An Era Of Re-Regulation? Progressives Shouldn't Celebrate Too Soon
Sorry that the links didn't copy. You can find them on the original post.
By Manifesto Joe
So, deregulation in America is supposed to have died last week? Not so fast. Laissez faire, historically, is one of those economic notions that's sort of like Jason in those bad splatter movies -- it keeps coming back.
I don't doubt that, no matter which candidate is elected president in November, deregulation will be a somewhat untouchable position for a while, where financial markets are concerned. Until several years pass, and the $700 billion payoff at taxpayers' expense is complete, we won't hear much about it.
But this is a zombie that's a re-animator's dream, having risen from rigor mortis again and again. It's a toxic idea has always served the interests of the moneyed class in most societies. Even after being repeatedly discredited by financial crises such as this one, and many before, it only takes a generation or two to resurrect it with as much "credibility" as ever.
As a one-time college textbook editor, I worked with economists, and found them to be largely a priesthood of ideologues. Their ideas don't have to bear strong resemblance to events of the real world. Among many, if not most of them, the "free market" is a quasi-religion, to be challenged only at the questioning of one's intellect and/or sanity.
Interestingly, most of them, even the "free-market" disciples, agree that the looming $700 billion taxpayer bailout of the U.S. financial system is necessary, though perhaps a necessary evil.
We come back to a condition of humans never liking to admit they are wrong. We also come back to old wisdom that one shouldn't bite the hand that feeds one. Most professional economists have "invested" a big stake in "free-market" theory, and their sources of income -- universities, "think" tanks and such -- generally expect them to maintain a certain ideological purity.
When current events fade into history, don't be surprised if we have a lot of economists, and compliant lawmakers trolling for right-wing votes, who want to start deregulating everything yet again. To broadly paraphrase the poet Santayana, most people do not remember the past, and they are therefore condemned to repeat it.
I'll steal another line, this one paraphrased from Citizen Kane: You're going to need more than one lesson, and you're going to get more than one lesson. In this case, the "you" is the American people.
What happened during the past 30 years was widespread economic amnesia, even among the alleged experts. What was forgotten was people's natural inclination to grow greedy and behave badly when not subject to certain restraints.
It's easy to blame the people who signed on to unsound subprime mortgage loans, who ran up vast credit-card debt, and so forth, if you look at the situation in just one dimension. What about the predatory lenders who offered them all this credit they could never have gotten 30 years ago?
I remember being quite impressed in the spring of 1978, as I approached graduation from college, at being offered my very first gasoline credit card. It was a big deal. "We believe that people about to graduate from college are good credit risks," I was told. Years later I was offered an actual Visa card, and the line of credit was pretty modest.
Now, all you need is a pulse. My 81-year-old mother, in assisted living, is getting solicitations. It would be possible for her to obtain one of these cards and run up a $10,000 tab in a hurry, then default. What would they do? Ruin her credit? Garnish her Social Security check?
The fault ultimately lies with greedy lenders. The great unwashed are always an easy target for blame, but the people in the suits don't have to make such absurdly generous offers to hapless people. This go-round, they approved loans and gave out other credit like it was lunch, with no thought for when the bills came due and they had to actually collect.
A wonderful analogy came from Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group. In a Monday piece from McClatchy Newspapers, she commented on the regulatory lapses:
"The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly. Instead, they let everyone drink as much as they wanted and then handed them the car keys."
Here's the link to the complete article.
It is important to note that Bush, possibly the Herbert Hoover of this generation and much worse, has nevertheless planted seeds for an eventual revival of the old market mentality. One couldn't expect a mediocre-at-best product of privilege to do otherwise. Here's some of what he had to say, as reported by The Associated Press:
The president favored government intervention even though it opened him up to criticism from financial conservatives who are raising their eyebrows at the pricetag of the bailout plan. "Look, I'm sure there are some of my friends out there saying, `I thought this guy was a market guy. What happened to him?'" Bush said.
"Well, my first instinct wasn't to lay out a huge government plan," he said. "My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became."
In other words, this is supposed to be an anomaly, not the logical outcome of unregulated capitalism, even though we've seen it in history over and over. Here's the full AP article about Bush's take on this, if you can stomach it.
It would be desirable in many ways to just let the avaricious fatcats go under amid this excess, but that can't be. There are dogmatic libertarians who actually think Americans could be that stupid, both individually and collectively. But we can't afford that. It comes to a kind of economic blackmail -- the risk is too great for too many people who had nothing to do with the bad decisions on either end of the credit process. So, the fatcats will be bailed out.
The hope, against hope, is that "we won't be fooled again." That they won't be able to sell this bill of goods to the next generation in 20 years, and that our own generations of today won't forget. That the libertarians will finally learn that their naivete assumes marketplace self-policing that neither people nor institutions will ever do.
Maybe, just maybe one day, we'll learn. Keep a close watch on your retirement investments in the meantime. Here's one more thought-provoking link by Steve Fraser that I urge the reader to ponder.
Manifesto Joe Is An Underground Writer Living In Texas.
Showing posts with label deregulation. Show all posts
Showing posts with label deregulation. Show all posts
Monday, October 18, 2010
Saturday, May 15, 2010
Republicans Again Rewrite History: They Were The Main 'Architects' Of Deregulation
By Manifesto Joe
Republicans either have a great sense of sick humor, or they think everybody else has amnesia, or they are brainwashed stoolheads -- or some of the above, or all of the above.
Some of us were paying attention to matters political and economic over the past 30-plus years. Deregulation was mainly a Republican idea, in all facets of the economy. The mantras were all very familiar: If you hamstring business to where it can't operate, everybody suffers; the free market is self-regulating anyway; competition will make the pie bigger for everyone. ...
There were Democrats, dating back to Jimmy Carter, who fell for all this and become accomplices. I can't blame them too much -- I'm all for leaving the market to do anything it can do better than the public sector, and that encompasses many things.
But recent evidence seems quite clear that finance and oil drilling are not strong suits for unfettered private sectors.
New Deal-era banking regulations (the Glass-Steagall Act of 1933) were rolled back by the Gramm-Leach-Bliley Act of 1999. Yes, President Bill Clinton did sign that bill -- he now acknowledges that to have been a mistake. Please note that the three legislators whose names were attached to the latter act -- led by the former Senate solon of kleptocracy, Phil Gramm of Texas -- were all Republicans.
Listening to Republicans talk now reminds me somewhat of the 1970s, when you could actually hear some of them blame the Vietnam War on the Democratic Party. Remember Bob Dole's remark during his vice presidential debate with Walter Mondale in 1976, in which he talked about "Democrat wars"? I remember Barry Goldwater saying something to that effect as well.
Blaming Vietnam on Democrats is, historically, quite a stretch. Yes, they were in office during the 1965-68 escalation, and it was Cold War Democrats who crafted Vietnam policy. But was this against the opposition of Republicans?
Hardly. The main problem Republicans seemed to have with the Vietnam War was that, according to them, the U.S. wasn't fighting to win. They favored MORE aggressiveness, MORE escalation and MORE involvement, not less. With the lonely exceptions of Mark Hatfield in the Senate and Pete McClosky in the House, there were few high-profile Republican critics of the war -- only critics of its conduct. In 1964, Republican presidential candidate Goldwater even suggested that the use of "low-yield" nuclear weapons should be seriously considered. By 1968, it was the Democratic Party, not the Republicans, who were split up the middle over the war.
And, please recall that it was two Democratic senators, Wayne Morse of Oregon and Ernest Gruening of Alaska, who cast the only two votes in Congress against the Gulf of Tonkin Resolution in 1964. Neither man saw his political career survive the decade.
Yes, Wall Street and the Gulf of Mexico are both a long way from Vietnam. But what is recalled is the Republican propensity to rewrite history for their own political purposes. To hear some of these people tell it, Barack Obama, with his 16 months in office, is largely responsible for the Gulf spill, for the Wall Street/subprime mortgage crackup, and for the Tate-LaBianca murders. And whatever he didn't do, Clinton and Carter did.
Let's see: Who was in office in 2005, when we saw BP's first big disaster, the explosion of the oil refinery at Texas City, Texas? Who didn't follow up with any advocacy of more stringent safety regulations of the oil industry, even after negligence on BP's part in the 2005 blast was so evident?
And, let's see: Who was in office when possible criminal prosecution of BP over a 2006 Alaska pipeline rupture was killed?
And, let's see again: Who was in office most of the time that the federal Minerals Management Service was supposed to be inspecting that Deepwater Horizon rig in the Gulf at least monthly, and failing to do it?
No, Republicans are not the exclusive owners of modern deregulation. But they were certainly the primary "architects" of it. And their anti-government rhetoric became a self-fulfilling prophesy: When you keep saying that government is the problem, that it can't do anything right, and then you put people of that philosophy in charge of what little regulation there is ... don't be surprised by the meltdowns. And, please don't blame it on those who sometimes just went along, in some cases reluctantly.
I'm reminded once more of something the late Molly Ivins wrote. It was something to the effect that when you deregulate something, you will often find out why it was regulated in the first place.
Republicans, enough revisionist history, please. At this time in history, we need to get busy cleaning up the messes. Obama seems willing to try, if you will let him. But so far, that hasn't seemed to be your inclination.
Manifesto Joe Is An Underground Writer Living In
Texas.
Postscript: Please note that although this post is dated Saturday, May 15, it was not actually posted until Thursday, May 20. This discrepancy is the result of the saving of an earlier draft, and I don't think it will be worthwhile to go to the trouble of altering it.
Republicans either have a great sense of sick humor, or they think everybody else has amnesia, or they are brainwashed stoolheads -- or some of the above, or all of the above.
Some of us were paying attention to matters political and economic over the past 30-plus years. Deregulation was mainly a Republican idea, in all facets of the economy. The mantras were all very familiar: If you hamstring business to where it can't operate, everybody suffers; the free market is self-regulating anyway; competition will make the pie bigger for everyone. ...
There were Democrats, dating back to Jimmy Carter, who fell for all this and become accomplices. I can't blame them too much -- I'm all for leaving the market to do anything it can do better than the public sector, and that encompasses many things.
But recent evidence seems quite clear that finance and oil drilling are not strong suits for unfettered private sectors.
New Deal-era banking regulations (the Glass-Steagall Act of 1933) were rolled back by the Gramm-Leach-Bliley Act of 1999. Yes, President Bill Clinton did sign that bill -- he now acknowledges that to have been a mistake. Please note that the three legislators whose names were attached to the latter act -- led by the former Senate solon of kleptocracy, Phil Gramm of Texas -- were all Republicans.
Listening to Republicans talk now reminds me somewhat of the 1970s, when you could actually hear some of them blame the Vietnam War on the Democratic Party. Remember Bob Dole's remark during his vice presidential debate with Walter Mondale in 1976, in which he talked about "Democrat wars"? I remember Barry Goldwater saying something to that effect as well.
Blaming Vietnam on Democrats is, historically, quite a stretch. Yes, they were in office during the 1965-68 escalation, and it was Cold War Democrats who crafted Vietnam policy. But was this against the opposition of Republicans?
Hardly. The main problem Republicans seemed to have with the Vietnam War was that, according to them, the U.S. wasn't fighting to win. They favored MORE aggressiveness, MORE escalation and MORE involvement, not less. With the lonely exceptions of Mark Hatfield in the Senate and Pete McClosky in the House, there were few high-profile Republican critics of the war -- only critics of its conduct. In 1964, Republican presidential candidate Goldwater even suggested that the use of "low-yield" nuclear weapons should be seriously considered. By 1968, it was the Democratic Party, not the Republicans, who were split up the middle over the war.
And, please recall that it was two Democratic senators, Wayne Morse of Oregon and Ernest Gruening of Alaska, who cast the only two votes in Congress against the Gulf of Tonkin Resolution in 1964. Neither man saw his political career survive the decade.
Yes, Wall Street and the Gulf of Mexico are both a long way from Vietnam. But what is recalled is the Republican propensity to rewrite history for their own political purposes. To hear some of these people tell it, Barack Obama, with his 16 months in office, is largely responsible for the Gulf spill, for the Wall Street/subprime mortgage crackup, and for the Tate-LaBianca murders. And whatever he didn't do, Clinton and Carter did.
Let's see: Who was in office in 2005, when we saw BP's first big disaster, the explosion of the oil refinery at Texas City, Texas? Who didn't follow up with any advocacy of more stringent safety regulations of the oil industry, even after negligence on BP's part in the 2005 blast was so evident?
And, let's see: Who was in office when possible criminal prosecution of BP over a 2006 Alaska pipeline rupture was killed?
And, let's see again: Who was in office most of the time that the federal Minerals Management Service was supposed to be inspecting that Deepwater Horizon rig in the Gulf at least monthly, and failing to do it?
No, Republicans are not the exclusive owners of modern deregulation. But they were certainly the primary "architects" of it. And their anti-government rhetoric became a self-fulfilling prophesy: When you keep saying that government is the problem, that it can't do anything right, and then you put people of that philosophy in charge of what little regulation there is ... don't be surprised by the meltdowns. And, please don't blame it on those who sometimes just went along, in some cases reluctantly.
I'm reminded once more of something the late Molly Ivins wrote. It was something to the effect that when you deregulate something, you will often find out why it was regulated in the first place.
Republicans, enough revisionist history, please. At this time in history, we need to get busy cleaning up the messes. Obama seems willing to try, if you will let him. But so far, that hasn't seemed to be your inclination.
Manifesto Joe Is An Underground Writer Living In
Texas.
Postscript: Please note that although this post is dated Saturday, May 15, it was not actually posted until Thursday, May 20. This discrepancy is the result of the saving of an earlier draft, and I don't think it will be worthwhile to go to the trouble of altering it.
Tuesday, December 29, 2009
From Joe's Vault: On Natural Monopolies
Joe's been kicking back a little during the holidays, but an old post seems relevant now in light of the health care debate. And, having noticed that Texans are now paying much higher electric rates than our neighbors are, even after we deregulated, this seems all the more relevant. From Sept. 28, 2007:
By Manifesto Joe
The late Molly Ivins once wrote something to the effect that after a service is deregulated, the result is that people often discover why it was regulated in the first place.
For 30 years, the "Priesthood of the Free Market" has been hellbent to sell Americans on the deregulation and privatization of damn near everything. Their progress has been astonishing. Even the Iraq war seems to have been about half outsourced.
After considering the deregulation of the electricity market, I am inclined to look beyond the "true believers" of the free market, and toward those whose only true belief is in maximization of profits, no matter the cost to anyone else. Remember the story of the Trojan Horse?
But the tide may finally be turning. It appears that many officials in states where electricity has been deregulated (about a third have done so) have come to similar conclusions as the late Molly.
The Sept. 21 online edition of the Fort Worth Star-Telegram reported:
Support for electric deregulation has dramatically fallen among the nation's utility regulators, with one-third in deregulated states expressing the likelihood of some sort of re-regulation, according to a new survey.
Conducted in conjunction with Standard & Poor's, the telephone survey of 96 state utility regulators also showed a plurality answering "none" when asked which states operate the most successful deregulated market. ...
Tim Morstad, an analyst with AARP-Texas ... said the poll should some as no surprise to anyone who pays a light bill in Texas. ...
"The rest of the country is figuring out what Texas consumers already know, that deregulation fails to deliver lower rates and better service," he said. ...
The survey also found that 43 percent of regulators in states with deregulation say it does not work well, and 37 percent said it does. Moreover, 54 percent of regulators in states with deregulation report that re-regulation is likely.
Texas is far from the only state where ratepayers have seen this kind of deception. This is from an article carried by The Associated Press in April:
BENTON, Ill. --This wasn't supposed to happen with deregulation. Electric bills were supposed to go down. Instead, Ellie Dorchincez can almost see the dollars evaporating every time she turns on the lights or opens the freezer at her small Farm Fresh grocery store.
Her electric bill, which used to be about $800 a month, has jumped to $1,800. ...
The cause of her distress is a common problem: the failure of deregulation to deliver its promise of lower electricity prices. In many states, it's had the opposite effect with sharply higher rates -- 72 percent in Maryland, up to 50 percent in Illinois.
Not one of the 16 states -- plus the District of Columbia -- that have pushed forward with deregulation since the late 1990s can call it a success. In fact, consumers in those states fared worse than residents in states that stuck with a policy of regulating their power industries.
An Associated Press analysis of federal data shows consumers in the 17 deregulated areas paid an average of 30 percent more for power in 2006 than their counterparts in regulated states. That's up from a 24 percent gap in 1990.
The idea was to move from a monopoly situation to robust competition for electric customers, with backers promising potentially lower rates in state after state. ...
But competition, especially for residential and small business customers, rarely emerged. ...
Consumer groups ... say deregulation has had a chance to prove itself. In Texas, for example, competition did develop after rate caps ended -- but the energy prices remained higher.
In Robert Kuttner's now-classic 1998 book Everything for Sale: The Virtues and Limitations of Markets, the economist wrote (p. 228):
We regulate some industries because they work more efficiently as monopolies. It would be wasteful and duplicative to have two parallel gas pipelines, two sets of telephone poles, two parallel rail lines, or two electric grids. Neither supplier could cover his costs by running at half-capacity, and both would soon have to raise prices or go out of business. Left alone, one would likely absorb the other. ...
Once we tolerate a monopoly, the producer is no longer subject to the discipline of competition. ... in principle the consumer is free not to buy the product. But in many natural monopolies, such as electricity, water, and transit, the product is a virtual necessity, and consumer demand is fairly inelastic; hence the consumer cannot discipline the monopolist.
Enter those godless socialists, the regulators. But I suspect that by now there are many God-fearing ratepayers in Texas and many other states who wish to God they had those crypto-Marxists back.
I reluctantly stuck with Reliant Energy here in the Lone Star State, in part just to see what they would do after the latest phase of deregulation. You know, like, to test the classical economic theory. Silly me. I went from paying 13.3 cents per kilowatt hour to 14.5 cents -- and the latter during the worst heat of the Texas summer. I'm certain, of course, that this was just a coincidence. I'm nevertheless switching to a "competitor" -- but not holding my breath for much improvement.
I posted this comment on a great blog, Red Hog Diary, about the health-care issue. But I think it also says a bit about natural monopolies that is salient:
A good incision sometimes works wonders. I'm going to try one.
The crucial thing so many seem to miss, and that populations of every developed country other than the U.S. have eventually understood, is that health care isn't a sector of the economy that is governed by a classical market mechanism. It's mostly what is termed a natural monopoly.
There are circumstances when one can make certain consumer choices. But if you've ever been picked up by an ambulance in what seemed like a life-threatening situation, you're not going to be able to shop around for the best room rates at the hospitals. Not if you want to live. Once you're in a hospital, you have to take it pretty much the way they offer it. It ain't like showing up at a flea market, haggling with the merchants like an Arab trader.
What I see is a fundamental mistake of people trying to apply classical economics to a sector that has never -- ever -- shown the appropriate characteristics for that. The rest of the world understands this. Even if they bitch about the particulars of their government systems, ask yourself why they aren't moving toward any emulation of ours.
Although I digress a bit -- these "thinkers" make the same mistake with utility deregulation. Where I live, under deregulation, I'm paying considerably more for electrical power now. It is another example of a natural monopoly. I can't play off two electrical grids against each other for lower rates, any more than I can do that between hospitals when I'm sick.
And, of course, I'm paying more for health care. Much, much more, outpacing inflation. Every passing year. And more for electricity. And more for medicine ... Get the picture?
I shouldn't leave this subject without noting that there is evidence of considerable chicanery by utility corporations left in charge of the proverbial henhouse. This is from an April 11 article in the online edition of the San Antonio Express-News:
Last week, TXU executives, facing a $210 million state fine for alleged price manipulations in the summer of 2005, threatened to withhold power by shutting down natural-gas-powered electricity plants if the allegations were not dropped.
That's so Enron. That kind of abusive management mentality went out of style with the Enron implosion of 2001. (It did? -- MJ)
The group of investors trying to buy TXU had to scold the TXU executives into withdrawing the threat a few days later. The executives' capitulation indicates that the potential buyers are deciding policy at TXU headquarters these days.
I have no argument whatsoever with market approaches that are genuinely competitive, socially responsible and deliver the goods in the best possible way. Ideally, the relationship between markets and governments is symbiotic: governments providing the infrastructure markets depend on to thrive, and strong markets supplying governments with the tax base they need in order to deliver on their end. Government entities can be maddeningly inefficient, but I've worked for large corporations that seemed to be trying to compete with them on that score.
This is how the prosperous economies of developed countries have really been built -- with a mixed system. (This World Wide Web: courtesy of the government. Look it up.)
As economist Kuttner wrote:
Faith in idealized market structures also has spawned a political jihad intent upon stripping away the community and governmental safeguards against market abuses and imperfections -- safeguards that are essential to the modern American system constructed during the Great Depression and after World War II. In addition, an overtly and proudly selfish ideology finances and propels the drive to cut taxes on the wealthy, punch holes in the social safety net, and "unchain" business from the shackles of regulation and litigation. The conservative catechism castigates those who would "reward need" by supporting public programs for the poor and, at its most radical, even rejects Adam Smith's conviction that the state must provide the bedrock of the educational and physical infrastructure of an industrialized society.
Plainly, utilities are usually natural monopolies, and Americans were ripped off en masse when the "Priesthood" sold so many on electric deregulation.
The corporate Trojan Horse is inside the gates, but it's not too late to drag it back out. It's just a shame that we the people, and more importantly our lawmakers, have to keep "relearning" these hard lessons.
R.I.P., Dear Molly. You saw this coming years ago, and you told us so.
Manifesto Joe Is An Underground Writer Living In Texas.
By Manifesto Joe
The late Molly Ivins once wrote something to the effect that after a service is deregulated, the result is that people often discover why it was regulated in the first place.
For 30 years, the "Priesthood of the Free Market" has been hellbent to sell Americans on the deregulation and privatization of damn near everything. Their progress has been astonishing. Even the Iraq war seems to have been about half outsourced.
After considering the deregulation of the electricity market, I am inclined to look beyond the "true believers" of the free market, and toward those whose only true belief is in maximization of profits, no matter the cost to anyone else. Remember the story of the Trojan Horse?
But the tide may finally be turning. It appears that many officials in states where electricity has been deregulated (about a third have done so) have come to similar conclusions as the late Molly.
The Sept. 21 online edition of the Fort Worth Star-Telegram reported:
Support for electric deregulation has dramatically fallen among the nation's utility regulators, with one-third in deregulated states expressing the likelihood of some sort of re-regulation, according to a new survey.
Conducted in conjunction with Standard & Poor's, the telephone survey of 96 state utility regulators also showed a plurality answering "none" when asked which states operate the most successful deregulated market. ...
Tim Morstad, an analyst with AARP-Texas ... said the poll should some as no surprise to anyone who pays a light bill in Texas. ...
"The rest of the country is figuring out what Texas consumers already know, that deregulation fails to deliver lower rates and better service," he said. ...
The survey also found that 43 percent of regulators in states with deregulation say it does not work well, and 37 percent said it does. Moreover, 54 percent of regulators in states with deregulation report that re-regulation is likely.
Texas is far from the only state where ratepayers have seen this kind of deception. This is from an article carried by The Associated Press in April:
BENTON, Ill. --This wasn't supposed to happen with deregulation. Electric bills were supposed to go down. Instead, Ellie Dorchincez can almost see the dollars evaporating every time she turns on the lights or opens the freezer at her small Farm Fresh grocery store.
Her electric bill, which used to be about $800 a month, has jumped to $1,800. ...
The cause of her distress is a common problem: the failure of deregulation to deliver its promise of lower electricity prices. In many states, it's had the opposite effect with sharply higher rates -- 72 percent in Maryland, up to 50 percent in Illinois.
Not one of the 16 states -- plus the District of Columbia -- that have pushed forward with deregulation since the late 1990s can call it a success. In fact, consumers in those states fared worse than residents in states that stuck with a policy of regulating their power industries.
An Associated Press analysis of federal data shows consumers in the 17 deregulated areas paid an average of 30 percent more for power in 2006 than their counterparts in regulated states. That's up from a 24 percent gap in 1990.
The idea was to move from a monopoly situation to robust competition for electric customers, with backers promising potentially lower rates in state after state. ...
But competition, especially for residential and small business customers, rarely emerged. ...
Consumer groups ... say deregulation has had a chance to prove itself. In Texas, for example, competition did develop after rate caps ended -- but the energy prices remained higher.
In Robert Kuttner's now-classic 1998 book Everything for Sale: The Virtues and Limitations of Markets, the economist wrote (p. 228):
We regulate some industries because they work more efficiently as monopolies. It would be wasteful and duplicative to have two parallel gas pipelines, two sets of telephone poles, two parallel rail lines, or two electric grids. Neither supplier could cover his costs by running at half-capacity, and both would soon have to raise prices or go out of business. Left alone, one would likely absorb the other. ...
Once we tolerate a monopoly, the producer is no longer subject to the discipline of competition. ... in principle the consumer is free not to buy the product. But in many natural monopolies, such as electricity, water, and transit, the product is a virtual necessity, and consumer demand is fairly inelastic; hence the consumer cannot discipline the monopolist.
Enter those godless socialists, the regulators. But I suspect that by now there are many God-fearing ratepayers in Texas and many other states who wish to God they had those crypto-Marxists back.
I reluctantly stuck with Reliant Energy here in the Lone Star State, in part just to see what they would do after the latest phase of deregulation. You know, like, to test the classical economic theory. Silly me. I went from paying 13.3 cents per kilowatt hour to 14.5 cents -- and the latter during the worst heat of the Texas summer. I'm certain, of course, that this was just a coincidence. I'm nevertheless switching to a "competitor" -- but not holding my breath for much improvement.
I posted this comment on a great blog, Red Hog Diary, about the health-care issue. But I think it also says a bit about natural monopolies that is salient:
A good incision sometimes works wonders. I'm going to try one.
The crucial thing so many seem to miss, and that populations of every developed country other than the U.S. have eventually understood, is that health care isn't a sector of the economy that is governed by a classical market mechanism. It's mostly what is termed a natural monopoly.
There are circumstances when one can make certain consumer choices. But if you've ever been picked up by an ambulance in what seemed like a life-threatening situation, you're not going to be able to shop around for the best room rates at the hospitals. Not if you want to live. Once you're in a hospital, you have to take it pretty much the way they offer it. It ain't like showing up at a flea market, haggling with the merchants like an Arab trader.
What I see is a fundamental mistake of people trying to apply classical economics to a sector that has never -- ever -- shown the appropriate characteristics for that. The rest of the world understands this. Even if they bitch about the particulars of their government systems, ask yourself why they aren't moving toward any emulation of ours.
Although I digress a bit -- these "thinkers" make the same mistake with utility deregulation. Where I live, under deregulation, I'm paying considerably more for electrical power now. It is another example of a natural monopoly. I can't play off two electrical grids against each other for lower rates, any more than I can do that between hospitals when I'm sick.
And, of course, I'm paying more for health care. Much, much more, outpacing inflation. Every passing year. And more for electricity. And more for medicine ... Get the picture?
I shouldn't leave this subject without noting that there is evidence of considerable chicanery by utility corporations left in charge of the proverbial henhouse. This is from an April 11 article in the online edition of the San Antonio Express-News:
Last week, TXU executives, facing a $210 million state fine for alleged price manipulations in the summer of 2005, threatened to withhold power by shutting down natural-gas-powered electricity plants if the allegations were not dropped.
That's so Enron. That kind of abusive management mentality went out of style with the Enron implosion of 2001. (It did? -- MJ)
The group of investors trying to buy TXU had to scold the TXU executives into withdrawing the threat a few days later. The executives' capitulation indicates that the potential buyers are deciding policy at TXU headquarters these days.
I have no argument whatsoever with market approaches that are genuinely competitive, socially responsible and deliver the goods in the best possible way. Ideally, the relationship between markets and governments is symbiotic: governments providing the infrastructure markets depend on to thrive, and strong markets supplying governments with the tax base they need in order to deliver on their end. Government entities can be maddeningly inefficient, but I've worked for large corporations that seemed to be trying to compete with them on that score.
This is how the prosperous economies of developed countries have really been built -- with a mixed system. (This World Wide Web: courtesy of the government. Look it up.)
As economist Kuttner wrote:
Faith in idealized market structures also has spawned a political jihad intent upon stripping away the community and governmental safeguards against market abuses and imperfections -- safeguards that are essential to the modern American system constructed during the Great Depression and after World War II. In addition, an overtly and proudly selfish ideology finances and propels the drive to cut taxes on the wealthy, punch holes in the social safety net, and "unchain" business from the shackles of regulation and litigation. The conservative catechism castigates those who would "reward need" by supporting public programs for the poor and, at its most radical, even rejects Adam Smith's conviction that the state must provide the bedrock of the educational and physical infrastructure of an industrialized society.
Plainly, utilities are usually natural monopolies, and Americans were ripped off en masse when the "Priesthood" sold so many on electric deregulation.
The corporate Trojan Horse is inside the gates, but it's not too late to drag it back out. It's just a shame that we the people, and more importantly our lawmakers, have to keep "relearning" these hard lessons.
R.I.P., Dear Molly. You saw this coming years ago, and you told us so.
Manifesto Joe Is An Underground Writer Living In Texas.
Saturday, October 25, 2008
30 Years Too Late, Greenspan Learns The First Great Economic Lesson Of The 20th Century
By Manifesto Joe
This hasn't been a popular opinion for a while, but here goes. The 20th century offered two great economic lessons: (1) Underregulation of markets is a very bad thing, and (2) overregulation of markets is also a very bad thing. The first lesson should have been abundantly clear in the winter of 1932-33. But by the '70s, the second lesson was prominent, so much so that many economists just plumb forgot about the first.
Among the most influential of these economists was Alan Greenspan, later to become a longtime chairman of the Federal Reserve. I found it disturbing, reading about his background way back in the '80s, that the Span Man actually bought into the crackpot economic notions of the late Ayn Rand and her quasi-solipsist cult.
But among economists, such was the climate of the '70s and '80s. The welfare-state excesses of the '60s and early '70s had suddenly made the reforms of the New Deal era irrelevant, and the pre-1929 mind-set had returned with much vindictiveness.
But Greenspan, appearing before a House committee this week, made a startling admission. He conceded that he was "partially wrong" in trusting financial markets to police themselves. Here's the link.
Sadly, the Span Man ran the Fed mostly as a "free" market ideologue for 18 years. By the time he left the post, most of the damage had been done. Now it's going to be up to younger Americans -- Mr. Greenspan is 82 -- to clean up the mess for generations.
Let's revisit the two great lessons. In the early '30s, it was a no-brainer that the greed of players in the financial markets had contributed greatly to the worst economic meltdown in U.S. history. And so, general economic thinking was dramatically altered. It should have been clear that, left so unregulated, greed is NOT good. It leads to unsound practices, skewed income redistribution, social irresponsibility, shortsightedness; and in the end, everybody gets hurt. Au contraire, Gordon Gecko. Unregulated greed is BAD. Greedy people do not police themselves; quite the opposite, they do their best to rig the game. We have seen repeatedly in history that unregulated greed ultimately DOES NOT WORK.
But, by the '60s, we had the Galbraith-dubbed "affluent society," in which so much could seem to be taken for granted. We sort of became victims of our own success. The welfare state tried to do a little too much -- though in the U.S., it paled in comparison to the largess of other societies that spent far less on their war machines.
By the '70s, we had the symptoms of "stagflation" and demand-pull inflation that tend to show up in societies that are overregulating and overtaxing. Unfortunately, this opened the door for the economic quackery that has characterized the "supply-side" and "trickle-down" (tinkle-down, I sez) thought of the past 30 years. Many economists, secure in their own tenure and advisory posts, conveniently forgot about what happened in the first half of the 20th century.
Now, at last near the end of our second Gilded Age, Alan Greenspan is compelled to humble himself before Henry Waxman, and admit that he's had to rethink his ideas of the past 40-plus years.
Pardon me, little fish that I am, that I take a moment to gloat a bit. I was warning about this in 1984. I couldn't get many people to listen back then, mesmerized as they seemed by the foolish platitudes rising through Ronald Reagan's 70-ish turkey neck.
Don't worry, Mr. Greenspan -- you'll have plenty of dignified company in the online history books. Now just fade away, and leave the cleanup to sadder but wiser generations.
Manifesto Joe Is An Underground Writer Living In Texas.
This hasn't been a popular opinion for a while, but here goes. The 20th century offered two great economic lessons: (1) Underregulation of markets is a very bad thing, and (2) overregulation of markets is also a very bad thing. The first lesson should have been abundantly clear in the winter of 1932-33. But by the '70s, the second lesson was prominent, so much so that many economists just plumb forgot about the first.
Among the most influential of these economists was Alan Greenspan, later to become a longtime chairman of the Federal Reserve. I found it disturbing, reading about his background way back in the '80s, that the Span Man actually bought into the crackpot economic notions of the late Ayn Rand and her quasi-solipsist cult.
But among economists, such was the climate of the '70s and '80s. The welfare-state excesses of the '60s and early '70s had suddenly made the reforms of the New Deal era irrelevant, and the pre-1929 mind-set had returned with much vindictiveness.
But Greenspan, appearing before a House committee this week, made a startling admission. He conceded that he was "partially wrong" in trusting financial markets to police themselves. Here's the link.
Sadly, the Span Man ran the Fed mostly as a "free" market ideologue for 18 years. By the time he left the post, most of the damage had been done. Now it's going to be up to younger Americans -- Mr. Greenspan is 82 -- to clean up the mess for generations.
Let's revisit the two great lessons. In the early '30s, it was a no-brainer that the greed of players in the financial markets had contributed greatly to the worst economic meltdown in U.S. history. And so, general economic thinking was dramatically altered. It should have been clear that, left so unregulated, greed is NOT good. It leads to unsound practices, skewed income redistribution, social irresponsibility, shortsightedness; and in the end, everybody gets hurt. Au contraire, Gordon Gecko. Unregulated greed is BAD. Greedy people do not police themselves; quite the opposite, they do their best to rig the game. We have seen repeatedly in history that unregulated greed ultimately DOES NOT WORK.
But, by the '60s, we had the Galbraith-dubbed "affluent society," in which so much could seem to be taken for granted. We sort of became victims of our own success. The welfare state tried to do a little too much -- though in the U.S., it paled in comparison to the largess of other societies that spent far less on their war machines.
By the '70s, we had the symptoms of "stagflation" and demand-pull inflation that tend to show up in societies that are overregulating and overtaxing. Unfortunately, this opened the door for the economic quackery that has characterized the "supply-side" and "trickle-down" (tinkle-down, I sez) thought of the past 30 years. Many economists, secure in their own tenure and advisory posts, conveniently forgot about what happened in the first half of the 20th century.
Now, at last near the end of our second Gilded Age, Alan Greenspan is compelled to humble himself before Henry Waxman, and admit that he's had to rethink his ideas of the past 40-plus years.
Pardon me, little fish that I am, that I take a moment to gloat a bit. I was warning about this in 1984. I couldn't get many people to listen back then, mesmerized as they seemed by the foolish platitudes rising through Ronald Reagan's 70-ish turkey neck.
Don't worry, Mr. Greenspan -- you'll have plenty of dignified company in the online history books. Now just fade away, and leave the cleanup to sadder but wiser generations.
Manifesto Joe Is An Underground Writer Living In Texas.
Tuesday, October 7, 2008
McCain-Keating-Palin '08: The Real GOP Ticket
If there is any remaining doubt about John McCain's connection with the deregulation debacle facing the country now, let's go back 20 or so years, to his "palling around" with one Charles Keating. Obama is only slightly acquainted with Billy Ayres, and was 8 when the bad behavior took place. Whither Charles Keating, Big Mac? (Fries with that, hon?)
http://www.keatingeconomics.com/
Or:
There are technical problems, but one or the other approach will get you there. -- MJ
http://www.keatingeconomics.com/
Or:
There are technical problems, but one or the other approach will get you there. -- MJ
Sunday, September 21, 2008
An Era Of Re-Regulation? Progressives Shouldn't Celebrate Too Soon
By Manifesto Joe
So, deregulation in America is supposed to have died last week? Not so fast. Laissez faire, historically, is one of those economic notions that's sort of like Jason in those bad splatter movies -- it keeps coming back.
I don't doubt that, no matter which candidate is elected president in November, deregulation will be a somewhat untouchable position for a while, where financial markets are concerned. Until several years pass, and the $700 billion payoff at taxpayers' expense is complete, we won't hear much about it.
But this is a zombie that's a re-animator's dream, having risen from rigor mortis again and again. It's a toxic idea has always served the interests of the moneyed class in most societies. Even after being repeatedly discredited by financial crises such as this one, and many before, it only takes a generation or two to resurrect it with as much "credibility" as ever.
As a one-time college textbook editor, I worked with economists, and found them to be largely a priesthood of ideologues. Their ideas don't have to bear strong resemblance to events of the real world. Among many, if not most of them, the "free market" is a quasi-religion, to be challenged only at the questioning of one's intellect and/or sanity.
Interestingly, most of them, even the "free-market" disciples, agree that the looming $700 billion taxpayer bailout of the U.S. financial system is necessary, though perhaps a necessary evil.
We come back to a condition of humans never liking to admit they are wrong. We also come back to old wisdom that one shouldn't bite the hand that feeds one. Most professional economists have "invested" a big stake in "free-market" theory, and their sources of income -- universities, "think" tanks and such -- generally expect them to maintain a certain ideological purity.
When current events fade into history, don't be surprised if we have a lot of economists, and compliant lawmakers trolling for right-wing votes, who want to start deregulating everything yet again. To broadly paraphrase the poet Santayana, most people do not remember the past, and they are therefore condemned to repeat it.
I'll steal another line, this one paraphrased from Citizen Kane: You're going to need more than one lesson, and you're going to get more than one lesson. In this case, the "you" is the American people.
What happened during the past 30 years was widespread economic amnesia, even among the alleged experts. What was forgotten was people's natural inclination to grow greedy and behave badly when not subject to certain restraints.
It's easy to blame the people who signed on to unsound subprime mortgage loans, who ran up vast credit-card debt, and so forth, if you look at the situation in just one dimension. What about the predatory lenders who offered them all this credit they could never have gotten 30 years ago?
I remember being quite impressed in the spring of 1978, as I approached graduation from college, at being offered my very first gasoline credit card. It was a big deal. "We believe that people about to graduate from college are good credit risks," I was told. Years later I was offered an actual Visa card, and the line of credit was pretty modest.
Now, all you need is a pulse. My 81-year-old mother, in assisted living, is getting solicitations. It would be possible for her to obtain one of these cards and run up a $10,000 tab in a hurry, then default. What would they do? Ruin her credit? Garnish her Social Security check?
The fault ultimately lies with greedy lenders. The great unwashed are always an easy target for blame, but the people in the suits don't have to make such absurdly generous offers to hapless people. This go-round, they approved loans and gave out other credit like it was lunch, with no thought for when the bills came due and they had to actually collect.
A wonderful analogy came from Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group. In a Monday piece from McClatchy Newspapers, she commented on the regulatory lapses:
"The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly. Instead, they let everyone drink as much as they wanted and then handed them the car keys."
Here's the link to the complete article.
It is important to note that Bush, possibly the Herbert Hoover of this generation and much worse, has nevertheless planted seeds for an eventual revival of the old market mentality. One couldn't expect a mediocre-at-best product of privilege to do otherwise. Here's some of what he had to say, as reported by The Associated Press:
The president favored government intervention even though it opened him up to criticism from financial conservatives who are raising their eyebrows at the pricetag of the bailout plan. "Look, I'm sure there are some of my friends out there saying, `I thought this guy was a market guy. What happened to him?'" Bush said.
"Well, my first instinct wasn't to lay out a huge government plan," he said. "My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became."
In other words, this is supposed to be an anomaly, not the logical outcome of unregulated capitalism, even though we've seen it in history over and over. Here's the full AP article about Bush's take on this, if you can stomach it.
It would be desirable in many ways to just let the avaricious fatcats go under amid this excess, but that can't be. There are dogmatic libertarians who actually think Americans could be that stupid, both individually and collectively. But we can't afford that. It comes to a kind of economic blackmail -- the risk is too great for too many people who had nothing to do with the bad decisions on either end of the credit process. So, the fatcats will be bailed out.
The hope, against hope, is that "we won't be fooled again." That they won't be able to sell this bill of goods to the next generation in 20 years, and that our own generations of today won't forget. That the libertarians will finally learn that their naivete assumes marketplace self-policing that neither people nor institutions will ever do.
Maybe, just maybe one day, we'll learn. Keep a close watch on your retirement investments in the meantime. Here's one more thought-provoking link by Steve Fraser that I urge the reader to ponder.
Manifesto Joe Is An Underground Writer Living In Texas.
So, deregulation in America is supposed to have died last week? Not so fast. Laissez faire, historically, is one of those economic notions that's sort of like Jason in those bad splatter movies -- it keeps coming back.
I don't doubt that, no matter which candidate is elected president in November, deregulation will be a somewhat untouchable position for a while, where financial markets are concerned. Until several years pass, and the $700 billion payoff at taxpayers' expense is complete, we won't hear much about it.
But this is a zombie that's a re-animator's dream, having risen from rigor mortis again and again. It's a toxic idea has always served the interests of the moneyed class in most societies. Even after being repeatedly discredited by financial crises such as this one, and many before, it only takes a generation or two to resurrect it with as much "credibility" as ever.
As a one-time college textbook editor, I worked with economists, and found them to be largely a priesthood of ideologues. Their ideas don't have to bear strong resemblance to events of the real world. Among many, if not most of them, the "free market" is a quasi-religion, to be challenged only at the questioning of one's intellect and/or sanity.
Interestingly, most of them, even the "free-market" disciples, agree that the looming $700 billion taxpayer bailout of the U.S. financial system is necessary, though perhaps a necessary evil.
We come back to a condition of humans never liking to admit they are wrong. We also come back to old wisdom that one shouldn't bite the hand that feeds one. Most professional economists have "invested" a big stake in "free-market" theory, and their sources of income -- universities, "think" tanks and such -- generally expect them to maintain a certain ideological purity.
When current events fade into history, don't be surprised if we have a lot of economists, and compliant lawmakers trolling for right-wing votes, who want to start deregulating everything yet again. To broadly paraphrase the poet Santayana, most people do not remember the past, and they are therefore condemned to repeat it.
I'll steal another line, this one paraphrased from Citizen Kane: You're going to need more than one lesson, and you're going to get more than one lesson. In this case, the "you" is the American people.
What happened during the past 30 years was widespread economic amnesia, even among the alleged experts. What was forgotten was people's natural inclination to grow greedy and behave badly when not subject to certain restraints.
It's easy to blame the people who signed on to unsound subprime mortgage loans, who ran up vast credit-card debt, and so forth, if you look at the situation in just one dimension. What about the predatory lenders who offered them all this credit they could never have gotten 30 years ago?
I remember being quite impressed in the spring of 1978, as I approached graduation from college, at being offered my very first gasoline credit card. It was a big deal. "We believe that people about to graduate from college are good credit risks," I was told. Years later I was offered an actual Visa card, and the line of credit was pretty modest.
Now, all you need is a pulse. My 81-year-old mother, in assisted living, is getting solicitations. It would be possible for her to obtain one of these cards and run up a $10,000 tab in a hurry, then default. What would they do? Ruin her credit? Garnish her Social Security check?
The fault ultimately lies with greedy lenders. The great unwashed are always an easy target for blame, but the people in the suits don't have to make such absurdly generous offers to hapless people. This go-round, they approved loans and gave out other credit like it was lunch, with no thought for when the bills came due and they had to actually collect.
A wonderful analogy came from Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group. In a Monday piece from McClatchy Newspapers, she commented on the regulatory lapses:
"The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly. Instead, they let everyone drink as much as they wanted and then handed them the car keys."
Here's the link to the complete article.
It is important to note that Bush, possibly the Herbert Hoover of this generation and much worse, has nevertheless planted seeds for an eventual revival of the old market mentality. One couldn't expect a mediocre-at-best product of privilege to do otherwise. Here's some of what he had to say, as reported by The Associated Press:
The president favored government intervention even though it opened him up to criticism from financial conservatives who are raising their eyebrows at the pricetag of the bailout plan. "Look, I'm sure there are some of my friends out there saying, `I thought this guy was a market guy. What happened to him?'" Bush said.
"Well, my first instinct wasn't to lay out a huge government plan," he said. "My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became."
In other words, this is supposed to be an anomaly, not the logical outcome of unregulated capitalism, even though we've seen it in history over and over. Here's the full AP article about Bush's take on this, if you can stomach it.
It would be desirable in many ways to just let the avaricious fatcats go under amid this excess, but that can't be. There are dogmatic libertarians who actually think Americans could be that stupid, both individually and collectively. But we can't afford that. It comes to a kind of economic blackmail -- the risk is too great for too many people who had nothing to do with the bad decisions on either end of the credit process. So, the fatcats will be bailed out.
The hope, against hope, is that "we won't be fooled again." That they won't be able to sell this bill of goods to the next generation in 20 years, and that our own generations of today won't forget. That the libertarians will finally learn that their naivete assumes marketplace self-policing that neither people nor institutions will ever do.
Maybe, just maybe one day, we'll learn. Keep a close watch on your retirement investments in the meantime. Here's one more thought-provoking link by Steve Fraser that I urge the reader to ponder.
Manifesto Joe Is An Underground Writer Living In Texas.
Monday, July 14, 2008
The Great Prevaricator Remembered II: With Reagan Policies, Seldom Has So Much Harm Been Done To So Many By So Few (Plus Swipes At Phil Gramm)
By Manifesto Joe
With news of a Bush/Treasury/Federal Reserve bailout of mortgage giants Fannie Mae and Freddy Mac, I'd say it's unofficially official: Reaganomics, and the 30-year era of helter-skelter deregulation that came with it, is at long last dying for good.
No, it's not dead yet. I think terminal brain cancer is a certain diagnosis. Yet Reaganomics lingers, having been reanimated repeatedly from the dead. But I don't think another long-term resurrection is possible.
And as the details of a massive bailout emerge, the person who comes to my mind is that turkey-necked geezer who presided over the first "great" round of deregulation during the '80s -- The Great Prevaricator himself, Ronald Reagan.
Reagan survives largely just in right-wing mythology. But some of his soldiers, who helped him construct this sturdy economic Trojan horse, are still with us. Despite a rebuke over a recent gaffe, former GOP Sen. Phil Gramm of Texas, deregulator extraordinaire, is still John McCain's economic adviser.
Gramm, a Texas Aggie economist (Know how to spoil an Aggie party? Flush the punchbowl), earned his bars in the "conservative" movement as one of The Fibber's hardiest point men. He started in the House as a major architect of the 1981 tax cuts that, first, handed a bonanza to the wealthiest Americans. Then, those cuts plunged the federal budget so deeply into the red that piecemeal tax increases had to be sneaked past the public for many years thereafter to slow the hemorrhaging.
He was also a player in the '80s deregulation of savings and loans, which ultimately opened them up to full-scale looting. It took years, and many, many billions from the taxpayers, to clean up that mess. (Sound familiar now? To paraphrase the poet Santayana, our leaders did not remember the past, and we are ALL condemned to repeat it.)
Near the end of his venal "service" in the Senate, Gramm was a towering figure in the second "great" wave of deregulation. This from Wikipedia:
Later in his Senate career, Gramm spearheaded efforts to pass banking reform laws, including the landmark Gramm-Leach-Bliley Act in 1999, which modernized Depression-era laws separating banking, insurance and brokerage activities. Between 1995 and 2000 Gramm, who was the chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, received $1,000,914 in campaign contributions from the Securities & Investment industry.
Here, "modernize" means that the bill Gramm co-sponsored repealed certain New Deal-era regulations of the Glass-Steagall Act of 1933, which had helped keep those pillars of high finance separate, and hence relatively honest and solvent, since the '30s.
Not content with leaving only this much damage imminent, Gramm helped pull off a major deregulatory coup the following year. More from Wikipedia:
Gramm was one of five co-sponsors of the Commodity Futures Modernization Act of 2000, which critics blame for permitting the Enron scandal to occur. At the time, Gramm's wife was on Enron's board of directors.
A big part of the CFMA was what became known as the "Enron Loophole." Again, Wikipedia:
The CFMA has received criticism for the so-called "Enron Loophole," 7 U.S.C. §2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The "loophole" was drafted by Enron Lobbyists working with senator Phil Gramm seeking a deregulated atmosphere for their new experiment, "Enron On-line." ...
The legislation was passed by the Republican controlled Congress and signed by President Bill Clinton [ouch --MJ] in December 2000 to allow for the creation, for U.S. exchanges, of a new kind of derivative security, the single-stock future. An attempt to reverse this policy was vetoed by President Bush in 2008. Several Democratic Legislators introduced legislation to close the loophole from 2000-2006, but were unsuccessful due to Republican control of the House and Senate.
So, in the ensuing years, Phil acquired a succession of nicknames, including "Enron Phil" for the CFMA, and recently "Foreclosure Phil" for his banking "modernization."
For more on the extent of the profound injuries that then-Sen. Phil Gramm personally inflicted on America, click here for a Joe Conason article in Salon.
But enough with beating up on a now-obvious sleazebag operative like Gramm. Let's go back a generation, and longer, to that moth-eaten spirit ultimately behind the Enron accounting scandal, and behind what is becoming known as the Panic of 2008. It's that mythical right-wing figure, the man Gore Vidal once perceptively described as "grandmotherly": Reagan.
The Sixties spawned a unique cast of characters who lingered and did their dance macabre across our collective unconscious, on their way to oblivion. The same seems to be happening with the malefactors of the Eighties, the Armani-clad hooligans of the Reagan era.
They seem determined not to go away completely, at least not right away. But I foresee a day when they will be like withered cranks at small-town school board meetings, voted out of office but showing up in enfeebled bids to harass those who replaced them. An effectively permanent death seems at hand.
Going back to the Fannie Mae/Freddy Mac bailout -- and perhaps forward toward many more -- here are a couple of especially significant quotes from The New York Times on this story:
The companies, known as government-sponsored enterprises, or G.S.E.’s, touch nearly half of the nation’s mortgages by either owning or guaranteeing them, and the debt securities they issue to finance their operations are widely owned by foreign governments, pension funds, mutual funds, big companies and other large institutional investors.
“G.S.E. debt is held by financial institutions around the world,” Mr. (Treasury Secretary Henry) Paulson said in his statement. “Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure.”
"... a stronger regulatory structure"? This from a Bush Cabinet member?
R.I.P., Ronnie Reagan. (And Phil Gramm?)
Manifesto Joe Is An Underground Writer Living In Texas.
With news of a Bush/Treasury/Federal Reserve bailout of mortgage giants Fannie Mae and Freddy Mac, I'd say it's unofficially official: Reaganomics, and the 30-year era of helter-skelter deregulation that came with it, is at long last dying for good.
No, it's not dead yet. I think terminal brain cancer is a certain diagnosis. Yet Reaganomics lingers, having been reanimated repeatedly from the dead. But I don't think another long-term resurrection is possible.
And as the details of a massive bailout emerge, the person who comes to my mind is that turkey-necked geezer who presided over the first "great" round of deregulation during the '80s -- The Great Prevaricator himself, Ronald Reagan.
Reagan survives largely just in right-wing mythology. But some of his soldiers, who helped him construct this sturdy economic Trojan horse, are still with us. Despite a rebuke over a recent gaffe, former GOP Sen. Phil Gramm of Texas, deregulator extraordinaire, is still John McCain's economic adviser.
Gramm, a Texas Aggie economist (Know how to spoil an Aggie party? Flush the punchbowl), earned his bars in the "conservative" movement as one of The Fibber's hardiest point men. He started in the House as a major architect of the 1981 tax cuts that, first, handed a bonanza to the wealthiest Americans. Then, those cuts plunged the federal budget so deeply into the red that piecemeal tax increases had to be sneaked past the public for many years thereafter to slow the hemorrhaging.
He was also a player in the '80s deregulation of savings and loans, which ultimately opened them up to full-scale looting. It took years, and many, many billions from the taxpayers, to clean up that mess. (Sound familiar now? To paraphrase the poet Santayana, our leaders did not remember the past, and we are ALL condemned to repeat it.)
Near the end of his venal "service" in the Senate, Gramm was a towering figure in the second "great" wave of deregulation. This from Wikipedia:
Later in his Senate career, Gramm spearheaded efforts to pass banking reform laws, including the landmark Gramm-Leach-Bliley Act in 1999, which modernized Depression-era laws separating banking, insurance and brokerage activities. Between 1995 and 2000 Gramm, who was the chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, received $1,000,914 in campaign contributions from the Securities & Investment industry.
Here, "modernize" means that the bill Gramm co-sponsored repealed certain New Deal-era regulations of the Glass-Steagall Act of 1933, which had helped keep those pillars of high finance separate, and hence relatively honest and solvent, since the '30s.
Not content with leaving only this much damage imminent, Gramm helped pull off a major deregulatory coup the following year. More from Wikipedia:
Gramm was one of five co-sponsors of the Commodity Futures Modernization Act of 2000, which critics blame for permitting the Enron scandal to occur. At the time, Gramm's wife was on Enron's board of directors.
A big part of the CFMA was what became known as the "Enron Loophole." Again, Wikipedia:
The CFMA has received criticism for the so-called "Enron Loophole," 7 U.S.C. §2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The "loophole" was drafted by Enron Lobbyists working with senator Phil Gramm seeking a deregulated atmosphere for their new experiment, "Enron On-line." ...
The legislation was passed by the Republican controlled Congress and signed by President Bill Clinton [ouch --MJ] in December 2000 to allow for the creation, for U.S. exchanges, of a new kind of derivative security, the single-stock future. An attempt to reverse this policy was vetoed by President Bush in 2008. Several Democratic Legislators introduced legislation to close the loophole from 2000-2006, but were unsuccessful due to Republican control of the House and Senate.
So, in the ensuing years, Phil acquired a succession of nicknames, including "Enron Phil" for the CFMA, and recently "Foreclosure Phil" for his banking "modernization."
For more on the extent of the profound injuries that then-Sen. Phil Gramm personally inflicted on America, click here for a Joe Conason article in Salon.
But enough with beating up on a now-obvious sleazebag operative like Gramm. Let's go back a generation, and longer, to that moth-eaten spirit ultimately behind the Enron accounting scandal, and behind what is becoming known as the Panic of 2008. It's that mythical right-wing figure, the man Gore Vidal once perceptively described as "grandmotherly": Reagan.
The Sixties spawned a unique cast of characters who lingered and did their dance macabre across our collective unconscious, on their way to oblivion. The same seems to be happening with the malefactors of the Eighties, the Armani-clad hooligans of the Reagan era.
They seem determined not to go away completely, at least not right away. But I foresee a day when they will be like withered cranks at small-town school board meetings, voted out of office but showing up in enfeebled bids to harass those who replaced them. An effectively permanent death seems at hand.
Going back to the Fannie Mae/Freddy Mac bailout -- and perhaps forward toward many more -- here are a couple of especially significant quotes from The New York Times on this story:
The companies, known as government-sponsored enterprises, or G.S.E.’s, touch nearly half of the nation’s mortgages by either owning or guaranteeing them, and the debt securities they issue to finance their operations are widely owned by foreign governments, pension funds, mutual funds, big companies and other large institutional investors.
“G.S.E. debt is held by financial institutions around the world,” Mr. (Treasury Secretary Henry) Paulson said in his statement. “Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure.”
"... a stronger regulatory structure"? This from a Bush Cabinet member?
R.I.P., Ronnie Reagan. (And Phil Gramm?)
Manifesto Joe Is An Underground Writer Living In Texas.
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