POMPEII -- I was in Pompeii a couple of days ago. Walking around the ancient city, reading up on its history, and thinking of its people -- wiped out in 79 A.D. by a volcanic eruption -- has me thinking a lot about warning signs.
Warning signs fall into two categories: those that are recognized while there is still time to heed the warning, and those that are acknowledged as "warning signs" only after the fact, when it's too late to do anything but sift through the ashes and wonder why we didn't do something when we had the chance.
In the case of Pompeii, the warning signs included a severe earthquake in 62 A.D., continued tremors over the ensuing years, springs and wells drying up, dogs running away, and birds no longer singing. And then the most obvious warning sign of all: columns of smoke belching out of Mount Vesuvius before the volcano blew its top, burying the city and its inhabitants under 60 feet of ash and volcanic rock.
But the warning tremors were dismissed as "not particularly alarming because they are frequent in Campania." And the billowing smoke was quaintly described as looking like an "umbrella pine."
There is currently plenty of alarming smoke pouring out of our economic Vesuvius, but it too is being dismissed. Instead of "umbrella pines," we are being lulled with the sightings of green shoots. Don't worry about those economic tremors, we are told, our financial system is back on track, the worst is over, the bailout worked and we just need to sit tight and wait for the bottom to be hit (some are arguing it's already been hit), after which we'll start our slow but steady climb to recovery.
But the warning signs are all around us:
-- Unemployment has hit a level beyond the administration's worst projections, and last month reached record highs in Rhode Island (12.4 percent), South Carolina (12.1 percent), and Nevada (12 percent), while Michigan, at 15.2 percent, still has the highest jobless rate of any state. Meanwhile, over 650,000 workers will run out of unemployment benefits come September.
-- Credit card defaults have surpassed 10 percent, and in May hit a record high -- the sixth straight month that dubious achievement has been reached.
-- Foreclosure numbers continue to shatter records. There were more than 336,000 foreclosure filings in June, the fourth month in a row with over 300,000. That meant that, as of July 1, one in every 84 homes had been -- or was in danger of being -- lost. And more than 15 million homeowners now owe more on their homes than they are worth.
-- In the first six months of 2009, 675,351 individuals filed for bankruptcy. In June alone, there were 116,365 bankruptcy filings -- a 40 percent increase over June 2008.
-- Since the recession began, an estimated 2.4 million workers have lost their health care benefits.
And the biggest warning sign that the natural order of things has been disturbed is how many of the very people responsible for the economic collapse not only are still in power, but are still lining their pockets with outrageous windfalls -- courtesy of the American taxpayer.
According to last week's earnings reports, Goldman Sachs posted a $3.44 billion second-quarter profit, Citigroup earned $3 billion, and Bank of America earned $2.4 billion.
On top of this, Goldman Sachs just announced that it was setting aside $11.36 billion for employee compensation through the first half of the year.
And AIG -- which we bailed out to the tune of $150 billion -- is apparently doing so well they're ready to set aside $235 million in bonuses.
After the earthquake that severely damaged Pompeii in 62 A.D., it is said that among the first buildings repaired were Pompeii's famous brothels. The metaphor holds. Only in 2009, we call them Goldman, AIG, Bank of America, and Citi. Though that is probably unfair. To the brothels.
But wait, you might ask, isn't the government reacting to the warning signs? Isn't Congress currently redesigning our financial regulatory structure? Yes, but the redesign will give greater authority to the Fed -- which missed all the warning signs leading up to the meltdown. As Mark Williams, finance professor at Boston University and a former Fed bank examiner put it, "giving the Fed more responsibility at this point is like a parent giving his son a bigger and faster car right after he crashed the family station wagon."
And what about the new "Pecora" commission, which has been charged with investigating how the financial collapse happened and how to prevent another one -- won't it point out the warning signs? Its chairman, Phil Angelides, certainly seems determined to. But look at its vice-chairman and the restrictions the commission is operating under. The vice chairman is Bill Thomas, the former GOP congressman from California, who earlier this decade chaired the House Ways and Means Committee. Even among shills for big business, he stands out. What's more, Mitch McConnell and John Boehner ensured the committee won't have much clout by forcing Democrats to agree to a provision that allows the committee to issue subpoenas only if one of its Republican appointees votes to issue one.
Then there is the proposed Consumer Financial Protection Agency, which is supposed to protect consumers from the vultures that helped destroy our economy. But its ability to monitor warning signs is being undermined by Wall Street, with the charmingly named Financial Services Roundtable leading the charge. "Politically, it would be difficult to kill it outright," says Scott E. Talbott, the Roundtable's Senior VP for government affairs. "Our goal is to change the agency, change the proposal, to where the benefits outweigh the costs.... We're not for the status quo. We're for protecting consumers. The question is, what's the best way to do it?"
I'm going to guess that, for Talbott's group, the "best way" to protect consumers will be a way that somehow does not protect consumers.
And then we have today's blistering report from Neil Barofsky, the special inspector general overseeing the TARP program, showing that many of the banks -- instead of using the bailout money they received to boost lending -- have used it to make investments, repay debts, or buy other banks. The report also takes on the Treasury Department for its ongoing lack of transparency when it comes to requiring bailed out banks to let the public know what they have done with our money. It's hard to heed warning signs that are so deliberately kept out of view.
Walking around Pompeii my friends and I kept wondering: "How could they miss the birds not singing, the water not flowing, the earth trembling, and the smoke billowing?" The list of today's warning signs, which future generations may similarly marvel at, grows longer with each passing day.
So the tremors continue to rumble beneath our feet and the plumes of smoke continue to belch overhead.
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