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“The Big Short” and Bernie’s Plan to Bust Up Wall Street

The Big Short” and Bernie’s Plan to Bust Up Wall Street

ROBERT B. REICH 
MONDAY, JANUARY 11, 2016

If you haven’t yet seen “The Big Short” – directed and co-written by Adam McKay, based on the non-fiction prize-winning book by Michael Lewis about the housing and credit bubble that triggered the Great Recession — I recommend you do so.

Not only is the movie an enjoyable (if that’s the right word) way to understand how the big banks screwed millions of Americans out of their homes, savings, and jobs – and then got bailed out by taxpayers. It’s also a lesson in why they’re on the way to doing all this again – and how their political power continues to erode laws designed to prevent another crisis and to shield their executives from any accountability.

Most importantly, the movie shows why Bernie Sanders’s plan to break up the biggest banks and reinstate the Glass-Steagall Act (separating investment from commercial banking) is necessary – and why Hillary Clinton’s more modest plan is inadequate. 

I’ll get back to Bernie and Hillary in a moment, but first you need to know why Wall Street wants us to forget what really happened.

The movie gets the story essentially right: Traders on the Street pushed highly-risky mortgage loans, bundled them together into investments that hid the risks, got the major credit-rating agencies to give the bundles Triple-A ratings, and then sold them to unwary investors. It was a fraudulent Ponzi scheme that had to end badly – and it did.

Yet since then, Wall Street and its hired guns (including most current Republican candidates for president) have tried to rewrite this history.

They want us to believe the banks and investment houses were innocent victims of misguided government policies that gave mortgages to poor people who shouldn’t have got them.

That’s pure baloney. The boom in subprime mortgages was concentrated in the private market, not in government. Wall Street itself created the risky mortgage market. It sliced and diced junk mortgages into bundles that hid how bad they were. And it invented the derivatives and CDOs that financed them

The fact is, more than 84 percent of the subprime mortgages in 2006 were issued by private institutions, and nearly 83 percentof the subprime loans that went to low- and moderate-income borrowers that year.

Why has Wall Street been pushing its lie, blaming the government for what happened? And why has the Street (along with its right-wing apologists, and its outlets such as Rupert Murdoch’s Wall Street Journal) so viciously attacked the movie “The Big Short?”

So we won’t demand tougher laws to prevent another crisis  followed by another “too-big-to-fail” bailout.

Which brings us back to Bernie and Hillary. Hillary Clinton doesn’t want to break up the big banks or resurrect the Glass-Steagall Act, as Bernie does

Instead, she’d charge the big banks a bit more for carrying lots of debt and to oversee them more carefully. She’d also give bank regulators more power to break up any particular bank that theyconsider too risky. And she wants more oversight of so-called “shadow banks” such as hedge funds and insurance companies like the infamous AIG.

In a world where the giant Wall Street banks didn’t have huge political power, these measures might be enough. But, if you hadn’t noticed, Wall Street wields extraordinary power.

Which helps explain why no Wall Street executive has been indicted for the fraudulent behavior that led up to the 2008 crash. Or for the criminal price-fixing scheme settled last May. And why even the fines imposed on the banks have been only a fraction of the banks’ gains.

And also why Dodd-Frank is being watered down into vapidity. For example, the law requires major banks to prepare “living wills” describing how they’d unwind their operations if they get into serious trouble. But no big bank has come up with one that passes muster. Federal investigators have found them all “unrealistic.”

Most of Hillary’s proposals could already have been put into effect by the Fed and the Securities and Exchange Commission, but they haven’t been – presumably because of the Street’s muscle.

As a practical matter, then, her proposals are invitations to more dilution and finagle.

The only way to contain the Street’s excesses is by taking on its economic and political power directly – with reforms so big, bold, and public they can’t be watered down. Starting with busting up the biggest banks, as Bernie Sanders proposes.

More than a century ago, Teddy Roosevelt broke up the Standard Oil Trust because it posed a danger to the U.S. economy. Today, Wall Street’s biggest banks pose an even greater danger. They’re far larger than they were before the crash of 2008.

Unless they’re broken up and Glass-Steagall resurrected, we face substantial risk of another near-meltdown – once again threatening the incomes, jobs, savings, and homes of millions of Americans.

To paraphrase philosopher George Santayana, those who cannot remember they were screwed by Wall Street are condemned to be screwed again. 

ROBERT B. REICH is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock, “The Work of Nations," and"Beyond Outrage," and, his most recent, "Saving Capitalism." He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, INEQUALITY FOR ALL. 

The TRUTH will set you FREE.

Demand more debates with Sanders, Clinton, and O'Malley

Sign my petition to the DNC: Demand more debates with Sanders, Clinton, and O'Malley

Saturday night's Democratic presidential primary debate was striking. It was all about substance and logic -- in sharp contrast to Republican debates that have been all name-calling and posturing.

It was the kind of debate that could have really gotten voters excited about the Democratic Party. But because of when it was scheduled, almost nobody saw it.

The Saturday night before Christmas vacation isn't exactly prime time for television watching. In fact, only 6.71 million saw the debate -- that's by far the lowest rating for any debate televised this cycle for either the Democrats or the Republicans.

And the bad scheduling looks like it is just going to keep getting worse. The next Democratic debate will be Sunday, January 17 -- on a three-day holiday weekend, scheduled at the same time as a major NFL playoff game.

The Democratic National Committee seems to have gone out of its way to make sure that America misses these debates. That's a shame.

If Democrats are going to win the White House in November, they need to be making their case to the American people NOW -- and the debates are one of their best opportunities to do so.

The DNC is running out of time to schedule additional debates. Will you join me and Democracy for America -- and sign my petition to Debbie Wasserman Schultz and the DNC asking for more weeknight, prime time Democratic debates so America can learn more about our candidates?

By scheduling debates at times few people are likely to watch, the DNC isn't just making it harder for Bernie to challenge Hillary. It's also allowing the Republicans to dominate the news and fill the airwaves with their right-wing rants and big lies.

The Republican National Committee has scheduled twice as many debates as the DNC, and all of them are occurring during weekdays in prime time. As a result, the GOP candidates are getting significantly more media attention than the Democratic candidates -- giving them more opportunity to shape the agenda for the general election in the press and the minds of millions of potential voters.

All three of our Democratic candidates are talking about things that matter to working families -- issues like raising wages, expanding paid family leave and making college debt-free. But because of the DNC's poor scheduling, nobody is hearing their message. And that's bad politics.

I found it extremely refreshing to see three presidential candidates discussing important policy differences on Saturday without stooping to bigotry. I have to believe that the rest of America would feel the same way -- if they were given the opportunity to actually watch.

We don't just need more debates. We need more debates that are scheduled when Americans are actually home and able to watch them. Please join me and DFA and sign my petition asking Debbie Wasserman Schultz and the DNC to give us more weeknight, prime time debates now.

Many thanks, and best wishes for the new year.

Robert Reich
Former Secretary of Labor

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ROBERT B. REICH is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock, “The Work of Nations," and"Beyond Outrage," and, his most recent, "Saving Capitalism." He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, INEQUALITY FOR ALL. 

The TRUTH will set you FREE.

My Bernie Sanders petition to the DNC: Can you share it on Facebook?

My Bernie Sanders petition to the DNC: Can you share it on Facebook?

Progressives are justifiably outraged at what appears to be a power play by the Democratic establishment. Over just the past couple of hours, more than 50,000 DFA members have signed on to stand with Bernie Sanders against it.

Every moment that the Sanders campaign is blocked from using its own voter file data hurts his campaign deeply. We need to build momentum NOW: Will you share Democracy for America's petition telling the DNC to restore Bernie's access to the voter file on Facebook now?

It seems like the DNC is doing all it can to blunt the momentum of Bernie's campaign -- just 24 hours after it received major endorsements from DFA and the Communication Workers of America.

First, the DNC refused to schedule an appropriate number of debates -- and hid the ones they did schedule by setting them up near holidays or on weekend nights.

Now, in a huge overreaction to a situation involving a security glitch by a data vendor, the DNC has completely removed the Sanders campaign's access to its very own voter file data -- and they won't say when or if they will give it back.

Not having access to this data for the upcoming primary process in 2016 would seriously cripple the Sanders campaign. This is unacceptable.

The Democratic Party establishment may not want Bernie in the race, but it cannot and must not drown out the voices of the people. Help us send a clear message to the DNC by sharing DFA's petition on Facebook now.

Robert Reich
Former Secretary of Labor

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ROBERT B. REICH is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock, “The Work of Nations," and"Beyond Outrage," and, his most recent, "Saving Capitalism." He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, INEQUALITY FOR ALL. 

The TRUTH will set you FREE.

Who are these people and why are they buying our democracy?

Robert Reich via MoveOn.org Civic Action

Dear friend,

$176 million.

That's the amount of money 158 families—and the companies they own or control—have already contributed to Republican and Democratic presidential candidates.¹ $176 million—that's half of the total funds contributed thus far in the 2016 presidential race.²

Who are these people and why are they buying our democracy? 

I tackle those big questions and more in three minutes in The Investments of the 158, my latest video with MoveOn. 

Please watch it and share it now.

How much more evidence do we need that our democracy is in crisis?

Please watch and share my latest video, which amounts to a giant wake-up call to reverse Citizens United and get big money out of politics, once and for all.

Thanks for all you do.

--Robert Reich

Sources:

1. "Buying Power," The New York Times, October 10, 2015
http://act.moveon.org/go/76?t=5&akid=160246.19913724.wHJg5F

2. Ibid.

MONDAY, DECEMBER 7, 2015

LOOK WHO’S BUYING AMERICAN DEMOCRACY

According to an investigation by the New York Times, half of all the money contributed so far to Democratic and Republican presidential candidates—$176 million—has come from just 158 families, along with the companies they own or control.

Who are these people?  They’re almost entirely white, rich, older and male—even though America is becoming increasingly black and brown, young, female, and with declining household incomes.

According to the report, most of these big contributors live in exclusive neighborhoods where they have private security guards instead of public police officers, private health facilities rather than public parks and pools.

Most send their kids and grand kids to elite private schools rather than public schools. They fly in private jets and get driven in private limousines rather than rely on public transportation.

They don’t have to worry about whether Social Security or Medicare will be there for them in their retirement because they’ve put away huge fortunes. They don’t have to worry about climate change because they don’t live in flimsy homes that might collapse in a hurricane, or where water is scarce, or food supplies endangered.

It’s doubtful that most of these 158 are contributing to these campaigns out of the goodness of their hearts or a sense of public responsibility. They’re largely making investments, just the way they make other investments.

And the success of these investments depends on whether their candidates get elected, and will lower their taxes even further, expand tax loopholes, shred health and safety and environmental regulations so their companies can make even more money, and cut Social Security and Medicare and programs for the poor—and thereby allow these 158 and others like them to secede even more from the rest of our society.

These people are, after all, are living in their own separate society, and they want to elect people who will represent them, not the rest of us.

How much more evidence do we need that our system is in crisis? How long before we make it work for all of us instead of a handful at the top? We must not let them buy our democracy. We must get big money out of politics. Publicly-finance political campaigns, disclose all sources of campaign funds, and reverse “Citizens United.”

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock, “The Work of Nations," and"Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His film, INEQUALITY FOR ALL is available on Netflix, iTunes, Amazon. His new book, "SAVING CAPITALISM: For the Many, Not the Few" is out 9/29. 

The TRUTH will set you FREE.

WHY THE SHARING ECONOMY IS HARMING WORKERS – AND WHAT MUST BE DONE

FRIDAY, NOVEMBER 27, 2015

WHY THE SHARING ECONOMY IS HARMING WORKERS – AND WHAT MUST BE DONE

In this holiday season it’s especially appropriate to acknowledge how many Americans don’t have steady work.

The so-called “share economy” includes independent contractors, temporary workers, the self-employed, part-timers, freelancers, and free agents. Most file 1099s rather than W2s, for tax purposes.

It’s estimated that in five years over 40 percent of the American labor force will be in such uncertain work; in a decade, most of us.

Already two-thirds of American workers are living paycheck to paycheck.

This trend shifts all economic risks onto workers. A downturn in demand, or sudden change in consumer needs, or a personal injury or sickness, can make it impossible to pay the bills.

It eliminates labor protections such as the minimum wage, worker safety, family and medical leave, and overtime.

And it ends employer-financed insurance – Social Security, workers’ compensation, unemployment benefits, and employer-provided health insurance under the Affordable Care Act.

No wonder, according to polls, almost a quarter of American workers worry they won’t be earning enough in the future. That’s up from 15 percent a decade ago.

Such uncertainty can be hard on families, too. Children of parents working unpredictable schedules or outside standard daytime working hours are likely to have lower cognitive skills and more behavioral problems, according to new research.

What to do?

Courts are overflowing with lawsuits over whether companies have misclassified “employees” as “independent contractors,” resulting in a profusion of criteria and definitions.


We should aim instead for simplicity: Whoever pays more than half of someone’s income, or provides more than half their working hours should be responsible for all the labor protections and insurance an employee is entitled to.

In addition, to restore some certainty to people’s lives, we need to move away from unemployment insurance and toward income insurance.

Say, for example, your monthly income dips more than 50 percent below the average monthly income you’ve received from all the jobs you’ve taken over the preceding five years. With income insurance, you’d automatically receive half the difference for up to a year.

It’s possible to have a flexible economy and also provide workers some minimal level of security.

A decent society requires no less.

Dear fellow MoveOn member,

The "sharing economy," also known as the "gig economy," the "on-demand economy," or the "uncertain economy," is exploding—think Uber and Airbnb—but few people are talking about what it'll mean for the social safety net built in this country over the past century. In five years, this new economic trend will encompass 40 percent of American workers.¹ 

That's why it's important that we take action now to figure out how to provide critical labor protections, even as our economy undergoes massive changes. 

Can you make sure your family and friends are talking about what's needed in the "sharing economy" by watching and sharing my latest video with MoveOn? 

We have to help make sure the changing economy works for workers by preventing the elimination of worker protections such as unemployment insurance, health insurance, worker safety, family and medical leave, and more.

Help jump-start this national conversation by watching and sharing this video now.

Thanks for all you do.

–Robert Reich

Source:

1. "The secret number to the sharing economy," TNW News, June 25, 2015
http://www.moveon.org/r?r=308312&id=135818-19913724-BHB4VMx&t=3 

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock, “The Work of Nations," and"Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His film, INEQUALITY FOR ALL is available on Netflix, iTunes, Amazon. His new book, "SAVING CAPITALISM: For the Many, Not the Few" is out 9/29. 

The TRUTH will set you FREE.

The Perils of Circus Politics

The Perils of Circus Politics

TUESDAY, NOVEMBER 17, 2015

Robert Reich

The next president of the United States will confront a virulent jihadist threat, mounting effects of climate change, and an economy becoming ever more unequal.

We’re going to need an especially wise and able leader.

Yet our process for choosing that person is a circus, and several leading candidates are clowns.

How have we come to this?

First, anyone with enough ego and money can now run for president. 

This wasn’t always the case. Political parties used to sift through possible candidates and winnow the field. 

Now the parties play almost no role. Anyone with some very wealthy friends can set up a Super PAC. According to a recent New York Times investigation, half the money to finance the 2016 election so far has come from just 158 families.

Or if you’re a billionaire, you can finance your own campaign.

And if you’re sufficiently outlandish, outrageous, and outspoken, a lot of your publicity will be free. Since he announced his candidacy last June, Trump hasn’t spent any money at all on television advertising.

Second, candidates can now get away with saying just about anything about their qualifications or personal history, even if it’s a boldface lie.

This wasn’t always the case, either. The media used to scrutinize what candidates told the public about themselves. 

A media expose could bring a candidacy to a sudden halt (as it did in 1988 for Gary Hart, who had urged reporters to follow him if they didn’t believe his claims of monogamy).

But when today’s media expose a candidates lies, there seems to be no consequence. Carson’s poll numbers didn’t budge after revelations he had made up his admission to West Point.

The media also used to evaluate candidates’ policy proposals, and those evaluations influenced voters. 

Now the media’s judgments are largely shrugged off. Trump says he’d “bomb the shit” out of ISIS, round up all undocumented immigrants in the United States and send them home, and erect a wall along the entire U.S.-Mexican border.  

Editors and columnists find these proposals ludicrous but that doesn’t seem to matter.

Fiorina says she’ll stop Planned Parenthood from “harvesting” the brains of fully formed fetuses. She insists she saw an undercover video of the organization about to do so.

The media haven’t found any such video but no one seems to care.

Third and finally, candidates can now use hatred and bigotry to gain support. 

Years ago respected opinion leaders stood up to this sort of demagoguery and brought down the bigots.

In the 1950s, the eminent commentator Edward R. Murrow revealed Wisconsin Senator Joe McCarthy to be a dangerous incendiary, thereby helping put an end to McCarthy’s communist witch hunts.

In the 1960s, religious leaders and university presidents condemned Alabama Governor George C. Wallace and other segregationist zealots – thereby moving the rest of America toward integration, civil rights, and voting rights.  

But when today’s presidential candidates say Muslim refugees shouldn’t be allowed into America, no Muslim should ever be president, and undocumented workers from Mexico are murderers, they get away with it.

Paradoxically, at a time when the stakes are especially high for who becomes the next president, we have a free-for-all politics in which anyone can become a candidate, put together as much funding as they need, claim anything about themselves no matter how truthful, advance any proposal no matter how absurd, and get away bigotry without being held accountable.

Why? Americans have stopped trusting the mediating institutions that used to filter and scrutinize potential leaders on behalf of the rest of us.

Political parties are now widely disdained.

Many Americans now consider the “mainstream media” biased.

And no opinion leader any longer commands enough broad-based respect to influence a majority of the public.

A growing number of Americans have become convinced the entire system is rigged – including the major parties, the media, and anyone honored by the establishment.

So now it’s just the candidates and the public, without anything in between.

Which means electoral success depends mainly on showmanship and self-promotion.

Telling the truth and advancing sound policies are less important than trending on social media.

Being reasonable is less useful than gaining attention.

Offering rational argument is less advantageous than racking up ratings.

Such circus politics may be fun to watch, but it’s profoundly dangerous for America and the world. 

We might, after all, elect one of the clowns.

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock, “The Work of Nations," and"Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His film, INEQUALITY FOR ALL is available on Netflix, iTunes, Amazon. His new book, "SAVING CAPITALISM: For the Many, Not the Few" is out 9/29. 

The TRUTH will set you FREE.

He would not rule out implementing a database system tracking all Muslims in the United States -- including Americans of Muslim faith.

Friend--

Donald Trump said on Thursday that he would not rule out implementing a database system tracking all Muslims in the United States -- including Americans of Muslim faith.

All Muslims in the U.S. would be legally obligated to register "at different places" around the country, putting their personal tracking information into the database. When asked how his idea differed from what the Nazi's required of Jews, Trump responded, four times, "you tell me."

image credit:The New York Times

Trump also refused to rule out requiring all Muslims to carry special religious identification, or to rule out warrantless searches of their homes and places of worship. Said Trump, "We're going to have to do things that we never did before; we're going to have to do certain things that were frankly unthinkable a year ago."

While Donald Trump is mimicking Nazi Germany, his fellow Republicans are trying to outdo him. Jeb Bush and Ted Cruz want to apply a religious test to refugees. Marco Rubio wants to "close down any place where radicals are being inspired," including mosques. This is spinning out of control, and it's time to draw the line.

It is necessary that Barack Obama, along with all living former presidents, all presidential candidates, leaders of the clergy, university presidents, heads of every large philanthropy, and editors-in-chief of every major newspaper, condemn this hateful venom from the leading Republican candidate for president of the United States.

Every hour it stands without rebuke is more poison leeching into the bedrock of America.

Please join me and Democracy for America in asking America's leaders to stand up and speak out against Donald Trump's outrageous comments. Click here to add your name now to our petition to President Obama, all presidential candidates, and prominent leaders across the spectrum of politics, academia, philanthropy, and journalism.

Together, if we can stand united in defense of America's values, we can turn the tide against Donald Trump and his dangerous bigotry.

Thank you for taking action at this critical moment.

Robert Reich
Former Secretary of Labor

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Paid for by Democracy for America, http://www.democracyforamerica.com/?t=2&akid=6983.1735462.6rXZwo and not authorized by any candidate. Contributions to Democracy for America are not deductible for federal income tax purposes.

The TRUTH will set you FREE.

The Perils of Circus Politics

The Perils of Circus Politics Robert Reich: If you’re sufficiently outlandish, outrageous, and outspoken, a lot of your publicity will be free. Since he announced his candidacy last June, Trump hasn’t spent any money at all on television advertising. READ HERE shared from

WEDNESDAY, 18 NOVEMBER 2015 Can We Talk About Weight? Steve Hochstadt: American culture is fixated on skinny as a moral virtue, and encourages the denigration of those who weigh more. I too am critical of people who use worries about weight as a weapon to assert their superiority. That makes me an enforcer of “political correctness”. READ MORE Friend on Facebook Follow on Twitter Forward to a Friend Kendrec McDade Shooting Report Reveals Lack of Pasadena Police Cooperation Skip Hickambottom: We find it extremely troubling that the the Office of Independent Review Group was not informed about the administrative review for the Kendrec McDade shooting until after it occurred. READ MORE What’s the Matter with Kentucky? Berry Craig: Once more, the social issues – what one of my union buddies calls “the three Gs – God, guns and gays”– have helped elect a reactionary union-buster in my home state. READ MORE Fighting for Good Jobs for Black Workers in Los Angeles Sonia Singh: One way the center is trying to tackle the barriers that trap Black workers in low-wage jobs is by focusing on construction. READ MORE The Perils of Circus Politics Robert Reich: If you’re sufficiently outlandish, outrageous, and outspoken, a lot of your publicity will be free. Since he announced his candidacy last June, Trump hasn’t spent any money at all on television advertising. READ HERE

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