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Simon Johnson: The Quiet Coup May 2009

eHa — Thu, 30 Apr 2009 18:45:42 +0100

Simon Johnson
The Atlantic
May 2009

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

by Simon Johnson
The Quiet Coup

One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.

Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.

No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

In Russia, for instance, the private sector is now in serious trouble because, over the past five years or so, it borrowed at least $490 billion from global banks and investors on the assumption that the country’s energy sector could support a permanent increase in consumption throughout the economy. As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious investment plans that generated jobs, their importance to the political elite increased. Growing political support meant better access to lucrative contracts, tax breaks, and subsidies. ...

Capital Flows

eHa — Thu, 30 Apr 2009 18:35:07 +0100

Transferring Wealth

2008-05-29 New York Times: In Stock Plan Employees See Stacked Deck
2007-12-15 New York Times: Rich Are Getting Richer Much Faster
2005-11-09 New York Times: The End of Pensions
2005-10-04 New York Times: Home Builders Bailing Out of Stock Market
2005-10-05 New York Times: At The Very Top A Surge In Income

Global Political Economy

Simon Johnson: The Quiet Coup May 2009

Walden Bello

Robert Brenner: The Economics of Global Turbulence summary

Michel Chossudovsky

Doug Henwood: The Global Economic Crisis update

Nicholas Kristof-Sheryl WuDunn-Edward Wyatt: Global Contagion: Networked Economies and Stunted Lives

Paul Krugman: The Return of Demand-Side Economics

GeoPoliTiki

a: the journal of culture and the unconscious

The Bernstein Tapes

California Psychoanalytic Circle

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complitgrads@lists.berkeley.edu

2008-11-23 New York Times: The Reckoning-Citigroup Saw No Red Flags

eHa — Tue, 25 Nov 2008 23:49:51 +0100

New York Times
November 23, 2008

The Reckoning

Citigroup Saw No Red Flags Even as It Made Bolder Bets

By ERIC DASH and JULIE CRESWELL

“Our job is to set a tone at the top to incent people to do the right thing and to set up safety nets to catch people who make mistakes or do the wrong thing and correct those as quickly as possible. And it is working. It is working.”

Charles O. Prince III, Citigroup’s chief executive, in 2006

In September 2007, with Wall Street confronting a crisis caused by too many souring mortgages, Citigroup executives gathered in a wood-paneled library to assess their own well-being.

There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.

Mr. Maheras told his boss that no big losses were looming, according to people briefed on the meeting who would speak only on the condition that they not be named.

For months, Mr. Maheras’s reassurances to others at Citigroup had quieted internal concerns about the bank’s vulnerabilities. But this time, a risk-management team was dispatched to more rigorously examine Citigroup’s huge mortgage-related holdings. They were too late, however: within several weeks, Citigroup would announce billions of dollars in losses.

Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.

But many Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.

Today, Citigroup, once the nation’s largest and mightiest financial institution, has been brought to its knees by more than $65 billion in losses, write-downs for troubled assets and charges to account for future losses. More than half of that amount stems from mortgage-related securities created by Mr. Maheras’s team — the same products Mr. Prince was briefed on during that 2007 meeting.

Citigroup’s stock has plummeted to its lowest price in more than a decade, closing Friday at $3.77. At that price the company is worth just $20.5 billion, down from $244 billion two years ago. Waves of layoffs have accompanied that slide, with about 75,000 jobs already gone or set to disappear from a work force that numbered about 375,000 a year ago.

Burdened by the losses and a crisis of confidence, Citigroup’s future is so uncertain that regulators in New York and Washington held a series of emergency meetings late last week to discuss ways to help the bank right itself.

And as the credit crisis appears to be entering another treacherous phase despite a $700 billion federal bailout, Citigroup’s woes are emblematic of the haphazard management and rush to riches that enveloped all of Wall Street. All across the banking business, easy profits and a booming housing market led many prominent financiers to overlook the dangers they courted.

While much of the damage inflicted on Citigroup and the broader economy was caused by errant, high-octane trading and lax oversight, critics say, blame also reaches into the highest levels at the bank. Earlier this year, the Federal Reserve took the bank to task for poor oversight and risk controls in a report it sent to Citigroup.

The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.

Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. ...

California Psychoanalytic Circle

eHa — Tue, 25 Nov 2008 23:19:31 +0100

Freud-MosesAndMonotheism.pdf

Freud-FutureOfAnIllusion.pdf

MacCannell-LookingForLoveInAllTheWrongPlaces.doc

MacCannell-BadiouPhilosophicalOutlaw.doc

Zizek-NewYorkTimes-HowChinaGotReligion

The Seminar of Jacques Lacan

2008-10-15 Washington Post: The Derivatives Meltdown-What Went Wrong

eHa — Mon, 20 Oct 2008 18:04:50 +0100

What Went Wrong

How did the world's markets come to the brink of collapse? Some say regulators failed. Others claim deregulation left them handcuffed. Who's right? Both are. This is the story of how Washington didn't catch up to Wall Street.

By Anthony Faiola, Ellen Nakashima and Jill Drew
Washington Post Staff Writers
Wednesday, October 15, 2008; A01

A decade ago, long before the financial calamity now sweeping the world, the federal government's economic brain trust heard a clarion warning and declared in unison: You're wrong.

The meeting of the President's Working Group on Financial Markets on an April day in 1998 brought together Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert E. Rubin and Securities and Exchange Commission Chairman Arthur Levitt Jr. — all Wall Street legends, all opponents to varying degrees of tighter regulation of the financial system that had earned them wealth and power.

Their adversary, although also a member of the Working Group, did not belong to their club. Brooksley E. Born, the 57-year-old head of the Commodity Futures Trading Commission, had earned a reputation as a steely, formidable litigator at a high-powered Washington law firm. She had grown used to being the only woman in a room full of men. She didn't like to be pushed around.

Now, in the Treasury Department's stately, wood-paneled conference room, she was being pushed hard.

Greenspan, Rubin and Levitt had reacted with alarm at Born's persistent interest in a fast-growing corner of the financial markets known as derivatives, so called because they derive their value from something else, such as bonds or currency rates. Setting the jargon aside, derivatives are both a cushion and a gamble — deals that investment companies and banks arrange to manage the risk of their holdings, while trying to turn a profit at the same time.

Unlike the commodity futures regulated by Born's agency, many newer derivatives weren't traded on an exchange, constituting what some traders call the "dark markets." There were now millions of such private contracts, involving many of Wall Street's top firms. But there was no clearinghouse holding collateral to settle a deal gone bad, no transparent records of who was trading what.

Born wanted to shine a light into the dark. She had offered no specific oversight plan, but after months of making noise about the dangers that this enormous market posed to the financial system, she now wanted to open a formal discussion about whether to regulate them — and if so, how.

Greenspan, Rubin and Levitt were determined to derail her effort. Privately, Rubin had expressed concern about derivatives' unruly growth. But he agreed with Greenspan and Levitt that these newer contracts, often called "swaps," weren't exactly futures. Born's agency did not have legal authority to regulate swaps, the three men believed, and her call for a discussion had real-world consequences: It would cast doubt over the legality of trillions of dollars in existing contracts and create uncertainty over how to operate in the market.

At the April meeting, the trio's message was clear: Back off, Born.

"You're not going to do anything, right?" Rubin asked her after they had laid out their concerns, according to one participant.

Born made no commitment. Some in the room, including Rubin and Greenspan, came away with a sense that she had agreed to cool it, at least until lawyers could confer on the legal issues. But according to her staff, she was neither deterred nor chastened.

"Once she took a position, she would defend that position and go down fighting. That's what happened here," said Geoffrey Aronow, a senior CFTC staff member at the time. "When someone pushed her, she was inclined to stand there and push back."

Greenspan and Rubin maintained then, as now, that Born was on the wrong track. Greenspan, who left the Fed job in 2006 after an unprecedented three terms, also insists that regulating derivatives would not have averted the present crisis. Yesterday on Capitol Hill, a Senate committee opened hearings specifically on the role of financial derivatives in exacerbating the current crisis. Another hearing on the issue takes place in the House today.

The economic brain trust not only won the argument, it cut off the larger debate. After Born quit in 1999, no one wanted to go where she had already gone, and once the Bush administration arrived in 2001, the push was for less regulation, not more. ...

Bernstein 3-15-94

eHa — Sat, 13 Sep 2008 03:07:10 +0100

First of all: why Hegel? On my view, at the present moment, all the major projects of modern philosophy and modern theory have simply dried up. They’re like a series of beached whales lying there. Look at them: Marxism, phenomenology, psychoanalysis, existentialism, analytic philosophy. As paradigms they’re simply unavailable. We feel that we cannot settle with any one of them. We feel that we have to, as it were, look across the board.

Now, within all this, when I say that philosophy, modern philosophy is either the avoidance or the appropriation of Hegel. If you read Derrida, or Levinas, or Deleuze, or Lyotard what you find them trying to do most of all is avoid Hegel, to get out of that shadow, to avoid whatever it is that Hegel means by the absolute, or by Spirit. Of Spirit is clearly pretending to think about Heidegger, but all the time thinking “How do I get away from this bastard, Hegel?” Deleuze’s Nietzsche book: Nietzsche never read Hegel, Nietzsche didn’t care about Hegel. But what does Deleuze do in his Nietzshe book, say: “Nietzsche’s a critique of dialectic.” Nietzsche never heard of dialectic! Nietzsche didn’t care about Hegel. And good for him.

So, one version, I mean again, Levinas, the face to face, the idea of the absolute other: it’s simply a critique of Hegel’s idea of recognition. (garbled)

Alternatively, some philosophies appropriate Hegel. Most obviously Marxism. Most obviously, obviously critical theory: Adorno, Habermas. Lacan. That’s why, I mean, why do you think Drucilla Cornell is working on Lacan? Because she’s an Hegelian with a guilty conscience. Right? So she has to work Lacan. (garbled) And that’s what that whole mini-course was about, right? The whole course was to show that Lacan was a good Hegelian.

Finally, we read Foucault as a philosopher. Why? Why read an historian as a philosopher? Well, Hegel is the philosopher who changed the rules of philosophy.

Up till the time of Hegel, philosophy was things like: what is the self? and then you make arguments. But then you pick up this book, all right? And at first, if you’re used to German idealism, it’s cranky, but it’s kind of vaguely recognizable as philosophy: it’s talking about the problem of knowledge. And then suddenly it’s talking about the struggle for life and death between a master and slave. And then it’s talking about this unhappy consciousness wandering through the world, a kind of mini story of Catholocism. And it gets worse. Suddenly, we’re reading about Antigone. Or the French revolution. Or Diderot’s Rameau’s Nephew. What’s going on here? How can this be philosophy? How can this story of other texts be philosophy?

Well, my thesis about modern philosophy is a kind of good Harold Bloomian thesis. That modern philosophy is, as it were, a misprision—to use Bloom’s word—of Hegel. That in order to do modern philosophy they must misread Hegel. It seems to me that if we agree with the hypothesis that modern philosophy is a series of beached whales, then whatever we do—and I’m not claiming that Hegel has the answer—but whatever we do we cannot, as it were, avoid the moment of Hegel. We must, as it were, engage with this misprision, this avoidance, right? Because Bloom’s theory about literature, you know, is the thought that every writer misreads their predecessor in order to make room for themselves. You have to misread in order to write because the father, the law, is too great a weight, too great an anxiety—the anxiety of influence: unless I do something absolutely radical and drastic, I’m just going to be Dad again. No one wants to be their father. So, at least it seems to me that we can’t avoid Hegel.

Now, all I want to do in the first instance, and you’ll have to excuse me, I find it really hard to think and sit at the same time. My brain is in my ass and I need to get off of it. All I want to accomplish, and all we can really accomplish, in the next kind of two months, is to make this book accessible to you. We cannot do a detailed reading; we cannot figure out every transition, every argument. All I want to do is give a presentation of the text by looking at its basic structure, and above all to look at certain specific moments of the text. Because the book, as you will hear, is about particular forms of consciousness, to use Hegel’s phrase. Forms of consciousness are different fundamental ways of looking at the world. And Hegel presents a whole series, for reasons that we’ll come to. Different very fundamental ways of fundamental episteme. Right? Fundamental ways of looking at experience. And certain of these are absolutely fundamental to the whole project. ...

The Bernstein Tapes

eHa — Sat, 13 Sep 2008 03:01:18 +0100

A recording of J.M. Bernstein's seminar on Hegel's Phenomenology of Spirit is available below digitally recorded in MP3 format. Each MP3 file is approximately 12-25MB and plays 30-60 minutes. Some days link to partial transcriptions of the lecture. In addition to the links below, you can display a non-descriptive listing of the files available for download here. You can also browse and download the files more efficiently via eHa's KDX server.

The seminar ran from March 15, 1994 to May 5, 1994 in the Department of Rhetoric at UC Berkeley. This duplicates without edit all the cassettes of the lectures available in the Department of Rhetoric's library.

A complementary collection of Bernstein's lectures on Kant's Critique of Pure Reason and his 2006-2007 lectures on Hegel's Phenomenology of Spirit is at http://www.bernsteintapes.com/

3-15: (lesser audio quality) Introduction; Hegel, "The Spirit of Christianity and Its Fate" from Early Theological Writings

3-15a 3-15b 3-15c 3-15d

3/17: Hegel, "The Spirit of Christianity and Its Fate" comments on Hegel's Differenzschrift; Hegel, Phenomenology of Spirit: Introduction

3-17a 3-17b 3-17c

3/22: Phenomenology--Introduction

3-22a 3-22b 3-22c

3/24: Consciousness

3-24a 3-24b 3-24c

4/7: Self Consciousness - Lordship and Bondage

4-7a 4-7b 4-7c

4/12: Reason. ...