Naomi Klein on America's bailout
Naomi Klein's must-read piece in Rolling Stone about the $700 billion Wall Street bailout begins by examining Reuben Jeffery III, the man first tapped to serve as the program's chief investment officer. Snip:
Like Treasury Secretary Henry Paulson, he's an alum of Goldman Sachs, having worked on Wall Street for 18 years. And as chairman of the Commodity Futures Trading Commission from 2005 to 2007, he proudly advocated "flexibility" in regulation — a laissez-faire approach that failed to rein in the high-risk trading at the heart of the meltdown.The New Trough (Rolling Stone, thanks Clayton Cubitt, illustration by Illustration by Victor Juhasz)Bankers watching bankers, regulators who don't believe in regulating — that's all standard fare for the Bush crew. What's most striking about Jeffery's résumé, however, is an item omitted when his new job was announced: He served as executive director of Paul Bremer's infamous Coalition Provisional Authority in Baghdad, during the early days of the Iraq War. Part of his job was to hire civilian staff, which made him an integral part of the partisan machine that filled the Green Zone with Young Republicans, investment bankers and Dick Cheney interns. Qualifications weren't a big issue back then, because the staff's main function was to hand over stacks of taxpayer money to private contractors, who were the ones actually running the occupation. It was this nonstop cash conveyor belt that earned the Green Zone a reputation, in the words of one CPA official, as "a free-fraud zone." During Senate hearings last year, when Jeffery was asked what he had learned from his experience at the CPA, he said he thought that contracts should be handed out with more "speed and flexibility" — the same philosophy he cited back when he was in charge of regulating Wall Street traders.
The Bush Administration has since reversed the Jeffery appointment, perhaps thinking better of giving a CPA alum such a central role in the Wall Street bailout. Still the original impulse underscores the many worrying parallels between the administration's approach to the financial crisis and its approach to the Iraq War. Under cover of an emergency, Treasury is rapidly turning into an economic Green Zone, overrun with private companies collecting lucrative contracts. Fittingly, one of the first to line up at the new trough was none other than the law firm of Bracewell & Giuliani — yes, that Giuliani. The firm's chairman, Patrick Oxford, could scarcely conceal his glee over the prospect of cashing in on the bailout. "This one," he told reporters, "is very, very big." At least four times bigger, in fact, than the post-9/11 homeland-security bubble, from which Giuliani and his various outfits have profited so extravagantly. Even bigger, potentially, than the price tag for the Iraq War itself.
the latest
latest episodes
"When the people find they can vote themselves money, that will herald the end of the republic." -- Benjamin Franklin
It's all about the Benjamins.
MDH, you are absolutely right. I'm pretty sure that is one of the reasons the Founding Fathers created a democratic republic instead of a pure representational democracy a la Athens.
Just for the record, none of what Klien describes, or the Bush Administration propogated is laissez-faire economics. It is far closer to Italian-style corporatism, which is most cerainly bad. It is most certainly NOT a free-market.
Also, let's not forget the Bush presided over that largest inflation of regulatory spending in history. This tends to support the view that the Bush Administration was not a friend of the free-market, and that regulation and corporatism can go hand-in-hand.
I lost total respect for Naomi Klein based on her massive misrepresentation of Milton Friedman in the Shock Doctrine. It's way beyond poor research. It's deliberately misleading. Reason magazine did an expose on this:
http://www.reason.com/news/show/128903.html
oh to be born interred to the debt of previous generations.
ahhh...we're pretty screwed. national debt is ten times the gov't annual income and interest alone is 250BILLION.
time for a big red reset button on this whole capit'list guv'ment thing.
Moving to Portugal looks better and better.
Naomi Klein has explained clearly what has happened in the last fifty years. While the papers and the other media wail in despair at the task of comprehending what in the hell is happening, she simply looked at the history of the Chicago School economists and their direct causation of much of the financial disasters and economic meltdown-cum-lootings of the Asian Tigers, England, Russia, Iraq, and now the USA. Follow the money. Here's a gem:
"And the folks at Morgan Stanley? They're planning to pay themselves $10.7 billion this year, much of it in bonuses — almost exactly the amount they are receiving in the first phase of the bailout. "You can imagine the devilish grins on the faces of Morgan Stanley employees," writes Bloomberg columnist Jonathan Weil. "Not only did we, the taxpayers, save their company...we funded their 2008 bonus pool."
This is not rocket science, but we are conditioned by the very air of the free-market age we live in not to look at the actions of businessment and their very simple plans to create crisis and confusion with the sole aims of 1) implementing Friedmanism, tautologically because it is good and the only possible answer and 2) driving wages, workers' rights, and prices of companies into the ground, while simultaneously privatized (looting) government functions such as the military, transportation, education, Social Security, and the very government itself. They want to generate bubbles and shocks because each iteration grants them their goal of owning, well, everything, and setting the price of wages as close to zero as possible. This is corporatism's goal: to eliminate government and set themselves up as the de facto owners of the world.
Catbeller,
The whole Friedmanism-to-cause-chaos nonsense is thoroughly debunked in the link I posted in #3.
One of the most obvious flaws of Klein's chaos conspiracy is that it turns ignoramuses like Bush into geniuses that are capable of making markets do exactly what they want. The problem isn't that evil geniuses are driving the bus--it's that nobody is driving the bus.
Deviant
I just read the article you recommended, and I've read The Shock Doctrine; and I have to say, I did not find the Reason article convincing.
I guess it all depends on what flavor of Kool-Aid we drink.
"...which made him an integral part of the partisan machine that filled the Green Zone with Young Republicans, investment bankers and Dick Cheney interns"[Citation needed]
"...the staff's main function was to hand over stacks of taxpayer money to private contractors, who were the ones actually running the occupation" [Citation needed]
"...from which Giuliani and his various outfits have profited so extravagantly" [Citation needed]
Listen, a lot of this is valid. The Iraq war is a mess, the bailout casts too wide a net etc... But it isn't always so devious. Why is there such a need to oversell everything in this country. I feel like I'm listening to Bizarro Rush Limbaugh half the time. Opposite opinions with the same lack of critical thought.
*(Note: last time I similarly questioned a Boingboing post it got quickly deleted.)*
I recently listened to Klein on her commonwealth club talk:
http://www.commonwealthclub.org/archive/?filter=kqed&yearRecording=2008&monthRelease=&yearRelease=2008
(scroll down a bit to find it)
In this talk, she definitely expresses the thought that it's not a "conspiracy" to create chaos, but rather, a neglect that causes it and opportunism that takes advantage of it to further an ideal. I don't know if this is a softening of previous positions she has expressed, however.
I'm all for the government helping out these companies in a way so that they stay afloat, but it infuriates me to read about the executives of these failing companies getting bonuses even after this economic meltdown. Bad decision making should not be rewarded with bonuses, period.
It's fun to watch all the little Libertarian heads asplode as their illusions fail before their very eyes.
Bush wasn't conservative enough!
Greenspan was no free marketeer!
The true mark of an ideology is when it's proponents cannot imagine any circumstances under which it could ever fail. You know, like giving free reign to free market impulses for 30 years and then when the global economy inevitably crashes claiming laissez-faire economics was never really practiced in the first place!!
Egypt.
A river.
And you.
They don't have to be devious. The concept of Disaster Capitalism is simple: grab a bucket, 'cause the chicago boys have made it rain soup forever. You don't have to be a clever conspirator. You just have to understand the opportunities that free-flowing capital creates when panics erupt. And as Klein points out, Friedmanites have graduated from simply capitalizing on panics to actively generating the panics by cleverly manipulating statistics and dropping hints to the press, as they did in Canada in the 90's. They can destabilize at will, and move in so quickly that most people don't even understand what the hell is going on. As Klein points out in the RS article, we can watch them literally panic the nation with threats of worldwide collapse and martial law - claimed by Bush himself! - and proceed to STEAL a trillion dollars right in front of god and his angels, with few understanding what they are seeing. The financial houses are not loaning out the money because no one told them to. They are using it to - oh yes - buy up companies and competitors at lower prices, guaranteeing once again that they will be too big to fail on an even greater scale. We are gifting at five percent the bastards who robbed us a trillion borrowed dollars to literally buy up more wealth, generate billions of profits, fire their own workers, and walk away with billions in their own pockets as a reward for their earlier theft of 75 trillion dollars of fake money.
I've heard this before, and it always makes me wonder:
How is this better than "tax and spend Democrats"?
And how does the GOP define "patriotism"? I mean. . . if some angry protester burns a flag, ironically enough that actually HELPS the economy (or at least the flag-producing portion of it), but hiring incompetents based on party loyalty, or giving away taxpayer money in a war zone with no oversight? (By all accounts literal planeloads of cash were shipped to Baghdad, most of which cannot be accounted for.)
last time I similarly questioned a Boingboing post it got quickly deleted.
The last time that you were rude, it was unpublished. There's a difference.
The administration is running out of time.
It needs to put together a blue-ribbon panel quickly and find out a way to blame this all on Barack Obama and people getting foodstamps.
Noen my ever-reliable friend,
The true mark of an ideology is when it's proponents cannot imagine any circumstances under which it could ever fail.
That's one. The other is when all negative outcomes are attributed to the opposite of your belief, irrespective of evidence, logic, or reason. :P
If only the Democrats had enough votes to stop this from being pushed through by the "Chicago Boys" in the Republican Party......
Sorry - I have to elaborate.
Let me get the story straight...
The president is widely hated for disregarding civil liberties and has statistically added more regulators & more regulatory spending than all but a handful of his predecessors, and has created havoc in markets & the economy, not to mention the lives of millions, with a dishonest war.
The Congressional Democrats almost universally voted for the bailout, which only passed after adding an obscene amount of pork, and daily add to the list of plans for ways to use the defunct semi-governmental mortgage agencies to mess with the housing market.
And, because the President passed a tax cut once & occasionally supports free trade agreements, this is all the fault of Republican libertarians?
Do I have the story straight?
"And the folks at Morgan Stanley? They're planning to pay themselves $10.7 billion this year, much of it in bonuses — almost exactly the amount they are receiving in the first phase of the bailout. "
See also:
http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking
"At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business."
We saw this coming, but what did we do? What could we do? I have no idea. Bonuses are based on individual and company performance. A LOW bonus for an average to low performing bank executive this year will be $65,000, which is higher than most people's yearly pay before taxes.
Do I have the story straight?
No, you don't have the story straight. You neglected to mention that the regulatprs Bush brought in were all of the "heck of a job" Brownie variety. GOP toadies who's only purpose is to loot public coffers.
Newt Ginrich and the GOP relied on Democrats doing the right thing and preventing a second depression while they grandstanded for their base.
And yes, Bush has presided over the largest transfer of wealth from the middle class to the very richest 1% in history.
If you are really intent on turning George Bush and the GOP into innocent players here you're going to need stronger drugs.
Noen,
And yes, Bush has presided over the largest transfer of wealth from the middle class to the very richest 1% in history.
I'm no Bush fan, but I think you're making this up.
When Bush took over, the top 1% had 21.5% of wealth. That number rose to as high as 23-24% and is expected to be under 20% due to current economics conditions. During downturns, that number has historically consistently shrunk. Since 2000 GDP and purchasing power have increased. How is what you describe even mathematically possible?
http://online.wsj.com/article/SB122506174552170247.html
You do realize that even if an income/wealth gap widens, it doesn't mean wealth is transfered.
Took me literally two minuets to find. Why is this hard?
The Great Wealth Transfer
"The widening gulf between workers and executives is part of a stunning increase in inequality throughout the U.S. economy during the past thirty years. To get a sense of just how dramatic that shift has been, imagine a line of 1,000 people who represent the entire population of America. They are standing in ascending order of income, with the poorest person on the left and the richest person on the right. And their height is proportional to their income -- the richer they are, the taller they are."
"Start with 1973. If you assume that a height of six feet represents the average income in that year, the person on the far left side of the line -- representing those Americans living in extreme poverty -- is only sixteen inches tall. By the time you get to the guy at the extreme right, he towers over the line at more than 113 feet."
"Now take 2005. The average height has grown from six feet to eight feet, reflecting the modest growth in average incomes over the past generation. And the poorest people on the left side of the line have grown at about the same rate as those near the middle -- the gap between the middle class and the poor, in other words, hasn't changed. But people to the right must have been taking some kind of extreme steroids: The guy at the end of the line is now 560 feet tall, almost five times taller than his 1973 counterpart."
I don't know about you but I believe the Noble Prize winner and not the toadies for Rupert Murdoc at the WSJ.
Noen,
If you actually read a little closer, you'd see the WSJ article is referencing the work of Saez and Piketty. I didn't link to their work directly because I don't know how many people on here have access to journal content.
It's funny that you'd back up Krugman's non-empirically based shot from the hip in Rolling Stone (as opposed to the actual study in my article) by pointing out he's a Nobel laureate. Does that mean you hold Friedman (also a winner) in such high regard as well?
Krugman's piece is fluff. Show something empirically-based and scientific. Why is this so hard?
Noen, that would seem to disprove a transfer. A transfer implies that a commodity is moving from one party to another, a zero-sum game. For the wealthy to grow that much the middle class and poor would have had to shrink. What this analogy seems to show is that the wealthy have been incredibly good at creating wealth. The poor and the middle class have benefited from this productivity, but not nearly as much as the rich.
For all the Kleinophiles, just because the politicians regurgitate free-market platitudes, their actions for the last 80 years illustrate that they have no love for free-markets. Conflating free-markets with corporatism is simply wrong.
Does anyone else feel the need to set off the tin-foil hat alarm?
Jeez, Noen. You've got your work cut out for you.
Deviant, you have probably already seen this link, but I thought it was germane to the current discussion. It deals with the current state of corporatism and free-market misunderstanding.
http://www.cato-unbound.org/2008/11/10/roderick-long/corporations-versus-the-market-or-whip-conflation-now/
The height of those guys on the right would be troubling if wealth wasn't an illusion.
SKR, thanks for the link!
np deviant, glad you liked it. The discussions on those threads has been great.
Perhaps Paulsen, Bernanke and Greenspan could form a band and release a cover album to bolster the economy: http://bail-me-out.ytmnd.com/