I cite

Merrill Lynch Bonus Payments Dwarf A.I.G.

t r u t h o u t | Merrill Lynch Bonus Payments Dwarf A.I.G..

In its last days as an independent company, Merrill gave performance-based bonuses exclusively to employees earning $300,000 a year or more and holding a rank of vice president or higher, according to their financial statements. $3.62 billion was handed out to these executives - a sum equal to 36.2 percent of the $10 billion in taxpayer funds that were allocated to Merrill as part of the Troubled Asset Relief Program (TARP) before the bonuses were paid.

The company had been failing as a result of misadventures in the now infamous mortgaged-backed securities market which began crumbling with the decline of home values as the bubble burst. The performance bonuses were determined by Merrill's compensation committee on December 8, 2008, before Merrill revealed that it lost $15 billion in the final three months of 2008, unusual timing according to court documents filed by New York Attorney General Andrew Cuomo in an ongoing suit against Merrill's former CEO.

In prior years, Merrill paid performance bonuses of this type after the end of the year, in January or February of the next year.

A Scary Corporate Coup Is Under Way

A Scary Corporate Coup Is Under Way -- We've Got to Stop It | Democracy and Elections | AlterNet. The White House executed a nifty two-step this week to re-educate the public and deflect anger. On Tuesday, Treasury Secretary Timothy Geithner relaunched the massive bailout of banking and finance. Knowing how unpopular this is with the people at large, Geithner followed on Thursday with his "sweeping" plans to re-regulate the bankers and financiers.

Whenever official plans are called "sweeping," it indicates that they really, really mean it this time.

Most Americans are not financial experts. It's very difficult, nearly impossible, for normal mortals to sort through the dense policy talk and conflicting opinions to figure out if the rhetoric of reform is real.

Confusion is widespread in the land. Most Americans want to believe this president is leading us out of the swamp, but how can they know? I say, trust your gut feelings. They are as reliable as the learned experts.’

Many Americans want to believe because they think that returning to "normal" means their decimated 401(k) retirement accounts might somehow recover the 30-40 percent that disappeared during the past year. If it takes monster bank bailouts to restore stock-market prices, let's have bailouts.

Good luck with that.

The Dow has regained 21 percent in two weeks of rallies, but I remind friends that steep, short bursts in the stock market do not foretell the future of the economy. Banks may be relieved of their losses without changing the general economic outlook. After the crash of 1929, there were occasional stock rallies, followed by fierce bears. It took 25 years (until 1954) for the Dow to regain its old peak.

Another way to assess the Obama plan for reform is ask: Who likes it? The verdict was swift and sure after Geithner's twin announcements. Wall Street likes it.

The blueprint for regulatory reforms was applauded by the Securities Industry and Financial Markets Association; the American Insurance Association; and the Private Equity Council, the trade group for the major private funds that will get public money and backup insurance to buy the banking system's rotten assets.

This could be born-again patriotism. Or it could be the animal appetites of financiers smelling gorgeous opportunity for returns. This may be one of those moments where people can find some guidance from their moral convictions. They do not need to know all the details to ask simple questions.

Does the outline of what's happening to rescue major financial institutions seem morally wrong? Or is it justified by the larger necessities of the national predicament? Is the government insufficiently tough in demanding reciprocal commitments from the beneficiaries? Should Washington pursue larger structural changes in the banking system?

I find it curious, and not a little disturbing, that William Greider takes in this article what is fundamentally a Bush approach: know it in your gut. It's interesting as a response to the delineation of a zone of unknowability--the fiscal crisis--as a way of restoring some kind of power to the people. And, this isn't new in the history of mass democracy, although elites tend to find it disturbing, just one step toward mob rule.

Dean Baker: Geithner's Plan Will Tax Main Street to Make Wall Street Richer

t r u t h o u t | Geithner's Plan Will Tax Main Street to Make Wall Street Richer.(excerpt; read the whole thing)

Oh, by the way, some people will get very rich off the Geithner plan. Some hedge and equity fund managers could make hundreds of millions or even billions off the Geithner plan. And, under current law, they will pay a lower tax rate on this money than a schoolteacher or firefighter. Are you sold yet?

One other outcome of the Geithner plan is that the folks who bankrupted their banks and wrecked the economy will be able to continue to earn multi-million dollar salaries. Of course this is necessary, because who else has the skills to run these banks, other than the people who drove them into bankruptcy?

For some reason, every plan the EMHB have developed so far involves using taxpayer dollars to subsidize the bankrupt banks and keep them breathing a little bit longer, while offering opportunities for other Wall Street actors to get hugely wealthy. Some people say that the EMHB keep coming up with plans that enrich the Wall Street crew because they are so closely tied to the Wall Street financial interests.

It is, of course, possible that the EMHB are too closely tied to the financial industry, but it's also possible that they just lack the creativity and imagination to think of a plan that doesn't enrich the Wall Street crew. After all, these people lacked the ability to see an $8 trillion housing bubble, the largest financial bubble in the history of the world.

Obama holds “very pleasant” meeting with top US bankers

Thought experiment: how would the article below read if all the references to the financial elite were changed to something else? So, how would the media and the right respond if the very pleasant meeting were with Obama and union representatives? Or, what if the meeting were with energy and oil executives? Climate scientists? Environmentalists? Women's groups? In other words, shouldn't there be some concern on the part of leftists that there is such a happy hug fest going on? Doesn't that tell us that Obama isn't doing anything that bothers them? And shouldn't that bother us? Shouldn't we expect them to be outraged and furious over the restrictions and restructuring he is going to install in order to ensure that the fiscal calamity we're enduring never happens again?

Obama holds “very pleasant” meeting with top US bankers.

US President Barack Obama met behind closed doors for more than an hour and a half with the chief executives of the largest American banks on Friday, reassuring the titans of finance that his administration has their best interests at heart. According to White House press secretary Robert Gibbs, the meeting's agenda included the Obama administration's "toxic asset" purchase program, proposals for regulation of the finance industry, and executive compensation.

Every aspect of the administration's economic policy caters to the interests of the financial elite, of which the president is merely a mouthpiece. The private meeting at the White House had the air of a conspiracy against the public, a gathering to discuss carving up state resources in order to hand them over to the banks and major investors.

Among those attending were 13 CEOs and two banking industry lobbyists. The individuals gathered at the White House stand at the helm of companies that together control much of American finance. They played a significant role in driving the speculative orgy on Wall Street that has now collapsed, precipitating the greatest economic crisis since the Great Depression.

Magic

Paul Krugman - The Market Mystique - NYTimes.com.(an excerpt)

After 1980, of course, a very different financial system emerged. In the deregulation-minded Reagan era, old-fashioned banking was increasingly replaced by wheeling and dealing on a grand scale. The new system was much bigger than the old regime: On the eve of the current crisis, finance and insurance accounted for 8 percent of G.D.P., more than twice their share in the 1960s. By early last year, the Dow contained five financial companies — giants like A.I.G., Citigroup and Bank of America.

And finance became anything but boring. It attracted many of our sharpest minds and made a select few immensely rich.

Underlying the glamorous new world of finance was the process of securitization. Loans no longer stayed with the lender. Instead, they were sold on to others, who sliced, diced and puréed individual debts to synthesize new assets. Subprime mortgages, credit card debts, car loans — all went into the financial system’s juicer. Out the other end, supposedly, came sweet-tasting AAA investments. And financial wizards were lavishly rewarded for overseeing the process.

But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.

The Quiet Coup - The Atlantic (May 2009)

The Quiet Coup - The Atlantic (May 2009).This is an excerpt from an article by Simon Johnson. Read the whole thing.

Becoming a Banana Republic

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.

But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.

The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.

Drive and biopolitics

Download Drive and biopolitics Here is the first draft of my efforts to think about drive and biopolitics. The paper synthesizes a number of the posts from the last several months. An excerpt:

Zizek notes that much has been written about the subject of desire and that now there needs to be attention to the mysterious subjectivity brought about by the circular movement of drive. Viewed in terms of changes in governmental reason since the late eighteenth century, changes wherein the economy arises as a site of truth external to and ungovernable by sovereign power, the political subject of drive appears as a passive subject, not one who can rule and be ruled in turn but one who is governed and managed and who through his very economic activity makes himself governable. The subject of drive is stuck in drive’s circuits and repetitions.

 

As an inhabitant of civil society, he is part of a governed population. To this extent, we can say that population is the space of overlap between government and economy, the site produced as state power confronts the limit of economic truth. As part of the population, the subject is neither the rational homo economicus nor the juridical subject. Agamben refers to such a subject as bare life and understood as the impossible/Real part of the population, the term bare life becomes useful.  

 

Agamben says that “the people necessarily contains the fundamental biopolitical fracture within itself”. He’s right, but he misidentifies the fracture. Agamben describes the division as between the people as a whole and the people as the excluded other, the poor and the exploited. The fracture is better understood as between the people as subjects of desire and the people as subjects of drive, that is, between the people and the population. Rather than locating the political problem in exclusion, the focus on drive explains the fundamental political problem as the limiting of the people’s power through the establishment of a domain of truth they cannot navigate, they cannot affect, they cannot steer as the corresponding endeavor to governmentalize them as parts of the population. Agamben writes:

 

It is as if what we call ‘people’ were in reality not a unitary subject but a dialectical oscillation between two opposite poles: on the one hand, the set of the People as a whole political body, and, on the other, the subset of the people as a fragmentary multiplicity of needed and excluded bodies . . .

 

The oscillation he describes is better understood as the circuit of drive, the circuit in which the people get stuck in a repetitive loop which they occupy as the population. No active subject, juridical or economic, persists as a part of the population. This is a set of the governmentalized.

 

But one should be wary of the risks involved in taking on Agamben’s argument in its entirety, risks that block from view the historicity of biopolitics. Foucault’s account makes clear the way biopolitics is the byproduct of a constellation of strategies and tactics circulating around a hole in political reason.  Blocked from knowledge of the economy, sovereign power swerves in another direction, extending into a variety of other more domains and turning the people, who were in the process of becoming sovereign throughout the 19th and 20th centuries, into the population.  

 

Political Theory and the Sensorium: May 7-9

Thomas Geoghegan on "Infinite Debt: How Unlimited Interest Rates Destroyed the Economy"

Democracy Now! | Thomas Geoghegan on "Infinite Debt: How Unlimited Interest Rates Destroyed the Economy".

THOMAS GEOGHEGAN: Well, history—historians like Niall Ferguson, conservative historians and progressive historians, many economic historians, see history as nothing but a turf war between three groups: the manufacturers, workers and the bondholders, or the financial sector. So where does labor fit in in all of this? People lost the ability to get wage increases and got the ability, an incredible ability, really unknown in previous times, to get credit cards with which they had high rates of interest. So, unable to get wage increases, people—or unable to get union cards, really, people got credit cards and began running up these great debts, which addicted the country to high rates of return in the financial sector, so that people were kind of spending their way out of the real economy, pushing more and more money, by the fact that they were going into debt, into this virtual financial sector economy. So, really, the inability of people to raise their own wages and the incredible ease with which they could get credit instead helped create this flow of capital out of manufacturing and into finance. You know, we, the little people in this country, helped finance the bloating up of this financial sector and really the downsizing of our own jobs in the real economy. We sent the signals, you know, to investors to put money into the financial sector and not into the manufacturing sector.
...

AMY GOODMAN: Well, as the economy grew and Wall Street was just blooming, individual workers were—

THOMAS GEOGHEGAN: Yes.

AMY GOODMAN: —as you write it, individual people were actually becoming worse off.

THOMAS GEOGHEGAN: Sure. Well, they went from being creditors to debtors. That’s what is so insidious about this whole process. Not only were people being denied wage increases, but they were losing their, quote, “savings,” at least in the sense losing the kind of security that they used to have. I saw that as a labor lawyer in Chapter 11 reorganizations, seeing all these companies, now taken over by financiers and squeezed for as much profit as they can, go belly up after outsourcing occurred. And then, people would be brought into court as creditors, not named as parties, but because they had claims to retiree health insurance and so forth, and would just be stripped of these rights.

So, you know, in addition to people not having the wage increases that they needed, because of lack of unionization, because of really the fact that the healthcare system was devouring up the money that would have been there to pay for them, they were also losing their savings and, worse than that, losing the sense that if they entered contracts with their employers, the money would be there at the end of the day. So you had this destruction of future-oriented thinking just at the time that the credit cards were being handed out to them, and it was kind of “live for the moment.”

Paul Krugman: World War Z

Democracy Now! | "The Zombie Ideas Have Won" - Paul Krugman on $1 Trillion Geithner Plan to Buy Toxic Bank Assets.

AMY GOODMAN: Well, you say, “Zombie ideas have won.” Why are you calling that Timothy Geithner’s plan today?

PAUL KRUGMAN: A zombie idea is an idea that you keep on killing, because it’s a bad idea, but it just keeps on coming back. And what this is is we’ve had this idea since Henry Paulson came out with his plan six months ago, the Bush administration, that the real problem is that the market is undervaluing all of these toxic assets, and what we need to do is have taxpayers go in and buy them at a fair price, and that will solve all of our financial problems. And that’s what happened. The Geithner plan is a complicated, disguised variant on the same idea. It’s the zombie that you keep killing, and it just keeps coming back.

AMY GOODMAN: Called “cash for trash”?

PAUL KRUGMAN: Yeah, that’s—that was the phrase that was out there six months ago, which I picked up. And yeah, it’s basically saying that, you know, there’s nothing really fundamentally wrong with our banking system; there’s just this crisis of confidence, and so nobody wants to buy, you know, asset-backed securities, nobody wants to buy stuff that’s ultimately backed by home mortgages, and if only we could get people to see that these things are really pretty decent assets, then the banks will be in fine shape. And that’s the trouble. You know, there’s an argument that says maybe they were somewhat underpriced, but to make this the centerpiece of your financial rescue plan is just—well, as I wrote in the column, it leaves me with a feeling of despair.
...

AMY GOODMAN: So you socialize the debt, you privatize the profit. Why—

PAUL KRUGMAN: Yes, it’s—you know, it’s, yeah, lemon socialism. The minuses are the taxpayers; the pluses are the private investors.
...
They are—I think they’re just daunted by the scale of this thing. The FDIC normally does, you know, two or three banks a week, even in bad times, and they’re small banks. Here we’re talking about quite possibly Citigroup, which is $2 trillion in assets. It’s a very big thing. And I think the reason they keep on coming back, the reason the zombie ideas won’t stay dead, is the lure of an easy solution, that you can just wave a magic wand and the problem goes away, and they’re still looking for magic.