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May. 5 2009 - 10:26 pm | 163 views | 5 recommendations | 37 comments

Stop Whining About Populist Anger!

via johnnyberg

via johnnyberg

Is there any business in the United States more vilified than credit card lending?

The card companies stand accused by Congress and the Federal Reserve of gouging customers with impenetrable fees, enticing innocents to borrow themselves into bankruptcy, and blowing off cardholders who try to correct errors in their accounts.

Attacking these firms is a crowd-pleasing sport for lawmakers, in part because every constituent has a story about being mulcted by a card issuer. Last week the House of Representatives easily passed a credit card holders’ bill of rights. The Senate will take up a similar measure soon. President Obama has signaled his approval.

Someone has to stand up for these companies. I guess it’ll have to be me

…The real scandal, according to the common refrain, is that issuers such as American Express, Citigroup and Bank of America have received billions of bailout dollars from taxpayers. How dare they repay the favor by putting the squeeze on us?

This is where populism shades into demagoguery. Critics who argue that it’s inappropriate for bailed-out banks to tighten credit terms on taxpayers have it exactly wrong: If we’re footing the bill, we should praise these banks for being stingy with credit, not hammer them for it. It won’t be any easier for them to pay us back if we hector them into maintaining the loose standards that produced this mess.

via Michael Hiltzik,  Credit card companies as evil villains? It’s not that simple – Los Angeles Times.

“Someone needs to stand up” for the credit card companies? Did I hear that right, Michael Hiltzik?

Apparently it is not enough that the credit card companies have spent $15.5 million on lobbying fees in the first quarter of 2009 alone (this according to CREW, the Citizens for Responsibility and Ethics in Washington), while employees of credit card companies spent an additional $14.5 million last year, and credit PACs spent $8.6 million more. It’s not enough that when the President even considered making a change to the credit laws, 14 top-ranking credit card company officials got to meet with Obama to plead their case in person; conveniently, none of the 14 was a registered lobbyist, which made them exempt from laws banning lobbyists from influencing officials with responsibility for distribution of stimulus/recovery funds. Apparently despite all that the credit card companies are voiceless yet, and still need Michael Hiltzik of the LA Times to champion their cause.

Of all the truly revolting political developments of the financial crisis age — and there have been a lot of them — probably nothing is more disgusting than the weirdly intense media backlash against “populist anger,” anger that is inevitably described by media sages like Hiltzik as irrational, unfounded, and pointedly unhelpful. The public is depicted as a great dumb beast lashing out wildly at shadows and hallucinations, with the poor diligent hardworking members of the financial class (slaving away to pump much-needed capital into the bloodstream of international commerce) suffering the collateral damage. And while commentators are always careful to note that much of the anger “may” or “could” be justified, rhetorically these lines always lead to a but clause. Rick Perlstein of Newsweek, for instance, noted that  some populist anger is useful, but it can very easily transform into the ” ‘bad’ kind of populism — the hateful kind; the violent kind; the demagogic kind.” Author Robert Frank talked about the public anger over the AIG bonuses being reasonable up to a point, but “if we’re not careful, we could end up shooting ourselves in the foot,” as “any broader effort to cap executive salaries would do more harm than good.”

This is another of the typical features of the anti-populism argument, the false dichotomy. We are constantly being told that we have to stem this populist anger or we’ll have communism, hard caps on executive salaries, lynch mobs, pitchforks, etc. Except that in reality the consequences of “populist” anger in this country are somewhat, uh, less severe. Think about it: when in American history has populist outrage ever led to serious punitive measures directed at rich people?

When the financial class nearly destroyed the American economy via the Savings and Loan crisis in the eighties, what was the punishment? Answer: we gave the people who did the fucking up $124 billion in taxpayer money. When currency speculators overbet the peso in 1994, what did we do? We bailed them out, with about $50 billion. Long Term Capital’s punishment? A bailout. Emerging-markets speculators who went in the tank in the late eighties? They got bailed out in front and in back, through a variety of bailout programs.

How about the insane exuberance for the internet bubble economy? The same politicians and central bankers who felt that intervention was necessary to correct the market’s irrational decision to wipe out Long Term and all those speculators in the economies of Southeast Asia and Russia — the same people who felt that government intervention was needed to correct “irrational” declines in investment value — saw no problem at all with the obviously overvalued, far more irrationally exuberant tech market. And when it all blew up, wiping out billions in value, Wall Street was “punished” with sweeping tax cuts, further deregulation, and massive cuts in the staff budgets of enforcement agencies like the SEC and the OTS (which saw its already-miniscule staff of 1200 slashed by 25% between the years 2001 and 2004).

Even after Enron and WorldCom and Tyco and a rash of similar accounting scandals that clearly indicated a widespread, endemic problem, the would-be dreaded response was the Sarbanes-Oxley Act, an incremental step toward greater financial disclosure so unfrightening to Wall Street that even Alan Greenspan loved it. Sarbanes-Oxley was supposed to inspire corporate responsibility, transparency, and stricter bookkeeping, but half a decade after its inception what Wall Street actually made of it was perhaps the most ineffectual and lax accounting environment the civilized world has ever seen, with one giganto-firm after another capsizing and sinking to the ocean floor under the weight of spiralling debts that often came as a complete surprise to shareholders, regulators, and sometimes even senior management as well.

We simply do not have a real functioning mechanism in American politics for converting public anger into tough government policy. The closest thing we have in that regard is the relationship between elected officials and the media: when TV news decides to flip out about something like the AIG bonuses for more than a day or two, we might sometimes see public officials do something about… something like the AIG bonuses. But that’s about it. In point of fact the only significant “reforms” to date, even in the face of this most extreme financial crisis, have been moves instituted to restrict short-selling and a relaxation of mark-to-market accounting rules, both measures on the deregulatory wish list of the big firms.

More significantly, there has been almost nothing in the way of punishment of the major figures responsible for this crisis.  If there were a real correlation between public anger and government policy, we’d have seen at least something in that area. Maybe there wouldn’t have been public floggings, but there would have been some serious frog-marching of unscrupulous assholes to prison.

And this isn’t about vengeance, it’s about policy: if the “consequence” for blowing a $4 trillion hole in the economy is seeing masses of government officials line up to hurl billions of taxpayer dollars at you, that doesn’t provide much of an incentive to fix your behavior. This is one area where there should have been a seamless melding of public outrage and government policy: we should have swooped in, rounded up 200 of the most guilty executives, hauled them before congress in a public trial, and packed them all off to a Supermax in Florence, Colorado to do real time with murderers, rapists and terrorists. Reality shows should have been quickly greenlighted to track their progress in the hole (can you imagine the ratings for a show called Project D-Block starring John Thain, Angelo Mozilo and Dick Fuld?).

All joking aside, this would have been an incredibly healthy step for our society to take — just as it would have been healthy (and still might be) for someone to go to jail for torture during the Bush years, or for contracting fraud in Iraq, or for any of the other countless crimes committed this past decade that will almost certainly go unpunished. The social contract has to be considered broken when some dumb schmuck can go to jail for five real years for selling a bag of weed while a guy who went to Harvard and Wharton and had all possible advantages gets nothing but a bailout and a temporarily lowered bonus regime for destroying billions of dollars of public wealth.

As for the credit card companies, fuck them. The biggest of them are engaged in one of the all-time great scams right now, gorging themselves on cheap money lent to them by the Fed or the government via bailout programs and then turning right around and further widening their spread by increasing prices to the ordinary consumer. Imagine an oil company that got to buy government crude from the Strategic Petroleum Reserve at a discount during the Katrina crisis and then turned around and gouged consumers during the shortage.

Think there would be public anger then? Maybe. This is close to the same thing, and let’s not forget who these motherfuckers are: they are the people who spent most of the last decade and a half showering congressmen with cash in order to get the Bankruptcy Bill passed. That bill made it significantly harder for people to declare bankruptcy to get out from credit card debt so that they could keep their homes. A study by the New York Federal Reserve last year concluded that there are roughly 32,000 more foreclosures per quarter because of this bill than there would have been had the old bankruptcy laws remained in place. The study estimated that the bill resulted in about 400,000 additional foreclosures total since its inception.

Gee, you think that played a role in the financial crisis at all? Forgetting all the predatory practices that these people are known for, they were a major accomplice in the financial disaster — and now they’re fighting tooth and nail to keep Congress from forcing them to stop arbitrarily jacking up fees on consumers. In other words the same banks (like Citi, for instance) that got a hot sexy multi-billion-dollar massage from the Fed and TARP when they pushed their debt-to-equity ratios to insane levels, borrowing 30 and 40 dollars for every dollar they had and investing them in the housing casino and the derivatives market, now are arguing that ordinary losers like you and me who might have $5000 or $10000 in revolving credit card debt shouldn’t get a break on their fees just because times are tough (or because they’re too stupid to hire a $500-an-hour lawyer to decipher their insane consumer contracts). In other words, when you borrow $500 billion against $20 billion and blow all of it at the roulette table, you should get a bailout; but when you take out a $10,000 credit card to pay for gas and groceries, you should pay whatever freight the company deems fit.

I’m tired of hearing about how dangerous it is when the public gets angry about this stuff. You know what? Let’s let it be dangerous, and see what happens. It’d be a nice change.


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  1. collapse expand
    Tony

    Matt – you just about summed up everything I’ve felt about this entire mess. This is what those moronic tea baggers should have been protesting. Seriously, when is anyone in this country going to be held accountable?

  2. collapse expand
    Larry G

    And let’s not forget that the media has for a long time been reporting, without any apparent disapproval that I can perceive, about Republican “rage” and “outrage” over this or that liberal Democrat-type scheme (ugh! ech! hurl!).

    Let’s face it. This is just Capital protecting its own.

    • collapse expand
      Tony

      I keep trying to figure out why it seems that exactly no one is being held accountable for this. As much as I hate the alpha male routine, this is one moment where I wish the American public, as a whole, would grow a pair. These assholes needs to be held accountable for the financial mess, and some of the higher ups of the Bush Administration need to be held accountable for this torture debacle. As much as I love Matt’s commentary on the economy, each of his articles and blog posts make it more and more frustrating. Keep up the good work, Matt.

      In response to another comment. See in context »
  3. collapse expand
    Scott

    ‘Populist’ is such a sneering, shit of a term. I’m glad to see someone take a shot at it.

    I’m sick of this absurd ‘our democracy must withstand populism’ mentality that infects these spivs.

    keep it up Matt.

  4. collapse expand
    lauging at salad tossers

    This is PRECISELY what the “tea baggers” were protesting: our money being spent as though it were limitless and our federal deficit being run up over the last 16 YEARS (and, now, beyond) with just stupid, wasteful stuff. Pick your poison from either side of the political spectrum.

    I’m just wondering when you guys will start talking about the laws that were passed thanks to Barney Frank and his…crones which forced these lenders to make loans to people who NEVER had a chance to pay them back (or the lenders would face exorbitant fines to the government). It seems like that might have had something to do with all this, too.

    The biggest problem is EVERY NUMBSKULL in Washington. Our best bet is to wipe the slate clean over the next 12 years (by voting out EVERY incumbent of both parties) and starting over.

    • collapse expand

      I may not agree with everything you said my friend, but wiping the slate clean is the best idea I’ve heard in a long time. To quote Sen. Barton, “It’s like communism, you can’t fix it.”

      In response to another comment. See in context »
    • collapse expand

      I may not agree with everything you said my friend, but wiping the slate clean is the best idea I’ve heard in a long time. To quote Rep. Barton, “It’s like communism, you can’t fix it.”

      In response to another comment. See in context »
    • collapse expand

      salad tosser, i have to call bull$#!t on you about blaming congress for FORCING lenders to make bad loans. nobody forced them to do give money to deadbeats with no credit; the sub-prime programs congress encouraged still required borrowers to have decent credit. lenders created those crappy loans because they WANTED to give those loans to public so they could take them and sell them to Wall St. Wall St. thought they’d discovered the alchemy for turning crap into gold and they were all too happy to buy crappy loans and then sell them again or insure them with another sucker bank.

      if the teabaggers really wanted to start a revolution the words “regulation” and “goldman sachs is taking over the gov” would have been flowing from their lips every 5 minutes. as it is, “throw the bums out” sounds nice, but so does “santa will bring us a pony”. not gonna happen, no matter how much karma is deserved.

      In response to another comment. See in context »
    • collapse expand

      If that’s what the teabaggers were protesting, the rallies should have started five years ago when the the Bush administration was squandering the Clinton budget surplus. This wasn’t a revolt against government spending. It was a partisan gripefest clothed in a misappropriated historical metaphor. Stoked by media hotheads, people forked over a chunk of their tax relief on “Maobama Tse Tung” shirts and wandered over to the statehouse mall to complain about whatever was on their minds.

      In response to another comment. See in context »
    • collapse expand
      deleted account

      “I’m just wondering when you guys will start talking about the laws that were passed thanks to Barney Frank and his…crones which forced these lenders to make loans to people who NEVER had a chance to pay them back (or the lenders would face exorbitant fines to the government). It seems like that might have had something to do with all this, too.”

      Oh no the bullshit about the CRA again. Most of the subprime loans weren’t even covered by the CRA.

      You right-wing dimwits don’t understand anything, do you? This isn’t all about us trying to help out desperate poor people. You’re really reaching if that’s what you think.

      In response to another comment. See in context »
    • collapse expand

      I’m just wondering when you guys will start talking about the laws that were passed thanks to Barney Frank and his…crones which forced these lenders to make loans to people who NEVER had a chance to pay them back (or the lenders would face exorbitant fines to the government). It seems like that might have had something to do with all this, too.

      I’m wondering when someone, anyone is going to come up with one shred of proof that any of this bullshit is true. This lie has been spread all over. I remember calling one guy on it. Show me one iota of proof , one shred of evidence that bankers were forced to make loans . Nadda.

      But then the next post came up “I’m a banker and no ever forced me to make loans like that”.

      I think one area that isn’t being discussed is the latest bailout of bankers via the bankruptcy legislation that featured cram downs by bankruptcy judges on mortgages. The ABA fought this tooth and nail. I mean their lobbyists came in decked out in 1000 dollar bills ready to battle with anyone that would vote for those “lazy ass homeowners”.

      How quickly we forgot that FASB passed a rule that pretty much ditched mark to market, so banks could value their assets. The timing was perfect to. Right before Q1 results were announced and despite a 6% contraction in GDP, bankers had huge profits who were basket cases only three months earlier. Hmmm. How’d that happen?

      We reward the bankers by politically interfering with FASB so they could lie about the value of their assets? Say it ain’t so…

      The problem with this bankruptcy bill was it could really screw up this terrific scam they bought and paid for by judges having a house independently appraised. Oh Nooo

      Then the public auditors and regulators would be forced to look at like assets that somehow were worth far more. Could be a big hit to capital. Couldn’t let that scam get blown out of the water. So they pissed on their constiuents again.

      The best line was from Senator Tester when asked why he voted against giving judges that authority. ” just think a deal’s a deal. I have a lot of empathy for folks who tend to get led astray, but I just think it’s going to create some problems – pretty obvious, actually. I don’t have to list them. I’m generally opposed. I don’t think it works well.”.

      Must have left his talking points in the Sauna.
      Hey Sen. You’ve only collected 850 grand from the bankers. WTF is wrong with you?. Don’t give me that “I’ve only been here 2 year” excuse. I wanna see some serious contributions for this man of the people.

      In response to another comment. See in context »
  5. collapse expand
    Jim

    Matt, you’re my hero. Please run for public office.

  6. collapse expand

    Right on, Matt. Let’s send some of these assholes to jail.

    Of course, it won’t happen. A few bad apples will be sacrificed to the mob Lynndie England-style, but most will walk.

    My favorite current bit of scapegoating is what’s going on with Bernie Madoff. Of course the guy’s a douchebag and deserves a jailhouse boyfriend, but how on Earth is he alone serving time for what his firm did? For that matter, isn’t our entire economy of the last two decades just a Ponzi scheme on steroids?

    There are no answers to be found in Congress, where each soulless sap has been bought for pennies on the dollar. God help us.

  7. collapse expand

    I’m afraid Matt’s gone a little off the rails here & should do just a bit more digging. From what I understand the WorldWide Financial Crisis is due solely to a little known organization called ACORN. Do a little research, people.

  8. collapse expand

    I found it easier to hate ACORN when it went by its old name, the Elders of Zion. Also, I presume “little known” is a cute way of saying “flogged relentlessly by Rush.”

  9. collapse expand

    i’m flummoxed by this as well. i guess it’s just that we have a pundit class of useful idiots doing the commissars’ bidding, without even having to be asked explicitly to do so. in return for telling the rabble they shouldn’t get TOO mad these guys make a good deal of money and their kids get to go to sidwell friends or whatever.

  10. collapse expand

    We simply do not have a real functioning mechanism in American politics for converting public anger into tough government policy. This is what jerks my chain the most.

    Why are we expected to give huge corporations a free pass on hosing us?

  11. collapse expand

    Hey Matt,

    I was let go from my job back in November. I’m still unemployed. I’m a regular, middle class guy and this is how I see the corporate 1-percenters:

    Back in 2002 my pay was “adjusted” due to the dot com crash. It never recovered, even though, two years later, the CEOS in our country proceeded to skyrocket to wealth unseen since the 1920s.

    In November of 2008 I was let go, along with a dozen others, in order (I found out later) to maintain a company budget that guarantees our CEO his 1 million dollar bonus. So over a dozen people lost their livelihoods so that 1 rich motherf*cker didn’t lose his EXTRA money!

    Yah! That’s populist rage! That’s f*ck the Rich ’cause they f*ck you whenever and wherever they can!

    • collapse expand

      It’s that sort of greed that should drive people up the wall. The fact that people are laid off all the time so that a CEO can collect a bonus makes me sick. How is it that people are rewarded for doing a shitty job? Hope you find something soon Russell.

      In response to another comment. See in context »
      • collapse expand

        Thanks man! I’m surviving on a dribble of freelance work for now.

        I just wish people could understand that when you make lots and lots of money you become responsible for more than just yourself.

        We like to think wealth is a reward, but it’s not that simple. Wealth is responsibility… so grow up you rich bastards! We, on the lower end of the pay-scale, are not your toys. We are your assets: treat us with a little respect.

        In response to another comment. See in context »
  12. collapse expand

    I’m convinced that almost half of us have been hypnotized into mistaking our rulers’ well-being with our own. I can’t tell you how many times I’ve gotten into discussions with people who make a fraction of what I make (which isn’t that much) going on about the dangers of taxing the top 1 percent and how top-level execs deserve their bonuses even when they’ve laid off thousands, etc. etc.

    How do we extract the pods from these people?

  13. collapse expand

    A real populist revolt requires engagement. The best way to take effective action against credit card companies is for consumers to stop using credit cards. While there would be a certain measure of justice secured by punishing the clubby circle at the top of the financial empire, a more permanent solution might be to neuter the “too big to fail” meme by aggressively lobbying Congress to tighten antitrust laws.

  14. collapse expand

    Er… didn’t you, accidental media member, just recently make a (quite funny) post that more or less depicted populist anger as a great dumb beast lashing out wildly at shadows and hallucinations? Just sayin’

  15. collapse expand

    It’s expected that in the finger wag from the elite to the common man “populism” has always been a pejorative term, but it’s intolerable as a lecture from media personalities presenting themselves as modern day Cassandras. Can’t we institute the media equivalent of a Hippocratic oath with accountability to the body politic? These reporters would watch “It’s A Wonderful Life” and complain about the rough and unprofessional manner in which George Bailey treats Mr. Potter. Let them eat cake, indeed.

    Let’s face it, it’s a small jump from “populism” to “democracy” as it’s currently practiced in it’s American form. The will of the big dumb mass is how we determine elections, Hollywood fortunes, and winners on American Idol. Populism is who we are. Or maybe who we should be. If more policy were, as you note Matt, directed toward the “common man,” or it were understood that this big dumb mass — let’s call it the middle class — is a barometer of the health of our society, well, then we wouldn’t find ourselves in the position of lending these over-leveraged pricks billions of our “common man” tax dollars so they don’t foreclose on their beach home in the Hamptons.

    Substitute the words “populist anger” for “accountability” and I think the conversation moves closer to what we’re really talking about here.

    I’d like to take a shot at the media here, too, in my populist rage, but it’s self-defeating to throw myself in with the crowd that thinks “the media” is one thing. The “reporters” you called out deserved a calling out, and I’ve been pissy enough on this same issue to know you’re working off a truncated list. The entire enterprise is simply disappointing. Watching the hoard of reporters so eager to come to the defense of robber barons you’d think we were on the cusp of a full-fledged revolution. And while populist anger simmers, somewhere in New York the best minds of CNN try to understand the problem by creating a giant hologram for Wolf Blitzer to talk to on the nightly newscast.

  16. collapse expand

    And now the banks are cooking their books to appear more profitable in order to give the TARP money back so they can resume their obscene compensation packages. And Geithner just smiles…

  17. collapse expand

    Q: What do you call rounding up 200 of the most guilty executives, haulingthem before congress in a public trial, and packingthem all off to a Supermax in Florence, Colorado, to do real time with murderers, rapists and terrorists?

    A: A good start.

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