A New Deal, or a New New Deal?

The drunken boat that was the Modified Paulson Plan sank yesterday, capsized by a crew of pirate freemarketeers in the House. What this means: we won't be giving away a trillion dollars of taxpayer money to the world's largest investment banks until sometime after the Jewish New Year.

But in the brief pause between attempted capitulation to capital and its successful realization, there's an opportunity. A slim one, a brief one -- But a real one.

Even as Treasury officials reassured their investment banking colleagues on a conference call that none of the strictures of the negotiated bill matter at all, and that they fully intend to give the taxpayers' money to the wealthiest and healthiest houses first (read: Goldman Sachs and J. P. Morgan); even as the House Republicans proclaimed their undying love of the free market that was collapsing around their ankles; even as John McCain was lurching toward leadership while succeeding only in breaking the china; even as Nancy Pelosi was trying to sell a deal which still stinks on ice -- the outlines of something far better were beginning to emerge. Here are some proposals: two modest (but necessary); one immodest (and equally necessary):

• WWWBD?

When Warren Buffet invested five billion of his own money in Goldman Sachs last week, he got guaranteed ten percent interest and warrants to buy. Our money's as good as his, yes? So: just give us the deal that Warren got.

• Let Wall Street pay for itself.

Until it was phased out in 1966, we had a tax on stock trades of .25%. The UK and other international markets still have one. It was called STET -- the Securities Turnover Excise Tax. The idea behind it was to encourage investment, discourage stock-market gambling: in the words of J.M. Keynes, "mitigating the predominance of speculation over enterprise."

If we were to insist on one now as the price of Paulson's Wild Giveaway, we'd get back $150 billion a year. In the midrange, we'd actually get back (over several years) what we're about to give to them (over several weeks). Thom Hartmann at Common Dreams has a thoughtful and compelling outline on the historical background of the STET, and just how this would work right now.

• Cure the disease, not the symptom

As Digby proposes, do what FDR did: use the financial collapse to institute genuine reform--a liberal Shock Doctrine. Her eloquent and passionate piece is better read than summarized. (Digby now demurs that, Saknussemm-like, Rick Perlstein was there before her. His piece for The American Prospect is a must-read as well.) Since the problem in the markets is a reflection of the larger problem in the economy, why not fix the economy? Why not a new New Deal?

Alas, after all of the sturm und drang of yesterday, the most likely outcome is the saddest one as the markets are already predicting: sometime later this week, we get some version of the original Paulson plan, with a couple of stupid sops to the "free-market" Republicans. (Nabokov once said that "reality" was a word that only made sense within inverted commas. Surely "free market" can this week be added to the list.) But the opportunities here are far greater, and far more thrilling, than anything either of our political parties will put on the table.

If we don't use this crisis as an opportunity, the pigs at the trough certainly will -- as they did after 9/11, and as Paulson and his gravediggers have been doing for the past few weeks. If we do nothing -- or if we simply accede to the demands of the big finance -- then the best description of September 2008 will have been written by Antonio Gramsci, the political theorist (and founding member of the Italian Communist Party). Gramsci said, "The old is dying, and the new cannot yet be born. In the interim, a great variety of morbid symptoms appear." That will be our legacy if we lack the courage to stand up to the Large Houses. And it will be all we deserve.

Comments

[yellowcockroachdemocrat]

"The Federal Reserve will pump an additional $630 billion into the global financial system" Does this mean that the Fed went ahead and did what the house voted against?

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9MTZEgukPLY&refer=home

[doctordawg]

YES YES YES YES YES!!! Give this man a standing ovation!

AEI and neocon "free market" think tanks ALREADY have plans for the NEXT disaster in place, so that while others are still swooning, they've got a five hundred page "answer" on the table, demadning "action".

Progressive MUST do this, also. PLAN for the next disaster NOW. When unregulated swaps come home to roost, we'd better have universal healthcare on the table as the best possible protection for mom and pop America ready to go, i.e THINK NOW or we will lose again.

Right now there is a coup going on in Washington, make NO mistake. The neocons are attempting to do to us what de Kerk did to Mandela as they transferred power - Mandela was given the presidency, but de Klerk and his cronies kept complete control of the MONEY!

We must not be blindsided here. PLAN NOW. USE this disaster to further progressive ideas. USE this disaster to push through universal healthcare with some argument like "almost a million bankruptcies a year are due to medical bills. This mortgage crisis could have been completely avoided if we had universal healthcare." ALL TRUE!!!

The neocon "free marketer" are using disaster as opportunity. We must attack this pre-emptively in kind.

[ErnestineBass]

Your use of the word "coup" is appropriate.

The Paulson plan is nothing short of a bloodless financial coup meant to consolidate the banking "industry" which will only place more and more power into the hands of a few.

IMO, this is extortion.

[magicmary]

I just sent a link to this article to my congressman - who voted no - and I encouraged him to turn this crisis into an opportunity. I LIKE that excise tax! I can't believe we don't have something like that in place! How obvious can you get!!!
Man, I'd love to lock some of our pols up in a room for a couple days and make them listen to the Thom Hartmann show..

Yes... let's make the NEW New Deal a meme across the interweb!!! If we can get a deal that works for all of us, it will have been worth the couple thousand I've already lost in my money market acccount!!

[joebhed]

Maybe the art of the possible, but it does not go far enough for me.

""Judge the man not by what he attains, but by what he seeks to attain.""

FDR put many limits on the FED bankers, through the '33 and '35 banking reforms.

But he sought to achieve much more.

His monetary brain-trust, based at the then-progressive Chicago Business School, developed a plan to deal with the failures of the capitalist business cycle, and with the inability of the FED to prevent the 1929 financial markets failure.

THAT was why they created the private FED system.

The Chicago Plan for monetary reform was created and structured to deal with the financial crisis of the day. Today's is the exact same market-failure manifestation as 1929.

We need to revitalize the principles of monetary reform that were engendered in the Chicago Plan.
Government control of the sovereign people's money system.
The issuance of a debt-free money supply, so that we don't have to end up paying for EVERYTHING three times over.
The restoration of an honest banking system based on the 100 percent-reserve principle.
Bankers actually lend the money in their vaults.
Money being used to employ Americans and utilize our resources for our own good.

These things are achievable.
These things are what FDR sought to achieve.
These things are what we need to achieve to prevent one more capitalist business cycle.
Are these the things that we seek to achieve?

[ivangoldstein]

You might get your wish because the current banks look shady as shi#@. Once the United States debt pyramid collapses the people will need to form a new government and a new currency. Since the Fed Reserve Notes will be used to keep warm we can start printing real Greenbacks, Lincoln style! In the bailout bill they actually wanted ZERO reserve requirements! So I hand the bank a $10 deposit and they can magically wave the wand and create .....whatever they want.

Just like Germany post Weimar Republic started issuing debt free money we can do the same and have a kickass economy. Full employment can be had in less than 2 years after the crash. And ZERO DEBT or DEFICITS because we owe nothing to private bankers.

[santamonica39]

Call you representative in the House. If they voted YES on this thing the first time make sure they know your views and that you oppose it. Explain the alternatives you'd like to see democrats supporting. Re-instituting this STET tax for instance is a great idea and god knows why democrats aren't doing more to push this. When you call ask to speak to the "legislative assistant who handles banking issues" so that you get to someone whose job is to advise the Rep. on those issues. Otherwise, you're probably just talking to an intern or staff assistant. Call don't email!! No one reads the emails and calls have a much greater impact!

[oafishcad]

Quick. The foxes guarding the henhouse are almost out of chickens. Without an immediate infusion of pullets this whole farm may collapse!!!!!!

[ProudLiberalDan]

Forget this naive "new poltiics" and bag bipartisanship. There's an election going on.

Instead of bailing out Wall Street, craft a MAIN STREET leaningt bailout that can get 60 votes in the Senate, and put that on the President's desk and DARE him to veto it and conservatives to vote against it.

I hope Obama is watching. New politics doesn't work when only one side of the political system is playing. Draw lines in the sand with conservatives over issues like Social Security and stand up and fight them. In case he hasn't noticed, Conservatives aren't interested in working together for the good of the country anyway.

[darker]

conservative Republicans are giving Americans
A RAW DEAL.

running scared Republicans are UP FOR RE-ELECTION and are
chronically campaigning.

Republican policy is TO CAMPAIGN, not to govern!
their decisions are based ON THE NEXT CAMPAIGN.
Their votes are about campaining, not providing good governing
for ALL Americans.

That's WHY Republicans are LOSERS.

[santamonica39]

I agree with you, but what can we do??? I've been calling and writing my representatives, but to no avail. Democrats whom I respected are supporting this ridiculous bailout. Even Obama is championing it, which defies logic. These other proposals are so much more sensible and better for taxpayers. Why can't the democrats in congress run with these? Have they NO courage? I feel powerless and angry and as if our country is already lost. I was working for Obama and donating to his campaign, but now I wonder what for. What difference does it make who wins the election, when both candidates are clearly bought and sold by corporate America. If Obama can't stand up to this nonsense now when it would be politically POPULAR (imagine that!), then what kind of president will he be?

[ProudLiberalDan]

As long as the Democrats are accepting campaign contributions from corporate interests, they will be a susceptible to corruption as the Republicans.

The Democrats needs to stop taking any corporation money so they are not beholden to them at all. It's not good enough to the country that they are less beholden to corrupt conservaties in the Republican Party.

[magicmary]

Honey, cut and past the bit about the excise tax which should be the first thing they do (plus the link to this article) and email it to every representative you can think of even if they aren't yours...Then spread the meme across the internet - we want a NEW New Deal!

[Balancement]

Forgive me for being callous. After three years of being out of work (my latest days-long interview resulted in a "you're wonderful--but we went with another candidate" letter [another "younger" candidate--which they can't say of course]), I'd like to see some other people suffer as I have for a while with no health coverage and no safety net other than dwindling retirement savings and the kindness of friends.

Nasty of me? You bet. Am I bitter and tired? You bet. But maybe, maybe, if thousands of other people go through the hell I've been going through for these three long painful years, maybe we'll get some universal health care and some unemployment that lasts longer than four minutes.

Amazing how some genuine pain can help people focus.

[Joeblue]

If it helps any you're no alone. I'm 59 and can't find a job even though I was at my last employeer 25 years, hard work and loyalty mean nothing.

[research]

Excellent!

The Voters rejected this wall street bailout with calls 200 to 1 against it.

Democrats, start being the party of the people again!

Nationalize the Federal reserve!

It's ridiculous The US treasury creates the money then loan out at 2% to the private Federal reserve corporation, who then turn around and charge 6.5 percent for OUR MONEY!

The Treasury can directly give or loan money to citezens

[SailFree]

Right! Bow to the whim of the mob!

No, wait, that's why the Founding Fathers created a REPUBLIC, not a democracy! That's why we don't have mob rule! That's why blacks don't have to sit at the back of the bus! That's why the wolves don't get to vote on whether to eat the rabbit!

Seriously, think about it.

[research]

you should look up what the founding fathers thought about the fed. They hated it.

[SamThornton]

Howard's right. The country is ready for a new New Deal and not for some nutty bailout deal. Think of it like this. Your cat has the mange. Your crazy uncle tells you the best way to cure the cat is to take the dog to the vet for mange treatment and hope the results slop over to the cat. That's basically what the Bush/Paulson bailout plan asks us to do.

Couple this with the exposure of a Treasury Department conference call yesterday that informed a group of Wall Street insiders that Treasury would ignore any restrictions, including dollar limits, bail out the biggest, healthiest firms first, pay original amounts for bad paper, and Golden Parachute provisions will be ignored for current contracts. In other words, so-called safeguards built into the bill are a fraud. (http://tinyurl.com/3laltl)

This isn't the first time we've been in a credit crunch and it won't be the last. Look to the ways we've resolved this problem before and do the same or similar. Time for Congress to get its head out of where it currently resides.

[darthdarcy]

Here's the way to go...

Nationalize the Oil Industry and all major Energy...

Single Payer Heath Care...

Nationalize the Airlines...

Penalize outsourcing

Set Regulations in the Financial markets once again

Grow Industrial Hemp and legalize decriminalize Marijuana so those dollars stop leaving the U.S...

Get the FDA back under independent testing and control away from the drug companies..

Clean up the DOJ..

End local school funding it violates the 14th Amendment

End Corporate "personhood"

There's more but that's a start..

[SamThornton]

Like the way you think.

[Venicedread]

Very nice post.
The New New Deal is what this country needs.
For the last half century plus, the greedy have been chipping away at the protections FDR put in place.
It really moved in their favor once they had a charismatic leader in the White House, Reagan, who could convince the country that regulation was bad.
Deregulation will be fine, once we get rid of the human condition called greed.

[Navy VET EOD]

If you haven't already, check the roll call vote to determine if your district representative in the House voted "aye" or "no". If they voted "aye" as mine, Steny Hoyer, did, then make sure he/she understands in no uncertain terms how relentlessly you will campaign against them ("safe" seat or not) between now and their next election. Write them twice a day if necessary. Don't let them push this through on the second, third, fourth or any other try.

[penelopepunditwatcher]

"We don't even know how to think progressively anymore. Most of the liberals are ready to lynch the mob that scuttled this awful bill."

Indeed! And what's up with that, anyway? I'm shocked by their response to he bill's temporary demise and I'm disappointed the Dems are not taking a much more aggressive approach to instating regulation and safeguards.

Yes, let's do reinstitute STET!

Any institution that says it needs bailing out, but refuses the restrictions (yet to be offered) with teeth ... does not need the taxpayers money.