Archive for October 12th, 2013

Empire of Corruption

by lizard

I am eight episodes from finishing Breaking Bad. There is a key moment (spoiler) where Walter gives a delayed answer to a question from his partner, Jesse: are you in the meth business or the money business? Jesse asks. Neither, says Walt. I’m in the empire business.

With America five days away from default, the empire business isn’t doing very well. I have no idea what the farce/threat ratio might be, but as far as “the market” is concerned, it might not matter. Here’s Michael Whitney with an article that takes a closer look, titled A Repo Implosion:

Absent a debt ceiling deal, the repurchase market–known as repo–would undergo another deep-freeze as it did in 2008 when Lehman Brothers defaulted triggering a run on the Reserve Primary Fund which had been exposed to Lehman’s short-term debt. The frenzied selloff sparked a widespread panic across global financial markets pushing the system to the brink of collapse and forcing the Federal Reserve to backstop regulated and unregulated financial institutions with more than $11 trillion in loans and other obligations. The same tragedy will play out again, if congress fails lift the ceiling and reinforce the present value of US debt.

Repo is at the heart of the shadow banking system, that opaque off-balance sheet underworld where maturity transformation and other risky banking activities take place beyond the watchful eye of government regulators. It is where banks exchange collateralized securities for short-term loans from investors, mainly large financial institutions. The banks use these loans to fund their other investments boosting their leverage many times over to maximize their profits. The so called congressional reforms, like Dodd Frank, which were ratified after the crisis, have done nothing to change the basic structure of the market or to reign in excessive risk-taking by undercapitalized speculators. The system is as wobbly and crisis-prone ever, as the debt ceiling fiasco suggests. The situation speaks to the impressive power of the bank cartel and their army of lawyers and lobbyists. They own Capital Hill, the White House, and most of the judges in the country. The system remains the same, because that’s the way they like it.

There is so much system failure, it can be overwhelming to track. I don’t expect unpaid bloggers to post as doggedly as I’ve tried to do recently, but I was looking forward to Intelligent Discontent’s new contributor, Sheena Rice, get into the mix on a weekly basis, like she said she was going to do in her introductory post.

It’s been awhile, but Sheena has a new post up, titled Scarier than Citizen’s United?. It’s a good read, but I’d like to highlight this section:

In every campaign finance case before the Roberts Supreme Court, some part of campaign finance regulations have been struck down. And honestly I would be shocked if this case was the exception. If aggregate limits are struck down by our friends the Supremes, as a violation of free speech, this would of course lay the groundwork for further attacks against campaign finance laws. Moreover, a decision in favor of McCutcheon could be interpreted to broadly eliminate campaign finance regulation, opening up federal elections to unlimited money.

Awesome right???

What I am really surprised by is the silence in Montana about this case. Montana has been at the forefront of battle of money in politics, and we’ve been there since the early 1900s and the days of Copper King corruption*. Voters overwhelmingly supported a citizen’s initiative to overturn Citizen’s United (well… at least to show support for it being overturned, problem with toothless resolutions.) So where is the discussion about McCutcheon?

I’m partly to blame for this. I have a platform, albeit a neglected one, here and I have not talked about it (or anything for that matter, sorry guys!). There is a lot going down right now; government shutdown, crappy judges, a US Senate race that finally has some life in it, and oh yeah the country may go into default. But we need to be talking about the impacts of corruption, and what that means for our future. Every election cycle means more and more money being spent, at the same time income inequality is increasing at significant rates. If the good old Supremes side with McCutcheon, fair elections will take another giant step backwards.

Sheena shouldn’t be surprised, Montana politics is as corrupt as it has ever been, and that includes Democrats. That’s the problem. The corruption conversation is almost always steered through partisan lenses, and those who don’t go along get marginalized (dropped from blogrolls, for example).

I agree with Sheena, we definitely should be talking about the impacts of corruption, and what that means for our future. If that conversation includes dark money and Brian Schweitzer, then so be it. If that conversation includes opposing the Baucus underling, John Lewis, from attaining a higher foothold in the Congressional feeding trough, then so be it.

Unfortunately, in our current political system, honest conversations about corruption won’t win elections.

I guess all we can do is wait for the failure to become even more obvious.

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