Powerful Banks and Government Handouts to the Rich: It's Time for Protest

By Zephyr Teachout, AlterNet.

A new grassroots group has organized protests for April 11 in 11 cities so far, and the ranks of signups are swelling fast.

Editor's Note:
Click here to join the protest!

The Rip Off Must Be Stopped!
Big bankers ruined our economy and now they are gaming the political system so they can profit even more off the crisis they caused. They must be stopped.
On April 11th, 2009, the public will come out in cities across the country to express their frustration and disapproval with how our elected officials have handled the economic crisis. No one has been left unscathed; this protest is yours.
Sign AlterNet's pledge that you aren't going to let this rip-off happen and join New Way Forward's national protest on April 11.
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Somehow, we've created a system that protects some of America's wealthiest individuals by letting them build institutions that are "too big to fail." Large scale banking has left our economy unstable, and overly dependent upon too few institutions. Greed for short-term profit, and competitive exuberance, has led to incomprehensible financing schemes and rewards for companies that sold people things they couldn't afford.
But, increasingly, people are realizing that anger at the banks ought also be directed at Congress, and at ourselves. We have created corporations that have left us exposed, unstable, and made it easy for concentrated wealth to exploit the political process.
A new grassroots, bottom-up, organization, has sprung up demanding structural change, and grown from 4 to over 1,000 people in the last week. Their clear and important demand is this: any bank that is too big to fail is too big to exist.
A New Way Forward, a web-based, unfunded, brilliant new organization started by Tiffiney Cheng, Morgan Knudson, Andrew Packer, and Nicholas Reville after watching Simon Johnson talk about nationalization and reorganization on Bill Moyers. They realized that the public protests didn't fit what the public seems to actually want; people want structural change, but most of the outlets for anger had to do with bonuses and short-term fixes. NWF has a three part platform:
NATIONALIZE: Experts agree on the means -- Insolvent banks that are too big to fail must incur a temporary FDIC intervention - no more blank check taxpayer handouts. REORGANIZE: Current CEOs and board members must be removed and bonuses wiped out. The financial elite must share in the cost of what they have caused. DECENTRALIZE: Banks must be broken up and sold back to the private market with new antitrust rules in place-- new banks, managed by new people. Any bank that's "too big to fail" means that it's too big for a free market to function.
The first action is protests and events on April 11. Already, 12 cities are holding events, and eight more are planning them. Word of mouth and email is driving the growth.
NWF is taking this moment to channel our anger at the unfair, wasteful, and dangerously unstable mega-banks into constructive legislation to ensure that our democracy is never so exposed, by so few people, again. It's a great example of the power of the internet to enable collective responses to serious political problems. And it represents a serious intellectual challenge to a set of assumptions that have governed our economic thinking for the last several decades.
There are real advantages to economies of scale. But they only go so far; the disadvantages right now are glaring. We've learned about the instability inherent in concentrated power too well recently; any economy dependent upon so few institutions to provide any key, publicly necessary good is necessarily unstable. Moreover, concentrated wealth necessarily leads to concentrated political power.
A corporation has an obligation to maximize profits, and, if you are one of few big players, one of the best ways to maximize profits is to lobby, and fund media campaigns, and make political donations--to reward and punish.
Luckily, the legal structure needed to break up banks is already there. Call it "trustbusting 2.0." Congress can pass new antitrust laws that limit how large a corporation can ever grow. For now--for good reason--the concern with "too big to fail" corporations is focused on banks, but the logic applies to all corporate power. The modern, webby, trustbusters' intellectual grandparents include Teddy Roosevelt and Thomas Jefferson.
Congress can pass new antitrust laws that limit how large a corporation can ever grow and how much they can exploit access to politics to take public money. The more people that join NWF, the more likely that is to happen.
Click here to join the protest!

Krugman: We're in for a Year of 'Economic Hell'

By Paul Krugman, The New York Times.

AlterNet

Whatever the new administration does, we're in for months, perhaps even a year, of economic hell. After that, things should get better.

Whatever the new administration does, we're in for months, perhaps even a year, of economic hell. After that, things should get better, as President Obama's stimulus plan -- O.K., I'm told that the politically correct term is now "economic recovery plan" -- begins to gain traction. Late next year the economy should begin to stabilize, and I'm fairly optimistic about 2010.
But what comes after that? Right now everyone is talking about, say, two years of economic stimulus -- which makes sense as a planning horizon. Too much of the economic commentary I've been reading seems to assume, however, that that's really all we'll need -- that once a burst of deficit spending turns the economy around we can quickly go back to business as usual.
In fact, however, things can't just go back to the way they were before the current crisis. And I hope the Obama people understand that.
The prosperity of a few years ago, such as it was -- profits were terrific, wages not so much -- depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn't coming back, the spending that sustained the economy in the pre-crisis years isn't coming back either.
To be more specific: the severe housing slump we're experiencing now will end eventually, but the immense Bush-era housing boom won't be repeated. Consumers will eventually regain some of their confidence, but they won't spend the way they did in 2005-2007, when many people were using their houses as ATMs, and the savings rate dropped nearly to zero.
So what will support the economy if cautious consumers and humbled homebuilders aren't up to the job?
A few months ago a headline in the satirical newspaper The Onion, on point as always, offered one possible answer: "Recession-Plagued Nation Demands New Bubble to Invest In." Something new could come along to fuel private demand, perhaps by generating a boom in business investment.
But this boom would have to be enormous, raising business investment to a historically unprecedented percentage of G.D.P., to fill the hole left by the consumer and housing pullback. While that could happen, it doesn't seem like something to count on.
A more plausible route to sustained recovery would be a drastic reduction in the U.S. trade deficit, which soared at the same time the housing bubble was inflating. By selling more to other countries and spending more of our own income on U.S.-produced goods, we could get to full employment without a boom in either consumption or investment spending.
But it will probably be a long time before the trade deficit comes down enough to make up for the bursting of the housing bubble. For one thing, export growth, after several good years, has stalled, partly because nervous international investors, rushing into assets they still consider safe, have driven the dollar up against other currencies -- making U.S. production much less cost-competitive.
Furthermore, even if the dollar falls again, where will the capacity for a surge in exports and import-competing production come from? Despite rising trade in services, most world trade is still in goods, especially manufactured goods -- and the U.S. manufacturing sector, after years of neglect in favor of real estate and the financial industry, has a lot of catching up to do.
Anyway, the rest of the world may not be ready to handle a drastically smaller U.S. trade deficit. As my colleague Tom Friedman recently pointed out, much of China's economy in particular is built around exporting to America, and will have a hard time switching to other occupations.
In short, getting to the point where our economy can thrive without fiscal support may be a difficult, drawn-out process. And as I said, I hope the Obama team understands that.
Right now, with the economy in free fall and everyone terrified of Great Depression 2.0, opponents of a strong federal response are having a hard time finding support. John Boehner, the House Republican leader, has been reduced to using his Web site to seek "credentialed American economists" willing to add their names to a list of "stimulus spending skeptics."
But once the economy has perked up a bit, there will be a lot of pressure on the new administration to pull back, to throw away the economy's crutches. And if the administration gives in to that pressure too soon, the result could be a repeat of the mistake F.D.R. made in 1937 -- the year he slashed spending, raised taxes and helped plunge the United States into a serious recession.
The point is that it may take a lot longer than many people think before the U.S. economy is ready to live without bubbles. And until then, the economy is going to need a lot of government help.

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