Naked Capitalism: Elizabeth Warren on the Attack

Elizabeth Warren Throws Down Gauntlet, Calls for Genuine Financial Reform

Posted on April 17, 2015 by

At the Levy Conference, Elizabeth Warren launched a new campaign for tough-minded, effective financial regulation. This ought to be a straightforward call for restoring banking to its traditional role of facilitating real economy activity. Instead, in this era of “cream for the banks, crumbs for everyone else,” common-sense reforms to make banks deal fairly with customers and remove their outsized subsidies will no doubt be depicted by pampered financiers as an unfair plot to target a successful industry. But as we’ve stressed, Big Finance gets more government support than any line of business, even military contractors. They are utilities and should be regulated as such. Thus even Warren’s bold call to action falls short of the degree to which the financial service industry need to be curbed.

Below is the video of her speech; I’ve also embedded the text at the end of the post.

From Adam Levitin at Credit Slips:

This speech is a bigger deal than Senator Warren’s Antonio Weiss speech or her famous Citibank speech. This speech is a blueprint for Dodd-Frank 2.0.  It lays out a detailed vision of the challenges for reform work going forward:

  • break up the big banks;
  • a 21st Century Glass-Steagal Act that promotes narrow banking;
  • a targeted financial transactions tax to reduce unnecessary volatility from excessive arbitrage;
  • elimination of the tax system’s preference for debt over equity financing, a limit on the Fed’s emergency lending authority;
  • a simplification of the financial regulatory system (does this as presaging a reduction in the number of bank regulators? The SEC should certainly feel the heat from this speech…);
  • reforms aimed at the various types of short-term debt that are the hallmark of the shadow banking sector (money market mutual funds, repo).

There are three remarkable things about this speech.  First, what is truly groundbreaking is that Senator Warren recognizes that the problems in the financial regulatory space are not just technocratic ones but political, and that technocratic fixes will never work until and unless the political structure of financial regulation is reformed.  Senator Warren’s speech says exactly what needs to be said:  the power of large financial institutions not only threatens our economy, it threatens our democracy. Senator Warren has picked up the mantle of Teddy Roosevelt.

Second, as a political matter this speech announces a reform offensive. Since the high-water mark of Dodd-Frank’s passage in 2010 we have seen a steady push for deregulation. For Senator Warren to take the offensive here, particularly when her party is in the minority in both houses of Congress shows real moxie. That this speech is credible in such political circumstances is also a testiment to its substantive strength.

Third, this speech presents the only vision for financial reform in the policy space. (OK, I guess the “deregulate ‘em all” approach is a vision of sorts, but come on…) There isn’t a competing right or left alternative out there.  No one else has a cohesive reform platform.  I think that makes Senator Warren’s speech all the more important because this is the speech that will shape the policy field going forward into 2016.  This is the yardstick against which all presidential candidates, Democratic and Republican will be measured. It will be interesting to see which ones endorse what parts of Warren’s vision and how enthusiastically. Silence will be particularly telling, as it is a vote for the dysfunctional status quo that leaves the Too-Big-To-Fail banks intact and growing.

And from Simon Johnson:

Senator Warren puts forward two main sets of proposals. The first is to more strongly discourage the deception of customers…

The second proposal is to end the greatest cheat of all – the implicit subsidies received by the largest financial institutions, structured so as to encourage excessive and irresponsible risk-taking. These consequences of these subsidies have already caused massive macroeconomic damage – this is why our crisis in 2008-09 was so severe and the recovery so slow. Yet we have made painfully little progress towards really ending the problems associated with some very large financial firms – and their debts – being viewed by markets and policymakers as being too big to fail.

Warren also hits important targets forcefully in her speech. She attacks the Department of Justice for its failure to take cases against big financial institutions to trial or to pursue their executives and managers who engage in fraud. She singles out the SEC as an even worse actor. She criticizes both agencies for entering into “cost of doing business” settlements as opposed to calling for (at a minimum) full disgorgement of their ill-gotten gains (the problem here, of course, is that both agencies tend to pursue only isolated examples of bad conduct, such as the SEC’s settlement with Goldman on only “Abacus” CDO out of a program of 25).

I hope readers will support Warren’s efforts. Her campaign will put a spotlight on the fealty of both parties, but particularly Hillary Clinton, to major financial players, and will expose inconsistencies between their messaging and their actual loyalties. It also serves to undermine the banking industry’s pretense that the crisis is over and nothing more needs to be done, when the Fed remains backed in a negative real interest rate corner that is a large, ongoing subsidy to trading and speculation, the very sort of activities that have been identified as negative from the perspective of economic growth.

But while I endorse Warren’s initiative, I feel compelled to highlight why it falls short. The notion that removing subsidies will end the “too big to fail” problem is misguided. Notice how Warren and her backers maintain that they are trying to make markets work better. Yet one big problem with our current system is that so much financial services activity has been moved off bank balance sheets into financial markets. During the crisis, the authorities didn’t bail out firms because they were too big to fail; they bailed them out because they were critical players in markets deemed too big to fail. Virtually no one would have deemed Bear Stearns to be systemically important prior to its rescue. So why was it salvaged? It was a big player in credit default swaps, and also a prime broker, meaning a large lender to hedge funds. Similarly, why did Federal and state banking regulators paper over the mess of mortgage chain of title, refuse to fix servicing (none of those firms remotely approached TBTF size), punt on securitization reform, and enter into an appalling “get out of liability almost free” Federal/49 state mortgage settlement? Because the officialdom deemed the mortgage backed securities market to be too big to fail.

The underlying problem is that in the US and far too many economies around the world, growth in private debt, particularly household debt, served to shore up stagnant worker incomes. But high household debt levels are actually a dampener over the longer term to growth. Yet the officialdom sees consumer relevering as positive and resisted the sort of widespread debt reduction and restructuring that could have set the financial services industry and consumers on a sounder footing.

As long as we have a market-based credit system, those markets, and the critical actors in those markets, will continue to be too big too fail. Recall that the comparatively modestly sized Bank of New York Mellon is also a “too big to fail” player by virtue of its role in clearing and tri-party repo. And rather than fix mortgage securitization, that market has instead been put on government life support via the fact that over 90% of residential mortgage issuance is now guaranteed by the Federal government.

So don’t kid yourself that removal of subsidies will do the trick. The officialdom will ride into the rescue if markets or institutions deemed to be essential start looking wobbly. Removal and reduction of subsidies needs to be accompanied by prohibition, particularly of low societal value/high risk activities like many over-the-counter derivatives. Regulators need to reject complexity and opacity. If they don’t understand a product and its risks thoroughly, they should not allow it to be offered. And that prohibition has to extend to lending or even taking anything more than trivial counterparty risk to firms that create or trade those products.

But this is a case where having Warren put serious financial reform back on the agenda opens up the topic of what is wrong with our current financial system up again for badly needed scrutiny. And instilling more spine in regulators would be a big step forward. So I hope you’ll press your Senators and Representative to join Warren’s campaign. It’s time to start taking ground back from an oversized, papered, and too often predatory industry.

…And Liberty for All



This post from Media Matters on the right-wing group behind the “religious freedom” laws leads off like this:

The current push for expanded state “religious freedom” laws is thanks in large part to the work of the Alliance Defending Freedom (ADF), an extreme right-wing legal group that’s worked to criminalize gay sex across the globe.

A $39 million non-profit Christian legal group, ADF bills itself as an organization that works for the “right of people to freely live out their faith.” The group has laid the groundwork for “religious freedom” laws across the country, using their legal work to peddle the myth that Christians are under attack by the “homosexual agenda.” But behind this religious freedom rhetoric, the group promotes an extreme anti-LGBT agenda, namely working internationally to criminalize gay sex.

As the piece notes, the group’s agenda extends far beyond these “freedom” laws:

As the “800-pound gorilla of the Christian right,” the group has become a fixture on Fox News in stories about “Christian persecution,” where the group is perhaps best known for defending anti-gay business owners who refuse to serve gay customers. But ADF’s agenda is far more extreme than defending discriminatory florists and bakers in court.

While the group prefers to talk about its “religious liberty” work when in the media spotlight, ADF also actively works internationally to promote and defend laws that criminalize gay sex. ADF’s formal support for anti-sodomy legislation dates to at least 2003, before the Supreme Court made its landmark decision in Lawrence v. Texas. ADF, which was at the time still known as the Alliance Defense Fund, filed an amicus brief in the case, defending state laws criminalizing gay sex. In its brief, ADF spent nearly 30 pages arguing that gay sex is unhealthy, harmful, and a public health risk.

Jim Hightower on Looting the Middle Class


The fountain-pen economy

Jim Hightower

Even the word “greed” is not negative enough to characterize the all-out assault on workers by today’s corporate elite.

From offshoring jobs to busting unions, from slashing wages to looting pensions, corporate take-aways from America’s used-to-be middle-class workforce certainly are driven by the avarice of top executives and wealthy investors. Plainly put, the more they can take from workers, the more they can put in their own pockets (or, most likely, in their offshore bank accounts). It adds up to a massive redistribution of wealth from the many to the few.

In addition to greedy, though, these people are rank thieves. As Woody Guthrie succinctly put it: “Some’ll rob you with a six-gun, some with a fountain pen.” We’re now in a rapacious fountain-pen economy. Since the Wall Street crash of 2008 (itself a product of grand theft by financial elites), the productivity and creativity of all Americans have regenerated every bit of the wealth that was frittered away by bankers, and we created trillions of dollars in new income. What a phenomenal national achievement that is, produced in an astonishingly short time by the shared effort of our people!

But strenuous effort is all we shared. The richest one-percent of Americans have grabbed 91 percent of the gains in income, and the even-richer one-tenth-of-one-percent sucked up 22 percent of the new wealth. Thus, the vast majority of us have still not recovered the wealth we lost (homes, cars, savings, etc.) and 99 percent of us are getting less income today than we were before Wall Street crashed our economy seven years ago.

It’s time we robees started talking plainly about what’s going on. The rich are not getting richer because they’re more enterprising than everyone else, harder-working, or of strong moral character. They’re thieves. They’re getting richer by stealing from you.

“US wealth inequality – top 0.1% worth as much as the bottom 90%,”, November 13, 2014.

“Top 1 percent capture most of wealth gains,”, January 27, 2015.

“The 1 Percent Have Gotten All The Income Gains From The Recovery,, January 28, 2015.

*  *  *  *

Scurrilous corporate thieves are stealing workers’ comp

They say there’s honor among thieves, but I say: That depends on the thieves.

Your common street thief, yes – but not those princely CEOs of corporate larceny. The elites in the top suites are pickpockets, swindlers, thugs and scoundrels, routinely committing mass economic violence against America’s working families to further enrich and empower themselves.

But now comes a cabal of about two-dozen corporate chieftains pushing a vicious new campaign of physical violence against workers. The anti-labor bully, Walmart, is among the leaders, but so are such prestigious chains as Macy’s and Nordstrom, along with Lowe’s, Kohl’s, and Safeway. Their goal is to gut our nation’s workers compensation program, freeing corporate giants to injure or even kill employees in the workplace without having to pay for the lost wages, medical care, or burial of those harmed.

Workers comp insurance is a social contract between injured employees, who give up the right to sue their companies for negligence, and employers, who pay for insurance to cover a basic level of medical benefits and wages for those harmed. Administered by state governments, benefits vary, and they usually fall far short of meeting the full needs of the injured people, but the program has at least provided a measure of help to assuage the suffering of millions.

But even that’s too much for these avaricious, multibillion-dollar corporations. Why pay for insuring employees when it’s much cheaper just to buy state legislators who’re willing to privatize workers’ comp? This lets corporations write their own rules of compensation to slash benefits, cut safety costs – and earn thieving CEOs bigger bonuses.

Yes, this shifty move is a scurrilous crime, but it’s a crime that pays richly. And the money can fill the hole in their souls where their honor used to be.

“Walmart, Lowe’s, Safeway, and Nordstrom Are Bankrolling a Nationwide Campaign to Gut Workers’ Comp,”, March 26, 2015.

A Brief History of Workers’ Compensation,”, 1999.

Naked Capitalism: Drugs and FDA Corruption


“God Damn the Pusher Man” – Especially when Enabled by the FDA Revolving Door

Posted on April 14, 2015 by

Lambert here: Here, as generally, “the revolving door” seems a barely adequate metaphor for the pervasiveness of corruption involved; after all, the doors constantly revolve in a house of ill-fame, and it’s the nature of the house itself, not the wear and tear on the hinges of its doors, that is at issue.

By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Cross posted from the Health Care Renewal website

Who is watching the watchers?  A story this week involving “speed”-like drugs added to “dietary supplements” suggests how far the once respected US Food and Drug Administration has fallen.

An Amphetamine-Like Drug Spiking “Nutritional Supplements”

The story began with a paper by Cohen and colleagues published a relatively obscure medical journal, and then picked up by the news media.(1)  The main points of the article were:

BMPEA (beta-methylphenylethylamine) is a compound first synthesized in the 1930s as a “potential replacement” for amphetamines.  Animal tests revealed amphetamine-like properties.  The compound was never tested on humans, and never marketed.


BMPEA remained known only as a research chemical until early 2013 when the FDA identified BMPEA in multiple supplements labelled as containing ‘Acacia rigidula’, even though the stimulant has never been identified or extracted from Acacia rigidula, a shrub native to Texas.


More than two years after the FDA’s discovery, the FDA has yet to warn consumers about the presence of the amphetamine isomer in supplements.

So Cohen et al undertook to identify “nutritional supplements” said to contain acacia rigidula and test them for BMPEA.  They found 21 such supplements, all of which tested positive. The authors then recommended,

that supplement manufacturers immediately recall all supplements containing BMPEA, and that the FDA use all its enforcement powers to eliminate BMPEA as an ingredient in dietary supplements. Consumers should be advised to avoid all supplements labelled as containing Acacia rigidula. Physicians should remain alert to the possibility that patients may be inadvertently exposed to synthetic stimulants when consuming weight loss and sports supplements.

Note that while the power of the FDA to regulate “nutritional supplements” is limited by a 1994 law, Cohen and colleagues wrote that it

is tasked with identifying and removing mislabelled, adulterated, and dangerous dietary supplements from the marketplace.

Since BMPEA is apparently not found in nature, and was not sold prior to 1994, putting BMPEA in a “dietary supplement” appears to be adulteration.

The Risks of BMPEA in Nutritional Supplements

The study was then picked up by the media.  In the Los Angeles Times, Pieter Cohen, the lead author of the journal article,

said that while the effects of BMPEA are unknown, the compound is potentially dangerous. He said the FDA’s failure to act is ‘completely inexcusable.’

Furthermore, in a CBS report,

BMPEA has not been tested in humans, but led to increased blood pressure in cats and dogs.

‘These are things that are signals that in humans will later turn into heart attacks, strokes and maybe even sudden death,’ Cohen said.

The point is that while it has never been tested fully on humans, there is every reason to suspect that BMPEA acts very similarly to amphetamine, colloquially called “speed.”  Amphetamines, as we discussed here, have dangerous side effects, including severe blood pressure elevations, and increased risks of stroke, myocardial infarction (heart attack), and other cardiac events.  The drugs also have a high potential for abuse.

Why Did the FDA Do Nothing? 

Despite the likely riskiness of BMPEA, the FDA did nothing when it found it in numerous dietary supplements in 2013, and has not indicated that it will do anything now.  According to the LA Times,

FDA spokeswoman Juli Putnam acknowledged that the agency published research on the occurrence of BMPEA in Acacia rigidula supplements in 2013.

‘While our review of the available information on products containing BMPEA does not identify a specific safety concern at this time, the FDA will consider taking regulatory action, as appropriate, to protect consumers,’ she said.

In a Consumers Report item, Dr Cohen responded to that,

‘It’s mind boggling,’ said Pieter Cohen, M.D., the Harvard physician who is the lead author of the new study, published online in the journal Drug Testing and Analysis. ‘The companies think they have complete impunity. They assume the FDA will do nothing about it. And they’re right.’

A post in the NY Times Well blog reiterated,

Under federal law, dietary supplements — with some exceptions — can contain only ingredients that are part of the food supply or that were already on the market before 1994. Dr. Cohen said that BMPEA has never been sold as a food or supplement, and as a result any product that contains it is considered adulterated, which would give the F.D.A. the authority to send warning letters to companies that add it to their supplements.

Yet while the FDA had authority to do something, it did nothing.

Was the Revolving Door the Reason?

Back in 2014, we posted about two transitions through the revolving door by the FDA official in charge of the regulation of nutritional supplements.  We reproduce the relevant section of the post below:

This round trip through the door was noted rather obliquely in a New York Times article in late April, 2014, focused on how slowly the FDA has reacted to apparently dangerous “dietary supplements,”

Before joining the F.D.A. in 2011, Dr. [Daniel] Fabricant was a top executive at an industry trade group, the Natural Products Association.

The article had previously identified Dr Fabricant as

the director of the division of dietary supplement programs in the agency’s Center for Food Safety and Applied Nutrition.


The F.D.A. recently announced that Dr. Fabricant is leaving the agency this month to return to the trade group as its chief executive.

While the NY Times article thus mentioned as an aside that a government official with major responsibility for regulating dietary supplements had these relationships with the dietary supplement industry, it did not then question whether that relationship had anything to do with slow responses by the FDA to reports of toxic dietary supplements.

In 2014, the Times drew no conclusions about Mr Fabricant’s career trajectory.  However, this time

But public health experts contend that the F.D.A.’s reluctance to act in this case is symptomatic of a broader problem. The agency is not effectively policing the $33 billion-a-year supplements industry in part because top agency regulators themselves come from the industry and have conflicts of interest, they say. In recent years, two of the agency’s top officials overseeing supplements — including one currently on the job — were former leaders of the largest supplement industry trade and lobbying group.

Daniel Fabricant, who ran the agency’s division of dietary supplement programs from 2011 to 2014, had been a senior executive at that trade group, the Natural Products Association, which has spent millions of dollars lobbying to block new laws that would hold supplement makers to stricter standards. He left the F.D.A. last year and returned to the association as its chief executive. His current replacement at the F.D.A.’s supplement division also comes from the trade group.

‘To have former officials in the supplement industry become the chief regulators of that industry at the F.D.A. is like the fox guarding the hen house,’ said Michael F. Jacobson, the executive director of the Center for Science in the Public Interest, a consumer advocacy group.

Also, the new Well blog post noted

Shortly before Dr. Fabricant left the F.D.A. in 2014 to return to the association, the F.D.A. hired another official from the group, Cara Welch. She is now the acting director of the agency’s supplement division. Dr. Cohen, who is also an internist at the Cambridge Health Alliance, said he repeatedly wrote to Dr. Welch asking what the agency was going to do about BMPEA, and that she did not respond.

Dr. Welch declined repeated requests for interviews. In a statement, Juli Putnam, an F.D.A. spokeswoman, said that the agency ‘has found that hiring experienced leaders with diverse backgrounds in public health, industry, academia, and science enriches the professional environment and leads to the best health policy outcomes for the American public.’

Before joining the F.D.A., Dr. Welch was the vice president of scientific and regulatory affairs at the Natural Products Association, where she was a staunch defender of the supplement industry. When JAMA, a leading medical journal, raised concerns in a 2011 editorial that the federal law allowed the supplements industry to police itself, Dr. Welch responded that the industry had ‘an excellent safety record.’

‘The industry itself supports and has implemented strong self-regulatory mechanisms,’ she said in an industry news release at the time.


To summarize, from 2011 to now, the leadership of the part of the FDA that is supposed to regulate dietary supplements was dominated by former top executives of the Natural Products Association, the trade organization for dietary supplement manufacturers.  In 2013, FDA scientists found that multiple dietary supplements contained BMPEA, a compound closely related to amphetamines, and hence potentially dangerous and addictive, although it had never been tested on or previously used by humans.  Although the FDA had authority to do something about this apparent adulteration of these products, it so far had done nothing.  Thus it appears that the currently legal revolving door that allows government regulation to be run by people who come directly from the industries that government is supposed to regulate could be responsible for exposing people to dangerous, addictive drugs.

Remember, BMPEA is a first cousin of amphetamine, amphetamine is “speed,” and as the drug epidemics of the 1960s and 1970s showed us, “speed kills.”  So a plausible argument is that the revolving door, as relevant to FDA, has enabled manufacturers of nutritional supplements to become the “pusher man,” a la the Steppenwolf sound track of Easy Rider,

As we noted here, some experts consider the revolving door per se to be corruption, not merely conflict of interest.  The current case plausibly suggests not only that the revolving door is corrupt, but that when applied to health care can pose dangers to patients, not merely danger to government finances, government ethics, and the integrity of representative democracy.  Nonetheless, up to now, a few people have decried the revolving door (and very occasionally in health care), but nothing has been done about it.

So it is surprising that today (13 April, 2015), the New York Times published an editorial inspired by the BMPEA case, which concluded

consumer advocates are surely right that putting the industry in charge of supplement regulation is like appointing the fox to guard the henhouse. Clearly, the F.D.A. should not allow industry insiders to fill key positions. A permanent solution is for Congress to enact conflict-of-interest laws forcing employees above a certain grade level at any agency to recuse themselves from official actions that affect a former employer or client, including trade associations and their members.

As a minimum, that would be a good start.  Unfortunately, even a NY Times editorial hardly guarantees action.  At least, however, the problem of the revolving door as a danger to patients has gotten a little less anechoic.

As we last wrote, the continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients’ and the public’s health.  Once again, true health care reform would cut the ties between government and corporate leaders that have lead to government of, for and by corporate executives rather than the people at large


1.  Cohen PA, Bloszies C, Yee C, Gerona R. An amphetamins isomer whose efficacy and safety in humans has never been studied, beta-methylphenylethylamine (BMPEA), is found in multiple dietary supplements.  Drug Testing Analysis 2015; DOI: 10.1002/dta.1793  Link here.

Uncle Sam’s Favorite Corporations

Federal loans



From the PDF “Uncle Sam’s Favorite Corporations,” here: UncleSamsFavoriteCorporations

Naked Capitalism on Reclaiming the Democratic Party


Chicago Mayoral Race Results: “Rahm, They Tell Me You Are Crooked, and I Answer: Yes, It Is True. Period.”

Posted on April 10, 2015 by

By Lambert Strether of Corrente.

And they tell me you are crooked and I answer: Yes, it is true I have seen the gunman kill and go free to kill again. –Carl Sandburg, Chicago

Ian Welsh got it right in 2010. These words are still true today:

The left must be seen to repudiate Obama, and they must be seen to take him down. If the left does not do this, left wing politics and policies will be discredited with Obama. This is important not as a matter of partisan or ideological preference, it is important because left wing policies work. It is necessary to move back to strongly progressive taxation, it is necessary to force the rich to take their losses, it is necessary to deal with global warming, it is necessary to deal with the fact that the era of cheap oil is over, it is necessary to stop the offshoring engine which is destroyin the American middle class.

Only left wing solutions to these problems will work. America has spent 30 years, since Reagan, trying to fix its problems by going more and more right wing, and it has been a disaster. Each additional step to the right has made the problem worse.

The first step to fixing America is fixing the Democratic party, and the first step in fixing the Democratic party is fixing Barack Obama and destroying, forever, publicly and in the most high profile way possible, the idea that Democrats can ignore and abuse their own base. The lies spewed by corporate media figures who earn millions of dollars a year, that every time the Democrats lose, it is because they were too left wing, so more tax cuts are necessary, must end.

Taking Rahm down — in addition to being a simple pleasure in itself — would have helped fix the Democratic party. It didn’t happen. Why, and what next?

Why did Rahm Win?

First, Rahm got lucky, RJ Eskow:

Emanuel had a surfeit of luck. Karen Lewis, the immensely popular head of the Chicago Teachers Union, led Emanuel 45 percent to 36 percent in head-to-head polling last July after confronting the mayor before and during a 2012 teachers’ strike. Tragically, Lewis was diagnosed with a cancerous brain tumor and was unable to run. That left Garcia short on time and resources with which to overtake the cash-rich incumbent. Another formidable challenger who chose not to run was Toni Preckwinkle, head of the Cook County Board of Supervisors.

Second, Garcia lost the black wards[1]. The Hill:

Black voters were the key swing constituency for Emanuel, even though the African-American candidate in the first election in February, Willie Wilson, backed Garcia, as did Jesse Jackson, Rep. Danny Davis (D) and Chicago Teachers Union President Karen Lewis. Emanuel beat Garcia 58 percent to 42 percent amongst this group.

Third, Garcia lost the black wards because the “black misleadership class” held them for Rahm (and by extension, Obama). Black Agenda Report:

Rahm Emanuel’s biggest asset was the overwhelming support of Chicago’s well-established black political class of preachers, business types, “community leaders” and public officials. President Barack Obama himself came home to Chicago this year and in 2011 to campaign for Rahm and cut commercials for him. Nearly every prominent black elected official in town, Democrats all, came out for Rahm, for privatization, for gentrification, for austerity, for more of the same. This is the state of black politics in 2015, and the reason that Rahm Emanuel carried every single one of Chicago’s majority black wards.

A career Democrat politician himself, Chuy Garcia could talk about the injustice of high stakes testing and privatizing public schools. What Garcia simply could not do was explain to black audiences why almost every black politician in town including the black Chicago Democrat in the White House was riding with Rahm. To do so would have been to directly criticize the regime of black urban politics and the policies of the president himself, something even the most “progressive” career Democrat politicians don’t do.

Notice, however, that Democratic “progressives” are failing in exactly the same way Garcia did; they never mention this factor. Not Eskow, not Jim Dean, not Ilya Sheyman, not MoveOn, not Bold Progressives, not anybody in the Democratic nomenklatura. BAR interviewed a Garcia staffer, who described what might have been:

“To win, Chuy needed to carry black wards against Emanuel, to make discouraged voters in those neighborhoods come out,” a campaign staffer told Black Agenda Report.

“You do that by conducting an intense voter registration drive in those areas, and giving those people compelling reasons to come out. It could have been done. Chuy’s campaign was dealt a good hand, but they didn’t play it. The campaign failed to conduct a voter registration drive in black Chicago, and to emphasize the issues that could have set black Chicago on fire.”

“This was the winter and spring when Ferguson was on everybody’s lips. Chuy could have won wider and deeper support in black Chicago by focusing early and sustained attention on the corrupt and brutal practices of CPD, Chicago’s Police Department. He didn’t do that. It took weeks to get the Garcia campaign to endorse the drive for reparations for survivors of Chicago police torture. It took weeks more to briefly draw Garcia’s attention to CPD’s black site at Homan Square, another controversy he declined to make a big sustained stink about. The campaign pissed away these key opportunities to mobilize black support. And the only jobs program they announced with actual numbers was Chuy’s proposal to hire a thousand extra cops.”

Garcia had a shot at winning more black votes than he did, but never took it. That’s because he’d rather lose as a “good Democrat” than win as a real one. Karen Lewis would not have been subject to the iron law of institutions, as Garcia — as well as Moveon, DFA, Bold Progressives, and all the rest of ‘em — clearly were.

Finally, Garcia didn’t clearly separate himself from Rahm on finance; austerity, in particular:

Instead we got Garcia, who steadfastly refused to draw up a bold policy program, opening himself up to easy criticisms by Emanuel that he had no real plan for the fiscal crisis facing the city. Even late in the campaign, he continued to use phrases like “shared sacrifice” (usually code words for additional austerity measures on the backs of workers) in describing how he would solve the city’s budget woes.

He refused to strongly endorse measures like a financial transactions tax.

So, as they tend to do, people voted for the real Rahm, instead of a fake one.

What Next for Chicago?

First, Democratic “centrists” take a few moments away from re-arranging the deck chairs to do the happy dance. Politico checks in with some “Democratic strategists.” The headline:

Rahm shows Hillary how to tame the left


To many Democrats, there are two possible lessons: First, that the professional left talks a much better game than it delivers even as it starts to make big promises about the presidential race. And second, that focusing voters on the progressive elements of a candidate’s record, as Emanuel did during his runoff, can blunt a challenge from an ineffective opponent.

“Rahm Emanuel is a progressive mayor, period,” said Paul Begala, a longtime Bill Clinton adviser and a friend of Emanuel who advises the pro-Hillary Clinton Priorities super PAC. “I don’t think people should say a right-wing Democrat won. I think you’ve got to actually look at what he did and what he ran on.”

“That’s the lesson for Hillary Clinton: You can run comfortably on a progressive agenda and win,” Begala said.

Really. Well, I hope Clinton doesn’t compromise with Jebbie on privatizing the Veteran’s Administration and call that “progressive,” is all I can say. And, too bad Elizabeth [genuflects] Warren didn’t endorse Chuy. Eh? But to resume…..

Second, the Board of Alderman got a little bit better. Labor Notes:

While the [Chicago Teachers Union-led campaign to oust Mayor Rahm Emanuel fell short, [ school counselor and CTU executive board member Susan Sadlowski Garza’s], victory is a boost for the council’s progressive caucus, which before the election included 7 members out of 50. Depending on the outcome of absentee ballot counts in several close races, the progressive caucus could increase to 12.

So, the next step would be to double-plus-a-smidge again, from 12 to 26, no?

Third, Emanual was, in fact, shoved a millimeter left on policy. Salon:

Despite their defeat, Chicago progressives were able to force Emanuel to the left. Last year, the mayor supported an increase in the city’s minimum wage to $13 [and why not $15?] an hour. After Garcia promised to end the speed camera program, Emanuel pulled cameras off 25 street corners.

Fourth, I hope for a Nixonion scandal scenario in Rahm’s second term. Remember, the Nixon adminstration imploded after stomping McGovern, even though (or perhaps because) Nixon ran the most vicious and effective political operation until Rove. And there’s plenty of scandal to go around, because selling off public property for cheap to insiders — that is, privatization — is just corrupt by definition, and Tiny Dancer being Tiny Dancer, we can expect him to double down. (Don’t believe Rahm’s “Honey, I’ve changed!” schtick for a minute). Commenter OIFVet lists some scandals in embryo:

“This is well beyond solving by moving the “diversion of tax monies” deck chairs around.” True enough, but it demonstrates part of the Chicago corruption playbook: if the unfunded liabilities are allowed to pile up long enough, Da Mare can simply say “The TIFs (or whatever diversionary program you may choose) would only address a small part of the liabilities, so let’s talk real solutions here rather than politicizing the program”. Voila: Da Mare appears statesman-like, and as an added bonus he can legitimately argue for deep cuts to needed programs, accelerating the money giveaways known as PPPs and continue to divert property taxes to the Pritzkers and such, and go after the unions. It’s a Chicago-style three-fer.

Regardless of the outcomes (“a Chicago-style three-fer”) all these pain points can be used to discredit Emanuel, if the left is willing to think of fighting neoliberalism as a permanent campaign, instead of an election cycle. In my book, the place to dig is Rahm’s sleazy private equity — sorry for the redundancy — backers. International Business Times:

Heading into the final days of campaigning for re-election, incumbent Chicago Mayor Rahm Emanuel has faced intensifying criticism for being too close to the city’s financial elite. Precisely how close, though, remains a matter of conjecture — and most likely will remain so until after the Tuesday runoff vote. That’s because Emanuel’s administration has for weeks blocked the release of correspondence between his administration and one of the Democratic mayor’s top donors, Michael Sacks. The administration has also refused to release details about tens of millions of dollars in shadowy no-bid city payments to some of Emanuel’s largest campaign contributors.

Do tell. Funny, though, I don’t recall Chuy making any noise about this at all. Did I miss it?

Finally, the (dys)functional identity of Democratic and Republican leadership becomes more and more visible. It was Republican money that let Rahm outspend Garcia by 8 to 1, after all. As R.J Eskow points out:

The nickname Emanuel earned during this race was “Mayor 1 Percent,” and it’s a name which is likely to stick. That reflects a new reality for “centrists” in the Emanuel/Third Way mold: corporate-friendly policies bring serious political risk.

That’s because the squillionaires bought Emanuel his second term, and everybody knows it[2]. Forbes:

And it’s Emanuel’s linkages to Republicans and the rich that are dogging him as the race winds down. “We don’t need more Republicans saying nice things about Rahm,” one Emanuel campaign advisor told Forbes recently.

While Emanuel’s friendship with the billionaire financier and newly elected Republican governor Bruce Rauner are no secret, the Mayor’s other relationships with rich Republicans are getting headlines in the last few days.

The lead story in Friday’s New York Times business section was headlined “Chicago’s Odd Couple” about Emanuel and a “billionaire Republican investor.” The story focused on the Mayor’s “single biggest donor,” Kenneth Griffin, a multibillionaire who is chief executive of the investment firm Citadel.

I don’t know how the implications of that identity play out on the national stage, but it’s to be hoped that it opens up a space for Democrats to be Democrats, instead of ersatz Republicans. After all, Boss Tweed wasn’t boss forever, though I’m sure it seemed at the time he would be. Livin’ the dream!


It seems to me that the possibility for a Democratic victory in the Chicago mayoral race was there, but the stars just didn’t align. If Karen Lewis doesn’t get brain cancer, she could have done all the work on the ground that Chuy’s campaign manager wishes they had been allowed to do. The Guardian scoop on Rahm’s black site for torture cops gets used. #BlackLivesMatter gets leveraged. David Sirota’s work on Rahm’s corruption gets used. The Black Misleadership class gets knocked off their game a bit. Where the money really goes becomes an issue. And so on.

Nevertheless, the left didn’t defeat Rahm, and weren’t seen to. They didn’t collect a scalp. Next time!


[1] Garcia lost the poor, too. DNAinfo:

Nearly 60 percent of voters with an annual family income under $30,000 picked Emanuel, according to an Edison Research exit poll.

Sixty-one percent of Chicagoans most affected by poverty, crime and failing schools — poor black families who earn less than $50,000 a year — also voted for Emanuel.

So, progressives, you gotta win the black and the poor…

[2] People focus on the TV ads. I’d like to know about the walking around money.

NOTE Let me caveat that the most I know about Chicago is many visits to the Museum of Science and Industry when I was very young. So I’d love to hear more from Chicagoans, both residents and expats, on what the this race meant, and what next.



Naked Capitalism: The Minimum-Wage Lie


The Minimum Wage: Could the Democrats Please Give Consideration to the Idea of Ceasing to Betray Working People?

Posted on April 8, 2015 by

By Lambert Strether of Corrente.

Let’s begin by noting that the current minimum wage is miserably inadequate and a flat insult to working people. The MIT Living Wage Calculator project[1] has this to say:

While the minimum wage sets an earnings threshold under which our society is not willing to let families slip, it fails to approximate the basic expenses of families in 2013 [or today]. Consequently, many working adults must seek public assistance and/or hold multiple jobs in order to afford to feed, cloth, house, and provide medical care for themselves and their families.

An analysis of the living wage using updated data from 2013 and compiling geographically specific expenditure data for food, childcare, health care, housing, transportation, and other basic necessities, finds that:

The minimum wage does not provide a living wage for most American families. A typical family of four (two working adults, two children) needs to work more than 3 full-time minimum-wage jobs (a 68-hour work week per working adult) to earn a living wage. Across all family sizes, the living wage exceeds the poverty threshold, often used to identify need. This means that families earning between the poverty threshold ($23,283 for two working adults, two children) and the median living wage ($51,224 for two working adults, two children per year before taxes), may fall short of the income and assistance they require to meet their basic needs.

Three jobs, 68 hours… It’s hard work — and extremely time-consuming! — to be part of the working poor.

Is raising the minimum wage popular?

Yes, it is. Rasmussen (a Republican-leaning polling firm) finds that 54% of American Adults favor an increase in the minimum wage, and 32% are opposed. That may be why increasing the minimum wage did so well in the 2014 election:

Voters in four red states approved ballot initiatives to raise their state minimum wages on Tuesday, sending another message to Washington that Americans support a higher wage floor.

In fact, the margins were, in some cases, greater than those of the Rasmussen poll (22%); Alaska’s initiative won by 38%, Arkansas’ by 31%, and Nebraska’s by 20%.

So 2014 was a debacle for Democratic candidates, but not for the sort of policy that, given their brand identity, one would expect Democrats to be backing. Perhaps the Democrats should give consideration to not s*cking on policy if they want to win?

But by what amount should the minimum wage be raised?

There are several ways of looking at this question, depending on the sort of social contract you consider wage labor to be.

$21.72. If by productivity, $21.72. Here the social contract is that if workers become more efficient, then their wages should increase in proportion to the efficiency gains. Oldthink, I know! But if that’s your theory, $21.72 is the result. CEPR:

Between the end of World War II and 1968, the minimum wage tracked average productivity growth fairly closely. S ince 1968, however, productivity growth has far outpaced the minimum wage. If the minimum wage had continued to move with average productivity after 1968, it would have reached $21.72 per hour in 2012–a rate well above the average production worker wage. If minimum-wage workers received only half of the productivity gains over the period, the federal minimum would be $15.34. Even if the minimum wage only grew at one-fourth the rate of productivity, in 2012 it would be set at $12.25.

$15.00. If by cost of reproducing labor power, $15.00.

Here the social contract is that workers sell their labor power for what it costs to reproduce it[2] (which is what “a living wage” is shorthand for). As it turns out, that’s $15.00 an hour. Americans for Tax Fairness:

[We have] analyzed the effect of Walmart’s new wage policy and found that even after the planned pay hikes are fully implemented, large taxpayer subsidies will still be required to make up for the company’s low wages.

Here’s how the numbers break down. An employee working 34 hours a week (Walmart’s definition of “full-time”) for $9 an hour would take home about $16,000 a year. If that worker was single, she would qualify for three out of five public programs. With children, the employee would qualify for all eight of the public programs—and the same is true at the $10 an hour rate.

The reality is Walmart would need to raise its base pay to at least $15 an hour to properly compensate its workers and relieve America’s taxpayers from picking up part of its payroll tab [which amount to $6.2 billion a year in public subsidies that support its employees: food stamps, Medicaid, child care support and five other taxpayer-funded programs].

It’s a remarkable exhibition of state capture that Walmart has actually gotten the taxpayers to “top up” the wage packet they offer.

$10.10. If you’re a Democrat, $10.10.

Finally, one might take the view that the social contract is a pure power relation[3]: Workers are paid what they have the power to take, period; “the strong do what they can and the weak suffer what they must,” as Thucydides said. Here — after agitation began for $15 — Democrats determined that the appropriate level of suffering for workers is to be denied a share in productivity gains, and to continue combining their wage packet with government subsidies to make a living wage.

Obama is throwing his support behind congressional Democrats’ proposal to raise the minimum wage to $10.10 and peg it to inflation, more than a dollar higher than the $9 proposal he made in his State of the Union address in February.

“The President has long supported raising the minimum wage so hardworking Americans can have a decent wage for a day’s works to support their families and make ends meet, and he supports the Harkin/Miller bill that accomplishes this important goal,” the White House official said in an email.

Given that $10.10 does not, as we have just seen, make ends meet, the White House email statement is grotesquely, breathtakingly cynical, even for Obama. (And whenever you hear “hardworking Americans,” keep a sharp eye out of for the con.) In any case, the real tell here is the number itself: Why 10.10? I’ve never been able to find a justification for it. Euphony? Why not be generous, and round up to the nearest quarter, for 10.25? Regardless, $10.10 is the number, and in one of his famous Executive Orders, Obama put that in place for some workers:

On February 12, 2014, President Obama signed Executive Order 13658, “Establishing a Minimum Wage for Contractors,” to raise the minimum wage to $10.10 for all workers on Federal construction and service contracts. The President took this executive action because raising wages will improve the quality and efficiency of services provided to the government. Boosting wages lowers turnover, increases morale, and will lead to higher productivity overall on Federal contracts.

However, as we have seen, $10.10 is not a living wage. And you will notice that none of the justifications in the Order have anything to do with workers at all.

What happens to leftists who try to raise the minimum wage “too much”?

The Democrats try to punish them, or discredit them and compromise away their proposals Naturellement. Two examples, first Seattle, Washington:

Mayor Ed Murray is expected to release his plan to raise Seattle’s minimum wage as soon as today. No matter what happens in the $15 wage debate, Seattle City Councilmember Kshama Sawant has already won.

If the Seattle City Council passes a $15 wage in the coming months (as appears likely), Sawant will appropriately get credit for coming out of nowhere to commandeer the city’s political agenda.

$15.00! Sawant got the workers “too much!” So what do the Democrats do? Run a candidate against Sawant, of course! Black Agenda Report:

Kshama Sawant helped lead a multi-year effort to raise the minimum wage in Seattle. The CEO of Seattle’s Urban League, [Panm Banks,] a longtime political insider with great fundraising connections wants to run for local office. Apparently there are no neoliberal pension-cutting Democrats for her to go after in Seattle, and no neolithic Republicans worth dethroning either.

The number one and only target of Banks’ campaign for office will be the socialist, because she knows things. Pam Banks knows that while you can never have too many Republicans or Democrats in office, even one socialist is way too many. CEO Banks knows that while you can never have too many corporate funded politicians, even one elected official that doesn’t take the corporate cash makes everybody else feel nervous and look bad. … Banks knows that any run against a socialist incumbent will be well funded by forces who already call the League, and her, their good friend. They just might not be friends of the people of Seattle.

Second example, Portland, Maine, where the Greens started an initiative for $15.00. Then this happened:

Under Portland mayor [Brennan’s] proposal, the minimum wage would initially increase from the current $7.50 to $9.50 an hour, with additional increases scheduled over the next few years.

Again, $15.00! Those darn Greens are trying to get the workers “too much!” Green state chair Asher Platts met with Brennan (sorry, Faceborg):

I saw the mayor of Portland today, he seemed really upset at the #‎15now campaign for overshadowing his more moderate min wage proposal.

What was odd, was when I explained to him that we supported any work to raise the wage, and that our campaign does him a favor by making his proposal look more moderate, and explained how with negotiations you always ask for more than you expect and compromise your way back, he said, “maybe that’s how you negotiate Asher, but that’s not how I negotiate.”

Which I was confused about, because… the definition of negotiation….

I guess he’s right though, that’s not how Democrats like him negotiate– they start conceding everything to their opponent and work their way backwards from there.

“[T]hat’s not how I negotiate.” Indeed!

Are there business benefits to raising the minimum wage?

Besides those mentioned in the statement that accompanies Obama’s Executive Order? Why, yes. One of the leitmotifs of the Obama recession has been business owners and managers complaining that “Darn it, we just can’t fill that skilled welder position for $8.00 an hour! What’s wrong with people these days?” Well, even or perhaps especially if you accept human rental by capital as the means of doing the work that society needs done, there is a mechanism for handling that issue: The pricing mechanism. The Gap — before Walmart and McDonalds — applied it, with wondrous results:

So far, there’s been one clear reaction, a Gap executive said at a conference Tuesday in Washington. For years, the company had tried to get more people to apply to work at Gap’s stores. Only the wage increase made any difference.

“Almost immediately, we saw our applications increase by double digits,” said Dan Henkle, the company’s global head of human resources, on a panel at the Council of Institutional Investors’ spring conference. That, in itself, should lead to better performance, he thinks. “The idea is, the more people who are applying to your stores, the greater the pool to choose from, you’ll get the best talent into your stores.”

If the Democrats — and, for that matter, J-Yel — are truly worried about the labor force participation rate, instead of shedding crocodile tears about it, then one way to entice people back into the crapified jobs is to at the very least not offer crapified wages. Eh?

Is there a business downside to raising the minimum wage?

Once you get away from the chalkboard, the neoliberal textbooks, and talk radio, it seems not. The fight in Seattle revolved around the restaurant owners, and it seems that they suffered no ill effects. Seattle Times:

Truth Needle: Is $15 wage dooming Seattle restaurants? Owners say no

The claim: Recent Seattle restaurant closures may have been linked to the city’s new $15 minimum wage.

What we found: False.

An article suggesting the $15-an-hour minimum wage was a factor in some recent Seattle restaurant closures caught fire with national and conservative media this week[4]. The only problem: When we asked the restaurateurs in question, they said it’s flat wrong.

And here’s the cost to diners from Eater:

How will the wage law impact the consumer? Will it increase prices? According to a University of Washington report prepared for the Seattle Income Inequality Advisory Committee, wage increases of about 10 percent can result in a 1- to 2-percent increase in a restaurant’s operating costs, which in turn translates to “one-time” price increases of about 0.7 percent. And so because the full wage increase from $9.47 to $15.00 represents a 58 percent change, consumers could see price hikes of about 4 percent total in the coming years from the wage law…

So, I can increase the wage packet for the cooks, the waitstaff, and everybody else by 60% while paying — let me break out my calculator: 20 * 1.04 = 20.8 — 80¢ on a twenty dollar meal? That doesn’t really seem so bad, does it?

So why do Democrats keep kicking the left?

I don’t know[5], honestly I don’t, although I’m reminded of Harry Reid disliking the “smelly tourists” who visit the Capitol; fortunately, the new Visitors Center forces them far underground, away from the sensitive nostrils of our elites. And I’m also reminded of Frum’s Law:[6]

But why Democrats hate the base — I grant I’m identifying the left with the base[7] — I don’t know.

Could it be that Democrats just don’t want working people to succeed?

I think it could. McDonalds offered its (non-franchise) workers a raise:

[B]ut hopes had deflated. Ms. Andino, who earns $8.75 an hour, the minimum wage in New York State, quickly learned McDonald’s was offering only $1 an hour more than that. And the pay increase was only for employees of company-owned stores, not for employees like Ms. Andino who worked at McDonald’s franchises.

But that did not stop Ms. Andino from feeling encouraged by the news. By 11 a.m. that day, she was demonstrating in Midtown Manhattan with dozens of other fast-food workers for better pay. The employees derided McDonald’s offer as too little money for too few employees, but they hailed the overture as proof that their protests were finally bearing fruit.

“We’re making progress,” said Ms. Andino, 20, who like many other workers continued to press McDonald’s and some retailers to increase wages to $15 an hour. “If we continue fighting, we’re going to end up winning.”

“If we continue fighting, we’re going to end up winning.” I think that’s a feeling that Democrats just don’t want working people to have[8]. The weak suffer as they must.


[1] Interestingly, Ikea pegged its wage to the results of that calculator.

[2] In other words, labor power is a commodity like any other, and in this case is sold at cost.

[3] Here are Bob and Ray on the Thucydidean theory of labor relations. Caution: The humor is Sahara dry.

[4] Amusingly, our crazypants Republican governor picked up on this.

[5] The classic expression of this existential question for the left comes from Susie Madrak (and WaPo):

“We’re the girl you’ll take under the bleachers but you won’t be seen with in the light of day,” the blogger, Susan Madrak pointedly told Axelrod on the call, which was organzied for liberal bloggers and progressive media.

Needless to say, she was not invited back. Now, as of this moment, the Democrats are emitting left-like noises, but I think that’s because “they have no place to go”; in the 2014 debacle, most of Steve Israel’s Blue Dogs got nuked, as voters decided they might as well vote for a real Repblican instead of a fake one.

[6] I did some Googling and found what I believe to be the original expression of Frum’s Law. Curiously, it seems to be a retweet (“RT”) from Glenn Greenwald (“@ggreenwald”) but I can’t find anything from Greenwald at all. So Frum’s Law it is.

[7] A good proxy for the size of the left is 14% of the electorate: Those who think ObamaCare doesn’t go far enough, and presumably want single payer or even a national health service. Last I checked, that’s about the size of the (feared) Tea Party.

[8] Unless it’s channelled, controlled, and neutralized by the Democratic nomenklatura, of course.

Political Cartoons from Tom Toles – The Washington Post

Humor: The Borowitz Report

Peace with Iran Could Limit Ability to Bomb It, Warns McCain



WASHINGTON (The Borowitz Report)—Shortly after world powers successfully negotiated a nuclear-framework agreement with Iran, Sen. John McCain warned that a lasting peace with the Middle Eastern nation “could greatly limit our ability to bomb it.”

“President Obama is hailing this framework as something that could enhance the prospects for peace in the Middle East,” McCain told reporters at the United States Senate. “For those of us who have looked forward to bombing Iran for some time now, that would be a doomsday scenario.”

“The Iranians know well and good that if they abandon their nuclear program exactly the way we’ve asked them to, we can kiss bombing them goodbye,” he said, shaking his head ruefully. “It’s a damn shame.”

As for President Obama, McCain added, “Sometimes I think the President cares more about making the Iranians happy than about making the people who want to bomb the Iranians happy.”

With the deadline for finalizing a nuclear treaty with Iran set for June 30th, McCain said that there was still a chance that talks could break down and allow the United States to bomb it, but added, “I’m not getting my hopes up.”

“If we all wake up on July 1st and we’re at peace with Iran, don’t say I didn’t warn you,” he said.

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