(Originally read a revised edition "Mortgaging Ireland: Financial Crisis & Socialist Resistance" published in the March 2011 issue of Monthly Review)
From Fenians to financiers: James Connolly and the Irish meltdown
By Julie L MacArthur
Rabble (Canada)
A spectre is haunting Ireland -- the spectre of James Connolly.
Connolly was executed by a British firing squad for his role in Ireland's 1916 Easter Rising for home rule. Celebrated as a hero of Irish independence by political parties of both the left and right in Ireland, his socialism is all too conveniently overlooked.
It is vital, however, to consider it, for the Irish struggle is one that speaks to the challenges of independence, sovereignty and democratic freedom, both at that time and now. And it is significant for the people of Ireland and of all countries. What value is formal political independence if it is not backed up by economic control; if the real decisions of public policy are made in boardrooms and backrooms rather than main streets and parliaments?
For Connolly:
"If you remove the English army tomorrow and hoist the green flag over Dublin Castle, unless you set about the organisation of the socialist Republic your efforts would be in vain. England would still rule you. She would rule you through her capitalists, through her landlords, through her financiers, through the whole army of commercial and individual institutions she has planted in this country and watered with the tears of our mothers and the blood of our martyrs." (Socialism and Nationalism, p25)
Now back to present-day Ireland.
A who's who of global finance descended upon Dublin in November to "hoist their flags," from the International Monetary Fund (IMF) and the European Central Bank (ECB), to the Rothschild investment bank, Merrill, Barclays, JP Morgan and Goldman Sachs. These power brokers arrived to prevent "contagion" from the financial crisis in this small country of 4.5 million people by lending the Irish state billions of euros to recapitalize insolvent banks and shore up the country's finances.
Unfortunately for the Irish, these actors came armed with the same ideological and policy tools that caused the crisis: a commitment to neoliberal growth models, open markets and the primacy of financial interests over those of labour, sovereignty or independence. Moreover, alternative ideas and paths are lacking from elites in Ireland's two major parties, Fianna Fáil and Fine Gael, as both are proven devotees of this free-market fundamentalism. It was their desire, proclaimed loudly through the 1990s and 2000s, to be "closer to Boston than Berlin" in regulation and finance.
Debt: to infinity, and beyond
The reasons for Ireland's economic collapse have been well covered by the global press in recent weeks. These include: an unsustainable growth model built on extremely low corporate taxes (12.5 per cent) and multinational inward investment, a property bubble fueled by cheap international credit, and politicians far too cozy with domestic banks and developers to regulate them sufficiently.
What is rarely highlighted in the press is the fact that Irish public spending was the casualty -- not the cause -- of the crisis. When Lehman Brothers investment bank collapsed in 2008 and credit markets seized up, Ireland's property bubble burst. As a result, a significant portion of bank assets became worthless and the country's construction and property sectors came to a standstill. The Irish government recapitalized banks with government bonds (totaling more than 176 per cent of GDP in 2009) in return for worthless property assets.
Dublin announced the deepest spending cuts in the history of the Republic to meet the conditions of the Nov. 28 €85 billion IMF and European Central Bank (ECB) loan. The state plans to raise income and sales taxes by €5 billion and cut spending by €10 billion by: reducing welfare payments by €3 billion, eliminating 25,000 public sector jobs and raising sales taxes by two per cent (to 23 per cent) by 2014.
According to economists Simon Johnson and Peter Boone "each Irish family of four will be liable for €200,000 in public debt by 2015." In all, €20.7 billion from the public pension fund was funneled to the banks over the last year and a half.
Perhaps most significantly, the Nov. 24 national budget plan outlined no change in the corporate tax rate of 12.5 per cent (one of the lowest corporate tax rates in Europe) "under any circumstances."
There were alternatives. The government could have required creditors to bear a share of the costs by allowing defaults and some bank failures. They could also have required the companies who have benefitted for years from the corporate tax policy to pay an equal share. Google, for example, reportedly saved $3.1 billion in taxes over the last three years by setting up in Ireland.
More recently, calls to withdraw from the European Monetary Union (EMU) have emerged in order to follow Iceland's lead of currency devaluation (an option denied Ireland). They chose to draw from the public purse instead.
While the IMF is asserts that its work pushing austerity in Ireland is ‘technical not political' the Irish public disagrees, and so do I. What could be more political than the socialization of bank debts and transfers of public wealth in to private hands?
Popular backlash
As the costs of propping up corrupt officials, developers and international bankers becomes increasingly unpalatable, politics in the Republic is shifting left; according to a Dec. 2 poll, Sinn Fein - "we ourselves" in Irish -- is two points higher than the ruling party Fianna Fáil. They won a historically unprecedented by-election seat in Donegal on Nov. 25 and their support in the south has doubled in the past month, from 8 per cent to 16 per cent. Political heavyweight Gerry Adams is giving up his seat in Westminster to run in the Republic's early 2011 election. These gains have opened up the possibility of a coalition with the Irish Labour Party in the New Year. This represents a colossal swing in post-independence Irish politics dominated by 60 years of rightist Fianna Fáil and Fine Gael.
Political opposition to the status quo also transcends electoral politics. On Nov. 27, 2010 close to 100,000 people (the equivalent of 785,000 in Canada) marched through the streets of Dublin. The banners and placards quoted Connolly and other heroes of Irish independence. These protests have been growing in size and frequency over the past year.
Such political developments may be short lived. Free-market party Fine Gael is also gaining politically as more conservative voters swap one establishment party for another.
Furthermore, nearly one in three Irish youth are predicted to leave the country in coming years, to make ends meet in countries like Canada and Australia, thus eroding some momentum for change. Finally the Congress of Irish Trade Unions (CITU) -- the organizer of the largest and most recent rally -- is seen as tainted by years of "social partnership" with ruling parties. Taken together, these factors may undermine the development of a cohesive and coherent political countermovement.
To Read the Rest of the Essay
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Showing posts with label Finance. Show all posts
Showing posts with label Finance. Show all posts
Matt Taibbi: Why Isn't Wall Street in Jail?
[Courtesy of Democracy Now's interview with Taibbi]
Why Isn't Wall Street in Jail? Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them
by Matt Taibbi
Rolling Stone
Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."
I put down my notebook. "Just that?"
"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
...
Here's how regulation of Wall Street is supposed to work. To begin with, there's a semigigantic list of public and quasi-public agencies ostensibly keeping their eyes on the economy, a dense alphabet soup of banking, insurance, S&L, securities and commodities regulators like the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC), as well as supposedly "self-regulating organizations" like the New York Stock Exchange. All of these outfits, by law, can at least begin the process of catching and investigating financial criminals, though none of them has prosecutorial power.
The major federal agency on the Wall Street beat is the Securities and Exchange Commission. The SEC watches for violations like insider trading, and also deals with so-called "disclosure violations" — i.e., making sure that all the financial information that publicly traded companies are required to make public actually jibes with reality. But the SEC doesn't have prosecutorial power either, so in practice, when it looks like someone needs to go to jail, they refer the case to the Justice Department. And since the vast majority of crimes in the financial services industry take place in Lower Manhattan, cases referred by the SEC often end up in the U.S. Attorney's Office for the Southern District of New York. Thus, the two top cops on Wall Street are generally considered to be that U.S. attorney — a job that has been held by thunderous prosecutorial personae like Robert Morgenthau and Rudy Giuliani — and the SEC's director of enforcement.
The relationship between the SEC and the DOJ is necessarily close, even symbiotic. Since financial crime-fighting requires a high degree of financial expertise — and since the typical drug-and-terrorism-obsessed FBI agent can't balance his own checkbook, let alone tell a synthetic CDO from a credit default swap — the Justice Department ends up leaning heavily on the SEC's army of 1,100 number-crunching investigators to make their cases. In theory, it's a well-oiled, tag-team affair: Billionaire Wall Street Asshole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the Asshole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.
That's the way it's supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who's in office or which party's in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets. Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.
The systematic lack of regulation has left even the country's top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. "I think you've got a wrong assumption — that we even have a law-enforcement agency when it comes to Wall Street," he says.
To Read the Entire Essay
Why Isn't Wall Street in Jail? Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them
by Matt Taibbi
Rolling Stone
Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."
I put down my notebook. "Just that?"
"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
...
Here's how regulation of Wall Street is supposed to work. To begin with, there's a semigigantic list of public and quasi-public agencies ostensibly keeping their eyes on the economy, a dense alphabet soup of banking, insurance, S&L, securities and commodities regulators like the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC), as well as supposedly "self-regulating organizations" like the New York Stock Exchange. All of these outfits, by law, can at least begin the process of catching and investigating financial criminals, though none of them has prosecutorial power.
The major federal agency on the Wall Street beat is the Securities and Exchange Commission. The SEC watches for violations like insider trading, and also deals with so-called "disclosure violations" — i.e., making sure that all the financial information that publicly traded companies are required to make public actually jibes with reality. But the SEC doesn't have prosecutorial power either, so in practice, when it looks like someone needs to go to jail, they refer the case to the Justice Department. And since the vast majority of crimes in the financial services industry take place in Lower Manhattan, cases referred by the SEC often end up in the U.S. Attorney's Office for the Southern District of New York. Thus, the two top cops on Wall Street are generally considered to be that U.S. attorney — a job that has been held by thunderous prosecutorial personae like Robert Morgenthau and Rudy Giuliani — and the SEC's director of enforcement.
The relationship between the SEC and the DOJ is necessarily close, even symbiotic. Since financial crime-fighting requires a high degree of financial expertise — and since the typical drug-and-terrorism-obsessed FBI agent can't balance his own checkbook, let alone tell a synthetic CDO from a credit default swap — the Justice Department ends up leaning heavily on the SEC's army of 1,100 number-crunching investigators to make their cases. In theory, it's a well-oiled, tag-team affair: Billionaire Wall Street Asshole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the Asshole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.
That's the way it's supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who's in office or which party's in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets. Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.
The systematic lack of regulation has left even the country's top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. "I think you've got a wrong assumption — that we even have a law-enforcement agency when it comes to Wall Street," he says.
To Read the Entire Essay
Frontline: The Warning
The Warning
Frontline (PBS)
In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.
"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."
Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.
"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"
Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."
Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.
"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."
To Watch the Episode
Frontline (PBS)
In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.
"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."
Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.
"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"
Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."
Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.
"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."
To Watch the Episode
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