Bill Scher's LiberalOasis

Home of the This Is Not Normal podcast, Bill Scher columns and other liberal commentary

Month: April 2010

The LiberalOasis Radio Show: Earth Day Edition

The LiberalOasis Radio Show was broadcast Saturday at 12 noon on WHMP in Western MA, featuring my interview with Mother Jones environmental reporter Kate Sheppard on the soon-to-be introduced Kerry-Graham-Lieberman clean energy jobs and climate protection bill.
You can download the podcast at these links: (iTunes / XML feed / MP3).

The LiberalOasis Radio Show: The Tea Party Is Over Edition

The LiberalOasis Radio Show was broadcast Saturday at 12 noon on WHMP in Western MA. We discuss the irrelevance of the Tea Party, the pressure on Republicans to back Wall Street reform and the soon-to-be released Kerry-Graham-Lieberman climate compromise. Plus, “Momtroversies” essayist Traci Olsen reflects on childhood intimidation and harassmenet, and Valley Advocate blogger Sarah Buttenwieser on access to abortion and the National Abortion Access Bowl-A-Thon fundraiser.
You can download the podcast at these links: (iTunes / XML feed / MP3).

The Week In Blog: End of Bipartisanship Edition

The latest edition of The Week In Blog is up at featuring Matt Lewis and myself on blog reaction to Wall Street reform, the Tea Party express and Elena Kagan possible Supreme Court nomination. Watch it below.

What to do with WaMu?

The Senate opens hearings today into the failure of Washington Mutual. Washington Mutual was among a group of banks that jumped into the subprime mortgage sector headfirst. Jumping into anything headfirst is not usually a good idea until you know how deep the pool truly is. It is estimated that over $700 billion of these subprime mortgages were handed out between 2004 and 2007. These were those famous adjustable-rate mortgages. Washington Mutual handed out over $133 billion in these adjustable mortgages. The former CEO Kerry Killinger stated that WaMu wasn’t being treated fairly by the government. He whined that WaMu “should have been given a chance to work its way through the crisis.” What I want to know is whether anyone in that hearing run over to Mr. Killinger and cry tears of sadness for this millionaire.
When people are given the wrong incentives, we shouldn’t be surprised when they do the wrong thing. Specifically, loan originating officers were given incentives to generate loans. It really didn’t matter what kind of loan. It didn’t matter whether the loan was fraudulent or legitimate. During Washington Mutual’s own internal investigation back in 2005, they found the two offices in California where over 50% of their loans were fraudulent. (At one location was over 80%.) Yet, the practice continued. Why? The money was too good. (Oh, I forgot to mention that their own risk officers were excluded from important meetings. This means that either these risk guys are lying to protect their butts or WaMu knew what they were doing was fraudulent and they didn’t want to rish telling them.)
In Michael Lewis’s book, The Big Short, he describes an incident where a immigrant farm worker who made no more than $14,000 a year was given alone for $750,000.
Lower middle class and upper lower class Americans were hit the hardest by these fraudulent practices. They were specifically sought out by these banks. These are Americans that are holding down one or two jobs. Both parents are working. They’re working extremely hard and they are very close to being able to afford a nice house, in a nice neighborhood with good schools. Something always gets in the way of their dream house. These are everyday expenses that they simply cannot afford — car breaks down, they need a new refrigerator, Johnny was hit in the head with a baseball and needs stitches. So Washington Mutual, IndyMac, Wachovia and others preyed on these Americans.

Here’s my whole problem with these shysters. They made tons of money off of unsuspecting Americans, off of Americans who wanted to believe in the American dream. When the banks collapsed, the Americans were kicked out on the street. Banks who were deemed too big to fail were rewarded for their size and they were allowed to buy the smaller failing banks at fire sale prices. Bankers who lost their jobs were given a little pot of gold on their way out the door. Bankers who kept their jobs were given big fat pay raises for acquiring new assets. Real, honest-to-goodness, hardworking Americans who believed that they would never be given a mortgage they didn’t qualify for were asked to bend over (and kicked in the seat-of-the-pants repeatedly).

So, I hope that something meaningful will come out of these Senate hearings. I hope this is not just a dog and pony show.

How much Money do these Big Banks owe You?

Last week, the Bureau of Labor Statistics released the employment report showing that 162,000 jobs were added in the month of March. Republicans look for the bad in the numbers, the Democrats look for the good and the reality was somewhere in the middle. It is nice that the economy has started adding jobs. The economy has added jobs three out of the last four months, yet we’re still in a huge jobs hole. In order to get the unemployment rate of 9.7% back down to the pre-recession rate of 5.0%, we need at least 11 million jobs. At our current rate it will take a 67 months to create 11 million jobs, just over five years. Who is willing to wait for five years?

I’m in the middle of reading Michael Lewis’ book, The Big Short. The whole subprime mortgage market was a big scam. These Wall Street banks would come up with new and exciting ways to entice people who could not afford a house to take out a mortgage on a house. As far as I know, it wasn’t illegal but it was unethical. The system was predicated on rising housing values. As long as the housing values rose, the folks with adjustable mortgages would simply refinance. (Many of us worry about the cost of refinancing, but those costs were waived in many of these subprime mortgages.) I’m still trying to figure out the purpose of derivatives. It seems like the purpose of derivatives is to hide the true risk and value of a particular security or commodity. It is like using Photoshop to morph me into Denzel Washington. That’s just wrong. If you are looking for Denzel and get me, I guarantee that you are going to be pissed!! Probably the only thing more deceptive and deceitful than derivatives would be these CDOs (collateralized debt obligations), which are nothing more than bundled derivatives. So, just in case you were able to figure out what was in a particular derivative, it became nearly impossible to figure out what was in the CDO. The big banks would then get a credit rating agency like Moody’s to put their AAA stamp of approval on these heaps of garbage. Then they would sell these heaps of garbage to your pension fund and my mutual fund. Funds would buy these things because they were AAA rated by S&P or Moody’s.
So, back to my original question, how much do these big banks owe you and me? When Lehman Brothers, Bear Stearns and Merrill Lynch began to implode in 2008, you and I came to the rescue. The government, using our money, decided that these guys were too big to fail (except for Lehmans, the government let them fail). Failure would’ve caused a catastrophic collapse of our financial system that’s what we were told. So, we reached deep into our pockets and pulled out hundreds of billions of dollars. Over the last several months, many of these banks have been paying back a large chunks of the billions of dollars we lent them. Once they pay all of the $700 billion back, are we square? My answer is no.. not even close. This guy (Andrew Haldane) over the Bank of England calculated that the irresponsibility of these large financial firms has cost the world approximately $4 trillion. When you think about job layoffs, businesses that had to close because the credit markets all froze up, the loss in value of retirement plans, yup… $4 trillion sounds about right.

The big question is how do we collect? It is clear that they owe us. I don’t think that we will ever get paid. I don’t think that we will ever get back the money that we lost because of their incompetence, arrogance and stupidity. The one thing that we can do is to make sure that this never happens again. We have to break up the banks. I don’t think that breaking them up into large chunks is a good idea. We need to break them up in such a way that they can fail without jeopardizing our economy. According to Robert Reich, $100 billion should be the upper limit. Okay, I can agree with this number. It is arbitrary. The loss of $100 billion is not going to bring down our economy. I like the number. (I also want to get rid of credit default swaps and derivatives need to be regulated, as do these huge pools of money called hedge funds.) So, it’s time to push Congress, and especially the Senate, towards better regulation and breaking up these huge banks and financial institutions.

The LiberalOasis Radio Show: Beyond The Echo Chamber Edition

The LiberalOasis Radio Show was broadcast Saturday at 12 noon on WHMP in Western MA. We analyze how the sudden Supreme Court vacancy may negatively impact the potential Senate climate protection bill. We then interview Tracy Van Slyke, co-author of the new book Beyond The Echo Chamber: Reshaping Politics Through Networked Progressive Media. Also, The Optimist,” Tom Pappalardo warns us about his funeral. And Poetry on the Radio’s Sarah Lariviere makes a new best friend.
You can download the podcast at these links: (iTunes / XML feed / MP3).

The Week In Blog: Bling Bling Edition

The latest edition of The Week In Blog is up at featuring Matt Lewis and myself on blog reaction to Michael Steele’s shaky week, Confederate History Month and the nuclear arms treaty with Russia. Watch it below.

Do conservatives understand the Constitution they say they love?

Healthcare commerce
Several states banded together and
filed a lawsuit stating that healthcare reform was unconstitutional. They seem to be using a two-pronged argument: First, healthcare reform “infringes on state powers under the Constitution’s Bill of Rights.” Secondly, according to the Attorney General of Virginia, “Congress lacks the authority under its constitutional power to regulate interstate commerce and force people to buy insurance.” We’ve heard cries of, “where does it say in the Constitution that Congress has the power to force you to buy insurance?”
Well, let’s start from a position that I think we all can agree on — the Supreme Court is the final arbiter over what the Constitution says and doesn’t say. Whether we agree or disagree with the Supreme Court, they have the final say (Article 3, Section 2).
Let’s start off this legal journey to looking at Article I, Section 8 — “The Congress shall have the power… to regulate commerce with foreign Nations, and among the several States, and with Indian Tribes;” “Commerce” is defined in Merriam Webster’s Dictionary as “social intercourse: exchange of ideas, opinions or sentiment.” The secondary definition is the one that we are more familiar with — “…the exchange or buying and selling of commodities on a large scale involving transportation from place to place.”

We really weren’t a nation for long before this commerce clause was challenged. In 1816, Congress passed a law which opened the second Bank of the United States. Shortly after the bank opened, the state of Maryland passed a law which imposed taxes on that bank. James McCulloch was the cashier of the Baltimore branch. He refused to pay the tax. McCulloch versus Maryland was the resultingĀ case. The Supreme Court, using the commerce clause, stated that Congress had the right and the power to incorporate a bank. Chief Justice John Marshall, who fought in the Revolutionary war, served in Virginia’s House of Delegates and was appointed to the court by President John Adams, argued that Congress possessed unenumerated powers not explicitly outlined in the Constitution. (Where was Antonin Scalia?) He went on to say, “Although, among the enumerated powers of Government, we do not find the word ‘bank’ or ‘incorporation,’ we find the great powers, to lay and collect taxes; to borrow money; to regulate commerce; to declare and conduct a war; and to raise and support armies and navies. The sword and the purse, all the external relations, and no inconsiderable portion of the industry of the nation are intrusted to its Government. It can never be pretended that these vast powers draw after them others of inferior importance merely because they are inferior. Such an idea can never be advanced. But it may with great reason be contended that a Government intrusted with such ample powers, on the due execution of which the happiness and prosperity of the Nation so vitally depends, must also be intrusted with ample means for their execution.” Therefore, in this early decision made almost 200 years ago, we see that Chief Justice John Marshall unequivocally rejects the notion that if the Constitution does not say X., Y. or Z. and Congress can’t do it. This in an of itself blows 99% of conservative arguments out of the water.

In 1824, steamboats were probably the fastest mode of transportation. Each state regulated its own waterway. A steamboat owner who operated in New Jersey and wanted to operate in New York challenged a New York law which gave exclusive rights to another company. Gibbons versus Ogden. Not only did the court find in favor of Congress that Chief Justice John Marshall also defined commerce. He stated, “The subject to be regulated is commerce, and our Constitution being, as was aptly said at the bar, one of enumeration, and not of definition, to ascertain the extent of the power, it becomes necessary to settle the meaning of the word. The counsel for the appellee would limit it to traffic, to buying and selling, or the interchange of commodities, and do not admit that it comprehends navigation. This would restrict a general term, applicable to many objects, to one of its significations. Commerce, undoubtedly, is traffic, but it is something more: it is intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse. The mind can scarcely conceive a system for regulating commerce between nations which shall exclude all laws concerning navigation, which shall be silent on the admission of the vessels of the one nation into the ports of the other, and be confined to prescribing rules for the conduct of individuals in the actual employment of buying and selling or of barter.”

To be fair, I should add that the courts tried to limit Congress’ power through the commerce clause in the late 1890s through the 1930s. In 1918 Congress tried to prohibit child labor. In the Hammer versus Dagenhart case, Justice William Day argued, in a 5 to 4 decision, that production was not commerce and therefore outside of the jurisdiction of Congress. So this limited Congress’s power through the commerce clause. Personally, I believe this is a nonsensical argument, since without commerce there’s no reason for production, and production as part of the process. It is part of commerce. The Supreme Court was splitting hairs here. Oliver Wendell Holmes’ dissent was brilliant. He states, “The act does not meddle with anything belonging to the States. They may regulate their internal affairs and their domestic commerce as they like. But when they seek to send their products across the state line, they are no longer within their rights. If there were no Constitution and no Congress, their power to cross the line would depend upon their neighbors. Under the Constitution, such commerce belongs not to the States, but to Congress to regulate.” This is a GREAT explanation of how the relationship between the States and the Federal Government should interact.

In the United States versus Darby Lumber Company, the Supreme Court overturned the Hammer decision. The Fair Labor Standards Act was passed as part of the New Deal. It regulated minimum wages and maximum weekly hours. It also dealt with child labor. This applied to all corporations that engage in interstate commerce. This unanimous decision came down in 1941. One of the most interesting things in the decision was that Supreme Court dealt with a common argument that conservatives have thrown out for years; states’ rights. The court ruled that, “the 10th amendment is not a limitation upon the authority of the National Government…”
In 1944, the Supreme Court ruled that Congress had the power to regulate insurance.
So, I think it’s pretty clear from the very beginnings of our republic that the Supreme Court’s interpretation of the commerce clause has been very expansive. For more on the commerce clause, I’ve written more here and here. Simon Lazarus of the American Constitutional Society for Law and Policy has written a nice 16-page brief on whether mandatory health insurance is constitutional.
Why don’t conservatives know this? I did a couple of hours of research and found information that is readily available on the Internet or in your local public library. My guess is many conservatives do know this information. Yet, they choose to ignore it while they stoke the anger and frustration of many Americans. The filing of a lawsuit and the multiple op-eds that have been generated seem to be part of a calculated political ploy. This is about politics. Maybe maybe that is what’s so sad about all of this.

The LiberalOasis Radio Show: Drilling For A Climate Bill Edition

The LiberalOasis Radio Show will be broadcast Sunday at 7 AM on WHMP in Western MA (just for this week, it will return to Saturdays at noon next week).
We analyze why President Obama’s drilling announcement increases the chances for a comprehensive climate bill. Plus, our monthly “Pleasant Conversation With A Conservative” with Matt Lewis, where we talk about the 2010 midterm elections.
You can download the podcast at these links: (iTunes / XML feed / MP3).

The Week In Blog: Drill Steele Drill Edition

The latest edition of The Week In Blog is up at featuring Matt Lewis and myself on blog reaction to the Daily Caller-RNC-lesbian bondage strip club scoop, the President’s coastal drilling plan and Sarah Palin’s impact on the Arizona GOP senate primary. Watch it below.