Government Must Help People DIRECTLY-- Not Through Grasping Big Business Crooks

This morning, Naked Capitalism carried a piece by economist Michael Hudson on the ramifications of the pandemic on the U.S. economy. Hudson explained how to escape from catastrophe by looking at a biblical perspective.

The word “Jubilee” comes from the Hebrew word for “trumpet”-- yobel. In Mosaic Law, it was blown every 50 years to signal the Year of the Lord, in which personal debts were to be canceled. The alternative, the prophet Isaiah warned, was for smallholders to forfeit their lands to creditors: “Woe to you who add house to house and join field to field till no space is left and you live alone in the land.” When Jesus delivered his first sermon, the Gospel of Luke describes him as unrolling the scroll of Isaiah and announcing that he had come to proclaim the Year of the Lord, the Jubilee Year.

Until recently, historians doubted that a debt jubilee would have been possible in practice, or that such proclamations could have been enforced. But Assyriologists have found that from the beginning of recorded history in the Near East, it was normal for new rulers to proclaim a debt amnesty upon taking the throne. Instead of blowing a trumpet, the ruler “raised the sacred torch” to signal the amnesty.

It is now understood that these rulers were not being utopian or idealistic in forgiving debts. The alternative would have been for debtors to fall into bondage. Kingdoms would have lost their labor force, since so many would be working off debts to their creditors. Many debtors would have run away (much as Greeks emigrated en masse after their recent debt crisis), and communities would have been prone to attack from without.

The parallels to the current moment are notable. The U.S. economy has polarized sharply since the 2008 crash. For far too many, their debts leave little income available for consumer spending or spending in the national interest. In a crashing economy, any demand that newly massive debts be paid to a financial class that has already absorbed most of the wealth gained since 2008 will only split our society further.

...In the past, the politically powerful financial sector has blocked a write-down. Until now, the basic ethic of most of us has been that debts must be repaid. But it is time to recognize that most debts now cannot be paid-- through no real fault of the debtors in the face of today’s economic disaster.

The coronavirus outbreak is serving as a mind-expansion exercise, making hitherto unthinkable solutions thinkable. Debts that can’t be paid won’t be. A debt jubilee may be the best way out.

Over the last couple of years, no one has written more cogently than Matt Stoller about the politics of monopoly. His book, Goliath: The 100-Year War Between Monopoly Power and Democracy should be required reading for a literate electorate. Last night, he wrote-- with a sense of urgency-- that "Congressional leaders are likely to put a very ugly deal in front of the American people, and if it passes, America may be unrecognizable after this pandemic. But there is a way to stop it, if people on the populist left and people on the populist right work together." Please pay attention:

You can't filibuster COVID-19

Here's the situation. Mitch McConnell, Chuck Schumer, and the Trump administration is negotiating a bailout package to address the coronavirus crisis. There's been a lot of chatter about the need to support workers as the economy goes into a freeze. This is happening around the world; the British government, for instance, is willing to pay 80% of worker wages during this downturn for those affected by the crisis.

But in the U.S., our leaders seem to be falling prey to what can only be called a corporate frenzy of favor-seeking. “Any time there is a crisis and Washington is in the middle of it is an opportunity for guys like me," said one lobbyist.

Now first I should say that I don’t know exactly what is going to be in the final bill, because the whole process is opaque and being negotiated right now by some untrustworthy political leaders. We will only find out the details at the last minute. So all I have to go off is rumor and reporting. But if we wait until we know the full contours, it will likely be too late to act. I hope I’m wrong, but the list of what lobbyists are asking for is long, and ugly, and often the requests for money or legislative favors are done to cover up mistakes made before the coronavirus hit.

Take Boeing. The aerospace giant of course wants a $60 billion bailout. Financial problems for this corporation predated the crisis, with the mismanagement that led to the 737 Max as well as defense and space products that don't work (I noted last July a bailout was coming). The corporation paid out $65 billion in stock buybacks and dividends over the last ten years, and it was drawing down credit lines before this crisis hit. It is highly politically connected; the board of the corporation includes Caroline Kennedy, Ronald Reagan’s Chief of Staff Ken Duberstein, three Fortune 100 CEOs, a former US Trade Representative, and two Admirals, one of whom is the board’s only engineer. Using the excuse of the coronavirus, Boeing is trying to get the taxpayer to foot the bill for its errors, so it can go back to making more of them.

But that's not all. Defense contractors want their payments sped up, and I've heard they want to widen a giant loophole called 'other transaction authority' to get around restrictions on profiteering. Elon Musk and Jeff Bezo want "$5 billion in grants or loans to keep commercial space company employees on the job and launch facilities open." They also want the IRS to give them cash for R&D tax credits.

CNBC reported that hotels want $150 billion, restaurants want $145 billion, and manufacturers wants $1.4 trillion. And the International Council of Shopping Centers wants a guarantee of up to $1 trillion. The beer industry wants $5B. Candy industry wants $500M. The New York Times reported that "Adidas is seeking support for a long-sought provision allowing people to use pretax money to pay for gym memberships and fitness equipment." Gyms are of course closed. Meatpackers want special visas so they can undercut wages of their workers, and importers want to stop paying duties they incurred for harming domestic industries for illegally dumping products into the U.S.

Now, I'm not opposed to supporting industries. This is a crisis, and we do not want a lot of the productive capacity of the United States to fall apart because of a pandemic. But the key to supporting enterprises is to make sure that there are strict conditions, so that power doesn't consolidate into the hands of monopolists and financiers cherry-picking distressed assets. Otherwise, America will simply be unrecognizable after this pandemic. CNBC personality Jim Cramer, for instance, is worried that after this pandemic America will have just three retailers. And he's right to be worried about that.

Here's how we can stop it. There are enough members of Congress to act and prevent what really looks less like a relief package and more a corporate coup. However, the problem is that this group is split into different political parties, and Congressional leadership is taking advantage of that dynamic to jam this through. Mitch McConnell wants big business to rule, so he's playing a trick. He is refusing aid to workers. Democrats are negotiating with him to try to get unemployment assistance and social welfare. McConnell knows Dems won't pay attention to corporate bailouts if he takes the public hostage, and Democrats know that they can hand out favors to big business if they just talk about how they got larger checks for workers.

So McConnell will put a bill down in front of Nancy Pelosi, with some good stuff like unemployment insurance, but also the really ugly stuff to hand over America to big business. The corporatists in the Democratic Party will tell her "Pass the corporate coup bill, after all we have to do something right now!" And because she doesn't have the votes from within her own caucus because of these corporatists, and because she doesn't particularly care if America is sold off to big business, she will do that. The only hope is to get together a bipartisan group from the right and the left to oppose this charade.

And there's a precedent.

In 2008, when Congress was on the brink of passing a $700 billion bailout to Wall Street, something astonishing happened. A motley bipartisan group of roughly a hundred members, as well as outside experts, formed what was called the "Skeptic's Caucus," and organized enough votes to take down the package. Congressional leaders then attached some minor tweaks, and forced the package through after the stock market crashed. Ultimately, the skeptics failed, and the bailouts ended up shifting power and wealth to an unaccountable elite class.

But for that brief moment, it became clear that opposition to Congressional leadership on corporate subsidies is possible. We will need another Skeptic's caucus, and quickly. And this time, it can succeed. Because this time, no one is fooled by what is happening. We can see it plainly.

So whether you are a Republican or Democrat, join a new Skeptic's caucus. And demand your member of Congress represent YOU, and not just big business. Help the people by dealing with unemployment, rent, mortgages, not big business executives trying to save their cushy positions.

Stoller, who began his Capitol Hill work in Alan Grayson's office, later worked as a Senate staffer for Bernie. As you can see from the just-released video clip above, it certainly looks like Bernie will be one of the senators standing behind his ideas. Another is Elizabeth Warren:

Welcome To The COVID Economy

Sure, there's a Trump tweet for occasion; but there's also a George Carlin video for every occasion as well. You may prefer how Carlin explains what we're going through as a society now but economist James Galbraith is slightly less pessimistic. In fact, he wrote a piece for The Nation this week about how to confront the side-effects of the pandemic, namely the economic one. He looks at it square in the eyes and wants you to accept it: "a house of cards has fallen. An entire world of illusions, self-deceptions, and sophistries has died. We’ve come to the end of a very long string. The string has been unspooling since the triumphs of Milton Friedman and Friedrich von Hayek, conventionally thought of as Margaret Thatcher and Ronald Reagan, but rooted equally in Jimmy Carter and Bill Clinton, in Tony Blair and Gordon Brown, and in the Bushes and Obama and many lesser figures. A binational, bipartisan coalition of catastrophe in the Anglo-Saxon realm of ideas. Donald Trump and Boris Johnson are consequences, not causes, of this mental failure. The delusion is economics as we’ve known it. Here, two concepts have ruled: self-organization and the veil of money. The first argued for markets, for all of society to be mediated by the forces of supply and demand. Its supposed virtues were competition, flexibility, incentives, efficiency; the reality is a fragile web, woven in strands of glass. The second submerged the financial system-- the banks, traders, speculators-- rendering those people and institutions as mere messengers, unimportant and invisible."

He wrote that "our leaders now plan to send out cash, as 'stimulus'-- as though a market response will organize itself. It is another delusion. In Europe "border controls are back" and America "is breaking apart." I agree with him that "federal officials, with few exceptions, are predatory, indifferent, or merely stupid [and that] congressional leaders appear stymied. The few steady hands are those of some governors-- in both parties-- many mayors, county judges, and other local officers." I don't know what he means by governors of both parties. The only governor who appears to be doing a genuinely good job at confronting the pandemic-- not a cosmetic job-- is DeWine, an Ohio Republican.

For the population, it is a test of character. Ordinary Americans are for the most part community-minded, prepared to follow instructions and do right, if others will do likewise. Around me in Austin, people are curtailing activities while going about their day jobs in the face of increasing risk. Pools and playgrounds and libraries are closed—we’re told, for several weeks. Everyone knows it could be months and months.

As everyone also knows, there has been far too little testing. There is no reserve of hospital beds or equipment. Global supply chains are broken, and medicines of many types will run short. The only possible advantage to being in America right now is that it is a large country; many people live in more space and can self-isolate more easily, for a time. This is not a consolation for the poor, nor for New Yorkers, nor for those reliant on assistance that they may not be able to get.





It is hard to look past the imminent swamping of the health system, but there are deeper disasters afoot. In California, nearly 6 million elderly have been told to stay home. Many of them live alone or in pairs. Who will feed them? To this, the governor replied, “Good question.” The reality is, we’ve done a good job in this country of keeping many frail and elderly people alive, a very poor job of keeping them healthy, and we have no system for keeping them fed. We may not even know where they are.

We are told there is plenty of food in the country. Can it get to the stores? Yes, for now; but for how long? How long will people be there to stock and sell and run the checkout counters and maintain security? Distribution and security are the weak links in the food chain. The market has given us efficiency and a high living standard. It has by the very same token not given us resilience, spare capacity, coordination, or leadership. It has, instead, given us fragility. A web of glass. Panic is both the rational response and the enemy. If panic takes control, it will destroy whatever is left.

The American economy must convert, in full and at once, to fight the pandemic. A public corporation-- the Health Finance Corporation, based on the Reconstruction Finance Corporation of the Depression and World War II, with power to borrow and allocate and meet problems as they arise-- is needed now. The National Guard and the Army and all their resources must be deployed. And every civilian resource, including all available human beings, must be enlisted.

The immediate medical need is supplies, beds, personnel. Hospitals can be built in days, we have learned. Space can be requisitioned; hotels and dormitories are empty. The military is said to know how to deal with mass casualty events. The Defense Production Act gives authority to command companies to make masks, oxygen tanks, respirators. Unlimited jobs are available for people to clean and perform other basic functions. It’s risky work, and it must be decently paid. Guarantee the jobs, and people will do them. China managed that much, and many people volunteered.

The next need is to stabilize priority civilian supply: food, drugs, cleaners, paper goods. The existing system may hold up for a while. The essential is to lock it in place, supporting the people doing their jobs so that they can continue: drivers, stockers, checkout clerks, cooks and kitchen help, and scrubbers. If the necessary goods keep coming in, people will stay calm and get along without the rest. As in Korea, ride-share and taxi drivers can be trained to disinfect and mobilized to drop off meals and medicines. Suddenly, all these workers are essential and must now be treated that way.

All the information services should now be drafted and basic customer bills should suspended for the duration: cable, cellular, landlines, Internet. Let the federal government compensate the companies for basic costs. Having secure communications and entertainment will help keep people at home. The boost in disposable incomes will help in exact inverse proportion to wealth; those losing work income will benefit most.

Among the most necessary big corporations right now are those who run mass distribution networks: Amazon, Walmart, FedEx, UPS, and the drugstores and major fast-food chains. They should be run as public utilities for the duration. That means giving delivery at cost on essential goods and stop-orders on frills. Top executives should contribute their time. The workers should get raises and medical care and protective equipment and unions. In return for staying on the job in the emergency, those workers too should emerge in an entirely different position after this ends.

Many large, medium, and small employers are down for the count and may be bankrupt soon: airlines, hotel chains, shopping malls, convention centers-- more than anyone can list. The equity will be gone; there must be financing to maintain essential operations and to hold the physical and engineering assets in place, and a debt moratorium to stave off the creditors and the vultures. Needless to say, evictions and foreclosures and utility stoppages must be stopped immediately; if necessary, it is better to ration the supplies. As businesses go down, so will the bankers. After the wave passes, we’ll see what can be rebuilt.

Through it all, the people must be reassured. Those at home must be cared for. And those who remain healthy must be given useful work. Solidarity, organization, determination: These are the words for us now.

Changing times... very changing times requires agile, competent leadership which is in short supply in our ruling class. Take the idea of bailouts. The airlines near our money to stay in business? OK, our tax dollars should go towards buying their stock. As Aaron Gordon wrote at Vice yesterday, "U.S. airlines have spent the last decade shoveling billions in profits to stockholders. Now they want your tax dollars with no strings attached. Fuck that."

The last decade has been very good to U.S. airlines. Industry consolidation, stuffing more people into smaller spaces on planes, and stacking fees upon fees have resulted in unprecedented prosperity for the country’s Big Four (American, Delta, United, and Southwest). From 2012 to 2016, these four airlines were the most profitable in the world, walking away with a combined $42.3 billion, according to an analysis by L.E.K. Consulting. In the two subsequent years, 2017 and 2018, the US airline industry raked in an additional $27.3 billion in profits. They then used nearly all of that money, a whopping 96 percent, to buy back shares from stockholders-- a move that enriches investors while doing nothing for the company itself-- and handsomely compensating executives.

Now, the airline industry, like nearly every other industry, is suffering due to the unprecedented coronavirus travel restrictions. The airlines are asking the federal government or a bailout of almost $60 billion, to be paid for with our tax dollars.

To which I say: Fuck that. The airlines shouldn’t get a dime from American taxpayers unless there are so many strings attached it can support a 787.

If a working class person had handled their finances in the same way the airlines have, it would be a caricature of a Republican talking point about individual responsibility. During the good times, airlines spent all of their money on financial chicanery and self-enrichment while saving virtually nothing for a rainy day. Now that the good times have stopped, they’re rapidly running out of cash, which is what tends to happen when you don’t have much sitting around. It’s like a meme about millennials and avocado toast except it’s about the boomers who run airlines.

You could be excused for doing this once, but not twice. The airlines should have learned their lesson after the September 11 bailouts that they are not normal companies. The industry, already in financial trouble, saw demand collapse all at once after which the feds gave them $18.6 billion in direct assistance and loan guarantees. The lesson here ought to have been that airlines are uniquely vulnerable to huge shocks and need to plan accordingly. These do not happen often-- oh, once every 20 years, thereabouts-- but often enough. That was not the lesson the airlines learned.

I suppose the airlines did have a plan. The plan was to get bailed out by us.

Fair play to the airlines, because they almost certainly will. Congress, which is comprised of some of the most frequent fliers and loyal airline customers in the country, will oblige them. Our political leaders will almost certainly meet the airlines on the industry’s terms because Congress overvalues the airlines themselves relative to the average American. A 2018 survey by an air travel industry group found 52 percent of Americans didn’t fly at all in 2017, and nearly three quarters of all trips were personal, not business. And airline flyers are disproportionately higher income, with the majority of airline trips coming from Americans with an annual household income of at least $75,000, well above the median household income (the most frequent fliers by income group, according to the airline industry survey, make more than $150,000 a year).

Airlines and other pro-business groups will argue a bailout is necessary in order to prevent massive job losses, an argument that made sense in 2001 when airlines were bearing the brunt of the recession following September 11 and mandatory flight groundings. But that argument doesn’t make sense today, because everyone is hurting just as much. The airlines, while experiencing massive revenue losses, can get in line with every other industry experiencing massive revenue losses, including but not limited to the entire hospitality and travel industry.

Even within the transportation industry, airlines don’t have a special case for bailouts. Public transportation is experiencing a similar shock, with ridership and revenue drops in line with what airlines are experiencing. According to the Bureau of Transportation Statistics, they employ the same number of people. Public transit agencies-- which, it’s worth bearing in mind, are publicly owned and operated, not private corporations-- are also asking for federal funds so they can keep running service for critical workers like hospital and grocery store staff, but they’re asking for about $13 billion, or about one-fifth of what the airline industry wants.

Fake Magic by Nancy Ohanian

Some, like Florida Senator Rick Scott, have argued against bailouts of any kind for anyone, including the airline industry. At the very least, industries like airlines that quite clearly have embedded federal bailouts as part of their long-term plans need to have their courses corrected.

The exact details are up for debate, but fundamentally, the government must set a precedent for corporations that spend the boom years enriching themselves and their shareholders only to crawl to Capitol Hill hat in hand. Rather than filling up the hat, they ought to get a kick in the butt.

Massachusetts Senator Elizabeth Warren laid out a plan (of course she did) of what this might look like for companies that get federal funds including: a mandatory $15 an hour minimum wage for all employees, a permanent ban on stock buybacks, no dividends or executive bonuses for three years, and criminal penalties for CEOs who violate any of these rules. It’s a start.

We must also stop the cycle of corporations privatizing profits while socializing costs. Why should we, the taxpayers of the United States, spend $50 billion or $60 billion or whatever it may be when we see nothing in return? As of this writing, the total market cap of the Big Four US airlines is $54 billion, almost exactly the value of the bailout being proposed. What if, instead of bailing out the airlines, the US government became the majority shareholder of each so it could profit from its investment?

This is not some pie-in-the-sky proposal. It’s exactly what happened with Conrail, a government-created railroad entity formed in the 1970s out of the bankruptcy of a bunch of private railroads including Penn Central. The government bought the bankrupt railroads for dirt cheap then privatized Conrail in the late 1980s once it started turning a profit, netting some $3.7 billion in 2020 dollars for taxpayers.

Whether or not that specific model is right for the airline bailout is up for debate. But the general idea, that the public needs to stop subsidizing the irresponsible financial behavior of large corporations while the average taxpayer suffers, needs to be the focus of Congress going forward. Maybe, just maybe, we can come out of this mess with a fairer and more equitable relationship between corporations and the American public. And, while I’m dreaming, with some minimum leg room requirements, too.

Should Reckless, Greed-Driven Banks Be Public Utilities— Rather Than Swords Of Damocles Hanging Over the Heads Of Society?

If you’ve been to Europe recently or if you look at European media sources you’re probably aware of the enormity of the Italian banking crisis and of the fears that the contagion from the crisis will have world-wide repercussions. Trump hasn’t tweeted about it yet so it isn’t really being covered by US mass media. We asked an old friend, Ellen Brown, author of, among other books, Web of Debt and The Public Bank Solution, to give us an overview of the crisis so that DWT readers won’t be blindsided if the crash comes. I know many of our readers listen to her twice-monthly radio show, It’s Our Money with Ellen Brown on PRN.FM and are aware she is advocating-- or at least offering-- a solution. Here’s her guest post:

The Italian Banking Crisis: No Free Lunch – Or Is There?
-by Ellen Brown

It has been called “a bigger risk than Brexit”– the Italian banking crisis that could take down the eurozone. Handwringing officials say “there is no free lunch” and “no magic bullet.” But UK Prof. Richard Werner says the magic bullet is just being ignored.

On December 4, 2016, Italian voters rejected a referendum to amend their constitution to give the government more power, and the Italian prime minister resigned. The resulting chaos has pushed Italy’s already-troubled banks into bankruptcy. First on the chopping block is the 500 year old Banca Monte dei Paschi di Siena SpA (BMP), the oldest surviving bank in the world and the third largest bank in Italy. The concern is that its loss could trigger the collapse of other banks and even of the eurozone itself.

There seems little doubt that BMP and other insolvent banks will be rescued. The biggest banks are always rescued, no matter how negligent or corrupt, because in our existing system, banks create the money we use in trade. Virtually the entire money supply is now created by banks when they make loans, as the Bank of England has acknowledged. When the banks collapse, economies collapse, because bank-created money is the grease that oils the wheels of production.

So the Italian banks will no doubt be rescued. The question is, how? Normally, distressed banks can raise cash by selling their non-performing loans (NPLs) to other investors at a discount; but recovery on the mountain of Italian bad debts is so doubtful that foreign investors are unlikely to bite. In the past, bankrupt too-big-to-fail banks have sometimes been nationalized. That discourages “moral hazard” – rewarding banks for bad behavior – but it’s at the cost of imposing the bad debts on the government. Further, new EU rules require a “bail in” before a government bailout, something the Italian government is desperate to avoid. As explained on a European website called Social Europe:

The EU’s banking union, which came into force in January 2016, prescribes that when a bank runs into trouble, existing stakeholders – namely, shareholders, junior creditors and, sometimes, even senior creditors and depositors with deposits in excess of the guaranteed amount of €100,000 – are required to take a loss before public funds can be used . . .

[The problem is that] the subordinated bonds that would take a hit are not simply owned by well-off families and other banks: as much as half of the €60 billion of subordinated bonds are estimated to be owned by around 600,000 small savers, who in many cases were fraudulently mis-sold these bonds by the banks as being risk-free (as good as deposits basically).

The government got a taste of the potential backlash a year ago, when it forced losses onto the bondholders of four small banks. One victim made headlines when he hung himself and left a note blaming his bank, which had taken his entire €100,000 savings.

Goldman Sachs Weighs In

It is not just the small savers that are at risk. According to a July 2016 article titled “Look Who’s Frantically Demanding That Taxpayers Stop Italy’s Bank Meltdown”:

The total exposure of French banks and private investors alone to Italian government debt exceeds €250 billion. Germany holds €83.2 billion worth of Italian bonds. Deutsche bank alone has nearly €12 billion worth of Italian bonds on its books. The other banking sectors most at risk of contagion are Spain (€44.6 billion), the U.S. (€42.3 billion) the UK (€29.8 billion) and Japan (€27.6 billion).

. . . All of which helps to explain why banks and their representatives at the IMF and the ECB are frantically demanding a no-expenses-spared taxpayer-funded rescue of Italy’s banking system.

It could also explain why Goldman Sachs took it upon itself to propose a way out of this dilemma: instead of buying Italian government bonds in their quantitative easing program, the ECB and the central bank of Italy could buy the insolvent banks’ nonperforming loans.

As observed in a July 2016 article in the Financial Times titled “Goldman: Italy’s Bank Saga – Not Such a Big Deal,” Italy’s NPLs then stood at €210bn, and the ECB was buying €120bn per year of outstanding Italian government bonds as part of its quantitative easing (QE) scheme. The author quoted Goldman’s Francesco Garzarelli, who said, “by the time QE is over – not sooner than end 2017, on our baseline scenario – around a fifth of Italy’s public debt will be sitting on the Bank of Italy’s balance sheet.” Bringing the entire net stock of bad loans onto the government’s balance sheet, he said, would be equivalent to just nine months’ worth of Italian government bond purchases by the ECB.

Buying bank debt with money generated by the central bank would rescue the banks without cost to the taxpayers, the bondholders or the government. So why hasn’t this option been pursued?

The Inflation Objection

Perhaps the concern is that it would be inflationary. But UK Prof. Richard Werner, who invented the term “quantitative easing” when he was advising the Japanese in the 1990s, says inflation would not result. In 2012, he proposed a similar solution to the European banking crisis, citing three successful historical precedents.

One was the US Federal Reserve’s quantitative easing program, in which it bought $1.7 trillion in mortgage-backed securities from the banks. These securities were widely understood to be “toxic” – Wall Street’s own burden of NPLs. The move was highly controversial, but it worked for its intended purpose: the banks did not collapse, the economy got back on its feet, and the much-feared inflation did not result. Werner says this was because no new money entered the non-bank economy. The QE was just an accounting maneuver, an asset swap in the reserve accounts of the banks themselves.

His second example was in Britain in 1914, when the British banking sector collapsed after the government declared war on Germany. This was not a good time for a banking crisis, so the Bank of England simply bought the banks’ NPLs. “There was no credit crunch,” wrote Werner, “and no recession. The problem was solved at zero cost to the tax payer.”

For a third example, he cited the Japanese banking crisis of 1945. The banks had totally collapsed, with NPLs that amounted to virtually 100 percent of their assets:

But in 1945 the Bank of Japan had no interest in creating a banking crisis and a credit crunch recession. Instead it wanted to ensure that bank credit would flow again, delivering economic growth. So the Bank of Japan bought the non-performing assets from the banks – not at market value (close to zero), but significantly above market value.

In each of these cases, Werner wrote:

The operations were a complete success. No inflation resulted. The currency did not weaken. Despite massive non-performing assets wiping out the solvency and equity of the banking sector, the banks’ health was quickly restored. In the UK and Japanese case, bank credit started to recover quickly, so that there was virtually no recession at all as a result.

For Italy and other “peripheral” eurozone countries, Werner suggests a two-pronged approach: (1) the central bank should buy the distressed banks’ NPLs with QE, and (2) the government should borrow from the banks rather than from bondholders. Borrowing in the bond market fattens the underwriters but creates no new money in the form of bank credit for the economy. Borrowing from banks does create new money as bank credit. (See my earlier article here.)

Clearly, when central banks want to save the banking system without cost to the government or the people, they know how to do it. So the question remains, why hasn’t the ECB followed the Federal Reserve’s lead and pursued this option?

The Moral Hazard Objection

Perhaps it is because banks that know they will be rescued from their bad loans will keep making bad loans. But the same moral hazard would ensue from a bailout or a bail-in, which virtually all interested parties seem to be advocating. And as was observed in an article titled “Italy: Banking Crisis or Euro Crisis?”, the cause of the banks’ insolvency in this case was actually something beyond the banks’ control – the longest and deepest recession in Italy’s history.

Werner argues that the moral hazard argument should instead be applied to the central bank, which actually was responsible for the recession due to the massive credit bubbles its policies allowed and encouraged. Rather than being punished for these policies, however, the ECB has been rewarded with even more power and control. Werner writes:

There is thus a form of regulatory moral hazard in place: regulators that obtain more powers after crises may not have sufficient incentives to avoid such crises.

What May Really Be Going On

Werner and other observers suspect that saving the economies of the peripheral eurozone countries is not the real goal of ECB policy. Rather, the ECB and the European Commission are working to force a political union on the eurozone countries, one controlled by unelected bureaucrats in the service of a few very large corporations and banks. Werner quotes David Shipley on Bloomberg:

Central bank officials may be hoping that by keeping the threat of financial Armageddon alive, they can coerce the region’s people and governments into moving toward the deeper union that the euro’s creators envisioned.

ECB and EC officials claim that “there is no free lunch” and “no alternative,” says Werner. But there is an alternative, one that is cost-free to the people and the government. The European banks could be rescued by the central bank, just as US banks were rescued by the Federal Reserve.

To avoid the moral hazard of bank malfeasance in the future, the banks could then be regulated so that they were harnessed to serve the public interest, or they could be nationalized. This could be done without cost to the government, since the NPLs would have been erased from the books.

For a long-term solution, the money that is now created by banks in pursuit of their own profit either needs to be issued by governments (as has been done quite successfully in the past, going back to the American colonies) or it needs to be created by banks that are required to serve the public interest. And for that to happen, the banks need to be made public utilities.

Did AIG's Mr. Greenberg set out to become the poster boy for corporate ingratitude and chutzpah?

Did central casting call for "a corporate-slimebag type"? No need -- that's former AIG chief Maurice Greenberg, the new poster boy for corporate slimitude.

by Ken

I expect you've heard about this Maurice Greenberg, the former AIG chief executive who had his ass saved by the government bailout and was inspired to a novel form of thanks: suing the federal government to the tune of $25B for amounts he and other AIG shareholders say they lost as the result of what they claim, as represented by the NYT's Michael J. de la Merced and Ben Protess, were the "onerous terms" exacted by the dagnab gummint.

As a counter-offer, I suggest taking the final value of the suers' shares and subtracting the value they would have had if the government hadn't intervened -- as, perhaps, toilet paper -- and giving the sons of bitches 48 hours to write checks for what they owe. Once payment is received, we can call it quits, except of course for parties at AIG who are adjudged to have engaged in civil or criminal malfeasance.

For them, and surely at the top of the list would be our Mr. Greenberg, it should be possible to come up with a generous enough package of both civil and criminal wrongdoing to ensure that even by the time the sentences are knocked down to a small fraction of their proper size by the "rich white scumbags' network" that cradles our "justice" system, the asshole Greenberg will be left with:

* on the criminal front, a term of incarceration that guarantees he will die in prison, and --

* on the civil front, penalties stiff enough to ensure that he's not left with a thin dime -- not him or anyone related to him, or anyone who's ever so much as said hello to him in the street (and anyone who tries to slip him so much as a thin dime should know that investigators will instigate full inquiries to determine whether any portion of that dime might be the proceeds of illegal activity).

The suit has already been tossed by the Federal District Court for the Southern District of New York, which is the district that includes, you guessed it, Wall Street! As the NYT team reports, "That decision is under review by the federal Court of Appeals for the Second Circuit, though the judge in the Court of Federal Claims in Washington declined to dismiss the case."

The new development in the case is that at a meeting of the current board of AIG this morning, it was decided that the company would not support Mr. Greenberg's hold-up suit.

After the meeting, which lasted all morning, the board voted to steer clear of the case. It also opted to ask Mr. Greenberg to stop pursuing legal claims in the company's name.

"In considering and ultimately refusing the demand before us, the board of directors properly and fully executed our fiduciary and legal obligations to A.I.G. and its shareholders," Robert S. Miller, A.I.G.'s chairman, said in a statement.

It's pointed out that AIG had some sort of legal obligation on behalf of its shareholders to at least consider joining the lawsuit.

A.I.G. directors faced a difficult choice. Joining the case would have added to public outrage over the company's bailout, one of the biggest and most controversial of the crisis. Lawmakers in recent days have warned the company not to side with Mr. Greenberg, which would make it "the poster company for corporate ingratitude and chutzpah."

The meeting coincided with an aggressive advertising campaign by the company thanking taxpayers for rescuing it during the crisis. And it comes only weeks after the insurer fully repaid its bailout, generating about $22 billion in profit for the public.

Mr. Miller reiterated the company's gratitude for the bailout.

"America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us, and deliver a profit to those who put their trust in us," he said. "We continue to thank America for its support."

But the members of A.I.G.'s board, most of whom joined after the rescue effort, owed a duty to shareholders to consider the lawsuit. Mr. Greenberg could challenge the decision to abstain as failing to fulfill legal obligations to investors.

Still, corporate law afforded the board leeway in deciding whether to pursue the case.

In case you were worried about our Mr. Greenberg and his fellow suers running short of pocket cash for the occasional night out at Wendy's, they're represented by David Boies. He said in a statement: "We continue to believe that the attempt by the A.I.G. board to prevent Starr International from pursing claims on behalf of A.I.G. shareholders is contrary to the shareholders’ interests.

For further background on the suit, we turn to the Borowitz Report.

A Letter from A.I.G.

Posted by ANDY BOROWITZ
Januar 8, 2013

NEW YORK (The Borowitz Report) -- Today, American International Group (A.I.G.) issued the following letter to American taxpayers.

Dear American Taxpayers:

In 2008, you paid for a bailout of A.I.G. totalling $182 billion. Today, we are writing to tell you that we're thinking of suing you.

When we made this decision, we knew we were in for some rough treatment from the media. We've been called everything from soulless bloodsuckers to Satan's scabrous handmaidens, and worse. At A.I.G., though, we have a different name for ourselves: true American heroes.

You see, by suing the same people who bailed out our asses just five years ago, we are standing up for one of the most precious American rights of all: the right to sue someone who has just saved your life.

Let's say that you're trapped in a burning building and a fireman pulls you out to safety. Once you're out of the fire, though, you notice that the fireman carelessly ripped the lapel of your Armani jacket. Shouldn't you be able to sue the fireman for the full cost of its replacement?

Or let's say you're drowning in the ocean. A lifeguard dives in, pulls you back onto the shore, and administers mouth-to-mouth resuscitation. Aren't you entitled to take appropriate action -- i.e., sue him for sexual harassment?

By suing you, we are standing up for the right of every other American who might, through no fault of his own, have his life saved and want to sue the person who saved him for millions of dollars. And that's why we're asking for your help today.

Lawsuits aren't cheap. They require highly paid lawyers, who rack up millions in legal fees, not to mention first-class airfare, hotels, and sumptuous gourmet meals -- hardly the kind of expense that we at A.I.G. can afford.

That's why we'd like you to pay for it.

You may think we're expecting a lot, asking you for the money necessary for us to sue you. But, remember, there's a bigger principle at stake, and someday, if you're pulled from a burning building or an ocean, you'll be glad you stood with us today.

Oh, and as for our ad campaign, "Thank you, America"? We're sticking with that, just changing the first word.

See you in court,
Your friends at A.I.G.

#

A Bailout For Spain's Banks Won't Do Any Good-- None Whatsoever-- For Spain's People But Banksters Are In Love With Sado-Monetarism

Rajoy beso Merkel

Property speculation in the '90s (irresponsible gambling) led to a severe over-extension of Spain's banking system. Last week they-- the country's banks and the government that had been bolstering them-- were on the brink of bankruptcy. Then German banksters orchestrated a "bailout" (really, for themselves)-- which every newspaper in the world has termed "buying time"-- which will lead directly for Spain's banks being on the brink of bankruptcy next month.

In 1998, the centre-right government passed a law that increased the amount of land for development. Developers got rich, selling the idea that property would always go up in value. You could buy a flat on the Mediterranean for $156,000 and sell it the next day for $234,000; by the end of the month it would be worth $390,000. And the flat, purchased off-plan, was still being built.

German banks financed Spain's banks, which needed funds for high-risk mortgages. Greed made the people rich for a while-- but then it made them poor, and jeopardised their future.

Spain is a country with a million unsold properties and an unemployment rate of 24.5 per cent.

Delinquency rates on these properties are as high as 19%. And did we mention that a quarter of the workers don't have jobs? At some point, the lights won't turn on when you flick the switch. The $125 billion "rescue plan" isn't meant to rescue any Spanish workers or consumers or, really, anyone in Spain at all. It's a plan to rescue the banksters who lent Spanish banks the money for the frenzied speculation. That's not good. "Austerity" is turning out to be the worst thing Germany has brought Europe since... well, you know.

And then there's Greece, Portugal, Cyprus (who is savvy enough to try to borrow from Russia instead of the Austerity-minded Germans) and Ireland. And Italy. Spain has already embraced Austerity-- the same way it embraced the other German idea in the '30s-- and it's just made things worse... a lot worse. The bond vigilantes are asking for enormous rates in return for investing in Spanish bonds-- rate's Europe's 4th largest economy can't afford, not during an unchecked recession (or whatever you want to call the economic crisis that's destroying the Spanish people's economic prospects. And the country's recently elected right-wing government of Mariano Rajoy-- a believer in Austerity-- admits things are going to get a lot worse. None of this bailout bullshit is addressing the real problems of economic growth-- jobs for working people.

"A significant part of this (bailout for Spanish banks) has to do with ring-fencing Greece," says Jacob Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington. "This is enough to prevent added market contagion."

But analysts said even bolder action may be needed from some key European governments and institutions that have been leery of committing too much to the effort.

Germany, worried that it will get stuck with the bill for any ambitious schemes, has rejected several ideas for easing the crisis. It has been reluctant to ease the terms of previous bailouts to reduce the pain of government spending cuts on Greece, Portugal and Ireland. And it has resisted calls for the creation of joint "eurobonds" that would raise money and spread responsibility for repayment across the euro countries.

Likewise, the European Central Bank has been reluctant to intervene to jolt the eurozone economy. Last week, it passed up an opportunity to reduce interest rates. And it has been reluctant to flood the economy with money to push down interest rates the way the U.S. Federal Reserve has.

The rescue money for Spain will come from pools set up by other euro countries. Spain's government will distribute it to the banks. The banks will pay it back with interest, and the money will go back to the rescue pools. Interest rates and other details had not been revealed as of Sunday.

...The troubles in Europe also are causing economic problems for the United States and developing countries such as China and Brazil, which rely on Europeans to buy their exports. So the plan unveiled Saturday eases pressure on the United States and the rest of the world economy as well.

European economic troubles pinch U.S. businesses. U.S. companies send 22 percent of the goods they export to Europe and have more than $2 trillion invested in factories, offices and businesses there.

A bigger fear is that Europe's financial troubles could cross the Atlantic. When banks lose confidence in each other, they refuse to lend each other money. Credit dries up, depriving economies of the fuel they need to grow. A financial crunch can wreck the economies on both sides of the ocean as it did in 2008.

Paul Krugman saw this one coming a mile away: "yet again the economy slides, unemployment soars, banks get into trouble, governments rush to the rescue-- but somehow it’s only the banks that get rescued, not the unemployed... What’s striking, however, is that even as European leaders were putting together this rescue, they were signaling strongly that they have no intention of changing the policies that have left almost a quarter of Spain’s workers-- and more than half its young people-- jobless." European interest rates remain artificially high-- a recipe for an even worse recession than the one Europe is steadily falling into.

For years Spain and other troubled European nations have been told that they can only recover through a combination of fiscal austerity and “internal devaluation,” which basically means cutting wages. It’s now completely clear that this strategy can’t work unless there is strong growth and, yes, a moderate amount of inflation in the European “core,” mainly Germany-- which supplies an extra reason to keep interest rates low and print lots of money. But the central bank won’t move.

Meanwhile, senior officials are asserting that austerity and internal devaluation really would work if only people truly believed in their necessity.

Consider, for example, what Jörg Asmussen, the German representative on the European Central Bank’s executive board, just said in Latvia, which has become the poster child for supposedly successful austerity. (It used to be Ireland, but the Irish economy keeps refusing to recover). “The key difference between, say, Latvia and Greece,” Mr. Asmussen said, “lies in the degree of national ownership of the adjustment program-- not only by national policy-makers but also by the population itself.”

Call it the Darth Vader approach to economic policy; Mr. Asmussen is in effect telling the Greeks, “I find your lack of faith disturbing.”

Oh, and that Latvian success consists of one year of pretty good growth following a Depression-level economic decline over the previous three years. True, 5.5 percent growth is a lot better than nothing. But it’s worth noting that America’s economy grew almost twice that fast-- 10.9 percent!-- in 1934, as it rebounded from the worst of the Great Depression. Yet the Depression was far from over.

Put all of this together and you get a picture of a European policy elite always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve.

Still, are we much better? America’s near-term outlook isn’t quite as dire as Europe’s, but the Federal Reserve’s own forecasts predict low inflation and very high unemployment for years to come-- precisely the conditions under which the Fed should be leaping into action to boost the economy. But the Fed won’t move.

What explains this trans-Atlantic paralysis in the face of an ongoing human and economic disaster? Politics is surely part of it-- whatever they may say, Fed officials are clearly intimidated by warnings that any expansionary policy will be seen as coming to the rescue of President Obama. So, too, is a mentality that sees economic pain as somehow redeeming, a mentality that a British journalist once dubbed “sado-monetarism.”

Whatever the deep roots of this paralysis, it’s becoming increasingly clear that it will take utter catastrophe to get any real policy action that goes beyond bank bailouts. But don’t despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner.

As for the efficacy of the bailout... Monday, Spain's 10 year bonds rose to 6.5%... and then just kept on going up. Today they were at the highest closing levels of the year. I guess no one heard about the bailout yet.

Boehner Wants To Bail Out His Big Oil Allies-- With OUR Money! Time For This Clown To Go!

Conservatives like John Boehner and his Blue Dog allies are putting their collective foot down-- NO. MORE. UNEMPLOYMENT. INSURANCE. EXTENSIONS! Boehner calls helping hard working American families whose breadwinners have been tossed out of work because of his own reprehensible economic policies a bailout. Boehner? The architect of the actual no-strings-attached bailout that he and Bush pushed through in October, 2008, just before the election that tossed them out of control-- and away from the power to keep rewarding their avaricious and corrupt corporate allies? It was one last granddaddy of all bailouts and it was Boehner who forced dozens of Republicans to vote for it who had voted against it the previous week when Bush failed to get it passed. Yes, that Boehner. The one who helped Bush push through outrageously unfair tax reductions for the wealthy that unbalanced the entire American economic system and led directly to the staggering deficit he now sheds crocodile tears over. (Yes, and he's still defending the unfair tax cuts for the rich and the cutbacks in services for the country.)

And Boehner has another bailout in mind-- no, not helping ordinary Americans-- helping his buddies at Big Oil. Boehner has taken $258,350 from the executives and shady lobbyists at the oil industry in thinly veiled bribes-- including $15,200 from B.P.-- and now he's leading the effort to bail them out.

Congressional Democrats and the White House are toying with different ways to force BP to cover the costs of damages from the Gulf oil spill. But they face stiff opposition from industry... and it seems leading Republicans. In response to a question from TPMDC, House Minority Leader John Boehner backed Tom Donohue, President of the Chamber of Commerce, in saying taxpayers should help pick up the tab.

"I think the people responsible in the oil spill-- BP and the federal government-- should take full responsibility for what's happening there."

On Friday, Donohue made clear that he opposes efforts to stick BP, a member of the Chamber, with the bill. "It is generally not the practice of this country to change the laws after the game," he said. "Everybody is going to contribute to this clean up. We are all going to have to do it. We are going to have to get the money from the government and from the companies and we will figure out a way to do that."

The Chamber is extremely influential in Republican politics, so on that level it's not particularly surprising that Boehner has Donohue's back on this one. But the politics of asking the federal government (i.e. taxpayers) to help cover the multi-billion dollar cleanup and rescue efforts are deadly. Look for Democrats to jump all over this one.

Reached in D.C. where he's conferring with Democrats in Congress, Justin Coussoule told us that he found it "odd that John Boehner and his sponsors/benefactors at the Chamber of Commerce both supported the massive no-strings attached Bush bailouts of Wall Street, but now callously refuse to assist hard working families across Ohio and the nation when they need unemployment insurance extensions."

But even more amazing given the horror story we are watching from the Gulf of Mexico now Boehner mimics the Chamber by proposing that “we the taxpayers” help bail British Petroleum out of their oily bath by funding the clean-up of the worst environmental disaster in American history. It is of note that the lax oversight and aggressive drilling without safeguards have been repeatedly cited by Mr. Boehner as “the solution” to American energy needs-- fostering our addiction to fossil fuels while denying global warming and working against development of alternative energy resources.

It is clear that Minority Leader Boehner continues to “dance with them that brought him” and now wants to leave the BP tab for those future those grandchildren taxpayers of whom he regularly namedrops.

Apparently Boehner’s rare compassion is only available to the powerful and connected-- or his regular golfing partners-- but…. I guess that is redundant.

It's important to remember that the Chamber of Commerce and Boehner work hand in glove against the interests of working families so that they can bolster the bottom lines of corporate special interests. Since the spill Donohue and Boehner have been plotting how to force the government (the taxpayers) to pick up the cost of the cleanup rather than B.P. “The head of the United States Chamber of Commerce … signaled, however, that his group would figure out a way to get the government to share in the cost of cleaning up the Gulf Coast. “It is generally not the practice of this country to change the laws after the game,” said Tom Donohue, the president of the U.S. Chamber of Commerce. “...Everybody is going to contribute to this clean up. We are all going to have to do it.  We are going to have to get the money from the government and from the companies and we will figure out a way to do that.”

That same day Donohue was railing against regulating Big Business in general and the oil companies specifically, a GOP mantra. Although B.P. and other oil giants funneled millions to fund the Tea Party "movement," and help present it as a "grassroots" expression of ordinary Americans, for them it was always all about Drill, Baby, Drill.

Donohue on Friday cautioned against putting too many regulations in place in the wake of the British Petroleum oil spill, saying there may not be enough information yet to make immediate, sweeping policy changes.  “I was astounded yesterday that the president took full responsibility for this and said it was the federal government, and not BP, that was running the cleanup,” Donohue said at a breakfast for reporters. “Well, it was interesting to hear the admiral from the Coast Guard say, ‘We have no capacity to do this cleanup.'  They’ve already broken up the regulatory body into more regulators. They’ve already got people retiring or being fired. This is the idea that we have to cover our political ass in our very, very difficult time. By the way, both parties do this kind of thing,” Donohue added.  There’s a “mentality in this Congress and this administration that the more regulation, the better,” Donohue said.  “I’m not too much of an advocate of doing the surgery before the diagnosis. Nor am I an advocate of grounding all the aircraft if there’s an aircraft accident, stopping all the trains if there’s a train accident,” Donohue said. “When you overregulate, you under-job.”

By the end of the day, Boehner was hysterical and backing away-- full throttle-- from his cavalier remarks about letting the taxpayers pick up the tab. Digby thinks he must be drunk on Man Tan and nicotine. "Boehner," she wrote, "is walking back his comments about having the government pay for the BP spill, but let's face facts. He was just on autopilot, echoing the Chamber of Commerce line verbatim and then got caught... Boehner is so out of touch and servile to Big Business that he's making mistakes. Big ones. Party leadership does get defeated-- just ask Tom Daschle and Tom Foley. This challenger [Justin Coussoule] is as mainstream as they come and he's very effective. The Democratic leadership should be helping and grooming him but so far, they aren't. So we should."

Please help Blue America send Boehner packing so we can get Congress back to a point where it works for the American people, not the special interests. We're trying to help Justin Coussoule raise enough money for his campaign so he can get his progressive message out effectively. If you can, please give him a hand here. And you can follow him on Twitter here.


UPDATE: Feb 20, 2016-- Hillary E-mail

Wasn't I surprised today-- my birthday, no less-- when I noticed one of the newly released Clinton emails includes a Sid Blumenthal memo to Hillary citing this post! Maybe Hillary wanted some tips about honing her skills at perfecting corruption techniques. Few were ever as good as John Boehner.

Will Voters Bail Out Republicans Like John Boehner, Paul Ryan & John Campbell Who Engineered The Wall Street Bailout & Are Fighting Against Reform?

On September 29, 2008, the Bush economic team acted as though it was hysterical about the banking system melting down. The House had just defeated H.R.3997, a vehicle for the Emergency Economic Stabilization Act of 2008, better known as the Wall Street bank bailout, and the Bush team demanded Congress change its mind or the financial system would collapse. It had failed 205-228, although Republican House Leader John Boehner managed to drag himself off the golf course to vote for it, as did GOP heavyweights Spencer Bachus (R-AL, top Republican on the Financial Services Committee), Paul Ryan (R-WI, top Republican on the Budget Committee and the Ways and Means Committee), Eric Cantor (R-VA, number-two Republican in the House) Roy Blunt (R-MO, ex-number-two Republican in the House), Pete Sessions (R-TX, head of the NRCC), Jerry Lewis (R-CA, top Republican on the Appropriations Committee), Dan Lungren (R-CA), Ken Calvert (R-CA), and David Dreier (R-CA, top Republican on the Rules Committee).

Among the Republicans who voted for the bailout (either on September 20 or October 3 or on both days) and have been financed politically by the Wall Street bankers and are now running for higher office are Mike Castle (who wants to be a Delaware senator), John Boozman (who wants to be an Arkansas senator), Mark Kirk (who wants to be an Illinois senator), Adam Putnam (who wants to be the Florida Agriculture Commissioner, a step toward the governor's mansion), Roy Blunt (who wants to be a Missouri senator), Pete Hoekstra (who wants to be governor of Michigan), Mary Fallin (who wants to be governor of Oklahoma), Zach Zamp (who wants to be governor of Tennessee), and Gresham Barrett (who wants to be governor of South Carolina). Ryan, of course, is being touted by his powerful financial backers as a presidential or vice presidential contender, something daily being pushed out by the right-wing media. In all, 65 Republicans voted yes.

But then Bush's team, along with Boehner, Ryan and Cantor, got busy twisting arms and threatening and bribing members over the weekend. The "conservative" experts on Bush's team, threatening doom and gloom, finally got the horrible bailout they were demanding, more than two dozen Republicans changing their votes from nay to aye. Over the course of the last year I've been speaking with a top Republican staffer for one of the members who switched votes. Insisting on anonymity for his boss's sake, he told me that the member was brutally double-teamed by Boehner and Ryan and forced to switch votes under all kinds of threats. My source said:

If anyone thought this kind of thuggish behavior had ended with Tom DeLay leaving Congress, they got a rude awakening. Bush seemed very detached from the whole thing, like he didn't understand what was happening and couldn't have cared less. But Boehner and Ryan were real assholes and just wouldn't let up. Boehner told [the member] that changing the vote wasn't going to hurt, and that not changing the vote was going to hurt really badly. We took it as a direct threat. Ryan was even more of a nasty prick, and we could practically see the Wall Street money hanging out of his pockets.

Today the tables may have turned on Boehner, and perhaps his votes for the bailout and his arm-twisting on its behalf will hurt John Boehner, just the way it has hurt thousands of families across Ohio and across America. For the first time since being elected in 1990-- in a special primary election against a Republican child molester-- Boehner is facing a serious challenge. He has not only GOP primary opponents (two) and general election Tea Party opponents (two again), but also a focused and energetic Democratic candidate, Justin Coussoule.

Justin is offering Ohio voters a real choice for a change, and if the mood in the country really is as anti-incumbent as we're being told, no one is as vulnerable as Boehner. This morning we contacted Justin, and he told us:

Boehner's arm-twisting mechanics over the bailout bill were nothing new. It was reminiscent of the day he passed out checks from tobacco lobbyists on the floor of the House minutes before a key vote on a tobacco subsidy.  What is most outrageous about Boehner's behavior over the bailout, though, is that he is now arm-twisting again in an attempt to block any effort at reregulation of the very banks he fought so hard to bail out.  Just this weekend he managed to harass Senate Republicans in an effort to stop any bipartisan deal on badly needed reform.  I'm running hard against Boehner to give voters here a real choice and an opportunity to reject this checkbook representation in which Boehner only serves the interests with the biggest checkbooks.

Today at least a dozen Republican members of Congress are fighting for political survival because they voted with Wall Street and against their constituents. Most likely to lose their seats are Mary Bono Mack (R-CA), Ken Calvert (R-CA), John Campbell (R-CA), Charlie Dent (R-PA), Bob Inglis (R-SC), Dan Lungren (R-CA), Mean Jean Schmidt (R-OH), Mark Souder (R-IN), Lee Terry (R-NE) and Frank Wolf (R-VA).

This morning we spoke with Irvine city councilmember and two-time mayor Beth Krom, the popular Democratic candidate running for the Orange County seat occupied by Campbell. She was very much aware of Campbell's two votes in favor of Bush's no-strings-attached Wall Street bailout. She told us:

When John Campbell supported the $700 billion bailout of Wall Street in October 2008, he put a post on his website that asserted that the bill was "basically a cost-free plan to stabilize financial markets and save every American’s savings and investments, not a bailout." He also suggested, "This bill may wind up costing less than one year’s worth of earmarks."

True to form, his enthusiasm for bailing out the banks may have been more about self-interest than the public interest. Not only was he worried about his own hefty portfolio of personal investments, he had a debt to pay to all the financial folks who have bankrolled his campaigns with hundreds of thousands of dollars in PAC contributions.

So while Campbell-- who regards every appropriation as an earmark-- refuses to bring tax dollars back to the communities he represents, he has no problem recycling them into his own investment accounts and campaign coffers.