials committed to their destruction…The S&L mess worked out well for the new class of robber barons that emerged in the Reagan years. A small group of rich business types went on a spending spree, and the public picked up the $150 billion tab. Privatize the wealth and socialize the risk.

Reagan’s Treasury Secretary, Donald Regan, drafted legislation in 1983 to repeal Glass-Steagall, but it was defeated in the Democratic House of Representatives. With the help of his newly appointed chairman of the Federal Reserve, Alan Greenspan, Reagan tried again in 1988, but the effort was again defeated in the House. Nevertheless, Reagan put Glass-Steagall on life support through his continuous refusals to enforce the terms of the law.


President Clinton’s about-face

Thom Hartmann explains in his book, “Threshold – The Crisis of Western Culture”, that Bill Clinton campaigned for the presidency as an unabashed FDR style liberal. In a speech at Georgetown University on October 23, 1991, he declared:

We need a new covenant, a solemn agreement between the people and their government to provide opportunity for everybody, inspire responsibility throughout our society, and restore a sense of community to our great nation – a new covenant to take government back from the powerful interests and the bureaucracy, and give it back to the ordinary people of our country…

More than 200 years ago, our founding fathers outlined our first social compact, between government and the people, not just between Lords and Kings… More than 60 years ago, Franklin Roosevelt renewed that promise with a New Deal that offered opportunity in return for hard work. Today we need to forge a new covenant that will repair the damaged bond between the people and their government, restore our basic values, embed the idea that a country has the responsibility to help people get ahead… And most important of all, that we’re all in this together…

Clinton was elected President on that promise. Hartmann points out that:

A majority of voters in 1992 were old enough to remember what America was like under the 1940-1981 New Deal era, when a single worker with a good job had health care, a pension, and could raise a family and buy a home… And they noticed that the twelve years of Reagan and Bush had begun the process of shattering that historic era; that the middle class was slipping away; that government had become remote and hostile rather than protecting the rights of workers and the middle class…

But something happened before Clinton was inaugurated. Hartmann continues:

A few weeks before Bill Clinton was to be sworn into office as president of the United States, he was visited by Goldman, Sachs CEO Robert Robin and Alan Greenspan. Rubin and Greenspan sat the young new president down and told him the facts of life as they saw them. Clinton would not govern as an FDR liberal; instead he must cut government, “free” trade, and reduce regulation of business… Clinton complied… In his second inaugural address, he declared, “The era of big government is over.”

I would love to know how a “visit” from Greenspan and Rubin so changed the course of our country. Did they threaten him, bribe him, or just convince him? I guess we’ll never know. Anyhow, Kleinknecht describes how Clinton’s thinking changed:

Bill Clinton… ended up buying into the Reagan mantra of deregulation and continued efforts to undermine Glass-Steagall… He made his chief economic adviser Robert Rubin, the former cochairman of Goldman Sachs and Company, a man who saw the world through the prism of Wall Street… The two men (Greenspan and Rubin) ensured that Clinton stayed the course of Reaganism on economic matters, much to the chagrin of administration liberals like Labor Secretary Robert Reich and Joseph Stiglitz, chairman of the Council of Economic Advisers…

Final repeal of Glass-Steagall

In 1999, Congress passed the Financial Services Modernization Act, commonly known as the Gramm-Leach-Biley Act, which repealed Glass-Steagall. Kleinknecht describes the effects of that:

It was no surprise that the conflicts of interest and sleazy behavior that Glass-Steagall was designed to prevent quickly reappeared once the law was shelved… There were enormous sums of money to be made on Wall Street, and some of that wealth would be plowed into political campaign funds… Within two years after the repeal of Glass-Steagall, companies were inflating their earnings by billions of dollars…

This was the dawn of the George W. Bush era, when the ethos of Reaganism was once again enshrined as holy writ, so the stock market implosion of the millennium would not give rise to new banking regulation. Instead, the financial press continued to deify Greenspan, Rubin, and Reagan, and the country plunged headlong into the subprime mortgage scandal.

One bubble on top of another

Paul Krugman describes the two nation-wide financial bubbles leading up to our current crisis. The first was the stock market bubble, which peaked in the summer of 2000 and then burst, leading to a 40% decline in the stock market over the next two years. Krugman notes that Alan Greenspan received high praise for the fact that the recession that resulted from the bursting of the stock market bubble of 2000 was so short-lived and mild. But that praise was misplaced. The reason that the recession was short-lived and mild was deceptive. The fact of the matter was that the deflating stock market bubble was replaced by the housing bubble. Therefore the recession wasn’t cured by anything Alan Greenspan did, but rather it was interrupted and delayed by the occurrence of another bubble – a much more dangerous one. Krugman explains what an asset bubble is:

An asset bubble is a sort of natural Ponzi scheme in which people keep making money as long as there are more suckers to draw in. But eventually the scheme runs out of suckers, and the whole thing crashes.

As for the housing bubble:

What justified a bubble in housing? … Americans have long been in the habit of buying houses with borrowed money, but it’s hard to see why anyone should have believed, circa 2003, that the basic principles of such borrowing had been repealed. From long experience, we knew that home buyers shouldn’t take on mortgages whose payments they couldn’t afford, and that they should put enough money down so that they can sustain a moderate drop in home prices and still have positive equity… What actually happened, however, was a complete abandonment of traditional principles… It was driven to a greater extent by a change in lending practices. Buyers were given loans requiring little or no down payment and with monthly bills that were well beyond their ability to afford…

Why did lenders relax their standards? … The lenders didn’t concern themselves with the quality of their loans because they didn’t hold on to them. Instead, they sold them to investors, who didn’t understand what they were buying….

As for Greenspan’s role:

As long as housing prices kept rising, everything looked fine and the Ponzi scheme kept rolling… Some economists warned that there was a major housing bubble… But authoritative figures declared otherwise. Alan Greenspan, in particular, declared that any major decline in home prices would be “most unlikely.”… But there was, and it began deflating in 2006 – slowly at first, then with increasing speed. By that time Greenspan was no longer chairman of the Fed…

Krugman sums up the recession of the early 21st Century:

Officially the recession was short, but the job market kept deteriorating long after the recession had officially been declared over… The unemployment rate rose steeply during the recession but continued to rise in the months that followed. The period of deteriorating employment actually lasted two and a half years, not eight months.

Prelude to depression – The shadow banking system

Krugman explains that in ordinary times it would likely have been possible for our country to have survived the bursting of the housing bubble without too much difficulty. However, the combination of high unemployment and a dysfunctional financial system was more than we could bear. Our financial system was (and is) dysfunctional in ways that the previously existing Glass-Steagall legislation was meant to prevent. But it wasn’t simply the demise of Glass-Steagall that was responsible for the problem. Rather, it was the whole deregulatory atmosphere under which our country has operated since the onset of the Reagan presidency. And more specifically, it was the taking on of investment bank functions by financial entities that were not formally labeled as banks but which actually were banks, in that they functioned as banks. Glass-Steagall wouldn’t have covered these entities even if it had still existed, because they were not “banks”. Krugman explains that the solution to this confusing situation is that:

Influential figures should have proclaimed a simple rule: anything that does what a bank does, anything that has to be rescued in crises the way banks are, should be regulated like a bank…

Krugman singles out for discussion one particular financial tool, known as the “auction-rate security”:

The idea of an auction-rate security was that it would reconcile the desire of borrowers for secure long-term funding with the desire of lenders for ready access to their money. But that’s exactly what a bank does. Yet auction-rate securities seemed to offer everyone a better deal than conventional banking. Investors in auction-rate securities were paid higher interest rates… while the issuers of these securities paid lower rates than they would have on long-term bank loans. There’s no such thing as a free lunch… yet auction-rate securities seemed to offer just that. How did they do that?

Well, the answer seems obvious in retrospect: Banks are highly regulated (even without Glass-Steagall)… By raising funds via auction-rate securities, borrowers could bypass these regulations and their attendant expense. But that also meant that auction-rate securities weren’t protected by the banking safety net. And sure enough, the auction-rate security system collapsed in early 2008. One after another, auctions failed, as too few new investors arrived to let existing investors get their money out… And each auction failure led to another; having seen the perils of these too-clever investment schemes, who wanted to put fresh money into the system? What happened to auction-rate securities was, in all but name, a contagious series of bank runs.

Today, the set of institutions and arrangements that act as “non-bank banks” are generally referred to either as the “parallel banking system” or as the “shadow banking system.” Conventional banks operate more or less in the sunlight, with open books and regulators looking over their shoulders. The operations of non-depository institutions that are de facto banks, by contrast, are far more obscure. Indeed, until the crisis hit, few people seem to have appreciated just how important the shadow banking system had become.

The roots of economic catastrophe

Krugman sums up the anti-regulatory craze that led to our current crisis:

As the shadow banking system expanded to rival or even surpass conventional banking in importance, politicians and government officials should have realized that we were re-creating the kind of financial vulnerability that made the Great Depression possible – and they should have responded by extending regulation and the financial safety net to cover these new institutions.

But this warning was ignored, and there was no move to extend regulation. On the contrary, the spirit of the times – and the ideology of the George W. Bush administration – was deeply anti-regulation. This attitude was symbolized by a photo-op… in which representatives of various agencies… used pruning shears and a chainsaw to cut up stacks of regulations. More concretely, the Bush administration used federal power… to block state-level efforts to impose some oversight on subprime lending…

So the growing risks of a crisis for the financial system and the economy as a whole were ignored or dismissed. And the crisis came.

This should not be surprising. Why should we expect that the results of deregulating financial institutions – or any corporate sector of our economy – should be any different than deregulating organized crime (i.e. doing away with all laws used to control it), for example? Both organized crime and corporate America are focused primarily on a ruthless pursuit of profits and power, and neither is particularly concerned about who gets run over in the process. So when the barriers are purposely removed we should not be too surprised to see lots of people get run over.

It is inevitable when the wealthy few are given huge advantages over vast masses of people. What we have seen in this country since the Reagan presidency is vast expansion of the income and wealth gap in our country, and consequently the accumulation into the hands of the wealthy few vast powers to shape national legislation to their advantage.

Privatizing benefits while socializing the responsibility for the consequences of risks should strike us as the most obvious of frauds. Yet those in power have managed to bamboozle millions of Americans into thinking of it as “throwing off the restraints on free enterprise”. James Galbraith explains the whole concept in a nutshell, with regard to Treasury Secretary Geithner’s plan for bailing out Wall Street:

The plan is yet another massive, ineffective gift to banks and Wall Street. Taxpayers, of course, will take the hit… The banks don't want to take their share of those losses because doing so will wipe them out. So they, and Geithner, are doing everything they can to pawn the losses off on the taxpayer…. In Geithner's plan, this debt won't disappear. It will just be passed from banks to taxpayers, where it will sit until the government finally admits that a major portion of it will never be paid back.

[defendandprotect]

1. kick

[Better Believe It]

2. K & R

[senseandsensibility]

3. Thanks for the effort it took to put this together

I hope everyone on DU reads it.

[Agony]

4. Thanks for posting this! I have now added “auction-rate security” to CDO, CDS, the "VIX"

(+ all that other crap at the CBOE), and naked short selling to the list of essential terminology for navigating our nifty "modern" financial system.

Thanks again for taking the time to post this.
Cheerio!

cboe.com all about the VIX etc.

nice tutorials! --> http://www.cboe.com/LearnCenter/cboeeducation/Course_02_01/mod_01_01.aspx

[Time for change]

13. I'd never heard of it before reading Krugman's book either

He's not only a great economist, but he's a terrific writer too, because he uses as little jargon as possible and tries his best to explain everything in terms that non-economists can understand.

[DemReadingDU]

30. thanks for the website, n/t

[Odin2005]

5. K&R

[mojowork_n]

6. Really interesting and very timely.

Speaking of "socialism" and "protecting private business," I just happened to read
an old news story about Russia, an hour ago. In a loose, connect-the-dots sort of way,
it made me wonder how many of our current problems may have some sort of indirect -- but
curiously parallel -- relationship to what happened, in Russia, in the 1990's.

Washington, Oct 23: Nearly half of Russia's credit and financial institutions are controlled by organised crime interests, the Federal Bureau of Investigation (FBI) has said in a report submitted to the Senate Intelligence Committee.

This, it says, allows the mobsters to more easily launder and move vast sums of cash around the world and to evade the efforts of the Russian government to collect taxes.

The FBI puts the capital flight from Russia arranged by the mobsters who control about 550 banks, at the huge sum of $200 billion over the past decade.

The report was completed two months before the collapse of the Russian economy in the summer but made available to the media only now.

Organised crime groups in Russia have gathered vast wealth and political influence within Russia and other former Russian republics, the Washington Times said.

"Previously, they had been silent partners of the regime in the black market economy. Today, Russian organised crime groups dominate the economic life ofRussia by exerting control over key economic sectors such as petroleum distribution, pharmaceuticals and consumer products distribution," it said.

This pervasive influence has "undermined open market competition necessary for normal economic development," it added.

"Along with corrupt public officials and unscrupulous businessmen, they have perverted the all-important privatisation process" by acquiring control of state-owned assets and selling them off at huge profits that were due to the government," the daily said.

Organised crime leaders have been elected to Russia's Duma, the lower house of parliament, and have influenced legislation giving tax breaks or other government benefits to criminal enterprises, it said.

Small businesses in Russia also are a main target of extortion efforts by Russian criminal gangs, which force business owners to turn over up to 20 per cent of their receipts for "protection money."

The report says that in the U.S., 25 Russian organised crime groups have been identified by the FBI. The larger groups are known to operate in Florida and New York, where they have engaged in extortion, racketeering, smuggling, prostitution and large-scale fraud.

Loose-knit Russian criminal groups in the U.S. have caused millions of dollars in losses from health care fraud, credit card fraud, computer fraud, bank fraud, check-kiting (a form of drawing money from a bank without having adequate funds in the checking account), visa and immigration fraud, forgery, securities fraud and contract fraud.

Russian criminals have purchased controlling interests in offshore banks on the Mediterranean island of Cyprus and on the Caribbean islands of Antigua and Aruba. On Aruba, five Russian banks opened in the past year, the report added.

"From these locations, they electronically launder large amounts of cash around the world," the report said, adding that secrecy has hindered efforts to trace the money.

The Russian criminal involvement in banking has brought with it "a high level of violence against banking officials in Russia," with "dozens" of victims of contract murders.

Russian authorities estimate that the number of organised crime groups has increased from about 4,352 in 1992 to about 12,000 today.

Cocaine marketed by Colombia's Cali drug cartel is being sold on the streets of Moscow. Russian criminal groups have provided the Cali drug cartel with weapons and combat helicopters in exchange for drugs. The Colombians tried to buy a submarine from a Russian crime group, the FBI report said.

Russian criminals are also collaborating with the Italian mafia in coordinating drug trafficking efforts. Trafficking of young women by Russian crime groups is increasing. They are now running hundreds of brothels and stripper bars throughout Europe and Asia.

"In many cases, young women from Russia and Eastern Europe are lured into a life of sexual bondage with promises of lucrative, legitimate employment made by bar an casino operators associated with Russian organised crime," the reportadded.

Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.

...It's an old story, from 1998, but probably not a huge surprise, to anyone.

What would be surprising would be if the F.B.I. ever issued an accurate
investigative report on the general topic of off-shore capital flight (tax
evasion), corruption, drug-money laundering, and ties to gangsters, etc.

...Focusing the investigation only on crime that occurs east of the Pacific,
west of the Atlantic, north of the Rio Grande, and to the south of the world's
longest and friendliest border, would make the report even more valuable.

It's interesting that the report was only released after all the horses had already
escaped from the barn, after the "Russian economy had collapsed," two months previously.
Maybe Americans can look forward to a similar report, a couple or three or four
decades hence, telling us more about the circumstances behind the 2008/2009 collapse of the
global economy.

Link to the full news story, on the FBI report:

http://www.expressindia.com/news/fe/daily/19981024/29755104.html

[Time for change]

26. I agree with annabanana on this

It seems to me that there is -- morally -- a very fine line or no line at all between criminal activity and manipulations carried technically within the bounds of the law (such as bribery of elected officials under the guise of "campaign donations"), with the goal of accumulating vast sums of wealth at the expense of the rest of society.

Naomi Klein had some very interesting things to say about criminal financial manipulations in Russia:
http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=2657842

[DemReadingDU]

32. Thanks for linking back

I missed that one.
Appreciate how you weave so much information in your postings.

[ClassWarrior]

7. K&R

NGU.

[annabanana]

9. "some sort of indirect" my ass.. .

That is exactly what's hapenend to our economy.. if you call the money manipulators by their proper name, criminals.

[zeemike]

8. A very informative post.

One that I think everyone should read.
You really do work hard at living up to your screen name.

[quaker bill]

10. Very nicely done.

K&R

[Laelth]

11. Excellent work. Thanks. n/t

:dem:

-Laelth

[conscious evolution]

12. K&R

[The_Commonist]

14. Very concise.

Thank you for your efforts...

[Overseas]

15. K&R. Thank you. //nt

[earth mom]

16. K & R & Bookmarked. nt

[tbyg52]

17. Printing and passing around, as usual. Thank you. nt

[Faryn Balyncd]

18. & the Senate HC "reform" is the biggest of them all:

Big Insurance & Big Pharma get guaranteed profits, regardless of future developments, and middle America starts off with a PRIVATE tax that for many millions of families will be greater than their federal tax bill, will, for the first time ever go to a private entity, and all the risk is born by the citizen who has no choice, and no negotiation power.



(K&R, by the way, for an excellent post.)

[senseandsensibility]

19. k and r

Thanks again for posting this.

[cascadiance]

20. In other words, those in charge don't believe in capitalism or socialism, but GREEDISM!

[DemReadingDU]

31. Greedism

all for them, none for us

[amborin]

21. K&R

[Z_I_Peevey]

22. K&R

[SandWalker1984]

23. Congrats, US govt has achieved the 14 characteristics of Fascism

FOURTEEN CHARACTERISTICS OF FASCISM


Dr. Lawrence Britt, a political scientist, wrote an article about fascism which appeared in Free Inquiry magazine, a journal of humanist thought. Dr. Britt studied the fascist regimes of Hitler (Germany), Mussolini (Italy), Franco (Spain), Suharto (Indonesia), and Pinochet (Chile). He found the regimes all had 14 things in common, and he calls these the identifying characteristics of fascism. The article is titled "Fascism Anyone?," and appears in Free Inquiry’s Spring 2003 issue on page 20.


The 14 characteristics are:


1.. Powerful and Continuing Nationalism – Fascist regimes tend to make constant use of patriotic mottos, slogans, symbols, songs, and other paraphernalia. Flags are seen everywhere, as are flag symbols on clothing and in public displays.


2.. Disdain for the Recognition of Human Rights – Because of fear of enemies and the need for security, the people in fascist regimes are persuaded that human rights can be ignored in certain cases because of "need." The people tend to ‘look the other way’ of even approve of torture, summary executions, assassinations, long incarcerations of prisoners, etc.


3.. Identification of Enemies/Scapegoats as a Unifying Cause – The people are rallied into a unifying patriotic frenzy over the need to eliminate a perceived common threat or foe; racial, ethnic or religious minorities; liberals; communists; socialists; terrorists, etc.


4.. Supremacy of the Military – Even when there are widespread domestic problems, the military is given a disproportionate amount of government funding, and the domestic agenda is neglected. Soldiers and military service are glamorized.


5.. Rampant Sexism – The government if fascist nations tend to be almost exclusively male-dominated. Under fascist regimes, traditional gender roles are made more rigid. Opposition to abortion is high, as is homophobia and anti-gay legislation and national policy.


6.. Controlled Mass Media – Sometimes the media is directly controlled by the government, but in other cases, the media is indirectly controlled by government regulation, or through sympathetic media spokespeople and executives. Censorship, especially in wartime, is very common.


7.. Obsession with National Security – Fear is used as a motivation tool by the government over the masses.


8.. Religion and Government are Intertwined – Governments in fascist nations tend to use the most common religion in the nation as a tool to manipulate public opinion. Religious rhetoric and terminology is common from government leaders, even when the major tenets of the religion are diametrically opposed to the government’s policies or actions.


9.. Corporate Power is Protected – The industrial and business aristocracy of a fascist nation often are the ones who put the government leaders in power, creating a mutually beneficial business/government relationship and power elite.


10.. Labor Power is Suppressed – Because the organizing power of labor is the only real threat to a fascist government, labor unions are either eliminated entirely or are severely suppressed.


11.. Disdain for Intellectuals and the Arts – Fascist nations tend to promote and tolerate open hostility to higher education, and academia. It is not uncommon for professors and other academics to be censored or even arrested. Free expression in the arts is openly attacked, and governments often refuse to fund the arts.


12.. Obsession with Crime and Punishment – Under fascist regimes, the police are given almost limitless power to enforce laws. The people are often willing to overlook police abuses, and even forego civil liberties, in the name of patriotism. There is often a national police force with virtually unlimited power in fascist nations.


13.. Rampant Cronyism and Corruption – Fascist regimes almost always are governed by groups of friends and associates who appoint each other to government positions, and who use governmental power and authority to protect their friends from accountability.


14.. Fraudulent Elections – Sometimes elections in fascist nations are a complete sham. Other times elections are manipulated by smear campaigns against (or even the assassination of) the opposition candidates, the use of legislation to control voting numbers or political district boundaries, and the manipulation of the media. Fascist nations also typically use their judiciaries to manipulate or control elections.

[DissedByBush]

34. Let's go over that

1.. Powerful and Continuing Nationalism – I don't accept that patriotism necessarily equals fascism.

2.. Disdain for the Recognition of Human Rights – One right.

3.. Identification of Enemies/Scapegoats as a Unifying Cause – To be fascism it really needs to be manufactured enemies and scapegoats, not real enemies. Terrorism is a real, legitimate enemy to us, unless you haven't been reading the papers for the last couple decades.

4.. Supremacy of the Military – Somewhat true, although our military is always under strict civilian control and the president isn't military.

5.. Rampant Sexism – We have a female Speaker and a black President, and a high-ranking gay congressman. Not buying it.

6.. Controlled Mass Media – We are nowhere close to the media control of fascist states.

7.. Obsession with National Security – Hit that nail on the head.

8.. Religion and Government are Intertwined – Uh, no. Hitler paid some lip service to religion insofar as he couldn't alienate the Christians in Germany, but it was not really part of his main platform.

9.. Corporate Power is Protected – Score #3.

10.. Labor Power is Suppressed – Labor is still strong here. True, unions not controlled by the government are not allowed in fascist states (or communist either).

11.. Disdain for Intellectuals and the Arts – We are getting there, but not quite yet.

12.. Obsession with Crime and Punishment – Score #4.

13.. Rampant Cronyism and Corruption – Score #5.

14.. Fraudulent Elections – Sort of, but not quite. Our elections are fraudulent to the extent that the two main parties make it impossible for others to gain any power. Otherwise, elections are just a struggle between the two main parties, each committing its own fraud to try to gain the advantage. Fascist states consist of one party squeezing out all others.

[Greyhound]

24. Auto K&R. The "housing" bubble.

I don't think that there can be any honest debate that Clinton's economy was exclusively fueled by the digital boom and the advent of the World Wide Web. While he continued to devastate the industrial/manufacturing sector, sacrificing the lives of still more millions of Americans on the alter of neo-feudalism, the unprecedented flood of new technology into the consumer market helped mask the carnage his policies wrought.

This created the stock market bubble and the financial industry jumped on it like a tick on an open sore. When the feeding frenzy collapsed, as was inevitable, it left behind an ocean of liquidity, generated by the repeated leveraging of make-believe assets in companies with no chance whatsoever of reaching the valuations assigned by the market, with nowhere to go.

Either coincidentally or by design the financial deregulation was completed JIT for that capital to flood the real estate market. Unfortunately, the real estate market depends entirely on the "useless eaters" buying houses and moves very slowly "earning" a measly 5% - 6% per year. The other big problem was that their wages were barely sufficient to buy houses at the pre-inflated prices, so there was no capacity to absorb the flood without significant changes to how the eaters are allowed to buy their hovels.

With no restrictions in lending, in concert with a 4-wall PR campaign to convince people that renting is dumb when you can buy for less per month, an inflationary cycle in housing was simply created by the industry that profits from the transactions.

Now of course, anyone with a rudimentary grasp of arithmetic can plainly see that people making $40,000 a year cannot afford a $300,000 mortgage, but since the object was not selling homes, but rather, selling mortgages, they didn't care about the consequences. Like Wall Street has always worked, it's all about the insiders getting into the market while it is shooting up and getting out before it collapses.

As we can clearly see, it worked. Now we have an administration, being led around by the nose by the perpetrators of this scheme, that is putting all of their efforts and our money into propping up an over-inflated market that the economic engine ("useless eaters") cannot afford on their falling wages. Of course this course is doomed to fail but it does delay the pain while the thieves have their consolidation and exodus underwritten by their victims.

And protecting parasites is all that really matters to the parasites and those that aspire to parasitism.

[truedelphi]

25. Great post. Though

when you state: "Either coincidentally or by design the financial deregulation was completed JIT for that capital to flood the real estate market. Unfortunately, the real estate market depends entirely on the "useless eaters" buying houses and moves very slowly "earning" a measly 5% - 6% per year. The other big problem was that their wages were barely sufficient to buy houses at the pre-inflated prices, so there was no capacity to absorb the flood without significant changes to how the eaters are allowed to buy their hovels."

There should be some disclaimer that the big reason the entire economy on Wall Street tanked was not over the useless eaters and the mortgages that were brokered on their behalf, but the fact that Wall Street had set up the derivative system and thus bet a thousand times or more on those mortgages and whether they would succeed or fail.

And since the computer models used to evaluate such did not even have "Fail" as an option, then the financial capital bet favorably on this house of cards. Only because of those gambles did the system fail - it was the derivatives crashing down not mortgages that caused it. There simply are not enough mortgages sold in the USA in a million years to cause the destruction that we have seen so far.

[Greyhound]

46. You are absolutely correct.

The inflated prices were/are unsustainable without significant advances in wages, but it was the untold trillions of dollars created through leverage that sunk the ship.

[DissedByBush]

33. That was a good example of the title

Even from that person making $40,000 a year. His private benefit was an expensive house, and the risks were socialized with the bailout.

While the housing bubble required the greedy insiders to run it, and those in government to allow and even promote and defend it, it could not have existed without such greedy people willing to spend beyond their means.

The only innocents in this were people who bought houses within their means and lost their jobs thanks to the recession caused by the greedy.

[Time for change]

37. Your ideas on this are very similar to what Krugman wrote about it.

except that Krugman's tone is considerably milder than yours -- and mine.

[defendandprotect]

27. kick

[louis-t]

28. Bookmarked for later use.

Next time some idiot freeper blames Barney Franks for the entire economic collapse, he/she is going to get an earful. Thanks.

[rainy]

29. K&R. thanks for posting this!!!!!! nt

[fascisthunter]

35. and yet you will here corpo-friendly morons claiming regulation was the problem

no, it was the one thing keeping you fuckers from screwing people over and by default fucking over the economy and the well-being of our country. I consider that a massive crime.

[DemReadingDU]

36. What happens when the government finally admits that a major portion of debt will never be paid back

That means we'd be formally bankrupt, and Congress(?)would need to decide which government programs are necessary to keep, if any?

The way the government keeps bailing out the banks and corporations, I think we must already be near bankruptcy. The future doesn't look too rosy for my little grandbabies.
:(

[mother earth]

38. Thank you, Time for Change! When does the revolution

begin? I'm at the ready. When does everyone understand it's OUR right to demand we be represented, and if those we elected are not doing the job, there must be a civil and legal way to oust them all, and end this insanity. I'm not talking about election, I'm sure there are ways to handle the complete corruption of our democracy, but people have never faced this kind of blatant takeover by corporate power. We have got to stop thinking there's nothing we can do. The three branches of gov't have been usurped by big moneyed interests.

I would love for some legal scholars to weigh in on our constitutional rights, and what the process is for dealing with this insidious corporate takeover, because that's what this is. We are no longer being represented, it's plain to see they are bleeding us of everything, including the future of this country. There seems to be no end in sight to the greed and corruption, and complete lack of oversight and rule of law.

They are enjoying salaries most of will never aspire to and benefits the rest of us will never know, while they represent the interests of their rich campaign donors, while America and our countrymen lose precious ground and money, all while our rights as citizens are ignored and trampled.

Seriously, what would someone like Bugliosi have to say, he wrote his book on the conviction of GW...it certainly should have taken place in a court of law, along with countless other convictions of his cohorts.

ENOUGH is ENOUGH. Rule of law must be the goal, and the founding fathers must have had a plan at the ready.

[Time for change]

43. Great questions

I wish I had better answers.

Of course, the rule of law is essential, but it's not enough.

First, we need better laws. The idea that bribery (i.e. campaign donations) of public officials is legal in a democracy is absurd. So is the idea that we have voting machines that are unverifiable. And so is the idea that we have a news media largely owned by a small number of wealthy people.

But even with the best of laws, we also need people who will enforce them. If U.S. presidents are allowed to commit war crimes without consequences, then even the best of laws won't help us.

[bkozumplik]

48. "the founding fathers must have had a plan at the ready. "

I dont think so.
Unless you count Jefferson's periodic revolution ideas-- roots of liberty, blood of tyrants.. revolution every 50 years.. People love to quote it still, but historical facts have proven that to be BS..crap. The founders weren't always right. Especially Jefferson.

I believe they thought this sort of thing would be handled by the reps in the house.
The House as the people's piece of government hasn't panned out well either. The house is minor in the flow of events, and suffers the same corruptions as the senate.

So, the founders are useless here. Worse than useless probably.

[truedelphi]

39. And now we have a President who promised us in Oct 2008 to

Make sure that the Big Banks used the Bailout monies in ways advantageous to the middle class, and that if they did not, then he would step in and overhaul the regulation process so that the banks would see to it that our needs and interests were met.

[Kablooie]

40. It's exactly the same thing as eliminating the police and laws. That would increase freedom too.

Companies will commit crimes just as people do. They will scam cheat, steal and kill to get more for themselves.

That is what true freedom is. Freedom to hurt or destroy anyone for personal gain.

That's what deregulation encourages and that's what we are getting.

[BrklynLiberal]

41. Thank you for this post!!!

[mnhtnbb]

42. Greenspan and Rubin's visit to Clinton? They probably reminded him what happened to JFK.

[Time for change]

44. The thought did enter my mind

But it seems to me that if that was the clear message they could have found someone more appropriate for that role -- someone from the CIA maybe. I don't think that Rubin and Greenspan would have wanted to get into something like that.

[winyanstaz]

45. Privatizing Benefits, Socializing Risks..???

Isnt that fascism?

[Uncle Joe]

47. On edit; Kicked, but too late to recommend.

Thanks for the thread, Time for Change.:thumbsup:

[WeDidIt]

49. VOTED! Best. DU. Post. Of. 2009.

Regulation of the financial markets needs to top the list of domestic agenda for 2010.

If profits are privatized, so should all risks associated with those profits.

If risks are socialized, so should all profits associated with those risks.

[Karenina]

50. . .

:kick:

[aaronbav]

51. Kick