“The broad implication is you’ve got to dot your i’s and cross your t’s,” said Kathleen G. Cully, an expert in bankruptcy and lender regulatory law in New York. “You need a proper chain of title, and in both of these cases there was a gap in the chain.”

The judges based their ruling strictly on Massachusetts law issues, and did not opine on the New York trust law issues we have highlighted. The ruling emphasized the horrible job the banks did in protecting and documenting their ownership interest and the overall carelessness of the securitization process. Massachusetts. law is somewhat unique in requiring that not only the note (the borrower IOU) be assigned correctly, but also that the lien (the so-called mortgage, or deed of trust) also be conveyed properly.

Effectively this shows the shortcomings of the fundamental design of the securitization process, of developing a one-size-fits-all process when some states have long-standing law (real estate is very well settled) that is idiosyncratic. How, in this case, could you design a securitiztion process that did NOT account for the need to handle the assignment of the mortgage, as Massachusetts requires?

As the ruling describes, one of the issues raised in the lower court case was “whether the plaintiffs were legally entitled to foreclose on the properties where the assignments of the mortgages to the plaintiffs were neither executed nor recorded in the registry of deeds until after the foreclosure sales.” Note that “out of time” assignments are common, often coming well after the timeframe required in the securitization documents, and even, as this case demonstrates, after foreclosure proceedings have commenced. At a hearing, the plaintiffs agreed that the documents they presented showed the transfer took place too late, but claimed they had other documents that would confirm that the transfer took place earlier. These documents, for the most part, were the original pooling and servicing related documents. In effect the argument was that there was an intent to transfer, and money had changed hands, which is a position the ASF and bank lobbyists have made repeatedly.

If you read the decision, you will see the judges recite the history of the two mortgages at issue and how they describe the language of the PSA and its requirements, how the banks did not adhere to its requirements, and how the documents the banks provided fail to link the properties in question specifically to the securitizations (meaning you can’t look at the closing documents and see clear evidence that the loans in question were even intended to be in these pools).

This is the key sentence from the decision, that the use of a securitization does not alter or reduce the requirements that apply to transfers and ownership of the loans and the related property:

Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone’s home or farm and must be treated as such.

Here is the decision:

Ibanez Decision

Further commentary from Bloomberg. Note the market reaction. This ruling increases the odds that more borrowers will sue bank servicers and trustees for wrongful foreclosures.

US Bancorp and Wells Fargo & Co. lost a foreclosure case in Massachusetts’s highest court that will guide lower courts in that state and may influence others in the clash between bank practices and state real estate law. The ruling drove down bank stocks.

The state Supreme Judicial Court today upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts….

The 24-company KBW Bank Index fell as much as 2.2 percent after the decision was handed down.

There’s a section of my forthcoming book about the rule of law which examines the direct causal line between the vast number of Wall Street officials in key administration positions and the full-scale exemption from accountability which financial elites enjoy even for the most egregious lawbreaking.  When you compile all of those appointments in one place, the absolute stranglehold large-scale corporate interests exert over virtually all realms of government policy is quite striking.  But it's nothing more than what the economist Nouriel Roubini meant when he told the makers of the 2010 documentary “Inside Job” that Wall Street has “captured the political system” on “the Democratic and the Republican side” alike, or what Simon Johnson describes as “The Quiet Coup”:  "The government seems helpless, or unwilling, to act against" elite business interests. 

Shipping in a JP Morgan executive to be White House Chief of Staff isn't a cause of any of this; it's just a nice symbol for what our political culture is, more than ever in the Era of Change.  It's the other side of the revolving door that sent Peter Orszag to his multi-million-dollar a year reward at Citigroup for his 18 months in an administration which lavished that bank will all sorts of gifts.  Getting exercised about Bill Daley's empowerment is like going to the beach and being angry that it's full of sand:  this appointment is the inevitable by-product of the essence of Washington and of the Obama presidency.  It's what they do and who they are.  As Matt Stoller suggested, the most surprising thing about the Daley pick is that he has no Goldman Sachs experience.

But I do find the angry reaction from some progressives to be somewhat perplexing (even though I agree with the substance of their critique and am glad they're voicing it).  On one level — the most superficial one — the Daley appointment seems very strange.  Think about this: leading progressive voices — including MoveOn and, in a very hard-hitting segment last night, Rachel Maddow (video below) — have vociferously condemned the Daley choice.  By contrast, the most enthusiastic reactions came from JP Morgan Chairman Jamie Dimon (who first suggested Daley), the Chamber of Commerce, the Third Way, and Karl Rove.  Beyond that, Daley was an outspoken opponent — in public — of two of Obama's most prominent legislative items:  health care reform and the financial regulation bill's consumer protection agency.  Why, angry progressives seem to be asking, would Obama ignore the views of his so-called "progressive base" while seeking to please those who are his political adversaries?

But it's perfectly rational for Obama to do exactly that.  There's a fundamental distinction between progressives and groups that wield actual power in Washington:  namely, the latter are willing (by definition) to use their resources and energies to punish politicians who do not accommodate their views, while the former unconditionally support the Democratic Party and their leaders no matter what they do.  The groups which Obama cares about pleasing — Wall Street, corporate interests, conservative Democrats, the establishment media, independent voters — all have one thing in common:  they will support only those politicians who advance their agenda, but will vigorously oppose those who do not.  Similarly, the GOP began caring about the Tea Party only once that movement proved it will bring down GOP incumbents even if it means losing a few elections to Democrats.

That is exactly what progressives will never do.  They do the opposite; they proudly announce:  we’ll probably be angry a lot, and we’ll be over here doing a lot complaining, but don't worry:  no matter what, when you need us to stay in power (or to acquire it), we’re going to be there to give you our full and cheering support.  That is the message conveyed over and over again by progressives, no more so than when much of the House Progressive Caucus vowed that they would never, ever support a health care bill that had no robust public option, only to turn around at the end and abandon that vow by dutifully voting for Obama's public-option-free health care bill.  That's just a microcosm of what happens in the more general sense:  progressives constantly object when their values and priorities are trampled upon, only to make clear that they will not only vote for, but work hard on behalf of and give their money to, the Democratic Party when election time comes around.

I'm not arguing here with that decision.  Progressives who do this will tell you that this unconditional Party support is necessary and justifiable because no matter how bad Democrats are, the GOP is worse.  That's a different debate.  The point here is that — whether justified or not — telling politicians that you will do everything possible to work for their re-election no matter how much they scorn you, ignore your political priorities, and trample on your political values is a guaranteed ticket to irrelevance and impotence.  Any self-interested, rational politician — meaning one motivated by a desire to maintain power rather than by ideology or principle — will ignore those who behave this way every time and instead care only about those whose support is conditional.  And they're well-advised to do exactly that. 

It is probably the case that a lack of enthusiasm on the part of the Democratic base contributed to the Democrats' defeat in the 2010 midterm election.  But what Obama cares about is getting re-elected in 2012, and he knows full well that come March or April of that year — if not earlier — most of the progressives who are now continuously complaining about him will be at the front of the line waving their Obama banners, pulling out their checkbooks and whipping into line anyone who is not similarly supportive.  By contrast, corporate institutions and Wall Street tycoons will pour their money into Obama's defeat if he does not show them the proper level of deference and accommodate their policy demands, but will support him (as they did in 2008) if he pleases them.  Resource disparities between those factions are significant, but it's also due in part to their own choices that Wall Street is empowered, and progressives are irrelevant.

If someone wants to lend unconditional support to Obama and the Democrats, there's a cogent (if not persuasive) rationale to justify it.  But what I find baffling is that those who make that choice — and who make clear that this is their choice — then express surprise, anger and scorn in situations like the Daley appointment when the White House so blatantly ignores what they want.  Given the posture of progressives, why would the White House possibly do anything other than ignore them (except when they're deliberately attacking them in order to appear more centrist)?  What motive does the White House have for doing anything other than that?  None that I can see.

We’ve all been there. It’s late, you’re at home and you’re spooked by one of your works of art – an Andy Warhol screen print of a smiling, smug Chairman Mao – so you pick up a gun and shoot it. One as a warning, the next through his eye.

In truth, only the late actor Dennis Hopper was there and it was the 1970s, a time when he was taking drugs in order to sober up quicker so he could start drinking again. Certainly his friend Warhol didn’t mind, cheerfully annotating the two bullet holes.

As a result the work became a Warhol-Hopper collaboration, and it will be sold by Christie’s in New York for an estimated £20,000-£30,000 next week, part of a sale of some 300 items of memorabilia and Hopper-owned art that filled his Venice Beach home from floor to ceiling. Many of the items are estimated in the low thousands of dollars and it follows the sale of Hopper’s expensive stuff last November when 30 works were sold for a combined total of $12.8m (£8m) including a Jean-Michel Basquiat which went for $5.8m.

But Mr Hessel and his small left-wing publisher (which is used to print runs in the hundreds) say that he has evidently struck a national, and international nerve, at a time of market tyranny, bankers’ bonuses and budget threats to the survival of the post-war welfare state. They also suggest that the success of the book could be an important straw in the wind as France enters a political cycle leading to the presidential elections of May 2012.

In a New Year message Mr Hessel, who survived Nazi concentration camps to become a French diplomat, said he was “profoundly touched” by the success of his book. Just as he “cried out” against Nazism in the 1940s, he said, young people today should “cry out against the complicity between politicians and economic and financial powers” and “defend our democratic rights acquired over two centuries”.

In a party-political aside which might or might not undermine his new status as political prophet, Mr Hessel went on to imply that “resistance” should begin with a rejection of President Nicolas Sarkozy and a vote for the Parti Socialiste.

The book has not pleased everyone. It also contains a lengthy denunciation of Israeli government policies, especially in the Gaza Strip. Although the final chapter calls vaguely for a “non-violent” solution to the world’s problems, the book also suggests that “non-violence” is not “sufficient” in the Middle East. Mr Hessel, whose father was a German jew who emigrated to France, has been accused by French jewish organisations of “anti-semitism”.

    <p>This diagnosis, though alarming, was hardly unique: drawing attention to the divide between the wealthy and everyone else has long been standard fare on the left. (The idea of “two Americas” was a central theme of John Edwards’s 2004 and 2008 presidential runs.) What made the argument striking in this instance was that it was being offered by none other than the former five-term Federal Reserve Chairman Alan Greenspan: iconic libertarian, preeminent defender of the free market, and (at least until recently) the nation’s foremost devotee of Ayn Rand. When the high priest of capitalism himself is declaring the growth in economic inequality a national crisis, something has gone very, very wrong.</p>

            Missouri car dealer Max Motors has upped the ante in its longstanding <a href="http://jalopnik.com/392524/missouri-dealer-offering-free-gun-or-free-gas-with-cars-though-we-see-a-way-of-getting-both">free-gun-with-purchase promotion</a>, offering a .50 caliber sniper rifle to anyone who buys a Dodge Viper. The next step? Air vents laced with powdered Viagra. <em>(Thanks <a href="http://www.jalopnik.com/people/mike4700">mike4700</a>!)</em> [<a href="http://cgi.ebay.com/ebaymotors/2010-Dodge-Viper-SRT10-ACR-Ltd-Avail-/310283050754?pt=US_Cars_Trucks&amp;hash=item483e4f9f02#ht_25790wt_1165">Max Motors</a>]                <a href="http://jalopnik.com/5723392/snipers-for-vipers-gives-rifles-that-new+car-smell" title="Click here to read more about “Snipers For Vipers” Gives Rifles That New-Car Smell [Steals And Deals]">More »</a>
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Goldman Sachs is investing $450 million of its own money in Facebook, at a valuation that implies the social networking company is now worth $50 billion.  Goldman is also apparently launching a fund that will bring its own high net worth clients in as investors for Facebook.

On the face of it, this might just seem like the financial sector doing what it is supposed to – channeling funds into productive enterprise.  The SEC is apparently looking at the way private investors will be involved, but there are some more deeply unsettling factors at work here.

Remember that Goldman Sachs is now a bank holding company – a status it received in September 2008, at the height of the financial crisis, in order to avoid collapse (for the details, see Andrew Ross Sorkin’s blow-by-blow account in Too Big To Fail.)  This means that it has essentially unfettered access to the Federal Reserve’s discount window, i.e., it can borrow against all kinds of assets in its portfolio, effective ensuring it has government-provided liquidity at any time.

Any financial institution with such access to such government support is likely to take on excessive risk – this is the heart of what is commonly referred to as the problem of “moral hazard.”  If you are fully insured against adverse events, you will be less careful.

Goldman Sachs is undoubtedly too big to fail – in the sense that if it were on the brink of failure now or in the near future, it would receive extraordinary government support and its creditors (at the very least) would be fully protected.  In all likelihood, under the current administration and its foreseeable successors, shareholders, executives, and traders would also receive generous help at the moment of duress.  No one wants to experience another “Lehman moment.”

This means that cost of funding to Goldman Sachs is cheaper than it would be otherwise – because creditors feel that they have substantial “downside protection” from the government.  How much cheaper is a matter of some controversy, but estimates made by my co-author James Kwak (in a paper presented at a Fordham Law School conference last February) put this at around 50 basis points (0.5 percentage points), for banks with over $100 billion in total assets.

In private, I have suggested to leading people in the Obama administration and in Congress that the “too big to fail” subsidy be studied and measured more officially and in a transparent manner that is open to public scrutiny, for example as a key parameter to be monitored by the newly established Financial Stability Oversight Council.  Unfortunately, so far they have declined to take up this approach.

However, there is consensus that the implicit government backing afforded to Fannie Mae and Freddie Mac in recent decades allowed them to borrow at least 25 basis points (0.25 percent) below what they would otherwise have had to pay; this is a significant difference in modern financial markets.  In 13 Bankers we refuted the view that these Government Sponsored Enterprises were the primary drivers of subprime lending and the 2007-08 financial crisis – that debacle was much more about extreme deregulation and private sector financial institutions seeking to take on crazy risks.  But it is still the case that Fannie and Freddie were badly mismanaged – and followed the market in 2005-07 with bad bets based on excessive leverage – in large part because they had an implicit government subsidy.  Those institutions should be euthanized as soon as possible.

Goldman Sachs now enjoys exactly the same kind of unfair, nontransparent, and dangerous subsidy; it has effectively become a new form of Government Sponsored Enterprise.  Goldman is not a venture capital fund or primarily an equity-financed investment fund.  It is a highly leveraged bank, meaning that it borrows through the capital markets most of the money that it puts to work. 

As Anat Admati (of Stanford University) and her colleagues tirelessly point out, the central vulnerability in our modern financial system is excessive reliance on borrowed money, particularly by the biggest players.

Goldman Sachs is a perfect example.  Most of this firm’s operations could be funded with equity – after all, it is not in the retail deposit business.  But issuing debt is attractive to shareholders because of the subsidies associated with debt funding for banks, and compelling to bank executives whose compensation is based on return on equity – as measured, this increases with leverage.  If they have more debt relative to equity, that increases the potential upside for investors.  It also increases the probability that the firm could fail – unless you believe, as the market does, that Goldman is too big to fail.

Social networking firms should be able to attract risk capital and compete intensely.  They do not need subsidies in the form of cheaper funding (seen today as a more favorable valuation for Facebook) or in any other form.

Social networking is a bubble in the sense that email was a bubble.  The technology will without doubt change forever how we communicate with each other, and this may have profound effects on the nature of our society.  But investors will get carried away, valuations will become too high, and some people will lose a lot of money.

If those losses are entirely equity-financed, there may be negative effects but they will likely be small – in the revised data after the 2001 dotcom crash, there isn’t even a recession (i.e., there were not two consecutive negative quarters for GDP).

But if the losses follow the broader Goldman Sachs structure and are largely debt-financed, then the US taxpayer will have helped create another major financial crisis.

And if you think that sophisticated investors at the heart of our financial system can’t get carried away and lose money on Internet-related investments, read up on Webvan:

“During the dot-com bubble, Goldman invested about $100 million in Webvan, the online grocer that never got off the ground and eventually collapsed in bankruptcy.”

An edited version of this post appears today on the NYT’s Economix blog; it is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

Richard Seymour of the blog Lenin’s Tomb (also author of The Liberal Defence of Murder & The Meaning of David Cameron, and all round rising theoretical star of the British Socialist Workers Party) has also been grinding an axe against Žižek for some time. Initially Seymour was enamoured by Žižek — despite outrage at some of his opinions — but around 2006 that started to change. Seymour confessed:

Perhaps it’s transference, but I used to think that Zizek had all the answers. Even when he was wrong, I assumed he knew it and was being contrarian, using the cunning of reason to provoke thought and all that rubbish. Even now when he’s writing absolute pig shit like this, (apparently a re-mix of this and this), I feel the urge to say “well, he didn’t meanthat“. But he did, and does. To clarify, practically everything in Zizek’s latest is a regurgitation of increasingly common Eurocentric – well, actually, Christian supremacist – platitudes about Islam and secularism.

From this post Seymour’s gripes becomes apparent: his charge is that scrape beneath the seductive theoretical exterior and you will simply find a warmed up liberal with Eurocentric and racist tendencies. “The seductive Lacanian packaging positions the “ire” at the Muhammad cartoons (which Žižek still doesn’t acknowledge as racist, only blasphemous, only disrespectful within the confines of religion) as a reaction to the West as perceived through a distorting phantasmatic screen, “a complex cobweb of symbols, images and attitudes”: this would be more impressive if Žižek did not reveal his own “complex cobweb” in the process.” From here on Seymour’s criticisms of Žižek have effectively operated via a single strategy: take Žižek’s reflections on a subject, from whatever angle they might be, and simply shout them down with charges of racism: a kind of rhetorical ‘nuclear option’. No one likes racism — a single Cartesian point across the political spectrum, aside from the far right — so repeatedly charging your opponent with it operates as vicious tool of deligitimation, and allows one to not even enter debate. In fact, to even debate the alleged racist’s position would be to enter into the same racist discourse. The example above acts as a case in point. Here, Seymour simply asserts that cartoons lampooning Muhammed are racist, ergo any attempt to think the reaction to them as anything more than justified rage against an obviously evil act of injustice is also racist.

This type of tautological rhetoric is repeated in his most recent post regarding Žižek’s commentary on an attack on a Roma community. For balance I will reproduce the quote isolated by Seymour and what I think is Seymour’s most substantial commentary on it.

Žižek wrote:

There was, in Slovenia, around a year ago, a big problem with a Roma (Gipsy) family which camped close to a small town. When a man was killed in the camp, the people in the town started to protest against the Roma, demanding that they be moved from the camp (which they occupied illegally) to another location, organizing vigilante groups, etc. As expected, all liberals condemned them as racists, locating racism into this isolated small village, while none of the liberals, living comfortably in the big cities, had any everyday contact with the Roma (except for meeting their representatives in front of the TV cameras when they supported them). When the TV interviewed the “racists” from the town, they were clearly seen to be a group of people frightened by the constant fighting and shooting in the Roma camp, by the constant theft of animals from their farms, and by other forms of small harassments from the Roma. It is all too easy to say (as the liberals did) that the Roma way of life is (also) a consequence of the centuries of their exclusion and mistreatment, that the people in the nearby town should also open themselves more to the Roma, etc. – nobody clearly answered the local “racists” what they should concretely do to solve the very real problems the Roma camp evidently was for them.

Seymour commented:

This was actually a response to a pogrom which observers compared to Kristallnacht. If the police hadn’t driven the gypsies out, the racist mob would have done so with fire and blades. But Zizek has no hesitation about regurgitating the classic anti-gypsy propaganda (they’re anti-social, they cause trouble, they basically bring it on themselves), championing of the racist mob and its ‘legitimate concerns’, counterposing the decent locals to snooty metropolitan elites, channelling the resentment of the ‘little man’ while slandering the little man’s victims. Richard Littlejohn wishes he could get away with this level of barbarism.

Seymour refuses to countenance the idea that there are any legitimate antagonisms, even only in addition to the pure racist frenzy driving the mob. Žižek’s stab at metropolitan, liberal condescension is taken simply as a ruse to allow his own racist instincts some veneer of criticality. But really, is it so incredulous that there were genuine frictions over safety and property in this instance? And does to even consider that possibility make one a racist? It seems to me that there is a hysterical, liberal view of racism — in a purely voluntaristic, moralistic register — at work in Seymour’s denunciations of Žižek. Rather than thinking through structurally how racism is intertwined with class, economics, culture and mechanisms that perpetuate real racial divides and concrete problems with race vectors (those structurally constructed and emergent upon racism), Seymour’s absolute scepticism tends towards the liberal position Žižek is criticising, so it is no wonder that he is so upset by Žižek’s repeated criticisms of liberal anti-racists.

What is the deeper explanation for all this? We enter the realm of conjecture now, but I don’t think Seymour’s running battle with Žižek can be disassociated from the politics of the Socialist Workers Party. For a great deal of investment has been made by the party in the last ten years in defending the victimised Muslim, combating Islamophobia, anti-fascist campaigns and anti-racism music festivals, and so on. Indeed, the stock and trade of the SWP has increasingly come to be a variant of liberal anti-racism, with the establishment of permanent united fronts with Tories, rightwing Muslim groups, and so on.  So there is a lot at stake for the party in whether or not liberal anti-racism is the correct paradigm. Žižek has thus become a target for party-political reasons.

The Federal Reserve is pushing a new mortgage regulation that would effectively eliminate the most powerful federal remedy for predatory lending.

The regulation would severely limit a practice called “rescission,” used to strike down demonstrably-illegal or fraudulent loan contracts and void a bank’s ill-gotten gains from such predatory lending practices. When a mortgage borrower wins a rescission case in court, the bank loses the right to foreclose, and has to give up all profits from interest and fees on the loan. The borrower still has to repay the principal — the original amount of money extended by the bank — but can’t be kicked out of the house.

Under the Fed’s new proposal, however, borrowers would be required to pay off the balance of the loan before the bank loses its right to foreclose — that means borrowers could still lose their homes, even in cases where banks have broken the law.

What gets interesting is how recission plays into the securitization model. The borrower is still on the hook for the principal, but with no ability to foreclose, it’s hard to compel the borrower to repay. And remember from our previous discussions of securitization, that “banks”, meaning servicers, are keen to foreclose because they get to repay themselves for fees (including junk fees and foreclosure-related charges) and principal and interest advances (remember they keep advancing principal and interest even when the borrower has quit paying, in theory they could stop once the loan is severely impaired, in practice pretty much no one does). The investors get whatever is left.

So the banks’ argument no doubt includes the need to alleviate the impact of recission on servicers. But there are far more surgical approaches (addressing how to deal with servicer fees and advances in cases of recession, probably with different treatment when the servicer is independent versus when it is under the same corporate umbrella as the originator that created the fraudulent loan). But it’s much easier to opt for simple seeming solutions that give the banksters what they want.

Last week I wrote about President Obama and losing poorly, about how he loses in a way that doesn’t build toward long-term liberal goals, that leaves his enemies stronger and in control of the narrative while splitting his supporters. I want to talk about this argument and financial reform, specifically how the progressive community was able to overcome it.  I would argue that the progressive community fought financial reform well for two key reasons.

A Community of Experts

The first is that Americans for Financial Reform (AFR), Roosevelt Institute, the financial blogosphere and many others found a large number of experts, built them up and deployed them in ways that pushed for stronger concrete changes. On Roosevelt’s end alone, our Make Markets Be Markets conference and Will It Work? How Will We Know? conferences took experts working in a variety of different places and on a number of individual topics and brought them together.

These were experts in their fields who had a different, stronger vision of how the financial sector should be regulated than what was proposed by Treasury.  They made strong recommendation, markers for what serious reform would look like.  This builds us for the long run, as there are now experts with a strong vision who have been tested in the public sphere, experts that wonks, media, lawmaker and regulators can call on for expertise in the future.  That’s building a community.

(It was also fun!  Frustrating, hard-work, a complete pain-in-the-ass, disappointing at times, but fun.  Matt Stoller pointed that out to me, that this kind of political community building should be fun, along with the smart insight that financial reform battles that are lost need to be lost in a way that builds coalitions. How many liberal groups had a fun 2010?)

Up until this point only regulators and deregulation-minded Washington insiders spoke about these topics. The financial reform effort allowed us to build for the long-run, and these new experts will be deployed again at the next financial crisis and on the next financial issues.

Fighting the Politics

The second is getting serious about the politics. There was a period in the beginning of 2010 where everyone, myself most of all, thought that the Senate financial reform bill would be weak, so weak that it wouldn’t be worth writing about or fighting for.  By the time it was over it was surprisingly strong given where it started – very surprising to others as well.  Edmund L. Andrews and Katherine Reynolds Lewis:

Bulked Up, Not Watered Down

Industry lobbyists are stunned that the bill became tougher rather than weaker as it progressed through the Senate…Scott E. Talbott, a top lobbyist for the Financial Services Roundtable, which has adamantly fought against many provisions in the Senate bill, sounded almost shell-shocked by the bill’s breadth…

The bill is a major victory for President Obama and a valedictory for retiring Senate Banking Committee Chairman Christopher J. Dodd, D-Conn. Dodd was the guiding force who overcame strong opposition from many Republicans and some Democrats and skillfully navigated past numerous procedural barriers.

There are two specific days on which this changed.

March 11th, 2010: The first was Chris Dodd’s decision to go it alone and release his own bill rather than water it down to get Republican support in committee. This watering down process between Dodd and the Republicans on his committee sent me in a serious depression over the prospects of financial reform. Shelby had walked away from the debate, Corker was trying to play the role to get a bill out, and then Dodd decided to go on his own. He also called for a vote immediately to get it out of conference without calling any amendments. And rejecting fake bipartisanship turned out to be the right decision.

The bill then went to the amendment process in the Senate. Many, including myself, are disappointed that not enough important amendments got a vote in the Senate. But it is important to remember that there was a moment where there weren’t going to be any votes on any amendments. And it’s only through progressive senators demanding votes on amendments that they went to the floor. And only by demanding votes, and forcing Republicans and Democrats to vote for or against Wall Street, was progress able to be made.

April 16th, 2010: Blanche Lincoln had written a derivatives bill that sent everyone scrambling. Everyone. On the second date, April 16th, everything changed because of the derivatives language that was introduced into this bill.

Especially the Section 106/716 language, which would spin out the dealers from commercial banks. Noam Scheiber got this dynamic perfect, noting that all the lobbyist energy had suddenly turned to scrapping this very specific derivatives language, and even with huge opinions against it, it got out of the Senate. This left little time to attack other things.  Suddenly progressives were the ones running the clock, not the lobbyists.

What’s important here is that Senator Lincoln didn’t decide to do it randomly. She did it because she had a primary challenger in Arkansas — Lt. Governor Bill Halter, who deserves a lot of credit for stepping up and risking his political career to challenge an entrenched incumbent. Halter was recruited and supported by many local Arkansas Democrats, Glenn Greenwald and Jane Hamsher of Accountability Now, the hundreds of thousands of members of the Progressive Change Campaign Committee, Markos Moulitsas-Zuniga and the Dailykos community, the millions of members of Moveon, and the millions of members of the SEIU and the AFL-CIO.  The other team was mobilized as well. The bank-dominated US Chamber of Commerce, was advertised on her behalf in the race.

But it was the people-powered groups that had more power in the primary. Lincoln knew that if she watered down her derivatives language, it would be known and that information would be given to voters. Special thanks are owed to these groups, who deserve a central place at the story for why this Senate bill is so strong, but so far I’ve seen very little attention given to them.

This synergy will continue.  It did after the bill with the PCCC and others campaigning to get Warren to the CFPB.

Is the final financial reform bill perfect?  No.   Is it stronger because of these items?  Yes.  And what I value the most is that the coalition of financial experts who have a stronger vision of how regulation should work in the financial sector is much more organized that before this crisis hit.   We’ll continue to build them for the future, and I hope you’ll help us any way you can.

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One often hears complaints about the use of anonymity on the internet, usually from people in the mainstream media who worry about people using anonymity irresponsibly, to say things they wouldn’t be willing to say in their own name. Abuse of anonymity, it is often assumed, is one of the things that make the internet such a toxic, uncivil place, and therefore allowing its use is highly questionable.

What I’d like to argue here is that allowing the use of real names in internet discourse is equally questionable if not moreso. To get at why this is true, let’s look at the difference in reactions to an anonymous commenter who makes a racist remark and the recent racist remarks of Hayley Barbour. In the case of the anonymous commenter, people will likely pile on, call him a racist, etc. In the case of Barbour, everyone notices that he’s an influential and powerful person and therefore assumes that he just slipped up and can’t possibly be a racist. In fact, everyone is afraid to come out and call Barbour a racist precisely because being a “racist” is regarded as an extremely bad thing, hence an insult, hence a personal attack — which then winds up rebounding on the accuser and making them look bad.

Similar dynamics abound. For instance, the kinds of things John Yoo advocated are absolutely dispicable and inhuman — but when you then think of John Yoo as a person, who presumably has his own needs and desires and loves his family, etc., suddenly appelations like “war criminal” and “worthy of death” seem somehow disproportionate.

Why should people engaged in public debate be able to abuse their status as particular human beings like this? It’s precisely these spurious appeals to our shared humanity that keep us from having a viable public sphere. The solution is precisely to disallow the use of real names and instead require consistent pseudonyms, so that all names in the public sphere of the internet are the names of discourses rather than human beings. If someone insists on using their real name, let it be treated as a pseudonym as well.

Filed under: bullshit, How's that working out for you — being clever?

The difference, it seems to me, can be found in a simple truism: money is power. All things being equal, having more money makes you more powerful. Social Security gives direct cash payments to retirees, and even though in practice they are constrained as to how they can spend it (needing food, etc.), they are in principle free to spend it however they wish — so it increases their power. Medicare, by contrast, gives money to doctors, hospitals, and pharmaceutical companies (and also private insurance companies through subcontracting, subsidies, etc.), increasing the power of corporations and the wealthy elites.

Similarly, why is export-driven growth such a big article of faith under neoliberalism? Why not promote domestic consumption instead? After all, the money spends no matter who your customers are, and it might even be cheaper to sell to locals than to ship everything to developed nations. The answer: in order to promote domestic consumption, you need to make it so that the local population has more money and therefore more power. Hence China, an authoritarian regime, opts for export-driven growth — and international organizations centered in the developed world preach the gospel of export-driven growth because it puts developing nations in a position of permanent dependency.

Another question: why would anyone object to extending unemployment benefits when it’s obvious there are no jobs? Wouldn’t removing further money from the system just make things worse? The answer: in a world where uninsurance benefits are relatively generous, the employer has less control over the worker. In a world where they’re stingy, the employer only has to keep working conditions 1% better than “dying on the street.” Productivity gains galore!

It’s become something of a cliche to reverse the traditional Republican denunciation of “class warfare” by saying that actually it’s the rich who are at war with everyone else — but I think the spuriousness of the original claim tends to make us underplay its reversal. This really is a “total war.”

It’s not a war where someone has invaded another country and the goal is to push back to the previous boundaries. Instead, it’s a war of conquest where the goal is to reduce the target population to a position of utter servitude and submission. The ruling classes ideally want to have all the power and for everyone else to have none. They can’t really achieve that, as they depend on everyone else for workers and customers, but they distribute power to the lower levels grudgingly but strategically, always looking for ways to minimize the expenditure and carefully target it so as to maximize the dynamic of dependency.

As for what everyone else can do to change this, I don’t know.

Filed under: economics, politics