President Trump says that he will likely declare a national emergency over the border wall if negotiations over the government shutdown continue. We speak with Robert Weissman, president of Public Citizen. “The Congress has given the president quite a bit of authority to declare emergencies with terms that are almost unbounded,” Weissman says. “Congress has always expected, and society has always expected, that presidents wouldn’t abuse that authority recklessly, declaring emergencies just because they want to. We obviously have a president now who has no such constraints.”
The Trump administration may be dazed and confused about many things, but not about its corporate agenda.
An unusual experiment with the truth from Donald Trump: he tweeted, truthfully, that “corporations have NEVER made as much money as they are making now.”
We’re 100 days into Corporate Government.
One month into the Trump administration, and it’s clear that there has been a wholesale corporate takeover of the government.
US Chamber Freaks Out Over Modest Obama Proposal That Would Require Gov't Contractors To Disclose Campaign Spending
It's a good rule of thumb: If the U.S. Chamber of Commerce -- the trade association for large corporations -- is whipped up about something, there's probably good reason for the public to strongly back whatever has sent the Chamber into fits.
What can $5 billion buy in Washington?
Quite a lot.
Over the 1998-2008 period, the financial sector spent more than $5 billion on U.S. federal campaign contributions and lobbying expenditures.
This extraordinary investment paid off fabulously. Congress and executive agencies rolled back long-standing regulatory restraints, refused to impose new regulations on rapidly evolving and mushrooming areas of finance, and shunned calls to enforce rules still in place.
"Sold Out: How Wall Street and Washington Betrayed America," a report released by Essential Information and the Consumer Education Foundation (and which I co-authored), details a dozen crucial deregulatory moves over the last decade -- each a direct response to heavy lobbying from Wall Street and the broader financial sector, as the report details. (The report is available at: www.wallstreetwatch.org/soldoutreport.htm.) Combined, these deregulatory moves helped pave the way for the current financial meltdown.
Here are 12 deregulatory steps to financial meltdown:
1. The repeal of Glass-Steagall
The Financial Services Modernization Act of 1999 formally repealed the Glass-Steagall Act of 1933 and related rules, which prohibited banks from offering investment, commercial banking, and insurance services. In 1998, Citibank and Travelers Group merged on the expectation that Glass-Steagall would be repealed. Then they set out, successfully, to make it so. The subsequent result was the infusion of the investment bank speculative culture into the world of commercial banking. The 1999 repeal of Glass-Steagall helped create the conditions in which banks invested monies from checking and savings accounts into creative financial instruments such as mortgage-backed securities and credit default swaps, investment gambles that led many of the banks to ruin and rocked the financial markets in 2008.
2. Off-the-books accounting for banks
Holding assets off the balance sheet generally allows companies to avoid disclosing “toxic” or money-losing assets to investors in order to make the company appear more valuable than it is. Accounting rules -- lobbied for by big banks -- permitted the accounting fictions that continue to obscure banks' actual condition.
3. CFTC blocked from regulating derivatives
Financial derivatives are unregulated. By all accounts this has been a disaster, as Warren Buffett's warning that they represent "weapons of mass financial destruction" has proven prescient -- they have amplified the financial crisis far beyond the unavoidable troubles connected to the popping of the housing bubble. During the Clinton administration, the Commodity Futures Trading Commission (CFTC) sought to exert regulatory control over financial derivatives, but the agency was quashed by opposition from Robert Rubin and Fed Chair Alan Greenspan.
4. Formal financial derivative deregulation: the Commodities Futures Modernization Act
The deregulation -- or non-regulation -- of financial derivatives was sealed in 2000, with the Commodities Futures Modernization Act. Its passage orchestrated by the industry-friendly Senator Phil Gramm, the Act prohibits the CFTC from regulating financial derivatives.
5. SEC removes capital limits on investment banks and the voluntary regulation regime
In 1975, the Securities and Exchange Commission (SEC) promulgated a rule requiring investment banks to maintain a debt to-net capital ratio of less than 15 to 1. In simpler terms, this limited the amount of borrowed money the investment banks could use. In 2004, however, the SEC succumbed to a push from the big investment banks -- led by Goldman Sachs, and its then-chair, Henry Paulson -- and authorized investment banks to develop net capital requirements based on their own risk assessment models. With this new freedom, investment banks pushed ratios to as high as 40 to 1. This super-leverage not only made the investment banks more vulnerable when the housing bubble popped, it enabled the banks to create a more tangled mess of derivative investments -- so that their individual failures, or the potential of failure, became systemic crises.
6. Basel II weakening of capital reserve requirements for banks
Rules adopted by global bank regulators -- known as Basel II, and heavily influenced by the banks themselves -- would let commercial banks rely on their own internal risk-assessment models (exactly the same approach as the SEC took for investment banks). Luckily, technical challenges and intra-industry disputes about Basel II have delayed implementation -- hopefully permanently -- of the regulatory scheme.
7. No predatory lending enforcement
Even in a deregulated environment, the banking regulators retained authority to crack down on predatory lending abuses. Such enforcement activity would have protected homeowners, and lessened though not prevented the current financial crisis. But the regulators sat on their hands. The Federal Reserve took three formal actions against subprime lenders from 2002 to 2007. The Office of Comptroller of the Currency, which has authority over almost 1,800 banks, took three consumer-protection enforcement actions from 2004 to 2006.
8. Federal preemption of state enforcement against predatory lending
When the states sought to fill the vacuum created by federal non-enforcement of consumer protection laws against predatory lenders, the Feds -- responding to commercial bank petitions -- jumped to attention to stop them. The Office of the Comptroller of the Currency and the Office of Thrift Supervision each prohibited states from enforcing consumer protection rules against nationally chartered banks.
9. Blocking the courthouse doors: Assignee Liability Escape
Under the doctrine of “assignee liability,” anyone profiting from predatory lending practices should be held financially accountable, including Wall Street investors who bought bundles of mortgages (even if the investors had no role in abuses committed by mortgage originators). With some limited exceptions, however, assignee liability does not apply to mortgage loans, however. Representative Bob Ney -- a great friend of financial interests, and who subsequently went to prison in connection with the Abramoff scandal -- worked hard, and successfully, to ensure this effective immunity was maintained.
10. Fannie and Freddie enter subprime
At the peak of the housing boom, Fannie Mae and Freddie Mac were dominant purchasers in the subprime secondary market. The Government-Sponsored Enterprises were followers, not leaders, but they did end up taking on substantial subprime assets -- at least $57 billion. The purchase of subprime assets was a break from prior practice, justified by theories of expanded access to homeownership for low-income families and rationalized by mathematical models allegedly able to identify and assess risk to newer levels of precision. In fact, the motivation was the for-profit nature of the institutions and their particular executive incentive schemes. Massive lobbying -- including especially but not only of Democratic friends of the institutions -- enabled them to divert from their traditional exclusive focus on prime loans.
Fannie and Freddie are not responsible for the financial crisis. They are responsible for their own demise, and the resultant massive taxpayer liability.
11. Merger mania
The effective abandonment of antitrust and related regulatory principles over the last two decades has enabled a remarkable concentration in the banking sector, even in advance of recent moves to combine firms as a means to preserve the functioning of the financial system. The megabanks achieved too-big-to-fail status. While this should have meant they be treated as public utilities requiring heightened regulation and risk control, other deregulatory maneuvers (including repeal of Glass-Steagall) enabled them to combine size, explicit and implicit federal guarantees, and reckless high-risk investments.
12. Credit rating agency failure
With Wall Street packaging mortgage loans into pools of securitized assets and then slicing them into tranches, the resultant financial instruments were attractive to many buyers because they promised high returns. But pension funds and other investors could only enter the game if the securities were highly rated.
The credit rating agencies enabled these investors to enter the game, by attaching high ratings to securities that actually were high risk -- as subsequent events have revealed. The credit rating agencies have a bias to offering favorable ratings to new instruments because of their complex relationships with issuers, and their desire to maintain and obtain other business dealings with issuers.
This institutional failure and conflict of interest might and should have been forestalled by the SEC, but the Credit Rating Agencies Reform Act of 2006 gave the SEC insufficient oversight authority. In fact, the SEC must give an approval rating to credit ratings agencies if they are adhering to their own standards -- even if the SEC knows those standards to be flawed.
From a financial regulatory standpoint, what should be done going forward? The first step is certainly to undo what Wall Street has wrought. More in future columns on an affirmative agenda to restrain the financial sector.
None of this will be easy, however. Wall Street may be disgraced, but it is not prostrate. Financial sector lobbyists continue to roam the halls of Congress, former Wall Street executives have high positions in the Obama administration, and financial sector propagandists continue to warn of the dangers of interfering with "financial innovation."
2008 marks the 20th anniversary of Multinational Monitor's annual list of the 10 Worst Corporations of the year.
Predictably, the cheerleaders for corporate globalization are bemoaning the collapse of World Trade Organization negotiations.
"This is a very painful failure and a real setback for the global economy when we really needed some good news," said Peter Mandelson, the European Union's trade commissioner.
Even worse, says the corporate globalization rah-rah crowd, the talks' failure will hurt the developing world. After all, these negotiations were named the Doha Development Round.
"The breakdown of these talks is bad news for the world's businesses, workers, farmers and most importantly the poor," laments U.S. Chamber of Commerce President Tom Donohue.
But don't shed any tears for the purported beneficiaries of the WTO talks. If truth-in-advertising rules applied, this might have been called the Doha Anti-Development Round.
The alleged upside of the deal for developing countries -- increased access to rich country markets -- would have been of tiny benefit, even according to the World Bank. The Research and Information System for Developing Countries points out that Bank analyses showed a successful conclusion of the Doha Round would, by 2015, increase developing country income in total by $16 billion a year -- less than a penny a day for every person in the developing world.
The World Bank study, however, includes numerous questionable assumptions, without which developing countries would emerge as net losers. One unrealistic assumption is that governments will make up for lost tariff revenues by other forms of taxes. Another is that countries easily adjust to import surges by depreciating their currencies and increasing exports.
In any case, the important point is that there was very little to gain for developing countries.
By contrast, there was a lot to lose.
The promise to developing countries was that they would benefit from reduced agricultural tariffs and subsidies in the rich countries. Among developing nations, these gains would have been narrowly concentrated among Argentina, Brazil and a few other countries with industrial agriculture.
What the spike in food prices has made clear to developing countries is that their food security depends fundamentally not on cheap imports, but on enhancing their capacity to feed themselves. The Doha rules would have further undermined this capacity.
"Opening of markets, removal of tariffs and withdrawal of state intervention in agriculture has turned developing countries from net food exporters to net food importers and burdened them with huge import bills," explains food analyst Anuradha Mittal of the Oakland Institute. "This process, which leaves the poor dependent on uncertain and volatile global markets for their food supply, has wiped out millions of livelihoods and placed nearly half of humanity at the brink of hunger and starvation."
Farmers' movements around the world delivered this message to government negotiators, and the negotiators refused to cave to the aggressive demands made by rich countries on behalf of agricultural commodity-trading multinationals. Kamal Nath, India's Minister for Commerce and Industry, pointed out that the Doha Development Round was supposed to give benefits to developing countries -- especially in agriculture -- not extract new concessions.
The immediately proximate cause of the negotiations' collapse was a demand by developing countries that they maintain effective tools to protect themselves from agricultural import surges. Rich countries refused the overly modest demand.
And agriculture was the area where developing countries were going to benefit.
The rough trade at the heart of the deal was supposed to be that rich countries reduce market barriers to developing country agricultural exports, and developing countries further open up to rich country manufacturing and service exports and investment.
Such a deal "basically suggests that the poor countries should remain agricultural forever," says Ha-Joon Chang, an economics professor at the University of Cambridge and author of Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. "In order to receive the agricultural concession, the developing countries basically have to abolish their industrial tariffs and other means to promote industrialization." In other words, he says, developing countries are supposed to forfeit the tools that almost every industrialized country (and the successful Asian manufacturing exporters) has used to build their industrial capacity.
In sum, says Deborah James, director of international programs for the Washington, D.C.-based Center for Economic and Policy Research, this was a lose-lose deal for developing countries. "The tariff cuts demanded of developing countries would have caused massive job loss, and countries would have lost the ability to protect farmers from dumping, further impoverishing millions on the verge of survival," she says.
By the way, it's not as if this is a North vs. South, rich country vs. poor country issue. Although there have been multiple lines of fragmentation in the Doha negotiations, the best way to understand what's going on is that the rich country governments are driving the agenda to advance corporate interests, not those of their populations. That's why there is so little public support for the Doha trade agenda, in both rich and poor countries.
Says Lori Wallach of Public Citizen's Global Trade Watch: "Now that WTO expansion has been again rejected at this 'make or break' meeting, elected officials and those on the campaign trail in nations around the world -- including U.S. presidential candidates -- will be asked what they intend to do to replace the failed WTO model and its version of corporate globalization with something that benefits the majority of people worldwide."
Before you buy your sweetie those roses for Valentine's Day, pause for a moment to consider where they come from, and at what cost – and what can be done to give a bit more joy not just to the flowers' recipients, but their producers.
Cut flowers are a highly globalized industry. The majority of cut flowers sold in the United States are imported, especially from Colombia and Ecuador. Kenya and Tanzania are the key overseas suppliers for Europe. Here's how the industry looks from the multinational corporate perspective: "In just a 24-hour period, each stem is cut, packed and loaded onto a temperature controlled UPS aircraft heading to Miami. There, they clear Customs and are distributed to florists and consumers across the country. Eighty-seven percent of all cut flower imports arrive in Miami." UPS reports that it imported more than 14.8 million stems of cut flowers into the United States last year from South American countries such as Colombia and Ecuador.
But on the ground in Colombia and Ecuador, things don't look so smoothly efficient and trouble free.
Olga Tutillo is secretary general of Rosas del Ecuador, a flower workers' union in Ecuador. She has worked at flower plantations for 22 years. She is 38 years old and has five children.
Tutillo explains how hard the work is for Ecuador's roughly 100,000 flower workers, about 70 percent of whom are women; the faces behind Cupid. The International Labor Organization estimates about 20 percent of the workforce consists of children.
The workers generally earn the national minimum wage, $145 per month. They work especially long hours in advance of Valentine's Day and other flower-giving holidays in the United States. They experience major occupational risks. Back pain is common among those who must stand or lean all day. Repetitive motion injuries are common. Rose pickers are frequently cut by thorns.
"There are also problems caused by pesticide fumigation," she explains. "Fumigation happens every day, either to prevent the plants from getting different diseases or to deal with it when they do get those diseases. Some of these chemicals are highly toxic."
Flower workers who try to organize to improve their working conditions face severe repression.
"It is extremely difficult to unionize in Ecuador," says Tutillo. "The companies are organized among themselves and they have a list on the internet of the people who have tried to unionize or have unionized. If someone tries to create a union, the company threatens to fire them and says they won't be able to find another job. These are the famous blacklists."
Thanks to firings, blacklisting and other tactics – like increasing use of contract workers instead of full-fledged employees – the unionization rate in Ecuador is depressingly low. Among 300 flower companies in Ecuador, reports Tutillo, "only four have unions – the other attempts to unionize have been repressed."
The story is much the same in Colombia, says Ricardo Zamudio, president of Cactus, a Colombian organization that conducts research on issues related to the flower industry.
Workers are trying to organize despite the repression they face. In Colombia a recent important development has been independent unionization at one flower company owned by Dole, which altogether controls 20 percent of Colombia's flower exports. The International Labor Rights Fund (ILRF) is running a letter-writing campaign to urge Dole Fresh Flowers and the Colombian-based firm Splendor Flowers to respect workers' right to unionize (www.laborrights.org).
Unfortunately, as long as the repression remains intense, consumers have much more freedom to demand flower justice than do the flower workers.
In Europe, a flower certification program has taken hold that tells consumers whether flowers were grown on farms or plantations that respect minimal environmental and labor conditions. According to the International Labor Organization, a substantial portion of flowers grown in Kenya, Tanzania and Zimbabwe receive certification under the Flower Label Program. The flower certification program is no panacea, but it does help modestly improve environmental and working conditions, and it gives workers more space to organize.
The program has had much less impact in South America, in considerable part because the Flower Label Program hasn't taken hold in the United States, where most Colombian and Ecuadorian flowers are shipped.
Just like with sweatshops, consumer pressure can make a significant difference in the lives of the flower workers. But the opportunity is in some ways greater, because of the concentration among both flower producers and sellers. ILRF is leading the way, trying to galvanize consumer pressure to force Dole and large cut-flower sellers – Albertsons, Safeway, Costco and Wal-Mart, among others – to pressure flower suppliers to respect workers' rights to organize, protect employees' health and safety, and pay overtime wages.
So go ahead and give that rose for Valentine's Day. But be careful of the thorns; and to avoid sticking it to the flower workers, support the ILRF campaign.