Dollars & Sense blog

Charles Tilly, 1929-2008

noreply@blogger.com (Dollars & Sense) — Fri, 09 May 2008 16:14:00 +0000

Professor Charles Tilly, a renowned social scientist, innovative theorist, and prolific author, passed away on April 29.

In addition to the NY Times obituary, and a statement from the president of Columbia University, here's a very perceptive personal remembrance from a former student and colleague -- just one of many people who remember him fondly.

Dollars & Sense extends our sympathies to his family, including his son Chris, who is a longtime member of the D&S family.

If You Liked Bear Stearns, You'll Love Fannie Mae/Freddie Mac

noreply@blogger.com (Dollars & Sense) — Wed, 07 May 2008 01:06:00 +0000

The New York Times reported today that the two mega government-sponsored mortgage lenders, who have single-handedly kept the US mortgage market from sinking through the quicksand altogether since private mortgage finance dried up in the wake of the subprime crisis (they account for no less than 80% of mortgages bought by investors in the first quarter of 2008), may themselves require enormous taxpayer-financed bailouts if properties they hold continue to decline in value. Fannie and Freddie, who use their unspoken government guarantee to clinch cheap financing (which they do, to a degree, pass on to consumers), buy mortgages from banks and keep some of them on their books, while securitizing and selling the rest off (retaining the liability for repayment if consumers default). For example, Fannie Mae sits on an enormous pile of debt and outstanding loans (nearly $3 trillion), while investments, retained earnings and equity (or "core capital") chalks up at only about %800 billion, while Freddie has about $2 trillion in liabilities and $750 billion in assets. If these some of these loans follow the prevailing trend and continue dropping in value, it is clear that Fannie and Freddie could find themselves facing a serious shortage of capital, especially since they've been doing all in their power to avoid ramping up capital, in order to concentrate on paying off shareholders. Shareholders, remember, were put off by a series of scandals at the agencies, and Fannie and Freddie have been using Congress' desperation to keep the mortgage markets open to extract better terms from Congress (for one thing, Congress increased the cap on mortgages they can buy to $730,000 from $417,000); and now, Fannie and Freddie want Congress to repeal the very
laws Congress made in the wake of the scandals.

On top of this, it appears as if the agencies aren't accounting for their losses in conventional ways (i.e. "unrealized" losses don't affect earnings), and that, even worse, according to The Times, that they are betting that the housing market will rebound by 2010. If the crunch lasts longer, say analysts who spoke with the paper, "unexpected" losses could overwhelm reserves.

Well, Fannie reported its third straight quarterly loss today, and Freddie reports next week. Meanwhile, the headlines are full of sentiments like "Is the Housing Tsunami Receding?"

Join the Call To Promote Open Economic Debate at Notre Dame

noreply@blogger.com (Dollars & Sense) — Mon, 05 May 2008 16:38:00 +0000

A group of students at Notre Dame are campaigning to broaden the ideological scope of the economics department there. According to their open letter

At Notre Dame, economics is divided into two separate departments: “The Department of Economics and Econometrics, which is a neoclassical economics department committed to rigorous theoretical and quantitative analysis in teaching and research,” and The Department of Economics and Policy studies, which is committed to “issues relating to socioeconomic justice and ethics,” “openness to alternative methodological approaches,” and the “roles of history and institutions” in the “broader political economy.” It is our fear that, in pursuit of higher department rankings, Notre Dame will sacrifice the latter department in favor of the former.

In other words, we oppose a situation in which neoclassical economic theory is taught to the exclusion of other theories. This tendency is already apparent in the one-sidedness of economics majors at our University. The required courses – introductory/intermediate microeconomics and macroeconomics, statistics, and econometrics – are all typically taught using only mainstream theory. It is alarming that a student could easily graduate from Notre Dame with a degree in Economics, having never questioned the basic assumptions of or been presented with plausible alternatives to neoclassical economics.

You can read the full letter and sign the petition here.

Dollars & Sense covered a similar struggle by undergrads at Harvard a few years ago. Look here for a list of progressive economics teaching resources. And please check out all of D&S's fantastic economics textbooks and readers.

Dockworkers of the World Unite!

noreply@blogger.com (Dollars & Sense) — Thu, 01 May 2008 22:43:00 +0000

In a potent reminder of what organized labor can do, thousands of dockworkers along all 29 West Coast ports took the day off in a coordinated action to protest the U.S. war in Iraq.

“We are supporting the troops and telling politicians in Washington that it’s time to end the war in Iraq,” said union President Bob McEllrath.

See the full story here.

CEOs of America Unite!

noreply@blogger.com (Dollars & Sense) — Thu, 01 May 2008 17:17:00 +0000

Kiwitobes has put together an interesting visual representation of overlapping membership on corporate boards among the largest U.S. corporations. This helps provide one explanation for the astronomical sums paid to CEOs and their lackeys (we get to talk like this on May Day). But as economist Arthur MacEwan explained in our magazine a few years back, the gap in pay between those who own the corporations and those who do the work is much greater in the United States than it is in many other countries that similarly have interlocking corporate boards. The rest of the answer, he concludes, has to do with the relative lack of power of U.S. workers.

Over many decades, U.S. companies have created a highly unequal corporate structure that relies heavily on management control while limiting workers' authority. Large numbers of bureaucrats work to maintain the U.S. system. While in the United States about 13% of nonfarm employees are managers and administrators, that figure is about 4% in Japan and Germany. So U.S. companies rely on lots of well-paid managers to keep poorly paid workers in line, and the huge salaries of the top executives are simply the tip of an iceberg.

This highly unequal corporate system is buttressed by an unequal political and social structure. Without a powerful union movement, for example, there is little pressure on Washington to adopt a tax code that limits corporate-generated inequality. Several other high-income countries have a wealth tax, but not the United States. In addition, U.S. laws governing the operation of unions and their role in corporate decision making are relatively weak (and often poorly enforced). Without powerful workers' organizations, direct challenges to high CEO pay levels are very limited (as is the power to raise workers' wages). So income distribution in the United States is among the most unequal within the industrialized world, and high executive salaries and low wages can be seen as two sides of the same coin.

Read the full article here.

Global Food Fights

noreply@blogger.com (Dollars & Sense) — Mon, 28 Apr 2008 21:12:00 +0000

A great commentary on the crisis in global food security from the Americas Program.

"For the first time since widespread famines devastated whole populations, serious doubts about global food supply have gripped societies throughout the world.

The problem this time is not so much the quantity of food produced (if it ever was), but what productive land will be used for, who will feed us, and who will eat."

Read the rest here.

The Opportunity Costs of War

noreply@blogger.com (Dollars & Sense) — Fri, 18 Apr 2008 17:15:00 +0000

Rep. Dave Obey (D-WI), the chair of the Appropriations Committee, has put out a nice list of what economists refer to as opportunity costs of the United States war in Iraq.

WAR COSTS: OPPORTUNITIES LOST

WASHINGTON - The war in Iraq is costing our country $339 million every day.
Every day we spend in Iraq means missed opportunities to invest in important priorities here at home.

For $339 million:

2.6 million Americans without adequate health insurance could have access to medical and dental care at community health centers.
955,000 families could get help with their energy bills through the Low-Income Home Energy Assistance Program.
Nearly 480,000 women, infants and children could receive nutritional help with the WIC program.
48,000 homeless veterans could be provided with a place to live.
130,000 low-income families could conserve energy and reduce their energy bills with help weatherizing their homes.
Over 100 communities could make improvements to their drinking water and waste water systems with help from the Clean Water State Revolving Fund
937 grants for research into diseases like Alzheimer’s, cancer, and diabetes could be provided by the National Institutes of Health.
4,400 more “COPS on the beat” could be hired and kept on the beat for the next three years.
2,060 more Border Patrol Agents could be hired to protect our borders.
18,000 more students could receive Pell Grants to help them attend college.
317,000 kids could receive every recommended vaccination.

The original post (a pdf) can be found here.

For D&S coverage of these issues, see this analysis of the true cost of the war, Arthur MacEwan's discussion of the role of oil at the start of the war, and Monique Morrissey's comparison of military and non-military spending as a share of GDP.

How would you spend the estimated $3 trillion that the United States will spend on the war? Fill up your shopping cart at 3trillion.org.

Born on Third Base?

noreply@blogger.com (Dollars & Sense) — Fri, 18 Apr 2008 17:10:00 +0000

Peter Wagner of the Prison Policy Initiative sent us this link to a recent article in Slate magazine. The article cites the curious phenomenon that professional baseball players are much more likely to be born in August than July. The author theorizes that August babies aren't naturally better at baseball -- they're just older than their peers, because Aug. 1 is the normal cut-off date for youth baseball leagues.

The author concludes that this structural benefit for the August-born is a "small advantage can have an impact that lasts a lifetime."

We'd like to see more sports commentary -- or any commentary -- that looks at the lifelong impacts of big advantages, like economic security, well-funded schools, racial justice, or gender equality.

UMass Research on the Changing Retail Workforce

noreply@blogger.com (Dollars & Sense) — Fri, 18 Apr 2008 16:45:00 +0000

Researchers at the University of Massachusetts, including Dollars & Sense associate Chris Tilly, have completed a national study, "The Changing World of Work in US Retail Trade." The researchers conducted 18 case studies of employees in food and consumer electronics retail businesses, focusing on recent transformations in the retail sector and their consequences for the low-wage workforce.

You can read more about the research at the Center for Industrial Competitiveness at UMass Lowell.

If you're in the Boston area, the authors of the study will be discussing their research on April 30 at UMass Boston. Details below:

Center for Industrial Competitiveness -UMass Lowell
Center for Social Policy - UMass Boston

A panel discussion of findings from a national study
Wednesday April 30, 2008
8:30 a.m. to 10:30 a.m.
University of Massachusetts Boston
Campus Center - 3rd Floor - Ballroom C

As a sector, retail trade exemplifies the central dilemma of low wage work in modern economies. Giant retailer Wal-Mart is the largest US employer, and overall, retail is one of the largest employment sectors in the country. What happens to jobs in this industry, which is a major provider of entry-level jobs, is a key element of the broader picture of low wage employment nationwide.

Retail work is undergoing significant change in the United States. To explore these changes, and their impacts in terms of turnover, skill levels, and other key workforce variables, the authors conducted 18 case studies of food and consumer electronics retail businesses. They spoke to employees from top corporate executives to frontline employees, visited stores, and reviewed HR statistics.

The two study authors will present selected findings:

Françoise Carré, Ph.D. Center for Social Policy, McCormack Graduate School, University of Massachusetts Boston
and

Chris Tilly, Ph.D. Department of Regional Economic and Social Development, University of Massachusetts Lowell.

Discussants of the study findings will include: Prof. David Weil¸ School of Management, Boston University; and Joel Boone, Vice President for Labor Relations, Stop and Shop Supermarkets.

Event sponsored by the Center for Social Policy, J. W. McCormack Graduate School at UMass-Boston; and the Center for Industrial Competitiveness and Department of Regional Economic and Social Development at UMass-Lowell.

For more information, contact:
UMass Lowell: Center for Industrial Competitiveness / 978 934-2796 /
UMass Boston: Center for Social Policy / 617 287-5550 /

Tax Day Thoughts on Social Security

noreply@blogger.com (Dollars & Sense) — Tue, 15 Apr 2008 17:21:00 +0000

On Tax Day, we recommend to you a recently-posted article from our March/April issue, Go Ahead and Lift the Cap, in which economist and D&S collective member John Miller responds to a Clinton campaign flyer claim about Obama's proposal to raise the cap on income subject to Social Security taxes. To her credit, Hillary Clinton has publicly questioned the very idea of a "Social Security crisis" (as we have repeatedly in the pages of D&S, e.g. here and here). But her criticism of Obama's proposed reform is off target.

We also recommend this item, from Craig Jennings of OMB Watch:

Social Security: Its Long-Term Outlook Is Still Just Peachy

In fact, it's getting better. The Social Security Trustees Report for 2008 was released by the Social Security Administration today (it's quite the page-turner). Here are the key facts:

* Social Security's "insolvency" date remains the same as last year - 2041. This is the year in which the program's payments will exceed its income.
* The year in which program's payments will exceed tax revenues remains unchanged - 2017. This is the year that the trust fund will first be used to make payments to beneficiaries
* The actuarial deficit over a 75-year horizon is 1.70 percent of taxable payroll - a 0.26 percentage point reduction from last year. This number represents the combination of increased revenues and decreased benefits as expressed by percent of taxable payroll that is required to avoid insolvency

Also included in the report is the cost of the program over the next 75 years. And as much as certain pundits (I'm looking at you Bob Samuelson!) would like you to believe that Social Security is a large bit of the long term fiscal challenge, the report underscores how small a portion of the Entitlement CrisisTM Social Security is.

Expressed in relation to the projected gross domestic product (GDP), OASDI cost is estimated to rise from the current level of 4.3 percent of GDP, to 6.0 percent in 2030, and then to decline to 5.8 percent in 2082.

At its peak in 2030, Social Security will cost 1.7 percent of GDP more than it does today - keep in mind, too, that in 2030, Social Security is still solvent. That's not pocket change, but it's not the soul-crushing, economy-killing, puppy-eating monster that Entitlement CrisisTM Henny Pennys make it out to be. To put into perspective, if President Bush's FY 2008 war supplemental request is fulfilled, that $196 billion would represent about 1.4 percent of current GDP. And while the war is an expensive project, it's hardly bringing the economy to a halt.

The real challenge in the long-term fiscal challenge is still health care costs. Data from GAO's Long Term Fiscal Outlook indicate that Social Security's modest cost increase (4.2 percent of GDP today to 5.3 percent in 2082) is a pittance compared to the growth in Medicare and Medicaid expenditures, which increase from 3.9 percent of GDP today to 13.9 percent in 2082.

Conference-Goers Push for Labor Solidarity, Rebound From Disruption

noreply@blogger.com (Dollars & Sense) — Tue, 15 Apr 2008 15:16:00 +0000

This from the staff of Labor Notes: a report on their annual conference, which was held this past weekend in Dearborn, Mich. D&S co-editor Amy Gluckman was in attendance.

More than 1,000 union activists and supporters met at the Labor Notes conference April 11-13 to strategize and debate how to rebuild the labor movement's power.

Media attention has been given to the attempted disruption of the conference by several hundred staffers and members of the Service Employees International Union (SEIU)—some of whom became violent when conference participants refused to allow the chanting protesters to enter the hotel’s banquet hall (See full story).

The fact is, however, that the business of the conference went on as planned. With the exception of a handful of earlier workshops in which speakers were shouted down by SEIU staffers, participants gathered in 110 meetings with members of their own unions and across unions, learned nuts-and-bolts tactics, debated grand strategies, networked, agreed, disagreed, and inspired each other.

A few highlights:

* About 250 participants swelled the American Axle workers’ picket line in Detroit during the Saturday lunch break. A half-dozen amazed American Axle workers, who have been on strike for seven weeks, later came to the conference to be presented with Labor Notes’ “Troublemaker” award.
* Rail workers from seven different unions founded Railroad Workers United, a cross-union solidarity caucus aiming to counter the frequent feuding and disunity among rail unions.
* Participants came from 21 countries, including Vietnam, Sri Lanka, Mexico, Brazil, and China.
* Telecom workers held a special half-day meeting to strategize over upcoming contract expirations and restructuring changes in the their industry.
* A linked set of workshops on Chinese labor issues drew new participants who debated how to relate to the world’s largest workforce.
* Another set of meetings on Black workers’ issues drew African American labor activists into a unique cross-union dialogue.
* A reception for the Freightliner Five—union officers fired last year in Cleveland, North Carolina, for leading a one-day strike—drew both fellow UAW members and those concerned about organizing in the South.
* A workshop titled “Neutrality Agreements and Organizing Deals: Salvation or Sell-Out?” drew more than a hundred to debate both principles and practical results.
* The percentage of the conference made up of young people was much larger than in recent years. In the Bay Area and Portland, local support committees organized ahead of time to enable big crews of hotel workers and building trades apprentices to attend.
* "Troublemaker" awards were given to John Sferazo, an Ironworker and 9/11 responder who fought for compensation for workers disabled by their work at Ground Zero; the United Workers, a scrappy group that won a living wage for the day laborers who clean Camden Yards in Baltimore; the Taxi Workers Alliance, which organizes New York City’s immigrant cabbie workforce; and American Axle strikers.

The conference was dedicated to Santiago Rafael Cruz, an organizer for the Farm Labor Organizing Committee in Mexico, who was murdered by employer-paid thugs.

Perhaps surprising, given the weakened state of the labor movement, is the fact that this was the largest Labor Notes conference since 1997, with more than 1,000 registrants. Although discussions were sober, participants still found inspiration in encountering so many others who were, as one session was titled, "troublemaking for the long haul."

Finance, Imperialism, and the Hegemony of the Dollar

noreply@blogger.com (Dollars & Sense) — Mon, 07 Apr 2008 19:07:00 +0000

Economist and D&S collective member Ramaa Vasudevan has an article in the current (April) issue of Monthly Review. It appears to be available only in the print edition; here is the abstract:

Finance, Imperialism, and the Hegemony of the Dollar
Ramaa Vasudevan

The July–August 2007 crisis in subprime mortgage markets precipitated the collapse of the market for asset-backed securities, forcing huge write-downs of more than $45 billion on the balance sheets of major banks. In the aftershock, interbank lending dried up. Bond insurers and money market funds were beset by a loss of confidence as the credit squeeze spread. The plunge in stock markets in January 2008 suggests that the repercussions of the collapse of the subprime mortgage market are still working their way through financial markets. With over 170,000 jobs lost and the expected spate of foreclosures, many observers believe that the credit crunch has pushed the economy towards a recession.

The article explores the U.S. dollar's "role in the mechanisms of U.S. imperialist hegemony," and the growth of financialization ("the growing political and economic power of finance along with the explosion of financial trading that facilitates a pattern of accumulation where profit-making is engineered increasingly through financial channels." (MR editor John Bellamy Foster has an article on financialization in the current issue; that one is posted to the MR site.)

Microfinance’s Success Sets Off a Debate in Mexico

noreply@blogger.com (Dollars & Sense) — Mon, 07 Apr 2008 16:16:00 +0000

From Saturday's New York Times:

Microfinance’s Success Sets Off a Debate in Mexico

By ELISABETH MALKIN
Published: April 5, 2008

VILLA DE VÁZQUEZ, Mexico — Carlos Danel and Carlos Labarthe turned a nonprofit that lent money to Mexico’s poor into one of the country’s most profitable banks.

But not all of their colleagues in the world of microlending — so named for the tiny loans it grants — are heaping praise on the co-executives of Compartamos. Some are vilifying them as “pawnbrokers” and “money lenders.”

They are the center of a fractious debate: how far should microfinance go toward becoming big business? Read more.

For a critique of microcredit, see Microcredit and Women's Poverty, by economists Susan Feiner and Drucilla Barker. The article was included in a volume edited by Farooque Chowdhury, Microcredit: Myth Manufactured (with a preface by Doug Henwood of the Left Business Observer).

March unemployment numbers

noreply@blogger.com (Dollars & Sense) — Mon, 07 Apr 2008 15:21:00 +0000

The Bureau of Labor Statistics released its March unemployment numbers on Friday, and the news is grim:

The unemployment rate rose from 4.8 to 5.1 percent in March, and nonfarm payroll employment continued to trend down (-80,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Over the past 3 months, payroll employment has declined by 232,000. In March, employment continued to fall in construction, manufacturing, and employment services, while health care, food services, and mining added jobs. Average hourly earnings rose by 5 cents, or 0.3 percent, over the month.

The full BLS summary is here.

A feature article in the current issue of D&S, A New WPA?, describes "employer of last resort" full-employment schemes—a big-picture policy proposal that the left can get behind. There are nifty WPA-era graphics, too.

A New Deal for the 21st Century

noreply@blogger.com (Dollars & Sense) — Fri, 04 Apr 2008 20:38:00 +0000

An upcoming conference, related to Ryan Dodd's feature article in the current issue of D&S, A New WPA?, which addresses "employer of last resort" policies for full employment.

A New Deal for the 21st Century

As income and wealth inequality approach levels not seen since the dawn of the Great Depression, we invite you to participate in a one-day conference on April 9: A New Deal for the 21st Century.

Our partners at the Roosevelt Institution are marking the 75th anniversary of the New Deal by exploring policy ideas that will make up a new social contract for future generations, and EPI is honored to be among the event's co-sponsors.

The lineup of speakers is impressive and includes our President, Dr. Lawrence Mishel. Best of all, registration is free!

Join us on April 9 and spread the word to all who would be interested.

Christian Dorsey
EPI Outreach Coordinator

A New Deal for the 21st Century One-Day Conference

Speakers include:

Rep. Rosa DeLauro (D-CT)
Rep. Paul Kanjorski (D-PA)
Sen. Bernie Sanders (D-VT)
William Leuchtenberg
Katrina vanden Heuvel
Jonathan Alter
Robert Borosage
Eric Alterman

Registration and agenda available here.

Following the conference, the Franklin and Eleanor Roosevelt Institute presents the FDR Distinguished Public Service Award to Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid at a gala dinner. Contact: Marianne Sherow, msherow--at--feri.org.

The Employment Road to Economic Recovery in Argentina

noreply@blogger.com (Dollars & Sense) — Fri, 04 Apr 2008 20:32:00 +0000

The announcement below is related to Ryan Dodd's feature article in the current issue of D&S, A New WPA?, which addresses "employer of last resort" policies like Argentina's Jefes de Hogar program.

The Employment Road to Economic Recovery in Argentina

A lecture by Daniel Kostzer (UNDP Buenos Aires, Argentina)

Monday, April 7, 2008
4:15 PM
Media Resource Center
Room LC 28
Drew University
36 Madison Avenue
Madison NJ 07940

Daniel Kostzer is currently coordinator of the Social Development Cluster at the UNDP's Buenos Aires office. He was director of research and macroeconomic coordination of the Ministry of Labor, Employment, and Social Security of Argentina. While at the Ministry of Employment, Kostzer was responsible for the creation and implementation of Jefes de Hogar, a program that created nearly two million jobs after the economic crisis of 2001. He has been a consultant for the ILO, ECLAC, and UNDP on issues related to employment, income distribution, and employment policies, and is a member of the knowledge networks of the World Commission on the Social Dimension of Globalization, ILO. Kostzer has been a lecturer on Argentinean social structure at the University of Buenos Aires, a visiting professor of labor economics at the University of Missouri Kansas City, a research associate at the Center for Full Employment and Price Stability, and a member of the editorial committee of the journal Estudios del Trabajo of ASET (Association of Labor Studies Experts of Argentina). Formerly, he was also an advisor of the National Parliament Lower Chamber and director of the CEDENOA (Center of Studies of the Argentinean Northern Region). His graduate studies were at the Institute of Social Studies, The Hague, Netherlands.

Event co-sponsored by the Spanish Department, Latin American Studies, and the Economics Department at Drew University.

For Info Contact: Dr. Fadhel Kaboub, 973-408-3764, fkaboub--at--drew.edu

Peas in a Pod

noreply@blogger.com (Dollars & Sense) — Thu, 03 Apr 2008 15:28:00 +0000

This from Mike Allen's Playbook at politico.com, via Doug Henwood at the Left Business Observer's lbo-talk:

REPUBLICANS ARE JAZZED ABOUT the news from USA Today's A4 that both Democratic presidential candidates "rely on close advisers who had oversight roles at financial institutions that went bust because of subprime loans. Clinton's campaign manager, Maggie Williams, earned at least $175,000 serving from 2000-07 on the board of Long Island-based Delta Financial, which filed for bankruptcy last year after a history of high-cost loans to low-income borrowers, according to public records. Obama's national finance chairwoman, Penny Pritzker, was chairwoman of the board of a Chicago-area bank in 1993 when it adopted a subprime business strategy that regulators say ultimately led it to collapse in 2001.

The Collapsing Housing Bubble and Resulting Financial Fallout

noreply@blogger.com (Dollars & Sense) — Wed, 02 Apr 2008 02:11:00 +0000

This policy memo is from Dean Baker of the Center for Economic and Policy Research.

The Collapsing Housing Bubble and Resulting Financial Fallout

In the decade from 1996 to 2006, the United States developed an enormous housing bubble that had no precedent in the country's history. During this decade, house prices rose in excess of 70 percent of their historic trend rate of growth, creating more than $8 trillion in housing bubble wealth.

This bubble is now collapsing. Its collapse is throwing the economy into a recession and threatening the stability of financial markets. In assessing the various proposals and measures being put forward to address this situation, there are several important factors to keep in mind:

• the housing bubble cannot be sustained - prices must be allowed to return to trend levels;

• housing policy should be focused on helping homeowners who were often tricked into buying predatory mortgages, not helping institutional holders of bad mortgage debt;

• bailouts of financial institutions should focus on keeping the financial system operating smoothly while avoiding as much as possible giving taxpayer dollars to the people whose actions created the current crisis;

• the Fed should pursue a policy of maximum transparency—lack of transparency was a major factor leading up to the current crisis;

• where it is impossible to avoid having the federal government provide aid to troubled financial institutions, there should be an explicit quid pro quo, with the government either accomplishing an important policy goal or getting a return on their investment.

1. The bubble must be allowed to deflate.

It is important to recognize that the housing market experienced an unsustainable bubble. There were no changes in the fundamental supply or demand factors in the housing market that could explain the unprecedented run-up in prices over the last decade. There was also no unusual increase in rents during this period, which would have been predicted if the run-up in house sale prices was explained by market
fundamentals.

This means that prices must fall back towards their trend level. This fact must inform housing policy. In cities in which house prices are still out of line with trend levels, government programs to buy up or guarantee mortgages will lead to large losses for the government, and will also cause homeowners to pay far more in ownership costs than they would pay to rent a comparable unit.

Furthermore, since prices are still falling, homeowners who receive "assistance" will almost certainly acquire no equity in their houses. Under such circumstances, government support really only helps current institutional mortgage holders, since it pays them a price for their mortgage that is almost certainly much larger than what it would be worth in the absence of government intervention.

2. Government policy should be tailored to help homeowners.

It is possible to structure a housing guarantee plan that would help homeowners. The key would be to set the purchase/guarantee price at a multiple to appraised rent (a sale-to-rent ratio of approximately 15 would be reasonable and in line with historic trends). This would ensure that the government doesn't step into the middle of a
collapsing bubble.

An alternative mechanism for protecting homeowners would be to temporarily change the rules on foreclosure. If homeowners facing foreclosure temporarily had the option to remain in their house as long-term renters, paying the fair market rent, this would provide an important element of security to homeowners, and would stabilize
neighborhoods facing large numbers of foreclosures. More importantly, since banks do not want to become landlords, it would give mortgage holders a very powerful incentive to renegotiate the terms of loans in ways that allow homeowners to remain in their homes (outlined here).

This proposal would cost the government nothing. It can also be targeted to ensure that it only benefits low- and moderate-income families by setting a cap restricting the rule change to homes that sold at less than the median house price in an area, or some comparable cutoff. Such a cutoff could ensure that only relatively low-income people benefit from this rule change.

3. The Fed should help the financial system, not the financial sector.

On the issue of financial bailouts, it is important to distinguish between actions that protect financial institutions, and actions that protect the financial system. The government's policy should rightly be focused on preventing the collapse of a major financial institution that could lead to a chain reaction within the industry.

The model for such intervention should be the takeover of the Northern Rock bank by the British government. The bank was essentially bankrupt, even after being given special low-interest loans from the Bank of England. To prevent a chain of collapses, the government took over the bank and replaced the management. The immediate task of this new management is to get the books in order, at which point the bank will be resold to the private sector. The original stockholders will be entitled to any money from the stock sale, net of government infusions into the bank.

The Northern Rock takeover is a model because it sustained the stability of the financial system while getting rid of the management who had driven the bank into bankruptcy, and did not give any taxpayer money to shareholders.

4. Investors and the public deserve transparency.

The current actions of the Fed do not look good by comparison. First, the creation of the Term Auction Facility (TAF) allowed banks to borrow large amounts of reserves from the Fed without any public record. If a bank is in a situation where it finds it necessary to borrow large amounts of reserve, this information should be known to
investors and the general public.

The terms of Bear Stearns' takeover also raise important concerns, especially with the increase in the takeover price. It is not clear whether J.P. Morgan is paying $1.3 billion for Bear Stearns, or for a $30 billion guarantee from the Fed. If J.P. Morgan is actually interested in buying Bear Stearns and paying a substantial price to its shareholders, then there is no obvious reason for the Fed to get involved. The current terms make it appear as though Bear Stearns shareholders are profiting at taxpayer expense.

Finally, the Fed has implicitly (almost explicitly) indicated that it will guarantee the loans, credit default swaps and other commitments of the major investment banks. In addition, it has made them eligible to borrow hundreds of billions of dollars at low-cost through the Fed's discount window.

5. No free rides.

Under the circumstances, this may be good policy, but the public should demand some return for the Fed's generosity. As a first and necessary step, the Fed should regulate investment banks. The primary goal of this regulation would be greater transparency in investment bank dealings, such as full disclosure of the volume of their credit default swaps and other liabilities.

This step would be completely voluntary for the financial institutions. If they do not want to take advantage of the Fed's implicit guarantee or have access to the discount window, they can operate outside the Fed's purview. Of course, they may find it much more difficult to get customers once it is known that the Fed is not concerned if the bank fails.

The second part of the quid pro quo could be in the form of either a share in the company, a social policy commitment, or both. It is important to remember that the discount window is in effect providing banks with access to loans at below the market rate of interest. Even more important, the Fed's guarantee is effectively allowing banks to sell credit default swaps that are backed up by the government—not by the banks themselves, since they lack sufficient capital. In effect, the banks are selling the Fed's good credit, not their own.

It is entirely reasonable for the taxpayers to get something in return for providing enormously valuable credit guarantees to the investment banks. One option would be for the government or the Fed to get some amount of stock options each year, so that it would share in any gains incurred by the bank. A second option would be for the Fed to charge a fee for providing this guarantee that would be proportionate to the
bank's capital.

On the social policy side, the government could impose limits on executive compensation at the institutions they assist with guarantees. For example, it could prohibit the annual total compensation for any executive from exceeding $5 million. These limits would ensure that taxpayers are not subsidizing exorbitant salaries and bonuses. Since the exorbitant salaries on Wall Street have been guideposts for other high-paying occupations, bringing these salaries down to earth could go far toward reducing inequality in our society.

20,000 Vietnamese Workers Go On Strike At Nike Contract Factory

noreply@blogger.com (Dollars & Sense) — Tue, 01 Apr 2008 16:52:00 +0000

From the Associated Press:

HANOI, Vietnam: More than 20,000 Vietnamese workers have walked off the job at a Taiwanese-owned plant that makes shoes for Nike Inc., demanding higher pay to keep pace with skyrocketing prices, officials said Tuesday.

Read more

What's behind the assault on Basra

noreply@blogger.com (Dollars & Sense) — Mon, 31 Mar 2008 21:31:00 +0000

Naftana ('Our Oil' in Arabic) is an independent UK-based committee supporting democratic trade unionism in Iraq. It works in solidarity with the Iraqi Federation of Oil Unions (IFOU). It strives to publicize the union's struggle for Iraqi social and economic rights and its stand against the privatization of Iraqi oil demanded by the occupying powers. For more information see the IFOU's website.

Dollars & Sense has covered the IFOU, most recently in David Bacon's feature article, Iraqi Workers Strike to Keep their Oil.

About the current assault on Basra, David Bacon told D&S: "It is very important to let people in this country understand that under the accusations about the 'militias' is an effort by the Iraqi government and the US to consolidate control over the oil and ports, and eliminate those parts of the political opposition that have successfully opposed them."

Here is the press release Naftana distributed to the media in Britain, in full:

Basra Assault Confirms Presence of British Forces a Threat to Political and Trade Union Rights in Iraq

Naftana 28
March 2008

In a series of telephone calls from Basra over the past 48 hours, Iraqi trade union activists appeal for solidarity and describe how the so-called 'Security Plan' started midnight 24 March with intense shelling and fire from all kind of weapons.

The attacking forces now besieging Basra stretched all the way to the city from Dhi Qar province. Two armoured divisions are deployed, in addition to thousands of policemen, backed by US and British planning and air cover.

They have cut off electricity supplies, food and water on the city of 1.5 million people. Hundreds have been killed or injured in a savage, premeditated and unprovoked attack, now spreading to much of Iraq as the people protest and show solidarity with Basra's beleaguered people.

They describe the attack as far worse than the invasion of 2003 and begun in the same barbaric manner that the criminal Saddam employed against Basra to crush the March 1991 people's uprising. They remind us that the present puppet Iraqi government sentenced Saddam's Defence Minister to death few months ago for similar crimes of waging war on civilians.

The assault is backed by the US and British occupation forces, particularly in providing air cover. US planes are also bombarding areas in the Basra, several southern cities and Baghdad, where tens of thousands marched yesterday denouncing the 'puppet regime'. It is now, along with many other cities, under a strict
curfew enforced by regime and occupation forces.

Trade union leaders have asked us to inform the public in Britain that the government's attack on Basra serves the occupation. The city is 'steadfast' and the onslaught will end in 'utter failure.' The city streets were free of the occupying forces before the assault and the regime's attacks will make it even more dependent on the occupation forces, they stressed.

Naftana, the UK support committee for the Iraqi Federation of Oil Unions in the struggle for democratic trade unionism in Iraq, condemns British collusion in the preparation of the assault on Basra city and British participation in air strikes.

Naftana urges all to join in calling for an immediate withdrawal of British forces from Iraq, ending the US-led occupation, and for the payment of reparations to Iraq.

In the absence of adequate media coverage of the nature and context of this savage onslaught, Naftana wants to set the record straight on UK involvement.

In December 2007, the Basra Development Commission (BDC) was formally announced after discussions between Gordon Browne and Iraqi Deputy Prime Minister Barham Salih. (Source.) Browne appointed a British businessman, Michael Wareing, Chief Executive of KPMG International as 'Commissioner', apparently heading the BDC. (Source.) Wareing visited Basra in February and made outrageous comments, confirming his real interests to be those of predatory business rather than the security, development and well-being of Basra and its people.

Wareing told The Observer: 'If you look at many other economies in the world, particularly the oil-rich economies, many of these places are quite challenging countries in which to do business. Frankly, if you can successfully operate in the Niger Delta, that is a very different benchmark from imagining that Basra needs to be like London or Paris.' (Source.)

Wareing's appointment was welcomed by Iraqi Deputy Prime Minister Barham Salih, a major advocate of the 2003 invasion and of privatisation. On March 13 the British Defence Minister Des Browne met with Salih in Basra Airport.

Browne promised to show new action on 'security' in Basra province and to bring Umm Qasr port up to 'the highest international standards'. (Source.)

What this meant was made clear by Salih who threatened the Governor, people of Basra and port workers' union of Umm Qasr saying 'there must be a very strong military presence in Basra to eradicate these militias'. (Source.)

What Salih, himself a former militia leader, was concerned about were organised port workers who had earlier confronted the American SSA Marine corporation in Umm Qasr and the Danish Maersk corporation in Khor az-Zubair in the two years after these companies were imposed by the occupying forces in 2003. (Since 2003 the first shortened its name to SSA Marine. See here and here on Umm Qasr, and see here and
here on Khor az-Zubair.)

The new plans involve privatisation measures opposed by the port workers, who are supported by other trade unions and port management. It is likely that the planned corporate takeover of the port is required in order to facilitate the activities of international oil companies.

Nevertheless, the scale of what was afoot was not apparent, but the link between military action and breaking trade unionism was. On March 17-18 the US Vice-President Dick Cheney was in Baghdad meeting with the Iraqi Prime Minister Nouri al-Maliki who presently heads the attack on Basra city. (Source.) Top of the agenda was the oil law (Source.) and how to insure its passage. The oil law means that international oil majors will control Iraqi oil for many decades.

Various reports reveal that the present carnage was coordinated and agreed with British and American leaders. Naftana believes they commanded it.

Why? The tide of national public opinion has turned against long-term troop deployment in both the UK and the USA. If the war was fought for oil and total domination of Iraq, then those most closely associated to those interests must speed up their plans. The present onslaught aims to break popular resistance, especially from the Sadrist movement, to the passage of the oil law and to the occupation itself.

Beyond that, with local elections looming next autumn, it aims to destroy morally and physically the popular base which would otherwise be set to drive, first from local power, and subsequently from national power, the US/UK allies, Nouri al-Maliki (al-Dawa party), his main allies in the Supreme Islamic Council, led by Abdulaziz al-Hakim, and the Kurdish leaders, Talbani and Barzani.

Naftana calls on all who support democratic trade unionism to stand by the people of Iraq, with the port workers of Umm Qasr and the oil workers of Southern Iraq, with workers in Baghdad and many other cities who are in danger of physical elimination.

Privatization is only part of the story; as David Bacon emphasizes, control over the oil industry is also a central aim of US and British interests. Greg Palast made this point in his interview with D&S back in May of last year:

Dollars & Sense: Many progressives are focused on privatization of the Iraqi economy, including its oil industry, as Bush's real goal for the invasion. But you write about two radically different plans within the administration, the neo-cons' versus Big Oil's—and Big Oil's plan was the one opposed to privatization. What's going on here?

Greg Palast: A lot of intelligent folk believe that before the tanks started to roll, Bush had a secret plan to grab Iraq's oil fields. That's wrong. He had TWO plans. In Armed Madhouse, I show you both—the result of two years undercover for the BBC. The plans conflict. There's the neo-con plan: Privatize—that is, sell off—everything, "especially the oil" industry. That's a quote from the neo-cons' 101-page planning document. That didn't happen because a Jim Baker team—he's the lawyer for both Exxon and Saudi Arabia—secretly wrote a 323-page plan that called for CONTROLLING the oil flow, not owning it. The purpose was to LIMIT the supply of oil from Iraq and keep prices high. This would "enhance [Iraq's] relationship with OPEC," the oil cartel—just the opposite of the neo-con plan, which aimed to break OPEC. So dig it: the invasion was about LIMITING the flow of oil from Iraq and keeping prices high, not about grabbing the oil to bring prices down. The secret Baker plan is now the law in Iraq and oil prices are over $50 a barrel. MISSION ACCOMPLISHED.

The Job

noreply@blogger.com (Dollars & Sense) — Mon, 31 Mar 2008 21:11:00 +0000

This satirical short (The Job) was created by Screaming Frog Productions.

New Report: Nation's Gentrified Neighborhoods Threatened By Aristocratization

noreply@blogger.com (Ben Greenberg) — Mon, 31 Mar 2008 16:25:00 +0000

This new report reminds us yet again why it is so important to follow the independent press. You never get ground truth like this in the mainstream media.

WASHINGTON—According to a report released Tuesday by the Brookings Institution, a Washington-based think tank, the recent influx of exceedingly affluent powder-wigged aristocrats into the nation's gentrified urban areas is pushing out young white professionals, some of whom have lived in these neighborhoods for as many as seven years.

Maureen Kennedy, a housing policy expert and lead author of the report, said that the enormous treasure-based wealth of the aristocracy makes it impossible for those living on modest trust funds to hold onto their co-ops and converted factory loft spaces.

"When you have a bejeweled, buckle-shoed duke willing to pay 11 or 12 times the asking price for a block of renovated brownstones—and usually up front with satchels of solid gold guineas—hardworking white-collar people who only make a few hundred thousand dollars a year simply cannot compete," Kennedy said. "If this trend continues, these exclusive, vibrant communities with their sidewalk cafés and faux dive bars will soon be a thing of the past."

Clinton's Bigger Lies

noreply@blogger.com (Ben Greenberg) — Fri, 28 Mar 2008 16:04:00 +0000

“Don’t worry, it’s cost plus,” was a saying made famous in Baghdad’s Green Zone, but the deluxe war spending was pioneered in the Clinton era.

(Naomi Klein, The Shock Doctrine, 292)

While there is still some attention to Hillary Clinton’s role in the 1990s US foreign policy in the Balkans, I think we ought to be discussing untruths much more significant than her fib about landing in Bosnia under sniper fire.

Clinton deserves the negative attention she is getting for her fabrication, but other lies, like the ones about her track record on economic policy, are what need ongoing scrutiny.

Sen. Clinton’s other honesty problem this week came with revelations that, while she claims to have been an internal NAFTA critic in the administration, she actually gave several presentations in favor of NAFTA at the time it was passed. But, to be fair, this may not be a deception. People are often called upon to advocate for decisions in public that they opposed in private. The NAFTA controversy suggests other concerns, such as: If she were such a vehement critic, and the administration backed it anyway, how important was she? And, how can she claim credit for the good deeds of her husband’s administration and yet take no responsibility for its problems?

Still, Clinton’s handling of the NAFTA question certainly raises concerns. Especially troubling is her campaign’s work to spread rumors of Obama sending back-channel messages to the Canadians suggesting their anti-NAFTA rhetoric was all talk — when, according to a high-level Canadian source, her campaign had done that.

So let’s go back to some other statements of Hillary Clinton and to some other features of the US military presence in the Balkans.

Last year, earlier on in her campaign, Clinton said

she would limit the Bush administration practice of hiring private companies to perform government functions and would work to boost the performance of key agencies, such as the Federal Emergency Management Agency, which she said performed well during her husband’s White House years. “People are rightly disturbed by what they see as the incompetence and corruption in this administration. And that’s undermined confidence in government, which makes it very difficult for us to meet the challenges we face today,” Clinton said.

As she reflects back on the US military presence in the Balkans under her husband’s administration, and on her role in forming and carrying out his policies, Hillary Clinton needs to speak about the Bill Clinton administration’s “practice of hiring private companies to perform government functions.”

In her book The Shock Doctrine, Naomi Klein observes that Halliburton, with Dick Cheney at the helm, made its first major expansions in the area of privatizing government functions in the Balkans—under Bill Clinton.

In the Balkans, where Clinton deployed nineteen thousand soldiers, US bases sprang up as mini Halliburton cities: neat, gated suburbs, built and run entirely by the company. And Halliburton was committed to providing the troops with all the comforts of home, including fast-food outlets, supermarkets, movie theaters and high-tech gyms…. As far as Halliburton was concerned, keeping the customer satisfied was good business—it guaranteed more contracts, and because profits were calculated as a percentage of costs, the higher the costs, the higher the profits…. In just five years at Halliburton, Cheney almost doubled the amount of money the company extracted from the US Treasury, from $1.2 billion to $2.3 billiion, while the amount it received in federal loan guarantees increased fifteenfold. (292)

Under the Clinton administration, we also saw the privatization of information technology divisions of the US government.

In the mid-nineties, Lockheed [Martin] began taking over information technology divisions of the US government, running its computer systems and a great deal of its data management. Largely under the public radar, the company went so far in this direction that, in 2004, the New York Times reported,

Lockheed Martin doesn’t run the United States. But it does help run a breathtakingly big part of it…. It sorts your mail and totals your taxes. It cuts Social Security checks and counts the United States census. It runs space flights and monitors air traffic. To make all of this happen, Lockheed writes more computer code than Microsoft. (293)

And whom do we find on the board of Lockheed Martin during this period?

The push to expand the service economy into the heart of government was, for Cheney, a family affair. In the late nineties, while he was turning military bases into Halliburton suburbs, his wife, Lynne, was earning stock options in addition to her salary as a board member at Lockheed Martin, the world’s largest defense contractor. (293)

So, yeah, I’m concerned about the “practice of hiring private companies to perform government functions”—concerned that new private corporate inroads into government functions were pioneered under Bill Clinton and expanded wildly under George Bush. I am concerned that the corporate takeover will not be reversed unless there is a formal plan to accomplish this reversal. As far as I can see, neither Hillary Clinton nor Barack Obama has such a plan.

In his Blueprint for Change, Obama champions the return of appropriate government regulatory functions, from the Labor Relations Board to the Department of Justice, but he sidesteps the new roles of private corporations in government function. Hillary Clinton, on the other hand, has claimed to be a standard bearer for the fight against these destructive economic policies, and it is nothing but a cynical lie.

If Hillary Clinton is going to continue to stake claims on her husband’s presidential legacy, then we should be concerned that she may be as friendly to Dick Cheney’s economic vision as George Bush is.

(Cross-posted on Hungry Blues.)

Cockburn on Spitzer, Wall Street, and UFE

noreply@blogger.com (Dollars & Sense) — Thu, 27 Mar 2008 00:28:00 +0000

Alexander Cockburn's column in the March 31st issue of The Nation (alas, not the most recent issue—some magazines are much more timely than D&S) argues that former New York governor Eliot Spitzer's downfall was due partly to the fact that he frightened Wall Street. "There were plenty of powerful financial institutions that craved his downfall and whose employees cheered wildly when it happened." Cockburn goes on:

A little perspective is useful here. We are now well advanced in an election year where the prime candidates, Barack Obama, Hillary Clinton and John McCain, have scarcely made a centerpiece of their campaigns the outrageous and racist thievery practiced by Wall Street in the subprime scandals. A lawsuit filed by the NAACP on March 7 makes for instructive reading in this regard. It seeks to fast-track the NAACP's class-action lawsuit against Washington Mutual, Citi, GMAC and fifteen other mortgage firms that steered African-American borrowers into predatory loans.

And here Cockburn cites a report by our neighbors and comrades, United for a Fair Economy:

The suit cites a 2008 study by United for a Fair Economy estimating losses of $164-$213 billion for subprime loans during the past eight years. UFE considers this to be "the greatest loss of wealth for people of color in modern US history."

(We were happy to be able to provide technical support for UFE's report, with the help of D&S collective member Bryan Snyder and Prof. Irvin Morgan of Bentley College.)

Cockburn goes on to point out that whereas the federal government, including the SEC, has no prosecutorial powers with respect to subprime powers, this was not the case for New York State, whose Martin Act is:

the most powerful criminal enforcement weapon in the country and one used to great effect by Spitzer when he was Attorney General. In January there were news stories about AG Andrew Cuomo using Martin to go after the subprime corporate miscreants. Such an onslaught, with the backing of Governor Spitzer, was undoubtedly making Wall Street nervous. Now Spitzer is gone. Wall Street has nothing to fear from Clinton or from Obama, whose candidac[ies] float on vast contributions from Wall Street, as detailed by Pam Martens in Counterpunch.

CEPR Paper Responds to Foreign Affairs on Venezuela

noreply@blogger.com (Dollars & Sense) — Thu, 27 Mar 2008 00:19:00 +0000

CEPR Paper Responds to Foreign Affairs on Venezuela

by Mark Weisberg

Center for Economic and Policy Research
March 21, 2008

Washington, D.C.

A new paper from the Center for Economic and Policy
Research responds to a recent article by Francisco
Rodriguez in the March/April 2008 issue of Foreign
Affairs that argued that Venezuela's poor have not
benefited from the government of President Hugo Chavez.

"In the five years since the Venezuelan government has
gotten control over its national oil company, the
economy (real GDP) has grown more than 87 percent,
poverty has been cut in half, and unemployment by more
than half," said Mark Weisbrot, CEPR Co-Director and
author of the paper, "An Empty Research Agenda: The
Creation of Myths About Contemporary Venezuela."

"Real social spending per person has increased by more
than 300 percent, and the government has expanded
access to health care, subsidized food, and education.
Under these conditions, it would indeed be remarkable
if the living standards of the poor had not improved
substantially," he added.

The paper looks at various claims in the Foreign
Affairs article by Francisco Rodriguez:

Rodriguez claims that inequality, as measured by the
Gini coefficient has worsened during the Chavez years.
This is wrong. The only consistent measure of the Gini
coefficient shows a substantial decline
from 48.7 in 1998, or alternatively from 48.1 in 2003,
to 42 in 2007. For a rough idea of the size of this
reduction in inequality, compare this to a similar
movement in the other direction: from 1980-2005, the
Gini coefficient for the United States went from 40.3
to 46.9, a period in which there was an enormous
(upward) redistribution of income. Read more...