Archive for January, 2010

A Corporate Full-Body Scan

Thursday, January 28th, 2010

The one redeeming feature of the abominable Supreme Court ruling on corporate electoral expenditures is the majority’s retention of the rules on disclaimers and disclosure. While opening the floodgates to unlimited business political spending, the Court at least recognizes that the public has a right to know when a corporation is responsible for a particular message and a right to information on a corporation’s overall spending.

Writing for the majority, Justice Kennedy states: “The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

There’s no question that steps must be taken to mitigate the Citizens United ruling, whether through changes in corporation law, shareholder pressure, enhanced public financing of elections, or even a Constitutional amendment.

Yet while these efforts progress, it is also worth taking advantage of the Court’s affirmation of the principle of transparency and push for even greater disclosure than what we have now. Groups such as the Sunlight Foundation are already moving in this direction.

The effort could begin with pressing the Federal Election Commission to tighten the existing reporting rules on what are known as “electioneering communications” and to enforce them more diligently.  But that’s not enough.

In the wake of Citizens United, we’ve got to demand more information on the many ways corporations exercise undue influence not only on elections but also on legislation, policymaking and public discourse in general. Now that Big Business is a much bigger threat to popular democracy, we have to subject corporations to intensive full-body scans to find all their hidden weapons of persuasion. The following are some of the areas to consider.

Lobbying. In his State of the Union Address, President Obama said that lobbyists should be required to disclose every contact with the executive branch or Congress. That’s fine, but why stop there? Many corporations do their lobbying indirectly, through trade associations which disclose little about their sources of funding. How about rules that require those associations to disclose the fees paid by each of their members and require publicly traded companies to disclose exactly how much they pay to belong to each of their various associations?

Front Groups. Corporations also indirectly seek to influence legislation and public opinion by bankrolling purportedly independent non-profit advocacy groups. Such front groups—such as those taking money from fossil-fuel energy producers to deny the reality of the climate crisis—do not have to publicly disclose their contributor lists. Why not require publicly traded companies, at least, to reveal all of their payments to such organizations?

Union-Busting. Encouragement of collective bargaining is still, in theory, official federal policy. Yet many companies violate the principle—and the rights of their workers—by using corporate funds to undermine union organizing campaigns. The existing rules on the disclosure of expenditures on anti-union “consultants” are too narrow and not vigorously enforced. That should change.

These are only a few of the ways that undue political influence and other forms of anti-social corporate behavior could be addressed through better disclosure. Yet, as we’ve seen, transparency by itself does not counteract corporate power unless something is done with the information.

This came to mind in reading the last portion of the Citizens United ruling. Not all five Justices in the majority went along with the idea of maintaining the disclaimer and disclosure rules. Parting with Kennedy, Roberts, Scalia and Alito, Justice Thomas argued not only that corporate independent expenditures should be unrestricted, but also that they should be allowed to take place under a veil of secrecy.

He bases his argument not on legal precedent, but rather on dubious anecdotal evidence that some supporters of California’s anti-gay-marriage Proposition 8 were subjected to threats of violence after their names appeared on public donor lists. Thomas thus suggests that corporations should be able to make their political expenditures anonymously to avoid retaliation.

While I am in no way advocating violence, I think activists need to use the information that becomes public as the result of expanded disclosure to make corporations pay a price for any attempts to buy our political system. If we can get them to worry about (non-violent) retaliation to the point that they limit their expenditures, then we will have gone a long way toward neutralizing the pernicious effects of the Citizens United ruling.

Haiti: Corporate Charity or Reparations?

Friday, January 22nd, 2010

After the New Orleans region was struck by Hurricane Katrina in 2005, Wal-Mart scored a public relations coup by delivering emergency supplies quickly while government agencies stumbled. Ignoring the fact that the company’s vast distribution network made the feat relatively easy, awestruck journalists hailed the giant retailer as a “savior” for many of the storm’s victims.

The Behemoth of Bentonville has apparently not been performing any major logistics miracles for the people of Haiti in the wake of the recent devastating earthquake. The company is working mainly through the Red Cross, initially providing $500,000 in cash and food kits worth $100,000.

Although the company’s outlays have apparently increased a bit since its January 13 press release, the amount is still in the neighborhood of $1 million. To put that number in perspective, in 2008 Wal-Mart had profits of $22 billion, which works out to some $2.5 million an hour—every day of the year.

It is hard to be impressed at a commitment of 30 minutes worth of profits to help deal with a disaster of the magnitude facing Haiti. But this is not just an abstract issue of generosity.

Over the years, Wal-Mart has earned huge sums from the impoverished nation. Haiti is one of the low-wage countries where garment contractors have produced the goods that, despite Wal-Mart’s vaunted low prices, can be profitability sold in its network of Supercenters. It’s been going on for many years. A 1996 report on Haiti by the National Labor Committee noted that Wal-Mart was a major customer of sweatshops paying garment workers as little as 12 cents an hour.

In this time of dire need, Wal-Mart should feel pressure to make a commitment to the Haitian people of a magnitude comparable to the wealth it has extracted from the country over the years.

The question of the obligation of a company such as Wal-Mart to a situation such as Haiti is particularly relevant in light of the outrageous ruling by the Supreme Court in the Citizens United case. Thanks to the High Court’s corporate shills, Wal-Mart executives are probably already fantasizing about the unlimited slush funds they will have to sway elections and pressure incumbents to do their bidding.

Now is a good time to launch a movement to push corporations to do something with their money other than buying the political system. The outpouring of support for Haiti could be the springboard for a campaign that demands that Wal-Mart—and other major corporations that have benefited from the country’s cheap labor—provide not a bit of charity but rather a substantial amount in the form of reparations.

Perhaps the way to start is to call for disclosure of an estimate of how much value Wal-Mart has extracted from the Haitian people. Rather than letting the company brag about its pittance of a voluntary contribution, it would be much more satisfying to see it have to negotiate an amount that would make a real difference for the country.

Pecora Weeps

Friday, January 15th, 2010

After J.P. Morgan was questioned by Congressional investigator Ferdinand Pecora during a 1930s investigation of the causes of the Great Crash, the legendary financier complained that Pecora (photo) had “the manners of a prosecuting attorney who is trying to convict a horse thief.” Morgan was also embarrassed when a Ringling Bros. publicity agent placed a diminutive circus performer on his lap in the middle of the proceedings.

At this week’s public hearing of the Financial Crisis Inquiry Commission, the nation’s most powerful bankers were, unfortunately, treated with a lot more deference. Sure, there was one satisfying exchange between FCIC Chairman Phil Angelides and Goldman Sachs CEO Lloyd Blankfein in which Angelides likened the firm’s practice of betting against the very securities it was peddling to clients to that of selling someone a car with faulty brakes and then buying an insurance policy on the buyer.

But those moments were rare. For the most part, the bankers came away unscathed. Most of the ten commissioners treated them not as suspected criminals whose misdeeds needed to be probed, but rather as experts whose opinions on the causes of the crisis were being solicited. This gave the bankers abundant opportunities to pontificate about industry and regulatory practices while avoiding any incriminating admissions about their own firm’s behavior.

For example, Commissioner Heather Murren, CEO of the Nevada Cancer Institute, asked Blankfein whether there should be “more supervision of the kinds of activities that are undertaken by investment banks?” This allowed him to babble on about the “sociology…of our regulation before and after becoming a bank holding company.”

The bankers seemed to have expected tougher questioning. Their opening statements sought to soften the interrogation by conceding some general culpability, though it was done in a mostly generic way. Jamie Dimon of JP Morgan Chase admitted that “new and poorly underwritten mortgage products helped fuel housing price appreciation, excessive speculation and core higher credit losses.” John Mack of Morgan Stanley acknowledged that “there is no doubt that we as an industry made mistakes.” And Brian Moynihan, the new CEO of Bank of America, noted: “Over the course of the crisis, we, as an industry, caused a lot of damage.”

But much too little time was spent by the commissioners exploring how the giant firms represented on the panel contributed to that damage. A search of the transcript of the hearing produced by CQ Transcriptions and posted on the database service Factiva indicates that the word “predatory” was not used once during the time the four top bankers were testifying.

The commissioners failed to challenge most of the self-serving statements made by the bankers to give the impression that, despite whatever vague transgressions were going on in the industry, their own firms were squeaky clean. Even Angelides failed to pin them down. When he asked Blankfein to state “the two most significant instances of negligent, improper and bad behavior in which your firm engaged and for which you would apologize” the Goldman CEO admitted only to contributing to “elements of froth in the market.” Angelides asked whether that included anything “negligent or improper.” Blankfein again evaded the question and the Chairman gave up.

The bankers also went unchallenged in making statements that were incomplete if not outright erroneous. When Blankfein, for example, claimed that Goldman deals only with institutional investors and “high-net-worth individuals,” no one pointed out the firm’s ties to Litton Loan Servicing, which has handled large numbers of subprime and often predatory home mortgages.

The Goldman chief also made much of the fact that he and other top executives of the firm took no bonuses in 2008. That’s true, but he failed to mention that, according to Goldman’s proxy statement, he alone became more than $25 million richer that year when previously granted stock awards vested.

The bankers were at their slipperiest when it came to the few questions about the issue of being too big to fail. They would not, of course, admit to being too big, but in spite of every indication that the federal government would never allow another Lehman Brothers-type collapse to occur, they labored mightily to argue that they could conceivably go under. This notwithstanding the fact that a couple of them had just thanked U.S. taxpayers for the financial assistance their firms had received.

I suppose it’s possible that the Commission is saving its best shots for later stages of the investigation and its final report, but its handling of the banker hearing deprived the public of a chance to see some of the prime villains of the current crisis get a much-deserved tongue-lashing.

Back to the Barricades?

Thursday, January 7th, 2010

The news that Byron Dorgan and Christopher Dodd will not run for reelection has Democrats fretting that they will lose their 60-vote supermajority in the Senate and will no longer be able to get anything accomplished.

But what have we got to show, with regard to checking corporate abuses, for the past 12 months of Democratic control over the legislative branch as well as the White House? Last year this time, excitement over Obama’s election and the Democratic gains in Congress persuaded many activists that great things could once again happen in Washington. The big business agenda would supposedly no longer reign supreme, and progressives anticipated major legislative gains regarding healthcare coverage, financial regulation, the climate crisis and union organizing.

Now those expectations seem hopelessly naïve. Rather than radical changes, we’ve ended up with a disappointing series of half-measures, quarter-measures, and stalemates.

The biggest frustration is in the healthcare arena. We seem to be on the verge of getting a new system that will expand coverage and curb some of the most egregious insurance industry abuses, but these improvements come at a high cost. The final bill will likely have a strict individual mandate compelling those without coverage to become customers of a bunch of blood-suckers yet a weak employer mandate allowing many companies to avoid providing decent coverage to their workers. It will not seriously regulate insurance rates yet may end up penalizing union workers who gave up wage increases to get more generous benefits. The bill that squeaked through the Senate and is expected to form the basis of the final legislation is so compromised that veteran reformers such as Physicians for a National Health Program have called for its defeat.

After crippling the economy through reckless investments and forcing millions of homeowners into foreclosure, the big banks have largely been treated with deference by Congressional Democrats and the Obama Administration. Nothing has been done to break up institutions deemed too big to fail and thus able to extort massive taxpayer-funded bailouts. Despite loud complaints from bankers used to sumptuous pay packages, the federal government’s restrictions on executive compensation have been pretty indulgent. The bill that passed the House in December creates a new consumer protection agency for financial services, but it is unclear how much power it will have. And the bill lacks aggressive regulation of the exotic financial instruments that helped bring about the crisis. Separate legislation on credit cards that was enacted curbs some of the industry’s most outrageous practices but does nothing about usurious interest rates.

The climate bill passed by the House in June not only shunned strict emission limits in favor of the dubious cap-and-trade system, but it would allow many major polluters to avoid paying for their emission allowances for up to 20 years. And the overall emission reductions the bill envisions are far below the level needed to make a substantial dent in global warming.

And then there’s the Employee Free Choice Act, the key priority of the labor movement, which did so much to get Obama and many Democrats elected. The legislation has been in suspended animation for many months as Senate leaders apparently cannot muster enough votes to overcome intransigent opposition not only from Republicans but also from some Dems. EFCA remained stalled even after the AFL-CIO signaled it was open to compromise on the key issue of card-check organizing.

Overall, corporate interests have been remarkably successful over the past year in avoiding serious restraints on their freedom of action. Much of what the Democrats are accomplishing amounts to the appearance of reform. It gives the impression that corporate misbehavior is being addressed but is actually inoculating business against more stringent regulation. In the case of healthcare, the situation is even worse: by turning millions into captive customers, Congress is granting unprecedented power and legitimacy to a discredited industry.

There are plenty of obvious explanations for this dismal performance. It is easy to point to the corrupting effect of corporate campaign contributions and lobbying by former Congressional staffers as well as the pernicious role of conservative Democrats and egomaniacs like Joe Lieberman.

But the progressive movement also deserves some of the blame. The euphoria following the 2008 election gave rise to another bout of the delusion that serious change requires nothing more putting in office a certain number of people with the preferred party designation.

During the 1930s FDR is supposed to have told activists in a private meeting: “I agree with you, I want to do it, now make me do it.” Although that quote has showed up in several blogs over the past year, the underlying message seems to have been lost on many of today’s activists. With the absence of substantial popular pressure, it has been easier for Congressional Democrats to succumb to the siren song of the corporate interests.

Ironically, it has been the woefully ignorant and confused tea party movement—serving as a witting or unwitting stalking horse for the corporate elite—that has lately shown the power of grassroots mobilization. Their positions make no sense, but the tea baggers have made sure that Congressional Republicans maintain a hard-right stance on everything.

Perhaps we will accomplish more if we return to our own barricades.