I’ve been busy preparing a post on the Rental Society, and otherwise occupied. While you wait, here are some recent must-reads to keep your rage fresh and sharp:
- Is student loan debt unconstitutional? Unlike other forms of private debt, it cannot be discharged in bankruptcy proceedings. Maureen Tkacik has revived the question of whether this is in violation of the equal protection clause in her historical overview, published by Reuters and in her amazing blog Das Krap (formerly Das Krapital). When the idea of making student loan debt undischargeable was first floated in the mid-1970s, Congress rejected it as a self-evident injustice. Attitudes reversed after a few years of propaganda about individual student-loan deadbeats (never mind that cumulative default rates have never been higher than with other forms of debt). The Bankruptcy Reform Act of 1978 made federally-guaranteed student loans undefaultable, and the eponymous bill of 2005 extended that to all student loans. Tkacik revives all this in her article (“The Unconstitutional 40 Years War On College Students: Lobbyists’ trillion dollar revenge on nerds,” Das Krap, August 12, 2012) which originated with research undertaken for OWS Alternative Banking.
Today, even if students
could scrounge together a trillion dollars [the total owed] out of their collective couches just like that, there is little doubt in my mind that Sallie Mae and its student loan-sharking brethren would simply see it as an opportunity to levy a massive prepayment penalty. (The internet is a rich trove of surreal personal accounts of being penalized for over-paying their student loan bills.)
Degrees remain essential for middle-class jobs, even as unemployment among college graduates rises. Nominal college tuition has risen by 900 percent since 1978, compared to just 165 percent for the nominal median wage. The young are being pushed early into a lifetime of debt servitude, often literally. Tkacik cites cases of Social Security checks garnished to pay off student loans. Interestingly, she finds that Wall Street is relatively uninvolved in the securitization of this form of debt. Issuance of “Student Loan Asset Backed Securities” represents only a fraction of the $100 billion in student loans incurred annually, having fallen off substantially since a peak in 2006.
- Almost three weeks later the New York Times took a look at the same subject, focusing on the tragedies of the relatively few who attempt to get their student loans forgiven for hardship, but leaving out most of the politics. (Ron Lieber, “Last Plea on School Loans: Proving a Hopeless Future,” NYT, August 31, 2012).
- So who’s going to fall down first, Keynesians or Austrians? Is the sovereign bond crisis really overwhelming the capacity of the European Union, the world’s largest economic region, to respond? Or do influential people find the crisis so convenient in justifying austerity measures and the push towards superstatehood that they would prefer to keep it going? One clue is provided by a mind-blowing graphic from a Der Spiegel interview with Bundesbank President Jens Weidmann (‘Too Close to State Financing Via the Money Press’, Der Spiegel, August 29, 2012).
The German central banker firmly opposes plans for the European Central Bank to purchase any more sovereign bonds from the crisis-struck nations.
- Remember, you are paying for this. Thanks to bailouts financed with your taxes, the Wall Street banks avoided their well-earned demise in 2008. Now, larger than ever, they continue to pay record bonuses; to flood your airwaves with ads; to claim sponsorship of charities; to finance think-tanks to produce the talking points for CNBC and FOX; to relieve the burden on your busy politicians by having lobbyists write legislation for them; and, of course, to donate anonymously to fix your elections.
The American Bankers Association board is set to vote tomorrow on a plan to create a nonprofit that would donate to super-political action committees, or super-PACs, that can spend unlimited amounts on TV ads and other campaign activities.
ABA officials, during a conference call yesterday to brief member firms, said they intend to raise several million dollars in the next few weeks and concentrate their contributions on six to 12 fiercely contested U.S. Senate races. Attempts in the Republican-controlled House to roll back regulation of the financial industry, particularly the 2010 Dodd-Frank Act, have so far run aground in the Democratic-controlled Senate.
The Rothenberg Political Report, a non-partisan publication that follows elections, on Sept. 3 listed five Senate races as “pure toss-ups,” three of which are held by Democrats. A sixth Senate seat, held by retiring Nebraska Democrat Ben Nelson, is listed as “Republican favored” and another, held by retiring Wisconsin Democrat Herb Kohl, is rated as a toss-up that “tilts Republican.”
Included in the list of “pure toss-ups” is the race in Massachusetts where Senator Scott Brown, a Republican, is facing off against Elizabeth Warren, the Harvard University law professor whose brainchild, the Consumer Financial Protection Bureau, drew fierce opposition from the banking industry. “The real battle when it comes to Congress is the Senate,” said Holman, who noted that the ABA would likely target senators that have stood in the way of changes to the Dodd-Frank financial-regulation law.
From Robert Schmidt and Phil Mattingly, “Banker Plan Would Fund Super-PAC To Sway Senate Races,” Bloomberg News, Sept. 5, 2012.
- While we’re at it, let’s not forget that your bailouts also help to finance the continuing regulatory capture. Through a Freedom of Information Act request, Bloomberg News has obtained the e-mail correspondence between the Securities and Exchange Commission and Annette Nazareth, “herself a former SEC commissioner” appointed by Bush. Nazareth now “represents the biggest banks and securities firms as a partner in the Washington office of Davis Polk & Wardwell LLP.”
The Dodd-Frank [banking reform law], which took effect in July 2010, would shape the SEC’s agenda for the next two years as it labored to write some 100 regulations the law required. It also opened opportunities for Nazareth. With her connections and longtime SEC experience, she emerged as the preeminent legal advocate for financial services firms as they sought to scale back the new rules.
With Nazareth on board, Davis Polk was hired as outside counsel on Dodd-Frank by the six largest U.S. banks and the Securities Industry and Financial Markets Association, the Wall Street trade group, according to the law firm’s website. The firm also performed work for foreign lenders including Credit Suisse Group AG (CS) and Deutsche Bank AG.
Nazareth’s e-mails to Schapiro and then-SEC General Counsel and Senior Policy Director David Becker [a buddy of Nazareth's who in the meantime has returned to the private side for a second stint of serving the banks as a corporate lawyer], demonstrate how lobbyists and lawyers draw on bonds they formed in government service to gain access for clients, and how they work to maintain those ties.
It’s “a real advantage” to send a familiar face into the agency, said Adam Pritchard, a University of Michigan law professor and ex-SEC lawyer. “If I’m a client, I’m very pleased. I’m willing to pay top dollar for that.”
For the detailed if not very surprising look at the power elite’s endless chain of mutual fellation and the carefree corruption created by the revolving-door system, see Robert Schmidt and Jesse Hamilton, “Top Bank Lawyer’s E-Mails Show Washington’s Inside Game,” Bloomberg News, Sep 5, 2012.
- “Liberia’s internationally acclaimed president has surrendered almost a quarter of her country to foreign logging companies, endangering the biggest surviving rainforest in West Africa.” See David Blair, “Liberia sells almost quarter of country to logging companies,” Daily Telegraph, Sept. 4, 2012.