Hell on Earth

In This Edition:

- Copenhagen Climate "Talks"
- Joe Lieberman, Veterans, & Health Care "Reform"
- Dean: Public Option Essential to Real Health Care Reform
- Simon Johnson on Economic "Reform"
- McCain Leads Senate Effort to Reinstate Glass-Steagall
- U.S. gave up billions in tax money in deal for Citigroup's bailout repayment
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Copenhagen Climate "Talks"

Copenhagen: Only the numbers count – and they add up to hell on earth
Climate Interactive's software speaks numbers, not spin – which is where the true understanding of the Copenhagen summit lies

Bill McKibben

guardian.co.uk, Tuesday 15 December 2009
http://www.guardian.co.uk/environment/cif-green/2009/dec/15/bill-mckibben/print

Climate change activists form the number 350 at the Sydney Opera House in Australia. Photograph: Tim Cole/EPA

The Bella centre is a swirl of chatter, the streets of Copenhagen are a swirl of protest. Depending on what hour you listen to the news bulletin, the UN climate negotiations have "come off the rails" or are "back on track" or have "stalled" or are "moving swiftly". Which is why the only people who really understand what's going on may be a small crew of folks from a group of computer jockeys called Climate Interactive. Their software speaks numbers, not spin – and in the end it's the numbers that count.

First number to know: 350. It's what scientists have been saying for two years is the maximum amount of carbon dioxide we can safely have in the atmosphere, measured in parts per million. Those scientists have been joined by an unprecedented outpouring from civil society: in late October, activists put on what CNN called "the most widespread day of political action in the planet's history," with 5,200 demonstrations in 181 countries, all rallying around that number. Three thousand vigils last weekend across the planet spelled out the number in candles. Thousands of churches rang their bells 350 times on Sunday, and yesterday the World Parliament of Religions, meeting in Melbourne and representing the "largest interreligious gathering on earth" sent an emergency 350 declaration here to Copenhagen.

The second number: 100. That's (roughly) how many countries are backing a 350 target here at Copenhagen. That's more than half the nations in attendance – unfortunately, they're the small, poor ones. But it's amazing to see them, in the face of enormous pressure, keeping the idea of real action alive. Yesterday Mohamed Nasheed, president of the Maldives, spoke to a roaring crowd of thousands: "We know what the laws of physics say: the most important number in the world is 350."

The third number: 4%. That's how much the US is offering to cut its emissions from their 1990 levels by 2020. Scientists tell us that the developed world would need to reduce by at least 40% to get us back on a 350 track, so the American offer is exactly an order or magnitude off. And they're not alone. All the rich countries, not to mention China, are looking to do as little as possible and still escape here with some kind of agreement they can hide behind.

The fourth number – and the most important one. When the folks at Climate Interactive plug in every promise made at these talks (the American offer on the table, the Chinese promise to reduce "energy intensity", the EU pledges, and so on) their software tells them almost instantly how much carbon they would eventually produce. When they hit the button last night, the program showed that by 2100 the world's CO2 concentrations (currently 390) would be – drumroll please – 770. That is, we would live in hell, or at least a place with a similar temperature.

So that's the scorecard. You may hear a lot of happy talk from world leaders over the next few days as they "reach a historic agreement". But that's how it all adds up.

• Bill McKibben is the coordinator of 350.org (http://www.350.org/)

Other Links:
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[The Elephant in the Climate Change Living Room--Human Population Size & Growth - Chris]

Population control called key to deal
By Li Xing (China Daily)
Updated: 2009-12-10 07:37

http://www.chinadaily.com.cn/china/2009-12/10/content_9151129.htm

COPENHAGEN: Population and climate change are intertwined but the population issue has remained a blind spot when countries discuss ways to mitigate climate change and slow down global warming, according to Zhao Baige, vice-minister of National Population and Family Planning Commission of China (NPFPC) .

"Dealing with climate change is not simply an issue of CO2 emission reduction but a comprehensive challenge involving political, economic, social, cultural and ecological issues, and the population concern fits right into the picture," said Zhao, who is a member of the Chinese government delegation.

Many studies link population growth with emissions and the effect of climate change.

"Calculations of the contribution of population growth to emissions growth globally produce a consistent finding that most of past population growth has been responsible for between 40 per cent and 60 percent of emissions growth," so stated by the 2009 State of World Population, released earlier by the UN Population Fund.

Although China's family planning policy has received criticism over the past three decades, Zhao said that China's population program has made a great historic contribution to the well-being of society.

As a result of the family planning policy, China has seen 400 million fewer births, which has resulted in 18 million fewer tons of CO2 emissions a year, Zhao said.

The UN report projected that if the global population would remain 8 billion by the year 2050 instead of a little more than 9 billion according to medium-growth scenario, "it might result in 1 billion to 2 billion fewer tons of carbon emissions".

Meanwhile, she said studies have also shown that family planning programs are more efficient in helping cut emissions, citing research by Thomas Wire of London School of Economics that states: "Each $7 spent on basic family planning would reduce CO2 emissions by more than one ton" whereas it would cost $13 for reduced deforestation, $24 to use wind technology, $51 for solar power, $93 for introducing hybrid cars and $131 electric vehicles.

She admitted that China's population program is not without consequences, as the country is entering the aging society fast and facing the problem of gender imbalance.

"I'm not saying that what we have done is 100 percent right, but I'm sure we are going in the right direction and now 1.3 billion people have benefited," she said.

She said some 85 percent of the Chinese women in reproductive age use contraceptives, the highest rate in the world. This has been achieved largely through education and improvement of people's lives, she said.

This holistic approach that integrates policy on population and development, a strategy promoting sustainable development of population, resources and environment should serve as a model for integrating population programs into the framework of climate change adaptation, she said.

(China Daily 12/10/2009 page10)

Copyright By chinadaily.com.cn. All rights reserved
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Regulation, Not the "Free Market," Drives Technological Innovation

US left behind in technological race to fight climate change
A speech by the US energy secretary, Steven Chu, shows how America's unquestioning belief in the free market has held back technological innovation

guardian.co.uk 12/15/09

http://www.guardian.co.uk/environment/georgemonbiot/2009/dec/14/us-technological-race-climate-change/print

I have just been watching the tragic sight of a fallen giant flailing around on its back like a beetle, desperately trying to turn itself over.

The occasion was a speech by the US secretary of energy, Steven Chu. He is, of course, a Nobel physicist, brilliant, modest, likeable, a delightful contrast to the thugs employed by the previous administration. But his speech was, in the true sense of the word, pathetic: it moved me to pity.

Yesterday afternoon in Copenhagen – where the UN climate talks are entering their second week – Professor Chu unveiled what would have been a series of inspiring innovations, had he made this speech 15 years ago. Barely suppressing his excitement,
he told us the US has discovered there is great potential for making fridges more efficient, and that the same principle could even be extended to lighting, heating and whole buildings. The Department of Energy is so thrilled by this discovery that it has
launched a programme to retrofit homes in the US, on which it will spend $400m a year. . . . .
http://www.guardian.co.uk/environment/georgemonbiot/2009/dec/14/us-technological-race-climate-change/print
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Copenhagen police release hundreds of detained activists
Only 13 protesters remain in custody after nearly 1,000 arrests during demonstrations at climate change summit
http://www.guardian.co.uk/environment/2009/dec/13/copenhagen-protesters-freed/print
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High-profile activist's arrest fuels fears of police crackdown in Copenhagen
Climate Justice Action spokesman to face charges, as Danish
police prepare for mass protests at Copenhagen's Bella centre
Bibi van der Zee
guardian.co.uk, Tuesday 15 December 2009

http://www.guardian.co.uk/environment/2009/dec/15/danish-police-mass-protest-copenhagen/print

A high-profile climate activist was arrested ahead of tomorrow's major protests planned outside the Copenhagen climate summit, fuelling anxiety about how the Danish authorities are policing demonstrations.

Tadzio Mueller, a spokesman for the umbrella group Climate Justice Action (CJA), was arrested today by plainclothes police as he left the Bella centre, where the official climate talks are taking place. The police are holding him at the Retorvej detention
centre, and he will be charged in court tomorrow morning. The police refused to say what charges will be brought. . . . .
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Joe Lieberman, Veterans, & Health Care "Reform"
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Joe Lieberman and the Health Care Train Wreck
Tuesday 15 December 2009
by: William Rivers Pitt, t r u t h o u t | Op-Ed

http://www.truthout.org/1215098?print

When last we heard from Sen. Joe Lieberman of Connecticut, he was throwing sand into the gears of the Democratic push for health care reform by declaring he would filibuster any legislation containing the so-called public option. "I feel so strongly about the creation of another government health insurance entitlement," said the senator back in November. "The government going into the health insurance business - I think it's such a mistake that I would use the power I have as a single senator to stop a final vote."

This pronouncement came at the same time as word got out that Lieberman was also planning to actively campaign for GOP candidates during the 2010 midterms, further undercutting his erstwhile party's hold on the majority in Congress."There's a hard core of partisan, passionate, hardcore Republicans," he said at the time. "There's a hard core of partisan Democrats on the other side. And in between is the larger group, which is people who really want to see the right thing done, or want something good done for this country and them - and that means, sometimes, the better choice is somebody who's not a Democrat."

For some reason, these twin insults did not motivate the Democratic Congressional leadership to expunge this hypocritical cretin from their ranks. Lieberman kept his committee chairmanship and was not even mildly censured by his colleagues. One month later, the decision to ignore his brazen disregard for his colleagues has come back to bite us all, for Mr. Lieberman has once again elbowed his way into the center of the health reform debate, and with a vengeance. "Mr. Lieberman threatened on national television to join the Republicans in blocking the health care bill, President Obama's chief domestic initiative," reported The New York Times on Tuesday. "Within hours, he was in a meeting at the Capitol with top White House officials. And on Monday night, Democratic senators emerged from a tense 90-minute closed-door session and suggested that they were on the verge of bowing to Mr. Lieberman's main demands: that they scrap a plan to let people buy into Medicare beginning at age 55, and scotch even a fallback version of a new government-run health insurance plan, or public option."

This turn of events is sickening and appalling on a couple of different levels.

First, of course, is the shameless reality that is Mr. Lieberman himself. During his 2004 presidential run, and again during his 2006 Senate campaign, Lieberman actively supported the public option's inclusion in any health care reform, and specifically supported the expansion of Medicare. As late as this past September, Lieberman continued to support such an expansion, as reported by The Connecticut Post. "As to how 47 million uninsured will afford coverage," said The Post, "Lieberman said only 12 million don't have insurance because they cannot afford it. By allowing citizens who are not eligible for Medicare or Medicaid to buy in for a rate below the private market, the government can extend coverage to more of those who are currently uninsured, he said."

That was then, and this is now. In one of the most astounding examples of political flip-floppery, Lieberman opened this week by declaring himself dead-set against the very health care reform policies he once championed, and once again announced his intention to don a Republican cloak and tear up the Democrats' legislative efforts. Again.

Why? One would have to be deep into a severe state of personal denial to believe Lieberman has legitimate concerns about the impending health care legislation, given the fact that he very recently supported the exact provisions he now wants removed or destroyed. The only sensible explanation would seem to be that Lieberman is actively needling the Democratic leadership, and has become such an obnoxious obstructionist only to keep his name in the news. Josh Marshall of Talking Points Memo explains the situation, and what it means going forward:

The key issue senate Democrats now have in dealing with Joe Lieberman isn't his position on the Medicare Buy-In. They need to confront the problem that Lieberman isn't negotiating in good faith. No surprise that Republicans are giddy with what a problem he's creating for Harry Reid & Co. But in my conversations with them, it's as clear to them as it is to anyone else that he's now basically mocking his Democratic colleagues by moving the goal posts every time a new agreement is struck.

This puts the Democrats in an extremely difficult, politically untenable position. Yes, they need 60 votes. But they're not going to be able to hang on to Lieberman's vote long enough to get the bill passed. That now seems unquestionably clear. People who say that the Dems should just move to reconciliation don't necessarily realize the difficulties involved - either procedurally or politically, in terms of losing even more Democratic votes. Personally, I'd like to see them try it. But I don't know if it's possible.

Until a couple days ago I was close to certain a health care bill would pass. I still feel relatively confident one will simply because the Dems just don't have any choice but to pass one. Once it is passed, if it is, it's definitely time for the Democratic caucus to strip Lieberman of all the benefits he receives as a member of the Democratic caucus. But that doesn't accomplish anything at the moment. The only path I can see for the Dems is that they need to try to put 60 votes together with Sen. Snowe. Yes, that sounds crazy to me too. But I think she actually has a set of policy priorities that could be met. I don't think that's true with Lieberman. So further negotiating just means more game-playing.

The solution to all this, one would think, would be for the Democratic leadership in Congress to wrap Lieberman in bright red wrapping paper, slap on a bow, and ship him across the aisle to his ideological compatriots in the GOP as an early Christmas present. Strip him of his leadership position, show him the door, and publicly denounce him as nothing more than a stinking chunk of cholesterol clogging up the arteries of progress.

But no. Of course that isn't going to happen. Instead, Democrats appear poised to once again knuckle under to this fraud and further denude what has already become a half-a-loaf bill. According to several sources, Rahm Emmanuel and the White House are actively pressuring the Democratic leadership in Congress to give Lieberman whatever he wants in order to pass some form of health reform legislation, no matter how ragged, damaging and useless the final product may turn out to be.

The Senate won't vote on health care reform until next week, and the process has changed course two dozen times already, so the outcome of this latest idiot eruption is far from certain, but the writing does appear to be on the wall this time around. Joe Lieberman doesn't give a tinker's damn about the people he represents, the party that coddles him, his own positions on key issues or anything else beyond getting his mug in front of television cameras in the guise of someone who actually matters. The Obama administration is once again moonwalking away from doing the right thing on this issue, and the jellyfish pond that is Congress appears poised to do what jellyfish do: float, flop, flounder and drift with the scum in this rising tide.

In short, this whole thing is about to become a train wreck of galactic proportions. Stay tuned.
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135,000 Uninsured Americans Will Die Before Health Reform Takes Effect, Analysis Finds

Over 6,600 Uninsured Veterans Will Die by 2013: Estimate

By Brad Jacobson

http://rawstory.com/2009/12/135000-uninsured-americans-die-health-reform-takes-effect-study/

December 15, 2009 "Raw Story" -- If Democrats manage to pull off efforts to reform the US healthcare system and ensure coverage for millions who are currently without insurance, the new system -- by design -- will likely still leave tens of thousands to die without insurance before reforms kick in.

A Raw Story analysis, based on a recent Harvard Medical School study, estimates that 135,000 American citizens and over 6,600 US veterans will die due to a lack of health insurance before current proposed healthcare reform measures would take effect.

One hundred and thirty-five thousand US lives far exceeds the total number of Americans who died in the Korean War, the Vietnam War and the attacks of 9/11 combined. The lives of over 6,600 US veterans is more -- by over 1,300 -- than the total number of US soldiers who have thus far died in both the Iraq and Afghanistan wars.

Dr. Steffie Woolhandler, a professor of medicine at Harvard University and co-author of the Harvard Medical School study, called Raw Story's estimates "quite reasonable."

Even more shocking is that these are modest estimates.

Health reform policy experts who spoke with Raw Story confirmed that the House and Senate bills would do virtually nothing for currently uninsured Americans until 2013 and 2014, respectively. Raw Story's calculations are based on the House health reform bill's projections. The Senate bill, however, would add another year of lethal lag time, driving up the estimated death rate by tens of thousands more US citizens and veterans. . . . .
http://rawstory.com/2009/12/135000-uninsured-americans-die-health-reform-takes-effect-study/
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Dean: Public Option Essential to Real Health Care Reform

http://voices.washingtonpost.com/44/2009/08/17/dean_public_option_essential_t.html?waporef=evri.widget.1
The Associated Press reports:

Former Democratic Party Chairman Howard Dean, a leading figure in the liberal wing of his party, said Monday he doubts there can be meaningful health care reform without a direct government role.

Dean urged the Obama administration to stand by statements made early on in the debate in which it steadfastly insisted that such a public option was indispensable to genuine change, saying that Medicare and the Veterans Administration are "two very good programs that have been around for a long time." Dean appeared on morning news shows Monday amid increasing indications the Obama White House is retreating from the public option in the face of vocal opposition from Republicans and some vocal participants at a town-hall-style meetings around the country.

The former Vermont governor was asked on NBC's "Today" show about President Barack Obama's statement over the weekend that the public option for insurance coverage was "just a sliver" of the overall proposal. Obama's health and human services secretary, Kathleen Sebelius, advanced that line, telling CNN Sunday that a direct government role in a system intended to provide virtually universal coverage was "not the essential element." Dean, a physician, argued that a public option is fair and said there must be such a choice in any genuine shake up of the existing system.

"You can't really do health reform without it," he said. Dean maintained that the health insurance industry has "put enormous pressure on patients and doctors" in recent years.

He called a direct government role "the entirety of health care reform. It isn't the entirety of insurance reform ... We shouldn't spend $60 billion a year subsidizing the insurance industry." Dean also said he doesn't foresee any Republican support for a public option. "I don't think the Republicans are interested and in order to have a bipartisan bill, you've got to have both sides interested," he said.
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Dean urges defeat of emerging health care bill
The Associated Press
Wednesday, December 16, 2009; 8:52 AM
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/16/AR2009121600755_pf.html

WASHINGTON -- Former Democratic Party Chairman Howard Dean argued Wednesday that the health care overhaul bill taking shape in the Senate further empowers private insurers at the expense of consumer choice.

"You will be forced to buy insurance. If you don't, you'll pay a fine," said Dean, a physician. "It's an insurance company bailout." Interviewed on ABC's "Good Morning America," he said the bill has some good provisions, "but there has to be a line beyond which you think the bill is bad for the country."

"This is an insurance company's dream," the former Democratic presidential candidate said. "This is the Washington scramble, and it's a shame."

Dean asserted that the Senate's health care bill would not prohibit insurance companies from denying coverage for preexisting conditions and he also said it would allow the industry to charge older people far more than others for premiums.

Rep. Anthony Weiner, D-N.Y., a prominent House liberal, protested the absence of any government-run insurance option in the Senate bill.

"We can't let the perfect be enemy of the good," Weiner said on CBS' "Early Show," "but we are reaching a tipping point."

When House and Senate negotiators go to conference to work out a compromise bill, Weiner said, "We should move away from some of the things the Senate has done and move back to where the House is. You need to contain cost. You do that with a public option."
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Is Joe Lieberman Protecting Israel?

By Robert Parry

December 16, 2009 "Consortiumnews" - http://www.consortiumnews.com/2009/121509.html

http://www.informationclearinghouse.info/article24195.htm

Sen. Joe Lieberman’s latest threat to scuttle health-care reform – vowing to join a Republican filibuster to block an over-55 buy-in to Medicare, a proposal that he has long championed – is raising questions about his motives. But no one is mentioning the unmentionable, the cause that has come to define Lieberman’s career: Israel.

Is it possible that Lieberman’s obstructionist behavior doesn’t relate to Connecticut’s insurance industry or to his political ego – the two most cited explanations – but rather to a calculation that he can use his leverage on health care to limit the pressure that President Barack Obama can put on Israel to make concessions on a Mideast peace plan?

After all, the more common explanations of Lieberman’s behavior have holes in their logic.

While it is true that Lieberman’s constituent Hartford-based insurance companies fear any government intrusion in their industry, the actual proposals for the Medicare buy-in or the tightly constrained “public option” actually would benefit the industry in the near term.

Those uninsured Americans 55 to 64 are customers whom the insurance industry doesn’t want. They are the part of the uninsured population that is most likely to need medical care, which is why private insurers have driven up the rates so high that these people can’t afford to buy health insurance.

Letting these desperate Americans buy into Medicare wouldn’t cost the health insurance industry much of anything – and it would reduce the moral (and PR) crisis that has led so many Americans to view private insurers as vultures preying on the most vulnerable.

In his past position in favor of the Medicare buy-in, Lieberman has recognized this reality, noting that this over-55 group faces a particular crisis because they have “retired early or unfortunately have been laid off early” and can’t afford health insurance.

Though Lieberman has long been a major recipient of health insurance industry backing, that has never before prevented him from favoring this Medicare buy-in. Only now does Lieberman say that he would join a Republican filibuster to kill the entire bill if his earlier proposal is included.

So, Senate Democratic leaders have reportedly agreed to drop the buy-in provision to appease Lieberman even though such a watered-down Senate bill may complicate reconciliation with a more liberal House bill and is infuriating the Democratic base.

Killing the Public Option

Similarly, Lieberman has protested any inclusion of a government-run insurance option even if it is only triggered by the failure of private insurers to offer affordable alternatives or if it is so tightly constrained that it would attract only a few million customers, again drawn primarily from the ranks of Americans most in need of medical care.

The Congressional Budget Office has estimated that only about six million people would sign up for the House version of the public option whose rates would likely exceed those of private plans because the sick would gravitate to the government plan. The current Senate version, with a state-by-state opt-out provision, would draw even fewer customers, the CBO said.

Yet either version actually helps the health insurance industry by siphoning off sick people and thus allowing the industry to corner the market on healthier customers, where the biggest profits lie.

So, Lieberman may not be serving the industry’s best interests by jeopardizing passage of a health reform bill. Not only does the industry stand to pick up tens of millions of new customers who will be compelled to buy insurance – and sometimes with government subsidies – but a decent reform bill also blunts demands for more radical changes.

If Americans grow more furious with the current system – its rising costs and its failure to cover nearly 50 million people – voters might press for a single-payer approach which could eliminate private insurers altogether.

For these reasons, the Lieberman-is-in-the-pocket-of-the-insurance-lobby explanation isn’t entirely convincing.
. . . .
The Israel Factor

Which brings us to Israel, which arguably has become Lieberman’s most treasured priority in his political life.

Mark Vogel, chairman of the pro-Israel National Action Committee, once said, “Joe Lieberman, without exception, no conditions … is the No. 1 pro-Israel advocate and leader in Congress. There is nobody who does more on behalf of Israel than Joe Lieberman.”

It was Lieberman’s embrace of neoconservative ideology and his aggressive support for wars against Israel’s Muslim enemies, the likes of Iraq’s Saddam Hussein, that led Connecticut Democrats to deny Lieberman the Senate nomination in 2006 and prompted his successful run as an Independent.

Partly because Obama opposed the Iraq War, Lieberman went on the stump for Republican John McCain in 2008, even questioning Obama’s patriotism.

Standing with McCain in August 2008, Lieberman called the election a choice “between one candidate, John McCain, who has always put the country first, worked across party lines to get things done, and one candidate who has not.’

Since the start of Obama’s presidency, Israel’s hawkish Likud government has made no secret of its concern that Obama might pressure it into making territorial and other concessions to the Palestinians and Syria to secure a Mideast peace agreement.

In Washington, the still-influential neocons also have been demanding that Obama continue Bush’s belligerent policies and side with Israel in a hard-line approach to Iran.

In that sense, Lieberman and the neocons have much in common with Republicans, such as Sen. Jim DeMint, R-South Carolina, who declared in July that “If we’re able to stop Obama on this [health reform], it will be his Waterloo. It will break him.”

A broken Obama could be easier to manipulate regarding Mideast peace talks and Iran.
. . . .
Lieberman has been careful not to connect his disruptive behavior on health-care reform to his support for Israel, but there can be little doubt that a chastened Obama, either defeated on health care or forced to sign a bill that liberals will view as a betrayal, will have much less political capital to expend in applying pressure on Israel.

A hobbled Obama won’t be able to push Israeli Prime Minister Benjamin Netanyahu to halt expansion of West Bank settlements or to take other steps that might lead to a Palestinian state. Obama also could be pushed around himself if Israel – itself an undeclared nuclear power – decides to launch airstrikes against Iran’s nuclear facilities.

The Israel explanation for Lieberman’s behavior on health-care reform is the one that seems to make the most sense.

Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & 'Project Truth' are also available there. Or go to Amazon.com.
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Simon Johnson on Economic "Reform"

“Wake Up, Gentlemen”
Posted: 15 Dec 2009 03:06 AM PST

http://baselinescenario.com/2009/12/15/wake-up-gentlemen/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BaselineScenario+%28The+Baseline+Scenario%29

The guiding myth underpinning the reconstruction of our dangerous banking system is: Financial innovation as-we-know-it is valuable and must be preserved.  Anyone opposed to this approach is a populist, with or without a pitchfork.

Single-handedly, Paul Volcker has exploded this myth.  Responding to a Wall Street insiders‘ Future of Finance “report“, he was quoted in the WSJ yesterday as saying: “Wake up gentlemen.  I can only say that your response is inadequate.”

Volcker has three  main points, with which we whole-heartedly agree:

1. “[Financial engineering] moves around the rents in the financial system, but not only this, as it seems to have vastly increased them.”

2. “I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy” and most important:

 3. “I am probably going to win in the end”.

Volcker wants tough constraints on banks and their activities, separating the payments system – which must be protected and therefore tightly regulated – from other “extraneous” functions, which includes trading and managing money.

This is entirely reasonable – although we can surely argue about details, including whether a very large “regulated” bank would be able to escape the limits placed on its behavior and whether a very large “trading” bank could (without running the payments system) still cause massive damage. 

But how can Mr. Volcker possibly prevail?  Even President Obama was reduced, yesterday, to asking the banks nicely to lend more to small business – against which Jamie Dimon will presumably respond that such firms either (a) are not creditworthy (so give us a subsidy if you want such loans) or (b) don’t want to borrow (so give them a subsidy).  (Some of the bankers, it seems, didn’t even try hard to attend – they just called it in.)

The reason for Volcker’s confidence in his victory is simple - he is moving the consensus.  It’s not radicals against reasonable bankers.  It’s the dean of American banking, with a bigger and better reputation than any other economic policymaker alive – and with a lot of people at his back – saying, very simply: Enough.

He says it plainly, he increasingly says it publicly, and he now says it often.  He waited, on the sidelines, for his moment.  And this is it.

Paul Volcker wants to stop the financial system before it blows up again.  And when he persuades you – and people like you – he will win.  You can help – tell everyone you know to read what Paul Volcker is saying and to pass it on.
By Simon Johnson
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McCain Leads Senate Effort to Reinstate Glass-Steagall
December 15, 2009 - by Donny Shaw
http://www.opencongress.org/articles/view/1410-McCain-Leads-Senate-Effort-to-Reinstate-Glass-Steagall?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OpenCongressCongressGossipBlog+%28Open+Congress+Blog%29

Throughout the financial crisis one law has been cited over and over as a main cause of the collapse and, more significantly, the resulting bailouts of “too big to fail” banks. That law is the Gramm-Leach-Biley Act, which repealed a New Deal-era financial regulatory rule known as the Glass-Steagall Act, which was signed into law by FDR to keep regular commercial banks separate from Wall Street investment banks. The law was repealed in 1999 by Bill Clinton; the pen that signed the law to repeal it is now hanging as a trophy in the halls of Citigroup’s corporate headquarters.

Now there’s a movement in the Senate to reinstate the Glass-Steagall protections. It’s being championed by Sen. John McCain [R, AZ] of all people. Newsweek reports:

John McCain lost the 2008 presidential election because of the financial crisis—at least that’s what his chief strategist, Steve Schmidt, suggested. “We were three points ahead on Sept. 15 when the stock market crashed. And then the election was over,” Schmidt said in a postmortem earlier this year. McCain was tarred with the regulatory failures of the Bush years, and it didn’t help that he had been a longtime acolyte of the Senate’s dean of deregulation, Phil Gramm, who once derided Americans as “a nation of whiners.” McCain also seemed to have few new ideas of his own about how to address the financial panic.

More than a year after the election, the Arizona Republican is looking to repair that reputation by joining up with Democratic firebrand Maria Cantwell to propose something that will be anathema to both Wall Street and the Obama administration. According to two congressional sources, the two maverick senators want to reinstate Glass-Steagall Act, the Depression-era law that forced the separation of regular commercial banking from Wall Street investment banking. The senators’ proposal echoes a failed amendment introduced in the House last week by Rep. Maurice Hinchey of New York.

The Senate prospects for the success of the McCain-Cantwell bill—which the two plan to announce together on Wednesday morning—seem bleak at best. But McCain and Cantwell join a still small but not insignificant insurgency of chronic doubters, including former Federal Reserve chairman Paul Volcker, who say not nearly enough is being done to change Wall Street and, in particular, to address the “too big to fail” problem. The issue is one of the few in Washington that can unite the left and right sides of the political spectrum. Democrats like Cantwell deplore Wall Street’s outsize role in the real economy and its lobbying influence, and conservatives such as McCain are appalled at the way the market system has been undermined—some would say rigged—by the power of the big banks.

By proposing a bill to reinstate Glass-Steagall, McCain and Cantwell are going well outside the usual D.C. thinking on financial regulation. An anonymous Treasury official, for example, is quoted in the article as saying, “I think going back to Glass-Steagall would be like going back to the Walkman.” Bringing back Glass-Steagall is something that has made a lot of sense to the grassroots and former officials who are no longer in power, but it hasn’t really found much support among people that are currently in positions of power in D.C.

There’s always more to the story than campaign contributions, but in cases like this it’s hard not to take a look. According to OpenSecrets.org, in 2008, financial firms gave an uncommonly large amount of money to the campaigns of current members of Congress. Included in their list (http://www.opensecrets.org/industries/recips.php?cycle=2010&ind=F)of top ten recipients for this year are such powerful senators as Senate Democratic Caucus Vice Chairman Chuck Schumer [D, NY], Majority Leader Harry Reid [D, NV] and Banking Committee Chairman Chris Dodd [D, CT].
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U.S. gave up billions in tax money in deal for Citigroup's bailout repayment
DEAL MADE TO RECOVER BAILOUT
Firms exempted from rule when U.S. sells its stake
By Binyamin Appelbaum
Washington Post Staff Writer
Wednesday, December 16, 2009; A01
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR2009121504534_pf.html

The federal government quietly agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis.

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.

The IRS, an arm of the Treasury Department, has changed a number of rules during the financial crisis to reduce the tax burden on financial firms. The rule changed Friday also was altered last fall by the Bush administration to encourage mergers, letting Wells Fargo cut billions of dollars from its tax bill by buying the ailing Wachovia.

"The government is consciously forfeiting future tax revenues. It's another form of assistance, maybe not as obvious as direct assistance but certainly another form," said Robert Willens, an expert on tax accounting who runs a firm of the same name. "I've been doing taxes for almost 40 years, and I've never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts."
For rest of article, See: http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR2009121504534_pf.html