In case you didn't know it, the revolution has already happened, and we lost

House Speaker John Boehner said the White House "moved the goal posts" by demanding an additional $400 billion in revenue during talks over a deal to avoid default. He said he was confident the U.S. will not default but said the White House has "refused to get serious" about spending cuts.

"Dealing with the White House is like dealing with a bowl of Jell-O," Boehner said.

-- a 7:30pm ET Washington Post "Politics News Alert"

by Ken

Compared with thinking about the horror in Norway (about which there doesn't seem to be any news coming in), it's almost a relief to turn to the Theater of the Weird that is our Debt-Ceiling Crisis & Negotiations Inc.

I don't doubt that Sunny John has a point about negotiating with the Obamablob, but when did any right-wing bully ever have trouble getting him to meet them 80 or 90 percent of the way? Besides, when it comes to blobulousness, how can you not return the charge playground-style: "Takes one to know one."

I don't know how this Theater of the Weird tragicomedy is going to work out except that it's going to be really, really bad. In important ways the outcome is predetermined, except for filling in some of the blanks and some of the numbers. As a colleague has been pointing out, the war is over, and we've lost. The oligarchs are in charge, and not many decisions of federal consequence are going to be made which don't meet with their approval.

Call it a civil war, or a New American Revolution, or a putsch, it took place without most of us realizing it was happening, and the New Order was established by the time it was determined that the federal government's basic principle in addressing the economic meltdown was going to be the ensure that the financial elites were made whole.

So I had to chuckle when I saw a piece pumped out by the NYT's DealBook financial-news service, chronicling the woes of the interns to the oligarchs, which starts like so:

"Fewer Perks and More Work for Wall St.’s Summer Interns"
BY KEVIN ROOSE

Wall Street interns have gone from pampered to pummeled.

In better days, college-age interns at the nation’s largest investment banks, known as summer analysts, were treated like young royalty. But shrinking profits and a spate of recent bank layoffs have forced this year’s interns to shoulder full-time workloads.

“I worked 85 hours last week!” said one Goldman Sachs summer analyst, a college senior who spoke on the condition of anonymity because she was not allowed to speak to the media.

“The last two days, I’ve been here until 3 a.m.,” said a Deutsche Bank analyst, who also spoke on the condition of anonymity to protect his job. “My weekends are fun, but that’s about it.”

While hard work has been customary among young finance workers for years, after-hours benefits once made the long days more palatable. . . .

And at this point we're launched on tongue-hanging-out tales of erstwhile intern splendor. The point of the piece, I'm sure, is to spread the word that the banksters are tightening their belts in these troubled times.

Unexpected turbulence in the industry has hit this year’s interns, who say that fewer full-time employees has meant more work for them. UBS and Credit Suisse have both conducted layoffs this year, and Goldman Sachs and Morgan Stanley are cutting back as well.

“Managing directors are telling interns, ‘We’re going to need you to step up,’ ” said one bank recruiter, who spoke only anonymously because she was not authorized to speak to the media.

By all means read the piece. It's entertaining. But I don't believe for a moment it tells us that the banksters are wobbling. What it tells me is that, now that they're consolidating their hegemony, one of the spoils of victory is being able to remake decisions about who has to be paid what. As we've been noting, there appears to be no limit to the greed of our financial lords, and I'm assuming they're simply making new calculations about what they have to pay those summer interns.

Maybe in the past they had to share some of their loot with the fiscal farmhands. For sure now they don't have to. As so many other bulwarks of the old-fashioned middle class have discovered to their chagrin, they're part of the team, they're just hired hands and hangers-on. As regards those poor downtrodden interns, reporter Roose seems to have found no shortage of whiners, but no deniers or decliners.

[D]emand at top-flight colleges for the internships, which had tailed off slightly during the financial crisis, has come roaring back.

“It’s the best way to land a permanent position, it’s prestigious, and there’s a steep learning curve, so you come away having been quickly trained and assigned meaningful work,” said Patricia Rose, director of career services at the University of Pennsylvania.

For their long hours, Wall Street interns are rewarded handsomely. Summer analysts are generally paid based on the prorated salary of a first-year analyst. At Goldman Sachs, for example, a first-year analyst’s salary of $70,000 translates to a summer intern’s pay of about $15,000 for 10 weeks of work, which includes a $2,000 housing stipend, according to one current intern. Interns at the Manhattan offices of BlackRock, the asset management firm, are paid a prorated salary that comes out to around $33 an hour, with time and a half for overtime exceeding 40 hours a week, according to a company spokeswoman.

But for most interns, the real prize is an end-of-summer job offer. Investment banks stock their full-time ranks with former interns, and the pressure to create loyalty during a 10-week summer is palpable. . . .

or interns who survive the summer, the payoff can be big. Top performers are often given offers in the fall for full-time positions that begin the following summer, freeing them from the stress of a senior-year job search.

And even for interns who don’t plan on returning full time next summer, like the overworked Deutsche Bank summer analyst, a Wall Street internship may be good preparation for the trials of working life.

“If I can get through this, I can get through anything,” the intern said.

On the chance that those internships may prove bonanzas, the would be financial wolves and sharks seem happy to take whatever terms are offered, so the oligarchs are adjusting the terms they're offering. "More for themselves" would be the operative economic principle.

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Yves Smith on Ezra Klein's weird idea that if Michael Lewis couldn't see the meltdown coming, it's no wonder that nobody could

The trailer for Inside Job

"I hope that [shredding Ezra Klein's piece] will encourage readers to take a cold, bloodyminded look at the excuses made for malfeasance in our elites."

-- Yves Smith, in her "Naked Capitalism" blogpost
"Ezra Klein Should Stick to Being Wrong About Health Care"

by Ken

A lot of progressives once had warm feelings toward Ezra Klein, before his WaPo gig sapped the juices out of his brain, so that while he's not absolutely, totally, 100 percent useless (if only by comparison with so much of what passes for "analysis" in the infotainment noozemedia), he's now pretty much a full-time dunderhead, spending most of his time trying to gussy up conventional wisdom as rarified inside knowledge.

Now he's seen the film Inside Job, which takes a look at some of the cause-and-effect of the economic meltdown and points some accusing fingers at the financial sector, and our Ezra is here to tell us that he hasn't just seen it, he's seen through it: "What 'Inside Job' got wrong."

It was an excellent documentary for people who don’t want to understand the financial crisis but want to believe they would’ve seen it coming. Watching it, you’d think that the only people who missed the meltdown were corrupt fools, and the way to spot the next one is to have fewer corrupt fools. But that’s not true. Worse, it’s dangerously untrue. In telling the wrong story about how the financial crisis happened, it misinforms about how to keep it from happening again.

Even I, a notorious financial unsophisticate, cringed at most of what I saw in Ezra's piece as I skimmed it. His basic argument is that the economic meltdown, or the housing bubble -- he sort of seems to think they're the same thing -- was such a complex phenomenon that no one could have predicted it, and no one did, not even the people who did. Maybe they just kind of got lucky, or in any case, if they didn't predict the exact sequence of events, it doesn't count.

As proof Ezra offers the fact that all so many really smart financial-sector types missed it, not least someone as fantastically brilliant as the world's greatest financial genius, Michael Lewis, and they missed it even though they all had every incentive to recognize and act on it on account of how much they stood to lose, which proves that nobody could have seen it coming. And oh, by the way, it also proves that corruption couldn't have been a major factor in the meltdown.

I hope by this point you're seething. Trust me, that's nothing compared with what Yves Smith, of the "Naked Capitalism" blog, seems to have felt while she read the piece, and the result is a humdinger of a post: "Ezra Klein Should Stick to Being Wrong About Health Care," which she begins by crediting Ezra's post with "manag[ing] the impressive feat of being spectacularly off base, rhetorically dishonest, and embarrassingly revealing of the lack of a moral compass all at once."

Since being off base is a major part of Klein's brand, I suppose one should not be surprised; those who've had the good fortune to have limited contact with his output can read Jon Walker's "Ezra Klein: Insurance Exchanges Don't Work and Must be Expanded Dramatically," or Physicians for a National Health Care Program's “Does Ezra Klein really think 'managed care didn't kill anyone'?" for two of many examples.

I'm going to shred this piece in some detail, first, because it will be entertaining, and second, I hope that it will encourage readers to take a cold, bloodyminded look at the excuses made for malfeasance in our elites.

Referencing the chunk of Ezra's post I've quoted above, Yves gets into gear:

The only objection Klein raises to Inside Job is that it punctures the favorite defense of economists, regulators, and their mouthpieces in the media "whocoulddanode?" Klein rejects the notion that corruption played a role; there no effort to rebut the evidence proffered in Inside Job and numerous other accounts (including on this blog and in ECONNED). He simply sidesteps the issue of corruption via straw-manning: "corrupt fools".

The most corrupt were decidedly not fools, they knew better and still took the destructive, profitable course. . . .

I wouldn't attempt to preempt Yves's "shredding" of the post, but let me just hit some of her basic points:

* Michael Lewis? Gimme a break! (I'm paraphrasing.) "Can Klein simply not tell the difference between Lewis, a bond salesman 25 years ago, and author/journalist since then, and a genuine in-touch expert on some aspect or other of modern finance?" Yves registers astonishment that Ezra actually cites Lewis's edge-of-the abyss deriding of the financial prophets of doom, and the neat inversion by which he makes his hero's obtuseness prove his point -- hey, if the world's smartest person couldn't see it coming, then nobody could.

* In the embarrassing matter of the unheeded but hardly insignificant body of economic observers who did see that something terrible was coming, but don't count because they didn't spell out the exact sequence of terrible events, Yves offers the analogy of the impossibility, "identified in 1899 by mathematician Henri Poincaré . . . of determining the movements of three or more celestial objects (meaning their gravitational forces could affect each other," because so many complex factors interact, then argues that the financial system has "a lot more than three actors, and --

even if you can describe the forces at work accurately, you cannot make useful predictions, at least not over anything other than very short time frames.

But you could nevertheless very clearly see in late 2006 and 2007 that Things Were Going to End Badly merely by reading the Financial Times. You could tell we were in the midst of a global credit mania. . . .

* But the most astonishing piece of inanity in Ezra's post is his assumption that --

"[so] many people who got it wrong had an incentive to get it right. Journalists. Hedge funds. Independent investors. Academics. Regulators. Even traders, many of whom had most of their money tied up in their soon-to-be-worthless firms. "Inside Job" is perhaps strongest in detailing the conflicts of interest that various people had when it came to the financial sector, but the reason those ties were "conflicts" was that they also had substantial reasons -- fame, fortune, acclaim, job security, etc. -- to get it right.

Even I in my financial unsophistication was stopped in my tracks by this. Here's Yves's reaction:

Huh? He can write this with a straight face? He has the incentives 100% wrong.

Asset bubbles are very popular. They look like increased wealth to the community. That’s why regulators are reluctant to intervene. If they do, they make people look less prosperous immediately, and they can't prove the counterfactual, if they had left things alone, the damage would have been worse. Recall the orthodoxy then was you couldn't recognize a bubble in progress, better to clean up afterwords. And that's before you get to the corruption that Klein is so keen not to discuss: regulatory revolving doors, annual bonus cycles which promote the institutionalized "devil take the hindmost" attitude, known in finance as "IBG-YBG" for "I'll be gone, you'll be gone".

Yves has much, much more to say about how we got into such a mess, how it not only could be but was seen coming, and what might be done to make it less likely to happen again. Finally, she doesn't seem to think it's an accident that Ezra arrives at a view that hey, it was a terrible shame, the meltdown, but gosh, there's just not much we can do. After all, this is the view of the people whose approval now seems to matter to him.

She comes back finally "to the issue that Klein wants us to ignore: corruption and capture."

The problem is not that there are no solutions. There are steps that we could take now to make modern finance much less risky, but that involves imposing pain on bankers. And that has not happened because, as Simon Johnson pointed out in May 2009, the US has suffered a "quiet coup" and is now in the thrall of financial oligarchs. The obstacle isn’t scariness or complexity, it’s the lack of political will.

It’s easy to understand why Klein writes this sort of piece. What is hard to fathom is why anyone, other than his patrons, continues to give what he has to say much credence.

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Will criminal prosecutions of financial-sector misdeeds ever be more than a sideshow?

Don't think there's not shit you can do, ways you can at least slow down this angry demon. Each and every one of us must do something. Stand up, take a swing, fuckin' throw an elbow. For example, after your job steals your health care coverage, steal their staplers! It's the least you can do. Yeah, I may not be able to get the catscan I need, but good luck affixing two pieces of paper together, you twat-lickers! Or refuse to pay a parking ticket, when the state is trying to make up the money they lost by giving billionaires tax cuts. . . .

If you work for a franchise restaurant, give shit away for free. Tell the manager that table five didn't like their trademark potpie-a-rooney and they demand a free cheesecake-a-rooney, whether they did or not. You don't owe that franchise anything. Why? Just because they stopped calling you a waiter and started calling you an "associate" or a "friend of the company" or a "franchise cuddlebunny" or whatever-the-fuck? Man, if only the Southern slave-owners had known this trick, everything would have been different. "Hey, we're gonna stop calling you 'slaves' and me 'master.' Instead you're gonna be called 'associate,' or 'friends of the plantation,' and we'll be one big happy family. . . .

-- Lee Camp, in the video

by Ken

And this is almost the least of it. Lee is on fire, overflowing with ways we can fight back against the corporate masters. You're gonna die!

Meanwhile, in the new (June 27) New Yorker George Packer has a piece, "A Dirty Business," on "going after financial-sector crime," basically tracking the uncharacteristically successful prosecution of Galleon hedge-fund wizard Raj Rjaratnam by the U.S. attorney for the Southern District of New York, Preet Bharara, made possible almost entirely, it appears, by the successful cultivation of informants.

A month after Rajaratnam's arrest, Bharara gave an unusually dark speech at N.Y.U.'s law school, speaking of "epic frauds surfacing with increasing frequency." He noted, "There is a lack of faith in the economic system; a lack of belief in the markets; and a lack of trust that the playing field is level." He made no apologies for ferreting out insider trading by using wiretaps, a practice that was unpopular on Wall Street. "When sophisticated business people begin to adopt the methods of common criminals, we have no choice but to treat them as such," he said.

U.S. Attorney Bharara elaborates for Packer.

In May, Bharara met with me in his office, on the eighth floor of 1 St. Andrew's Plaza, a brutalist concrete structure near the federal courthouse in lower Manhattan. His windows face south, and through the murky light of a damp late afternoon the towers of Wall Street were barely visible. "There are often two categories of reasons to do the right thing," he said. Category 1 is a sense of right and wrong. "But if that doesn't work for you -- and it doesn't for a lot of people -- then there's the Category 2 reason: you're going to get caught, your business is going to go down the tubes, you're going to go to jail. For a lot of these people, maybe Category 1 doesn't work but Category 2 should. But maybe there was not enough enforcement, such that they thought, What's the big deal?" Insider trading, Bharara observed, was unlike other federal crimes -- it wasn't committed by people with a violent outlook or a bad upbringing, or by serial lawbreakers who knew no other life. "These folks seem not to have been of that type," he said.

Packer acknowledges that some Wall Street observers have called this case "a sideshow." Filmmaker Charles Ferguson, who made Inside Job, "told me that Bharara's focus on an insider-trading scandal was misplaced, given that the financial crisis was caused primarily by shoddy mortgages and the cynical trading of those irresponsible loans. And --

Last month, the Times columnist Joe Nocera accused Bharara of displaying phony toughness while sending a message to Wall Street's élites that "crime pays." Matt Taibbi, of Rolling Stone, has taken the even harsher view that prosecutors have given bankers a pass because they covet lucrative jobs in the private sector.

And by the time Packer's done, even after Bharara has objected testily that people who assume his office isn't looking at criminal proseecutions of meltdown-related activities (he points out that grand-jury secrecy means that any grand-jury proceedings that have proceeded or are proceeding are, you know, secret) you have the sense that there are people who would like to do something of a criminal-prosecution nature about financial-sector abuses, but there are more than enough reasons why it's never going to happen.

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