Why Are They After the Banks?

Big Brother loves 'financial reform'
Intrusive Office of Financial Research threatens civil liberties

The next time you make a withdrawal from an automated teller machine, Treasury Secretary Timothy F. Geithner might be watching over your shoulder. Boosted by the sweeping, 1,400-page financial regulatory proposal currently making its way through the Senate, Mr. Geithner would have unprecedented, real-time access to a wealth of personal and corporate financial data - all in the name of protecting the public.

The legislation, sponsored by Senate banking committee Chairman Christopher J. Dodd, would create the innocuously named Office of Financial Research as a central repository for transaction-related records held by financial companies.

According to proponents, "decision-makers" like Mr. Geithner need up-to-the-minute information to act in order to prevent what they refer to as another Wall Street meltdown. The proposed agency would also provide statistical analysis and research, purportedly to monitor systemic risk to the financial system.

The idea raises a number of red flags, not least of which is the plan's fundamentally flawed premise that a central committee of unelected bureaucrats would be qualified to judge what's right and what's wrong for the economy. Our economic woes of the past three years would not have been solved had Treasury officials been armed with crisper charts and more accurate PowerPoint slides.

Yet the details of the proposal show that this new agency's mission is not meant to be limited to improving the quality of financial data. Mr. Dodd's legislation would grant the agency director the coercive power of subpoena to obtain records and rulemaking authority to force private-sector firms to maintain their internal financial records in a format acceptable to the government. The legislation also grants sweeping authority to maintain a data center that would collect and maintain "all data necessary" to carry out the director's wishes. Needless to say, the government's history of losing hard drives and laptops filled with sensitive information suggests entrusting more to
a federal agency is not a smart idea.

Of more concern is how the proposed law treats government employees with legal access to this gold mine of information. Bureaucrats would be allowed to exploit their knowledge of market conditions as private-sector consultants one year after leaving the agency. Not only would individuals who had such privileged access to confidential information command a high price in the private sector, they also would be equally rewarded while employed at public expense.

The already generous limitations of the general schedule of salaries and benefits would not apply to the Office of Financial Research. The agency's director could pay salaries in excess of $200,000 a year to as many bureaucrats as he saw fit to hire.

Indeed, the law sets up a semi-independent fiefdom where the agency director would set his own budget by imposing taxes on large financial firms and not have to answer directly to any elected officials.

There's no telling how much a multimillion-dollar boondoggle of this magnitude might end up costing in monetary terms, but it's enough to know the price in the loss of financial privacy and freedom is too great. The Senate should vote down this intrusive and wasteful bureaucracy.

Vapor Bill

Vapor bill:

A bill which moves through the legislative process in one or more houses of the U.S. Congress without legislative language. The best example of a Vapor Bill is the Senate Health Care Reform bill, which has no legislative language, but has been amended in the Senate Finance Committee. The term Vapor Bill was derived from the word Vaporware, a term coined during the dot-com era to describe all-singing-all-dancing software that was not written yet.

Here is how Brian Darling of the Heritage Foundation describes the Vapor Bill:

President Barack Obama’s push for a sweeping health care overhaul is going to be voted upon in the Senate Finance Committee this week and nobody has read the actual bill yet.

The Washington Post reported last Friday that “Senate Finance Committee Releases Its Final Text of Health-Care Bill,” yet you click on a link to the “Bill” referenced in the Post article and all you get is a 262 page description of the legislation. There still is no actual legislative language being given to Senators, Staff or the American Public. That is why many are calling it the “Vapor Bill.”

Why It Matters:

A bill without legislative language cannot be accurately scored by the Congressional Budget Office (CBO). Its impact and effects cannot be judged, nor can it be accurately evaluated without the legislative language. The end of life counseling in the House bill was discovered by reading the bill — as were many other objectionable ideas and issues.The Vapor Bill is part of a key Senate Democratic Leadership strategy to bring a blank bill before the Senate — in this particular case — the AIG Bonus bill.

How You Can Stop It:

Call Your Senator’s right now and demand that the legislative language for the health reform bill be available for 72 hours before the Senate begins consideration of the bill, and that CBO Scores the bill by evaluating the legislative language — not a literary work that is not the language that will become law. The phone number for the Senate switchboard is (202) 224-3121 and if you tell the operator which state you live in, they will connect you with your Senator’s office. Call the Democratic Senator first. They are the ones that need to hear the following message:

Vote against cloture on the motion to proceed until the bill’s legislative language has been scored by CBO and the language has been available on the internet 72 hours before consideration of the bill begins.Are we losing control of our democracy, if such far reaching legislation can be hidden from the public? If you answered yes, call your Senators NOW.

Buy Gold or Silver

Washington is unable to call all the shots
By Michael Hudson

Challenging the American empire will be the focus of meetings in Yekaterinburg, Russia, today and tomorrow for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other leaders of the six-nation Shanghai Co-operation Organisation. The alliance comprises Russia, China, Kazakhstan, Tajiki-stan, Kyrgyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia.

The attendees (who will be joined on Tuesday by Brazil for trade discussions) have assured American diplomats that dismantling the US financial and military hegemony is not their aim. They simply want to discuss mutual aid - but in a way that has no role for the US or for the dollar as a vehicle for trade among these countries.

The meeting is an opportunity for China, Russia and India to "build an increasingly multipolar world order", as Mr Medvedev put it in a St Petersburg speech this month. What he meant was this: we have reached our limit in subsidising the US military encirclement of Eurasia while also allowing the US to appropriate our exports, companies and real estate in exchange for paper money of questionable worth.

An "artificially maintained unipolar system", Mr Medvedev said, was based on "one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks".

Keen observers of America, if not effective managers of their own economies, these countries argue that the root of the global financial crisis is that the US makes too little and spends too much. Especially upsetting is US military expenditure - such as military aid to Georgia or the presence in the oil-rich Middle East and central Asia - using money that foreign central banks recycle.

Overconsumption by US citizens, US buy-outs of foreign companies and dollars the Pentagon spends abroad all end up in foreign central banks. These governments face a hard choice: either recycle the dollars back to America by buying US Treasury bonds or let the "free market" force up their currencies relative to the dollar - thereby pricing their exports out of world markets, creating domestic unemployment and business failures. US-style free markets hook them into a system that forces them to accept unlimited dollars. Now they want out.

This means creating an alternative. Rather than making merely "cosmetic changes as some countries and perhaps the international financial organisations themselves might want", Mr Medvedev concluded his St Petersburg speech: "What we need are financial institutions of a completely new type, where particular political issues and motives, and particular countries, will not dominate."

For starters, the six countries intend to trade in their own currencies so as to get the benefit of mutual credit, rather than give it to the US. In recent months China has struck bilateral deals with Brazil and Malaysia to trade in renminbi rather than the dollar, sterling or euros.

Many foreigners see the US as a lawless nation. How else to characterise a country that holds out a set of laws for others - on war, debt repayment and the treatment of prisoners - but ignores them itself?

The US is the world's largest debtor, yet has avoided the pain of "structural adjustments" imposed on other debtor nations. US interest rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programmes that the "Washington consensus" has forced on other countries via the International Monetary Fund and other vehicles. The US tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors.

It is no mystery to other countries how the US remains above the law. Foreigners see a financial system backed by American aircraft carriers and military bases encircling the globe. The IMF, World Bank, World Trade Organisation and other Washington surrogates are seen as vestiges of a lost American empire no longer able to rule by economic strength, left only with military domination.

The countries that are gathering today are convinced that this hegemony cannot continue without adequate revenues and are attempting to hasten the bankruptcy of the US financial-military world order. If China, Russia and their allies have their way, the US will no longer live off the savings of others, nor have the money for unlimited military spending.

US officials wanted to attend Yekaterinburg as observers. They were told no. It is a word that Americans will hear much more in the future.

The writer is professor of economics at the University of Missouri

From Gold is Money