Politics

Why the FCC Will Probably Ignore the Public on Net Neutrality

Monday, 06 October 2014 13:22

Gangadharan writes: "The flood of responses was 'unprecedented.' Since the early 20th century, agencies like the Federal Communications Commission have asked the public for comments before making big decisions. But in the past few months, the Commission received a deluge for one particular proceeding that could change the Internet as we know it."

(image: lifehacker.com)

Why the FCC Will Probably Ignore the Public on Net Neutrality

By Seeta Pe�a Gangadharan, Vox

06 October 14

he flood of responses was "unprecedented." Since the early 20^th century, agencies like the Federal Communications Commission have asked the public for comments before making big decisions. But in the past few months, the Commission received a deluge for one particular proceeding that could change the Internet as we know it.

The decision in question is on the fate of network neutrality - the idea that Internet Service Providers and the government should treat all data and traffic on the Internet the same.

The question is � will the FCC tally but otherwise ignore citizens' concerns? Or will it engage with the public and address those worries head on?

If history is any indication, everyday citizens will likely continue to have weak influence at the agency. But understanding why citizens continue to have a weak influence points to a much larger tension between federal agencies and the public � and one that we must address if we want our agencies to help restore trust in government and strengthen their civic purpose.

It's been more than a decade since the last major round of public participation in FCC rulemaking peaked but failed to win over the agency during a five-year debate over media ownership rules. (Note: rulemakings differ from complaints, like the hundreds of thousands of Janet Jackson/Superbowl complaints invoked incorrectly by commentators comparing them to participation in the Open Internet proceeding.) The rules, some of which had been in place since the 1940s, restricted how much a single company could own in local markets and the national market. The idea here was to reduce consolidation, and thus the control that big media magnates could wield over the airwaves and the American public. Then, in 2002, following a court decision that allowed more consolidation in the cable market, the Commission launched the most comprehensive review of ownership rules in the history of the agency to determine whether broadcast markets needed to keep apace with cable.

During the ten months of the proceeding, and in a pre-social media era of email campaigns, citizens submitted more than half a million comments. Public interest organizations, like Free Press and Prometheus Radio Project, mobilized citizens to contribute comments to the rulemaking record. Together with Democratic Commissioners Michael Copps and Jonathan Adelstein, these groups organized nearly a dozen town hall meetings in which ordinary people could voice their concerns. Meanwhile, other groups like the National Rifle Association and MoveOn (strange bedfellows if there ever were any) galvanized their membership in separate letter-writing campaigns, generating a couple million postcards, letters, and emails to Commission staff opposing the rules.

The impact?

While public participation galvanized the public interest community and helped to turn Democrat Commissioners Adelstein and Copps into populist heroes, citizens largely failed to sway the three Republican commissioners who wanted to relax ownership rules. The Commission voted 3-2 to increase the number of television stations a single company could own, both locally and nationally; revised regulations governing common ownership of radio stations in local markets; and replaced two existing rules limiting common ownership (e.g., the newspaper/broadcast cross-ownership rule and the radio/television cross-ownership rule) with a single set of cross-media limits. The changes marked a radical re-rendering of the broadcast media marketplace, and paved the way for media conglomerates to expand their gatekeeping role when deciding which news to feature and which advertisements to carry, locally and nationally.

The public interest community derided the vote and called the process a sham. Then, the debate moved out of the agency and into the courts, and citizen input began to look even more ineffectual. A year following the FCC's decision, an appellate court decision in the Third Circuit rejected parts of the Commission's suite of deregulatory changes and also asked it to revise other parts of its decision. Though Prometheus, the lead complainant on the case, as well as other public interest organizations, credited public participation as a motivating factor, the court made no reference to the hundreds of thousands of citizen comments asking the Commission to preserve or strengthen ownership rules.

Four years later, and still in the glow of the appellate decision, this community mobilized again for a new proceeding on media ownership rules. Again, citizens flooded the Commission with comments, held town halls, and campaigned against media consolidation. The FCC also hosted a series of six public hearings.

Yet, after more than 165,000 comments in the rulemaking record, and hundreds of hearing statements and testimonies, citizens once again had only a modest impact on the final decision. By and large, the vote solidified the Commission's trend towards deregulation: though some rules remained untouched, the agency relaxed rules regarding the ability of newspaper and broadcast companies to consolidate.

So, what's the deal here? Why ask for public comment if only to give it short shrift?

The answer lies partly in the tension between our expectations of how such rulemaking proceedings will function, and how, in reality, they're actually designed to function. In the interviews I conducted for my dissertation, FCC commissioners and a handful of staffers (e.g., civil servants, as opposed to political appointees) explained that the rulemaking process does not function like a popular democracy. In other words, you can't expect that the comment you submit opposing a particular regulation will function like a vote. Rulemaking is more akin to a court proceeding. Changes require systematic, reliable evidence, not emotional expressions. And with the exception of Democrat Commissioners Copps and Adelstein, the people I spoke with at the FCC considered citizen input during the media ownership proceeding as emotional and superficial content.

One staffer explained why some comments in the record matter more than others, saying a lot of comments submitted by ordinary citizens are not "usually very deep or analytical or, you know, substantiated by evidence, documentary or otherwise. They're usually expressions of opinion." That means these kinds of comments are "not usually reviewed at a very high level, because they didn't need to be."

Or as another staffer said, "I find the whole rulemaking context almost hilarious in many instances, because you know you're reading something, and you know it's not true. And you're guessing, you know, the person is hallucinating." Ordinary comments were, in other words, prone to error and lacked truthfulness, in the eyes of many of the Commission's staff. They also represented one person's opinion or experience, whereas according to staff, comments submitted by legal or economic experts collated information in a more systematic way, and from a much broader population of consumers.

"There are limitations on the scope of the authority of the FCC to make certain changes in response to that public input," explained Commissioner Abernathy. The FCC, in other words, ought not to be swayed by popular opposition. "We really do have to be careful, I think, about following the law that's given to you... [A rule] cannot be based on the number of complaints."

Commissioners Copps and Adelstein have argued that labeling the input of all ordinary citizens as worthless and emotional is misguided. They claimed that the stories people revealed in comments and in hearing testimony during the media ownership proceedings spoke to the failings of a consolidated media marketplace. And they added that ordinary Americans had few opportunities to share their experiences and opinions in a frank manner. News coverage of about media ownership happened infrequently and rarely addressed a general readership.

But Commissioners Copps and Adelstein were the exception. The other commissioners, like the career bureaucrats who spoke to me about the proceeding, viewed citizen stories as suspect, unverifiable, unsophisticated. And ultimately, that sentiment prevailed in the final rules voted upon by the Commission.

There's one way to get the Commission to pay attention to comments: become a lawyer, economist or researcher and meet the Commission's expectations for what reasoned input really means.

"Comments are going to be as good as the time and effort [commenters] put into it," one staffer explained to me.

In the wake of more than 3 million comments in the present open Internet proceeding-which at first blush appear overwhelmingly in favor of network neutrality-the current Commission is poised to make history in two ways: its decision on net neutrality, and its acknowledgment of public perspectives. It can continue to shrink the comments of ordinary Americans to a summary count and thank-you for their participation. Or, it can opt for a different path.

This doesn't mean it has to take all 3 million comments into consideration. But it could applaud the robust response, noting that it's relatively rare for ordinary Americans to speak up about free expression and corporate accountability in the Internet industry. And it could concede that personal experience can be substantive, too (which is same benefit of the doubt that regulators give to companies touting customer service reports or consumer feedback). That's a tremendous opportunity for the Commission - and one that could position it as a role model for other federal institutions: What if all agencies treated rulemaking as a genuine democratic process, that valued peoples' voice, history and context?

13 comments

FOCUS | Too Big to Jail?

Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=15946"><span class="small">Bill Moyers, Moyers & Company</span></a>

Monday, 06 October 2014 11:53

Moyers writes: "Attorney General Eric Holder�s resignation last week reminds us of an infuriating fact: No banking executives have been criminally prosecuted for their role in causing the biggest financial disaster since the Great Depression."

Attorney General Eric Holder and Treasury Secretary Timothy Geithner in 2009. (photo: Matthew Cavanaugh/EPA)

Too Big to Jail?

By Bill Moyers, Moyers & Company

06 October 14

ttorney General Eric Holder�s resignation last week reminds us of an infuriating fact: No banking executives have been criminally prosecuted for their role in causing the biggest financial disaster since the Great Depression.

�I blame Holder. I blame Timothy Geithner,� veteran bank regulator William K. Black tells Bill this week. �But they are fulfilling administration policies. The problem definitely comes from the top. And remember, Obama wouldn�t have been president but for the financial contribution of bankers.�

And the rub? While large banks have been penalized for their role in the housing meltdown, the costs of those fines will be largely borne by shareholders and taxpayers as the banks write off the fines as the cost of doing business. And by and large these top executives got to keep their massive bonuses and compensation, despite the fallout.

But the story gets even more infuriating, the more Black lays bare the culture of corruption that led to the meltdown.

�The Clinton, Bush and Obama administrations all could have prevented [the financial meltdown],� Black tells Moyers. And what�s worse, Black � who exposed the so-called Keating Five � believes the next crisis is coming: �We have created the incentive structures that [are] going to produce a much larger disaster.�

BILL MOYERS: This week on Moyers & Company, the crusading Bill Black.

WILLIAM K. BLACK: No one can claim with a straight face that if we prosecuted bankers, as opposed to banks, that it would have any negative effect. It would have huge positive effects in sending the right message of accountability and the right message of deterrence.

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And by our sole corporate sponsor, Mutual of America, designing customized individual and group retirement products. That�s why we�re your retirement company.

BILL MOYERS: Welcome. As you�ve heard, Eric Holder has announced that he�s resigning as Attorney General. He will leave behind a mixed scorecard: A for civil rights, C for civil liberties and F for failing to prosecute the banking executives who brought about the financial calamity of 2008. Holder let the bankers off the hook individually as he negotiated civil settlements with their institutions for issuing mortgage-backed securities tied to faulty subprime loans. The billions of dollars in penalties the banks are paying will largely be borne by shareholders and by taxpayers as the banks write off the fines as the cost of doing business. The executives get off scot free.

But hold on � don�t close the file yet. As Michael Hiltzik wrote in the Los Angeles Times last week, "Given the government's failure to bring criminal cases against bankers and other Wall Street figures for collapsing the US economy in 2008, it's been left to the little guy to strike back." And the �little guy� did just that, in a case in Sacramento, where a federal jury acquitted four mortgage holders charged with fraud after hearing testimony that bank executives had pulled out all the stops to seduce them into taking out those toxic loans.

One of the key expert witnesses in that case is with me now. Bill Black�s testimony helped blow up the prosecution�s contention that the little guy was the culprit, when in fact it was the bank executives who had deliberately created the fraudulent loans to enrich themselves. They pulled off the classic shell game. Bait and switch. Take the money and run. Let ordinary people suffer the consequences.

It�s a story Bill Black knows well. A scholar, litigator, and regulator, he helped prosecutors convict more than 1000 crooked bankers during the horrific savings and loan scandals back in the l980s and 90s. He exposed five United States Senators � the so-called Keating Five � who took big campaign contributions from bank executive Charles H. Keating, Jr, and then tried to help him hide his crimes from bank examiners. His classic book "The Best Way to Rob a Bank Is to Own One" is now available in an updated edition. He holds two academic appointments � one at the University of Missouri-Kansas City and also at the University of Minnesota School of Law. And welcome back.

WILLIAM K. BLACK: Thank you.

BILL MOYERS: In a nutshell, what did the jury decide in Sacramento? And why should we care?

WILLIAM K. BLACK: Well, this is the first time that a jury has ever got to hear what actually caused the crisis. And the jury was horrified. Because it was the lenders who deliberately made massive amounts of fraudulent loans and then sold these massive amounts of fraudulent loans through additional frauds to the secondary market and eventually brought down the global financial system.

And the testimony that came out in the case is that the agents, the FBI agents and the IRS agents simply assumed that the banks were the victims and the bankers were the victims and simply assumed that the little people, the mice, were the problem in all of this. So they never even investigated the banks and the bankers.

BILL MOYERS: The mice?

WILLIAM K. BLACK: Yeah, the saying in the savings and loan debacle is you never wanted to be the guy that was chasing mice while lions roamed the campsite. So the mice are these alleged tiny frauds type of thing, where they ignore the lions, who are the CEOs of the banks and such.

BILL MOYERS: And the jury said, no, it's the lions.

WILLIAM K. BLACK: It's--

BILL MOYERS: Not the mice.

WILLIAM K. BLACK: Yes. So this is a crisis created by the lenders. And the reaction of the US attorney, who's Benjamin Wagner there was, well, we're not going to be deterred in prosecuting mortgage fraud. Well, we don't want them to be deterred. We want them to prosecute but prosecute the lions and stop this nonsense.

BILL MOYERS: Even Eric Holder never seemed in doubt about who was responsible. I mean, his own words indicate that he knew that guilt lay at the feet of those who run the banks. Here he is being interviewed by NBC's Pete Williams.

PETE WILLIAMS on NBC Nightly News: Mr. Attorney General, what does JP Morgan admit that it did wrong in the settlement?

ERIC HOLDER on NBC Nightly News: Well, it packaged loans that it knew did not pass its own stated due diligence test. We have a whistleblower who indicated that she expressed concerns about what the strength of these mortgage-backed securities were. And they put them out there to the market and said that they were perfectly fine when in fact they were not.

PETE WILLIAMS on NBC Nightly News: So to be clear, you're saying that JP Morgan's conduct here contributed to the housing collapse?

ERIC HOLDER on NBC Nightly News: Not only the conduct of JP Morgan. It was the conduct of other banks doing similar kinds of things that led directly to the collapse of our economy in 2008 and in 2009.

BILL MOYERS: Yet Eric Holder didn't bring one criminal case against any executives in charge of the banks' lending. You've called this the greatest strategic failure in the history of the Department of Justice.

WILLIAM K. BLACK: Yeah, in baseball terms they�re batting 0.000. But they�re not just batting 0.000, they took called strikes. They never got the bat off their shoulder and even swung. They didn't even try.

BILL MOYERS: Do you remember when President Obama told �60 Minutes,� I think it was late December of 2011 that, �Some of the most damaging behavior on Wall Street�wasn�t illegal?�

WILLIAM K. BLACK: I do.

BILL MOYERS: What did you think?

WILLIAM K. BLACK: I thought that he was wrong. That in fact if he listened to what the United States of America has demonstrated in court and through investigations, the activity was clearly illegal, it was a violation of a whole series of laws that make it felonies.

And these are just the frauds that caused the crisis. In addition to the frauds that caused the crisis, which are massive and we could talk about, we have the largest cartel in world history. This was the bid rigging of Libor, which is an international standard that sets the prices on over $300 trillion in contracts.

A trillion is a thousand billion, right? And then we have the foreclosure frauds where we have false affidavits. Over 100,000 felonies in that context. And then we have the bid rigging on bond prices where all the major banks, according to the Justice Department, were involved.

And then we had the Federal Housing Finance Administration, a federal agency suing virtually every largest, of the largest 20 banks in the United States of America, saying they defrauded Fannie and Freddie through false sales. And it goes on and on.

The savings and loan debacle, we made over 30,000 criminal referrals. Here, zero criminal referrals as far as we can get any public information. So the first thing Holder should�ve done is reestablish the criminal referral process. Because, you know, banks don�t make criminal referrals against their own CEOs.

BILL MOYERS: Do you tell yourself, well, there is a justifiable and understandable reason why they don't prosecute?

WILLIAM K. BLACK: No, there is no justifiable reason. Apparently modern financial regulators are vastly more sophisticated than we were as financial regulators 25 years ago. Because we had never figured out that the key to financial stability was leaving felons in charge of the largest financial institutions in the world.

BILL MOYERS: But they do claim with a straight face that they can't prosecute.

WILLIAM K. BLACK: They make it sound like the only choice we have is to prosecute banks as opposed to bankers. And that's nuts, right? We've always prosecuted bankers. We prosecuted successfully over 1,000 bankers in the savings and loan and bank crises.

And those are just the major cases and such. And it, of course, it greatly enhanced financial stability instead of the other way around. Indeed, none of the people in that era came back in this crisis and were able to lead frauds. And they couldn't because they had criminal records. But in the next crisis, these folks have no criminal records. They'll easily be able to come back. In fact, if you want to create the next crisis and make it vastly worse, leave the people in charge who led the frauds in the senior ranks at the banks in charge of those banks. So now they have all the postgraduate education in how to run a fraud. And they learned that there are no consequences other than good consequences.

BILL MOYERS: How does it feel to be right? Because when you said that this is the greatest strategic failure in the history of the Department of Justice, it was before the Justice Department inspector general himself issued a report that determined the FBI Criminal Investigative Division "ranked mortgage fraud as the lowest ranked criminal threat in its lowest crime category."

WILLIAM K. BLACK: And that it had diminished the number of FBI agents assigned, that the number of investigations and cases was falling still, that they were misleading the public by claiming that they were making it a higher priority, and that they had lied about the number of criminal cases they had brought against the mice, and that they persisted in using the false statistics when they knew that they were false. All of those things were found by the inspector general. It feels terrible to be right about those things.

BILL MOYERS: There's clearly been a culture of deference toward the banks in the Obama administration. You would agree with that?

WILLIAM K. BLACK: Absolutely. Again, I blame Holder. I blame Timothy Geithner. But they are fulfilling administration policies. The problem definitely comes from the top. And remember, Obama wouldn't have been president but for the financial contribution of bankers.

And it's an extraordinary political story. Because the Clintons, of course, have been close to banking for decades and very supportive of it. But a junior senator from Illinois was able to outraise by a substantial margin political contributions from the banking industry to win that nomination.

And then outraise his opponent, who was, of course, famously or infamous for his support of banking, John McCain, by more than two to one. And a person who led that effort to take big finance money and get it to then Senator Obama was, of course, Jamie Dimon, the CEO and chairman of the board of JP Morgan.

BILL MOYERS: Whom the �Times� has referred to as President Obama�s �favorite banker.�

WILLIAM K. BLACK: As his favorite banker even though, as Holder now admits, JP Morgan was one of the leading, what we call criminology, accounting control frauds in the world. It takes �The New York Times� six pages to list the violations on its website of JP Morgan Chase. So these are serial fraudsters.

And Jamie Dimon has even said out loud to his own shareholders what we call the accounting control fraud recipe. His phrase is, it's easy to produce low quality revenue. Bad underwriting means income today and losses tomorrow. Now, of course, it doesn't mean real income today. It means fictional income through accounting fraud.

So he gets it. If you have terrible, terrible underwriting, you will be mathematically guaranteed to report record profits that will make the executives wealthy through modern executive compensation. And if there's a problem, well, the government will bail you out and give you massive subsidies if you're too big of fail. And, of course, JP Morgan is the quintessential example of too big to fail, too big to jail.

BILL MOYERS: Do you remember when Obama was elected president he called the bankers to the White House and he said, I'm all that's standing between you and the pitchforks, meaning between you and a wronged and indignant public.

WILLIAM K. BLACK: I thought that was an obscene statement, slanderous about the American people. The American people don't want pitchforks. They want justice. They want these senior officers to be prosecuted. If they're found guilty, they want them to be sent to prison. And they want their fraudulent proceeds, the bonuses and compensation to be recovered. And that is a very good thing about the American people.

BILL MOYERS: To man that wall between the bankers and the public he chose Eric Holder as everyone knows who at the time was at the elite law firm of Covington & Burling which represents some of the very banks he would later exonerate from criminal prosecution. Within that justice were three other top lawyers from Covington & Burling, including the firm's star lawyer defending against white collar crime who became Holder's right hand man running the criminal division of the Justice Department. What are we to make of that coincidence?

WILLIAM K. BLACK: Well, first, you should avoid it. But I want to caution that it isn't just the conflict, and indeed that in some ways takes one away from where the primary focus should be. So in the savings and loan crisis, President Bush, the first, brought in a Covington & Burling lawyer when they represented banks and such.

And he promptly, his name is Harris Weinstein, increased enforcement actions by fivefold. And we went after the biggest folks and we had by far our greatest victories. Because Harris Weinstein was picked because he was tough and competent and because he was given a mission which was you will go after the worst folks and you will demonstrate the rule of law exists in the United States. And that there was a political subtext of, I inherit, I, President Bush, inherited this crisis and I'll be seen as fixing it. Show the American people that there is no exception to the rule of law. Whereas Holder had exactly the opposite instructions which are, you know, don't rock finance. And that was reinforced by Timothy Geithner. But again Obama picked Timothy Geithner who was notorious as the worst failed regulator in the United States of America in the field.

BILL MOYERS: Why do you think on any evidence you have that they didn't want to fix the problem?

WILLIAM K. BLACK: Because two things. One, they were wrapped into this insanity that Timothy Geithner and Ben Bernanke were pushing that said, we must not do anything negative about the banks. We must instead �foam the runway[s],� is the infamous phrase of Timothy Geithner.

BILL MOYERS: To make a soft, safe landing.

WILLIAM K. BLACK: For the banks.

BILL MOYERS: For the banks.

WILLIAM K. BLACK: Not for the people. We will use the people as the excuse to get these programs. But the programs we all know are really for the banks.

BILL MOYERS: You do acknowledge that there have been some big settlements, I mean, and not all of them by Holder, but there've been settlements of over, you know, 125 or more billion dollars so far.

WILLIAM K. BLACK: Most of the money is actually deals they would've cut anyway. And it's window dressing, but it's in the interests of both the bank and the Justice Department to claim very large dollar amounts. Step back from what we've just been saying though and think, you know, put my lawyer hat on, of negotiating deals like this.

I'm representing the banks, you're Eric Holder. I know that you believe that I'm too big to fail and that there'll be a disaster if I have any risk of failure. Are you going to ever assess a fine on me that matters to my institution? Of course not, because it was violate all of those conditions.

So what do I want as CEO? Of course I don't want to go to jail and I'm happy to trade off some dollars in a fine to make sure that I never go to jail. But I also don't want the little officers to go to jail because they might be flipped by the prosecutors and the prosecution might move up the chain. So I want to negotiate immunity not just for me, but for everybody.

BILL MOYERS: Otherwise they'll rat on me?

WILLIAM K. BLACK: Otherwise they might rat on me. And this immunity doesn't have to be formal. It's just no cases will occur, right? Right? Right. So often there isn't a formal deal of immunity, but you see a practice of no prosecutions. And the other thing that I want in the best of all worlds, I want to make sure that I get to keep all my bonuses and compensation for all the frauds that I've led.

And that's the other part of the deal. In all of these cases, they get to keep the fraud proceeds. That has never happened in modern United States. That is why it's the worst strategic failure, but it's also failure of integrity at the Justice Department and at the Obama administration. And the Bush administration was no better on this score.

BILL MOYERS: No, the, what you're saying is that more than one administration cooperated in maintaining a system that is based upon deference to the banks and disrespect for the public.

WILLIAM K. BLACK: Right, and, but it's also a component in the case of Obama of we're humans and we are, everything we learn in research about humans is we're reciprocal. And so the finance area is the reason he's president of the United States. When he was in his hour of greatest need, when he had, was written off as a candidate against Hillary in the nomination battle the first time around, he had this miraculous survival. And that took money.

That took lots and lots of money. And who gave that money? It came overwhelmingly from finance at the critical moment when he needed it most. All of us as human beings, the people that helped us in, a friend in need is a friend indeed is the saying that we have as human beings.

BILL MOYERS: Is that a way to run the government of the United States?

WILLIAM K. BLACK: It's a way to run it into the next disaster.

BILL MOYERS: You think that's possible?

WILLIAM K. BLACK: Oh no, not possible, it's certain. We have created the incentive structures that is going to produce a much larger disaster. And just look at it. Again it isn't just the frauds that led to the crisis. It is all the frauds afterwards. HSBC knowingly launders over $1 billion in funds for the Sinaloa cartel, one of the most vicious drug cartels in the world that has caused the deaths of thousands of people.

We don't prosecute. We have them dead to rights. We don't say that you can't do business anymore. We take no serious sanctions, just one of these silly fines again. Standard Chartered, one of the, again one of the largest banks in the world, not only evaded sanctions on funding terrorist groups and nations that we say are funding terror, but actually had training manuals on how to deceive the United States regulators.

So these are banks doing things that used to be in those really bad novels that you would read at an airport when you had only 10 percent of your brain functioning, right, about bankers, these awful conspiracies and they're funding terrorists and such. Well, they actually are. It's the modern reality.

BILL MOYERS: What does it say about our financial capitalism?

WILLIAM K. BLACK: Well, there's no threat to capitalism like capitalists. They are destroying the underpinnings. And when dishonest people gain a competitive advantage in markets, it creates something that in economics and criminology we call a Gresham's dynamic. And that means bad ethics drives good ethics out of the marketplace. And so the key is to have a real rule of law, to have real regulation. Because that not only protects the consumer, it protects the honest banker.

BILL MOYERS: But you've just described a situation which has to discourage folks out there, you know that, that they understand what you're saying but you've also described why it can't be fixed, because of the relationship between Wall Street and Washington.

WILLIAM K. BLACK: So first Citizens United has made this far worse, and that's an atrocious decision and it has to be overturned if we're going to restore our democracy and such. But beyond that, there's never going to be a decisive victory against power and money and finance. We have to fight. Every generation has to engage in this struggle. And if it gives up and says it's hopeless, well, it'll give up and it will be hopeless.

BILL MOYERS: Bill Black, thank you very much for being with me.

WILLIAM K. BLACK: Thank you.

BILL MOYERS: At our website BillMoyers.com see the top five bank bailouts that you probably have never heard about.

That�s all at BillMoyers.com. I�ll see you there and I�ll see you here next time.

20 comments

FOCUS | Voodoo Economics, the Next Generation

Monday, 06 October 2014 10:23

Krugman writes: "Even if Republicans take the Senate this year, gaining control of both houses of Congress, they won�t gain much in conventional terms: They�re already able to block legislation, and they still won�t be able to pass anything over the president�s veto."

Paul Krugman. (photo: NYT)

Voodoo Economics, the Next Generation

By Paul Krugman, The New York Times

06 October 14

ven if Republicans take the Senate this year, gaining control of both houses of Congress, they won�t gain much in conventional terms: They�re already able to block legislation, and they still won�t be able to pass anything over the president�s veto. One thing they will be able to do, however, is impose their will on the Congressional Budget Office, heretofore a nonpartisan referee on policy proposals.

As a result, we may soon find ourselves in deep voodoo.

During his failed bid for the 1980 Republican presidential nomination George H. W. Bush famously described Ronald Reagan�s �supply side� doctrine � the claim that cutting taxes on high incomes would lead to spectacular economic growth, so that tax cuts would pay for themselves � as �voodoo economic policy.� Bush was right. Even the rapid recovery from the 1981-82 recession was driven by interest-rate cuts, not tax cuts. Still, for a time the voodoo faithful claimed vindication.

66 comments

Why We Allow Big Pharma to Rip Us Off

Monday, 06 October 2014 08:09

Reich writes: "According to a new federal database put online last week, pharmaceutical companies and device makers paid doctors some $380 million in speaking and consulting fees over a five-month period in 2013."

Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)

Why We Allow Big Pharma to Rip Us Off

By Robert Reich, Robert Reich's Blog

06 October 14

ccording to a new federal database put online last week, pharmaceutical companies and device makers paid doctors some $380 million in speaking and consulting fees over a five-month period in 2013.

Some doctors received over half a million dollars each, and others got millions of dollars in royalties from products they helped develop.

Doctors claim these payments have no effect on what they prescribe. But why would drug companies shell out all this money if it didn�t provide them a healthy return on their investment?

America spends a fortune on drugs, more per person than any other nation on earth, even though Americans are no healthier than the citizens of other advanced nations.

Of the estimated $2.7 trillion America spends annually on health care, drugs account for 10 percent of the total.

Government pays some of this tab through Medicare, Medicaid, and subsidies under the Affordable Care Act. But we pick up the tab indirectly through our taxes.

We pay the rest of it directly, through higher co-payments, deductibles, and premiums.

Drug company payments to doctors are a small part of a much larger strategy by Big Pharma to clean our pockets.

Another technique is called �product hopping� �making small and insignificant changes in a drug whose patent is about to expire, so it�s technically new.

For example, last February, before its patent expired on Namenda, its widely used drug to treat Alzheimer�s, Forest Laboratories announced it would stop selling the existing tablet form of in favor of new extended-release capsules called Namenda XR.

The capsules were just a reformulated version of the tablet. But even the minor change prevented pharmacists from substituting generic versions of the tablet.

Result: Higher profits for Forest Labs and higher costs for you and me.

Another technique is for drug companies to continue to aggressively advertise prescription brands long after their twenty-year patents have expired, so patients ask their doctors for them. Many doctors will comply.

America is one of few advanced nations that allow direct advertising of prescription drugs.

A fourth tactic is for drug companies to pay the makers of generic drugs to delay their cheaper versions. These so-called �pay-for-delay� agreements generate big profits for both the proprietary manufacturers and the generics. But here again, you and I pay. The tactic costs us an estimated $3.5 billion a year.

Europe doesn�t allow these sorts of payoffs, but they�re legal in the United States because the major drug makers and generics have fought off any legislative attempts to stop them.

Finally, while other nations set wholesale drug prices, the law prohibits the U.S. government from using its considerable bargaining power under Medicare and Medicaid to negotiate lower drug prices. This was part of the deal Big Pharma extracted for its support of the Affordable Care Act of 2010.

The drug companies say they need the additional profits to pay for researching and developing new drugs.

But the government supplies much of the research Big Pharma relies on, through the National Institutes of Health.

Meanwhile, Big Pharma is spending more on advertising and marketing than on research and development � often tens of millions to promote a single drug.

And it�s spending hundreds of millions more every year lobbying. Last year alone, the lobbying tab came to $225 million, according to the Center for Responsive Politics.

That�s more than the formidable lobbying expenditures of America�s military contractors.

In addition, Big Pharma is spending heavily on political campaigns. In 2012, it shelled out over $36 million, making it the biggest political contributor of all American industries.

Why do we put up with this? It�s too facile to say we have no choice given how much the industry is spending on politics. If the public were sufficiently outraged, politicians and regulatory agencies wouldn�t allow this giant ripoff.

But the public isn�t outraged. That�s partly because much of this strategy is hidden from public view.

But I think it�s also because we�ve bought the ideological claptrap of the �free market� being separate from and superior to government.

And since private property and freedom of contract are the core of the free market, we assume drug companies have every right to charge what they want for the property they sell.

Yet in reality the �free market� can�t be separated from government because government determines the rules of the game.

It determines, for example, what can be patented and for how long, what side payoffs create unlawful conflicts of interest, what basic research should be subsidized, and when government can negotiate low prices.

The critical question is not whether government should play a role in the market. Without such government decisions there would be no market, and no new drugs.

The issue is how government organizes the market. So long as big drug makers have a disproportionate say in these decisions, the rest of us pay through the nose.

23 comments

Even if We Defeat the Islamic State, We'll Still Lose the Bigger War

Monday, 06 October 2014 07:59

Bacevich writes: "Syria has become at least the 14th country in the Islamic world that U.S. forces have invaded or occupied or bombed, and in which American soldiers have killed or been killed. And that�s just since 1980."

Residents of Syria�s Idlib province examine buildings damaged in air strikes by the United States and its Arab allies. (photo: Ammar Abdullah/Reuters)

Even if We Defeat the Islamic State, We'll Still Lose the Bigger War

By Andrew J. Bacevich, The Washington Post

06 October 14

Andrew J. Bacevich, the George McGovern fellow at Columbia University�s School of International and Public Affairs, is writing a history of U. S. military involvement in the Greater Middle East.

s America�s efforts to �degrade and ultimately destroy� Islamic State militants extend into Syria, Iraq War III has seamlessly morphed into Greater Middle East Battlefield XIV. That is, Syria has become at least the 14th country in the Islamic world that U.S. forces have invaded or occupied or bombed, and in which American soldiers have killed or been killed. And that�s just since 1980.

Let�s tick them off: Iran (1980, 1987-1988), Libya (1981, 1986, 1989, 2011), Lebanon (1983), Kuwait (1991), Iraq (1991-2011, 2014-), Somalia (1992-1993, 2007-), Bosnia (1995), Saudi Arabia (1991, 1996), Afghanistan (1998, 2001-), Sudan (1998), Kosovo (1999), Yemen (2000, 2002-), Pakistan (2004-) and now Syria. Whew.

With our 14th front barely opened, the Pentagon foresees a campaign likely to last for years. Yet even at this early date, this much already seems clear: Even if we win, we lose. Defeating the Islamic State would only commit the United States more deeply to a decades-old enterprise that has proved costly and counterproductive.

Back in 1980, President Jimmy Carter touched things off when he announced that the United States would use force to prevent the Persian Gulf from falling into the wrong hands. In effect, with the post-Ottoman order created by European imperialists � chiefly the British � after World War I apparently at risk, the United States made a fateful decision: It shouldered responsibility for preventing that order from disintegrating further. Britain�s withdrawal from �east of Suez,� along with the revolution in Iran and the Soviet intervention in Afghanistan, prompted Washington to insert itself into a region in which it previously avoided serious military involvement.

At the time, oil � not freedom, democracy or human rights � defined the principal American interest, and stability was the goal. Military power offered the means by which the United States hoped to attain that goal. Armed might would keep a lid on things. The pot might simmer, but it wouldn�t boil over.

In practice, however, whether putting boots on the ground or relying on missiles from above, subsequent U.S. efforts to promote stability have tended to produce just the opposite. Part of the problem is that American policymakers have repeatedly given in to the temptation to unleash a bit of near-term chaos, betting that longer-term order will emerge on the other end.

Back in Vietnam, this was known as burning down the village to save it. In the Greater Middle East, it has meant dismantling a country with the aim of erecting something more preferable � �regime change� as a prelude to �nation building.� Unfortunately, the United States has proved considerably more adept at the former than the latter.

Mostly, coercive regime change has produced power vacuums. Iraq offers a glaring example. Although studiously ignored by Washington, post-Gaddafi Libya offers a second. And unless the gods are in an exceptionally generous mood, Afghanistan will probably become a third whenever U.S. and NATO combat troops finally depart.

In place of governing arrangements that Washington judged objectionable, the United States has found itself coping with the absence of any effective governments whatsoever. Instead of curbing bad behavior, spanking induced all sorts of pathologies.

By inadvertently sowing instability, the United States has played directly into the hands of anti-Western radical Islamists intent on supplanting the European-imposed post-Ottoman order with something more to their liking. This is the so-called caliphate that Osama bin Laden yearned to create and that now exists in embryonic form in the portions of Iraq and Syria that Islamic State radicals control.

Want to measure what America�s war for the Middle East has accomplished through its first 13 iterations? The Islamic State has to rank prominently on any list of achievements. If Iraq possessed minimally effective security forces, Islamic State militants wouldn�t have a chance. But the Iraqi army we created won�t fight, in considerable measure because the Iraqi government we created doesn�t govern.

President Obama did not initiate the long and varied sequence of military actions that has produced this situation. Yet he finds himself caught in a dilemma. To give the Islamic State a free hand is to allow proponents of the caliphate to exploit the instability that U.S. efforts, some involving Obama himself, have fostered. But to make Syria the latest free-fire zone in America�s never-ending Middle East misadventure will almost surely prolong and exacerbate the agonies that country is experiencing, with little ability to predict what consequences will ensue.

Even if U.S. and allied forces succeed in routing this militant group, there is little reason to expect that the results for Syrians will be pretty � or that the prospects of regional harmony will improve. Suppress the symptoms, and the disease simply manifests itself in other ways. There is always another Islamic State waiting in the wings.

Obama�s bet � the same bet made by each of his predecessors, going back to Carter � is that the skillful application of U.S. military might can somehow provide a way out of this dilemma. They were wrong, and so is he.

We may be grateful that Obama has learned from his predecessor that invading and occupying countries in this region of the world just doesn�t work. The lesson he will bequeath to his successor is that drone strikes and commando raids don�t solve the problem, either.

We must hope for victory over the Islamic State. But even if achieved, that victory will not redeem but merely prolong a decades-long military undertaking that was flawed from the outset. When the 14th campaign runs its course, the 15th will no doubt be waiting, perhaps in Jordan or in a return visit to some unfinished battleground such as Libya or Somalia or Yemen.

Yet even as the United States persists in its determination to pacify the Greater Middle East, the final verdict is already in. U.S. military power has never offered an appropriate response to whatever ails the Islamic world. We�ve committed our troops to a fool�s errand.

And worse, the errand is also proving unnecessary. With abundant North American energy reserves now accessible � all that shale oil and fracked gas � we don�t need the Persian Gulf oil that ostensibly made our post-1980 military exertions imperative. For whatever reasons, Washington�s national security elites seem oblivious to the implications these resources have for policy in the Middle East.

No matter how long it lasts, America�s war for the Greater Middle East will end in failure. And when it does, Americans will discover that it was also superfluous.

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