...there are two opposite reasons for being a democrat. You may think all men so good that they deserve a share in the government of the commonwealth, and so wise that the commonwealth needs their advice. That is, in my opinion, the false, romantic doctrine of democracy. On the other hand, you may believe fallen men to be so wicked that not one of them can be trusted with any irresponsible power over his fellows. -- C. S. Lewis
Wednesday, April 7, 2010
Reasons for believing in Democracy
Tuesday, March 30, 2010
Saturday, December 26, 2009
Tuesday, December 1, 2009
Friday, November 27, 2009
Friday, November 20, 2009
Tuesday, November 3, 2009
Some Thoughts on the State of the US
If you are an American and do not wish to get depressed, I suggest you skip this part. However, if you are an American, this might be just the part for you to read.
Like in my previous letter I’m not going to talk in detail about what’s happening in the United States. What I’ve learned from previously letters is that, as many people before me have found out for themselves, the bearer of bad news is seldom liked. People, especially Americans, feel offended by the things I mention, thinking that my critique is somehow aimed at them; I guess by proxy of being American. Let me reiterate that my “critique,” if one is really to call it that, is intended as observations, and where applicable as warnings. I’m merely noticing things that I find significant and mention them.
If there is one recent incident that should send shivers down the spine of every American citizen then it is the G20 meeting that was held in Pittsburg in September. Unfortunately few Americans actually know what happened there, since the media did a very good job of under reporting the peripheral events occurring outside the meeting. The mainstream media did not reveal the truth of how ordinary citizens (i.e. non-protesters) were attacked, both physically and with military weapons, including rubber bullets, teargas and experimental sonic weapons. It is clear from this event that the mainstream media in America is actually suppressing news and that free press is a rarity these days. I serious advice people to stop following the pre-packaged news agencies like CNN and start listening to independent news agencies, such as Democracy Now: The War and News Report, or other similar news agencies. Or if you can speak another language, listen to American news as covered by non-American broadcasters. Germany, for one, seems to present clearer description of big newsworthy events (i.e., not Michael Jackson or Britney Spears) in the USA. I’ve also seen some good stuff on Russia Today.
Most Americans do not know this but much the anti-protest police used in Pittsburg during the G20 meeting was made up of foreign military forces, and police forces from outside of Pittsburg. This is terrifying in itself, but also makes good sense – you don’t want the militia you’re using to feel sentimental about the people they are oppressing, do you?
People were arrested for using Twitter, warning fellow citizens in Pittsburg to stay clear of certain areas. Twitter, if you don’t know, is an Internet based text-messaging system that allows one to send simultaneous messages to everyone that is registered to your account. Well, people used their Twitter-accounts to warn other people to avoid certain areas where this anti-riot police, or rather militia, was at. (And for good reason, the militia were harassing innocent civilians, beating them, shooting them with rubber bullets, or sonic devices, or teargas – I’d be quite thankful if someone forewarned me to avoid such danger zones.) For this, some of these Twitter-users were thrown in jail, and / or raided by the FBI, for, (get this!) interfering with police activities. What does this say about the future of freedom of speech in America?
The ironic thing is that the USA condemned Iran’s oppression of Twitter-users just a couple of months earlier when Iranian freedom of speech activists used Twitter as a networking tool. Now, in America users of Twitter are raided, treated as terrorists and thrown in jail.
During the Pittsburg event members of the press was detained, and the main news media broadcasters were quiet. Or if they covered the event it showed a skewed reality. Thank goodness that, for now, the Internet is still an open resource. Many students from the University of Pittsburg recorded some of the events on their cell phones and uploaded it onto YouTube. You can easily search for it. But how long will the Internet stay open? There are already movements towards muzzling it – think of the Cyber Bullying Act which is one step in the wrong direction, no matter how well intended.
Should I mention how children in some American schools are taught songs of praise to glorify the President? Really, this is seriously disconcerting. I don’t have anything personally against Mr. Obama, how could I? I’m not American. But this reconfirms a grave trend I’ve noticed even before his election – a type of worship similar to little North Korean children singing praises to the Great Leader. And while such Obama-worship is happening on the one side of the spectrum, a colleague told me that she heard how people are having bets on the date the First Lady of America will become a widow; and I also heard of a poll that was on Facebook asking whether or not the president should be assassinated. So while the Obama-mania is still sweeping one segment of America, there seems to be a counter-wave as well. And in between are the normal folk, who will become caught in the crossfire.
Did you know that a private company, with the convenient title of “American Police Force” is buying up prisons to be privately owned. With private companies having names such as “American Police Force,” and foreign militia running the streets pretending to be local police or military, how is one to know who is friend and who is foe, who is protector and who is predator? And I just recently heard that some of these privately owned jails bribed judges to get more prisoners. So much for a fare trial!
And let met not even begin talking about the Swine Flu and the recent declaration of a “national emergency.” Sweden was the first country to start swine flu vaccinations and it is also the first to report deaths related to the injection. The fact that a “national emergency” was declared, which basically give authorities the power to forcefully quarantine and vaccinate people against their will, seems not to make the headlines at all. The fact that there are carcinogens and mercury in some of the vaccinations doesn’t seem much of a media headline either – in fact, some of the media reports actually lie about the vaccine ingredients. I wonder how much the pharmaceutical companies have invested in these media broadcasters. The swine flu is not fake (although some do think it artificial), and I would not be surprised if it was engineered by these pharmaceutical companies who made millions selling vaccines to governments.
Want to hear more? How about the FBI’s application to renew three Patriot Act spying provisions, without them having to reveal their conduct (aka “gag power”). Melissa Goodman, the ACLU Staff Attorney explains that the “gag power has allowed the FBI to manipulate the debate, to suppress evidence of its misuse of the NSL power, and to deprive Congress and the public of important information it needs to inform whether these intrusive surveillance and gag powers should be reformed.” It was announced that the Supreme Court will review, at least parts of, the controversial Patriot Act, to ascertain it constitutionality – but one has to wonder about their “creative interpretations” sometimes.
The Dollar keeps dropping in value (which is no surprise as more money is continually printed—“stimulus”—without any physical backing like gold). Latin American countries have announced a new Latin American Currency to replace dependency on the Dollar. The BRIC countries (Brazil, Russia, India, and China) are in negotiations to find an alternative currency than the US Dollar to trade in.
And the United States is increasing its three foreign wars (Afghanistan, Iraq, and Pakistan), with the current Administration considered sending more and more young soldiers; many of them to die in wars based on lies: “Weapons of Mass Destruction.” Does the US Administration really think that it is making America a safer place by increasing its oppression of these countries? Rather, it is fuelling emotions of revenge which is bound to increase terrorists’ attacks and one would not be surprised to see more of that in the future.
Surely seeing such trends one must be concerned for the future of the country? And I am especially concerned for the future of all my American friends and acquaintances. I’m not sharing these things because I take pleasure out of pointing the issues in America; rather, I’m sharing it because I am seriously troubled by it.
Imagine if America took all those billions of dollars it is pumping into these wars, and instead of using it to destroy “and keep order,” the money is used to build up, provide food, schools, hospitals, homes…
There is a story in the Bible where Syria came to destroy Israel, but through miraculous events Israel got the upper hand. The king of Israel asked council from the prophet Elisha: “My father, shall I smite them?” Elisha gave a surprising answer: “Thou shalt not smite them: wouldest thou smite those whom thou hast taken captive with thy sword and with thy bow? Set bread and water before them, that they may eat and drink, and [let them] go to their master.” The king listened and “he prepared great provision for them: and when they had eaten and drunk, he sent them away, and they went to their master. So the bands of Syria came no more into the land of Israel.” (You can read the story in II Kings 6.) This is how you make peace with your enemy.
The principle in this story was mentioned before by the Sage-King Solomon: “If thine enemy be hungry, give him bread to eat; and if he be thirsty, give him water to drink…” (Proverbs 25:21). Centuries later the Messiah came to make this principle clearest, by saying “Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you…” (Matthew 5:43).
If it was possible for the US government to take such an approach to their enemies they would make friends of them, and will then need little fear of terrorist attacks. Of course, this will not happen. The way of the Kingdom of God, i.e. the Way of Unconditional Love and Peace and “good will toward men,” is not the way of earthly governments—American or any other government; after all, Jesus did say that his “kingdom is not of this world.”
Making friends of its enemies is not the agenda of the USA. America’s culture of violence has it conditioned into believing that conquering is the way. It may be a way, but it is definitely not the way to long lasting peace. Instead it creates enemies intend on revenge. Do not be fooled; America’s wars are far from over and President Obama’s campaign promises were at best wishful thinking. While American tactics involve drone planes blasting away civilians, who can expect peace?
I said that I’d not go into detail concerning America. I didn’t. The few points I’ve mentioned I hardly discussed, and these were merely a blip of the things that happened over the last two months.
Like in my previous letter I’m not going to talk in detail about what’s happening in the United States. What I’ve learned from previously letters is that, as many people before me have found out for themselves, the bearer of bad news is seldom liked. People, especially Americans, feel offended by the things I mention, thinking that my critique is somehow aimed at them; I guess by proxy of being American. Let me reiterate that my “critique,” if one is really to call it that, is intended as observations, and where applicable as warnings. I’m merely noticing things that I find significant and mention them.
If there is one recent incident that should send shivers down the spine of every American citizen then it is the G20 meeting that was held in Pittsburg in September. Unfortunately few Americans actually know what happened there, since the media did a very good job of under reporting the peripheral events occurring outside the meeting. The mainstream media did not reveal the truth of how ordinary citizens (i.e. non-protesters) were attacked, both physically and with military weapons, including rubber bullets, teargas and experimental sonic weapons. It is clear from this event that the mainstream media in America is actually suppressing news and that free press is a rarity these days. I serious advice people to stop following the pre-packaged news agencies like CNN and start listening to independent news agencies, such as Democracy Now: The War and News Report, or other similar news agencies. Or if you can speak another language, listen to American news as covered by non-American broadcasters. Germany, for one, seems to present clearer description of big newsworthy events (i.e., not Michael Jackson or Britney Spears) in the USA. I’ve also seen some good stuff on Russia Today.
Most Americans do not know this but much the anti-protest police used in Pittsburg during the G20 meeting was made up of foreign military forces, and police forces from outside of Pittsburg. This is terrifying in itself, but also makes good sense – you don’t want the militia you’re using to feel sentimental about the people they are oppressing, do you?
People were arrested for using Twitter, warning fellow citizens in Pittsburg to stay clear of certain areas. Twitter, if you don’t know, is an Internet based text-messaging system that allows one to send simultaneous messages to everyone that is registered to your account. Well, people used their Twitter-accounts to warn other people to avoid certain areas where this anti-riot police, or rather militia, was at. (And for good reason, the militia were harassing innocent civilians, beating them, shooting them with rubber bullets, or sonic devices, or teargas – I’d be quite thankful if someone forewarned me to avoid such danger zones.) For this, some of these Twitter-users were thrown in jail, and / or raided by the FBI, for, (get this!) interfering with police activities. What does this say about the future of freedom of speech in America?
The ironic thing is that the USA condemned Iran’s oppression of Twitter-users just a couple of months earlier when Iranian freedom of speech activists used Twitter as a networking tool. Now, in America users of Twitter are raided, treated as terrorists and thrown in jail.
During the Pittsburg event members of the press was detained, and the main news media broadcasters were quiet. Or if they covered the event it showed a skewed reality. Thank goodness that, for now, the Internet is still an open resource. Many students from the University of Pittsburg recorded some of the events on their cell phones and uploaded it onto YouTube. You can easily search for it. But how long will the Internet stay open? There are already movements towards muzzling it – think of the Cyber Bullying Act which is one step in the wrong direction, no matter how well intended.
Should I mention how children in some American schools are taught songs of praise to glorify the President? Really, this is seriously disconcerting. I don’t have anything personally against Mr. Obama, how could I? I’m not American. But this reconfirms a grave trend I’ve noticed even before his election – a type of worship similar to little North Korean children singing praises to the Great Leader. And while such Obama-worship is happening on the one side of the spectrum, a colleague told me that she heard how people are having bets on the date the First Lady of America will become a widow; and I also heard of a poll that was on Facebook asking whether or not the president should be assassinated. So while the Obama-mania is still sweeping one segment of America, there seems to be a counter-wave as well. And in between are the normal folk, who will become caught in the crossfire.
Did you know that a private company, with the convenient title of “American Police Force” is buying up prisons to be privately owned. With private companies having names such as “American Police Force,” and foreign militia running the streets pretending to be local police or military, how is one to know who is friend and who is foe, who is protector and who is predator? And I just recently heard that some of these privately owned jails bribed judges to get more prisoners. So much for a fare trial!
And let met not even begin talking about the Swine Flu and the recent declaration of a “national emergency.” Sweden was the first country to start swine flu vaccinations and it is also the first to report deaths related to the injection. The fact that a “national emergency” was declared, which basically give authorities the power to forcefully quarantine and vaccinate people against their will, seems not to make the headlines at all. The fact that there are carcinogens and mercury in some of the vaccinations doesn’t seem much of a media headline either – in fact, some of the media reports actually lie about the vaccine ingredients. I wonder how much the pharmaceutical companies have invested in these media broadcasters. The swine flu is not fake (although some do think it artificial), and I would not be surprised if it was engineered by these pharmaceutical companies who made millions selling vaccines to governments.
Want to hear more? How about the FBI’s application to renew three Patriot Act spying provisions, without them having to reveal their conduct (aka “gag power”). Melissa Goodman, the ACLU Staff Attorney explains that the “gag power has allowed the FBI to manipulate the debate, to suppress evidence of its misuse of the NSL power, and to deprive Congress and the public of important information it needs to inform whether these intrusive surveillance and gag powers should be reformed.” It was announced that the Supreme Court will review, at least parts of, the controversial Patriot Act, to ascertain it constitutionality – but one has to wonder about their “creative interpretations” sometimes.
The Dollar keeps dropping in value (which is no surprise as more money is continually printed—“stimulus”—without any physical backing like gold). Latin American countries have announced a new Latin American Currency to replace dependency on the Dollar. The BRIC countries (Brazil, Russia, India, and China) are in negotiations to find an alternative currency than the US Dollar to trade in.
And the United States is increasing its three foreign wars (Afghanistan, Iraq, and Pakistan), with the current Administration considered sending more and more young soldiers; many of them to die in wars based on lies: “Weapons of Mass Destruction.” Does the US Administration really think that it is making America a safer place by increasing its oppression of these countries? Rather, it is fuelling emotions of revenge which is bound to increase terrorists’ attacks and one would not be surprised to see more of that in the future.
Surely seeing such trends one must be concerned for the future of the country? And I am especially concerned for the future of all my American friends and acquaintances. I’m not sharing these things because I take pleasure out of pointing the issues in America; rather, I’m sharing it because I am seriously troubled by it.
Imagine if America took all those billions of dollars it is pumping into these wars, and instead of using it to destroy “and keep order,” the money is used to build up, provide food, schools, hospitals, homes…
There is a story in the Bible where Syria came to destroy Israel, but through miraculous events Israel got the upper hand. The king of Israel asked council from the prophet Elisha: “My father, shall I smite them?” Elisha gave a surprising answer: “Thou shalt not smite them: wouldest thou smite those whom thou hast taken captive with thy sword and with thy bow? Set bread and water before them, that they may eat and drink, and [let them] go to their master.” The king listened and “he prepared great provision for them: and when they had eaten and drunk, he sent them away, and they went to their master. So the bands of Syria came no more into the land of Israel.” (You can read the story in II Kings 6.) This is how you make peace with your enemy.
The principle in this story was mentioned before by the Sage-King Solomon: “If thine enemy be hungry, give him bread to eat; and if he be thirsty, give him water to drink…” (Proverbs 25:21). Centuries later the Messiah came to make this principle clearest, by saying “Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you…” (Matthew 5:43).
If it was possible for the US government to take such an approach to their enemies they would make friends of them, and will then need little fear of terrorist attacks. Of course, this will not happen. The way of the Kingdom of God, i.e. the Way of Unconditional Love and Peace and “good will toward men,” is not the way of earthly governments—American or any other government; after all, Jesus did say that his “kingdom is not of this world.”
Making friends of its enemies is not the agenda of the USA. America’s culture of violence has it conditioned into believing that conquering is the way. It may be a way, but it is definitely not the way to long lasting peace. Instead it creates enemies intend on revenge. Do not be fooled; America’s wars are far from over and President Obama’s campaign promises were at best wishful thinking. While American tactics involve drone planes blasting away civilians, who can expect peace?
I said that I’d not go into detail concerning America. I didn’t. The few points I’ve mentioned I hardly discussed, and these were merely a blip of the things that happened over the last two months.
Tuesday, October 20, 2009
Some Hope in the (Financial) Crisis
I've been quite negative about the state of the world, but the following TED-Talk video by John Gerzema gives me a little hope. Don't get me wrong, I do not for a moment think that the financial crisis is over. In fact, I'm very much convinced that financially the worst is yet to come. Nevertheless, it would seem that the world may be a little bit better prepared for it.
Now while the financial crisis is something to be concerned about, it is not my main worry. What I'm really worried about is governments continued effort to confine, restrict, muzzle, and basically cattle their citizens increasingly more and more. Good luck with that.
Now while the financial crisis is something to be concerned about, it is not my main worry. What I'm really worried about is governments continued effort to confine, restrict, muzzle, and basically cattle their citizens increasingly more and more. Good luck with that.
Monday, October 5, 2009
Saturday, October 3, 2009
Monday, September 28, 2009
America -- Land of the Free; or is it?!
In what was possibly the most surreal, horrific, and unimaginable thing I have ever witnessed in my life, 1200 Riot Police and Military Personal rabidly attacked a group of well under 300 American citizens, many of them just students that were unaware there was even a protest going on. They then expanded their perimeter and shut large areas of Oakland down. This is how my last experience at the G20 in Pittsburgh went down, out of control authorities mercilessly attacking an unarmed crowd with batons, tear gas, pepper spray, sound weapons, and rubber bullets. Around 10pm on Friday night, long after the vast majority of dignitaries and protesters had left, it became evident that the outrageous show of force by the Military and Police was not enough to stave off their thirst for blood. Read more here...
Wednesday, September 23, 2009
The Land of the Bloody
So these days in America you can be stopped at a roadblock and have a blood sample forcibly taken from you. The "Land of the Free" looks more and more like Nazi Germany... but hey, the major news being covered is Kanye West's antics at the MTV-awards. Not to mention that such bodily violation is against the Fourth Amendment, the Tenth Amendment, and who knows which other law is being broken.
Friday, September 18, 2009
The Political Power of Iconography
In the video below the powerful influence of icons and branding is discussed within the context of politics, specifically American politics. As someone who was once a graphic designer (and who have designed my share of logos) and also an avid believer in the need visual literacy in the times we live, I found this an excellent analysis well worth watching.
Eckhart Tolle and New Age
The pastors from Woodland Hills Church has a sound Q&A regarding Eckhart Tolle's worldview and similar New Age trends. You can view it here. They also made comments that resonated with my "Why I'll Never Be a Pantheist Again".
Eckhart Tolle is the author of the book The New Earth, which is endorsed by Oprah Winfrey -- this of course made it a secure best seller.
Eckhart Tolle is the author of the book The New Earth, which is endorsed by Oprah Winfrey -- this of course made it a secure best seller.
Wednesday, September 16, 2009
Obama Banking Too Much On Banks
A very informative article by Nomi Prins, a former investment banker that became a journalist.
Obama Banking Too Much On Banks
On Monday—one year after the once-mighty Lehman Brothers collapsed in the nation’s biggest bankruptcy—President Obama addressed the state of the economy and again outlined his proposals for what he calls reform. The location—Federal Hall at 26 Wall Street, near the New York Stock Exchange and New York Federal Reserve Bank—was fitting. George Washington took his presidential oath there, a precursor for how intertwined Washington and Wall Street would become. And Obama’s speech indicates that he’s still making the grave error of mistaking the health of Wall Street for the health of the American economy.
Obama chose not to deliver his speech on, say, the streets of Bend, Oregon, or Fresno, California, which provide different indicators of our economic predicament. That’s because Washington’s approach to the crisis has been to focus on the banking system, throw a few crumbs to citizens, and hope everything else will magically work itself out.
The problem with concentrating on the banking system is that it allows the administration to present an overly optimistic assessment of its actions. "The storms of the past two years are beginning to break," Obama pronounced, attributing this to a government that "moved quickly on all fronts, initializing a financial stability plan to rescue the system from the crisis and restart lending for all those affected by the crisis." He continued: "By taking aggressive and innovative steps in credit markets, we spurred lending not just to banks, but to folks looking to buy homes or cars, take out student loans, or finance small businesses. Our home ownership plan has helped responsible homeowners refinance to stem the tide of lost homes and lost home values."
Those steps were certainly aggressive. Under both the Bush and Obama administrations, the government, from the Federal Reserve to the Treasury Department, has flushed the banking systems and other components of the financial markets with $17.5 trillion worth of loans, guarantees, and other forms of support. About another $1 trillion has been provided to citizens through the recovery package, first-time homeowner tax benefits, auto purchase credits, and approximately $800 billion to help guarantee the loans of certain lenders—which somewhat helps borrowers, but helps lenders more.
But these measures have hardly brought the economy back from the brink. They brought Wall Street back from capital starvation and prevented the possibility of more big banks going bankrupt—instead of the slew of smaller and mid-size ones that have since met the same fate as Lehman Brothers. Taking credit for stabilizing the financial system after feeding it with massive amounts of federal money is like a teacher bragging about turning around the academic performance of a failing student after handing them all the answers to the big tests.
Here’s how the economy is really faring (and how Washington is failing to take adequate steps to fix it):
* National unemployment is at 9.7 percent, higher than last year’s 5.8 percent, with double digit jobless rates in 139 metropolitan areas this July, compared to 14 last July.
* The number of foreclosures is greater than last year: nearly 2 million new foreclosure filings occurred in the first half of 2009, up 15 percent from the same period in 2008.
* While homes in some areas have begun to slowly sell again, they are doing so at deeply depressed prices, in many instances below their mortgage value.
* Wall Street bonuses are back to pre-crisis levels. For some firms, such as Goldman Sachs, they are even higher.
* Bank leverage, or excessive borrowing on the back of risky assets—a major cause of the meltdown—is rising again.
* Geithner recently reported that his program to enable private financial firms to buy up toxic assets with government help will wind up costing less than the $1 trillion he had first envisioned. However, he did not mention that there are less toxic assets available to buy partly because the Fed has allowed banks to use some toxic assets as collateral in return for cheap loans.
* Big banks are bigger than they were last year. Since the Fed blessed more mergers last fall, the nation’s three largest banks—Bank of America, JPMorgan Chase and Wells Fargo—hold the maximum percentage of legally permissable US deposits or more.
* Mid-size and smaller banks keep closing. This year, the Federal Deposit Insurance Corporation (FDIC) has closed 92 banks and depleted its deposit insurance money in the process.
* We still don’t have detailed information on the trillions of dollars of loans the Fed handed out to the banking sector or about the quality of the collateral banks provided in return.
Obama did acknowledge that the picture isn’t entirely rosy. He also outlined his ideas for avoiding another catastrophe: reshuffle the decks of regulatory agencies, slap a few trading constraints on some derivatives, and create a Consumer Financial Protection Agency (CFPA). But while Obama's rhetoric was stern—"normalcy cannot lead to complacency," he vowed—the proposals themselves are hardly sweeping.
Obama’s plan calls for eliminating the Office of Thrift Supervision and providing greater oversight by the Fed of “systemically important” institutions. The Senate is trying to water that down, in part because some members of both parties in Congress remain skeptical about the power of the Fed itself. The Senate also wants to consolidate regulatory authority into fewer entities, but leave oversight to a council of regulators. Of course, consolidating regulatory oversight only works if regulators are doing their jobs and the banking system is transparent enough to allow them to do so.
The last leg of Obama’s proposal would be establishing the CFPA, which would monitor financial products in an effort to protect consumers from risky instruments such as subprime mortgages. Legislation to create such an agency is expected to be taken up this year by the House Financial Services Committee, chaired by Rep. Barney Frank (D-Mass).
A strong CFPA is a sensible plan. Right now there is no other body imbued with the power not just to protect consumers but also to foster the general economic stability that would be achieved by closely monitoring the integrity of financial products. This proposal has drawn the most ire from the banking community, so you know it’s good. The Chamber of Commerce launched a $2 million ad campaign to convince people that a CFPA would mean that local butcher couldn’t extend credit to his customers without government interference.
But Obama's reforms do not strike deeply enough. The banking crisis has been subdued, not fixed, because of enormous amounts of government assistance. Ignoring that fact, and failing to overhaul the sector, leaves us open to another crisis. And the next round will be worse, because there is now so much more federal money invested in the banks.
Simply funding the banking system without reforming it is an expensive and dangerous game. Obama is capable of truly fixing things—by dividing up the Wall Street mega-banks with a new Glass Steagall Act, thereby enabling the success of more extensive regulatory reforms. Or, he could introduce a set of cosmetic changes that allow banks to keep doing what they did before last year’s crisis and that put us on the path for the next one.
Obama Banking Too Much On Banks
On Monday—one year after the once-mighty Lehman Brothers collapsed in the nation’s biggest bankruptcy—President Obama addressed the state of the economy and again outlined his proposals for what he calls reform. The location—Federal Hall at 26 Wall Street, near the New York Stock Exchange and New York Federal Reserve Bank—was fitting. George Washington took his presidential oath there, a precursor for how intertwined Washington and Wall Street would become. And Obama’s speech indicates that he’s still making the grave error of mistaking the health of Wall Street for the health of the American economy.
Obama chose not to deliver his speech on, say, the streets of Bend, Oregon, or Fresno, California, which provide different indicators of our economic predicament. That’s because Washington’s approach to the crisis has been to focus on the banking system, throw a few crumbs to citizens, and hope everything else will magically work itself out.
The problem with concentrating on the banking system is that it allows the administration to present an overly optimistic assessment of its actions. "The storms of the past two years are beginning to break," Obama pronounced, attributing this to a government that "moved quickly on all fronts, initializing a financial stability plan to rescue the system from the crisis and restart lending for all those affected by the crisis." He continued: "By taking aggressive and innovative steps in credit markets, we spurred lending not just to banks, but to folks looking to buy homes or cars, take out student loans, or finance small businesses. Our home ownership plan has helped responsible homeowners refinance to stem the tide of lost homes and lost home values."
Those steps were certainly aggressive. Under both the Bush and Obama administrations, the government, from the Federal Reserve to the Treasury Department, has flushed the banking systems and other components of the financial markets with $17.5 trillion worth of loans, guarantees, and other forms of support. About another $1 trillion has been provided to citizens through the recovery package, first-time homeowner tax benefits, auto purchase credits, and approximately $800 billion to help guarantee the loans of certain lenders—which somewhat helps borrowers, but helps lenders more.
But these measures have hardly brought the economy back from the brink. They brought Wall Street back from capital starvation and prevented the possibility of more big banks going bankrupt—instead of the slew of smaller and mid-size ones that have since met the same fate as Lehman Brothers. Taking credit for stabilizing the financial system after feeding it with massive amounts of federal money is like a teacher bragging about turning around the academic performance of a failing student after handing them all the answers to the big tests.
Here’s how the economy is really faring (and how Washington is failing to take adequate steps to fix it):
* National unemployment is at 9.7 percent, higher than last year’s 5.8 percent, with double digit jobless rates in 139 metropolitan areas this July, compared to 14 last July.
* The number of foreclosures is greater than last year: nearly 2 million new foreclosure filings occurred in the first half of 2009, up 15 percent from the same period in 2008.
* While homes in some areas have begun to slowly sell again, they are doing so at deeply depressed prices, in many instances below their mortgage value.
* Wall Street bonuses are back to pre-crisis levels. For some firms, such as Goldman Sachs, they are even higher.
* Bank leverage, or excessive borrowing on the back of risky assets—a major cause of the meltdown—is rising again.
* Geithner recently reported that his program to enable private financial firms to buy up toxic assets with government help will wind up costing less than the $1 trillion he had first envisioned. However, he did not mention that there are less toxic assets available to buy partly because the Fed has allowed banks to use some toxic assets as collateral in return for cheap loans.
* Big banks are bigger than they were last year. Since the Fed blessed more mergers last fall, the nation’s three largest banks—Bank of America, JPMorgan Chase and Wells Fargo—hold the maximum percentage of legally permissable US deposits or more.
* Mid-size and smaller banks keep closing. This year, the Federal Deposit Insurance Corporation (FDIC) has closed 92 banks and depleted its deposit insurance money in the process.
* We still don’t have detailed information on the trillions of dollars of loans the Fed handed out to the banking sector or about the quality of the collateral banks provided in return.
Obama did acknowledge that the picture isn’t entirely rosy. He also outlined his ideas for avoiding another catastrophe: reshuffle the decks of regulatory agencies, slap a few trading constraints on some derivatives, and create a Consumer Financial Protection Agency (CFPA). But while Obama's rhetoric was stern—"normalcy cannot lead to complacency," he vowed—the proposals themselves are hardly sweeping.
Obama’s plan calls for eliminating the Office of Thrift Supervision and providing greater oversight by the Fed of “systemically important” institutions. The Senate is trying to water that down, in part because some members of both parties in Congress remain skeptical about the power of the Fed itself. The Senate also wants to consolidate regulatory authority into fewer entities, but leave oversight to a council of regulators. Of course, consolidating regulatory oversight only works if regulators are doing their jobs and the banking system is transparent enough to allow them to do so.
The last leg of Obama’s proposal would be establishing the CFPA, which would monitor financial products in an effort to protect consumers from risky instruments such as subprime mortgages. Legislation to create such an agency is expected to be taken up this year by the House Financial Services Committee, chaired by Rep. Barney Frank (D-Mass).
A strong CFPA is a sensible plan. Right now there is no other body imbued with the power not just to protect consumers but also to foster the general economic stability that would be achieved by closely monitoring the integrity of financial products. This proposal has drawn the most ire from the banking community, so you know it’s good. The Chamber of Commerce launched a $2 million ad campaign to convince people that a CFPA would mean that local butcher couldn’t extend credit to his customers without government interference.
But Obama's reforms do not strike deeply enough. The banking crisis has been subdued, not fixed, because of enormous amounts of government assistance. Ignoring that fact, and failing to overhaul the sector, leaves us open to another crisis. And the next round will be worse, because there is now so much more federal money invested in the banks.
Simply funding the banking system without reforming it is an expensive and dangerous game. Obama is capable of truly fixing things—by dividing up the Wall Street mega-banks with a new Glass Steagall Act, thereby enabling the success of more extensive regulatory reforms. Or, he could introduce a set of cosmetic changes that allow banks to keep doing what they did before last year’s crisis and that put us on the path for the next one.
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