Congressional Republicans and Democrats Guilty of Crony Capitalism

Federal Reserve Chairman Ben Bernanke with committee chairman Spencer Bachus (R-AL) on Capitol Hill March 2, 2011. Bernanke reportedly defended the Federal Reserves monetary policy against criticism from Republicans.

Hypocrisy at its best. For us commoners, it is illegal to trade stocks and bonds if we have access to non-public information about a company. Remember Martha Stewart. She was sent to federal prison for this exact crime. But did you know it is not illegal for everyone. The members of the U.S. Congress are exempt from this law.  

Steve Kroft reports members of Congress and their aides have regular access to powerful political intelligence, and many have made well-timed stock market trades in the very industries they regulate. For now, the practice is perfectly legal, but some say it’s time for the law to change.  

Peter Schweizer’s new book, Throw Them All Out, delves into the details of how both parties are enriching themselves with inside information that the public is not privy to. Many members of Congress are shown to have made suspiciously timed trades including John Kerry, Dick Durbin, and Jim Moran. But it is a Republican from Alabama, Spencer Bachus, who tops them all.  

Henry Blodget of Daily Ticker recently reported on this.     

Rep. Bachus made more than 40 trades in his personal account in the summer and fall of 2008, in the early months of the financial crisis. 

The fact that Bachus personally traded while getting private government briefings is bad enough. The fact that he was the ranking member of the House Financial Services Committee at the time is simply outrageous. 

In one case, the day after getting a private briefing on the collapsing economy and financial system from Ben Bernanke and Hank Paulson, Rep. Bachus effectively shorted the market (by buying options that would rise if the market tanked.) 

A few days later, after the market tanked, Bachus sold his position and nearly doubled his money. 

If a corporate executive or Wall Street trader did this–cashed in personally after getting private, non-public information from his work–Rep. Bachus and every other member of Congress would be up in arms about corruption and insider trading. 

And they would be right. 

GOP Policies Obliterating the Middle Class

I have been listening to GOP representatives and pundits proclaiming that taxing the wealthy who they refer to as so-called job creators would be bad for the economy.  These “job creators” have had the lowest tax rates in centuries, and over the last decade, we are still waiting for those millions of jobs they are supposed to create.  In fact, it has created such a gap in wealth between them and the middle class that it rivals the decade prior to the Great Depression. 

I came across a ThinkProgress article that articulates this point and brings into light how much income the middle and lower classes have lost and how the wealth in America is now concentrated into just 1% of our society. 

It may shock you exactly how wealthy this top 1 percent of Americans is. ThinkProgress has assembled five facts about this class of super-rich Americans: 

1. The Top 1 Percent Of Americans Owns 40 Percent Of The Nation’s Wealth: As Nobel Laureate Joseph Stiglitz points out, the richest 1 percent of Americans now own 40 percent of the nation’s wealth. Sociologist William Domhoff illustrates this wealth disparity using 2007 figures where the top 1 percent owned 42 percent of the country’s financial wealth (total net worth minus the value of one’s home). How much does the bottom 80 percent own? Only 7 percent:

As Stiglitz notes, this disparity is much worse than it was in the past, as just 25 years ago the top 1 percent owned 33 percent of national wealth. 

2. The Top 1 Percent Of Americans Take Home 24 Percent Of National Income: While the richest 1 percent of Americans take home almost a quarter of national income today, in 1976 they took home just 9 percent — meaning their share of the national income pool has nearly tripled in roughly three decades.

3. The Top 1 Percent Of Americans Own Half Of The Country’s Stocks, Bonds, And Mutual Funds: The Institute for Policy Studies illustrates this massive disparity in financial investment ownership, noting that the bottom 50 percent of Americans own only .5 percent of these investments:

4. The Top 1 Percent Of Americans Have Only 5 Percent Of The Nation’s Personal Debt:  Using 2007 figures, sociologist William Domhoff points out that the top 1 percent have 5 percent of the nation’s personal debt while the bottom 90 percent have 73 percent of total debt: 

5. The Top 1 Percent Are Taking In More Of The Nation’s Income Than At Any Other Time Since The 1920s: Not only are the wealthiest 1 percent of Americans taking home a tremendous portion of the national income, but their share of this income is greater than at any other time since the Great Depression, as the Center for Budget and Policy Priorities illustrates in this chart using 2007 data: 

As Professor Elizabeth Warren has explained, “there is nobody in this country who got rich on his own. Nobody…Part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” More and more often, that is not occurring, giving the protesters ample reason to take to the streets.

Too Big To Fail – Wall Street Making Sure It Will Happen Again

The movie based on the extremely popular book Too Big To Fail by Andrew Ross Sorkin is coming out soon, and there was recently a screening in New York that was attended by our current Treasury Secretary, Tim Geithner. After the screening Geithner told the crowd that attended something that no one wanted to hear, he predicted another big crisis will be coming.  

“It will come again. There will be another storm, but it’s not going to come for a while. I’m certain we will” experience another catastrophe. He just couldn’t say when or what kind. “You will not know” when, which he is how he answered Sorkin when he tried to pin Geithner down. “It’s not going to be possible for people to capture risk with perfect foresight and knowledge.”

Keep in mind this is at a time when Republicans are trying to remove a lot of the oversight regulations that were instituted after the 2008 Wall Street crash. They are also opposing appointment of Elizabeth Warren to the Consumer Financial Protection Bureau, which was created to protect consumers, and are trying to weaken its regulatory power in order to protect corporations. 

A GOP bill that was proposed aimed to make it easier for the Financial Stability Oversight Commission to overrule decisions that the CFPB might make in favor of consumers. It would require a simple majority vote by FSOC, instead of a two-thirds majority.

Republicans argued that the changes the bill would produce would make the consumers’ bureau more transparent and accountable, and protect more small banks. Democrats contended that the revisions would only weaken the CFPB, and give financial institutions a stronger say.

To prove Democrats’ point, Maloney offered another amendment that would have defined the “safety and soundness” mentioned in the proposal to exclude profits. Her point was that consumer-friendly decisions generally come at the expense of profits, and — if profitably is a standard — there would be a ready rationale to overturn almost any CFPB rule or finding.

“I am not saying that a financial institution should not be able to make a profit,” Maloney said in the hearing. “I am simply saying that, if you are going to put an extraordinary check on the CFPB’s ability to protect consumers, then a financial institution’s profitability should not come at the expense of consumers.”

Big Oil’s First-Quarter Profits

Big Oil’s first-quarter profits jumped 45% to nearly $36 billion At a time when our gas prices are through the roof and disasters on multiple continents, oil companies are rolling in the dough. They are bringing in record profits (not to mention the record bonuses handed out by Wall Street for 2010).

The class warfare is becoming more and more apparent as the days and months go buy. While they are back to making money at pre-2008 and pre-Gulf oil spill levels, we are having to jump through hoops to get buy a house or hold onto a house that is under water or heaven for bid going into foreclosure.

Here are oil company profits for the first quarter of 2011; also, American companies previous profits and tax breaks:

Exxon Mobil Corp:

2011 profits swelled by 69% to $10.7 billion.
2009 profits of $19; paid $0.00 in federal income tax and received a $156 million IRS rebate.

Royal Dutch Shell:  
2011 profits jumped 60% to $8.8 billion.

BP: 
2011 net income rose 17% to $7.1 billion.

Chevron Corp: 
2011 earnings jumped 36% to $6.2 billion.
2009 profits of $10 billion; $19 million refund last year.

ConocoPhillips: 
2011 first-quarter profits widened by 44% to $3 billion.
2007 to 2009 profits of $16 billion; received $451 million in tax breaks

This should be unacceptable, infuriating to all of us. I truly hope we can keep up this anger that we have seen over the past few months since the 2010 election and change the trajectory our country is heading.

Boehner Won’t End Oil Subsidies

There are Democrats who are wanting to end billions in subsidies to oil companies. Since they have posted record profits and are considered the most profitable industry on earth, it would sound like a great idea to fix our budget problems, however, Boehner does not want to end these subsidies.

Instead he wants to drill for oil and increase production. This makes no sense because any oil we drill for would automatically go on the world market.

The only benefit it would have is to create jobs and increase the chance of another oil spill. Steve Hargreaves wrote:

The problem is this: While increased oil and gas drilling in the United States may create good-paying jobs, reduce reliance on foreign oil and lower the trade deficit, it will have hardly any impact on gas and oil prices. That’s because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes. Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production.

“This drill drill drill thing is tired,” said Tom Kloza, chief oil analyst at the Oil Price Information Service, which calculates gas prices for the motorist organization AAA. “It’s a simplistic way of looking for a solution that doesn’t exist.”

Since the oil companies are listed as the top 6 richest industries in the world, I think they should pay more, but since they own our representatives, particularly Republicans, it is very unlikely they will end these subsidies unless we force them to.