InterVentions: August 2008

Federal Appeals court rejects torture victims' suit

The reasoning, especially coming after the Supreme Court's judgment in Boumediene, is so disgusting it's mind boggling. Basically: no reasonable government official could have known that torturing these people is a violation of the constitution. Is the divide between moral reasoning and moral knowledge and legal reasoning and legal knowledge so wide that with a straight face we can render judgments like this court did? You don't have to be a 'natural law' theorist to believe that something has gone seriously wrong here. SCOTUS gave this Appeals Court a chance to revisit their ruling; evidently, they didn't take their responsibility seriously.

Decider-in-Chief

Interesting article in the WaPost detailing the process by which the torture memos were released. Obama set up a debate format in which opponents and proponents of release took turns airing their arguments. This is the kind of willfully deliberative process that I imagine was non-existent during the Bush years. Even more impressive is the following: "When it ended, Obama dictated on the spot a draft of his announcement that the documents would be released, while most of the officials watched, according to an official who was present." He must have been leaning in a certain direction prior to the debate, but nevertheless Obama's capacity to make a decisive judgment immediately following what must have been a complex and emotional debate strikes me as a first-rate virtue for a commander in chief. Now we use Bush's quip that he is the decider-in-chief without shame and forboding.

Self-Caused Disaster Capitalism

Naomi Klein coined the term 'disaster capitalism' to describe the advent of economic opportunism grounded on catastrophic and unforeseen events. AIG, the recipient of $160 billion from the US government (so far!), forces us to coin another phrase, 'self-caused disaster capitalism'. Not as elegant an expression for sure, but highly descriptive. Instead of corporations waiting for disasters to happen, they now cause them and dare the government to let them fail.

In a 'secret' memo, AIG executives warned US officials that allowing AIG to fail would have systemic disastrous consequences for the world's financial system. Apparently, it worked, since taxpayers are now on the hook for another $30B.

This illustrates 'moral hazard' in the genuine sense: motivate reckless economic behavior by guaranteeing that financial immolation is doused with tax-payer funds.

A world of discontent

Mass protests and lines of anxious customers at bank doors: Ukraine is the latest scene of social unrest as the economic crisis continues. Last weekend, 120,000 people marched through the streets of Dublin to protest against government austerity measures targeted largely at public sector workers. The French Carribbean island of Guadaloupe has seen weeks of strikes and protests, while in France over a million workers have gone on strike against Sarkozy's policies; mass protests have brought down governments in Iceland and Latvia as their economies effectively collapse; popular anger and protest continues in Greece, where public sector workers held a 24-hour stoppage last week. There are reports of unrest in China, as growth slows. As unemployment grows this year, we can expect more of the same: the question is where and how well this popular anger will be directed.

Join the Home Defenders Campaign

ACORN has begun organizing a civil disobedience campaign to stop home foreclosures. ACORN wants to put together networks of concerned people across the country that will come out in an emergency and surround homes authorities are trying to seize and whose occupants they want to evict. This way poor, struggling people who, unlike banks and their shareholders, aren't getting bailed out by the state can stay in their homes.

Please have the courage to sign up and act in solidarity with your fellows. If you're in New York, there will be training sessions this weekend.

Bizarro world, cont.

Amidst pressures from the Empire's henchmen, Charlotte-based Bank of America, Lindsey Graham (R-SC) continues to endorse the nationalization of banks. He asserts, plainly and in terms everyone can understand, "The truth is we put more money into the Bank of America than it's worth. That's not nationalization. That's just stupid."

Indeed. Is it possible that a Republican is seriously endorsing this strategy? Or is it some Jedi mind trick/ruse to get Obama to stake a position? Inquiring minds want to know.

Khatami to Run for President

Former Iranian President Mohammed Khatami has announced that he will challenge Ahmadinejad in elections in June. Khatami is a reformer who has fought for a more democratic Iran and is known for his friendliness toward the West. How he fares in the upcoming elections will be interesting in many ways. First, we will have to see how hard the conservative establishment tries to thwart his bid. This establishment has formal control over the electoral process in Iran and can block his candidacy if it chooses to. Second, with the new US administration taking a more conciliatory note toward Iran, it is possible the Iranian electorate will welcome a less hardline President. One major contributing factor in Amadinejad's victory four years ago was the aggressive policies of the Bush administration.

Government Tapped Journalist's Phones

On the Media reports on revelations by whistleblower Russell Tice that under the Bush administration, intelligence officials tapped the phones of American journalists. This monitoring was more than simply noting the foreign contacts journalists had. In fact, the intelligence community examined the content of any call, including domestic calls. This had a chilling effect on the ability of journalists to cover the affairs of the state as government sources became afraid of talking. What's most disturbing about the story is that because of federal legislation this monitoring may no longer be illegal.

Competing historical lessons

Mitch McConnell, Senate minority leader and all around nay-sayer, offers us two historical precedents to explain why a large stimulus package will fail: the Great Depression and Japan in the 1990's. According to McConnell, it didn't work then, and we shouldn't believe it will work now. On the other hand, liberal economist, and recent Nobel prize winner, Paul Krugman just released a revised edition of his book, 'The Return of Depression Economics' in which he argues that those same two historical precedents show that a large stimulus package will work. Who's right?

I know where my bets would go. McConnell's strategy smacks of Rovian duplicitousness: take your opponent's strengths, shake and distort, and use to your own advantage.

Government to buy debt, not banks

The New York Times reports that the Obama administration has decided on a bailout plan for the banking industry that would have the federal government buy or otherwise support their bad mortgage-backed assets. The plan would not involve state-ownership of the banks themselves. It would, in other words, be a rescue package to the industry that caused our present economic woes.

If this is true, it is extremely disappointing. Not only does it mean that already rich bankers get a huge amount of welfare, it also doesn't address the coercive power they exercise over us. They can go on determining the fate of the world and expect to be supported by their victims when times are tough.

Tax breaks for banks

The Treasury's newfound broad powers is suspect as a constitutional matter, but surely ill advised as a prudential matter.

We now know, via the Washington Post, that a tax law that conservatives have been anxiously and vigorously attacking for decades, has been quietly (really, secretly) 'reinterpreted' by the Treasury. The law forbids corporations from using offshore shell companies as tax shelters. The upshot of the reinterpretation: a $110bn tax windfall for banks. Evidently, due to the complexity of the bailout, few or no members were aware of the change. Due to the delicate nature of corporate executives in our current economic 'crisis' (who are otherwise at all other times vicious tigers) , the article suggests that Congress is wary of coming out to declare the illegality of this maneuver: who wants to be the cause of the next Great Depression?

Could there be any better example of Naomi Klein's thesis of the 'shock doctrine'? I suspect we will be hearing of further outrageously hidden 'reinterpretations' of law. Hopefully (can we hope?) the newly empowered Democratic Party will do the right thing and methodically bring back law and order after 8 years of chaos.

What's Actually in the bailout proposal

The proposed bailout contains two particularly disturbing provisions. Section 8 reads:
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
Yes, that's right: no oversight whatsoever. We are being asked to trust Henry Paulson-- whose previous job, in case you'd forgotten, was as CEO of Goldman Sachs-- to get us out of a mess he played a significant part in creating. He will have a free hand to hire Wall Street companies to value the toxic assets of, you guessed it, Wall Street companies-- and no-one will be able to do anything about it.You could not make this stuff up!
The key phrase of Section 6 reads:
"The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time."
In other words, this is not a $7 billion bailout; the actual cost could be many times that. As economist Nomi Prins explains here, "[i]t means that if everything we American taxpayers buy re-evaluates down to zero, we get to buy more. That's hardly taxpayer "protection." With several hundred billion dollars of write-downs already announced this year by the part of the industry compelled to post their losses, it's a safe bet that $700 billion worth of the junkiest assets in existence will be heading to zero the second they are purchased."
Enough said!