Glenn Greenwald highlights this episode of Bill Moyer’s Journal, where Rep. Marcy Kaptur and economist Simon Johnson tell us that the big banks on Wall Street “own” Congress. An excerpt:

BILL MOYERS: Let me show you an excerpt from the speech President Obama made on Wall Street last month, September. Here is the challenge he laid down to the bankers.

PRESIDENT OBAMA: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.

BILL MOYERS: A reality check. Not one CEO of a Wall Street bank was there to hear the President. What do you make of that?

SIMON JOHNSON: Arrogance. Because they have no fear for the government anymore. They have no respect for the President, which I find absolutely extraordinary and shocking. All right? And I think they have no not an ounce of gratitude to the American people, who saved them, their jobs, and the way they run the world.

Why don’t they fear Obama? Because Obama’s top advisors are their own people, and they own Congress:

While the industry has scaled back its political spending in the wake of last year’s economic collapse, data from the Center for Responsive Politics show that it’s still investing heavily in the Senate, where it’s likely to have its best shot at stopping — or at least shaping — the crackdown on Wall Street that President Barack Obama has proposed.

And it’s clearly looking to Democrats to do it.

Of the $10.6 million the industry has given to sitting senators this year, more than $7.7 million has gone to Democrats.

The clue as to why our government struggles to deal with any substantial problem facing our country today is right there. So long as politicians must run massively expensive campaigns to get themselves elected, they will be in thrall to those who give them the most money. Between that and a media that’s incapable of either understanding or addressing the problems that face our nation, it’s hardly any wonder that some (myself included) find ourselves thinking that our nation is doomed.

Some things for you to ponder this morning:

1. A senior cleric in Iran comes out against the election results. But were they rigged? Critics say yes.

2. Some analysis of Netanyahu’s announcement that Israel would consider recognition of a Palestinian state. A step forward, but still balking on other important considerations like settlement expansion.

3. A Presidential election and some new laws, but the end result is the same; you can’t trust the NSA not to spy on the American people.

4. Speaking of intelligence agencies, the CIA is fighting the release of it’s own internal reports regarding interrogations of “high-value” detainees. Obviously, there’s something in embarrassing in them.

5. Speaking of detainees, here are some people who don’t wet their pants at the thought of being responsible for them.

6. Obama will announce that the federal government will extend benefits to the domestic partners, including same-sex partners and spouses, of federal employees.

7. The Obama administration is proposing regulatory changes that will broaden government oversight of banks and the financial markets.

8. And lastly, another great column of David Leonhardt at the New York Times. This time he takes on the scare word “rationing” and explains how health care is already rationed ineffeciently and unfairly everyday in America.

More evidence to bolster Matt Taibbi’s conspiracy theory; the foxes are in charge of the henhouse, and our “reform” efforts largely mirror that of the oligarchical nations of Russia and Argentina:

Does anyone really doubt any more that the predominant characteristic of our political culture is “the incestuous relationship between governments and large [] corporate conglomerates”? Yet another former Goldman Sachs official and long-time derivatives advocate who played a major role in the repeal of key banking regulations, Gary Gesner, is now poised to become Obama’s chief of the Commodities Futures Trading Commission, the body charged with regulating commodities and financial futures. The sleazy, central role Goldman Sachs has played in the events of the last six months — from their current CEO’s still-unexplained presence with Paulson (its former Chairman) and Geithner (protegé of its other former Chairman, Robert Rubin) as the AIG bailout was designed to the massive government windfalls that firm has received (including from that very AIG bailout) — is merely illustrative of how our Government has long functioned and continues to.

Yves Smith last night noted the rather extraordinary (though unsurprising) development that the very institutions that played such a critical role in the crisis — Citibank and Bank of America — are now using TARP funds they received not to extend more loans (the ostensible purpose of the bailout), but rather, to buy up more and more of the very distressed assets that Geithner insists they need to be relieved of, because they now know that, under Geithner’s plan, they will be able to sell them at a substantial profit courtesy of public funds (i.e, the Government will buy those crippled assets at well above their current market price). As Smith puts it: “So not only are they seeking to extract far more than was intended even with the already generous subsidies embodied in this program, but this activity is also speculating with taxpayer money. . . .Welcome to yet more looting.”

We don’t need reform. We need a scourging.

For your reading pleasure:

1. The Treasury Dept. is set to announce new regulatory controls over previously unregulated financial transactions.

2. The Pentagon says in a new report that China is seeking to boost it’s military’s power and effectiveness. China says we need to chill out. In the meantime, China prepares to force Tibetans to celebrate “Serf Liberation Day“, the 60th anniversary of the Chinese invasion of Tibet.

3. 16 die in a Baghdad bombing.

4. American cities are dealing with an increase in “shantytowns” as the number of homeless rise. Hollywood producers Peter Samuelson wants to give them something better than cardboard boxes to live in.

5. Secretary Clinton bluntly admits that the failed U.S. war on drugs has contributed to rising violence in Mexico.

6. American taxpayers are paying for the expansion of settlements in the West Bank, if in a backhanded way.

7. New study says that most wrongful convictions in Texas stem from witness misidentification.

8. Lisa Falkenberg on Gov. Perry’s stimulus fund logic (or lack thereof.)

9. The next American soccer star?

10. A question about student loan forgiveness tops the list at the new “ask the President” website.

Matt Taibbi says the honchos on Wall Street are robbing us blind and laughing at us while they do it:

As complex as all the finances are, the politics aren’t hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

“But wait a minute,” you say to them. “No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what’s left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?”

But before you even finish saying that, they’re rolling their eyes, because You Don’t Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they’re on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

Matt Taibbi can never be accused of moderation of language, but strip it down and it doesn’t sound any better. The people who spent billions making sure that their complex financial transactions stayed out of the cross hairs of federal regulators, are now receiving trillions for their failing companies from the federal government in the form of shadowy and unaccountable loans and payments, at the behest of men who ostensibly work for the government but once hobnobbed with these captains of finance. In response, they patronize and condescend to anyone foolish enough to second guess their methods, insist that they are integral to the recovery process, celebrate when the government agrees to hand over more money, and bitch and moan about “misdirected” public anger over all of this. An optimist might be inclined to think that the Obama administration is on top of all this, like they say they are. A cynic might just be inclined to believe Taibbi’s version, that we’re all suckers and in the end the rogues on Wall Street who caused this mess will still be in charge, still raking in millions, while people like you and me are looking for jobs. These days, it’s very hard not to be a cynic.

I’m trying not to get too entirely caught up in the ranting surrounding the AIG bonus debacle, but this is too amusing/maddening not to mention. From Andrew Sorkin’s column in the NY Times yesterday:

Now we can debate why A.I.G. felt it necessary to guarantee seven executives at least $3 million apiece when the economy was clearly on shaky ground. Perhaps we will find out these contracts were a bit of sleight of hand to enrich executives who knew this financial Titanic had hit the iceberg. But another possible explanation is that A.I.G. knew it needed to keep its people.

That is the explanation offered by Edward M. Liddy, who was installed as A.I.G.’s chief executive when the government effectively nationalized the company last fall. (He is being paid $1 a year.)

“We cannot attract and retain the best and brightest talent to lead and staff” the company “if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he said.

And in the NY Times this morning:

The bonuses that the American International Group awarded last week were paid to 418 employees and included $33.6 million for 52 people who have left the failed insurance conglomerate, according to the office of the New York attorney general.

Really, there’s nothing I can add to that.

UPDATE: I blogged too soon. David Leonhardt asks whether retention bonuses are even necessary to retain talent at firms like AIG. The answer, according to his research, appears to be no. Also, in general, Leonhardt’s column is a good kickoff for a conversation we really ought to be having about executive compensation at large corporations. You may recall that we already had a national conversation about this earlier this decade, but the collapse of various individual corporations apparently was not painful enough to prompt serious reform. Of course, things are slightly different this time around.

Leonhardt says something else worth nothing:

The larger question is how to change the rules on corporate pay to reduce the odds of future crises. Throughout this crisis, policy makers, starting with President George Bush and Ben Bernanke and now including President Obama, have been a bit too deferential to Wall Street. That deference has fed populist anger, which threatens the political viability of the necessary continuing bailout of the credit markets.

The bonus scandal offers Mr. Obama and Mr. Bernanke a chance to get ahead of the curve — so long as they come up with changes that extend well beyond A.I.G.

I think Leonhardt is on to something here. This mess with AIG has damaged the credibility of the Obama administration, but it also presents an opportunity for the administration to use the populist anger it’s generated to build political momentum for real reforms. The administration’s handling of Wall Street thus far hasn’t inspired any confidence in me that they’ll recognize or seize this opportunity, but it’s there for the taking nonetheless.

Do you know what’s most infuriating about this AIG bonuses debacle? That much of the anger directed at AIG and the executives and traders who will receive this money will spill over on the Obama administration. And deservedly so, in my opinion, as the Treasure Department “reluctantly” approved the bonuses even before news of them became public, and Obama himself apparently didn’t become outraged about them until yesterday even though the Treasury Department has known for months that the bonuses would be an issue. And now Obama has ordered Treasure to “pursue every single legal avenue to block these bonuses” but the only plan proposed thus appears-ridiculously-to be a plan to “recoup” the bonus payments with future bailout money! It is not possible to overstate how weak it makes the Obama administration look that they cannot prevent the payout of egregious bonuses to the very people who produced the present crisis at AIG, even as the administration is lining up to give AIG another $30 billion. This will damage not only future efforts to contain the credit crisis on Wall Street (though who even knows what those efforts are yet?) but also efforts to get future stimulus legislation through Congress if and when it becomes necessary. What’s truly angering is that this all appears to be an entirely self-inflicted wound. Had the Geithner and the Obama administration anticipated this crisis, they could’ve pressured AIG quietly in advance to ditch the bonus idea or forfeit the possibility of future bailout money. Now, they can only make a half-assed effort to get money back that’s already been paid out, and run the risk of looking completely impotent in the face of AIG executives whose company is on the public dole. Unbelievable.

UPDATE: And now members of the Obama administration are trying to throw Sen. Chris Dodd under the bus, blaming him for a provision in the American Recovery and Reinvestment Act that allowed AIG to hand out bonuses last Friday (via Glenn Greenwald.) Except oops…that’s not true. As Jane Hamsher explains, Dodd actually pushed for a provision that would’ve prevented such bonuses, and was talked back from it by-can you guess?-Geithner and the Treasury Department.  So to recap…the Treasury Dept. approves the bonuses, is caught off guard by popular outrage, then tries to blame Sen. Dodd for the mess (counting on useful idiots in the media and right-wing blogs) then Obama gets “outraged” yesterday, and now in Washington there is much weeping and gnashing of the teeth as Americans go hunting for their pitchforks and torches. All for $165 million, a pittance compared to the vast sums spent so far trying to repair our damaged economy. Well done fellas. Well done. 

Apparently, our recently discovered national thriftiness is dooming our economy (via Megan McArdle):

Consumers are pulling back because they’ve realized that they’re too far in debt. The economy is shrinking in large part because consumers are pulling back. And the result, almost surely, is to leave household balance sheets worse than ever. I can’t do this accurately until the Federal Reserve’s flow of funds data have been updated, but almost without question the ratio of household debt to personal income has been rising, not falling, as consumers try to save more.

So to escape the debt trap we’re in, we must spend more. This is cruel irony indeed, but the lesson really is that we ought to have been a little more thrifty when our economy could afford it as opposed to now, when our economy is diving off a cliff. Our economy has survived on a combination of debt and consumerism, and we shall now pay heavily for our short-sightedness.

Smacked down!

President Obama on Wednesday announced a salary cap of $500,000 for top executives at companies that receive large amounts of bailout money, calling the step an expression not only of fairness but of “basic common sense.”

“We all need to take responsibility,” the president said as he prompted Congress once again to act on his economic stimulus program and repeated his accusations that some Wall Street executives had shown “the height of irresponsibility” when millions of non-wealthy Americans were bearing the burden of Wall Street’s failures.

The people are sick and tired, Mr. Obama said, of seeing Wall Street executives come to the government “hat in hand when they were in trouble, even as they paid themselves customary lavish bonuses.”

“This is America, and we don’t begrudge wealth,” the president said. But Americans definitely begrudge “executives being rewarded for failure,” especially if their earning are subsidized by taxpayers, he said.

Naturally, not everyone is happy about this announcement:

“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

“It would be really tough to get people to staff” companies that are forced to impose these limits, he said. “I don’t think this will work.”

I invite these execs to join the rest of us in hunting for jobs right now if they feel so inclined. Strangely, I’m just having a hard time imagining a flood of talent away from Wall Street right now.

After decades of decline, Union membership is slowly crawling back upwards:

The percentage of American workers belonging to a union jumped in 2008, the first statistically significant increase in the 25 years that the figure has been reported, reversing a long decline in union membership.

In 2008, union members represented 12.4 percent of employed workers, up from 12.1 percent a year earlier, according to a report from the Bureau of Labor Statistics issued yesterday. Union membership had been falling since the 1950s, when members constituted as much as a third of the U.S. workforce.

“We saw what looked like a bottoming out last year, and this suggests that we might have turned the corner,” said John Schmitt, senior economist at the Center for Economic and Policy Research.

Naturally, major U.S. businesses are already plotting on how to put a damper on this trend (via Boing Boing):

Three days after receiving $25 billion in federal bailout funds, Bank of America Corp. hosted a conference call with conservative activists and business officials to organize opposition to the U.S. labor community’s top legislative priority.

Participants on the October 17 call — including at least one representative from another bailout recipient, AIG — were urged to persuade their clients to send “large contributions” to groups working against the Employee Free Choice Act (EFCA), as well as to vulnerable Senate Republicans, who could help block passage of the bill.

Bernie Marcus, the charismatic co-founder of Home Depot, led the call along with Rick Berman, an aggressive EFCA opponent and founder of the Center for Union Facts. Over the course of an hour, the two framed the legislation as an existential threat to American capitalism, or worse.

“This is the demise of a civilization,” said Marcus. “This is how a civilization disappears. I am sitting here as an elder statesman and I’m watching this happen and I don’t believe it.”

So if you follow that, financial institutions screw up in a colossal manner, dragging the nation’s economy down with them, then workers who are losing their jobs by the tens of thousands race to join unions to protect themselves from the screwups of others, and this is how “civilization disappears.” Imagine if you can what Mr. Marcus would have thought of the French Revolution, when people were really mad.

If you can stomach it, the audio is here (also via Boing Boing.)