Happy Thanksgiving

If They Are Too Big To Fail, They Are Too Big.

During the last years corporate America has been allowed to consolidate into monopolies. Giant corporations exist today in Telecommunications, Health Care, Automotive Manufacturing, Financial Services and many other industries that are vital to U.S. national security.

Certainly, recent events have taught us that we need to expand our definition of “national security” to include the health and well-being of our financial structure. Washington now tells us that GM is “too big to fail”, that Citibank is “too big to let go” and that a failure of AIG would trigger a global financial disaster . Unfortunately this seems to be true and equally unfortunate is that there are corporations in other industries that are presumably “too big to let go” (Verizon?).

All this has come about because our government “let go”. The last 25 years has seen an unraveling of regulation in many industries and sectors as the idea that “all government is bad” ruled the day. This has been especially true of the Bush Administration which has left several of our governmental departments to atrophy or fall apart almost completely. We hear and see that the departments of Justice, Commerce, Treasury, Energy, Health and Human Services and others have become dysfunctional as ideologues have taken over and career officials have left in droves. Financial, and more to the point anti-trust regulation has deteriorated to a point that is dangerous to our society and our economy.

So the question begs “if it’s too big to fail, isn’t it just too big?”.

While “big” maybe better for upper management and occupants of executive suites (and their compensation) it certainly has not been good for the U.S. consumer and the American economy.

The United States is today 15th in the world in broadband penetration. Broadband is undoubtedly as important to our future as the Interstate Highway System was when Eisenhower envisioned an expansive highway network that would facilitate the ease of movement of goods and people to an unprecedented extent. In Japan it is easy to have a teleconference via cell phone speeding from Tokyo to Osaka on the “bullet train”. In South Korea wireless is ubiquitous and the entire country is covered. And in the United States, Verizon still sells DSL, an outdated 20th century technology, as broadband and the consumer, for the most part, doesn’t understand why the Internet runs so slowly.

While the U.S. has all but sanctioned monopolies our government has not ensured that these mega-corporations serve the public and invest in, build and deploy the latest technologies. Greed and lack of foresight has made us a second rate telecommunications power. And certainly, in the early 21st century, telecommunications, electronic commerce and general interconnectivity are issues of national security.

I believe that it is way past time to look at monopolistic practices in vital industries as a danger to our national security.

It is therefore incumbent upon our new President and his administration to immediatly strengthen national security by assuring modernization and enforcement of regulations that prohibit the growth of any business that is deemed “too big to fail”.

Time For A Re-definition: What Does National Security Mean?

Defining National Security

For far too long the U.S. has seen “national security” exclusively  as a military question.  American’s have been led to believe, certainly during the last eight years, that military superiority equaled national security.

The Bush Administration, and its “neo-con” policy influencers have denigrated the concept of “soft power”, repudiated long-standing and important bi-lateral and multi-lateral agreements (The Geneva Convention) and shunned any who opposed it as being “wimps” or lacking a vision of American Empire.

Many on the far right even speak of “decoupling” – the idea that what happens in the rest of the world doesn’t matter to us. They still seem to believe that the U.S. is the only super-power and that America doesn’t need to react need to concern itself with global events because as the only remaining super-power we can dictate to the rest of the world and create events rather than having to respond to them. What could be further from the truth.

Decoupling is a myth. Globalization has caused the global economy to integrate. As we've seen, events in the U.S. have far-reaching consequences that spread rapidly to the rest of the world. And vice-versa.

The American situation at the beginning of the 21^st century demands a redefinition of whatthe idea of “national security” means to us. We can no longer afford to live in an intellectual bubble that insulates us from knowing what the consequences of our, and other global players, actions are.

If the freezing of lending, the collapse of the mortgage industry, troubles in the Automobile industry, government bailouts and the specter of corporate CEO’s begging for huge sums of money have taught us anything it should be that many things can affect our National Security, not just military affairs. We must expand our definition of national security to encompass financial well-being as well.

The exercise of wise “soft power” oversees, and proper government regulation of key industries at home are integral parts of America’s national security.   

We are not used to being led well

It will be awhile before we get used to being led well again. This has been a long 8 years for the body politic. It will be interesting to see America respond to good governance again.

What's The Matter With Us?

Gary Becker & Richard Posner
The Becker Posner Blog

The Financial Crisis: Why Were Warnings Ignored?--Posner“

"Citi was heavily involved in derivatives, which have been described by Warren Buffett as ‘financial weapons of mass destruction.'

It should be clear by now to any rational person that the deepening economic crisis has it's origins in a total lack of oversight by the governments of the world.

Some very smart people, including Nouriel Roubini, Paul Krugman, and many others warned about what was happening. Why were they ignored?

Could it have been greed? Could it have been that the exact same people who had the most to lose or gain ignored what they didn't want anyone to really know?

I am unable to believe that the the very same people who still feed at the trough today-those who claimed that they actually were entitled to 7,8,9 or even 10 figure incomes because they were the smartest people around really didn't know what was happening. I believe that they ignored or refused to acknowledge the truth so that they could continue to suck huge salaries and bonuses out of the system. And they are still getting away with it!

Thomas Frank asked "What's The Matter With Kansas?"....it's time to ask, what's the matter with the American people?"

If a brilliant economist yells to the crowd, is it the people's fault if they don't hear? You betcha!

Paul Krugman
The few, the proud, the destructive

We are getting so screwed.....

what's worse is that these thieving greedy bastards are getting their pockets filled again...pockets that are already over-flowing with huge ill-begotten booty. It's our money folks....

Robert Reich
Citigroup Scores

"If you had any doubt at all about the primacy of Wall Street over Main Street; the utter lack of transparency behind the biggest government giveaway in history to financial executives, and their shareholders, directors, and creditors; and the intimate connections the lie between Administrations -- both Republican and Democratic -- and the heavyweights on Wall Street, your doubts should be laid to rest. Today it was decided the government will guarantee more than $300 billion of troubled mortgages and other assets of Citigroup under a federal plan to stabilize the lender after its stock fell 60 percent last week. The company will also will get a $20 billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Program.

This is not a particularly good deal for American taxpayers, but it is a marvelous deal for Citi. In return for all the cash and guarantees they are giving away, taxpayers will get only $27 billion of preferred shares paying an 8 percent dividend. No other strings are attached. The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened.

Meanwhile, more than a million workers in the automobile industry, along with six million homeowners in danger of losing their homes, and a millions of Americans who depend on small businesses and retailers for paychecks, are getting nothing at all."

Paul Kedrosky
Good Bank, Bad Bank, and Fucked Bank

Yves Smith - Naked Capitalism
WSJ: US Agrees to Bail Out Citi (Updated)