Did you have a sense of deja vu listening to Obama in his Oval Office speech talk about the imperative need to become independent of fossil fuels? Did you feel, “Ho hum, what’s new?” Jon Stewart refreshes our memory, as only he can do, with stiletto clips and painful humor. When will we get serious?

Jon Stewart on Energy Independence

This is noteworthy on two counts: 1) that the NYT would give a high profile to a piece critical of Israeli hardline policies and US support, and 2) that a prominent American Jew has the courage to make these criticisms so publicly.

Mr Judt’s piece is well reasoned and worth reading on its own merits.

Below is  the beginning, and a link to the full article.

If you are moved to help support those working to change US and Israeli policies, you can find information in this earlier Roylat post.

Op-Ed Contributor

Israel Without Clichés

By TONY JUDT

Published: June 9, 2010

THE Israeli raid on the Free Gaza flotilla has generated an outpouring of clichés from the usual suspects. It is almost impossible to discuss the Middle East without resorting to tired accusations and ritual defenses: perhaps a little house cleaning is in order.

No. 1: Israel is being/should be delegitimized

Israel is a state like any other, long-established and internationally recognized. The bad behavior of its governments does not “delegitimize” it, any more than the bad behavior of the rulers of North Korea, Sudan — or, indeed, the United States — “delegitimizes” them. When Israel breaks international law, it should be pressed to desist; but it is precisely because it is a state under international law that we have that leverage.

Some critics of Israel are motivated by a wish that it did not exist — that it would just somehow go away. But this is the politics of the ostrich: Flemish nationalists feel the same way about Belgium, Basque separatists about Spain. Israel is not going away, nor should it. As for the official Israeli public relations campaign to discredit any criticism as an exercise in “de-legitimization,” it is uniquely self-defeating. Every time Jerusalem responds this way, it highlights its own isolation.

No. 2: Israel is/is not a democracy

Perhaps the most common defense of Israel outside the country is that it is “the only democracy in the Middle East.” This is largely true: the country has an independent judiciary and free elections, though it also discriminates against non-Jews in ways that distinguish it from most other democracies today. The expression of strong dissent from official policy is increasingly discouraged.

But the point is irrelevant. “Democracy” is no guarantee of good behavior: most countries today are formally democratic — remember Eastern Europe’s “popular democracies.” Israel belies the comfortable American cliché that “democracies don’t make war.” It is a democracy dominated and often governed by former professional soldiers: this alone distinguishes it from other advanced countries. And we should not forget that Gaza is another “democracy” in the Middle East: it was precisely because Hamas won free elections there in 2005 that both the Palestinian Authority and Israel reacted with such vehemence.

No. 3: Israel is/is not to blame

Israel is not responsible for the fact that many of its near neighbors long denied its right to exist. The sense of siege should not be underestimated when we try to understand the delusional quality of many Israeli pronouncements.

Unsurprisingly, the state has acquired pathological habits. Of these, the most damaging is its habitual resort to force. Because this worked for so long — the easy victories of the country’s early years are ingrained in folk memory — Israel finds it difficult to conceive of other ways to respond. And the failure of the negotiations of 2000 at Camp David reinforced the belief that “there is no one to talk to.”

But there is. As American officials privately acknowledge, sooner or later Israel (or someone) will have to talk to Hamas. From French Algeria through South Africa to the Provisional I.R.A., the story repeats itself: the dominant power denies the legitimacy of the “terrorists,” thereby strengthening their hand; then it secretly negotiates with them; finally, it concedes power, independence or a place at the table. Israel will negotiate with Hamas: the only question is why not now.

No. 4: The Palestinians are/are not to blame

Abba Eban, the former Israeli foreign minister, claimed that Arabs never miss an opportunity to miss any …

Full Article

By giving the big banks every possible bailout with no concern for cost to taxpayers, Geithner, Summers, and Fed Chairman Bernanke, ignited a firestorm of popular anger – much of which got directed toward Obama – and rightfully so.

Volcker, who was initially appointed as Fed Chairman by President Carter but whose real influence came under Reagan, broke the back of the growing inflation of the 1960’s (that doubled prices in that decade) by raising short-term interest rates to unprecedented levels. This was the opposite of the zero-interest rate policy of Bernanke – and the effects on bank profits was opposite also. In the end, though, Volcker came to be regarded by the financial community as a hero.

Volcker has been a strong critic of letting banks get too big to fail and using that status to take risks that imperial financial stability of the world – with the banks reaping the upside and taxpayer and savers bearing all the downsides.

Let’s hope this is just the first round

Financial Regulation

Bank plan highlight’s Volcker’s new clout

Fri Jan 22, 2010 3:35pm EST

Related News

* Volcker had been outspoken on "too big to fail" concern

* Ex-Fed chief consulting about bank plan with lawmakers

By Caren Bohan

WASHINGTON, Jan 22 (Reuters) – When President Barack Obama launched a fight with Wall Street by announcing a new U.S. plan to limit banks’ size, the man standing at his side was former Federal Reserve Chairman Paul Volcker.

Volcker’s new clout on the White House economic team was on full display as the 6-foot-7-inch longtime adviser took the choice spot next to Obama, who named his proposal to restrict bank trading activities "the Volcker Rule."

The 6-foot-1 Obama referred to Volcker as "this tall guy behind me."

U.S. Treasury Secretary Timothy Geithner and senior economic adviser Lawrence Summers — who attended the announcement but at a greater distance from the president — still wield a tremendous amount of power.

Volcker, who commands respect on Wall Street and among both Democrats and Republicans, is seeing a resurgence of his influence after venting frustrations to friends that he had been left out in the cold when it came to economic decision-making at the White House.

The 82-year-old Volcker was one of Obama’s most influential advisers during his 2008 presidential campaign and now chairs a panel of outside economic advisers to the White House.

He had rarely been seen in Washington since the start of the Obama administration and made no secret of a difference in opinion with the White House over how to deal with the problem of "too big to fail" financial firms.

Volcker’s fear, shared by some other economists, is that newly consolidated U.S. banks might engage in reckless behavior on the belief that the government would never allow them to fail because of their sheer size. Such risky activity could put the financial system at risk of another crisis, these economists say.

CLOUT

Asked by the New York Times in October about reports he was losing influence with the Obama White House, Volcker retorted that he "did not have influence to start with."

That made Volcker’s presence at the announcement all the more significant to underscoring Obama’s commitment to push the new regulatory approach that Wall Street appears set to fiercely oppose.

"Volcker being there was huge," said Simon Johnson, a professor at the Massachusetts Institute for Technology and a former chief economist at the International Monetary Fund.

The bank announcement elated many of Obama’s liberal supporters, who have welcomed his tougher rhetoric in recent weeks toward the banking executives he referred to in December as "fat cats."

Geithner and Summers, who worked together at Treasury during the Clinton administration, have been criticized by some liberal supporters of Obama and view them as too cozy with Wall Street.

Legislation in 1999 tearing down the Depression-era Glass-Steagall law separating commercial and investment banking passed under their watch. Obama’s new bank rules would not bring back Glass-Steagall but would revive its spirit.

Volcker, who has been consulting on Capitol Hill about Obama’s bank proposal, could be an asset to the administration in selling the proposal, said Johnson, who shared Volcker’s frustrations that the administration had not moved earlier to limit the size of banks, which get an implicit subsidy in the form of federal deposit insurance.

"Volcker carries a cache that is unparalleled," said Johnson, noting the former central banker’s role in breaking the back of double-digit inflation in the early 1980s — a victory that came despite a huge popular backlash against the economic pain brought on by his interest-rate increases.

RIFT WITH GEITHNER?

In an indication of a possible rift, financial industry sources told Reuters on Thursday of some reservations Geithner had expressed behind the scenes about the new bank plan, which was not included in the original plan on financial regulatory reform that the administration unveiled last June.

Administration officials, while noting the importance of Volcker’s role, insisted the decision to go forward with the plan was unanimous.

Geithner and Summers worked closely with Volcker late last year on it and had largely finalized it by late December. They put the finishing touches on it on Jan. 13.

Aides said Obama personally felt strongly about moving ahead on curbs on the banks, in part because of concerns about risk-taking by banks after they returned to profitability in the wake of the 2008-2009 financial meltdown.

White House officials played down any talk of Geithner and Summers losing influence.

A trademark of Obama’s management style, which was apparent during the deliberations over his Afghanistan strategy, is to encourage the airing of dissenting views and then to work with his advisers to arrive at a consensus.

"He is concerned to make sure that he’s exposed to all points of view," Summers told a small group of reporters in a briefing last week when asked to describe Obama’s decision-making process. "So he wants to hear disagreement with things that he has said or advisers who have different perspectives to share those differing perspectives."

Also emerging as a bigger player in shaping economic policy is Vice President Joseph Biden, who devoted much of his time last year to helping to oversee the $787 billion stimulus program that Obama signed into law last February.

Biden feels "passionately about the same set of problems" of firms becoming too big to fail and helped to shape the proposal on banks, said one White House official.

(Editing by Howard Goller)

Perhaps the best news of all  is that he had Paul Volcker at his side when he made the announcement. More on this on the following post.

Investment sources clearly sees Obama’s new initiative as a serious threat to the financial sector and thereby the inflated values of stocks, sending the market down sharply two days in a row.  This may be the pin that pricks the latest stock market bubble.

Here’s a quick summary from Reuters. See related video at the end.

Obama threatens fight with banks on new risk rules

Jeff Mason and Kevin Drawbaugh

WASHINGTON

Thu, Jan 21 2010

WASHINGTON (Reuters) – U.S. President Barack Obama threatened to fight Wall Street banks on Thursday with a new proposal to limit financial risk taking, sending stocks and the dollar tumbling.

Obama, a Democrat who is struggling to advance his agenda after a key election loss this week, laid out rules to restrict some banks’ most lucrative operations, which he blamed for helping to cause the financial crisis.

"If these folks want a fight, it’s a fight I’m ready to have," Obama told reporters at the White House, flanked by his top economic advisers and lawmakers.

"We should no longer allow banks to stray too far from their central mission of serving their customers," he said.

Financial sources said Treasury Secretary Timothy Geithner had hesitations about the proposals, concerned that good economic policy was being sacrificed for politics.

But a White House official said the plan had the unanimous backing of Obama’s economic team.

"We should no longer allow banks to stray too far from their central mission of serving their customers," Obama said.

After a mixed first year as president, Obama took a tough, populist-tinged stance aimed at revving up his political base by exploiting anger over Wall Street excess.

The proposals, which require congressional approval, would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.

They would also set a new limit on banks’ size in relation to the overall financial sector that would take into account deposits — which are already capped — as well as liabilities and other non-deposit funding sources.

The proposed rules also would bar institutions from proprietary trading operations, unrelated to serving customers, for their own profit.

Proprietary trading involves firms making bets on financial markets with their own money rather than executing a trade for a client. These expert trading operations, which can bet on stocks and other financial instruments to rise or fall, have been enormously profitable for the banks but can hold huge risks for the financial system if the bets go wrong.

The White House blames the practice for helping to nearly bring down the U.S. financial system in 2008.

The White House said it wants to coordinate with international allies in its implementation of the measures.

POPULIST MOVE HITS SHARES

Big financial institutions criticized Obama’s move.

"Trading, proprietary or otherwise, did not lead to the financial crisis," said Rob Nichols, president of the Financial Services Forum, a lobbying group for CEOs of firms such as Goldman Sachs and JPMorgan Chase.

He said the government should be focused on better risk management, corporate governance and other forms of regulatory oversight, "rather than arbitrarily banning certain activities, or setting arbitrary size limits."

Obama’s move is the latest in a series to crack down on banks and follows a devastating political loss for his party in Massachusetts on Tuesday, when a Republican captured a U.S. Senate seat formerly held by the late Democratic Senator Edward Kennedy, potentially imperiling his domestic agenda.

Bank shares slid and the dollar fell against other currencies after Obama’s announcement.

JPMorgan fell 6.59 percent, helping push the Dow Jones Industrial average down 2 percent.

Citigroup Inc fell 5.49 percent and Bank of America Corp fell 6.19 percent while Goldman dropped 4.12 percent despite posting strong earnings on Thursday.

Ralph Fogel, investment strategist at Fogel Neale Partners in New York, said the move would have a major impact on big-name brokerage firms like Goldman Sachs and JPMorgan.

"If they stop prop trading, it will not only dry up liquidity in the market, but it will change the whole structure of Wall Street, of the whole trading community," he said.

Underscoring the high level of public anger at banks, a majority of 1,006 Americans surveyed in a Thomson Reuters/Ipsos poll said executive pay was too high.

White House economic adviser Austan Goolsbee said the proposals were not designed to be punitive. He said they aimed to end the concept that some banks were "too big to fail" and to show that when such firms "mess up, they die."

Before his announcement, Obama met with Paul Volcker, the former Federal Reserve chairman who heads his economic recovery advisory board and who favors putting curbs on big financial firms to limit their ability to do harm.

The House of Representatives approved a sweeping financial regulation reform bill on December 11 that included a provision that would empower regulators to restrict proprietary trading. The Senate has not yet acted on the matter.

(Additional reporting by Caren Bohan, Ross Colvin, Matt Spetalnick, Alister Bull and Karey Wutkowski; Editing by Will Dunham)

Related Video

Obama takes aim at bankers

Commentary

• Make that two cheers for Obama
• Obama escalates his War on Wall Street

Der Spiegel published a fascinating, in-depth review of the signals and confusion that confronted the colonel in charge that made the fateful mis-decision. It shows how easy it will be for similar tragedies to occur in the future, under US command, creating the same kind of furor here. 

Below is an initial excerpt, with a link to the full story. The in-depth review starts on page 2 of the article. Be sure to get that far. Links to more recent articles are in the left sidebar. These article show that this single incident is continuing to fuel the opposition to German involvement in Afghanistan. What lies ahead for Obama in the US?

The End of Innocence in Afghanistan

‘The German Air Strike Has Changed Everything’

By SPIEGEL Staff

The recent bombing of two tanker trucks in an attack ordered by a German military colonel has led to major international criticism of the Bundeswehr. The incident has given a black eye to a country whose politicians have never been shy of telling others what’s best in Afghanistan.

…

The commander of the German reconstruction team in the northern city of Kunduz is experiencing the most horrendous days of his life. His decision to order air strikes against two hijacked NATO fuel trucks on the night of Sept. 4 changed everything — him, his career, German politics, relations with the Americans and the deployment of German soldiers in Afghanistan.

…

[A] German officer has issued a devastating order to shoot, causing two US fighter jets to kill 50 to 100 people on the ground, including civilians. It was an unnecessary air strike, that much is certain. The village of Omar Khel, which lies in the vicinity of the air strikes, now stands for the end of the illusion that a country could keep its hands clean in a world plagued by military conflict.

Full Story

The latest development in this story in Germany was reported today.

I find in the headlines today that the Bush comparison occurred to others – the Huff Post and Der Spiegel, and I’m sure many others. Here is the Der Spiegel headline and summary. I highly recommend reading the whole article.

Searching in Vain for the Obama Magic 

Never before has a speech by President Barack Obama felt as false as his Tuesday address announcing America’s new strategy for Afghanistan. It seemed like a campaign speech combined with Bush rhetoric — and left both dreamers and realists feeling distraught. Full Story

Obama’s action on Afghanistan is certainly another nail in the coffin of my hopes the Obama would bring about positive change. Add his militarism to his “economic” (wall street bailout) policies and what is there left to give one hope?

I watched a very interesting Bill Moyer program that I highly recommend if you didn’t see it. He assembled audios of phone conversations of Lyndon Johnson when he was considering what to do in Viet Nam in the period after he assumed power. The frightening part of it is how much he wanted to avoid committing troops to Viet Nam and how the political forces and  calculations, the military, and American macho character steadily and surely sucked him down the road to war. As I watched it, I saw the inevitability of Obama’s escalation in Afghanistan.

A very sad day for me and and our country and especially for all those from America and in Afghanistan and Pakistan that will be ground up in the meat grinder of war.

In the next few days I will try to send several articles on an important news story in Germany that has received no coverage in the US but that foreshadows what is sure to emerge here as the Afghan conflict escalates.

I followed this doubleheader program with the following interview with Simon Johnson, who I previously recommended here, and U.S. Representative March Kaptur, who totally captured my heart. It was a perfect complement to the first program, making it all too clear why the ghetto dwellers are left to rot when not thrown in prison. If the bankers care not at all about those whites in middle America who are suffering while they fatten up on the public purse, what possibility is there that we will truly address the failure of our society/economy to provide a meaningful life for the black and brown of the ghettos?

I haven’t posted anything on the financial crisis for quite some time, because the main flows have not changed since March or April 2009, when the Obama Administration made abundantly clear they were going to continue to turn the firehose of public money onto the banking sector until big firms were flush with cash and profit. The flow continues and the banks are now flush – while the rest of the economy is in the sh__house.

The anatomy of this scandal is laid out in depressing detail in Barry Ritholz’s book, Bailout Nation.  He also today posted the Moyer interview with Johnson and Kaptur in convenient format, including the transcript.

The interview ends with this exchange. If nothing else, you should watch the end of the interview so that you can see the expression on Johnson’s face as he says, “I’m skeptical.” The expression leaves no doubt of the depth of his skepticism.

MARCY KAPTUR: I don’t think President Obama has the right people around him. The poor man inherited a total mess, globally and domestically. I think some of the people that he trusted haven’t delivered. I urge him to get new generals. It’s time.

SIMON JOHNSON: Louis the Fourteenth of France, a very powerful monarch, was famous for having many bad things, you know, happen under his rule. And people would always say, ‘If only Louis the Fourteenth knew. I’m sure he doesn’t know. If we could just tell him, he’d sort it out.’ You know. I’m skeptical.

Kaptur & Johnson on Bill Moyers

By Barry Ritholtz – October 11th, 2009, 8:57AM

Just over a year after economic calamity brought promises of reform from Washington, has Wall Street really changed? Former International Monetary Fund chief economist Simon Johnson and US Rep. Marcy Kaptur (D-OH) report on the state of the economy.

click for video

In Michael Moore’s new film Capitalism: A Love Story, Congresswoman Kaptur says there has been a financial coup d’etat, and that Wall Street – rather than Congress – is in charge.

October 9, 2009

BILL MOYERS: Welcome to the JOURNAL.

I sat in a theater packed with passionate moviegoers, every one of them seemingly aghast at the Wall Street skullduggery exposed by Michael Moore in his latest film. It’s called ‘Capitalism: A Love Story.’ Here’s an excerpt:

MICHAEL MOORE: We’re here to get the money back for the American People. Do you think it’s too harsh to call what has happened here a coup d’état? A financial coup d’état?

MARCY KAPTUR: That’s, no. Because I think that’s what’s happened. Um, a financial coup d’état?

MICHAEL MOORE: Yeah.

MARCY KAPTUR: I could agree with that. I could agree with that. Because the people here really aren’t in charge. Wall Street is in charge.

BILL MOYERS: That’s the progressive Representative from Ohio, Marcy Kaptur, she’s with me now. She has a Masters from the University of Michigan, did graduate study at M.I.T. and still lives in the same house in the Toledo working class neighborhood where she grew up.

She’s in her 14th term in Congress, the longest-serving Democratic woman in the history of the House, and she’s an outspoken financial watchdog on three important Committees: Appropriations, Budget and Oversight and Government Reform.

Also with me is a familiar face to viewers of this broadcast. Simon Johnson is the former Chief Economist at the International Monetary Fund. He now teaches Global Economics and Management at M.I.T.’s Sloan School of Management. He’s one of the founders of the website Baselinescenario.com. I check it out daily for Simon’s take on the economic and financial crisis.

It’s been a year since the great collapse and both my guests are well equipped to assess what’s happened since then. Welcome to you both.

MARCY KAPTUR: Thank you.

BILL MOYERS: Let’s look at this story that I just read from the Associated Press this week about how Treasury Secretary Geithner is on the phone several times a day with a select group of very powerful Wall Street bankers, especially Citigroup, J.P. Morgan, Goldman Sachs. He will talk to them when Members of Congress have to leave a message on the answering machine. And these are the bankers who helped bring on this calamity and who are now benefiting from it. What does that say to you?

MARCY KAPTUR: That says to me that Wall Street and Washington is a circuit. And because Mr.Geithner headed the New York Fed that that historic relationship, unfortunately, continues. And it gives them special access and special power to influence policy.

SIMON JOHNSON: Well, I think it really tells you how the system works. The system is based on access and is based on what on Wall Street shaping Washington’s view of what’s important.

It’s the people who are very close to Mr. Geithner before when he was the head of the New York Fed. Before he became Treasury Secretary. These people have unparalleled access. And in a crisis, when everything is up for grabs, you don’t know what’s going on, the people who will take your phone calls, right, in government and people who are going to be standing in the oval office, making the key decisions. That’s the heart of the system. That’s the heart of how you get your agenda through, by changing their worldview.

MARCY KAPTUR: And they also move people. In other words, Mr. Geithner came from the New York Fed, he came from Wall Street, and he becomes Secretary of the Treasury. His predecessor, Mr. Paulson, came from Goldman Sachs, and he becomes Secretary of Treasury. You can go back decades, and you will see that there’s this revolving door between Wall Street and Washington. And I recently asked Chairman Bernanke of the Federal Reserve, ‘Let me ask you a question. Would you be willing to consider a reform where the Cleveland Fed would have equal power to the New York Fed, in terms of how the Fed is run?’ And his answer was, ‘No.’

BILL MOYERS: And why did you ask that question?

MARCY KAPTUR: Because I think we need to democratize the Fed. I think that my region of the country, which is suffering so heavily from these decisions that were made by Wall Street and Washington, we need to have voice. And our bankers, who didn’t do the bad things, our community bankers, who are having to pay higher fees shouldn’t be treated this way. Why should the people who did it right be penalized for those that did it wrong?

SIMON JOHNSON: Remember Wall Street convinced us that trading derivatives without any regulation, that all these kind of crazy housing loans, which are very dangerous for consumers. That all of this was sensible. All of this was a good way to sustain growth. That was wrong. That wasn’t it. That wasn’t that’s not the end of the story. In the crisis, when things got bad, they also convinced the key people in Washington that they, the bankers, the big bankers, the Wall Street bankers, who are really responsible for all of these problems, they should be saved. Not just their banks, but they individually and should be saved. Their jobs, their pensions, all their perks. It’s an extraordinary moment.

BILL MOYERS: You asked on your blog, just this week, a question I want to put to you now, and to both of you. You asked, ‘Does this crisis reflect something about the disproportionate influence of a few incompetent investment bankers or a deeper breakdown of capitalism?” What’s your answer to your own question?

SIMON JOHNSON: Well, definitely, this disproportionate influence of some fairly incompetent bankers, that’s for sure. That’s what we’re seeing today. That’s what we’ve seen over the past few months. I think on the issue on the issue of capitalism, we have to take this very seriously. To me, at least, the financial part of our capitalism is very seriously broken.

SIMON JOHNSON: They persuaded us to allow them to take incredible risks. And then they pushed all the downside, all those losses onto us, the taxpayer, at the same time as really hammering hard all the people who were duped, essentially, into taking out loans. People lost their houses. It’s an absolute tragedy. This combination cannot go on. And yet, the opportunity for real reform has already passed. And there is not going to be not only is there not going to be change, but I’ll go further. I’ll say it’s going to be worse, what comes out of this, in terms of the financial system, its power, and what it can get away with.

BILL MOYERS: Why?

SIMON JOHNSON: That’s the.

BILL MOYERS: Why is it going to how is it going to be worse?

SIMON JOHNSON: Well, there’s four we used to have a dozen or so substantial big banks, now we’re down to four. Now we’re down to four big banks that have a lot more market power and a lot more political power. They make the campaign contributions. They shape agendas in ways that are that are really quite scary. If you look, for example, at derivatives. And the debate on whether or not derivatives should be regulated in a sensible manner. And at this point, actually, the Obama Administration has is leaning in a better direction. But the big financial players are absolutely against any kind of sensible regulation. And I think they’re going to win.

MARCY KAPTUR: Let me give you a reality from ground zero in Toledo, Ohio. Our foreclosures have gone up 94 percent. A few months ago, I met with our realtors. And I said, ‘What should I know?’ They said, ‘Well, first of all, you should know the worst companies that are doing this to us.’

MARCY KAPTUR: I said, ‘Well, give me the top one.’ They said, ‘J.P. Morgan Chase.’ I went back to Washington that night. And one of my colleagues said, ‘You want to come to dinner?’ I said, ‘Well, what is it?’ He said, ‘Well, it’s a meeting with Jamie Dimon, the head of J.P. Morgan Chase.’ I said, ‘Wow, yes. I really do.’ So, I go to this meeting in a fancy hotel, fancy dinner, and everyone is complimenting him. I mean, it was just like a love fest.

MARCY KAPTUR: They finally got to me, and my point to ask a question. I said, ‘Well, I don’t want to speak out of turn here, Mr. Dimon.’ I said, ‘But your company is the largest forecloser in my district. And our Realtors just said to me this morning that your people don’t return phone calls.’ I said, ‘We can’t do work outs.’ And he looked at me, he said, ‘Do you know that I talk to your Governor all the time?’ He said, ‘Our company employs 10,000 people in Ohio.’

MARCY KAPTUR: And I’m thinking, ‘What is that? A threat?’ And he said, ‘I speak to the Mayor of Columbus.’ I said, ‘Why don’t you come further north?’ I said, ‘Toledo, Cleveland, where the foreclosures are just skyrocketing.’ He said, ‘Well, we’ll have someone call you.’ And he gave me a card. And they never did. For two weeks, we tried to reach them. And finally, I was on a national news show. And I told this story. They called within ten minutes. And they said, ‘Oh, we’ll work with you. We’ll try to do some workouts in your area.’

We planned the first one after working with them for weeks and weeks and weeks. Their people never showed up. And it was a Friday. Our people had taken off work. They’d driven from all these locations to come. We kept calling J.P. Morgan Chase saying, ‘Where’s your person? Where’s your person?’ And they finally sent somebody down from Detroit by 3:00 in the afternoon. But out people had been waiting all morning and a lot of people that’s how they treat our people.

BILL MOYERS: You did a remarkable thing on the floor of the House recently. And I want to show my audience a clip of a speech in which you urge people to break the law.

MARCY KAPTUR: So why should any American citizen be kicked out of their homes in this cold weather? In Ohio it is going to be 10 or 20 below zero. Don’t leave your home. Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don’t have that mortgage, and you are going to find they can’t find the paper up there on Wall Street. So I say to the American people, you be squatters in your own homes. Don’t you leave. In Ohio and Michigan and Indiana and Illinois and all these other places our people are being treated like chattel, and this Congress is stymied.

BILL MOYERS: Wow. You are urging them to resist the law when the Sheriff shows up to throw them out of their home.

MARCY KAPTUR: I’m saying that they deserve justice, too. And that the scales of justice in front of the Supreme Court are supposed to be balanced, and they’re not. And that possession is 90 percent of the law. And that you have legal rights, as a home owner. You have a right to legal representation. You have a right before the judge to have the mortgage note produced by whomever in the system has it. Judge Boyko of Cleveland threw out six cases, because when the foreclosures came up, the financial institutions couldn’t produce the note. Our people deserve their day in court.

BILL MOYERS: What’s your explanation as an economist. And a student of this financial system as to why the banks are taking so long to help the homeowners when Congress has allocated funds for that purpose?

SIMON JOHNSON: I’m afraid that it’s pretty obvious and it’s very tragic. That they have no interest in helping the homeowners. They make money with what they’re doing. Bill, they’ll expected a lot of these mortgages they made to default, okay? It was in their models. A high default rate. Now, they didn’t expect house prices to come down so much. That’s where they got their losses. But they absolutely made these loans expecting they would have to foreclose on people. And figuring they would make money on that.

SIMON JOHNSON: These are very smart, very profit-oriented people. I can assure you, if there was money in it for them. They would be negotiating you know, very various kinds of re-schedulings of these loans. They don’t want to do it. They it’s not in their interest. It’s not where the money is. Follow the money. The money is where Jamie Dimon says it is. Jamie Dimon says, ‘You ain’t seen nothing yet,’ in terms of his lobby in Washington. He’s on the record as saying, he’s this is his big initiative right now.

BILL MOYERS: To?

SIMON JOHNSON: To spend more time in Washington, more time cultivating all those relationships on Capital Hill and in the executive branch. And you know what else Jamie Dimon said to his shareholders? To his shareholders meeting this year, he said, with regard to 2008, the year of what we regard as the greatest financial crisis, an absolute human tragedy. He said, Jamie Dimon said to his shareholders, ‘This was perhaps our best year ever.’

MARCY KAPTUR: Think about what these banks have done. They have taken very imprudent behavior, irresponsible. They have really gambled, all right? And in many cases, been involved in fraudulent activity. And then when they lost, they shifted their losses to the taxpayer. So, if you look at an instrumentality like the F.H.A., the Federal Housing Administration. They used to insure one of every 50 mortgages in the country. Now it’s one out of four.

MARCY KAPTUR: Because what they’re doing is they’re taking their mistakes and they’re dumping them on the taxpayer. So, you and I, and the long term debt of our country and our children and grandchildren. It’s all at risk because of their behavior. We aren’t reigning them in. The laws of Congress passed last year in terms of housing, were hollow. Were hollow.

MARCY KAPTUR: Foreclosures in my area have gone up 94 percent. And we know the basic rules of economics. Housing leads us to recovery. Housing was the precipitating factor in this economic downturn. Unless you dealing with the housing sector, you aren’t going to have growth in this economy

BILL MOYERS: You’re both saying the financial world, the banks in particular, are putting their interests above anybody else’s interest. And they’ve got the power in the executive branch, and the Congress to back up their demands, right?

SIMON JOHNSON: This is capitalism, Bill. That’s what they’re supposed to do. They represent their shareholders, they’re appointed by the board of directors to make money for their shareholders. And the way they think that they can best make money is to shape the regulatory rules around housing around derivatives, around all everything we used to have that kept the financial sector under control. Has all been, you know, washed away, one way or another, by their efforts, right? They make money in the boom, that way. And when and when bad things happen, they shove all the downside onto the taxpayer. That’s what they’re doing their job.

MARCY KAPTUR: It’s socialism for the big banks. Because they’ve basically taken their mistakes and they’ve put it on the taxpayer. That’s the government. That’s socialism. That isn’t capitalism.

SIMON JOHNSON: Well people some people call that lemon socialism. So, when it turns out to be a lemon, it’s you it’s yours, the taxpayer. When it turns out to be good, it’s mine, I’m Wall Street.

BILL MOYERS: Why have we not had the reform that we all knew was being was needed and being demanded a year ago?

SIMON JOHNSON: I think the opportunity the short term opportunity was missed. There was an opportunity that the Obama Administration had. President Obama campaigned on a message of change. I voted for him. I supported him. And I believed in this message. And I thought that the time for change, for the financial sector, was absolutely upon us. This was abundantly apparent by the inauguration in January of this year.

SIMON JOHNSON: And Rahm Emanuel, the President’s Chief of Staff has a saying. He’s widely known for saying, ‘Never let a good crisis go to waste’. Well, the crisis is over, Bill. The crisis in the financial sector, not for people who own homes, but the crisis for the big banks is substantially over. And it was completely wasted. The Administration refused to break the power of the big banks, when they had the opportunity, earlier this year. And the regulatory reforms they are now pursuing will turn out to be, in my opinion, and I do follow this day to day, you know. These reforms will turn out to be essentially meaningless.

MARCY KAPTUR: When Lincoln ran into trouble, during the Civil War, he got new generals. He brought in Grant. I hope that President Obama will bring in some new generals on the financial front.

BILL MOYERS: Should Geithner be fired? And Summers be fired?

MARCY KAPTUR: I don’t think that any individuals who had their hands on creating this mess should be in charge of cleaning it up. I honestly don’t think they’re capable of it.

BILL MOYERS: Let me show you an excerpt from the speech President Obama made on Wall Street last month, September. Here is the challenge he laid down to the bankers.

PRESIDENT OBAMA: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.

BILL MOYERS: A reality check. Not one CEO of a Wall Street bank was there to hear the President. What do you make of that?

SIMON JOHNSON: Arrogance. Because they have no fear for the government anymore. They have no respect for the President, which I find absolutely extraordinary and shocking. All right? And I think they have no not an ounce of gratitude to the American people, who saved them, their jobs, and the way they run the world.

BILL MOYERS: In the scheme of things, it is the Congress, and the government that’s supposed to stand up to the powerful, organized interests, for the people in Toledo, who can’t come to Washington. Who are working or trying to keep their homes or trying to pay their health bills. What’s happened to our government?

MARCY KAPTUR: Congress has really shut down. I’m disappointed in both chambers, because wouldn’t you think, with the largest financial crisis in American history, in the largest transfer of wealth from the American people to the biggest banks in this country, that every committee of Congress would be involved in hearings, that this would be on the news, that people would be engaged in this. What we’re seeing is– tangential hearings on very arcane aspects of financial reform. For example, now we’re going to have a consumer protection agency to help the poor consumer, who doesn’t understand all of this, rather than hearings on the fundamental new architecture of reforming the American financial system, so that we have prudent lending, capital accumulation at the local level again; that we encourage savings and limit debt by the American people. Our country needs this. Those aren’t the hearings that are happening.

If you want a marker at the Federal level of how serious we are to get justice out of this financial crisis, look at the F.B.I. Look at the number of people who are really prosecuting and investigation mortgage fraud and securities fraud. It is so small

I’ve been one of the Members of Congress trying to increase by ten times the agents to get at the justice issues for the American people. For companies that have been hurt. For shareholders that have been hurt. Our government isn’t doing it. That it’s very easy to look at the budget of the F.B.I. in mortgage fraud and securities fraud and say, ‘How serious is the government?’ And until those numbers increase, we will not begin to get justice.

BILL MOYERS: If we can’t get reform out of this calamity, when can we get it then, given the realities you have both described?

SIMON JOHNSON: That’s the worry, Bill, right? And I’m very serious. I’m very serious about this. Which is, you know, does it take- we have elements of the Great Depression now, in terms of the impact on people, okay? I mean, people losing their jobs, their homes, their health insurance.

BILL MOYERS: Even though Wall Street says, ‘Well, we’re past the crisis now. Profits at the banks are up. And Wall Street- and the stock market is stirring.’

SIMON JOHNSON: We’re out of the financial part of the crisis, we’re not out of the human part of the crisis.

MARCY KAPTUR: And we’re not out of the housing crisis. The President ought to take these empty units and require his Administration to broker rental agreements with families, so they’re not kicked out. Property values are dropping, all over the country, sometimes by as much as 25 percent. You can do a 30 year mortgage, even a 40 year mortgage, where people have a job or even unemployment benefits, if they’re going to get them for another year. Well, my goodness, you can keep them in their home. Empty units do no one any good.

Let me tell you what happened in- where I live in Toledo, Ohio. The house next to me was foreclosed. And so, I called, the other day, a little plaque appeared on the door of this house. And it said, ‘$500 down, $300 a month rent.’ I said, ‘What is that, a land contract deal? What’s going on there?’ So I called the number. I get a repossession dealer in South Carolina. I said, ‘Hello sir, what’s your name?’ ‘Johnny,’ or something. I said, ‘And what’s your address?’ He gave me a P.O. Box number. I said, ‘Now listen,’ I said, ‘Your property is bringing down the value of our property because you’re on our heels.’ ‘Lady, I get these things from the bank.’ And he said, ‘You know, we try to unload ‘em. What are you going to offer me?’ This is what he’s saying to me over the telephone. I don’t think a single one of my neighbors knows that that home is now in possession of a group in South Carolina that could care less about it.

SIMON JOHNSON: Just to reinforce this point. Fanny Mae and Freddie Mac are now government agencies. Okay? They not only hold a lot of mortgages that are in default or close to default. They’re also responsible for enormous amount of the new loans- that are being originated anywhere in the country, actually. They work for the President. The kinds of proposals that Congresswoman Kaptur’s put in forth are entirely reasonable. And can be implemented by the executive branch, hopefully with Congress on board, certainly at the urging of certain members of Congress, obviously. But they can do it.

BILL MOYERS: So Simon, go ahead- you were saying- what is it that scares you? You’re worried?

SIMON JOHNSON: Another Great Depression. Right? If you don’t fix the financial system, Bill. If you allow them to have the same attitude. If you- if you actually allow them to increase their economic power, their ability to take risk, and their belief that they can shove the losses onto the government. And that’s why they didn’t show up to President Obama’s speech on Wall Street.

BILL MOYERS: Why don’t they respect him?

SIMON JOHNSON: Because they think that the next time they won’t even have to ask. They’ll just be given the bailout that they want.

MARCY KAPTUR: Right. That’s been their history. Their bed is feathered. When they messed up during the 1980s, they put their bill through the savings and loans crisis on the American people. $140 billion.

BILL MOYERS: And we’re still paying that off, by the way. I think the last payment will be made in 2013.

MARCY KAPTUR: Very good. Most people don’t even know that.

BILL MOYERS: Well, I covered that.

MARCY KAPTUR: But that, you know, it opened the flood gates. They go, ‘Oh, we can get away with $140 billion?’ This time how many trillions have they gotten away with? Plus all the deregulatory actions that were taken during the 1990s. I remember when they came to the Congress, when Newt Gingrich became Speaker of the House. And they came down to the Banking, Finance, and Urban Affairs Committee, and they took the name off the door. And they changed it to Financial Services. And people began to see that they had money in the bank, and they charged them a fee to cash their own check on their own money. And then fees went up for everything. And the ordinary consumer found, ‘Hey, it’s not so smart to have a savings account, because it costs me more money if I have under $10,000 in the bank, they charge me all this money on my own money.’ They got exactly what they wanted. And so, then all the abuses and the irresponsible and imprudent behavior of the 1990s that led to this, nobody did anything. They just kept opening more floodgates to them. And then with the removal of Glass-Steagall in 1999, which I-

BILL MOYERS: That was the rule that kept the investment banks from being owned by banks, right?

MARCY KAPTUR: It’s about separating banking and commerce.

BILL MOYERS: Right.

MARCY KAPTUR: They said as a country, you know, banks have extraordinary power. They have the power to create money. And decide how much that is worth. They have extraordinary power. And we used to have capital ratios. We need to get back to them. Ten to one. For every dollar in your bank, you can lend ten. You know what J.P. Morgan did? A hundred to one. And then with derivatives, who knows how much? Glass-Steagall separated banking from commerce, so that we didn’t have these institutions getting too big, getting into too many things. And we just gave them total abandon. And they took it.

SIMON JOHNSON: Well, the final end of the last vestige of Glass-Steagall came in just now in August. Unnoted, but I think very significant. Goldman Sachs, you remember, was an investment bank, a securities company. Not allowed to be a commercial bank; didn’t have access to the Federal Reserve and this ability to tap into the money supply of the country. Until September of last year, when the crisis broke, they were allowed a very short notice to convert to being a bank holding company. This was what saved Goldman Sachs in my opinion. Also Morgan Stanley. Which meant they could stay in the securities business. And they could also have access to the Federal Reserve. In August, just now, they converted to what’s called a financial holding company. That may seem like a technical detail to you, but this means they can borrow from the Fed, at essentially zero interest rate now.

They can invest in, I mean, as far as we can see, from the outside, looking at their portfolio, anything they want, including, you’re going to love this one, they just bought some stock, big chunk of stock in a Chinese automotive company. Okay? So, that’s your money, that’s your Federal Reserve, financing a highly speculative investment. And if it goes well, they get the upside. And if it goes badly, that’s another one for us.

BILL MOYERS: Well, and this is what we were talking about earlier, the system. I mean, President Clinton’s Secretary of Treasury, Robert Rubin helps eliminate Glass-Steagall. And then leaves the government and goes to work for? Citicorp?

SIMON JOHNSON: Well Rubin’s a fascinating character. He ran Goldman Sachs, he went into the Clinton White House, then he became Secretary of the Treasury, and it was on his watch that, first of all, Glass-Steagall began to really seriously crumble, and then it was completely swept away- replaced, abolished, really. And then, of course, Rubin goes on after he leaves Treasury, to be the senior guru type figure at Citigroup. And Citigroup is absolutely epicenter of everything that’s gone wrong with our financial system.

BILL MOYERS: And wasn’t it Robert Rubin the mentor, the guru to both Tim Geithner and Larry Summers?

SIMON JOHNSON: Absolutely. Both Geithner and Summers advanced to senior positions in the Treasury under Rubin was instrumental in bringing Larry Summers to be President of Harvard, after the Clinton Administration. And according to published new report, he was absolutely key person in making sure that Tim Geithner first went to a senior job at the IMF, and then became President of the New York Fed. And there are unconfirmed reports that Robert Rubin was an essential advisor to then candidate Obama in fall of last year, with regard to who he should bring on board as the leadership team on the economic side.

MARCY KAPTUR: And you know, looking at it from the heartland, when I look at Wall Street and all their connections into Washington, and I’ve been at it a while now, it’s very disheartening to me, because I know they don’t care about us out there. We’re flyover country for them. And they’re just out to make money.

And I have seen people that I worked with in the Carter White House, who were associated what the bond industry of Wall Street, use their access and create for themselves a money path that today has led them to head organizations like Black Rock, and get private contracts with the Federal Reserve. The over $2 trillion, we don’t know how much that the Federal Reserve has extended at this point.

BILL MOYERS: And Black Rock is?

MARCY KAPTUR: Black Rock is an institution that has gotten the major contract of the Federal Reserve to do the mortgage workouts. And my question is, the very people involved in Black Rock, who’ve gotten these confidential contracts with the Federal Reserve, they were involved on Wall Street in creating the instruments in the first place. So how do we know that they are not covering up their own crime?

BILL MOYERS: So, Simon, what happens now? If we’re going to avert a depression and the next calamity, what needs to be done?

SIMON JOHNSON: Well, I think you have to keep at it, Bill. I mean, that’s the lesson from previous generations of Americans, who have really confronted entrenched power like this. You have to keep at it. And you mustn’t be satisfied. When the Administration says, ‘Okay, we fixed it. Don’t worry. We did some technical tweaking on capital requirements, for example, in the banks.’ You have to say, ‘No, that’s not true. Let’s look at what’s happening, let’s follow it through.’

The muckrakers of today are absolutely essential, I think, to really pushing these banks. And revealing what they’re doing. And by the way, Bill, it’s going to I think it’s going to be a long haul. I think that the economy will start to recover. We’ll get some jobs back. It’s going to be very painful for a lot of people. But other people’s attention is going to drift. It’s a three, five, seven, maybe twelve year cycle. But when it comes back, it will come back with a vengeance. And it will be even, I think, even more devastating, in all likelihood, than what we just saw.

BILL MOYERS: How do we get Congress back? How do we get Congress to do what it’s supposed to do? Oversight. Real reform. Challenge the powers that be.

MARCY KAPTUR: We have to take the money out. We have to get rid of the constant fundraising that happens inside the Congress. Before political parties used to raise money; now individual members are raising money through the DCCC and the RCCC. It is absolutely corrupt. It’s good people.

BILL MOYERS: Those are the fundraising groups both parties-

MARCY KAPTUR: Parties.

BILL MOYERS: In the Congress.

MARCY KAPTUR: And then people wonder, ‘Well, why doesn’t Congress get along?’ Because they are made into arch enemies by the type of fundraising system that is embedded in the very guts of the institution. So, you’ve got to clean that out. But meanwhile, we need to get hired over at the justice department, 1,000 agents, in mortgage fraud and in securities fraud. Then, I pray, that the leadership of both chambers will do the kind of robust hearings that the nation deserves to rout out those who did wrong and to change the fundamental financial architecture of this country. And then the President needs to get his top housing advisors in the room with him. And they need to meet all weekend. And they need to get their arms around this housing market, in order to stem the rising foreclosures. We haven’t stopped the bleeding out there.

BILL MOYERS: Does President Obama get it?

MARCY KAPTUR: I don’t think President Obama has the right people around him. The poor man inherited a total mess, globally and domestically. I think some of the people that he trusted haven’t delivered. I urge him to get new generals. It’s time.

SIMON JOHNSON: Louis the Fourteenth of France, a very powerful monarch, was famous for having many bad things, you know, happen under his rule. And people would always say, ‘If only Louis the Fourteenth knew. I’m sure he doesn’t know. If we could just tell him, he’d sort it out.’ You know. I’m skeptical.

BILL MOYERS: Simon Johnson, Congresswoman Kaptur, thank you both very much for this interesting discussion.

MARCY KAPTUR: Thank you.

SIMON JOHNSON: Thank you.

I note B.O.’s graciousness in admitting his  undeservingness of the Nobel Peace Prize. I cling to the notion, perhaps the fantasy, that between the ears of the current President a monologue plays on a nearly endless loop with words something like this: "Rome wasn’t built in a day.

To turn a juggernaut the size of the American Empire takes the application of great force over considerable time. If I attempt to do this hastily, the effort will surely fail and I will likely be killed before I do anything much.

To avoid total failure, I must suffer public defeats along the way to success. To avoid being precipitous, to respect the need for caution, I have to go much slower than the progressives urge me to. Even at the cost of furious criticism I must let proxies–instead of me– accomplish
all they can, to keep some of the onus off of me for causing rapid, profit-killing change, for being a radical, which the U.S. electorate will never accept. Rashness never wins the day. Patient politics does." I can’t say that this bit of Poppins-speak protects me against the steady beat of Obama’s rimes and misdemeanors. I can’t say that much of the time I’m not among the furious.

I can’t say, either, paradoxically, that I’m not congenitally more optimistic than this existence justifies. I can only say that I’m not always wrong. I don’t _expect_ my optimistic view to be vindicated, but I devoutly hope it will. I’ll let go of it reluctantly.

In the health-care debate that’s consuming Obama and everybody else, necessarily, the ultimate prize, guaranteed medical attention for everybody, is still in play, despite bad planning by the administration. The spines of the Democrats, which have been as sturdy as soap bubbles for nearly as long as I can remember, are slowly stiffening to accommodate the strength and tenacity of their
constituents. So health care is getting true democratic consideration.

Meanwhile, owing to an outbreak of decency that is, so far, milder than sniffles, Iraq is a shrinking horror. The violence in Afghanistan, after a stupid, Obama-approved  "surge," is also aloft in the realm of pollsters and talking heads–in other words, is out in open public discussion instead of being prosecuted in D.C. war rooms. Obama is blamed for "governing by speech." Personally, I like that form of government. In a democracy you must sell your ideas and policies in open forum, and that’s what a President should do. Government is, except in war, the result of people speaking. This president is very good at it, just as the last was very poor, and "openness" was missing during
his term, as it was during his father’s, with terrible consequences.

Obama is a celebrity. Clinton was a bad celebrity. Kennedy was a good one. How you score on the celebrity meter is a poor indicator of your intentions, but it is an unequaled lubricant for the machinery of governing. Hitler made terrible use of it; Roosevelt and Churchill used it to tremendous effect. Charisma equals power. Obama has it. His "Accomplishment" score card, so far, stinks–STINKS–but I’m not ready yet to impeach.

The health-care controversy is seismic, tectonic in its significance. The claim by the Olbermanns, Maddows and Mahers (who I adore) that this is not a crusade to kill the medical-insurance industry and bring the medical-industrial complex under government control is disingenuous. It is precisely that. What idiot, rich or poor, will patronize malevolent greed and incompetence-made-necessary-by-stinginess when there’s a free or cheap alternative?    

I can’t wait. I have VA health care. In the fall of 2005 I was totally theirs while they cured me, aggressively and expertly, of throat cancer. My left knee is worn out. Soon they’ll install a new one. The cost to me for both these interventions–and for the ongoing watchfulness they keep
trained on me–is zero. If I were rich, I’d have a ridiculously small co-pay. Government is good at building highways and bridges, at universal education (sometimes) and at doctoring.

To destroy one of late-stage capitalism’s most productive sources of golden eggs is to strike a blow at the buccaneering heart of our Religion of Profit. An even bigger and more dangerous vampire is our "defense" industry. Coal, oil, atomic energy, industrial agriculture, finance, commodity trading–it’s a big list of economic sectors that have long since crossed the line between "fair profit" for needed goods and services and naked exploitation of corrupt government and the power of
advertising to rob the masses.

How rich are these titans? How hard will they fight to protect their money factories? We are seeing the answer in the desperate contortions of the Republicans.

What’s at stake is the basic argument about distributing stuff that reached its last climax in Philadelphia in the overheated summer of 1787, when people gathered to sweat and shout and decide how to run their new nation, what its constitution should say. What they agreed on was a
compromise that everybody hated, which assured that the quarrel would go on as long as humans are humans, neither devils nor saints.

Obama deferred this morning to the "transformational leaders" who precede him as Nobel laureates. Whether he’ll rise to that description or whether my cockeyed optimism is just helplessly and totally cockeyed, is playing out in an extraordinary pageant, right in front of us. It’s plain that he knows what the phrase means.

What for me is the last straw has been his complete back down from his campaign rhetoric on health care reform. Rather than standing fast for his principles and fighting for what, based on his prior stands, he knows in his heart is right, he has been all to ready to cave in to seemingly any interest group that has an objection.

I now despair that he doesn’t have the backbone and character required to win in the rough and tumble of national politics. Those he cites as examples, Lincoln, Roosevelt, and Reagan, knew how to stand by their beliefs and move the opponents into disarray. Obama seems all to easily brought to disarray by opponents who have a fraction of the power and ammunition that he has.

The following article, sent to me by Tom Wodetzki, crystallized all of the floating discontents I’ve been feeling. It is all too insightful, and it makes me sick. He who I’d seen as the hope for transformation, is indicted as a political opportunist that has become a willing tool of the corporate power interests. If Glenn Greenwald is right, our country is doomed to continue its downward slide.

Glenn Greenwald

Friday Aug. 21, 2009 08:22 EDT

salon.com

Has Obama lost the trust of progressives, as Krugman says?

(updated below – Update II – Update III)

Paul Krugman has an excellent column today arguing that progressives have backlashed so intensely over the prospect of Obama’s dropping the public option because — for reasons extending far beyond specific health care issues — they no longer trust the President.  Citing Obama’s steadfast continuation of Bush/Cheney Terrorism policies, the administration’s extreme coziness with crisis-causing banks, and the endless retreats on health care, Krugman says that "a backlash in the progressive base . . . has been building for months" and that "progressives are now in revolt. Mr. Obama took their trust for granted, and in the process lost it." 

Krugman contends that while "the fight over the public option involves real policy substance," it is at least as much "a proxy for broader questions about the president’s priorities and overall approach."  That’s the argument I made the other day about why the health care fight is so important regardless of one’s views of the public option.  The central pledges of the Obama campaign were less about specific policy positions and much more about changing the way Washington works — to liberate political outcomes from the dictates of corporate interests; to ensure vast new levels of transparency in government; to separate our national security and terrorism approaches from the politics of fear.  With some mild exceptions, those have been repeatedly violated.  Negotiating his health care reform plan in total secrecy and converting it into a gigantic gift to the pharmaceutical and insurance industries — which is exactly what a plan with (1) mandates, (2) no public option and (3) a ban on bulk negotiations for drug prices would be — would constitute yet another core violation of those commitments, yet another bolstering (a major one) of the very power dynamic he vowed to subvert.

It is difficult to dispute that there is rising progressive anger over what the administration appears to be doing in the health care realm.  Consider the remarkable, blog-based fund-raising campaign to embolden progressive House members who vowed a NO vote on any health care bill lacking a public option even if that’s the bill returned from conference reconciliation.  If those House progressives adhere to their pledge, that would be an enormous impediment to the White House’s plans — and Kevin Drum astutely notes that the purpose of the fund-raising effort is to force the notoriously hapless, impotent and capitulating House progressives to adhere to their clear commitment (as The Hill put it yesterday:  "House liberals have a history of getting rolled").  In just a few days, that campaign has raised more than $300,000.  From what I can recall, that is the most prolific single-issue Internet fund-raising since the fundraising bonanza fueled by anger over the 2008 vote by Democrats (revealingly including Obama) to legalize Bush’s warrantless eavesdropping program and retroactively immunize telecom lawbreakers.

If one were to analyze matters from a purely utilitarian perspective, one could find ways to justify the White House’s attempt to write a health care plan that accommodates the desires of the pharmaceutical and drug industries [mandates (i.e., 50 million forced new customers) plus government subsidies to pay their premiums plus no meaningful cost controls (i.e., no public option)].  All other things being equal, it’s better — from the White House’s political perspective — that those industries not spend vast sums of money trying to defeat Obama’s health care proposal, that they not pour their resources into the GOP’s 2010 midterm effort, that they not unleash their fully army of lobbyists and strategists to sabotage the Democratic Party.  That’s the same calculating mindset that leads the White House to loyally serve the interests of the banking industry that caused the financial crisis (we don’t want to make enemies out of of Goldman Sachs or turn investment bankers into GOP funders).  Indeed, that’s the same mindset that leads the White House to avoid any fights with the Right — and/or with the intelligence community and permanent military establishment — over Terrorism policies (there’s no political benefit to subjecting ourselves to accusations of being Soft on Terror and there’s plenty of reasons to cling to those executive powers of secrecy, detention and war-making).

In essence, this is the mindset of Rahm Emanuel, and its precepts are as toxic as they are familiar:  The only calculation that matters is maximizing political power.  The only "change" that’s meaningful is converting more Republican seats into Democratic ones.  A legislative "win" is determined by whether Democrats can claim victory, not by whether anything constructive was achieved.  The smart approach is to serve and thus curry favor with the most powerful corporate factions, not change the rules to make them less powerful.  The primary tactic of Democrats should be to be more indispensable to corporate interests so as to deny the GOP that money and instead direct it to Democrats.  The overriding strategy is to scorn progressives while keeping them in their place and then expand the party by making it more conservative and more reliant on Blue Dogs.  Democrats should replicate Republican policies on Terrorism and national security — not abandon them — in order to remove that issue as a political weapon.

If those Emanuelian premises are the ones that you accept, if you believe that Obama should be guided by base concerns of political power, then you’re likely to be satisfied with the White House’s approach thus far — both in general and on health care specifically.  That would also likely mean that you’re basically satisfied with the behavior of Democrats during the Bush era, and especially since 2006 when they won a majority in Congress, since that is what has driven them for the last decade: all that matters is that we beat the Republicans and we should do anything to achieve that, including serving corporate donors to ensure they fund Us and not Them and turning ourselves into war-making, civil-liberties-abridging, secrecy-loving GOP clones in the national security realm.

But that isn’t what Obama pledged he would do when he campaigned.  He repeatedly vowed he would do the opposite — that he would reject that thinking and battle aggressively against domination by what he called "the interests of powerful lobbyists or the wealthiest few" who have "run Washington far too long" –  and he convinced millions of people that he was serious, people who, as a result, became fervent devotees to his cause.  Those are the people who New York Times columnist Frank Rich recently said have been "punked by Obama" because it is precisely that same narrow group which continues to be the prime beneficiaries and masters of Washington behavior during the Obama presidency.

More than any betrayal on a specific issue, it is Obama’s seeming eagerness to serve the interests of those who have "run Washington for far too long" — not as a result of what he has failed to accomplish, but as a result of what he has affirmatively embraced — that is causing what Krugman today describes as a loss of trust in Obama from those who once trusted him most.  This approach is not only producing heinous outcomes, but is politically self-destructive as well.  In a superb post the other day, Digby recounted what fueled the Naderite movement in 2000 and warns, presciently I think, that the willingness of Obama/Emanuel so blatantly to disappoint those to whom they promised so much (especially young and first-time voters who were most vulnerable to Obama’s transformative fairy dust) will lead them either to support a third party or turn off from politics altogether:

Rahm Emanuel believes that the key to Democratic success is a coalition in which Blue Dogs and corporate lackeys mitigate progressive change on behalf of the moneyed interests which he believes the political system must serve. Regardless of his malevolent view of how the political system should work, on a political level, I think he’s living in the past. . . .

But on a political level, the left has been betrayed over and over again on the things that matter to us the most. The village is pleased, I’m sure. But the Democratic party only needs to look back eight short years to see just how destructive it is to constantly tell their left flank to go fuck themselves. . . .

At the time [in 2000] nobody believed that an incumbent Vice President in a roaring economy would have a race so close that the Republicans could steal it. But we know differently now don’t we? And you would think that the Democratic establishment would also know that because of that, it may not be a good idea to alienate the left to the point where they become apathetic or even well… you know. It can happen. It did happen. Why the Democrats persist in believing that it can’t happen again is beyond me. . . .

Obama mobilized a whole lot of young people who have great expectations and disappointing them could lead to all sorts of unpleasant results. Success is about more than simply buying off some congressional liberals or pleasing the village. It’s worth remembering that a third party run from the left is what created the conditions for eight long years of Republican governance that pretty much wrecked this country.

After 2000, what is it going to take for the Democrats to realize that constantly using their base as a doormat is not a good idea? It only takes a few defections or enough people staying home to make a difference.  And there are people on the left who have proven they’re willing to do it.  The Democrats are playing with fire if they think they don’t have to deliver anything at all to their liberal base — and abandoning the public option, particularly in light of what we already know about the bailouts and the side deals, may be what breaks the bond.

It’s really not too much to ask that they deliver at least one thing the left demands, it really isn’t. And it’s not going to take much more of this before their young base starts looking around for someone to deliver the hope and change they were promised.

On most fronts that matter — civil liberties, national security, economic policy, servitude to corporate interests, even rising opposition to Obama’s long-promised escalation of the war in Afghanistan — that defines rather clearly what the Obama/Emanuel approach has been thus far.  Stopping it somewhere — anywhere — is vital, and for many reasons, the health care fight provides an excellent opportunity (at least as good as any) for doing so.  Clearly — as first became conclusively clear when Obama so shamelessly reversed himself on FISA and telecom immunity — the Obama White House will not, on its own, cease following the dictates of Blue Dogs, "centrists" and the corporate interests which own them.  That will only happen if they realize that their political power is threatened by building their power in service of corporate interests and by continuing to ignore the interests of those who elected them.  The signs which Krugman identifies to show that Obama has lost the trust of many progressives is one important step, but preventing a health care bill that is nothing but an ill-gotten gift to the insurance and drug industries is a far more important step still. Whatever else one might want to say, changing who wins in Washington is the most important goal there is.

UPDATE:  The new weekly Research 2000/Kos tracking poll was just released and — according to Daily Kos polling analyst Steve Singiser — Obama’s approval ratings have taken a dive (as have the Demorcratic Party’s) due to increasing dissatisfaction with him on the part of Democrats:

Across the board, the drops among Obama and the Democratic Party have come not from the loyal opposition, nor have they come from dismayed Independents.

They have come from Democrats.

A cursory look at the graph for Obama’s favorability, broken down by party, shows that after a long period of relative stability among Democrats, there was a sharp drop this week . . . Anyone who thinks the protracted arguments over health care aren’t frustrating the Democratic base need look no further. A ten-point dip in net favorability, in a single week, is a pretty solid statement.

That speaks for itself.  The Obama/Emanuel approach not only produces awful policy but is also self-destructive politically.

UPDATE II:  On the general question of "trusting Obama," BTD makes an important point:  "I am against the idea of trusting any politician, including Obama, Ted Kennedy, Russ Feingold, Bernie Sanders, Nancy Pelosi and Anthony Weiner. Watch what they do, not what they say."  Indeed, as I’ve written many times, "trust" is appropriate for one’s friends, loved ones, family members and the like — but not for politicians.   That’s what John Adams meant when he said:  "There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty."  "All" means "all" and "none" means "none."

But that’s not how our political culture works generally.  Our politics have become entirely celebretized.  Political discussions typically resemble junior high chatter about one’s most adored and despised actors:   filled with adolescent declarations of whether someone "likes" and "trusts" this politician or "dislikes" that one.  "I trust Obama" has long been a common refrain among his most loyal supporters.  The fact that, as Krugman says, that is much less true now is quite significant, even if "trust" is an inappropriate emotion in the first place to feel towards any political official.

UPDATE III:  It’s not just the Research 2000/Kos poll that shows a significant decline in Obama’s approval ratings among Democrats.  According to Greg Sargent, the ABC News/Washington Post poll released this week shows the same and even worse:

A major factor in President Obama’s slide in today’s big Washington Post/ABC News poll, which is preoccupying the political classes today, is his surprisingly sharp drops among Democrats and even liberals, according to crosstabs that were sent my way.

Much talk today has focused on Obama’s difficulties with independents. But the drop among Dems and liberals is also a key driving factor in the President’s skid, according to WaPo polling analyst Jennifer Agiesta, who graciously provided the additional data.

Even for those of you who are willing to justify anything and everything in the name of "political pragmatism," betraying clear campaign commitments and constantly exhibiting contempt for core progressive values doesn’t seem to be working very well as a political strategy, to put that mildly

– Glenn Greenwald

The World from Berlin

‘Obama Should Make Sure Cheney Is Brought to Justice’

The appointment of a federal prosecutor to probe CIA abuses while interrogating terror suspects is exposing deep divisions in the US. While conservatives oppose the plans, liberals say it doesn’t go far enough. German commentators think the Bush administration must be brought to account.

With the United States already split down the middle by the Obama administration’s attempts to introduce health care reform, the opening up of an investigation into alleged CIA abuse of prisoners looks likely to put an end once and for all to the president’s hopes of healing the country’s deep divisions.

The announcement by US Attorney General Eric Holder on Monday that he had appointed a federal prosecutor to look into possible abuses by CIA interrogators in the war on terror has unleashed attacks from both the conservative right and those to the liberal left who feel the probe will not go far enough.

A CIA report from 2004 newly declassified and released on Monday by the Obama administration revealed some of the harsh tactics used by CIA interrogators on captured terror suspects. One detainee, accused of involvement in the Sept. 11 attacks, was threatened with the murder of his child. Another was told he would be forced to watch his mother raped. The method of waterboarding, or simulated drowning, often went beyond what was authorized, prisoners were slapped and handguns and power drills were used to threaten detainees.

Veteran federal prosecutor John Durham is now charged with looking into these possible abuses by CIA agents who may have overstepped even the wide latitude that they were given under the Bush administration’s highly controversial guidelines.

‘Senior Officials Authorized Torture’

Republican senators have attacked the appointment, saying the probe could hamper US intelligence efforts. Former Vice President Dick Cheney reiterated an earlier allegation that the Obama administration was undermining national security and that the intelligence obtained from the harsh interrogation techniques had saved lives. In a statement Cheney said that those who carried out the interrogations "deserve our gratitude" and do not deserve to be "targets of political investigations or prosecutions."

However, several Democrats as well as officials with the American Civil Liberties Union (ACLU) and Amnesty International have complained that the probe is too narrow in scope because it will not investigate the behavior of officials in the Bush administration who sanctioned the interrogations program.

"Any investigation that begins and ends with so-called rogue interrogators would be completely inadequate given the evidence that’s already in the public domain," Jameel Jaffer of the ACLU told the Associated Press. "We know that senior officials authorized torture."

German commentators on Wednesday praise the launch of the investigation but most would like to see it widened to bring George W. Bush and Dick Cheney to account.

The center-left Süddeutsche Zeitung writes:

"The public has a right to know the full truth about what happened in America’s torture chambers and about the attempts by George W. Bush’s government to cover this up. Attorney General Eric Holder has now appointed a special investigator to look into the worst excesses."

"President Barack Obama is not enthusiastic. … It is understandable that Obama might want to leave alone the sins of his predecessor. The culture clash over health care reform has shown once again how deeply divided this country has become, with two irreconcilable camps. The Republicans are prepared to do everything they can to damage Obama. They want one thing: To see the president fail. That’s why they are pushing a fundamentalist opposition against any health care reform, despite the fact that the conservatives realize how urgently this is required. If one follows the weird debate about this reform, it becomes clear just what the US faces in the event of investigations and even trials of CIA agents."

"The Republicans will attempt to recreate an atmosphere of collective hysteria similar to that which followed the 2001 attacks. Back then the fear of another terrorist attack prevented all sensible thoughts. Concerns about the rule of law were pushed to the side. The Republicans will accuse Obama of putting the country’s security in jeopardy."

"Nevertheless, there can be no alternative to shedding light on the events in the CIA jails. What happened there was simply wrong and not in tune with the American principles of the rule of law and with the country’s deeply rooted awareness of human dignity. The logical consequence of this investigation would be that those who allowed, justified or even ordered abuse and torture would be brought to justice. It was George W. Bush and Dick Cheney who are to blame for the fact that America lost its decency and its reputation."

The Financial Times Deutschland writes:

"The break with the Bush era took longer than Barack Obama’s supporters may have hoped for. Only after plenty of resistance has the US president now brought himself to take a closer look at the brutal interrogation methods used by CIA operatives and have any perpetrators prosecuted. As understandable as Obama’s initial hesitancy is from a tactical point of view, it is important that he now clearly advocates a comprehensive investigation and punishment."

"Before his inauguration, Obama faced a dilemma. Although he wanted to bring about far-reaching change in the US, he felt that he needed to rely on the support of the broader public, including those who had not voted for him. Obama’s goal was to build a consensus to bring about his mammoth projects, such as the stimulus packages, a climate protection law and reforms to banking regulations and the health system. He wanted to soften the hardened political positions of the Bush era and to overcome the divide in society. If a few misdeeds from the past went unatoned, than that was an acceptable price to pay for Obama’s greater aims."

"In the meantime it seems neither necessary nor effective to take too much heed of the sensitivities of the Republican camp. Important decisions in the fight against the economic crisis have already been made. And the Republicans’ aggressive and populist campaign against Obama’s healthcare reform has broken any bipartisan consensus."

"The president should now concentrate on reconciling his disappointed supporters. Obama’s new direction would be more credible if he also made responsible those in the previous administration who ordered the questionable interrogation methods. And if he were to make the investigation into allegation of torture a top priority, rather than hiding behind his attorney general."

The left-wing Die Tageszeitung writes:

"Those who want a better tomorrow should look forwards not backwards. That idea is part of the American self image. When Barack Obama promised during the election campaign that he did not want to look back in anger at those who were responsible for war and violence, he was perfectly in tune with this ideal. America had instead to once again reinvent itself."

"The Democrat had hoped that this strategy would win over important Republican votes for the implementation of his grand projects such as health care reform. The deal was: I will leave your deeds unpunished and you allow me to make America a better country. As a candidate Obama already had a refined sense of what the political class would … allow."

"The pressure on Obama is now growing. It is disillusioning to see that he only called on an independent investigator after the CIA’s gruesome deeds … became public. In the name of the United States, people were tortured and even threatened with the murder and rape of their relatives. ‘Unbelievable’ is the likely first reaction. Particularly when one hears how Dick Cheney coolly defends these excesses right up until today."

"Upon calmer reflection, however, it is less surprising that something like this could happen in the privatized politics of the Bush administration. Set free from democratic controls and driven by a greed for profits, a system could establish itself in which the humanitarian principles played no role at all."

"Whether Obama likes it or not as US president he carries the responsibility for his country not just today and tomorrow but also during its recent past. And that is why he must expose the CIA crimes rigorously. And he has to hold those responsible accountable even if they belong to his own political class. If Obama is serious about a new beginning then he must do everything to make sure that Cheney, who was after all the brains behind the horror, is brought to justice."

Siobhán Dowling