Suddenly it looks like we are seeing political victories for progressives, on LGBT rights, on issues important to Hispanics, even occasionally on issues important to women. At the same time, we lose every single battle over economic issues. How is it that when polls show that a huge majority oppose cuts to Social Security, Democratic politicians like President Obama and Senate Majority Leader Dick Durbin are all for it, as are the Republicans? How is it that when Obama gets elected on a pledge to hike taxes on incomes above $250K, with a huge majority and control of the Senate, and a legislative situation where all he has to do is nothing and it happens, and then it doesn’t? How is it that the same bill continued a bunch of disgusting loopholes for the richest Americans and the corporations they control, like the NASCAR loophole that essentially only benefits one enormously wealthy family? How is it that within days of hearings showing the incompetence of JPMorgan’s derivatives traders the House Agriculture Committee cleared legislation to inflict derivative losses on the FDIC?

To answer that question, we have to get outside of normal discourse in the US, and take up a new word: oligarchy. Even though our pundit class doesn’t seem to grasp the possibility, it’s easy to see that this single concept explains the apparent discrepancy between wins on social issues and utter defeat on all economic issues.

We think of the US as the Shining City on the Hill of Democracy. Maybe so. But as Jeffrey Winters and Benjamin Page say in their article Oligarchy in the United States?, kindly made available by the author, it is perfectly possible for an oligarchy to function quite nicely inside a democracy. In this paper, and this somewhat more accessible version, Winters and Page answer three questions: a) what is oligarchy? b) how can you have an oligarchy in what is ostensibly a democracy, and c) how can an oligarchy function when there is such a large number of hyper-wealthy people? As to the first, they define oligarchy to mean rule by the richest citizens, a definition that follows Aristotle. This is from Politics, IV, viii:

For polity or constitutional government may be described generally as a fusion of oligarchy and democracy; but the term is usually applied to those forms of government which incline towards democracy, and the term aristocracy to those which incline towards oligarchy, because birth and education are commonly the accompaniments of wealth.

It’s easy enough for an oligarchy to work inside a democracy. Historically, the richest citizens had to fight to protect their wealth and power, with expensive castles and armies and alliances with other oligarchs. As the nation state evolved, the rich struck a deal: the state would take on the burdens of protecting property from foreigners, peasants and other oligarchs, and the rich agreed at least in theory to abide by the same rules as everyone else in the state. Of course, the rich played an important role in determining how those rules would be established. Winters and Page point to a number of provisions in the US Constitution that wet things up for significant control by the rich. Not least is Art. I, Section 10, which prohibits states from passing laws that impair the obligation of contracts, and the Fifth Amendment, which prohibits taking property without due process and just compensation. The Constitution protected wealthy slavers, awarding them extra votes so they could insure control in their home states.

Throughout our history, the richest among us have used their wealth to secure favorable laws. The full extent of that influence is obvious in hindsight, even if at the time other motivations may have seemed important. Laws that restricted voting may have looked like ways to enforce racial prejudice, but they also applied to poor whites as well. Poll taxes, property requirements and other requirements were designed to insure that undesirables couldn’t vote.

Turning to the question of coordination among the oligarchs, how can they work together when there are so many of them. The answer is that all of these hyper-rich people share three important interests:

1. Protecting and preserving wealth
2. Insuring the unrestricted use of wealth
3. Acquiring more wealth.

They don’t have to conspire to protect their interests. They just have to shut up and let a few of them manage the specifics. As an example, consider the Estate Tax. Its function is partly to generate revenue, but its social role is to break up large fortunes. The Walton heirs, a group which has done nothing to deserve great wealth besides belonging to the lucky sperm club, provides leadership for the rest of the oligarchy on this issue. They spend vast sums of money to insure that their children do not suffer the indignity of living on less than billions and billions of dollars of inherited money. You can count the members of the oligarchy who oppose the Walton heirs on this issue, and they do not oppose changes with the kinds of money and influence that the Walton heirs bring, only by cheap talk.

The oligarchs have armies of professionals to influence economic policy; Winters calls them the Wealth Defense Industry. These people see themselves as independent professionals, but they need patronage to maintain their positions, and they get it by providing research and advocacy for the policies and facts that support the views of their controllers. Just watch those supposedly independent lawyers espouse laughable positions in courts, and then watch those indefensible positions win in supposedly independent courts. The same is true of economists and accountants and pretty much any profession you can name.

Winters and Page have some thoughts on the makeup of the oligarchy in the US, but their attempts rely on simple measures like income and wealth alone, and are not completely convincing. Part of the problem is that it is difficult to analyze the patterns of influence with a few raw numbers and simple measures of concentration of wealth and income. There is no obvious way to measure the power of working through corporations, foundations, think tanks, and even universities, which bring a deep range of pressures to bear on government officials. But even the raw numbers show that the power and influence of the rich is enormous, and much greater than any other segment of the population.

It’s only recently that the Oligarchy has lost interest in the bargain about following the rules. Entire industries are off limits for prosecution. Rules are randomly changed to favor the interests of the rich. And worst of all, democracy itself isn’t working. We used to operate under some general form of majority rule. That is not the case in either house. In the House, under the Hastert Rule, the Speaker, John Boehner, will not present a bill that doesn’t have the support of a majority of his party. That means that a minority of the House can prevent any bill from being heard. That minority comes from small states in the most conservative parts of the country.

The Senate operates under rules that allow a single Senator to stop a bill in its tracks. A minority can prevent discussion of any bill. That’s bad enough, but the same rule applies to appointment of judges and the officials in policy positions. These require the advice and consent of the Senate, but again, a minority can prevent consideration of even routine appointments for any reason or for no reason. That means that we do not have judges in many courts, and that the President cannot govern with the people he thinks best.

These matters are largely the fault of the Republicans, who are the party of the rich, the oligarchs. But at least in the Senate, the Democrats could change these rules. They refused to do so in the face of the bad faith of the Republicans. It’s at least as much the fault of Harry Reid as it is the fault of the party of the rich.

The primary impact of this leverage in the hands of the minority is on economic issues. The oligarchy is just as divided as the rest of the population on social issues, like immigration, LGBT rights, women’s issues and similar non-financial matters. It turns out that, for example, some of the oligarchs have family or friends or are themselves LGBT. Their interests in wars and other kinds of issues are also divided. Because of that, democracy could theoretically work on those issues. It’s only those economic issues where the rich are on the same team, and they always win those battles.

And that’s exactly how things are working out. On matters of direct interest to the oligarchy, they win. You can have your silly laws about marriage or abortion as long as they get their way on money. It’s a lousy bargain, and it doesn’t have to be that way.

Cross-posted and slightly revised from Naked Capitalism.

Despite the best efforts of Lanny Breuer to hide it, the complaint filed against Standard and Poor’s by Los Angeles US Attorney André Birotte, Jr. proves that the Department of Justice is fully aware of the corruption on Wall Street in the run-up to the Great Crash. The alleged facts point directly at the issuers of real estate mortgage-backed securities and collateralized debt obligations as the leading cause of the losses of the victims of S&P’s alleged frauds.

In a nutshell, the issuers, a term which deal underwriters, played a major role in creating the software and techniques used to rate RMBSs and CDOs. They used that role to delay and water down changes to the ratings systems. They played the ratings agencies against each other, and they got much higher ratings than were justified by the mortgage loans that underlay the securities. The issuers had mountains of these bad loans, and were desperate to get them off their baoks to protect their balance sheets. Those issuers include Too Big To Fail Banks, and some others as well.

The complaint explains the role played by issuers in developing the RMBS ratings systems at S&P, beginning at ¶ 123. In April 2004 S&P executives met to discuss changes to the process for creating and implementing changes to its ratings criteria. The new policy

… required consideration of “market insight” and “rating implications” and the polling of both “3 to 5 investors in the product” and “and appropriate number of issuers and investment bankers for a full 360-market perspective.”

¶ 125. That policy was implemented on July 1, 2004. The complaint says that issuer feedback led S&P to limit, adjust and delay updates to ratings criteria in order to preserve profits and market share. I described this in more detail here. The impact was dramatic. One internal S&P document says that “Competition among ratings agencies has helped drive down support levels in deals”, meaning that RMBS securities became more risky. ¶ 131.

S&P also invited input from issuers into its CDO ratings process. The discussion begins at ¶ 158. In response to one group of changes, Bear Stearns allegedly said Bear Stearns would quit using S&P. The changes were not implemented. Issuer input resulted in weakened ratings criteria and delays in implementation in this and other cases^.

Issuers were trying to get that garbage off their books. In 2006, it was becoming clear to S&P that RMBSs and CDOs were not performing as predicted by their ratings. Line-level personnel at S&P wanted to change a policy that permitted analysts to rate CDOs based in part on the initial ratings of RMBS tranches included in the CDO, even when S&P knew downgrades were likely. ¶ 207. S&P executives discussed the actions of issuers:

Issuers were shtting down and liquidating their warehouses i.e., stores of RMBS temporarily held by issuers as they assembled assets for future CDOs), in part to enable the issuers to avoid being required to mark their positions to market — and being stuck with collateral that had suffered losses.

¶ 233(b). What this means is that issuers were taking advantage of the lag time they actively created in adjusting ratings criteria to shovel more of their garbage off their books and onto actively misled investors.

Who were these issuers? The complaint doesn’t name any specific issuers, but it names a large number of securities. Here are some names:

Gemstone CDO VII: $1.1 billion, sold by Deutsche Bank, relationship of managers unclear; litigation pending; March 2007.

Sorin CDO VI: $550 million, Bear Stearns (now owned by JPMorgan), March 2007

Cairn Mezzanine ABS CDO III Limited: $1.78 billion, RBS Greenwich Capital Markets (the securities trading arm of Royal Bank of Scotland), March 2007.

Stack 2007-1: $1.5 billion, Citigroup, April 2007

Octonion I CDO: $1 billion, Citigroup, April 2007

Corona Borealis CDO Ltd.: $1.5 billion, underwritten by Lehman Brothers, other relationships unclear, April 2007.

Vertical Capital LLC, distributed by UBS: Vertical ABS-CDO 2007-1, $1.5 billion April 2007.

And these are just some of the issues rated or for which final ratings were issued. The complaint says S&P rated more than $135 billion in securities from March to June 2007, long after it was obvious that the housing market had collapsed.

The Department of Justice knows this, but it refuses to indict anyone. This complaint makes it clear that it wasn’t just an accident or a matter of greed, as the President and his henchmen claim. With the departure of Tim Geithner and Lanny Breuer, the most offensive proponents of the get out of jail free card, there is an opening for change.

We have this Progressive Caucus in the legislature. Why haven’t some of them taken on the task of learning about this stuff and asking out loud why there are no indictments? Once you know the Obama Administration is making crap up, it’s easy to get past their false explanations. This is one area of bipartisan agreement: every single American hates these cheats.
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* The complaint doesn’t say why, so it may or may not have been requested by issuers; but one change S&P made was to change to zero the correlation assumption “…between ‘a CDO of ABS asset” and ‘an RMBS asset in a CDO/ABS transaction.” Correlation in this sense refers to the statistical relation between the failure of two assets: if one fails, what is the probability that the other will. Readers may recall that one of the tools that made RMBSs seem plausible was the Gaussian Copula, which theoretically is a way to measuring the likelihood of correlation of defaults in a large group of mortgage loans. Intuitively, if the portfolio of loans is spread geographically and by other criteria of separation, there should be low likelihood that if a loan in Boston fails, so will a loan in Las Vegas. The model had a number of weaknesses.

There is a close relationship between two tranches of the same RMBS. If one fails, it raises the likelihood that another will fail. Calling it zero removes that relationship, and gives the CDO a higher rating than it should have.
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I watched the inauguration on CBS, and didn’t turn it off before I was exposed to the sophomoric punditry we get from both old and young on national TV. One of the talking heads informed us that the speech called for working together, which in mediaspeak means doing what Republicans want, and the rest of the comments reinforced that view. They had the text in advance, but they don’t get it; it didn’t fit their idiotic narrative. Now that we have it, let’s take a closer look.

I see three related themes. First, there is a reference to the Declaration of Independence, “life, liberty and the pursuit of happiness”. This theme starts with “Through blood drawn by lash and blood drawn by sword, we learned that no union founded on the principles of liberty and equality could survive half-slave and half-free. “ This is a reference to Lincoln’s Second Inaugural Address:

Fondly do we hope, fervently do we pray, that this mighty scourge of war may speedily pass away. Yet, if God wills that it continue until all the wealth piled by the bondsman’s two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said “the judgments of the Lord are true and righteous altogether.”

Obama makes this stick by talking about the struggles represented by “Seneca Falls, Selma, and Stonewall”. Those struggles are brought forward to today, and he adds to them fair treatment of all of our immigrants. This motif is reinforced by those participating in the ceremony, people from the communities who made up the winning coalition. Obama makes it clear that he knows who elected him and what they want, at least in the social sphere.

Lincoln’s Second Inaugural Address is best known for this:

With malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in, to bind up the nation’s wounds, to care for him who shall have borne the battle and for his widow and his orphan, to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations.

I think we can assume that Obama knows this, and intended to say that he recognizes that the minority who loathe these changes do not lose their personal dignity, but that they have to change. Peterr made this point last Saturday, and obviously Obama has read and understood Lincoln’s powerful speech.

The second theme is the statement that the election was a defeat for the Republicans who demand that the rich be given a special place in the nation, that they are entitled to run things.

The patriots of 1776 did not fight to replace the tyranny of a king with the privileges of a few or the rule of a mob.

He says that the privileged few are the biggest beneficiaries of the collective efforts of the nation.

No single person can train all the math and science teachers we’ll need to equip our children for the future, or build the roads and networks and research labs that will bring new jobs and businesses to our shores. Now, more than ever, we must do these things together, as one nation, and one people.

… For we, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it.

This is a beautiful restatement of Elizabeth Warren’s forceful statement that “nobody got rich on their own”.

The third theme is that the election was a massive defeat for every last one of the conservative principles espoused by loser Mitt Romney, and Obama knows it. First, he throws the Republican campaign themes back in their faces. First there is the Warren reference, which denies the premise of the Republican Convention. Then there is this:

The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.

This is a flat denial of the Republican makers and takers meme.

Second, there is no call for bipartisanship. Instead, there is as close to a demand for change in the losing party as we could hope for in a public speech:

Progress does not compel us to settle centuries-long debates about the role of government for all time – but it does require us to act in our time.

For now decisions are upon us, and we cannot afford delay. We cannot mistake absolutism for principle, or substitute spectacle for politics, or treat name-calling as reasoned debate. We must act, we must act knowing that our work will be imperfect.

Obama already has begun to act in this vein, as we saw on taxes. I want more. I hope he makes McConnell get that lemon-sucking look every single day as he realizes he failed in his mission to ruin this President. This speech is a hopeful first step on the road to change. Read the rest of this entry →

Mint the Coin has drawn a whole lot of fevered discussion, but Joe Wiesenthal (@theStalwart) has perhaps the best take: the project opens the door to a real discussion of money, its origins and its purposes. The idea of just minting a coin with a huge designated value does sound strange to those of us whose economics came out of Paul Samuelson’s textbook. Here’s a possible explanation* for the discomfort. And if you think it sounds strange, just think how it sounds to the Ron Pauls of the world.

In my economics class all those years ago, I was taught that money originated in barter societies. This view came from Adam Smith in Wealth of Nations. David Graeber* says that in Smith’s world, which sounds like an American Indian tribe, money arises from barter. One guy makes bows and arrows, another tents. Some use the bows and arrows to hunt down game. In Smith’s world, the bow guy trades for meat and tents, the tent guy trades for meat and bows and arrows, and hunters trade for tents and bows and arrows. Obviously not everyone needs a tent on the same schedule as bows and arrows, so they create money. It’s a great way to solve the complex problems created by barter.

Graeber points out that this bizarre society assumes that women aren’t taking part in any of these transactions, which is absurd, because most likely the clothes and probably the tents are made by the women. Smith might not have known it, but at the time he was writing,

… Lewis Henry Morgan’s descriptions of the Six Nations of the Iroquois, among others, were widely published — and they made clear that the main economic institution among the Iroquois nations were longhouses where most goods were stockpiled and then allocated by women’s councils, and no one ever traded arrowheads for slabs of meat. Economists simply ignored this information. Stanley Jevons, for example, who in 1871 wrote what has come to be considered the classic book on the origins of money, took his examples straight from Smith, with Indians swapping venison for elk and beaver hides, and made no use of actual descriptions of Indian life that made it clear that Smith had simply made this up.

Debt, p. 29, footnote omitted. Smith’s view is that people are driven by a truck and barter mentality.

What, he begins, is the basis of economic life, properly speaking? It is “a certain propensity in human nature . . . the propensity to truck, barter, and exchange one thing for another. ” Animals don’t do this. “Nobody,” Smith observes, “ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. ” But humans, if left to their own devices, will inevitably begin swapping and comparing things. This is just what humans do. Even logic and conversation are really just forms of trading, and as in all things, humans will always try to seek their own best advantage, to seek the greatest profit they can from the exchange.

Debt, p. 25. If you stop to think about it, this is laughably simple-minded view of humans. Graeber points out that people engage in all kinds of transactions outside of simple truck and barter, ranging from acquiring wives to temple contributions. In fact, no one has ever seen or reported on a society based on truck and barter, and no one has ever seen a society in which money arose to simplify barter.

Graeber explains the relevance of these points. He says Adam Smith had an agenda. He wanted to set up economics as a separate area of study, amenable to scientific inquiry and theorizing:

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I live in a high-rise on the north side of Chicago. My building is full of older people. When the elevator comes, I hold the door for the people with walkers, people wearing braces and casts from falls, and people who move too slowly to exit or enter. It’s safe to say that not one of them had anything at all to do with the Great Crash. They didn’t vote to cut taxes during a war. They didn’t vote to cut taxes on the rich. They didn’t vote to destroy the regulatory system that protected us from the financial sector. They didn’t push fraudulent loans on unsuspecting homebuyers. They didn’t create innovative securities to sell to unsophisticated investors. They didn’t shortchange pension plans to benefit executives and shareholders.

We know who did this. It was craven politicians whose votes opened the door to destruction of the economy. They did it to benefit a small number of very rich people, and their servants in the financial sector. Once the doors were open, the rich burst through and wrecked the economy.

The plutocrats and their servants in the financial sector have paid no price. They are richer than ever, and their control over the public discourse and national and state legislatures is stronger than ever. The politicians paid no price either. They got re-elected time after time, and continued on the path of rewarding failure, and refusing to help the people whose lives were destroyed. They created phony crisis after phony crisis, trying to find a way to protect the wealth of the arrogant plutocrats, and push the losses off onto the people in my building.

Now, in a lame duck session, following an election in which the people began to kick out the Blue Dogs and some of the worst of the Tea Party conservatives, a re-elected Obama has one more chance to accomplish this goal. He wants to cut Social Security benefits in an ugly and sneaky way. He wants to cut Medicare and health programs that disproportionately benefit poor and sick. He wants to cut food stamps at a time when food insecurity is greater than ever. In exchange, he gets some magic beans from the Republicans that will magically improve the economy. Dday explains the miserable deal in more detail here.

Obama won’t be able to do this next year. Speaker Boehner can’t deliver the votes he needs in the House, so a bunch of defeated Blue Dogs are necessary to get to a majority in this lame duck session. In the next session of Congress, there may not be enough craven Democrats to allow the President to act out his inner Ronald Reagan/Bill Clinton, and end Social Security as we know it. None of these evil ideas would be enacted if Congress had to vote on them one at a time.

Can you imagine the outrage if people realized just what will happen to them? Young people would have to face the prospect of helping their parents when their own income is stagnant to falling. Old people will be faced with unpalatable choices of catfood. All of us will be looking at an uglier society. Maybe Obama can deliver one of his patented emotional outpourings over the death of the Great Society, and the misery of the innocent.

Nobody has explained why the innocent should suffer because of the unpunished crimes of others. Bankers and others in the financial sector aren’t investigated or prosecuted. Ousted legislators come back to haunt us as lobbyists for their true owners.

Maybe someone could ask our leaders this question instead of chasing details about the theater of negotiations.

Image by DonkeyHotey released under a Creative Commons license.

The American Banker led a panel discussion of some of its members, allowing them to demonstrate once again their ignorance of their own situation. US Bankcorp CEO Richard Davis says that the big problem facing Geithner’s successor is “helping the industry handle international regulations”, lest they “overwhelm U.S. banks, or make them scale back their operations.” He isn’t saying what “operations” will have to be scaled back, probably because he doesn’t want to admit that 99.9% of us would be happy to see them scale back their money laundering, their overpriced derivatives, their fraudulent foreclosures and their participation in proprietary trading. But that is clearly the part of the business he intends to keep doing.

Davis also reiterated the frequent industry warning that regulation will make it too costly for banks to do business with many customers.

“Banking services will become less and less available to more and more people. And we’re not threatening, we’re not being mean, we’re not trying to make a point. But now you have credit risk and all those other risks” to worry about, he said. “That next scream you’ll hear from Congress a couple of years forward will be wondering where the banks are.”

So, those terrible international regulations will restrict lending to small business. Amazing how regulations directed at money-laundering, overpriced derivatives, thuggish proprietary trading and fraudulent foreclosures will result in reduced lending, the only thing most of us think is the business of banks. And of course all banks face the same rules, so Davis shouldn’t worry that US banks will lose out in international competition.

More whimpering:

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It’s that time of election season when the mere thought of politics turns the stomach, and few of us can stand any more of the yammering that we call campaigns, so we turn to navel gazing. You probably saw Conor Friersdorf on “How shall I use my precious vote”, and the pontificating that followed. I think that blows out my earlier entry in that category, here. Matt Taibbi looks like a lock in the incompetent Democrats category and the role of the media in these stupid campaigns category. So, I going to enter the What Does It All Mean category.

The only reason to vote is that from the outset we agreed that consent of the governed is the essence of democracy. It was a long time ago indeed, before the Republicans made the filibuster an instrument of minority rule. The Democrats decided that they could safely be move right, just like the Republicans only less crazy, and began voting for just about anything their rich patrons wanted, from deregulation of the financial system to tax cuts for those who don’t need them to ending welfare as we know it.

Now we have the leader of the Democrats, Barack Obama, running on a platform just like the moderate version of Mitt Romney. For example, Obama says if elected, he’ll only tinker with Social Security, just like the moderate Mitt, instead of slashing it like the Tea Party Mitt. Tea Party Mitt wants to invade Syria and Iran. Moderate Mitt, like Obama, is apparently content to kill people with drones.

Moderate Mitt assumes that the Tea Party fanatics will vote for him even if he isn’t crazy enough for them, because he and his party have spent the last five years ferociously lying about Obama. So he panders to the low information voters and tribal Republicans with his version of Compassionate Conservatism. Maybe he’ll win with that combination. Are they really consenting to be governed by the insane economic policies both versions of Mitt Romney promise? Or are they just afraid of Obama?

Possibly enough low-information voters and moderate Republicans will vote for Obama because they are worried about the Tea Party Mitt, or they think Romney is a liar and an unprincipled selfish prig and that he despises them from the bottom of his plutocratic heart. Maybe that’s enough to get Obama re-elected. What kind of government are those people consenting to? For them, Obama’s the lesser of two evils. Maybe they’ll be happy to see his proposals defeated by divided government suffering from minority rule so that nothing gets done. Maybe they don’t know what else to do. That doesn’t sound like consent.

And what about the tribal democrats who are going to vote for Obama? There is no constituency in the Democratic party to cut Social Security. The vast majority of traditional Democrats realize that Social Security is the basis for their retirement and that of their parents. They want to preserve it for their children. Certainly no liberal is in favor of cutting Social Security or Medicare, and precious few are in favor of killing people with drones or locking up pot smokers or turning police departments into paramilitary operations, but tribal Democrats don’t seem interested in that kind of issue, let alone punishing Wall Street criminals. Obama just needs to top off with some of those low-information voters. He figures he’ll get their votes, and maybe he will.

In 2008, the left was energized. We saw ourselves as the base of the Democratic Party, and nearly every one of us gave money, and spent hours trying to convince anyone we met to vote for Obama, and generally succeeding. It didn’t take long before we realized that Obama accepted the principle that this is a center-right nation, and planned to govern from the center-right. Obama told the left to drop dead, and he continues to do so. He didn’t lift a finger to push any of our issues, especially my barebones demand that he enforce the criminal laws governing the financial sector. That left whatever is left of the left with no where to go. In 2010, there was no energy on the left, and the crazy right won back the House.

Obama assumes lefties will vote for him because he isn’t a soulless plutocrat who thinks half of the population is out to get his money. That’s the Democratic Party’s version of the crazies saying that Obama is an Islamo-Communist from Kenya. Obama doesn’t care how close the election is, and he doesn’t care if he has majorities in Congress. He just wants to squeak through. If we vote for him, what are we consenting to? He’ll see it as approval of his program of governing from the center-right.

This isn’t about consent at all. It sucks. It’s hard to work up the energy to curse, let alone to go to the trouble of voting.

The transcript of the Romney talk at the Mark Leder fundraiser is up. It turns out that Mitt opened the floor for political advice from the assembled rich folk, and it would be hard to find a sillier group, at least until the next fund-raiser.

First up we get a dose of Rush Limbaugh on Elizabeth Warren and the Cherokee thing, which Mitt loves, because it backs up his tasteless joke that it would be helpful if he were a Latino. The next guy tells Romney how to handle the debate: say that a vote for Obama is a vote to bankrupt the United States. This guy doesn’t realize that the Ryan plan doesn’t balance the budget until the 2030s, if ever. I bet President Obama knows that.

Romney replies that he talked to this guy John Whitehead (that joke writes itself), who used to work for Goldman Sachs and was President of the New York Fed. Whitehead says that the Fed is buying up all the US Treasury debt, and when it quits buying, interest rates will go through the ceiling. Paul Krugman shows us charts. See how easy it is to show what a bunch of silly people we have running the country?

OMG, says the next guy, we are headed for fiscal disaster. Why don’t people get it? Romney thinks we are like Greece, and only a few elites get it. Maybe he can explain it to some of the people in the 53% who might vote for him. And those pesky Democrats distract people with social issues to draw in the young people. Completely unlike the Republicans, who wouldn’t think of exploiting social issues to draw in their single-issue voters. And as to Greece, what with all their rich people not paying taxes, I do see the comparison.

We then move into foreign policy.

I saw Dr. Kissinger; I said to him, “How are we perceived around the world?” And he said, “One word: VEAK!” [Audience laughs.]

Wicked Kissinger impression there, Mitt. And it’s great that you take foreign policy lessons from murderous thugs.

Eventually we get back to the political geniuses in the room. People have terrible misconceptions about you, Mitt, and when I talk to people they just don’t seem to like you until I browbeat them. What can we do? Mitt urges him to: “raise millions of dollars” for me so I can do ads. That will make people like me enough to vote for me.

Yeah, says the next political genius:

Why don’t you stick up for yourself? To me, you should be so proud of your wealth. That’s what we all aspire to be—we kill ourselves, we don’t work a nine to five. We’re away from our families five days a week. I’m away from my four girls five days a week and my wife. Why not stick up for yourself and say, “Why is it bad to be, to aspire to be wealthy and successful? You know, why is it bad to kill yourself?

All this guy wants is for Mitt to tell him it’s all right that he sucks as a husband and a father because he makes a lot of money. The rebooted Mittbot 3.? empathy subroutine misfires again, so only drivel comes out.

Here’s where the 47% comment comes in:

For the last three years, all everybody’s been told is, “Don’t worry, we’ll take care of you.” How are you going to do it, in two months before the elections, to convince everybody you’ve got to take care of yourself?

So some guy in the audience was watching Fox News and fed Mitt the line that made him a laughingstock again. Great friends just do that kind of thing for you, don’t they?

And next up, we have a guy who is totally unaware of today’s Republican Party:

Fifty-four percent of American voters think China’s economy is bigger than the US. When I first met you four or five years ago, you did a diagram where you went very granular and you said, “Look, guys”—this was a small group—and you said, “this is it, this is what it is, tell it like it is.” How are you going to win if 54 percent of the voters think China’s economy is bigger than ours?

Really, that’s what’s bugging you? Not the fact that 30% of Republicans believe that the President is a Muslim? Not the fact that 65% of Americans believe that Obama would handle an alien invasion better than Mitt? So here’s this guy’s solution:

I want to see you take the gloves off and talk to people that actually read the paper and read the book and care about knowing the facts and acknowledges power. As opposed to people who are swayed by, you know, what sounds good at the moment. If you turned it into like, “Eat what you kill,” it’d be a landslide. In my humble opinion.

It was the w[h]ine talking. Moving on.

The next guy, who claims to be “the oldest Republican in [unintelligible]”, says that the Obama administration isn’t doing anything about crony capitalism. In [unintelligible] where this guy comes from, Romney is going to make the SEC and the CFTC enforce the laws against Wall Street criminals. If that were so, I might actually like [unintelligible]. Romney just wishes that the SEC and the CFTC weren’t unionized so he could fix things.

And we close with this great idea: let’s get Ann “you people” Romney to dance a horse onto a bunch of TV shows and say nice things about Mitt.

I guess when you want money badly enough, you’ll put up with a whole lot of silly people.

I’m just sure Elizabeth Warren had Jamie Dimon in mind when she said this to the Democratic Convention:

Wall Street CEOs—the same ones who wrecked our economy and destroyed millions of jobs—still strut around Congress, no shame, demanding favors, and acting like we should thank them.

Could there be a more obvious strutter than Jamie Dimon? Just look at this picture of the guy, and imagine his voice as he gently instructs his inferiors on the Senate Banking Committee in the ways of the world. Ben Protess and Michael J. de la Merced should be ashamed of their headline: “Proud” JPMorgan Chief Apologizes. That wasn’t an apology. The point of Dimon’s testimony was that the London Whale Trades were just exactly what banks are supposed to do, except for the losing billions of dollars part. But CEO Worship is part of the deal at the New York Times.

Dimon shamelessly demands favors.

“There are huge benefits to size,” Mr. Dimon said. He noted that JPMorgan’s size allowed it to be “a port in the storm” during the market turmoil of 2008. “Big banks have a function in society.”

The United States, he added, has the “best, widest, deepest and most transparent capital markets in the world.” Cautioning against needless reform, Mr. Dimon said, “Let’s make sure we keep that before we do a bunch of stupid stuff that destroys that.

There are benefits to size? Share with the class, Jamie, what are they? More money for CEOs? More room for inflated egos? More flunkies kowtowing to you? It certainly doesn’t have anything to do with lending money into the American economy. Loans as a percentage of JPMorgan’s total assets fell from 32.7% in 2010 to 31.9% in 2011. 2011 10-K, p. 179. Consumer loans in all categories fell. Commercial loans increased from an inconsequential 2.4% of total assets in 2010 to an inconsequential 2.9% of total assets in 2011. See page 318.

Dimon tells Congress and regulators not to do stupid stuff that will interfere with his glorious business. I’m a lot more worried about the stupid stuff Dimon and his flaccid management team do. Under Dimon’s leadership, JPMorgan lost billions of dollars in its claimed area of expertise, derivatives trading. JPMorgan has been involved in every area of fraud and abuse revealed by investigations since the Great Crash, including bribery in Jefferson County swaps deals, manipulation of LIBOR, foreclosure fraud and fraud in the sale of RMBSs, MF Global, the collapse of Lehman Brothers, illegally foreclosing on members of the armed forces, money laundering, Bernie Madoff’s Ponzi Scheme … it’s a complete list of the major frauds in banking sector, and who knows how many more examples are hidden away in their files?

Even members of the financial elites like Sanford Weill, who assembled Citigroup, and Sally Krawcheck, who headed up Merrill Lynch, see that these companies cannot be adequately regulated. Weill wants to break up the giant banks, and Krawcheck wants drastic increases in capital reserves for the riskier banks. Personally, I favor long prison sentences.

But Jamie Dimon is in charge, strutting and preening and telling any reporter in earshot that Congress should really worry about doing something stupid in regulating his operation. The business press regurgitates that arrogance and smothers the stench of corruption with incense of praise waved at savvy bankers.

Banks and their allies share with Geithner’s Treasury Department a deep and abiding contempt for the ability of the American people to comprehend the financial system. The business press thinks that finance is like the Large Hadron Collider, intricately pieced together and operating on theories too complicated for the average human. It’s a lie. Banks make money by cheating people, not by lending them money. And no one goes to jail.

The Tax Justice Network says that the richest people around the world have hidden between $21 and $30 trillion in tax havens, safe from the demands of their fellow citizens that they participate in funding the operations of governments by paying taxes. What do the rich do with that money? We know they play speculative games with the money, trying to profit from other rich people or pension plans, and money people are trying to save for retirement or for college expenses for their kids. But the main thing they do with money is lend it out. One of their favorite borrowers is the US government. It won’t default, and that interest check shows up when it’s due.

That’s our deal with the rich: they don’t have to pay taxes to fund the government, we just borrow from them, and pay them interest forever.

The figures for government debt growth are astounding. Thirty years ago, the world embarked on a massive tax-cutting program, led by the US. In that time, according to the Bank for International Settlements, governmental debt in 16 OECD economies (deflated by consumer prices) quadrupled. We are all paying interest on that to the people who own those sovereign obligations. If governments had raised that money by taxation, we wouldn’t be paying for the privilege of operating a government. Other non-financial sector debt has grown at similar rates.

As a side note, when trying to explain why this massive increase in debt loads, the Bank for International Settlements didn’t mention the massive tax-cutting regime in the developed nations.

The implications of this tax and borrow deal are infuriating. For one thing, billionaires like Peter Peterson can scold the government about its massive debt, while sucking out guaranteed interest payments, directly, and indirectly through their foundations and corporations. They can use their fellow travelers, like Bloomberg columnist Caroline Baum to persuade the gullible that we don’t have any money to fund Social Security and Medicare, because we have to pay the interest on that debt, and we can’t raise taxes because that would be useless, and reflective of an unattractive urge to hurt the rich for no good reason.

Since the Great Crash of 2008 we’ve been trying to muddle through and get back to some golden age of normal, like the 2000s, so the financial sector can continue its pillage. That isn’t going to work, and the ever alert Zero Hedge is, as usual, ahead of the curve. Last September, they posted a discussion of a study by Boston Consulting Group on the enormous fiscal problems facing the world. BCG isn’t impressed with the kick the can down the road approach that politicians in every nation have adopted. They think we need to restructure debt; hence the title of their paper, Back to Mesopotamia, a reference to a Debt Jubilee idea of that ancient ancestral society. An easy way to finance that restructuring is to tax existing assets. I didn’t realize polite people would say things like this in public:

Many politicians would see taxing financial assets as the fairest way of resolving the problem. Taxing existing financial assets would acknowledge one fact: these investments are not as valuable as their owners think, as the debtors (governments, households, and corporations will be unable to meet their commitments.”

This tax isn’t some piddling thing, either. The US would need a one-time tax of 25% of wealth. The Boston Consulting Group admits the evident unfairness of this in the context of recommendations for solving the housing crisis in the US:

Such a course of action would pose a significant issue of moral hazard, benefiting those who were reckless and imposing a share of the burden on those who were careful [or lucky]. But the government could conclude that the total economic and social costs of a prolonged period of low growth and deleveraging are so huge that unconventional measures are justified. After all, inflation would have even worse side effects.

(Me in brackets). As they say, we can’t keep on with this pretend solution regime forever. Maybe we’ll inflate away the savings of millions of Americans until we have social disruption, or maybe we’ll try austerity until we have social disruption. The debt won’t get paid. The only realistic way out is to inflict that loss on the people who can bear it best, the richest among us. Thus spake Boston Consulting Group.