Saturday, April 24, 2010

Clinton's Contrition

Friday 23 April 2010
by: David Sirota, t r u t h o u t Op-Ed

In 1992, I was in 10th grade. Hence, I didn't care about much more than the girls I could never get, the Philadelphia 76ers' playoff chances and the shortcomings of my own unimpressive basketball career (in that order) -- and I certainly didn't care about politics. So when my teacher assigned me to represent a Southerner I'd never heard of in a mock presidential debate, I was, um, not psyched.
My attitude changed, though, when I started researching -- wait, what was his name again? Oh, right -- Bill Clinton. To my surprise, what I found was inspiring. The lip-biting saxophonist seemed like a forthright guy with some heartfelt "feel your pain" outrage at the unfairness of the moment's Gordon Gekko zeitgeist. An early campaign speech I discovered particularly captivated me -- the one in which Clinton said, "I expect the jetsetters and featherbedders of corporate America to know that if you sell your companies and your workers and your country down the river, you'll be called on the carpet."
Call me crazy or gullible -- at 16, I was probably both -- but I bought it. If not for Clinton's campaign (and that irrepressibly optimistic Fleetwood Mac jingle), I might have followed star-crossed hoop dreams already doomed by my god-awful jump shot. Instead, I chose a political path, genuinely believing in that place called hope.
This naive faith, of course, is why I would later come to detest Bill Clinton.
Upon assuming office, he championed the very corporatist policies he railed on -- lobbyist-written free-trade pacts and financial deregulation, to name a few. To me, a fervent supporter turned spurned groupie, Clinton eventually looked like an opportunist who knew he was selling out -- and yet sold out anyway.
Because of his reversals, I ended up in my adult years being critical of Clinton -- so consistently critical, in fact, that I'm shocked to find myself about to spend the next few paragraphs praising him. No, not for his (admittedly impressive) humanitarian work, but for his recent contrition.
Whereas former presidents typically devote their retirements to history-revising legacy preservation, Clinton is laudably doing the opposite -- and the nation will, hopefully, benefit.
It began with his congressional testimony last month. Discussing his administration's trade policy, Clinton admitted that it "has not worked" to alleviate poverty, as promised.
"It was a mistake," he said of his agribusiness-backed initiatives forcing impoverished countries to eliminate tariffs. "It was a mistake that I was a party to ... I had to live every day with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did."
Clinton didn't stop there. In a subsequent ABC News interview, he said that when it came to 1990s-era financial deregulation that so harmed today's economy, "I think (my advisers) were wrong, and I think I was wrong."
Some will undoubtedly say "too little, too late." But with Clinton having nothing to gain from these admissions -- and, really, lots to lose -- the 10th-grade idealist in me says "better late than never."
Better he acknowledge the failure of misguided trade and deregulatory initiatives, rather than pretend they succeeded. Better he apologize for the betrayals that deflated his supporters, rather than feign indifference. Why? Because the penitence may now spur change.
Clinton's compunction could, for instance, convince President Obama to shelve new free-trade proposals and avoid undermining Congress' current financial regulatory legislation. It may compel Obama to fire the same Clinton economic aides who now work in his administration. And it might even prompt a nation of exceptionalists to admit its errors and actually reform itself.
After all, if Clinton can learn from mistakes, then America should be able to do the same.

David Sirota is the author of the best-selling books "Hostile Takeover" and "The Uprising." He hosts the morning show on AM760 in Colorado and blogs at E-mail him at or follow him on Twitter @davidsirota.
Copyright 2010

All republished content that appears on Truthout has been obtained by permission or license.

Corporate Reform Is Long Overdue: Am I Missing Something Here?

Friday 23 April 2010
by: Jack Lohman, t r u t h o u t Op-Ed

Perhaps I'm biased.
I bought $25,000 of stock in a corporation that I thought had a good idea. Little did I know that the CEO also had a second idea: to drain the shareholder value through high salaries and bonuses, and then put the company belly up. My money went down the tubes, as did many others, though the CEO and executives made out very well.
I don't like being ripped off, and few folks do. The Fat Cats know that's just part of the game, because they invented it. And they can afford to play it because they'll win more than they lose. They have these things like insider trading and cooking the books that keep them whole.
So, now Obama wants to take over the banks when they fail, and those shareholder values will go to zero even though they had no say in running the company. But the bankers and their bonuses for failure likely will survive, as they'll find ways to offshore their wealth.
Unfortunately, Congress seems not to want to protect the investments of shareholders, as the recent hit on our IRAs will attest. It's that free-market thingy, don'cha know? We should have known better.
It also seems that Congress has had a hands-off policy because the CEOs and boards finance their campaigns to a greater extent than do the shareholders. Campaign cash works as planned, and these CEOs are no dummies.
Corporations (and banks) have been taken over by CEOs and the buddy system, a board of directors where each member sits on each others' boards and each votes in favor of the others' pay package. Exorbitant salary, vacation and retirement benefits, stock options, and a handsome golden parachute in the event of an unfriendly takeover or forced change of command. Nice arrangement.
Like the CEO of UnitedHealth who reaped $100 million by exercising stock options. How nice is that?
And, oh, to ward off potential shareholder lawsuits that claim mismanagement, they hire an outside "compensation consultant" to provide a recommendation they can all live with and that will give the board legal cover in a lawsuit. And they pay these "consultants" very well to ensure an acceptable answer, which comes out of profits to the detriment of the shareholders they rip off.
So, we have Fat Cats funding the elections of the politicians who otherwise would pass laws to shield shareholders from corporate corruption. And, now, the Supreme Court guarantees that these corporations are to be treated like "people" and can give unlimited funds to back the elections of these same politicians.
Is this what they call corporate and political corruption?
The fix?
I'm sure there are many fixes, but the first is to give the owners (the shareholders) a binding vote on CEO, executive and board member compensation packages (including stock options and golden parachutes). The CEOs and boards should run the companies, but the rules should facilitate easy replacement of CEOs and board members in the event of poor management. And board members should be selected by the shareholders alone, rather than by conflicted CEOs.
As well, corporations may be people, but they can't go to jail. The CEOs, therefore, should not be able to hide behind the corporate veil, and if they are involved in wrongdoing they should spend the time in jail.
Lastly, the shareholders should have a binding vote over whether, and if so to what extent, and to whom, the company is going to bribe - er, contribute to - in the political system. The same should be true of union members when their dues are being spent on contributions. Nobody's money should be spent on politicians they don't agree with, with their money mandated by the personal whim of the CEOs.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States Lic

Cheating US Workers

Friday 23 April 2010
by: Dick Meister, t r u t h o u t Op-Ed

Hundreds of thousands of workers are being cheated by US employers who blatantly violate the laws that are supposed to guarantee those workers decent wages, hours and working conditions.
That's been going on for a long time, but rarely as extensively as it was during the administration of George W. Bush. Thankfully, Bush is gone. And thankfully, President Obama and his outstanding secretary of labor, Hilda Solis, have this month launched a major campaign to try to overcome the very serious damage of the past.
Even the name of the campaign itself is very un-Bush-like. "We Can Help," it's called. Bush, of course, never so much as offered help to badly exploited workers. He did, of course, offer plenty of help to their lawbreaking employers.
So, just what are Obama, Solis and their allies in the labor movement and elsewhere up to? They're taking some very big steps to encourage workers to report employer violations of the wage and hour laws - especially low-wage workers, who are the most exploited. And they're trying to respond as quickly as possible to the workers' complaints.
Undocumented immigrants, perhaps the most exploited of all workers, are being encouraged to make complaints and are promised they won't be punished for their illegal status. As the Labor Department explains, all workers deserve decent treatment, whatever their legal status.
Solis's Labor Department has made the campaign a top priority. The department has already hired more than 250 new investigators, increasing the number by more than one-third. Even with a lesser number, the department has recovered more than $170 million in back pay for more than 200,000 workers since Obama took office.
The key element of the campaign is to make sure that workers understand their rights under the laws and report any violations of those rights.
Certainly there's no doubt that there are plenty of violations to report. For instance, a recent survey of workers in Los Angeles, New York and Chicago found thousands of rampant abuses of low-wage workers, many of them undocumented immigrants.
They worked in stores, in factories and offices, at construction sites, in janitorial and food service jobs, in warehouses, in private homes and elsewhere. More than one-fourth of the workers had been paid less than the legal minimum wage, often by more than $1 an hour less. That amounted to an average of more than $50 week in underpayments on wages that averaged not much more than $300 a week to begin with.
Many of the workers had been denied overtime pay or had their pay illegally docked for the cost of tools or transportation. Some were forced to work without pay before and after their regular work shifts. Being forced to work without pay? Slavery is the word for that.
Although the Labor Department is relying primarily on workers themselves to report on employers' labor law violations, the department is also getting help from the AFL-CIO, its affiliated unions and other worker advocacy groups.
They are distributing posters, fact sheets and booklets spelling out the wage and hour laws and how to report violations, arranging meetings between workers and Labor Department staffers, holding forums at union halls and other steps.
The department also has begun a publicity campaign in English and Spanish that includes TV ads featuring prominent Hispanics such as Dolores Huerta, co-founder of the United Farm Workers union, and Puerto Rican actor Jimmy Smits.
Win or lose, the drive to greatly strengthen workers' rights is one of the most important ever undertaken by an American administration. I strongly suspect it will come in a winner.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

"Imagine": A Simple Plan for World Peace

Friday 23 April 2010
by: Eleanor J. Bader, t r u t h o u t Book Review

2048: Humanity's Agreement to Live Together
by J. Kirk BoydBerrett-Koehler Publishers, Inc., 2010

The first time I heard John Lennon's "Imagine," I was a high school kid with little sense that the world could be different. The song stopped me in my tracks. Tears streamed down my cheeks as Lennon's visionary prayer for a world without religious or nationalistic swagger set my heart and mind racing.
J. Kirk Boyd, author of "2048: Humanity's Agreement to Live Together" and the executive director of the 2048 Project at the University of California, Berkeley, has developed Lennon's vision and crafted a cogent and realizable proposal for peace and well-being the world over. The plan is straightforward and simple and is conveyed in a clear, short, easy-to-read text. Like Lennon, Boyd wants a world in which people matter; he envisions a universe where respect trumps competition and each person alive receives the material essentials to ensure his or her advancement. And, rather than presenting a pie-in-the-sky what if, "2048" projects a concrete, if still developing, timetable for granting universal human rights to the world's people. Indeed, in less than four decades, by 2048, Boyd foresees tremendous changes in how we govern ourselves and treat one another.
Special Offer: A limited number of copies of "2048: Humanity’s Agreement to Live Together" are available for readers who sign up for a recurring donation of $15 here:

Just indicate that you'd like a copy of "2048" in the comments section of the donation page.
Humanity, he writes, "has an unprecedented opportunity to prevent future wars, eliminate poverty and create the conditions necessary for a sustainable existence on our planet. These ends can be achieved through a written agreement to live together that is enforceable in the courts of all countries. "
The idea hearkens back to 1948, the year that members of the United Nations created the Universal Declaration of Human Rights. That document was revolutionary, for the first time acknowledging that everyone alive has certain fundamental entitlements, regardless of current residence or place of birth. The concept, Boyd explains, gave voice to the idea that there should be one human rights standard. "No one should be free from slavery in one country but not another," he writes. "No one should have the right to an education in one country but not another and no one should have the right to speak out against the government in one country but not another."
But there was a problem, Boyd continues, because despite international lip-service supporting the Declaration, it has been largely unenforceable. In fact, because the UN lacks the power to punish countries for violating the Declaration, the statement has been symbolically important, if essentially meaningless, in protecting human rights.
Not so "2048." "First, we write our agreement to live together," Boyd writes. "Second, we insist that those in power make our agreement enforceable law in exchange for our allowing them to govern. Third, we teach students about our agreement and we go to court to enforce our agreement, because history has shown that even a written agreement may be violated by government officials unless we go to court and obtain orders to stop them."
What's more, the 2048 plan picks up - and expands - the Four Freedoms delineated by President Franklin Delano Roosevelt in his 1941 State of the Union address: Freedom of speech, freedom of religion, freedom from want and freedom from fear. Boyd has added a fifth freedom, freedom for the environment, to address the ever-worsening ecological crisis that threatens planetary survival.
Upholding these pillars, according to "2048," will move the planet toward peace, security and prosperity. It is important to note that the proposal leaves capitalism intact while shrinking the distance between the richest and poorest peoples. The concept further eschews turning every sword into a plowshare. "Our international community is spending $1.4 trillion a year on military expenditures. One percent of GNP for all countries is roughly $500 billion. All it would take to bring about the realization of the Five Freedoms and to usher in a new form of human society would be to reallocate $500 billion of military costs," Boyd assures readers. "That would leave $900 billion for military, more than enough."
One percent. Imagine that.
Ending poverty, of course, is key and a chapter entitled "Freedom From Want" lays out some appalling statistics. Each day, Boyd writes, 27,000 children die from starvation and preventable diseases such as dysentery. Indeed, 80 percent of humanity lives on less than $10 day, while the world's richest residents increasingly control the lion's share of wealth and resources.
"Without the realization of freedom from want for everyone in the world, social pressures will erupt and not everyone rebelling will be a terrorist ...Wiping out poverty will do more to rid the world of terrorism than any number of nuclear weapons will ever do. Terrorism will fade away as the Five Freedoms take hold," Boyd predicts.
In addition, Boyd argues that freedom from want is integrally tied to freedom from fear. Assuring both requires that governments treat every human being with dignity. It also requires that each person have access to life's essentials: adequate food, clothing, and recreation; a decent home; basic literacy training; medical care; a useful, remunerative job; and adequate protection from the economic panic wrought by old age, illness, accidents or unemployment.
Sound ridiculously utopian? Perhaps. But the strength of "2048" is that it makes the formulation seems both sensible and possible. Boyd puts his faith in the rule of law - he is, after all, an attorney - and he argues that regional human rights courts, patterned after the successful European Court of Human Rights, can make a huge dent in upholding the Five Freedoms and shifting expenditures from armaments to human needs. At the same time, he acknowledges opposition from critics who equate universal human rights with cultural imperialism, a charge he finds absurd. "Every person is human; therefore every person has human rights," he writes. "It doesn't matter whether those human beings are Chinese, British, or Nigerian - only that they live, that they exist."
That said, the draft document, available for perusal and comment
here, will undoubtedly ruffle many a feather. For example, Article 21 outlaws torture and bans the use of biological, chemical and nuclear weapons. On a completely different tangent, Article 26 guarantees access to contraception and gives the world's people control over all decisions regarding reproduction. "Everyone has the right to control his or her body," the Article states, "including the authority to end life-extending treatment." While most progressives will cheer these sections, seeing them as enormous advances for humankind, we don't need a crystal ball to predict that they will elicit a firestorm of opposition.
Boyd is unfazed by inevitable disagreements and welcomes written comments and questions about the 2048 draft document. At the same time, he is not a community organizer, which means that the task of mobilizing support to move 2048 from text to reality falls to us. In the end, if we want to achieve the Five Freedoms, we need to dig in our heels and work to bring them to fruition.
Boyd takes great inspiration from Gandhi, reminding "2048" readers of the pacifist leader's statement, "What a man [sic] thinks about, he becomes." In urging us to think about universal human rights, Boyd bolsters support for nonviolence, respect and tolerance. In the end, he helps us imagine a new, more equitable, social order.

John Lennon would be pleased.

All republished content that appears on Truthout has been obtained by permission or license.

Bill Moyers | James Kwak and Simon Johnson: Banks Are an Oligarchy

This is a long article or you can watch the video..........worth the time...........Scott

Bill Moyers James Kwak and Simon Johnson: Banks Are an Oligarchy
Friday 16 April 2010
by: Bill Moyers Bill Moyers Journal Interview
Moyers and economists James Kwak and Simon Johnson wonder whether the financial powers are more profitable, and more resistant to regulation than ever.
How did Big Finance grow so powerful that its hijinks nearly brought down the global economy – and what hope is there for real reform with Washington politicians on Wall Street's payroll? Bill Moyers talks with authors Simon Johnson and James Kwak, two of the nation's most respected economic experts and authors of the new book 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown.
VIDEO: Part I - Interview with James Kwak and Simon Johnson
VIDEO: Part II--Interview With James Kwak and Simon Johnson

BILL MOYERS: Welcome to the JOURNAL. With all due respect, we can only wish those tea party activists who gathered this week were not so single-minded about just who's responsible for their troubles, real and imagined. They're up in arms, so to speak, against big government, especially the Obama administration.
But if they thought this through, they'd be joining forces with other grassroots Americans who will soon be demonstrating in Washington and elsewhere against high finance, taking on Wall Street and the country's biggest banks.
The original Tea Party, remember, wasn't directed just against the British redcoats. Colonial patriots also took aim at the East India Company. That was the joint-stock enterprise originally chartered by the first Queen Elizabeth. Over the years, the government granted them special rights and privileges, which the owners turned into a monopoly over trade, including tea.
It may seem a stretch from tea to credit default swaps, but the principle is the same: when enormous private wealth goes unchecked, regular folks get hurt - badly. That's what happened in 2008 when the monied interests led us up the garden path to the great collapse.
Suppose the Tea Party folk had dropped by those Senate hearings this week looking into the failure of Washington Mutual. That's the bank that went belly up during the meltdown in September 2008. It was the largest such failure in American history.
WaMu, as we were reminded this week, made sub-prime loans that its executives knew were rotten, then packaged them as mortgage securities, and pawned them off on unsuspecting investors.
SEN. CARL LEVIN: And that was your responsibility to make sure that the securities which went out to the investors were following notice to the investors of everything that they needed to know in order that the information be complete and truthful. That's what your testimony was, under oath.
DAVID BECK: It's a very real possibility that the loans that went out were better quality than Mr. Shaw laid out.
SEN. CARL LEVIN: And you don't -
DAVID BECK: A very real possibility.
SEN. CARL LEVIN: And there's a very good possibility that they were exactly the quality that he laid out, right? Is that right?
DAVID BECK: That's right.
SEN. CARL LEVIN: Okay. And you don't know, and apparently you don't care. And the trouble is, you should have cared.
BILL MOYERS: Then there's Lehman Brothers. During those black September days a year and a half ago, the Feds decided to let Lehman go. This led to America's biggest bankruptcy ever. In an admirable work of journalism this week, the New York Times reported that Lehman secretly controlled a company called Hudson Castle and used it to borrow money as well as to hide bad investments in commercial real estate and sub-prime mortgages.
But the week's award for sheer gall goes to a Chicago-area hedge fund called Magnetar, named after a kind of neutron star that spews deadly radiation across the galaxies. Thanks to the teamwork of the investigative reporting website "ProPublica," NPR's "Planet Money" project and "This American Life," we learned Magnetar worked with investment banks to create toxic CDO's - collateralized debt obligations - securities backed by sub-prime mortgages the management knew were bad. And then Magnetar took that knowledge and bet against the very same investments they had recommended to buyers. Selling short and making a fortune.
And late this week the Securities and Exchange Commission charged the godfather of Wall Street, Goldman Sachs, with fraud in earning a fifteen million dollar fee involving those complex CDO's, a hedge fund, and the housing market.
But, since we know all this, why is it so hard to hold Wall Street accountable? Even as we speak the banking industry and corporate America are fighting against financial reform with all the money and influence at their disposal Their effort is to preserve a system that would enable them to ransack the country once again.
So even if the Tea Party folks saw the light, what can ordinary Americans do?
That's the question I want to put to my guests, Simon Johnson and James Kwak. They have written this new book, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. It's a must read - already a best seller -- and it couldn't have come at a better time. This book could change the debate over financial reform by tipping it in favor of the public.
Simon Johnson is a former chief economist at the International Monetary Fund. He now teaches at MIT's Sloan School of Management and is a Senior Fellow at the Peterson Institute for International Economics.
James Kwak is studying law at Yale Law School - a career he decided to pursue after working as a management consultant at McKinsey & Company and co-founding the successful software company, Guidewire. Together James Kwak and Simon Johnson run the indispensable economic website
Welcome to you both.
Let me get to the blunt conclusion you reach in your book. You say that two years after the devastating financial crisis of '08 our country is still at the mercy of an oligarchy that is bigger, more profitable, and more resistant to regulation than ever. Correct?
SIMON JOHNSON: Absolutely correct, Bill. The big banks became stronger as a result of the bailout. That may seem extraordinary, but it's really true. They're turning that increased economic clout into more political power. And they're using that political power to go out and take the same sort of risks that got us into disaster in September 2008.
BILL MOYERS: And your definition of oligarchy is?
SIMON JOHNSON: Oligarchy is just- it's a very simple, straightforward idea from Aristotle. It's political power based on economic power. And it's the rise of the banks in economic terms, which we document at length, that it'd turn into political power. And they then feed that back into more deregulation, more opportunities to go out and take reckless risks and-- and capture huge amounts of money.
BILL MOYERS: And you say that these this oligarchy consists of six megabanks. What are the six banks?
JAMES KWAK: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.
BILL MOYERS: And you write that they control 60 percent of our gross national product?
JAMES KWAK: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.
BILL MOYERS: And what's the threat from an oligarchy of this size and scale?
SIMON JOHNSON: They can distort the system, Bill. They can change the rules of the game to favor themselves. And unfortunately, the way it works in modern finance is when the rules favor you, you go out and you take a lot of risk. And you blow up from time to time, because it's not your problem. When it blows up, it's the taxpayer and it's the government that has to sort it out.
BILL MOYERS: So, you're not kidding when you say it's an oligarchy?
JAMES KWAK: Exactly. I think that in particular, we can see how the oligarchy has actually become more powerful in the last since the financial crisis. If we look at the way they've behaved in Washington. For example, they've been spending more than $1 million per day lobbying Congress and fighting financial reform. I think that's for some time, the financial sector got its way in Washington through the power of ideology, through the power of persuasion. And in the last year and a half, we've seen the gloves come off. They are fighting as hard as they can to stop reform.
SIMON JOHNSON: I know people react a little negatively when you use this term for the United States. But it means political power derived from economic power. That's what we're looking at here. It's disproportionate, it's unfair, it is very unproductive, by the way. Undermines business in this society. And it's an oligarchy like we see in other countries.
BILL MOYERS: And you say they continue to hold the global economy hostage?
JAMES KWAK: Exactly. Because what's happened- what we learned in 2008 were certain institutions are so big and so interconnected that if they were to fail, they would cause systemic shocks throughout the economy. That's essentially what happened in September 2008 when Lehman Brothers collapsed. And what's remarkable, and I think what essentially proves the point of our book is that almost two years later, nothing has changed.
Or the only thing that has changed is that these banks have gotten larger, more powerful, both economically and politically. And they've been flexing their muscles in Washington for the last year and a half. So Neal Wolin, the Deputy Treasury Secretary gave a blistering speech to the U.S. Chamber of Commerce in which he said, look, the financial sector has been spending more than one million dollars per day lobbying against the reforms we need to fix the financial system. Now, Simon and I think those reforms that the Administration has proposed do not go far enough. But we think they're certainly better than nothing. What Wall Street wants is they want nothing. They want to stop this in its tracks and go back to where we were five years ago.
SIMON JOHNSON: It's amazing, Bill. But this is this is politics and this is money. And you know, there's a ground game, which is campaign contributions, which are surging in. I'm sure on both sides of the aisle. And there's also the ideological space. It's amazing. The Chamber of Commerce that claims to represent the broad cross section of American business is siding with six big banks, who favor policies that are directly contrary to the interests of most of the membership of the Chamber of Commerce. And that's just not just me saying that. That's Neal Wolin. That's Treasury. That's the White House saying that now. Calling fortunately, they've come to the point where they're willing to call the Chamber of Commerce on that. But I don't know if that message is getting through to people.
JAMES KWAK: You see what the bankers have done is they have taken a basic principle which is more or less true. Which is that free financial markets do enable money to go to the places where people need it. But on top of that, they've erected a system that is indescribably complex. And gives many opportunities to make money at the expense of their customers, at the expense of their counterparties. Even at the expense of their own employers. So, one of the things that has happened has been that Wall Street finance has become so complex and the internal systems of Wall Street banks has become so complex that if you are a smart banker, who is out to maximize your own income, you can find the loopholes in the system and you can exploit them, even if it means taking money from your own-- from your own company
BILL MOYERS: You've been writing this week on your website-- about this hedge fund in Chicago that's made a lot of money. In effect, betting against the American Dream. What was that?
JAMES KWAK: Magnetar is a hedge fund which means that other people gave them money to invest. And their job is to make as much money as possible. And these were the smart guys in the room. They saw that the system was broken. And they found a specific way to exploit it. And they knew that they could go for example, they could go to Wall Street banks and the banks would collaborate in making these extremely toxic securities. Because they knew what the bankers incentives were. They knew that the banker's incentives were to do the deal, to do the transaction, to get the fees up front. And they knew that there was nobody watching out for the investors. There was nobody watching out to make sure that securities they manufactured were actually good securities. But essentially what they were doing is they wanted to short the housing market. And they shorted the market in such a way that they actually made the problem worse, because what they did is they encouraged they tried to create these very toxic securities explicitly so that they could then short those securities. And that's why in a sense, they were they were shorting the American Dream. But what the real story of Magnetar, I think, is that they were exploiting a system that was deeply broken.
So, we like to think that the financial system we have in Wall Street are set up so that as people try to make lots of money they are they are indirectly helping the economy by making sure their capital goes where it's needed most. What the Magnetar story shows us that this is a casino, where you can make money you can make money exploiting the weaknesses in the casino. And it has nothing to do with the American Dream. It has nothing to do with making sure that capital goes to the places where it's needed most. I have to say that we owe a great to debt to "ProPublica" and "Planet Money" and "This American Life" for uncovering this story
BILL MOYERS: Public radio's excellent program, "This American Life", did a terrific broadcast on this subject, based upon the ProPublica investigation that you talked about. And there's a song in it that I have to play for the two of you and for my audience. Take a listen.
UNIDENTIFIED MAN: Step one. You write a check for 10 million dollars. Hand the check to a Wall Street bank, and ask them to make us a CDO. Step two: they create the CDO, using risky stuff, very risky stuff, extremely risky stuff. Step three: other investors commit hundreds of millions of dollars to the CDO. Step four: we bet against the CDO, using a credit default swap. Step five: the housing market crashes. The CDO's value goes to zero, our bet pays off and we make hundreds of millions of dollars and before you can say step six, we're rich! We're going to bet against the American Dream, we're going to be on the winning team, purchase risky debt on a massive scale. Then place a bet that the debt will fail. Hundreds of millions for Magnetar, the economy collapsing like a dying star. No one will know till it's on NPR, and who cares? It's time to hit the town, this sucker could go down. The housing market's losing steam. And all we got to do to make our dreams come true is bet against the American Dream!
BILL MOYERS: You're smiling, James, but is it really that funny?
JAMES KWAK: Well for decades, we've been told that Wall Street and financial innovation were promoting the American Dream. And what they've I think what the show and the song have really hit the hit the nail on is that in fact, you can make even more money betting against the American Dream. And that's the kind of system we have today.
SIMON JOHNSON: My bumper sticker from this and I hope it does become a bumper sticker is, "Trust me, I'm a banker."
I mean, you need to break through there's a level of progress here, Bill. Which is when people can laugh about it. When people can break it down into pieces. When you've got the 60-second version. And you can hammer that. And people understand it. Then you're starting to fight back. This is about ideology. This is about belief. This is about these guys are smart. These guys are well paid. So they must know what they're doing. And that's wrong.
BILL MOYERS: You wrote on your website this week about how JPMorgan Chase lost $880 million on one of these kind of whacky obscure deals? But the executives still paid themselves millions of dollars in up front fees. And you conclude that bankers placed a ticking bomb on their own bank balance sheet. It exploded and personally they still made money.
JAMES KWAK: Exactly. Because this is an example so, this is from the "ProPublica" investigation of Magnetar. essentially the bankers at JPMorgan Chase involved in the transaction created a new CDO. A new collateralized debt obligation. Which was very, very toxic. And either they knew at the time that it was toxic, or they should have known, I have no way of knowing. JPMorgan decided to hold onto most of this toxic product they-- they had built. A billion dollars worth of toxic product. And then when the market collapsed, it turned out they lost $880 million on that position.
So, if we think about it, there are really two possibilities here. The bankers involved in the transaction either really thought that this was a good product and a good investment, in which case they're incompetent. Or they had- they may have doubts, they may have thought it was toxic, but they knew that the way the internal systems at JPMorgan Chase worked, they could get the fees front, they could get bonuses based on those fees, and leave the bomb for later.
BILL MOYERS: Somebody wrote on your blog this week, "If I were to buy an old house. Make some cosmetic improvements that mask an underlying rot. Got my insurance company to write an exorbitant homeowners policy exceeding any leans against the property. Then burned it down, wouldn't that be fraud?" Did you answer this guy?
JAMES KWAK: I haven't. That would
BILL MOYERS: Would you?
JAMES KWAK: That would be fraud.
BILL MOYERS: That would be fraud. So, explain to me how you manage to lose $880 million on your own company's money to make a quick buck for yourself and you get away with it?
JAMES KWAK: Well, I think that there are laws in this area. So, for any securities, there has to be-- for this type of security, there has to be a document which explains those securities. And that's a document that you give to the investors who might buy them. And there are laws governing those. And if you put in facts in there that that are materially false. That you know to be true, that is fraud. But I think the problem is that in many of these cases, I don't think that many of these people are criminals. I get a lot of criticism for saying that I don't think these people are criminals. But I think it's relatively easy to write these documents in such a way that you're not saying anything you know to be false. And so, they pass through, they pass through any kind of you avoid any possible criminal liabilities there. But yet, they can be misleading in a way that encourages people to buy them.
SIMON JOHNSON: I think it's actually worse in some instance, Bill. Certainly for offshore activities. Goldman Sachs was involved in hiding a lot of Greek government debt. They then sold new Greek government obligations to people in the United States as far as far as we understand it. And didn't reveal that they'd hidden the levels of the true levels of government debt. Now, that is withholding material information. That's a violation of rule 10B-5. and where is the legal process, you should ask, that holds them accountable for that? I've talked to lots of very good lawyers about this. And there are many complicated stories about why Goldman Sachs won't face any civil action or criminal action. There are huge loopholes in our legal system with regard to financial services that need to be closed.
BILL MOYERS: There were some interesting hearings, as I know you saw, before the Financial Crisis Inquiry Commission. And some of the first, some of the most interesting testimony came from the former honchos at Citigroup. Mr. Prince and Mr. Rubin. Take a look.
CHARLES PRINCE: Let me start by saying I'm sorry. I'm sorry that our management team, starting with me, like so many others, could not see the unprecedented market collapse that lay before us.
ROBERT RUBIN: My role at Citi, defined at the outset, was to engage with clients across the bank's businesses, here and abroad. Having spent my career in positions with significant operational responsibility at Treasury and, prior to that, at Goldman Sachs, I no longer wanted such a role at this stage of my life, and my agreement with Citi provided that I would have no management of personnel or operations.
ROBERT RUBIN: But almost all of us, including me, who were involved in the financial system, missed the powerful combination of factors that led to this crisis and the serious possibility of a massive crisis. We all bear responsibility for not recognizing this, and I deeply regret that.
PHIL ANGELIDES: The two of you, in charge of this organization did not seem to have a grip on what was happening. I don't know that you can have it two ways. You were either were pulling the levers or asleep at the switch.
BILL MOYERS: How can it be that a Robert Rubin, former Secretary of the Treasury, pulls down $100 million as a senior advisor to Citigroup and claims he doesn't know the risk that was involved in what he was trying to sell to clients and foreign officials? How can that be?
JAMES KWAK: I think there are two things. There's a narrow and a broad view of this. The narrow view is I think Rubin is actually not lying. I think it is true that Rubin did not know what the risks were. Although he certainly should have known what the risks were. And that's because he was fully subscribed to this ideology that free markets are good. That the market will take care of itself. That, he also suffered from a lot of the blindness that corporate officers and directors have. Corporate officers and directors manage these enormous organizations with tens of hundreds of thousands of people. They have very little idea what's going on. They're getting their information from subordinates, who are giving them a filtered view of the world. On the other hand, when he says, no one could have foreseen this. This is what I call an intellectual cover up. And I say that because it's very disingenuous. Over the past 20 years, these banks used their economic power and their political power to engineer an unregulated financial environment in which precisely this sort of thing could happen. And in that sense, I think that this was not an accident. It was not a natural disaster. It was not unforeseeable. It was the product of the efforts by the sector over the past 20 years to reshape Washington and to engineer an environment that would allow them to make as much money as possible. Simon talked earlier about money. And we know that the financial sector, especially Wall Street, has been, has made enormous contributions to both campaign contributions and lobbying expenses. But I think there were, there were two more potent weapons in their arsenal. One is the revolving door. So, we've seen an enormous number of people passing back and forth between Washington and Wall Street over the past 20 years. This is not a new phenomenon. It happens in every industry. But there are certain things that make it especially pernicious when it comes to finance. One is that, one is a question of incentives. So, compared to other industries, Wall Street can simply offer enormous amounts of money. I'm not saying that everyone did that. I'm not saying that even the majority of people did that. But that is, that is very clear.
BILL MOYERS: The New York Times has a story this week saying that 125 former members of Congress and staffers are now working for the financial industry in Washington. One of them is Michael Oxley, whose name is on one of the most important pieces of business legislation in the last 20 years. The Sarbanes-Oxley bill, which was designed to impose some very strict accounting rules after Enron on all of this. And there he is now, he's a lobbyist for the securities industry.
SIMON JOHNSON: But Bill, it goes even further and deeper than that. Robert Rubin was Secretary of the Treasury in the 1990s. He oversaw the deregulation. He fought hard against Brooksley Born, the only regulator in living memory who tried to prevent derivatives from getting out of control. He then went to Citigroup. He presided over this nonsense and this mess. He's now and he was he's clearly - minence grise of this administration. Mr. Geithner and Mr. Summers are his proteges. But that's, that's not all. Next week, the Hamilton Project, a project of the Brookings Institution founded by Mr. Rubin, will have a big public event. Probably Mr. Rubin's most prominent Washington appearance since the crisis broke. The headline act at this event will be Vice President Joe Biden. Now, maybe Mr. Biden will be taking on the view of finance that we all should fear greatly. But I'm not so optimistic.
BILL MOYERS: You know, I don't get it. Recently when "Newsweek" wanted to give big space to somebody to explain how we get out of this, who wrote the piece? Robert Rubin. I mean, are they locked into this worldview so that they cannot see the consequences of their own actions?
JAMES KWAK: Well, I think there are a couple things going on. One of the things we talk about in the book is how the Democratic Party became taken over by this Wall Street friendly view in the 1990s, which is, you know, extremely important, because in the 1980s, we had a deregulatory administration that was largely opposed by a Democratic Congress. And it became very convenient for Democrats, because if you believed in the ideology of finance, you could sincerely think, I am a Democrat, I am a servant of the poor and the working class. And yet, I can take campaign contributions from Wall Street, because I sincerely believe that Wall Street is doing what's best, what's in the interest of the country.
I think it's been exposed in the last year and a half that a lot of what Wall Street did was not in the best interest of the country, not in the interest of the people getting these subprime loans, not in the interest of the taxpayer who was paying for the immense fiscal costs of the financial crisis and the recession. But it's, there's a curious time lag going on in the, in the Wall Street, intellectual and political establishment, where they think they're still in 2005.
SIMON JOHNSON: As I travel around the country, Bill, I'm really struck by the fact that while people in Washington talk about populist anger in the country, most of what I encounter is legitimate, sensible anger. People actually understand what happened. They understand what went wrong. And they want to stop it. And the banks don't get this. The belief system on Wall Street is the same. Jamie Dimon, head of JPMorgan Chase, one of the most powerful men in the country. If you don't know his name, you should look him up because this is a man to fear.
BILL MOYERS: Very close to the President. Has dinner- lunch with the President.
SIMON JOHNSON: The President called him a savvy businessman, recently. Jamie Dimon told his shareholders, we just had probably our best year ever. They didn't have their best year ever. They went through crisis. They were saved like the rest of the financial system by the government, by the taxpayers, but that's not how they see it. That's not what they believe. That's really important. That belief must be shaken if we're to make any progress at all.
BILL MOYERS: But we can't compete with those lobbying dollars. We can't compete with this interlocking oligarchy that you say. That's a fact.
SIMON JOHNSON: Bill, in 1902, when Theodore Roosevelt took on the industrial trusts, nobody knew what he was doing. Nobody thought he could win. The Senate was called the Millionaires Club for a reason. And it wasn't even any theory. The antitrust theory, everything we know and believe about monopoly, why monopoly is bad for society, didn't really exist, certainly not in the mainstream consensus, when Roosevelt decided to take on J.P. Morgan, okay?
Ten years later, the mainstream consensus has shifted completely. People understood from the debate and from the struggle, from the fact- from the way the trusts fought back and the way they spent their money, they began to understand this was profoundly dangerous, politically and socially. 1912, everyone agreed that breaking up Standard Oil was a good idea. Had to be done. They broke into 35 companies, most of them did well. The shareholders actually made money. It's a very American resolution, Bill. And it's very clear that we've had this confrontation before in American history: Andrew Jackson against the Second Bank of the United States in the 1830s, Jackson won, barely; Theodore Roosevelt, the beginning of the 20th Century; FDR in the 1930s.
The American democracy was not given to us on a platter. It is not ours for all time, irrespective of our efforts. Either people organize and they find political leadership to take this on, or we are going to be in big trouble, okay? Now, I agree, we don't have Theodore Roosevelt. I agree. The only Senator who speaks complete truth and clarity on this issue is Ted Kaufman from Delaware, who's an appointed Senator, he got- he was appointed to Joe Biden's seat, and he's not running for reelection. He therefore doesn't care about the money. I take that point. But there are others. There must be others. We must find them and we must fund them, individually, sufficiently, to fight against this nonsense from the corporate sector.
I would like to emphasize, Bill, I'm a professional entrepreneurship, James is a successful entrepreneur. We're not anti-finance. We have many people endorsing the book, backing us, and you know, they, we put their blurbs in the book for a reason, who are from finance. Who really appreciate and understand this key point. Which is the complexity has gone too far. It's become dangerous. And we need to return our financial system to a simpler, more direct, easier to manage way.
BILL MOYERS: You both paid attention last week, to the hearings in Washington, on the Financial Crisis Inquiry Commission. Was there a theme that you heard emerge there?
JAMES KWAK: I think the biggest theme that I heard emerge was that this was an innocent mistake. So, what I mean by that is-
BILL MOYERS: You mean the collapse of 2008? All of this? What- was-
JAMES KWAK: Exactly.
BILL MOYERS: An accident?
JAMES KWAK: Yes, an accident in the sense that-
BILL MOYERS: Natural disaster?
JAMES KWAK: As we heard Chuck Prince say and Robert Rubin say, we couldn't see it coming. These were, there were risks that build up in the system, and our models didn't account for it. We're sorry that it happened. Not even, we're sorry that we did it. We're sorry that it happened.
And I think that this is, I mean, it's unfortunate if they really believe this. Because again, if we just take a very small example, one of the things that clearly went wrong is these banks were not able to manage their own risk. They did not know what positions they had. They did not know what market forces they were exposed to. You would think that should be the first job of a bank. And I don't think this was an innocent mistake. And I say that for this reason. It was in the bank's short term financial interest to underestimate their risk. Because if they had estimated their risk accurately, they should have had to set more capital aside, they would have been less profitable.
So, yes, it's possible that the CEOs of these banks honestly did not understand their risk positions. But that mistake-- there was an incentive behind that mistake. You know, banks never overestimate their risk. These mistakes always only go in one direction. Because that's the direction they have an incentive to make the mistake in.
BILL MOYERS: What do you mean they have an incentive to make a mistake?
JAMES KWAK: So, in the short term, a bank's profitability is going to depend on how much capital it has to set aside. So, in banking, if I have a certain position, I have to set aside a certain amount of capital to protect myself from that position going bad. If I think the position is less risky than it actually is, I'm going to set aside less capital to cover that position, and that's going to give me a higher profit margin.
If I'm the head of this bank, that means that in the short term, I'm going to have higher profits, higher stock price, more money for me, but I'm underestimating the risk of something blowing up several years down the line. But we know that the, essentially, the incentive systems within these banks favor short term profits over long term solvency.
SIMON JOHNSON: The most profound thing, observation, on this structure, inadvertent, I would say, observation, was by Chuck Prince, the former head of Citigroup. In July 2007, right before the whole structure began to crumble. He said, "As long as the music is playing, you've got to get up and dance." And that's a statement about the incentive structure. Saying, well, everybody's doing it. That's how we all make money. We've got to do it, too. I'm just a bank doing what all the other banks are doing. That's absolutely the heart of the problem. I would also say and tell you, and emphasize, these people will not come out and debate with us. The heads of these companies or their representatives, they will not come out. They're afraid. They don't have the substance. They don't have the arguments. We have the evidence. They have the lobbyists. And that's all they have.
BILL MOYERS: They've got the power, the muscle, the money.
SIMON JOHNSON: They have money.
BILL MOYERS: You just have the arguments. You just have the facts. On your side.
SIMON JOHNSON: Absolutely. That's exactly what it comes down to.
BILL MOYERS: Let me show you one of my favorite moments of the week. The commission on the crisis is looking into two former executives of the big mortgage giants, Fannie Mae and Freddie Mac. And the Fannie Mae guy tries to say, what happened was Congress made us do it.
BILL THOMAS: Was there an opportunity, perhaps, to reprioritize your charter and focus on those things that were most relevant in the marketplace that would have made the institution more sound?
ROBERT J. LEVIN: That wasn't done at my pay grade.
BILL THOMAS: My understanding is, between 2000 and 2008, you made $45 million. So only people above 45 thousand-- 45, excuse me, million dollars, between two and 2008, could answer that question?
ROBERT J. LEVIN: What I meant by the, what I was addressing was the question of, could we have affected the charter act--
BILL THOMAS: Right. And it was above--
ROBERT J. LEVIN: Of the company--
BILL THOMAS: Your pay grade.
ROBERT J. LEVIN: Yes. And my language was sloppy, and--
BILL THOMAS: No, it wasn't sloppy.
ROBERT J. LEVIN: And what I meant by that--
BILL THOMAS: It was flippant, if you want that as a choice.
ROBERT J. LEVIN: What I meant by that, sir, was that that was in the purview of the Congress, not the company.
BILL MOYERS: You're laughing.
SIMON JOHNSON: So, look, what I say to my, to all my Republican friends: on Fannie Mae and Freddie Mac, you were right. They became too big to fail. They captured Congress. They were known as some of the most formidable financial lobbyists in the 1990s. They argued for the rights to take on these kinds of risks, okay?
And the Republicans were right. The Republicans called them on this. But now it's the big private banks that have the same incentive structure. That have bulked themselves up so big that you can't let them fail. That's what we saw in September 2008. Hank Paulson looked at his options. And they are all pretty awful. And I'm not a big fan of Hank Paulson, but I think the moment where he looked at it, he was right. That if you let JPMorgan Chase or Goldman Sachs fail, the consequences would have been devastating, because they're so big. It's a Fannie May and Freddie Mac structure come to Wall Street, come to the top guys on Wall Street. And our Republican colleagues and friends should recognize this, they should acknowledge it. And then we can all fix this together.
BILL MOYERS: Well then why is Mitch McConnell, the Senator from Kentucky, who is the Republican Leader in the Senate saying what he said this week? Let me show you from his statement.
SEN. MITCH MCCONNELL: If there's one thing Americans agree on when it comes to financial reform, it's that it's absolutely certain they agree on this: never again, never again should taxpayers be expected to bail out Wall Street from its own mistakes [...] This bill not only allows for taxpayer-funded bailouts of Wall Street banks, it institutionalizes them. The way to solve the problem is to let the people who made the mistakes pay for them. We won't solve this problem until the biggest banks are allowed to fail.
BILL MOYERS: He seems to be saying what you say, right?
SIMON JOHNSON: It's a clever piece of political manipulation. It's not at all what we say. What he says is dangerous and deliberately misleading.
SIMON JOHNSON: He says let the biggest banks fail, go bankrupt, don't do anything, leave the situation as it is now and when they get in trouble, let them fail. If you do that, you'll have catastrophe. The bankruptcy system clearly and manifestly cannot deal with the failure of a complex, global, financial institution. And we have the evidence before us in what happened after Lehman Brothers failed. That was bankruptcy. It caused chaos around the world, Bill. That's what the Republicans are advocating. Is we just leave things as they are and next time we'll take that chaos and we'll get a second Great Depression. We're arguing for reform. We're arguing for change. We're arguing for ways to make those biggest banks smaller and safer. If they were small enough to fail, that's a very different story. And that's a much safer place to be.
BILL MOYERS: What do these big six banks think about what Senator McConnell is saying?
JAMES KWAK: Well, the big six banks don't want any reform at all, essentially. So, I think that they are, and there's some evidence that Senator McConnell has been talking to the big banks and to other people on Wall Street.
BILL MOYERS: There have been published reports that he attended a fundraiser with hedge funds and other Wall Street poobahs just last week, before he made this statement. And the reporters, knowing that he had been at this big fundraiser for hedge fund and Wall Street tycoons a week before, begin to press him in an unusual, and actually promising way. Take a look at this.
REPORTER: How do you push back against this perception that you're doing the bidding of the large banks? You know, there was a report that you guys met with hedge fund managers in New York. A lot of people are viewing this particular line of argument, this bailout argument as spin--
SEN. MITCH MCCONNELL: You could talk to the community bankers in Kentucky.
REPORTER: I'm not asking you about the community bankers--
SEN. MITCH MCCONNELL: But, I'm telling you about the community bankers in Kentucky. This is not, everybody--
REPORTER: Have you talked with other people other than community bankers?
SEN. MITCH MCCONNELL: Well, sure. We talk to people all the time. I'm not denying that. What's wrong with that? That's how we learn how people feel about legislation. But the community bankers in Kentucky, the little guys, the main street guys, are overwhelmingly opposed to this bill.
REPORTER: Well what would you say to folks who say that this is just spin to deflect attention from the fact that you're representing the large banks?
BILL MOYERS: So, he deflects their questions about being at this meeting with the large banks, the oligarchs, as you called them. And talks about community banks back in Kentucky. What do you make of that?
SIMON JOHNSON: Well, two things, Bill. First of all, he's embarrassed, as he should be, and that's good. I don't think they used to be embarrassed. I think-- I hope Vice President Biden is somewhat embarrassed by the event he's going to attend next week with Robert Rubin, unless he criticizes Rubin and goes after Rubin's view of the world. In which case, I'm okay with that.
JAMES KWAK: This other part of the problem which Simon and I talk about more in the book, and that we don't think is fully solved by the legislation in the Senate, is why do you have to have these too big to fail banks in the first place? So, we think that's the obvious and simplest and almost unarguable solution that you should simply not have banks that are too big and too interconnected to fail.
SIMON JOHNSON: There are no benefits to society, Bill, from having banks that are larger than $100 billion in total assets. This is a well-established fact. The evidence does-
BILL MOYERS: You make the case.
SIMON JOHNSON: There's nearly 100 pages of footnotes for a reason.
BILL MOYERS: But don't let the facts get in the way.
SIMON JOHNSON: I understand. But there's no evidence, okay? We've let our banks get to $2 trillion-- Citigroup when it almost failed or did fail in fall 2008 was a $2.5 trillion bank. Jamie Dimon runs a $2 trillion bank at JPMorgan Chase and says, if we're big, it's 'cause we're beautiful and efficient. And we should be allowed to get bigger. It's not true. They're big because of the government subsidy, right? That's what gives them the profits at this level. If they get bigger, they'll become more dangerous. That's, those are the costs. On the benefit side, there's no economy of scale or scope or anything else to support the case that banks bigger than $100 billion. That's on a pure cost/benefit basis.
JAMES KWAK: So, there's no way that Jamie Dimon, who according to many observers is perhaps the savviest bank CEO, the best one out there, there's no way that he can know what's going on within his organization. There's no way he can even have an information system that will let him know, efficiently, all the things that he needs to know. So, why is JPMorgan Chase so big? One reason is that it's in the interest of CEOs to have large banks. Because if you have, the larger your bank, the bigger your salary. But then at the same time, it creates this incentive among the traders, the people who really make the money or lose the money in these banks. It creates an incentive to the traders to essentially exploit the management failings of the company.
BILL MOYERS: The toughest hearing in Washington this week was conducted by Senator Carl Levin in the Senate, looking into Washington Mutual. That's the largest bank ever to go under in our history, and there are some friends of mine in Washington say there's some possible criminal indictments going to be coming out of this. Let me show you Senator Levin laying out some of the evidence.
SEN. CARL LEVIN: To keep that conveyor belt running and feed the securitization machine on Wall Street, Washington Mutual engaged in lending practices that created a mortgage time bomb...WaMu built its conveyor belt of toxic mortgages to feed Wall Street's appetite for mortgage-backed securities. Because volume and speed were king, loan quality fell by the wayside and WaMu churned out more and more loans that were high risk and poor quality.
Destructive compensation schemes played a role in the problems just described. These incentives contributed to shoddy lending practices in which credit evaluations took a back seat to approving as many loans as possible.
BILL MOYERS: He goes on, you know? There's evidence that WaMu knowingly sold fraudulent loans to investors in the form of securities. That loan offices were falsifying documentation in order to churn out as many lousy loans as they could. And that senior management was putting pressure on the loan officers to do just this. And he claims, what we were talking about, that destructive compensation schemes were part of the problem.
JAMES KWAK: I think that some people may go to jail. I think that falsifying loan documents, I think there's a good chance people could go to jail for that. I think that if there are- you know, when you get the emails of people at midlevel managers at these banks saying, you know, falsify the loan documents. They might go to jail as well. I don't think anyone who's high up in these banks is going to go to jail for this reason.
I think that, for example, these loans were eventually sold on to investment banks which used them to manufacture new securities. Those investment banks were getting documents from Washington Mutual. These are like representations and warranties. So Washington Mutual is saying, you know, these loans meet these criteria. And the investment bank is going to say, I got this document from Washington Mutual. They told me the loans were good. You can't send me to jail.
And he's absolutely right. So, you've got investment bankers who must have known. Who should have known that a lot of these loans are bad. But they've got a piece of paper from the person selling them the loan saying they meet these criteria. He's pretty much Scott free when it comes to criminal liability. So--
BILL MOYERS: Mistakes were made, but not by me, right?
JAMES KWAK: Exactly.
BILL MOYERS: I mean, that seems to be the mantra that came through all these hearings this week: mistakes were made but not by me.
SIMON JOHNSON: Or, no, I think they also say, Bill, well, everyone made mistakes, Bill. You know, we're just human. This was beyond our control. And that's not true, these are systems they controlled, they designed. Mr. Rubin designed this, right? And I want to point out there's something very interesting in this WaMu conversation.
It's only when a firm collapses that you get full discovery. Now, Senator Levin is a great voice on this. And I think he's absolutely nailing this. But he only has the ability to get at this level of detail and documentation from a company that failed like WaMu. For the people who were able to keep going. The Goldman Sachses of this world, you'll never know what they were really up to.
These are incredibly smart people. They're very well paid. They have ever incentive. The regulators are totally outgunned. It's not an accident that this complexity allows them to get away with it. It's by design. That's the system. Not a conspiracy, Bill. Don't say that.
BILL MOYERS: I wouldn't.
SIMON JOHNSON: It's a system of--
BILL MOYERS: A system.
SIMON JOHNSON: It's a system of beliefs and incentives, much more profoundly dangerous than a conspiracy.
SIMON JOHNSON: Conspiracies you can unroot. Conspiracies you can have, you know, a couple of hearings. People can understand it on TV. You get the sound bite. This is very complex. This is about what many, many PhDs and specialists in finance have cooked up over 20 years with the active participation of the people who were supposed to oversee that in Washington.
BILL MOYERS: Is this what the blogger meant when he posted on "The Baseline Scenario" this week, "Unnecessary complexity just creates rich opportunities for systemic corruption"?
JAMES KWAK: That is certainly one of the things he meant.
BILL MOYERS: What should be the purpose of reform? Should it change the behavior of Wall Street, or should it change the regulation of Wall Street? And there is a difference, is there not?
SIMON JOHNSON: Absolutely. Look, I don't know if this will work or not. I don't know if at the end of the day, we will end up supporting the bill. I hope we will, okay? But whatever happens, this is one legislative cycle. Theodore Roosevelt did not change the mainstream consensus in this country with regard to power and monopoly and the dangerous side effects of big business overnight.
He didn't do it in one year or two years. It was a ten year process. The consensus has to change, Bill. And regulation, the role of regulation or understanding of regulation with regard to finance has to change. The regulation is there to limit the downside to society and to make sure that all of these activities have as much as possible of the positive effect on the economy without generating these massive negative shocks. And we're a long way from that point.
JAMES KWAK: I think the distinction you made is a very good one. Between changing the regulation of Wall Street and changing Wall Street itself. I think the bill does a lot of things that will improve the regulatory system.
I think it does not do a lot to change Wall Street. Certainly, better regulation will change Wall Street a little bit, but some of the basic fundamental issues, I think, for example, the fact that in many realms, Wall Street banks knowingly make money by finding, because they want to put on a trade, they find a sucker to take the other side of that trade.
They're making money directly off of their customers. You can't really have it any other way when you're engaged in proprietary trading. These, this is not going to change. The fact that we have these enormous banks that are too big to manage and that have a competitive advantage, because they're big. That's not going to change.
And that's one reason I think why it's not going to satisfy the many people in America right now who are upset and frustrated about what's happen. Because they're going to see that what we've done is we've made Washington a little bit better at regulating Wall Street. We haven't changed the fundamental causes.
BILL MOYERS: Well, I've seen one regulatory agency after another taken over by the very industries they were supposed to regulate.
SIMON JOHNSON: This is absolutely right, Bill. And, you know, the person who nailed this intellectually a long time ago was from the University of Chicago. George Stigler. Not a man of the left. He got a Nobel Prize for his observation. All regulated industries end up with the industry capturing the regulators.
And what's happened to us is a Stigler, exactly what Stigler warned against on a massive scale. And you have to think very hard about this. The Administration still argues that we should delegate responsibility, going forward, for lots of things around finance. Like how much capital you should have. Delegate that to the regulators.
Now, that's crazy. That's not acceptable. That is not what they should do. Particularly because, and any Democrat should say, well, wait a minute, next time a free market President who doesn't believe in regulation comes in will gut the system. And any person from the right who's read Stigler should say, Well, these regulators are just going to get captured. You've got to put it in legislation. You've got to design the legislation. You've got to go after the things that can be legislated. Congress must not abdicate this responsibility.
BILL MOYERS: So, you would break up the banks. That's what you would do, right?
SIMON JOHNSON: We would set a hard size cap on the banks. And the banks, in order to comply with that, would have to break themselves up. So, take a bank like Goldman Sachs, for example. It's about ten times bigger than what we would be comfortable with. And, you put that cap in-- they have to figure out how to do it. They have a fiduciary responsibility to their shareholders not to lose value as they comply with this law, not a regulation, law, right? Our book is called "13 Bankers" because it was 13 bankers who were pulled into the White House last March, and they were saved completely and unconditionally in the most amazing deal ever: their jobs, their pensions, their board of directors, their empires. But the title is also an echo of a remark made forcefully in 1998 by Larry Summers, who was then Deputy Treasury Secretary to Brooksley Born, who was trying to regulate over the counter derivatives.
And she was way ahead of her time, by the way. None of this nonsense existed. But she had- she saw this coming in a very profound sense. And she wanted to act in a preemptive and preventive way. Now, Larry Summers called her up. This is according to the public record and it's not been disputed by any of the protagonists here.
He called her up and he said, Brooksley, if you do what you want to do, which is regulate the derivatives. Over- regulate all this over the counter derivatives, you- I have 13 bankers in my office who say you will cause the greatest financial crisis since World War II., right? That was what he believed. That was the prevailing philosophy of the Rubin wing, the Wall Street wing of the Democratic Party.
That was Alan Greenspan's view. That is what brought us to this point. The idea that if you regulate, in any fashion, in any form, you will cause problems, you will prevent growth, you will cause crisis. That view is profoundly wrong. It has been manifestly and repeatedly demonstrated to be wrong. And the people who hold that view must change their minds or they should be voted out of office.
BILL MOYERS: If Wall Street's behavior doesn't change, can we have another financial catastrophe like the one in 2008?
JAMES KWAK: The definition of insanity is repeating the same thing over and over again and expecting a difficult result. And I think one of the core messages in our book is that the fundamental conditions of the financial system today are the same as the ones we had leading up to this crisis. And it would be folly to expect a different outcome.
Now, the legislation will help in certain ways. It will certainly, you know, it'll bolt the barn door after the horses have fled. The Consumer Financial Protection Agency will make it much harder to have a bubble built on subprime mortgages. But we'll have a bubble built on something else. And it may even be on a market or a product that doesn't even exist yet.
And that's why, again, legislation is helpful, but if you're going to have the same kind of incentive structures on Wall Street and the same degree of concentration, the same degree of political power, it's likely that we'll have another financial crisis.
The financial world has gotten much more dangerous in the last 30 years. We had this one. We had the stock market bubble of 2000. We had the long term capital management crisis. We had the S & L crisis. We had the Latin American debt crisis. And the question is, are these crises going to-- are we going to somehow figure out a way to have fewer of them, or a way to make them less damaging? And I'm not sure I've seen that.
SIMON JOHNSON: The structure of the system is such that people will take these egregious risks. That's what they're paid to do. They will mismanage their companies. That is absolutely in their incentive. And they get the upside, remember? Goldman Sachs just helped Geely Automotive, a Chinese car company, buy Volvo from Ford.
Now, that's an interesting investment. It's a very risky investment. If that goes well, Goldman will get tremendous upside. If it goes badly or if Goldman's other investments go badly, who gets the downside? Well, Goldman Sachs is a bank holding company now. They were allowed to become that in September 2008 as a way to rescue them. They have access to the Federal Reserve discount window. Okay? If Goldman Sachs gets into trouble, that's the responsibility of the Federal Reserve and the downside is for society. That is an untenable, unacceptable position in America today.
BILL MOYERS: We are moving now toward the decisive moment in this fight for reform, sometime in the next two or three weeks, we may well have a vote in the Senate. But what are you going to be looking for over the next two weeks that will convince you there is some possibility of true reform?
JAMES KWAK: Well, it's going to be a little bit difficult, because right now a lot of the action is in the fine print. As often happens in the last phase of bills. But I think there's going to be an attempt to weaken the Consumer Financial Protection Agency. Even more than it's been weakened already.
And essentially, what will happen is opponents will try to make the C.F.P.A. subordinate to some other regulators, who can veto it. I think that on derivatives, there's going to be a lot of action, essentially on this issue of exemptions.
So, the derivative legislation looks quite good if you read the first page and look at the headlines. But then there are exemptions inside it. And the question is how big are the exemptions. The thing that we care about most is on the too big to fail issue. So, are we going to have real constraints on the size and scope of these banks? Things that the Obama Administration unveiled in principle to great fanfare in January.
They had a press conference with Paul Volcker and said we're going to have these Volcker rules. Those rules have been considerably watered down in the legislation. And I think that, you know, what we would most like to see are serious constraints on the scope and the size of these banks. Those are the main issues that I'll be looking at.
SIMON JOHNSON: So, the second Volcker rule was proposed in January was to put a size cap on our largest banks at their current size. Now, that-
BILL MOYERS: $2 trillion?
BILL MOYERS: 2 trillion-
SIMON JOHNSON: Now, a size cap is a good idea. Obviously, the current size makes no sense at all, because that's how we got into this mess. There will be amendments brought forward to the floor of the Senate, if this process has any integrity at all. For example, Senator Sherrod Brown has a very good draft amendment.
BILL MOYERS: Ohio, right?
SIMON JOHNSON: Absolutely. And he will, in that amendment, press for a hard cap on the size. And I think also restrictions on the scope. And they'll give a lot more restrictions in legislation, which regulators will have a hard time getting out to, in terms of what can be allowed in our biggest financial institutions.
For me, at least Bill, that is going to be the critical moment. How many people support that amendment or that kind of amendment. Does the Democratic leadership come out in favor of it? Where does the White House stand on this? If the White House steps back and the White House says well, it's all up to the Senate, we're staying out of this. I think you know what's going to happen. You're going to get mush, right? Nothing really meaningful will come of it.
If the President takes the lead, the President takes this one, if the President takes this to the country, takes on the Chamber of Commerce, goes directly to people. And explains why you need to make our biggest banks smaller. As one way, that's not a sufficient condition for financial stability, but it's necessary and it gets at the heart of their political power. Take on the big banks. Take them on directly. That's what Jackson did. That's what Theodore Roosevelt did. That's what Franklin Roosevelt did, too.
BILL MOYERS: Simon Johnson, James Kwak, thank you for being with me. The book is 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. We will link this conversation with your website,
JAMES KWAK: Thank you.
ROBERT J. LEVIN: Few, if any, predicted the unusually rapid...
DANIEL H. MUDD: I did the best that I knew how...
ROBERT J. LEVIN: In hindsight, if we and the industry as a whole had been able to anticipate...
CHUCK PRINCE: Regrettably, we were not able to prevent the losses that occurred...
ROBERT RUBIN: I was not involved in the interactions between the company and the regulators...
DANIEL H. MUDD: Although I was not in the room -- it was executive session [...] I don't, but I just don't know what the number was.
BILL MOYERS: That's it for the JOURNAL.
All republished content that appears on Truthout has been obtained by permission or license.
Friday 23 April 2010
by: Alexander Cockburn, t r u t h o u t Op-Ed

Marijuana was by no means the first boom crop to delight my home county of Humboldt, here in Northern California, five-hours' drive from San Francisco up Route 101. Leaving aside the boom of appropriating land from the Indians, there was the timber boom, which crested in the 1950s when Douglas fir in the Mattole Valley went south to frame the housing tracts of Los Angeles.
In the early 1970s, new settlers - fugitives from the 1960s and city life - would tell visiting friends, "Bring marijuana," and then disconsolately try to get high from the male leaves. Growers here would spend nine months coaxing their plants, only to watch, amid the mists and rains of fall, hated mold destroy the flowers.
By the end of the decade, the cultivators were learning how to grow. There was an enormous variety of seeds - Afghan, Thai, Burmese. The price crept up to $400 a pound, and the grateful settlers, mostly dirt poor, rushed out to buy a washing machine, a propane fridge, a used VW, a solar panel, a 12-volt battery. Even a 3-pound sale was a relatively big deal.
The 1980s brought further advances in productivity through the old Hispanic/Mexican technique of ensuring that female buds are not pollinated, hence the name sin semilla - without seeds. By 1981, the price for the grower was up around $1,600 a pound. The $100 bill was becoming a familiar local unit of cash transactions. In 1982, a celebrated grow here in the Mattole Valley yielded its organizer, an Ivy League grad, a harvest of a thousand pounds of processed marijuana, an amazing logistical triumph. Fifteen miles up the valley from where I write, tiny Honeydew became fabled as the marijuana capital of California, if not America.
That same year, the "war on drugs" rolled into action, executed in Humboldt County by platoons of sheriff's deputies, DEA agents and roadblocks by the California Highway Patrol. The National Guard combed the King Range. Schoolchildren gazed up at helicopters hovering over the valley scanning for gardens. War in this case brought relatively few casualties and many beneficiaries into the local economy: federal and state assistance for local law enforcement; more prosecutors in the DA's office; a commensurately expanding phalanx of defense lawyers; a buoyant housing market for growers washing their money into legality; $200 a day and more for women trimming the dried plants.
A bust meant at least a year of angst for the defendant and at least $25,000 in legal fees, though rarely any significant jail time. It did produce a felony conviction, several years of probation and all the restrictions of being an ex-felon. Nationally, between 1990 to 2005, there were 7,200,000 marijuana-related arrests - 1 out of every 18 felony convictions.
By now, the cattle ranchers were growing, too. Where once you'd see a battered old pickup, now late-model stretch-cab Fords, Chevys and Dodges would thunder by. Ranch yards sported new dump trucks and backhoes. Dealerships were selling big trucks and Toyota 4Runners, purchased with cash. By the mid-1990s, the price of bud was up around $2,400 a pound.
Best of all, the war was a sturdy price support in our thinly populated, remote Emerald Triangle of Humboldt, Mendocino and Trinity counties. Marijuana remained an outlaw crop. Then in 1996 came California's Compassionate Use Act, the brainchild of Dennis Peron, who returned from Vietnam in 1969 with two pounds of marijuana in his duffel bag and became a dealer in San Francisco. In 1990, when his companion was dying of AIDS, Peron began his drive for legal medical use of marijuana.
It was the launch point for greenhouses big enough to spot on Google Earth, plus diesel generators in the hills cycling 24/7 and lists of customers in the clubs down south in San Francisco and L.A. By 2005, with increasingly skilled production, the price was cresting between $2,500 and even $3,500 a pound for the grower. These days, in San Francisco and L.A (the latter still fractious legal terrain), perfectly grown and nicely packaged indoor pot - 4 grams for $60, i.e., $6,700 a pound at the retail level - can be inspected with magnifying glasses in tastefully appointed salesrooms.
The age of Obama saw Attorney General Eric Holder tell the federal DEA to give low priority to harassment of valid medical marijuana clubs in states - fourteen so far, plus Washington, D.C. - that give marijuana some form of legality. Remember, in the U.S., there is federal law, and there are state laws. Federal law trumps state law, but it's still up to the U.S. Attorney General to decide on priorities in enforcement.
On March 25, California officials announced that 523,531 signatures - almost 100,000 more than required - had been validated in support of an state initiative to legalize marijuana and allow it to be sold and taxed, no small fiscal allurement in budget-stricken California.
The California initiative will be on the November ballot. Various polls last year indicated such a measure enjoyed a 55 percent approval rating. It will certainly be a close-run thing, though old people unable to afford prescription painkillers are turning with increasing enthusiasm to marijuana. Call the California ballot the second shoe dropping in the "health reform" drama.
People here in Humboldt County reckon legalization is not far off and spells the end of the 30-year marijuana boom, which was under stress anyway because of one of the oldest problems in agriculture - oversupply. The local weekly, the North Coast Journal, has made a somewhat comic effort to construct a silver lining for the county. It talks hopefully of branding the Humboldt "terroir," of tours of "marijuanaries." Dream on. Down south, there's more sun, more water and very capable Mexicans ready to tend and trim for $15 an hour. The smarter growers reckon they have two years at most. Here on the North Coast, the price of marijuana will drop; the price of land will drop; and the trucks will stop being late-model. There'll be less money floating around. How long will the small producers of gourmet marijuana last before the big companies run them off, pushing through the sort of regulatory "standards" that are now punishing small organic farmers?
Alexander Cockburn is co-editor with Jeffrey St. Clair of the muckraking newsletter CounterPunch. He is also co-author of the new book "Dime's Worth of Difference: Beyond the Lesser of Two Evils," available through
Copyright 2010

All republished content that appears on Truthout has been obtained by permission or license.

Do the Right Thing

Friday 23 April 2010
by: William Rivers Pitt, t r u t h o u t Op-Ed

For a number of years, the running joke about me among my friends was that, because I write for a living, I'm a bum. They didn't really mean it, and there was definitely a tinge of envy in their voices when they cracked on me about it - after all, my commute to work is the 15 feet from my bed to my desk, and wearing pants is entirely optional in my "office" - but there it is. These friends of mine are people who bust their asses for a living, as security guards and in hot restaurant kitchens and in windowless offices and in crowded classrooms and behind bar tops and pedaling bicycle rickshaws filled with inebriated low-tipping tourists back and forth between downtown hotels and Fenway Park, and so the fact that I sat at home reading and writing every day made me an easy mark.
That all changed when the economy got eaten by a bunch of white-collar hedge fund bandits in Washington and New York. It stopped being funny to rank on people about their jobs when it seemed like everyone we knew was either in danger of losing theirs or already had. It stopped being funny when the money got tight. And I stopped hearing the jokes about my profession when my own financial security required I take a second job.
Since nobody anywhere was hiring anyone for anything, I took the best gig I could find, which turned out to be bouncing at a bar. Several nights a week, I pushed away from my keyboard to stand outside a door on a frigid street in a black shirt and check IDs, throw out drunks and keep the peace, such as it was. The gig also involved hauling out garbage, sweeping up cigarette butts, dumping beer swill buckets, polishing tables and dragging dripping boxes of empty beer bottles out behind the building at the end of the night. The pay wasn't great, and my work on average wasn't done until 4:00 AM, but it was enough to make the difference between eating and not eating, and I've been at it ever since.
The job is as blue-collar as you can get, which is nothing new for me. I had my first job before I was ten years old, working the snack bar at a scruffy little public golf course, which later became mowing the entire place and raking every sand trap once I was tall enough to see over the steering wheel of the machinery. Growing up, I never had less than two jobs, and usually had three. I've cleaned septic tanks, served ice cream, rented videos, delivered pizzas, and for one memorably nightmarish season, sold men's underwear for six bucks an hour at a Filene's department store.
About 15 years ago, however, I moved into white-collar office work, and then became a teacher, and then a full-time writer, which I suppose you could define as "no collar" to go along with "no pants." However you define it, the fact of the matter was that it had been a very long time since I'd done a job whose sole requirement was having a strong back and a good right hook, and I realized very quickly that my friend's jokes about my writing career were not entirely misplaced. I'd been in my own cushy writing bubble long enough to forget what sore feet and long nights feels like at the end of a week, and while I'm not saying writing is easy, it is definitely soft by comparison.
The best part about my night job is that most everyone who goes there to drink works very, very, very hard for a living. A great many of them smoke, and since Boston banned butts in bars more than seven years ago, I get to spend a great deal of time talking to the customers out on the sidewalk when they come out to light up. Given the nature of my day job, these conversations invariably turn political, and so, in a very weird and interesting way, I have become something of an informal pollster on the issues of the day. It is a wildly unscientific process, to be sure, given that the people I "poll" are at least partially if not fully in the bag, and that our conversations tend to last only as long as it takes them to choke a butt, but it has been a revelatory experience nonetheless.
The short version of my "findings" boils down to this: people are pissed off and scared. They work too hard for too little, and just spent the last year watching fat cat pols in DC dicker and dither over a health care "reform" bill even the experts don't seem to fully understand. They've watched their jobs, futures and family security explode like the Hindenburg, only to open a newspaper and read about scumbag CEOs and thieving brokerage houses raking in millions in bonuses and billions in profits as a reward for stealing everything but the spoons in the sideboard. They want the heads of these people to roll, and they want jobs, and they want their futures back, and if the politicians who have thus far failed to get this done were on fire in front of them, they wouldn't piss on them to put them out.
So, screw my writing, my political analysis and my cushy little no-collar perspective. This is the bouncer talking, and these people in Washington had better listen good. This push for financial regulation and reform that's about to happen had better be the real deal, had better have some big sharp teeth, and had better include putting some fat Wall Street fillet-mignon asses in prison for the havoc they have wreaked on the lives of millions of good, decent and diligent workers who deserve better.
George W. Bush and his people got a walk for the flagrant crimes they committed, and we've watched these Wall Street criminals thus far escape equally scot-free, and I am here to tell you, the view from the sidewalk is nothing but livid little people who wonder what it has to take before someone goes to jail for being a crook.
I'd say more, but I can't right now. My night job is expecting me.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

A Year of War Would Pay for Local Jobs Bill

Saturday 24 April 2010
by: Robert Naiman, t r u t h o u t Op-Ed

(Image: Lance Page / t r u t h o u t; Adapted: The U.S. Army, Thomas Hawk, lepiaf.geo)

Sometime between now and Memorial Day, the House is expected to consider $33 billion more for war in Afghanistan. This "war supplemental" is largely intended to plug the hole in Afghanistan war spending for the current fiscal year caused by the ongoing addition of 30,000 troops in Afghanistan, whose purpose is largely to conduct a military offensive in Kandahar that 94 percent of the people there say they don't want, preferring peace negotiations with the Taliban instead.
Of course, by itself the number $33 billion is totally meaningless. To make it meaningful, we need to compare it to something - what else could we do with $33 billion?
A recent missive from the AFL-CIO gives a compelling answer: we could use $33 put America back to work:
If the Local Jobs for America Act (HR 4812) becomes law, it will create or save more than 675,000 local community jobs and more than 250,000 education jobs, according to the latest estimates from the House Education and Labor Committee.
According to the House Education and Labor Committee, the bill includes $75 billion over two years for local communities to hold off planned cuts or to hire back workers for local services who have been laid-off because of tight budgets. The bill also includes $24 billion, already approved by the House in December, to help states support 250,000 education jobs, put 5,500 law enforcement officers on the beat, and retain, rehire, and hire firefighters.
Let's therefore put the two year cost of the Local Jobs for America Act at $100 billion, or $50 billion a year.
Now, in order to compare apples and apples, we need to convert the $33 billion for war in Afghanistan to an annual figure - note that the $33 billion just pays for the Afghanistan war through the end of the current fiscal year on September 30. There's some debate about when the Pentagon will actually finish burning through the money it's already been given; let's start our count on June 1. In that case, $33 billion pays for four months of war in Afghanistan, for an annualized cost of $99 billion.
In other words, the cost of the Local Jobs for America Act is half of the cost of continuing the war in Afghanistan.
Or we could look at it this way: supposed we decided to pay the two-year cost of the Local Jobs for America Act by shortening the war in Afghanistan. By how much time would we have to shorten the war? We'd have to shorten it by at least a year.
Now, if only there were a bill in Congress that would likely shorten the war in Afghanistan by at least a year.
Fortunately, there is. Last week, Senator Russ Feingold [D-WI] and Representative Jim McGovern [D-MA] introduced companion legislation "to require a plan for the safe, orderly, and expeditious redeployment of United States Armed Forces from Afghanistan." This legislation requires the President to establish a timetable for military withdrawal from Afghanistan. Since the current deadline for U.S. military withdrawal is nonexistent, I think it's fair to say that if this bill becomes law, the war is likely to be shortened by at least a year.
If you want your representatives in Congress to support the Local Jobs for America Act, and they say, "that's a great idea, but we have to pay for it," then encourage them to support the Feingold-McGovern bill.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

Robert Naiman is senior policy analyst at Just Foreign Policy.