Sunday, May 1, 2016

William K. Black — Obama’s Great Lie: What’s Good for Wall Street Felons is Good for America

To no one’s surprise, President Obama lobs periodic attacks on Bernie Sanders’ plans to restore the rule of law to Wall Street elites. Obama launched his latest attack, fittingly, through Wall Street’s sycophant-in-chief, Andrew Ross Sorkin. Sorkin’s column expresses his shock at how Obama repeatedly extended their interview for hours beyond its scheduled length. No one else is shocked that Obama, trying to make the case that bailing out the Wall Street felons was an act of supreme genius, would find Sorkin’s relentless sycophancy towards those felons and their political cronies so endearing. This is the first segment of my response. It focuses on the Obama administration’s great lie – the only policy “tools that work” in response to a financial crisis are getting “in bed with the banks” and making even wealthier through federal bailouts the bankers who grew wealthy by leading the fraud epidemics that caused the crisis.
The context of Sorkin’s column was Obama making the pitch for his “economic legacy.” Obama is distressed that we do not understand how great he was because he was too busy saving us to have the time to “explain” to us how great he was.
New Economic Perspectives
Obama’s Great Lie: What’s Good for Wall Street Felons is Good for America
William K. Black | Associate Professor of Economics and Law, UMKC

I posted this comment over at NEP:

Great smackdown, Bill. 

I hope you will point out that in "saving the banks,"actually the US financial system, the president was acting as global "emperor" in that the US controls the world through finance more than military. Military power is just the backup. It's through the lock on global finance that the Anglo-American empire retains global hegemony. The American empire is the historical extension of the British empire as a sea power. The East India Company has morphed into transnational corporatism, and global finance is run out of Wall Street and London. Thus, the "special relationship."

20 comments:

Matt Franko said...

https://www.youtube.com/watch?v=339qi22oXwo

Obama 2009: "We're already out of money right now..."

Why does he think this?

left: "its a xenophobia/neo-liberal/bankster conspiracy!"

right: "not enough freedom!"

Ralph Musgrave said...

I've never been able to put a very accurate figure on the exact size of the subsidy the banks got during the bail-out. The size of the loan they got from the Fed seems to be around $600bn for 18 months. I got that from here:

https://www.metabunk.org/debunked-the-fed-gave-away-16-trillion-and-2-5-trillion-to-citigroup.t745/

However, the size of the SUBSIDY or "gift" all depends on the interest on that loan. It very much looks like the average rate of interest was around zero: which makes it a whapping great gift. On the other hand if the average rate was around the same rate that Warren Buffet charged Goldman Sucks, i.e. 10%, than that's presumably a fair free market rate, in which case there is no subsidy or gift.

Of course it's no big surprise that the revolving door brigade aren't telling us loud and clear what the average rate of interest was.

Matt Franko said...

Ralph they used the target rate as the rate offered... was probably 0.25% or so pretty quickly... a bit more for the 7-day and longer operations, etc.. against qualified collateral...

Its the whole basis of "monetary policy" or "monetarism"... everything the CB does has to be at the policy rate, they try to control/regulate the economy (Federal Reserve Act: "maximum employment with stable prices...") thru raising and lowering the interest rates ... (not an endorsement)

Bob Roddis said...

Great smackdown, Bill. I hope you will point out that in “saving the banks,”actually the US financial system, the president was acting as global “emperor” in that the US controls the world through finance more than military. Military power is just the backup. It’s through the lock on global finance that the Anglo-American empire retains global hegemony. The American empire is the historical extension of the British empire as a sea power. The East India Company has morphed into transnational corporatism, and global finance is run out of Wall Street and London. Thus, the “special relationship.”

Of course, this type of corporatist control of the government monopoly finance system and the military has nothing whatsoever to do with “capitalism”, Hayek or “deregulation”. The key to making sense of any problem in politics and/or economics is to distinguish a bright line between violent intervention and its absence, where people are safe and free from violent intervention. You have done an outstanding job of blurring those two antipodal concepts so that intelligent analysis is made impossible. Be proud Tom Hickey and William Black.

Matt Franko said...

I might agree this way:

"You have done an outstanding job of blurring ... so that intelligent analysis is made impossible."

Dont know about your "two concepts" there tho Bob...

Tom its like you are trying to say the the British East India Company is responsible for Venezuela TODAY being out of beer... this is quite a stretch imo....

Tom Hickey said...

Tom its like you are trying to say the the British East India Company is responsible for Venezuela TODAY being out of beer... this is quite a stretch imo...

It is, Matt, if you understand history and economic history. It's probably why there is so little economic history taught in conventional economics, which is almost purely theoretical. Get's around the messy details.

The East India Company established the dominance of the joint stock company, along with the government corporate charter, the collusion of government with business, mercantilism, and in the case of Britain economic empire based on sea power controlling global trade. The US just took that over right from the get-go through Alexander Hamilton's understanding of how Britain operated. The US grew in power and influence as a result and then after WWII, the US replaced Britain as the center of the empire, with military control of sea and air, as well as of global finance through the dominance of the USD.

I first got this years ago a from encountering Dee Hock's analysis of the history of the corporations and its relation to capitalizing gains and socializing losses. Dee Hock was the founder of Visa.

I have been looking into it since then. It's all the working out of a pattern. Those who just took at econ are clueless about how the world actually works. It's deeply historical and instituional.

Bob Roddis said...

David Stockman, Austrian: Fundamentally, the financial crisis was a product of the Fed’s repeated blowing up of bubbles, and not of deregulation. Moreover, any suffering inflicted on the 99 Percent by our system doesn’t come from the free market, it comes from the crony capitalism that is now our economic system. The Blackberry Panic of September 2008, in which Washington policy makers led by former Goldman Sachs CEO Hank Paulson, panicked as they saw Wall Street stock prices plummet on their mobile devices, had very little to do with the Main Street economy in the United States. THE PANIC AND BAILOUTS THAT FOLLOWED WERE REALLY ABOUT PROTECTING THE BONUSES AND INCOMES OF VERY WEALTHY AND POLITICALLY WELL-CONNECTED MANAGERS AT BANKS AND OTHER HEAVILY LEVERAGED BUSINESSES THAT WERE EVENTUALLY DEEMED TOO BIG TO FAIL. What followed was a massive transfer of wealth from the taxpayers and middle-class savers, in the form of bailouts and zero interest rates on bank deposits imposed by the Fed, to the so-called One Percent.

AS I SHOW IN MY BOOK, NONE OF THIS WAS NECESSARY TO SAVE THE LARGER ECONOMY, SINCE THE LOSSES THAT WOULD HAVE TAKEN PLACE AS A RESULT OF THE COLLAPSE WOULD HAVE BEEN LARGELY LIMITED TO WALL STREET. WHAT THE BAILOUTS DID WAS PRESERVE THE WEALTH OF WEALTHY AND POWERFUL WALL STREET PLAYERS. MEANWHILE, WE’VE SEEN NO REAL ECONOMIC RECOVERY IN THE REST OF THE ECONOMY.

This transfer of wealth continues, by the way, in the form of relentlessly low interest rates, and an ongoing war by the Fed on safe and stable investment tools such as savings accounts and low-risk bonds. Indeed, this is a deliberate policy to get people away from these safer investments, and to get them investing in more volatile and higher yield investments. The idea is that the Fed can somehow force bigger returns on these riskier investments, and this will lead to a wealth effect. People will then think they’re richer, and we can then spend ourselves into a recovery. This is a terrible doctrine, but that’s what rules Washington right now. It actively works against middle-class people who want to work and save and invest their money responsibly and conservatively.”


https://mises.org/library/david-stockman-his-book-and-bailouts

Matt Franko said...

Well Tom then the Chinese have apparently adopted it hook, line and sinker...

Had a discussion with my Ag livestock expert friend who was in town last month... about the Chinese takeover of Smithfield Foods... (he interviewed for a VP job with them some years ago... now with another firm...)

His opinion was the Chinese have tried to work cooperatively for decades thru agricultural technology transfer programs to no avail... they cant get the gain on the animals and they cant get the processing rates...

iow they cant establish their own institutions from scratch just using the knowledge, that achieves the production they want... (allegedly... imo could just be second rate disgraced USD zombies but we'll see...)

So they now would like to buy out the corporations in order to get it...

Same thing with you see all of these Chinese people in the US university institutions.... I visited Princeton last fall Chinese people everywhere...

They apparently cant form educational institutions to teach 200/300/1000s year old western knowledge either so they are sending people here... would seem simple to me anyway...

so there must be something to be said for institutions with longevity.... which includes government, corporations, and the academe.... might not be as easy as it looks

But I still dont see your causation from the British East India Company those old people were all caught up scrambling around the whole earth raping and pillaging for the metals... poor disgraced bastards all of them...

Are you saying that back then they were sitting around a table and going: ".... and 300 years from now get this.... we'll be able to cut off the beer supply to Venezuela!!!! Ha ha ha ha!!!!" ... c'mon I dont think so....

We're not under gold anymore so the analysis HAS TO start to take this into account imo... we have to throw out all of that old stochastic shit... its no longer applicable...

MRW said...

@Ralph Musgrave,

There’s not much scholarship on that debunking site. His castigation of Leo Wanta as a con man is reprehensible, and stupid. Seems to be basing it on Gordon Duff’s assessment, and since he doesn’t like Duff (or finds him wanting) then Wanta is painted with the same brush. I’ve been familiar with Wanta’s work for over 20 years and that includes the court cases, his Wisconsin jailing for trumped-up charges, and the background that preceded Gordon Duff’s involvement (if any) by at least 12 years. I have copies of Reagan’s communications with him that this debunking charlatan has never seen. Furthermore, just because this retired video game programmer debunks something doesn’t make it so.

Try someone more reliable:

WORKING PAPER NO. 698 | December 2011
$29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient

http://www.levyinstitute.org/pubs/wp_698.pdf

Randy Wray’s one-page explanation of the above Levy Institute/Ford Foundation project done under his auspices is here:
http://www.levyinstitute.org/pubs/op_23.pdf

Simsalablunder said...

"Are you saying that back then they were sitting around a table and going: ".... and 300 years from now get this.... we'll be able to cut off the beer supply to Venezuela!!!! Ha ha ha ha!!!!" ... c'mon I dont think so...."

You really are obsessed with coming up with conspiracies and ascribe it others.
Perhaps we shall not expect more from someone who finds Trumps storytelling about WW2 good enough history to know and learn by. Let me guess, the causation was there so the "trained technocrat" found it to be an apolitical scientific statement…

Tom Hickey said...

I still dont see your causation from the British East India Company

THE innovation that resulted in Western global dominance was the joint stock-limited liability corporation and institutional arrangements supporting it — finance, management, intellectual property, etc..

Now the push is on to make transnational corporations legally privileged over sovereign states through treaties and trade agreements. That cements globalization under Western liberal principles and "values."

Simsalablunder said...

"iow they cant establish their own institutions from scratch just using the knowledge, that achieves the production they want... (allegedly... imo could just be second rate disgraced USD zombies but we'll see...)

So they now would like to buy out the corporations in order to get it..."

They do what westerners done over and over again, that is; buy up companies to quickly gain the knowledge they want.

MRW said...

They’re gaining access to the US pork supply, and locking it up. Efficient. They have over a billion mouths to feed. Their new middle class doesn’t want to grow them.

MRW said...

Furthermore, the Chinese eat and use pork parts we slough off to pet food. This way, they can get prepare pork for the export market at the source.

nivekvb said...

I think of the Pork Scratchings they sell in some English pubs. It just pigs skin soaked in cheap oil, the leftovers from the pork industry. It comes in Small bags that they pin up on the wall along with the peanuts. It's really horrible stuff.

Ralph Musgrave said...

MRW,

Thanks for details on those two Levy Institute works. However after I quick skim thru, I’m not much the wiser. However, I note that Randy Wray’s one page work agrees (very roughly speaking) with my above point that the maximum amount loaned was around $600bn rather than the $20tr to $30tr figure which is often bandied about.

As to the longer work, that’s a blizzard of detail which I’ll try to work thru if I have time. But it doesn’t answer in any clear way the most important and basic question that everyone should be demanding an answer to: what was the total amount loaned, over what period and at what rate of interest? I.e. what was the total effective subsidy or gift for Wall Street bankster / criminals?

Matt Franko said...

"Trumps storytelling about WW2 good enough history to know and learn by. Let me guess,"

Ha let ME guess: you think instead Hitler was part of a vast "neo-liberal conspiracy!" or something?

"neo-liberal" is a figure of speech that WE use... those people dont even know what you are talking about with this word... they are simply pursuing policies that they think are optimal.... "survival of the fittest! we're out of money! live within our means! etc"

If you have alternative policies in mind that you think are better/would result in better socio-economic outcomes, then you have to make the superior TECHNICAL arguments.... you cant just say "we have to get rid of the neo-liberal conspirators!! and everything will be fine!" ... nobody outside of our circle even knows what you are talking about...

They (we) have NOT made the superior technical arguments so therefore we get nowhere... instead of rolling up their sleeves and trying to figure it out, the top-enders are asserting that it is all a big "neo-liberal conspiracy!" and bailing out into politics... might work if you win, if you dont win, then you are right back to where you started ie nowhere and still looking stupid...

and btw Wray's idiot "$29T!" analysis that MRW cites above is an outstanding example of failed technocracy... it violates every known standard of the accounting science...

Simsalablunder said...

"Ha let ME guess: you think instead Hitler was part of a vast "neo-liberal conspiracy!" or something?"

Well that guess was of no quality, since it's based on false premises. Should a trained technocrat know that? Some perhaps but obviously a hack like you not.

"you cant just say "we have to get rid of the neo-liberal conspirators!! and everything will be fine!"

No one is saying that. That is your accusation you're parroting over and over again. And it's a misrepresentation, a lie you keep on repeating. Here's news for you -a lie don't get to be a truth by repetition.

"btw Wray's idiot"

One of your superior technical argument… I'm sure it's gaining a lot of traction…

Tom Hickey said...

I note that Randy Wray’s one page work agrees (very roughly speaking) with my above point that the maximum amount loaned was around $600bn rather than the $20tr to $30tr figure which is often bandied about.

It's the rollovers, Ralph. Low interest rollovers, called "extend and pretend," with bogus "stress tests" to mask insolvency.

This was liquidity provision in the extreme to avoid having to recognize insolvency, while many many others who did not get that extent of liquidity provision, or any at all, went belly up.

There was no reason for all the foreclosures, under suspicious if not illegal circumstances as it came out owing to predatory landing and fraud.

Why should the financial sector been privileged and even protected from the force of the law while others were hung out to dry.

The US economy still has not recovered from it, exacerbated by the stonewalling of the opposition and the insane imposition of austerity, such as the sequester, when stimulus was needed.

The global economy is still coupled with the US economy as the world's largest, the US the provider of the reserve currency, and the US twin deficits the drivers of the global economy.

And the issues with the financial sector not only remain, but the sector has become even more concentrated. Crazy.

Tom Hickey said...

Hitler was part of a vast "neo-liberal conspiracy!" or something?

Not "neoliberalism," which is post-WWII.

The action in Europe, the UK and US post-WWI was opposing the USSR. Hitler genuinely expected England and the US to support him in his attack on the USSR, since it was in all their interests to overcome communism as a common threat. Moreover, there were plenty of powerful people in England and the US that supported this.

After all, Hitler (and Hjalmar Schacht his cb chief) had turned the German economy around in the 30's. Source . Hitler was not initially viewed as a threat by all in US and UK, or even France for that matter. Italy was already under Mussolini's corporate statism. "The trains were running on time" in Germany and Italy. There was munnie to be made and power relationships to develop.

The problem with Hitler and Mussolini turned out to be that they were nut cases allied with Japan as rising power challenging the US in the Pacific. But there were still powerful Western interests supporting Hitler when he started his land grabs, and Italy's colonial ventures were not significantly opposed. After all, Britain and France had carved up the Middle East under Sykes-Picot.

Once the US leadership realized that the Axis was not going to be an ally in the fight against the USSR and was posing a threat to the "free world," they worked with opposition in the Nazi party and the General Staff to oust Hitler and enlist Germany in concentrating on Russia. Allen Dulles is documented as being involved with this.

Upon the defeat of Germany, the US worked to incorporate whatever was useful in the fight against the USSR, regardless of prior affiliation. A few Nazis were tried and hung, and some wrists slapped, like Alfred Krupp, but otherwise it was back to business as usual, with various operations, such as Overcast, later named Paperclip, Alsos, TICOM, Gladio, etc.

Now German PTB are leading the neoliberal onslaught in the EZ, and the Bundeswehr is again on the borders of Russia under NATO.

A fundamental reason behind the drive for Brexit is the refusal of the UK to accept German leadership of the EU as well as the EZ. This is a marriage of convenience that cannot work, given historical precedent.