September, 22 2008, 04:08pm EDT
For Immediate Release
Contact:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167
Behind the Bailout
WASHINGTON
NOAM CHOMSKY
Chomsky, whose recent books include Interventions and The Essential Chomsky, stated:
"Markets have inherent and well-known inefficiencies. One factor is
failure to calculate the costs to those who do not participate in
transactions. These 'externalities' can be huge. That is particularly
true for financial institutions. Their task is to take risks,
calculating potential costs for themselves. But they do not take into
account the consequences of their losses for the economy as a whole.
Hence the financial market 'underprices risk' and is 'systematically
inefficient,' as John Eatwell and Lance Taylor wrote a decade ago,
warning of the extreme dangers of financial liberalization and
reviewing the substantial costs already incurred -- and also proposing
solutions, which have been ignored.
"The threat became more severe when the Clinton administration repealed
the Glass-Steagall act of 1933, thus freeing financial institutions 'to
innovate in the new economy,' in ClintonaEURTMs words -- and also 'to
self-destruct, taking down with them the general economy and
international confidence in the U.S. banking system,' financial analyst
Nomi Prins adds. The unprecedented intervention of the Fed may be
justified or not in narrow terms, but it reveals, once again, the
profoundly undemocratic character of state capitalist institutions,
designed in large measure to socialize cost and risk and privatize
profit, without a public voice. That is, of course, not limited to
financial markets. The advanced economy as a whole relies heavily on
the dynamic state sector, with much the same consequences with regard
to risk, cost, profit, and decisions, crucial features of the economy
and political system."
More Information
NOMI PRINS, via Celeste Balducci
Prins is a former investment banker turned journalist. She used to run
the European analytics group at Bear Stearns and has also worked at
Lehman Brothers and Goldman Sachs. She said today: "With another Sunday
night surprise announcement, this time that Goldman Sachs and Morgan
Stanley have been transformed into Bank Holding Companies, the
dissolution of Glass-Steagall transcends its 1999 repeal. Rather than
risk more pain while scrounging for capital, Goldman (with former CEO
turned Treasury Secretary Hank Paulson's help) has positioned itself to
take capital directly from citizens, with all the benefits and federal
safeguards of a commercial bank. Somewhere Senator, and former
Treasurer, Carter Glass, is turning in his grave."
More Information
MAX FRAAD WOLFF
An economist, Wolff just wrote the piece "Cowardly New World," which
states: "Secretary Paulson has attempted to declare himself the most
equal of pigs in our animal house economy. The Treasury seeks more than
$700 billion for itself under the sole auspices of the Secretary whose
management helped bring us right over the brink. I say more because
unlike so many commentators, I read the proposal. It only limits
Treasury to $700 billion in balances at any one time (Section 6). If
they buy $700B and lose 20 percent of the principle ($140B), Treasury
will just buy another $140B. That restores market confidence?"
Wolff is an instructor at the Graduate Program in International Affairs
at the New School University. He is a frequent contributor to
Huffington Post, Asia Times and The Indypendent.
More Information
A nationwide consortium, the Institute for Public Accuracy (IPA) represents an unprecedented effort to bring other voices to the mass-media table often dominated by a few major think tanks. IPA works to broaden public discourse in mainstream media, while building communication with alternative media outlets and grassroots activists.
LATEST NEWS
US Increases Dominance as World's Top Arms Exporter
"The impacts of the global arms trade aren't just about the volume of weapons delivered," said one expert, citing "a few examples of how U.S. arms deliveries can make the world a more dangerous place."
Mar 13, 2023
A Sweden-based research institute published a report Monday showing that the United States accounted for 40% of the world's weapons exports in the years 2018-22, selling armaments to more than 100 countries while increasing its dominance of the global arms trade.
The report—entitled Trends in International Arms Transfers, 2022—was published by the Stockholm International Peace Research Institute (SIPRI) and listed the United States, Russia, France, China, and Germany as the world's top five arms exporters from 2018-22. The five nations accounted for 76% of worldwide weapons exports during that period.
The five biggest arms importers over those five years were India, Saudi Arabia, Qatar, Australia, and China.
"The United States has much room for improvement."
The United States saw a 14% increase in arms exports over the previous five-year period analyzed by SIPRI. U.S. arms were delivered to 103 nations from 2018-22, with 41% going to the Middle East.
"Even as arms transfers have declined globally, those to Europe have risen sharply due to the tensions between Russia and most other European states," Pieter Wezeman, senior researcher at the SIPRI Arms Transfers Program, said in a statement. "Following Russia's invasion of Ukraine, European states want to import more arms, faster. Strategic competition also continues elsewhere: Arms imports to East Asia have increased and those to the Middle East remain at a high level."
According to the report, Russia's invasion of Ukraine early last year "had only a limited impact on the total volume of arms transfers in 2018–22, but Ukraine did become a major importer of arms in 2022."
Ukraine was the 14th-largest arms importer from 2018-22 and the third-biggest last year.
Wiliam Hartung, a senior research fellow at the Washington, D.C.-based Quincy Institute for Responsible Statecraft, wrote Monday that "the impacts of the global arms trade aren't just about the volume of weapons delivered. The question is how those weapons are likely to be used, and the extent to which they promote stability versus fueling conflict or propping up repressive regimes with abysmal human rights records."
"On this score the United States has much room for improvement," he continued. "Transfers to Saudi Arabia and the United Arab Emirates for use at the peak of their brutal war in Yemen, and sales to major human rights violators from the Philippines, Egypt, and Nigeria are a few examples of how U.S. arms deliveries can make the world a more dangerous place."
"There are a number of promising steps that Congress can take—as articulated by a new coalition, the Arms Sales Accountability Project—that would mandate closer scrutiny of U.S. sales," Hartung asserted.
"There is also some useful language in the Biden administration's new arms transfer policy directive, that, if implemented, would significantly rein in the most egregious sales," he added. "Only time will tell if U.S. policy can be moved towards one based on arms sales restraint rather than arms sales promotion."
Keep ReadingShow Less
100+ Groups Detail Demands for Dioxin Testing After Toxic Train Derailment
"It's important for the residents of East Palestine that accurate and transparent testing for dioxin be done at the lowest levels possible, so that the residents can begin to understand the risks they face and can make informed decisions to protect their health," said one expert.
Mar 13, 2023
While welcoming a federal order that Norfolk Southern test for dioxins near a derailed train that was carrying hazardous materials through East Palestine, Ohio, over 100 groups on Monday shared "recommendations on how this testing should be conducted to improve transparency, rebuild public trust, and comprehensively address possible releases."
The U.S. Environmental Protection Agency (EPA) told the rail company to develop a plan to test for dioxins—carcinogenic chemical compounds that persist in the environment and human body and are tied to developmental, reproductive, and immune system problems—only after nearly a month of pressure from residents across Ohio and Pennsylvania.
River Valley Organizing (RVO), Toxic-Free Future, and other organizations signed the letter sent on Monday to agency leaders including EPA Administrator Michael Regan—which states that "to date, Norfolk Southern has done an extremely poor job of building trust with the community of East Palestine and other communities impacted by the disaster."
"We strongly recommend the U.S. EPA itself conduct the dioxin sampling or hire its own consultants to conduct the testing."
"To ensure this testing is adequately conducted, and to rebuild public trust, we strongly recommend the U.S. EPA itself conduct the dioxin sampling or hire its own consultants to conduct the testing," the letter continues. "Norfolk Southern should not be in charge of the dioxin sampling. This testing must be paid for by the responsible parties, not taxpayers."
Along with laying out what the groups believe should be detailed in the dioxin sampling plan—including goals, locations, detection limits, procedures, and laboratories used—the letter calls for allowing residents to weigh in before testing begins.
"All sampling data and test results should be made available to the public for review in a transparent and easily accessible format," the organizations argued. "This information must be accessible for review, given the need for results to be meaningful to impacted communities as well as to build trust through transparent action."
While the EPA has said that its own "monitoring for indicator chemicals has suggested a low probability" that dioxins were released as a result of the February 3 derailment and subsequent "controlled burn" of vinyl chloride, as the letter says:
Responders reportedly punctured and burned more than 115,000 gallons of vinyl chloride in uncontrolled conditions for numerous days, making it likely that dioxins and related chlorinated substances were formed and released into the communities surrounding the disaster site. Four train cars of polyvinyl chloride plastic also burned, also likely forming dioxins. There have been elevated levels of dioxins released in other major accidents involving chlorinated chemicals—from the 2004 explosion at the PVC plant in Illiopolis, Illinois, to the 1997 Plastimet PVC recycling fire in Ontario, to the 2001 World Trade Center attacks.
The organizations also recommended that "the EPA work with other agencies to provide medical monitoring for impacted
communities, especially East Palestine and those in the combustion plume, that desire it."
"Communities surrounding and downwind of the derailment have a right to know whether the fire resulted in elevated concentrations of dioxins. The testing must be transparent and comprehensive," the letter asserts. "This would help demonstrate EPA's commitment to comprehensively responding to this disaster, rebuilding trust with East Palestine and other impacted communities, and advancing environmental justice."
Leaders and experts at groups that signed the letter echoed its key messages in a statement Monday—including RVO co-executive director Amanda Kiger, who declared that "this community deserves to know what potential toxic chemicals they will have to live with for years to come due to Norfolk Southern's greed."
Just like per- and polyfluoroalkyl substances (PFAS), often called forever chemicals, "dioxins are toxic even at very low levels of exposure," noted Mike Schade, director of Mind the Store, a program of Toxic-Free Future.
Stephen Lester, science director of the Center for Health, Environment & Justice, highlighted that "exposure to dioxins can cause cancer, reproductive damage, developmental problems, immune effects, skin lesions, and other adverse effects."
"It's important for the residents of East Palestine that accurate and transparent testing for dioxin be done at the lowest levels possible, so that the residents can begin to understand the risks they face and can make informed decisions to protect their health," Lester said.
Others took aim at Norfolk Southern, which since the derailment has faced intense scrutiny for its safety culture and practices.
Given that "Norfolk Southern has obvious financial conflicts of interest in the outcomes of all environmental testing and public health evaluations," Dr. Ted Schettler, science director at the Science and Environmental Health Network, stressed the need for "rigorous oversight of the U.S. EPA, including strict quality control measures and split-sample testing."
Judith Enck, a former U.S. EPA regional administrator who is now president of Beyond Plastics, said that "it is unfortunate that the EPA took a month to decide to test for dioxins, and then rather than doing it itself, is having Norfolk Southern consultants to do the actual testing."
"The testing plan is too limited and should be revised to require some testing inside people's homes, at schools, and air filters in schools and buildings and cars should be tested, not just soil," she added. "Rain has likely driven contaminants toward groundwater and that water should be tested over a period of months and year[s]."
Enck's comments came after she wrote in a New York Times opinion piece last week that the EPA should have "ordered comprehensive testing the very day of the burn" and "told residents, especially pregnant women and families with young children, not to return home until it was safe to do so."
"Instead, it timidly stood back, leaving local authorities, corporate interests, and rumors to fill the void," she charged. "In lieu of a comprehensive plan, the EPA appears to be playing a game of crisis whack-a-mole, waiting and then responding to the news cycle. This is no way to safeguard our communities."
Keep ReadingShow Less
Barney Frank Under Fire for Downplaying Deregulation While Being Paid by Signature Bank
After he had received more than $1 million as a Signature board member, the architect of the Dodd-Frank banking regulations minimized the risks of weakening rules he helped enact post-2008 financial crisis.
Mar 13, 2023
Barney Frank, a former House Democrat from Massachusetts, has been the subject of criticism since federal regulators took over Signature Bank on Sunday.
That's because Frank, architect of the Dodd-Frank banking regulations implemented in the aftermath of the 2008 financial crisis, played a key role in whitewashing the bipartisan effort to weaken those rules in 2018—after he had received more than $1 million while serving on Signature's board following his departure from Congress.
Since federal regulators seized Signature's assets on Sunday—two days after they intervened to protect depositors amid the collapse of Silicon Valley Bank (SVB)—progressive critics have been quick to blame a deregulatory measure approved five years ago by the then-Republican-controlled Congress for engendering two of the three largest bank failures in U.S. history.
The GOP, however, wasn't alone in supporting Sen. Mike Crapo's (R-Idaho) Economic Growth, Regulatory Relief, and Consumer Protection Act. As Sen. Elizabeth Warren (D-Mass.), a trenchant critic of the legislation, observed when it was moving through Congress, several Democrats—including Sens. Mark Warner (Va.), Joe Manchin (W.Va.), and Jon Tester (Mont.)—were integral to its passage.
To justify their decision, many of them pointed to Frank. The originator of the Dodd-Frank Wall Street Reform and Consumer Protection Act used his cachet as a presumed banking expert to legitimize a rollback of the very framework he helped enact in 2010 as chair of the House Financial Services Committee. But the ex-lawmaker wasn't merely an uninterested bystander. In 2015, he joined the board of directors at Signature, a crypto-friendly bank that was poised to benefit from less stringent oversight.
Frank said Crapo's Economic Growth, Regulatory Relief, and Consumer Protection Act "would not help the biggest Wall Street banks and denied it would increase the risks of another financial crisis," The Washington Post reported when then-President Donald Trump signed the bill into law in May 2018. "Some Democrats leaned heavily on those words as they pushed back against the plan's liberal critics."
However, the newspaper noted, "proponents of the law rarely, if ever, mentioned that Frank is not just the author of the 2010 law, but also sits on the board of New York-based Signature Bank."
In the wake of Signature's collapse on Sunday night, Frank's role in downplaying the risks of deregulation—while being paid by a bank that stood to gain from it—has received fresh light.
As the Post reported in May 2018: "Dodd-Frank imposed additional regulatory safeguards on banks with more than $50 billion in assets, but the rollback that passed this week, among other things, raises that threshold to $250 billion. Signature Bank has more than $40 billion in assets and can now grow significantly without automatically facing additional regulation."
But the bank's growth over the past half-decade came to a screeching halt over the weekend when its customers, alarmed by the failure of SVB, quickly withdrew $10 billion.
"Frank acknowledged that Signature stood to benefit, but he said his role on the bank's board did not influence his thinking," the Post reported five years ago. "Frank said his position on the threshold predates his compensation from the financial sector."
As Politicoreported on Monday, Frank disputes that Trump-era deregulation "had anything to do with" Signature's failure, even though it weakened oversight of "mid-size and regional banks like his own."
"I don't think that had any impact," Frank told the outlet. "They hadn't stopped examining banks."
Frank went so far as to tellCNBC that there was "no real objective reason" that Signature had to enter federal receivership.
"I think part of what happened was that regulators wanted to send a very strong anti-crypto message," Frank argued. "We became the poster boy because there was no insolvency based on the fundamentals."
Warren, by contrast, has focused her ire directly on the deregulatory moves minimized by Frank.
"Had Congress and the Federal Reserve not rolled back the stricter oversight, SVB and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks," Warren wrote Monday in a New York Times opinion piece.
"They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses," the lawmaker continued. "But because those requirements were repealed, when an old-fashioned bank run hit SVB, the bank couldn't withstand the pressure—and Signature's collapse was close behind."
"These bank failures were entirely avoidable if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018," she added. "SVB and Signature are gone, and now Washington must act quickly to prevent the next crisis."
Like Warren, Independent Sen. Bernie Sanders of Vermont has called for fully repealing "the disastrous 2018 bank deregulation law."
Keep ReadingShow Less
Most Popular
SUPPORT OUR WORK.
We are independent, non-profit, advertising-free and 100%
reader supported.
reader supported.