Steve Kroft’s explosive 60 Minutes report on rampant ‘legal’ congressional insider trading last Sunday provoked fury and heartache at an elitist political class spiraling out of control. I cannot claim to have romantic notions about any politician, but this latest disclosure is the final nail in the coffin. For politicians to use access to insider information to line their own pockets while sitting on or even trashing legislation that might adversely affect their personal profits is despicable. All the while, Wall Street continues to function like a giant Ponzi scheme. Representatives who claim to have our backs instead put us on the hook for irresponsible business practices and then profit from the same mistakes that cost average Americans their pensions.

We know that the regular rules do not apply to the “1 percenters.” Make no mistake; the 1 percenters refer to politicians as much as any “evil” banker since Congress counts at least 267 millionaires in their ranks. The message to those of us out here on the ground is clear: Take what crumbs we give you. Your voices will not be heard.

CBS’ 60 Minutes reported insider trading activity by four Republicans, including House Speaker Boehner, and only one Democrat, namely former Speaker and current Minority Leader Nancy Pelosi. Yet Throw Them All Out, Peter Schweizer’s book on which Kroft’s report is based, implicates plenty of Democrats, including Senator John Kerry who made a killing on pharmaceutical stocks in 2003 while on a committee influencing the same. But given the current nature of the fourth estate, with many reporters trading objectivity for access and a seven figure book deal, I am shocked such a story saw the light of day, balanced or not.

In Ms. Pelosi’s case, while House Speaker, she and her husband were offered very favorable terms in a credit card IPO. She likewise made a killing while sitting on legislation for two years that would have reduced her profit margin. For shame. Schweizer was condemned by Ms. Pelosi’s team as a “conservative writer” with an “agenda” even though Kroft stated that Schweizer’s research had been independently confirmed. Republican Rep. Spencer Bachus of Georgia, chair of the House Committee on Financial Services, basically bet against his own county in the financial crisis of 2008 and likewise made a killing in the market. There are now calls for his resignation.

As a result of Schweizer’s book, legislation is being proposed to stop the outrageous practice of legal insider trading by Congress. Let’s see how far it gets. It has been tried before only to die a quick death.

While Tea Partyers and the Occupy Wall Street crowds have gained some traction calling attention to perils of government overspending and greedy bankers, respectively, it is the Tea Party that has a more accurate perspective. Only through an irresponsible legislative body on both sides does other crooked activity flourish. It all rolls downhill.

Unfortunately, the truth of that message is obscured. The bulk of mainstream media helps to muddy the waters with biased coverage.

Most media outlets downplay reports of rapes, assaults, health hazards and filthy conditions at some of the OWS encampments around the country in what I assume is an attempt to glorify the movement. That same media has made a herculean effort to paint the Tea Party as right wing “extremists and racists.” Given the media’s predisposition for running interference for this President, as it did for his predecessor, it is not hard to glean their reasons for unfavorable characterizations of a group that targets government misbehavior rather than just the crooks on Wall Street.

In 2010, the Washington Post featured a story by a young woman who spent a year attending every Tea Party rally imaginable. She found scant evidence of racism, despite what the mainstream media, self-serving political operatives and frankly, anyone with a platform seems to imply. Likewise, there are OWS protesters with honest concerns and good motives who are not violent and do not defecate on cars.

Any grassroots movement is only as good – or bad – as those co-opting it. And it will only be deemed as good or bad as those who purchase ink by the barrel decide it can be.

Sarah Palin offered an op-ed in the Wall St. Journal in which she pointed out the need for “sudden and relentless reform” and bipartisan grassroots efforts to get it:

This call for real reform must transcend political parties. The grass-roots movements of the right and the left should embrace this. The tea party’s mission has always been opposition to waste and crony capitalism, and the Occupy protesters must realize that Washington politicians have been “Occupying Wall Street” long before anyone pitched a tent in Zuccotti Park.

Her suggested solutions:

We need reform that provides real transparency. Congress should be subject to the Freedom of Information Act like everyone else. We need more detailed financial disclosure reports, and members should submit reports much more often than once a year. All stock transactions above $5,000 should be disclosed within five days.

We need equality under the law. From now on, laws that apply to the private sector must apply to Congress, including whistleblower, conflict-of-interest and insider-trading laws. Trading on nonpublic government information should be illegal both for those who pass on the information and those who trade on it. (This should close the loophole of the blind trusts that aren’t really blind because they’re managed by family members or friends.)

No more sweetheart land deals with campaign contributors. No gifts of IPO shares. No trading of stocks related to committee assignments. No earmarks where the congressman receives a direct benefit. No accepting campaign contributions while Congress is in session. No lobbyists as family members, and no transitioning into a lobbying career after leaving office. No more revolving door, ever.

Not bad ideas. Then it is possible that politics may revert to being a public service rather than a path to millionaires’ row. I won’t hold my breath.

Grassroots – and bipartisan – fury is the only thing that may have an effect on our damaged political system, yet we cannot even seem to accomplish that, as demagoguery works to keep left and right busy tearing each other down, rather than seeing the true culprits here.

Self-serving political operatives and their cronies gin up all sorts of distractions to keep us focused on making enemies of one another, which keeps the attention off the more insidious crimes taking place behind closed doors.

As the late George Carlin once said, “You think you have choice in this country? Here is your choice: Leaded or unleaded. Decaf or Regular. Window or Aisle.” We are not encouraged to think critically to affect change, but rather to engage in what writer Robert A. Johnson called shadow projections – ‘I don’t have something because you have it. My life stinks because of you.’ It is a malaise that keeps us looking for bad guys, and gals, in all the wrong places. This generally leads to boxing with shadows, nothing more.

The halls of power offer a seductive siren song promising personal enrichment and influence. The protected political class, along with the irresponsible blokes in our financial sector had best beware the day that both sides let the smoke clear to see past the bread and circus distractions offered by those in charge. If America’s left and right ever figure out who the real criminals are, 60% of Congress will be out of a job. And the cronies they have long protected will likewise get a pink slip.

Well, this came as a bit of a surprise, a pleasant one at that. You will recall that Rep. Maxine Waters had inserted a provision into the Financial Reform Bill creating quotas for women and minorities for financial institutions.

But not so fast says the US Commission on Civil Rights, as this article by Caroline May makes clear, U.S. Commission on Civil Rights Demands Changes to Democrats’ Financial Reform Bill. That pretty much says it all, but wait until you see what some of the members actually said about this issue:

[snip] Commissioners Peter Kirsanow, Ashley Taylor, Gail Heriot, and Todd Gaziano affixed their names to the letter, which charges the Senate with either “consciously or unconsciously” promoting discrimination.

“All too often, when bureaucrats are charged with the worthy task of preventing race or gender discrimination, they in fact do precisely the opposite,” the letter reads. “They require discrimination by setting overly optimistic goals that can only be fulfilled by discriminating in favor of the groups the goals are supposed to benefit.”

The letter continues, “In this case, the bureaucrats are not even being asked to prevent discrimination, but to ensure ‘fair inclusion.’ The likelihood that it will in fact promote discrimination is overwhelming.”

Holy moley – they are not mincing any words here. And good for them for that. But they did not stop there:

[snip] “Some legislators have evidently come to think of women and minorities as just another constituency whose leaders must be brought on board with incentives when major legislation is being considered,” the letter says. “The notion that legislation should include ‘a little something’ for everyone is troubling in any context, but it is especially troubling in the context of race and gender, given the requirements of the Fifth and Fourteenth Amendments to the Constitution.”

Commissioner Todd Gaziano told The Daily Caller that Section 342, whether it intends to or not, could have dire implications for the financial markets.

“The likely end of creating offices that require these types of racial and gender goals is that it will result in quotas and discrimination,” he said. “There are many existing laws and enforcement mechanisms that already prohibit discrimination. This provision, by contrast, takes affirmative steps to guarantee discrimination.”

That sounds like a fairly damning assessment to me. Clearly, there are so many problems with inserting these quotas on so many different levels. That the Civil Rights Commission is coming out against it, and so strongly, is telling. Previously, the former chief economist at the US Department of Labor, Diana Furchtgott-Roth, also came out strongly against this provision:

“This is a radical shift in employment legislation,” she said. “The law effectively changes the standard by which institutions are evaluated from anti-discrimination regulations to quotas. In order to be in compliance with the law these businesses will have to show that they have a certain percentage of women and a certain percentage of minorities.”

Furchtgott-Roth worries that this might be a harbinger of things to come.

“So what does this mean? Are we going to get rid of anti-discrimination laws all together and just put in quotas? Could this be what’s to come in other sectors?” she questioned.

And an excellent question it is. Disturbing question, too, I might add.

So what will become of this letter by some of the members of the US Civil Rights Commission on this issue? Well, I wish I could tell you it was going to make all the difference:

Commissioner Peter Kirsanow was more blunt.

“I don’t think it is going to have a substantial effect,” he said. “I think they will ignore it as they have other letters we have sent. Just recently, they ignored our concerns with the health care bill, which contains a number of highly suspect racial provisions embedded deep within the text. They will emerge at some point and we will have to deal with them.” (Emphasis mine.)

Kirsanow added that in addition to the constitutional problems associated with mandating quotas, the political implications are also troubling.

“There is considerable evidence over the years that these types of quota provisions dissolve into a political spoils system—we see it at the federal, state and local level—with certain positions being reserved for certain people,” he said.

Uh, yeah. Again, I urge you to read the full article here. It is well worth your time.

I just have to wonder why this was even put into this bill in the first place, especially if there is evidence showing it is so counter productive. Perhaps the excuse, um, I mean, explanation, will come to light at some point (though I am not holding my breath). At the very least, I hope this provision is removed.

I’m not holding my breath for that, either.

Uh, um, hell yes, there was a big problem with Fannie Mae and Freddie Mac, Rep. Waters.

But wait, there’s more. Here is Rep. Waters revealing her true position on the government’s role in terms of Big Oil:

Okay, okay – I couldn’t resist that version. Too funny. Here is the real version:

Yes, all of that stuttering trying to cover up what she had just said is real. Yowzer.

Now, personally, I think Rep. Waters has demonstrated a complete and utter lack of integrity when it comes to financial issues, judging by her comments on Fannie and Freddie. So have Dodd and Frank, for that matter. That the latter two are the authors of a financial regulatory bill should give great pause to everyone.

So, it really should come as no surprise that now she wants to legislate quotas into the new Dood-Frank Financial Regulatory bill. Oh, how I wish I was kidding. According to this Daily Caller piece, that is exactly what Rep. Waters has done,
Racial Quotas in Dodd-Frank Financial Regulatory Bill:

The Dodd-Frank financial regulatory bill, ostensibly aimed at reforming Wall Street and preventing a future financial crisis, will impose racial and gender quotas on financial institutions if passed, according to economist Diana Furchtgott-Roth.

Section 342 of the bill will establish Offices of Minority and Women Inclusion in at least 20 federal financial services agencies. These offices will be tasked with implementing “standards and procedures to ensure, to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency at all levels, including in procurement, insurance, and all types of contracts.”

So called “fair inclusion” will apply to “financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants and providers of legal services.”

The provision goes on to assert that the government will terminate contracts with institutions they deem have “failed to make a good faith effort to include minorities and women in their workforce.” [snip]

Good grief. Quotas? Where does that leave “anti-discrimination” regulations, then? That question is answered here:

The provision goes on to assert that the government will terminate contracts with institutions they deem have “failed to make a good faith effort to include minorities and women in their workforce.”

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor and senior fellow at the Hudson Institute, spotlighted the controversial section in an article at Real Clear Markets on June 8th. She told The Daily Caller that the law amounts to a quota system.

“This is a radical shift in employment legislation,” she said. “The law effectively changes the standard by which institutions are evaluated from anti-discrimination regulations to quotas. In order to be in compliance with the law these businesses will have to show that they have a certain percentage of women and a certain percentage of minorities.”

Furchtgott-Roth worries that this might be a harbinger of things to come.

“So what does this mean? Are we going to get rid of anti-discrimination laws all together and just put in quotas? Could this be what’s to come in other sectors?” she questioned. [snip]

Click HERE to read the rest.

Yes, I would say this is a huge departure from anti-discrimination regulations. That a quota system is being buried in this financial regulation shouldn’t really come as a surprise, I guess. But still, it does.

Wow. Has it really been less than two years since the Democrats controlled all three houses? Sure seems longer, especially considering all they have shoved down our throats. Er, I mean, “accomplished.”

And I guess if Rep. Waters gets her way, we’ll have another one shoved down our throats. Yep, pretty soon, quotas for everyone, coming to a business near you soon!! Good grief…

“We’re going to have to make some tough choices” about the deficit and national debt, President Obama said to a crowded gymnasium full of supporters at Indian Hills Community College, after a lengthy riff on how the unsustainable debt would need to be tackled.

This, unlike most of what the president said during the town hall meeting, was met with silence.

“I noticed I didn’t get a lot of clapping about the whole ‘We’re gonna have the hard choices’ thing,” the president ribbed the crowd.

The President is ribbing the crowd? Now that’s what I call “The Audacity of Hope.” Half million dollar pizza parties. The most expensive inauguration in history. After this gentleman spent all of last year more than tripling spending (yes, I know, I know, it was all Bush’s fault) now he wants to tell the American people it is time to make some hard choices?

More frustrating than the endless campaigning and political posturing is the notion that the American people are so bloody stupid, they will not leap to the same conclusions I just did. Further, he tells us this stuff as if he just thought of it. Haven’t the tea partiers, for one, been screaming about these very problems for over a year?

Could it be President Obama is not aware why his audience sat on their hands for his remark about “hard choices?” I cannot prove that the people of Ottumwa, Iowa agree with my assessment but perhaps this might be a reason why he did not receive the adulation he is used to and so craves:

It is offensive to be lectured to about fiscal restraint by a man who has been spending taxpayer money like a drunken sailor for the better part of a year and a half, bailing out and covering for reckless companies with reckless management styles that continue to scam the American people, hiding the true cost of the legislation his Congress has been ramming down our throats and promising transparency while delivering the opposite.

The people of Iowa, and the rest of American for that matter, have been practicing plenty of fiscal retraint as they deal with high unemployment, watching their savings dwindle to dangerously low levels amidst an uncertain future with an administration that appears tone deaf as to their problems.

Any President that keeps trying to sell the bill of goods that cap and trade is going to help solve our economic problems instead of finally planting his feet behind the desk to figure out how to put more people back ot work in this country really needs to talk less to the American people – and listen more.

“This will bear on how we think about our federal budget in the future,” [Obama] said. “Everybody dislikes Washington right now, and everybody wants to lower their taxes. Everybody hates waste in government. But at the same time, you know, government does some important things like helping to make sure you’ve got clean drinking water and that your roads aren’t full of potholes.”

Please Mr. President, stop telling me what I hate. I don’t hate taxes. I am more than happy to pay my fair share and do so regularly. I hate when my taxpayerdollars go to bailout out the actions of corrupt actors who are not held to the same rules as I am. I do not hate government. I hate bloated government, local, state and federal, that enjoys no end of perks and bloated salaries and perks. I appreciate the good things that government does, which is why I pay taxes. What I don’t appreciate is the things my tax money is supposed to pay for – like education – gets “borrowed” away and never returned.

Clearly, the President has no idea what I hate which gives me a clear indication of why his policies have nothing to do with the urgent needs of the American people.
Close attention need by paid to the following:

…Earlier in the day, back in Washington, DC, he’d presided over the first meeting of his Debt Commission, which will issue recommendations after the November 2010 elections on ways to reduce the $12.8 trillion national debt.

“I’ve said that it’s important that we not restrict the review or the recommendations that this commission comes up with in any way,” the president said at the meeting. “Everything has to be on the table. …This means that all of you, our friends in the media, will ask me and others once a week or once a day about what we’re willing to rule out or rule in when it comes to the recommendations of the commission. That’s an old Washington game and it’s one that has made it all but impossible in the past for people to sit down and have an honest discussion about putting our country on a more secure fiscal footing. So I want to deliver this message today: We’re not playing that game. I’m not going to say what’s in. I’m not going to say what’s out. I want this commission to be free to do its work.”

Could it be he is not going to give you any details about what is “in it” until after the midterms because if he told you now, all his herd mentality Dems insistently following Pelosi and Reid off a cliff would be voted down this November? Is that why we are not getting a report from the Debt Commision until after that?

In Ottumwa, the president previewed for the crowd that whatever the commission comes up with, “we’re going to have a very tough debate about how to bring down our deficits.”

He continued, “as this debate unfolds, I just want everybody to pay attention to what folks are saying. A lot of times politicians will tell you, ‘I’m going to cut your taxes, I’m going to lower the deficit, I’m going to expand Medicare.’”

Don’t settle for that, the president told the crowd. “Ask every politician when they say they’re going to balance the budget and deal with the deficit: ‘What exactly are you going to cut? What spending are you willing to eliminate? Are you going to eliminate funding for sewers? Are you going to reduce the cost of Medicare? Because there’s no such thing as a free lunch.”

Who the hell out here has been getting a free lunch. The free lunch has gone to the folks at Goldman Sachs, Fannie and Freddie, and GM (who claim they paid back their bailouts — however they did it with other TARP money).

A free lunch? Why does President Obama insist upon being condescending? Beyond his pronouncements from on high about “bitter voters,” this reminds me of candidate Obama’s pronouncement about Democrats and abortion during the campaign. As reported by CBS News:

“The mistake pro-choice forces have sometimes made in the past, and this is a generalization . . . has been to not acknowledge the wrenching moral issues involved,” he said.

Really? Do we not? Telling us what we do and do not like or believe seems to be a pattern.

Reading the other fine print of his statement in Iowa, he wants us to ask other politicians what THEY are going to do – but we cannot ask the President what HE is going to do. “We’re not going to play that game?” All he is doing is playing games, while taxpayers can only look on in frustration and disbelief.

The president said “the way folks talk about it in Washington,” you might think the debt could be solved by reducing waste and abuse, eliminating foreign aid and earmarks. But those are relatively small parts of the budget, he said.

Which “folks” are these, exactly?

“We could eliminate all foreign aid and all earmarks and we’d still have a huge problem, because most of our budget goes to Social Security, Medicare, Medicaid and defense spending, about 70 percent of the budget. Everything else we do is only about 30 percent of the budget. So this is going to be a tough bunch of choices that we gotta make here.”

Okay – so here is the bitter pill to swallow – get ready folks. Here come the cuts! So that if you have been paying in to Medicare, as my mother has, for example, in her 50 years in the work force, you can expect less. Presidents like to point toward Social Security’s impending insolvency without mentioning part of the reason it is in trouble is because government keeps borrowing money from it that they do not put back.
Remember his economic advisor Austan Goosbee talked about privatizing Social Security? Do not be surprised if you hear rumbings next year, too – the same rumblings President Bush made several years ago. Now I ask you – would you want the private sector – otherwise known as Wall Street crooks – playing with your dough while you’re busy keeping the roof over your head and don’t have enough time to daily monitor their shenanigans?

“I just want everybody to be prepared” for this debate, which will take place over the next couple years. “Remember when I was running for office, I said I will not just tell you what you want to hear, I would tell you what you needed to hear. And you needed to hear that we’re going to have some hard choices about our deficit.”

Oh, that was my favorite comment of all. I have never heard a bigger pile of horse hooey! And that is saying something. He told everybody what they wanted to hear out on the campaign trail – unicorns and giant popsicles. But little else.

Is there anyone with the courage to stand up and insist that this President start telling the truth? The press has already proven themselves to be, almost uniformly, nothing more than notches on his bedpost, cowed from speaking up for fear of a lack of access, which would mean a loss of their $5 million dollar book deals.

Who is speaking for us?

Thank you. Rant over.

Read how Austan Goolsbee, one of Obama’s chief economic advisors, tiptoes, avoids and runs away from this idea!!

CORKER: There is no question, and I think that first of all, I plan to offer changes to this resolution authority that say that, if a large entity like this has to go through this resolution where in essence they’re liquidated in an orderly way, I think that everything that the executive team and the board members have earned through this company over the last five years needs to be clawed back. In other words, there needs to be some penalties assessed to the management that have caused the country to have to go through this orderly liquidation process. So absolutely, I will be offering an amendment that deals with that, so that we’re taking back, we’re clawing back all the earnings that management has made out of this firm, if it has to go through orderly liquidation. I think that’s very appropriate, and certainly I’m going to be doing that on the floor if it doesn’t make
it into the base bill.

TAPPER: Austan, can the White House get behind that clawback
provision? Are you being out-populisted by Republicans?

GOOLSBEE: Well, look, in the bill now — the president went to
Cooper Union this last week to revisit the spot where more than two
years ago, he went and said we need to have fundamental reform–

TAPPER: But there is no clawback in this bill?

GOOLSBEE: There is a requirement that they’re all fired. If you
get to that point, all the management is fired–

TAPPER: So they take their $500 million to their home in the Hamptons.

GOOLSBEE: — all the shareholders are wiped out. Well, look, as I say, on any details, we’re open to looking at negotiating the details of how we carry out the president’s principles. But if negotiation — and Senator Corker, to his credit, is not in this camp — but if the negotiators are going to come forward more as a delaying tactic and we’re just going to put in hundreds of amendments and try to keep this going so as to stall, delay and kill reform, that’s not going to happen. This is going to pass.

Um. No. It’s not a delaying tactic. But since we saw in the case of Goldman Sachs that they were betting on the market crashing and profiting by our losses, we need to find some way to put the fear of God into these jerks so that they do not try to profit by playing Ponzi schemes with our dough. Corker’s idea is just one way to make sure we have leglsiation with teeth.

Whether Senator Corker is just doing some populist-type posturing or not, the point is made — if we don’t have accountability in this reform bill and, as Dem. Senator Sherrod Brown discussed earlier, a way to overcome this “too big to fail” debacle, any reform falling short of tackling those two concerns effectively is meaningless.

What do you think would be fitting punishment for irresponsible and dishonest Wall Street sharks? I have a feeling I know the answer!

Testimony Could Undercut SEC Charge Against Goldman

The government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.

Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.

If true, the testimony would go directly against government claims that ACA did not know Paulson was hoping the collateralized debt obligations would fail, and subvert charges that Goldman breached its duty by not informing ACA of Paulson’s position.

CNBC has examined documents in which a government official asked Pellegrini whether he informed ACA CDO manager Laura Schwartz about Paulson’s position in the portfolio, named Abacus 2007-AC1.

“Did you tell her that you were interested in taking a short position in Abacus?” a government official asked Pellegrini, referring to the name of the CDO portfolio.

“Yes, that was the purpose of the meeting,” Pellegrini responded.

Oops. I am guessing that is not the answer they anticipated:

The exchange is key in that the Securities and Exchange Commission is charging that the failure to disclose Paulson’s position was a “material” factor that could have caused both ACA and German Bank IKB to back out of the CDO investment. When the CDO failed, Paulson reaped a gain of more than $900 million, the government has said.

The SEC does not mention the exchange in its complaint against Goldman.

“We look forward to presenting a complete and accurate evidentiary record in court,” SEC spokesman John Nester said in a statement to CNBC.

CNBC further learned that Pellegrini and Schwartz met at least three times to discuss the CDO and Paulson’s short position on Abacus.

Because of the deal’s structuring, Paulson stood to gain $900 million from the deal but lose only $20 million.

Here’s the thing. Couldn’t they have actually done a TAD more investigating before making these charges against Goldman Sachs? I mean, they make the charges just the other day, and voila, a few days later, this testimony comes out completely contradicting their charges. I’m just saying, maybe SOMEONE could have done a little more homework before leveling these charges, don’t you think?

And while I am at it, NQ reader Peggy Sue supplied this fascinating testimony from William Black on Lehman Brothers to the House Finance Committee. It is quite an indictment of a number of federal entities, especially the Fed, as well as the SEC:

Holy smokes. Mr. Black didn’t mince any words, did he? He is exactly the kind of straight talker we need to clear up this big, huge, mess. And he exposes the sheer incompetence of those who have been charged with oversight of financial institutions, especially continuing “business as usual” when that business was costing us millions and millions of dollars.

It sounds to me like there are a helluva lot of people running this show deserving of lawsuits, too – I’m not holding my breath that they will get their comeuppance, though. They’ll probably get promotions…

Democratic officeholders should be afraid.

Republican officeholders, too.

For many a year now, officeholders of both major parties have worked hard to earn the distrust of ordinary Americans. It appears that they finally have succeeded.

If only ordinary Americans hadn’t been so inattentive. If only ordinary Americans hadn’t been so trusting. If only ordinary Americans hadn’t been so damnably nice, the country would be in a better position to manage its finances today. [snip]

Better late than never, a lot of ordinary Americans are waking up to the sobering reality that there really is no one they can trust. Not Democrats. Not Republicans. Not government. Not corporations. And certainly not corporations in league with government.

The people who are angry today are more in tune with this nation’s founders than ordinary Americans have been in decades.

While there are those who make fun of a few tea partiers dressing up in costumes reminiscent of our founding fathers, those costumes are designed to make a point:

The United States has an intricate system of checks and balances, and a government structure based on a separation of powers, and a Bill of Rights that safeguards the rights of states and the rights of the people precisely because the greatest collection of political talent and philosophical insight ever assembled on this continent — and maybe anywhere on this planet — looked at the concept of government and said, “We need to make a really small cage for this thing, then be careful not to overfeed it.”

We seem to have lost the care-and- feeding instructions about a century ago. We let government out of its little cage and it has been consuming everything it can lay its paws on ever since. In the last 45 years, it has been on a real binge, and in the last year and a half, it has taken bigger bites than a lot of people thought possible.

Ordinary Americans who care about freedom are finally getting a clue and — horrors! — they’re hollering at members of Congress. That’s right: Nice, trusting, formerly inattentive Americans are getting in the faces of the political class and calling them names.

…If members of the political class are too tender to endure a little well-earned rudeness from the people whose hard-earned money they like to “spread around,” then they ought to get out of politics. Maybe their successors will find the voice of the people less irritating.

While O’Brien is correct in stating that this righteous anger needs to be expressed without violence, he also states that this administration and our media as taking to shutting down criticism with tactics of demonization (just like the administration before it):

Don’t doubt for a second that the left is hoping desperately for someone to step all the way out of line. They thought they had their man — and early news reports said they did — when Joseph Stack crashed his Piper Dakota into an IRS building in Texas.
As it turned out, Stack proved to be a Marx-quoting lefty — the wrong flavor of nut.

So the left has to settle for a little name-calling of its own: “ignorant,” “racist,” “homophobes,” “hooligans,” “extremists.” The list, as you know, goes on and on.

It’s bunk, but it’s the script.

Tea Party folks are just patriots worried, with good reason, about the future of the country they love. They’re vocal and they’re inspiringly unaffiliated.

They scare the hell out of both political parties, because they’ve embraced distrust.

The Democrats fear them because they see through the left’s empty promise of utopia in exchange for freedom. The Republicans fear them because they’re pushy and because they’re loyal to their principles rather than to a party.

They make everyone uncomfortable. That’s healthy.

While I’ve never been to a tea party protest, I got good and angry when the bailouts started at the end of 2008 and the pork laden non useful Stimulus package passed in 2009 and the bailouts of car companies that couldn’t run themselves properly happened, too. The 2700 page health care monstrosity, whose ugly details are now just coming to light, was the last straw.

I was taught to play by the rules only to discover my taxpayer dollars were used to bail out those using our investments as a giant ponzi scheme. And too many politicans who exempt themselves from the rules and policies we are expected to follow take pork for their districts as an inducement to continue to sell taxpayers down the river.

So crooks and liars are rewarded for their folly while the rest of us are told to pay the bill – and keep playing by the rules. That is but one reason for the groundswell of anger sweeping the country.

What are yours?

Elizabeth Warren and Jamie Dimon

How is it that some people are able to aggressively promote the virtues of truth, transparency, and integrity within our financial system while others would seem to talk a good game but do not truly walk the walk? The key, in my mind, is that the former are not beholden to a constituency focused on short term maximization of profits and revenues. Who is distinguishing herself as a leader in this category? Elizabeth Warren, the current chair of the Congressional Oversight Panel to investigate the U.S. banking bailout.

Warren writes in today’s Wall Street Journal of Wall Street’s Race to the Bottom. This race is very much a function of implementing strategies and developing products that have served to maximize the short term revenues of these firms, while eroding the very foundation of the financial system itself.

Of particular interest in Warren’s article is her comment on Congressional efforts to develop a consumer finance protection effort and the response of Wall Street’s CEOs to this effort. Warren derisively singles out JP Morgan’s Jamie Dimon, Wall Street’s top banker. She writes:

The consumer agency is a watchdog that would root out gimmicks and traps and slim down paperwork, giving families a fighting chance to hang on to some of their money. So far, Wall Street CEOs seem determined to stop any kind of watchdog. They seem to think that they can run their businesses forever without our trust. This is a bad calculation.

It’s a bad calculation because shareholders suffer enormously from the long-term cost of the boom-and- bust cycles that accompany a poorly regulated market. J.P. Morgan CEO Jamie Dimon recently explained this brave new world, saying that crises should be expected “every five to seven years.”

He is wrong.

Dimon seems to accept the fact that markets and economies will tend to excess as a normal order of business. The fact is our economy and markets have ballooned every five to seven years since the late ’80s. But, is this normal? No. What drove the ballooning was the willingness and desire on behalf of both borrowers and lenders to implement excessive leverage across a wide array of asset classes, utilizing both sides of the balance sheet, and even moving off-balance sheet as well.

Wall Street pushed the leverage because it drove short term revenues.

Who failed?

1. Wall Street management.
2. Wall Street’s boards of directors.
3. Regulators of all stripes, including the SEC, FINRA, OCC (Office of the Comptroller of the Currency), FHFA (Federal Housing Finance Agency), and OTS (Office of Thrift Supervision).
4. Congressional oversight.

Warren is right. Dimon is wrong.

Blaming the market and economy for excesses in the natural ebb and flow of capital is shirking responsibility.

The aforementioned CEOs, boards, and regulators have a responsibility to protect and promote prudent and wise use of capital. If that practice hits short term profits, so be it. This obligatory prudence is their charge and it will promote long term fiscal health and free market capitalism.

When will Jamie Dimon, his fellow CEOs, the members of the boards, and the regulators have the balls to call for real transparency and take a stand for true capitalism in the process? America is waiting.

Thank you, Elizabeth Warren.

LD

Bloomberg’s Jonathan Weil once again distinguishes himself and provides great insight on this dynamic in writing, Fudging Losses is Easy When the FDIC Does It Too:

No wonder so many banks are delaying their losses. The Federal Deposit Insurance Corp. keeps showing them how, by doing the same thing with its own.

Last week the FDIC, led by Chairman Sheila Bair since 2006, said its insurance fund’s liabilities exceeded assets by $8.2 billion as of Sept. 30. That marked the first time since 1992 that the industry-financed fund had shown a deficit. There’s plenty of reason to believe its financial health is much worse.

How much worse?

Here’s how the numbers break down. The FDIC said its fund’s latest deficit included a $38.9 billion reserve for future bank failures, as of Sept. 30. By comparison, the agency reported $30.7 billion of such losses for the previous year.

The credibility of that reserve figure gets shaky when you consider how much the number of troubled banks has risen lately. The FDIC last week said the tally of banks on its “problem list” more than tripled during the past year. The list consists of banks that, in the agency’s view, exhibit “unsafe or unsound” lending practices or financial conditions. (The FDIC doesn’t name the banks.)

Specifically, the FDIC said there were 552 banks with $345.9 billion of assets on its problem list as of Sept. 30 — almost 7 percent of all U.S. banks. That was up from 171 banks with $115.6 billion of assets a year earlier.

The upshot: The FDIC says it expects only a modest increase in losses from bank failures during the next four quarters, while it also says the number of banks on the brink of failure has skyrocketed.

The analysis here is simple. The number of problem banks and problem assets increases by 300%. The reserve fund increases by 30% or 1/10th the rate of increase.

While Wall Street banks are supposedly racking up mega-profits and readying to pay extraordinary bonuses, the American taxpayer will be receiving a bill on Tuesday for the hamburgers the industry is eating today.

Thank you, Jonathan Weil.

LD

Additionally, analysts also discount the fact that the FDIC fund to cover depositors of failed institutions is close to zero. This fund can be replenished by the FDIC imposing an assessment on remaining banks or, if need be, tapping an emergency line of credit at the U.S. Treasury.

What will be the real impact of bank failures? In my opinion, American consumer confidence and small business owners will bear the brunt of the pain from the bank failures. Why?

>> The reality of further job losses at these banks and those they support within local economies.

>> The psychological impact of seeing small and community banks fail.

>> The lack of credit availability to consumers and small business owners in communities across America.

What are the plans to stem the tide and plug the holes created by bank failures?

1. Have larger banks take over these institutions. What are the risks in this transition? Many of these banks are already filled with underperforming and delinquent loans. The acquiring banks typically want the cheap deposit base of the failed banks and little more.

2. Private equity buyers will have the opportunity to purchase failed banks. What are the risks in this process? The private equity buyers will have to maintain higher capital ratios. Another risk is that the private equity buyers may utilize the cheap deposit base as a pool of liquidity and capital for higher return undertakings than traditional lending in the local communities.

In my opinion, the gap dividing Wall Street and Main Street is only going to grow wider in the midst of these bank failures. The party on Wall Street has little appreciation for this reality on Main Street.

John Kanas, the former chairman and CEO of North Fork Bank, and his private equity firm purchased BankUnited in Florida this past May. Kanas addresses these topics in an interview on CNBC.

LD

Developments within the credit card space have exposed the true colors of these institutions . . . not that there was ever any doubt. Recall how consumer outrage at rapidly rising interest rates on credit cards pressured Washington to rein in the usurious business practices of the financial industry.

New legislation was badly needed as banks clearly utilized abusive business practices. The Wall Street Journal highlighted these developments in writing on May 21st, Credit-Card Fees Curbed:

“Credit cards are a tremendously valuable and useful tool for consumers, providing them with relief during critical moments,” said Senate Banking Committee Chairman Christopher Dodd. “This is a very important industry….We just want it to work better.”

The legislation marked a major defeat for the credit-card industry, as lawmakers complained that consumers are being hit with tricks and traps on their cards.

Well, while the legislators were in the front room having the photo ops, the bankers were in the back room building a new and better mousetrap, at least from their perspective.

The Los Angeles Times sheds light on how Credit Card Firms Try End Run Around New Federal Rules:

Banks are quietly changing the terms of millions of credit card accounts as they brace for a tough new law that will limit rate hikes.

The law would restrict interest rate increases unless a credit card has a variable rate. So at least two major lenders are switching their cards with fixed rates to — you guessed it — variable rates.

“It’s completely unfair,” said Linda Sherry, a spokeswoman for Consumer Action. “It’s an end run around the intent of the new law.”

That law is the Credit Card Accountability, Responsibility and Disclosure Act, which President Obama affixed with his signature in May. Its various provisions will be phased in between next month and February.

Who are these two major lenders? Bank of America and JP Morgan Chase. Given the size of their operations, watch every other credit card issuer set the same trap.

How exactly does the trap work? The banks try to baffle consumers with bull*%!# while sticking their hands ever deeper into our wallets. The Los Angeles Times highlights:

Los Angeles resident Victoria Afonina received a letter from Bank of America the other day informing her that “as a result of a change in our business practices, your annual percentage rate will use a variable rate formula based on the U.S. prime rate.”

“If the prime rate changes,” it said, “your APR will vary accordingly.”

Afonina, 44, told me she had to read the letter several times to understand what BofA was saying.

She said she’d been a cardholder with the bank for about five years and had enjoyed a relatively low fixed rate of 9.9% any time she carried a balance.

“When I finally understood what they were saying, and that my rate could change every month, I was shocked,” Afonina said. “I’m a good customer. Why are they treating me like that?”

Good question.

“The change from fixed to variable rates allows us to better manage our business as market conditions change,” said Betty Riess, a BofA spokeswoman.

And those new federal rules. . . ?

“Legislative and regulatory changes that limit our ability to re-price for risk were a factor in our decision,” Riess acknowledged.

How could Washington possibly write legislation which allows banks to set these traps and negate the very spirit of the law? Are they that stupid? Are the bank lobbying efforts that strong? Are legislators more concerned with the photo op and headlines than truly protecting consumer interests?

Yes, yes, and yes.

In the meantime, Sense on Cents strongly encourages you to pay down your credit card balances as quickly as possible so you will not be subject to this usury!!

LD

Rep. Edolphus Towns

I commend Rep. Edolphus Towns (D-NY), Chairman of the House Committee on Oversight and Government Reform. Rep. Town’s closing statement at yesterday’s Congressional hearing culminated some riveting theatre. That said, this is not a one act play. Rep. Towns highlights the need to dig deeper in exposing what truly happened in the midst of the Bank of America takeover of Merrill Lynch. Towns finished the hearing with this Closing Statement:

At the outset of this hearing, I said that it’s time to shine some light on the events surrounding Bank of America’s acquisition of Merrill Lynch.

At this point, I would say we’ve gotten a peek, but we don’t have full sunshine yet.

I would make three observations:

1. There are significant inconsistencies between what we have been told today, what we were told two weeks ago by Ken Lewis, and what the Fed’s internal emails seem to say.

2. It is still unclear whether Bank of America was forced by the Federal government to go through with the Merrill deal, or whether Ken Lewis pulled off what may have been the greatest financial shakedown of all time; and

3. As a result of this hearing, we have learned that the SEC and FDIC played a role in this transaction.

Former Treasury Secretary Hank Paulson has agreed to appear before this Committee in July and I look forward to that hearing.

But we also need to hear from the FDIC and the SEC, so that we can better understand what happened during the dark days of last December.

Will Congress and the Obama administration look to pursue these ‘inconsistencies?’ Will the parties to these conversations collectively be brought together so these inconsistencies can be addressed? Will the American public once again be subjected to an accusation by one party to a conversation claiming the other party misremembered?

In true Joe Friday fashion, Rep. Ed Towns echoes my sentiments:

The immediate reaction to Bernanke’s testimony is less than positive. The Bank of America-Merrill Lynch ‘play’ could very well be a preview to the Fed as the uber-regulator for systemic risk. Sense on Cents strongly believes the Fed should not occupy that role. Why? Throw any concept of an independent Federal Reserve right out the window. Bloomberg addresses this prospect in, Bernanke Grilling May Weaken Case for Expanded Powers:

Bernanke failed to resolve some lawmakers’ questions on whether the Fed bullied executives and stepped over other regulators in the name of financial stability in a three-hour congressional hearing yesterday.

Criticisms by members of both parties are likely to diminish support for the Obama administration’s plan to make the Fed the single agency responsible for the largest and most interconnected financial institutions.

“There’s something rotten in the cotton here — no ifs, ands or buts about it,” Representative Edolphus Towns, a New York Democrat who chairs the House Oversight Committee, told reporters after the hearing. “There was a forced situation, a shotgun wedding” and “we’re just trying to find out who had the shotgun.”

Will it be business as usual in Washington or will the American public truly learn if Ben Bernanke and possibly Hank Paulson abused their powers.

Don’t recall? Misremembered? Just the facts, please!

LD

The intrigue behind the acquisition of Merrill Lynch by Bank of America may never be known. Will Congress pursue total transparency and integrity to compel all pertinent parties to be fully forthcoming? Would Congress go so far as to appoint an independent investigator with powers to subpoena Ben Bernanke, Ken Lewis, John Thain, Hank Paulson, Larry Summers, and Tim Geithner? Does the rule of law apply in our country only when convenient? Bloomberg provides a peek into this intrigue, Republicans Say Fed Set Late Report of Merrill Loss:

House Republican staffers said the Federal Reserve tried to control the timing of disclosures of rising losses at Merrill Lynch & Co. in the weeks leading up to its takeover by Bank of America Corp., according to a memo obtained by Bloomberg.

The memo, prepared by staffers for Republican lawmakers at a House Oversight Committee hearing tomorrow, cites what it identifies as excerpts from internal Fed e-mails to support the conclusion. Fed Chairman Ben S. Bernanke is scheduled to testify at tomorrow’s hearing in Washington.

The e-mails show that the Fed “engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other Federal Regulatory agencies,” Representative Darrell Issa, the panel’s senior Republican, said in an e-mailed statement.

Strong words by Representative Issa.

Cover-up? Who was negatively impacted by not revealing information on losses at Merrill Lynch? Existing Bank of America shareholders, who may very well have voted against this deal.

Hiding details from other Federal regulatory agencies? Such as? The SEC. The OCC. The FDIC, which would assume a significant percentage of losses on assets purchased by Bank of America. How did FDIC chair, Sheila Bair, feel about that prospect?

“Dear Ben, Strong discomfort with this deal at the FDIC, for all the reasons you and I have discussed,” Bair said in a Jan. 14 e-mail, according to the memo. “My board does not want to do this and I don’t think I can convince them to take losses beyond the proportion of assets coming out of the depository institutions.”

Who else was clearly reluctant to finalize this transaction? Bank of America chairman and CEO, Ken Lewis. He testified in February to New York State authorities about being pressured by Bernanke and Paulson. Lewis hedged his statement about Bernanke’s and Paulson’s pressuring him, if not outright threatening him, under questioning by Congress earlier this month.

Will we learn more today from Bernanke or will this chapter close without a full accounting of what truly happened? Will Congress pass the Obama administration’s proposal to make the Federal Reserve the uber-regulator to stem systemic risk? Might shareholder rights be trampled in the process? Do the ends justify the means? Do laws mean anything? Can one be a well-intended crook? So many questions.

LD

Buying Brand Obama

Barack Obama is a brand. And the Obama brand is designed to make us feel good about our government while corporate overlords loot the Treasury, our elected officials continue to have their palms greased by armies of corporate lobbyists, our corporate media diverts us with gossip and trivia and our imperial wars expand in the Middle East. Brand Obama is about being happy consumers. We are entertained. We feel hopeful. We like our president. We believe he is like us. But like all branded products spun out from the manipulative world of corporate advertising, we are being duped into doing and supporting a lot of things that are not in our interest.

What, for all our faith and hope, has the Obama brand given us? His administration has spent, lent or guaranteed $12.8 trillion in taxpayer dollars to Wall Street and insolvent banks in a doomed effort to reinflate the bubble economy, a tactic that at best forestalls catastrophe and will leave us broke in a time of profound crisis. Brand Obama has allocated nearly $1 trillion in defense-related spending and the continuation of our doomed imperial projects in Iraq, where military planners now estimate that 70,000 troops will remain for the next 15 to 20 years. Brand Obama has expanded the war in Afghanistan, including the use of drones sent on cross-border bombing runs into Pakistan that have doubled the number of civilians killed over the past three months. Brand Obama has refused to ease restrictions so workers can organize and will not consider single-payer, not-for-profit health care for all Americans. And Brand Obama will not prosecute the Bush administration for war crimes, including the use of torture, and has refused to dismantle Bush’s secrecy laws or restore habeas corpus.

That is EXACTLY what MANY of us have been saying ad nauseum for MONTHS now – Obama is another Bush, further evidenced by his saying one thing and doing the exact OPPOSITE:

Brand Obama offers us an image that appears radically individualistic and new. It inoculates us from seeing that the old engines of corporate power and the vast military-industrial complex continue to plunder the country. Corporations, which control our politics, no longer produce products that are essentially different, but brands that are different. Brand Obama does not threaten the core of the corporate state any more than did Brand George W. Bush. The Bush brand collapsed. We became immune to its studied folksiness. We saw through its artifice. This is a common deflation in the world of advertising. So we have been given a new Obama brand with an exciting and faintly erotic appeal. Benetton and Calvin Klein were the precursors to the Obama brand, using ads to associate themselves with risqué art and progressive politics. It gave their products an edge. But the goal, as with all brands, was to make passive consumers mistake a brand with an experience.

“The abandonment of the radical economic foundations of the women’s and civil-rights movements by the conflation of causes that came to be called political correctness successfully trained a generation of activists in the politics of image, not action,” Naomi Klein wrote in “No Logo.”

Well, ain’t that the damn truth. Sad, but the truth, nonetheless. And it led to this:

Obama, who has become a global celebrity, was molded easily into a brand. He had almost no experience, other than two years in the Senate, lacked any moral core and could be painted as all things to all people. His brief Senate voting record was a miserable surrender to corporate interests. He was happy to promote nuclear power as “green” energy. He voted to continue the wars in Iraq and Afghanistan. He reauthorized the Patriot Act. He would not back a bill designed to cap predatory credit card interest rates. He opposed a bill that would have reformed the notorious Mining Law of 1872. He refused to support the single-payer health care bill HR676, sponsored by Reps. Dennis Kucinich and John Conyers. He supported the death penalty. And he backed a class-action “reform” bill that was part of a large lobbying effort by financial firms. The law, known as the Class Action Fairness Act, would effectively shut down state courts as a venue to hear most class-action lawsuits and deny redress in many of the courts where these cases have a chance of defying powerful corporate challenges.

While Gaza was being bombarded and hit with airstrikes in the weeks before Obama took office, “the Obama team let it be known that it would not object to the planned resupply of ‘smart bombs’ and other hi-tech ordnance that was already flowing to Israel,” according to Seymour Hersh. Even his one vaunted anti-war speech as a state senator, perhaps his single real act of defiance, was swiftly reversed. He told the Chicago Tribune on July 27, 2004, that “there’s not that much difference between my position and George Bush’s position at this stage. The difference, in my mind, is who’s in a position to execute.” And unlike anti-war stalwarts like Kucinich, who gave hundreds of speeches against the war, Obama then dutifully stood silent until the Iraq war became unpopular.

Oh, yes – a man of SUCH conviction. Hahahaha. As long as it scores him some points, he’s ALL over it.

But get this – if there was any doubt whatsoever in any way, shape, or form, that Obama is the sole result of marketing, check this out:

Obama’s campaign won the vote of hundreds of marketers, agency heads and marketing-services vendors gathered at the Association of National Advertisers’ annual conference in October. The Obama campaign was named Advertising Age’s marketer of the year for 2008 and edged out runners-up Apple and Zappos.com. Take it from the professionals. Brand Obama is a marketer’s dream. President Obama does one thing and Brand Obama gets you to believe another. This is the essence of successful advertising. You buy or do what the advertiser wants because of how they can make you feel.

Yep, pretty much – so it doesn’t matter HOW empty the promises, or vague the rhetoric, doggone it, he just makes us feel all tingly inside (blech, yuck, ick).

Hedges has an explanation for how we got to this place:

Celebrity culture has leeched into every aspect of our culture, including politics, to bequeath to us what Benjamin DeMott called “junk politics.” Junk politics does not demand justice or the reparation of rights. Junk politics personalizes and moralizes issues rather than clarifying them. “It’s impatient with articulated conflict, enthusiastic about America’s optimism and moral character, and heavily dependent on feel-your-pain language and gesture,” DeMott noted. The result of junk politics is that nothing changes – “meaning zero interruption in the processes and practices that strengthen existing, interlocking systems of socioeconomic advantage.” It redefines traditional values, tilting “courage toward braggadocio, sympathy toward mawkishness, humility toward self-disrespect, identification with ordinary citizens toward distrust of brains.” Junk politics “miniaturizes large, complex problems at home while maximizing threats from abroad. It’s also given to abrupt unexplained reversals of its own public stances, often spectacularly bloating problems previously miniaturized.” And finally, it “seeks at every turn to obliterate voters’ consciousness of socioeconomic and other differences in their midst.”

An image-based culture, one dominated by junk politics, communicates through narratives, pictures and carefully orchestrated spectacle and manufactured pseudo-drama. Scandalous affairs, hurricanes, earthquakes, untimely deaths, lethal new viruses, train wrecks—these events play well on computer screens and television. International diplomacy, labor union negotiations and convoluted bailout packages do not yield exciting personal narratives or stimulating images. A governor who patronizes call girls becomes a huge news story. A politician who proposes serious regulatory reform, universal health care or advocates curbing wasteful spending is boring. Kings, queens and emperors once used their court conspiracies to divert their subjects. Today cinematic, political and journalistic celebrities distract us with their personal foibles and scandals. They create our public mythology. Acting, politics and sports have become, as they were during the reign of Nero, interchangeable.

Yet another reference to Nero – and appropriately so.

But here is yet another sad truth:

In an age of images and entertainment, in an age of instant emotional gratification, we do not seek reality. Reality is complicated. Reality is boring. We are incapable or unwilling to handle its confusion. We ask to be indulged and comforted by clichés, stereotypes and inspirational messages that tell us we can be whoever we seek to be, that we live in the greatest country on Earth, that we are endowed with superior moral and physical qualities, and that our future will always be glorious and prosperous, either because of our own attributes, or our national character, or because we are blessed by God. Reality is not accepted as an impediment to our desires. Reality does not make us feel good.

In his book “Public Opinion,” Walter Lippmann distinguished between “the world outside and the pictures in our heads.” He defined a “stereotype” as an oversimplified pattern that helps us find meaning in the world. Lippmann cited examples of the crude “stereotypes we carry about in our heads” of whole groups of people such as “Germans,” “South Europeans,” “Negroes,” “Harvard men,” “agitators” and others. These stereotypes, Lippmann noted, give a reassuring and false consistency to the chaos of existence. They offer easily grasped explanations of reality and are closer to propaganda because they simplify rather than complicate.

Pseudo-events—dramatic productions orchestrated by publicists, political machines, television, Hollywood or advertisers—however, are very different. They have, as Daniel Boorstin wrote in “The Image: A Guide to Pseudo-Events in America,” the capacity to appear real even though we know they are staged. They are capable, because they can evoke a powerful emotional response, of overwhelming reality and replacing reality with a fictional narrative that often becomes accepted truth. The unmasking of a stereotype damages and often destroys its credibility. But pseudo-events, whether they show the president in an auto plant or a soup kitchen or addressing troops in Iraq, are immune to this deflation. The exposure of the elaborate mechanisms behind the pseudo-event only adds to its fascination and its power. This is the basis of the convoluted television reporting on how effectively political campaigns and politicians have been stage-managed. Reporters, especially those on television, no longer ask if the message is true but if the pseudo-event worked or did not work as political theater. Pseudo-events are judged on how effectively we have been manipulated by illusion. Those events that appear real are relished and lauded. Those that fail to create a believable illusion are deemed failures. Truth is irrelevant. Those who succeed in politics, as in most of the culture, are those who create the brands and pseudo-events that offer the most convincing fantasies. And this is the art Obama has mastered.

Ah, yes – convincing people to ignore reality and just listen to the sound of his voice. Great – just what we want in our elected officials – to create a little fantasy world in which we can live and not have to deal with all that icky reality stuff:

A public that can no longer distinguish between truth and fiction is left to interpret reality through illusion. Random facts or obscure bits of data and trivia are used to bolster illusion and give it credibility or are discarded if they interfere with the message. The worse reality becomes—the more, for example, foreclosures and unemployment skyrocket—the more people seek refuge and comfort in illusions. When opinions cannot be distinguished from facts, when there is no universal standard to determine truth in law, in science, in scholarship, or in reporting the events of the day, when the most valued skill is the ability to entertain, the world becomes a place where lies become true, where people can believe what they want to believe. This is the real danger of pseudo-events and why pseudo-events are far more pernicious than stereotypes. They do not explain reality, as stereotypes attempt to, but replace reality. Pseudo-events redefine reality by the parameters set by their creators. These creators, who make massive profits peddling these illusions, have a vested interest in maintaining the power structures they control.

The old production-oriented culture demanded what the historian Warren Susman termed character. The new consumption-oriented culture demands what he called personality. The shift in values is a shift from a fixed morality to the artifice of presentation. The old cultural values of thrift and moderation honored hard work, integrity and courage. The consumption-oriented culture honors charm, fascination and likability. “The social role demanded of all in the new culture of personality was that of a performer,” Susman wrote. “Every American was to become a performing self.”

Hard work?? Thrift? Moderation? Oh, my – that is SOOO Twentieth Century! It’s a brand new day, folks, and along with that is a new brand, OBAMA, and his “listen to what I say, and ignore everything I do”:

The junk politics practiced by Obama is a consumer fraud. It is about performance. It is about lies. It is about keeping us in a perpetual state of childishness. But the longer we live in illusion, the worse reality will be when it finally shatters our fantasies. Those who do not understand what is happening around them and who are overwhelmed by a brutal reality they did not expect or foresee search desperately for saviors. They beg demagogues to come to their rescue. This is the ultimate danger of the Obama Brand. It effectively masks the wanton internal destruction and theft being carried out by our corporate state. These corporations, once they have stolen trillions in taxpayer wealth, will leave tens of millions of Americans bereft, bewildered and yearning for even more potent and deadly illusions, ones that could swiftly snuff out what is left of our diminished open society.

Chris Hedges’ new book, “Empire of Illusion: The End of Literacy and the Triumph of Spectacle,” will be out in July and can be preordered on Amazon (and please remember that No Quarter benefits if you click the Amazon button at the No Quarter site) or at your local bookstore

I couldn’t have said it better myself. Both Obama the Brand and the man are dangerous with his marketing to mask his real actions. Too many people did not wake up before granting Bush a second term (though even THAT is debatable given the state of our elections, particularly electronic voting machines – shameless plug for “Hacking Democracy” Live Chat and voter fraud in general). We can only hope, and work (in the good ol’ Twentieth Century way), to help more people move back into the reality-based community. To move from the illusion of Obama the Brand to the reality of Obama the Politician. The sooner, the better. And “sooner” can’t come fast enough for me. How about you?

The world is awash in a sea of debt. The debt is piled highest in Europe on a relative basis while in actual terms the debt in the United States outpaces all other parts of the world. As the deleveraging process continues, the demand for new money to spur growth is anemic. The paradox of thrift is keeping our economy in a state of stagnation. The Fed and U.S. Treasury are utilizing all tools in their box to restructure debt and promote lending without risking default. Ultimately, all the Fed and Treasury programs will devalue the debt via inflation. Inflation, in which future dollars are worth less than current dollars, is akin to paying a negative rate of interest on money.

So when you think of the policies being promoted by Geithner, Bernanke, Obama, Summers, Jarrett, Orszag, and the rest of the administration, review them in light of that rate of interest on your money.

As the FT reports:

The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve’s last policy meeting.

The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation.

A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5 per cent.

Fed staff separately estimated what size and type of unconventional operations, including asset purchases, might provide this level of stimulus. They suggested that the Fed should expand its asset purchases by even more than the $1,150bn (€885bn, £788bn) increase policymakers authorised at the last meeting, which included $300bn of Treasury purchases.

I do believe this report as being accurate of the administration’s intentions. At every turn, members of the administration have put forth proposals and policies consistent with this negative interest rate approach. It would be foolhardy to think that the administration will stop now. Thus, we should expect a continued expansion of the Fed’s balance sheet, more quantitative easing, more capital injections into the banking system, and no hesitation at ongoing fiscal stimulus. Will Congress look to impose fiscal discipline? Do you really think Nancy Pelosi, Harry Reid, Chris Dodd or any other liberal Democrat will stop spending especially if they are told it is the right approach? They have lived for this day.

The end game will be inflation. The administration wants it. The risk is hyper-inflation.

How do stocks react to a bout of inflation and potentially hyper-inflation? Very good question. Companies with pricing power should do well. Those companies without pricing power will likely suffer.

How do bonds (fixed income instruments) react to a bout of inflation and potentially hyper-inflation? Bonds will decline in value precipitously.

What do market participants think?

LD