
Stabilizing a Flawed System is Not the Same as Restructuring or Remaking It
A recent study cited by the Editor of the Financial Times argues that we are now in a Depression, although no one wants to use the term or face the music.
Recall that it took the National Bureau of Economic Research a full year to recognize the reality of a recession that analysts at investment banks had been acknowledging for as long. Despite everything that has happened, and is continuing to occur on the economic front — a rise in unemployment claims, mounting foreclosures, and escalating bankruptcies — the sense of crisis is being downplayed to stoke confidence and encourage the belief in “green shoots†and an emerging recovery.
The Obama Express is in full motion with new announcements, proposals, and laws signed daily. Yet, something’s missing. Au Contraire, Mr. Maher, there is no lack of audacity, just a failure to recognize that cosmetic alterations do not fundamental change make. What we have is a political elite that is more Clintonesque than Rooseveltesque. (If only the Repugs were right with their fears of the Socialist menace!)
These proposals, described as “new rules for the road,†were mostly embraced by the banks, a sign they are not tough enough. The Congress will probably approve them quickly because they were “hammered out†through a process of negotiations that seems to have heard more from the industry than public interest advocates.
The Washington Post tells us:
“Time and again, lawmakers, regulators and industry lobbyists pressed their concerns behind closed doors at the White House and the Treasury Department, according to participants.
Turf-conscious regulators opposed the idea to consolidate banking oversight agencies and took their appeal over the Treasury directly to the White House. Ultimately the administration spared all but one agency.
A few key lawmakers argued against merging the two federal agencies that oversee the stock and commodity markets. That did not happen.
Insurance companies fought over whether a national regulator should oversee them. The White House dropped the proposal.â€
Etc. Etc. Etc, ad nuseum.
So now we have 88 pages of financial reforms, as if the authors of this compromised and consensualized agenda were being paid by the word. The President is telling us that “mistakes†were made, as if massive crimes, theft, fraud and unregulated greed were not involved in causing the calamity at the heart of the crash of the economy.
Bloomberg surveyed the wreckage: “Financial firms worldwide have recorded more than $1.4 trillion in writedowns and credit losses since 2007 as the U.S. housing market collapsed and the economy sank into recession.â€
Billions spent to unlock credit and get banks lending again have led nowhere. The financial news service quotes Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California.
“It is becoming clearer that banks are not as willing to lend,†he said in an e-mailed message. “With their risk rising once again, risk premiums on non-financials must rise commensurately.â€
They don’t see a recovery around the corner either, “The broad sense is we have not seen the bottom there yet,†said Bert Ely, a banking consultant in Alexandria, Virginia. “For later this year, and into next year, there are just big question marks out there.â€
Question marks indeed.
What are the questions we should be asking? What happened to changes for ratings agencies that gave high marks for bogus mortgage securities? Why trust the Fed which, in the words of one critic “started the fire†through low interest rates to extinguish it.
Simon Johnson, the ex-IMF Chief now at MIT asks some others:
• Has the President really been briefed on the supposed benefits of having large financial institutions with great economic power and pervasive political influence? Don’t just claim that these are a good thing – tell us, in detail and preferably with numbers, what we the public gain from the presence of these behemoths among us. Keep in mind that “everyone has them†is no kind of argument – something so manifestly dangerous is not to be blindly copied.
• Why was executive and other compensation so notably absent from the latest Geithner-Summers joint statement of our problems and likely solutions? Does the President really expect us to believe that any set of reforms will work if they do not directly constrain the amounts that can be earned from misunderstanding risk today and hoping that the consequences do not appear on your watch? Does he have any idea of how the people who run big financial firms will game whatever controls try to limit their risk-taking?
• Can President Obama finally talk about the much broader break down of corporate governance in this country, with boards of directors serving no discernible purpose in terms of limiting the excesses of corporate executives in the financial sector but also more broadly? Surely, without a reform package that includes measures to address this core issue, we will get exactly nowhere.
Perhaps “exactly nowhere†is the real destination in the sense that the real goal of the Geithner-Summers-Obama “reform†package seems to be to restore the old financial order, not restructure it, or heavens forbid, bring it under public control and accountability. New Rules and regulations are great, but do they add up to real reform?
Have the banks really acknowledged their role in the demolition derby that wrecked the economy? Not really, even as Llloyd Blankfein of Goldman Sachs admits, “We know that we have an explicit contract with our shareholders to be responsible stewards of their capital… we regret that we participated in the market euphoria and failed to raise a responsible voice.”
Is that all they are copping to? A few weeks back, Goldman paid $60 million to Massachusetts to settle a complaint that they funded mortgages “designed to fail.†They admitted no wrong-doing, in a practice so common when Wall Street gets its fingers caught in the cookie jar of criminality.
Tell that to the millions losing their homes.
After helping to fund the subcrime market, Goldman was hailed as a visionary for turning against it. “it made $4bn profit from betting against the sub-prime mortgage market, and because – bar the fourth quarter of 2008 – it has continued to make a profit throughout.â€
Clearly the profiteers are far more secure than their victims. Here are the thoughts of some knowledgeable people who want progressive change and who are in the know:
Former Investment Banker Nomi Prins: “The plan makes no mention of reconstructing the financial system.â€
Marshall Auerback sees an opportunity for real reform squandered: “As with so much of the Obama administration, great-sounding words, but nothing in the way of substantive change. Particularly disturbing are the moves on derivatives, notably “credit default swapsâ€. Excuse us for not liking a market that is rigged in favor of the sellers, the monopoly dealers, who even today refuse to allow open price discovery in credit default swaps among and between other dealers. True to their Wall Street ethos, Summers and Geithner have capitulated on the most important aspect of derivatives, by refusing to place these instruments on a regulated exchange, where transparency and standardization would be far more operative.â€
A New Way Forward: “It’s not enough to try to patch up the current system. We demand serious reform that fixes the root problems in our political and economic system: excessive influence of banks, dangerous compensation systems, and massive consolidation. And we demand that the reform happen in an open and transparent manner.â€
“You go to war,†the not missed Mr. Rumsfeld once said, “with the army you have.†Unfortunately, in the case of Financial Reform, we are being led by Generals at the top, but there are no troops or people’s army below to hold them accountable, much less push them to emulate a more aggressive approach a la FDR.
Organizing put this president in office. Only organizing can push him to do what must be done. Can we get Congress to toughen up these uneven and timid proposals?
– News Dissector Danny Schechter, blogger in chief at Medichannel.org, is making a film based on his book PLUNDER (Cosimo).
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As if the former U.S. Election Assistance Commission (EAC) chair Paul DeGregorio hadn’t done enough damage to our nation’s electoral system during his disastrous reign as a commissioner from 2003 to 2007, it looks like he’s now more than happy to cash in on his Bush-appointed public post in the private sector as Chief Operating Officer for a dubious Internet voting operation.
Everyone Count’s DeGregorio was the EAC chair who first 





Repression Stepped Up, Iran Becomes World’s Biggest Prison For Journalists
Monday, June 22nd, 2009The Islamic Republic of Iran now ranks alongside China as the world’s biggest prison for journalists. The crackdown has been intensified yet again following Supreme Leader Ali Khamenei’s endorsement of the result of the 12 June presidential election and the opposition’s decision to call another demonstration on 20 June.
Iran now has a total of 33 journalists and cyber-dissidents in its jails, while journalists who could not be located at their homes have been summoned by telephone by Tehran prosecutor general Said Mortazavi.
“The force of the demonstrations in Tehran is increasing fears that more Iranian journalists could be arrested and more foreign journalists could be expelled,†Reporters Without Borders said. “The regime has been visibly shaken by its own population and does not want to let this perception endure. That is why the media have become a priority target.â€
The press freedom organisation added: “The international community cannot continue to ignore the situation. It must have a clear and unanimous reaction that is proportionate to the gravity of these events. And there will never be any question of recognising the results of the 12 June election.â€
Reporters Without Borders already wrote to the leaders of the European Union’s 27 member countries urging them not to recognise President Mahmoud Ahmadinejad’s reelection.
It has emerged that Mohammad Ghochani, the editor of Etemad Meli (a daily owned by Mehdi Karoubi, one of the opposition presidential candidates), was arrested at 2 a.m. on 18 June. Intelligence ministry officials took him away to an unknown location, probably the security wing of Tehran’s Evin prison.
Ghochani is also the editor of the dailies Shargh and Hammihan and the weekly Saharvand Emroz. The publication of all these newspapers had already been suspended before his arrest.
Reporters Without Borders has also learned that blogger and human rights activist Shiva Nazar Ahari was arrested at her Tehran home on 14 June (see her blog: http://azadiezan.blogspot.com).
Husband-and-wife journalists Bahaman Ahamadi Amoee and Jila Baniyaghoob were arrested at midnight of 20 June by intelligence ministry officials in plain clothes who searched their home and then took them away to an as yet unknown location, probably the security wing of Tehran’s Evin prison.
A winner of the Courage in Journalism prize awarded by the International Women’s Media Foundation, Baniyaghoob edits a news website that focuses on women’s rights, Canon Zeman Irani (http://irwomen.net). Her husband, Amoee, writes for various pro-reform publications.
Reporters Without Borders has also been able to confirm that Ali Mazroui, the head of the Association of Iranian Journalists, was arrested in the morning of 20 June.
The BBC confirmed in the afternoonof 21 June that its Tehran correspondent, Jon Leyne, has been ordered to leave the country within 24 hours. Officials accused him of “supporting riotersâ€. The authorities had previously accused Britain of “conspiring“ against Iran.
Journalists and activists held in Evin prison are being put under a lot of pressure to make filmed “confessions†acknowledging their participation in a “velvet revolution.†Reporters Without Borders has also received many allegations of torture.
The state radio and TV broadcaster is meanwhile putting out false information about the opposition candidates and the cancellation of today’s demonstration. Foreign news agency correspondents are also being pressured not to report anything about the opposition.
A few hours after Ayatollah Khamenei’s speech yesterday endorsing Ahmadinejad’s election and banning any demonstrations, several videos were posted online showing individuals on rooftops chanting “Allah Akbar!†(see this Iranian blogger’s video: http://www.youtube.com/watch?v=yZfm…).
After being blocked since 11 June, the Iranian news website Entekhab (www.entekhabnews.com/) has now been closed down on the orders of the Tehran prosecutor general.
At least 20 journalists had already been arrested since 12 June (see list below). Reporters Without Borders has not been able to trace many others. Some may have found refuge but others may now be with those of their colleagues who had already been in jail for some time. Even before the election, Iran was ranked as the Middle East’s biggest prison for journalists and cyber-dissidents.
Twenty-three journalists have been arrested in the week since the presidential election results :
14 June:
Somayeh Tohidloo, who also keeps a blog (http://smto.ir)
Ahmad Zeydabadi
Kivan Samimi Behbani
Abdolreza Tajik
15 June:
Mohamad Atryanfar, the publisher of several newspapers including Hamshary, Shargh and Shahrvand Emrouz, who has reportedly been taken to the security wing of Evin prison.
Saeed Hajjarian, the former editor of the newspaper Sobh-e-Emrouz, who was arrested at his Tehran home on the night of 15 June despite being badly handicapped.
16 June:
Mohammad Ali Abtahi, also known as the “Blogging Mullah,†who was arrested at his Tehran home. His blog: http://www.webneveshteha.com/.
Hamideh Mahhozi, arrested in the southern city of Bushehr.
Amanolah Shojai, who is also a blogger. Arrested in Bushehr.
17 June:
Saide Lylaz, a business reporter for the newspaper Sarmayeh, who had been very critical of Ahmadinejad’s policies. He was arrested at his Tehran home.
Rohollah Shassavar, a journalist based in the city of Mashad.
18 June:
Mohammad Ghochani, the editor of Etemad Meli.
20 June:
Jila Baniyaghoob, editor of website Canon Zeman Irani (http://irwomen.net),
Bahaman Ahamadi Amoee,
Ali Mazroui, the head of the Association of Iranian Journalists.
A hotline for journalists in danger
SOS Presse, a phone hotline for journalists – (33) 1 4777-7414 – is open every day round the clock and, with the help of American Express, a Reporters Without Borders official can be quickly reached. Collect/reverse-charge calls can be made. SOS Presse (33) 1 4777-7414
Posted in Commentary, Media Freedom, Middle East, News | 3 Comments »