Dutchess Democracy: October 2008

Hi all...

The eight below recently posted online seem on the money to me (good grist for calls to Congress-- at 800-828-0498)!...

[no time like the present to bring back the Glass-Steagall Act-- sign on to www.PetitionOnline.com/FDRagain]

1. "The 'No BAILOUTS Act'" by John Nichols
http://www.commondreams.org/headline/2008/10/01

2. "Boston Tea Party, 2008" by Robert Scheer
http://www.thenation.com/doc/20081013/scheer

3. "Here's How to Fix the Wall Street Mess" by Michael Moore
http://www.michaelmoore.com/words/message/index.php?id=237

4. "Reid Blinked on Senate Bailout Bill" by Matthew Rothschild
http://www.progressive.org/mag/comment1-10-08.html

5. "The Bailout Keeps Getting Stinkier" by Jim Hightower
http://jimhightower.com/node/6614

6. "Tax the Speculators: A Fair Plan to Pay for Economic Recovery" by Chuck Collins
http://www.commondreams.org/view/2008/09/19-3

7. "Congressional Backbone Needed" by Ralph Nader
http://www.commondreams.org/view/2008/09/25-1

8. "Paulson Bailout Plan a Historic Swindle" by William Greider
http://www.thenation.com/doc/20081006/greider

Joel
489-5479
876-2488

[recall Robert Kuttner's "The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity"-- published last year (inspiration for online petition above started by yours truly then); see www.SquanderingofAmerica.com; also see Kuttner's "Alarming Parallels Between 1929 and 2007":
http://www.prospect.org/cs/articles?article=the_alarming_parallels_between_1929_and_2007]

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From http://www.commondreams.org/headline/2008/10/01 ...[kudos to DeFazio and Kaptur!]...

Published on Wednesday, October 1, 2008 by The Nation

"The 'No BAILOUTS Act'"
by John Nichols

There is nothing more frustrating than listening to defenders of fundamentally flawed bailout plan that House Speaker Nancy Pelosi and top Democratic and Republican leaders failed in passing Monday must be "saved" by Democrats who recognized when the House voted on Monday that this was the wrong response.

Pelosi's plan is based on Treasury Secretary Hank Paulson's wrongheaded scheming. Democrat leaders may have tinkered a bit with the Bush aide's proposal, but certainly not enough to make it acceptable -- let alone wisely enacted.

Oregon Congressman Peter DeFazio says, correctly, that the problem with the Democratic speaker's bailout measure, which the House rejected by a 228-205 vote - with progressive Democrats joining fiscally conservative Republicans to say "no" - is that it "is still built on the Paulson-Bush premise."
DeFazio, a Democratic dissenter, says that the bill Pelosi tried to get the House to back Monday demands that taxpayers take on too much of the risk which creating openings for Wall Streeters to pocket millions (perhaps billions) in federal dollars. While the Pelosi plan may put some limits on so-called golden parachutes, it still allows for what DeFazio describes as "camouflage parachutes"--hidden payouts to the corporate CEOs who created the crisis.

"We can do better," says DeFazio. "We should start again on a new package."

That's exactly what the Oregon populist is doing with a new proposal, the "No BAILOUTS Act" (Bringing Accountability, Increased Liquidity, Oversight, and Upholding Taxpayer Security). Introduced Tuesday with co-sponsorship from some of the most outspoken critics of the Paulson machinations - including Ohio Democrat Marcy Kaptur, a leader of the anti-bailout movement in Congress - the measure would impose a securities tax equivalent to one quarter of one percent of profits and empower the Federal Deposit Insurance Corporation to deal more effectively with bank failures.

The plan is based on a proposal made last week by former FDIC chair William Isaac, who recalled that in the 1980s Congress enacted a "net worth certificate" program - which allowed the federal agency to shore up the capital of weak banks to give them more time to resolve their problems - and the FDIC resolved a $100 billion insolvency in savings banks for a total cost of less than $2 billion.
"It was a big success and could work in the current climate," argued Isaac.

The chair of the FDIC during Ronald Reagan's first term explained that that:

If we were to (1) implement a program to ease the fears of depositors and other general creditors of banks; (2) keep tight restrictions on short sellers of financial stocks; (3) suspend fair-value accounting (which has contributed mightily to our problems by marking assets to unrealistic fire-sale prices); and (4) authorize a net worth certificate program, we could settle the financial markets without significant expense to taxpayers.

Say Congress spends $700 billion of taxpayer money on the loan purchase proposal. What do we do next? If, however, we implement the program suggested above, we will have $700 billion of dry powder we can put to work in targeted tax incentives if needed to get the economy moving again.
The banks do not need taxpayers to carry their loans. They need proper accounting and regulatory policies that will give them time to work through their problems.

DeFazio, Kaptur and their allies essentially agree.

So, too, does the powerful Service Employees International Union, which has endorsed DeFazio's proposal.

"We finally have a plan that will restore confidence in the financial markets without writing a blank check to the same Wall Street banks and CEOs who got us into this mess," said SEIU President Andy Stern.

"This is an important, short-term solution that protects taxpayers and their savings accounts. To revive the economy over the long-term, we must address rising unemployment, stagnant wages, the healthcare crisis, and a tax system that is tilted in favor of the wealthy."

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From http://www.thenation.com/doc/20081013/scheer ...

"Boston Tea Party, 2008"
TruthDig
by Robert Scheer

October 1, 2008

Robert Scheer is the editor of Truthdig, where this article originally appeared. His latest book is The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America(Twelve).

How dare you throw that tea into Boston Harbor! Such is the anti-democratic arrogance of the fear-mongering pundits and politicians who tell us if we taxpayers don't instantly give the Wall Street banking bandits a $700 billion bailout, we are destroying America. Instead of applauding representatives from both parties who, for once, heeded the public rather than the fat cats, the established pundits blasted those who dared get out of line.

It was a time for some of the best commentators to fail and, as much as I hate to admit it, for Lou Dobbs, and even Newt Gingrich, to shine. Dobbs called it correctly: The sky is not falling, there is time for reasoned debate, and why isn't the public being listened to?

Gingrich put it best when he said short-circuiting serious Congressional oversight over an enormous transfer of taxpayer dollars to an industry is "un-American." Others, with whom I typically am in far greater agreement, just rolled over to give the bankers what they demanded.

"When Madmen Reign" was the headline on a column by Bob Herbert in the New York Times that absolves the Democrats from any responsibility for the crisis despite a willingness of their party's leadership in the past to vote for key legislation proposed by what Herbert condemns as the "anti-regulation, free market zealots" of the Republican Party. Both parties betrayed the principles of a true free market--remember Adam Smith's invisible hand, under which no market player could unilaterally set price?--in favor of the concentrated power of oligopoly to control everything.

Those Republicans who dared to vote, this time, against the demands of the Wall Street power brokers were derided by New York Times conservative columnist David Brooks as engaging in the "Revolt of the Nihilists." While suddenly embracing President Franklin Roosevelt's New Deal as the positive alternative to nihilistic behavior, Brooks ignored Roosevelt's main achievement, which was to put the public interest before that of the Wall Street titans.

Wasn't it nihilistic when Congress, led by Republicans but supported by key Democrats, including then-President Bill Clinton, shredded the protections put into place by Roosevelt to control an ever-avaricious banking industry?

Anyone who has bothered to study that history knows that Senator John McCain was deeply involved in the push for rampant deregulation, and his choice of former Senate Banking Committee Chairman Phil Gramm, the principal author of the decisive deregulation legislation, to co-chair the McCain presidential campaign mocks McCain's attempt to blame the crisis on everyone but himself.

The Democrats, however, also are culpable, and it was sickening to watch Clinton on The Daily Show getting away with blaming a crisis he helped create on overexcited home purchasers. I don't blame Daily Show host Jon Stewart for not knowing enough about the subject to challenge Clinton on his own fervent support of deregulation, but it is disappointing that Paul Krugman, an economist and one of the nation's sharpest commentators, should also miss that point. Indeed, in his column for the New York Times castigating McCain for his connection to Gramm, Krugman said voters should be reassured that Barack Obama has Clinton's treasury secretary, Robert Rubin, to turn to for advice on how to handle this mess.

Rubin, the former head of Goldman Sachs, worked as hard as Gramm to pass the legislation his Wall Street buddies wanted. Rubin then returned to Wall Street as a honcho at Citigroup, the first company to successfully exploit the new legislation's nefarious loopholes. As for his insight, it was as recently as January of this year that Rubin termed the financial meltdown a normal phase of the business cycle.

Back in the spring, two months after Rubin's "What, me worry?" silliness on the economy, Obama gave a brilliant speech on Wall Street's problems at the same venue, Manhattan's Cooper Union for the Advancement of Science and Art, in which he singled out as central to the problem the legislation that Rubin had gotten Clinton to sign.

Obama should stick with the wisdom of a community organizer from the tough side of Chicago: Fight the bankers who swindle unsuspecting homeowners, and restore the bailout provision that Democratic leaders had proposed but then abandoned--stopping the home foreclosures by empowering bankruptcy court judges to force a renegotiation of terms.

Any bailout worthy of support should put endangered homeowners first, not the bankers who swindled them.

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From http://www.michaelmoore.com/words/message/index.php?id=237 ...

Wednesday, October 1st, 2008

"Here's How to Fix the Wall Street Mess"
by Michael Moore

Friends,

The richest 400 Americans -- that's right, just four hundred people -- own MORE than the bottom 150 million Americans combined. 400 rich Americans have got more stashed away than half the entire country! Their combined net worth is $1.6 trillion. During the eight years of the Bush Administration, their wealth has increased by nearly $700 billion -- the same amount that they are now demanding we give to them for the "bailout." Why don't they just spend the money they made under Bush to bail themselves out? They'd still have nearly a trillion dollars left over to spread amongst themselves!

Of course, they are not going to do that -- at least not voluntarily. George W. Bush was handed a $127 billion surplus when Bill Clinton left office. Because that money was OUR money and not his, he did what the rich prefer to do -- spend it and never look back. Now we have a $9.5 trillion debt. Why on earth would we even think of giving these robber barons any more of our money?

I would like to propose my own bailout plan. My suggestions, listed below, are predicated on the singular and simple belief that the rich must pull themselves up by their own platinum bootstraps. Sorry, fellows, but you drilled it into our heads one too many times: There... is... no... free... lunch. And thank you for encouraging us to hate people on welfare! So, there will be no handouts from us to you. The Senate, tonight, is going to try to rush their version of a "bailout" bill to a vote. They must be stopped. We did it on Monday with the House, and we can do it again today with the Senate.

It is clear, though, that we cannot simply keep protesting without proposing exactly what it is we think Congress should do. So, after consulting with a number of people smarter than Phil Gramm, here is my proposal, now known as "Mike's Rescue Plan." It has 10 simple, straightforward points. They are:

1. APPOINT A SPECIAL PROSECUTOR TO CRIMINALLY INDICT ANYONE ON WALL STREET WHO KNOWINGLY CONTRIBUTED TO THIS COLLAPSE. Before any new money is expended, Congress must commit, by resolution, to criminally prosecute anyone who had anything to do with the attempted sacking of our economy. This means that anyone who committed insider trading, securities fraud or any action that helped bring about this collapse must go to jail. This Congress must call for a Special Prosecutor who will vigorously go after everyone who created the mess, and anyone else who attempts to scam the public in the future.

2. THE RICH MUST PAY FOR THEIR OWN BAILOUT. They may have to live in 5 houses instead of 7. They may have to drive 9 cars instead of 13. The chef for their mini-terriers may have to be reassigned. But there is no way in hell, after forcing family incomes to go down more than $2,000 dollars during the Bush years, that working people and the middle class are going to fork over one dime to underwrite the next yacht purchase.
If they truly need the $700 billion they say they need, well, here is an easy way they can raise it:

a) Every couple who makes over a million dollars a year and every single taxpayer who makes over $500,000 a year will pay a 10% surcharge tax for five years. (It's the Senator Sanders plan. He's like Colonel Sanders, only he's out to fry the right chickens.) That means the rich will still be paying less income tax than when Carter was president. This will raise a total of $300 billion.

b) Like nearly every other democracy, charge a 0.25% tax on every stock transaction. This will raise more than $200 billion in a year.

c) Because every stockholder is a patriotic American, stockholders will forgo receiving a dividend check for one quarter and instead this money will go the treasury to help pay for the bailout.

d) 25% of major U.S. corporations currently pay NO federal income tax. Federal corporate tax revenues currently amount to 1.7% of the GDP compared to 5% in the 1950s. If we raise the corporate income tax back to the level of the 1950s, that gives us an extra $500 billion.

All of this combined should be enough to end the calamity. The rich will get to keep their mansions and their servants, and our United States government ("COUNTRY FIRST!") will have a little leftover to repair some roads, bridges and schools.

3. BAIL OUT THE PEOPLE LOSING THEIR HOMES, NOT THE PEOPLE WHO WILL BUILD AN EIGHTH HOME. There are 1.3 million homes in foreclosure right now. That is what is at the heart of this problem. So instead of giving the money to the banks as a gift, pay down each of these mortgages by $100,000. Force the banks to renegotiate the mortgage so the homeowner can pay on its current value. To insure that this help does no go to speculators and those who have tried to make money by flipping houses, this bailout is only for people's primary residence. And in return for the $100K paydown on the existing mortgage, the government gets to share in the holding of the mortgage so that it can get some of its money back. Thus, the total initial cost of fixing the mortgage crisis at its roots (instead of with the greedy lenders) is $150 billion, not $700 billion.

And let's set the record straight. People who have defaulted on their mortgages are not "bad risks." They are our fellow Americans, and all they wanted was what we all want and most of us still get: a home to call their own. But during the Bush years, millions of them lost the decent paying jobs they had. Six million fell into poverty. Seven million lost their health insurance. And every one of them saw their real wages go down by $2,000. Those who dare to look down on these Americans who got hit with one bad break after another should be ashamed. We are a better, stronger, safer and happier society when all of our citizens can afford to live in a home that they own.

4. IF YOUR BANK OR COMPANY GETS ANY OF OUR MONEY IN A "BAILOUT," THEN WE OWN YOU. Sorry, that's how it's done. If the bank gives me money so I can buy a house, the bank "owns" that house until I pay it all back -- with interest. Same deal for Wall Street. Whatever money you need to stay afloat, if our government considers you a safe risk -- and necessary for the good of the country -- then you can get a loan, but we will own you. If you default, we will sell you. This is how the Swedish government did it and it worked.

5. ALL REGULATIONS MUST BE RESTORED. THE REAGAN REVOLUTION IS DEAD. This catastrophe happened because we let the fox have the keys to the henhouse. In 1999, Phil Gramm authored a bill to remove all the regulations that governed Wall Street and our banking system. The bill passed and Clinton signed it. Here's what Sen. Phil Gramm, McCain's chief economic advisor, said at the bill signing:

"In the 1930s ... it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets.

"We are here today to repeal [that] because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom.

"I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality."

This bill must be repealed. Bill Clinton can help by leading the effort for the repeal of the Gramm bill and the reinstating of even tougher regulations regarding our financial institutions. And when they're done with that, they can restore the regulations for the airlines, the inspection of our food, the oil industry, OSHA, and every other entity that affects our daily lives. All oversight provisions for any "bailout" must have enforcement monies attached to them and criminal penalties for all offenders.

6. IF IT'S TOO BIG TO FAIL, THEN THAT MEANS IT'S TOO BIG TO EXIST. Allowing the creation of these mega-mergers and not enforcing the monopoly and anti-trust laws has allowed a number of financial institutions and corporations to become so large, the very thought of their collapse means an even bigger collapse across the entire economy. No one or two companies should have this kind of power. The so-called "economic Pearl Harbor" can't happen when you have hundreds -- thousands -- of institutions where people have their money. When you have a dozen auto companies, if one goes belly-up, we don't face a national disaster. If you have three separately-owned daily newspapers in your town, then one media company can't call all the shots (I know... What am I thinking?! Who reads a paper anymore? Sure glad all those mergers and buyouts left us with a strong and free press!). Laws must be enacted to prevent companies from being so large and dominant that with one slingshot to the eye, the giant falls and dies. And no institution should be allowed to set up money schemes that no one can understand. If you can't explain it in two sentences, you shouldn't be taking anyone's money.

7. NO EXECUTIVE SHOULD BE PAID MORE THAN 40 TIMES THEIR AVERAGE EMPLOYEE, AND NO EXECUTIVE SHOULD RECEIVE ANY KIND OF "PARACHUTE" OTHER THAN THE VERY GENEROUS SALARY HE OR SHE MADE WHILE WORKING FOR THE COMPANY. In 1980, the average American CEO made 45 times what their employees made. By 2003, they were making 254 times what their workers made. After 8 years of Bush, they now make over 400 times what their average employee makes. How this can happen at publicly held companies is beyond reason. In Britain, the average CEO makes 28 times what their average employee makes. In Japan, it's only 17 times! The last I heard, the CEO of Toyota was living the high life in Tokyo. How does he do it on so little money? Seriously, this is an outrage. We have created the mess we're in by letting the people at the top become bloated beyond belief with millions of dollars. This has to stop. Not only should no executive who receives help out of this mess profit from it, but any executive who was in charge of running his company into the ground should be fired before the company receives any help.

8. STRENGTHEN THE FDIC AND MAKE IT A MODEL FOR PROTECTING NOT ONLY PEOPLE'S SAVINGS, BUT ALSO THEIR PENSIONS AND THEIR HOMES. Obama was correct yesterday to propose expanding FDIC protection of people's savings in their banks to $250,000. But this same sort of government insurance must be given to our nation's pension funds. People should never have to worry about whether or not the money they've put away for their old age will be there. This will mean strict government oversight of companies who manage their employees' funds -- or perhaps it means that the companies will have to turn over those funds and their management to the government. People's private retirement funds must also be protected, but perhaps it's time to consider not having one's retirement invested in the casino known as the stock market. Our government should have a solemn duty to guarantee that no one who grows old in this country has to worry about ending up destitute.

9. EVERYBODY NEEDS TO TAKE A DEEP BREATH, CALM DOWN, AND NOT LET FEAR RULE THE DAY. Turn off the TV! We are not in the Second Great Depression. The sky is not falling. Pundits and politicians are lying to us so fast and furious it's hard not to be affected by all the fear mongering. Even I, yesterday, wrote to you and repeated what I heard on the news, that the Dow had the biggest one day drop in its history. Well, that's true in terms of points, but its 7% drop came nowhere close to Black Monday in 1987 when the stock market in one day lost 23% of its value. In the '80s, 3,000 banks closed, but America didn't go out of business. These institutions have always had their ups and downs and eventually it works out. It has to, because the rich do not like their wealth being disrupted! They have a vested interest in calming things down and getting back into the Jacuzzi.

As crazy as things are right now, tens of thousands of people got a car loan this week. Thousands went to the bank and got a mortgage to buy a home. Students just back to college found banks more than happy to put them into hock for the next 15 years with a student loan. Life has gone on. Not a single person has lost any of their money if it's in a bank or a treasury note or a CD. And the most amazing thing is that the American public hasn't bought the scare campaign. The citizens didn't blink, and instead told Congress to take that bailout and shove it. THAT was impressive. Why didn't the population succumb to the fright-filled warnings from their president and his cronies? Well, you can only say 'Saddam has da bomb' so many times before the people realize you're a lying sack of shite. After eight long years, the nation is worn out and simply can't take it any longer.

10. CREATE A NATIONAL BANK, A "PEOPLE'S BANK." If we really are itching to print up a trillion dollars, instead of giving it to a few rich people, why don't we give it to ourselves? Now that we own Freddie and Fannie, why not set up a people's bank? One that can provide low-interest loans for all sorts of people who want to own a home, start a small business, go to school, come up with the cure for cancer or create the next great invention. And now that we own AIG, the country's largest insurance company, let's take the next step and provide health insurance for everyone. Medicare for all. It will save us so much money in the long run. And we won't be 12th on the life expectancy list. We'll be able to have a longer life, enjoying our government-protected pension, and living to see the day when the corporate criminals who caused so much misery are let out of prison so that we can help reacclimate them to civilian life -- a life with one nice home and a gas-free car that was invented with help from the People's Bank.

Yours,
Michael Moore
MMFlint@aol.com
MichaelMoore.com

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From http://www.progressive.org/mag/comment1-10-08.html ...

"Reid Blinked on Senate Bailout Bill"
by Matthew Rothschild October 1, 2008

The Senate leadership just blew an opportunity for adequately revising the bailout bill.
The Senate bill does nothing for people who need help the most: people who are facing foreclosure.

It doesn't resurrect the Glass-Steagall act to divide regular banking from financial banking.

It doesn't outlaw or even regulate the kind of swapping and trading that precipitated this mess.

As Senator Russ Feingold said on Sept. 30, "negotiators must address the deeply flawed regulatory structure that paved the way for this crisis. The administration and others have said such reforms must wait for another day, but once a rescue package is enacted, we lose the leverage needed to enact tough reforms to get the financial sector to clean up its act, and we risk having to deal with this same mess all over again."

But the authors of the Senate bill discarded their leverage even before they brought the bill to the floor.

What the bill does is raise the limits on insured deposits from $100,000 to $250,000, which is being sold as way to help small businesses bank enough safely for payroll. But it will surely allay the fears of the wealthiest people in this country, who don't want to be bothered to go to different banks to park their surpluses over $100,000.

And it gives this same group of people a break by revising the Alternative Minimum Tax, which was designed to make sure the rich pay their fair share.

Plus, it extends business tax credits.

Oh, it does a few good things-though they have nothing to do with the current crisis.
It expands the child tax credit.

It enshrines mental health parity for insurance, which Paul Wellstone pushed long ago.

And it provides incentives for renewable energy, which we also need.

But as for clearing the rot on Wall Street, it does nothing.

The Democrats in the Senate could have brought a bill to the floor that would have won over progressives in the House, especially in the Black Caucus and Hispanic Caucus, who insisted on some help for people facing foreclosure.

Instead, the Senate leadership decided to try to mollify reactionaries in the House.

Once again, Harry Reid blinked.

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From http://jimhightower.com/node/6614 ...

"The Bailout Keeps Getting Stinkier"
Wednesday, October 1, 2008
Posted by Jim Hightower

Whew! The finance industry might be taking big losses these days, but it hasn't lost a bit of its shameless sense of entitlement.

Even before members of Congress got a peek at the Bushites' Wall Street bailout plan, lobbyists for various financial interests were swarming Washington with demands that their clients get a piece of the $700 billion pie, preferably á la mode. For example, on the Saturday morning when the draft of the proposal was still under White House review, only banks with big holdings of investment schemes based on home mortgages were to be eligible for government rescue. But insurance industry lobbyists weaseled their way into the back rooms of power, and, by that evening, the Bush plan was magically broadened to include not just a bailout of bad mortgages, but of "any other financial instrument."

Likewise, the original Saturday morning text restricted bailout funds to banks based in the United States. But such foreign-based giants as UBS, Deutsche Bank, HSBC, and Barclay's squawked that they also had made bad mortgage-based investments in the U.S. - so, by Saturday evening, the proposal was changed to give foreign banks a place at our bailout table. This was no small concession. Swiss-based UBS, for example (whose chief lobbyist is former-Sen. Phil Gramm, the longtime economic advisor to John McCain) is in line for us taxpayers to cover as much as $20-billion worth of its bad paper.

Then there is a special cast of industry greedheads lobbying to get theirs. A gaggle of Wall Street banks and investment funds are hovering like vultures around the White House in hopes of getting more than a billion dollars in fees that the Bushites plan to dole out for "managing" the bailout. Yes, some of the very outfits that caused this mess are now trying to cash in on the cleanup!

These people keep adding stink on stink.

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From http://www.commondreams.org/view/2008/09/19-3 ...

Published on Friday, September 19, 2008 by The Nation

"Tax the Speculators: A Fair Plan to Pay for Economic Recovery"
by Chuck Collins

With the specter of financial Armageddon raised in headlines everywhere, two questions keep occurring to me. Where will the government find the $85 billon to bail out AIG and other Wall Street giants? And how will we pay for the proposed Main Street recovery, including federal aid to states, relief to homeowners, and public works projects for the unemployed?

The Bush administration plans to add to the $400 billion projected deficit and our $9 trillion national debt. But it's irresponsible to shift the bill entirely to the next generation. The corporations that rigged the casino economy and the wealthy CEOs and investors that profited at everyone else's expense should bear the recovery costs, not our kids and grandchildren.

We can't recover the money from the companies now. They have extracted the profits and their CEOs have cashed they gilded paychecks. The speculators bought mansions, private jets, and small islands. Lehman Brothers declared bankruptcy on Monday and 25,000 workers are on the brink of unemployment. But Lehman CEO Richard Fuld is sitting pretty, with his $354 million compensation from the last five years and a mega-mansion in Greenwich, Connecticut.

When a CEO or employee improperly takes money from a company and is forced to pay it back, it is colorfully referred to as "disgorgement." In 1999, managers of Compaq Computer cooked the books and gorged on bonuses based on misrepresented profits. The government forced them to pay it back.

But what happens when a whole sector of the economy has been cooked and billions of dollars have already been stashed in offshore bank accounts? How are the crooks held accountable for robbing our entire economy?

Here are six actions that will fairly generate over $400 billion a year to pay for a broad-based economic recovery and reduce the extreme inequalities that fueled speculation at the outset.

Institute a Financial Transactions Tax. Congress should levy a tax on financial transactions such as sale and purchase of stock and more exotic transactions such as credit default swaps, options, and futures. The UK has a modest financial transaction tax of 0.25 percent, a penny on every $4 invested. This is negligible for a long-term investor, but imposes a cost on the fast-buck flippers. Estimated annual revenue: $100 billion.

Impose an Income Tax Surcharge Rate on Incomes Over $5 Million. The 50,000 households with annual incomes over $5 million are the bigger winners from twenty-five years of Wall Street deregulation. They've also seen their effective tax rates decline under President George W. Bush. Instituting a 50 percent tax rate surcharge on incomes over $5 million and a 70 percent rate on incomes over $10 million would generate $105 billion a year.

Eliminate the Tax Preference for Capital Gains. Wealth extracted from Wall Street windfalls will pay out income for years to come. There's no economic reason for taxing income from corporate dividends and capital gains at 15% while taxing income from actual work at 35%. Taxing wealth and work at the same rates would generate $95 billion a year in revenue.

Progressive Inheritance Taxes. When great amounts of wealth passes to the next generation a portion of it should be taxed. A progressive estate tax could generate $50 billion a year in the short term, but much more in outlying decades.

Eliminate Taxpayer Subsidies for Excessive CEO Pay. Five loopholes that benefit top executives should be abolished. These include eliminating offshore deferred compensation, capping the tax deductibility of excessive pay, and eliminating double standards for stock option accounting. Closing these tax loopholes would generate $20 billion a year. (Read more about this in this recent report from the Institute for Policy Studies and United for a Fair Economy.)

Close Offshore Corporate Tax Havens. Congress should prevent corporations from playing games by claiming expenses in the United States and profits in countries that don't collect taxes. According to the Government Accountability Office, two-thirds of US corporations paid no corporate income tax between 1998 and 2005. Closing this loophole would generate over $100 billion.

Government action should prioritize protecting ordinary people and the real productive economy, not further reward the superrich and the speculative sectors of the economy. A fair plan to the pay for the recovery is a good start.

Chuck Collins directs the program on Inequality and the Common Good at the Washington, DC-based Institute for Policy Studies and coordinates the Working Group on Extreme Inequality. He is co-author, with Mary Wright, of The Moral Measure of the Economy (Orbis).

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From http://www.commondreams.org/view/2008/09/25-1 ...
Published on Thursday, September 25, 2008 by CommonDreams.org

"Congressional Backbone Needed"
by Ralph Nader

Congress needs to show some backbone before the federal government pours more money on the financial bonfire started by the arsonists on Wall Street.

1. Congress should hold a series of hearings and invite broad public comment on any proposed bailout. Congress is supposed to be a co-equal branch of our federal government. It needs to stop the stampede to give Bush a $700 billion check. Public hearings should be held to determine what alternatives might exist to the four-page proposal advanced by Treasury Secretary Henry M. Paulson.

2. Whatever is ultimately done, the bailout plan should not be insulated from judicial review. Remember there is a third co-equal branch of government - the judiciary. The judiciary does not need to review each buy-and-sell decision by the Treasury Department, but there should be some boundaries established to the Treasury Department's discretion, and judicial review is needed to ensure that unbridled discretion is not abused.

3. Sunlight is a good disinfectant. The bailout that is ultimately approved must provide for full and timely disclosure of all bailout details. This will discourage conflicts of interest and limit the potential of sweetheart deals.

4. Firms that accept government bailout monies must agree to disclose their transactions and be more honest in their accounting. They should agree to end off-the-books accounting maneuvers, for example.

5. Taxpayers must be protected by having a stake in any recovery. The bailout plan should provide opportunities for taxpayers to recoup funds that are made available to problem financial institutions or to benefit from the financial institutions' rising stock price and increased profitability after being bailed out.

6. The current so-called "regulators" cannot be trusted. The U.S. Government Accountability Office (GAO), "the investigative arm of Congress" and "the congressional watchdog," must regularly review the bailout. We cannot trust the financial "regulators," who allowed the slide into financial disaster, to manage the bailout without outside monitoring.

7. It is time to put the federal cop back on the financial services beat. Strong financial regulations and independent regulators are necessary to rebuild trust in our financial institutions and to prevent further squandering of our tax dollars. The Justice Department and the SEC also need to scrutinize the expanding mess with an eye to uncovering corporate crime and misdeeds. Major news outlets are reporting that the FBI is investigating American International Group, Fannie Mae, Freddie Mac, and Lehman Brothers.

8. Cap executive compensation and stop giving the Wall Street gamblers golden parachutes. The CEOs who have created the financial disaster should not be allowed to leave with millions in hand when so many pensioners and small shareholders are seeing their investments evaporate. The taxpayers are bailing out Wall Street so that the financial system continues to function, not to further enrich the CEOs and executives who created this mess.

9. Congress should pass the Financial Consumers' Information and Representation Act, to permit citizens to form a federally-chartered nonprofit membership organization to strengthen consumer representation in government proceedings that concern the financial services industry. As the savings and loan disasters of the 1980s and the Wall Street debacles of the last few years have demonstrated, there is an overriding need for consumers and taxpayers to have the organized means to enhance their influence on financial issues.

10. The repeal of the Glass-Steagall Act, separating traditional banks from investment banks, helped pave the way for the current disaster. It is time to re-regulate the financial sector. The current crisis is also leading to even further conglomeration and concentration in the financial sector. We must revive and apply antitrust principles, so that banking consumers can benefit from competition and taxpayers are less vulnerable to too-big-to-fail institutions, merging with each other to further concentration.

11. Congress should impose a securities and derivatives speculation tax. A tax on financial trading would slow down the churning of stocks and financial instruments, and could raise substantial monies to pay for the bailout.

12. Regulators should impose greater margin requirements, making speculators use more of their own money and diminishing reckless casino capitalism.

Ask your representative a few questions: "What should be done to limit banking institutions from investing in high-risk activities? What should be done to ensure banks are meeting proper capital standards given the financial quicksand that has spread as a result of the former Senator Phil Gramm's deregulation efforts? And, "What is being done to protect small investors?"

P.S. Shareholders also have some work to do. They should have listened when Warren Buffett called securities derivatives a "time bomb" and "financial weapons of mass destruction." The Wall Street crooks and unscrupulous speculators use and draining of "other people's money" out of pension funds and mutual funds should motivate painfully passive shareholders to organize to gain greater authority to control the companies they own. Where is the shareholder uprising?

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From http://www.thenation.com/doc/20081006/greider ...

"Paulson Bailout Plan a Historic Swindle"
by William Greider

September 19, 2008

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses--many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public--all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics--exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: "The joyous reception from Congressional Democrats to Paulson's latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington's one-party government and the Sell Side investment banks."

A kindred critic, Josh Rosner of Graham Fisher in New York, defined the sponsors of this stampede to action: "Let us be clear, it is not citizen groups, private investors, equity investors or institutional investors broadly who are calling for this government purchase fund. It is almost exclusively being lobbied for by precisely those institutions that believed they were 'smarter than the rest of us,' institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse."

Let me be clear. The scandal is not that government is acting. The scandal is that government is not acting forcefully enough--using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets. Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system. The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times. There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.

A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system. Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own--cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Only with these conditions, and some others, should the federal government be willing to take ownership--temporarily--of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets--property, houses, shopping centers--that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value--not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.

Despite what the pols in Washington think, the RTC bailout was also a Wall Street scandal. Many of the financial firms that had financed the S&L industry's reckless lending got to buy back the same properties for pennies from the RTC--profiting on the upside, then again on the downside. Guess who picked up the tab? I suspect Wall Street is envisioning a similar bonanza--the chance to harvest new profit from their own fraud and criminal irresponsibility.

If government acts responsibly, it will impose some other conditions on any broad rescue for the bankers. First, take due bills from any financial firms that get to hand off their spoiled assets, that is, a hard contract that repays government from any future profits once the crisis is over. Second, when the politicians get around to reforming financial regulations and dismantling the gimmicks and "too big to fail" institutions, Wall Street firms must be prohibited from exercising their usual manipulations of the political system. Call off their lobbyists, bar them from the bribery disguised as campaign contributions. Any contact or conversations between the assisted bankers and financial houses with government agencies or elected politicians must be promptly reported to the public, just as regulated industries are required to do when they call on government regulars.

More important, if the taxpayers are compelled to refinance the villains in this drama, then Americans at large are entitled to equivalent treatment in their crisis. That means the suspension of home foreclosures and personal bankruptcies for debt-soaked families during the duration of this crisis. The debtors will not escape injury and loss--their situation is too dire--but they deserve equal protection from government, the chance to work out things gradually over some years on reasonable terms.

The government, meanwhile, may have to create another emergency agency, something like the New Deal, that lends directly to the real economy--businesses, solvent banks, buyers and sellers in consumer markets. We don't know how much damage has been done to economic growth or how long the cold spell will last, but I don't trust the bankers in the meantime to provide investment capital and credit. If necessary, Washington has to fill that role, too.

Finally, the crisis is global, obviously, and requires concerted global action. Robert A. Johnson, a veteran of global finance now working with the Campaign for America's Future, suggests that our global trading partners may recognize the need for self-interested cooperation and can negotiate temporary--maybe permanent--reforms to balance the trading system and keep it functioning, while leading nations work to put the global financial system back in business.

The agenda is staggering. The United States is ill equipped to deal with it smartly, not to mention wisely. We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington, even if only to share their outrage.

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Wednesday, October 1, 2008

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