Texas Longhorns with newborn calf in Bluebonnets

Texas Longhorns with newborn calf in Bluebonnets

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Alan Maki

Alan Maki
Doing research at the LBJ Library in Austin, Texas

It's time to claim our Peace Dividend

It's time to claim our Peace Dividend

We need to beat swords into plowshares.

We need to beat swords into plowshares.

A program for real change...


What we need is a "21st Century Full Employment Act for Peace and Prosperity" which would make it a mandatory requirement that the president and Congress attain and maintain full employment.

"Voting is easy and marginally useful, but it is a poor substitute for democracy, which requires direct action by concerned citizens"

- Ben Franklin

Let's talk...

Let's talk...

Thursday, October 9, 2008




Campaign for America's Future STAFF

By David Sirota

October 9th, 2008 - 11:19am ET

Is Henry Paulson a crony communist or a businessman? The answer could be the difference between economic disaster and recovery.

Understanding Paulson's role in stopping —or fueling — the credit crisis requires a review of two axioms from Economics 101: 1) A credit crisis occurs when banks stop lending and 2) The amount banks can lend is a multiple of the capital in their vaults. Therefore, ending a credit crisis means prompting new lending — and that means maximally increasing bank capital.

Enter Paulson, the former Goldman Sachs executive and current Treasury secretary. The bailout he fearmongered through Congress aims to waste almost a trillion taxpayer dollars buying banks' bad mortgages — a scheme all but ensuring a disastrous outcome.

If Paulson pays banks exactly what their mortgages are worth, he will not increase banks' capital (or their lending ability) — he will merely convert one asset (mortgages) into another (cash), making no impact on the credit crisis. If, to protect taxpayers, he buys mortgages at lower prices than banks list them, banks will have to write down their capital and consequently contract lending — and the credit crisis will worsen. If Paulson overpays for mortgages, he may marginally augment bank capital, but also incur massive taxpayer losses when he later resells the mortgages at their real price.

The silver lining is a little-noticed provision in the bailout bill allowing Paulson -- if he chooses — to buy ownership stakes in banks. According to Robert Johnson, the Senate Banking Committee's former chief economist, this would cost roughly $375 billion less than the mortgage-buying plan — and, better yet, more aggressively attack the credit crisis.

Mortgages may be underpriced today, but they retain some value on banks' books. So rather than purchasing mortgages (a capital-neutral transaction), Paulson could buy bank stock, infusing banks with new capital on top of their mortgages. That would exponentially increase lending capacity, prevent taxpayers from buying toxic assets, give the public a share of future profits, and grant regulators ownership leverage to restructure bank management.

This is where Paulson's personal proclivities come in.

A crony communist looking to socialize risk and privatize gain would consider these options and choose to buy mortgages — that is, choose to ignore the credit crisis, reward discredited executives and permit banks to keep any subsequent profits — all while inhibiting a potential government-mandated housecleaning of Wall Street. Indeed, the Financial Times' Wolfgang Munchau says Paulson's mortgage-buying program is driven by "a wish to benefit the investment banks he once chaired, and which stand to gain handsomely from such a package."

A businessman, by contrast, would limit taxpayers' exposure, give us a stake in future gains and demand management control. He would, in short, treat taxpayers like Warren Buffett treats his Berkshire Hathaway shareholders when buying banks with their money.

This is how Sweden successfully confronted its banking crisis in 1992, and how England is addressing its own meltdown today. In fact, world leaders are citing our crony communism as a cautionary tale. "This is not the American plan," said British Prime Minister Gordon Brown in announcing his bank rescue. "We will have a stake in the banks — we are not simply giving money."

The bailout bill's failure to make this course of action mandatory should have killed the legislation in Congress. But banking CEOs and their lobbyists turned "should have" into "didn't." They love crony communism and hate government ownership stakes because, as financial analyst Luigi Zingales says, "Nobody likes to pay for their own mistakes — it is much better to have the taxpayers pay."

Considering the opposition, then, it is a miracle any ownership stake language slipped into law. Whether Paulson now uses that language will signal how deep Washington corruption runs.

Crony communism or crony capitalism...

By Alan Maki | October 9th, 2008 - 1:04pm GMT

Perhaps you could explain where this "crony communism" comes from?

It sounds to me like you are trying to confuse an already complex problem.

As a proud "red" Finn I take great exception to the cheap manner of injecting anti-communism into a discussion about such an important topic.

Obviously you really are writing under the illusion that capitalism can be "regulated" out of this mess.

I think the way to address this issue is to first start by asking the question: From a working class point of view, who is suffering most as a result of this economic mess and how do we relieve the problems of working people, first?

Obviously, working class people trying to put a roof over the heads of their families are the primary victims here so we should first, and foremost, be concerned to keep these people in their homes... no matter what happens to the economy as a result... the last thing we need in this country is a new wave of homelessness. Any country that can squander billions of dollars on wars in Iraq and Afghanistan can subsidize housing.

This means, the first step--- and the first step now, not after Obama is elected tens of thousands of foreclosures and evictions later--- there needs to be a federal moratorium declared on home foreclosures and evictions.

Second step. The federal government should purchase each and every home mortgage as it comes up for foreclosure. The mortgage should be adjusted based upon present market value and the former mortgage holders should have to eat the difference.

Third. Interest payments on these mortgages should be based upon a sliding income scale taking into consideration any other extenuating circumstaces of the family--- unemployment, health care expenses and bills, educational expenses, etc--- interests should range from Zero to 4%.

All interest should be used to establish a federal bank along the lines of the State Bank of North Dakota.

After this is done, the Wall Streeters should be told to take care of their own mess... they can make some withdrawls from their accounts in the Cayman Islands where Goldman Sachs seems to enjoy fun in the sun.

As for you, as a progressive, injecting this kind of pathetic and shameful anti-communism into this discussion; you can take your anti-communism and shove it where the sun never shines.

This is corrupt, crony capitalism; nothing more, nothing less.

If the entire capitalist system, which has obviously turned cannibalistic, collapses, I say, "good riddance;" working people will establish a healthy democratic socialist economy in its place without all the pain of going through another massive capitalist economic depression.

Working people are not stupid when it comes to solving problems; why do you think management has a "suggestion box" next to every time clock in every mine, mill and factory in this country?

Now is the time to have a good open debate in this country: Which way America... capitalism or socialism?

This is supposedly a democracy... let's vote :)

I am insulted and offended that Barack Obama would find such urgency in caring for the Wall Street coupon clippers while telling the rest of us that our problems can wait until after he gets elected. We have all heard this line of bull before.

Alan L. Maki
Director of Organizing,
Midwest Casino Workers Organizing Council

58891 County Road 13
Warroad, Minnesota 56763
Phone: 218-386-2432
Cell phone: 651-587-5541
E-mail: amaki000@centurytel.net