The Great American "I Told You So"

In the current Rolling Stone, Matt Taibbi talks about the ridicule he and the editors caught last year over his big Goldman Sachs takedown, "The Great American Bubble Machine." The financial media cognoscenti had laughed at his suggestion that Goldman had committed securities fraud. Taibbi gets to laugh now, and it probably won't be his last:

The truth is that what Goldman is alleged to have done in this SEC case is even worse than what all these assholes laughed at us for talking about last year.

Prior to the "Bubble Machine" piece, I had heard rumors that Goldman had gone out and intentionally scared up toxic mortgages and swaps in order to get short of them with sucker bookies like AIG. But – and this seems funny in retrospect – I foolishly dismissed those tales as being too conspiratorial. I thought it was bad enough that Goldman was shorting the subprime market even as it was selling toxic subprime-backed securities to chumps on the open market. The notion that the bank would actually go out and create big balls of crap that would be designed to fail seemed too nuts even for my tastes.

In the year since – and this, to me, is the main lesson from the SEC case against Goldman – the public has quickly come to accept that when it comes to the once-great institutions of modern Wall Street, literally no deal that makes money is too low to be contemplated.

(Crossposted from Scrutiny Hooligans.)

Corporate Ventriloquism

Jane Hamsher of Firedoglake had a dustup a few weeks ago with Rep. Anna Eshoo (D-CA) over an amendment to H.R. 3200 that Eshoo sponsored governing the licensing of biologic drugs. Hamsher, a three-time breast cancer survivor, contended that a loophole allowed manufacturers to extend their twelve-year exclusive license to drugs by making minor tweaks to the molecules.

Eshoo got testy about being called out, saying, “My amendment prohibits by its plain language exactly what Ms. Hamsher alleges it would encourage.” But other experts contended that Eshoo didn’t understand the “plain language” of her own amendment, that it said just the opposite of what she thought. Also, Energy and Commerce chair Henry Waxman’s statements supported Jane’s contention that the provision contained a loophole that allowed Big Pharma to “evergreen” its exclusive licenses to biologic medications.

This morning, Marcy Wheeler pointed to an NYT piece describing the pushback from Big Pharma. They worked at getting congresscritters from both sides of the aisle to enter their talking points into the Congressional Record:

Statements by more than a dozen lawmakers were ghostwritten, in whole or in part, by Washington lobbyists working for Genentech, one of the world’s largest biotechnology companies.

E-mail messages obtained by The New York Times show that the lobbyists drafted one statement for Democrats and another for Republicans.

[snip]

Genentech, a subsidiary of the Swiss drug giant Roche, estimates that 42 House members picked up some of its talking points — 22 Republicans and 20 Democrats, an unusual bipartisan coup for lobbyists.

[snip]

Members of Congress submit statements for publication in the Congressional Record all the time, often with a decorous request to “revise and extend my remarks.” It is unusual for so many revisions and extensions to match up word for word. It is even more unusual to find clear evidence that the statements originated with lobbyists.

It would be nice to see those e-mails, by the way. It makes you wonder who wrote the “plain language” for Eshoo’s anti-evergreening amendment.

(Full disclosure: This writer has had Roche as a client.)

(cross-posted from Scrutiny Hooligans)

What Civilized Country Operates Like This?

You have seen it. The plastic bucket beside the cash register at the convenience store. A photo is taped to it. A child needs an operation. His father lost his job. The family lost its insurance. They are about to lose their home. Can you spare some change?

What civilized country operates like this? In case God-and-country defenders of the status quo need reminding, America’s for-profit health insurance system serves neither.

Reform advocates must hammer away at this relentlessly: health insurance reform is a moral issue more than an economic one.

Nicholas Kristof delivered further proof that the system is morally bankrupt in the October 4 New York Times.

Travis and Michael Waddington hoped to donate a kidney to their father, David, 58, a wine retailer and victim of polycystic kidney disease. PKD had destroyed David’s kidneys. Since the disease is genetic, Travis and Michael needed to be tested for the disease themselves before donating. Yet a positive result might mean the sons might never be able to get insurance. So their doctors advised against getting tested. Another advised getting tested under fictitious names. To protect their sons, husband and wife shot down the idea, even at the risk of David’s life.

Eventually, David received a kidney from a deceased donor, but Michael recently began experiencing PKD symptoms and now faces an insurance nightmare now all too familiar, obtaining affordable insurance – or any insurance – after being diagnosed with a serious illness.

Closer to home, an acquaintance recently donated a kidney to his father under somewhat different circumstances, but with similar risks. Such acts of mercy by organ donors (talk about risky behavior) present insurers with an elective pre-existing condition, and present donors with a moral dilemma. Fortunately, his father’s insurance covered both transplant surgeries. But both the son’s own physician and the transplant surgeons recommended that he say nothing to his insurer. It was illegal to deny coverage or insurance to organ donors, doctors told him. Nonetheless, they often heard of it happening.

Why tempt fate? He told his insurer nothing.

Kristoff calls an insurance system that forces patients into such impossible choices, “the disgrace of the industrialized world.”

But that’s putting it mildly. As T.R. Reid puts it in The Healing of America, our system is virtually a worldwide laughingstock. One thing on which experts at international health care symposia can agree, Reid explains, is that the U.S. for-profit insurance system is a mess. “Bashing the U.S. system is a standard agenda item.”

Joanne Ford, a patient on Social Security disability and wearing Coke-bottle eyeglasses, arrived for a Remote Area Medical free clinic in Knoxville. She came hoping to get a new pair for free. But nearly last in line, she almost missed her chance. Interviewed by 60 Minutes, Ford said tearfully, “I am sad that we are the wealthiest nation in the world and we don’t take care of our own.”

Even the socialist bogeymen of Europe treat their own better.

For-profit insurance can be cruel and capricious, not unlike the age of Dickens that Keith Olbermann invoked in a recent hour-long commentary. America’s uninsured have "a 40 percent higher risk of death than their privately insured counterparts," a new Harvard study finds. Furthermore, 45,000 Americans a year die from lack of health insurance. Like Dickens’ London, America’s working poor too often are either invisible or else blamed as surplus population –– impediments to the economic fortunes of their “betters.”

It is a seasonal tradition to revisit cherished redemption stories during the coming dark nights around the solstice, to refresh human connections not just to family and friends, but to our fellow men. Defenders of the status quo, especially, need to refresh theirs.

America would do well to revisit those redemption stories earlier this year as it considers how best to rehabilitate a business more informed by Wall Street than A Christmas Carol. For-profit health insurance is rare in the civilized world, and rightly so. It is a cold-hearted business more interested in serving the numbers on its balance sheets than the humanity behind the numbers.

That calls into question the humanity of its defenders, like the conservative radio icon who brags about taking on all comers with half his brain tied behind his back. That would be the feeling half. The human half. The half that Messrs. Scrooge and Potter let atrophy as an impediment to being good men of business.

Right now, a popular caterer downtown has posters on her door. A child needs an operation. A strawberry blonde boy in an adult-sized straw hat. He has a severe immune deficiency disease. He is with his parents at Duke University Medical Center for a bone marrow transplant. There's a pancake breakfast to raise money.

You might as well hold a bake sale to buy a bomber.

What civilized country operates like this?

(Cross-posted from Huffington Post.

Losing sight

from Atlantic:

Wall Street is a very seductive place, imbued with an air of power. Its executives truly believe that they control the levers that make the world go round. A civil servant from Washington invited into their conference rooms, even if just for a meeting, could be forgiven for falling under their sway. Throughout my time at the IMF, I was struck by the easy access of leading financiers to the highest U.S. government officials, and the interweaving of the two career tracks. I vividly remember a meeting in early 2008—attended by top policy makers from a handful of rich countries—at which the chair casually proclaimed, to the room’s general approval, that the best preparation for becoming a central-bank governor was to work first as an investment banker.

As a former government regulator told me, you had people who wanted nothing more from their job than to be the good cop ... and then you had those who always wanted to be something else. They wanted to be one of the Big Money Boys. And they lost sight of who they served and what it was they were hired to do.

Behold AIG

Four years ago, I wrote a column describing the modern corporation as a science-fiction monster – an artificial life form neither biological nor technological, but legal, a soulless creation possessing only appetite and instinct. Behold AIG.

Friday, the New York Times reported that the insurance giant is suing the U.S. government for $306 million. After receiving almost $200 billion from U.S. taxpayers to keep it from collapsing, AIG has taken legal action against its benefactors – us – who hold an 80% stake in the company. All this while sparking national outrage by paying bailout-funded bonuses totaling $165 million to some of the same avaricious jerks that brought our economy to its knees.

Read more at Campaign for America's Future ...

Unserious

Here on the left, we're shrill. We're unhinged. Amateurs. Unpatriotic. For eight years we warned America about war crimes, torture, rendition, phony intelligence, domestic surveillance, insider deals, greed, corruption and the gutting of the Constitution. We can't be taken seriously. Not like the professionals.

Not like these guys:

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

[h/t Scrutiny Hooligans]

Creative destruction for the better half

From Greenwald:

Anyone arguing that [the people's] views should be ignored, that their judgment be overridden by the decree of the wiser, superior ruling class (see David Brooks and Kevin Drum as good examples), is simply endorsing the continuation of the predominant framework for how our country has been run for the last decade, at least. Whatever else that is, there's nothing "wise" about that framework. Even if one believes in principle that the country is best entrusted to the elevated wisdom of a magnanimous and superior ruling class, and that majoritarian opinion should be systematically ignored, our ruling class -- the one we actually have -- is anything but wise and magnanimous. It's bloated, incestuous, reckless, inept, self-interested, endlessly greedy and corrupt at its core. Ye shall know them by their fruits. It's hard to imagine anything less wise than continuing to submit to its dictates.

Liberation from -- one could say "destruction of" -- the system run by that ruling establishment class is of critical importance.

Yesterday was the first shot. Round one.

Tomorrow, the Senate.

Wall Street's Lifeboat Ethics

I hear on the news that the Obama campaign already has an ad out using clips from last night's debate. Entitled "Zero," it highlights the fact that McCain never once used the words "middle class." Implication: The omission speaks volumes about McCain's priorities. That, and having his campaign staffed by lobbyists.

More striking was this clip of an exchange this week between Larry Kudlow (CNBC, National Review; formerly with the Reagan administration, Freddie Mac and Bear-Stearns) and Vermont Sen. Bernie Sanders:



Sanders mocks free-marketer Kudlow as a socialist for supporting the disaster capitalist bailout of Wall Street. Ordinarily, government expenditures designed to help Main Street pay bills or provide health care for families are non-starters for Kudlow and his fellows. Benefiting Main Street is irrelevant. Such actions are un-capitalist. They present a moral hazard and tilt the country towards socialism. Conservatives oppose such actions on principle. "Oh, no!" Sanders mimics. Yet here Kudlow argues, "Every twenty or thirty or fifty years, I'm okay with it." Yes, when it is his friends in peril.

Kudlow argues [1:59] that a taxpayer-funded bailout of Wall Street moguls will "first and foremost help Main Street, middle-class people." Why the sudden concern for you and me?

"Wall Street went bust! I mean, look what happened. Bear-Stearns went under. Lehman Brothers went under. Merrill had to sell," argues Kudlow [3:58]. When Wall Street is in trouble, government must not blink before rushing to the rescue.

Uh, huh. When New Orleans went under (water) and people drowned, conservative pundits and bloggers argued that taxpayers had no responsibility for bailing out people who "irresponsibly" lived in a town established below sea level in the eighteenth century. Bush promised help. New Orleans is still waiting.

These are Wall Street’s lifeboat ethics. As the titanic U.S. economy lists badly, Wall Street brokers, bankers and speculators of the second Gilded Age want those of us in steerage to buy them lifeboats - to the tune of $700 billion - promising to come back and pick us up after the ship goes down.

We have seen that movie.

What Do You Say?

Paulson: "Drop your opposition! Now! You have no chance of escape! Come forward with the $700 billion! If you wish to save your economy! This is your last warning! The choice is yours!"

Colonel Trautman: "What do you say John?"

Rambo: [loading his gun] "Fuck 'em!"

Brings tears to my eyes

First from Alex Knapp:

Both Matthew Yglesias and John Cole agree that the Obama/Clinton proposal to tax the “windfall profits” of the oil companies is a bad idea, and you’ll get no argument from me. However, one thing that I did notice when I was doing a little google-fu on the issue is that there appears to be approximately 20 to 50 billion dollars spent by the federal government per year on direct subsidies (as opposed to tax breaks) given to the oil industry each year.

[. . .]

Not only would that generate more revenue than the “windfall tax” (estimated to be $15 billion), but it would do so without getting the federal government into the problematic business of deciding how profitable companies are allowed to be.

Kevin Drum puts icing on the cake:

Anyway, this really ought to be the liberal rallying cry: forget a windfall profits tax, let's work first on getting rid of the massive corporate welfare infrastructure we've constructed for an industry that really, really doesn't need it. Not as sexy as a gas tax holiday, maybe, but it makes a helluva lot more sense.

Come on Wall Street, don't be slow . . .

Why man, this is loans a-go-go!
There's plenty good money to be made
Enticing home buyers with adjustable rates...

Froma Harrop reminds us we've seen heard this song before (Originally Published on Thursday February 14, 2008):

Schemes We Have Seen

During the push to privatize Social Security, the idea's foes were accused of not trusting the American people to manage their own money. The naysayers prevailed, and aren't we glad.

How interesting that the buildup to the mortgage meltdown employed many of the same sales tactics as the Social Security privatization scheme. Resentment, fear, flattery and hype — plus scant details on fees and other costs — all went into the pitch.

When a former Fed official called for rules to tame the subprime mortgage business, the peddlers howled. This was an attack on low-income people, particularly those of color, they said. Without lax lending practices, fewer minorities would have enjoyed the blessings of homeownership.

(Worth reading in full, if the link lasts.)

So, hello subprime paradise.

Bye, bye, Miss American Pie.

The Bottom Line and the Flatline

Thank goodness we don't have "socialized" medicine.

RN's Statement on Death of Nataline Sarkisyan: 'CIGNA Should Have Listened to Her Doctors And Approved the Transplant a Week Ago'

On Dec. 11, four leading physicians, including the surgical director of the Pediatric Liver Transplant Program at UCLA, wrote to CIGNA urging the company to reverse its denial. The physicians said that Nataline “currently meets criteria to be listed as Status 1A” for a transplant. They also challenged CIGNA’s denial which the company said occurred because their benefit plan “does not cover experimental, investigational and unproven services,” to which the doctors replied, “Nataline’s case is in fact none of the above.”

[. . .]

CNA/NNOC Executive Director Rose Ann DeMoro called the final outcome "a horrific tragedy that demonstrates what is so fundamentally wrong with our health care system today. Insurance companies have a stranglehold on our health. Their first priority is to make profits for their shareholders – and the way they do that is by denying care."

"It is simply not possible to organize major protests every time a multi-billion corporation like CIGNA denies care that has been recommended by a physician," DeMoro said. “Having insurance is not the same as receiving needed care. We need a fundamental change in our healthcare system that takes control away from the insurance giants and places it where it belongs – in the hands of the medical professionals, the patients, and their families."

Follow the link to Crook's and Liars' ABC video clip. (Quicktime format)

[h/t Crooks and Liars]

Dodd rocks their world

People power forces Harry Reid to put FISA on the back burner until next year:

All throughout the day, Judiciary Democrats such as Dodd, Edward Kennedy, and Russ Feingold took aim at the bill, even as Reid professed his hope that the Senate would pass the FISA bill today, in advance of its holiday adjournment. Dodd, a margin-of-error presidential candidate, vowed to filibuster the FISA bill on the floor if it granted large telecom companies such as Verizon and AT&T immunity from civil lawsuits for allegedly cooperating with the government. The Intel Committee bill did just that.

But early this evening, Reid surrendered, saying the FISA legislation would be taken up again in January, after the recess.

Watch Dodd's video thanking 500,000 of us for pressuring Harry Reid into pulling the FISA bill from the floor until next year:



Glenn Greenwald:

The most important value of victories of this sort is that they ought to serve as a potent tonic against defeatism, regardless of the ultimate outcome. And successes like this can and should provide a template for how to continue to strengthen these efforts. Yesterday's victory, temporary as it is, shouldn't be over-stated, but it also shouldn't be minimized. All of it stemmed from the spontaneous passion and anger of hundreds of thousands of individuals demanding that telecoms be subject to the rule of law like everyone else. And this effort could have been -- and, with this additional time, still can be -- much bigger and stronger still.

[h/t Glenn Greenwald]

Kennedy got pissed

in the Senate today. And not on alcohol. About FISA. (emphasis mine)

Let’s not forget why we are even talking about this issue. At some point in 2001, the Bush Administration began a massive program of warrantless spying. New reports suggest that the Administration began its warrantless spying even before 9/11. The Administration never told Congress what it was doing. In clear violation of the FISA law and in complete disdain for the 4th Amendment, it also never told the FISA court what it was doing.

[. . .]

There is still a great deal we don’t know about this secret spying, but what we do know is alarming. Numerous reports indicate that it covered not only international communications, but also Americans’ purely local calls with their friends, neighbors, and loved ones. A lawsuit in California has produced evidence that at the government’s request, AT&T installed a supercomputer in a San Francisco facility that copied every communication by its customers, and turned them over to the National Security Agency.

Think about that. The National Security Agency of the Bush Administration may have been intercepting the phone calls and e-mails of millions of ordinary Americans for years.

The surveillance was so flagrantly illegal that even lawyers in the Administration tried to fight it. Nearly 30 Justice Department employees threatened to resign over it. The head of the Office of Legal Counsel, Jack Goldsmith, testified that it was “the biggest legal mess I had ever encountered.”

Mr. Goldsmith himself acknowledged that “top officials in the administration dealt with FISA the way they dealt with other laws they didn’t like: they blew through them in secret based on flimsy legal opinions that they guarded closely so no one could question the legal basis of the operations.”

Think about that as well. The President’s own head of the Office of Legal Counsel states that the Administration’s policy has been to “blow through” laws it doesn’t like, in secret, so that its actions cannot be challenged. The Bush White House has repeatedly failed to understand that our government is a government of laws, and not of men.

[. . .]

Here’s another fact that no one should lose sight of. From the very beginning, telecommunications companies have always had immunity under FISA when they comply with lawful surveillance requests. In fact, the Senate Judiciary Committee worked closely with AT&T, and the company played a major role in drafting FISA’s immunity provisions in the 1970s.

To be completely protected from any liability whatever, all a company needs under FISA is a court order or an appropriate certification from the Attorney General. That’s it. Just get one of those two documents, and you’re off the hook.

So in this debate, let’s be clear that we’re not talking about protecting companies that complied with lawful surveillance requests. We’re talking about protecting companies that complied with surveillance requests that they knew were illegal.

[. . .]

Some of the telecoms might have been doing what they thought was good for the country. Some of them might simply have been doing what they thought would preserve their lucrative government contracts. We simply don’t know. But either way, it is not the role of telecommunications companies to decide which laws to follow and which to ignore. FISA is a law that was carefully developed over many years to give the Executive Branch the flexibility it needs, while protecting the rights of Americans. It is the companies’ legal duty—and their patriotic duty—to follow that law.

Nothing could be more dangerous for Americans’ privacy and liberty than to weaken that law, which is precisely what retroactive immunity is meant to do. Yesterday’s newspaper disclosed that in December of 2000, the National Security Agency sent the Bush Administration a report asserting that the Agency must become a “powerful, permanent presence” on America’s communications network. A “powerful, permanent presence” on America’s communications network. Under this Administration, that is exactly what the NSA has become. If the phone companies simply do the NSA’s bidding in violation of the law, they create a world in which Americans can never feel confident that their e-mails and phone calls aren’t being tapped by the government.

[. . .]

The President has said that American lives will be sacrificed if Congress does not change FISA. But he has also said that he will veto any FISA bill that does not grant retro-active immunity. No immunity, no FISA bill. So if we take the President at his word, he's willing to let Americans die to protect the phone companies.

So the telecoms were entrapped by the government into breaking the law, huh?

And they knew it was against the law? (Quest Qwest did too. Except it's legal team said no, get a court order first.)

And now the telecoms should be immune from prosecution because the government instigated it?

Every John, pimp and drug dealer caught in a sting will be demanding that deal.

“Surprise, surprise, surprise."

"That ain’t my finger, neither.”

From this morning's New York Times:

Tens of thousands of Medicare recipients have been victims of deceptive sales tactics and had claims improperly denied by private insurers that run the system’s huge new drug benefit program and offer other private insurance options encouraged by the Bush administration, a review of scores of federal audits has found.

Conformity and Despotism?

"In any game where the rules have been abandoned, those with the fewest scruples win." -- Daniel Brook, "The Trap"

Brook was talking specifically about the rise of lobbyist influence in Washington, but the sentiment applies to much of what's gone on in D.C. in the last decade. Andrew Sullivan has described the impulses driving American politics as "scruple-free." Corporate American has both enabled and followed its Washington misleaders, reaping economic windfalls, but those rewards have not trickled down to Average Joe.

"The Trap: Selling Out to Stay Afloat in Winner-Take-All America" deals with the corporatization of America and the loss of freedom Americans face as a consequence. He profiles working people who feel they've sold their souls for economic security, stifling their urges to serve their communities in order to finance middle class homes and families once attainable on teachers' and firefighters' salaries.

Yet even while New Deal policies were building a powerful, more egalitarian American middle class, Barry Goldwater warned that:

Equality, rightly understood, as our founding fathers understood it, leads to liberty and to the emancipation of creative differences. Wrongly understood, as it has been so tragically in our time, it leads first to conformity and then to despotism.

Goldwater said that on the heels of the conformist, red-scare 1950s, and (ironically) on the cusp of a radically nonconformist decade. Goldwater conservatives advocated smaller government and free markets as the means for unleashing individual talent and avoiding the bogeyman of creeping socialism. But were their fears justified? The conservative policies begun under Ronald Reagan and accelerated under George W. Bush have left Americans with fewer choices, not more, Brook argues:

A free-for-all society does not set people free. Instead it sets in motion a moral race to the bottom reminiscent of the savage state of nature described by seventeenth-century British political theorist Thomas Hobbes in which simply surviving becomes the overarching goal of human life and all higher aspirations must be stifled. "No Arts; no Letters" was Hobbes's stark phrase. Yet any civilization worth living in depends on having some talented people who opt not to maximize their earnings potential and instead pursue less lucrative creative and service professions.

For all the promises of greater freedom, conservative economics has delivered wealth for a few and insecurity for many. Freedom, as Goldwater understood it, meant freedom to spend more of your money as you see fit. That you'd be free to determine how you spend your life was assumed. "The Trap" examines how, whether they want to or not, more Americans -- including her best and brightest -- are compelled into serving corporate interests at the expense of their own. Necessity, not choice, is keeping them out of lower-paying public service jobs, from teaching to the Peace Corps. Many who can still afford college graduate with loans nearing six figures -- conservatives having worked to eliminate state funding for college tuitions in recent decades. Saddled with debt, with pay scales stagnant, unions under assault, and private health care costs skyrocketing, Americans who hope to cling to a middle-class lifestyle are finding themselves limited, not emancipated.

And while conservatives talk a good game on supporting entrepreneurship, Brook says:

A 2005 survey showed that 28 percent of Americans have considered setting up their own businesses, compared to only 15 percent of Europeans. Yet the employment statistics reveal that Americans are far less likely to actually do it -- 14.7 percent [pg. 66] of the European workforce is self-employed, compared with only 7.3 percent of Americans.

National health care in EU countries explains that discrepancy, Brook suggests. In 2006 the Financial Times (Britain's Wall Street Journal) found less entrepreneurial inhibition in Europe:

With its low [real estate] costs and generous welfare net, Berlin is a entrepreneurs' heaven, where barriers to entry are low and failure rarely entails personal ruin. In the past two years, twenty-seven thousand companies have been created.

Brook cuts the quote too short, however. The Times continues: "... and they are overwhelmingly one-person businesses."

Conservative pro-big business policies and anti-government orthodoxy here made things even worse with the recent bankruptcy "reform" that makes individual entrepreneurship that much more risky. Brook laments:

America is thwarting the very ambition that has long defined its people.

And under conservative economic policies, are we coming closer to realizing Goldwater's feared conformity and despotism?

Security upgrade

From a clip Ed Schultz played this afternoon. From Sen. Byron Dorgan, December 13, 2005:

I want to mention that there is one building that is a five-story building in the Cayman Islands located on Church Street. I have brought a photo of it to the Senate floor previously, and I should do that again at some point. That building is the official residence and address for 12,748 corporations.

Now, one might ask, how is it 12,748 corporations can share a residence or an address in a 5-story white building in the Cayman Islands? Simple. It is nothing more than an address.

What is the purpose of having an address in a 5-story white building in the Cayman Islands? So that one does not have to pay taxes to this country. Money can be moved through a tax haven and avoid paying U.S. taxes. So one is a U.S. company, they are chartered probably in Delaware, have all the advantages of being an American, but now the new economics tell them they should produce in China, sell in this marketplace and set up an address in a 5-story white building mailbox in the Cayman Islands, so that they can have all the opportunities that come with being an American, except the responsibilities to hire American workers or to pay American taxes. That is what is happening.

People say, well, that is just an anticorporate rant. It is not. I think there are some wonderful corporations in this country, some terrific corporations with inventive people, creative people, who have advanced this country, have produced wonderful, breathtaking products, but I think there is a culture in this country, with respect to trade and corporate responsibility, that has gone off the track. ... We are selling this country piece by piece.

And rewarding those involved in doing it. I wrote this in a column published in February 2005:

I'm lucky; things are beginning to improve. But it's been tough watching our manufacturing base bleed away, watching one factory after another close. And why? Last year, 290 employees at Cooper Bussman in Black Mountain heard they would lose their jobs. Days earlier, Houston-based Cooper Industries reported solid fourth-quarter growth. After Cooper Industries announced it would reincorporate in Bermuda to avoid paying U.S. taxes, John Ong, Cooper board member and Bush Pioneer, went to Norway as U.S. ambassador. Workers in Black Mountain didn't even get a lousy T-shirt.

Stunningly, Cooper was quite matter-of-fact about why it was reincorporating offshore:

“We are excited about the opportunities presented by a Bermuda reincorporation and are confident that it is in the best interests of our shareholders and other constituencies,” said H. John Riley, Jr., chairman, president and chief executive officer. “This change will enhance Cooper’s strategic flexibility and our reduced global tax position will significantly increase cash flow -- enabling us to further strengthen our balance sheet and better position us to pursue worldwide growth opportunities.

[. . .]

Under the plan to change its place of incorporation from Ohio to Bermuda, previously announced on June 11, 2001, Cooper Industries, Ltd., a newly-formed Bermuda corporation, will become the parent holding company of Cooper Industries, Inc. The reincorporation offers strategic advantages not available under the Company’s current corporate structure. Cooper’s effective tax rate post-reincorporation will be reduced to a range of 20 to 25 percent from approximately 32 percent, creating immediate value for Cooper shareholders. The improved global tax position is expected to generate additional cash flow of approximately $55 million annually, and add approximately $.58 per share to earnings.

Translation? Screw you, Uncle Sam.

Curmudgeon-in-Residence, Ralph Nader, weighs in today at Tom Paine:

Uncle Sam has bent over to give Big Business what it has demanded in the past 25 years. Huge tax reductions, compared to the prosperous 1960s. Massive deregulation, or the abandonment of law and order against criminal, negligent or defrauding corporations. Your tax dollars were transferred in the form of subsidies, handouts, giveaways and bailouts to demanding, mismanaged or corrupt large businesses.

Still, it was not enough coddling to keep these giant companies from casting aside what allegiance they had to our country, its communities and people. The companies’ standard is to control them or quit them as these CEOs see fit.

When BusinessWeek magazine answered a resounding “yes” to its cover story in 2000, "Too Much Corporate Power?," the editors were not kidding. They even wrote an editorial saying that “corporations should get out of politics.” I guess they meant that since corporations do not vote, and are not human beings, that they should not be honing in on what should be the exclusive domain of real people.

Because they are not real people. As I wrote in a column in July 2005:

. . . there’s nothing natural about the corporation. It’s an artificial life form engineered to relentlessly pursue profit. As actor Michael Biehn said of “The Terminator,” that’s what it does. That’s all it does.

The corporation is a very clever invention that has grown beyond the ability of its creators to control it. We have difficulty seeing that because the corporation has become such a part of the warp and woof of our culture. And because popular fiction depicts inventions gone awry as being biological or technological. This out-of-control invention is legal.

The flaw is not in capitalism or business. Capitalism and business existed for centuries before the appearance of corporations. The corporation is but one model for organizing a business. A very successful model, to be sure, but by no means the only one. The problem is that the corporation was badly designed ... by us. Its design flaws are becoming manifest as corporations increasingly supplant citizens as the principal clients of government. It is a technology badly in need of a security upgrade.

“The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains. To put an end to it will be neither a short nor an easy task, but it can be done.”

— Theodore Roosevelt, 1910

Creative destruction

The Boston Globe wonders about the sale of Chrysler Corporation to Cerberus Capital Management, and whether workers need a little "buffer" from globalization's "creative destruction."

The people who put together the Chrysler sale won't be worrying about their own pensions or healthcare. At their level of compensation, they are assured the best of both. And if Cerberus managers can turn around Chrysler, they'll deserve lucrative stock options and bonuses. There's enough wealth in this economy, however, that the people who make the cars, as well as though who make the deals, should be protected in illness and old age

In this morning's New York Times Michael Kinsley chronicles the ownership history of Avis to explain how much of modern business is really finance. Heaven forbid anyone who runs the place should know anything about renting cars.

Why make or rent cars when you can make money flipping the companies and employees who do?

Engineers R Us

Yesterday NPR’s Morning Edition interviewed Vivek Wadhwa, a Duke researcher and former tech executive who examined the statistics underlying the popular assumption that America has a shortage of trained engineers. Corporate executives have cited the alleged shortage as the reason they seek out engineering talent overseas. NPR played an audio clip of Bill Gates citing the shortage as the reason Microsoft has a campus in India.

The Duke study disputes the notion that America’s engineering talent is insufficient to meet the needs of American employers, either in quantity or in quality. Wadhwa concludes that the engineer shortage (at least in aggregate) does not exist. While it is true that India is turning out large numbers of engineers, many of them are unemployable, Wadhwa himself alleges. The training available to US students still exceeds the education students acquire there. His concern is that the continued loss of research and development jobs to offshore locations will eventually erode America’s competitive edge.

Corporate executives Wadhwa spoke with admit privately that the number one reason for offshoring is "cost, cost, cost." When he ran a tech firm, Wadhwa had outsourced to India and Russia for that reason. NPR asked, if he should ever find himself running a tech firm again, what he would do differently.

“If I was a tech entrepreneur I would act in my own company's interests,” Wadhwa replied unapologetically, “and I would find the cheapest labor, the best quality I could, and I would go overseas right now. That's where the problem is with the system ...”

The interviewer was taken aback.

“Well, that's what the problem is. That's capitalism. The system rewards you for doing what's in your own interest."

For example, the interests of Gates the philanthropist and Gates the chairman of Microsoft are different, Wadhwa argues. Gates "doesn't get paid to worry about U.S. competitiveness and to worry about social issues as the chairman of Microsoft."

And that's the problem as Wadhwa sees it. The system forces managers into making decisions based solely economic interests. It forces the champions of public morality into arguing that greed is good (for business). Please, check your conscience and patriotism at the door.

But Wadhwa is describing the nature of the public corporation, not capitalism itself. Capitalism existed millennia before the appearance of the corporate model for organizing businesses. It is only one model, but its success has made it so ubiquitous that we have come to accept it without examination as the model.

Politicians celebrate the mom-and-pop small business as the engine behind American prosperity and job growth, but our model of success is Wal-Mart. Since it went public Sam Walton’s five-and-dime chain has morphed into the world’s largest public corporation, bringing to communities what Hillary Clinton diplomatically described as a “mixed blessing.” That mixed blessing includes lower-cost consumer goods made in China, not here and – owing to Wal-Mart’s take-no-prisoners pricing – rapid death to its small competitors in towns across the country.

Would Sam recognize or approve of what his creation has become? Once he went public, Wal-Mart’s visionary creator lost control of his creation to its absentee landlords: the shareholders. The public corporation already exerts more control over human affairs than the people who created it or serve it.

As I have written before, our creation seems to have already grown beyond our control.

“The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains. To put an end to it will be neither a short nor an easy task, but it can be done.”

— Theodore Roosevelt, 1910

New Life Forms

[It's been nearly a sixty hour week and little time for blogging, so an entry from the archives.]

Column first appeared in the Asheville Citizen-Times July 30, 2005:

“The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains. To put an end to it will be neither a short nor an easy task, but it can be done.”

— Theodore Roosevelt, 1910

How many movies start with some clever guy inventing/discovering something extraordinary? So many that you don’t have to be Michael Crichton (“Jurassic Park”) or Mary Shelley (“Frankenstein”) to know where this is heading. Halfway through the film that something is threatening the hero, his girlfriend and the world. And a pair of cute kids.

In real life these out-of-control somethings are neither biological nor technological, but legal. They are corporations.

Public corporations are systematically corrupting democracy, spending vast sums exercising their rights as “persons” to remake America a nation of, by and for the corporation. They write the laws governing them — the recent bankruptcy bill, for one — secure federal handouts, and with the recent United Airlines bankruptcy ruling, are positioning to cheat employees out of billions of dollars in underfunded pensions by erasing their obligations in court. Stockholder risk is being socialized, subsidized by employees and taxpayers.

Conceived in law and born on paper, corporations grow, consume resources and generate waste — even mate and spawn offspring. They need not die. Ever. They are intelligent (some more than others) and have personalities (some nicer than others). Corporate behavior is, well, businesslike. Not unlike another cold-blooded beast.

In “Jaws,” Matt Hooper (Richard Dreyfus) explained the shark to the town’s mayor as “a perfect engine … an eating machine. It’s really a miracle of evolution. All this machine does is swim and eat and make little sharks. And that’s all.”

The corporation is not so well rounded. All this machine does is generate profits for shareholders. And that’s all. Team building, recycling, and charitable donations give corporations a human face, but are ultimately window dressing. Employees who start hearing “shareholder value” had better update their resumes.

Thousands have done so lately. True, some factories had outlived their time. Yet many corporations simply desert America to evade taxes and to seek “greater efficiency” (cheap labor) overseas. The newly unemployed shrug, shed tears, pack their belongings, and go looking for their next opportunity to be treated as chattel. That’s just the way things are, right?

Well, something is wrong with the way things are. You might not be able to put a name to it, but you sense it. You feel it. And you know it when you experience it firsthand.

We easily spot the really bad apples: Enron, WorldCom, Tyco. But daily we tolerate common indecency and rule bending as acceptable — even desirable — as long as it feeds our portfolios (and campaign coffers). We learn to view the world through a corporate lens. Competition. Risk and reward. The bottom line. The big fish eat the little ones. What could be more natural?

Except there’s nothing natural about the corporation. It’s an artificial life form engineered to relentlessly pursue profit. As actor Michael Biehn said of “The Terminator,” that’s what it does. That’s all it does.

There’s the rub. Incorporation grants privileges and immunities unavailable to flesh-and-blood citizens. In return for special treatment — save for paying taxes when it’s unavoidable — corporate persons owe employees, communities and their country nothing. Especially loyalty. Loyalty is a one-way street.

Decisions that void workers’ American Dreams typically have little to do with unethical corporate boards (most are honest, to be sure) or dire economic necessity, but arise from the statutory requirement that corporations maximize profits. Period.

Everyone and everything else, including democracy, becomes fodder. What kind of “persons” have we created? The problem is the corporation was badly designed … by us.

Privileges are not without obligations, and these artificial persons have conveniently forgotten theirs. The growth in offshore tax shelters and the disappearance of America’s strategic manufacturing base reveal corporate patriotism as simply more window dressing.

President Calvin Coolidge said, “The chief business of the American people is business.”

But for corporate persons, the business of business is not America. The Bush administration dreams of reinventing the tort system, the tax system, and Social Security. But if the president truly puts America’s security and her working families ahead of political contributions, he should support reinventing the corporation. All it lacks is a soul.