Shredding Your Own Safety Net

Steven Greenhouse has a good Sunday piece on the weakening of unemployment protections. Unemployment benefit duration has fallen from 65 to 39 weeks. Only about a third of unemployed workers receive any unemployment benefits (down from one half in the mid-1970s), and 40% of very poor families who quality for public assistance actually get it, or half as many as in 1990. The implication is that more people losing all of their private-sector income with no public replacement will make the recession worse, or turn a recession into a depression.

The middle-class's happy cutting of social services was premised on a cluster of incorrect ideas: that investment income (including their house(s)) would always rise faster than inflation, they could always borrow at low rates and roll over the loan indefinitely, and that social services were for Other People, generally foreign and/or undeserving. Now bankruptcy filing are setting new records. The NYT has a good piece on this, with a story about one middle-class family caught in the bind, and caught by doing what they thought they were supposed to do.

The same goes for 401(k) plans, whose ability to harness the wealth-producing genius of the markets persuaded tens of millions of employees to allow their companies to replaced defined-benefit pensions with defined-contribution pensions. This "great risk shift" from companies to employees was sold as the road to riches. The LA Times writes that with many employees having lost ten years of gains in the last few months, these middle-class stalwarts are having a rethink.

The dismantling of social infrastructure - including unemployment and poverty benefits - was premised on the idea that poor people were bad people. If your society had good social services, it would encouraging losers. These losers would hang on to their loser habits. They would breed and multiply. (Hence the power of the image of the "welfare mom," who was also a "welfare queen," who "bought vodka with food stamps" - Reagan's oft-repeated urban legend - that she obtained by having six children with six different absent fathers.)

Well hey - Losers R Us. If we got rid of the dumb economic moralizing, we might both avoid Great Depression II and rebuild society.

Emphasis on the word WE. They, the economic leaders of the country and the world, aren't going to do Jack. See Gretchen Morgenson's typically acerbic analysis of the Paulson fumbling which isn't even helping bank credit, to say nothing of credit for the people.

Since the $700 billion TARP was funded, it has been used solely to shore up banks and other financial institutions. (An irreverent friend calls it The Act Rewarding Plutocrats.)

Treasury officials did move closer to helping consumers with a new plan floated last week aimed at offering $50 billion in loans to companies that issue credit cards, make student loans and finance car purchases.

Kind of interesting, isn’t it, that troubled homeowners are missing from the list of TARP beneficiaries and left to fend for themselves?

Yes you said it - interesting. Interesting that WE helped build this system by submitting to its world view. Interesting that WE might reconsider.

G20 Flop

Having now read the G-20 Summit statement, I pronounce the meeting a failure. It reiterated some tired platitudes about an open global economy and not retreating into protectionism, as though this were really the danger facing the world. It called for some mild regulatory reforms of the financial system that caused this mess, with no specific proposals. The big omissions were the following:

1. construction of an integrated system of standards, what Martin Wolf at the FT has called a "new Bretton Woods."
2. call for stimulus packages to help populations in the global North and South alike. The world's population is almost entirely absent from this document. The American and European middle-classes are also absent.
3. any vision of social development. The UN's Millennial Goals are there unexpressed and articulated - for poor people.
   

Many others will argue this is a major step in an important process. I doubt it.

I now think it was a prophetic moment when the French finance minister, Christine Lagarde, pulled out her Coolpix (a not very recent model) to take a snapshot of her neighbor at the big round table. These world leaders are acting like a bunch of tourists.

The public is going to have to do this on its own.

The Curse of the Countryside

It's Sunday morning, so I'm reading Father Frank, who flays the Republicans in no uncertain terms:

The G.O.P. ran out of steam and ideas well before George W. Bush took office and Tom DeLay ran amok, and it is now more representative of 20th-century South Africa during apartheid than 21st-century America.

It's kind of amazing to see that in print: the Republicans as the American Apartheid Party.

Rich then cites David Letterman's joke about how the 10 G.O.P. presidential candidates at an early debate looked like “guys waiting to tee off at a restricted country club."

The very limited region of GOP gains were immediately apparent, and yet the GOP base in white males remained very solid this year. I criticized Father F last Sunday for understating how Republican white males continue to be overall, regardless of how culturally brain-dead or economically dysfunctional their party becomes.

There were reports this week of an upswelling of anti-Obama racist attacks on black folks, especially but not only in the South. Is it racism or some kind of country politics - or both - that made Southern whites go for McCain 68% - 30%? If you broke males out of the number it would be even higher?

The split between country and city is huge: cities over 500,000 went for Obama 70% - 28%, and cities 50,000-500,000 gave Obama a 59% - 39% advantage. Suburbs were almost evenly split, and everything below 50,000 went 53-45% for McCain.

On the other hand, the "West" is full of rural spaces, and yet "Whites in the West" gave McCain 48% and not the 68% McCain got from their Southern cousins. This may well be because the West has more gigantic coastal cities, huge urban-oriented suburbs, and multipolar racial politics.

This begs the question of why you need all those things to have even minimally centrist politics (Obama vs. the hard-right McCain and Palin). Why can't you have centrist politics with the normal class mixture of the white and still-rural South?

Journalistic anthropology isn't yet giving us answers. The best newspaper piece I've seen focused on the Republicans overdoing it on their Southern strategy and alienating voters elsewhere. But here's the underlying analysis:

Mr. Obama’s race appears to have been the critical deciding factor in pushing ever greater numbers of white Southerners away from the Democrats.

Here in Alabama, where Mr. McCain won 60.4 percent of the vote in his best Southern showing, he had the support of nearly 9 in 10 whites, according to exit polls, a figure comparable to other Southern states. Alabama analysts pointed to the persistence of traditional white Southern attitudes on race as the deciding factor in Mr. McCain’s strong margin. Mr. Obama won in Jefferson County, which includes the city of Birmingham, and in the Black Belt, but he made few inroads elsewhere.

And the idea is driven home by the accompanying visual stereotype of Southern White Man (one Bill Pennington of Vernon, Alabama).


Unfortunately, this assumes the cracker racism that needs to be explained.

The best non-Southern analysis I've read involves my favorite issue - the degradation of public systems and social spaces that force people to stick with personal hierarchies and private solutions. Racism supports the hierarchy that has done more in a perverse and destructive way for white Southern working class security in their own world than has the region's white economic and social leaders. The latter have pursued strategies of underdevelopment decade after decade since the beginning of the South itself - slavery, Jim Crow segregation, and "massive resistance" to integration led appropriately enough by Sen. Harry F. Byrd, a descendant of the Byrd family colonizers of Virginia, who united stone racism with stone opposition to public spending - all which have kept the South backward as an economy and a civil society and a democracy. It is a non-democracy, where that requires the full participation of all social partners. The poet Charles Simic wrote a great piece on this just before the 2004 presidential election, and it is worth reading now.

What is Congress Doing?

Joe Nocera reports on some bailout hearings last week. He had some moments of surpise and optimism:

“Do you believe that the collapse of large hedge funds pose systemic risk?” [Rep. Henry Waxman] began. “And does this justify greater federal regulation?” That question, in turn, provoked one of the most amazing hearings I’ve ever attended, not because sparks flew but because the hedge fund managers responded with answers I never thought I would hear in my lifetime.

[The hedge fund managers] all agreed with Mr. Waxman, and with the other Congressional questioners, that in certain cases hedge funds could indeed pose systemic risk. All but Mr. Griffin said they would favor at least some regulation of hedge funds. They all agreed on the need for more disclosure. They said they had no problem turning over now-hidden information about their portfolios to a federal regulator. Mr. Simons and several others (though, again, not Mr. Griffin) said that if Congress changed the tax laws in ways that caused them to have to pay more taxes, they would be O.K. with that. I almost fell out of my chair.

Nocerca is a good financial journalist and I hope he didn't hurt himself. But it is not quite that surprising: hedge funds took enormous risks because they had to keep up with everyone' else's enormous risks so they could match their profits. I'm not justifying it, but it is common sense that pitchers could agree with batters that they shouldn't spit on the ball - as long as other pitchers don't do it. That Nocera is shocked is a sign of how ideologically bent finance economics has become.

For a good explanation of what was wrong with the bailout passed in early October, see former World Bank president turned critic Joseph Stiglitz's discussion last month.

I have a few things to say about George W. Bush's ignorance of the simple facts about how much worse the degregulated US banking system has done than its European counterparts, but am still looking for a decent copy of his speech last week.

Big as China

Yesterday I said the public should ask for and receive a public infrastructure building program of $750 billion ove two years, to come closer to the scale of China's new program for its own upgrades. Today I was gratified to see Paul Krugman estimate the need to be $600 billion. Pretty close!

A Bailout for Actual People?

What an idea! But bank analysts are noticing that unem- ployment tends to create liquidity problems for individuals. That in turn can further clog the financial system. Thus spaketh Richard Bernstein of Merrill Lynch: "The government can come up with any number of refinancing and liquidity plans, but households are likely to increasingly default on mortgages and other debts if cash flow is not stabilized via employment." The economy lost 265,000 jobs in October and 285,000 in Septermber, and nearly 1.2 million so far this year. Analysts are promising worse to come. So hey - should we spend some bailout money on creating jobs for people?

Time entertained itself with a new series called "Top Ten Scared Traders of the Week" (see above).

There are lots of good ideas for the milllon things that need building or rebuilding, starting with green housing and green transportion.

Bush's lame-duck Treasury department isn't likely to help with this. Everyone should read Treasury Secretary Paulson's statement from yesterday - a masterpiece of omnious vagueness about the dismal future. All the allocated hundreds of billions are going to scarily bad banks who made such major mistakes that their failure could create a giant sucking sound pulling who knows how many businesses, pension plans, bond funding programs with it. We don't know who owns what, so we don't know exactly why the top folks like Paulson are so freaked out.

Paulson announced expanding the capital injection program to include private partnerships. They, that is we, are going to have to offer massive sweeteners to get private capital into this mess - if they thought it was safe they would have gotten back in already. That's going to cost. Apparently something like recent declines in consumer spending has increased Treasury concern about non-business credit markets. Paulson writes,

The important markets for securitizing credit outside of the banking system also need support. Approximately 40 percent of U.S. consumer credit is providedthrough securitization of credit card receivables, auto loans and student loans and similar products. This market, which is vital for lending and growth, has for all practical purposes ground to a halt.

This process of "securitization" refers to creating securities that are nominally backed by an asset like 10,000 houses whose mortgages were pooled into the security.

But Paulson's language is important. He could have said "Approximiately 40 percent of U.S. consumer credit has been provided through securitization of credit card receivables . . ." This change in English verb structure would identify securitization as a historically local and specific, and perhaps reversible practice. His text could then entertain the possiblity that securitizing everything from home mortgages to credit card balances was a mistake - the mistake that underlies the whole current mess. The reason that is was a mistake is that instead of spreading and "hedging" risk, securitization depended on a collective belief that the value of these instruments would be sustained (and usually grow very quickly) even though their contents, and thus their risk, was not possible to caculate. Once the collective belief faded (the market became "illiquid"), the risk of most of these investments became, practically speaking, infinite.

Yesterday's Greenspan-like tedium of utterance marked an important expansion of the bailout that denies the error of securitization.

we are examining strategies to support consumer access to credit outside the banking system. To date, Fed, FDIC and Treasury programs have been targeted at our banking system, and the non-bank consumer finance sector continues to face difficult funding issues. Specifically, the asset-backed securitization market has played a critical role for many years in lowering the cost and increasing the availability of consumer finance. This market is currently in distress, costs of funding have skyrocketed and new issue activity has come to a halt. Today, the illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards. This is creating a heavy burden on the American people and reducing the number of jobs in our economy.

With the Federal Reserve we are exploring the development of a potential liquidity facility for highly-rated AAA asset-backed securities. We are looking at ways to possibly use the TARP to encourage private investors to come back to this troubled market, by providing them access to federal financing while protecting the taxpayers' investment.

Paulson's plan is to revive the securitization market and not to end it, and to do this by luring private investors back with unspecified but - logically speaking - inevitably expensive incentives.

Why not do something a few people were talking about two months ago? Instead save the money for infrastructural rebuilding, China style - say $750 billion over 2 years? The jobs, the new consumer spending, the return to the housing market, would all do more for finance than simply propping a rotten market with bribes. And it would buy the country a new infrastructure rather than a bunch of toxic bonds.

America the Socialist - you WISH

Fivethirtyeight.com has a nice explanation of the electoral shift in 2008 that appears in the map at the left. Well and good for Dims to win elections. But it misses the big picture.

The big picture is that whites took a look at a Republican candidate who offered tax cuts skewed toward the wealthy investors that had just tanked their middle-class pensions, and who will double their government's deficit, and who are forcing cuts in every public support for middle-class life known to man, and took a look at this candidate who defined the 30-year boom in income inequality and 30-year wage freeze for 80% of Americans as the fountain of wealth, and who trashed tax cuts NOT skewed toward the rich as socialism - and 55% of the dimwits voted for him!

We have to face the fact that when it comes to their own money, white Americans are the dumbest fuckers on earth.

Reality check. Guess who made the middle class. Franklin Delano Roosevelt. Pushed by the labor movement, by Democrats, and by socialists. And by communists! And then by the New Deal's mass public works program that was finally and sadly given its proper enormous scale by World War II, and still later by retaining and expanding it via the Republican Gov Earl Warren in California and even a little by Dwight D. Eisenhower in the Republican 1950s White House, even as McCain and Palin's ideological godfathers were defining socialism as anti-Americanism, and by being expanded yet again by Dem Gov of California Pat Brown and Republican Gov of New York Nelson Rockefeller - before that kind of Republican was drummed out of the party and turned into a Clinton Democrat.

Here's a short, starter list of the socialist government programs that created the middle-class out of the abandoned farmers and union-busted workers and semi-educated fake professional service workers like the folks who bred me.

• Federal Home Loan Bank Act (1932): creates savings and loans to fund mortgages with federal guarantees in case of default
• Home Owners’ Loan Act (1933): cheap credit
  
• Glas-Steagall Banking Act (1933): established Federal Deposit Insurance Corporation and kept banks from blowing all of your money like they did after its repeal in the late Clinton period.
  
• Various New Deal Legislation (1930s): support for farms, small business, home building, credit stability, rural electrification
• Servicemen’ Readjustment Act (1944) (“GI Bill of Rights” - supports education, job training, medical care consumer loans, home loans for vets
• Highway Authorization Acts (1947, 1956): 79,000 miles constructed
  
• Federal Housing Administration: direct loans (4%) and loan guarantees for large-scale housing development

Each of these programs had to be pried open over many years for African Americans and other people of color. But this long civil rights struggle doesn't change the fact that the middle-class, segregated then more integrated, exists only because of mass social investment, now and forever, amen.

Meanwhile, yesterday, mass social investment was indeed taking place, for the t0p 0.01%, and NOT happening for everyone else:

• AIG upped its take of your money to $150 billion. For just one gambling insurance company, that's what it costs for us to cover its lost bets.
• Fannie Mae announced another $29 billion in losses for the 3rd quarter of 2008.
• American Express declared itself a bank so it could feed at the same federal windows.
• Arnold Schwarzenegger, put into office by the white middle-class, and saying every week for years that the state of California spends too much, suddenly declared that the real problem is the state doesn't tax enough. His solution: increase the sales tax, soaking the middle and the poor.
• GM has decided to save its dwindling cash reserves by stopping retiree health benefits for its former white-collar workers.
• The New York Times published data suggesting that 10 million homeowners will soon have their houses "underwater" - worth less than the mortgage they are paying to stay in the house.
• The University of California announced that its pension fund had lost 28.3% of its value since June 30, 2007 - echoing similar losses all over the country.
• The Los Angeles Times reported that the federal bank bailout could cost the state of California $2 billion in lost tax revenues.
  

Meanwhile the war in Iraq, that great murderer of Iraqis and fleecer of the American public, got going again.

Smile as you write those checks, and give thanks to Baal that we have no socialism in America!

Meet our New Deal President - in China!

During the election, Obama got a little play with his little program for infrastructural development. He plans to create a "National Infrastructure Reinvestment Bank," because nothing says efficiency and stability like a title with the word "bank." This entity would then spend $6 million dollars, as Dr. Evil would say - ok, $60 billion dollars in our dollars. The catch - it would do this over 10 years.

Using America's world-renowned math skills, I divide 60 by 10 and get 6, umm, 6 million, whoops, $6 billion dollars a year. Since the US has 300 million or so people, that means that our New Deal president-elect plans to spend, per person per year, for the renewal of American prosperity - 20 bucks!

Meanwhile, China just announced its own stimulus package, focused on public works: the equivalent of $586 billion, in two years. Since China has about 1.4 billion people, it will spend a little more than $200 per person per year, or almost exactly 10 times the Obamanomics amount.

But hey, we can think big like China too: we're spending $200 per person per year - to bail out failed banks. And that's just round 1.

Contemplating the Unchanged

It's always nice to start Sunday with a sermon from Fr. Frank of the First Church of Media Populism. That didn't come out quite right, but I mean it as a complement. Every Sunday morning Frank Rich flays patronizing media groupthink about the doltish American public, which of course is often doltish but which cannot be assumed to fall for every stupid trick that Republican campaign managers - themselves no geniuses - can invent. He's good on the class bias - the white upper-middle class big media view that has swallowed market economics whole (my beef) while anxiously overestimating the power of the public to be duped just as easily as they were by the same right-wing ideas.

Father's close is especially nice - hmm, forget it, I won't spoil the ending by pulling it out of context. Read the piece and the good Obama quote at the end.

Father misreads some of his stats, however, to make the point that we the people shattered two assumptions: that whites won't vote for a black president, and that the culture wars are over. The latter cannot be shown by saying as Father does that "only" gay marriage was crushed by culture warriors. More on this later.

As for the first point, exit polls show no improvement (outside of a margin of error) in the white vote for the Democratic candidate. Father Frank uses the National Journal poll, and if you play around with the menus you can see the sad flatline of white male support for Dems - from the previous high of 38% (Clinton 1996) to Obama's 41%. That's within a margin of error. Look at "White Men Attending Church Weekly" - an unvarying 3:1 Republican margin. The only solid Dem improvement with white men was in the 18-29 age group.

When you look at whites overall - same story. Every grouping of whites aged 30 and over went at least 55% for McCain. Among voters 65 and over, the Dems do worse every time, this one included.

And check out the impact of religion. If you declare an affiliation, even if you don't attend church regularly there's a 60% chance the Republicans own your vote.

And white women? If you break out single college-educated white women, you can see a strongly Dem group that has gotten more Democratic over time. But white women overall voted slightly more strongly for Gore and Clinton '96 than for Obama.

I just hope that marriage, when it eventually comes to them, doesn't turn the gay vote as Republican as it does the straight vote.

The Two Obamas

Obama One: Policy Obama.

This is the Obama of the often muddled and mediocre policy choices, as on health care.

This is the Obama of the boring new "change" website and the strong tendency to follow Bill Clinton into "too little too late" - like his wee stimulus package.

This is the Obama who may pick Larry Summers or some other Clintonista who conspired with the right-wing deregulators of the late 1990s to cause the problems he is now supposed to solve.

This is the Obama who did pick a central Clinton figure Rahm Emmanuel to be White House Chief of Staff, thus putting hard-line pro-Israeli positions and hard-line pro-Wall Street neoliberalism in the guardhouse to the Oval Office.

This is the Obama who has taken up positions in foreign policy much like those of Bush and Condi Rice.

This is the Obama who favors same-sex civil unions while opposing gay marriage, and who was used by the YES on 8 campaign in California against gay marriage, even as he said he was opposed to Proposition 8.

This is the Obama who can be pushed to the "center" by right-wing spin about how the people voted massively on November 4 for low taxes and small government. This is the Obama that, like Clinton before him, the Right can roll.

Obama Two: Movement Obama

This is popular Obama, mass Obama, the Obama of the 7 hour lineup to vote, the Obama that belongs entirely to the global public because this "Obama" is created by their hopes and dreams. This could be called the Multitude Obama. This is the Obama of November 5, of the Obama Revolution. This is the Obama that inspired Le Monde to follow its gloomy editorial about Obama's conventional realism in foreign policy with several pages of articles about the electrifying effect on France's racial awareness in general and the demands of its people of color more specifically.

Some commentators were invoking Obama Two as soon as the election was finished. Here's a statement I especially like from Columbia professor Mahmood Mamdani

There is that remarkable primary debate with Hillary and Edwards, where a reporter asked the three of them who would Martin Luther King support on this day, and Hillary and Edwards responded by convincing the audience why King would have supported them. And Obama responded by saying King would not have supported anybody, that King would have organized his movement to push the winning candidate to pursue the objectives. Well, that’s the real question now in the US today.

There was a movement, a youth movement, to elect Obama. Will that movement dissolve itself? Will that movement build itself now around the objectives for which it organized? Will America recognize, as I believe South Africa has after the election of Mandela, that the election of Mandela was not change, but an opportunity to change? And whether that opportunity is realized and transformed into a program of social justice within the country and peace abroad will depend on the movement that pushes Obama and gives him the opportunity to respond to it. . . .

Has the movement been absorbed into the state? Look, there’s a remarkable difference between the youth movement of the ’60s, which mainly organized outside the system, and the youth movement which has brought Obama to power, because this movement has organized within the system to reform the system. Obama keeps on saying that this movement must not go away, that change hasn’t come, that this is the beginning of change. Now, will the candidate be able to tame the movement, or will the movement be able to stamp itself to some extent in the coming days.

See Robert Kuttner and Arun Gupta saying very similar things about the financial front: Obama One will need his better half if he is to do the right (and effective) thing, and that better half comes from social movements under the pressure of events.

We regular folks can't do a damn thing about Obama One. But we created Obama Two and can send him into battle any time we need to. He is neither of those guys at the top:

Yes We Did

Everybody's happy. everybody's jumping. On the world scale, at the very least 80%. Every single one of my blue-state Republican family and friends voted for him. My 80-year-old father and his wife wrote: "hooray, we watched the dramatic win here on Maui. It surely would have been fun to be in Chicago at Grant Park. Now let us begin."

The World joy will be hard to stop.

And it will be hard to stop everybody's work. The Seven Million who worked for Obama. The four years of endless efforts in precincts all over the country to have an actual fair vote in which everyone is counted.

On the show she does with Elizabeth Robinson on KCSB, "No Alibis," Avery Gordon said it was also sad that everyone worked so hard just for a fair election, the meager baseline of formal democracy. Sharon Hoshida pointed out the victory for bottom-up organizing in general.

Both of these are true. Community organizing was the big winner Tuesday night. Even if organizing job 1 was to count the votes correctly. wow!

Obama's greatest strength is not his "intellect" and "character" as has been touted by beltway folks. These are very good. But his real genius is understanding the power and the intelligence of the streets and corners where people live, talk, think, and act.

His best line in his acceptance speech:

I know you didn't do this just to win an election and I know you didn't do it for me. You did it because you understand the enormity of the task that lies ahead.

His second best line:

will always be honest with you about the challenges we face. I will listen to you, especially when we disagree.

Obama's win was a win for the grassroots - again, its brains and power - and a win for someone who unlike nearly any other national politician and pundit I can think of, learned how to listen.

This also means people will be able to talk back. There will be discussions. There will be multiple sides, international differences exchanged, and no prefabricated victory for the power-associated view.

This sounds simple, like a dumb-level pluralism. But in the context of American politics, it is huge.

That is because We-Obama defeated the two principles that have allowed the Right to rule three decades of US national politics:

• before the election, do not debate. Throw the other side out of the debate (liberal abortionist gay- marriage supporting terrorist-loving pacifists who hate America).

• during the election, suppress the other side's vote

The absolutely awe-inducing lines, the endless discussion of voting minutae, the national care for the voting booth defeated the second. And something else defeated the first- the sperading perception of the sheer failure of the rhetoric and the deeds of polarization to fix the country.

You could see it in the red counties of western Virginia and eastern Indiana in the way McCain and culture-war Amazon Palin polled 10-15 points behind the Bush of 2004. The casting out of the political thought of the entire post-1929 period had visibly ceased to work.

While looking for something better, people looked to Obama because he does get it - the labor, the ordinary effort, the regular intelligence, and how change comes from that. My friend Virigina, American in Paris, got me to read the Yes We Can section in the Nov 4 speech again and she is right about how good it is.

Ann Nixon Cooper is 106 years old.

She was born just a generation past slavery; a time when there were no cars on the road or planes in the sky; when someone like her couldn't vote for two reasons -- because she was a woman and because of the color of her skin.

And tonight, I think about all that she's seen throughout her century in America -- the heartache and the hope; the struggle and the progress; the times we were told that we can't, and the people who pressed on with that American creed: Yes we can.

At a time when women's voices were silenced and their hopes dismissed, she lived to see them stand up and speak out and reach for the ballot. Yes we can.

When there was despair in the dust bowl and depression across the land, she saw a nation conquer fear itself with a New Deal, new jobs and a new sense of common purpose. Yes we can.

There are storm clouds on the horizon for We-Obama:

Obama's Clintonomics
Obama's Clinton people.
The hardship that was already there.

Amy Goodman got one of the best quotes of the night, from a woman at an Obama rally in Chicago:

I feel that I want to hang a flag. That I'm a part of the United States. And that we matter. All of us.

That's the core of the victory right there. "we matter. All of us." That will be the source of all the change to come.

the Amazing Lines

The lines are unbelievable and suggest not just our less than democratic election system but a mass upwelling of devotion to turn things around. That's Calais, Vt., Virginia Beach, Va., San Francisco, Ca., Alexandria, Va, Hialeah, Fla and Vienna, Va.

And here's a nice Rachel Maddow rant about long lines as the new version of the poll tax.

We're Gonna Party Like It's 1996

You see the point. Obama will lose those three per- ennial disa- ppoint- ments to modern America, Indiana, Missouri, and North Carolina. He won't get the cracker belt in Arkansas and Louisiana. He won't get the rural center - too obvious to be sad about. He won't get AZ. But he will get Florida and the other big battlegrounds. Amazingly Obama will win Virginia (I really feel bad for the Carolinas, trailing Virginia again). And he can add Colorado.

Clinton got 379 electoral votes.

They way they were: page down to look at the mug shots of the 90s rulers.

Obama is gonna win.

And then what?

California split? Red county vs. Blue county? Krugman's right to worry. Friedman's right to say "I can’t remember a presidential campaign that was so disconnected from the actual challenges of governing that will confront the winner the morning after." But this election is about a revolution in cultural capital and symbolic power.

This is why the possible advent of a "new FDR" is being announced in places like Bloomberg's financial news service. The 28 year reign of Reaganomics is over - by which I mean its existence as common sense and assumed ground rules (it still has lots of institutional power). That will make Obama's life easier than Clinton's on the economic front, as bad as the crisis is now.

But we're going to have to help him think up the next step.

Dumbness Factor

I just re-found this analysis of the correlation between voting Democratic and level of education. It's only suggestive - on the level of states - but does show the big factor in shifting populations out of hard conservatism (as opposed to the Dems' soft conservatism) is not high school but college completion.
The author adds,

I'm well aware that these results do not mean that getting a degree makes one vote Democratic. It is more likely that getting a degree makes one reject simplistic populism in favor of issue-based analysis, makes one more likely to live in cities, and makes one gravitate to the more college-dense and simultaneously more Democratic states on the coasts and Great Lakes -- and that those things are much more causative than the degree itself.

Well ok - close enough.

One of the California students in Grenoble said it's pretty obvious why Republicans cut higher ed spending - it grows their vote. There are worse explanations.

hoping, wishing, and all but praying

The Obama Revolution

I realized how this is going to work while not making it through 10 minutes of Sunday CNN in Lyon and flipping to a cable channel called Demain.TV, and finding a show whose French title means "Desperately seeking a French Obama." One of its guests was a woman called Khédidja Bencherif, la Présidente du comité de soutien parisien à Barack Obama, a group in Paris that supports Obama. The host asked her why, since you can't vote for him. She said because he represents the possiblity of a society without exclusion. And she said if this happened in many societies it would change the world.

Mme Bencherif is right. The Obama revolution is the end of the politics of casting out that has dominated US political discourse for a generation. It was designed to keep inclusion from getting any farther than it had in the 60s and 70s. And it worked.

The media versions were Rush Limbaugh and Bill O'Reilly, among many others. The idea was not to have a debate but to throw the other side(s) of the debate out before it got started. Liberalism was treason, criticism was weakness, government was an attack on working Americans, etc etc. The responses were banished in advance. This was the point of the culture wars - to eliminate the cultural and psychological sources of resistance to the grossly elitist economic and social policies that have formed the Washington Consensus since 1980.

Not to up the ante, but I do like quoting Jean-Francois Lyotard defining the act of casting the opponent out of the language game as a strategy of terror. But that's pretty much what we've had. And that's what Obama's success will end.

Let's be clear. The Obama revolution isn't in his policies, obviously. On the French scale his politics are closest to that of the country's dominant conservative, President Nicholas Sarkozy. Sarkozy is in fact somewhat to the left of Obama in proposing new unemployement protectoins as a repsonse to the crisis and in accepting France's single-payer health care, which is causing popular anger with its new American-style, Obama-endorsed, proliferation of extra uncovered fees. Obama wouldn't be a socialist in a country whose largest non-conservative party is the Socialist Party, which is in turn not so radical that it can't be regularly taken to task by the weekly magazine Marianne for having swallowed neoliberalism's faith in the power of self-regulating markets to govern economies and societies, which Marianne does from its left Gaullist position (de Gaulle having been a conservative nationalist who put the social fabric first).

The Obama revolution is that he would not simply advocate, or represent, but, in the White House, getting off Air Force 1 instead of Bush in Moscow, Johannesburg, Buenos Aires, Paris, Tokyo, Cairo, accompanied by the real sista - as Rev. Wright reminded us - Michelle Obama as First Lady - wow, it's amazing even to write those words, an African American First Lady of the United States - Obama would incarnate the end of the triumph of exclusion and discrimination.

Not the end, obviously, but the end of exclusion as the governing principle.

And then we'll have to do the rest. for example . . .

Middle-Class Issues

It's great news that Obama is doing as well as projections like this one suggest (where he wins with almost 350 electoral votes). But he has campaigned as a moderate, appealing to the economic majority with a combination of tax cuts and cheap, low-cost reforms in areas like health-care. If the economy hadn't gone into crisis mode, we would be taking more skeptical views of Obama's political genius right now.

How should the mass middle-class decide how to vote? A clear choice was laid out by John McCain and Michael Moore.

On October 26th, John McCain said this at a rally:

We’re going to double the child deduction for every family. We’ll cut the capital gains tax. We’ll cut business taxes to help create jobs and keep American businesses in America. You know, as Joe the Plumber and small business owners across the country have now reminded us all, America didn’t become the greatest nation on earth by giving our money to the government to spread the wealth around.

This reflects the core Republican position throughout the 20th century: cut taxes and justify it by larding large cuts for the top brackets (capital gains) with apparently middle-class cuts (child deduction). Denounce redistribution, and make this seem like something other than plutocracy by equating redistribution with socialism and poverty.

In reality, public services create wealth, and they built the mass middle-class. Governments built middle classes with high-quality common systems - schools, roads, mass communication infrastructure, bus and train systems, health care, etc. - that market forces always undervalue and underinvest in (this comes from 1950s neoclassical innovation economics - Kenneth Arrow, Richard Nelson - and not only from the left). America did "become the greatest nation on earth by giving money to the government" to build things companies never build - Microsoft, Exxon, Cindy Hensley McCain's beer distributor Hensley & Co.

Hopefully Obama knows this, though he won't say it out loud. Sounds like "taxes." But later a big education campaign will be needed to get the middle class to see where its origins really lie.

Why don't they know this already? Alaska has socialism, in the form of Sen Ted Stevens's federal pork train. Sarah Palin increased the windfall profit tax to double the annual state handout to every man, woman and child to about $3300 a year, or $13,000 for a family of four. The red states who vote against big government get more from big government than the blue states that like it. Nothing wrong with this- they're mostly more backward and more poor than the blue states. But they are pretty dumb to have never figured out where roads and sewers in Alaska actually come from.

On the Obama side, it was Michael Moore who raised the mass middle-class issue of who runs the economy.

AMY GOODMAN: How did it happen that they didn’t change, that you have now in Michigan the highest unemployment rate in the country?
MICHAEL MOORE: It happened because the workers don’t control the means of production. Oops, I guess I can’t be president now that I said that. No, but seriously, I think that if the autoworkers, years and years ago, could have had a say in the cars that were being built, the Big Three would have built cars that people wanted to drive, instead of the kind of crappy-mobiles that they continue to build, the gas-guzzlers they continue to build. And people wanted something different, and nobody listened, because the auto companies were arrogant.

Moore starts with a classical marxist formulation, then Americanizes it by saying it's common sense to put worker knowledge into the production process, and Detroit's massive failure proves the stupidity of not doing this. He's right: unilateral executive control - the watchword of US "free market" capitalism - is not only unfair and undemocratic, but inefficient as well.

In fact "markets" have made the economy more oligarchic than it was 30 years ago - unionized workers and white-collar professionals have generally speaking less governing power than ever, in the midst of what is supposed to be a knowledge economy. This is no accident, and a turnaround toward democratic economics is the core stake of this election.

Republicans are right about what the first practical outcome of a turnaround like that: a major stimulus plan for the states, where most public systems need to be rebuilt and upgraded for the twenty-first century.

Bailout Misuse 2

Yesterday Binyanim Appelbaum reported in the Washington Post that "U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years."

The 33 banks signed up so far plan to pay shareholders about $7 billion this quarter. Companies generally try to pay consistent dividends and, at the present pace, those dividends will consume 52 percent of the Treasury's investment over the initial three-year term.

"The terms of our capital purchase program were set to encourage participation by a broad array of financial institutions so they strengthen their financial positions," Treasury spokeswoman Michele Davis said.

The Treasury's approach contrasts with decisions by foreign governments, including Britain and Germany, to require banks that accept public investments to suspend dividend payments until the government is repaid. The U.S. government similarly required Chrysler to suspend its dividend payments as a condition of the government's 1979 bailout.

The legislation passed by Congress authorizing the Treasury's current bailout program is silent on the issue.

The Financial Times reports today that AIG, the huge bailout beneficiary, has borrowed from one federal program to pay back loans taken out from another federal program. The reason? "Analysts said that AIG might have used the commercial paper facility to pay back the loan because the interest rates charged were lower. The government demanded a punitive rate of 8.5 per cent over the London Interbank Borrowing Rate on its $85bn two-year loan, while the Fed is charges interest of around 2-3 per cent for three-month commercial paper."

Another contrast with Europe: the German Bundestag's bailout legislation, passed October 17th, restricts executive salaries at any beneficiary institution to 500,000 Euros per year. Some executives warned that this would discourage banks from participating, thus admitting that many executives would consider letting their banks default rather than try to survive on the minimum wage of 500k a year. But it passed nonetheless, the conservative prime minister Angela Merkel intoning, "no aid without a quid pro quo."

Use and Abuse

The bailout money was supposed to pay banks to do their actual job and lend money. There are reports that the money will be used for a new round of bank mergers and acquisitions. Amy Goodman reported on October 28th that "Bank Bailout May Lead to Greater Consolidation".

A similar message came from the other end of the political spectrum, the investment advisers at Money Morning:

Those billions are a virtual lock to set off a merger tsunami in which the biggest banks use taxpayer money to get bigger – admittedly removing the smaller, weaker banks from the market, but ultimately also reducing the competition that benefited consumers and kept the explosion in banking fees from being far worse than it already is. . . .

According to Dealogic, government investments in financial institutions has reached $76 billion this year – eight times as much as in all of 2007, which was the previous record year. And that total doesn’t include the $125 billion the U.S. government is investing in the large U.S. banks as part of its rescue package, the similar amount it may invest in smaller banks, or other deals that the feds are helping engineer (JPMorgan Chase & Co.’s (JPM) buyouts of The Bear Stearns Cos. and Washington Mutual Inc. (WAMUQ) are two such examples).

MM quotes an M&A analyst explaining why: "When it comes to M&A, there’s always a pronounced ‘domino effect.’ Consolidation breeds more consolidation as industry leaders conclude they have to keep acquiring in order to remain competitive.” The crisis hasn't made the drive toward concentration go away: it's made it worse.

Market logics aren't being checked by government money. They are using government money to carry on business as usual. That is of course the point of government efforts, most effectively laid out by Sarkozy in France: reassure the public, but also get market leaders back on their feet, which will mean plowing a lot of weaklings - aka your local regional bank - into the topsoil, fertilizing it with tax dollars, and giving the financial giants a whole new root system.

Money Morning says, invest in a regional bank today, before it gets bought! Especially in the Southeastern US!

The amount of leveraging is so enormous that the bailout money can't stop it. Think of leverage as Hurricane Katrina and the bailout as the New Orleans levees. Here's MM's Keith Fitz-Gerald on the combination of size and the absence of real knowledge about what's sitting out there.

As scores of highly leveraged hedge funds dump billions of dollars worth of holdings at once, they effectively “flood” the markets with whatever the asset is that they are trying to sell. In doing so, they push the values down for the rest of us. For an example, imagine a house in your neighborhood selling for 50% of its appraised value. Upon completion of the sale, all “comparables” in the area, including your own home, will likely take a hit as a result. So it’s in everybody’s interest to keep prices as high as possible.

But nobody can do that when there are more homes than buyers – even in the best neighborhoods.
So when is it going to stop?

We don’t know. No one does. Hedge funds are notoriously secretive in their reporting, so even though there are estimates as to how much they own and (by implication) how much they owe, it’s hard to gain perspective on how much leverage is actually being used. Nor do we really know who holds what asset – especially as it relates to potential liquidations.

Over the weekend, rumors were flying that U.S. Federal Reserve examiners are hounding Citadel Investment Group LLC regarding “counterparty risk” and its exposure to debt. Citadel, naturally, vehemently denies this, but lately where there’s smoke, there’s certainly been the potential for fire.

Then there’s Europe. Despite the fact that many Europeans find it fashionable to blame the whole financial-system meltdown on the United States, mounting evidence suggests they may be the biggest hypocrites of all.

Data from the Bank of International Settlements shows that Western European Banks may hold as much as $4.7 trillion in cross-border bank loans to Eastern Europe, Latin America and emerging Asian markets, which means, as Bloomberg News journalist Tom Cahill described it as “the exposure of continental European banks to a whole set of ‘sub-prime’ nations in the form the former Communist bloc may be the Achilles heel of the European banking system.”

That means that “the elephant in the room is that while public sector debt was held in check by policymakers, private debt as a percentage of GDP exploded, as that was not part of convergence criteria to join the Eurozone."

Secrecy, no public figures, no knowledge - that's the core of all of this.

Fools Who Run Things

The most shockingly dumb moment of the week was former Fed chairman Alan Greenspan apparently said this to the House Committee of Oversight and Government Reform:

I made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."

If Greenspan really said this, it is admission that markets do not self-regulate and that self-interest is not the highest form of government. It then follows that you need actual governments, and that democratic processes can control markets if they want to.

This is in short the self-immolation of 50 years of the right-wing market ideology that he has championed his entire career, that was advanced by the Reagan era, and that Greenspan implemented during his 18 years as the summit of global financial policymaking at the Fed.

The Wall Street Journal reports it slightly differently. And neither statement appears in Greenspan's prepared remarks. The latter are baldly incoherent. Greenspan offers several different explanations for the crazy mispricing of mortgage-backed and other assets, and then says this:

It was the failure to properly price such risky assets that precipitated the crisis. In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivatives markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria.

The model collapsed. It collapsed was based on bad history? Think about what this says about the ruling paradigm of finance capital for the last 30 years - gone - and about economic models in general - no better than historical data.

Greenspan is finished, but rescues are being attempted in John McCain's non-stop clown show. Many people have commented on his weird performance on Fox News on Sunday, where he denounces socialism while praising the government bailout. Actually, McCain's position is totally coherent. "Socialism" for McCain means "redistribution" in which incomes become more equal (we've been in the midst of an inequality boom for 30 years). "Bailout" means giving $700 billion to banks, which means maintaining if not extending income inequality. "Socialism" means more money below. The bailout means more money above. McCain's support for bailouts makes perfect sense. (Rick McArthur does a nice job explaining to Amy Goodman why Obama is a conservative and not a socialist.)

Another act that had the center ring for a while was famous investment genius Warren Buffett, who used a piece in the NYT to try to talk all the little frogs back into the boiling water. Buffett says his money is now in stocks, tells everyone to buy stocks without the disclaimer of his own self-interest in helping himself out with this advice, and then tells everyone the only way to make real money is to do the opposite of everyone else. In other words, buy when they panic sell, sell when they frantically buy.

This is irresponsible, reprehensible advice: regular people cannot do the opposite of what everyone else is doing, since the only basis for doing that is the kind of professional training and experience that Buffett has and that you and I do not. Nor do we have Buffett's billions to gamble on buying some real crap cheap, only to see it go down for ever.

Buffett is at least nice about it. Another circus act in the Wall Street Journal abuses Joe Blow investor for not taking enough risks, then for taking too many risks by, at age 55, still being in stocks! The springs are flying out of the Jack-in-the-box.

Maureen Dowd issues the first call for revenge I've seen in the NYT. Now we're getting somewhere.

Dean Baker is best skewerer of the "sorry, it was an accident" school of letting big financial fish off the hook. He was predicting the collapse of the housing bubble for years, and is wonderfully vicious about the protestations of financier innocence that are justifying the bailout. He describes an alternate universe in which Alan Greenspan says in 2002 that there is a housing bubble and uses the Fed to educate the press and the economists and the realtors and the public. Had this happened, he asks,

Does anyone think that the execs at Goldman Sachs, Citigroup, Merrill Lynch and the rest could say "who could have known?" to their shareholders, who just saw most of the value of their stock disappear? My guess is that all of these execs would be out of their jobs and facing lawsuits for neglecting their responsibilities to their shareholders.

(See his equally valid dig at the NYT for attributing noble educational motives to wealthy conservatives but not to organizations like his.)

This has been another horrible financial week for Earth, especially its regular folks. While my Google news feeder was telling me that Obama was going to visit his grandmother, Monday's Financial Times was a slow-motion train wreck. " ING takes 10bn E injection from state." "Silicon Valley suffers wave of job losses amid pessimism." "Crisis engulfs the Emirates." That's just the front page. Page 2: "Call for west Europe to support east." "Mexico inquiry into derivatives is widened." "Soeul launches $130bn loan and liquidity rescure." "Pakistan seeking IMF help. " "Rations cut for army of buyers." "Public blame bankers for abusing system." Page 3: "US faces its worst recession in 26 years." "Indicators hint China on verge of sharp slump." The only thing making any money is the Obama campaign (page 4) - and some of the giant banks that got us here. By today it was even worse, with markets in Japan, Korea, and Hong Kong having now lost 50% just this year .

And that doesn't even get to the real economy, where companies are busy flinging their employees into the water.

Years of Counterfeiting

The big news for most people in the US this week was not the equities plunge but the plunge's impact on retirement assets - they've lost 20 percent of their value in the past 15 months. This will cause a seismic shift in retirees' feelings about markets - right as the boomers try to retire in earnest.

The other big news is that the confidence fixes didn't work. The feds didn't do nothing like 1929. But they did next to nothing like 1987. Actually more than 1987. But junk wasn't enough, and buying commercial paper wasn't enough, and the math still doesn't work out - the market in Credit Default Swaps is worth $62 trillion! So now the Repubs have to tear their hearts out and take government ownership positions in exchange for cash. And it still won't work.

Why not? Because banks won't lend to other banks whose assets are counterfeit. Many many many assets consist of notes whose value was created in the writing of the notes, and which hinged on leveraged debt. These notes had that value once in a specific exchange. They don't have it anymore.

I'm not saying credit isn't real. I'm saying issuing credit is like printing money. There was way too much of it. The amount of "M3" money increased from 1971 to 2006 by a factor of 14. People depended too much on it for their standard of living. It also made life to expensive. The deflating of invented assets isn't over yet.

Costs of other bailouts (from Le Monde October 3, 2008 p 9):

1986 -1995: savings and loan bailout - $160 billion, or 3.7% of GDP, 78% paid by the government

1991-1993: Swedish banking crisis - $65 billion crowns, or 4% of GDP

1998-2001: Japanese banking crisis - Y60 trillion, or $500 billion dollars, 12% of GDP; 70% of cost to state paid by selling shares on the market

Scarier than Usual

Here's a piece from today's Financial Times that gets at the underlying instability in the financial markets - at the underlying insolvency, to be exact.

Reshaping the banks: time to ask the IMF for help

by Raghuram Rajan

Financial markets are in panic. Central banks are willing to lend against all manner of collateral. Yet inter-bank credit markets are freezing up. Why? Have central banks contributed to the problem? And what do we do now?

The root of the problem, of course, lies in one class of assets, mortgage backed securities, rising in complexity as a result of defaults on the underlying housing mortgages, and falling in liquidity and value. Banks found they could no longer pledge these assets as collateral against borrowing. A bank now had two problems.

One was an immediate liquidity problem. It had to find a way to finance the mortgage backed securities that were previously financed with debt. The second was a capital problem. Because the market value of its assets had fallen, it was very thinly capitalized on a market value basis. But this problem could be handled later.

This, in a sense, was the Bear Sterns situation – illiquidity rather than insolvency. Central banks reacted by expanding the range of entities they would lend to and the range of assets they would accept as collateral. This immediately alleviated the liquidity problem, as banks borrowed pledging illiquid assets at the central bank.


But having solved the liquidity problem, banks did little to bolster their capital. Indeed, the capital problem has been getting worse. Moreover, with much of the collateral pledged, the bank has to rely on unsecured funding. Unsecured lenders to the bank (and the inter-bank market is unsecured) are now unwilling to lend, knowing that their claims will be hit when the bank defaults. And unless the central bank is willing to substitute for the entire unsecured loan market, the bank will have to default. What was a liquidity problem is now a solvency problem, which cannot be solved by further small increases in liquidity infusion.

Why have the banks not been more pro-active in raising capital? Clearly they felt they had time, in large part because the assistance from the central banks alleviated the liquidity problem. Rather than selling equity when asset prices were moderately depressed, they thought they could wait the crisis out. And central banks may have been at fault in not pressing the issue harder when it was easier to raise capital, especially given that their liquidity assistance was helping banks postpone capital raising.

What now? In the United States, the Treasury Plan has focused on buying distressed assets rather than on recapitalizing banks. Of course, if the price of mortgage backed assets can be boosted sufficiently and quickly, some banks will be recapitalized, but given that the values of many other assets are falling, this may only be a partial fix, even if it works. And it may be too late. Hopefully, the authority obtained from Congress can be quickly redeployed in recapitalizing banks more directly.

The reluctance to call this a problem of inadequate capital is, partly, prudence (which central banker wants to say parts of the banking system are insolvent) and partly optics. A liquidity intervention could perhaps be passed off as something that need not cost the taxpayer, while a capital infusion by the government seems a more final use of taxpayer money. Politicians still may believe drastic action is not warranted, though it seems that buying assets at made-up prices is as drastic, if not more, than buying equity or preferred shares at market prices.

The more Machiavellian view is that large players in the banking sector like the way it is currently being reshaped, as these too-big-to-fail entities are willing to run down their capital ratios buying the lucrative businesses of entities that have failed. They prefer a selective and limited rescue. While a reshaping of the banking system may be needed, it would be unfortunate if access to government protection rather than efficiency determined how it was reshaped.

There have been many suggestions on what to do. A temporary guarantee of the short term liabilities of all levered financial institutions, a quick audit, followed by speedy resolution of those that are beyond revival, and a recapitalization plan, perhaps including government money, for those that can survive, are all elements of what needs to be done. Key here is to provide incentives for private capital to participate, and even do the bulk of the lifting. Purchases of distressed assets from banks will be part of the solution, but it cannot be the sole item. Indeed, there is tremendous experience in the IMF of how this can be done. All the United States needs to do is ask!

The author is a professor of finance at the GSB, University of Chicago.

October 7th, 2008

What the Numbers Mean

Listening to French Bloomberg in Lyon, seeing the shocked face of the newscaster as she looks at a world of red ink, seeing the CAC 40 fall over 9 percent in one day, Germany's DAX down 8 and the Dow back under 10,000, I think that this will destroy the blind faith in markets for a generation.
As you watch the sheep heading over the cliff, you naturally wonder why you followed them in the first place.

There's lots of anger everywhere about giving $700-800 billion to the same people who created the need for it in the first place. Here's the sound of an angry economist. Here's an apologetic columnist, misusing the kind of argument I made yesterday about peer pressure in markets to say new regulation might stifle innovation. He's right to say that "The returns on what turned out to be toxic assets were just too good to miss. Any banking chief who had dared pull out of the market for, say, leveraged loans or mortgage-backed securities in 2005 and 2006 would have been lynched by investors for destroying shareholder value."

It went way beyond that. Covering today's Congressional hearings on the Lehman Brothers' collapse, the New York Times noted that "Another document showed that executives were warned in a January 2008 meeting that the company was facing liquidity problems. Yet the firm moved forward with capital outlays, including $5 billion in bonuses, $4 billion in shares and $750,000 in dividend payments between 2007 and the firm’s bankruptcy filing on Sept. 15." Massive debt, leverage, invented investment vehicles, obscured risk, deception, wishful thinking, free credit sponsored by the US government - all maxed out to max out gains.

Meanwhile, in France, Le Figaro, the conservative newspaper, published a poll (Friday October 3, p 21) in which they asked with which of 2 views on the current crisis their readers agreed the most. One was that the current crisis was like the others capitalist systems have, and that the system will soon get back on its feet. One-third agreed with this. The other was "the financial crisis is a crisis that shows that it is necessary to change fundamentally the capitalist system." 59% chose this.