TheMillerCircle.org

Having been away to a meeting for about ten days, I came to appreciate that the news making doesn’t take a vacation, or at least not one that coincides with your own travel plans. And, let’s face it, the news is moving at a fast and furious pace these days. Nothing less than determining the kind of country we are going to have is presently under evolutionary development, in its early launching nursery and no one knows for sure where we will wind up as a country or a culture. And isn’t it nice to see that in the face of these very serious challenges, the current toxic iteration called the Republican Party continues to self-destruct, as they are unable to define and apply relatively simple concepts, such as coherence.

As I focused on science and scientific institutions related to the meeting I attended, other than skimming through the New York Times, I didn’t keep up with my normal news channels and web sites for information. As soon as I returned, I found Naomi Klein (author of the “Shock Doctrine”) on the Bill Maher show last Friday, who expressed what has to be another pet peeve that we all share about the conduct or misconduct of our banking system. As she pointed out, the public has provided bailout funds for CitiBank equal to about two times  what the bank is actually worth today. Yet CitiBank and the entire banking industry continue to lobby heavily to defeat the kinds of measures that Congress is trying to pass to improve regulatory control over banks and banking practices–and they do it using public funds!

Dick Durbin from Illinois had his bill defeated in the Senate last week that would have given bankruptcy judges the ability to initiate refinancing for defaulted home mortgages. Isn’t this what we should have been doing two years ago? Since we are the largest share holders of many large banks, can’t we simply order them to stop lobbying against what we consider to be critical issues for the public good? And, why can’t the banks themselves get this right? Breaking up the banks, eliminating bank management and the bank boards complicit in current practices, replacing them with a system that selects and rewards bankers for serving the public good, rather than developing methods to enhance bank executive pay, should be a  national priority for our banking industry reform. We need a financial system that serves our economy, not the other way around. It used to be like that, though I don’t remember when it switched. Some of these bankers should be in prison.

It seems clear to me, as it does to many others, that we cannot have full reform of our anti-public interest lobbying system until we have campaign finance reform, eliminating the big money donors who control our political agenda. That’s what defeated Durbin’s bill, with more than a dozen Democratic Senators opposing his legislation. You can bet that most if not all of the defectors get big bucks from the banking industry for their election campaigns.  Right now the big political donors hold all the trump cards and they have no intention of letting them go. Furthermore, our financial sector is now emboldened with the new reality that we have reinforced by socializing their risk, while privatizing their profits. Perhaps the government loans and bailout money will be repaid someday, though I seriously doubt that it will, as the public also took it on the chin (on the $ billion scale not the $ trillion scale of today) over the savings and loan crisis of the 1980s.

Today, high profile lobbyists are given a much higher priority for service and reservations at exclusive Washington DC restaurants, compared to that given to our elected officials, simply because they have more money to spend on entertainment and expensive lobbying efforts, all of which are tax-deductible. K-street still flourishes. But if the public has already invested heavily into many of these companies, it is counter productive to our own national interests to allow lobbying efforts to work against the government priorities that we are trying to establish in the interests of common sense and fiscal responsibility. This lobbying behavior is going on in the banking industry of today, but it has been going on in the defense industry for decades. We have a predator/prey relationship with corporate America and there is no doubt which entity is the predator.  We must find the political will to eliminate lobbying efforts that run against the grain of the public interest, especially when these activities are funded by the public: the first place to start is through the elimination of expensive political campaigns that insure the perpetuity of the extravagant lobbying system that we have today in Washington DC.

On a somewhat lighter note, Ralph Blumenthal, writing for the NYT last week, wrote an interesting piece on how a new manuscript had been uncovered related to Charles Ponzi, the originator of the Ponzi scheme concept of fraud. William H. McMasters, one of Boston’s top publicists in the 1920s, wrote an expos’e that appeared on the front page of the Boston Post, one of the nation’s top newspapers at the time,  in August,  1920. In the expos’e,  McMasters declared that Ponzi was broke, that his get rich quick scheme of promising a 50% return within45 days was a fraud. In his article McMasters stated “I do not anticipate that another Charles Ponzi will ever appear in the financial world.” Although the Post went on to win a Pulitzer Prize the following year for their work in exposing Ponzi, McMasters was not mentioned in the award. He went on to write a memoir of his experience which was lost but recently uncovered, adding a new chapter to the life of Charles Ponzi and how his scheme was uncovered. Ponzi pleaded guilty to the charges against him and spent time in prison, after which he died in Brazil in 1949: at the time his fraud was revealed, he was short about $ 10 million or roughly $100 million in today’s $. This of course pales in comparison to our modern day Ponzi schemer, Bernie Madoff.  In retrospect, though big at the time, Charles Ponzi dealt in chump change compared to Madoff. Why were their no McMasters to reveal Madoff’s Ponzi scheme before it gathered its momentum? Which era was supposed to have greater regulatory control over financial institutions?

The bankers of today intend to return as quickly as they can to the euphoria of 2006. Just as John K. Galbraith said “~there is no long-term memory system in our financial market.” Maybe now we can be more emphatic by saying there isn’t any short-term memory their either.

RFM