I appeared on Rachel Maddow's MSNBC show last night to discuss my latest newspaper column about the bailout. You can watch the clip here. Rachel's first question really is the question of our time: Did we get punked? As progressive bailout critics have been saying since the current Wall Street bailout was first proposed, the answer is yes.
As the Minneapolis Federal Reserve reports, the major claims about a credit crisis that justified Congress cutting a trillion-dollar blank check to Wall Street were demonstrably false. And new data and reports show they remain demonstrably false.
For instance, take a look at line 1 and line 5 of this December Federal Reserve report on bank lending. That's right - you see no significant decrease in lending, and in some cases, an increase. Interbank lending has dropped some, but certainly not at the crisis levels the Bush administration and banks claimed.
Then take a look at this story from Reuters, recounting a big report from a widely-respected financial analysis firm:
"The credit crunch is not nearly as severe as the U.S. authorities appear to believe and public data actually suggest world credit markets are functioning remarkably well, a report [from Celent consulting] released on Thursday says...The report, much of which is based on U.S. Federal Reserve data, challenges a long list of assumptions one by one, arguing that there is indeed a financial crisis but that, on aggregate, the problems of a few are by no means those of the many when it comes to obtaining credit.
"It is startling that many of (Federal Reserve) Chairman (Ben) Bernanke and (Treasury) Secretary (Henry) Paulson's remarks are not supported or are flatly contradicted by the data provided by the very organizations they lead," said the report.
Regarding U.S. business access to credit, the report says: Overall U.S. bank lending is at its highest level ever; U.S. commercial bank lending is at record highs and growing particularly fast since May 2007; Corporate bond issuance has declined but increased commercial lending has compensated for this; [Interbank] Lending hit its highest level ever in September 2008 and remained high in October and that overall interbank lending is up 22 percent; The cost of interbank lending...dropped to its lowest level ever in early November and remains at very low levels; [consumer credit] was at a record high in September; and local government bond issuance had continued at similar levels to those before the credit crisis, while bank lending for real estate reached a record level in October 2008, it says. (emphasis added)- Advertisement -
Then there's this story from the Wall Street Journal looking at a new study by the National Federation of Independent Business:
The report found that among small businesses "no "credit crunch" has appeared to date beyond the normal cyclical tightening of credit." The NFIB found that worries about interest rates and financing were a concern to only 3% of respondents...By and large, the story of the NFIB report was that if credit is going untapped, it's largely because company operators are not choosing to pursue the credit. It's not that companies can't get the extra money, it's that they don't want or need it because of the broader slowdown in economic activity. (emphasis added)
That last point is the big one: The real crisis is in the real economy - ya know, the real world of jobs, wages, health care premiums and pensions that Washington has totally ignored as it keeps writing checks to its well-heeled campaign contributors on Wall Street under the guise of a lending crisis. Adding insult to injury is the last thing I discussed with Rachel - the fact that because the bailout money came with almost no strings attached, the financial industry recipients of the taxpayer largesse are either hoarding the money, using it to pay shareholder dividends and executive bonuses, or devoting it to efforts to buy up smaller competitors.
So what to do?
First thing's first - we have to pressure, cajole, lambaste and downright humiliate Wall Street stooges on Capitol Hill who claim nothing can be done. These are people like New York Sen. Chuck Schumer (D). The recent subject of a scathing New York Times profile examining his complicity in the financial crisis, Schumer insisted to the Wall Street Journal that despite Congress's clear power to reform - or even revoke - the bailout, "there's not much we can do other than jawbone." It's the old Innocent Bystander Fable, designed to make us think Congress can do nothing other than keep forking over the money to campaign contributors. And it's a straight-up lie.
Second, Congress can reject the Bush administration's request to release the next $350 billion installment of no-strings-attached bailout money for Wall Street, if that request happens.
Third, Congress can add all the strings and oversight measures to the remaining money that bailout critics originally said were necessary. That means eliminating gaping loopholes in the executive pay limits; preventing the money from subsidizing shareholder dividends, forcing the government to buy voting shares of bank stock (rather than non-voting stock as it is doing today) so that regulators have the leverage to clean out bad bank management; following Britain's lead in making the money contingent on increased lending; and expanding the ways the money can be used, so that it can be allocated to the real economy (ie. manufacturing companies, etc.).
Finally, Congress can allocate the unspent bailout money to a robust economic recovery package focused on job-creating infrastructure and health care priorities - and Congress can pass that economic recovery package right now, rather than waiting for the next president.
Looking at what's gone on in the last 3 months, we see a classic example of Naomi Klein's "shock doctrine" and subsequent disaster capitalism. Bailout critics were attacked as "irresponsible" by Establishment pundits and politicians - even though the data showed that those pundits and politicians were using an admittedly real problem to manufacture the perception of a full-on earth-shattering crisis so as to justify the biggest taxpayer heist in contemporary American history. And though that data was largely ignored by the same media that beat the drum for the bailout, it is now becoming too compelling to ignore.