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Sunday, September 21, 2008

William Greider Adds His Voice to the Failout Pushback

[via AlterNet]
Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: Dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses -- many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public -- all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics -- exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

That's just the first two paragraphs. Follow the link up top to read the whole thing. You just can't fool all the people all the time. Somebody's got a piper to pay.


jollyspaniard said...

It's more complicated than that. A lot of short sellers were forced to park their money long which probably played a big (maybe the biggest) part in the stock market's uptick.

The big question is what happens when these positions are fully unwound. There's a potential for a lot of capitol to flee the market that was temporarily tied up by the short seeling ban.

Dale Carrico said...

Are you suggesting that the matter of a trillion dollar average taxpayer bailout of rich people who made crap loans for quick profits -- a bailout that will cripple efforts to create a working healthcare system, a shift to renewable energy, and repair American infrastructure, efforts that would benefit the very taxpayers who were screwed by those rich people who they are bailing out instead -- is not "the big question"?

Or are you just proposing that another comparably catastrophic episode in "the big question" of America's adventure in market-fundamentalist deregulation, defunding, and elite looting is well on its way?

If you mean the former, I disagree, if you mean the latter, I agree that this is the beginning and not the end of the neoliberal dominos falling down to the cost of us all.

What matters in Greider's piece is what matters most -- keep your eyes on the real culprits here and delineate general principles of good governance to ensure that the response these crises function as a remedy rather than a sequel to the original crime.

Martin said...

jolly is referring to the 10-day ban on short selling. Short selling is the opposite of normal investing.

In the normal (long selling) model, you buy a stock when its price is low and sell when the price is high, pocketing the difference.

In short selling, you borrow someone else's stock and sell it while it's high, betting on the fact that it will drop. Then you buy it back and pocket the difference.

Short sellers are widely maligned in the investment world, because they are betting on the failure of certain companies. Others counter that short sellers are important whistle blowers that can sound the alarm and bring attention to potential problems in the market, often before they happen.

In fact, over the last couple of years, federal regulators and other market players have been highly critical of short sellers, even to the point of harassing and intimidating them. Basically, the market gurus didn't want the short sellers scaring anybody off, they wanted to keep beating the drum and making the market look stronger than it is, hoping these things would work themselves out as long as investors remained confident. But the short sellers were right -- the market was heading for catastrophe.

So now what did they do? They BANNED short selling on 799 stocks (which include large corporations, and those specific to the lending industry) for 10 days.

They muted the whistle blowers entirely. And more to the point that jolly was making, the recent boost in the market is in part due to the fact that the short sellers are hamstrung.

So the "big question" with regard to this specific situation is "what will happen to the market after the ban is lifted?" (in something like six or seven more days).

Don't be surprised if the market takes another dip in a week or so.


As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

While I agree with most of what Greider writes, that's a bold statement. After all, where would voters go?

If some companies are "too big to fail," then it seems the entrenched duopoly is too big to be replaced by anyone else. Thousands of politicians already have millions of dollars reserved in their reelection funds. That's quite a handicap for anyone else.

Dale Carrico said...

I still don't quite understand how this topic qualifies as "the big question" given everything else that is afoot. I won't be surprised at all by the market taking another dip in a week or so (or before that and after that as well).

As for "bringing down the parties" -- it seems to me that this statement refers to major realignments and reformulations of parties as much as anything else. One can imagine the stressed marriage of corporatist and evangelical wings of the post-Reagan "movement conservative" ascendancy over the Republican party splintering over the legacies of 1994-2008, for example. One can imagine a progressive-populist resurgence in the Democratic party repudiating DLC and "Reagan Democrat" arguments.

Saddling movement Republicanism with the neoliberal deregulatory mania (mostly but not entirely fairly at all, given Clintonism) that eventuated in the crisis would be part of the landscape articulating the former, while another Blue Dog corporatist capitulation on the part of the Dems here would certainly hasten the latter, either result transforming the partisan landscape quite fundamentally.

I both hope for and suspect a return to a more Eisenhowerian Republicanism (a good thing for the Nation -- and a healthier dialogue in the US more generally) with evangelicals depoliticizing somewhat as they were prior to Carter and "Reagan Democrats" (so-called) returning to a less theologized Republican party away from a more Bryant-populist Democratic party.

It's hard to believe that the racist Southern Strategy, for one thing, given the failure of Rovian gambits over immigration, will leave the post-Nixonian Republican culture wars intact after Obama's stunning run in any case -- even if Republicans manage to steal the Presidency again in '08. Of course there is a darker side here, where the trasnformations take on the coloration of Weimar. I can't believe I've become a person who worries about such possibilities, but very definitely I have.

Anyway, that's what I took Greider to mean. If he means to threaten a rage-fueled rise in third parties, that's just pissing in the wind and pretty much the only way one could be assured a preservation of the status-quo given the magnitude of present distress given the immoral illegal ruinous war and occupations of choice based on lies that have stressed our military to the breaking point and bankrupted our treasury, the meltdown of the neoliberal financialized economy, our fraying and failing infrastructure, our healthcare crisis, and so on. Unless the US changes very basic institutional barriers that presently render third party candidacies all but irrelevant except as occasional spoilers -- instant runoff voting, public financing of campaigns, and so on -- it is an arrant absurdity to even bring up third parties as any kind of viable political response to America's debased politics in this moment. At least that's how it looks to me.