Wall Street

Paul Krugman slams Wall Street for “undermining our economy and our society”

Paul Krugman slams Wall Street for "undermining our economy and our society"

Paul Krugman (Credit: AP/Lai Seng Sin)

I know this is the second consecutive Salon article, but economist, Paul Krugman has something to say and I wanted to share it…

Salon

The New York Times columnist argues that America’s large financial sector has done more harm than good

In his latest column for the New York Times, best-selling author and award-winning economist Paul Krugman argues that the financial sector of the American economy is not only outsized but that it’s hurting the economy and making Americans’ lives worse.

Citing journalist Michael Lewis’ new book on high-frequency trading — which opens with a story about an expensive tunnel being drilled for fiber-optic cable to cut down the communication time between Chicago’s futures markets and the stock market in NYC by three milliseconds — Krugman argues that American public policy has become overly influenced by high finance, with inequality and economic instability as a result. “[American] society,” Krugman writes, “is devoting an ever-growing share of its resources to financial wheeling and dealing, while getting little or nothing in return.”

After claiming that the large financial sector in the U.S. doesn’t increase overall prosperity and doesn’t promote economic stability, Krugman writes that its primary function seems to be to prey off of less powerful economic actors. “[Wall Street's] playing small investors for suckers,” Krugman says, “causing them to waste huge sums in a vain effort to beat the market.” The result, Krugman posits, is a select few Wall Street players making a lot of private profits while contributing little to the overall public.

Krugman continues:



In short, we’re giving huge sums to the financial industry while receiving little or nothing — maybe less than nothing — in return. [NYU Professor Thomas] Philippon puts the waste at 2 percent of G.D.P. Yet even that figure, I’d argue, understates the true cost of our bloated financial industry. For there is a clear correlation between the rise of modern finance and America’s return to Gilded Age levels of inequality.

So never mind the debate about exactly how much damage high-frequency trading does. It’s the whole financial industry, not just that piece, that’s undermining our economy and our society.

 

The Year of the Great Redistribution

Robert Reich

The stock market closed out a record year at an all-time high [at the end of the year] giving stockholders in 2013 their biggest annual gains in almost two decades.

But the real news here, that went completely unreported, is that the 2013 bull market widened inequality because

(1) the richest 1 percent of Americans own 35 percent of the value of all shares of stock, and the richest 10 percent own over 80 percent,

(2) the corporate profits on which these gains were based came largely from keeping the wages of ordinary workers low,

(3) the capital gains and dividends these gains generated are taxed at a lower rate than most of the income of the middle class, and

(4) the biggest winners are the top executives and Wall Street traders whose year-end bonuses are tied to the stock market, and the hedge-fund and private-equity managers whose “carried interest” loophole allows them to cash in big-time. When will we stop measuring the health of the economy by the Dow Jones Industrial average? —

Uh, America, are we listening to this man?

Ted Cruz Gets His Health Insurance Through Goldman Sachs, His Wife Confirms

This is the guy that wants to take away the chance for millions of working Americans to have affordable health care…

The Huffington Post

The wife of Sen. Ted Cruz (R-Texas) confirmed in an interview with The New York Times what the tea party star’s opponents have insinuated gleefully for weeks: The most vocal opponent of Obamacare enjoys a high-priced health plan through investment bank Goldman Sachs.

“Ted is on my health care plan,” Heidi Nelson Cruz, who has worked in the firm’s management division for eight years, told the paper in a story published Wednesday.

Cruz’s plan through Goldman appeared to be an uncomfortable fact for the conservative senator as he lambasted the health care reform law and helped drive what would become a two-week government shutdown. In an exchange during Cruz’s 20-hour anti-Obamacare marathon on the Senate floor in September, Sen. Dick Durbin (D-Ill.) tried unsuccessfully to get Cruz to admit where he gets his own coverage.

“Will the senator from Texas for the record tell us now — and those who watched this debate — whether he is protected and his family’s protected?” Durbin asked.

Cruz deflected the discussion toward an uninsured diabetic woman that Durbin had been talking about earlier.

A spokeswoman for Cruz confirmed to the Times that the senator gets his coverage through Goldman. The Wall Street bank told the paper the coverage is worth at least $20,000 a year. “The senator is on his wife’s plan, which comes at no cost to the taxpayer and reflects a personal decision about what works best for their family,” the spokeswoman, Catherine Frazier, said.

As a HuffPost reader noted, it’s debatable whether such a plan comes at no cost to the taxpayer. Employer-sponsored health plans are generally tax-deductible for companies, so the Cruz family’s expensive health plan presumably reduces Goldman’s tax liability.

“Ted is very much a visionary,” Heidi Cruz Nelson told the Times. “He is very strategic, and he’s very practical, and he does what needs to be done, not what everybody wants him to do.”

In interviews with the Times, friends of Heidi Nelson Cruz described her as “less ideological” than her husband, who, recent polls have shown, is still adored by tea party adherents and loathed by liberals and many independents after the shutdown. Before her time at Goldman, she held several posts in the George W. Bush administration, including in the Treasury Department and the National Security Agency.

“Nothing in her background remotely approached Ted’s Scalia-like conservatism,” one friend said, referring to Supreme Court Justice Antonin Scalia.

 

Boehner wants to keep one hostage, briefly let the other go

                                                                               Associated Press

The Maddow Blog

Have you looked at the major Wall Street indexes this morning? As I type, the Dow Jones Industrial Average is up over 200 points, and as a matter of percentage, the S&P and Nasdaq indexes are doing even better. After weeks in which stocks were on a downward trend, what caused the sudden spike?

Wall Street is now under the impression that congressional Republicans are not going to use the debt ceiling to crash the economy on purpose. This leads to a variety of questions, not the least of which is whether Wall Street’s exuberance is rational.

It may not be. Jane Timm reports from Capitol Hill:

On Thursday, House Speaker John Boehner proposed a short-term debt ceiling increase — if President Obama will negotiate on opening the government.

That plan may be presented to Obama this afternoon, when a delegation of Republican negotiators will meet at the White House.

And this is where things start to get messy.

We talked earlier about the subtle shifts in the Republicans’ posture, as it slowly dawns on them that they’re losing the public; they won’t achieve their goals through extortion; and they need to find a way out of the trap they set and then promptly fell into.

So, Boehner and his team came up with a plan. They’ll let the government shutdown continue, but raise the debt ceiling for six weeks. In exchange for not crashing the economy on purpose, Democrats will have to agree to participate in budget negotiations.

Will Republicans agree to let the government reopen during the budget talks? No.

Will Republicans take the prospect of a debt-ceiling crisis off the table? No.

Is there any chance in the world Democrats will consider this a credible solution? No.

Indeed, it’s already been rejected.

The White House indicated that while the president might sign a short-term bill to avert default, it rejected the proposal as insufficient to begin negotiations over his health care law or further long-term deficit reductions because the plan does not address the measure passed by the Senate to finance and reopen the government.

“The president has made clear that he will not pay a ransom for Congress doing its job and paying our bills,” said a White House official, speaking on the condition of anonymity.

The Democratic appeal to Republicans can basically be summarized in a few words: Just do your job. The government needs to be funded, so fund it — without strings attached or a series of demands. The debt ceiling needs to be raised, so raise it — without demanding treats or taking hostages. At that point, the parties can enter negotiations on just about anything and everything.

But the GOP’s new “offer” is predicated on the same assumptions as the other “offers”: Republicans won’t talk unless the threat of deliberate harm hangs over the discussion. It’s effectively become the GOP’s prerequisite to every process: only plans involving hostages will be considered.

Indeed, why raise the debt ceiling for just six weeks? Either Republicans are prepared to hurt Americans on purpose or they’re not. This is either a threat or it isn’t. Boehner is willing to put the pin back in the grenade, but he wants Democrats to know he’s prepared to pull it again around Thanksgiving?

I suppose it’s evidence of some modicum of progress that GOP officials are looking for a new way out of this mess, but this new “plan” is hardly any more credible than the others.

I wish I could share in Wall Street’s excitement, but I don’t.

NRCC Chair Reportedly Says GOP Waged Shutdown Fight To Placate Tea Party

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Rep. Greg Walden (R-OR)

This comes as no surprise.  The only surprise is that a Republican let  it go public…

TPM LiveWire

When pressed by Republican donors last month to explain why the party seemed willing to flirt with a government shutdown, Rep. Greg Walden (R-OR) reportedly said that the tea party left the GOP with no choice.

The Daily Beast’s David Freedlander reported on the comments by Walden, who serves as chair of the National Republican Congressional Committee (NRCC), which came during a lunch event in New York City.

From Freedlander’s report:

Why, they asked, did the GOP seem so in the thrall of its most extremist wing? The donors, banker types who occupy the upper reaches of Wall Street’s towers, couldn’t understand why the Republican Party—their party—seemed close to threatening the nation with a government shutdown, never mind a default if the debt ceiling isn’t raised later this month.

“Listen,” Walden said, according to several people present. “We have to do this because of the Tea Party. If we don’t, these guys are going to get primaried and they are going to lose their primary.”

Walden then credited the tea party for its involvement in grassroots efforts.

“I hear this complaint all the time,” Walden reportedly said. “But no one gets involved at the local level. The Tea Party gets involved at the local level.”

The NRCC disputed Walden’s quote, prompting Freedlander to add a note in the body of his piece. NRCC spokeswoman Andrea Bozek told TPM that Walden never mentioned the tea party during his remarks.

Freedlander made clear to TPM in an email that he was not running a correction.

“Although NRCC did not previously dispute the account laid out in the story, they are now, and the story has been updated to reflect that,” he wrote.

Elizabeth Warren Calls Supreme Court Right-Wing, ‘Pro-Corporate’

elizabeth warren supreme court

BOSTON – SEPTEMBER 2: Massachusetts Sen. Elizabeth Warren speaks at the annual Labor Council breakfast in Boston, Sept. 2, 2013. (Photo by Jessica Rinaldi for The Boston Globe via Getty Images)

In  my opinion Senator Warren is the smartest and bravest politician in Washington…

The Huffington Post

In a speech at an AFL-CIO convention on Sunday, Sen. Elizabeth Warren (D-Mass.) criticized the Supreme Court for being too right-wing and serving the interests of Big Business over the needs of Americans.

In voicing her support for the labor movement and promoting an agenda aimed at defending working families, Warren warned of conservative-leaning justices and a “corporate capture of the federal courts.”

“You follow this pro-corporate trend to its logical conclusion, and sooner or later you’ll end up with a Supreme Court that functions as a wholly owned subsidiary of big business,” Warren said.

Warren said that Wall Street and major corporations are making it difficult for labor leaders to enact financial reform.

“The big banks and their army of lobbyists have fought every step of the way to delay, water down, block or strike down regulations,” Warren said. “When a new approach is proposed -– like my bill with John McCain, Angus King and Maria Cantwell to bring back Glass-Steagall -– you know what happens. They throw everything they’ve got against it.”

“I believe that if people would be opposed to a particular trade agreement, then that trade agreement should not happen,” she said.

Warren was citing a bipartisan bill aimed at separating lending and trading.

“Despite the progress we’ve made since 2008, the biggest banks continue to threaten the economy,” Warren said in a written statement defending the bill. “The four biggest banks are now 30 percent larger than they were just five years ago, and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk.”

After Warren concluded her speech, AFL-CIO President Richard Trumka praised the senator, saying, “Ah, if we could only clone her.”

GOP Rep: Wall Street doesn’t commit crimes because they don’t use guns

Are these people really this ignorant?

The Examiner

During a recent town-hall meeting, a Republican congressman claimed that there was no criminal activity happening on Wall Street because they don’t use guns.

Rep. Tom McClintock (R-CA) spoke to constituents during a town-hall event in El Dorado Hills, California and was asked many questions. A member in the audience asked what the congressman thought about “Wall Street criminal practice” and where he stood on the Glass Steagall act, a piece a legislation that was repealed in the 1990s that had previously separated commercial banks and investment banks after the stock market crash of 1929. Rep. McClintock responded, but an an interesting reason for why he didn’t believe there was any criminal activity occurring on Wall Street.

“You can get somebody to do just about anything with a gun. I hear about predatory lending, for example, my first question is that is just terrible. You shouldn’t be able to force somebody to take out a loan they don’t want. With respect to Glass Steagall, that is the measure that had been in place, it was a depression era measure, that essentially forbids banks from making a wide range of investments. My attitude is someone different on that. Instead of applying additional government forces into the process, in this gets back to your critical question, lets stop bailing out peoples bad decisions.”

When the financial crisis came into full swing in the fall of 2008, the American people looked on in horror as the economy was dealt its hardest blow since the Great Depression. Decades of looking the other way while big banks where able to run wild, continuing tax breaks for wealthy individuals and corporations and trade practices that only hurt the middle class, the economy finally fell flat on its face. For any member of congress to use an excuse of lack of fire arms for the reason there is no criminal activity on wall street is almost as delusional as the party he is apart of.

Journalist explains how utter lack of expertise in Congress is ruining America

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Robert Kaiser

I’ve wondered how so many politicians could be as uninformed in just a general knowledge of high-school civics and economics.

The Raw Story

For his new book, journalist Robert Kaiser intensely researched the political maneuvering surrounding the Dodd–Frank Wall Street Reform and Consumer Protection Act. His conclusion? Most members of Congress don’t understand what they’re arguing about.

Speaking on PBS, Kaiser said Wall Street reform only occurred in the wake of the 2008 financial collapse thanks to the unique talents of former Rep. Barney Frank (D-MA) and former Sen. Chris Dodd (D-CT).

Unlike the rest of Congress, Frank and Dodds had an actual grasp on the financial situation and understood the need to act. Frank provided the brainpower, while Dodds’ political skill was necessary for financial reform to pass.

“But it was upsetting to me as a citizen to realize how few members understood the issues they were dealing with,” Kaiser remarked. “These are, of course, extremely complicated financial matters, how banks work, how they’re regulated, so on.”

“Not everybody can know this, but at the end, I concluded that you could fit the number of experts in Congress on financial issues easily onto the roster of a Major League Baseball team,” he added. “That’s 25 people. I think that is the max.”

Kaiser also said the lack of expertise was resulting in a deadlocked Congress. Rather than trying to craft meaningful legislation to aid the country, most lawmakers were more interested in scoring partisan political points.

“You don’t really engage on issues in this Congress,” he explained. “What you engage in is political warfare, partisan bashing, one or the other. And the result is that serious policy issues, as we have seen again and again, get very short shrift.”

Watch video, courtesy of PBS, below:

 

Obama is clearly the worst socialist ever

Wrong again GOP and sycophants…

Maddow Blog

Wall Street’s major indexes soared this morning after U.S. home prices saw their best annual rise in seven years, and consumer confidence got another boost. But even before today’s stock-market gains, President Obama is in rare company when it comes to Wall Street returns.

In the 84 years that the Standard & Poor’s 500-stock index has been calculated, it doubled during the terms of only four presidents before Barack Obama’s election in 2008. This month that number rose to five as the index climbed to more than twice what it was when he took office.

Through Friday, more than 52 months after he took office, the index was up 105 percent during his term in office, for a compound annual gain of 18 percent.

In terms of the percentage gain, it’s worth taking some of this with a grain of salt. If I open a widget factory and sell two widgets a year, I’ll find 100% growth if I sell four widgets the following year. In Obama’s case, it was easier to double the value of the major Wall Street indexes given the scope of the catastrophe he inherited from Bush/Cheney.

Nevertheless, Obama had to get the economy back on track, and he did. As the above New York Times chart helps demonstrate, when it comes to stock-market growth, Obama is already among the most successful modern president of either party, and if the economy continues to steadily improve over the next three years, Obama will fare even better from a historical perspective.

From a purely political perspective, it’s worth remembering that the president’s critics on the right predicted the opposite.

As we talked about several months ago, the real fun begins when we reminisce about what Obama’s Republican critics were saying in early 2009. Indeed, the Wall Street Journal ran anentire editorial in early March 2009 arguing that the weak stock market was a direct result of investors evaluating “Mr. Obama’s agenda and his approach to governance.”

Karl Rove and Lou Dobbs made the same case. So did Rush Limbaugh, Sean Hannity, and Fred Barnes. For a short while, it was one of Mitt Romney’s favorite talking points, too. EvenJ ohn Boehner got in on the larger attack.

For the record, I don’t think a strong stock market is necessarily proof of a robust economy. On the contrary, I care far more about unemployment, median wages, and economic growth than Wall Street returns. But the right shouldn’t try to have it both ways — if a bear market in 2009 is, in the minds of conservatives, clear proof that Obama’s agenda is misguided and dangerous, then by the same reasoning, should we interpret soaring Wall Street indexes as proof of Obama’s genius?

 

Why Are Homeowners Being Jailed for Demanding Wall Street Prosecutions?

That’s an excellent question…

Rolling Stone Magazine

Bankers go free while cops tase peaceful protesters and the Department of Justice targets journalists

A two-day long housing protest outside the Department of Justice this week has resulted in nearly 30 arrests and several instances of law enforcement unnecessarily using tasers on activists, according to eye-witnesses. The action – which was organized by a coalition of housing advocacy groups, including the Home Defenders League and Occupy Our Homes – called for Attorney General Eric Holder to begin prosecutions against the bankers who created the foreclosure crisis.

“Everyone here is fed up with Holder acknowledging big banks did really bad stuff but [saying] they’re too big to jail,” says Greg Basta, deputy director of New York Communities for Change, who helped organize the event. Holder has previously suggested that prosecuting large banks would be difficult because it could destabilize the economy. The attorney general recently tried to walk those comments back – but the conspicuous lack of criminal prosecutions of bankers tells another story, one thatRolling Stone‘s Matt Taibbi has written about extensively.

Gangster Bankers: Too Big To Jail

Alexis Goldstein, a former Wall Street employee and current Occupy Wall Street activist who was also at the event on Monday, agrees. “I want Eric Holder to uphold the rule of law, regardless of how much power the criminal has,” says Goldstein. She says the lack of criminal prosecutions has created a “culture of immunity” that only gets further entrenched by the small settlements that banks now consider a cost of doing business. “There’s no risk,” she says, adding that the DOJ is effectively “incentivizing breaking the law.”

Around 400 homeowners and 100 supporters took part in Monday’s actions outside the DOJ, according to Basta. One of them was Vera Johnson, of Seattle. “I’ve been dealing with foreclosure issues for three years,” says Johnson, just minutes after being released from the jail where she was held for over 24 hours for participating in this peaceful protest. Bank of America recently granted Johnson a loan modification after the media picked up on a Change.org petition that she started to save her home; this reprieve turned out to be a time bomb, as her rates were set to return to their original levels after four years. It’s an all too common story, and Johnson went to Washington, D.C. to “join in solidarity” with others in similar situations.

Many of this week’s protesters have been black and Latino homeowners, who were hit particularly hard by the foreclosure crisis. Mildred Garrison-Obi – a black woman from Stone Mountain, Georgia – was evicted from her home in 2012, though with the help of Occupy Our Homes she was able to return to it after four months of facing homelessness. “It was devastating,” says Garrison-Obi, who was arrested today in a related action held outside of a law firm where Holder was once a partner. “But I’m not alone.”

Activists note with dismay that the government has been significantly harder on people who stage nonviolent demonstrations against Wall Street than it has on the crooked bankers responsible for the housing crisis. Goldstein and Basta both say they witnessed law enforcement using tasers on multiple protesters this week. Johnson says that several hours before her arrest, as she and others sat on planter boxes outside the DOJ, a Department of Homeland Security officer asked, “Do you want to get arrested?” and then, “Do you want to get tased?” Later, when she refused to unlock her arms with another protester after three warnings – hardly a violent act or a threat to public safety – she says she was tased from behind on her left arm. She turned around to see the same officer, who she recalls telling her, “That’s what you get.”

Carmen Pittman, an activist with Occupy Our Homes in Atlanta, suffered similar treatment at this week’s protests. In video footage of her arrest, Pittman appears to have her arms interlocked with another protester.

Continue reading here…