After a historic 22 percent spike in 2021, the average annual bonus for New York City-based securities industry employees fell 26 percent in 2022, according to just-released New York State Comptroller data. But the rate of increase in average Wall Street bonuses since the 2008 crash is still far higher than wage increases for ordinary workers, according to Institute for Policy Studies analysis of comptroller and BLS data.
The 2022 average Wall Street bonus of $176,700 is up 28.9 percent in real terms since 2008 (75.2 percent in current dollars). That’s more than twice as high as the 13.6 percent real average wage growth rate during this period for all private sector workers.
The gap is even wider between Wall Street bonuses and wages in the manufacturing and construction industries. Real average wages have increased only 4.6 percent in manufacturing and 11.5 percent in construction.
Source: Institute for Policy Studies analysis of NY Comptroller and Bureau of Labor Statistics data
Wall Street pay v. the minimum wage
Since 1985, the first year the comptroller reported bonus data, the average Wall Street bonus has increased 1,165 percent, from $13,970 to $176,700 in 2022 (not adjusted for inflation). If the minimum wage had increased at that rate, it would be worth $42.37 today, instead of $7.25.
The total bonus pool for 190,800 New York City-based Wall Street employees in 2022 was $33.7 billion — enough to pay for 771,520 jobs that pay $15 per hour with benefits for a year.
Wall Street bonuses come on top of base salaries, which averaged $516,560 for New York securities industry employees in 2021.
Wall Street bonuses and gender and racial inequality
The rapid increase in Wall Street bonuses over the past several decades has contributed to gender and racial inequality, since workers at the low end of the wage scale are disproportionately people of color and women, while the lucrative financial industry is overwhelmingly white and male, particularly at the upper echelons.
The share of the five largest U.S. investment banks’ senior executives and top managers who are male: JPMorgan Chase: 71%, Goldman Sachs: 77%, Bank of America: 63%, Morgan Stanley: 76%, and Citigroup: 62%.
Nationwide, men make up 62 percent of all securities industry employees but just a tiny fraction of workers who provide care services that are in high demand but continue to be very low paid. Men make up less than 6 percent of childcare workers, an occupation that pays $26,680 per year, on average. Men make up just 13 percent of home health aides, who average $29,260 per year.
Sources: Bank diversity report indicators for 2021 and Bureau of Labor Statistics occupational data for 2022
At the five largest U.S. investment banks, the share of executives and top managers who are Black: JPMorgan Chase: 5%, Goldman Sachs: 3%, Bank of America: 6%, Morgan Stanley: 3%, and Citigroup: 8%.
Nationally, Black workers hold just 6.4 percent of lucrative securities industry jobs but 32.5 percent of home health and 29.5 percent of nursing home jobs.
Source: Bank diversity report indicators for 2021 and Bureau of Labor Statistics occupational data for 2022
Regulators Fail to Rein in Wall Street Bonus Culture
The Comptroller’s bonus report comes amidst heightened scrutiny of Wall Street bonuses due to recent banking collapses. Silicon Valley Bank executives received their 2022 bonuses just hours before regulators seized control of the collapsing firm.
For more than a dozen years now, Wall Street and corporate lobbyists have blocked both financial executive pay restrictions and a federal minimum wage increase. This speaks volumes about who has influence in Washington — and who does not.
What Can Be Done to Rein in Excessive Wall Street Pay?
Wall Street’s bonus culture encouraged the high-risk behaviors that led to the 2008 financial crisis, costing millions of Americans their homes and livelihoods. In response, Congress inserted several compensation-related provisions in the post-crisis Dodd-Frank financial reform. These include Section 956, which bans Wall Street incentive pay that encourages “inappropriate” risk-taking. For more than a dozen years, regulators have failed to implement this rule, despite continued financial recklessness, as Public Citizen has documented.
Biden administration financial regulators should swiftly – and rigorously – enact the Dodd-Frank Wall Street pay restrictions that were supposed to have been enacted by May 2011. This new regulation should include:
A ban on stock options at Wall Street banks
Options allow executives to buy company shares at a set price, offering all the benefits of share price increases with no downside risk. According to the bipartisan 2011 Financial Crisis Inquiry Commission, these pay structures create “incentives to increase both risk and leverage” in order to boost a company’s short-term stock price.
Require Wall Street executives to set aside significant compensation for 10 years to pay potential misconduct fines – or make depositors whole in a crisis
If such a regulation had been in place before the SVB collapse, top executives would’ve automatically forfeited this deferred pay to help cover the cost of their recklessness. Former New York Federal Reserve Bank President William Dudley first proposed such collective funds in 2014, arguing that making executives put their own “skin in the game” would help change Wall Street’s dangerously risky culture.
A ban on executive hedging of bonus pay
Any effort to reduce inappropriate risk-taking will be ineffective if employees can buy insurance to protect their compensation from the risk of poor company performance, as the AIG CEO was able to do in 2008.
This post was originally published on Common Dreams.
The federal minimum wage in the United States would be more than $42 an hour today if it rose at the same rate as the average Wall Street bonus over the past four decades, according to an analysis released Thursday by the Institute for Policy Studies.
Citing newly released data from the New York State Comptroller, IPS noted that the average Wall Street bonus has increased by 1,165% since 1985, not adjusted for inflation.
Last year, the average cash bonus paid to Wall Street employees was $176,700—75% higher than in 2008 but slightly lower than the 2021 level of $240,400.
The federal minimum wage, meanwhile, has been completely stagnant since 2009, when it was bumped up to $7.25 from $5.15. While many states and localities have approved substantial pay increases in recent years, 20 states have kept their hourly wage floors at the federal minimum.
Sarah Anderson, director of the Global Economy Project at IPS and the author of the new analysis, wrote Thursday that “average weekly earnings for all U.S. private sector workers increased by only 54.4%” between 2008 and 2022—a significantly slower pace than inequality-fueling Wall Street bonuses.
“The total bonus pool for 190,800 New York City-based Wall Street employees in 2022 was $33.7 billion—enough to pay for 771,520 jobs that pay $15 per hour with benefits for a year,” Anderson observed. “Wall Street bonuses come on top of base salaries, which averaged $516,560 for New York securities industry employees in 2021.”
Anderson argued that there are a number of straightforward steps lawmakers and regulators can take to curb exorbitant Wall Street compensation and bonuses.
In the wake of the 2008 financial crisis, Congress passed several provisions aimed at reining in bankers’ compensation as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
But as The American Prospect‘s David Dayen pointed out last week, “bank regulators hip-pocketed one of those rules that Congress mandated in 2010—the one that would prohibit banker compensation that is specifically tied to taking inappropriate risks.”
“The last time there was even a proposed rule on this was nearly seven years ago,” Dayen continued. “And in 2018, when Federal Reserve Chair Jerome Powell was asked whether he would abide by Congress’ wishes and finish the rule, he blandly replied, ‘We tried for many years’ and ‘we were not able to achieve consensus’—just thumbing his nose at a congressional mandate.”
Anderson urged the Biden administration’s financial regulators to stop deferring to Wall Street lobbyists and “swiftly—and rigorously—enact the Dodd-Frank Wall Street pay restrictions that were supposed to have been enacted by May 2011.”
Any new regulation, Anderson wrote, can and should include “a ban on stock options at Wall Street banks” and mandates requiring Wall Street executives to “set aside significant compensation for 10 years to pay potential misconduct fines.”
“If such a regulation had been in place before the [Silicon Valley Bank] collapse,” Anderson noted, “top executives would’ve automatically forfeited this deferred pay to help cover the cost of their recklessness.”
This post was originally published on Common Dreams.
In the wake of recent bank collapses and protests across the United States demanding financial institutions end fossil fuel financing, 50 climate, environmental justice, and Indigenous rights groups on Tuesday advocated for new regulations.
“We the undersigned strongly urge financial regulators and Congress to learn from the collapse and bailout of Silicon Valley Bank (SVB) and rapidly implement new regulations to mitigate against climate-related financial risk,” the coalition wrote.
“Climate-related risks are moving us toward a financial crisis. But regulators have not taken adequate steps to actually mitigate those risks.”
The groups’ letter was sent to key leaders at the U.S. Treasury Department, Federal Reserve, Federal Deposit Insurance Corporation (FDIC), National Economic Council, and relevant U.S. House and Senate committees.
After explaining how the SVB collapse is partly the result of poor management enabled by regulatory rollbacks under the Trump administration, the letter states that “this is only the latest example of a bank being wholly unprepared for a large and obvious financial risk.”
The letter continues:
It is a stark reminder of the chaos that can unfold when a financial institution has high exposure to a risky industry, and of the fact that the leaders of major financial institutions are frequently far more concerned with their short-term gains than with robust risk management measures that ensure their safety and the safety and soundness of the financial system. As a reminder of the latter, senior managers at SVB paid themselves millions in bonuses hours before their bank failed and the federal government financially backstopped it. Here again, stronger rules—including the Dodd-Frank executive compensation rules that remain unfinished—could have incentivized greater bank attention to risks.
To prevent any potential for a cascade of bank runs after SVB’s collapse, federal regulators have now effectively set a precedent of guaranteeing all bank deposits in all banking institutions nationwide, to be backstopped by the Federal Deposit Insurance Fund and then taxpayer dollars. Moreover, the Federal Reserve has begun lending at extraordinarily generous terms to any other banks with assets whose real value has been curbed by interest rate hikes—in effect, the Fed is offering a first-of-its-kind, get-out-of-bank-failure-free card to any firms that made the same foreseeable mistake as SVB. Regulators justified this extraordinary shift in the structures of American finance by relying on emergency rules in place to prevent systemic risk to the financial system. In effect, regulators argued that SVB’s inability to mitigate one of the most obvious forms of financial risk—the potential for rising interest rates amid high inflation—constituted a grave risk to the whole financial system, and, thereby, the whole economy.
“If management at a wide swath of banks failed to properly address a well-understood risk, they cannot be trusted to independently address other complex emerging risks,” the groups argued. “Regulators must intervene to protect the financial system from risks associated with climate change and the ongoing transition to a green economy.”
The letter notes recent remarks from Treasury Secretary Janet Yellen about the economic and financial impact of the climate emergency as well as how, as it worsens, “banks of all sizes holding mortgage-backed bonds will see their assets drop in value” while “banks invested in the fossil fuel industry will eventually be saddled with stranded assets.”
“Climate-related risks are moving us toward a financial crisis. But regulators have not taken adequate steps to actually mitigate those risks,” the coalition warned, calling on U.S. policymakers to:
Move with urgency and speed to implement proposed guidance for banks and financial institutions related to preparation for climate-related financial risks and to follow up with more detailed guidance;
Rapidly move forward on rigorous exams for banking institutions, including for medium-sized banks, regardless of industry pressure for light-touch supervision of climate-related risks; and
Please also see previous coalition letters recommending action on the Federal Reserve’s and the Treasury Department’s climate guidance.
“Banks cannot be trusted to independently evaluate and protect against the systemic risks of the climate crisis in real-time. They also cannot be trusted to avoid creating risks for other institutions and the financial system through their support for fossil assets and greenhouse gas emissions,” the letter says. “This process requires regulators to set clear rules and ensure banks and financial institutions do not engage in unsafe behavior and do not create undue risks and costs for the financial system and the economy.”
Signatories include Greenpeace USA, Lakota People’s Law Project, Sierra Club, and Third Act—who came together earlier this month for a “Stop Dirty Banks” national day of action, the first elderly-led mass climate demonstration in U.S. history.
“Today is a major drive to take the cash out of carbon,” declared Third Act’s Bill McKibben. “We want JPMorgan Chase, Citi, Wells Fargo, and Bank of America to hear the voices of the older generation which has the money and structural power to face down their empty, weasel words on climate. We will not go to our graves quietly knowing that the financial institutions in our own communities continue to fund the climate crisis.”
This post was originally published on Common Dreams.
On
CNN March 14, Roger Altman, a former deputy Treasury secretary in the Clinton administration, said that American banks were on the verge of being nationalized:
What the authorities did over the weekend was absolutely profound. They guaranteed the deposits, all of them, at Silicon Valley Bank. What that really means… is that they have guaranteed the entire deposit base of the U.S. financial system. The entire deposit base. Why? Because you can’t guarantee all the deposits in Silicon Valley Bank and then the next day say to the depositors, say, at First Republic, sorry, yours aren’t guaranteed. Of course they are.
…So this is a breathtaking step which effectively nationalizes or federalizes the deposit base of the U.S. financial system.
The deposit base of the financial system has not actually been nationalized, but Congress is considering modifications to the Federal Deposit Insurance Corporation (FDIC) insurance limit. Meanwhile, one state that does not face those problems is North Dakota, where its state-owned bank acts as a “mini-Fed” for the state. But first, a closer look at the issues.
Bail In, Bail Out, or “Socialism for the Rich”?
On Friday, March 10, Silicon Valley Bank (SVB) was put into receivership by the FDIC. The FDIC announced that deposits over the $250,000 insurance limit would get an advance dividend within the next week, and would receive a receivership certificate for the rest of the funds. Most of the depositors were venture-backed startups that needed to keep large deposits in the bank to meet payroll and pay suppliers, and over 95% of the deposits were uninsured and at risk of being lost. It was basically a “bail in” of the uninsured deposits, which would be recoverable only if funds were available after the bank’s assets had been sold.
But that arrangement lasted only two days. On March 12, Signature Bank was put into receivership; and the FDIC, Treasury, and Federal Reserve jointly announced that all of the deposits at the two banks, not just those under the insurance limit, would be available for withdrawal on demand.
At
a Senate Finance Committee hearing on March 16, Treasury Secretary Janet Yellen said that the guarantee would not apply to all deposits at all banks. Rather, the determination would be made on a case-by-case basis.
In a
Bloomberg News interview on March 16, former FDIC Chair Sheila Bair criticized that decision. She observed that the two banks getting special treatment were not “systemically important,” and that the cost of the expanded guarantee was to be covered by a special assessment against all insured banks, including the small community banks that provide essential credit to local businesses. She argued that if guarantees were going to be given over the $250,000 limit, they should apply to deposits everywhere.
Meanwhile, on March 12, the Federal Reserve announced that it had set up a special purpose vehicle of the sort arranged for Covid relief in March 2020, called
the Bank Term Funding Program (BTFP). Like the Covid special purpose vehicles, it would be backstopped with $25 billion from the Exchange Stabilization Fund (ESF), a fund set up in 1934 to stabilize the exchange value of the dollar. The BTFP was to be available to any bank needing it, and many banks obviously did. Over $300 billion in short-term loans were withdrawn from the Fed’s various facilities just in the week after SVB’s collapse.
This money is not, however, the sort of “free lunch” provided to troubled banks in the last financial crisis. The money is to be advanced as a loan for up to a year, at a
hefty interest rate as of March 22 of 4.88%. According to a Federal Reserve press release, advances will be made to “eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.”
“Valued at par” means that banks can hold their long-term federal securities to maturity while acquiring ready cash against them to meet withdrawals, without having to “mark to market” and sell at a loss.
The Systemic Flaw
So what caused this crisis, and what can be done to remedy it?
In the midst of the 2008 economic crisis, former Fed Chair Alan Greenspan conceded that
there was a flaw in his perception of the financial operating system. For 40 years, he had believed that banks could “self-regulate” responsibly, a presumption that had proven to be flawed.
In the case of SVB, however, the bank was not engaged in the sort of risky lending seen in the subprime crisis, and increased
“stress testing” wouldn’t have saved it. It had put its deposits largely in federal securities, purported to be the safest assets available—so safe that they carry a “zero risk weighting” requiring no extra capital buffer. What went wrong was that they were long-term bonds at low interest. When rates shot up, the market value of the bonds dropped, since buyers prefer newer bonds paying higher interest. Bonds that could be sold were sold at a loss, and some marked “hold to maturity” could not be sold at all. As a result, SVB lacked the liquidity to meet the sudden unexpected demand for withdrawals.
The flaw to which SVB and many other “troubled” banks have fallen victim is the age-old systemic problem of “borrowing short to lend long.” For centuries, banks have borrowed the money of depositors who expect to have it available on demand, and have invested it in long-term assets that cannot be immediately liquidated. The system works well so long as the depositors don’t panic and rush to pull their money out all at once. But when they do, if the problem is systemic, not just single banks but the whole banking system can collapse.
We used to see this flaw dramatized every December, when TV networks ran the 1946 Christmas classic “It’s a Wonderful Life.” When the Bailey Brothers Building and Loan suffered a bank run, George Bailey (Jimmy Stewart) had to explain to the panicked depositors that their money had been lent to their neighbors. He was on the verge of suicide, when a guardian angel showed him how critical he and his bank had been to the community; and the neighbors pitched in and rescued the bank.
Even closer to the situation today was
the crisis of the savings and loan associations (S&Ls) of the 1980s, after the Federal Reserve raised interest rates dramatically to kill inflation. Most of the assets of the S&Ls were long-term fixed-rate mortgages. As rates rose, they had to pay more to attract deposits; but the amount they earned on their fixed-rate mortgages didn’t change. Losses mounted, but the S&L insurance fund, the FSLIC, lacked sufficient money to reimburse all the depositors at failed S&Ls so the regulators turned a blind eye and allowed them to keep operating as “zombies.” The matter was finally resolved with legislation in 1989 that placed S&L insurance under the FDIC and established the Resolution Trust Corporation to resolve the remaining troubled S&Ls. The ultimate cost to the taxpayers was estimated to be as high as $124 billion.
As with George Bailey’s savings and loan, the flaw was not “fractional reserve” lending. The S&Ls pooled the money of their customers and lent only what they had. The systemic flaw was and still is that to make long-term loans, banks must borrow “other people’s money,” which is expected to be available on demand. Today the banks’ liquidity options include not just their own depositors but other banks’ depositors in the fed funds market, and pension funds and other institutional creditors lending in the repo market. But they all expect their money to be available on demand; and if the bank has lent it out in long-term loans, the bank can be caught short shuffling reserves around trying to meet that demand.
The Failed Banks Were Not Nationalized, But Maybe They Should Have Been
One option that was debated in the 2008-09 crisis was actual nationalization. As
professor Michael Hudson wrote in February 2009:
Real nationalization occurs when governments act in the public interest to take over private property… Nationalizing the banks along these lines would mean that the government would supply the nation’s credit needs. The Treasury would become the source of new money, replacing commercial bank credit. Presumably this credit would be lent out for economically and socially productive purposes, not merely to inflate asset prices while loading down households and business with debt as has occurred under today’s commercial bank lending policies.
Gar Alperovitz, professor emeritus at the University of Maryland, also weighed in on the issue. In a 2012
New York Times article titled “Wall Street Is Too Big to Regulate,” he noted that the five biggest banks—JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs—had amassed assets amounting to more than half the nation’s GDP. He wrote:
With high-paid lobbyists contesting every proposed regulation, it is increasingly clear that big banks can never be effectively controlled as private businesses. If an enterprise (or five of them) is so large and so concentrated that competition and regulation are impossible, the most market-friendly step is to nationalize its functions…
Nationalization isn’t as difficult as it sounds. We tend to forget that we… essentially nationalized the American International Group, one of the largest insurance companies in the world, and the government still owns roughly 60 percent of its stock.
Another example was Continental Illinois, the largest bank bankruptcy and the seventh-largest bank in the country when it failed in 1984. The FDIC wiped out existing shareholders, infused capital, took over bad assets, replaced senior management, and owned the bank for about a decade, running it as a commercial enterprise, selling it in 1994.
What constituted a radical departure from capitalist principles in the last financial crisis was not “nationalization” but an unprecedented wave of bank bailouts, sometimes called “welfare for the rich.” The taxpayers bore the losses while the culpable management not only escaped civil and criminal penalties but made off with record bonuses. Banks backed by an army of lobbyists succeeded in getting laws changed so that what was formerly criminal behavior became legal. Instead of nationalization, we got TARP, the
Troubled Asset Relief Program, in which toxic assets were purchased from financial institutions by the Treasury. Faced with the inequity of that solution, many economists recommended nationalization instead. Willem Buiter, chief economist of Citigroup and formerly a member of the Bank of England’s Monetary Policy Committee, wrote in the Financial Times in September 2009:
Is the reality of the modern, transactions-oriented model of financial capitalism indeed that large private firms make enormous private profits when the going is good and get bailed out and taken into temporary public ownership when the going gets bad, with the taxpayer taking the risk and the losses?
If so, then why not keep these activities in permanent public ownership? There is a long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities that are ultimately underwritten by the taxpayer. …Once the state underwrites the deposits or makes alternative funding available as lender of last resort, deposit-based banking is a license to print money. [Emphasis added.]
Those are all good arguments, but Congress is not likely to nationalize the whole banking system any time soon.
What About Nationalizing the Liquidity Pool?
Without going to those lengths, what could be made a public utility is the banks’ liquidity pool. Banks could borrow directly from the deep pocket of the central bank, the “lender of last resort” (or from the Treasury if it were reengineered so that it could issue money as credit without taxing or going into debt). Banks would still need to make “prudent” loans—loans to borrowers who had demonstrated an ability to pay the money back—since if they suffered substantial defaults, they would not be able to balance their books and could be put into bankruptcy. They would still charge interest to cover their costs, and they would still compete for borrowers by keeping their interest rates low, maintaining the principles of “market capitalism” operating now. Customer deposits could be sequestered separately from loans, e.g. at government-backed postal banks. In fact, sequestering customer funds is
what brokerages (such as Schwab and Fidelity) do now. Rather than the bank gambling with your money, you gamble with it yourself. But that, of course, can be risky too!
In any case sequestering deposits is not likely to happen either. What is being sought is what Roger Altman predicted—FDIC insurance coverage of the entire deposit base. In a March 17 letter
first reported by Bloomberg News, the Midsize Bank Coalition of America called on regulators “immediately… to reinstate full deposit insurance coverage for depositors,” for two years. That was done in 2008, the letter noted, “and was one of the most effective tools used in the great financial crisis and it needs to be brought back immediately. Importantly, as happened previously, this increase in insurance should be paid for directly by the banks themselves by simply increasing the deposit insurance assessment on banks who choose to participate in this increased insurance coverage.”
The concern for midsize banks is that depositors have been fleeing to giant “too big to fail” banks, perceiving them to be safer. But as Cornell professor Robert Hockett observes, midsize banks lend to the midsize businesses that are the backbone of the productive economy. He has drafted legislation to provide for universal deposit insurance,
discussed in Forbes. However, it’s an uphill battle. Even Sheila Bair, who is clearly sympathetic to the plight of local banks, has reservations on full coverage. As reported on MSN.com:
FDIC Chairwoman Sheila Bair said Tuesday that Congress should consider temporarily providing guarantees for deposits in transaction accounts used by employers to pay their workers—a move that some Democrats are considering.
But Bair said it would be an “overreaction” to insure all bank deposits.
“Unlimited insurance would be very expensive to do. It would be assessed on the banking system, backstopped by taxpayers, and would primarily help very, very wealthy people,” Bair said on Washington Post Live.
Small community banks—defined as banks with $10 billion or less in assets—have spoken out against paying more to cover the failure of larger banks such as SVB.
The Public Bank Option
Meanwhile, one midsize bank that has escaped this furor is the Bank of North Dakota. With assets in 2021 of $10.3 billion and a return on investment of 15%, the BND is owned by the state, which self-insures it. There is no fear of bank runs, because the state’s revenues compose the vast majority of its deposits, and they must be deposited in the BND by law.
The state’s local banks are also protected by the BND, which is forbidden to compete with them. Instead, it partners with them, helping with liquidity and capitalization. The BND has been called a “mini-Fed” for the state and its banks. That helps explain why
North Dakota has more local banks per capita than any other state, at a time when other states have been losing banks to big bank mergers, causing the number of U.S. banks to shrink radically.
U.K. professor Richard Werner recently published
a briefing memo supporting the case for a public bank. It was prepared for the state of Tennessee, which is considering a sovereign state bank on the North Dakota model, but the arguments apply to all states. Benefits discussed include dividends, higher state-level tax revenues, greater job creation, greater local autonomy and resilience to shocks, more options for funding public sector borrowing and state pension funds, and protection of financial transaction freedom and privacy.
Small and local is good, but even small regional banks need to pool their resources for maximum efficiency and security. A state-owned bank on the model of the Bank of North Dakota can provide low-interest loans, liquidity, and financial sovereignty, keeping financial resources in the state directed to public purposes, all while turning a profit for the state.
This post was originally published on Common Dreams.
Once again, government socialism – ultimately backed by taxpayers – is saving reckless midsized banks and their depositors. Silicon Valley Bank (S.V.B) and Signature Bank in New York greedily mismanaged their risk levels and had to be closed down. The Federal Deposit Insurance Corporation (FDIC), in return, to avoid a bank panic and a run on other midsized banks went over its $250,000 insurance cap per account and guaranteed all deposits – no matter how large, which are owned by the rich and corporations – in those banks.
Permitting such imprudent risk-taking flows directly from the Trump-GOP Congressional weakening of regulations in 2018, which was supported by dozens of Democrats, led by bank toady Senator Mark Warner (D-VA). That bipartisan deregulation provided a filibuster-proof passage by the Senate.
The other culprit is the Federal Reserve. Its very fast interest rate hikes reduced the asset value of those two banks’ holdings in long-term Treasury bonds, which reduced their capital reserves. With the “what, me worry” snooze of the California Department of Financial Protection and Innovation, S.V.B had little supervision from state regulatory examiners and compliance enforcers.
Actually, big depositors sniffed the shakiness of these two banks and acted ahead of the regulatory cops with mass withdrawals that sealed the fate of S.V.B. Imagine, S.V.B was giving out bonuses hours before its collapse. For this cluelessness, the bank’s CEO, Gregory Becker, took home about eleven million dollars in pay last year.
All this was predicted by Senator Elizabeth Warren and Rep. Katie Porter. Warren, in particular, specifically opposed the 2018 Congressional lifting of stronger liquidity and capital requirements along with regular stress tests for banks with assets over $50 billion. Trump’s law allowed the absence of these safeguards to cover banks with assets up to $250 billion. Such de-regulation covered S.V.B and Signature.
Signature Bank had former House Banking Committee Chair Barney Frank on its board of directors. His name is on the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed following the 2008 Wall Street collapse. Even Mr. Frank was clueless about what Signature’s CEO Joseph DePaolo was mismanaging. (DePaulo was paid $8.6 million last year.)
Of course, the underfunded FDIC doesn’t have enough money to make good all the large depositors in these two banks. So, it is increasing the fees charged to all banks for such government insurance. The banks will find ways to pass these surchargers on to their customers.
Other midsized banks may be shaky as more major depositors pull out and put their money into mega-giant banks like JPMorgan Chase, Bank of America and Citigroup, which are universally viewed as “too big to fail.” The smaller businesses harmed by these closed banks are now on their own. No corporate socialism is as yet saving them.
One of the provisions of the Dodd-Frank law was to require federal agencies to rein in bank executives’ pay that incentivizes recklessness and even fraud, as Public Citizen noted. Yet after 13 years, PC declared: “a hodgepodge of federal agencies – the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Federal Reserve, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission – that is supposed to finalize the rule has so far failed to do so.”
Defying mandates of Congress, often riddled with waivers from Capitol Hill, is routine for federal agencies. They know that when it comes to law and order for profiteering corporations, Congress is spineless. Have you heard of any resignations or firings from these sleepy regulatory agencies? Of course not. They continue to raise the ante for corporate socialist rescue even beyond their legal authority. For example, where does the FDIC get the authority to guarantee all the deposits in the failed banks when the Congressional limit is strictly $250,000 per account?
Some people will remember Secretary of the Treasury Henry Paulson telling the Washington Post that there were “no authorities” for massive bank bailouts – think Citigroup in 2008 during a private weekend meeting in Washington, DC – but, he said, “someone had to do it.”
Meanwhile, the American people remain fearful but silent over the safety of their bank deposits. They heard Treasury Secretary Janet Yellen tell Congress that the banking system “remains sound.” Some remember that’s what her predecessor said in the spring of 2008 about Fannie Mae and Freddie Mac – the safest investments after Treasury bonds. By the fall, both of these giants had collapsed taking millions of trusting shareholders down with them.
Finally, all those brilliant economists at the Federal Reserve surely must know that when midsize banks lose almost 20% on the value of their 10-year Treasuries, due to the very fast interest rate hikes by Jerome Powell’s Fed, trouble is on the horizon. Why didn’t they anticipate this outcome and do some foreseeing and forestalling? Nah, why worry, didn’t you know that the Fed prints money?
Or maybe the Federal Reserve (its budget comes from bank fees, not the Congress), couldn’t see beyond fighting inflation, something it did not take seriously in time over a year and a half ago. More than a few outside economists repeatedly gave the Fed fair warning. But then the Fed, hardly ever criticized by the mainstream press, was listening to its brilliant economists.
Stay tuned. This rollercoaster ride is not over yet.
Once again, government socialism—ultimately backed by taxpayers—is saving reckless midsized banks and their depositors. Silicon Valley Bank (S.V.B) and Signature Bank in New York greedily mismanaged their risk levels and had to be closed down. The Federal Deposit Insurance Corporation (FDIC), in return, to avoid a bank panic and a run on other midsized banks went over its $250,000 insurance cap per account and guaranteed all deposits—no matter how large, which are owned by the rich and corporations—in those banks.
Permitting such imprudent risk-taking flows directly from the Trump-GOP Congressional weakening of regulations in 2018, which was supported by dozens of Democrats, led by bank toady Senator Mark Warner (D-Va.). That bipartisan deregulation provided a filibuster-proof passage by the Senate.
The other culprit is the Federal Reserve. Its very fast interest rate hikes reduced the asset value of those two banks’ holdings in long-term Treasury bonds, which reduced their capital reserves. With the “What, me worry?” snooze of the California Department of Financial Protection and Innovation, SVB had little supervision from state regulatory examiners and compliance enforcers.
Actually, big depositors sniffed the shakiness of these two banks and acted ahead of the regulatory cops with mass withdrawals that sealed the fate of SVB. Imagine, SVB was giving out bonuses hours before its collapse. For this cluelessness, the bank’s CEO, Gregory Becker, took home about eleven million dollars in pay last year.
All this was predicted by Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.). Warren, in particular, specifically opposed the 2018 Congressional lifting of stronger liquidity and capital requirements along with regular stress tests for banks with assets over $50 billion. Trump’s law allowed the absence of these safeguards to cover banks with assets up to $250 billion. Such de-regulation covered SVB and Signature.
Signature Bank had former House Banking Committee Chair Barney Frank on its board of directors. His name is on the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed following the 2008 Wall Street collapse. Even Mr. Frank was clueless about what Signature’s CEO Joseph DePaolo was mismanaging. (DePaulo was paid $8.6 million last year.)
Of course, the underfunded FDIC doesn’t have enough money to make good all the large depositors in these two banks. So, it is increasing the fees charged to all banks for such government insurance. The banks will find ways to pass these surchargers on to their customers.
Other midsized banks may be shaky as more major depositors pull out and put their money into mega-giant banks like JPMorgan Chase, Bank of America, and Citigroup, which are universally viewed as “too big to fail.” The smaller businesses harmed by these closed banks are now on their own. No corporate socialism is as yet saving them.
One of the provisions of the Dodd-Frank law was to require federal agencies to rein in bank executives’ pay that incentivizes recklessness and even fraud, as Public Citizen noted. Yet after 13 years, PC declared: “a hodgepodge of federal agencies—the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Federal Reserve, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission—that is supposed to finalize the rule has so far failed to do so.”
Defying mandates of Congress, often riddled with waivers from Capitol Hill, is routine for federal agencies. They know that when it comes to law and order for profiteering corporations, Congress is spineless. Have you heard of any resignations or firings from these sleepy regulatory agencies? Of course not. They continue to raise the ante for corporate socialist rescue even beyond their legal authority. For example, where does the FDIC get the authority to guarantee all the deposits in the failed banks when the Congressional limit is strictly $250,000 per account?
Some people will remember Secretary of the Treasury Henry Paulson telling the Washington Post that there were “no authorities” for massive bank bailouts—think Citigroup in 2008 during a private weekend meeting in Washington, DC— but, he said, “someone had to do it.”
Meanwhile, the American people remain fearful but silent over the safety of their bank deposits. They heard Treasury Secretary Janet Yellen tell Congress that the banking system “remains sound.” Some remember that’s what her predecessor said in the spring of 2008 about Fannie Mae and Freddie Mac—the safest investments after Treasury bonds. By the fall, both of these giants had collapsed taking millions of trusting shareholders down with them.
Finally, all those brilliant economists at the Federal Reserve surely must know that when midsize banks lose almost 20% on the value of their 10-year Treasuries, due to the very fast interest rate hikes by Jerome Powell’s Fed, trouble is on the horizon. Why didn’t they anticipate this outcome and do some foreseeing and forestalling? Nah, why worry, didn’t you know that the Fed prints money?
Or maybe the Federal Reserve (its budget comes from bank fees, not the Congress), couldn’t see beyond fighting inflation, something it did not take seriously in time over a year and a half ago. More than a few outside economists repeatedly gave the Fed fair warning. But then the Fed, hardly ever criticized by the mainstream press, was listening to its brilliant economists.
Stay tuned. This rollercoaster ride is not over yet.
This post was originally published on Common Dreams.
Former Silicon Valley Bank CEO Greg Becker sold $3.6 million worth of shares on February 27, just days before the bank disclosed a large loss that triggered its stock slide and collapse. Over the previous two years, Becker sold nearly $30 million of stock.
But Becker won’t rake in the most from this mess. Jamie Dimon, chair and CEO of JPMorgan Chase, the biggest Wall Street bank, will likely make much more.
That’s because depositors in small and medium-sized banks are now fleeing to the safety of JPMorgan and other giant banks that have been deemed “too big to fail” because the government bailed them out in 2008.
Last Friday afternoon, the deputy Treasury secretary, Wally Adeyemo, met with Dimon at his office in New York. He asked Dimon whether the failure of Silicon Valley Bank could spread to other banks. “There’s a potential,” Dimon responded. Presumably, Dimon knew such contagion would mean vastly more business for JPMorgan. In a note to clients on Monday, bank analyst Mike Mayo wrote that JPMorgan in particular is “battle-tested” in volatile markets and “epitomizes” how the largest U.S. banks have shed risk since the 2008 financial crisis. “Recent industry developments should further its ability to gather core funding and act as a source of strength.”
Recall that the 2008 financial crisis generated a gigantic shift of assets to the biggest Wall Street banks, with the result that JPMorgan and the other giants became far bigger. In the early 1990s, the five largest banks had accounted for only 12% of U.S. bank deposits. After the crisis, they accounted for nearly half.
After this week, they’ll be even bigger.
Their giant size has already given them a huge but hidden federal subsidy estimated to be $83 billion annually—a premium that investors and depositors willingly pay to these enormous banks in the form of higher fees and lower returns, because they’re too big to fail. Some of this hidden federal subsidy goes into the pockets of bank executives. Last year alone, Dimon earned $34.5 million. (Greg Becker is a piker by comparison.)
The 2008 financial crisis generated a gigantic shift of assets to the biggest Wall Street banks, with the result that JPMorgan and the other giants became far bigger. After this week, they’ll be even bigger.
Jamie Dimon was at the helm in 2008 when JPMorgan received $25 billion from the federal government to help stem the financial crisis brought on largely by the careless and fraudulent lending practices of JPMorgan and other big banks. Dimon earned $20 million that year.
In March 2009, President Obama summoned Dimon and other top bank executives to the White House and warned them that “my administration is the only thing between you and the pitchforks.” But Obama never publicly rebuked Dimon or the other big bankers. When asked about the generous pay Dimon and other Wall Street CEOs continued to rake in, Obama defended them as “very savvy businessmen” and said he didn’t “begrudge peoples’ success or wealth. That’s part of the free market system.”
What free market system? Taxpayers had just bailed out the banks, and the bank CEOs were still raking in fat paychecks. Yet 8.7 million Americans lost their jobs, causing the unemployment rate to soar to 10%. Total U.S. household net worth dropped by $11.1 trillion. Housing prices dropped by a third nationwide from their 2006 peak, causing some 10 million people to lose their homes.
Rather than defend those CEO paychecks, Obama might have demanded, as a condition of getting bailed out, that the banks help underwater homeowners on Main Street.
Another sensible proposal would have been to let bankruptcy judges restructure shaky home mortgages so that borrowers didn’t owe as much and could remain in their homes. Yet the big banks, led by Dimon, opposed this. They thought they’d do better by squeezing as much as possible out of distressed homeowners, and then collecting as much as they could on foreclosed homes. In April 2008, Dimon and the banks succeeded: The Senate formally voted down a bill that would have allowed bankruptcy judges to modify mortgages to help financially distressed homeowners.
In the run-up to the 2020 election, Dimon warned against policies that Bernie Sanders and AOC were then advocating, including Medicare for All, paid sick leave, and free public higher education. Dimon said they amounted to “socialism.” “Socialism,” he wrote, “inevitably produces stagnation, corruption, and often worse—such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives—which they frequently do to maintain power,” adding that socialism would be “a disaster for our country.”
Dimon also warned against “over-regulation” of banking, cautioning that in the next financial crisis, big institutions like JPMorgan wouldn’t be able to provide the lending they did during the last crisis. “When the next real downturn begins, banks will be constrained—both psychologically and by new regulations—from lending freely into the marketplace, as many of us did in 2008 and 2009. New regulations mean that banks will have to maintain more liquidity going into a downturn, be prepared for the impacts of even tougher stress tests, and hold more capital,” he wrote.
But as was demonstrated again this past week, American capitalism needs strict guardrails. Otherwise, it is subject to periodic crises that summon bailouts. The result is socialism for the rich while everyone else is subject to harsh penalties: Bankers get bailed out, and the biggest banks and bankers do even better. Yet average people who cannot pay their mortgages lose their homes. Meanwhile, almost 30 million Americans still lack health insurance, most workers who lose their job aren’t eligible for unemployment insurance, most have no paid sick leave, child labor is on the rise, and nearly 51 million households can’t afford basic monthly expenses such as housing, food, child care, and transportation.
Is it any wonder that so many Americans see the system as rigged against them? Is it surprising that some of them become susceptible to dangerous snake-oil peddled by demagogues?
This post was originally published on Common Dreams.
Every systemic banking crisis has a trigger that sets it off. In the case of SVB, the reason for its bankruptcy is twofold.
Responding to worried questions raised by many about the ongoing banking crisis that started in the US with the bankruptcy of the Silicon Valley Bank (SVB), and is now affecting Japan and other countries, I can offer the following brief analysis.
The trigger
Every systemic banking crisis has a trigger that sets it off. In the case of SVB, the reason for its bankruptcy is twofold.
The fall in prices in the secondary market for bonds – basically, US government bonds (treasuries) – which was caused by the Fed rate hike which, in turn, was “imposed” on all central banks by inflation.
The plummeting in the share prices of Big Tech and of the entire digital ecosystem of small tech start-ups around Big Tech – a decline caused by the Fed’s termination (due to inflation) of money printing.
In more detail, SVB took two hits at the same time.
The first hit its funds, which were mainly invested in US treasuries. This happened as the rise in interest rates reduced the resale price of these bonds (Why buy “second hand” an older bond that yields 0.5% when you can buy a “new” one that yields 3%?). In itself, this development was not sufficient to bankrupt SVB. As long as SVB was not obliged to sell at a reduced price the older bonds it held, there was no problem. However, because of the second hit, SVB was forced to sell at a large discount. And that’s where the problem started.
When inflation forced the Fed to stop printing new money (i.e. no more quantitative easing), the flow of funds that were keeping the shares of Big Tech companies in the stratosphere also stopped. Thus, Big Tech shares deflated. As these companies (Google, Amazon, Meta, Twitter, Netflix, Airbnb, Uber, etc.) based their funding on loans taken out by putting up their overvalued stock prices as collateral (e.g., that’s how Elon Musk bought Twitter), Big Tech suddenly ran out of cash. That’s why they started pulling their deposits from banks like SVB.
In short, at the same time as SVB’s capital base was being reduced, depositors were asking for their deposits back. As soon as the news got out that SVB was late in returning depositors’ funds, a classic bank run began.
The cause
The underlying reason why the failure of a medium-sized bank in California created so much angst worldwide is that international capitalism has never been able to get back on its feet after 2008.
In more detail: Central banks (the FED, the ECB, etc.) have one basic tool – the interest rate. When they want to put a brake on economic activity to keep inflation in check, they raise the interest rate, and vice-versa. But, in addition to price stability, central banks have two other goals: the stability of the banking system, and the balancing of liquidity with investment. The interest rate chosen by the central bank is one. That same number (e.g. 3%) must achieve three objectives simultaneously: price stability, banking system stability, and balancing between liquidity and investment.
What could be done as an alternative? The exact opposite: austerity for the banks, with nationalisation of those who cannot survive.
And herein lies the reason why I argue that, after 2008, capitalism cannot recover: There is no longer one interest rate that can achieve all three of these objectives simultaneously. This is the tragedy of central bankers: If they want to tame inflation (at a high enough interest rate), they trigger a banking crisis and, as a result, they are forced to bail out the oligarchs who, despite being bailed out, drive investments below liquidity. If, on the other hand, they impose a lower interest rate to avoid triggering a banking crisis, then inflation gets out of control – with the result that businesses expect interest rates to rise, which discourages them from investing. And so on and so forth.
Back to 2008, then?
No, for two reasons. First, the problem for US banks today is not that their assets are junk (e.g. structured derivatives based on red loans) as they were in 2008, but that they own government bonds which they are simply forced to sell at a discount. Second, the Fed bailout announced yesterday is different from the one in 2008 – today it is the banks and depositors who are being bailed out, but not the bank owners-shareholders. These two reasons explain why bank stocks are falling but there is no total collapse of stock markets.
The fact that there is no total collapse of the stock markets does not, of course, mean that the crisis of capitalism – which has been developing continuously since 2008 – is not deepening. It simply does not have the characteristics of an instantaneous, heavy-handed fall.
What does this development mean for Europe?
In 2008, Berlin and Paris were rejoicing that the banking crash was American and did not concern them – or so they thought. Until they realised that Franco-German banks were loaded with the toxic US derivatives that bankrupted Lehman.
Today, Franco-German banks don’t seem to have the same problem – rather, they are being spared due to the antiquated structure of the European economy. What do I mean? Franco-German banks have not lent large amounts to European Big Tech for the simple reason that European Big Tech doesn’t exist – they still lend to car manufacturers and extraction companies. So, I don’t see a European SVB on the horizon.
That doesn’t mean, of course, that European banks are safe. Their own funds are also invested in bonds whose prices have fallen. A large deposit flight will create the same problems here as we are seeing in the US. Such a flight could come from parts of the financial system that one cannot imagine – for example, from the insurance sector (as in Britain last autumn) or from a collapse of the weak Credit Suisse, which has long been suffering.
What should have been done?
Since 2008, governments and central banks have been trying to prop up the banks through a combination of socialism for the banks, and austerity for everyone else. The result is what we see today: The metastasis of the crisis from one “organ” of capitalism to another, with the magnitude of the crisis increasing with each such metastasis.
What could be done as an alternative? The exact opposite: austerity for the banks, with nationalisation of those who cannot survive. And socialism for workers – a basic income for all, a return to collective bargaining and, further out, new forms of participatory ownership of high- and low-tech companies. In other words, nothing short of a political revolution.
To those who fear the idea of a political revolution, my message is simple: Prepare to pay the price of the escalating crisis of a capitalism determined to take us all to its grave.
This post was originally published on Common Dreams.
I hadn’t intended to spend so much time this week on the banking crisis. I’m old enough to remember a time when banking was boring. But since the 1980s, banking has become hugely profitable for bankers and wildly dangerous for the rest of the economy. This week shows why.
At this moment, the Federal Reserve Bank is sitting on the horns of a dilemma.
On one horn are legitimate fears that smaller banks won’t have enough capital to meet their depositors’ needs if the Fed continues to raise interest rates when it meets next week.
Raising rates will slow the economy and possibly imperil banks—especially those that used depositors’ money to purchase long-term bonds when interest rates were lower, as did Silicon Valley Bank.
In other words, raising interest rates next week could cause an even bigger run on the banks.
Besides, inflation is receding, albeit slowly. So why take the risk?
But on the other horn are the Fed’s legitimate fears about inflation becoming entrenched in the economy, requiring more interest rate hikes.
But the two objectives—avoiding a bank run and raising rates—are in conflict. As the song goes, Something’s got to give. What will it be?
This week’s goal was to stabilize the banks enough so the Fed can raise interest rates next week without prompting more bank runs.
This required the Fed to bail out uninsured depositors at three banks and signal it will bail out others—in effect, expanding federal deposit insurance to cover every depositor at every bank.
On top of this, 11 of America’s biggest banks yesterday agreed to contribute a total of $30 billion to prop up First Republic Bank, another smaller bank caught in the turmoil. This “show of support” (as it was billed, without irony) elicited a cheer from the Fed’s Jerome Powell and Treasury Secretary Janet Yellen, who called it “most welcome.” (Of course it was welcome. They probably organized it.)
But consumers and depositors are still worried.
Meanwhile, on the other side of the Atlantic, the European Central Bank has raised interest rates by half a percentage point, saying it’s as committed as ever to fighting inflation.
The financial system is facing a crisis of confidence. Finance ultimately depends on confidence—confidence that prices are under control, and confidence that banks are sound.
But ever since the near meltdown of Wall Street in 2008, followed by the milquetoast Dodd-Frank regulation of 2010 and the awful 2018 law exempting smaller banks, confidence in America’s banks has been shaky.
November’s revelation that the bitcoin giant FTX was nothing but a Ponzi scheme has contributed to the fears. Where were the regulators? Last Friday’s revelation that Silicon Valley Bank didn’t have enough capital to pay its depositors has added to the anxieties. Where were the regulators?
Credit Suisse has been battered by years of mistakes and controversies. It is now on its third CEO in three years. Why? Swiss banking regulations are notoriously lax, but American bankers have also pushed Europeans to relax their financial regulations, setting off a race to the bottom where the only winners are the bankers. As Lloyd Blankfein, then CEO of Goldman Sachs, warned Europeans, “operations can be moved globally and capital can be accessed globally.”
One advantage of being a bank (whether headquartered in Silicon Valley or Switzerland) is you get bailed out when you make dumb bets. Another is you can choose where around the world to make dumb bets. Which is why central banks and bank regulators around the world must coordinate with each other to ensure that instead of a race to the bottom, it’s a race to protect the public.
**
Banking is a confidence game. If the public loses confidence in banks, the financial system can’t function.
In the Panic of 1907, when major New York banks were heading toward bankruptcy, Secretary of the Treasury George B. Cortelyou deposited $35 million of federal money in the banks. It was one of the earliest bank bailouts, designed to restore confidence.
But it wasn’t enough. J.P. Morgan (the man who founded the bank) organized the nation’s leading financiers to devise a private bailout of the banks, analogous to yesterday’s. They redirected money between banks, secured further international lines of credit, and bought up the plummeting stocks of healthy corporations.
Confidence was restored, but the underlying weaknesses of the financial system remained. Those weaknesses became painfully and irrevocably apparent in the Great Crash of 1929.
This post was originally published on Common Dreams.
On Friday, March 10, Silicon Valley Bank (SVB) collapsed and was taken over by federal regulators. SVB was the 16th largest bank in the country and its bankruptcy was the second largest in U.S. history, following Washington Mutual in 2008. Despite its size, SVB was not a “systemically important financial institution” (SIFI) as defined in the Dodd-Frank Act, which requires insolvent SIFIs to “bail in” the money of their creditors to recapitalize themselves.
Technically, the cutoff for SIFIs is $250 billion in assets. However, the reason they are called “systemically important” is not their asset size but the fact that their failure could bring down the whole financial system. That designation comes chiefly from their exposure to derivatives, the global casino that is so highly interconnected that it is a “house of cards.” Pull out one card and the whole house collapses. SVB held $27.7 billion in derivatives, no small sum, but it is only .05% of the $55,387 billion ($55.387 trillion) held by JPMorgan, the largest U.S. derivatives bank.
SVB could be the canary in the coal mine foreshadowing the fate of other over-extended banks, but its collapse is not the sort of “systemic risk” predicted to trigger “contagion.” As reported by CNN:
Despite initial panic on Wall Street, analysts said SVB’s collapse is unlikely to set off the kind of domino effect that gripped the banking industry during the financial crisis.
“The system is as well-capitalized and liquid as it has ever been,” Moody’s chief economist Mark Zandi said. “The banks that are now in trouble are much too small to be a meaningful threat to the broader system.”
No later than Monday morning, all insured depositors will have full access to their insured deposits, according to the FDIC. It will pay uninsured depositors an “advance dividend within the next week.”
The FDIC, Federal Reserve and U.S. Treasury have now agreed on an interim fix that will the subject of another article. Meanwhile, this column focuses on derivatives and is a followup to my Feb. 23 column on the “bail in” provisions of the 2010 Dodd Frank Act, which eliminated taxpayer bailouts by requiring insolvent SIFIs to recapitalize themselves with the funds of their creditors. “Creditors” are defined to include depositors, but deposits under $250,000 are protected by FDIC insurance. However, the FDIC fund is sufficient to cover only about 2% of the $9.6 trillion in U.S. insured deposits. A nationwide crisis triggering bank runs across the country, as happened in the early 1930s, would wipe out the fund. Today, some financial pundits are predicting a crisis of that magnitude in the quadrillion dollar-plus derivatives market, due to rapidly rising interest rates. This column looks at how likely that is and what can be done either to prevent it or dodge out of the way.
“Financial Weapons of Mass Destruction”
In 2002, mega-investor Warren Buffett wrote that derivatives were “financial weapons of mass destruction.” At that time, their total “notional” value (the value of the underlying assets from which the “derivatives” were “derived”) was estimated at $56 trillion. Investopedia reported in May 2022 that the derivatives bubble had reached an estimated $600 trillion according to the Bank for International Settlements (BIS), and that the total is often estimated at over $1 quadrillion. No one knows for sure, because most of the trades are done privately.
As of the third quarter of 2022, according to the “Quarterly Report on Bank Trading and Derivatives Activities” of the Office of the Comptroller of the Currency (the federal bank regulator), a total of 1,211 insured U.S. national and state commercial banks and savings associations held derivatives, but 88.6% of these were concentrated in only four large banks: J.P. Morgan Chase ($54.3 trillion), Goldman Sachs ($51 trillion), Citibank ($46 trillion), Bank of America ($21.6 trillion), followed by Wells Fargo ($12.2 trillion). A full list is here. Unlike in 2008-09, when the big derivative concerns were mortgage-backed securities and credit default swaps, today the largest and riskiest category is interest rate products.
The original purpose of derivatives was to help farmers and other producers manage the risks of dramatic changes in the markets for raw materials. But in recent times they have exploded into powerful vehicles for leveraged speculation (borrowing to gamble). In their basic form, derivatives are just bets – a giant casino in which players hedge against a variety of changes in market conditions (interest rates, exchange rates, defaults, etc.). They are sold as insurance against risk, which is passed off to the counterparty to the bet. But the risk is still there, and if the counterparty can’t pay, both parties lose. In “systemically important” situations, the government winds up footing the bill.
Like at a race track, players can bet although they have no interest in the underlying asset (the horse). This has allowed derivative bets to grow to many times global GDP and has added another element of risk: if you don’t own the barn on which you are betting, the temptation is there to burn down the barn to get the insurance. The financial entities taking these bets typically hedge by betting both ways, and they are highly interconnected. If counterparties don’t get paid, they can’t pay their own counterparties, and the whole system can go down very quickly, a systemic risk called “the domino effect.”
That is why insolvent SIFIs had to be bailed out in the Global Financial Crisis (GFC) of 2007-09, first with $700 billion of taxpayer money and then by the Federal Reserve with “quantitative easing.” Derivatives were at the heart of that crisis. Lehman Brothers was one of the derivative entities with bets across the system. So was insurance company AIG, which managed to survive due to a whopping $182 billion bailout from the U.S. Treasury; but Lehman was considered too weakly collateralized to salvage. It went down, and the Great Recession followed.
Risks Hidden in the Shadows
Derivatives are largely a creation of the “shadow banking” system, a group of financial intermediaries that facilitates the creation of credit globally but whose members are not subject to regulatory oversight. The shadow banking system also includes unregulated activities by regulated institutions. It includes the repo market, which evolved as a sort of pawn shop for large institutional investors with more than $250,000 to deposit. The repo market is a safe place for these lenders, including pension funds and the U.S. Treasury, to park their money and earn a bit of interest. But its safety is insured not by the FDIC but by sound collateral posted by the borrowers, preferably in the form of federal securities.
This banking system (the “shadow” or “parallel” banking system) – repo based on securitization – is a genuine banking system, as large as the traditional, regulated banking system. It is of critical importance to the economy because it is the funding basis for the traditional banking system. Without it, traditional banks will not lend and credit, which is essential for job creation, will not be created.
While it is true that banks create the money they lend simply by writing loans into the accounts of their borrowers, they still need liquidity to clear withdrawals; and for that they largely rely on the repo market, which has a daily turnover just in the U.S. of over $1 trillion. British financial commentator Alasdair MacLeod observes that the derivatives market was built on cheap repo credit. But interest rates have shot up and credit is no longer cheap, even for financial institutions.
According to a December 2022 report by the BIS, $80 trillion in foreign exchange derivatives that are off-balance-sheet (documented only in the footnotes of bank reports) are about to reset (roll over at higher interest rates). Financial commentator George Gammon discusses the threat this poses in a podcast he calls, “BIS Warns of 2023 Black Swan – A Derivatives Time Bomb.”
The Perverse Incentives Created by “Safe Harbor” in Bankruptcy
In The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences, Prof. David Skeel refutes what he calls the “Lehman myth”—the widespread belief that Lehman’s collapse resulted from the decision to allow it to fail. He blames the 2005 safe harbor amendment to the bankruptcy law, which says that the collateral posted by insolvent borrowers for both repo loans and derivatives has “safe harbor” status exempting it from recovery by the bankruptcy court. When Lehman appeared to be in trouble, the repo and derivatives traders all rushed to claim the collateral before it ran out, and the court had no power to stop them.
So why not repeal the amendment? In a 2014 article titled “The Roots of Shadow Banking,” Prof. Enrico Perotti of the University of Amsterdam explained that the safe harbor exemption is a critical feature of the shadow banking system, one it needs to function. Like traditional banks, shadow banks create credit in the form of loans backed by “demandable debt”—short-term loans or deposits that can be recalled on demand. In the traditional banking system, the promise that the depositor can get his money back on demand is made credible by government-backed deposit insurance and access to central bank funding. The shadow banks needed their own variant of “demandable debt,” and they got it through the privilege of “super-priority” in bankruptcy. Perotti wrote:
Safe harbor status grants the privilege of being excluded from mandatory stay, and basically all other restrictions. Safe harbor lenders, which at present include repos and derivative margins, can immediately repossess and resell pledged collateral.
This gives repos and derivatives extraordinary super-priority over all other claims, including tax and wage claims, deposits, real secured credit and insurance claims. [Emphasis added.]
The dilemma of our current banking system is that lenders won’t advance the short-term liquidity needed to fund repo loans without an ironclad guarantee; but the guarantee that makes the lender’s money safe makes the system itself very risky. When a debtor appears to be on shaky ground, there will be a predictable stampede by favored creditors to grab the collateral, in a rush for the exits that can propel an otherwise-viable debtor into bankruptcy; and that is what happened to Lehman Brothers.
Derivatives were granted “safe harbor” because allowing them to fail was also considered a systemic risk. It could trigger the “domino effect,” taking the whole system down. The error, says Prof. Skeel, was in passage of the 2005 safe harbor amendment. But the problem with repealing it now is that we will get the domino effect, in the collapse of both the quadrillion dollar derivatives market and the more than trillion dollars traded daily in the repo market.
The Interest Rate Shock
Interest rate derivatives are particularly vulnerable in today’s high interest rate environment. From March 2022 to February 2023, the prime rate (the rate banks charge their best customers) shot up from 3.5% to 7.75%, a radical jump. Market analyst Stephanie Pomboy calls it an “interest rate shock.” It won’t really hit the market until variable-rate contracts reset, but $1 trillion in U.S. corporate contracts are due to reset this year, another trillion next year, and another trillion the year after that.
A few bank bankruptcies are manageable, but an interest rate shock to the massive derivatives market could take down the whole economy. As Michael Snyder wrote in a 2013 article titled “A Chilling Warning About Interest Rate Derivatives:”
Will rapidly rising interest rates rip through the U.S. financial system like a giant lawnmower blade? Yes, the U.S. economy survived much higher interest rates in the past, but at that time there were not hundreds of trillions of dollars worth of interest rate derivatives hanging over our financial system like a Sword of Damocles.
… [R]ising interest rates could burst the derivatives bubble and cause “massive bankruptcies around the globe” [quoting Mexican billionaire Hugo Salinas Price]. Of course there are a whole lot of people out there that would be quite glad to see the “too big to fail” banks go bankrupt, but the truth is that if they go down, our entire economy will go down with them. … Our entire economic system is based on credit, and just like we saw back in 2008, if the big banks start failing, credit freezes up and suddenly nobody can get any money for anything.
There are safer ways to design the banking system, but they are not likely to be in place before the quadrillion dollar derivatives bubble bursts. Snyder was writing 10 years ago, and it hasn’t burst yet; but this was chiefly because the Fed came through with the “Fed Put” – the presumption that it would backstop “the market” in any sort of financial crisis. It has performed as expected until now, but the Fed Put has stripped it of its “independence” and its ability to perform its legislated duties. This is a complicated subject, but two excellent books on it are Nik Bhatia’s Layered Money (2021) and Lev Menand’s The Fed Unbound: Central Banking in a Time of Crisis (2022).
Today the Fed appears to be regaining its independence by intentionally killing the Fed Put, with its push to raise interest rates. (See my earlier article here.) It is still backstopping the offshore dollar market with “swap lines,” arrangements between central banks of two countries to keep currency available for member banks, but the latest swap line rate for the European Central Bank is a pricey 4.83%. No more “free lunch” for the banks.
Alternative Solutions
Alternatives that have been proposed for unwinding the massive derivatives bubble include repealing the safe harbor amendment and imposing a financial transaction tax, typically a 0.1% tax on all financial trades. But those proposals have been around for years and Congress has not taken up the call. Rather than waiting for Congress to act, many commentators say we need to form our own parallel alternative monetary systems.
Crypto proponents see promise in Bitcoin; but as Alastair MacLeod observes, Bitcoin’s price is too volatile for it to serve as a national or global reserve currency, and it does not have the status of enforceable legal tender. MacLeod’s preferred alternative is a gold-backed currency, not of the 19th century variety that led to bank runs when the banks ran out of gold, but of the sort now being proposed by Sergey Glazyev for the Eurasian Economic Union. The price of gold would be a yardstick for valuing national currencies, and physical gold could be used as a settlement medium to clear trade balances.
Lev Menand, author of The Fed Unbound, is an Associate Professor at Columbia Law School who has worked at the New York Fed and the U.S. Treasury. Addressing the problem of the out-of-control unregulated shadow banking system, he stated in a July 2022 interview with The Hill, “I think that one of the great possible reforms is the public banking movement and the replication of successful public bank enterprises that we have now in some places, or that we’ve had in the past.”
Certainly, for our local government deposits, public banks are an important solution. State and local governments typically have far more than $250,000 deposited in SIFI banks, but local legislators consider them protected because they are “collateralized.” In California, for example, banks taking state deposits must back them with collateral equal to 110% of the deposits themselves. The problem is that derivative and repo claimants with “supra-priority” can wipe out the entirety of a bankrupt bank’s collateral before other “secured” depositors have access to it.
Our tax dollars should be working for us in our own communities, not capitalizing failing SIFIs on Wall Street. Our stellar (and only) state-owned model is the Bank of North Dakota, which carried North Dakota through the 2008-09 financial crisis with flying colors. Post-GFC (the Global Financial Crisis of ’07-’09), it earned record profits reinvesting the state’s revenues in the state, while big commercial banks lost billions in the speculative markets. Several state legislatures currently have bills on their books following the North Dakota precedent.
For a federal workaround, we could follow the lead of Jesse Jones’ Reconstruction Finance Corporation, which funded the New Deal that pulled the country out of the Great Depression. A bill for a national investment bank currently in Congress that has widespread support is based on that very effective model, avoiding the need to increase taxes or the federal debt.
All those alternatives, however, depend on legislation, which may be too late. Meanwhile, self-sufficient “intentional” communities are growing in popularity, if that option is available to you. Community currencies, including digital currencies, can be used for trade. They can be “Labor Dollars” or “Food Dollars” backed by the goods and services for which the community has agreed to accept them. (See my earlier article here.) The technology now exists to form a network of community cryptocurrencies that are asset-backed and privacy-protected, but that is a subject for another column.
The current financial system is fragile, volatile and vulnerable to systemic shocks. It is due for a reset, but we need to ensure that the system is changed in a way that works for the people whose labor and credit support it. Our hard-earned deposits are now the banks’ only source of cheap liquidity. We can leverage that power by collaborating in a way that serves the public interest.
In 2018, ignoring the vocal warnings of experts and advocacy groups, the then-Republican-controlled Congress passed legislation that weakened post-financial crisis regulations for banks with between $50 billion and $250 billion in assets, sparking fears of systemically risky failures and more taxpayer bailouts.
Silicon Valley Bank (SVB), the California-based firm that collapsed on Friday, controlled an estimated $212 billion, leading analysts and lawmakers to argue that the 2018 law made the institution’s market-rattling failure and resulting federal takeover more likely.
Sen. Elizabeth Warren (D-Mass.), who was an outspoken opponent of the deregulatory measure, said in a statement Friday that “President Trump and congressional Republicans’ decision to roll back Dodd-Frank’s ‘too big to fail’ rules for banks like SVB—reducing both oversight and capital requirements—contributed to a costly collapse.”
But the GOP wasn’t alone in its support for Sen. Mike Crapo’s (R-Idaho) Economic Growth, Regulatory Relief, and Consumer Protection Act, which critics dubbed the Bank Lobbyist Act.
As Warren noted as the bill was flying through Congress, a number of Democrats—including Sens. Mark Warner (D-Va.), Joe Manchin (D-W.Va.), and Jon Tester (D-Mont.)—were integral to the legislation’s passage, which led almost immediately to more bank consolidation.
Prior to the enactment of the Crapo bill, which then-President Donald Trump signed into law on May 24, 2018, banks with more than $50 billion in assets were subject to enhanced liquidity mandates and more frequent stress tests aimed at ensuring they could weather economic turmoil.
The 2018 law raised the threshold for the more stringent regulations to $250 billion or higher, a gift to banks like SVB that had been working for years to gut post-crisis regulations implemented under the Dodd-Frank Act of 2010. The diminished oversight, some argued, is at least partly to blame for SVB’s crisis.
“The collapse of Silicon Valley Bank was totally avoidable,” Rep. Katie Porter (D-Calif.) wrote on Twitter. “In 2018, Wall Street pushed a deregulation bill that allowed banks like SVB to take reckless risks. It passed, even as I and many others warned of the risks. I am writing legislation to reverse that law.”
As The Leverreported Friday, SVB specifically pushed Congress in 2015 to hike the regulatory threshold to $250 billion, with the bank’s president touting its “strong risk management practices.”
“Three years later—after the bank spent more than half a million dollars on federal lobbying—lawmakers obliged,” the outlet noted.
The collapse of SVB, a major lender to tech startups, was the second-largest bank failure in U.S. history and the biggest since the 2008 crisis. SVB’s failure came days after it announced it sold $21 billion worth of bonds at a substantial loss, triggering fears about the firm’s health and a run on the bank that was intensified by venture capitalists’ calls for startups to pull their money.
The bank’s last-ditch efforts to raise capital and find a buyer failed, prompting regulators to seize its assets and begin efforts to make depositors whole. (SVB reportedly paid out bonuses to U.S. employees just hours before federal regulators took over.)
The American Prospect‘s David Dayen noted that “because the depositors holding the bag at SVB are Very Important People, there’s going to be intense pressure for a bailout.”
“Hedge fund titan Bill Ackman is already calling for one,” Dayen observed. “Larry Summers told Bloomberg that the financial system should be fine, as long as depositors get every penny of their money back, which would be a $150 billion bailout.”
In an appearance on “Face the Nation” Sunday morning, Treasury Secretary Janet Yellen pledged that “we are not going to do that again,” referring to the bank bailouts of 2008.
“But we are concerned about depositors,” Yellen added, “and we’re focused on trying to meet their needs.”
The Federal Deposit Insurance Corporation (FDIC) is currently seeking a buyer for SVB, with final bids due by Sunday afternoon, according toBloomberg.
“This predictable disaster should give serious pause to the current MAGA House majority who are pursuing further rollbacks of consumer financial protections after taking money hand over fist from Wall Street banks.”
In a statement on Saturday, Liz Zelnick of the watchdog group Accountable.US said that “this mess was left behind by congressional Republicans and the Trump administration, who were too deep in the big banks’ pocket to care about the consequences of gutting financial industry oversight.”
“The chickens came home to roost this week in the Republican war against Wall Street reform and consumer financial protections,” Zelnick continued. “This predictable disaster should give serious pause to the current MAGA House majority who are pursuing further rollbacks of consumer financial protections after taking money hand over fist from Wall Street banks—but don’t count on it.”
Some expert observers were quick to voice concern that SVB’s collapse is just the start of broader chaos in the financial industry and the overall economy.
Dennis Kelleher, the president of Better Markets, warned that the fall of SVB “is going to cause contagion and almost certainly more bank failures,” noting that the Federal Reserve’s rapid and large interest rate increases left many financial institutions without “time to reposition their balance sheets and portfolios.”
“That’s why SVB is just the beginning,” Kelleher argued. “Contagion, likely more bank failures, and various bailouts are almost certainly coming. While the immediate financial stability threats will materialize or be addressed, the underlying fundamental problems caused in large part by the Fed will remain and likely get worse.”
“The Fed’s actions to fight increasing inflation will need to be materially adjusted, which it should be anyway because inflation is driven by many factors that are beyond the Fed’s control,” he said. “Causing financial instability and a recession (of any depth and length) while missing the mark on inflation should cause a fundamental rethinking of the Fed’s powers, authorities, and role.”
This story has been updated to include comments from Treasury Secretary Janet Yellen.
Santa Clara-based Silicon Valley Bank, a major lender to technology startups, collapsed on Friday after its emergency attempts to raise money and find a potential buyer failed, forcing regulators to step in and take over the institution. The speed of SVB’s collapse, the largest since the fall of Washington Mutual in 2008, stunned observers and rattled Wall Street, with bank stocks selling off…
Dilhani worked for six years in a Sri Lankan factory that makes clothes for Nike. She is one of millions of South and Southeast Asian garment workers in Big Fashion companies’ supply chains who saw their income dramatically reduced during the Covid-19 pandemic through layoffs, wage cuts, and wage theft. As an outspoken member of her factory’s employee council, Dilhani pushed for repayment of lost…
The word “inequality” is everywhere in the media. It usually refers either to race, gender, rich vs. poor, or other differences between human beings. Absent from the public debate is the biggest perpetrator of “inequality” against human beings – the corporate entity itself.
Ever since 1886 when a U.S. Supreme Court reporter, in a headnote for the Court’s opinion, wrote that corporations possessed equal rights under the Constitution, judges and corporatist legislators have equipped corporations with an arsenal of inequitable rights. (The Constitution makes no mention whatsoever of “corporation” or “company”).
How is that possible with the 14th Amendment mandating equal protection under the law? Because this central provision for our alleged rule of law didn’t take into account the contrivances of corporate lawyers, corporate judges and corporate-indentured lawmakers.
Corporations that are created by state charters are deemed “artificial persons.” States like Delaware and Nevada have made a revenue business out of chartering corporations under permissive laws that concentrate power at the top of autocratic commercial hierarchies, leaving their shareholder-owners with very few options other than to sell. Since the early 1800s, states have chartered corporations giving their shareholders limited liability. The maximum they can lose is the amount of dollars invested in their company’s stocks or bonds. The modern history of corporate law is now aimed at maximizing the limited liability of the corporation itself.
The following twelve examples of inequality are shocking:
The corporate entity protects owners and shareholders from business debts and other liabilities. Yet, individual business owners are not personally shielded from business related debts or liabilities.
Bankruptcy laws favor corporations mightily over individuals. Bankrupt corporations can cancel their labor union contracts, are free from lawsuit liabilities against them, and can even get judges to grant retention bonuses for the culpable executives so they can provide parties with their alleged historical memory. Then under Chapter 11 bankruptcy, the company, having shed its liabilities, can reorganize and be back in business. If it is a giant bankrupt company like General Motors was in 2009, its recreation can get many billions of taxpayer dollars because it is considered “too big to fail.” Compare all these privileges with an individual going bankrupt no matter how wealthy he or she may have been. No contest.
Under criminal laws, corporations have huge advantages. Unlike most individuals who commit serious crimes, corporations have lawyers who shield them with “no-prosecution” or “deferred prosecution” agreements instead of criminal penalties. Unlike individual criminals, corporations cannot be jailed, and are almost never executed (that is having their charter pulled and put out of business, unless they are small business crooks). Former U.S. Attorney General Eric Holder said the big banks may even be too big to be prosecuted. While the big corporations, having cost the lives of many people and sickened more, continue on their merry profiteering ways. In this category are the large drug, chemical, auto, oil, coal and hospital chains.
Wrongfully injured people suing corporations under tort law find corporations can endlessly delay, with their insured or deductible legal expenses. Victims who are desperate for money to pay medical and other bills, cannot deduct their legal expenses and may not have insurance. Corporations can force low settlements because of their inequality of status and power.
Unequal taxation is a Niagara of inequality. The top federal tax rate for individuals is 37% and only 21% for corporations, before a plethora of loopholes. Why should an individual businessperson or any individual have to pay 37% and face an economic disadvantage vis-a-vis a competitor that only pays 21%? The baseless response is that there is a rational classification for this unfairness – nonsense.
Unlike individuals, corporations can create their own parents – (holding companies) for evasive purposes. They can also create hundreds of children (subsidiaries) to evade all kinds of law enforcement. The tax and non-regulatory haven of the Grand Cayman Islands has thousands of corporations “domiciled” there. One large building – Ugland House – “houses” 12,000 corporations. Real humans would be insufferably cramped if they attempted to quarter themselves with such inorganic efficiencies.Until the decision last month by the Third Circuit of Appeals, saying no to profitable Johnson & Johnson’s corporate lawyers, corporations could create a subsidiary and put in it all the pending lawsuits by injured consumers, declare the subsidiary bankrupt and then leave the harmed plaintiffs with little recourse. This is called the “Texas two-step” a creation of corporate lawyers.
Corporations’ one-sided contracts requiring you to sign or click on, turn you into contract peons. Freedom of contract is gone. Your status is reduced to obeying the harsh impositions by banks, auto dealers, insurance companies, credit card companies, utilities, etc. Try to escape and go to a competitor. No dice. They all have the same restrictions, with minor variations. These long, inscrutable fine-print handcuffs require you to waive your right to go to court for a trial by a jury of your peers.
The antitrust laws, being little enforced over the years, have resulted in monopolies or shared monopolies, replete with manipulative powers that make a mockery out of an alleged free marketplace. How’s that for inequality – destroying the right to and benefits from a competitive market?
Corporations are given monopoly licenses by the FCC to control 24/7 what we own – the public airwaves. The radio and TV corporations get this bonanza free of charge along with the power to decide who gets on and who doesn’t. No individual could either have such a status or in any way challenge these license renewals made virtually automatic by the corporatized U.S. Federal Communications Commission.
Emanating from these inequalities, embedded in corporate-lobbied unequal laws, are the realities of raw economic, political and cultural power that intimidate and coerce mere human mortals. Corporations are able to survive and thrive after horrendous overcharges, crimes and casualties – the opioid and other drug companies, the vast toxic pollution of air, water and food, the crimes of Wall Street and the exploitation of workers’ health and economic well-being. Corporations continue, as they are not human, without feeling the sanctions of social shame, guilt or ostracism. Mere humans have no such inherent escapes.
Other derivative political power allows corporations to strategically plan and control the lives of humans with algorithms and monopoly patents. They get away with direct marketing that exploits children and circumvents their parents’ authority, breaking long-held cultural barriers to mass gambling online, and continuing to discriminate against women and minorities, as workers and consumers.
The biggest prize of all for the uses of corporate-dominant inequality over real people is the control of the Congress, state legislatures, country boards, city councils, and elections along with the selection of judges. Their assemblage of ever larger entrenched legal and illegal inequalities produces a multiplier effect, achieving deeper inequalities as corporate control over capital, labor, technology and choice of jurisdictions here and abroad intensifies their privileges and immunities.
All these drives for maximum power and control are maturing the corporate state – as Wall Street and Washington merge. President Franklin Delano Roosevelt, in a formal message to Congress in 1938, called the control of government by private power “fascism.” In 1933 Supreme Court Justice Louis Brandeis wrote an opinion warning about big corporations becoming a “Frankenstein monster” in our midst.
So, all you fighters against inequality between people leap into the Big Leagues and confront the biggest progenitors of inequalities of all – giant corporations. Grab hold of the roots if you wish to prevent the bitter fruits. End cruel exploitation provided by these double standards.
Taking aim at Wall Street banks financing the oil, gas, and coal extraction fueling the climate crisis, a coalition of institutional investors on Tuesday announced the filing of climate-related shareholder resolutions in an effort to force “more climate-friendly policies that better align with” the firms’ public commitments to combating the planetary emergency.
In the resolutions, members of the Interfaith Center on Corporate Responsibility (ICCR) and Harrington Investments asked six banks—Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup, and Wells Fargo—to enact policies phasing out fossil fuel finance, disclose plans for aligning their financing with their stated near-term emissions reduction goals, and to set absolute end-of-decade emissions reduction targets for their energy sector financing.
Shareholders also filed climate resolutions at four companies—Chubb, Travelers, The Hartford, and Berkshire Hathaway—that insure fossil fuel projects.
“Each of the major banks has publicly committed to aligning its financing with the goals of the Paris agreement to achieve net-zero emissions by 2050, a target widely considered imperative to avoid catastrophic climate impacts and financial losses,” ICCR said in a statement. “Scientific consensus shows that new fossil fuel expansion is incompatible with achieving net-zero by 2050, yet these banks continue to invest billions of dollars each year in new fossil fuel development—a fact corroborated by a new Reclaim Finance report released last week.”
\u201cBREAKING: @ICCRonline members filed two shareholder proposals for 2023 calling on US banks @jpmorgan @BankofAmerica @Citibank @WellsFargo @GoldmanSachs @MorganStanley to implement more climate-friendly policies & better align with their net zero pledges https://t.co/D000QaI2L6\u201d
As Stop the Money Pipeline—a coalition of over 200 groups seeking to hold “financial backers of climate chaos accountable”—noted:
A slate of resolutions calling for policies to phase out financing for fossil fuel expansion was filed by the same investors at U.S. banks in 2022. They received between 9% and 13% support, which was a significant milestone for these first-of-their-kind proposals. This year’s fossil fuel financing proposals have been updated to encourage banks to finance clients’ low-carbon transition so long as those plans are credible and verified. The previous resolutions were supported by many major institutional investors, including the New York State and New York City Common Retirement Funds.
New in 2023 are the resolutions on absolute emissions reduction targets for energy sector financing filed by the New York City and New York State comptrollers, and the resolutions calling for disclosure of climate transition plans filed by As You Sow. The day before the resolutions were filed, Denmark’s largest bank, Danske, announced a phaseout of corporate financing for companies engaged in new coal, oil and, gas development.
“Any climate commitment from a bank that is still financing fossil fuel expansion is greenwashing, pure and simple,” Arielle Swernoff, U.S. banks campaign manager at Stop the Money Pipeline, said in a statement. “By supporting these resolutions, shareholders can hold banks accountable to their own climate commitments, effectively manage risk, and protect people and the planet.”
\u201cNEW! Investors have filed climate shareholder resolutions at major US and Canadian banks.\n\nOur response \u2b07\ufe0f\nhttps://t.co/NYbLsbCevF\u201d
— Stop the Money Pipeline (@Stop the Money Pipeline) 1674580274
Dan Chu, executive director of the Sierra Club Foundation—which led the filing at JPMorgan Chase—lamented that “all major U.S. banks continue to finance billions of dollars for new coal, oil, and gas projects every year. Such financing undermines the banks’ net-zero commitments and exposes investors to material risks.”
“These shareholder resolutions simply ask banks to align their promises with their actions and to adopt policies to phase out the financing of new fossil fuel development,” Chu added.
Referring to a warning from the International Energy Agency, Kate Monahan of Trillium Asset Management—which spearheaded the Bank of America filing—said that “we will not be able to achieve the Paris agreement’s goal of limiting warming to 1.5°C if banks continue to finance new fossil fuel exploration and development.”
“Bank of America has publicly committed to the Paris agreement but continues to finance fossil fuel expansion with no phaseout plan, exposing itself to accusations of greenwashing and reputational damage,” Monahan contended. ” By continuing to fund new fossil fuels, Bank of America and others are taking actions with potentially catastrophic consequences.”
Anyone who is active in our communities knows that housing insecurity and homelessness are rising fast, due in part to an ever-shrinking lot of affordable rentals and homes. Housing should be the rallying cry right now.
There are a number of structural reasons for this housing crisis, and the most truly terrifying fact is that while housing becomes less and less affordable, there is no plan to make homes more available. At this time, we have far-right bomb throwers running one branch of government whose wish is to make those who live on SSI or Social Security even more unstable than they currently are. Every day we see these corporate shills threatening to cut or even eliminate entitlements that millions rely on for survival. And it seems that workforce housing is rapidly disappearing.
One of the major problems that nobody is addressing is the huge number of rental properties and single-family homes that are being snatched up by nameless, faceless corporations in order to evict longstanding residents, slap a new coat of paint on the walls, maybe purchase a shiny new fridge, and double the rent to a new tenant. There seems to be no limit to the number of houses or apartments these huge corporations can own.
According to The Wall Street Journal in 2021, 200 corporations are aggressively purchasing tens of thousands of homes, and even entire neighborhoods, and jacking up the rents. For example, a Blackrock creation called Invitation Homes merged with another outfit and as of 2021, this conglomerate owned 80,000 rental homes. In 2012, this outfit, also known as Treehouse Homes, went on a buying spree where they were purchasing $150 million dollars worth of homes every week—up to $10 billion.
Some of these corporate acquisitions will be sold for well over market value. Often the smaller houses that might have been worker housing are considered tear-downs and will be replaced with a 4 or 5,000-square-foot monstrosity. Many others are used to create profit in the short-term rental market.
While housing becomes less and less affordable, there is no plan to make homes more available… We desperately need a legal framework to make affordable housing possible.
In my small town, a large corporation bought an apartment complex and is in the process of evicting a 90-year-old wheelchair-bound resident—in a town with a 0.7% vacancy rate. This resident just had his lease not renewed. The idea that you can evict long-term disabled tenants is just disgusting—but there is no law against it now. A local group is working on creating a law to prevent this type of corporate crime.
If we lived in a country that actually valued its citizens, housing would be a priority. Since the Republicans remade so much of America under Ronald Reagan, there is no federal housing being built. No money for states to build housing. A housing crisis would be almost impossible to avoid in a country where real wages continue to stagnate, and in some years even decline, and there is no legal challenge to the huge corporations who dominate the industry. For-profit developers are who is building now, and in some instances need to put a couple of token affordable units into a large project, but frequently the affordable units are too expensive for many who need homes. And sometimes they even revert to market rates after a certain period.
The amazing generation of people under 35 is speaking out about opportunity: many younger people will never have the chance to own a home. The stories are rampant: people who bid for a home get outbid by either the corporate buyers or by older people who have capital from having sold a home they were able to purchase when homes were far more affordable. People my age—in our 60’s—have owned homes that we bought for $100,000 or less and often when we sell them they go for 5-10 times that price. But young adults have none of those advantages.
We desperately need a legal framework to make affordable housing possible. I am not a housing expert, or a lawyer. But some things are clear: corporate ownership of millions of units of housing has not been good for our country. Rent control is non-existent in the vast majority of towns and cities in the U.S. Homelessness has spiraled to numbers not seen ever before. The corporate ownership issue must be addressed nationally, but that does not seem to be an issue the Biden administration has been interested in tackling. There is a housing action plan put out in May 2022, but we haven’t seen any of that money go into housing in my part of New England.
States could restrict number of houses used for short-term rentals, but federal intervention is needed in what I think is the biggest obstacle to bending the homelessness curve: limits to corporate ownership of housing. Unhoused people on our sidewalks, in shelters, in motels, in tents: this is our present and our future if we don’t see some real, urgent action to legally protect the vulnerable and house us all. Housing is a human need, not a speculative purchase.
This post was originally published on Common Dreams.
Top banks in the United States and around the world have made a show of embracing net-zero emissions pledges, portraying themselves as allies in the fight against the global climate emergency.
But a new analysis published Tuesday by a group of NGOs makes clear that the world’s leading financial institutions—including major Wall Street banks such as Citigroup, JPMorgan Chase, and Bank of America—are still pumping money into fossil fuel expansion, bolstering the industry that is primarily responsible for worsening climate chaos.
According to the report, 56 of the largest banks in the Net-Zero Banking Alliance (NZBA)—a coalition convened by the United Nations—have provided nearly $270 billion in the form of loans and underwriting to more than 100 “major fossil fuel expanders,” from Saudi Aramco to ExxonMobil to Shell.
Additionally, 58 of the biggest members of the Net-Zero Asset Managers (NZAM) initiative—including the investment behemoths BlackRock and Vanguard—held at least $847 billion worth of stocks and bonds in more than 200 large fossil fuel developers as of September.
Both the NZBA and the NZAM are under the umbrella of the Glasgow Financial Alliance for Net-Zero (GFANZ), a campaign launched in 2021 with the goal of expanding “the number of net zero-committed financial institutions.” Climate advocates have long argued that net-zero pledges are fundamentally inadequate to the task of stopping runaway warming.
“The science is very clear: we need to stop developing new coal, oil, and gas projects as soon as possible if we want to meet our climate goals and avoid a worst-case scenario,” said Lucie Pinson, the executive director and founder of the watchdog group Reclaim Finance. “Yet, it is business as usual for most banks and investors who continue to support fossil fuel developers without any restrictions, despite their high-profile commitments to carbon neutrality.”
“Their greenwashing is all the more damaging as it casts doubt on the sincerity of all net-zero commitments and undermines the efforts of those who are truly acting for the climate,” Pinson added.
\u201c\ud83d\udea8 NEW REPORT: since joining the Glasgow Financial Alliance for Net Zero #GFANZ, financial institutions have provided HUNDREDS OF BILLIONS of $ to fossil fuel expansion \ud83d\udca3\n \nIt’s the finding of a report published today by 13 NGOs including Reclaim Finance.\n\n#GFANZFuelsFire #wef23\u201d
The groups found that the U.S.-based Wall Street giants Citigroup, JPMorgan Chase, Bank of America, Morgan Stanley, and Wells Fargo provided nearly $90 billion in total financing for fossil fuel expansion between the dates they joined the NZBA and August 2022.
Citigroup, which touts its net-zero commitments on its website, led the pack with $30.5 billion in fossil fuel financing from April 2021 to August 2022.
“The U.S. financial sector cannot be taken seriously on climate change until it stops investing in new fossil fuel projects,” said Adele Shraiman, a representative for the Sierra Club’s Fossil-Free Finance campaign. “We need an urgent transition to a green economy and the financial sector must help deliver that.”
Overall, according to the new report, “229 of the world’s largest fossil fuel developers received finance from the 161 GFANZ members covered… which will support them to develop new coal power plants, mines, ports, and other infrastructure, as well as new oil and gas fields and pipelines and LNG terminals.”
“These new fossil fuel projects are incompatible with the objective of limiting global warming to 1.5°C, as confirmed in the latest International Energy Agency’s World Energy Outlook published in October 2022,” the report states. “They will lock in greenhouse gas emissions for decades, despite the adoption of decarbonization targets by some GFANZ members.”
Paddy McCully, a senior analyst at Reclaim Finance, said in a statement that “GFANZ members are acting as climate arsonists.”
“They’ve pledged to achieve net-zero but are continuing to pour hundreds of billions of dollars into fossil fuel developers,” said McCully. “GFANZ and its member alliances will only be credible once they up their game and insist that their members help bring a rapid end to the era of coal, oil, and fossil gas expansion.”
This post was originally published on Common Dreams.
The U.S. committee tasked with overseeing the financial sector on Thursday “dispelled any doubt of their intent to do the bidding of the financial industries over the interests of everyday families,” said a government watchdog group as the panel signaled it will significantly scale back its efforts to push for consumer protections on Wall Street.
House Financial Services Committee (HFSC) Chair Patrick McHenry (R-N.C.) announced the new Republican subcommittee chairmanships, with new panels including the Subcommittee on Financial Institutions and Monetary Policy—tasked with overseeing the Consumer Financial Protection Bureau (CFPB)—and the Subcommittee on Digital Assets, Financial Technology, and Inclusion, headed by pro-cryptocurrency Rep. French Hill (R-Ark.).
Gone from the list were the former Diversity and Inclusion Subcommittee and all references in the panels’ descriptions to “consumer protection,” “investor protection,” and “community development.”
\u201cJUST IN: Wall Street money vacuum and new HFSC Chair, @PatrickMcHenry, has eliminated the Diversity and Inclusion Subcommittee and references to consumer protections in subcommittee titles.\n\nLearn what it means for the MAGA majority’s agenda here: https://t.co/7q90LtCVv1\u201d
The Republicans now in control of the HFSC “never met a consumer protection effort they liked and have been rewarded accordingly with millions of dollars from greedy industries they now oversee,” said Liz Zelnick, director of the economic security and corporate power program at Accountable.US.
The watchdog noted that in addition to the considerable campaign cash McHenry and other Republicans on the committee have received from Wall Street—including $9.2 million for the new committee chairman—the new leadership’s ties to financial giants have been made clear in other ways.
McHenry was a speaker at the Consumer Banker Association’s annual Washington Forum in 2021 and events hosted by the National Association of Federally-Insured Credit Unions and the American Bankers Association last year. He also received the “Champion of Small Business Award” in 2018 from the so-called Small Business Investor Alliance, which represents lower- to middle-market private equity funds, and the “Spirit of Enterprise Award” from the U.S. Chamber of Commerce in 2016.
Of the $9.2 million he has raked in from Wall Street over the course of his career, $154,000 came from industry groups that lobbied in 2018 in support of McHenry’s Protecting Consumers’ Access To Credit Act, which aimed to weaken consumer protections from predatory lenders.
Accountable.US described McHenry as a “Wall Street money vacuum and longtime adversary of federal consumer protection efforts.”
McHenry’s decision to appoint Rep. Blaine Luetkemeyer (R-Mo.), a former banker, to oversee the National Security, Illicit Finance, and International Financial Institutions subcommittee is “equally concerning for consumers,” said Accountable.US.
Luetkemeyer’s family has had ties to the Bank of St. Elizabeth—acquired by Mid America Bank in 2021—going back several generations, and since entering Congress the Republican has “used his position as a lawmaker to lend support to industry after the Consumer Financial Protection Bureau was sued by the U.S. Chamber of Commerce and other financial groups over its reinterpretation of policy toward unfair, deceptive, or abusive acts and practices.”
He introduced legislation to restructure the leadership of the CFPB and has taken at least $722,500 from the country’s three largest banks, which in 2019 made over $6.8 billion in overdraft fees—a major target of the CFPB.
The committee member tasked with overseeing the CFPB on the Subcommittee on Financial Institutions and Monetary Policy is Rep. Andy Barr (R-Ky.), who told a conference of bankers in 2021 that the bureau “is a big concern.”
“Predictably, McHenry wasted no time seeking payback on behalf of his biggest donors by scrapping key subcommittees dedicated to consumer protection and preventing industry discrimination,” said Zelnick.
“The frothy-mouthed hostility McHenry and Luetkemeyer have exhibited toward the CFPB and its director strongly suggests a belief that ripping off consumers is a legitimate part of doing business, including excessive overdraft penalties and predatory hidden fees,” she added. “Only politicians deep in the pocket of industry could view with contempt the bureau’s incredible success in saving consumers money and holding scammers and financial predators accountable.”
This post was originally published on Common Dreams.
A group of progressive senators raised alarm this week over a pernicious outgrowth of the United States’ for-profit healthcare system: medical credit cards.
In a
letter to the chief executives of Wells Fargo and Synchrony Financial—two large issuers of medical credit cards—Sens. Elizabeth Warren (D-Mass.), Ed Markey (D-Mass.), Bernie Sanders (I-Vt.), Chris Murphy (D-Conn.), and Sherrod Brown (D-Ohio) expressed concern that “given the circumstances in which these cards are used, medical credit cards could be predatory to patients seeking medical care and leave patients stuck paying higher costs with ‘hefty, high-interest debt.’”
“The concern here is the current structure of our healthcare system often requires that patients enter into medical debt in order to access services they need,” reads the letter, which was made public this week. “Within that context, patients—often under duress because of concerns about their medical care—are being pushed into and then locked into medical credit cards despite the availability of alternative payment options that might be more beneficial and offer lower interest rates.”
By contrast, medical credit cards often come with high interest rates following so-called “no interest” periods that banks
deceptively use to lure in customers who are desperate to pay for costly medical treatments. In 2013, the Consumer Financial Protection Bureau (CFPB) ordered CareCredit—Synchrony Financial’s medical credit business—to refund up to $34.1 million to “consumers who were victims of deceptive credit card enrollment tactics.”
Last month, the CFPB hit Wells Fargo—which offers a medical credit card named Health Advantage—with $3.7 billion in penalties for a slew of abuses and called the institution “one of the most problematic repeat offenders of the banks and credit unions.”
Crain’s Chicago Business recently reported that “as healthcare costs and insurance deductibles rise, more hospitals in Chicago and around the country are teaming up with banks to market medical credit cards and other loans to patients who lack the insurance or funds to pay for care.”
“Hospitals that convince patients to take medical credit cards get paid upfront by banks at a time when unpaid bills are straining their budgets. Lenders, for their part, see an opportunity to capitalize on the growing gap between the cost of medical care and what many Americans can afford,” the newspaper continued. “Patients who take the card get money to pay for care, solving a short-term dilemma. But a quick decision made in a high-stress situation can create long-term financial problems. Patients who can’t drum up the cash to pay off the initial balance within an introductory period end up with hefty credit card debt that carries some of the highest interest rates in the industry.”
More than
100 million people are saddled with medical debt in the United States, collectively owing upwards of $200 billion.
Last year,
Kaiser Health Newsspotlighted the story of Cheyenne Dantona, whose situation is appalling but increasingly common in the United States, where obtaining lifesaving treatment often entails financial ruin:
Dantona, 31, was diagnosed with blood cancer while in college. The cancer went into remission, but when Dantona changed health plans, she was hit with thousands of dollars of medical bills because one of her primary providers was out of network.
She enrolled in a medical credit card, only to get stuck paying even more in interest. Other bills went to collections, dragging down her credit score. Dantona still dreams of working with injured and orphaned wild animals, but she’s been forced to move back in with her mother outside Minneapolis.
“She’s been trapped,” said Dantona’s sister, Desiree. “Her life is on pause.”
In their letter, the senators pointed to several “disturbing” features of medical credit cards, including that “the available credit is typically set to the cost of the service, ‘meaning the card is maxed out immediately, damaging card holders’ credit scores.’”
“The cards may also adversely impact consumers’ credit reports because of the way they are treated by credit reporting agencies: the agencies recently agreed to remove 70% of medical debt from credit reports, but these changes will not benefit medical credit card holders because their debt is considered credit card debt and as such is ‘viewed less favorably by the bureaus,’” the lawmakers wrote.
“Banks have identified medical credit cards as a lucrative opportunity to profit off of the worsening crisis of patients who are unable to afford their medical care,” the lawmakers continued, demanding that the bank executives provide information about their medical credit card businesses such as how many accounts are in collections and how many healthcare providers they have partnered with.
“As we work to reform our healthcare system so no individual faces medical debt,” the senators added, “we remain concerned about circumstances that serve only to exacerbate financial harm of unaffordable healthcare.”
Sanders, a letter signatory and the incoming chair of the Senate Health, Education, Labor, and Pensions Committee, has decried the “very concept” of medical debt, arguing it “should not exist.”
During his 2020 presidential campaign, Sanders offered a proposal to wipe out existing medical debt in the United States.
“In the wealthiest country in the history of the world,” the senator said at the time, “one illness or disease should not ruin a family’s financial life and future.”
This post was originally published on Common Dreams.
Janine Jackson interviewed CSG Advisors’ Gene Slater about the affordable housing crisis for the November 11, 2022, episode of “CounterSpin.” This is a lightly edited transcript. Janine Jackson: Home ownership is a key ingredient in what is still called the “American Dream.” Beyond the meaningful symbolism of having one’s own patch, home ownership is instrumental in wealth creation — the…
This month, President Biden has openly threatened to reconsider the close ties between the United States and Saudi Arabia, but the financial industry appears certain he’s not ready to put his money — or theirs — where his mouth is.
Wall Street leaders are visiting Saudi Arabia this week for an investment conference sponsored by the Saudi government, just two weeks after the White House said it would be reexamining the long-standing U.S.-Saudi alliance.
Top bankers to attend the gathering in Riyadh included JPMorgan CEO Jamie Dimon, Goldman Sachs CEO David Solomon and Blackstone Group CEO Stephen Schwarzman. The trio, whose firms collectively manage about $4.8 trillion in assets, spoke on the same panel at the so-called Future Investment Initiative.
“They will work it through and I’m comfortable folks on both sides are working through [it] and these countries will remain allies going forward,” said Dimon, of the strained ties between the U.S. and Saudi governments.
The Biden administration lost its patience with the Saudi government earlier this month after Saudi officials sided with their Russian counterparts and cut oil production. The White House accused the Saudi Crown Prince Mohammed Bin Salman of failing to keep promises made to President Biden over the summer on hiking output to clear global oil markets of high prices, and of helping Russia’s invasion of Ukraine by keeping crude oil prices elevated.
“The White House has indicated it might seek retribution for the Saudi decision, and some Democrats in Congress are making a push to scale back some military and economic ties to the kingdom,” The New York Timesreported on October 25.
But attendance at the Future Investment Initiative suggests otherwise. The annual event is a symposium that was established in 2017 by Bin Salman, Saudi Arabia’s de facto ruler, as part of an effort to modernize and diversify the country’s oil-dependent economy. Foreign direct investment in Saudi Arabia has increased since the first Future Investment Initiative was held, but the money has mostly been “channeled into oil assets instead of backing ambitious new projects,” according to Bloomberg.
The four largest U.S. banks — JPMorgan, Citigroup, Bank of America, and Wells Fargo — have invested over $1 trillion in fossil fuels since 2016. JPMorgan is the most prominent of the four in terms of its exposure to oil and natural gas drilling. A think tank with close ties to the firm said earlier this year that banks’ climate promises shouldn’t be scrutinized by regulators because of “the aspirational nature of external commitments.”
Crude oil extraction isn’t the only reason financiers are headed to Saudi Arabia. The Gulf monarchy has outsized importance on global financial markets this year, according to analysts, because it’s flush with oil money as rising energy prices and interest rates shrink the supply of investment capital available to wealth managers.
The Public Investment Fund, the Saudi government’s sovereign wealth fund, manages some $620 billion. All U.S. banks but four have a smaller portfolio. Billions of dollars from the Saudi fund have gone to back risky high profile ventures in the U.S., such as Uber, which has never turned a profit, and WeWork, which tried but failed to take its stock public in 2019 in a spectacular collapse. The Saudi government is also using its oil revenue to construct a futuristic city called Neom, which “has received its fair share of skepticism around feasibility,” as CNBC noted.
Saudi companies have also played an increasingly large role in global financial markets. In 2020, state oil company Aramco publicly listed 1.5% of its shares on the Saudi stock market, raising $29 billion in the process in the world’s largest ever initial public offering (IPO). U.S. banks hired to help with the IPO included JPMorgan and Goldman Sachs, who ended up with less prominent roles than they had sought after they rubbed Bin Salman the wrong way by valuing Aramco below $2 trillion.
This year there has been ample opportunity for banks to make money on IPO fees in Saudi Arabia, with 22 companies in the country going public this year, a record for Saudi Arabia. Just before the Future Investment Initiative, JPMorgan announced that it was hiring 20 new bankers at its Saudi-based operations.
But it wasn’t long ago that the bank, and others, downplayed ties to the repressive monarchy. Many bankers declined to attend the Future Investment Initiative for years following the gruesome killing of Washington Post journalist Jamal Khashoggi at the Saudi consulate in Istanbul in 2018. Within weeks of the killing, U.S. intelligence assessments leaked to the media said that Bin Salman himself ordered Khashoggi to be dismembered.
The public relations calculus changed this year, however, with the supply of investment capital squeezed by rising interest rates. This year’s conference featured the first appearance by Dimon and other major bank executives since Saudi security forces killed Khashoggi.
President Biden also initially claimed to be horrified by the killing of Khashoggi and vowed to make Bin Salman a “pariah” during the 2020 presidential campaign, but has since softened his approach to the Saudi crown prince — at least until the announcement of oil production cuts earlier this month.
Still, the White House doesn’t seem too determined to follow through on its threat to reassess U.S.-Saudi relations, especially if recent history is any indication. The alliance has not been threatened by evidence tying the Saudi state to the 9/11 hijackers, and Biden never seriously considered halting U.S. support for the Saudi-led military campaign in Yemen, despite its numerous atrocities, including the use of mass starvation as a weapon of war. Without U.S. support, the Saudi air force would be unable to conduct operations, including those required to enforce its ongoing blockade of Yemen.
When asked about senior bankers’ trip to Saudi Arabia, White House Press Secretary Karine Jean-Pierre said: “American companies will make their own decisions about their presence and where to invest.”
U.S.-based companies, however, don’t unlikely to “make their own decisions” in a vacuum. Right now, they’re betting that the U.S. government will continue to enable the Saudi monarchy’s reactionary brutality in exchange for U.S. corporations’ access to oil and capital. It’s no surprise Wall Street is shrugging off President Biden’s threats as idle. foreign investment if they face currently shrugging
A trade association that lobbies on behalf of the largest banks in the United States told regulators that their members’ pledges to reduce investments in carbon-emitting industries are “aspirational,” implying that they shouldn’t be taken seriously by authorities.
The Bank Policy Institute made the remarks in public comments on guidelines proposed earlier this year by federal bank regulators, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), on climate-related risk management. Specifically, the lobbying group rejected the notion floated by the agencies that regulations should ensure banks’ greenhouse gas commitments to the public “are consistent with their internal strategies and risk appetite statements.”
“The final guidance with respect to public communications should recognize the aspirational nature of external commitments and the fact that these commitments and plans will need to adapt over time as data and methodologies improve and external circumstances change,” the organization said.
The institute urged regulators to “establish realistic expectations with respect to public statements” and said the government “should calibrate its expectations as to the granularity between external statements and internal risk appetite statements accordingly.”
The remarks contrast with public comments on the same subject matter submitted by other trade associations, which plainlysaid that rulemaking on banks’ public commitments could prohibit lying and misleading statements.
The proposed guidelines were drafted and unveiled separately by the OCC and FDIC, but are almost identical in wording. The draft rules would only apply to the largest banks in the country — firms with more than $100 billion in assets under management. The Bank Policy Institute was founded in 2018 by the largest of such institutions to lobby on behalf of financial industry behemoths as the Trump administration pursued a deregulatory agenda. The four biggest banks in the country — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — are the only firms to hold permanent seats on the Bank Policy Institute’s rotating board of directors.
All fourbankshave pledged to achieve “net-zero” carbon emissions by 2050, though they refuse to stop fossil fuel financing now, as they confirmed during recent congressional testimony in September during questioning from Rep. Rashida Tlaib (D-Michigan). International scientific organizations, including the Intergovernmental Panel on Climate Change and the International Energy Agency, have called for an immediate end to fossil fuel extraction to maximize the possibility of people around the world avoiding the worst effects of global warming: namely, rising sea levels and more intense and frequent natural disasters.
The Bank Policy Institute has especially close ties to JPMorgan Chase, which has been the most prolific financier of fossil fuel enterprises since governments around the world agreed to the Paris climate accords in 2015, according to the environmentalist organization Oil Change International. The chair of the Bank Policy Institute’s board of directors is JPMorgan Chase CEO Jamie Dimon, and its chief lobbyist, Kate Childress, had previously spent 10 years as a lobbyist at JPMorgan Chase, ushering the bank through the aftermath of the financial crisis and the passage of Dodd-Frank financial reform. Childress was Dimon’s “point person at the Business Roundtable,” another corporate lobbying group, according to trade publication pymnts.com.
Dimon routinely attracts media attention for scolding those who call for carbon-intensive energy industries to be downsized without delay. In August, he accused critics of the oil and gas industries of having “thick skulls” and in September, told Representative Tlaib that withdrawing credit from dirty energy industries “would be the road to hell for America.”
The Bank Policy Institute did not respond to a request for comment on whether it expects banks’ public commitments on climate change to be taken seriously. Representative Tlaib said the remarks show big banks attempting “to avoid necessary oversight of their climate pledges.”
“When big banks make pledges to tackle the very climate change they’ve helped finance — their word isn’t worth the paper it’s written on,” Tlaib told Truthout. She added that large financial institutions “must not only be held accountable for their past actions, but also be forced to divest from fossil fuels today and stop feeding the flames of the climate crisis. Congress and the federal government must continue unflinching oversight as we move towards the clean energy revolution and a green economy. We will not be bullied into relinquishing our future.”
The public commitment language drafted by the OCC and the FDIC is arguably the strongest part of the proposed guidelines. The agencies aren’t seeking to force banks to divest from carbon-emitting energy sources like oil, gas and coal, and even supporters of a stringent banking regulatory framework on climate risk concede that regulators lack the authority to order firms to wean themselves off of certain types of energy investments, even if they wanted to. But with clear rulemaking on public commitments, banks can, at least, pay the price for misleading the public with promises to reduce their carbon footprints.
“Although the FDIC cannot legally mandate that institutions make specific public commitments regarding their loan portfolios, it should require that when institutions articulate measurable targets that they also take the steps necessary to adhere to those targets,” the Center for American Progress said in its comments.
“As financed [greenhouse gas] emissions are a critical driver of both micro- and macroprudential climate-related risk, the FDIC should make clear that having a credible transition plan and reporting on progress is a crucial part of a bank’s risk management system,” said the watchdog group Americans for Financial Reform.
At the heart of the issue are the methods used by banks to move toward “net-zero” carbon emissions in their asset portfolio: investments in “carbon sink” credits or offsets based on the preservation of forests, and carbon capture technology. The promise of the latter has been exaggerated by boosters and the promise of the former hasn’t been proven, according to comments made to regulators by Public Citizen.
“Given these challenges, financial institutions relying on these technologies in their net zero plans should have to demonstrate specific, committed projects that are fully proven to reduce carbon safely and permanently at scale, and appropriately incorporate the cost of both funding and adequately monitoring those commitments into their profitability forecasts,” Public Citizen said. “No projects currently meet these criteria, and there may be none for decades, if ever.”
In one case of carbon credits not living up to their promises, JPMorgan Chase “paid almost $1 million to preserve forestland in eastern Pennsylvania” that “was never threatened; the trees were already part of well-preserved forests,” according to a report published in December 2020 by Bloomberg. Since then, the bank has increased its exposure to the carbon credit market. Last July, for example, Dimon said that “Timber assets is [sic] going to be a great thing for asset management,” referring to a lumber company named Campbell that JPMorgan Chase purchased weeks earlier. The bank acquired Campbell “to gain a foothold in the growing market for forest-carbon offsets,” according to Markets Insider.
Despite indifference from top bankers in response to urgent calls to divest from fossil fuels, the frequency and cost of weather-related natural disasters have increased over the past four decades due, in part, to climate change, according to the National Oceanic and Atmospheric Administration. Data gleaned from bank regulators also show evidence of climate change having a growing impact on the finance industry. Agencies grant regulatory relief when banks have branches in areas hit by disasters, citing the difficulty faced by people in disaster areas staying current on their bills in the aftermath. An analysis by Truthout shows that the number of those regulatory relief orders issued annually by the FDIC after weather-related disasters going back to 1995 has increased significantly in the past two decades. A five-year moving average of annual weather-related relief orders issued by the FDIC increased about 5.1 times between 2001 and 2021, with similar measures of tornado-related orders and flood-related orders in the same time frame up by 10.5 and 9 times respectively. The last year without a tornado-related disaster relief order was 2009 and the last year without a disaster relief order that singled out flooding was 2006. The five-year moving average of fire-related relief orders hasn’t decreased since 2010 and was up from 0 to 1.4 between 2001 and 2021.
Moving averages are the mean of a subset of data and are designed to smooth out short-term fluctuations to highlight longer term trends. A spokesperson for the FDIC explained that the agency’s discretion has nothing to do with the increase in relief orders, which are based on disaster declarations by the Federal Emergency Management Agency.
Although critics are calling for financial regulators to do more, powerful conservatives are furious that the agencies are doing anything at all. Republicans on the Senate Banking Committee urged the Federal Reserve last year “to refrain from taking any additional actions with respect to climate-related risks.” The top Republican on the committee, Pat Toomey (R-Pennsylvania), is fond of asserting that no financial institutions have failed in the last 50 years because of extreme weather events, and uses a reactionary dogwhistle to malign regulators interested in addressing climate risk, calling them “woke.”
Not only is Toomey’s assertion about bank failures incredibly vacuous — it’s built on the assumption that what has happened with weather events will happen again in the future, despite rising sea levels and higher global temperatures causing the intensity and frequency of such events to increase. Toomey’s claim also obscures damage that climate-related catastrophes have already done. In 2005, for example, a Louisiana-based bank named Hibernia lost $197.7 million due to the damage caused by hurricanes Katrina and Rita. Moreover, the threat isn’t limited to banks located primarily in areas prone to natural disasters.
“[T]wo-thirds of banks’ physical risk comes from the indirect economic impacts of climate change, such as supply chain disruptions and lower productivity, with coastal flooding (driven by sea level rise and stronger storms) representing the largest source of direct risk,” non-profit Ceres said in a report published in September 2021.
When asked to respond to Toomey’s remarks on bank failures and weather-related events, a spokesperson for the FDIC pointed to a statement made on October 3 by agency Chair Martin Gruenberg at a speech on climate change to the American Bankers Association.
“These [climate] trends challenge the future resiliency of the financial system and, in some circumstances, may pose safety and soundness risks to individual banks. It is the goal of our work on climate-related financial risk to ensure that the financial system continues to remain resilient despite these rising risks,” Gruenberg said.
The FDIC spokesperson also said that it was too early in the rulemaking process to comment on the proposed language on banks’ public commitments. But if the Bank Policy Institute gets its way, the provisions — and regulators’ best shot at addressing the harm done by destructive fossil fuel industries — could fall by the wayside, and those who don’t profit from the destruction will bear the burden.
“Similar to financial institution action during the subprime mortgage crisis, financial institutions supporting fossil fuel-related activities are creating risks that other entities are left to deal with,” as Public Citizen noted.
During a bank oversight hearing this week, Republican Rep. Trey Hollingsworth boasted that one of his staffers would soon be leaving Congress to work on Wall Street, offering a glimpse of the legalized corruption that permeates the highest levels of the U.S. political system.
Perhaps free to speak so candidly because he’snot running for reelection, Hollingsworth (Ind.) happily announced that one of his top aides, Sruthi Prabhu, is departing his office next week to join Bank of America, a powerful institution whose CEO testified at Wednesday’s House Financial Services Committee hearing alongside other top industry executives.
“She is very, very excited,” said Hollingsworth, whose past campaigns werefunded heavilyby the finance and investment industries. “I hope you will take good care of her and know and recognize the talent she has shown already in our office. I’m sure she’ll do the same at Bank of America.”
“We will do that,” responded Bank of America CEO Brian Moynihan. “And her father already works for us.”
Watch:
This is inexcusable.
A truly wild moment yesterday from the House Financial Services Committee, where they laugh about the revolving door from Congress to the banks. pic.twitter.com/LnHDlj6ZJu
Rep. Alexandria Ocasio-Cortez (D-N.Y.), a member of the House Financial Services Committee,wrotein a Twitter post Thursday that she “was in the room when this happened and it was just as gross and wild in person as it is here.”
“People rightly discuss conflicts of interest of members of Congress, but lobbying of senior staff (who move on behalf of members and committees) is a huge part of the problem too,” Ocasio-Cortez noted.
Donald Sherman, chief counsel at Citizens for Responsibility and Ethics in Washington, expressed a similar sentiment,writing, “This is gross.”
The exchange between Hollingsworth and Bank of America’s CEO provides a striking look at a phenomenon commonly known as the revolving door, which describes the seamless employment track from Congress to the industries lawmakers are tasked with regulating, and vice versa.
The revolving door between committees that oversee the nation’s banks spins particularly fast: Many lawmakers and aides involved in crafting — and watering down — Wall Street regulations in the wake of the 2008 financial crash went on totake jobs at large financial institutions.
Public Citizen hasestimatedthat in the midst of the economic crisis, the financial services industry deployed more than 1,400 former federal employees — including ex-committee staffers — to lobby Congress on banking issues.
Walter Shaub, a senior ethics fellow at the Project on Government Oversight and the former head of the Office of Government Ethics,calledHollingsworth’s jovial back-and-forth with Bank of America’s top executive “absolutely wild.”
“I’m not an extremist who thinks people should be unemployable, but anyone who says Washington’s revolving door isn’t a problem is either lying or hasn’t spent much time with folks working on the Hill or in presidential administrations, including this one.”
Some who have spent substantial time working on Capitol Hill, such as Sen. Bernie Sanders (I-Vt.) aide Warren Gunnels,reacted with disgustto Wednesday’s hearing.
“I’ll never forget, after a meeting with GOP staff on the financial services committee one day, I said I had to work with Bernie on a statement and questions for an upcoming hearing,” Gunnels recounted. “They laughed and said, ‘You’re so funny! Banking lobbyists write all of our statements and bills for us.’”
Russia’s war on Ukraine has wreaked havoc on global commodity markets, driving up energy and food prices and exacerbating hunger emergencies around the world.
But while disastrous for the global poor — millions of whom are living on the brink of famine — the chaos has been a major boon for Wall Street giants, according to new data showing that the world’s 100 largest banks are on pace to smash commodity trading profit records this year.
“The 100 biggest banks by revenue are set to make $18 billion from commodities trading in 2022,” Bloombergreported Friday, citing figures from the London-based firm Vali Analytics. “That would be the highest in the data, which goes back 14 years, and exceed the previous high watermark in 2009.”
“The prediction is the latest evidence that the wild swings in energy prices triggered by the war in Ukraine are delivering a boon to commodity traders, even as they push European nations into crisis,” Bloomberg added. “Vali, an analytics firm that tracks trading business, compiled data that includes the leading five banks in commodity trading: Macquarie Group Ltd., Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc., and Morgan Stanley.”
Though the prices of wheat and other food staples have fallen from their peak in recent months, they remain significantly elevated compared to last year, according to the United Nations’ Food and Agriculture Organization, leaving millions vulnerable to hunger and starvation.
The World Food Program estimates that “as many as 828 million people go to bed hungry every night” and “the number of those facing acute food insecurity has soared — from 135 million to 345 million — since 2019.”
Energy prices have also eased but remain high, contributing to cost-of-living crises throughout Europe and other parts of the globe.
“People’s misery makes capitalists’ superprofit,” Salvatore De Rosa, a researcher at the Lund University Center for Sustainability Studies, tweeted in response to Bloomberg’s reporting. “How do you reform this?”
Wall Street banks have not just benefited from the commodity price increases — they’ve actively helped fuel them, experts say.
“We’re in a market where speculators are driving prices up,” Michael Greenberger, former head of the Division of Trading and Markets at the U.S. Commodity Futures Trading Commission, toldMongabay in July.
“Commodity markets are supposed to be hedging markets for people who are dealing with the commodity involved,” Greenberger said. “In the case of wheat, it would be farmers and people buying wheat. But if we looked at it, there would be banks in there with no interest in what the price of wheat is, writing swaps and controlling this price.”
“It’s too easy to say the war in Ukraine has unbalanced all these markets, [or that] supply chains and the ports are shot, and that there’s a supply and demand reason for these prices going up,” Greenberger added. “My own best guess is anywhere from 10% to 25% of the price, at least, is dictated by deregulated speculative activity.”
US President Joe Biden gave a major speech in Philadelphia last night. His mission: to speak to the soul of the nation. In his address, he blasted Trump supporters as un-American, attacked Capitol insurrectionists and lauded his own record on topics like extremism and gun control. He described Trump backers as “semi” fascist, which saw some aligned with the ex-president demand an apology.
Biden’s supporters were clearly exhilarated, tweeting their admiration for the president. Some hailed his example:
One commenter said that the speech drew a line between democracy and fascism:
Anyone who thinks the #bidenspeech was political doesn’t know the difference btwn fascism & democracy
Anyone who thinks the speech was divisive has betrayed America for a psychopath who terrorized our Capitol & purloined our secrets@POTUS thank you. That was one helluva speech
But American politics have never been so clear cut. The framing of Biden as an antifascist, or even a man of the left, is both highly partisan and factually wrong. And pointing this out is by no stretch of the imagination Trump apologia.
Trump is a vile figure, a buffoon who rode to power on, among other things, a wave of hate. No argument there. But reality defies simple interpretations of his replacement.
Biden may be more palatable to an audience of wealthy white liberals than Trump, but he too is a product of the hyper-capitalist, imperialist American body politic. That is to say the politics of a white settler state steeped in, and built on, class and racial violence. And this is reflected in Biden’s policies.
Biden the imperialist
Biden’s foreign policy has continued in a similar vein to his predecessors. His administration has poured billions of dollars in arms into the Ukraine conflict. Despite assurances, he has overseen a continuation of the humanitarian disaster in Yemen. He inherited the Afghan war and oversaw the disastrous retreat from the country in 2022, for which he has been fiercely criticised.
His approach to China also reflects a continuation of US foreign policy. Some foreign policy experts have warned that Biden’s approach will echo the War on Terror with Sinophobia sitting alongside the demonisation of Muslims which became standard in post 9/11 discourse.
Support for Israel remains an unquestionable. In July 2022, Biden restated his commitment to the country and announced himself a Zionist:
The connection between the Israeli people and the American people is bone deep, and generation after generation that connection grows. We invest in each other. We dream together.
Biden the cop
Despite saying he was supportive of Black America, Biden ultimately rejected one of the movement’s key demands: defunding the police. In 2021, Biden pushed for more police numbers. He even suggested billions in emergency funding meant for the pandemic response be used to employ more officers.
In his comments on the topic, he folded cops in with vastly different kinds of public sector and community workers:
It means more police officers, more nurses, more counsellors, more social workers or community violence interrupters to help resolve issues before they escalate into crimes
He also said:
This is not a time to turn our backs on law enforcement or our communities.
On migration – another flashpoint topic under Trump – one US factchecking service claimed in January 2022 that apprehensions at the Mexican border went up 317% under Biden’s first month in office compared to the same period for Trump. The Biden government has also detained ten of thousands of asylum seekers, according to an April 2022 report in The Intercept.
Biden the capitalist
Since coming to power Biden has made some lukewarm criticism of Wall Street. In June 2022, he told an audience of trade unionists that he would not alter any of his economic reforms and vowed to pursue billionaires and firms over taxes:
Our work isn’t done. America still has a choice to make – a choice between a government by the few for the few or a government for all of us, democracy for all of us, an economy where all of us have a fair shot and a chance to earn our place in the economy.
Yet the fact remains Biden, like any US leader, is a Wall Street president to the hilt. He enjoyed $74mn in support from Wall Street leaders during his election run. More, it is estimated, than Trump himself.
His rhetoric over cancelling student loans, which haunt so many educated Americans, have turned out to be hot air. Some of those affected said the amounts being considered in debt forgiveness would barely register:
It cost me $400,000 of debt for the chance to complete my degree. And the interest keeps accruing. $10,000 is a patronisingly small amount for the staggering cost of education in this country.
Same but different
Objectively speaking Biden is preferable to Trump clearly. But that’s doesn’t mean he is good. Not when the bar is so terrifyingly low, as the UK experience will also attest.
Biden sounds better than Trump, true again. And he may not be riding a wave of out-and-out fascism. But the liberal capacity for war, violent policing, and unfettered capitalism is hardly something to get excited about.
The truth is that for those being bombed, starved, incarcerated, or murdered by police, it makes very little difference whether it is a bumbling far-right populist pulling the proverbial trigger, or a slickly packaged but equally bumbling centrist.
The only people who get a kick out it are US Twitter liberals, who can pretend for a moment that politics is a sort of live action roleplaying game in which they, naturally, are the good guys.
Those who say Congress is too corrupt to create a publicly funded system of universal health care are likely to be in for a surprise. Recent developments suggest that Americans may see Medicare for all within the next decade. However, since our system of privately funded elections inevitably leads to Congress putting profits over people, this is not likely to be a good thing.
The death spiral of insurance costs
Some advocates of a publicly funded universal health care system have predicted that its creation is inevitable because of the “death spiral” of insurance costs. This term refers to the fact that as costs of insurance rise, fewer people can afford it, leading to a new round of rising premiums and out-of-pocket costs. If this cycle were allowed to continue indefinitely, it would be only a matter of time before the medical insurance industry priced its product out of existence.
In a rational world, this simple fact would lead Congress to do what every other industrialized nation has done; create a publicly funded system of universal health care either through a government-run system such as Medicare for All, or through a tightly regulated system of non-profit insurers that offer a defined benefit package specified by the government, as in Germany. Of course, politics in the US is rational only in the sense that it follows the logic of profits over people. The desires of the donor class come first, and the corporations of the Medical-Industrial Complex have lots of money to give.
But if the insurance industry seems destined to price itself out of existence, how is Congress going to save its deep-pocketed friends?
The Affordable Care Act is a bailout for a failing insurance industry
Obamacare increased coverage primarily through 1) subsidizing private insurance purchased through the Exchange and 2) covering most of the costs of a huge expansion of Medicaid. Because most of the money didn’t come from employer profits or wages of average workers, this massive taxpayer subsidy of a private industry served to partially mask the fact that insurance costs are still exploding. Of course, as anyone with private insurance knows, it didn’t eliminate medical cost inflation. It just alleviated it enough to make people who have insurance complacent enough to not protest.
Since the Affordable Care Act went into effect, many of its inadequacies have become obvious to even its most ardent supporters. As a result, progressives have built substantial support for a publicly financed system of universal health care in the last decade. Unfortunately, Wall Street has made enormous progress toward privatizing Medicare at the same time. If they succeed, we may end up with a tremendously expensive form of Medicare for All that has all the defects of private insurance. These include reduced provider choice, inflated billing, and inappropriate denials of care and payments that lead to delays in treatment that have been associated with increased morbidity and mortality.
Privatized Medicare is a blatant giveaway to the medical insurance industry
During the Trump Administration, the insurance industry-controlled Center for Medicare and Medicaid Innovation developed the Medicare Direct Contracting program. This was a plan to give exorbitant sums to corporations to pay bills from doctors and hospitals, which traditional (government-run) Medicare does now with a 2% overhead. These contractors, the majority of which are investor-owned, are given a lump sum of money to cover medical bills and allowed to keep up to 40% as profit and overhead. That’s why private equity funds are salivating to get at those profits by acquiring contracts and subbing out the work. It’s a straight-up wholesale transfer of tax money to the pockets of the wealthy, with the same perverse incentives as Medicare Advantage to maximize profits by denying care.
But it gets worse. The pool of money contractors are given to pay providers is inflated by a method that essentially constitutes fraud. Called up-billing, it’s a trick developed by Medicare Advantage insurers to artificially elevate the acuity of their covered members. Under Medicare guidelines, this allows them to pay medical providers more for the same services. Since total payments determine the size of the pool of money from which they can extract their 40%, the more they pay out, the more they make.
According to a recent report, this scam cost US taxpayers over $12 billion in 2020 alone in excess payments to insurers offering Medicare Advantage. Since MA covers only about 40% of the Medicare population and is limited to taking 15% in overhead and profits, the amount that taxpayers would be forced to fork over to Wall Street if all Medicare beneficiaries are transferred to the direct contracting program is staggering. The plan is for this to happen by 2030. That’s what makes addressing this problem so urgent.
Loss of choice under the direct contracting plan
One of the most outrageous provisions of the direct contracting scheme is that seniors and the disabled who have chosen to enroll in traditional Medicare are being forced into direct contracting entity without their informed consent. If they have seen any primary care provider in the previous two years who currently works for a direct contracting entity, they are automatically transferred.
Most never realize this because the notifications are so difficult to understand. Even if you realize that your Medicare claims will now be handled by a for-profit corporation, your only way out is to switch doctors. Since a rapidly increasing majority of doctors now work for hospitals or corporations, it is going to become increasingly difficult to do so. In addition, independent medical providers receive financial incentives to participate. This is how CMS plans to meet its goal of forcing every beneficiary into one of these plans by 2030.
Only Biden can prevent this scheme from completely privatizing Medicare
The bottom line is this: Compared to Medicare Advantage insurers, these new contractors are able to increase the amount they skim off what taxpayers give them from 15% to 40% of an inflated pool of funds for doing a job that traditional Medicare does with 2% of payments based solely on services provided. No wonder almost all major insurers currently offering Medicare Advantage have applied to become contractors. Since the goal is 100% enrollment of Medicare patients, it’s clear that the rest will soon follow.
Any program so profitable for Wall Street is sure to achieve bipartisan support, especially since this is the only way for the medical insurance industry to avoid the death spiral of insurance costs. That’s why Biden has embraced it with all the enthusiasm of any other politician in the pockets of Wall Street investors. His response to a campaign led by Physicians for a National Health Program was to change the name of the program from Medicare Direct Contracting to ACO-REACH, while keeping all the essential provisions of the original version intact.
Biden will ultimately be responsible for the privatization of Medicare if we can’t get him to kill ACO-REACH, because the bill that created Obamacare barred Congress from challenging programs created by the Center for Medicare and Medicaid Innovation. (While the Supreme Court could rule that the Center for Medicare and Medicaid Innovation lacks the power to create such a sweeping program without congressional approval, as it stripped the EPA of the power to regulate carbon emissions, the corporatist-dominated Court is, of course, unlikely to challenge a program that serves Wall Street interests).
Since this scheme has been promoted by both Republican and Democratic administrations, the only way to stop it is to put pressure on members of Congress to speak out publicly against the program. We have to kill this thing by dragging it out into the sunlight, where taxpayers can see it and become appropriately outraged. If Congress can’t stop the program by direct action, they can certainly bring pressure to bear on Biden to do so.
This may be one issue where public outrage will make a difference
It may seem that trying to whip up outrage over government corruption is a quaint idea, but recent events have made this a prime time to make this a major issue. Biden, who has a long history of favoring Social Security privatization, recently received a great deal of negative attention for nominating a long-time champion of privatization to a position on the Social Security Advisory Board. Public awareness of the fact that he is promoting privatization of both programs may be more effective at stoking public anger than would either issue by itself. If you doubt it, consider the huge hit in popularity that George Bush took when he tried to privatize Social Security in 2005.
It’s time to go out on the street and raise some hell. Call, write, and visit your members of Congress. Question them at appearances during the August recess. Write to your local paper. We have to apply maximum pressure on them to lean on Biden if we want to stop this travesty and save any chance of creating a publicly funded system of universal health care that will put people over profit.
Crimes without criminals was not a subject for study when I was in law school. The two were seen as part of the same illegal package. That was before notorious corporate lawyers and a cash register Congress combined to separate economic, health and safety crimes from corporate accountability, incarceration and deterrence.
Lawlessness is now so rampant that a group of realistic law professors, led by Professor Mihailis E. Diamantis of the University of Iowa Law School, claim there is no corporate criminal law. I say “realistic” because their assertion that corporate criminal law, does not in fact, exist is not widely acknowledged by their peers.
Most Americans know that none of the executives on Wall Street who are responsible for the lies, deception, and phony investments they sold to millions of trusting investors were prosecuted and sent to jail. “They got away with it,” was the common refrain during the 2008-2009 meltdown of Wall Street that took our economy down and into a deep recession that resulted in massive job loss and the looting of savings of tens of millions of Americans.
Not only did the Wall Street Barons escape the Sheriff but they got an obedient Congress, White House and Federal Reserve to guarantee trillions of dollars to bail them out, implicitly warning that the big banks, brokerage firms and other giant financial corporations were simply “too big to fail.” They had the economy by the throat and taxpayer dollars in their pockets. Moreover, Wall Streeters made out like bandits while people on Main Street suffered.
All this and much more made up a rare symposium organized by Professor Diamantis last year at Georgetown Law School. (See here). He wrote that the “economic impact of corporate crime is at least twenty times greater than all other criminal offenses combined,” quoting conservative estimates by the FBI. It’s not just economic, he continued: “Scholars, prosecutors and courts increasingly recognize that brand name corporations also commit a broad range of ‘street crimes’: homicide, arson, drug trafficking, dumping and sex offenses.”
The litany of corporate wrongdoing ranges from polluting the air and drinking water, dumping microplastics that end up inside human beings, promoting lethal opioids that caused hundreds of thousands of deaths, providing millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities, (Wells Fargo), manufacturing defective motor vehicles, producing contaminated food, allowing software failures resulting in crashes of two Boeing 737 MAX’s with 346 deaths. (See, Why Not Jail? By Rena Steinzor).
People don’t need law professors to see what’s happening to them and their children. People laugh when they hear politicians solemnly declare that “no one is above the law,” extol “the rule of law” and “equal justice under the law.”
By far the greatest toll in preventable fatalities and serious injuries in the U.S. flows from either deliberate, negligent or corner-cutting corporate crime under the direct control and management of CEOs and company presidents, many of whom make over $10,000 an hour over a 40-hour week.
Five thousand people a week die in hospitals due to “preventable problems,” documents a Johns Hopkins University School of Medicine study. The EPA estimates some 65,000 deaths a year from air pollution; OSHA has estimated about 60,000 work-related fatalities from diseases and traumas in the workplace. This carnage does not include the far greater numbers of people suffering from illnesses and injuries.
This range of corporate destruction was pointed out thirty-four years ago by Russell Mokhiber in his classic book, Corporate Crime and Violence: Big Business Power and the Abuse of the Public Trust (Sierra Club, 1988).
What are Congress and the White House saying and doing about this growing corporate crime wave? Saying little and doing almost nothing. Corporate criminal law enforcement budgets are ridiculously paltry. The Department of Health and Human Services recovers less than three percent of the estimated $100 billion a year stolen from Medicare and Medicaid. There are too few cops on the corporate crime beat and the White House and Congress are unwilling to remedy this problem.
Congress doesn’t hold broad hearings on corporate crime, except when a dustup gets headlines like the recent contaminated baby formula from the unsanitary Abbott factory in Sturgis, Michigan.
This is remarkable because since January 2021, two of the rare outspoken lawmakers against corporate criminality, Senator Richard Blumenthal (D-CT) and Senator Sheldon Whitehouse (D-RI), both are chairs of subcommittees in the Senate Judiciary Committee.
There are large gaps to be filled and updated in the inadequate federal corporate criminal law. Some regulatory agencies, such as the FAA (aviation) and NHTSA (auto safety) have no criminal penalty whatsoever for willful and knowing violations that directly result in fatalities.
Then there is the patsy Department of Justice (DOJ). For years we’ve asked DOJ officials to ask Congress to fund a corporate crime database (like the street crime database). Attorney General Merrick Garland won’t even respond to letters about this issue. For years, specialists like Columbia Law professor John Coffee have been urging the DOJ to stop settling the few cases they bring against corporate crooks with weak “deferred prosecution agreements” or “non-prosecution agreements.” These deals involve modest fines, no jail time for the corporate bosses and a kind of temporary probation for the corporation.
Corporate attorneys play the DOJ like a harp knowing that the Department has a small budget for prosecuting corporate crime and that many DOJ attorneys are looking for lucrative jobs in these corporate law firms, after a few years of government service. Any one of many giant corporate law firms has more attorneys than all the lawyers working on corporate crime in the Department of Justice.
Professor Diamantis, W. Robert Thomas and their colleagues are prolific writers of law review articles. They argue for a range of effective penalties that will deter recidivism, which is rampant. They probe restructuring the corporate hierarchies of privileges and immunities from the law. They argue for updating the antiquated federal criminal code to match new technological/Internet/artificial intelligence (AI) violations.
Until, however, these scholars can make it into the mainstream media to reach enough citizens and get this “law and order” agenda adopted by candidates campaigning for elective office, the ideas they advance will circulate mostly among themselves indefinitely.
Demanding a new political discourse in which the poor are no longer blamed for their poverty in the wealthiest nation in history, hundreds of impoverished and low-income activists on Monday rallied in New York City and marched on Wall Street to take their demands directly to the center of U.S. wealth.
On Thursday, Rep. Ilhan Omar (D-Minnesota) introduced a bill that would get rid of a limit on the construction of public housing and take steps to guarantee affordable housing for all Americans.
The Homes for All Act would authorize the construction of 12 million public housing and affordable housing units, making a $1 trillion investment in construction projects over the next decade. The legislation would also make funding for maintenance and other expenses related to public housing mandatory, in order to ensure that public housing funding isn’t cut in the future.
Omar said that the bill, which is cosponsored by progressive Representatives Alexandria Ocasio-Cortez (D-New York), Ayanna Pressley (D-Massachusetts), Rashida Tlaib (D-Michigan), and others, is especially timely as the nation faces an urgent housing crisis.
“Since the eviction moratorium ended, we have seen an uptick in people being kicked out of their homes,” Omar said in a statement. “We need solutions that meet the scale of this crisis. We need Homes for All, my bill to invest in 12 million new housing units – vastly expanding the available affordable housing stock, driving down costs throughout the market and creating a new vision of what public housing looks like in the United States of America.”
The bill takes aim at a particular provision called the Faircloth Amendment, which has prevented the government from constructing mass amounts of new public housing units since 1999. The amendment, supported by Republicans in the ‘90s, specifically bars public housing agencies from using funds to build new housing, and locks in the amount of public housing units to the level they were at in 1999.
Housing advocates have long called for the repeal of the Faircloth Amendment, and several lawmakers like Sen. Bernie Sanders (I-Vermont) have introduced legislation that would get rid of the provision.
Last year, Ocasio-Cortez introduced legislation specifically aimed at repealing the limit; she attached it to an early version of President Joe Biden’s infrastructure bill last year, but affordable housing provisions were ultimately negotiated out, and the social spending provisions were eventually nixed entirely thanks to conservative Democrats.
Omar has introduced the Homes for All Act before, in 2019. But this week’s bill comes as the nation faces a new crisis, fueled by pandemic-related economic instability and real estate firms that are buying up homes in order to turn them into investments in record numbers.
At the end of 2021, institutional and individual investors made up a quarter of home sales. A disproportionate amount of these investments are low- and mid-priced homes, meaning that homebuyers are being out-competed and forced to rent.
Meanwhile, corporate landlords are waging what seems like a coordinated effort to jack up rent prices, exploiting tenants who are already experiencing high inflation rates. According to Redfin, rents have risen by 14 percent on average; in some cities, like Austin, Texas, rents are being hiked up by an average of 40 percent, forcing people to reevaluate their finances or find somewhere else to live.
Housing advocates have praised the bill as timely and urgently needed. It has been endorsed by organizations like the National Coalition for the Homeless, the National Low Income Housing Coalition and the Working Families Party.
“Everyone living in the United States should have safe, accessible, sustainable, and permanently affordable housing: a Homes Guarantee. Right now, our country falls woefully short of delivering on this promise,” said Tara Raghuveer, housing campaign director for People’s Action, which also endorsed the bill. “The housing and homelessness crises are the direct and predictable result of treating housing as a commodity rather than a human right… This will be the new standard by which progressive housing policy is measured.”
This is a little soft-shoe pissed off blathering from me, so apologies up front. No big news on the Ukraine Invasion front, or the Gates Owning All the Farms front, or the Climate-Wall Street-Chronic Illness front. Nothing related to the MICIMATT (Military-Industrial-Congressional-MEDIA-Academia-Think-Tank) front. Just plain old burnt toast and spilled milk from a radical who has to still be in the job market at the tender age of 65.
Never in my imagination, just five years ago even, would I have figured I’d be here, that is, stuck in the USA, blessed to be in a relationship (it’s good, but again, people in my life do need me somewhat sane to handle varying degrees of their own trauma), and pigeon-holed as a malcontent who is also unemployable.
The fact that people in the fields I venture into are less than middling, and the fact that lives hang in the balance tied to vax mandates, and forced boosters, and proof of mRNA life (I hear people, through the fog of the propaganda madmen, that mRNA a la Pfizer and Moderna, is better than the J & J, Janssen, which is not the same vax, but is now being discontinued. Imagine, J & J was a single dose experimental jab, but the Mengele actors in the CDC and Big Pharma move the goal posts daily so J & J single dose, has to be seconded to be a full-vax record — after a five month lapse between the two. However, the J & J is cancelled, no more manufacturing, so anyone trying to stay away from mRNA now, after their one shot of J & J has to submit to a completely different platform for this SARS-CoV2 mass experimentation game).
These are experimental. The blasphemy is, a, forced vaccinations on everyone, no discussion about the alternatives, or the safety; then, forcing these on youth, age six months; then, the lack of choice of all the vaxxes around the world, including China’s and Cuba’s; then, complete liability for death and injury for the big Pharma thugs; then, of course, we, the taxpayer foot the bill for R & D, for the salaries of these thieves, and then we buy the vials, and when they are contaminated, or when they expire, we end up watching 30 million doses down the drain, and then we, the taxpayer, foot the bill for the replacements. Money and more money, that is the planne pandemic.
Pre-Planned Demic — forced vaccinations for college students, and then, how many for kids going to kindergarten, K12, have to be vaxxxed? Then, the HPV, and I have written about that here —
I got screwed, blued and tatooed by the powers that be. Big Pharma, Planned Parenthood and the nonprofit industrial complex. Try that out for size!
So, what is in the discontinued Johnson & Johnson (J&J)/Janssen COVID-19 Vaccine?
Ingredients:
The J&J/Janssen COVID-19 vaccine contains a piece of a modified virus that is not the virus that causes COVID-19. This modified virus is called the vector virus. The vector virus cannot reproduce itself, so it cannot cause COVID-19. This vector virus gives instructions to cells in the body to create an immune response. This response helps protect you from getting sick with COVID-19 in the future. After the body produces an immune response, it gets rid of all of the vaccine ingredients just as it would discard any information that cells no longer need. This process is a part of normal body functioning.
Full list of ingredients: The J&J/Janssen COVID-19 vaccine contains the following ingredients:
A harmless version of a virus unrelated to the COVID-19 virus: Recombinant, replication-incompetent Ad26 vector, encoding a stabilized variant of the SARS-CoV-2 Spike (S) protein. Provides instructions the body uses to build a harmless piece of a protein from the virus that causes COVID-19. This protein causes an immune response that helps protect the body from getting sick with COVID-19 in the future.
Sugars, salts, acid, and acid stabilizer:
Polysorbate-80
2-hydroxypropyl-β-cyclodextrin
Trisodium citrate dihydrate
Sodium chloride (basic table salt)
Citric acid monohydrate (closely related to lemon juice)
Ethanol (a type of alcohol)
These work together to help keep the vaccine molecules stable while the vaccine is manufactured, shipped, and stored until it is ready to be given to a vaccine recipient.
Alas, I teach a class at the community college here, OCCC. One student asked first day of class who was vaccinated and boosted. I massaged that into, “Well, we have to wear masks, per college requirements, but there is not vax mandate. Best we not ask people personal questions about their health issues and decisions.”
My marching orders were that if I asked once and then twice for a student to mask, and if they refused, the course would be cancelled.
That is the absurdity of this entire dress rehersal for bigger and more systematic totalitarian methods of control. The mob, the bandwagon, the transfer of Fauci’s credentials to infer credibility. Pissing matches now on which vax and booster you get.
I do not know if many DV readers get the totality of this Western Mentality for Ordering People Around at work, school, in public, everywhere. Again, pre-SARS-CoV2, and conccurently — people I have gotten jobs for are working 14 hour shifts, in sub-freezing warehouses, moving frozen goods/foods along frozen floors with forklifts sliding all over the place. Imagine, coming home and still five hours after the shift frozen fingers and core temperature still not normal. Forced drug screening, forced background checks, forced credit checks, checks on prior evictions, driving record checks, physicals, all medications listed, reference checks, in-case-of-emergency references, and more, including being paid every two weeks, on a fucking Visa card.
Toil, weathering, mean as cuss bosses and supervisors, repetitive deadening work. No talking on the job. Keep those headphones and ear buds off. I’ve challenged the honchos driving up in Mercedes and Teslas how the hell do they look at themselves in the mirror at night or in the morning without seeing a monster of exploitation. Big jacked up $60,000 pickups while my clients have to take rotten and rotting public buses, many lines of which stop a mile or two away from the facility.
Work, baby, the great resignation, sure. But, here we are now — who owns us? How do we put that roof over our heads and that john in the corner and kitchen next to the bed?
Wall Street won’t rest until it become the biggest – and perhaps only – landlord in the US.
At least that’s the impression one gets by observing the behavior of the two Wall Street “black” giants, Blackrock and Blackstone. As a reminder, the WSJ sparked widespread outrage recently when it exposed what most industry insiders had known for a long time, namely that Blackrock (and other institutional investors) have been ravenously gobbling up US real estate. Now it’s Blackstone’s turn.
On Tuesday, the WSJ reported that Blackstone – which already is not only America’s largest landlord but also the world’s largest real estate company with a $325 billion portfolio – has agreed to buy single-family rental company Home Partners of America for $6 billion, betting the demand for suburban housing will stay hot even as the pandemic eases. Home Partners owns more than 17,000 houses in the United States; the company buys, rents out and eventually offers its tenants a chance to buy them. Now all those functions will be done by the largest US private equity firm.
And so, I, like millions, are at the whim of the followers, the sheeple, for sure, and we play their game, and STILL, we can’t be in their sandboxes. All those state and city and county and even nonprofit jobs tied to state, city, county contracts (grants) I apply for caveat the application in big bold notations — Upon hire, the candidate must submit proof of full Covid-19 vaccination. That means, of course, those agencies have the power to go straight to CDC/STATE records of the shot sheet. Not a paper copy of the CDC shot record, but the proof has had to be recorded into the data field; i.e. computer.
I was going to cross that bridge if and when I got any sense of being offered a job, but, alas, there are not job offers for schmucks like me. That is, of course, the lamentation here. But as always, I attempt to make my little Paul’s World tie into a larger frame, some universal set of lessons.
age
gender
politics
over-educated
too many different jobs over time
moving too many times
too confident
too willing to discussion many aspects of the job in the Q & A
too much on the internet, easily searchable vis Google
blacklisted through checking off, “no, it is not okay to contact previous employer”
more
There are so many reasons why “they” don’t hire folks like “me.” Strike up the ageism and sexism band, for sure. I am 65, a male, and the jobs I am attempting to get are in the social services/education/editing/writing arena.
Educational navigator, state and county jobs, even city jobs. The writing is on the wall, in a rural county, and, when I do get interviews, it’s four to six women on Zoom. I’ve had 12 people in a room for one job interview I actually drove 40 miles to attend in person. I was asked to apply by the ED. Very good back and forth, and they liked me, thought I was smart, a fit, but not a perfect fit. The rejection letter from the Executive Director was all complimentary. But, again, here I am, on the job market. Many times an interview is couched with “we are a tight-knit family, a very close team so how do you think you’d be part of that?”
I’ve had to ask several time, at the end of interviews when they ask me if I have questions, what ways do the people on the team work with people like me, an obvious outsider, to be part of a team that they call family? Really, what makes it easy for a male with education to fit into a tight knit team, which from the outside seems like a clique?
I am a great interview, and I am able to put on many faces, in addition to bringing up interesting connections to my long work experience and my education to each respective job I’ve applied for.
And, that small-knit female group is not wanting to have an outsider, someone who doesn’t look like them. These people, to be blunt, are seated inside a nanny mentality, and drawn into paperwork world while following procedures to the letter. They are not giving and creative souls, not in any real sense. Also, they seem to be pretty one-dimensional. I get through the screening, then the interview, then the email a week or weeks later, which is a form letter, that states in mealy mouthed terms, I was rejected:
PAUL — Thank you for interviewing for the position of Permanency Workers (Social Services Specialist 1) Newport . Although you have not been selected for the position, we enjoyed learning about your background and experience in greater detail.
Again,thank you for your timeand interest. We encourage you to apply for other opportunities in the future.
Thank you.”
Yep, my mother told me I should have continued at the U of Arizona and got the medical degree. Even a law degree. That was way back when, at 19 years of age and having the gift of gab, the gift of testing to a high level, above 89 or 90. Gifts . . . now, at 65, feeling, well, embarassed that, a, I have to look for work with no retirement, in this shit hole country, and in any shit hole state (you name it). Democratic or Republican governor, the scum rises to the top. With so much scum below them. And, b, I am pissed off and in this predictament. And, c, that I even feel this way — useless, a throw-away, disposable, nothing (I don’t feel these for many minutes in a day, but still, feeling this shit is like hot lead down one’s gullet).
One of the questions from the above committee of three was around “Many people perceive the CPS (child protective services) has having a lot of power. Rightly or wrongly, how would you deal with this perception?”
Well, of course, I know a few things or two about CPS and foster care and removing children from families. And, I thought I could give the CPS a bit of perspective, AND, while the gender police want to top load professions that are traditionally not full of women with women, you would think those female-filled social services centers would want a few wise males in their ranks.
That’s just hopeful thinking. Well, here, from an old article, Atlantic, from a CPS worker:
It seems there is always some sort of story in the media regarding one form of child abuse or neglect or another. Recently, I came across two such stories, one about a working mother who allowed her 9-year-old daughter to play unsupervised at a playground near her work and was subsequently arrested and her daughter put into foster care; and another, actually, about the mass shut-off of water services in an underprivileged Detroit neighborhood which brought up the fact that many don’t complain about the issue due to fears of having their children immediately removed from their homes as lack of water service is, allegedly, grounds for this in the city. These stories always hit home for me. Besides being a parent, I previously worked for Children’s Protective Services in Ohio.
Opinions usually fell into one of two predictable camps: as a CPS worker you were either accused of doing too little to protect the children involved, or of being too invasive, at best another mindless bureaucrat and at worst a power-happy sadist that got off on telling others how to raise their kids. In truth, both are often correct. I’ve seen them personally. And it’s a problem. Most workers, however, fall somewhere along the wide spectrum in between, and where they fall will be influenced more by their local inter-and-intra-agency culture than any statute.
Thinking of the mother of the 9-year-old, I realize I am not privy to the details of the case. I understand there is a lot I don’t know. Things like, does this mom have a history of abusing or neglecting this child or other children? Did the child have any special needs that made her especially vulnerable to being unsupervised? Did the child have any other signs of abuse like severe bruising or physical injuries, or of neglect such as obvious malnutrition or chronic head lice, or any other incalculable number of things? These would no doubt make a huge impact on my opinion of the situation, but as it stands what I read is this: a 9-year-old girl was left with a cellular phone at a playground near her mother’s workplace with adequate shade and access to water. Upon learning that her mother was not present, an adult called the police. So far, I vilify neither the caller for calling nor the police for responding. It is what happens next that I strongly question.
Apparently, the best answer to this case was to remove the child from her mother’s custody, put her in foster care, and arrest the mother. I’ll be blunt: this is insane.
Well, of course, I handled ALL the questions well, but then, the rejection. All those rejections. All those terrible people lifted through the prostitution called politics of bureaucracies. There are so many mean, dog-eat-dog, I-got-mine-too-bad-you-don’t-got-yours fucking Americanos. Yankee or Stars and Bars, most are cut from the same shit-hole Mayflower cloth. There are some mean folks I have met in Child Protective Services. In Portland, in Seattle, in Spokane, in El Paso!
This is the shape of things to come, for many of us, who are self-avowed radicals, willing to say and write and publish things that are definitely outside the bold lines of the center fold of American meanness. American group think. American belonging in the bandwagon. Infantalized. Disneyfied. Now, get stuck in a rural arena, with few opportunities, and this is the weekly routine —
change up the resume
write a new cover letter
do an on-line application
sometimes complete these timed tests, many of which are psycho personality tests — sick stuff
attest at the end of the application, before hitting submit, that all stuff is truthful, and that they, the prospective employer, has the right to go back into all manner of work and legal and living history
And it is almost impossible during this process, and while consuming corporate, commercial, un-News news, to not get jaded, cynical, pissed off and, well, dejected. Since all the stories are about the beautiful people, the celebrities, all the crap around thespian stars and sports stars. All the felonies committed by politicians, corporate heads, even those in positions of state-county-city government.
There are so many undeserving folk in positions of big and minimal power. Yep, we know that. And to hear any manner of these people who get quoted or get the limelight for me is to hear monsters who have zero idea how the 80 percent live.
Nepotism, favoritism, cancelling, xenophobia, bandwagoning, credentialism, and other -isms rule the day. Then, to see folks circling their wagons interviewing me only because they may be checking off something on their diversity list — “get a white old male in the mix to look like we are diversity mavens” — to have at least three people in the pool. I have had my application stopped because not enought applicants hit the pool. Imagine that.
Then, there’s this blasphemy — more and more staffing firms, the bane of humanity, controlling the hiring process. That culprit, Indeed, has gotten into staffing. LinkedIn? All of them, rotten to the core, and many jobs are now conduited through those chosen people’s job screening-prepping-hiring headhunter systems that are all relying upon algorithms and Salesforce techniques:
Contracting is Worker Exploitation — (source). I have written about this in the past. Broken records abound:
Staffing agencies perpetuate this ugly cycle because they make a hefty profit exploiting contractors. Staffing agency recruiters will lie about the length of the contract and specific requirements, they’ll alter resumes without your knowledge, and make little to no effort to find another assignment once a contract ends. Some of these staffing agencies are so unprofessional, they’ve sent me emails meant for other people they’re trying to recruit. Staffing agencies are the worst. They don’t disclose how much they charge a company for a contractor’s services to maximize their profits. For example, for one of my recent contracting gigs, the company paid the staffing agency $60 an hour. I received $40 an hour while the staffing agency received $20 an hour for every hour of my work. The staffing agency received $800 a week for doing practically nothing, while I did all the work. These are the risks of contracting work, but it doesn’t make it right or ethical.
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“This Is One of the Most Important Legal Battles for Labor in Decades” (In These Times)
Over the last few decades, a growing number of American workers have effectively lost many of their labor rights because of the way their bosses structure the employment relationship. These workers are contractors who are hired by one company but work for another: the Hyatt Hotel housekeepers who actually work for Hospitality Staffing Solutions, the Microsoft tech workers who actually work for a temp agency called Lionbridge Technologies, and the Amazon warehouse workers who actually work for Integrity Staffing Solutions. These workers often perform the same work at the same place as other workers, frequently on a permanent basis.
But because their employers have entered into complicated contracts with each other, these workers have been unable to exercise their labor rights. If the workers can only bargain with the staffing company and not the lead company where they actually work, they are negotiating with the party that often has no power to change the terms of their employment. For that reason, workers have fought for a more inclusive definition under the National Labor Relations Act of what constitutes an employer — and when two employers are joint employers.
Here, in my neck of the woods, the Lincoln County School District, again, sell outs at the top, and the bizarre superintendent and her VPs and thug principals in league with her meglamania, the District gives shit about workers:
Educational Staffing Solutions (New Jersey, Tennessee) is a staffing firm specializing in placing highly qualified staff in daily, long-term, and permanent K-12 school district positions, including paraprofessionals, substitute teachers, and other support staff. The company innovates education staffing to provide dynamic solutions to schools and professional opportunities to passionate educators. ESS provides its employees with the ability to work for schools across the country and competitive training, flexible work schedules, and professional development. The company’s partner schools receive personalized solutions, hands-on management, technology, and program reporting and analytics. ESS was founded in 2000, and its headquarter is located in Cherry Hill, New Jersey, United States. The firm’s expert professionals serve more than 3 million students with a pool of 60,000 substitute and permanent employees throughout the United States. ESS provides healthcare benefits and other perks to its employees.
So these schools, public schools, have sold out their food services to profiteers (Sodexo, et al), given up cleaning to the janitorial profiteers (Sodexo; Bon Apetite), contracted out the buses (Student First, et al), and their hiring of staff, teachers, administrators, too, sold out to the profit gougers. Staffing firms and those all-American welfare cheats who look, sound, smell like, well, good people. This is what the average person has to confront.
A national labor phenomenon known as “The Great Resignation,” or “The Big Quit,” began to take hold in January 2021 and has since grown. Millions of workers in the United States have turned the turmoil caused by the coronavirus pandemic into opportunities to rethink their professions and reframe their lives.
The trend is especially pronounced in the accommodation and food services sector, which experienced more than 5 percent worker attrition each month from June to October of last year.
Online, people flooded a Reddit forum called “r/antiwork” for commiseration and solidarity; by year’s end, the page had reached 1.5 million members. In the streets, thousands of unionized workers in manufacturing, health care, and higher education went on strike last fall for fair pay and protections. (source)
So, with two master’s degrees, and three dozen years teaching, and some of that including substituting K12 in Washington and Texas, I have to face jobs where $14.89 an hour, no benefits, on-call, at will, are the options. But add to this paltry pay: a substitute teacher needs to pay a fee to get a substitute certification, which is $350 in Oregon. I even had to take a civics test, here in Oregon, a test that was so fucking easy that, well, another fee to pay in order to get a shitty $14.89 an hour.
And, then, being banned from teaching, another story, here at DV —
“Take Down this Blog, or Else!” — No job interview, no job offer, targeting by city, county, state honchos, watched by the pigs, shadowed by all the sub humans
You will not hear VP Harris or Jill Biden talking about this blasphemy, or Henry Giroux or Chris Hedges writing about this stuff. Believe you me, this is below them, to be blunt. I am part of a legion of older folk caught in several levels or circles of THEIR hell: the arbitrators, the people in high and mid office, making some of the worst decisions ever. We are at the whim of lock-step fearful folk. We are at the beck and call of the most uncreative people on earth. I have seen the antithesis of education, of journalism, of social work, of college teaching in my many decades of wandering the planet as a writer who should have gone the route of med school or law.
I’m sixty-five and really part of the growing throw-away contingency of millions in this Western Culture who are just the flesh and blood (and data mines) in a pipeline for more rich and super rich and almost rich people to take their pound of flesh — fees, penalties, late charges, triple taxation, tickets, surcharges, foreclosures, evictions, repossessions, code infractions, add-ons.
Oh, cry for me, United Snakes of America. Evictions, uh? They — the landlords, the BlackRocks, the BlackStones, the Banks and the Insurance and the Real Estate monsters, they are the Stinkin’ Badges!
I’ve written about this before, so again, broken DVD/record:
Never forget who we are:
In 2019, Democratic Senator Elizabeth Warren blasted Blackstone for “shamelessly” profiting from the U.S. foreclosure crisis, arguing that Wall Street’s investment in single-family homes was a “huge loss for America’s renters.” (source)
Never mind, though, old Elizabeth states she is through and through a capitalist. Haha, rhetoric, yakking, and not a fucking thing is done. Huge loss for America’s renters? This is life and death, again, these people at the top are clueless, intentionally, or just because they do not know what it is to be us.
But then, forgetting is in the water:
And, you can’t get Whoopied when you got no millions:
Unemployment, on the dole, on the fiddle, under the table, riff-raff, deplorable, welfare king, trash, undesirable, vermin, dreg of society, scum, outcast — terms thrown at me and my people. Hell, just look at the Chosen People’s movie channels — all those narratives, those Hulu and Netflix and Amazon series and movie crap, how they depict (they never really depict real struggle) us commoners, those of us who still have a few good years left to be “contributors,” but for many reasons, will never get the third, fourth, tenth chance. Watch closely how they depict the working class. Take notes. We are dregs, man. Broken, mean, thieves, fornicators, dumb, and deplorables.
Remote Area Medical? Shit, we are an underperforming country, intentional, vis-a-vis the corporate whores, the lot of them:
Scale this shit up. Dental clinics, care homes, medical clinics. Free, of course. Reroute that Biden-Trump-Bush-Obama-Clinton war money to what we need: Stan Brock, Mutual of Omaha’s Wild Kingdom:
A debate over healthcare has been raging nationwide, but what’s been lost in the discussion are the American citizens who live day after day, year after year without solutions for their most basic needs. Remote Area Medical documents the annual three-day “pop-up” medical clinic organized by the non-profit Remote Area Medical (RAM) in Bristol, Tennessee’s NASCAR speedway. Instead of a film about policy, Remote Area Medical is a film about people, about a proud Appalachian community banding together to try and provide some relief for friends and neighbors who are simply out of options.
Fucking amazing Stan Brock — they don’t make people like him anymore!
Source: Institute for Policy Studies analysis of NY Comptroller and Bureau of Labor Statistics data 
Sources: Bank diversity report indicators for 2021 and Bureau of Labor Statistics occupational data for 2022 
Source: Bank diversity report indicators for 2021 and Bureau of Labor Statistics occupational data for 2022 
(@TaraSetmayer) 
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