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By Felix Salmon, Reuters
One of the saddest aspects of the financialization of the US economy is the way in which America’s best and brightest found themselves working on Wall Street, rather than in jobs which improved the state of the world. Proof of this comes from the absolutely astonishing 325-page comment letter on the Volcker Rule which has been put together by Occupy the SEC; it’s pretty clear, from reading the letter, that the people who wrote it are whip-smart and extremely talented.
Occupy the SEC is the wonky finreg arm of Occupy Wall Street, and its main authors are worth naming and celebrating: Akshat Tewary, Alexis Goldstein, Corley Miller, George Bailey, Caitlin Kline, Elizabeth Friedrich, and Eric Taylor. If you can’t read the whole thing, at least read the introductory comments, on pages 3-6, both for their substance and for the panache of their delivery. A taster:
10 years ago I debated Berman's "Chief Economist" on C-Span:
Let's approximate (and let's go high) that the University of Virginia in Charlottesville has 2,000 direct and contracted (it won't say how many contracted, so we have to guess) employees working for under $13 per hour as demanded by the Living Wage campaign. And let's imagine they work on average 40 hours per week and 50 weeks a year, and let's imagine they earn the bare legal mimimum of $7.25 per hour. That would mean that it would take $23 million to make things right, to allow fulltime workers to pay their bills, quit their second jobs, see their families, and take care of their health.
Who has $23 million?
It turns out that UVA has got $4.76 BILLION.
I hate to have to point this out, but $23 million is less than a half a percent of $4.76 billion. (If my math is off that's UVA's fault too! :-)
If you earn $50,000 a year, do you ever give $200 or so to good causes? UVA isn't being asked to do that. It's being asked to pay people a decent humane wage for their hard work.
There's little less honorable than greed. Doesn't UVA have an honor code?
Excerpted from Sarah Anderson at IPS:
Key elements of tax reform to reverse extreme inequality
This section draws heavily from the forthcoming book by my Institute for Policy Studies colleague Chuck Collins, 99 to 1: How Wealth Inequality is Wrecking the World and What We Can Do About It (Berrett-Koehler, March 2012).
New income tax brackets for the 1 percent. Under our current tax rate structure, households with incomes over $350,000 pay the same top income tax rate as households with incomes over $10 million. In the 1950s, there were 16 additional tax rates over the highest rate (35 percent) that we have today.
A tax on financial speculation. The richest 1 percent of Americans contributed to the 2008 economic meltdown by moving vast amounts of wealth into the speculative shadow banking system. Our society is still paying the mammoth social costs of this meltdown — through home foreclosures, unemployment, and the destruction of personal savings. A modest federal tax on every transaction that involves the buying and selling of stocks and other financial products would both generate substantial revenue and dampen short-term speculation. For ordinary investors, the cost would be negligible. A financial speculation tax would amount to a tiny insurance fee to protect against financial instability.
A higher tax rate on income from wealth. Giving tax advantages to income from wealth also encourages short-term speculation. With carefully structured rate reform, we can end this preferential treatment for capital gains and dividends and, as Warren Buffett and other analysts have noted, encourage long-term investing.
A progressive estate tax on the fortunes of the 1 percent. The wealthiest Americans have all benefited from generations of investments in pubic goods that have left the United States with an infrastructure — in everything from education and roads to dispute resolution — that enables wealth creation. Our wealthy have a responsibility to give back to the society that has given them so much. The current estate tax on inherited wealth stands at 35 percent and only applies to estates over $5 million ($10 million for a couple). Congress could raise additional revenue from those with the greatest capacity to pay by establishing a progressive estate tax with graduated rates and a 10 percent surtax on the value of an estate above $500 million, or $1 billion for a couple.
An end to tax haven abuse. By one estimate, the use of tax havens by corporations and wealthy individuals costs the federal treasury $100 billion a year.23 These havens are transferring wealth out of local communities into the foreign bank accounts of the world’s wealthiest and most powerful.24 Tax havens, or more accurately “secrecy jurisdictions,” can also facilitate criminal activity, from drug money laundering to the financing of terrorist networks.
A wealth tax on the top 1 percent. A “net worth tax” could be levied on household assets, including real estate, cash, investment funds, savings in insurance and pension plans, and personal trusts. Such a tax could be calibrated to tax wealth only above a certain threshold. For example, France’s solidarity tax on wealth only kicks in on asset value in excess of $1.1 million.
The elimination on the cap on social security withholding taxes. Extending the payroll tax to cover all wages, not just wage income up to $110,100, would be an important step. Some of our richest Americans are done paying withholding taxes in January, while ordinary working people pay all year.
Our current levels of extreme inequality did not suddenly appear. They have grown steadily over the past 30 years. Reversing this inequality trend will be a long-term challenge. But we have transformed a highly divided nation into a more stable and equitable society before. We can certainly do it again.
From Naked Capitalism:
As readers may know by now, 49 of 50 states have agreed to join the so-called mortgage settlement, with Oklahoma the lone refusenik. Although the fine points are still being hammered out, various news outlets (New York Times, Financial Times, Wall Street Journal) have details, with Dave Dayen’s overview at Firedoglake the best thus far.
The Wall Street Journal is also reporting that the SEC is about to launch some securities litigation against major banks. Since the statute of limitations has already run out on securities filings more than five years old, this means they’ll clip the banks for some of the very last (and dreckiest) deals they shoved out the door before the subprime market gave up the ghost.
The various news services are touting this pact at the biggest multi-state settlement since the tobacco deal in 1998. While narrowly accurate, this deal is bush league by comparison even though the underlying abuses in both cases have had devastating consequences.
The tobacco agreement was pegged as being worth nearly $250 billion over the first 25 years. Adjust that for inflation, and the disparity is even bigger. That shows you the difference in outcomes between a case where the prosecutors have solid evidence backing their charges, versus one where everyone know a lot of bad stuff happened, but no one has come close to marshaling the evidence.
The mortgage settlement terms have not been released, but more of the details have been leaked:
1. The total for the top five servicers is now touted as $26 billion (annoyingly, the FT is calling it “nearly $40 billion”), but of that, roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1500 to $2000 per borrower foreclosed on between September 2008 and December 2011.
Banks will be required to modify second liens that sit behind firsts “at least” pari passu, which in practice will mean at most pari passu. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages. Per the Journal:
“It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets.
The Times is also subdued:
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.
2. Schneiderman’s MERS suit survives, and he can add more banks as defendants. It isn’t clear what became of the Biden and Coakley MERS suits, but Biden sounded pretty adamant in past media presentations on preserving that.
3. Nevada’s and Arizona’s suits against Countrywide for violating its past consent decree on mortgage servicing has, in a new Orwellianism, been “folded into” the settlement.
4. The five big players in the settlement have already set aside reserves sufficient for this deal.
Here are the top twelve reasons why this deal stinks:
New Report: Growing Number of Americans Can’t Cover Basic Expenses if Job Loss or Other Emergency Strikes
2012 Assets & Opportunity Scorecard Shows Major Increase in “Asset Poor” Households
Washington, DC—In the United States, 27 percent of all households are “asset poor,” meaning they lack
the savings or other assets to cover basic expenses for just three months if a layoff or other emergency
leads to loss of income, according to the 2012 Assets & Opportunity Scorecard, released today by the
Corporation for Enterprise Development (CFED). Since the release of the 2009-2010 Assets & Opportunity
Scorecard, the number of asset poor families has increased by 21 percent from one in five families to one in
four families. The asset poverty rate is now nearly twice as high as the Census Bureau’s official income
poverty rate of 15.1 percent.
Forecasting Economic Decline
by Stephen Lendman
Economic analyst Harry Dent's 2009 book, titled "The Great Depression Ahead" became a national bestseller. He predicted the current crisis and worse ahead.
Whistling Past the Graveyard
by Stephen Lendman
Europe's sinking. Japan's in recession. China risks landing hard. America's sure to follow. Yet equity markets rallied impressively so far in January.
From Naked Capitalism:
The story did not outline terms, but previous leaks have indicated that the bulk of the supposed settlement would come not in actual monies paid by the banks (the cash portion has been rumored at under $5 billion) but in credits given for mortgage modifications for principal modifications. There are numerous reasons why that stinks. The biggest is that servicers will be able to count modifying first mortgages that were securitized toward the total. Since one of the cardinal rules of finance is to use other people’s money rather than your own, this provision virtually guarantees that investor-owned mortgages will be the ones to be restructured. Why is this a bad idea? The banks are NOT required to write down the second mortgages that they have on their books. This reverses the contractual hierarchy that junior lienholders take losses before senior lenders. So this deal amounts to a transfer from pension funds and other fixed income investors to the banks, at the Administration’s instigation.
Another reason the modification provision is poorly structured is that the banks are given a dollar target to hit. That means they will focus on modifying the biggest mortgages. So help will go to a comparatively small number of grossly overhoused borrowers, no doubt reinforcing the “profligate borrower” meme.
The Codepink "Pink Panther Ladies Investment Club" met with Goldman Sachs in their posh San Francisco offices
By Dave Lindorff
On my Yahoo home page today, there was a picture of the globe, and an instant poll asking me to check one of two choices: Yes or No, Do you believe global warming is a real threat?
I don’t usually waste my time on these things, but there was that tantalizing link to “See the results,” and you had to vote to see them, so I voted.
NEW Podcast & Organizer Resources Page
Student Debt Jubilee & Why Higher Education Ought to be Free Podcast
We are excited to share with you the podcast of our recent interview Student Debt Jubilee & Why Higher Education Ought to be Free. On this podcast, the 84th in our Conversations with the Cabinet series, we learned from expert organizers about effectively challenging the unjust phenomenon of student loan debt, as well as why free higher education for all at our two- and four-year public universities is a common-sense, fair and affordable alternative.
Quality public higher education is a right and yet this basic right has been violated for 36 million Americans who have student loan debt. In 2010, average student debt upon college graduation was $24,000 (see Huffington Post article). This year, unpaid college student loans exceeded $1 trillion for the first time, and student loan debt is now higher than credit card debt. (see USA Today article). Thus, our country is creating an entire generation of indentured servants, while offering unprecedented wealth to predatory and unregulated private lenders such as Sallie Mae (related Mother Jones and Counterpunch articles).
We were joined by Alan Collinge of Student Loan Justice StudentLoanJustice.org and author of book Student Loan Scam. We also heard from Serge Bakalian, of Default, the Student Loan Documentary, as well as Kyle McCarthy, Default distributor and co founder of Occupy Student Debt and www.Studentdebt.me.
The second half of our Conversation featured Bob Samuels, President of the University Council, AFT in California, author of Why All Higher Public Education Should Be Free and blogger at Changing Universities , as well as Samir Sonti, graduate student in government, free higher education expert, and member of the Campaign for the Future of Higher Education.
Listen to the podcast, then check out our resource list to see how you can help end student debt and bring about free higher education for all in 2012!
Co-Producer and Host
Conversations with the Cabinet
Grim 2012 Economic Outlook - by Stephen Lendman
Yearend isn't just about holiday season binge shopping, parties, and over-indulgence. It's also when economic predictions surface.
The Wall Street Journal publishes consensus views. On December 23, it headlined, "Risks Cloud Outlook for Economy in 2012," saying:
By Dave Lindorff
It’s fascinating to watch the long knives coming out for Texas Republican Rep. Ron Paul, now that according to some mainstream polls he has become the front-running candidate in the Jan. 3 GOP caucus race in Iowa, and perhaps also in the first primary campaign in New Hampshire.
I stopped by a corporate chain bookstore this week and checked out the "Current Affairs" section. I was a little surprised to discover that according to a dozen or more books dominating the display we are all under a vicious life-and-death assault from a raving, drooling mob of communist devils led by that well-known pinko guerrilla Barack Obama.
Deepening Global Financial Trouble - by Stephen Lendman
Desperate times call for desperate measures, especially for troubled Eurozone economies.
Trapped under euro straightjacket rules, everything tried so far failed, despite hooplas announcing each new plan.
From The New Bottom Line and the Public Accountability Initiative
According to a "mini-report" released today by the The New Bottom Line and the Public Accountability Initiative, Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, US Bank, and Wells Fargo are set to award themselves $156 billion in compensation (including salaries, benefits and bonuses) to executives in 2011, a 3.7 percent increase over 2010. (Although, they do not release data on compensation until next year, it is possible to estimate the size of the compensation pool based on the first three quarters of 2011.)
- To download the mini-report: click here.
- To see our blog post about the report (including info on bank bonus actions in Chicago and Minneapolis last week), click here
- To read the full press release, click here
- To see some infographics we cooked up (comparing BofA, Wells Fargo, Chase CEO compensation to that of hourly, daily, annual pay to average worker) click here
We recently called on the CEOs of Bank of America, Wells Fargo and JPMorgan Chase to forego holiday bonuses for their executives and use the money to write down mortgage principal for families facing foreclosure or who owe more than their homes are worth, make loans to small businesses, and pay their fair share of taxes. In Chicago and Minneapolis last week, National People's Action groups delivered more than 5,000 signatures from that online call to action. On Thursday, families in Chicago pledged to move $218,000 from Bank of America and JPMorgan Chase to community banks and credit unions that share their values (Move Our Money campaign in action!!). On Friday, in Minneapolis, about 50 people protested in front of Wells Fargo and urged the bank to create jobs and help people stay in their homes instead of dispersing huge bonuses. In January, when information about the banks’ compensation packages becomes more available, there will be more protests to come.
Global Economic Tremors - by Stephen Lendman
On December 17, Gerald Celente told On the Edge host Max Keiser:
"The entire financial system is collapsing. Look what's going on in China. All of the empty buildings. Look at the home sales and real estate market. They're in steep decline now."
By Dave Lindorff
Word that the Los Angeles Police, who sent in 1200 officers in riot gear to violently rout a few hundred Occupy Movement demonstrators from their LA encampment last week, had earlier sent 12 undercover young officers into the peaceful occupation camp to spy on the activists should come as no surprise.
America's Weak Jobs Report - by Stephen Lendman
ABC News quoted an unnamed White House spokesperson, saying the November jobs report provides "further evidence that the economy is continuing to heal."
Obama's Chairman of the Council of Economic Advisers Alan Krueger hyped the 0.4% unemployment rate drop to 8.6%, "the lowest (figure) since March 2009." He didn't explain why. More on that below, including the real unreported employment rate.
Bailouts, Bondage and Political Bankruptcy - by Stephen Lendman
Europe and America perhaps face their gravest ever economic crisis. Growing millions are impoverished, unemployed, and out of luck.
Hunger and homelessness are increasing. So is unaddressed anger over handouts to bankers, not people facing crushing hardships.
Last week, I had a conversation with a man who runs his own trading firm. In the process of fuming about competition from Goldman Sachs, he said with resignation and exasperation: “The fact that they were bailed out and can borrow for free — it’s pretty sickening.”
Though the sentiment is commonplace these days, I later found myself thinking about his outrage. Here is someone who is in the thick of the business, trading every day, and he is being sickened by the inequities and corruption on Wall Street and utterly persuaded that nothing has changed in the years since the financial crisis of 2008.
A few weeks ago, we got a real kick out of the fact that Occupy Oakland deposited a $20,000 donation it received into Wells Fargo -- one of the many big banks the movement has been actively protesting since September. Say what you want about Occupy SF camp (it's dirty and filled with homeless people) -- at least protesters there are practicing what they preach.
Members of Occupy SF announced their ambitious plans to turn protesters into bankers by creating the People's Reserve Credit Union. According to Occupy SF's Facebook page:
The goal of this project is to encourage San Francisco residents, businesses, as well as nonprofit and city agencies to keep their money out of the big banks and to redistribute that money locally. Initial services will include micro-loans for the working poor and homeless, and subsidized student loans at low interest rates.
The credit union is being created with the help of San Francisco's Glide Community Church and Supervisors John Avalos and Eric Mar. The group filed its paperwork and has already crafted a thoughtful mission statement: The credit union will serve as a replicable model for other financial institutions to reinvest wealth in their local communities. They will support microenterprise, provide educational loans, and foster community improvement projects.
Jason Macarthur, a protester with Occupy SF, listed the goals that the organization plans to achieve within the first year. That includes starting with 500 members with plans to grow to 2,000 members before the end of next year.
Other plans include: