Taking the Long View of History
Guest Blogger Saul Friedman on AARP

Restoring Confidence in the Economy

category_bug_politics.gif On Sunday evening, President-elect Barack Obama and future First Lady Michelle Obama sat down with Steve Kroft of 60 Minutes for their first interview since the election. They were charming on the topics of their young daughters, how their lives have changed, the potential presidential pooch and Obama's mother-in-law, Marian Robinson, who may live with them in the White House. But I was more interested in the policy discussion, particularly the economy.

Noting that he has a transition team assigned to be in daily contact with Treasury Secretary Henry Paulson, Obama sidestepped a question about whether he is "in sync" with the man who is running the $700 billion bailout. Instead, he acknowledged one area I believe is a large - perhaps the largest - obstacle to rebuilding the economy any time soon:

"...there's no doubt," said Obama, "that we have not been able yet to reset the confidence in the financial markets and in the consumer markets and among businesses that allow the economy to move forward in a strong way. And my job as president is gonna be to make sure that we restore that confidence." Full transcript here]

Confidence is a subjective, elusive state of being. It can't be bought and sold or forced by presidential edict. It grows from trust gained over time through experience with a person or institution that operates in fairness. But who we trust differs among people depending on many factors. For example, what I have learned about Barack Obama over two years leads me to feel confident that as president he will keep the best interests of the country and its people (over corporations and cronies) in mind as he makes many decisions during the next four years. Conversely, the 47 percent who voted for Senator John McCain apparently don't share my confidence in Obama.

However, what I have zero confidence in these days are the executives of banks, Wall Street firms and corporations in general who, with the acquiescence and cooperation of politicians in Washington, have spent a generation robbing citizens of their jobs, homes and savings; the country of its treasury; and the future of its well-being.

From the least to the largest aspects of our lives, we have been bilked by corporations and our government. Average salaries have not increased, relative to inflation, in more than a decade. Millions of jobs have been deliberately shipped overseas with nothing here to replace them. Those two facts alone go a long way toward accounting for the massive personal debt Americans carry.

Additionally, millions were tricked into mortgages for homes for they could not afford, sold at prices inflated beyond their intrinsic value. Millions more were sold toxic investments while being assured nothing could go wrong. And nearly every adult in the country found their credit cards, signed on for at interest rates of eight or ten percent, suddenly costing usury rates when the credit corporations, overnight and based on greed alone, increased interest rates to 25 and 30 percent.

Meanwhile, the executives of these corporations and hedge fund managers (and politicians, who return to the private sector after having created legislation - or thwarted it, whichever works to their personal advantage - to enrich their corporate campaign contributors) grant themselves astronomical salaries and bonuses commonly reaching into the eight and, over time, nine figures while paying income taxes at a far lower rate than you and I, and bitching about inheritance and capital gains taxes too.

If you think that isn't literally our money they take home, you haven't been paying attention for the past 20 years. It came from all that I've listed above along with neglecting the national infrastructure, schools, transportation, the environment and, among others, this particularly reprehensible outrage: the law that prevents Medicare from negotiating drug prices with pharmaceutical companies as the Veterans Administration does.

You can thank former Louisiana Rep. Billy Tauzin for that legislation which he forced through Congress just two months before leaving to become head of the powerful Pharmaceutical Research and Manufacturers of America lobby at a reported $2.1 million a year salary. It is rare that a politician is so transparent in his greed that the public is allowed see the straight line between his self-serving legislation and his personal bank account.

There will be no renewed confidence in the "financial markets, consumer markets and businesses" Obama referenced in his 60 Minutes interview until the corporate thieves pay in some manner proportionate to their crimes. So far there is no indication that will happen.

Just last week we were treated to news that some banks have set aside several billions of bailout money for executive bonuses this year. With the exception of one or two, there has been no announcement that the CEOs and other leaders of banks and corporations who wrecked the economy (leaving many elders and others destitute of a lifetime of savings) have been fired. No salaries have been reduced to governmental levels even though bailout banks are being partially nationalized.

While these people keep their several mansions, Bentleys, yachts, art that belongs in museums, dozens of $5,000 suits, astronomical salaries and bonuses, the American people are paying for it all in blood, hunger and cold in winter.

"...hopefully, everybody's learned their lesson," said Obama on 60 Minutes. "And the answer is not heavy-handed regulations that crush the entrepreneurial spirit and risk taking of American capitalism. That's what's made our economy great. But it is to restore a sense of balance."

Also, "I think that we have to restore a sense of trust, transparency, openness in our financial system."

Trust? Confidence? From me? Not a chance. Not until the guilty pay enough that it hurts them as much as the rest of us. America's sense of fair play demands it. And no Bush era excuses, as Secretary Paulson suggested, that these people are needed - at multi-million-dollar salaries - because they know how the markets operate. Nonsense. They are ones who broke the markets. There are plenty of unemployed, smart people right now who would willingly take over at reasonable cost. Citibank fired 50,000 people yesterday. There is no doubt some are qualified.

There will be no restoration of confidence, no renewed trust in our commercial institutions and, therefore, no economic recovery until some evidence of fair play is forthcoming which means someone pays. Re-regulation - light or heavy-handed - is not enough. I hope President-elect Obama, who seems, generally, to avoid placing blame, understands that the great mass of Americans is seething at their betrayal and "let them eat cake" will not do.

[At The Elder Storytelling Place today, Karen Swift re-inaugurates that blog with a story titled, Remembering Who You Are.]

Comments

Punishment is sorely needed. But with that unbelievable 52/47 split, it's going to be tricky.

And another thought...will it require a clean sweep of the Justice Department to enable the President to put together an investigative team with 'teeth'?

This may take awhile. But heck, I've got nothing better to do these days; I can wait.

We have been repeatedly financially raped. There's just no other way to describe what was deliberately done. I suppose next we'll be told that we brought it on ourselves.

At first I thought Paulson knew what he was doing with the bailout money, then after listening to him on MacNeil Lehrer I decided he really didn't know what he was doing and was just making it up as he goes along. Now my suspicion is that he knows exactly what he's doing and it is a rape of the national treasury to benefit the rich and powerful.

Trust? Confidence? From me? No way!

The blind trust that allowed this rape to happen has now disappeared with our dollars. Trust has to be earned and so far not a single person in charge of this mess has earned one iota of the people's trust.

Ronni, you are a muckraker in the tradition of the finest Americans who served the public interest by connecting the dots and exposing what we don't know, don't understand, can't find time to puzzle out, or don't want to know/"get". (I.F. Stone is high among my muckraking heros.) Yet I feel overwhelmed, trapped, mugged, and don't know what to do save write letters to a "dead-letter" mailbox.

I found a way not to play this game. I work for myself, have saved my money, understood the cost of borrowing money and live below my means. I was a real estate broker for 10 years and worked at an escrow company for 3 years. I have closed many deals, and not once did I observe people not understanding how their mortgage would be re-payed or the cost of borrowing the money. Many times, though, I observed these same people not caring enough to read the documents before them...they were too ready to sign...greed was in their eyes as well. We all have played a part in this disaster.

I have neither trusted nor had any confidence in any of these people for a very long time. Having worked for a while as a consultant at the Massachusetts State House some years back as a writer on the education reform bill, I can say that 99% of the politicians I came into contact with were arrogant,self-serving, dishonest, behind-the-scenes-dealmaking scumbuckets. Hah, Zoë, now tell us how you REALLY feel, eh? It's taken a lot for me to come around to supporting Obama (which I did, ultimately do) because it seemed - and still mostly seems to me that anyone who would want to be president of this country, considering the mess it's in, either has delusions of grandeur, or intends to enrich him/herself at the public coffers. I'm hoping against hope that Obama really is what he portrays himself to be. As far as the slime currently holding court on capitol hill, it's clear enough to me that they're using their last six weeks or so in control to grab everything they can get for themselves and their cronies. Why am I NOT surprised that those big banks and corporations taking bail out monies are still paying themselves huge salaries and bonus checks on top of the perks - cars, homes, expenses - that DON'T get reported. You can bet the politicians are looking for some *favors* from these people once they get the boot themselves. What I have ALWAYS loved seeing as I travel 40 miles on the Massachusetts Turnpike to and from my job in Boston every day is the ratty old twelve and fourteen year old cars with Bush-Cheney stickers on their bumpers. These are obviously people who have been brainwashed into believing that it's their mission in life to sacrifice and live in poverty in order to stick to their Republican ideals. And America is 47% THESE people, you say? (Well except for the tiny percentage who are living like the aristocracy at everyone else's expense, that is.) Trust? Confidence? Feh!

I don't see any reason to believe that "the great mass of Americans is seething at their betrayal."

I worked at a bank during the savings and loan bubble and bust of the 1980s. I interviewed a number of professionals and managers who were laid off, and was fascinated to find that anger was non-existent. Instead, their reaction was that it was to be expected that they be sacrificed for the good of the corporation.

Which went belly-up anyway, at cost of $2 billion to the taxpayers. The CEO who oversaw the disintegration of the particular bank is now a respected community leader, honored for his philanthropy.

We are the last American generation who remembers cradle-to-grave employment, and the implicit contract that once existed between employers and employees, government and citizens. Those younger than we are have no idea what that contract looks like.

This makes me think about an experience I had working on the Obama campaign. Before the last weekend, I was given the assignment of calling through the list my small sub-office had of everyone who had ever worked on the campaign -- I was to get them in to help out now.

I reached one woman who was obviously in the middle of crying -- "I just can't...the call before you they told me I was laid off and I don't know what I am going to do." Obviously I stopped my recruitment pitch and we just talked for awhile, nothing important, just human contact at a tough moment.

Obama owes the people who trusted him. A lot of them were living very precariously, juggling kids, part time jobs, small savings...

Now we work on encouraging him to pay back.

Where did the bankers,brokers,mortgage touts, hedge-fund managers and related scum get their "Licenses to Steal"? Will they be automatically revoked at the expiration of the Bush "Slash & Burn Program?
The Neo-cons' agenda is to crush the American Economy and our political system to rubble and then build a new one based on free-market economics and oligarchy.

My family worked hard and donated a lot for Obama to become president. Although we have things we want to see done, we also know it can't happen overnight and what is rushed through is often a mistake. I hope Americans understand we didn't get here instantly and we can't instantly turn it all around. It will take new ideas, thoughtful approaches and I think Obama understands that from all he has said. I just hope Americans don't expect a free lunch when things get fixed. That's been the problem for too long-- at all economic levels.

While it's true that some people might've been greedy who refinanced homes to buy luxuries or bought homes above their price range, but a lot was the desire to have a home of their own. It's not just an investment but a piece of the American dream. Some realtors did take advantage of people's ignorance or encouraged them to buy above their means to insure their own fat commissions; some were probably responsible and tried to help buyers get into something they could afford. Even banks often wanted bigger loans, not smaller ones as more profit for themselves. I think there was blame to go around but what it requires now is new ideas to fix it without unduly penalizing those who were responsible in their own choices. The blame game gets us nowhere if it is about resentment. What helps is to see what went wrong and fix it. That will take time.

Following mythster question .... we the people, the citizens/voters of this country gave them all a "license to steal" when we elected the US Presidents, Representatives and Senators who voted for the deregulations, got bought off by well-financed lobbyists! Even then voters continued to drink their Koolaid and follow them like dumb sheep in to the voting booths to do their bidding and once more return them to office.
A very smart man once said,
"Every country has the government it deserves." -- Joseph Marie de Maistre (1869)
In other words, the voters are to blame ... and we, the very rock upon which this Democracry stands or falls, are the only ones who must wise up and think before we vote in the future ... if we want to have a future!
Miki

As one of the other commenters said, I've tried to be responsible in my financial life. However, the value of my retirement accounts have declined by 25% during the last few months. This combined with the loss of a job and being unable to find a new one has made me seem so vulnerable.

Today, I received an email from AARP - the following is an excerpt:
"As you read this, AARP representatives – your own personal team of ‘lobbyists’ – are in Washington, DC, making sure that Congress’ proposed stimulus package will help the economy AND Americans over 50.

At the same time, Wall Street’s professional lobbyists are also holding meetings in Washington. But thankfully, we have an advantage – YOU.

Wall Street lobbyists are armed with influence and financial records. But what we know from years of being the most powerful grassroots advocacy group in Washington is that an AARP member’s PERSONAL TESTIMONY can trump even the most aggressive opponent.

I need your help – can you take 2 minutes to tell me how the Wall Street “meltdown” has impacted your life? Your testimony is powerful and will make the difference in Washington when AARP representatives go to bat for you.

Click here to tell us how the economic crisis is impacting your life and we’ll share your stories with Congress.

We know that a large number of 50+ homeowners not only have mortgages, but are dangerously close to foreclosure. We also know that older Americans have experienced disproportionate losses to their retirement savings.

We have all of the numbers. What we don’t have is your story.

Whether it’s delinquent mortgage payments, devastating losses to retirement savings, or recent unemployment, in many cases America’s older persons have been the hardest hit by the financial meltdown.

You can help us make our case for protecting older people by providing real stories from real citizens that Congress and the media haven’t heard yet. We need as much testimony from you as possible – everything that you can offer will help us make our case. Will you help by sharing your story today?

Tell us how the financial crisis is affecting you and your loved ones.

By sharing personal experience, you can make sure your voice is heard, and we can help demand economic solutions that will work for you.

After you share your story, forward this email to your friends and family. Ask them to join you by sharing their own stories – the more personal experiences we have, the stronger our case will be."


Yes, building trust again will take a long time, perhaps past Obama's four years. It will take a massive change in the way the government and corporations operate, and -- though I supported him and believe he will do his best -- I just don't see that happening in just four years.

And time is what elders *don't* have. I fear that there will be a lot of suffering among our older citizens before things are made right, if they ever are.

I find this item posted by Alan Reynolds in the Cato-at-Large blog provides an interesting perspective:

Before “loaning” billions more in taxpayer money to some very bad credit risks, simply because they are old American brands associated with Detroit, we might ask what distinguishes these companies from others.

The not-so-big three are certainly are no less global than, say, Honda. General Motors gets 44% of its revenue from other countries and Ford gets 53%, according to Forbes (April 21). A German company, Daimler-Benz, still owns a fifth of Chrysler, and a group of affluent private investors owns the rest.

An “American” brand tells you little about where all the parts in a car are made. I was once at a dinner with Lee Iaccoca where I teased him about my Dodge Stealth, made in Japan by Mitsubishi. Similarly, today’s Chevy Aveo is imported from Daewoo in South Korea. Yet Hyundai has a plant in Alabama.

Cars.com found only four cars and six light trucks with a domestic content (meaning US or Canadian) above 75%. That list includes the Toyota Tundra and Sienna and the Honda Odyssey. Other Honda’s have a 60-70% domestic content, barely missing the cut.

The “Detroit” metaphor for primarily domestic vehicles is also inappropriate. Among the remaining seven vehicles with a very high domestic content, three are made outside Michigan —the Chevy Malibu from Kansas and Cobalt from Ohio, and the Ford Explorer from Kentucky. Ford’s F-150 truck might be made in Michigan or Missouri, the Chevy Silverado in Michigan or Indiana.

The only strictly “Detroit” cars with high domestic content are the Pontiac G6 from Orion MI and the Chrysler Sebring from Sterling Heights MI. Consumer Reports says, “The G6 isn’t a very good car” and “The Sebring is one of the least competitive family sedans on the market.” Yet these are the only Detroit-made sedans with a high domestic content. Does anyone really think taxpayer subsidies can save cars like that? And why should the federal government offer special deals for uncompetitive cars made in Michigan, thus tilting the playing field against better cars made in, say, Ohio, Tennessee or South Carolina?

As a Chicago Fed study documents, “the auto industry is increasingly characterized by international carmakers, as well as by parts suppliers that operate in multiple countries. Against a background of global supply chains, it has become quite difficult to identify and label products such as autos by nationality. Overall, the processes of globalization of markets and supply chains have served to noticeably lower prices of new cars for American consumers and businesses. On a quality-adjusted basis, for example, new vehicle prices have been falling at an average annual rate of 0.5% over the current decade. Importantly, higher quality and gains in longevity are among the improvements in today’s vehicles.”

Thank you, Ronni, for this informative post! FDR had his accountants go over the banks' books after he took office. These greedy people need to pay for what they've done. You are so right! Excellent comments, too! I love this blog!

In my opinion, this is your very best blog post. Thanks!

Readers interested in a very easy to understand exposition of how we got into this economy and where we need to go are directed to http://www.chrismartenson.com/ for Chris' crash course in economics. Or, you can just lay back and re-read that old copy of "Atlas Shrugged" over on your bookshelf.
D. Goetz

Hindsight is 20 20.

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