As noted in my diary, yesterday, economist Dean Baker pointed out on Friday that "
When Wall Street Rules, We Get Wall Street Rules." Regrettably, as Monday's news cycle brings us even greater clarity on this truth, we're now seeing the latest manifestations of what happens when "
the banks run the place." IMHO, the frustration's light years beyond palpable. And, as Paul Krugman's also reminding us in his NY Times op-ed column this morning (See: "
Now That's Rich"),
"Our political culture has become...deeply corrupt."
How ironic is it that it's Eliot Spitzer reminding us of the greed, corruption and whoring that's occurring in corporate America, today? Here we are, 30+ months into the Great Recession, and when it comes to Wall Street and their minions in Washington that enable them: "They Still Don't Get It."
Oh, the irony!
Krugman's spot-on today. And, after all's said and done, what can one say about a twisted political and corporate culture that attempts to throw a President out of office for a blowjob, but then turns around and puts an idiot into office for (not one, but) two terms, thus enabling the Great Recession and the resulting and ongoing devastation of our middle and lower classes?
This Is What Happens When Wall Street Continues To Rule...
"AUSTERITY" FOR 90%+ OF US, AND MORE TAX CUTS FOR THE RICH?
Now That's Rich
By PAUL KRUGMAN
New York Times
August 23, 2010
We need to pinch pennies these days. Don't you know we have a budget deficit? For months that has been the word from Republicans and conservative Democrats, who have rejected every suggestion that we do more to avoid deep cuts in public services and help the ailing economy.
Krugman then points out that maintaining the Bush tax cuts for the wealthy is quantified as cutting checks that average $3 million each to the wealthiest 120,000 people in the U.S.
So what's the choice now? The Obama administration wants to preserve those parts of the original tax cuts that mainly benefit the middle class -- which is an expensive proposition in its own right -- but to let those provisions benefiting only people with very high incomes expire on schedule. Republicans, with support from some conservative Democrats, want to keep the whole thing.
And there's a real chance that Republicans will get what they want. That's a demonstration, if anyone needed one, that our political culture has become not just dysfunctional but deeply corrupt.
Krugman continues on to tell us what's at stake. Making the Bush tax cuts permanent for the wealthiest sector of our society, in contrast to following the administration's proposal, would cost taxpayers $680 billion over the next 10 years.
The Princeton economist reminds us that we had to grovel through "...months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments."
He points out that nearly all of the $680 billion in tax cuts that would be provided to our citizenry if the Bush giveaways were to remain in place would go to the wealthiest one percent of our society--those with incomes over $500,000 per year. And, to compound this travesty, the majority of that money would actually go to the richest one-tenth of one percent of our society!
No, this has nothing to do with sound economic policy. Instead, as I said, it's about a dysfunctional and corrupt political culture, in which Congress won't take action to revive the economy, pleads poverty when it comes to protecting the jobs of schoolteachers and firefighters, but declares cost no object when it comes to sparing the already wealthy even the slightest financial inconvenience.
So far, the Obama administration is standing firm against this outrage. Let's hope that it prevails in its fight. Otherwise, it will be hard not to lose all faith in America's future.
HEALTH INSURANCE...
"Paychecks to Shrink Because of Higher Health Premiums, U.S. Companies Say"
Paychecks to Shrink Because of Higher Health Premiums, U.S. Companies Say
By Jeffrey Young
Bloomberg Media
Wed Aug 18 16:20:20 GMT 2010
Workers will pay more for their health care next year as U.S. companies prepare for provisions of the overhaul signed into law by President Barack Obama, according to a survey released today.
About 63 percent of businesses plan to make employees pay a higher percentage of their premium costs in 2011, said the Washington-based National Business Group on Health, which surveyed 72 companies that employ more than 3.7 million people. The survey showed 46 percent plan to raise the maximum level of out-of-pocket costs that workers must bear.
The companies surveyed expect their costs of health-care benefits to rise an average of 8.9 percent next year. The legislation Obama signed in March will contribute an estimated 1 percentage point to the higher expense, Helen Darling, the business group's president, said at a press conference in Washington today. Employee-paid portions may see small increases, she said.
"They're usually very small increments," Darling said. "It could be as little as 1 percent."
Employers may be using the health-care law as cover for changes they already planned to make to their benefits, said Igor Volsky, a health-care researcher at the Washington-based Center for American Progress, which supported the overhaul.
Imagine that? Corporate America hiding behind health care reform to blame the administration for what is, in effect, the status quo's own greed! (I'm shocked! Shocked, I say!)
CREDIT CARDS...
As I noted in my post on July 26th, (See: "The Real Warren/CFPB Story: The True Cost of Wall St. 'Reform'") the Wall Street banks are currently in the process of significantly raising the cost of everyday banking for the rest of us. And, as I also noted in that diary, this is a critical part of our government's ongoing, stealth bailout of the status quo. So, while rumors had circulated inside the beltway, a couple of weeks ago, that Liz Warren would be named last week as head of the new Consumer Finance Protection Bureau, that hasn't happened...yet. (I would have loved to have been a fly on the wall when Ms. Warren met with the President at the White House a few days ago.)
Perhaps the delay--not that we have any certainty whatsoever that this'll ever happen, at all--was due to stories like this: "Credit Card Companies Jack Up Rates Despite Flagging Economy, Super Low Funding Costs."
# # #
(Diarist's Note: Diarist has received written authorization from Naked Capitalism Publisher Yves Smith to reprint her blog's posts in their entirety here at DKos.)
Credit Card Companies Jack Up Rates Despite Flagging Economy, Super Low Funding Costs
Yves Smith
Naked Capitalism
Monday, August 23, 2010
The banks giveth and the banks taketh away, big time.
This chart from a Wall Street Journal article on credit card interest rates says a great deal:
Even though banks are getting all kinds of bennies from the Fed and regulators, such as a nice steep yield curve and lots of regulatory forbearance (econ-speak for extend and pretend), they are still out to extract a pound of flesh from the retail borrower. Since that has been a core element of their business model for the last decade, it is probably not so surprising that they are loath to give that practice up.
Now some will argue, correctly, that consumers need to delever. But guess what? They are paring debt levels, including credit cards. The number of open accounts has fallen by over 20% since the peak, as has the balance outstanding (over 6%). And not all of this has been voluntary. Banks have been shutting accounts and cutting credit lines.
But (drumroll) increasing interest rates, particularly when the banks are getting very sizeable subsidies, means that more of the money consumers pay to credit card companies goes to interest, less to reducing principal (of course, the banks will maintain that they are merely recouping lost income from penalties, since new credit card rules have curbed abusive practices).
A more serious issue is that not all consumer debt is consumer debt. Credit cards have long been an important source of funding for small businesses. Generally speaking, banks will lend only to relatively large, established "small" businesses, or against assets. For instance, Amar Bhide, in his landmark book on new venture, found that the biggest sources of funding for new enterprises were savings, friends and family, and credit cards. Small business owners often use credit cards to contend with temporary cash flow shortfalls or seasonal borrowing needs. And I've known some who have maxed out their credit cards to save their companies.
And in our modern, lend by FICO template world, the cutbacks in credit and increases in prices are often arbitrary. Early in the downturn, for instance, I had readers complaining to me that they had their credit lines cut even though they had an unblemished record and over 700 FICO scores simply because they lived in one of the epicenters of the housing meltdown. Some of those readers included small business owners whose businesses were not local or in real estate, but the curtailment in credit would make them collateral damage.
Yet another example of what Michael Thomas described back in 1998, after the Long Term Capital Management affair:
The thirteen-digit ($1,250,000,000,000) number that's being tossed around - the chin-scratching classes like to speak of "systemic risk" - is designed to convince us little people that there is a crisis at hand and therefore, if we somehow end up paying for it, it's for our own good. In other words, to save the king's castle, it is necessary to destroy the people's village.
From the Wall Street Journal:
New credit-card rules that took effect Sunday limit banks' ability to charge penalty fees. They come on top of rule changes earlier this year restricting issuers' ability to adjust rates on the fly. Issuers responded by pushing card rates to their highest level in nine years.
In the second quarter, the average interest rate on existing cards reached 14.7%, up from 13.1% a year earlier, according to research firm Synovate, a unit of Aegis Group PLC. That was the highest level since 2001.
Those figures look especially stark when measuring the gap between the prime rate--the benchmark against which card rates are set--and average credit-card rates. The current difference of 11.45 percentage points is the largest in at least 22 years, Synovate estimates.
By comparison, the spread between 10-year Treasurys and a standard 30-year fixed-rate mortgage is just 1.93 percentage points, near historical averages, according to mortgage-data provider HSH Associates.
# # #
Yes, Jerome a Paris hit the nail on the head in his great post yesterday, "An optimistic diary (for once)."
It's really not a question of whether or not changes will occur within our society to effectively cope with our world's converging emergencies. When it comes to our survival--as a society: economically, ecologically, or otherwise--it's really just an issue as to when those changes happen.
And, based upon our daily news cycles of late--just like the warning that's posted on a car's rearview mirror--those "objects" may be closer than they appear.
(In fact, many of us can feel them biting our Democratic asses right now!)