The Great American Bank Robbery

By Joseph Stiglitz, W. W. Norton & Company
Posted on February 27, 2010, Printed on February 27, 2010
http://www.alternet.org/story/145774/

The following is Part I of a two-part excerpt from Freefall: America, Free Markets, and the Sinking of the World Economy by Joseph Stiglitz ( W.W. Norton & Co., 2010). Read AlterNet's recent interview with Stiglitz by Zach Carter.

Bankruptcy is a key feature of capitalism. Firms sometimes are unable to repay what they owe creditors. Financial reorganization has become a fact of life in many industries. The United States is lucky in having a particularly effective way of giving firms a fresh start—Chapter 11 of the bankruptcy code, which has been used repeatedly, for example, by the airlines. Airplanes keep flying; jobs and assets are preserved. Shareholders typically lose everything, and bondholders become the new shareholders. Under new management, and without the burden of debt, the airline can go on. The government plays a limited role in these restructurings: bankruptcy courts make sure that all creditors are treated fairly and that management doesn't steal the assets of the firm for its own benefits.

'Death of American Capitalism:' The 10 final scenes

Commentary: Munger warns 2012 is our tipping point on 'road to ruin'

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) -- Good news, Americans are "downbeat about today. Upbeat about tomorrow," says the latest USA Today/Gallup Poll. "Americans feel battered by hard times, record home foreclosures, stubbornly high unemployment rates and war."

And yes, we are "fed up with Washington and convinced more than 3 to 1 that the nation is heading in the wrong direction," yet there's "confidence that there will be better times ahead, that the classic American dream endures and hasn't been extinguished. It's not even at its low ebb." Why? Because we're in denial!

Joseph Stiglitz: Bankers Made Reckless Bets on the Economy, Knowing Taxpayers Were Going to Pick up the Tab

By Zach Carter, AlterNet
Posted on February 25, 2010, Printed on February 27, 2010
http://www.alternet.org/story/145773/

Nobel Prize-winning economist Joseph Stiglitz has served as the Chairman of President Bill Clinton's Council of Economic Advisers and Chief Economist for the World Bank. He has been a persistent critic of free-market economics, whose recent book Freefall: America, Free Markets, and the Sinking of the World Economy (W. W. Norton & Co., 2010) traces the roots of the financial crisis and details the government's flawed response. Dr. Stiglitz discussed the crash of '08 in an interview with AlterNet economics editor Zach Carter.

Zach Carter: How did we get here?

Joseph Stiglitz: Well, there are so many pieces that contributed to our getting here that it's hard to distill into something simple, but the bottom line is that the banks acted recklessly in their lending, in their gambling, in their management of risk. They made bad judgments about credit worthiness. In a sense, they failed their core societal function of allocating capital and managing risk. They misallocated capital and they mismanaged the risk. What I tried to do with the book is peel back the onion and ask – this is not the way capitalism supposed to work – why did things happen so badly? And here there are a number of factors. One of them was that the bankers had the incentive to engage in short-sighted behavior and excessive risk-taking. You have to ask, "Why is that?" And the answer has to do with problems of corporate governance and a host of other problems that I try to delineate in the book.

Tax Fraud

Debunking the claim that higher income-tax rates reduce GDP.

By Eliot Spitzer
Posted Tuesday, Feb. 23, 2010, at 3:39 PM ET

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The American debate over taxes is ferocious and highly partisan. Some, mostly Republicans, reflexively oppose all taxes. Others, mostly Democrats, decry the lack of progressivity and fairness in the tax system and favor higher tax rates for the wealthy.

This debate isn't new. The same arguments have been repeated, with the same passion, since our income tax system was created—first during the Civil War and then—after its initial rejection by the Supreme Court—following the ratification of the 16^th Amendment in 1913. A wonderful book by Steven Weisman, The Great Tax Wars, brings this history to life.

But as Weisman makes clear, one thing has changed in a spectacular manner, and that is the American public's—and American politicians'—willingness to defend high marginal income-tax rates as an essential and proper way to pay for the cost of government. Until a generation ago, many Americans and their representatives argued vehemently that the wealthy ought to pay more in taxes, but that position has drastically declined in popularity. Weisman sets the debate in the context of the battle between those who invoke justice—progressive taxes create equity and hence justice—and those who invoke virtue—the belief that hard work should be rewarded and taxing higher income at an elevated level creates a disincentive to the hard work we should promote.

The Rising Toll Of Wall Street's Global War

By Zach Carter

Created 02/23/2010 - 9:12am

Over the past thirty years, Wall Street has waged a steady war against governments around the globe, convincing policymakers of various ideological stripes that whatever raises profits for bankers and traders will be good for the rest of society. It's a very simple and appealing portrait of how the world works. Unfortunately, it's completely wrong.

Profiting from hunger

In an interview with AlterNet's Terrence McNally [1], economic luminary Raj Patel explains the connection between widespread global poverty and wild Wall Street profits. Markets are defined by a set of rules—if those rules completely disregard social welfare, then the participants in those markets will ignore them as well. When traders can make a quick buck speculating on the price of rice, they will, even if that speculation drives up the price of a basic necessity and makes people go hungry.

Deflating The Middle Class Dream

By Natasha Chart

Created 02/23/2010 - 10:22am

The dream of the middle class is that the majority of people will be able to comfortably cover their basic needs by working a reasonable number of hours at a probably unspectacular, but useful and therefore, respectable, job. A middle class life means a secure place to live, good food to eat, adequate medical care, the ability to purchase clothing and transportation services suitable to maintaining employment, and a stable environment for your children to grow up in so they can do as well or better [1].

Today, the entire concept of the middle class is being effectively scrapped in an environment where that level of economic security may often require desperate measures [2], or a six-figure income [3]. Why? Because no new jobs were created between 1999 and 2009 [4], completely deflating the wage economy.

In Avedon Carol's words, "Our owners are telegraphing that some magic formula dictates [5] that we have to be made miserable. Of course, what's making us miserable isn't magic - it's them." Productivity will likely continue to rise [6], but its benefits won't be shared [7] down the economic ladder [8], they'll be used as collateral to cash out productive enterprises [9] and fire their workers.

The Unemployed Now Have Their Own Union, and It's Catching on Quickly

By Harry Kelber, Labor Educator
Posted on February 24, 2010, Printed on February 26, 2010
http://www.alternet.org/story/145797/

It's been only a month that a union for the unemployed has come into existence through an ingenious grassroots organizing campaign. In case you haven't heard about it, the union's name is "UR Union of the Unemployed" or its nickname, "UCubed," because of its unique method of organizing.

UCubed is the brain-child of the International Association of Machinists and Aerospace Workers (IAM), whose leaders feel that the millions of unemployed workers need a union of their own to join in the struggle for massive jobs programs.

Exposing the Great American Bubble Barons: Join Us in the Investigation

Join AlterNet's collective investigative project into the bubble barons who got obscenely rich as they destroyed our economy. Help hold them accountable with Citizen Journalism.

February 24, 2010 | A century ago, the robber barons at the helm of the U.S. economy were easily identifiable titans of industry: Andrew Carnegie of Carnegie Steel, John D. Rockefeller of Standard Oil, financier and steel magnate J.P. Morgan. It was easy to draw the link between the robber barons' brutal business practices and their immense wealth; it was clear that these businessmen were, quite literally, robbing the American people in the course of amassing their fortunes.