Let's get down to Basics: Terrorism 101

Washingtonsblog:

Sunday, September 12, 2010The Warped Mission of the American Military: "Out-Terrorize the Terrorists"

A number of American soldiers are blowing the whistle on the American military practice of indiscriminately killing Iraq civilians - by randomly firing bullets in a 360 degree circle - anytime that an improvised explosive device hits a U.S. soldier.

As Truthout notes:

Both [specialists Ethan McCord and Josh Stieber] say they saw their mission as a plan to "out-terrorize the terrorists," in order to make the general populace more afraid of the Americans than they were of insurgent groups.

In the interview with [Constitutional lawyer Scott] Horton, Horton pressed Stieber:

"... a fellow veteran of yours from the same battalion has said that you guys had a standard operating procedure, SOP, that said - and I guess this is a reaction to some EFP attacks on y'all's Humvees and stuff that killed some guys - that from now on if a roadside bomb goes off, IED goes off, everyone who survives the attack get out and fire in all directions at anybody who happens to be nearby ... that this was actually an order from above. Is that correct? Can you, you know, verify that?

Stieber answered:

"Yeah, it was an order that came from Kauzlarich himself, and it had the philosophy that, you know, as Finkel does describe in the book, that we were under pretty constant threat, and what he leaves out is the response to that threat. But the philosophy was that if each time one of these roadside bombs went off where you don't know who set it ... the way we were told to respond was to open fire on anyone in the area, with the philosophy that that would intimidate them, to be proactive in stopping people from making these bombs ..."

Terrorism is defined as:

The use of violence and threats to intimidate or coerce, especially for political purposes.

So McCord and Stieber are correct: this constitutes terrorism by American forces in Iraq.

Of course, America's institutionalized policy of torture (see this and this) is also terrorism. As I pointed out last year:

An article today in Der Spiegel describes a study on the use of torture over the last couple of thousand years:

A new book, ["Extreme Violence in the Visuals and Texts of Antiquity"] by Martin Zimmerman, a professor of ancient history in Munich, looks at current research into the kinds of violence that inspired "loathing, dread, horror and disgust."

In the ancient Far East, where there were large states peopled by many different ethnicities, leaders demonstrated their might by inventing ingenious new tortures and agonizing methods of execution -- as a way to keep the population obedient...

The issue of state-sanctioned torture to achieve political goals is still a current one.

The study reinforces what I wrote last year:

Listen to the testimony to Congress by a representative of the U.S. Department of Health and Human Services:

"Governments that use torture intend to intimidate their citizens in order to maintain control; those who are tortured become examples of the consequences of dissent."

Indeed, this is a well-known tactic for brutal regimes. Take Zimbabwe, for example:

"Victims and eyewitnesses told Human Rights Watch that [Zimbabwe’s brutal regime] has set up detention centers . . . to round up and instill fear in suspected political opponents."

Torture is a form of terrorism, plain and simple.

As the U.S. Department of Health and Human Services director told Congress:

"... torture is the deliberate mental and physical damage caused by governments to individuals to ... terrorize society."

And the U.S. policy of assassinating people all over the world (including Americans) - without trial - is a form of terrorism as well.

Unfortunately, this is nothing new. As the former director of the National Security Agency said:

By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism - in every version they produced, the lawyers said the US would be in violation.

(the audio is here).

And as Truthout points out, the 360 degree firing on innocent bystanders is most definitely a war crime:

High-level orders to kill civilians in the context of retaliation for attacks on forces have already been successfully prosecuted as a war crime. In 1944, German SS Obersturmbannführer Herbert Kappler ordered the execution of civilians in the ratio of ten to one for every German soldier killed in a March 1944 attack by Italian partisans. Kappler was sentenced to life in prison. The executions took place in the Caves of Ardeatine in Italy, and were made into the subject of a movie starring Richard Burton. None of the lower-ranking soldiers who actually carried the order out were prosecuted.

***

The attack which spurred the World War II German commander's retaliatory executions, intended as collective punishment for not informing on partisans, was an IED planted in a garbage container. Kappler's rank was the equivalent of a lieutenant colonel.

The ironic thing is that top conservative and liberal terrorism experts say that torture and other war crimes increase terrorism and reduce national security.

And terrorism is bad for the economy as well.

Homeland Security at Work

Does this sound familiar....?

savanahnow.com:

Effingham deputies call feds after arresting Russians with shovel, wire cutters outside Georgia Power plant

Posted: September 9, 2010 - 6:05pm | Updated: September 9, 2010 - 7:31pm

By DeAnn Komanecky

SPRINGFIELD — Effingham County sheriff deputies have reported the early Sunday morning arrest of three men to the federal Joint Terrorism Task Force.

The men, two from Russia and one from Kazakhstan, were found near Georgia Power’s Plant McIntosh on Old Augusta Road about 1 a.m. Sunday after a ranger with the Department of Natural Resources reported a suspicious vehicle, Effingham County sheriff’s spokesman David Ehsanipoor said.

Deputies reported the men, who were inside a 1995 Nissan Pathfinder, had a machete, shovel, wire cutters and ski masks. One man also had black silk stockings in his front left pocket.

Arrested were Evgeniy Luzhetskiy, of Kazakhastan Nail Idiatullin and Rustem Ibragimov of Russia. All three reported they lived in Charleston, S.C., deputies reported.

The men were all charged with possession of tools during the commission of a crime.

The three were released after being interviewed by task force members, Ehsanipoor said.

"They did all have visas that allowed them to be here and are supposed to be leaving the country soon."

Here's your tax cut for the rich at work

Let freedom ring's Talking Points Memo Blog:

What the wealthy did with their tax cuts

September 9, 2010, 12:31PM

According to the the U.S. census US capital investment in foreign countries has gone from $1.3 trillion in 2000 to $3.2 trillion in 2008 while at the same time the Bush tax cuts which overwhelmingly went to the wealthy cost 1.3 trillion per politifact. So the wealthy essentially took their tax cuts, intended per the Republicans to spur U.S. jobs, and invested them and more in foreign countries, not the U.S..

Wikipedia apparently not biased enough toward Israel

John Caruso at the Distant Ocean:

Since I've written an entire series of posts explaining why Wikipedia is all but useless when it comes to political topics, and especially Israel, I found this amusing indeed:

This week in Jerusalem, two Israeli groups hoping to smite their online enemies, both domestic and foreign, began a course in the "Zionist editing" of Wikipedia entries.

At the opening seminar, attended by about 80 activists, one of the organizers, Naftali Bennett, said that the aim of the course is to make sure that information in the online encyclopedia reflects the worldview of Zionist groups. For example, he said, "if someone searches [for] 'the Gaza flotilla,' we want to be there; to influence what is written there, how it’s written and to ensure that it is balanced and Zionist in nature."

Hilarious, sure, but at the same time I always appreciate it when people are able to generate oxymoronic phrases like "balanced and Zionist in nature" without the slightest awareness of the contradiction. And I particularly liked this bit...:

Another of the course’s organizers, Ayelet Shaked of the My Israel movement, told Arutz Sheva, an Israeli news organization based in the West Bank, that the use of the word "occupied" in Wikipedia entries discussing Palestinian territory conquered by Israel in 1967 was just the kind of problem she hoped a new team of editors could help fix.

...since as I've written before, the only mention of "occupied" or any variant thereof in the Wikipedia page for Jerusalem used to be "The land currently occupied by the Church of the Holy Sepulchre is considered one of the top candidates for Golgotha and thus has been a Christian pilgrimage site for the past two thousand years." That was in 2007, and in looking at it now the situation is still knee-slappingly comical (though nanoscopically better). Go "fix" that "problem", you lying zealots!

The prize for the person who incorporates the most Zionist changes in Wikipedia entries is apparently a trip in a hot-air balloon over Israel. But that's not all; I've heard rumors that the prole who makes the most doubleplusgood efforts to rectify WikiError may even get a guided tour of the Ministry of Truth!

Somehow I missed this US Senate testimony by Brzezenski

Here's the straight scoop from the guy who invented the concept of War in Afghanistan.

http://web.archive.org/web/20070206230803/http://www.senate.gov/%7Eforeign/testimony/2007/BrzezinskiTestimony070201.pdf

SFRC Testimony -- Zbigniew Brzezinski
February 1, 2007

Mr. Chairman:
Your hearings come at a critical juncture in the U.S. war of choice in Iraq,
and I commend you and Senator Lugar for scheduling them.

It is time for the White House to come to terms with two central realities:

1. The war in Iraq is a historic, strategic, and moral calamity.
Undertaken under false assumptions, it is undermining America’s
global legitimacy. Its collateral civilian casualties as well as some
abuses are tarnishing America’s moral credentials. Driven by
Manichean impulses and imperial hubris, it is intensifying regional
instability.

2. Only a political strategy that is historically relevant rather than
reminiscent of colonial tutelage can provide the needed framework for
a tolerable resolution of both the war in Iraq and the intensifying
regional tensions.

If the United States continues to be bogged down in a protracted bloody
involvement in Iraq, the final destination on this downhill track is likely to
be a head-on conflict with Iran and with much of the world of Islam at large.
A plausible scenario for a military collision with Iran involves Iraqi failure
to meet the benchmarks; followed by accusations of Iranian responsibility
for the failure; then by some provocation in Iraq or a terrorist act in the U.S.
blamed on Iran; culminating in a “defensive” U.S. military action against
Iran that plunges a lonely America into a spreading and deepening quagmire
eventually ranging across Iraq, Iran, Afghanistan, and Pakistan.

A mythical historical narrative to justify the case for such a protracted and
potentially expanding war is already being articulated. Initially justified by
false claims about WMD’s in Iraq, the war is now being redefined as the
“decisive ideological struggle” of our time, reminiscent of the earlier
collisions with Nazism and Stalinism. In that context, Islamist extremism
and al Qaeda are presented as the equivalents of the threat posed by Nazi
Germany and then Soviet Russia, and 9/11 as the equivalent of the Pearl
Harbor attack which precipitated America’s involvement in World War II.

Retiring Chairman of Obama's Economic Council Totally Clueless

Some say the elite have no contact with the real world.

Washington Post: (via Cryptogon)

Economist Christina Romer serves up dismal news at her farewell luncheon

By Dana Milbank

Washington Post Staff Writer
Wednesday, September 1, 2010; 10:40 PM

Lunch at the National Press Club on Wednesday caused some serious indigestion.

It wasn't the food; it was the entertainment. Christina Romer, chairman of President Obama's Council of Economic Advisers, was giving what was billed as her "valedictory" before she returns to teach at Berkeley, and she used the swan song to establish four points, each more unnerving than the last:

She had no idea how bad the economic collapse would be. She still doesn't understand exactly why it was so bad. The response to the collapse was inadequate. And she doesn't have much of an idea about how to fix things.

What she did have was a binder full of scary descriptions and warnings, offered with a perma-smile and singsong delivery: "Terrible recession. . . . Incredibly searing. . . . Dramatically below trend. . . . Suffering terribly. . . . Risk of making high unemployment permanent. . . . Economic nightmare."

Anybody want dessert?

At week's end, Romer will leave the council chairmanship after what surely has been the most dismal tenure anybody in that post has had: a loss of nearly 4 million jobs in a year and a half. That's not Romer's fault; the financial collapse occurred before she, and Obama, took office. But she was the president's top economist during a time when the administration consistently underestimated the depth of the economy's troubles - miscalculations that have caused Americans to lose faith in the president and the Democrats.

Romer had predicted that Obama's stimulus package would keep the unemployment rate at 8 percent or less; it is now 9.5 percent. One of her bosses, Vice President Biden, told Democrats in January that "you're going to see, come the spring, net increase in jobs every month." The economy lost 350,000 jobs in June and July.

This is why nearly two-thirds of Americans think the country is on the wrong track - and why Obama's efforts to highlight the end of U.S. combat in Iraq and the resumption of Middle East peace talks have little chance of piercing the gloom as voters consider handing control of Congress back to the Republicans.

Romer's farewell luncheon had been scheduled for the club's ballroom, but attendance was light and the event was moved to a smaller room. Romer, wearing a green suit, read brightly from her text - a delivery at odds with the dark material she was presenting. When she and her colleagues began work, she acknowledged, they did not realize "how quickly and strongly the financial crisis would affect the economy." They "failed to anticipate just how violent the recession would be."

Even now, Romer said, mystery persists. "To this day, economists don't fully understand why firms cut production as much as they did or why they cut labor so much more than they normally would." Her defense was that "almost all analysts were surprised by the violent reaction."

That miscalculation, in turn, led to her miscalculation that the stimulus package would be enough to keep the unemployment rate from exceeding 8 percent. Without the policy, she had predicted, unemployment would soar to 9.5 percent. The plan passed, and unemployment went to 10 percent.

No wonder most Americans think the effort failed. But Romer argued, a bit too defensively, against the majority perception. "As the Council of Economic Advisers has documented in a series of reports to Congress, there is widespread agreement that the act is broadly on track," she declared. Further, she argued, "I will never regret trying to put analysis and quantitative estimates behind our policy recommendations."

But the problem is not that Romer did a quantitative analysis; the problem is that the quantitative analysis was wrong. Inevitably, this meant that, as she acknowledged, "the turnaround has been insufficient."

And what to do about this? Here, Romer became uncharacteristically hesitant to make predictions. She suggested some "innovative, low-cost policies." But the examples she cited - a "national export initiative," new trade agreements and a "pragmatic approach to regulation" - aren't exactly blockbusters.

"The only sure-fire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less," she said. But asked about the main Republican proposal, extending George W. Bush's tax cuts for those earning more than $250,000, Romer replied that doing so would be "fiscally irresponsible."

The truth is that the Obama administration is pretty much out of options. Any major new effort would be blocked by Republicans, who have few alternatives of their own. "What we would all love to find - the inexpensive magic bullet to our economic troubles - the truth is it almost surely doesn't exist," Romer admitted.

The valedictory was becoming more of an elegy. At the end of the depressing forum, the moderator read a question submitted by a member of the audience: "You seem like you'd be a lot of fun at parties. Are you?"

The economist blushed. "You'll have to just take it for granted," she said.

Like 8 percent unemployment.

The rigged card game that is the US Economy

Washingtonsblog:

Friday, September 3, 2010

Government Policy Caused the Drought of Unemployment

The unemployment rate has risen again for the the first time in 4 months. I predicted a growing, long-term unemployment problem last year.

Indeed, the government's actions have directly contributed to the rising tide of unemployment.

The Government Has Encouraged the Offshoring of American Jobs for More Than 50 Years

President Eisenhower re-wrote the tax laws so that they would favor investment abroad. President Kennedy railed against tax provisions that "consistently favor United States private investment abroad compared with investment in our own economy", but nothing changed.

For the last 60 years, the tax benefits to American companies making things abroad has encouraged jobs to move out of the U.S.

The Government Has Encouraged Mergers

The government has actively encouraged mergers, which destroy jobs.

For example, the Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry.

This is nothing new.

Citigroup's former chief executive says that when Citigroup was formed in 1998 out of the merger of banking and insurance giants, Alan Greenspan told him, “I have nothing against size. It doesn’t bother me at all”.

And the government has actively encouraged the big banks to grow into mega-banks.

The Government Has Let Unemployment Rise in an Attempt to Fight Inflation

As I noted last year:

The Federal Reserve is mandated by law to maximize employment. The relevant statute states:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

***

The Fed could have stemmed the unemployment crisis by demanding that banks lend more as a condition to the various government assistance programs, but Mr. Bernanke failed to do so.

Ryan Grim argues that the Fed might have broken the law by letting unemployment rise in order to keep inflation low:

The Fed is mandated by law to maximize employment, but focuses on inflation -- and "expected inflation" -- at the expense of job creation. At its most recent meeting, board members bluntly stated that they feared banks might increase lending, which they worried could lead to inflation.

Board members expressed concern "that banks might seek to reduce appreciably their excess reserves as the economy improves by purchasing securities or by easing credit standards and expanding their lending substantially. Such a development, if not offset by Federal Reserve actions, could give additional impetus to spending and, potentially, to actual and expected inflation." That summary was spotted by Naked Capitalism and is included in a summary of the minutes of the most recent meeting...

Suffering high unemployment in order to keep inflation low cuts against the Fed's legal mandate. Or, to put it more bluntly, it may be illegal.

In fact, the unemployment situation is getting worse, and many leading economists say that - under Mr. Bernanke's leadership - America is suffering a permanent destruction of jobs.

For example, JPMorgan Chase’s Chief Economist Bruce Kasman told Bloomberg:

[We've had a] permanent destruction of hundreds of thousands of jobs in industries from housing to finance.

The chief economists for Wells Fargo Securities, John Silvia, says:

Companies “really have diminished their willingness to hire labor for any production level,” Silvia said. “It’s really a strategic change,” where companies will be keeping fewer employees for any particular level of sales, in good times and bad, he said.

And former Merrill Lynch chief economist David Rosenberg writes:

The number of people not on temporary layoff surged 220,000 in August and the level continues to reach new highs, now at 8.1 million. This accounts for 53.9% of the unemployed — again a record high — and this is a proxy for permanent job loss, in other words, these jobs are not coming back. Against that backdrop, the number of people who have been looking for a job for at least six months with no success rose a further half-percent in August, to stand at 5 million — the long-term unemployed now represent a record 33% of the total pool of joblessness.

And see this.

In fact, the Fed intentionally curbed lending by banks in an attempt to stem inflation.

The Government Has Allowed Wealth to be Concentrated in Fewer and Fewer Hands

As I pointed out a year ago:

A new report by University of California, Berkeley economics professor Emmanuel Saez concludes that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.

The report shows that:

• Income inequality is worse than it has been since at least 1917

• "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007"
  

• "In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth."

As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970s. The minimum wage, adjusting for inflation, is lower than it was in the 1950s. See this. On the other hand, billionaires have never had it better.

As I wrote in September:

The economy is like a poker game . . . it is human nature to want to get all of the chips, but - if one person does get all of the chips - the game ends.

In other words, the game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone's money, the game ends.

The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed...

This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).

It is a question of focusing any government funding which is made to the majority of poker players - instead of the titans of finance - so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.

I noted in April:

FDR’s Fed chairman Marriner S. Eccles explained:

As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

***

When most people lose their poker chips - and the game is set up so that only those with the most chips get more - free market capitalism is destroyed, as the "too big to fails" crowd out everyone else.

And the economy as a whole is destroyed. Remember, consumer spending accounts for the lion's share of economic activity. If most consumers are out of chips, the economy slumps.

And unemployment soars.

As former Secretary of Labor Robert Reich wrote yesterday:

Where have all the economic gains gone? Mostly to the top.

***

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

***

THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.

***

And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. By contrast, little has been done since 2008 to widen the circle of prosperity.

So through it's policies encouraging the offshoring of jobs, mergers, decreasing of economic activity to fight inflation, and allowing wealth to be concentrated in fewer and fewer hands, the government has channeled water away from U.S. jobs, creating the worsening unemployment drought.

Note for Keynesians: As I have repeatedly explained, the government hasn't spent money on the right kind of things to stimulate employment. See this and this.

What Can Obama Really Do?

2010 August 29

by Ian Welsh:

A zombie argument is going around about why Obama hasn’t accomplished liberal and progressive ends to the extent many would have liked him to:

Obama can’t do anything because he needs 60 votes in Congress and he doesn’t have them because Republicans and Dems like Lieberman and Nelson won’t vote for his programs.

This argument is misleading in one sense and incorrect in another. It is misleading in that it misrepresents how things get done in Congress. It is incorrect in that many liberal policies do not require the consent of Congress.

Let’s examine the misconceptions this zombie argument is built on.

Negotiation 101

Let’s look at how things get done in Congress. Obama apologists make the excuse that Obama couldn’t have passed a larger stimulus because he was forced to reduce the stimulus by $100 billion as it was. This line of reasoning demonstrates a misunderstanding of how negotiation (or Congress) works.

If Obama had wanted a $1.2 trillion stimulus, say, he should have asked for a $1.6 trillion stimulus. Then “moderate” Republicans and Dems could have negotiated him down $400K. This is basic negotiation, which anyone who has ever negotiated in a third world bazaar knows—you start off with an offer far higher (or lower) than what you’re willing to accept, and leave room for the inevitable haggling.

The same is true of health care reform. If you’re negotiating for a public option—if you actually want one, then you don’t throw single payer advocates out. You act as if that’s something you’re seriously considering, you talk about polls showing it has majority support, and you then “compromise” to a public option.

This sort of self-defeating, pre-negotation concession has been a repeated pattern for the Obama administration (assuming that Obama does seek Liberal ends).

Force It Through

Many liberal policies do not require the consent of congress.

The Bush tax cuts were pushed through under reconciliation. Most of health care reform, including a public option could have been accomplished the same way. The tactical choice was entirely at the discretion of the Democratic leadership.

If Obama and Reid can’t hold 50 votes, then the problem is them, not the policies themselves, or “how congress works”.

Congress: Who Cares about Congress?

Now, let’s talk about other issues. There are many areas where Obama does not need Congress’s approval.

Don’t Ask, Don’t Tell: Obama can issue a stop loss for any soldiers any time he wants. Bang, that’s it, at least for as long as he’s President.

HAMP (the program supposedly intended to help homeowners, which hasn’t): This program is totally under administrative control. If Obama wanted it to work, there’s nothing to stop him.

Habeas Corpus: Obama can give everyone in Gitmo their day in court. Restoring habeas corpus is totally at his discretion, and he has chosen not to.

Social Security: After Congress voted down a debt and deficit commission, Obama went ahead and created one anyway–and stacked it with people with track records of wanting to slash Social Security.

In short, Obama has managed to side-step Congress in order to work against Democratic policy positions (e.g., Social Security), but otherwise has ignored executive privilege when he wanted to continue Bush-era policies (e.g., detention without trial at Gitmo) or to ignore the rights and needs of everyday Americans (e.g., HAMP and DADT). To the Obama administration, Congress is a very selective obstacle.

Going Forward: What Obama Can Still Do

Not only could Obama rectify DADT, HAMP, Habeus Corpus, and his Social Security commission with a stroke of his pen, he can still do a great deal to help the economy. If he wants to.

TARP: Obama has complete control of the TARP funds, the majority of which have not been spent. (We’re talking over $500 billion in slush funds.) $ 500 billion is a lot of stimulus, if it’s done right. Cash for Clunkers, representing a tiny fraction of the total stimulus funds, massively goosed GDP while it was in effect.

Leaving aside direct stimulus, there are plenty of other helpful things Obama could do. For example, as a friend of mine noted, most distressed debt today is selling to collection agencies for less than 10 cents on the dollar (often under 5 cents). The Treasury could buy up $100 billion of that distressed debt at 10 cents on the dollar. Reclaim the money at 15 cents on the dollar through the IRS, and otherwise just write it off. You won’t make 50% profit, because some people can’t pay even 10%, but you’ll almost certainly make some profit. Roll the money over and buy up more debt. Keep doing it. (N.B. In the past such debt didn’t sell so cheap, mainly because in the past, pre-Bankruptcy “reform”, people who really couldn’t pay would declare bankruptcy, but now they can’t. Obama never made fixing that horrible bankruptcy bill a priority at all.) Folks would be absolutely thrilled by a way to deal with distressed debt. With the debt off their backs, they could spend again, so it would also be stimulative. There are plenty of other things that could be done with over 500 billion dollars to help ordinary people and goose the economy.

Breaking the Banks (and getting lending going again): The banks have been pretty ungrateful for the massive bailout they received. They have unilaterally increased credit card rates to gouge customers, have been gaming the market (so much so that one quarter many banks didn’t lose money on their trading operations even one day of the quarter), have fought against financial reform, and have generally acted against the interests of the majority of Americans. One might say “well, now that they’re bailed out, there is nothing we can do about it.”

Wrong.

The Fed still holds over $2 trillion in toxic waste from the banks. The banks still hold trillions of dollars of toxic waste. If sold on the open market this stuff would sell for, oh, about 5 cents on the dollar. If forced to mark the assets they are keeping on their books at inflated prices to their actual market value, I doubt there is a single major bank in the country which wouldn’t go bankrupt. Including Goldman Sachs.

So here’s what you do. As the Federal Reserve you sell $100 billion of the toxic waste on the open market. Set an actual price for it. Then you make the banks mark their assets to market value. They go bankrupt. You nationalize them. (Why not?–They are actually bankrupt after all, and they haven’t increased lending like they were supposed to; in fact, they have decreased it.) You make the stockholders take their losses and the bondholders too, then you reinflate the banks. (If the Fed can print trillions to keep zombie banks “alive” it can print money to reinflate nationalized banks.) The banks lend under FDIC and Fed direction, at the interest rates the Fed directs. The FDIC and Fed eventually break the banks up into a reasonable size. And while they’re at it, they get rid of the entire executive class which caused the financial crisis, and have the DOJ go over all the internal memos and start charging everyone who committed fraud. (Hint: that’s virtually every executive at a major bank.) Again, this is completely up to Obama–the DOJ answers to him.

Think Obama can’t do this without Bernanke? Wrong. Obama can fire any Fed Governor for cause and replace them during a Congressional recess with no oversight.* (”Cause” is never defined, but Obama can note that the Fed’s mandate includes maximum employment and not stopping the financial crisis in the first place is certainly plausible as cause as well.)

Obama had the power. Obama had the money. Obama has the power–and the money.

The idea that Obama, or any President, is a powerless shrinking violet, helpless in the face of Congress is just an excuse. Presidents have immense amounts of power: the question is whether or not they use that power, and if they do, what they use it for.

Obama has a huge slush fund with hundreds of billions of dollars and all the executive authority he needs to turn things around.

If Obama is not using that money and authority, the bottom line is it’s because he doesn’t want to.

Putting aside the question of what Obama could have accomplished already, if he wants to help everyday Americans, turn around Democratic approval ratings in time for the midterm elections, and leave behind him a legacy of achievemant, he can still do it. If he wants to.

ndnote:

*”2. Members Ineligible to Serve Member Banks; Term of Office; Chairman and Vice Chairman
The members of the Board shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any member bank, except that this restriction shall not apply to a member who has served the full term for which he was appointed. Upon the expiration of the term of any appointive member of the Federal Reserve Board in office on the date of enactment of the Banking Act of 1935, the President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the term of not more than one member in any two-year period, and thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President. “

12 USC 242