The Jvl Bi-Weekly for 091508

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Monday, September 15th, 2008

Volume 7, No. 16

6 Articles, 17



1. Obama, The Prince of Bait-And-Switch

2. US Job Losses Hit Four Year High

3. Al Jazeera Speaks to Howard Zinn

4. The Peaceful Revolution in Farmers' Markets

5. Economic Free Fall?

6. Should Biden Share Blame for Foreclosure Crisis

1. OBAMA, THE PRINCE OF BAIT-AND-SWITCH

(John Pilger describes the denigration of the of civilian casualties in colonial wars, and the anointing of Barack Obama, as he tours the battlefields, sounding more and more like George W. Bush.)

BY

JOHN PILGER


On 12 July, The Times devoted two pages to Afghanistan. It was mostly a complaint about the heat. The reporter, Magnus Linklater, described in detail his discomfort and how he had needed to be sprayed with iced water. He also described the "high drama" and "meticulously practised routine" of evacuating another overheated journalist. For her US Marine rescuers, wrote Linklater, "saving a life took precedence over [their] security". Alongside this was a report whose final paragraph offered the only mention that "47 civilians, most of them women and children, were killed when a US aircraft bombed a wedding party in eastern Afghanistan on Sunday".

Slaughters on this scale are common, and mostly unknown to the British public. I interviewed a woman who had lost eight members of her family, including six children. A 500lb US Mk82 bomb was dropped on her mud, stone and straw house. There was no "enemy" nearby. I interviewed a headmaster whose house disappeared in a fireball caused by another "precision" bomb. Inside were nine people – his wife, his four sons, his brother and his wife, and his sister and her husband. Neither of these mass murders was news. As Harold Pinter wrote of such crimes: "Nothing ever happened. Even while it was happening it wasn't happening. It didn't matter. It was of no interest."

A total of 64 civilians were bombed to death while The Times man was discomforted. Most were guests at the wedding party. Wedding parties are a "coalition" specialty. At least four of them have been obliterated – at Mazar and in Khost, Uruzgan and Nangarhar provinces. Many of the details, including the names of victims, have been compiled by a New Hampshire professor, Marc Herold, whose Afghan Victim Memorial Project is a meticulous work of journalism that shames those who are paid to keep the record straight and report almost everything about the Afghan War through the public relations facilities of the British and American military.

The US and its allies are dropping record numbers of bombs on Afghanistan. This is not news. In the first half of this year, 1,853 bombs were dropped: more than all the bombs of 2006 and most of 2007. "The most frequently used bombs," the Air Force Times reports, "are the 500lb and 2,000lb satellite-guided..." Without this one-sided onslaught, the resurgence of the Taliban, it is clear, might not have happened. Even Hamid Karzai, America's and Britain's puppet, has said so. The presence and the aggression of foreigners have all but united a resistance that now includes former warlords once on the CIA's payroll.

The scandal of this would be headline news, were it not for what George W Bush's former spokesman Scott McClellan has called "complicit enablers" – journalists who serve as little more than official amplifiers. Having declared Afghanistan a "good war", the complicit enablers are now anointing Barack Obama as he tours the bloodfests in Afghanistan and Iraq. What they never say is that Obama is a bomber.

In the New York Times on 14 July, in an article spun to appear as if he is ending the war in Iraq, Obama demanded more war in Afghanistan and, in effect, an invasion of Pakistan. He wants more combat troops, more helicopters, more bombs. Bush may be on his way out, but the Republicans have built an ideological machine that transcends the loss of electoral power – because their collaborators are, as the American writer Mike Whitney put it succinctly, "bait-and-switch" Democrats, of whom Obama is the prince.

Those who write of Obama that "when it comes to international affairs, he will be a huge improvement on Bush" demonstrate the same wilful naivety that backed the bait-and-switch of Bill Clinton – and Tony Blair. Of Blair, wrote the late Hugo Young in 1997, "ideology has surrendered entirely to 'values'... there are no sacred cows [and] no fossilised limits to the ground over which the mind might range in search of a better Britain..."

Eleven years and five wars later, at least a million people lie dead. Barack Obama is the American Blair. That he is a smooth operator and a black man is irrelevant. He is of an enduring, rampant system whose drum majors and cheer squads never see, or want to see, the consequences of 500lb bombs dropped unerringly on mud, stone and straw houses.

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2. US JOB LOSSES HIT FOUR-YEAR HIGH

(The Fed is set to keep rates unchanged because of inflationary pressures [EPA].)

AUTHOR UNKNOWN



The unemployment rate in the US has climbed to a four-year high of 5.7 per cent in July after employers shed 51,000 jobs.

The latest data, released by the US labour department on Friday, showed a lack of credit had affected employers' expansion plans and willingness to hire.

So far, the US economy has lost a total of 463,000 jobs this year.

The news comes as car-manufacturing company General Motors posted losses of $15.5bn on Friday.

The rise in the unemployment rate to 5.7 per cent from 5.5 per cent came in June when many young people enter the labour market looking for summer jobs.

But this year, fewer of them were able to find work, the government said.

The unemployment rate for teenagers jumped to 20.3 per cent, the highest since late 1992.

Company job cuts

General Motors (GM) filed a report on Friday showing the third-worst quarterly loss in its history in the second quarter as north American vehicle sales plummeted and the company faced expenses due to labour unrest and its restructuring plan.

The company said it would lose thousands of hourly and salaried workers, speed the closure of lorry and four-wheel-drive vehicle plants, suspending its dividend and raising cash through borrowing and the sale of assets.

GM also said it would reduce production by another 300,000 vehicles, and that could prompt another wave of blue-collar early retirement and buyout offers.

More than 700 Bennigan's restaurants, owned by privately held Metromedia Restaurant Group, are closing, driving more people to unemployment lines.

Chrysler LLC, GM, Wachovia, Cox Enterprises and Pfizer also announced job cuts in July.

A fallout from the housing slump and high energy prices also are weighing on employers.

More job cuts

Job losses have further hit the housing, credit and financial debacles.

Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs.

Meanwhile, spending on construction projects around the country dropped 0.4 per cent in June as cutbacks in home building eclipsed gains in commercial construction, the US commerce department said.

The Institute for Supply Management's reading of activity from the country's producers of cars, aircraft, appliances and other manufactured goods hit 50, down from 50.2 in June. Readings above 50 signal growth.

Temporary help firms, also viewed as a barometer of demand for future hiring, eliminated 29,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.

In May and June combined, the economy lost 98,000 jobs, according to revised figures. That was not as bad as the 124,000 reductions previously reported.

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3. AL JAZEERA SPEAKS TO HOWARD ZINN, THE AUTHOR, AMERICAN HISTORIAN, SOCIAL CRITIC AND ACTIVIST, ABOUT HOW THE IRAQ WAR DAMAGED ATTITUDES TOWARDS THE US AND WHY THE US "EMPIRE" IS CLOSE TO COLLAPSE

Q: Where is the United States heading in terms of world power and influence?

HZ: Obviously, since the war in Iraq, the rest of the world has fallen away from the United States, and if American foreign policy continues in the way it has been - that is aggressive and violent and uncaring about the feelings and thoughts of other people - then the influence of the United States is going to decline more and more.

This is an empire which is on the one hand the most powerful empire that ever existed; on the other hand an empire that is crumbling - an empire that has no future ... because the rest of the world is alienated and simply because this empire is top-heavy with military commitments, with bases around the world, with the exhaustion of its own resources at home.

[This is] leading to more and more discontent and home, so I think the American empire will go the way of other empires and I think it is on its way now.

Q: Is there any hope the US will change its approach to the rest of the world?

HZ: If there is any hope, the hope lies in the American people.





[It] lies in American people becoming resentful enough and indignant enough over what has happened to their country, over the loss of dignity in the world, over the starving of human resources in the United States, the starving of education and health, the takeover of the political mechanism by corporate power and the result this has on the everyday lives of the American people.

[There is also] the higher and higher food prices, the more and more insecurity, the sending of the young people to war.

I think all of this may very well build up into a movement of rebellion.

We have seen movements of rebellion in the past: The labour movement, the civil rights movement, the movement against the war in Vietnam.

I think we may well see, if the United States keeps heading in the same direction, a new popular movement. That is the only hope for the United States.

Q: How did the US get to this point?

HZ: Well, we got to this point because ... I suppose the American people have allowed it to get it to this point because there were enough Americans who were satisfied with their lives, just enough.

Of course, many Americans were not, that is why half of the population doesn't vote, they're alienated.

But there are just enough Americans who have been satisfied, you might say getting some of the "goodies" of the empire, just some of them, just enough people satisfied to support the system, so we got this way because of the ability of the system to maintain itself by satisfying just enough of the population to keep its legitimacy.

And I think that era is coming to an end.

Q: What should the world know about the United States?

HZ: What I find many people in the rest of the world don't know is that there is an opposition in the United States.





Very often, people in the rest of the world think that Bush is popular, they think 'oh, he was elected twice', they don't understand the corruption of the American political system which enabled Bush to win twice.

They don't understand the basic undemocratic nature of the American political system in which all power is concentrated within two parties which are not very far from one another and people cannot easily tell the difference.

So I think we are in a situation where we are going to need some very fundamental changes in American society if the American people are going to be finally satisfied with the kind of society we have.

Q: Do you think the US can recover from its current position?

HZ: Well, I am hoping for a recovery process. I mean, so far we haven't seen it.

You asked about what the people of the rest of the world don't know about the United States, and as I said, they don't know that there is an opposition.

There always has been an opposition, but the opposition has always been either crushed or quieted, kept in the shadows, marginalised so their voices are not heard.

People in the rest of the world hear the voices of the American leaders.

They do not hear the voices of the people all over this country who do not like the American leaders who want different policies.

I think also, people in the rest of the world should know that what they see in Iraq now is really a continuation of a long, long term of American imperial expansion in the world.

I think ... a lot of people in the world think that this war in Iraq is an aberration, that before this the United States was a benign power.

It has never been a benign power, from the very first, from the American Revolution, from the taking-over of Indian land, from the Mexican war, the Spanish-American war.

It is embarrassing to say, but we have a long history in this country of violent expansion and I think not only do most people in other countries [not] know this, most Americans don't know this.

Q: Do you think there is a way out of this and for the future influence of the US on the world to be a positive one?

HZ: Well, you know for the United States to begin to be a positive influence in the world we are going to have to have a new political leadership that is sensitive to the needs of the American people, and those needs do not include war and aggression.

[It must also be] sensitive to the needs of people in other parts of the world, sensitive enough to know that American resources, instead of being devoted to war, should be devoted to helping people who are suffering.

You've got earthquakes and natural disasters all over the world, but the people in the United States have been in the same position as people in other countries.

The natural disasters here [also] brought little positive reaction - look at [Hurricane] Katrina.

The people in this country, the poor people especially and the people of colour especially, have been as much victims of American power as people in other countries.

Q: Is there a way for this to improve?

HZ: Well you know, whatever hope there is lies in that large number of Americans who are decent, who don't want to go to war, who don't want to kill other people.

It is hard to see that hope because these Americans who feel that way have been shut out of the communications system, so their voices are not heard, they are not seen on the television screen, but they exist.

I have gone through, in my life, a number of social movements and I have seen how at the very beginning of these social movements or just before these social movements develop, there didn't seem to be any hope.

I lived in the [US] south for seven years, in the years of the civil rights movements, and it didn't seem that there was any hope, but there was hope under the surface.

And when people organised, and when people began to act, when people began to work together, people began to take risks, people began to oppose the establishment, people began to commit civil disobedience. Well, then that hope became manifest ... it actually turned into change.

It has never been a benign power, from the very first, from the American Revolution, from the taking-over of Indian land, from the Mexican war, the Spanish-American war.

It is embarrassing to say, but we have a long history in this country of violent expansion and I think not only do most people in other countries [not] know this, most Americans don't know this.

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4. THE PEACEFUL REVOLUTION IN FARMERS' MARKETS

BY

LYNN PERRIN

A peaceful revolution is taking place across North America. While it is neither underground nor covert, it may soon be quashed by local and provincial policy-makers. They potentially could assert that the revolution is too risky and that laws must be enacted in the public interest.

The revolutionaries in this case are ordinary consumers and farmers wishing to trade directly in local food products via farmers’ markets. Despite the growing popularity of these markets, they have had to overcome and still face ongoing legal and regulatory barriers that inhibit their expansion. These barriers have been justified in the name of food safety and public order.

Local decision-makers maintain barriers by refusing to alter the Vancouver city bylaw that makes it illegal for anyone to sell fresh fruit and vegetables outdoors without an annual “special event” permit. Farmers’ markets are denied the same five-year space allocations granted to community gardens located on parklands, based on the argument of discouraging flea markets and illegal sales. This lack of longer-term security for farmers’ markets reduces the willingness of farmers to participate and ultimately reduces access to local foods for consumers.

Another example of official barriers to farmers’ markets is the 2007 provincial regulations that have closed down smaller meat processors, thus denying cost-effective access to slaughtering facilities for small-scale farmers raising animals. This change also makes it difficult for both producers and their customers at farmers’ markets to have ensured traceability of the products that are sent off to distant slaughterhouses. This traceability is an important element for consumers wishing to have assured food quality and concerned about issues such as hormone additives, pesticide use and genetically modified ingredients.

The rules governing provincial farmers’ markets require that there be a direct interaction between the grower or processor and the consumer, which ensures traceability. This attribute is lacking in the conventional food industry, which depends on food grown or processed an average of 1,300 miles away and handled by up to six people before it reaches the consumer’s mouth. For growers and processors, direct interaction with people who are going to eat the food they produced is one of the main reasons for selling at farmers’ markets.

My research involving interviews and surveys with both suppliers and managers at farmers’ markets confirms that barriers from laws and regulations are retarding growth of this sector of the food industry despite growing consumer demands. These barriers are compounded by other issues such as the loss of farmland through exemptions from the Agricultural Land Reserve, the rising price of farmland and the lack of adequate support for the sector from public officials.

Yet not everything is bleak, and governments in B.C. are slowly coming to see the virtues of the farm-to-fork revolution. This change has been spurred by initiatives such as the 100 Community Food Action Initiatives established by the regional health authorities in 2005 to encourage eating local produce for improved health and food security, the B.C.-originated 100-Mile Diet book and a growing number of food councils that advocate for increased access to locally grown and processed foods. Just this year the B.C. minister of agriculture and lands cited farmers’ markets in the province’s new agricultural plan, Growing a Healthy Future.

Nevertheless, my study found that important obstacles stand in the way of the success of the local food revolution, beyond the impermanence of sites for farmers’ markets and the new meat slaughtering regulations. Officials still perceive small-scale growers, value-added food processors and farmers’ markets as a boutique niche of B.C.’s overall food industry, and this attitude permeates a wide range of public policies and practices that create barriers to accessing local foods.

Several policy recommendations follow from my analysis of institutional, survey and interview materials. Changes must be made so that farmers’ markets are viewed as an integral part of the provincial food system. For example, the B.C. Association of Farmers’ Markets should be included in the B.C. ministry of agriculture’s online InfoBasket as a producer/processor association in every commodity category. Farmers’ market representatives need to be included in the initiation and consultation processes for any proposed legislative and regulatory changes that could affect them. In addition, municipal practices need to be revised to provide longer-term security of venues for farmers’ markets.

It’s time not only to dismantle the barricades, but to welcome the farm-to-fork revolutionaries as an important and growing part of the provincial food industry.

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5. ECONOMIC FREE FALL?

BY

WILLIAM GREIDER

Washington can act with breathtaking urgency when the right people want something done. In this case, the people are Wall Street's titans, who are scared witless at the prospect of their historic implosion. Congress quickly agreed to enact a gargantuan bailout, with more to come, to calm the anxieties and halt the deflation of Wall Street giants. Put aside partisan bickering, no time for hearings, no need to think through the deeper implications. We haven't seen "bipartisan cooperation" like this since Washington decided to invade Iraq.

In their haste to do anything the financial guys seem to want, Congress and the lame-duck President are, I fear, sowing far more profound troubles for the country. First, while throwing our money at Wall Street, government is neglecting the grave risk of a deeper catastrophe for the real economy of producers and consumers. Second, Washington's selective generosity for influential financial losers is deforming democracy and opening the path to an awesomely powerful corporate state. Third, the rescue has not succeeded, not yet. Banking faces huge losses ahead, and informed insiders assume a far larger federal bailout will be needed--after the election. No one wants to upset voters by talking about it now. The next President, once in office, can break the bad news. It's not only about the money--with debate silenced, a dangerous line has been crossed. Hundreds of billions in open-ended relief has been delivered to the largest and most powerful mega-banks and investment firms, while government offers only weak gestures of sympathy for struggling producers, workers and consumers.

The bailouts are rewarding the very people and institutions whose reckless behavior caused this financial mess. Yet government demands nothing from them in return--like new rules for prudent behavior and explicit obligations to serve the national interest. Washington ought to compel the financial players to rein in their appetite for profit in order to help save the country from a far worse fate: a depressed economy that cannot regain its normal energies. Instead, the Federal Reserve, the Treasury, the Democratic Congress and of course the Republicans meekly defer to the wise men of high finance, who no longer seem so all-knowing.

Let's review the bidding to date. After panic swept through the global financial community this spring, the Federal Reserve and Treasury rushed in to arrange a sweetheart rescue for Bear Stearns, expending $29 billion to take over the brokerage's ruined assets so JPMorgan Chase, the prestigious banking conglomerate, would agree to buy what was left. At the same time, the Fed and Treasury provided a series of emergency loans and liquidity for endangered investment firms and major banks. Investors were not persuaded. Their panic was not "mental," as former McCain adviser Phil Gramm recently complained. The collapse of the housing bubble had revealed the deep rot and duplicity within the financial system. When investors tried to sell off huge portfolios of spoiled financial assets like mortgage bonds, nobody would buy them. In fact, no one can yet say how much these once esteemed "safe" investments are really worth.

The big banks and investment houses are also stuck with lots of bad paper, and some have dumped it on their unwitting customers. The largest banks and brokerages have already lost enormously, but lending portfolios must shrink a lot more--at least $1 trillion, some estimate. So wary shareholders are naturally dumping financial-sector stocks.

Most recently, the investors' fears were turned on Fannie Mae and Freddie Mac, the huge quasi-private corporations that package and circulate trillions in debt securities with implicit federal backing. Treasury Secretary Henry Paulson (formerly of Goldman Sachs) boldly proposed a $300 billion commitment to buy up Fannie Mae stock and save the plunging share price--that is, save the shareholders from their mistakes. So much for market discipline. For everyone else, Washington recommends a cold shower.

Talk about warped priorities! The government puts up $29 billion as a "sweetener" for JP Morgan but can only come up with $4 billion for Cleveland, Detroit and other urban ruins. Even the mortgage-relief bill is a tepid gesture. It basically asks, but does not compel, the bankers to act kindlier toward millions of defaulting families.

A generation of conservative propaganda, arguing that markets make wiser decisions than government, has been destroyed by these events. The interventions amount to socialism, American style, in which the government decides which private enterprises are "too big to fail." Trouble is, it was the government itself that created most of these mastodons--including the all-purpose banking conglomerates. The mega-banks arose in the 1990s, when a Democratic President and Republican Congress repealed the New Deal-era Glass-Steagall Act, which prevented commercial banks from blending their business with investment banking. That combination was the source of incestuous self-dealing and fraudulent stock valuations that led directly to the Crash of 1929 and the Great Depression that followed.

Even before Congress and Bill Clinton repealed the law, the Federal Reserve had aggressively cleared the way by unilaterally authorizing Citigroup to cross the line. Wall Street proceeded, with accounting tricks described as "modernization," to re-create the same scandals from the 1920s in more sophisticated fashion. The financial crisis began when these gimmicky innovations blew up.

Democrats who imagine they can reap partisan advantage from this crisis don't know the history. The blame is bipartisan; so also is the disgrace. In 1980, before Ronald Reagan even came to town, Democrats deregulated the financial system by repealing federal interest-rate ceilings and other regulatory restraints--a step that doomed the savings and loan industry and eliminated a major competitor for the bankers. Democrats have collaborated with Republicans on behalf of their financial patrons every step of the way.

The same legislation also repealed the federal law prohibiting usury--the predatory practices that ruin debtors of modest means by lending on terms that ensure borrowers will fail. Usurious lending is now commonplace in America, from credit cards and "payday loans" to the notorious subprime mortgages. The prohibition on usury really involves an ancient moral principle, one common to Judaism, Christianity and Islam: people of great wealth must not be allowed to use it to ruin others who lack the same advantages. A decent society cannot endure it.

The fast-acting politicians may hope to cover over their past mistakes before the public figures out what's happening (that is, who is screwing whom). But the Federal Reserve has a similar reason to move aggressively: the Fed was a central architect and agitator in creating the circumstances that led to the collapse in Wall Street's financial worth. The central bank tipped its monetary policy hard in one direction--favoring capital over labor, creditors over debtors, finance over the real economy--and held it there for roughly twenty-five years. On one side, it targeted wages and restrained economic growth to make sure workers could not bargain for higher compensation in slack labor markets. On the other side, it stripped away or refused to enforce prudential regulations that restrained the excesses of banking and finance. In The Nation a few years back, I referred to Alan Greenspan as the "one-eyed chairman" [September 19, 2005] who could see inflation in the real economy--even when it didn't exist--but was blind to the roaring inflation in the financial system.

The Fed's lopsided focus on behalf of the moneyed interests, combined with its refusal to apply regulatory laws with due diligence, eventually destabilized the overall economy. Trying to correct for previous errors, the Fed, with its overzealous free-market ideology, swung monetary policy back and forth to extremes, first tightening credit without good reason, then rapidly cutting interest rates to nearly zero. This erratic behavior encouraged a series of financial bubbles in interest-sensitive assets--first the stock market, during the late 1990s tech-stock boom, then housing--but the Fed declined to do anything or even admit the bubbles existed. The nation is now stuck with the consequences of its blindness.

The Federal Reserve's dereliction of duty is central to the financial failures. It betrayed the purpose for which the central bank was first created, in 1913, abandoning the sense of balance the Fed had long pursued and that Congress requires. Most politicians, not to mention the press, are too intimidated to question the Fed's daunting power, but their ignorance is about to compound the problem. Instead of demanding answers, the political system is about to expand the Fed's governing powers--despite its failure to protect us. Treasury Secretary Paulson proposed and Democratic leaders have agreed to make the insulated Fed the "supercop" that oversees not only commercial banks and banking conglomerates but also the largest investment houses or anyone else big enough to destabilize the system. This "reform" would definitely reassure club members who are already too cozy with the central bankers. Everyone else would be left deeper in the dark.

The political system, once again, is rewarding failure. The Fed is an unreliable watchdog, ideologically biased and compromised by its conflicting obligations. Is it supposed to discipline the big money players or keep them afloat? Putting the secretive central bank in charge, with its unlimited powers to prop up troubled firms, would further eviscerate democracy, not to mention economic justice.

If Congress enacts this concept early next year, the privileged group of protected financial interests is sure to grow larger, because other nonfinancial firms could devise ways to reconfigure themselves so they too would qualify for club membership. A very large manufacturing conglomerate--General Electric, for instance--might absorb elements of banking in order to be covered by the Fed's umbrella (GE Capital is already among the largest pools of investment capital). Private-equity firms, with their buccaneer style of corporate management, are already trying to buy into banking, with encouragement from the Fed (the Service Employees International Union has mounted a campaign to stop them). A new President could stop the whole deal, of course, but John McCain has surrounded himself with influential advisers who were co-architects of this financial disaster. For that matter, so has Barack Obama.

The nation, meanwhile, is flirting with historic catastrophe. Nobody yet knows how bad it is, but the peril is vastly larger than previous episodes, like the savings and loan bailout of the late 1980s. The dangers are compounded by the fact that the United States is now utterly dependent on foreign creditors--Japan and China lead the list--who have been propping us up with their lending. Thanks to growing trade deficits and debt, foreign portfolio holdings of US long-term debt securities have more than doubled since 1994, from 7.9 percent to 18.8 percent as of June 2007. If these countries get fed up with their losses and pull the plug, the US economy will be a long, long time coming back.

The gravest danger is that the national economy will weaken further and spiral downward into a negative cycle that feeds on itself: as conditions darken, people hunker down and wait for the storm to pass--consumers stop buying, banks stop lending, producing companies cut their workforces. That feeds more defaulted loan losses back into the banking system's balance sheets. This vicious cycle is essentially what led to the Great Depression after the stock market crash of 1929. I offer not a prediction but a warning. The comparison may sound farfetched now, but US policy-makers and politicians are putting us at risk of historic deflationary forces that, once they take hold, are very difficult to reverse.

A more aggressive response from Washington would address the real economy's troubles as seriously as it does Wall Street's. Financial firms have lost capital on a huge scale--more of them will fail or be bought by foreign investors. But Wall Street cannot get well this time if the economy remains stuck in the ditch. Washington needs to revive the "animal spirits" of the nation at large. The $152 billion stimulus package enacted so far is piddling and ought to be three or four times larger. Instead of sending the money to Iraq, we should be spending it here on getting people back to work, building and repairing our tattered infrastructure, investing in worthwhile projects that can help stimulate the economy in rough weather.

An agenda of deeper reforms can boost public confidence even as it undoes a lot of the damage caused by the financiers and bankers. Some suggestions:

§ Nationalize Fannie Mae and other government-supported enterprises instead of coddling them. Restore them to their original status as nonprofit federal agencies that provide a valuable service to housing and other markets. Make the investors eat their losses. Buy the shares at 2 cents on the dollar. Without a federal guarantee, these firms are doomed anyway.

§ Resolve the democratic contradiction of "too big to fail" bailouts by dismantling the firms that are too big to fail--especially the newly created banking conglomerates that have done so much harm. Restore the boundaries between commercial banking and investment banking. In any case, market pressures are likely to shrink those behemoths as banks sell off their parts to survive. For the remaining big boys, revive antitrust enforcement. Set stern new conditions for emergency lending from government--supervised receivership, stricter lending rules to prevent recidivism and severe penalties for greed-crazed shareholders and executives.

§ Assign the Federal Reserve's regulatory role to a new public agency that is visible and politically accountable. Make the Fed a subsidiary agency of the Treasury Department and reform its decision-making on money and credit to restore an equitable balance between competing goals and interests--seeking full employment but also stable money and moderate inflation.

§ Begin the hard task of re-creating a regulated financial system Americans can trust, one that recognizes its obligations to the broad national interest. This requires regulatory reforms to cover moneypots like private-equity funds and to clear away the blatant conflicts of interest and double-dealing on Wall Street, and also to give responsible shareholders, workers and other interests a greater voice in corporate management and greater protection against rip-offs of personal savings.

§ Re-enact the federal law against usury. The details are difficult and can follow later, but this would be a meaningful first step toward restoring moral obligations in the financial sector. People would understand it, and so would a lot of the money guys. Maybe in the deepening crisis, Washington will begin to grasp that money is also a moral issue.

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6. SHOULD BIDEN SHARE BLAME FOR FORECLOSURE CRISIS? (Experts: Many Americans Lost Homes Due to a Bill Championed by Biden)

BY

JUSTIN ROOD

Experts say hundreds of thousands of Americans may have lost their homes due to a bill championed by Sen. Joseph Biden, D-Del., Barack Obama's vice-presidential running mate.

At least two studies have concluded that the United States' foreclosure crisis was exacerbated by a 2005 law that overhauled the nation's bankruptcy law. That conclusion is echoed by other experts, although the banking and credit industry disputes it.

Congressional Republicans drove the effort to pass the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. But Biden who has enjoyed hundreds of thousands of dollars in campaign donations from credit industry executives endorsed the measure early on and worked to gather Democratic support for it.

Biden's early and vocal support was "essential" to the bill's passage, said Travis Plunkett of the Washington D.C.-based advocacy group Consumer Federation, which opposed the measure. Biden "went out of his way to undermine criticism of the legislation," and his efforts helped convince other Democrats to support the bill.

"Biden was a fairly strong proponent of that bankruptcy bill," said Philip Corwin, a consultant for the American Bankers Association, which represents banks and lenders. However, Biden was "not in our pocket in any way," he added.

Biden's Senate office did not provide comment for this story.

Asked if the Obama/Biden campaign was concerned Biden's record was a liability when discussing economic security, David Wade, a spokesman for the Obama/Biden campaign, said, "Barack Obama and Joe Biden have real solutions for struggling families in danger of losing their homes because of the Bush economy and abusive lending practices."

BAPCPA "is directly responsible for the rising foreclosure rate since the end of 2005," concluded a 2007 study by Credit Suisse. The law "increased foreclosures and the number of homes for sale," echoed a July 2008 study by U.S. Treasury researcher David Bernstein. That study estimated the law had pushed foreclosures or forced sales on 200,000 homeowners since it went into effect, but noted that was a rough, "back-of-the-envelope" calculation.

"Trying to tie the forclosure crisis to the [2005 bankruptcy] bill is a stretch," said the ABA's Corwin. Corwin called the Credit Suisse report "junk" and said the Bernstein study wasn't "worth the paper it was written on."

The head author of the 2007 Credit Suisse report clarified his earlier findings in an email Wednesday. "The law likely contributed to increased foreclosures early on," said researcher Rod Dubitsky, but combined with other key factors, including subprime lending practices, to create the current crisis. Bernstein did not respond to a request for an interview.

The bill was backed by banks and credit card companies including MBNA, which is headquartered in Delaware, Biden's home state. They wanted the bill because it would make it harder for Americans to use bankruptcy to avoid repaying credit card debt. MBNA executives had been Biden's single largest source of campaign donations, and MBNA has employed Biden's son Hunter as a company executive, lobbyist and consultant. The Obama campaign has said Hunter Biden did no work for MBNA on the bankruptcy bill. MBNA has since been bought by Bank of America.

Over the past two years, sub-prime mortgage borrowing and a weakening economy have pushed increasing numbers of Americans into dire financial straits. Under the old rules, many could have declared bankruptcy, shed much of their debt, restructured their mortgages and held onto their homes, according to experts and the two reports.

But the 2005 law Biden championed made it more expensive and more difficult to declare bankruptcy, experts conclude. That forced hundreds of thousands of distressed homeowners to sell their homes, or default on their mortgages, after which the bank would sell their former home, according to the studies. That flood of homes going up for sale in an already-weakening market further depressed home prices, according to the two reports, snowballing into the current crisis.

BAPCPA "increased home foreclosures, increased the dollar value of financial assets in default, and put additional downward price pressure on real estate markets," concluded the Bernstein report. Bernstein conducted the report as an individual, not as a representative the Treasury Department.

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