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Illustration: From Keith Tucker, www.whatnowtoons.com
How the morons get the idea that ALL the Bush cuts should remain in place is beyond me. I can see Republicans liking it as they are traditional supporters of the rich. But these Teat Party nuts just don't get it -- nor do they make over $250,000/year.
I've been waiting awhile to make a few comments, but needed some sources. True, I did post a series of essays on the economy by Nobel prize winners, the last was Paul Krugman, but all that was before things got even more absurd than they are now.
Daley announced that he will not run, so Rahm Israel Emmanuel is going, going, going!!!! Let him go! Let his people go!!
In his last speech Obama talked a good game about the Republicans. He has been spineless against them so far, however. We shall see.
Some Christian nut proposes Koran burning on 9/11. Let him. Then all hell will break out in the Mideast. You know, I haven't heard any such hate speech from Atheists and Agnostics. It takes a God in the sky to hide behind to be a bold bigot.
Here is the truth about the economy:
Guest:
Robert Scheer, longtime journalist based in California. He is the editor of Truthdig and author of many books. His latest is The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.
Rush Transcript
This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.Donate - $25, $50, $100, More...
Bob, welcome to Democracy Now!
ROBERT SCHEER: Hi, Amy.
AMY GOODMAN: What is wrong with the economy today? And how did we get here?
ROBERT SCHEER: Well, you know, you say a longtime journalist. I worked for the Los Angeles Times as a national reporter, and I covered these hearings in Washington when the Clinton Administration in the '90s basically fulfilled the promise of the Reagan Revolution. Reagan was not able to reverse the sensible regulations of the New Deal of Franklin Delano Roosevelt designed to prevent us from getting into another depression. And those regulations of Glass-Steagall, which Feingold was against—was for keeping and against reversing, said that investment banks playing with supposedly rich people's money should not be allowed to merge with commercial banks that were using the deposits of people that were insured by the taxpayers and that these were different activities. And Reagan could never pull off that kind of deregulation. In fact, because of the savings and loan scandal at the end of his term, he actually had to sign off on increased financial regulation. But when Clinton came in, he brought in one of the big players on Wall Street, Robert Rubin, who has been head of Goldman Sachs, and basically turned to him and said, "You know, what do I need to do to get Wall Street on my side?" And they said, reverse what they considered to be onerous financial regulation. And Clinton delivered on that. He brought in Rubin then to be his Treasury secretary, who was followed by Lawrence Summers, who’s now the top economics adviser in the Obama White House.
And in addition to the Gramm bill that reversed Glass-Steagall, he did something even more significant for our current crisis. He—after Summers had pushed it through, Congress signed off on the Commodity Futures Modernization Act of 2000. He was already a lame duck president. It was in the closing weeks of his administration. And this is the source of our whole problem, really, in terms of the housing meltdown, because we had these suspect derivatives that sensible people in the administration, like Brooksley Born, had warned against. No one knew what these toxic investments all about, the bundling of mortgages, which is what encouraged all of the wild subprime and Alt-A financing, because they were then going to be packaged together, made into securities, and then backed by credit default swaps, and all of this stuff that really didn’t exist. It certainly didn’t exist in Adam Smith’s capitalism, but it didn’t really exist even in Ronald Reagan’s capitalism. This newfangled—these gimmicks that were developed and spiraled wildly out of control were made possible because of that Commodity Futures Modernization Act, which Clinton signed and which said in Titles III and IV, no existing government regulation, no existing government regulatory body, will be allowed to supervise these credit default swaps, these collateralized debt obligations that were there.
And as a result, we had this wild runup of irresponsible mortgage lending. The banks no longer did, as in the old days, worry about whether you could make your payments, whether there was value in the house, because they weren’t going to hold that mortgage for thirty years like in the old days. They were going to sell it, you know? And that wild runup of the market—I call it the Clinton bubble. I think his administration deserves or should be given the main responsibility. And that is at the source of our problem. And this has not gone away. This is why we’re threatened with a possible 'nother steep decline, or we're threatened with a decade of Japanese-type stagnation. And the reason is because we now, taxpayers, are holding, you know, trillions of dollars of this stuff, these toxic investments. And as a result, housing right now is in a terrible state of affairs. There are 11 million homeowners that are underwater. They owe more on their mortgages than their houses. That translates to about 50 million people living in houses that are now worth less than what they owe on them, and they’re tempted to walk away from them. That’s why we don’t have any consumer demand. And it’s not just the people who are in trouble with their own houses, which is a tragic enough story, but even if somebody’s made every payment, even if they own their home outright. If you foreclose a house or two in that neighborhood, it brings everyone else down.
And all this stuff that Obama has been talking about really does not meet the problem. And the basic problem is, instead of throwing money at Wall Street, which is what Bush did and what Obama continued to do, you should have had a moratorium on housing foreclosures. You should have said, "OK, Wall Street, we’ll help you, but you are now going to be forced, through bankruptcy courts, new rules we’re going to put in place, to adjust people’s mortgages so they can stay in their home." And all this malarkey about "We’ll do more infrastructure," you know, and so—they always do that. We’ll spend $50 billion on this—what he said in Wisconsin. What is that $50 billion? It’s chump change compared to, say, the $300 billion of toxic investments by one group, Robert Rubin’s bank, Citigroup. He went, after he left the administration, to be a top bigshot at Citigroup, made possible by the reversal of Glass-Steagall. And, you know, $300 billion. So compare that to the $50 billion they’re going to do for infrastructure for the whole nation.
And I think the sad thing about Obama—you know, obviously, I supported him. I wrote columns thinking he was going to be great. An enormous disappointment. Somebody—no one can explain to me—I haven’t seen a satisfactory explanation. But in my book, I reprint the speech that Obama gave in the spring of '08, when he was a candidate. And it came three months after Robert Rubin had given a speech at Cooper Union saying we had no financial problem, we had no crisis. Three months later, Obama, at that same Cooper Union, said, you know, this is all due to reversal of Glass-Steagall, all due to reckless, radical deregulation. He spelled it out. And then, you know, mysteriously—maybe not so mysteriously when you think that Wall Street became his biggest, financial community became his biggest campaign contributor—he turned to the disciples of Robert Rubin—the Lawrence Summers, Timothy Geithner, the very people that had, with Rubin, created this mess—and said, "OK, you guys, fix it all." And they haven't fixed it. They’ve taken care of Wall Street. And as my subtitle in my book said, they mugged Main Street.
AMY GOODMAN: We’re talking to Robert Scheer. Robert, you said this is what President Obama should have done. For example, a moratorium on all bankruptcies. What should he do now? Why "should have"? What could he do starting today?
ROBERT SCHEER: Oh, immediately he should push for bankruptcy courts to have the power to force the banks to readjust these mortgages. You know, we picked up their bad paper. Why don’t they help people now who are stuck? You know, the basic idea of the New Deal was that these were not innocent victims of Wall Street scams. So we have—this is why you have all this anger in the tea party and everything else. It’s very legitimate.
I’m not one of—and by the way, you mentioned Feingold in your—it would be a tragedy to lose Feingold. If there’s one person in the United States Congress that has called this correctly, that has stood up for the interest of ordinary people, it’s Russ Feingold. I mean, I can’t think—you know, maybe Bernie Sanders, but Russ Feingold has been at it longer in the Senate. I mean, he just has been right on this stuff from day one. And the idea that rage about what’s happened to the economy is now going to take its toll on him, the one guy who—one of the few who got it right, is really frightening. But that’s what happens when you have an economic breakdown. We saw it in Germany, for God’s sake. You know, you look—the demagogues scapegoat all the people. You know, they scapegoat immigrants. And what you have now is a lot of money, a lot of money, from the big banks and everyone else, going into lunatics’ camp—the campaign of lunatics. But why? Because, "Oh, get government off our back. You know, big government," ignoring the fact that, you know, this government did not get big and the debt did not rise because we’re trying to help firemen or school teachers keep their jobs. It happened because we have, literally, through the Fed and through the federal government, spent, you know, what? Three, four—committed three, four trillion dollars to make the banks whole.
So when you say what we should do right now, Obama could call for a moratorium. A moratorium, what? Two, three years on mortgage foreclosures. You know, that’s what you do when you’re facing a crisis. He could call for and push through a regulation, as well as legislation, saying the bankruptcy courts—remember, we had the change in bankruptcy law to hurt consumers, make it harder for consumers to declare bankruptcy. Well, they could push for new regulation, new laws, say, no, we’re not going to leave it voluntarily, as he’s now doing with the banks to somehow make readjustments of which there have been very few, has not dealt with the problem. They should say, no, this is the ball game right now. The ball game is keeping people in their homes. The ball game is preventing all those boarded-up buildings in suburbs of South Florida, Riverside, California.
I mean, if you travel in this country, there’s enormous pain, because people’s life savings, their sense of their worth, their piece of the American Dream, were tied up in their family. When you lose that home or when you’re suffering or you’re facing foreclosure, you lose not only your pride, you lose your ability to retire, to send your kids to school. I mean, the dreams of Americans are wrapped up in their home. And I don’t know why we’re talking about anything else right now. If we want to get the economy going again, if we want to get people back to work, if we want to get consumption up, what you’ve got to do is help people with that nest and that nest egg, which is their home. And there’s very little, precious little in Obama’s speeches, and certainly almost nothing in his actions, to help those homeowners.
AMY GOODMAN: And how do you help people who don’t have a home?
ROBERT SCHEER: Well, you know, I know—there’s lots of things to do to help people home. But let me tell you, this is not a division between haves and have-nots when it comes to home owning. And one of my anger with some of the liberals around in the Democratic Party who supported this deregulation, they said this was going to help minority people get homes. You know, Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac were as rapacious as any—as Citigroup or Goldman Sachs. And the so-called liberal—this is dealt with in great detail in my book, which takes very few prisoners on either side, in either party. But Fannie Mae and Freddie Mac, with the support of people like Barney Frank and even many in the Black Caucus, said, "No, no, don’t touch Fannie Mae and Freddie Mac. They’ll help poor people get into their homes." Sure, a lot of minorities got into homes. They lost their savings. They’re now hurting. They can’t hold on to their homes. They’re being foreclosed. So, you know, the dream of American housing was not a have/have-not thing. It was supposed to be emancipation of Americans. It was supposed to be of them a piece of the pie.
So, first thing is, if we do this thing of keeping people in homes, we’re helping a lot of working people and poorer people. This is not something to benefit the rich. The rich make out like bandits in this kind of market. But secondly, if we can’t put a floor on housing foreclosures, if we can’t stem this bleeding right now, we’re not going to get consumption back, you know, and if we don’t get consumption back, because people were consuming based on their sense of what they’re worth, we’re not going to get the jobs back—jobs in construction, but jobs generally. And so, I would not divide the interest of homeowners and keeping them in their homes from the rest of the population.
AMY GOODMAN: Robert Scheer, your last chapter, "Sucking Up to the Bankers: Crisis Handoff from Bush to Obama"—has Obama done anything different about the economy than Bush, do you feel?
ROBERT SCHEER: No. Obama has been a disaster. And I say this as someone who was suckered into contributing to his campaign financially. You know, my wife maxed out in her contributions, pushing those buttons every time. I still get emails from the Obama campaign telling "We’re winning here, we’re winning there." But it’s been a disaster. Now, maybe, you know, if he could appoint Elizabeth Warren, you know, to the consumer agency, there will be a little bit of value in this deregulation—in this new regulation. But—
AMY GOODMAN: What about that?
ROBERT SCHEER: Russ Feingold was absolutely right to vote against it. Hello?
AMY GOODMAN: We’re going to play an excerpt of Elizabeth Warren’s speech that she gave recently at Netroots Nation next. But what about Elizabeth Warren, seen as the frontrunner for this job, but seen as a—there’s a quiet campaign in the White House, or perhaps not so quiet, among people like Rahm Emanuel, who supposedly, rumor has it, are opposing her?
ROBERT SCHEER: Yeah, well, look, come on. You can’t look to the Democratic Party, you know, hacks, for leadership on this. First of all, most of these people are veterans of the Clinton administration. They’re the same people who destroyed Brooksley Born. Brooksley Born was one of the most competent lawyers in this country, dealing—she represented banks. She understood more about these derivatives than anyone around, actually, when she was appointed to what was supposed to be a lesser agenc, you know, the Commodity Futures Trading Commission. And she spotted this problem. You know, seventeen times in testimony before congressional committees, Brooksley Born sounded the alarm that there was going to be a housing meltdown, that this thing had gone wild, that we had enabled Wall Street graft. She knew the inside outside. It was people like Summers, who’s now in this administration, I think, who don’t want Elizabeth Warren—Timothy Geithner, and there are plenty of others. There are many Goldman Sachs veterans and other big Wall Street veterans in this administration, as well. And they destroyed Brooksley Born. And they’re threatened by Elizabeth Warren, because Elizabeth Warren represents consumers. She’s a brilliant legal mind, and just as Brooksley Born is. And Elizabeth Warren said, "Wait a minute. You know, what kind of, you know, government is this, when you’re caring about Wall Street and you’re ignoring the pain out there?"
And I have to stress this, Amy. This is not some abstract—you know, I studied economics in graduate school, and I could do some mathematical modeling and all that stuff. This is not a game. It’s not a political game. It’s not a mathematics game. They’re real human beings who invest their whole life putting shelter over their family, caring about their family. And when you go out in these communities—and I’ve done some of that—you know, it’s so depressing. You know, I mean, I talked to people in Riverside who cleaned office buildings, you know, in Long Beach and commuted to Riverside so their kids could live in a better neighborhood. And they bought this house, and they made the payments. They made the payments. They did everything they were supposed to do. And the neighborhood went into the toilet, and they lose everything. They lose everything. And that story is repeated millions of times in America.
And the guys who did it to us, they weren’t those vicious right-wingers. And, you know, it wasn’t all the people that we liberals like to attack. It was our friends. Let’s get that straight, you know? When I call this the Clinton bubble, you know, I mean it very seriously. It was our friends. It was people, you know, like the heads of Fannie Mae and Freddie Mac, who claim to be liberal Democrats. But they were being rewarded with enormous bonuses. You know, enormous bonuses. They made out just as well as the people running Citigroup. These were not government agencies. These were actually traded on the stock market, but posing as government-supported agencies. And the fact of the matter is that the damage that was done to us was done by people who talk a very good game. You know, Robert Rubin contributed money to the Harlem dance group, you know? Jesse Jackson even supported the reversal of Glass-Steagall. There’s a whole chapter in my book, you know? The people who acted in a very bad way, in this book, were people who we would probably be more comfortable talking to, you know, over a drink somewhere than the others. So, you know, my book, you know, it’s called "How Reagan Democrats—Reagan Republicans and Clinton Democrats Enriched Wall Street and Mugged Main Street." And the Clinton Democrats, who now control the Obama administration, are—you know, this is turning the henhouse over to the foxes. And I would say the record of Obama on this has been abysmal. He has been a frontman for Wall Street, and it is shocking.
AMY GOODMAN: Robert Scheer, I want to thank you very much for being with us, longtime journalist based in California, worked for the Los Angeles Times for some thirty years, editor at Truthdig.com, author of many books. The latest, just out today in paperback, is The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.
democracynow.org. Some of the work(s) that this program incorporates, however, may be separately licensed. For further information or additional permissions, contact us.
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And about Elizabeth Warren: it appears Rahm Israel Emmanuel opposes her appointment. It also seems Daley will not run for another term and Rahm wants to be Mayor. Let him go. I don't have to put up with him anymore.
Elizabeth Warren, Harvard Law School professor and bankruptcy expert. She chairs the Congressional Oversight Panel over the bank bailout.
Rush Transcript
This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.Donate - $25, $50, $100, More...
Big banks are strongly opposed to Warren’s nomination. According to a New York Times editorial from earlier this summer, quote, "The banks don’t oppose Ms. Warren because she doesn’t get it. They oppose her because she does."
Well, the idea for an independent federal agency to protect ordinary borrowers from abuses by lenders was largely her idea, based on an article she wrote three years ago. In July, Congress made her idea a reality as part of the financial reform legislation.
Elizabeth Warren addressed an enthusiastic crowd at the Netroots Nation convention in Las Vegas earlier this summer. This is a part of what she said.
- ELIZABETH WARREN: I thought of four things that we should think about as we begin to build a new bureau. The first one is: It must stand for families. We’ve had long enough where there’s been no one to stand for families. Now, what does that mean? It means, in part, in the case of the credit agreements that we’ve been talking about, a level playing field again. It means that there’s someone there to make sure that both families and lenders understand the terms of the credit agreement; that it is as obvious to one side as the other; that when they come together, they get what this transaction is, the cost; that we create competitive markets so that the products are products that not only are priced so that consumers can understand them, but they’re priced well in the marketplace.
But it also means something else to stand on behalf of families. When folks—when powerful people get together in our government, and they start to divide up where things are going to go, when they start to make decisions about who’s going to be helped and who’s not going to be helped, there needs to be at least one person in the room who asks the question, how will this affect America’s families? Not just how will it affect America’s banks, not just how will it affect America’s businesses, but how will it affect America’s families? One of the things this bureau can do is be there on behalf of American families.
Now, the second thing that I think is really critical about this agency is it must be reality-based. It’s not good enough to have a great theory. And frankly, it’s not good enough to have just a good heart. It’s got to be grounded in how things really work on the ground. And I’m going to give you an example of that. Small banks. If the consequence of this agency is to put in enough new bureaucratic obligations that it crushes community banks, then the agency will not have been successful. If the community banks are driven out of business, that creates more concentration in the banking industry. The big get bigger, and the small go away. But it also means there are fewer of those banks around to lend to the small businesses that we’re counting on to restart this economy. And it means that families themselves have fewer choices between small banks and big banks. And that’s a choice we’ve got to preserve. So, ultimately, what this agency has to be about is, yes, the first one on the side of the families, but second, the side of creating workable, realistic markets, sustainable markets, over time—markets that work for consumers, but that also create a viable functioning credit system. It’s got to be part of what goes into this.
Third part is the agency—the bureau. The bureau has to be able to grow and change. You know, part of what went wrong in the 1930s was that we didn’t keep the rules up to date. The world changed around it. The markets changed around it. How families behaved changed around it. But the rules were not changing. They were not vital. And so, what this agency—what we have to think about when you’re building in at the beginning is, how do you build change? How do you build some creative destruction into the agency itself? You know, I come from the world of bankruptcy. It’s what I teach. Bankruptcy is littered with the businesses that didn’t adapt to the world. Government doesn’t have that same discipline in it. And so, part of building this agency is building in how it will change and adapt over time, that it has the right structure to do that.
And then the last part I want to mention is part of why I’m here today. This will be the first agency we have built in a wired world. Think about that for just one minute. The relationship between government agencies, between bureaucracy, between the government and its people, at the time we built all of the earlier agencies, was one of—the government labors relative obscurity, and you send out some information, and people get it through their newspapers or watching television or radio or whatever they listen to. This is an agency that will be the first to be born digital. It will be an agency that can send from—it will have the capacity to communicate with millions of Americans by just hitting a send button. It will also be an agency where millions of Americans have the capacity to communicate with the agency by hitting a send button. And the possibilities here are endless. The notion that part of how one comes to understand and define the problems in the credit area will change if we hear—if this agency hears, if this bureau hears from people who are experiencing it. This is part of its—it can be built into the research function of the agency. If the agency can hear from people and communicate with people, it changes the concept of how regulations work, of how regulations are tested, of how regulations are communicated and how they are enforced. So, I think of this as a real opportunity as we build this agency, not to replicate what was built last time, when we had a consumer agency in the 1970s, but to try a whole new model, to think about this agency from a different perspective.
So, that’s why I came here today. I bought a plane ticket and showed up here, because I have a specific “ask.” I wanted to talk to people who have a voice, and that’s why I came to talk to you. There are three things I want to ask you to do with your voice. I want to ask you to use your voice on behalf of economic security for middle-class Americans. In a world in which so many people face so much insecurity, I want you to give them voice. I also want to ask you to use your voice for ideas. This is the place to let ideas be born, to let them bounce around, to let them get tougher, to let the bad ones die out and the good ones advance. This is where ideas should come from. And the third is, I want to ask you to use your voice as a voice of conscience, in a world that sorely needs more conscience. You are our collective conversation on conscience.
So, I’m going to wrap this up by saying we have an opportunity now to pick up the tools that were laid out in this new Consumer Financial Protection Bureau. And, look, unused tools don’t do anyone any good. The point is to pick them up and use them. And it’s going to be tough. The era of my grandmother in the Great Depression, it was tough then. Remember, Franklin Roosevelt faced his economic royalists. Remember, it took him years to get his entire economic package into place. It paid off. It was tough, but it paid off. So what I want to think about is what we do from this moment going forward. If you have any doubts about where we’re headed and how much change we can make, I ask you for just one second to glance back over your shoulder at where we have traveled over the last year. I was in Chairman Barney Frank’s office just a few weeks ago, and Barney Frank deserves as much credit as anyone on this planet for keeping this Consumer Financial Protection Bureau and making it strong. So, Chairman Frank and I were talking about some details about the bureau and what might happen and not in conference. And we got to the end, and Barney looked up in that way he does, you know, over the top of his glasses, and he growled, because that’s the only way I know to describe a conversation with Barney. He’s like, “You know, Elizabeth, a year ago, this idea wouldn’t have even qualified as a pipe dream. And here we are.”
And here’s the best part of it, when you’re thinking about what we can do. We’re not here today because the banks gave it to us. The banks did not, a year ago, say, “Well, we’re really sorry we broke the economy. And we really appreciate that you put $700 billion and a few trillion in guarantees on the table to help bail us out. And, therefore, we’re going to support some regulation for ordinary families to kind of level the playing field and just make sure that everybody’s getting a fair deal here, that you can read your credit card contracts and mortgage agreements.” They didn’t say that. They fought us every single inch of the way. They announced in August of last year that the consumer agency was dead. And why was it dead? Because they were going to kill it. They were quoted in the New York Times. They were that sure of themselves. The lobbyists came out and said, “We will kill the consumer agency.” And they announced it, and they re-announced it, and they re-announced it. They also announced its death over and over and over. If you check the papers, it was the agency was still dead as of February of this year. But we didn’t give up. We scratched, and we bit, and we hung on, and we didn’t give up. And today, here’s where we are, with a good, strong set of tools to change the consumer market.
So let me wrap this back around. Is this going to save the middle class by itself, the consumer agency? I’ve written about the middle class now for two decades. And if you want to give me another couple of hours, I could bend your ear about all that’s happened here. And the answer is no. There’s frankly too much that’s broken. We’ve got to have change in labor policy. We’ve got to have change in health policy. We’ve got to have changes in education policy. That’s what it will take to restore a middle class. But we also have to have changes in consumer credit policy. And the new bill is a big step in that direction. So, here’s what I want to say. One way or another, I’ll keep pushing for the middle class. I hope you will, too. Thank you. Thank you.
AMY GOODMAN: Harvard Law professor Elizabeth Warren, chair of the Congressional Oversight Panel that oversees the bank bailout and an outspoken consumer advocate. She was speaking at the Netroots Nation conference.
democracynow.org. Some of the work(s) that this program incorporates, however, may be separately licensed. For further information or additional permissions, contact us.
