Occupy Wall Street V: Diagnosing And Attacking The Symptoms Of Our Collective Disease

This past weekend, I witnessed the Occupy Wall Street movement up close and in full force in Portland, Oregon. When I returned to Eugene, Oregon, where I’m serving as a Visiting Professor this semester at the University of Oregon School of Law, the movement had peacefully taken over one of the main public parks downtown. I’m planning on stopping by this evening or over the weekend. The movement has been peaceful, and most importantly it has gotten a great deal of people thinking and talking. Here, in Oregon, students and people I meet on the street are abuzz about the movement and the financial condition the majority of Americans find themselves in today.

Last week, I conducted a lunchtime talk for students, staff, and faculty entitled “Race and the Financial Crisis: Sorting Myth from Reality.” This talk was well attended and resulted in many lengthy follow-up discussions with students and colleagues. Among students, many of my discussions have centered on the Occupy Wall Street Movement, what ideology it espouses and how it should move forward or morph into a political movement with lasting impact. My recent talk and subsequent discussions have forced me to think deeply about the Occupy Wall Street Movement, and to pose some strategic questions.

I commend the Occupy Wall Street Movement organizers, largely grass-roots individuals from all walks of life, young and old, brown, yellow, and white for the discussion and level of introspection that they’ve forced the American populace to confront whether they agree or disagree with the movement. I’ve followed the movement throughout its duration; I’ve watched an insipient movement grow into a national and international movement and dialogue. My meager suggestion to the Occupy Wall Street Movement is to hone in and focus on the public policy choices and paths of our business leaders and politicians (both Democrat and Republican) that have forced 99% of us into the dire straits we find ourselves.

I think the Financial Crisis or Great Recession has sparked frustration and despair not seen in this nation and world for several generations. Congress threw a lifeline in the form of bailouts and corporate welfare to big banks and Wall Street, but somehow forgot about Main Street. In Washington, we are politically gridlocked. Republican politicians would rather see one man lose his job, President Barack Obama, than debate meaningful policies to create jobs and opportunities for the masses. Republicans talk about “job creators” whose taxes we shouldn’t raise. When was the last time Paris Hilton, and other rich folks who largely inherited their wealth created a job? The so-called “job creators” are hoarders and consumers maximizing their own self-interest, utility and profit. I give the Republicans credit for acting from the same playbook and staying on message. They have better PR and marketing people than some of our biggest corporations. These folks stay on message, and stick to their talking points without deviation. This observation is reinforced on the rare occasions when I have the stomach to watch Fox News.

Democrats had their chance when they were a majority, early in President Obama’s term, and squandered the opportunities presented because of disunion, and lack of focus. In many ways, it is hard to tell a Democrat from a Republican in Washington. Personally, I think they are all drinking the same Kool-Aid. Democrats have adopted the rhetoric of Republicans. I’ve noticed lately, President Obama can’t finish a sentence or complete a statement without ending it with “…and it will lower the budget deficit” or "...we need to ease regulations." Democrats preach and cajole about the evils of regulation, much like their Republican counterparts. Democrats expound and trumpet free markets and private enterprise as much as Republicans nowadays.

Democrats and Republicans alike have failed 99% of us in American society. We have to keep the pressure on both parties. I say all of this to say clearly to the Occupy Wall Street Movement, keep the debate focused on the economic, political, and cultural policies that keep 99% of us indentured permanently to 1% of the population who own the means of production, and profit from their capital and investments while we slave away as laborers in the proverbial fields. Before a doctor can attack or treat a problem, he/she must first diagnose it. In my humble opinion, an economic, political, social and cultural doctrine that often goes unnamed, unidentified, and unspoken has gotten us in this terrible predicament. You ask what is it? What could this horrible disease be called? It is named Neo-Liberalism; and it took hold of our economic, political, social and cultural policies about 30-40 years ago.

Neo-Liberalism has four (4) main premises:

• The rule of the market—free enterprise and private enterprise—which entails cutting public expenditures for social services like education, healthcare, and other public initiatives;
• Deregulation—little to no government regulation where profit maximization by private market actors is jeopardized or perceived as being harmed;
• Privatization—selling of state owned enterprises, goods, and services to private investors in the name of efficiency, which often leads to concentration of wealth and higher consumer payments and outlays for goods and services; and
• Elimination of the concept of the “public good” or “community”—in other words, “individual responsibility” is valued at a premium, every man, woman, and child in society has to fend for themselves and if they don’t succeed they’re just “lazy” or “shiftless.”

Alas, doesn’t this all sound familiar. Business, political, social and cultural leaders have been pushing this false prophesy down our throats for years. Democrats and Republicans alike have pursued a Neo-Liberal agenda in Washington and in our respective state capitals, from Columbus to Sacramento. I’ll give you many Democrat and Republican examples (you can figure out for yourself which Administration or Congress hawked these policies):

• Does this sound like plans to privatize Social Security?
• Sound like the decimation of our public school system in favor of private charter schools?
• What about efforts to privatize the procurement of student loans?
• Does this sound like efforts to abolish the EPA, and to dial back regulation of environmental polluters like BP?
• What about the privatization of our prison and penal system?
• Sound like the efforts to block universal healthcare in favor of the private market?
• What about bank deregulation in the late-1990’s and the passage of Gramm-Leach-Bliley?
• What about the failure to regulate derivatives and commodities in the 1990’s?
• What about telecom deregulation in the 1990’s?
• What about the 1980’s racially coded “Welfare Queen” who was demonized in the media for failing to pull herself up by the bootstrap because she was simply lazy and shiftless?

Truly, the list goes on. I myself, and other bloggers on this blog, like andre cummings, Lydie Pierre-Louis, and Steve Ramirez, to single out a few, have written about the ill-effects of deregulation and Neo-Liberal policies on a multitude of levels. Neo-Liberalism has morphed into Neo-Feudalism in this nation; fewer control the vast majority of assets, resources, and real wealth in society. The wealth gap is continually expanding. 99% are the surfs and servants of the 1% aristocracy and overlords. We are in the midst of a New Gilded Age with new Robber Barons emerging each day.

The wages of sin of a small minority are being visited on a vast majority. The Wall Street elites who got us into this mess go unpunished for their crimes, while their victims, those of us on Main Street, have been wrongfully convicted and serve their sentence and do their hard labor and eat their prison food. Where is the Innocence Project when you need it? America needs you Barry Scheck! Overturn our convictions, the glove doesn't fit.

The Financial Crisis has been a wake-up or clarion call to a multitude of people. The consequences of the Financial Crisis have been visited upon those least responsible for the economic crisis (i.e. women, children, people of color, and the elderly) in order to prop up powerfully entrenched elites, and those responsible for the financial bleeding. Society is at a serious underappreciated crossroads. Clearly, in this nation we are decidedly moving away from our Keynesian Economic Assumptions: full employment; economic equality; and regulation of private cartels. American Capitalism is turning into Vulture Capitalism where the weakest die on the side of the economic road or highway and are devoured to sustain the wealthy and elites. We are witnessing a failure of capitalism. The dust will settle somewhere and it might not be pretty. The economic pressure cooker may very well explode.

I challenge the Occupy Wall Street Movement to take a page from the finely honed Republican playbook to stay on message, find a talking point and stick to it. I submit to you, in our sound bite society, message truly does matter. One of the real big issues that has gotten us to this point is Neo-Liberalism—Occupy Wall Street Movement ideologically and intellectually pick up on this message and educate your followers and the public on the ills of the doctrine. Advocate a return to Keynesian Doctrine—full employment, economic equality and extension of the American Dream to as many as possible, and regulation of private cartels in the interests of the public good or community. We are all in this together. We can't afford to allow our racial, social, gender, or class differences to derail us.

The Occupy Wall Street Movement has the eyes and hears of the American and international public, carry a clear message forward. I thank and appreciate the Occupy Wall Street Movement for sparking a positive and non-violent discourse on issues that inform our society. Young and old, and people of all shades and walks of life are forcing a debate on the structure of our society that will have what I suspect will be a lasting impact for years to come. In the 1990’s, President Clinton helped reinvent welfare, as we know it. In 2011, the new mantra should be to reinvent corporate welfare, as we know it. We can no longer afford to bailout Wall Street, and write a blank check for the mistakes and miscues of corporate elites. Generally, we can and should reinvent American Capitalism, as we know it, moving forward to a bright future, to recapture the American Dream we were all told we could reach for and achieve. Occupy Wall Street is helping us to do just that. More power to those of you spearheading a timely and vast movement!

Examining The Lehman Brothers Failure: Is This Enron All Over Again?

What led to the demise and failure of Lehman Brothers? This is the precise question that Anton Valukas, a partner in the New York office of the venerable law firm Jenner & Block, was appointed in January 2009 by the U.S. Bankruptcy Court for the Southern District of New York to answer. Indeed, Lehman Brother’s bankruptcy, which was filed on September 15, 2008, is the largest Chapter 11 bankruptcy filing in history. Many would argue that the Lehman collapse has contributed greatly to our current financial crisis—The Great Recession—one of the worst since The Great Depression. Yesterday, Valukas issued a 2,200-plus page Report detailing the failure of Lehman Brothers.

Valukas indentified a number of failures in corporate governance and auditing and financial controls. Valukas observed that Lehman Brothers “repeatedly exceeded its own internal risk limits and controls.” According to Valukas, Lehman’s management made a number of terrible decisions that ultimately led to Lehman’s collapse. Commenting on Lehman’s executives, Valukas noted that conduct “ranged from serious but non-culpable errors of business judgment to actionable balance sheet manipulation.” Valukas indicated that Lehman Brother’s attempted to forestall its ultimate demise by misleading investors about its true financial picture.

Perhaps most damning, Valukas discloses Lehman’s use of “Repo 105” a financial accounting device to “cook” or alter its balance sheet. Using Repo 105, Lehman shifted $50 billion of toxic assets off its balance sheet during the first and second quarters of 2008, instead of selling and reporting these toxic assets at a loss. Through a loophole and gap, accounting rules allowed Lehman to treat Repo 105 transactions as sales instead of financings. Lehman’s chief financial officer was implicated in emails that indicated that Repo 105’s chief purpose was to reduce liabilities on the balance sheet.

Valukas found that Repo 105 was not disclosed to government regulators, rating agencies, investors, or to Lehman’s board of directors. Lehman apparently did not act alone. Valukas discovered that Ernst & Young, Lehman’s auditor, was made aware of Repo 105 and did not challenge the use of this questionable accounting practice. Repo 105 led to the repossession of billions of taxpayer dollars and investment and retirement funds!!!

We passed Sarbanes-Oxley in the wake of the Enron scandal to try to root out financial and accounting irregularities. How could similar irregularities occur at Lehman Brothers? History has a way of constantly repeating itself. One thing is for certain, the civil lawsuits, and hopefully criminal charges and indictments, will flow shortly. I will do my best to keep you posted in the coming weeks and months.

Lobbyists Spend A Record $3.5 Billion In 2009: Did Average Citizens Profit From These Efforts?

For most people, 2009 marked a year in which many of us had to pull back and tighten the reins on our own personal budgets as a result of the overall downturn in the economy. Apparently, for some segments of society this was not the case. Did you know that lobbyist spent nearly a record $3.5 billion lobbying the federal government in 2009? Recently, I came across some interesting and compelling statistics compiled by the Center for Responsive Politics, a political watchdog group, that I’ll share with you in today’s post that gave me several moments of pause.

For example, companies and special interest groups spent a record $3.47 billion on federal lobbying efforts in 2009, this amount represented a 5% increase over statistics reported in 2008. Lobbyists were not deterred by the Great Recession, the decline of the dollar, bank failures, TARP bailouts, or near 10% unemployment nationally and far worse unemployment rates in a number of individual states. One lesson learned: lobbying appears to be a growth industry heading into the future if you are seeking employment and job security. In other words, lobbying appears to be a recession-proof industry.

The Obama Administration and Congress were busy over the past year pushing forward a number of hot-button issues like health care reform, financial regulatory reform, climate-change and other controversial legislation. In a year when Congress was busy debating such wide-ranging ideological issues lobbyists were paying close attention on the sidelines.

A number of industry sectors notably stand-out as the deep pocket and influential lobbyists. The pharmaceutical and health industry spent an estimated $266.8 million lobbying on health care reform—this happens to be the largest amount ever spent by a single industry in a one year period of time. Business associations spent $183 million on federal lobbying. Oil and gas lobbyists spent $168.4 million. The insurance industry spent $164.2 million. At the end of the day, all of these industry sectors that I mention spent more in 2009 than they did in 2008. However, the electric utility industry spent $144.4 million, slightly off the 2008 pace for that industry segment. To recap, the top five industry sectors in terms of spending were the following:

1. Pharmaceutical and Healthcare Industry ($266.8 million)
2. Business Associations ($183 million)
3. Oil and Gas Industry ($168.4 million)
4. Insurance Industry ($164.2 million)
5. Electric Utility Industry ($144.4 million)

The single largest institutional lobbyist was the U.S. Chamber of Commerce, an association that represents roughly 3 million businesses in various industries, which distributed $145 million for lobbying activities at the federal level. The Chamber of Commerce has consistently held the top spot as the largest single spender over the past nine (9) years. 2009’s figure of $145 million spent on lobbying activity by the Chamber of Commerce marks a 6% increase over 2008 figures.

I promise you that I’m not making these figures up. You can see them for yourself. A wonderful website www.opensecrets.org compiles and breaks down the numbers that I’ve just shared with you. As a citizen, and probably thinking along the same lines as other citizens, when I come across data like this I’m left scratching my head and asking one simple and basic question. Has spending such vast sums on lobbying improved the quality, scope, and reach of legislation and policy emanating out of Washington to make the everyday lives of a greater multitude of citizens better and more productive? I have my own answer and opinion in response to the question that I pose. I can only imagine what your response would likely be in answering this question.