Washington DC: Fast track Obama and ditch Bush Jnr's incompetent - borderline criminal - bailout Print E-mail

 London ~~ Friday November 14, 2008, page 38
First Published at: 

Ditch the smooth transition. The people voted for change

Instead of accepting the corrupted bail-out and reassuring Wall Street, Obama's team must start doing the hard stuff now

 Scroll down to read more via Amy Goodman's interview with Naomi on Democracy Now!, November 17 2008 and also the pre-US election call, via the Boston Globe, to fast track Barack Obama into the White House, ousting Bush Jnr's feckless, lame-duck administration unable to lead as the world faces economic catastrophe

By Naomi Klein

The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bail-out is not merely incompetent: it is borderline criminal.

In a moment of high panic in September, the US treasury pushed through a radical change in how bank mergers are taxed - a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140bn in tax revenue, legislators found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "[the] treasury had no authority to issue the [tax change] notice".

Of equally dubious legality are the equity deals the treasury has negotiated with many of the banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals: "Any use of these funds for any purpose other than lending - for bonuses, for severance pay, for dividends, for acquisitions of other institutions ... is a violation of the act." Yet this is exactly how the funds are being used.

Then there is the nearly $2 trillion that America's central bank, the Federal Reserve, has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg news service believes this secrecy violates the law and has filed a federal suit demanding full disclosure.

Yet the Democrats are either openly defending the administration or refusing to intervene. "There is only one president at a time," we hear from Barack Obama. That's true. But every sweetheart deal the Bush administration makes threatens to hobble Obama's ability to make good on his promise of change. To cite just one example, that $140bn in missing revenue is almost the same sum as Obama's renewable energy programme. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

Yes, there is only one president at a time, but that president needed the support of powerful Democrats - including Obama - to get the bail-out passed. Now that it is clear the Bush administration is violating the terms to which both parties agreed, the Democrats have not just the right, but a grave responsibility, to intervene forcefully.

I suspect the real reason the Democrats are failing to act has less to do with presidential protocol than with fear: fear that the stockmarket, which has the temperament of an over-indulged two-year-old, will throw one of its world-shaking tantrums. Disclosing the truth about who is receiving federal loans, we are told, could cause the market to bet against those banks. Question the legality of equity deals, and the same thing will happen. Challenge the $140bn tax giveaway and mergers could fail.

More than that, the Democrats, including Obama, appear to believe that the need to soothe the market should govern all key economic decisions in the transition period. Which is why, just days after a euphoric victory for "change", the mantra abruptly shifted to "smooth transition" and "continuity".

Take Obama's choice for chief of staff. Rahm Emanuel, the House Democrat who received the most donations from the financial sector, sends an unmistakably reassuring message to Wall Street. When asked if Obama would be moving quickly to increase taxes on the wealthy, as promised, Emanuel pointedly did not answer the question.

This same market-coddling logic should, we are told, guide Obama's selection of treasury secretary. Fox News and MNSBC explained that Larry Summers, who held the post under Clinton, is the man "the Street would like most". Let's be clear why. "The Street" would cheer a Summers appointment for the same reason the rest of us should fear it: because traders will assume that this champion of deregulation will offer a transition from Henry Paulson so smooth that we will barely know it happened. On the other hand, someone like Sheila Bair, the chairman of the banks' insurer of last resort, the Federal Deposit Insurance Corporation, would spark fear on the Street - for all the right reasons.

One thing we know for certain is that the market will react violently to anyone likely to impose serious regulation, invest in people, and cut off the free money. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent poll found 60% strongly favour "stricter regulations on financial institutions", while just 21% support aid to financial companies.)

There is no way to reconcile the public's vote for change with the market's foot-stomping for more of the same. Any moves to change course will be met with market shocks. The good news is that once it is clear the new rules will be applied across the board, fairly, the market will stabilise and adjust. Furthermore, the timing for this turbulence could not be better. Over the past three months, we've been shocked so often that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that predates him, or fault him for honouring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories will fade.

When transferring power from a functional, trustworthy regime, everyone favours a smooth transition. When exiting an era marked by criminality and bankrupt ideology, a little rockiness at the start would be a very good sign.

November 17, 2008

Naomi Klein on the Bailout Profiteers and the Multi-Trillion-Dollar Crime Scene

“The more details emerge, the clearer it becomes that Washington’s handling of the Wall Street bailout is not merely incompetent. It is borderline criminal,” says Naomi Klein, author of The Shock Doctrine.

Rush Transcript

AMY GOODMAN: World leaders from nearly two dozen countries met in Washington over the weekend to discuss plans to increase regulation of international financial activity. They acknowledged that a failure of market oversight in countries like the United States had precipitated the financial crisis.

Meanwhile, here at home, it’s been a month into the Bush administration’s more than $700 billion bank bailout. Last week, Treasury Secretary Henry Paulson outlined a new bailout strategy intended to boost consumer borrowing and promote financing for companies that give out loans. President-elect Obama’s transition team is reportedly working on improving the management of the bailout come January 20th.

But that’s two months away and according to the Washington Post, with $290 billion already committed, the Bush administration has taken no action to fill congressionally-mandated independent positions to oversee how the bailout is used.

According to Naomi Klein’s latest article in The Nation, “The more details emerge, the clearer it becomes that Washington’s handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.” The article is called “In Praise of a Rocky Transition.”

Naomi Klein, investigative journalist, author of The Shock Doctrine, joins us now from Toronto, Canada.

Welcome to Democracy Now!, Naomi.

NAOMI KLEIN: Thanks so much, Amy.

AMY GOODMAN: “Criminal”? Explain.

NAOMI KLEIN: Well, there’s a few elements now that are being described as illegal that we’re finding out. First of all, the equity deals that were negotiated with the largest banks and also some smaller banks, representing $250 billion worth of the bailout money, this is the deal to inject equity into the banks in­to inject capital into the banks in exchange for equity. The idea was to address the so-called credit crunch to get banks lending again. The legislation that enabled this was quite explicit that it had to encourage lending. Barney Frank, who was one of the architects of that legislation, has said that it violates the act if the money is not going to that purpose and is instead going to bonuses, is instead going to dividends, going to salaries, going to mergers. He said that violates the acts, i.e. it’s illegal. But what we know is that it’s going precisely to those purposes. It is going to bonuses. It is going to shareholders. And it is not going to lending. The banks have been quite explicit about this. Citibank has talked about using the money to buy other banks.

Then there’s other aspects of this that are borderline illegal. We found out that in the midst of the crisis, the Bush­the Treasury Department pushed through a tax windfall for the banks, a piece of legislation that allows the banks to save a huge amount of money when they merge with each other. And the estimate is that this represents a loss of $140 billion worth of tax revenue for the US government. Many tax attorneys who were interviewed by the Washington Post said that they felt that the way in which the Treasury Department went about this by unilaterally changing the tax code was illegal, that this had to be­this had to include Congress. Congress only found out about it after the fact.

There’s another piece of this puzzle that is also borderline illegal, which is that in addition to the $700 billion that we are discussing, the $700 billion bailout, there’s another $2 trillion that’s been handed out by the Federal Reserve in emergency loans to financial institutions, to banks, that actually we don’t really know who they’re handing the money out to, because, apparently, it’s a secret. They could be handing it out to a range of other corporations­I think they are­but they’re saying that they won’t disclose who has received these taxpayer loans, because it could cause a run on the banks, it could cause the market to lose confidence in the institutions that have taken these loans. Once again, that represents an additional $2 trillion.

The other thing that the Fed won’t disclose is what they have accepted as collateral in exchange for these loans. This is a really key point, because, of course, at the heart of the financial crisis is­are these so- called distressed assets. The value of these assets is enormously controversial. They may be worth very little. So if the Fed has accepted distressed assets as collateral in exchange for these loans, there’s a very good chance the taxpayers aren’t going to be getting this money back. So Bloomberg News has launched a lawsuit in federal court to find out who has received the loans and what has been accepted as collateral, because they believe that this lack of transparency is illegal. So that’s why we’re calling this the “trillion-dollar crime scene” or the “multi-trillion-dollar crime scene.” And they’re really challenging lawmakers to call them out, the Treasury is.

And I think, you know, Amy, the last time I was on Democracy Now!, we were talking about Henry Paulson’s original three-page proposal, the $700 trillion stickup, where he basically said, “Give me $700 trillion. Don’t ask any questions. I can never be challenged by any arm of government or any court of law.” Now, that aspect of the bailout was supposedly dealt with, and we were all reassured that there was going to be transparency, accountability, legality. But now we’re finding out that, in fact, Henry Paulson has achieved his original goal by stealth, because there is no accountability, and lawmakers are very hesitant to challenge this, because they’re afraid of causing a run on the banks, of causing more market instability. So, essentially, what the Bush administration has done is said, you know, “We dare you to challenge us and be responsible for the great depression.” And the Democrats, not known for their firm spines, have so far failed to challenge them in anything other than rhetoric.

AMY GOODMAN: And what’s very interesting about this, of course, as I talked to you before the election, but now the election is over, and the Democrats are not in a weaker position, but in a far more powerful position, and they are meeting this week.

NAOMI KLEIN: Right. They actually­they have a lot of leeway in which to act on this. You know, if Barney Frank means what he says, that this violates the act, then of course they can challenge the deals that have already been signed, these terrible equity deals that are so much worse than what Gordon Brown negotiated in Britain. I mean, let’s remember, Gordon Brown got voting rights at the banks that they bailed out, seats on the boards, 12 percent dividends for US tax­for UK taxpayers, as opposed to the five percent negotiated in the US and no voting rights and no seats on the board. Other thing Gordon Brown did is he got it in writing that the banks had to start lending, as opposed to Henry Paulson, who didn’t get it in writing, and the banks are not lending.

So, there is room to move, but, you know, the logic that has really gripped lawmakers is that they can’t rock the boat. And we hear this across the board, really, in the talk of, you know, who to appoint as Treasury Secretary, how to approach economic policy in this period. We hear all these phrases­you know, continuity, smooth transition. And really, that’s code for more of the same, because what the market wants is for there not to be tough regulation, is for the free money to keep flowing. What will upset the market, what will create a rocky transition, is if it’s clear that there’s a new sheriff in town, that they’re going to have to follow the law, that they’re going to cut off all of this corporate welfare, there’s going to be real accountability, real conditions attached to the money. You know what? The market really doesn’t want that.

Unfortunately for the market, voters have just voted for change. They voted for a candidate who really turned the election into a referendum on this economic policy of rampant deregulation. So you’ve really got a problem here. How do you reconcile the market’s desire for status quo with the voters’ demand for real change? There is no way to do that without a few bumps along the way. And I’m quite concerned that what we’re seeing from Obama’s team is an accepting of this logic that they need to give the market what it wants, which is continuity, smooth transition, which is really just code for more of the same. And when you hear names like Larry Summers being bandied about for Treasury Secretary, that’s feeding the market exactly what it wants, which is more of the same.

AMY GOODMAN: Naomi Klein, I wanted to go more to these­what you’re calling “borderline criminal” deals, the Washington Post revealing as part of the bailout, lawmakers changed Tax Code Section 382, which limits the kinds of tax shelters companies can use to­during corporate mergers, created to stop companies who avoid paying taxes by acquiring shell companies valued by the losses on their stocks. And then, going on in the piece, it says congressional aides admitted lawmakers agreed to keep the change hidden to avoid public outrage. Staffers with Senate Finance Committee chair, Max Baucus, a Democrat, reportedly asked that an administration briefing on the tax code change be kept secret. One congressional aide said, “We’re all nervous about saying this was illegal because of our fears about the marketplace. To the extent we want to try to publicly stop this, we’re going to be gumming up some important deals.”

NAOMI KLEIN: Right. I mean, this is­that’s an incredible statement, Amy, because really what they’re saying is, we can’t afford to enforce the law, because there is an economic crisis, that somehow, because there’s an economic prices, legality is a luxury that Congress can’t afford. That is a very scary statement. But this is what I mean by this logic that you have to­you know, the market, particularly a bear market, has the temperament of an ill-tempered two-year-old. I mean, it throws temper tantrums whenever it doesn’t get what it wants, whenever it is frightened. So it is really dangerous to pander to the tastes of the market in this period. It needs a little bit of tough love. That’s what people have voted for. But there will be a temper tantrum if there is a clear message that the law is going to be followed.

So, we find out that there has been this backdoor, illegal tax break handed over to the banks. And, by the way, Amy, this is an example, a classic example, of what I call disaster capitalism or the shock doctrine­right?­where the banks had been pushing for this tax break for many, many years, they weren’t able to get it through during normal circumstances, but in a crisis they push it through the back door when everybody is focused on­well, at the point that they pushed this through, which was September 30th, this was the worst of the economic crisis and people were focused on the collapse of Lehman, and they were focused on the fact that they couldn’t get the bailout legislation through. So nobody even noticed this until it was too late.

And so, this is what I mean by the strategy of the Bush administration, is now they are saying to Congress, “We dare you to stand in the way of these bank mergers, because if you do that”­because the tax break that they handed out is what encouraged a wave of bank mergers. And I really do think it is worth pausing to question this idea that what Treasury should be doing at this point is encouraging very large bank mergers, because one of the other problems that, you know, is at the root of this crisis, and certainly at the root of this unprecedented bailout, is that you have so many banks that are considered too big to fail, right? So why is it that we are not questioning this solution, the so-called solution to the crisis, which is creating even bigger banks, banks that will, once again, be too big to fail?

We’re really heading to a future where there will be, you know, three or four large banks, all of them too big to fail, which means that if they take more­they take more and more risks, which nobody is asking them not to. It’s important to understand that in exchange for the bailout money, the banks are not being told that they can’t carry the incredible leverage rates that we saw, for instance, at Bear Stearns, thirty-three to one. They aren’t being told that they can’t invest in these high-risk, complex financial instruments. They can still do whatever they want, but now they’re even bigger, which means that if they get themselves into trouble again, they will be bailed out again. So why is it that the government is cutting their taxes to encourage these mergers? The Democrats are saying, “Well, we can’t do anything now, because if we do, we will gum up these deals.” So I think we should question all of it. Across the board, I think the assumptions are faulty.

AMY GOODMAN: Naomi Klein, we have to break. but we’re going to come back to this discussion. I also want to talk to you about your piece in the Rolling Stone, “The Bailout Profiteers.” And after that, we’ll be joined by a former CIA analyst and the president of the Center for Constitutional Rights to talk about President-elect Obama’s transition team, when it comes to intelligence, deeply involved in the whole issue of the politicization of intelligence in the lead-up to war and in justifying the renditions. This is Democracy Now!, democracynow.org, the War and Peace Report. We’ll be back with Naomi Klein in a minute.


AMY GOODMAN: […] We’re also broadcasting across Canada on community radio stations, where Naomi Klein is, in Canada, in Toronto, the award-winning journalist, syndicated columnist, author of the bestseller The Shock Doctrine: The Rise of Disaster Capitalism. Her last piece in The Nation is called “In Praise of a Rocky Transition.” And the piece before that is in Rolling Stone; it’s called “The Bailout Profiteers.” Naomi Klein, lay them out.

NAOMI KLEIN: Well, what I do in the Rolling Stone piece is talk about the really uncomfortable parallels between what we saw in Iraq in the Green Zone and what we’re seeing in the US Treasury. It’s sort of the Green Zoning of the US Treasury. If we think about the way the Bush administration handled the occupation of Iraq, the working assumption was that everything that could be privatized, everything that could be outsourced, would be outsourced. And it has been very much a corporate war, as you well know. But at the same time, the handing out of the contracts in the early days was done very, very quickly, because, of course, there was this manufactured emergency that we all know was based on lies, in retrospect. But that was used, that state of emergency was used to justify no-bid contracts, to justify the fact that there was very little oversight of the contractors.

And we’re seeing all of this repeat now, but just on such a massive scale, such a larger scale. First of all, when Henry Paulson and Neel Kashkari, his deputy, announced the $700 billion bailout, they also announced that they would be outsourcing all of the work. They have handed out the work to many of the banks and Wall Street law firms that really created the crisis in the first place. But in the same way, there’s also been very little competition for these contracts. They were handed out very quickly. And at the same time, as we were discussing earlier, there is very little oversight over the process.

So, just to give you one example that I discuss in the Rolling Stone piece, there’s the general contractor, the really big contracting­it’s kind of the Halliburton of Treasury contracts­went to the bank, Bank of New York Mellon. Bank of New York Mellon, by the way, is one of the nine banks that got the equity deals, the cash injections in exchange for equity. And they are also very deep in this derivatives mess themselves, but they have been hired to handle a huge part of the bailout. So what I argue in the piece is that we actually have it backwards. It’s not the banks that have been partially nationalized; it’s Treasury that has been partially privatized by the very banks that created the crisis in the first place.

One of the things that’s really extraordinary about the Bank of New York Mellon contract is that, unlike the Halliburton contract or the Bechtel contract or the Blackwater contract, we actually don’t know how much it’s worth. It’s quite extraordinary. It’s redacted. The part of the contract that would tell taxpayers how much of their money is being given to this bank and how they’re calculating the payment for Bank of New York Mellon is all blacked out. I was reassured by Treasury three weeks ago that they would be disclosing that information within days. They still haven’t disclosed it.

Another contract that I look into in the Rolling Stone piece is for the first law firm that received a contract to advise Treasury on the equity deals, on those key equity deals that we’ve now found out are such bad deals, the ones that didn’t get it in writing that the banks were supposed to start lending, the ones that only got five percent dividends for US taxpayers when Britain got 12 percent. Well, the bank that got the­sorry, the law firm that got the contract to advise Treasury is called Simpson Thacher Bartlett. This is a Wall Street heavy-hitter firm. They’ve negotiated some of the largest bank mergers in recent years. And what we discovered in researching this piece is that Bank of­is that Simpson Thacher had represented seven of the nine banks that received the equity deals that they were advising Treasury on. And, you know, what’s important to understand is that these banks that Simpson Thacher represents on other matters represent far more of their revenue than US Treasury. So what I am arguing is that they are in a very large conflict of interest, because they really are a bankers’ law firm, not a public interest law firm.

AMY GOODMAN: Naomi Klein, can you talk about what is happening right now in Washington, what took place over the weekend, the meeting of the G20?

NAOMI KLEIN: Well, you know, this was an epic lost opportunity, Amy, because I think a lot of people assume, certainly assumed originally, that what would come out of this catastrophe, what would come out of this crisis, would be a re-examination of some of the thinking that has underpinned so much of economic policy in the past thirty years. And, as I said earlier, Barack Obama turned his election campaign into a referendum on the mania for deregulation and free trade and really less trickle-down economics. He said the idea of giving more and more to the people at the top and waiting for it to trickle down to the people below, and that really resonated with voters, and they elected him on that platform. And let’s remember, Amy, because this really is about democracy, that his campaign turned around when the economic crisis really hit Wall Street. He was losing ground to McCain when the crisis hit Wall Street, and Obama started using this language of really putting the ideology of deregulation on trial. That’s when his numbers turned around. That’s when he went on his winning streak that took him all the way to Election Day. And so, I think that there has been this assumption that, OK, now we’re going to fix it.

But if we look at what just came out of the G20 summit, it’s really been a reassertion of the very­this very ideology of deregulation. On the one hand, you have the statement that you started the program with, where the world leaders said that this crisis was born of the shadow banking industry, not enough oversight, not enough regulation, too much complexity. At the same time, when they talk about solutions, they’re calling for resurrecting the failed World Trade Organization talks that collapsed this summer. And we heard, if you recall, this summer, when the Doha talks collapsed, that globalization and the Washington Consensus were dead, because developing countries had rejected it.

The other thing that they’re calling for is a greater role for the International Monetary Fund. And it’s important to understand that the reason why the International Monetary Fund and the World Trade Organization and the whole free trade agenda, generally, has been in collapse in recent years is because countries around the world are no longer willing to accept the conditions attached to joining this club, the conditions attached to an International Monetary Fund loan. In reasserting a greater role for the International Monetary Fund, in calling for the World Trade Organization talks to get back on track, these world leaders are actually calling for more financial market deregulation, more of the same.

I’ll give you one example: the Doha talks. Although much of the focus has been on agricultural subsidies, part of the Doha talks is about financial sector deregulation and the push, particularly from Britain and the United States, for countries like China and India to open up their financial services markets to US and British and European companies who want into these markets. And what’s really striking is that you hear this language of anti-protectionism, you know, that we can’t turn away from free trade. What this really means, Amy, is that Citibank and Barclays want to go into China, want to go into India, and they want to buy up Chinese and Indian banks, they want to get into these markets. But what’s so incredible in this moment is the hypocrisy, just the rampant hypocrisy, because Barclays and Citibank and all of the other banks that would benefit from this type of free trade are of course the very banks that are receiving massive state protection from their own governments in the form of the bailouts that we’ve just been discussing. So these sort of corporate welfare bums now want to use the language of anti-protectionism to go into other countries and buy up their assets, but, of course, they are being subsidized so heavily by their own taxpayers. So it’s a moment of high hypocrisy.

It’s also a moment of, as I said at the beginning, lost opportunities, because­just to give you one example, think about what these leaders could do if they really wanted to, in terms of collaborating to harmonize regulation, so that banks were no longer able to pit governments against each other for who could offer the lowest taxes, who could give them the best tax havens, who could offer the lowest regulation. There was just a hearing on Friday about hedge funds that Henry Waxman convened. And before those hearings, we heard from one of the wealthiest hedge fund owners in the country, Ken Griffin, who’s actually an Obama supporter. Ken Griffin, a billionaire hedge fund owner­he owns Citadel Investment­was asked by the committee whether he believed that hedge funds were sufficiently regulated and whether they should be more highly taxed. What Ken Griffin said was that if that happened, there would be even more jobs in the financial industry in the United States lost to Britain. And he talked about how his heart breaks when he goes to Canary Wharf in London and sees how many good jobs have been lost to Britain, which has, in many ways, lower­less regulation of hedge funds.

But what’s so striking about that, Amy, is that it would be so easy in this moment for the US government and the British government to actually harmonize their regulations so that they could­so that companies like Citadel Investment and other hedge funds would really have nowhere to run. And when you have a crisis like this, which so clearly shows the need for those types of regulations, when you have an election like there just was in the United States, where people have said clearly that this is a priority, the leaders have an opportunity to act and to close down these tax havens, to prevent this ability of governments to be pitted against one another, and have a race to the top as opposed to a race to the bottom. But they blew that opportunity, and they actually called for less regulation.

AMY GOODMAN: Just underscoring what you wrote on the whole issue of the difference in the bailouts, the British Prime Minister Gordon Brown extracting meaningful guarantees for taxpayers, voting rights on banks, seats on their boards, 12 percent in annual dividend payments to the government, a suspension of dividend payments to shareholders, restrictions on executive bonuses, a legal requirement banks lend money to homeowners and small businesses. Here in the United States, Washington Post reporting major US banks are on pace to spend more than half their bailout money on rewarding their shareholders. The thirty-three banks are set to receive some $163 billion in government bailouts; half of that sum will go to paying off shareholders over the next three years.

NAOMI KLEIN: Yeah, this bailout is really not a bailout at all; it’s a parting gift to the people that the Bush­that George Bush once referred to jokingly as “my base.” You know, in one of my columns recently, I likened it to what European colonial rulers used to do when they finally realized they had to hand over power; they would loot the treasury on the way out the door.

And the reason why there has been this dramatic change in policy just in recent days, where Henry Paulson has said, “OK, well, we’re not going to do what we originally had said at all,” which is use the bailout money to buy distressed assets, to buy bad debts, “Now we’re going to go from these equity deals with the banks to bailing out credit card companies”­the reason for that is that that first $250 billion was essentially money down the drain. They are admitting that it didn’t do what it was supposed to do, which was increase lending. So, now they’re making it up as they go along. It’s take three, take four, take five. But we’re supposed to somehow not notice that $250 billion, an astronomical sum, was just wasted, going to bonuses, going to shareholder payouts, going to CEO salaries. And now they’re trying another method to get lending going. But it really was the parting gift, Amy.

And if we think about what this money means, and this is­you know, this crisis isn’t over, and the same people who justified this bailout, who clamored for this bailout, are the very people who are going to turn around and say to Barack Obama, “We can’t afford for you to make good on your election promises. We can’t afford universal healthcare. In fact, we can’t afford what meager services Americans get in exchange for their tax dollars, like Social Security payments.” We’re already hearing this lowering of expectations now in the national discourse. So, the money­this really is, you know, reverse Robin Hood gone mad. The money has been given to the people who needed it least, and it’s going to be used to justify austerity measures imposed against those who need it most. It’s going to be used to justify cuts to food stamps. It’s going to be used to justify cuts to Social Security, to healthcare, let alone being used to justify why more ambitious plans for a national healthcare program, for green energy are not affordable. So people have to be ready for this. You know, the next shock is yet to come.

AMY GOODMAN: Your final thought, this, on the bailing out of the auto industry, the Big Three in Detroit, starting with General Motors?

NAOMI KLEIN: Well, obviously, it shouldn’t be a blank check. You know, I always think about what the International Monetary Fund does when developing countries come and ask for a loan. Think about what they’re doing right now. The International Monetary Fund says, “You want a loan? Well, here’s our list of conditions.” They used to call it structural adjustment. The same thing could be done to the auto industry. If they’re coming for a bailout, they should be structurally adjusted, and taxpayers should be playing IMF to the auto industry and insisting that they change the way they work, that they build green automobiles, that they protect jobs. It can’t simply be a blank check.

That said, what’s really disturbing is the way the Bush administration appears to be using the desire among Democrats to bail out the auto industry to horse trade the free trade deal with Colombia. You know, what we’re really seeing, Amy, is a resurrection of the entire free trade­discredited free trade agenda. This crisis being used­the shock of this crisis being used to resurrect all of these discredited deals. The Colombia free trade deal, the International Monetary Fund, the Doha round, they’re all coming back from the dead at precisely the moment that we should be actually burying, for good, this whole agenda of deregulation.

AMY GOODMAN: Naomi Klein, I want to thank you for being with us, award-winning journalist, syndicated columnist, author of the bestseller The Shock Doctrine: The Rise of Disaster Capitalism. Her latest piece is in The Nation; it’s called “In Praise of a Rocky Transition.” Before that, in Rolling Stone magazine, and that’s called “The Bailout Profiteers.” This is Democracy Now!, democracynow.org, the War and Peace Report. Naomi was speaking to us from the CBC TV studios in Toronto.

 October 15, 2008

Fast track the new president

By Richard S. Tedlow and David Ruben

THE NEXT PRESIDENT will be elected on Nov. 4, but will not take office until Jan. 20. Normally, this lag time is not an issue. But with the financial system in meltdown, the "real" economy threatening to follow, and a feckless, lame-duck administration unable to lead, this yawning interval is a problem. If history is any guide, a very big problem.

Consider the election of 1932, perhaps the closest historical analogy to our current situation. The Great Depression was already in full swing when Franklin D. Roosevelt was elected on Nov. 8 to succeed Herbert Hoover. Unfortunately, things went from bad to worse in the four months between Roosevelt's election and inauguration. (At that time, the new president didn't take office until March 4.) During those dreadful days, the index of industrial production dropped to an all-time low. The unemployment rate soared to an all-time high. Twenty-three states intervened in their banking systems with unprecedented force. By the time Roosevelt took office, numerous banks had been closed or placed under increased state regulation. On Inauguration Day itself, New York Governor Herbert H. Lehman declared a two-day bank holiday.

Meanwhile, the federal government was paralyzed. Hoover and Roosevelt could not agree on a joint course of action. The economy continued its historic plunge, and ever more Americans lost not only their incomes but their hope. However, bold responses such as a national banking holiday - not to mention the psychological boost of an inspiring new leader declaring that "the only thing we have to fear is fear itself" - would have to wait for March.

How can we avoid a similar fate? The present January inaugural date is fixed by the 20th Amendment to the Constitution. Changing that would take years, not days.

But there is a way out - if our political leaders are smart, courageous, and public-spirited enough to take it.

Assume that Barack Obama wins the election, as polls show is increasingly likely. The following day, Vice President Cheney should be prevailed upon to resign. Using his powers to designate a successor under the 25th Amendment, President Bush should then appoint, and Congress should confirm, Obama as vice president (just as Richard Nixon appointed Gerald Ford vice president in 1973 when Spiro Agnew resigned). Bush himself should then resign, elevating Obama to the presidency - as Ford became president when Nixon resigned. Obama should then appoint Joe Biden as vice president.

With Congress's confirmation of Biden, the new administration would be in place, on the job, and ready to tackle the economic crisis - in November, not January. (The electoral college's official ratification of the election results in December would merely rubber-stamp the transition.)

Such extraordinary action would be particularly appropriate in the event of an Obama/Biden victory, since that ticket promises the most dramatic change from the current administration's approach and policies.

However, it could be pursued with equal effectiveness if the McCain/Palin ticket is victorious. The goal remains the same: Get the new administration up, running, and dealing with the crisis as quickly as possible. It is simply vital for the government to act in as urgent a fashion as the situation demands.

The founding fathers' original four-month "interregnum" may have made sense at a time when election results were disseminated and presidents-elect transported to Washington at a horse's pace. The 20th Amendment, adopted in 1933, shortened that interval to its present 11 weeks. That amendment moved us in the right direction. It simply didn't go far enough.

Most free nations change administrations with far greater dispatch. The British, for example, replace their governments virtually overnight. If you're elected prime minister on Thursday, the Queen calls you to the palace on Friday and asks you to form a new government. Meanwhile, the movers are already packing up your predecessor.

We can fix our system now, before it causes irreparable harm. Why wait?

Richard S. Tedlow is a professor of business administration at Harvard Business School. David Ruben is a research associate at Harvard Business School.
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