How to unoccupy Wall Street

The Thinker by Rodin

There is no sign that protesters occupying Wall Street and other cities are going away. Police are just one of many groups baffled by these groups: seemingly disparate communities of people intent to live 24/7 outside in urban environments, making homes in cheap plastic tents, sleeping in sleeping bags on cold concrete surfaces, and using local McDonalds for bodily necessities. For the most part they are a peaceful lot, although a small subset of the protestors occupying Oakland caused some minor vandalism at the Port of Oakland. Mostly the protestors seem to be communal and ad hoc. It is the ad hoc nature of these protests that is perhaps the most disturbing aspect to those who oppose them. “What do they want?” is the common complaint, but answers from the representatives of the 99% are elusive. They oppose the power of corporations and big banks, and the increasing wealth of the superrich, but there are no list of demands, no spokesmen, and no figurehead. Instead the protestors and the protests seem to be wholly organic.

It’s unclear what caused the movement to come together now, when conditions have been bad for years. Moreover, it is nebulous as best how it will end. Police are trying the usual tactics of coercion and intimidation. Marches tend to be sporadic and ad hoc, which often violates some local ordinance where protests have to be planned. This gives police the justification to lobby tear gas, use pepper spray and try other group dispersal tactics. Protestors generally handle these indignities well. Neither Jesus nor Martin Luther King would find much in their behavior worthy of chastisement.

I suspect at this point even the police are wising up. These Occupy movements are fed by general discontent, and they fade away only when the source of the discontent fades. A robust economic recovery that lifts all boats does not appear to be on the horizon. If anything, Congress seems intent to do everything possible not to solve our underlying economic problems, and Republicans see growing income inequality as good. A cold winter may shrink the number of occupiers temporarily, but is unlikely to stop protests altogether. Even if it does, they are easy enough to restart with crowd-sourcing technologies on Twitter and Facebook.

Authorities can try using increasingly heavier hands. After all, it worked before. During the early days of the Great Depression, about 46,000 former World War I soldiers unable to find work and their families occupied Washington D.C. They wanted Congress to give them immediately cash payments for their service certificates. The Bonus Army got the attention of Congress and the White House, but not in a good way. General Douglas McArthur used two regiments of cavalry to clear Washington of protestors. Yet, protestors were eventually successful. In 1936, the Bonus Army got their bonuses. Members of the Bonus Army also received preferential hiring for positions in the Civilian Conservation Corps. The ruckus helped sweep Franklin D. Roosevelt into the White House in 1932.

While the number of actual protestors at Occupy events is relatively small, at least at the moment a plurality of Americans are sympathetic to their cause. With approval of Congress at nine percent, Americans overall feel disconnected from their government. The Occupy movement is a direct result of this disconnection and frustration.

The problems that Occupy movements are trying to address are institutional and devilishly hard to solve, which suggests these movements are not going to go away anytime soon. Congress is largely refusing to consider their requests. This makes perfect sense because our political system has been engineered by time and money to enfranchise those with money and those that are highly partisan. The result is a Congress elected from congressional districts drawn so politically extreme that moderates and ordinary people in the middle are institutionally disenfranchised. Moreover, the disenfranchisement will be permanent unless things change in a fundamental way.

Those looking for hope will not find much. We recently finished the 2010 census and partisan state legislatures are doing again what they have always done: drawing Congressional districts that are highly partisan. There are a few brave exceptions. California and Arizona are now required by law to draw nonpartisan districts. It seems to be working in California, but the jury is still out in Arizona. In any event, two states out of fifty changing course is hardly a trend, and typically congressional districts are redrawn only as a result of the census held every ten years.

Something resembling real change is simply not possible for another year, which is when the next congressional elections are scheduled. Even then the odds of any real change are rather small. The decentralized nature of Occupy events is a direct response to this actual disempowerment.

A prequel to the Occupy movements could be seen with the Supreme Court’s Citizens United decision in 2010. In the ruling, the Supreme Court broadened the ability of corporations and entities with money to influence government. Virtually everyone except major corporations and those in power panned the ruling. We reacted viscerally to the notion that a corporation is the same thing as a person. Before we had tolerated it, but with the ruling broadening it, slowly a critical mass formed. This event plus the way we addressed the Great Recession to favor Wall Street formed the catalyst for a new and broadly popular movement.

It will take a new people-oriented Congress in 2013 to really address these inequities. Whether we get this kind of Congress is problematic but it is possible that despite our highly partisan districts the 99% will speak with a strong enough voice where a new dynamic can emerge.

At a minimum, a few constitutional amendments would be in order for this new Congress, with dubious prospects that they would be approved by three fourths of the states. In the first, the constitution must be amended to specify that only people and not other entities can contribute to campaigns for political office and that Congress can restrict the amount of these contributions by law. In the second, states would be required to create congressional districts that are contiguous and nonpartisan, to be overseen or perhaps even created by federal judges in these states.

A constitutional amendment cannot address income inequality, but a Congress that actually represents the people rather than the wealthy and the political extremes could choose to pass laws that help address these issues. It’s my belief that these steps, and only these steps, will truly end these Occupy protests.

 

Free and clear

The Thinker by Rodin

Protestors on Wall Street and elsewhere are occupying spots in major cities, trying to make the top one percent acknowledge the ninety nine percent. Many are without jobs. Those with jobs may have taken pay cuts, or were forced to go part time, or were required to contribute more toward health care or retirement. Many of those protestors also carry the burden of underwater mortgages. Others are saddled with burdensome student debt.

They are the unemployed, the underemployed, the over leveraged, the disenfranchised and the generally pissed off. If you are one of them, at a certain point you might as well pitch a tent in Zucotti Park. The weather may be too hot or too cold. You may have to wait in a line at McDonalds at 3 AM to use a toilet. You may suffer from insomnia from the din of a city that never sleeps and smell like a bus depot. But at least you are in the presence of fellow compatriots. You have known relentless misery, you are knowing more misery but at least you can talk with someone who really understands. And once a day or so you can shout out your lungs at the largely tone-deaf moneyed class who might, if the weather is nice, toast you with champagne from the balcony of the New York Stock Exchange.

Mortgage rates are at record lows, but little good this does someone who is underwater on their mortgage. Because they had the flawed judgment to misjudge the future, they are no longer credit worthy, so certainly no respectable lender is going to let them renegotiate their mortgage. The Sword of Damocles shall always be pressed against their chests. No, only good people, really special people, i.e. those with actual equity in their house and good jobs get to refinance their mortgages at crazy low interest rates. In that sense, maybe I am one of the one percent.

No, not really. Our income is not that lofty. We’d need $343,927 in adjusted gross income to fall into that bracket. We’re not quite in the top five percent either. We’d need $154,653 in AGI to qualify. We come close though, so we are definitely in the top ten percent, which is good enough for many of us with mortgages to get one of those sweet refinance deals. Unlike those with underwater mortgages, our property had about twenty years to mostly appreciate, so that when prices finally fell we still had plenty of equity. Plus, over nearly two decades we have chipped away at our house’s principle. The current balance on our mortgage is $64,211.24. We paid $191,000 for the house in 1993 and took a mortgage for $171,900 of the amount. It was not until two years ago that we managed to get the balance below $100,000.

Despite our current 6.875% interest rate, our credit union is still happy to refinance the balance of our mortgage, if we don’t mind giving them $2581 in various fees for the privilege. In exchange they will pay off our 30-year mortgage and give us a new 10-year mortgage at 2.875%. We should save $372 a month in interest, once we pay off the fees, which will take about seven months.

As for those of you with underwater mortgages, sorry, you are largely out of luck. I’d like to say we possessed some sort of genius, buying low in good neighborhoods but the truth was we were just lucky. My wife and I could easily have been underwater on our mortgage too. By chance and perhaps date of birth we rolled double sixes.

Please don’t be angry with us. Yet there must be some sort of element of unfairness here. Someone must be getting shafted when we start accumulating $372 more a month. Rest assured that just like the brokers on Wall Street this extra income will be unearned. I did not have to take a part time job at a Wal-Mart to bring home this extra bacon. I just had to fill out some papers, tidy up the house for the real estate appraiser and endure yet another loan closing ceremony. This will be our fourth, since we first owned a townhouse and already refinanced once. The only deficiency to our refinanced loan is that I will have less mortgage interest to write off on my taxes. Still, I would rather pay more taxes than pay a lender extra interest. Perhaps some of it will trickle down to some of you. I would not hold your breath. I don’t plan to hire a gardener, and I already got a service that mows the grass.

Granted, owning a house comes with all sorts of other expenses not factored into the principle, interest and escrow. The entire outside of our house with the exception of three doors has been replaced. Every appliance has been replaced, sometimes more than once. Still, I can remember the days when I was living on a marginal income and rented. Once a year like clockwork you could count on the rent being raised, generally well above the cost of living. Soon we will be paying less per month in principle and interest than we paid thirty years ago per month when we lived in an apartment. It makes no sense. Meanwhile, as the downsized give up houses and end up back in apartments, extra demand is making rents go up. This crazy disparity makes no sense to me. It probably does to a Republican like Herman Cain. After all, they are loooosers.

The day is not that far off (I am hoping less than five years) when we will make that final mortgage payment. Then there will be no more mortgage payments ever. We will own the house, not to mention our cars, free and clear. Moreover, for the first time since I was age twenty or so I will be able to honestly say that I won’t owe anyone a dime. I can lay down the heavy burden of debt from my shoulders at last. I plan a party on that day, and drinking a lot of expensive champagne. I might even get drunk.

Being free of debt won’t mean our lives will be free, of course. I don’t know what I will do with all that extra money every month. Perhaps with my decent pension and retirement saving I will truly retire and never work another day in my life. Perhaps it will get eaten up in ever more egregious health care premiums or long-term care insurance. For a while though I hope I can at least revel in being free from the burden of debt.

Perhaps I will pitch a tent in Zucotti Park.

Wall Street’s puppet masters

The Thinker by Rodin

Last month I wrote how the oligarchy stays in charge. At the time, the Occupy Wall Street movement was nascent, so nascent that not even I was blogging about it. Since then it, everything has changed. It used to be that the headlines were full of stories about how we need to cut the deficit and lower taxes. Thanks to OWS, the story is now about the chronic lack of jobs, sinking standards of living that seem unstoppable, and a generation of mostly twenty somethings with no real job prospects on even their most distant horizons. They are joined by other large groups of unemployed people who happen to be over fifty, and thus become something like untouchables. Unemployment is a problem at all levels of the workforce. The OWS movement is finally giving it the focus it deserves, and rightly raises the question: why did we bail out Wall Street when none of it trickled down to the unemployed who needed it most?

The OWS movement has at least made me do more pondering about how the wealthy stay wealthy and how the rest of us take it on the chin. There are the obvious strategies that I mentioned in the previous post: the moneyed and Wall Street buy the influence they want. Then there are less obvious strategies: such as using inheritances to pass unearned income to the next generation, wealth that is arguably put to unproductive uses. Then there are the strategies that most people don’t think about.

For example, there is snuffing out potential competition. The oil companies, in spite of their profits, are running scared of the clean energy industry. Oh sure, they are spending lots of money with newspaper advertisements touting how they are going green by doing solar energy projects and the like. This is ninety percent setting expectations and one percent doing something tangible. It’s a try to set up a meme with the public that, “Well, they really aren’t entirely evil just because they want to rip up Alberta’s tar sands.” Those with the money, at least if they are savvy, will continue to spend significant capital to make sure competitive markets don’t emerge.

It’s not coincidence that the oil industry contributes disproportionately to Republican candidates, for instance. This behavior is not seen as anticompetitive; it is seen as pro-business. It’s easy to win the competition when you can use money to set an uneven playing field from the start. Thus money buys not just political power, but the ability to have your message drown out the competition’s. In many cases, you can buy out these threats with your ready capital, often ostensibly to build market share in an emerging industry, but more typically to quietly kill them so business as usual can continue.

This happens all the time here in American but we rarely notice it. Why are there only three major ratings firms on Wall Street? It is in part because the big three have the capital to squash any competition. The government rarely breaks up companies anymore, even after the Great Recession. In fact, despite the lessons of the Great Recession, the trend is just the opposite. Thus, as one example, Bank of America swallows up Countrywide Mortgage and everyone yawns. Money gives you this sort of power. Unless you have an administration and congress full of trustbusters, abuse simply leads to more abuse.

Perhaps the most insidious way to stay in charge is through financial obfuscation. A good example is derivative stocks. The more complex you make a financial instrument, the harder it is to figure out what is really going on. Only experts can really understand how these instruments work, and then only dimly. In all likelihood the only ones who really understand them are those who create and manage them.

That leaves us poor individual investors pretty much baffled. We know we need to invest money for the future but unless the financial entity is incredibly simple, like simple shares of a blue chip stock or an index fund, we are baffled by how it works or how to fairly value them. Instead we turn to so-called experts to give us advice on what represents good investments, for which usually they have a vested interest that disproportionately lines their pockets. To really understand our financial world, you need a PhD in finance plus you have to keep up on the minutia of markets. If you can do this, you can be bought off. Wall Street will hire you for seven or eight figure incomes to manage a fund. Unless you have missionary zeal, you won’t be an Elizabeth Warren trying to simplify things for the average consumer. And if you are Elizabeth Warren, you will find out that politicians have been bought off specifically to keep you out of a position of power.

Yes, obfuscation is profitable, at least for those already in charge, and it effectively drains wealth from the rest of us. We think that to make money we must do it through specially trained intercessors on Wall Street. What we really need are simplified rules and financial instruments that the average person can understand, which implies that many “innovative” financial instruments should probably be outlawed. As we have seen, many were engineered without real failsafes and have cascading effects when they fail that drain wealth principally from those who never directly invested in these instruments.

No wonder Republicans are dead set against a consumer protection agency. They realize that if such an agency were effective, it might level the playing field. And what that really means is that wealth generated through third parties and financial obfuscation might return to where it rightly belongs: to individual investors.

Sucking it up for Herman Cain

The Thinker by Rodin

Herman Cain is Tea Party America’s favorite presidential candidate of the moment. Recent polls show him leading among Republican voters. While recent history suggests that Cain fascination will be brief (Michele who? Rick who?), you can understand why conservatives would be gaga over him. Cain, when speaking about Occupy Wall Street protesters, had this retort:

Don’t blame Wall Street, don’t blame the big banks, if you don’t have a job and you’re not rich, blame yourself! […] It is not someone’s fault if they succeeded; it is someone’s fault if they failed.

Attention 99% America: this may not be obvious to you but anyone can succeed in America. The only reason we are all not millionaires is because only one percent found the moxie to become a success. The ability to achieve success includes everyone: including the crippled, the disease ridden, the mentally retarded and the homeless. You can all become independently rich if you try hard enough. And if you don’t, you are a failure. A complete looooser.

If you are still not getting it, consider the curve of standard deviation below. It seems in nature most of us fit somewhere in the middle of the curve, but some of us are must inevitably be on the low or the high end. There are very few in the top one percent of the curve. Herman Cain is one of them. You and me, we’re in the 99% and the reason that I infer this is true, channeling Herman Cain, is because we chose to go fat and be lazy:

If you are not in the top 1%, you are a looooser

In the world of Herman Cain and Tea Party America, here is where we could all be if we tried hard enough:

The possible American world according to Herman Cain
The possible American world according to Herman Cain

That’s right. We all can all be millionaires, just suck in it, suck it up, be clever, put your nose to the grindstone and inevitably you too, like Herman Cain, can rise from humble circumstances to become a millionaire. It’s that simple. When you have the right mental attitude, just like God, you can move mountains. End of story.

But some people just aren’t getting it. They apparently include Matt, a guy I hired to do some handyman work for me. The guy I tried to hire was too busy, so he referred me to Matt. Matt is a guy who lives somewhere off I-66 in Virginia’s Piedmont. Five days a week he works a full time job somewhere that obviously does not come close to covering his modest lifestyle. When not working, he is taking care of his four kids so his wife can work at her odd part time jobs. On some Friday and Saturday nights, if he is lucky, he gets gigs playing the guitar at local pubs, which contributes some spare change to household expenses, and is his one passion in life. On Thursdays and Saturdays he runs his other business: handyman for hire. He does about a third of the work himself, but he also hires other good ol’ white boys like him to put in a few hours here and there to handle customers like me who are not Tool Time Tims. All of them so far that I’ve met smoke and all appear to live hand to mouth. They are Joe Bageant’s poor working class. This week some of them made some spare change because Matt subcontracted some of my work to them.

The weather has not been a construction worker’s friend this week. We had torrential rain for a good part of yesterday. The guys tried to tack down the new screening on our deck between downpours; otherwise they were in our garage trying to put up a new garage ceiling. For some reason the morons who built our house back in the 1980s attached drywall to the ceiling of our garage. About a quarter of it fell out while I was cleaning it a few weeks back, fortunately not while I was directly under it. I’m having them replace it with sturdier particleboard, and directed that they actually use screws to attach the boards into the joists instead of the drywall nails used when the house was constructed. Anyhow, progress has been slow.

Matt apparently is not working hard enough to be a success. He was managing multiple other projects with other good ol’ boys, which meant frequent trips to Manassas and other places to make things right. He’s pissed that he’s behind on our job, and is apologetic. Fortunately I am in no hurry.

Matt is basically doing everything possible to make money in this economy with his natural talents, but even with three jobs and essentially working twelve or more hours a day seven days a week, it’s still not enough. What’s the problem here?

If you were thinking, “Well, the economy is not doing too great, and a handyman’s wages are pretty modest, and gosh, it takes a lot to feed a family of six” you are one of the 99% and hence a looooser. If you are the surreally out of touch Herman Cain, the solution is obvious: Matt is a failure. Moreover, he is simply not trying hard enough. Maybe if in addition to working seven days a week he gave up the guitar gigs and worked instead of sleep, he could finally achieve success. He basically should run himself into the ground even more than he is doing now, which is leaving him obese, tobacco addicted and with circles under his eyes.

I bet you can guess where I stand on this. It’s pretty simple. Herman Cain, you may be a success, but in many ways you are also a moron who cannot see one centimeter past the bridge of your nose. Only a moron or a conservative would actually believe this crap that you spewed out. And yet it seems part of our American character to believe your crap. The fault is never in our stars, or in the broader economy, or in life’s circumstances, or our genetics, or our abusive parents, or our substandard schools but only in ourselves. Just like original sin that the Catholics believe in, in your mind the original sin is the inability of everyone to replicate what you achieved. The rest of us are failures, basically dog poop.

Mr. Cain, please print this out and stick it up some orifice in your body where the sun don’t shine. Consider it a little thank you from one of the 99%. And Matt, I feel nothing but compassion for you and the good ol’ boys who work for you, even if I can’t get too close to you because I am a nonsmoker. You are doing extraordinary things and while it is still clearly not enough, you have my respect and heartfelt sympathy. You also have my sincere hope that the economy improves quickly so you don’t need to be someone’s handyman anymore and get the chance to breathe again. And I hope you get more gigs strumming out those songs that you love.

Maybe it’s about time for a little class warfare

The Thinker by Rodin

It’s too early to say whether the Occupy Wall Street movement will have long-term legs. A group of a few hundred people has spent the last two weeks or so occupying Wall Street day and night. They are protesting many things they do not like about that street and the moneyed class that inhabit it. Yesterday, they moved uptown to the Brooklyn Bridge, occupied it, shut a span down and over five hundred protesters were arrested. However, the protest has mostly been lawful, if not more than a bit noisy, and mostly centered on Wall Street. Some on Wall Street look down from their balconies in bemusement and brazenly raise glasses of champagne at the protestors, while other traders try to tune out the commotion on the street.

Occupy Wall Street looks like a new phenomenon, but it is but the latest and it is spreading. It’s not hard to trace its roots to protests earlier this year in Madison, Wisconsin. The Occupy Wall Street movement seems more amorphous, less structured and lacking much in the way of central authority. Occasional lists of concerns dribble out of various alleged spokespeople and they seem to be a laundry list of complaints. However, they picked Wall Street for a reason. It is emblematic, even more so than Washington, of America’s problems. In a nutshell, protestors are seeing wealth being sucked up by Wall Street like they have a Hoover vacuum in our pockets and houses. They perceive that Wall Street has largely not suffered, and indeed has profited from the suffering of others. This has the inconvenient fact of being absolutely true.

In truth, some people on Wall Street (principally office workers) did suffer from the Great Recession. Brokerage houses laid off a lot of people and a few institutions like Lehman Brothers went belly up. Mostly though the politicians Wall Street had bought off with many campaign contributions came through for them when they badly screwed up. The gates of the U.S. treasury were opened and capital flooded into Wall Street firms to keep them solvent and to weather the crisis. Both Republican and Democratic administrations decided doing so was in the country’s best interests.

If Wall Street were more politically savvy perhaps it would have shown some humility. However, it was soon back to business as usual which included a phenomenal amount of arrogance. Had the United States not interfered in the stock markets, most likely many of these firms would no longer be in business. However bad stock prices are today, they would be valued much less. However necessary the bailout turned out to be, it exacerbated engrained bad habits on Wall Street.

It’s a little early to characterize exactly who is protesting but it appears to be principally the downsized, the educated but under or unemployed, and younger people feeling that Wall Street is pulling the rug from the expectations of the lifestyle they expected in adulthood. In reality, the 2000s were a lousy decade for almost everyone except for the rich. 2011 and 2012 are merely extending this lousy decade and the frustrated have had enough.

To start, they want justice. They see no justice when income is taxed higher than capital gains. They see no justice when their houses are foreclosed from under them while those who sold them shoddy mortgages escape and civil and criminal penalties. They see no fairness when Wall Street quickly starts awarding itself obscene bonuses and they, if they can get a job at all, make some fraction of their previous income. Why do they have to scramble and depend on charity (if they can find it) when Wall Street is coddled by Uncle Sam and, indeed, soon feels free to raise a finger at Uncle Sam? Many on Wall Street are tsk tsking the federal government for deficit spending, while depending on its largess when times get tough. In short, they are perceived as arrogant and out of touch hypocrites. More importantly, they are financially successful arrogant hypocrites, because with power and influence bought and paid for their world is hardly the risky one they purport it to be. In fact, it’s pretty comfy in there, at least among those of a certain class.

I think this movement will only continue to gain stature and size. It is already spreading to cities across the country, like Asheville NC, Spokane WA and Chicago. It’s not like a lot of these people have much else to do. They are already miserable and unemployed. Many are also homeless. How is it much worse to stand around day and night in front of Wall Street and scream about the injustices between rich and poor when every day you experience injustice, poverty and misery?

It is not coincidence that America grew so prosperous when wealth was shared broadly because tax rates were much higher. The extra revenue collected generally went to good use: for VA benefits, including paying for college for veterans, for highways that connected us, for student loans that allowed ordinary people to aspire to the middle class, and for basic research that provided vaccines and the Internet. The rich were never seriously impacted by these higher taxes because they were rich, but taxing more of their wealth did allow many ordinary people to get a leg up and allowed our nation to grow prosperous.

For all their riches, Wall Street pointedly ignores that their wealth and our national wealth is dependent upon the people, and how well they prosper. The more the ordinary people prosper, the more the rich are likely to prosper, because with all that new education and energy new markets will open up, and America will be primed to exploit them. In short, more taxes on the rich are not evil for society as a whole. They enable general prosperity, they promote the general welfare, and in the long term they raise all boats. Of course any tax rate can eventually turn regressive if high enough, but with tax rates lower than they have been in fifty years, there is plenty of room to increase revenues, which will be redistributed through a democratic process for arguably more productive uses than feeding the balance sheets of Wall Street bank accounts.

The dynamics of the movement will play out over time, but the movement could be pivotal in the 2012 elections. We do need a strategy that lifts all boats. Cutting taxes hasn’t done it. Supply side economics hasn’t done it. Deficit spending hasn’t done it. However, redistribution of income through the tax system from those who have more of it has worked quite well for the decades it has been tried. It’s time to try it again.