War on Education

W.

 

Since the Republican Party adopted Reaganomics as their official economic policy and radical Christian fundamentalism as their social policy, there have been concerted efforts from the right to downplay the importance of education. The reason for this troubling fact is that when put to the test of history, the GOP's ideas do not stand up. Reaganomics proved to be a massive failure, and well, let's just say that many conservatives are still denying basic science. For example, evolution, or that homosexuality is not a choice. These people are afraid that book learnin' will kill their way of life-They're right; it will. And that's the beauty of the free marketplace of ideas. Good ideas last and bad or false ideas fade. At least, that's how it should be. The GOP is doing everything in its power to fight education. They've turned it into a political issue when basic science and history should not be a matter of political debate. Facts are facts and that's that.

 

Not one of the Republican candidates has taken a favorable position toward promoting education. Mitt Romney boasted of his cuts to higher learning as governor of Massachusetts, Rick Santorum called President Obama a "snob" for wanting people to go to college. They convince people that education makes you less sensible-but isn't it logical to say that the more you study something, the better qualified you are to form an opinion on it? In the face of global competition and countries like China outperforming us on tests, the Republican answer is "you don't need no book learnin'" The trouble is that this will not change because the party has built its platform on false history. The GOP makes up falsehoods like "over regulation caused the '08 recession," and sell them to people.  The only way they get away with it is because the people themselves do not know any better-And they like it that way because they are able to push their agenda through. People who are uneducated or uninformed don't even realize they're being lied to, and that the lies hurt them. This is how candidates like Newt Gingrich can come out and say he supports eliminating child labor laws, or Michelle Bachmann can say "minimum wage hurts workers", or commentators like the late Andrew Breitbart can tell people that "Big government kills the economy" and that the free market is the answer to our problems-people do not know their country's history and thus, have no hindsight. They know nothing of Progressive Era or the consequences of completely laissez-faire capitalism. Upton Sinclair's The Jungle describes the meatpacking industry before it was regulated-Not a pretty picture. 1929 unregulated banks collapsed the stock market so FDR passed a series of sweeping reforms known as the New Deal, in order to prevent this kind of catastrophe from happening again, but the Republicans do not like inconvenient history. Their ideology is far too ironclad to be bothered by facts.

The simple truth is, education is the only protection people have against lies and propaganda. We cannot afford to be a country of blind followers if we are to stay competitive on a global scale. We must tell the GOP that education and higher education are a net benefit to society because they drive innovation and keep people involved in politics. Greed should not come before patriotism-and its patriotic to encourage people to better themselves through education.

Supremely Corrupt

W.

 

This Supreme Court may prove to be the most radical in our history-That, or the most bought off court in history. Right now the justices are hearing the case brought against the PPACA's individual mandate, and are proving quite hostile to the bill.

Let me give you a brief synopsis of the argument against it: The conservatives argue that the mandate to require people to buy health insurance is an overstepping of government power because it is regulating "inactivity."  They say that an individual choosing not to buy health insurance is their right. The precedent cited by Judge Hudson, the Virginia Federal Judge who ruled against the PPACA, has all been overturned early in the 20th century. What this precedent says is that if an activity only indirectly affects interstate commerce, it does not fall within the government's jurisdiction to regulate.

What Judge Hudson and the other conservatives are missing is the fact that when it comes to healthcare, there is no such thing as inactivity and when it comes to commerce, there is no distinction between "direct" and "indirect" affects because of the interconnectedness of the local, state, and national economies. This is the current, well-established precedent. In this case, free riders, or people without health insurance, who cannot afford to pay their medical bills, drive up costs for everyone else because hospitals do treat everyone and take a loss when treating them. In this case, the "inactivity" directly impacts commerce nationwide.

This should be pretty cut and dry for this Supreme Court, however, it is not. The reason is chilling.  The conservative Justices are owned by the GOP and big money interests, and are in dereliction of duty. Republicans tried very hard to get the PPACA before the court because, to some degree or another, they knew this. This corruption becomes more obvious by the fact that Justice Thomas has many ethical violations including receiving donations from conservative donors like the Koch Brothers and Harlan Crow.

If "We the People" are to be in charge of our country, this Supreme Court must resign. This kind of corruption is especially dangerous because this branch is less subject to change than the others, and answers only indirectly to the people.

Change We Can Believe In

W.

 

I have written much on the ills of America, but I feel I have been vague when it comes to my answers. I figured I would write this post with the intention of outlining a platform of possible solutions to fix this country focusing on these 5 categories:

1) Regulation

2) Infrastructure

3) Voting

4) Government reform

5) Workers

Of course, as with any platform, the rhetoric is shallow without specific solutions- so here it is, my platform explained in a comprehensive way:

REGULATION:

1. Eliminate private money from politics by constitutional amendment
2. Equal airtime/coverage for candidates on the networks (like it used to be) by constitutional amendment. This will ensure that lobbying is dead and the only thing way for people to influence a candidate is through voting.
3. Regulate the banks: Reinstate Glass-Steagall, undo Commodity Futures Modernization Act of 2000, and strengthen CRA regulations.
4. Create A National Bank that will not gamble with America's money in an international market-people can have faith in the fair practices and security of this institution.
5. A law banning regulators from working in the industries they regulate after they leave public service for at least 5 years.
6. Regulate industry and hold individuals accountable for environmental disasters, worker rights violations, and ethics violations via prosecution. (Of course this means prosecute those responsible for the '08 recession)
7. Proportional wages between bosses and workers: A boss must maintain a set ratio.

INFRASTRUCTURE:

1. More public infrastructure programs to create jobs: specifically in the field of clean energy- solar panel road installations nationwide, the construction of a bullet train, vertical farming, affordable housing construction and conversion. As Alexander Hamilton said in his Report on Manufacturers:

   "In countries where there is great private wealth, much may be effected by the voluntary contributions of patriotic individuals; but in a community situated like that of the United States,the public purse must supply the deficiency of private resource."

2. Treat all goods made abroad as foreign goods and tax them as such, even those made by American corporations. This will hold companies accountable for the type of business they run. If they want to move work overseas, then they will pay their dues.
3. Reform our welfare system by allowing people to receive benefits for 2 years after the point at which they are no longer qualified to receive them. As it stands now, the system perpetuates itself by dropping people immediately after they cross the threshold. This creates more of a drain on the taxpayer and keeps people on welfare.
4. Open up schools in poorer neighborhoods and offer higher salaries to teachers in those areas.-Education should be as easy to access as fast food.
5. Healthcare for all- Nationalize it and regulate it.

VOTING:

1. No restrictions on voting-They are unconstitutional. The only qualifications for voting are listed in the founding document itself and cannot be abridged.
2. Alternative voting- By rank: That way, people can vote their conscience as opposed to the lesser-of-two-evils.

GOVERNMENTAL REFORM:

1. Fairer Taxes: 4 more income tax brackets going up to 65% on top bracket as well as an increase on the capital gains tax from 15% to 30% (to be reduced after 10 years to 25%)
2. Term limits on Congress- 6 terms in the house, 2 or 3 in the Senate
3. End Corporate Welfare-This includes Oil Subsidies.
4. Cut the defense budget in half and close down unnecessary bases abroad-put people to work in infrastructure programs, not weapons production or occupations of other countries.
5. Bring back the Good Neighbor Policy
6. End the Wars including the War on Drugs-They are costly and ineffective. We can keep our security tight without being offensive.
7. Legalize hallucinogens and marijuana, decriminalize all others-regulate and tax them. Treat drug addiction not as a crime, but as a sickness. No more jailing people for possession of ANY drug.
8. Forgive all student loans for a period of 5 years- Education should be encouraged because it is a net benefit to society.
9. Tax Churches-Increasingly churches are being used for non-charitable, political purposes.
10. No more unfunded tax cuts for the rich
11. Freeze all bank foreclosures for a 2 year period, on homes owned for for 5 years prior to default-they should not benefit from a mess they created. People in a recession should worry about working-not paying for their homes.
12. No more private prisons.
13. Break up the big interstate banks-reestablish decentralized banking.

WORKERS:

1. Raise the Minimum Wage to $10/hour

The Enumerated Powers in the United States Constitution give the government the ability to "provide for the general welfare" by passing any law "necessary and proper." This fact, voids the claims of those who would call such progressivism unconstitutional. If we do these things America will be the top of the world once again. People will have money in their pockets. When the majority of people have money to spend, our economy booms. When only the few have money-we falter because it pools up top. When we do not regulate, we falter because those who know the system exploit those who don't. When we focus on money over people, we falter because austerity is a failure. Government is not the root problem in America: greed is. We can make our system work for us. Let's go out and be the country of "Can Do" once again.

 

 

Repubnant Nonsense: Journalist Ethic Be Damned

W.

 

Back in high school I figured out that there were no Republicans who could justify the party as being "of the people." I might not have been as up to date on my politics or as well versed in the subject, but I was smart enough then to understand that there is a big lie in American politics: That the GOP has anything good to offer this country.

Since then, I have learned more and more about the GOP-from its laissez-faire ideology that caused the Great Depression, to the realignment of the "Solid South" over the issues of race, women's rights, and homosexuality, to development of the modern Republicans. I can now say without faltering, the fact that our media actually covers the GOP as neutrally as it does continues disturbs me.

How much BS we tolerate for the sake of journalist ethic! By covering the GOP neutrally we give a platform for racism, homophobia, misogyny, ignorance, and greed. One thing I find particularly offensive as an informed American, is the deplorable economic farce that is "Reaganomics." The GOP claims that deregulation and tax cuts/benefits for the super rich benefit everyone.  What exactly do they base this on? Well...nothing. There is no shred of evidence in history to suggest that this is a viable economic platform. My evidence? Literally every time we've had a GOP president since Lincoln, we've seen a recession (with the exception of Ike.) The Republicans inevitably try to blame every one of these economic problems on over-regulation and the New Deal (a lingering hatred from the fact that the New Deal made the Republicans a minority party in Congress until the 90's), but a candid look at history reveals this not to be the case.

Of course, many Republicans are essentially brainwashed by bombardments of propaganda from right wing media so they don't trust reliable news like nonpartisan NPR or PBS or even the New York Times or Washington Post. They don't even trust government reports! We have freedom of information-how blind can one be? What kills me is that while they claim that anything that disagrees with their narrative, which I will discuss shortly, is biased and unreliable, they follow sources like FOX News, whose owner, Rupert Murdoch, donated a million dollars of his own money to the Republican Party, or think tanks like the Heritage Foundation, the Cato Institute, or the Mercatus Center, all of which are paid for and funded/and or owned by the oil tycoon, billionaire Koch Brothers. Other sources like the late Andrew Breitbart's Big Government, while not owned by the Kochs, still features many of their employees.  Gee, I wonder why big oil wants less regulation and more drilling........Let's follow this thought process to the next logical question: Are the interests of a middle or lower class American family the same as the interests of a multi-billion-dollar oil company or its billionaire owners? See, there's a fine line between stupid and willfully ignorant that these people walk. If they had any sense they'd realize that the private sector is not there to protect their consumers-its there to profit off of their consumers. Government is there to help the people-that is the only reason it exists. In the Constitution, the first Enumerated Power of government states that its primary purpose is to provide for the "general welfare" and "general defense." In other words, the primary purpose of the United States federal government is to protect the people. Active government is the ally of the masses and virtually all presidents who have understood this have done better than the ones who have not. Of course, if you're a Republican, the "General Welfare" Clause does not mean what it so obviously means-that social programs are A-Ok.  Here is where the problem lies: the disconnect with reality.

Another particularly egregious lie the GOP spreads is President Obama's "radicalism."  A more moderate president we could not find. Not only has Obama cut regulations, he bailed out the banks and GM, cut the corporate tax rate, and extended the Bush Tax Cuts. It is so obvious the only thing "people" like Sarah Palin, Sean Hannity, Rush Limbaugh, and the late Andrew Breitbart really dislike about him is his skin color. Of course, they would deny this claim.  Let's not forget however, that FOX News and virtually every right wing media outlet gave voice to the "Birther" movement, or as I like to call them, The Crazies.  The GOP CPAC had speakers from the John Birch Society, a well known hate group, and the candidates for president this year have said things like, "Obama the 'Food Stamp President'"and, "I don't want to make black people's lives easier" and the infamous, black men in DC are all “semi-criminal or entirely criminal.” When you combine this garbage with the history of the party, the truth seems perfectly clear. What good could this party possibly claim to offer?

This brings me to my next assertion: There has never been a "great" Republican president, in the modern sense of the party, AKA post Lincoln. Not a single one, speaking as a student of political science, not a partisan (which I admit, is hard to step out of). Every one of them has let the country down in some way: they allowed the economy to collapse (Ford, Reagan, Bush, W. Bush), or made us new enemies abroad(Reagan, Bush, W. Bush), or violated his oath of office (Nixon, Reagan, W. Bush)The closest is Ike-and he had NOTHING on FDR, Truman, or Johnson, all of whom created long lasting legacies that helped the people in general (the New Deal, The Fair Deal, and of course the Great Society).  The line I always hear Republicans use when confronted with the facts about their most precious hero, Ronald Reagan, is: Well Jimmy Carter was an awful president who caused a recession that Reagan fixed-These people, who credit Clinton for Bush's recession (and he is partly to blame, though you have to factor in the GOP Congress), blamed a recession that began during and carried on after Carter's single 4-year term in office, without realizing that their logic is flawed. Their first claim relies on the idea that economic policy takes at least eight years to implement while their second says it takes 4 or less. Continuing by the first string of logic, Reagan is responsible for the Savings & Loans Crisis of the late 80's and early 90's (and he is) while Nixon and Ford are responsible for the recession that hit during Carter.  The second string has Reagan responsible for the 1982 recession AND S&L- Pick your poison. Fact is, it was not Carter's fault that the economy faltered. Here is what ACTUALLY HAPPENED: The 1973 Arab oil embargo was a result of the US support for Israel. As it happened, Carter was the president at the time. There was nothing he could do in the face of this crisis. Then OPEC opened oil reserves in Saudi Arabia to the US but the effects still lingered.  The economic boom under Reagan represented the recovery as well as the immediate effects of Reaganomics.  However, this success gave way almost immediately with the S&L Crisis of '84 that lasted until the early '90's and was the direct result of Reaganomics.  Part of the reason the myth that Carter was terrible is so popular is that Carter wasn't charismatic, but its also because right wing media sources spread lies like butter. We see this mistaken blame problem today. Their go-to argument for the '08 Subprime Mortgage Crisis is to blame Fannie Mae and Freddie Mac, the CRA, or (if they're fans of the Know-Nothing, in the historical sense of the term, Ron Paul) the Federal Reserve. In spite of direct evidence and findings to the contrary from the Senate Majority and Minority Staff Report from the Permanent Subcommittee on Investigations, these people insist that "the bankers were trying to uphold the law by giving out loans to people who couldn't afford it (bc the government forced them to) and making money hand over fist bc of it." These claims are asinine, and the people who propagate them should open their eyes/study history. The following is what occurred:

What really happened to cause the '08 recession is people made risky decisions for high commissions and were insulated from failure because they sold off the risk, often times betting against the people they gave the loan to, for more money. The truth is, lenders made higher profits off of subprime loans because the more risky the loan, the higher the potential profit, the same as you would betting on a 10 to 1 horse. They traded these loans (people's debts) for the amount of money that it could bring in rather than what it was probably going to bring in. Now, this system would have never been possible without Wall Street's backing these subprime loans with triple A ratings. Wall Street rating agencies made profits by giving out ratings, the banks and lenders made profits by giving loans to high risk people, and then selling the trading the loans for higher profits. It's as if these people bet on a 10 to 1 horse and sold their bet for the amount they would win if the horse won without actually knowing if the horse had won. The whole system collapsed when, surprise surprise, people defaulted!!! Then, everyone involved insisted they couldn't have seen it coming: well if they'd taken a look back 20 years to the S&L Crisis, maybe they would have realized that something was wrong--I don't buy these claims of ignorance.

It blows my mind that people are so blind. I understand having a life where you work hard, get home late and fall asleep, not really having time for politics, but if all you watch is FOX News, and all you listen to is talk radio, and all you read are conservative think-tanks, there's a problem. Now it's not your fault per say--Education is needed to end the spread of misinformation.

This brings me to my next point: Education. The GOP attacks education-Yes, they actually attack education and their brainwashed followers fall in behind them! Let's think why the party of the people would attack personal betterment. Could it be, and this is pure speculation, that its easier to sell people a load of crap if you keep them dumb? Could it be people maintain their bigotry when they are uneducated, thus making it possible to create wedge issues divide the American people and distract them from important issues that affect everyone? I wonder if the party that created a new voting base in the South in the 1960's over the issue of Civil Rights and can credit all of their victories since to this idea of a "culture war", would be capable of such dishonesty!! Lets be realistic here: What is more important: abortion, or the fact that the GOP economic plan is to do nothing while the rich take everything for themselves and let the poor and middle descend into complete poverty? (To clarify, I'm not saying that abortion is not an important issue now that it has been made an issue, but the fact is, the Supreme Court made its decision years ago with Roe v. Wade, and it should have died then and there.) However, many Republicans get drawn in by the racial undertones of the party, or the homophobic and misogynistic rhetoric-The reason is, these people who vote based on what can only in the loosest of senses be called "social values" are uneducated, and it is like Thomas Jefferson once said "Bigotry is the disease of ignorance, of morbid minds; enthusiasm of the free and buoyant. Education & free discussion are the antidotes of both."

Now, I'm not attacking every single Republican: I understand why the wealthy are in the party-they benefit. There's nothing philanthropic about it: they vote out of self interest....Or do they? There is a case to be made that when everyone is doing better, the wealthy do better- however, this means long term policy decisions that cost money in the short term whereas the ability to make a large amount of money by feeding off of everyone else is more immediate.  That makes sense. However, its the people who don't make $250,000/year that I don't get. Basically what they're saying is "I'm prejudiced enough, stubborn enough, not involved enough, or not educated enough to vote against my own interests." There are a limited number of reasons for being a Republican today: You are somebody who doesn't do enough research and falls prey to old adages and rhetoric, or you're greedy- They package their lies under the guise of "personal responsibility," as if the Democrats don't support people being responsible for themselves.  Under the facade however, what they really mean is "we don't believe in human dignity and we don't want to support anyone but ourselves." John Steinbeck once said “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.” Many Republicans are bothered by the idea of a social contract while still receiving its benefits.  A recent study found that many Tea Party Republicans are receiving government assistance! This is the great narrative the GOP spreads- that everyone has an equal opportunity.  This is statistically false as white males earn more than any other demographic.  Another problem with this narrative is the idea that Democrats want people to be parasitic to the state-No Democratic politician has ever said "I want a lazy population living off the government forever" or even "We should establish communism in America." The Democrats seem to understand that the only way to really overcome a recession is to invest in the people.

I am bothered by the fact that, in an effort to treat the Democrats and the Republicans fairly, our media has legitimized the bigotry and BS that is the GOP platform.  We will literally tolerate complete nonsense for the sake of journalist ethic and I think it's depressing.

Republicans Are Communists: Ideology v. Reality

By Walker M. Bragman

 

It is a commonly accepted argument that communism fails because it does not take into account some basic aspects of human nature, namely, greed. While on the surface, this system is appealing and utopian, in practice it is an impossibility due to the fact that human beings have the capacity for selfish desire. What is meant to be a society in which the people share the means of production, turns into a totalitarian dictatorship like in Stalinist Russia. People have taken the cause of communism and warped it to meet their own personal ends. Even Karl Marx, author of The Communist Manifesto, denounced “communists.” Communism however, is not the only system of government that sounds good on paper but turns out to be a nightmare in practice.

There exists in America today an ideology centered around the free market, that has its roots in the debates of old between federalists and anti-federalists, loose constructionists and strict constructionists: the argument for laissez-faire economics. This ideology is recognizable today by the color red and the elephant mascot. Republicans masquerade about under the pretense of being the “responsible” party, however, a candid look at history reveals them for what they are: naïve ideologues with failed policies. Like their communist brethren, Republicans today cling to an impractical agenda that fails to take into account the human element.

There is one point in Republican policy that has been constant since the realigning of the party that took place in the 1960's, and that is the cry for deregulation. Less government, they say, is the best government. The logic behind such claims is that the free market can look after itself and the least amount of regulation possible means the most profit for America; businesses are the only ones who can effectively regulate their own activities. This logic is flawed. As we look back on history we find that what these policies actually equate to, are declining safety standards, environmental disaster, economic catastrophe, embezzlement, risky business, and less competition, because let us remember one important thing: businesses are only designed to make the highest possible profit, not to have a conscience. Using three relatively recent events: the BP oil spill, the Savings & Loans Crisis, and the Subprime Mortgage Crisis, we can see exactly how this failure occurs.

First, let us turn our attention to the BP Oil Spill in the Gulf that occurred on April 20, 2010, possibly the worst man-created environmental disaster ever. The official government report states directly in Chapter Eight, titled “Safety is not Proprietary,” “The record shows that without effective government oversight, the offshore oil and gas industry will not adequately reduce the risk of accidents, nor prepare effectively to respond in emergencies."(1) Culling through the report is a tedious process that most Americans did not do, however if they did, they would find that the mantra for the Republican Party, that is, businesses can self regulate sufficiently, is complete nonsense. Lack of regulation and government oversight is specifically cited as the root of the problem.

Inside this lengthy document is reference to another explosion at a BP refinery that occurred in Texas City on March 23, 2005, which happened to be the third largest refinery in the United States and killed 15 people as well as injured more than 170.(1)The findings related to this catastrophe are strikingly similar to the Gulf spill. The report reads:

Testifying in 2007 about the Texas City event before a U.S. Senate Subcommittee, Carolyn W. Merritt, Chairman and CEO of the Chemical Safety Board, described the equipment that caused the blast as “1950s-era” and “unsafe,” and stressed that it was equipment that “many companies around the world ha[d] long since eliminated. . . .” Merritt added that BP had in fact considered eliminating the equipment in 2002, which had by then already resulted in “a number of serious releases,” but had ultimately declined to do so “[f]or a variety of reasons—including cost pressures” and BP’s ability to take advantage of “the existence of an exemption under [U.S. Environmental Protection Agency] air regulations. . . .” The Safety Board’s report on Texas City noted that “while most attention was focused on the injury rate, the overall safety culture and process safety management program had serious deficiencies. Despite numerous previous fatalities at the Texas City refinery (23 deaths in the 30 years prior to the 2005 disaster) and many hazardous material releases, BP did not take effective steps to stem the growing risks of a catastrophic event.” The report added: “Cost-cutting and failure to invest in the 1990s by Amoco (who merged with BP in 1998) and then BP left the Texas City refinery vulnerable to a catastrophe. BP targeted budget cuts of 25 percent in 1999 and another 25 percent in 2005, even though much of the refinery’s infrastructure and process equipment were in disrepair. Also, operator training and staffing were downsized.”(1)

The report continues...

BP’s safety culture failed on the night of April 20, 2010, as reflected in the actions of BP personnel on- and offshore and in the actions of BP’s contractors. As described in Chapter 4, BP, Halliburton, and Transocean did not adequately identify or address risks of an accident—not in the well design, cementing, or temporary abandonment procedures. Their management systems were marked by poor communications among BP, Transocean, and Halliburton employees regarding the risks associated with decisions being made. The decisionmaking process on the rig was excessively compartmentalized, so individuals on the rig frequently made critical decisions without fully appreciating just how essential the decisions were to well safety—singly and in combination. As a result, officials made a series of decisions that saved BP, Halliburton, and Transocean time and money—but without full appreciation of the associated risk.(1)

While the government's thorough report does not indicate malicious intent on behalf of BP, it does indicate a willful disregard for history by those who would argue for deregulation of big businesses. Americans have access to government documents such as this report so it is shameful that so many would still argue for this policy initiative: the information is available, there should be no dispute about basic facts and findings. But just in case there is any doubt as to what exactly is said in the report: companies cannot be trusted to self regulate and anyone who says they can is a delusional ideologue. Chapter 8 states that “BP conducted its own accident investigation of Deepwater Horizon, but once again kept its scope extremely narrow.... Professor Najmedin Meshkati of the University of Southern California, Los Angles—a member of the separate National Academy of Engineering committee investigating the oil spill—criticized BP’s accident report for neglecting to “address human performance issues and organizational factors which, in any major accident investigation, constitute major contributing factors."(1) He added that BP’s investigation also ignored factors such as fatigue, long shifts, and the company’s poor safety culture.”

(For full report visit: :http://www.oilspillcommission.gov/final-report or https://s3.amazonaws.com/pdf_final/9_OSC_CH_8.pdf)

The next example to be examined occurred under conservative America's white knight, Ronald Wilson Reagan, and is known as the Savings & Loans Crisis. Reagan defined Republican economic policy with what are now referred to as “Reaganomics” also known as trickle-down economics. The idea behind it was that by deregulating businesses and giving the rich a tax cut, the economy would be stimulated. It didn't work. Ultimately, this policy's utter failure culminated in what is now known as the Savings & Loans Crisis. Basically, what happened is this: 747 savings & loans associations failed in the 1980's. The federal government bailed out the failed institutions with $87.9 billion. The reason for considering this incident is because it so clearly mirrors today's recession. The official FDIC report on Savings & Loans clearly blames a lack of government oversight as the root cause for collapse. Similar to today, when the government was not watching and regulating, private individuals made risky decisions for profit that led to disastrous consequences for the American taxpayers. Deregulation, while it led to initial rapid growth, resulted in greedy individuals making risky decisions as stated in the report:

With money flowing so plentifully, risk takers gravitated toward the S&L industry, altering ownership characteristics. Although more than a few of these new owners engaged in highly publicized cases of fraudulent activity, many others were just greedy. Sharp entrepreneurs realized the large potential profit from owning an S&L, whose charter now allowed a wide range of investment opportunities without the corresponding regulation of commercial banks...

There are many notorious examples of how this system was abused by unscrupulous S&L owners reporting high current income on ADC loans while milking the institution of cash in the form of dividends, high salaries, and other benefits. A rapidly growing S&L could hide impending defaults and losses by booking new ADC loans. The rush into construction lending by S&Ls was such that among the fastest growers, loan fees accounted for substantially all net income in the crucial years 1983 and 1984.(2)

Typical to these types of polices, the deregulation of the S&L's led to the decline in loan standards for commercial banks as well. While the loans industry was making money hand-over-fist, the safety standards were declining rapidly. Unqualified recipients were taking out loans that they had no way of paying back. Taxpayers ended up having to bail out the industry for its mistakes. The report states:

S&Ls entered the commercial real estate lending are a at a time when banks were increasing their own investments in commercial real estate loans, having lost many of their traditional corporate clients to the commercial-paper and bond markets. At the same time, chartering activity of de novo banks and thrifts was high. The result was simply a matter of too many lenders chasing too few loans. The rush of new competitors, all eager to lend to developers, had a negative effect on existing commercial banks, on their underwriting standards, and on the quality of their loans. Field examiners and bank regulators have noted that in the 1980s borrowers could generate bidding wars between banks and S&Ls. Everyone wanted to lend money and everyone wanted to grow. Although for the most part S&Ls lent to lesser-qualified borrowers, their presence in the marketplace contributed to the overall decline in bank lending standards during the 1980s.(2)

The final piece of this report warns against lax government regulation. It clearly states that this kind of policy ends in disaster. Perhaps America should have studied its history before voting for George W. Bush and accepting his platform of low taxes and low regulation. Who does this really benefit?

The regulatory lessons of the S&L disaster are many. First and foremost is the need for strong and effective supervision of insured depository institutions, particularly if they are given new or expanded powers or are experiencing rapid growth. Second, this can be accomplished only if the industry does not have too much influence over its regulators and if the regulators have the ability to hire, train, and retain qualified staff. In this regard, the bank regulatory agencies need to remain politically independent. Third, the regulators need adequate financial resources. Although the Federal Home Loan Bank System was too close to the industry it regulated during the early years of the crisis and its policies greatly contributed to the problem, the Bank Board had been given far too few resources to supervise effectively an industry that was allowed vast new powers. Fourth, the S&L crisis highlights the importance of promptly closing insolvent, insured financial institutions in order to minimize potential losses to the deposit insurance fund and to ensure a more efficient financial marketplace. Finally, resolution of failing financial institutions requires that the deposit insurance fund be strongly capitalized with real reserves, not just federal guarantees.(2)

(for full report visit: http://www.fdic.gov/bank/historical/history/167_188.pdf)

So what did we learn from the Savings & Loan Crisis? Evidently not enough. Since then the federal government has embarked on a campaign of deregulation and weakening regulation on the banks. This of course culminated in 2008's Subprime Mortgage Crisis.  I recently scanned through the Senate Majority and Minority Staff Report from the Permanent Subcommittee on Investigations on this event and found, sure enough in the section labeled "Background" that what had started the ball rolling and allowed for predatory loans to have been given, banks to become too-big-to-fail, and what had given the banks unprecedented power over the credit agencies, was deregulation and purposeful weakening of oversight through complicating regulations.

Until relatively recently, federal and state laws limited federally-chartered banks from branching across state lines. Instead, as late as the 1990s, U.S. banking consisted primarily of thousands of modest-sized banks tied to local communities...This broad-based approach meant that when a bank suffered losses, the United States could quickly close its doors, protect its depositors, and avoid significant damage to the U.S. banking system or economy. Decentralized banking also promoted competition, diffused credit in the marketplace, and prevented undue concentrations of financial power... (3)

The Report continues:

In the mid 1990s, the United States initiated substantial changes to the banking industry, some of which relaxed the rules under which banks operated, while others imposed new regulations, and still others encouraged increased risk-taking. In 1994, for the first time, Congress explicitly authorized interstate banking, which allowed federally-chartered banks to open branches nationwide more easily than before (the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994). In 1999, Congress repealed the Glass- Steagall Act of 1933, which had generally required banks, investment banks, securities firms, and insurance companies to operate separately(The Glass-Steagall Act of 1933), and instead allowed them to openly merge operations (The Gramm-Leach-Bliley Act of 1999). The same law also eliminated the Glass-Steagall prohibition on banks engaging in proprietary trading and exempted investment bank holding companies from direct federal regulation. In 2000, Congress enacted the Commodity Futures Modernization Act which barred federal regulation of swaps and the trillion-dollar swap markets, and which allowed U.S. banks, broker-dealers, and other financial institutions to develop, market, and trade these unregulated financial products, including credit default swaps, foreign currency swaps, interest rate swaps, energy swaps, total return swaps, and more. In 2002, the Treasury Department, along with other federal bank regulatory agencies, altered the way capital reserves were calculated for banks, and encouraged the retention of securitized mortgages with investment grade credit ratings by allowing banks to hold less capital in reserve for them than if the individual mortgages were held directly on the banks’ books. In 2004, the SEC relaxed the capital requirements for large broker-dealers, allowing them to grow even larger, often with borrowed funds. In 2005, when the SEC attempted to assert more control over the growing hedge fund industry, by requiring certain hedge funds to register with the agency, a federal Court of Appeals issued a 2006 opinion that invalidated the SEC regulation. These and other steps paved the way, over the course of little more than the last decade, for a relatively small number of U.S. banks and broker-dealers to become giant financial conglomerates involved in collecting deposits. (3)

The Republican argument is typically to blame the borrowers and the federal government for providing the incentive to give out high risk loans, but the report nullifies these claims in its description of the risky practices of the lenders. In fact, reading the report, it is plain to see that the primary culprits aside from relaxation of regulation, are of course, the banks and Wall Street.

By 2005, as U.S. financial institutions reached unprecedented size and made increasing use of complex, high risk financial products, government oversight and regulation was increasingly incoherent and misguided. Due to the 2002 Treasury rule that reduced capital reserves for securitized mortgages(relaxing of oversight), RMBS holdings also became increasingly attractive to banks, which could determine how much capital they needed to hold based on the credit ratings their RMBS securities received from the credit ratings agencies...The resulting increased demand for mortgage backed securities, joined with Wall Street’s growing appetite for securitization fees, prompted lenders to issue mortgages not only to well qualified borrowers, but also higher risk borrowers (subprime borrowers). Some lenders began to specialize in issuing loans to subprime borrowers and became known as subprime lenders. Subprime loans provided new fuel for the securitization engines on Wall Street...

Those practices, for example, required little or no verification of borrower income, required borrowers to provide little or no down payments, and used loans in which the borrower was not required to pay down the loan amount, and instead incurred added debt over time, known as “negative amortization” loans. Some lenders offered a low initial “teaser rate,” followed by a higher interest rate that took effect after a specified event or period of time, to enable borrowers with less income to make the initial, smaller loan payments. Some qualified borrowers according to whether they could afford to pay the lower initial rate, rather than the higher rate that took effect later, expanding the number of borrowers who could qualify for the loans. Some lenders deliberately issued loans that made economic sense for borrowers only if the borrowers could refinance the loan within a few years to retain the teaser rate, or sell the home to cover the loan costs. Some lenders also issued loans that depended upon the mortgaged home to increase in value over time, and cover the loan costs if the borrower defaulted. Still another risky practice engaged in by some lenders was to ignore signs of loan fraud and to issue and securitize loans suspected of containing fraudulent borrower information. These practices were used to qualify borrowers for larger loans than they could have otherwise obtained. When borrowers took out larger loans, the mortgage broker typically profited from higher fees and commissions; the lender profited from higher fees and a better price for the loan on the secondary market; and Wall Street firms profited from a larger revenue stream to support bigger pools of mortgage backed securities...Because higher risk loans required borrowers to pay higher fees and a higher rate of interest, they produced greater initial profits for lenders than lower risk loans. In addition, Wall Street firms were willing to pay more for the higher risk loans, because once securitized, the AAA securities relying on those loans typically paid investors a higher rate of return than other AAA investments, due to the higher risk involved. As a result, investors were willing to pay more, and mortgaged backed securities relying on higher risk loans typically fetched a better price than those relying on lower risk loans. Lenders also incurred little risk from issuing the higher risk loans, since they quickly sold the loans and kept the risk off their books...Once lenders began to sell or securitize most of their loans, volume and speed, as opposed to creditworthiness, became the keys to a profitable securitization business.(3)

While all this was going on, synthetic collateralized debt obligations allowed lenders to bet against the people they were lending to, making them even more money. Now, Republicans typically look to blame Fannie Mae and Freddie Mac for the crisis, but according to the report, the role these government institutions played was limited. The reason banks took risks was clearly not the government, it was the high returns they yielded:

Lenders that produced a high volume of loans could sell pools of the loans to Wall Street or to government sponsored entities like Fannie Mae and Freddie Mac. Likewise, they could securitize the loans and work with Wall Street investment banks to sell the securities to investors. These lenders passed on the risk of nonpayment to third parties, and so lost interest in whether the sold loans would, in fact, be repaid...To ensure an ongoing supply of loans for sale, lenders created compensation incentives that encouraged their personnel to quickly produce a high volume of loans. Loan processing personnel were compensated according to the speed and number of the loans they processed. Loan officers and their sales associates received still more compensation, often called yield spread premiums, if they charged borrowers higher interest rates or points than required in the lender’s rate sheets specifying loan prices, or included prepayment penalties in the loan agreements. The Subcommittee’s investigation found that lenders employed few compensation incentives to encourage loan officers or loan processors to produce high quality, creditworthy loans in line with the lender’s credit requirements. They also encouraged their staffs to issue or purchase higher risk loans, because those loans produced higher sale prices on Wall Street.(3)

Another problem was the ineffectiveness of existing regulations. The involvement of the credit rating agencies themselves in packaging and selling these toxic loans and collateralized debt obligations allowed Wall Street and the banks to circumvent regulations and make huge profits for themselves.

Without investment grade ratings, Wall Street firms would have had a more difficult time selling structured finance products to investors, because each investor would have had to perform its own due diligence review of the product. In addition, their sales would have been restricted by federal and state regulations limiting certain institutional investors to the purchase of instruments carrying investment grade credit ratings. Still other regulations conditioned capital reserve requirements on the credit ratings assigned to a bank’s investments.

In addition to making structured finance products easier to sell to investors, Wall Street firms used financial engineering to combine AAA ratings – normally reserved for ultra-safe investments with low rates of return – with high risk assets, such as the AAA tranche from a subprime RMBS paying a relatively high rate of return. Higher rates of return, combined with AAA ratings, made subprime RMBS and related CDOs especially attractive investments.(3)

The motivator behind the credit agencies' involvement was the same as it was for the banks: profit. As the report says:

The credit rating agencies charged substantial fees to rate a product. To obtain a rating during the height of the market, for example, S&P generally charged from $40,000 to $135,000 to rate tranches of an RMBS and from $30,000 to $750,000 to rate the tranches of a CDO.(3)

The trouble with this model is something the report calls an “inherent conflict of interest” between rating agencies and the people who bring them business. The big question Republicans ask is “well, where were the regulators?” The answer is: with their hands tied. According to the report:

U.S. financial regulators failed to stop financial firms from engaging in high risk, conflict-ridden activities. Those regulatory failures arose, in part, from the fragmented nature of U.S. financial oversight as well as statutory barriers to regulating high risk financial products...

Federal and state financial regulators responsible for oversight of banks, securities firms, and other financial institutions in the years leading to the financial crisis operated under a number of statutory and regulatory constraints.

One key constraint was the sweeping statutory prohibition on the federal regulation of any type of swap, including credit default swaps. This prohibition took effect in 2000, with enactment of the Commodity Futures Modernization Act (CFMA). The key statutory section explicitly prohibited federal regulators from requiring the registration of swaps as securities; issuing or enforcing any regulations or orders related to swaps; or imposing any recordkeeping requirements for swaps. In addition, the law explicitly prohibited regulation of any “‘interest rate swap,’ including a rate floor, rate cap, rate collar, cross-currency rate swap, basis swap, currency swap, equity index swap, equity swap, debt index swap, debt swap, credit spread, credit default swap, credit swap, weather swap, or commodity swap.” These prohibitions meant that federal regulators could not even ask U.S. financial institutions to report on their swaps trades or holdings, much less regulate swap dealers or examine how swaps were affecting the mortgage market or other U.S. financial markets.

As a result, the multi-trillion-dollar U.S. swaps markets operated with virtually no disclosure requirements, no restrictions, and no oversight by any federal agency, including the market for credit default swaps which played a prominent role in the financial crisis. On September 23, 2008, in a hearing before the Senate Committee on Banking, Housing, and Urban Affairs, then SEC Chairman Christopher Cox testified that, as a result of the statutory prohibition, the credit default swap market “is completely lacking in transparency,” “is regulated by no one,” and “is ripe for fraud and manipulation.” In a September 26, 2008 press release, he discussed regulatory gaps impeding his agency and again raised the issue of swaps: “Unfortunately, as I reported to Congress this week, a massive hole remains: the approximately $60 trillion credit default swap market, which is regulated by no agency of government. Neither the SEC nor any regulator has authority even to require minimum disclosure.” In 2010, the Dodd-Frank Act removed the CFMA prohibition on regulating swaps.

A second significant obstacle for financial regulators was the patchwork of federal and state laws and regulations applicable to high risk mortgages and mortgage brokers. Federal bank regulators took until October 2006, to provide guidance to federal banks on acceptable lending practices related to high risk home loans. Even then, the regulators issued voluntary guidance whose standards were not enforceable in court and failed to address such key issues as the acceptability of stated income loans.89 In addition, while Congress had authorized the Federal Reserve, in 1994, to issue regulations to prohibit deceptive or abusive mortgage practices – regulations that could have applied across the board to all types of lenders and mortgage brokers – the Federal Reserve failed to issue any until July 2008, after the financial crisis had already hit.

A third problem, exclusive to state regulators, was a 2005 regulation issued by the OCC to prohibit states from enforcing state consumer protection laws against national banks. After the New York State Attorney General issued subpoenas to several national banks to enforce New York’s fair lending laws, a legal battle ensued. In 2009, the Supreme Court invalidated the OCC regulation, and held that states were allowed to enforce state consumer protection laws against national banks. During the intervening four years, however, state regulators had been effectively unable to enforce state laws prohibiting abusive mortgage practices against federally- chartered banks and thrifts.(3)

The Republican argument is that big government created this recession by trying to encourage home ownership. While I will acknowledge that the government agencies Fannie Mae and Freddie Mac did increase risks, and that the Federal Reserve didn't do its job to regulate those risks, and in fact may have helped expand them by purchasing many of the mortgage backed securities from Fannie and Freddie(3), these institutions were not the cause of the recession. In fact, they all came in late in the game, and while the report does say that “some federal housing policies encouraged people to purchase homes they were ultimately unable to afford, which helped to inflate the housing bubble,”(3) it goes on to quote economist Arnold Kling:

According to economist Arnold Kling, Fannie Mae and Freddie Mac purchased these loans after “lowering their own credit standards in order to maintain a presence in the market and to meet their affordable housing goals.”(3)

(For the rest of the report, go here: http://www.hsgac.senate.gov/download/report-psi-staff-report-wall-street-and-the-financial-crisis-anatomy-of-a-financial-collapse Relevant pages 15-46)

It is plain to see from the reports that the primary factor in causing each of these events was a lack of oversight and deregulation. So why then is there such a disconnect for Republicans with such simple history? For this answer we will turn to the GOP argument about what happened in the Subprime Mortgage Crisis, that the lenders were merely trying to obey the law. Once more we see the Republicans trying to deny greed. The report shows that while some government policies did encourage people to take loans they could not afford, banks and Wall Street were selling toxic loans for their own profits, and betting against the people they sold loans to for their own profits, and earned commission for giving out as many loans as possible regardless of safety. This is how they are similar to communists: they push for a failed system, but more importantly, both want to dismantle the federal government based on a firm belief in the natural benevolence of (some)human beings. The difference between communists and Republicans of course, is who each believe is benevolent. Communists believe that the middle and lower class people are just, while Republicans reserve that virtue for the rich because the GOP position on the recession is revealing: It says that the only greed Republicans believe in is the greed of the poor and of the middle class.

I leave you with this simple statement: Now is not the time for idealism in politics. It is time to drop ideology and act practically since we are in a recession. America needs to pick itself up by the bootstraps and pass much needed regulatory reform. If you are like me, then you are not rich and you cannot afford to lose in the same way that a Wall Street investor can. We must stand firm against anyone who would fight for policies that benefit the wealthiest Americans because the interests of the rich are just that: the interests of the rich.  They differ from the interests of average people. We, the average people, need to be rational in the voting booth or else the United States will collapse on itself.

1)National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling Final Report Chapter 8: Safety is Not Propriety

2)FDIC Official Report- Lessons From the Eighties:The Savings and Loan Crisis and Its Relationship to Banking

3) Senate Majority and Minority Staff Report from the Permanent Subcommittee on Investigations: WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse

 

 

Base Baiting

Given the recent statements from Newt Gingrich accusing blacks of being lazy and calling Obama a "food stamp president" in spite of the fact that more people signed up for food stamps under Bush, Rick Santorum saying he doesn't "want to make black people's lives easier", and the GOP CPAC hosting Peter Brimelow, a white supremacist, as a speaker, the new ad for Ron Paul from the "No One But Paul" money bomb that praises Senator Barry Goldwater for his views on government seems poorly timed. Paul has already come under fire for his connections to white supremacist groups as well as racist statements made in his newsletters which bore his signature. Barry Goldwater, the ad says, became famous in the 1960's for his views on "small government." It is true that Goldwater's views made him popular in the 60's, but only in the most glossed over way imaginable. At that time, the south was still solidly Democratic given the legacy of the Civil War as well as the New Deal, which was so popular nationwide that the Republican Party had shrunk greatly in size due to its being associated with Herbert Hoover and the Great Depression.  When the Democrats under Harry Truman began taking a stance for civil rights, the south began to show signs of discontent.  Many Republicans saw an opportunity for their party to become competitive on a national scale and win over a new base: southern conservative whites.  Two such Republicans were Richard M. Nixon and of course the segregationist Senator Barry Goldwater. Goldwater's approach was became known as the Southern Strategy.  He came out in strong opposition to 1964 Civil Rights Act under the premise of small government and using same slogan the Confederates used during the Civil War, "states rights." When he ran for president in 1964 and because of his opposition, became the first Republican to win the electoral votes of the deep southern states since Reconstruction. captured all of the southern electoral votes. This was the first stage of the realignment of the South.  Over the years the Republican Party has toned down the rhetoric but kept the message. The man responsible for streamlining the Southern Strategy and making it more palatable for mainstream consumption was none other than Republican guru, President Ronald Reagan. Reagan managed to cause white moderates to leave the Democratic Party, representing the second stage of the realignment. One of his more infamous moments was his "states' rights" speech in response to the Civil Rights Act. What is perhaps most disturbing about Ron Paul's ad, the statements by Santorum and Gingrich, as well as Peter Brimelow at the Republican CPAC, is the insight it provides into the GOP: The opposition to Obama--calling him a socialist, a radical, a Muslim, an illegal immigrant-- is racially motivated, and our media broadcasts it.  We as modern citizens must wholly reject this kind of racism from candidates for public office by calling it for what it is. Moreover, we must educate our people in order to ensure that this kind of thinking does not spread and is eventually phased out into the fringe.

For My Lewd Friends

Santoruption

The “Obamyth” 2/1/12

For Mr. Gingrich

W.

 

 

 

 

 

Last week I had a chance to speak with presidential hopeful and former speaker Newt Gingrich. I asked him a question about the effects of deregulation on our economy citing the S&L Crisis, the BP Oil Spill, and of course the Subprime Mortage Crisis. His response was a total denial that deregulation had anything to do with any of these events. In fact, he said we have too much regulation and that is what is hurting our economy.

I have gone back and done my research (again) and I have here a list of the government reports from each of these events. In these reports, deregulation by one name or another, is cited as the root cause for the crisis. I even made it easy to find the significant parts of the reports by giving quotes or page numbers. I hope that former historian Newt appreciates my work. Something tells me he will not respond...again.

 

https://s3.amazonaws.com/pdf_final/9_OSC_CH_8.pdf - BP Oil Spill (Ctrl + f "The record shows that without effective government oversight, the offshore oil and gas industry will not adequately reduce the risk of accidents, nor prepare effectively to respond in emergencies.”)

http://www.fdic.gov/bank/historical/history/167_188.pdf- Savings & Loans Crisis  (ctrl+f  "the regulatory lessons")

http://www.hsgac.senate.gov/download/report-psi-staff-report-wall-street-and-the-financial-crisis-anatomy-of-a-financial-collapse The Subprime Mortgage Crisis (pg 15-17 give a good summary to the background though there is a lot to cull through. )

http://jec.senate.gov/archive/Documents/Releases/presstax081302.pdf As for those Bush Tax Cuts hurting the economy...Here it is in black and white. And here: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0CFEQFjAE&url=http%3A%2F%2Fjec.senate.gov%2Fpublic%2F%3Fa%3DFiles.Serve%26File_id%3D99d9632f-9933-4a58-9c02-95f983f1e89e&ei=r_QmT92SMKyB0QGaxpTkCA&usg=AFQjCNGLpqiznMigxV3myjiKAtnR1LFjkw