Archive for Corruption
On Deadly Sins
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Neal Gabler of the Woodrow Wilson Center laments that Wall Street reforms will never outfox human nature — specifically, greed:
If we’ve learned nothing else about investment banking over the last two years, we’ve learned that it operates like a virus. You can devise all sorts of economic antibiotics — from stricter regulation and more oversight to limiting certain institutional arrangements, as Glass-Steagall did — but sooner or later they are all bound to fail because financial instruments keep mutating to escape destruction. Investment bankers reconstitute highly risky, highly profitable schemes such as credit default swaps or unit contingent options or other exotic inventions. That’s why reform never works. It will always be outsmarted.
At least, as long as there is financial reward in outsmarting the system. Gabler notes (anecdotally, at least),
that During the long postwar economic boom, the top marginal rates hovered at 91%, removing a lot of the incentive to game the financial system. There was no point in scheming if you couldn’t profit from it. Still, the country prospered. So did Wall Street.
What changed starting in 1981, according to Gabler, is that the government started rewarding greed. “The Reagan tax cuts were hailed by conservatives as a way to unleash American initiative,” Gabler writes (by dropping the punishing, punishing, punishing, punishing, punishing top marginal tax rates — these people are really sensitive about being punished). We succeeded in unleashing “American avarice” along with it. Gordon Gekko made his Wall Street debut in 1987.
Reward a behavior and you’ll get more of it is an article of faith in certain circles. It reminds me that one of the core beliefs behind our criminal justice system — and a style of parenting popular in certain circle — is that punishment is supposed to deter misbehavior. Crimes of passion excluded, of course, and it would be hard to argue that the creation of derivatives and credit default swaps were crimes of passion, merely of greed.
Incentives, as we have seen, don’t always work the way common sense says they should. But if Gabler’s analysis has any merit (you don’t treat viruses with antibiotics, for example), disincentivizing one of the seven deadly sins again might have a more salutary effect than trying to inoculate against it.
That would be terribly unfair, of course. The full list of deadly sins applies only to people in the lowest tax brackets.
A Quote to Ponder
Posted by: | CommentsWhen plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.
– Frederic Bastiat, “The Law”, 1850
[h/t Open Left - comments thread]
The Great American “I Told You So”
Posted by: | CommentsIn the current Rolling Stone, Matt Taibbi talks about the ridicule he and the editors caught last year over his big Goldman Sachs takedown, “The Great American Bubble Machine.” The financial media cognoscenti had laughed at his suggestion that Goldman had committed securities fraud. Taibbi gets to laugh now, and it probably won’t be his last:
The truth is that what Goldman is alleged to have done in this SEC case is even worse than what all these assholes laughed at us for talking about last year.Prior to the “Bubble Machine” piece, I had heard rumors that Goldman had gone out and intentionally scared up toxic mortgages and swaps in order to get short of them with sucker bookies like AIG. But – and this seems funny in retrospect – I foolishly dismissed those tales as being too conspiratorial. I thought it was bad enough that Goldman was shorting the subprime market even as it was selling toxic subprime-backed securities to chumps on the open market. The notion that the bank would actually go out and create big balls of crap that would be designed to fail seemed too nuts even for my tastes.
In the year since – and this, to me, is the main lesson from the SEC case against Goldman – the public has quickly come to accept that when it comes to the once-great institutions of modern Wall Street, literally no deal that makes money is too low to be contemplated.
So Simple A Puppet Can Do It
Posted by: | CommentsThe financial crisis in four minutes (Updated below):
[h/t Matt Taibbi]
Almost forgot this one from ThisLife.org, even shorter at one minute thirty:
Bet Against the American Dream from Alexander Hotz on Vimeo.
Reality Bites
Posted by: | CommentsFrom self-described the champions of “fiscal restraint”:
Junior Florida Republican Party staffer had $1.3 million charged to party credit card
Among the damages:
Over the next 2½ years, nearly $1.3 million in charges wound up on Melanie Phister’s AmEx — $40,000 at a London hotel, and nearly $20,000 in plane tickets for indicted former House Speaker Ray Sansom, his wife and kids, for starters. Statements show thousands spent on jewelry, sporting goods and in one case $15,000 for what’s listed as a month-long stay at a posh Miami Beach hotel, but which the party says was a forfeited deposit.
The credit card records, obtained by the St. Petersburg Times and Miami Herald, offer the latest behind-the-scenes look at extravagant and free-wheeling spending by the party touting fiscal restraint. Not only did certain elite legislative leaders have their own party credit cards to spend donors’ money with little oversight, but Phister’s records show these leaders also liberally used an underling’s card — without her knowledge, she says.
[...]
The Florida Democratic Party requires staffers and leaders to use their own credit cards and seek reimbursement for appropriate expenses. That’s now the practice at the Florida Republican Party, and fundraiser Hoffman suggested it’s about time.
[h/t C&L]
Choose a Side
Posted by: | CommentsOver at Daily Kos, Darcy Burner poses this challenge:
Next week, there’s going to be a test in Congress. A real litmus test about whose side various Representatives and Senators are on. It’s a stunningly straightforward bill – only two pages long – that would simply remove the antitrust exemption for health insurers. It would keep insurers from being able to collude and price fix, requiring them to compete in the marketplace for business.
Unlike nearly everything else that’s been done in the last year, this bill is completely uncompromised – no deals have been cut to water down the bill in favor of health insurance companies. It is an unambiguously populist bill, and a clean cut against corporatism. It’s building off of work that key progressives in the House, including Reps. DeFazio, Slaughter, and DeGette, have been teeing up for years.
Assuming the Perriello-Markey bill makes it onto the floor, no one in Congress should be allowed to duck their vote for the insurance companies and against their constituents. Hagan, Shuler and the rest of NC’s delegation should know, as Darcy explains, Vote against this bill, and it means you’re in the pocket of the insurance companies.
As Digby said, “The campaign ads write themselves, don’t they?”
Choose a side. We’ve already chosen.
President Of The Lambs: Redux
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A hello to Scrutiny Hooligans readers: my name is Tom Buckner, and I’ve been offered the chance to post here, “above the fold” as it was put to me. For this I’m very grateful. Osiris only knows what shenanigans I’ll repay this kindness with. Like ending sentences with prepositions. Or sentence fragments. I may even relapse into the Pelagian Heresy.
But I have decided to get my feet wet by reprinting an essay from 2005, which was hosted at a wondrous blog called the nonist. There are a few things I could update and a few things I would now emphasize differently; I’m less inclined now to let the Democratic Party off the hook, for one thing. And let’s not dwell on the purple prose in the first paragraph, either. But nothing important has changed. I still think the idea I expound here is an important and overlooked one.  It asks a simple question: if your boss can make you piss into a cup to prove you’re not seeking what wiser people than I have termed “illegal states of mind,” then why cannot society demand proof that its rulers have a conscience? Read More→
Oh No.
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I don’t have time for a proper post about this, but here’s the skinny from MSNBC:
In a landmark ruling, the U.S. Supreme Court on Thursday struck down laws that banned corporations from using their own money to support or oppose candidates for public office.
By 5-4 vote, the court overturned federal laws, in effect for decades, that prevented corporations from using their profits to buy political campaign ads. The decision, which almost certainly will also allow labor unions to participate more freely in campaigns, threatens similar limits imposed by 24 states.
It leaves in place a ban prohibiting corporations and unions from directly contributing funds to candidates for any use.
In a statement, President Barack Obama said that the decision gives ‘a green light to a new stampede of special interest money in our politics.’ The president pledged to work with Congress to ‘develop a forceful response’ to the court’s ruling.
What’s your take on the ruling?
A Poisioned Primer on the Conference
Posted by: | CommentsA jaundiced look under the hood of the conference committee process from Matt Taibbi’s The Great Derangement:
The mechanism of the conference committee is a special voodoo all unto itself, a monstrously complex bureaucratic maze whose diabolical scheme is known to a select few congressional practitioners. But for the moment, only two facts are important.
The first is that the bill can again be completely rewritten here, rewritten from top to bottom, rewritten even so that it has a completely opposite meaning from the bills that passed the two houses – in a word, rewritten in such a fashion as to render the whole process up till now meaningless.
The second is that a majority vote of conference committee members, called “conferees,†is not even required for passage. Again, the conference committee chairs are the key players here. Whatever the top dogs from the House and Senate want generally occurs. They redo the bill according to whatever swinish commercial dynamic happens to govern this back-room deal (for the conference hearings are almost always conducted out of the public eye), then send the final version to a vote, again giving the members just a few hours’ notice before they make an essentially blind decision on the by-now completely revised legislation.
Industry lobbyists figured out long ago, Taibbi writes, that it’s cheaper to buy a couple of key conferees than a majority of the Congress. Don’t expect Matt’s Bush-era description of the process to change when the health care bills go to conference.
Read More→
Is the Senate Bill Half Full … Or Not?
Posted by: | CommentsThis week, I’ve been following the back-and-forth dialogue on the Senate health care bill, and there are some good arguments from credible people on both sides. There’s a glass half-full vs. half-empty dynamic to the debate that boils down to what Glenn Greenwald said yesterday:
If one judges the bill purely from the narrow perspective of coverage, a rational and reasonable (though by no means conclusive) case can be made in its favor. But if one finds this creeping corporatism to be a truly disturbing and nefarious trend, then the bill will seem far less benign.
Marcy Wheeler wrote about this earlier in the week. But Greenwald succinctly nails down what’s been nagging me:
It’s certainly true that health care opponents on the left want more a expansive plan while opponents on the right want the opposite. But the objections over the mandate are largely identical — it’s a coerced gift to the private health insurance industry that underwrites the Democratic Party. The same was true over opposition to the bailout, objections to lobbying influence over Washington, and most of all, the growing anger that Washington serves the interests of financial elites at the expense of the working class.Whether you call it “a government takeover of the private sector” or a “private sector takeover of government,” it’s the same thing: a merger of government power and corporate interests which benefits both of the merged entities (the party in power and the corporations) at everyone else’s expense. Growing anger over that is rooted far more in an insider/outsider dichotomy over who controls Washington than it is in the standard conservative/liberal ideological splits from the 1990s.
Marcy’s concern about the Senate bill echoes this. As to whether this is a bill we can pass now and improve later to get us closer to single-payer, Marcy writes,
In fact, this bill will move toward single payer, too–though not the kind we want. For the large number of people who live in a place where there is limited competition, this bill will require them to get health care through the oligopoly or monopoly provider. It’ll work great for the provider: they will be able to dictate rates. But the Senate bill allows these blossoming single payer providers to keep up to 25% of the benefit in profits and marketing costs, and pass little of that benefit onto citizens. If we make private corporations our single payer, how are we going to convince them to cede control when we ask them to let the government be the single payer?
How’s that government of the people working out for you?
