Nouriel Roubini: How to Break Up the Banks, Stop Massive Bonuses, and Rein in Wall Street Greed

By Zach Carter and Nouriel Roubini, AlterNet
Posted on May 18, 2010, Printed on May 18, 2010
http://www.alternet.org/story/146900/

New York economist Nouriel Roubini is the author of, most recently, "Crisis Economics: A Crash Course In The Future Of Finance." He is considered one of the most prominent and respected economists in the world. When both Wall Street bankers and Bush administration policymakers were insisting that everything was just fine, Roubini was warning about the most dire financial crisis since the Great Depression. In 2007, the financial elite laughed him off, but Roubini was vindicated by the crash of 2008. AlterNet economics editor Zach Carter recently spoke with Roubini about the financial crisis, the subsequent bailout, the financial reform bill moving through Congress, and the global economic outlook.

Zach Carter: How is the financial reform legislation going?

Nouriel Roubini: In my view, the financial reform bill goes in the right direction in terms of what needs to be done, but it doesn't go far enough in a number of dimensions. My view is that if banks are too big to fail, using higher capital charges and an insolvency regime is not going to work. If they're too big to fail, they're just too big, and they should be broken up.

If they're too big to fail, they're also becoming too big to be saved, too big to be bailed out, and too big to be managed. No CEO can monitor the activities of thousands of separate profit and loss statements, and the activities of thousands of different bankers and traders. So that's one dimension. We must be capable of going beyond the Volcker Rule, which is essentially Glass-Steagall-Lite. We need to go all the way and implement the kind of restrictions between commercial banking and investment banking that existed under Glass-Steagall.

How Are Things Going in Afghanistan?

A Pentagon report says: not well.

By Fred Kaplan
Posted Friday, May 14, 2010, at 4:17 PM ET

---

Hamid Karzai has gone back to Afghanistan, and so the denizens of the Pentagon's E Ring and Foggy Bottom's seventh floor can drop their strained smiles and resume biting away at their fingernails.

Things in that unhappy country are going badly—much worse, of course, than Team Obama had to pretend this week but quite a bit worse than even a sensible skeptic might think. And unless Karzai takes to heart the lectures he heard (someone must have given him a stern talking-to amid all the bonhomie), things are only going to get worse still.

The evidence for this comes from an unclassified, 150-page Defense Department document called "Report on Progress Toward Security and Stability in Afghanistan." Released in late April, it's the fifth in a series of semi-annual reports mandated by Congress. A few disheartening lines from its executive summary were duly recited by the media. But the full report is a hair-raiser. The news is almost all bad; and the few bits of good news turn out, on close inspection, to be extremely misleading.

Oceans’ fish could disappear in 40 years: UN

By Agence France-Presse

Monday, May 17th, 2010 -- 1:43 pm

The world faces the nightmare possibility of fishless oceans by 2050 without fundamental restructuring of the fishing industry, UN experts said Monday.

"If the various estimates we have received... come true, then we are in the situation where 40 years down the line we, effectively, are out of fish," Pavan Sukhdev, head of the UN Environment Program's green economy initiative, told journalists in New York.

Politicians ignore Keynes at their peril

Deficit reduction is a big mistake when unemployment is high, as anyone familiar with the basics of economic theory can tell you

Dean Baker
Monday 17 May 2010 17.00 BST

John Maynard Keynes explained the dynamics of an economy in a prolonged period of high unemployment more than 70 years ago in The General Theory. Unfortunately, it seems very few people in policymaking positions in the United States or Europe have heard of the book. Otherwise, they would be pushing economic policy in the exact opposite direction than it is currently heading.

Most wealthy countries have now made deficit reduction the primary focus of their economic policy. Even though the US and many eurozone countries are projected to be flirting with double-digit unemployment for years to come, their governments will be focused on cutting deficits rather than boosting the economy and creating jobs.

The Continuing Exploits of Cattle Conservatism

Submitted by pmcarpenter on Mon, 05/17/2010 - 5:32am.

THE FIFTH COLUMNIST by P.M. Carpenter

I wish I could say the latest NBC News/Wall Street Journal poll presented its uncomprehending majorities as the incomprehensible, but unfortunately they're all too familiar and all quite accountable.

Before getting to that, however, a few of the poll's horrifying highlights.

For instance, more Americans than not -- in actual fact, an absolute majority -- now say "they are willing," in the words of NBC News' deputy political director, Mark Murray, "to give up personal freedoms and civil liberties to prevent another terrorist attack." In short, the terrorists have won; they have corralled us into a nation of cowards and authoritarian enablers -- a superpower of poltroonery, a contradiction which cannot hold.

Google Data Admission Angers European Officials

By KEVIN J. O’BRIEN

BERLIN — European privacy regulators and advocates reacted angrily Saturday to the disclosure by Google, the world’s largest search engine, that it had systematically collected private data since 2006 while compiling its Street View photo archive.

After being pressed by European officials about the kind of data the company compiled in creating the archive — and what it did with that information — Google acknowledged on Friday that it had collected snippets of private data around the world. In a blog post on its Web site, the company said information had been recorded as it was sent over unencrypted residential wireless networks as Google’s Street View cars with mounted recording equipment passed by.

Corporate Frontman Known as 'Dr. Evil' Makes a Fine Living Attacking Charities

By Ian T. Shearn, The Humane Society of the United States
Posted on May 11, 2010, Printed on May 17, 2010
http://www.alternet.org/story/146832/

Editor's Note: Reprinted by permission of The Humane Society of the United States.

If charity does indeed begin at home, in the case of Richard Berman, it starts in a $3 million, 8,800-square-foot mansion he shares with his second wife in McLean, Va. One of his first decisions in a day of many is whether to drive the Bentley or the Ferrari to work. On this particular spring morning, he goes with the Bentley.

Capable of zero to 60 in 4.4 seconds, the commute to his Washington D.C. office is no doubt enjoyable, even if the car’s 500-plus horsepower is bridled in congestion. He glides into his parking garage in the K Street corridor, gently backs the Bentley into a reserved spot and exits the car, clutching a bundle of newspapers under his arm.

PAUL KRUGMAN: Going to Extreme

Utah Republicans have denied Robert Bennett, a very conservative three-term senator, a place on the ballot, because he’s not conservative enough. In Maine, party activists have pushed through a platform calling for, among other things, abolishing both the Federal Reserve and the Department of Education. And it’s becoming ever more apparent that real power within the G.O.P. rests with the ranting talk-show hosts.

News organizations have taken notice: suddenly, the takeover of the Republican Party by right-wing extremists has become a story (although many reporters seem determined to pretend that something equivalent is happening to the Democrats. It isn’t.) But why is this happening? And in particular, why is it happening now?

Will They Get Fooled Again?

by Dean Baker

While it may not be the job of the Chairman of the Federal Reserve Board to deceive Congress to advance the interests of the big banks, apparently no one has informed Ben Bernanke of this fact.

Some people may recall the role that Mr. Bernanke played in helping to get the TARP through Congress. As part of the effort to build fear among members, he told Congress: "The credit markets aren't working. Corporations aren't able to finance themselves through commercial paper."

This was a big deal. Most large corporations are now dependent on selling commercial paper to finance their ongoing operations. They borrow money on the commercial paper market to meet their payroll and pay suppliers. If major companies were not able to sell commercial paper, they would quickly be unable to pay their bills and the economy really could shut down.

Katha Pollitt: What Ever Happened to Welfare Mothers?

Long lines of gloomy people in business suits at a jobs fair. Foreclosure signs on tidy suburban lawns. Adults moving into their parents' basement. In the news these days, the face of poverty is middle class, educated and often married: the hard-working, play-by-the-rules victims of the ongoing financial crisis. It's the man-bites-dog story that never ends.

But what about the people who already were poor before the crisis? Like women on welfare? Oh, them. The welfare reform bill, pompously titled the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) and signed by Bill Clinton in the run-up to the election, was supposed to pull these hapless folk off the dole with a mix of carrots and sticks aimed at forcing mothers off welfare and into the workforce. Not only would they find jobs that would allow them to support their children, the theory went; once single motherhood ceased to be subsidized by the taxpayer, poor women would settle down and marry before having kids. On its tenth anniversary PRWORA was widely trumpeted as a success: "Pragmatic progress," declared Newsweek's Robert Samuelson. "Everything has worked," Douglas Besharov of the American Enterprise Institute told USA Today. "Welfare reform has been a triumph for the federal government and the states-and even more for single mothers," claimed Brookings Institution senior fellow Ron Haskins in its newsletter. On the New York Times op-ed page, Clinton patted himself on the back for a successful triangulation ("At the time, I was widely criticized by liberals who thought the work requirements too harsh and conservatives who thought the work incentives too generous") and for moving millions from "dependence to empowerment."

Frank Rich: A Heaven-Sent Rent Boy

OF all wars, only culture wars offer the hope of sheer, unadulterated hilarity. Sex and hypocrisy were staples of farce long before America became a nation, and they never go out of style. Just listen to the roaring audience at the new hit Broadway revival of the perennial “La Cage aux Folles,” where a family-values politician gets his comeuppance in drag. Or check out the real-life closet case of George Rekers, who has been fodder for late-night television comics all month.

Rekers is in a class by himself even in the era of Larry Craig and Ted Haggard. A Baptist minister and clinical psychologist with a bent for “curing” homosexuality, the married, 61-year-old Rekers was caught by Miami New Times last month in the company of a 20-year-old male escort at Miami International Airport. The couple was returning from a 10-day trip to London and Madrid. New Times, which published its exposé in early May, got an explanation from Rekers: “I had surgery, and I can’t lift luggage. That’s why I hired him.''

Lean, green killing machines

As the Taliban gunman hides from an approaching Apache attack helicopter, he may not care that the American aircraft is painted with chrome-free primer to reduce its environmental impact. Nor may he be impressed that the next generation of pilotless surveillance drones will be part-powered by solar energy.

The US military is rushing to embrace sustainability. Its primary motive is not ethical. It is trying to keep pace with China in a strategic race to harness clean energy. Any future conflict between superpowers will almost certainly feature eco-weapons and green tactics. The oil-burning Americans are starting to realise how badly they are lagging behind.

Hannity's double whammy: falsely claims Obama is cutting troops' pay and military spending

Sean Hannity falsely claimed that President Obama is "cutting troops' pay" and "cutting back on the military spending now as we speak." In fact, the Obama administration requested an increase in soldiers' salaries and also requested a larger overall defense budget for fiscal year 2011.

A New Deal for Young Adults: Social Security for Students

By Alexander Hertel-Fernandez

Created 05/14/2010 - 8:20am

This post is based on a brief written for the National Academy of Social Insurance, read the entire brief here [1].

As graduation season commences, President Obama and other policymakers have called for efforts to increase college completion rates, especially for disadvantaged students. To help achieve this goal, Congress and the administration ought to look to a program with a strong historical record of aiding students: Social Security.

Social Security already provides support to the children of parents who have retired, died, or become disabled up through the child’s nineteenth birthday at the latest. From 1965 to 1981, Congress extended these benefits to age 22 if the child was enrolled in a form of higher education. Research has shown that these Social Security “student benefits” aided college enrollment and completion amongst low-income and minority young adults.

Climate Change: Four Futures

By Sara Robinson

Created 05/14/2010 - 2:04pm

As the debate over the climate bill heats up, there's one rule of thumb that may help you keep your bearings as the rhetoric becomes more gaseous and the weeds grow ever higher around the facts.

It's this: There are, in the end, only four possible futures here.

Future 1: Continuation
More business as usual. The people favoring this approach aren't just the deniers; they're also the people who intellectually understand and accept the reality of global heating, but are so locked into the status quo and its systems that they're either unable to imagine or impotent to instigate the kind of responses required to meet it.

(A rather sobering example: a friend told me earlier this week about a meeting with a Congressional staffer who proffered the opinion that 350 ppm of atmospheric carbon -- the absolute target set by the IPCC as necessary to avoid catastrophic warming -- wasn't possible, but a target of 450 ppm could probably be sold on the Hill. The guy honestly thought you could negotiate with physics the same way you negotiate state school lunch funding -- that Mother Nature is a bureaucrat who can be counted on to pad her budget request forms, expecting Congress to dock them. That's classic Continuation thinking.)

Senator Kaufman Was Right – Our Financial System Has Become Dangerous

By Simon Johnson, co-author, “13 Bankers: The Wall Street Takeover and The Next Financial Meltdown“

Update: link to Senator Kaufman’s speech yesterday

Senator Ted Kaufman (D, DE) is best known these days for arguing that, as part of comprehensive financial reform efforts, our biggest banks need to be made smaller. His advocacy on this issue helped build support around the country and forced a Senate floor vote on the Brown-Kaufman amendment, which was defeated 33-61 last Thursday.

Senator Kaufman has also pushed strongly the idea that in recent years there was a pervasive “arc of fraud” within the mortgage-securitization-derivatives complex. This thesis also seems to be gaining traction – according to the WSJ today, the criminal probe into this part of the financial sector continues to develop.

The Return of Madcap Capitalism

By Robert Parry
May 14, 2010

For much of the post-World War II era, there was a broad consensus that well-regulated capitalism – paired with an effective public sector – was the economic model that worked best, especially compared with the Soviet Union’s heavy-handed central planning or the madcap capitalism that had led to the Great Depression.

The harsh Soviet approach failed to meet basic consumer needs, and laissez-faire capitalism was too susceptible to the boom-and-bust cycles that brought on the Great Depression. President Franklin Roosevelt’s New Deal had charted a middle course that let capitalists make money producing and selling products while the government constrained capitalism’s worst excesses.

In the 1950s and 1960s, President Dwight Eisenhower’s Interstate highway system and John Kennedy’s space program also showed how smart government programs could help create an infrastructure to spur economic growth. Tax rates on the wealthy were relatively high in those days, but an expanding middle class was generating an unprecedented national prosperity.

Repairing The Job Machine

More jobs might be created this year than during George W. Bush's presidency.

Saturday, May 15, 2010
by Ronald Brownstein

If the economy produces jobs over the next eight months at the same pace as it did over the past four months, the nation will have created more jobs in 2010 alone than it did over the entire eight years of George W. Bush's presidency.

That comparison comes with many footnotes and asterisks. But it shows how the economic debate between the parties could look very different over time -- perhaps by November, more likely by 2012. More important, the comparison underscores the urgency of repairing an American job-creation machine that was sputtering long before the 2008 financial meltdown.

James K. Galbraith: Why the 'Experts' Failed to See How Financial Fraud Collapsed the Economy

By James K. Galbraith, AlterNet
Posted on May 15, 2010, Printed on May 15, 2010
http://www.alternet.org/story/146883/

Editor's Note: The following is the text of a James K. Galbraith's written statement to members of the Senate Judiciary Committee delivered this May.

Chairman Specter, Ranking Member Graham, Members of the Subcommittee, as a former member of the congressional staff it is a pleasure to submit this statement for your record.

I write to you from a disgraced profession. Economic theory, as widely taught since the 1980s, failed miserably to understand the forces behind the financial crisis. Concepts including "rational expectations," "market discipline," and the "efficient markets hypothesis" led economists to argue that speculation would stabilize prices, that sellers would act to protect their reputations, that caveat emptor could be relied on, and that widespread fraud therefore could not occur. Not all economists believed this – but most did.

Why The Way We're Working Isn't Working -- A Survival Manual for the Modern Age

By Arianna Huffington, Huffington Post
Posted on May 15, 2010, Printed on May 15, 2010
http://www.alternet.org/story/146880/

From Wall Street, to the lagging economy, to Greece and the "euro zone," to our broken regulatory system, to the high-speed computer trading system that might have played a role in last week's mini-meltdown in the stock market, to those two wars we're still in a decade later, it's clear that something is wrong. It's not that our political leaders and economic chieftains aren't, for the most part, smart people -- it's that they're making their decisions without judgment or wisdom. And when so many smart people end up making so many mistakes, clearly the way we're working isn't working.

Figuring out why this is so -- and what we can do about it -- is the animating idea behind The Way We're Working Isn't Working: The Four Forgotten Needs That Energize Great Performance by Tony Schwartz, Jean Gomes, and Catherine McCarthy, a terrific new book. It is essential reading for anyone who wants a more productive and meaningful life.