Hooverian Class War Returns: Cushioning the Banks While Refusing to Save Jobs or Require Loans to the Taxpayers who Saved the Financial System

It's amazing to see how quickly the policies of Hoover that produced the last great Depression have returned in full force to rule the ongoing decisions at Treasury and among most of the Republicans in Congress. For a little bit, we fell into the stupid hope/delusion of thinking that finally Bush, Bernanke, and Paulson had discovered historical wisdom and learned something from the past. We believed they had imbibed of the elixir of historical wisdom that brought them to reject the mistakes of Hoover in favor of a more activist government that would use its power to protect the people of this country from the harm of an economic depression produced by a government that refuses to act on behalf of the people it is sworn to protect.

But the refusal of Paulson, Bernanke, and Bush to protect the jobs of home-owners and small business-owners by requiring the Banks they so generously bailed out to use their billions of tax-payer money to provide loans to the citizens that saved them, and to the manufacturing industries (like the auto industry) that provides the anchor to the entire economy, has once again underlined the fundamental Hooverian orthodoxy that controls this administration, and only the Inauguration on January 20 will bring the destructive reign of this ideological orthodoxy to an end. Unfortunately, by then it may be too late to stem the tide of the flood of job losses that may be released by the collapse of the dam if the US auto industry is allowed to fall into bankruptcy.

While our neo-Hooverians are willing to devote billions of dollars to supporting the banks, without requiring the banks to use any of these billions of dollars to make loans to the consumers and business-owners on whom the functioning of the economy depends, these Hooverians seem completely happy, now that they have protected the banks from collapsing, to conclude that their work is done. Now it seems they believe all they have to do is sit by and watch while Congress refuses to require the banks to use their newly gifted billions (courtesy the taxpayers) to provide loans to home- and business-owners, or to the Detroit auto manufacturers, so that jobs can be protected, and products can continue to be manufactured, and people can continue to purchase what is manufactured.

Apparently these new Hooverians (including Paulson) think that it is enough to have kept the financial system from collapsing. Now they seem to believe all they need to do is stand by and watch while the spiral of economic slow-down and job loss increases in pace and size, until what began as a recession turns into another great depression.

After the stock market collapse of October 1929, there was no immediate economic collapse into depression. For almost a year after the crash of 1929, the economy and the market teetered in the kind of unsteady recession we are witnessing now. But in the absence of any clear policy direction from Hoover that emphasized the value of preserving and supporting the economy of jobs in 1930, by the second half of 1930 the entire economy began to collapse, and the stock market quickly followed as both headed into a tail-spin steadily downward for two long years from mid-1930 to mid-1932, by which time what had been a recession in 1930 had turned into a full-blown economic depression--reflected in a stock market that had lost nearly 90% of its value by 1932.

The new Hooverians, in their lack of concern or attention to making policy decisions that support the kinds of investment and loans that will maintain existing jobs (like those in the auto industry), and create new jobs (like those that could be created if banks opened their doors to major investments in alternative energy, and the government passed policies that supported such investments), are repeating the same kinds of mistakes that drove the recessionary economy of early 1930 into the depression economy of 1932.

So as you watch the decisions of the do-nothing, "let the market function" Hooverians like Paulson, and of the Republican/Hooverian party of naysayers, who would rather see the US auto industry collapse than admit the fundamental error of their market fundamentalist ideology, think of Hoover and the Republicans of 1930, who had no idea of the wreck their do-nothing market strategy was to make of the economy within two years.

If you want to see the recession of 2008, like the recession of 1930, turn into the great depression of 2010, then just stand by and allow the Hooverians to have their way with mis-ruling our economy. But if you want to avoid watching--like spectators to a nightmare--the recession of 2008 slide into the depression of 2010, your work is simple and clear: Employ the wisdom of history to help your legislators and policymakers avoid repeating the Hooverian mistakes of the past. Overrule the Hoover do-nothing strategy that would allow the Banks to sit idly by on the $700 billion cushion of protection provided them courtesy of the US taxpayer, while they refuse to use those billions to provide loans to the very citizen tax-payers who have bailed them out....

Hooverian capitalism is capitalism of, by, and for the wealthy, no matter what happens to the rest of us; This is the capitalism of the Paulson/Bush policy which freely aids the banks with billions while it outright refuses to provide relatively small bridge loans to the industries that employ a majority of middle-class working Americans. If this is not plutocratic class war, I dont know what is....

The plutocrats are always so quick to yell "class war" whenever workers challenge the right of the wealthy to use tax-payer money to feather their nests without any regulatory oversight; and yet rarely are the plutocrats ever called to account for using the power of their unregulated wealth to wage class war constantly and ruthlessly on the low and moderate-income people whose taxes they freely use to stabilize the financial system and feather the nests of wealthy CEOs, even while these same banks and CEOs refuse to use this money to do what banks are supposed to do: loan out their money to those who seek to deploy it to preserve and create jobs....

So on Tuesday we witnessed the amazing spectacle of Paulson declaring to Congress that he had full right and authority to bail out the banks while utterly refusing to admit that any of the TARP money should be used to make relatively small bridge loans to the auto companies to support their ability to continue to support manufacturing jobs....

And then we wonder why there are so few manufacturing jobs left in the United States! The financial sector and the investing elite that controls it no longer appear able to comprehend this simple logis: As there is less and less manufacturing in this country, there will be less and less real wealth standing behind and supporting their financial games on the stock market. As jobs disappear, the basis of the wealth that supports their paper stock wealth will vanish with it, and we will all finally witness the stock market follow the steady decline of jobs down and down and down as occurred in 1930 to 1932.

Fortunately, this time around, we have a new President who seems to understand the fallacies of the Hooverian ideological approach to the market. This President is taking over the White House at the beginning of the downward spiral instead of at its end. But because Obama does not take office until January 20, there is still much damage and downward momentum that can be furthered if the Bush/Hoover/Paulson policies are allowed to continue to govern the market until January 20.

Every day in which the Hoover policies of do-nothingism prevail means thousands of additional job losses, and an accelerating rhythm of economic decline, which in our accelerated market of the 21st century could potentially spiral out of control into a depressionary deceleration much more quickly than occurred in 1930. And the bankruptcy of GM, if that is allowed to happen under the charge of our Hooverians, could be the trigger that opens the floodgates of spiralling job loss that not even Obama may easily be able to control once it takes hold....

The best way to avoid this possibility is to promote policies that will not only save as many jobs as possible now, but will begin to produce new jobs (by quickly passing, even before Obama takes office, for example, major green collar jobs legislation and incentives such as those being promoted by Senator Stabenow of Michigan.)

"Preserve and Create--Jobs, Jobs, Jobs," is the policy of those who would wish to avoid repeating the 1930s-era mistakes of Hoover in 2008, and of driving the recessionary economy of 2008 into the depression of 2010.

It's not too late now, but unless we act boldly and quickly to support and create jobs, instead of allowing bad policy to destroy them, we may find ourselves within a year on an uncontrolled slide into depression.

The choice is ours--it is 1930 again, and we can either allow the Republican policies of Hoover/Bush/Paulson hold sway over our destinies, OR we can choose to laugh these policies out of government and defeat them. If we want to preserve the market for democracy, let's get about the work of driving the Hooverian policymakers out of the market so "the market" can begin to function more fairly again, for the benefit of everyday workers, home-owners and small businesses, rather than only to the benefit of the plutocrats (who could care less whether the rest of us are in a great depression by 2010, since they are well-insulated from its impacts). While we may be standing in soup-lines within a year, they will be sipping the champagne purchased with the $700 billion in taxpayer aid provided to them so the financial institutions could continue to exist even as the rest of the economy collapsed into oblivion....

In the (not so good) old days they called this kind of situation the class war of the plutocrats against the workers. Today, in the absence of any stomach for class analysis among most in the laboring classes, this situation is simply termed "greed." But since greed is presumed to be universal, the laboring classes (including white collar laborers) have disarmed themselves, and thus rendered themselves incapable of any meaningful critique of the circumstances oppressing them. And with that collapse of meaningful critique came with it the collapse of democracy, which depends on self-government, which cannot function in the absence of the tools of critique.

And like Katrina, in the absence of social critique, the depression, if it comes, will be viewed as if it were a natural disaster instead of a disaster of human manufacture that resulted from particularly bad structures of unequal power and particularly bad structures of decision-making.

Hoover has returned to Washington, and in the persons of Bush and Paulson has brought plutocratic class war with it. Now the only question that remains is: Will the people of the United States recognize, before its too late, who their oppressors are, and laugh Hoover and his policies out of the market so that the work of critique and healing can begin. Let critical laughter rain down on the nation in such abundance that policies requiring the people to serve the plutocrats are replaced by policies that require financial institutions to serve the people. What a fine and fair and truly democratic reversal of fortune that would be! And we might all yet be saved if we learn to laugh in this critical way....

The Most Stupid Idea In the World: Allow US Auto Manufacturers to Go Bankrupt

The most stupid ideas in the world continue to be peddled by free market ideologues who are suggesting that the best thing we can do for the American car industry and our economy is allow the Detroit manufacturers to go bankrupt.

After the most dramatic evidence since the 1930s of the total failure of free market fundamentalist ideology—the belief that the market should be allowed to do whatever the market does on its own, without government intervention, because that will be best for the economy—it’s amazing to still see Congress and the corporate media giving credence and air time to the junk bond ideas these market fundamentalists continue to peddle in spite of overwhelming evidence of their worthlessness and the damage they have done to the American political economy.

The only response free market ideological junk-peddlers should be getting these days is sarcastic laughter, and this especially applies to those who are arguing that the best thing we can do for the US car industry and economy is to allow the Detroit companies to go bankrupt.

Free market fundamentalism has launched us well on the way to the next great Depression, and if Congress now allows market fundamentalism to determine its decision-making about the Detroit car-makers, our political leaders will be turning the United States economy onto the surest route to the next great depression. If Congress continues to allow market fundamentalism to provide its map to the economic future, even after all evidence has proven market fundamentalism to be an ideology that has done much more direct damage to our national economy than communism ever did, we will find ourselves repeating the history of the 1930s depression in the next decade.

The surest route for US policymakers to take if they want to turn the worsening recession into a depression is to allow the Detroit auto industry, just as it is entering a period of major transformation, to go bankrupt. The bankruptcy of GM would trigger the immediate loss of millions of jobs, which would in turn accelerate the current downward spiral of job loss and economic contraction into a whirlwind the end of which could not be predicted by anyone.

This is how the recession of 1929 triggered by the stock market crash was turned into the Great Depression of the 1930s: by a market fundamentalist ideology that Hoover and Congress allowed to block decisive government action to preserve existing jobs and create new jobs to keep the economy from collapsing.

After the economy had collapsed, and Roosevelt took over in 1933, it was too late for even the most dedicated focus on job creation to have more than a limited impact on resuscitating the US economy until the production speedup of World War II jolted the economy back to life.

Fortunately, this time around, we have a new President who understands and respects history, intelligence, and the importance of job creation coming into office near the beginning of the downward spiral of job loss, instead of at its end. This means that it is still possible we could avoid repeating the mistakes of the past—BUT ONLY IF political leaders pay heed to the lessons of history and act to make sure that the spiral of job loss is not allowed to grow out of control. The surest way to allow the current job loss spiral to spin quickly out of control is to allow the US auto manufacturers to fall into bankruptcy.

While Congress has been willing to allow banks and the financial industry to be bailed out, Now—when the most important remaining manufacturing industry in the country is on the verge of failure—congressional leaders are actually allowing themselves to fall back into the stupidities of market fundamentalism, and question whether they should extend help to the anchor of the entire remaining manufacturing sector in the US. Without logic or any intelligent concern for the horrible impact the bankruptcy of the Detroit car industry would have on the loss of millions of jobs in an already spiraling downward movement of job loss, congressional leaders now seem willing to allow a major source of jobs in the US economy to disappear. And this would also, by the way, convert an already suffering regional economy in the Midwest into a disaster zone.

There could not be a worse time for Congress to fall back into the stupidities of the market fundamentalism that, by “allowing the market to be the market,” has brought us to this economic crisis in the first place. If Congress now allows stupidity and ideology to continue to rule over reason, they will allow the Detroit auto industry to fail, and they will in one fell swoop project us from a recessionary spiral into a depression-producing whirlwind.

So we must all ask and challenge our congressional leaders and the corporate media with the following question: Will they allow the stupidity of failed market ideology to rule and bring our common future to ruin, or will they laugh these stupidly shouting ideologues out of the park, and create the quiet and open space needed for thoughtful ideas and innovation to rescue us from the disastrous stupidities of the past? The choice is ours, as well as theirs. Let’s get to work—in laughing, thinking, and acting, for the sake of our common future.

Stop Bush's Pillage of the US Treasury and Tax-Payers Now!: Time for Congress to ACT to Defend the Constitution and the Economy

From The Great Crisis of 2008:

Bush & Co. can still do great damage to our nation's economy and seriously cripple its potential for recovery under an Obama administration, as Naomi Klein has argued this weekend (at the Miami Book Fair) in her excellent discussion (broadcast on BookTV) of the way the Bush administration is using the "shock" of the current financial crisis and the "bailout" to continue to loot our nation's Treasury, as their parting gift to the nation.

While President Bush is lamely attempting to use this weekend's G20 summit to warn against any major efforts at reform of the financial system, and to cover up his culpability for administering the bad policies that delivered us into this crisis, the people of the US and the rest of the world have pulled back the curtain to reveal his administration as the bad wizard that has been using the ideology of the free market to manipulate the world's political economy for the interests of the most powerful and wealthy.

And now that the world-embracing confidence game has been revealed, the Bush administration is trying to make sure--as it is forced to turn over the reigns of power--that those who next come into power will be as crippled and limited as possible in their efforts to repair the harm done by the past years of maladministration and ill-gotten gain.

Unless Congress under Pelosi and Reid IMMEDIATELY converts the next few weeks of the "lame duck" session of Congress into an EMERGENCY session dedicated to taking swift and decisive action to STOP the corrupt Bush administration's looting of our nation's economy, through a misuse of its crisis financial authority at the end of its term that parallels the misuse of its war authority at the beginning of its term, the potential an Obama administration might have for repairing the damage will quickly disappear in the next few weeks, evern before Obama enters office.

If the Obama administration is to have any ability to repair the financial and political damage of the last decades of disastrous policy, a supine Democratic-led Congress must learn how to stand up NOW to prevent any additional looting of the national Treasury by requiring that any additional Treasury funds provided to 'bail out' the bad decisions of corporations and executives be tied to strict standards of accountability and oversight, including requirements similar to those of Britain that require banks using such funds to provide loans to the citizens whose tax dollars are bailing them out.

The policy of the lame-duck Congress, if it wishes to preserve any potential for an Obama administration to repair the harms of the past, should be direct and simple, and loud and clear:

If the banks do not wish to provide loans to citizens, then the banks should not be eligible for tax-payer-funded bailouts! Britain understood this, and wrote such a requirement into the law that provided Treasury funds to British banks, but the Bush administration, which seeks to protect the privileges of unrestrained power to continue to rob tax-payers in order to make the wealthy wealthier, prefers to preach the virtues of unfettered capitalism to the G20 so it can continue to protect a corrupt financial system that robs the needy for the profit of the rich and powerful. This is how the Bush administration understands freedom and the market, and has terribly corrupted the meaning of both.

If Congress does not immediately act to stop even more harm from being done in the waning days of this corrupt administration, then this "lame duck" Democratic Congress will be guilty not only of complicity with the bad policies of the last two years, but will be responsible for selling out the Obama administration before it even takes office.

Let's hope that in the next few days Pelosi, Reid, and the entire Democratic Congress will learn the lessons of this election and pay heed to the demands of the American people for change NOW. If Pelosi, Reid, and Congress fail to act even now to put an immediate halt to the criminal corruption of the political process that continues to allow tax-payer dollars to be used to bail out the rich and powerful, without accountability or appropriate oversight, then Pelosi, Reid, and the rest of the Congress will be as guilty as the Bush administration for the national disaster that stems from this failure to act decisively and clearly to bring the terrible abuses of the Bush administration to an end, for once and for all.

As Klein has written in her most recent article in The Nation:

Despite all of this potential lawlessness, the Democrats are either openly defending the administration or refusing to intervene. "There is only one president at a time," we hear from Barack Obama. That's true. But every sweetheart deal the lame-duck Bush administration makes threatens to hobble Obama's ability to make good on his promise of change. To cite just one example, that $140 billion in missing tax revenue is almost the same sum as Obama's renewable energy program. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

For both the Democratic Party and the incoming Obama administration, as well as the country, silence and supine inaction in the face of the continuing outrages of the Bush administration against both the nation's political economy and Constitution are no longer an option.

Either the Congress and Obama must begin to fulfill their constitutional oversight responsibilities NOW, or Obama's acceptance of the promise to "protect and defend" the Constitution on Inauguration day on January 20, 2009 may end up being as hollow as it is unachievable.

Again, to quote Naomi Klein, who wrote before the election:

This duplicity is a political opportunity. Whoever wins the election on November 4 will have enormous moral authority. It should be used to call for a freeze on the dispersal of bailout funds—not after the inauguration, but right away. All deals should be renegotiated immediately, this time with the public getting the guarantees.

It is risky, of course, to interrupt the bailout process. The market won’t like it. Nothing could be riskier, however, than allowing the Bush gang their parting gift to big business—the gift that will keep on taking.

Also see Naomi Klein's articles:

The Bailout Profiteers

The Bailout: Bush's Final Pillage