Robert Reich Reports


You're reducing the trickle-down economy by asking people to pay their own way. Isn't that kinda what Republicans keep asking for, people to pay their own way?
It's what they say. However, what they keep actually doing is making us pay the way for the wealthy oligarchs.


Super Anarchist
Plus, they’d have to pay 20 percent a year on unrealized gains in the value of their liquid assets, such as stocks, which can accumulate value for years but are taxed only when they are sold (and not even then if left to their heirs).
Get rid of the step-up basis - that's the root of the unrealized gains evil. The problem with unrealized gains is that a day later, they can be unrealized losses. That proposal is about as realistic as a 'balanced budget amendment'. Never gonna happen - for good reason. Its CRAZY complicated to implement and a REALLY bad idea. If it gets past, I'm going to invest in volatility every November because that, combined with 0-day options means the stock market is going to crack like a whip every Christmas. Be an awesome gift for a year and then people will realize why it's insane and turn it off. Truth is, regulators would see what's coming and suspend it before it happens - but it would be fun to chatter about for a little while. Get rid of the step-up basis instead and work it from there.
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billy backstay

Backstay, never bought a suit, never went to Vegas

Why I love Bernie Sanders​

He doesn’t stop​

Robert Reich

A few weeks ago, Bernie phoned.


The Brooklyn patois was unmistakable.


“Listen, I want you to know that I recommended you to be the next secretary of labor.”

Bernie is not one for small talk.

“But I’ve been there. Done that. Don’t want to do it again.”

“Just wanted to give you a heads up. You’ll be getting some calls from the media.”

Did Bernie even hear what I said?

“Thanks, Bernie.”


“Bye, and …” He was already off the phone.
Let me just come right out and say it: I love Bernie Sanders.

I love his authenticity. Some people like Donald Trump because he says whatever he wants and he’s an asshole. Bernie’s authenticity comes from saying what he wants and speaking the truth. And although he’s blunt, he’s anything but an asshole. When he growls “this grotesque level of income and wealth inequality is immoral,” he means it. And he’s right.

I love his chutzpah. On Tuesday, Bernie announced that Starbucks’s anti-labor CEO, Howard Schultz, has agreed to testify before the Senate Committee on Health, Education, Labor and Pensions, which Bernie chairs. The National Labor Relations Board has filed more than 80 complaints against Starbucks for refusing to negotiate in good faith with its workers in more than 280 Starbucks stores that have voted to unionize. Schultz had refused the committee’s request to appear until Bernie threatened to subpoena him. "I look forward to hearing from Mr. Schultz as to when he intends to end his illegal anti-union activities and begin signing fair first contracts with the unions," Bernie said.

I love him because he sounds like a vintage record (even his voice has the crackle of worn vinyl).
I love him because he’s never been afraid to call himself a democratic socialist. Soon after he began running for the 2016 Democratic presidential nomination, his campaign manager warned me he was about make a speech to “introduce” the public to democratic socialism. I was impressed that he had the guts to do this but worried about his timing. “Does he have to do it now?” I asked. The campaign manager told me Bernie was committed to doing it and couldn’t be persuaded otherwise. It was pure Bernie.

Ever since Franklin D. Roosevelt pushed for Social Security, Republicans have used “socialism” to scare Americans away from doing anything big that we need done.

But America is changing. As early as 2011, the Pew Research Center found that almost half of all voters under the age of 30 held a positive view of socialism while only 46 percent held a positive view of capitalism. In the 2016 Democratic primaries and then again in 2020, young people all over America wore buttons reading “Feel the Bern.” They were like the young admirers of Ruth Bader Ginsburg, another warrior who combined progressive conviction with elder crankiness.

I love Bernie because he has endless patience for important things and no patience for unimportant conversation. In 2010, he delivered an eight-and-a-half-hour speech on the Senate floor to protest the extension of tax cuts instituted during George W. Bush’s presidency. I was in the Capitol at the time and dropped by his office to congratulate him on his marathon. He quickly thanked me, then waved me off to take a phone call.

Just before the California Democratic primary in 2020, he gave a stemwinder of a speech in Oakland. We had a late dinner at a small dive on Shattuck Avenue that was empty except for the two of us — until a supporter spied us through the window and came bounding in with a Bernie poster.

“Senator, would you sign my …?”

“Not now! We’re eating!” Bernie barked.

In all my years of politics, I’d never come across a candidate willing to do this.

I love Bernie because he’s a true populist — a word that has gotten a terrible rap since Trump but should be redeemed. It means for the people and against the powerful. Trump pretends to be a populist, but he’s always wanted to be one of the powerful and has forever been in their pockets. Bernie is a true populist.

I love Bernie because he has almost single-handedly changed the national conversation — turning proposals that had once been on the Democratic fringe into respectable, and in some cases mainstream, Democratic positions. Creating jobs by rebuilding infrastructure. Providing free tuition at public universities. Breaking up the big banks. Guaranteeing workers paid medical and family leave.

The policies no longer seem far-fetched. And now that he’s chair of a powerful Senate committee, Bernie might be able to usher some of them through, if Democrats regain control of the House next year.

I love Bernie because even at the age of 81, his indignation hasn’t faded. Nor has his energy.

When he entered Congress in 1991 as an independent, he wasn’t particularly well liked. That may have had something to do with his telling the press that Congress “is not working. It is failing. Change is not going to take place until many hundreds of these people are thrown out of their offices,” and charging that “Congress does not have the courage to stand up to the powerful interests. I have the freedom to speak my mind.”

At the time, Congressman Barney Frank shot back: “Bernie alienates his natural allies. His holier-than-thou attitude — saying, in a very loud voice, he is smarter than everyone else and purer than everyone else — really undercuts his effectiveness.” Joe Moakley, another Massachusetts Democrat, then chairman of the powerful House Rules Committee, complained that Bernie “screams and hollers, but he is all alone.”

Bernie’s lack of popularity on Capitol Hill didn’t hold him back. He was reelected to the House seven times and was one of the founding members and the first chair of the Congressional Progressive Caucus, which has grown steadily from six members in 1991 to 71 today.

His ascent to the Senate in 2006 was astonishing — beating the Republican candidate, Richard Tarrant, one of the wealthiest men in Vermont, by 33 percentage points.

I backed Bernie in 2016 when he ran for the Democratic nomination for president against Hillary Clinton and backed him again in 2020. I took some crap for doing this from Clinton people, but I’m glad I did it. The system needed shaking up. It needed Bernie’s candidacy even if he wasn’t going to get the nomination.

I love Bernie because he has more guts than any politician I know. Hell, he has more guts than just about anyone I know.

But I’m still not going to be labor secretary again.

billy backstay

Backstay, never bought a suit, never went to Vegas
Update as he wrote about this a month or so ago..... FWIW, we have been saving on grocerie shopping at Trader Joes, and Costco, but some travel is involved.

FRIDAY, MARCH 10, 2023

Think Grocery Prices Are High Now? Just Wait.

Think your grocery bill is high now? Just wait.

A massive corporate merger could send skyrocketing food prices through the stratosphere, unless the government sees the deal for what it is — a rotten egg.

Supermarket giant Kroger is in the process of finalizing a nearly $25 billion deal to acquire its jumbo-sized competitor Albertsons, combining their 5,000 supermarkets into one mega company.

Corporate concentration in the grocery market is already a huge problem, with estimates showing that just five companies control over 60 percent of American grocery sales

This means less consumer choice, and more opportunity for grocery stores to jack up prices — which they’ve already been doing lately under the cover of inflation. Let’s be clear: Big corporations are using the excuse of inflation to pass price increases through to you.

Now you may think this merger won’t affect you because you don’t have a Kroger or Albertsons where you live, but here’s the kicker: Both stores already control dozens of other grocery brands across the country. So you may not even know you’re actually shopping at Kroger or Albertsons.

All told, this deal could affect grocery stores relied on by 85 million households.

What’s to stop this new goliath from continually raising prices if customers have nowhere else to shop? With grocery bills already going through the roof, Kroger buying Albertsons gets rid of the roof altogether.

A Kroger-owned mega company can also get away with paying workers even less than it already does — because fewer competitors means grocery workers have fewer choices of whom to work for.

According to one survey, 75% of Kroger workers were food insecure and 14% have experienced homelessness. One out of every five Kroger workers has relied on government aid to survive. This is no secret to Kroger execs either. Recently leaked internal documents reveal that the company has known about the plight of its workers for years.

This is the story of monopolization, folks. Corporate consolidation is bad news for everyone except the super-rich. It’s awful for consumers, workers, and the economy as a whole — and it’s driving the most extreme wealth imbalance in over a century.

But the good news is that this Kroger-Albertsons deal is far from being fully baked. The Federal Trade Commission has the power to intervene and stop it. Several labor unions, produce growers, antitrust experts, and state Attorneys General are already urging the FTC to block it.

We can’t afford to let another supermarket giant gobble up an even bigger piece of the American pie.



billy backstay

Backstay, never bought a suit, never went to Vegas

The real story behind the Silicon Valley Bank debacle​

And four lessons​

Robert Reich

On Friday, bank regulators closed Silicon Valley Bank, based in Santa Clara, California. Its failure was the second largest in U.S. history and the largest since the financial crisis of 2008.

On Sunday, regulators closed New York-based Signature Bank.

As they rushed to contain fallout, officials at the Federal Reserve, Treasury, and Federal Deposit Insurance Corporation announced in a joint statement on Sunday that depositors in Silicon Valley Bank would have access to all of their money starting Monday. They’d enact a similar program for Signature Bank.

They stressed that the bank losses would not be borne by taxpayers, but who will bear them? What the hell happened? And what lessons should be learned?

The surface story of the Silicon Valley Bank debacle is straightforward. During the pandemic, startups and technology companies enjoyed heady profits, some of which they deposited in the Silicon Valley Bank. Flush with their cash, the bank did what banks do: It kept a fraction on hand and invested the rest — putting a large share into long-dated Treasury bonds that promised good returns when interest rates were low.

But then, starting a little more than a year ago, the Fed raised interest rates from near zero to over 4.5 percent. As a result, two things happened. The value of the Silicon Valley Bank’s holdings of Treasury bonds plummeted because newer bonds paid more interest. And, as interest rates rose, the gusher of venture capital funding to startup and tech companies slowed, because venture funds had to pay more to borrow money. As a result, these startup and tech companies had to withdraw more of their money from the bank to meet their payrolls and other expenses.

But the bank didn’t have enough money on hand.

There’s a deeper story here. Remember the scene in It’s a Wonderful Life where the Jimmy Stewart character tries to quell a run on his bank by explaining to depositors that their money went to loans to others in the same community, and if they’d just be patient, they’d get their deposits back?

In the early 1930s, such bank runs were common. But the Roosevelt administration enacted laws and regulations requiring banks to have more money on hand, barring them from investing their depositors’ money for profit (in the Glass-Steagall Act), insuring deposits, and tightly overseeing the banks. Banking became more secure, and boring.

That lasted until the 1980s, when Wall Street financiers, seeing the potential for big money, pushed to dismantle these laws and regulations — culminating in 1999, when Bill Clinton and Congress repealed what remained of Glass-Steagall.

Then, of course, came the 2008 financial crisis, the worst collapse since 1929. It was the direct result of financial deregulation. Alan Greenspan, chairman of the Federal Reserve from 1987 to 2006, called it “a once-in-a-century credit tsunami,” but pressed by critics, Greenspan acknowledged that the crisis had forced him to rethink his free market ideology. “I have found a flaw,” he told a congressional committee. “I made a mistake … I was shocked.”

Shocked? Really?

Once banking was deregulated, such a crash was inevitable. In the 1950s and ’60s, when banking was boring, the financial sector accounted for just 10 to 15 percent of U.S. corporate profits. But deregulation made finance exciting and exceedingly profitable. By the mid-1980s, the financial sector claimed 30 percent of corporate profits, and by 2001 — by which time Wall Street had become a gigantic betting parlor in which the house took a big share of the bets — it claimed a whopping 40 percent. That was more than four times the profits made in all U.S. manufacturing.

When the bubble burst in 2008, the Bush administration moved to protect investment banks. Treasury Secretary Hank Paulson, former CEO of Goldman Sachs, and Timothy Geithner, president of the New York Fed, arranged a rescue of the investment firm Bear Stearns but allowed Lehman Brothers to go under. The stock market crashed. AIG, an insurance giant that had underwritten hundreds of billions’ worth of credit on the Street, faced collapse. So did Citigroup (to which Robert Rubin, Clinton’s former Treasury secretary, had moved after he successfully pushed for the Glass-Steagall repeal), which had bet heavily on risky mortgage-related assets.

Paulson asked Congress for $700 billion to bail out the financial industry. He and Fed Chair Ben Bernanke insisted that a taxpayer bailout of Wall Street was the only way to avoid another Great Depression.

endorsed the Wall Street bailout and appointed a team of Clinton-era economic advisors (led by Geithner, who became Obama’s Treasury secretary, and Lawrence Summers, who became director of the National Economic Council). These were the same people who, working under Rubin in the 1990s, had prepared the way for the financial crisis by deregulating Wall Street. Geithner, as chair of the New York Fed, had been responsible for overseeing Wall Street in the years leading up to the crisis.

In the end, the Obama administration rescued Wall Street, but at enormous cost to taxpayers and the economy. Estimates of the true cost of the bailout vary from half a trillion dollars to several trillion. The Federal Reserve also provided huge subsidies to the big banks in the form of virtually free loans. But homeowners, whose homes were suddenly worth less than the mortgages they owed on them, were left hanging in the wind. Many lost their homes.

Obama thereby shifted the costs of the bankers’ speculative binge onto ordinary Americans, deepening mistrust of a political system increasingly seen as rigged in favor of the rich and powerful.

A package of regulations put in place after the financial crisis (called Dodd-Frank) was not nearly as strict as the banking laws and regulations of the 1930s. It required that the banks submit to stress tests by the Fed and hold a certain minimum amount of cash on their balance sheets to protect against shocks, but it didn’t prohibit banks from gambling with their investors’ money. Why not? Because Wall Street lobbyists, backed with generous campaign donations from the Street, wouldn’t have it.

Which brings us to Friday’s failure of the Silicon Valley Bank. You didn’t have to be a rocket scientist to know that when the Fed raised interest rates as much and as fast as it did, the financial cushions behind some banks that had invested in Treasury bonds would shrink. Why didn’t regulators move in?

Because even the thin protections of Dodd-Frank were rolled back by Donald Trump, who in 2018 signed a bill that reduced scrutiny over many regional banks and removed the requirement that banks with assets under $250 billion submit to stress testing and reduced the amount of cash they had to keep on their balance sheets to protect against shock. This freed smaller banks — such as Silicon Valley Bank (and Signature Bank) — to invest more of their deposits and make more money for their shareholders (and their CEOs, whose pay is linked to profits).

Not surprisingly, Silicon Valley Bank’s own chief executive, Greg Becker, had been a strong supporter of Trump’s rollback. Becker had served on the San Francisco Fed’s board of directors.

Oh, and Becker sold $3.6 million of Silicon Valley Bank stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure. There’s nothing illegal about corporate trading plans like the one Becker used, and the timing could merely have been coincidental. But it smells awful.

Will the failure of Silicon Valley Bank be as contagious as the failures of 2008, leading to other bank failures as depositors grow nervous about their safety? It’s impossible to know. The speed with which regulators moved over the weekend suggests they’re concerned. The Wall Street crisis of 2008 began with one or two bank failures, as did the financial crisis of 1929.

Four lessons from this debacle:
  1. The Fed should hold off raising interest rates again until it has done a thorough appraisal of the consequences for smaller banks.
  2. When the Fed rapidly raises interest rates, it must better monitor banks that have invested heavily in Treasury bonds.

  3. The Trump regulatory rollbacks of financial regulations are dangerous. Small banks can get into huge trouble, setting off potential contagion to other banks. The Dodd-Frank rules must be fully reinstated.
  4. More broadly, not even Dodd-Frank is adequate. To make banking boring again, instead of one of the most profitable parts of the economy, Glass-Steagall must be reenacted, separating commercial from investment banking. There’s no good reason banks should be investing their depositors’ money for profit.
What do you think?

billy backstay

Backstay, never bought a suit, never went to Vegas

How to stop playing whack-a-mole with the banks​

Bring back Glass-Steagall​

Robert Reich


Yesterday I received the following email:
Employee of silicon valley bank here. Ironically I read Saving Capitalism and The System just in the last two months. I loved and enjoyed them although the topic is concerning of course.
And then this week watched my bank implode because they reached for the highest yield at the worst time to increase their stock price and triggered a shit storm for everyone.
I can't think of a better example of shareholder capitalism. Shareholders over depositors and employees. And of course regulators asleep behind the wheel.
Anyway not that you needed the validation but just wanted you to know from a reader of your work I am literally living through it now and you couldn't be more correct about the oligarchy and our current political/economic dilemma.
[name withheld]

President Biden is reassuring Americans that the U.S. banking industry is safe, saying that customers’ deposits will “be there when you need them.”

Well, yes. Deposits are safe, at least for now, because the Federal Reserve just set up a broad emergency lending program to ensure that all banks can meet the needs of their depositors.

But there’s a difference between insuring depositors and insuring banks.

People who deposit money in a bank should not have to exercise care in selecting which bank they deal with for fear that their deposits might vanish overnight. So it’s appropriate for the Fed to bail out depositors.

But executives of banks — whatever the size of those banks — should have to exercise care in what they do with those deposits. If the Fed bails out all banks that get in trouble, bankers have no incentive to be more careful. Their major incentive will continue to be to make as much money as possible for their shareholders (and thereby for themselves), even if they put their depositors’ money at unreasonable risk.

The short-term fix is to require smaller banks to follow the same rules as big banks under the Dodd-Frank Act — maintaining a minimum share of capital on hand to cover depositors and be able to pass stress tests.

Why don’t they now? Because the rules requiring small banks to do so were gutted during the Trump administration. Congress must pass legislation to restore these rules and prevent this from ever happening again.

But over the long term, this is no solution. For years, we’ve been playing whack-a-mole with banks. We regulate over here, and they shift risks onto the public over there.

Whenever the nation goes through a crisis or a near-crisis, as we did with the implosion of Silicon Valley Bank last Friday, there’s an opportunity to rethink fundamentals. Why are banks allowed to have shareholders at all? Doing so only serves to privatize the gains, and then, when a bank goes too far in maximizing shareholder returns, socialize the losses.

The fact is: The goal of maximizing shareholder returns is fundamentally at odds with the goal of protecting depositors.

It’s time to admit that banks that take in deposits are public institutions that shouldn’t gamble with those deposits. Regardless of size, no bank has the capital on hand to manage a sudden full-blown bank run. This is why, ever since the bank bailouts of 2008, the biggest banks have been “too big to fail.” And it’s why last weekend the government decided to backstop smaller banks, too.

Bankers want to hide this reality, but let’s face it: A bank charter is essentially a franchise from the government, a kind of outsourcing arrangement, to take in deposits and issue loans. That the Federal Deposit Insurance Corporation has the authority to instantly assume total control of a so-called “private” bank reveals the public nature of banking.

The Glass-Steagall Act was the law of the land until 1999. It prohibited banks from making profits off of the deposits entrusted to them. I say, bring it back!

What do you think?

billy backstay

Backstay, never bought a suit, never went to Vegas

Office Hours: Is “woke capitalism” the new Republican racist dog whistle?​

They’re even blaming Silicon Valley Bank’s failure on it​

Robert Reich

Rather than understand Silicon Valley Bank’s failure as the result of financial deregulation that allowed bank executives to take excessive risks, Republican politicians are blaming the bank’s failure on “woke” capitalism.

House Oversight Committee Chairman James Comer (R-Ky.) calls Silicon Valley Bank “one of the most woke banks.”

Florida Gov. Ron DeSantis charges that Silicon Valley Bank’s focus on diversity, equity, and inclusion “diverted from them focusing on their core mission.”

Fox News host Tucker Carlson says diversity and inclusion standards are why “big banks are now increasingly incompetent.”

What seems to have incensed these Republicans is Silicon Valley Bank’s announcement last summer that it would be providing mortgages to lower-income homebuyers and using hiring practices that promote diversity. Of course, there’s zero evidence that these initiatives contributed to the bank’s collapse.

DeSantis, by the way, seems to be focusing his entire upcoming presidential campaign on his opposition to wokeness. “We are not going to surrender to woke,” he said. “Florida is the state where woke goes to die.” In late February, under pressure from trustees appointed by DeSantis, the New College of Florida voted to abolish the office that oversees the school’s diversity, equity, and inclusion efforts.

Hence, today’s Office Hours question: Is “woke” capitalism becoming Republicans’ new racist dog whistle?

billy backstay

Backstay, never bought a suit, never went to Vegas

Who's raking in the most from the banking mess?​

Follow the money​

Robert Reich


Former Silicon Valley Bank CEO Greg Becker sold $3.6 million worth of shares on Feb. 27, just days before the bank disclosed a large loss that triggered its stock slide and collapse. Over the previous two years, Becker sold nearly $30 million of stock.

But Becker won’t rake in the most from this mess. Jamie Dimon, chair and CEO of JPMorgan Chase, the biggest Wall Street bank, will likely make much more.

That’s because depositors in small and medium-sized banks are now fleeing to the safety of JPMorgan and other giant banks that have been deemed “too big to fail” because the government bailed them out in 2008.

Last Friday afternoon, the deputy Treasury Secretary, Wally Adeyemo, met with Dimon at his office in New York. He asked Dimon whether the failure of Silicon Valley Bank could spread to other banks. “There’s a potential,” Dimon responded. Presumably, Dimon knew such contagion would mean vastly more business for J.P. Morgan. In a note to clients on Monday, bank analyst Mike Mayo wrote that JPMorgan in particular is "battle-tested" in volatile markets and "epitomizes" how the largest US banks have shed risk since the 2008 financial crisis. "Recent industry developments should further its ability to gather core funding and act as a source of strength."

Recall that the 2008 financial crisis generated a gigantic shift of assets to the biggest Wall Street banks, with the result that JPMorgan and the other giants became far bigger. In the early 1990s, the five largest banks had accounted for only 12 percent of US bank deposits. After the crisis, they accounted for nearly half.

After this week, they’ll be even bigger.

Their giant size has already given them a huge but hidden federal subsidy estimated to be $83 billion annually — a premium that investors and depositors willingly pay to these enormous banks in the form of higher fees and lower returns, because they’re too big to fail. Some of this hidden federal subsidy goes into the pockets of bank executives. Last year alone, Dimon earned $34.5 million. (Greg Becker is a piker by comparison.)

Jamie Dimon was at the helm in 2008 when JPMorgan received $25 billion from the federal government to help stem the financial crisis which had been brought on largely by the careless and fraudulent lending practices of JPMorgan and other big banks. Dimon earned $20 million that year.

In March 2009 President Obama summoned Dimon and other top bank executives to the White House and warned them that “my administration is the only thing between you and the pitchforks.” But Obama never publicly rebuked Dimon or the other big bankers. When asked about the generous pay Dimon and other Wall Street CEOs continued to rake in, Obama defended them as “very savvy businessmen” and said he didn’t “begrudge peoples’ success or wealth. That’s part of the free market system.”

What free market system? Taxpayers had just bailed out the banks, and the bank CEOs were still raking in fat paychecks. Yet 8.7 million Americans lost their jobs, causing the unemployment rate to soar to 10 percent. Total U.S. household net worth dropped by $11.1 trillion. Housing prices dropped by a third nationwide from their 2006 peak, causing some 10 million people to lose their homes.

Rather than defend those CEO paychecks, Obama might have demanded, as a condition of getting bailed out, that the banks help underwater homeowners on Main Street.

Another sensible proposal would have been to let bankruptcy judges restructure shaky home mortgages so that borrowers didn’t owe as much and could remain in their homes. Yet the big banks, led by Dimon, opposed this. They thought they’d do better by squeezing as much as possible out of distressed homeowners, and then collecting as much as they could on foreclosed homes. In April 2008, Dimon and the banks succeeded: The Senate formally voted down a bill that would have allowed bankruptcy judges to modify mortgages to help financially distressed homeowners.

In the run-up to the 2020 election, Dimon warned against policies that Bernie Sanders and AOC were then advocating, including Medicare for all, paid sick leave, and free public higher education. Dimon said they amounted to “socialism.” “Socialism,” he wrote, “inevitably produces stagnation, corruption and often worse — such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives—which they frequently do to maintain power,” adding that socialism would be “a disaster for our country.”

Dimon also warned against “over-regulation” of banking, cautioning that in the next financial crisis, big institutions like J.P. Morgan won’t be able to provide the lending they did during the last crisis. “When the next real downturn begins, banks will be constrained – both psychologically and by new regulations – from lending freely into the marketplace, as many of us did in 2008 and 2009. New regulations mean that banks will have to maintain more liquidity going into a downturn, be prepared for the impacts of even tougher stress tests and hold more capital,” he wrote.

But as was demonstrated again this past week, American capitalism needs strict guardrails. Otherwise, it is subject to periodic crises that summon bailouts. The result is socialism for the rich while everyone else is subject to harsh penalties: Bankers get bailed out and the biggest banks and bankers do even better. Yet average people who cannot pay their mortgages lose their homes. Meanwhile, almost 30 million Americans still lack health insurance, most workers who lose their job aren’t eligible for unemployment insurance, most have no paid sick leave, child labor is on the rise, and nearly 51 million households can’t afford basic monthly expenses such as housing, food, child care, and transportation.

Is it any wonder that so many Americans see the system as rigged against them? Is it surprising that some of them become susceptible to dangerous snake-oil peddled by demagogues?

billy backstay

Backstay, never bought a suit, never went to Vegas

The Confidence Game​

What’s behind yesterday’s $30 billion private bailout, and the Swiss bailout of Credit Suisse?​

Robert Reich


I hadn’t intended to spend so much time this week on the banking crisis. I’m old enough to remember a time when banking was boring. But since the 1980s, banking has become hugely profitable for bankers and wildly dangerous for the rest of the economy. This week shows why.

At this moment, the Federal Reserve Bank is sitting on the horns of a dilemma.

On one horn are legitimate fears that smaller banks won’t have enough capital to meet their depositors’ needs if the Fed continues to raise interest rates when it meets next week.

Raising rates will slow the economy and possibly imperil banks — especially those that used depositors’ money to purchase long-term bonds when interest rates were lower, as did Silicon Valley Bank.

In other words, raising interest rates next week could cause an even bigger run on the banks.

Besides, inflation is receding, albeit slowly. So why take the risk?

But on the other horn are the Fed’s legitimate fears about inflation becoming entrenched in the economy, requiring more interest rate hikes.

But the two objectives — avoiding a bank run and raising rates — are in conflict.
As the song goes, Something’s got to give. What will it be?

This week’s goal was to stabilize the banks enough so the Fed can raise interest rates next week without prompting more bank runs.

This required the Fed to bail out uninsured depositors at three banks and signal it will bail out others — in effect, expanding federal deposit insurance to cover every depositor at every bank.

On top of this, 11 of America’s biggest banks yesterday agreed to contribute a total of $30 billion to prop up First Republic Bank, another smaller bank caught in the turmoil. This “show of support” (as it was billed, without irony) elicited a cheer from the Fed’s Jerome Powell and Treasury Secretary Janet Yellen, who called it “most welcome.” (Of course it was welcome. They probably organized it.)

But consumers and depositors are still worried.

Meanwhile, on the other side of the Atlantic, the European Central Bank has raised interest rates by half a percentage point, saying it’s as committed as ever to fighting inflation.

Yet rising interest rates are shaking banks in Europe as well. Just hours before the European Central Bank’s announcement, the banking giant Credit Suisse got a $54 billion lifeline from Switzerland’s central bank.

The financial system is facing a crisis of confidence. Finance ultimately depends on confidence — confidence that prices are under control, and confidence that banks are sound.

But ever since the near meltdown of Wall Street in 2008, followed by the milquetoast Dodd-Frank regulation of 2010 and the awful 2018 law exempting smaller banks, confidence in America’s banks has been shaky.

November’s revelation that the bitcoin giant FTX was nothing but a Ponzi scheme has contributed to the fears. Where were the regulators? Last Friday’s revelation that Silicon Valley Bank didn’t have enough capital to pay its depositors has added to the anxieties. Where
were the regulators?

Credit Suisse has been battered by years of mistakes and controversies. It is now on its third CEO in three years. Why? Swiss banking regulations are notoriously lax, but American bankers have also pushed Europeans to relax their financial regulations, setting off a race to the bottom where the only winners are the bankers. As Lloyd Blankfein, then CEO of Goldman Sachs, warned Europeans, “operations can be moved globally and capital can be accessed globally.”

One advantage of being a bank (whether headquartered in Silicon Valley or Switzerland) is you get bailed out when you make dumb bets. Another is you can choose where around the world to make dumb bets. Which is why central banks and bank regulators around the world must coordinate with each other to ensure that instead of a race to the bottom, it’s a race to protect the public.


Banking is a confidence game. If the public loses confidence in banks, the financial system can’t function.

In the Panic of 1907, when major New York banks were heading toward bankruptcy, Secretary of the Treasury George B. Cortelyou deposited $35 million of federal money in the banks. It was one of the earliest bank bailouts, designed to restore confidence.

But it wasn’t enough. J.P. Morgan (the man who founded the bank) organized the nation’s leading financiers to devise a private bailout of the banks, analogous to yesterday’s. They redirected money between banks, secured further international lines of credit, and bought up the plummeting stocks of healthy corporations.

Confidence was restored, but the underlying weaknesses of the financial system remained. Those weaknesses became painfully and irrevocably apparent in the Great Crash of 1929.

billy backstay

Backstay, never bought a suit, never went to Vegas

The undeserving rich​

Putting the bank bailout in context​

Robert Reich


Last week’s bailout of small banks (and it was a bank bailout) needs to be seen in the larger context of America’s soaring inequality.

The standard conservative explanation for why inequality has widened is that individuals are paid what they’re “worth” — and that a few Americans at the top are now worth extraordinary sums while most Americans are not.

Their argument is easily confused with a moral claim that people deserve what they are paid in the market. Yet the amounts people are paid are morally justifiable only if the legal and political institutions defining the market are morally justifiable, which they are not.

Markets depend on who has the power to design and enforce them — deciding what can be owned and sold and under what terms, who can join together to gain additional market power, what happens if someone cannot pay up, how to pay for what is held in common, and who gets bailed out.

These are fundamentally moral judgments. Different societies at different times have decided these questions differently. It was once thought acceptable to own and trade human beings, to take the land of indigenous people by force, to put debtors in prison, and to exercise vast monopoly power.

So we need to ask: Is it morally acceptable that the typical worker’s wage has stagnated for the last 40 years while most of the economy’s gains have gone to the top? Do we believe that people who are rich are succeeding because of their own inherent worthiness or because the game is rigged in their favor? Have people who are poor failed, or has the system failed them? Is it morally acceptable that the pay of American CEOs has gone from an average of 20 times that of the typical worker 40 years ago to over 300 times today? Are the denizens of Wall Street — who in the 1950s and 1960s earned modest sums but are now paid tens or hundreds of millions annually — really “worth” that much more now than they were worth then?

Inequality in America began widening in the late 1970s and then took off. Inequality hasn’t widened nearly as much in other advanced economies. Why not?

Corporate and financial executives in America have done everything possible to prevent the wages of most American workers from rising in tandem with productivity, in order that more of the gains go instead into corporate profits and stock prices. Their major strategy has been to make workers less secure so they accept lower real wages (adjusted for inflation).

Some of this insecurity has been the result of trade agreements that have encouraged companies to outsource jobs abroad — protecting the firms’ intellectual property and financial assets but not the labor value of the people who work for them.

Some insecurity has resulted from shredded safety nets. Public policies that emerged during the New Deal and World War II placed most economic risks on large corporations through wage contracts and employer-provided health benefits along with Social Security, workers’ compensation, and 40-hour workweeks with time-and-a-half for overtime.

Now, those safety nets are mostly gone. Full-time workers who had put in decades with a company can find themselves without a job overnight — with no severance pay, no help finding another job, and no health insurance. Today, nearly one out of every five working Americans is in a part-time job. Two-thirds live paycheck to paycheck. Employment benefits have shriveled: The portion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent.

Some insecurity has resulted from the government’s policy of fighting inflation by raising interest rates to slow the economy — putting most of the inflation-fighting burden on average workers who thereby lose their jobs or don’t get real wage gains, rather than on corporations through tough antitrust enforcement, laws against price gouging, and price controls.

Most basically, the prevailing insecurity is due to the demise of labor unions. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker earned $35 an hour in today’s dollars. America’s largest employer is now Walmart, and the typical entry-level Walmart worker earns about $9 an hour. The GM worker was not better educated or motivated than the Walmart worker.

The people who now hold a record share of the nation’s wealth justify their wealth (and their low tax rates) by utilizing three myths.

The first is trickle-down economics. They claim that their wealth trickles down to everyone else as they invest it and create jobs. Yet for over 40 years, as wealth at the top has soared, almost nothing has trickled down. (Trump provided a giant tax cut to the wealthiest Americans, promising it would generate $4,000 in increased income for everyone else. Did you receive it?)

The super-wealthy do not create jobs or increase wages. Jobs are created when average working people earn enough money to buy all the goods and services they produce, forcing companies to hire more people and pay them higher wages.

The second myth is the “free market.” As I noted above, the ultra-rich claim they’re being rewarded by the impersonal market for creating and doing what people are willing to pay them for. The wages of other Americans have stagnated, they say, because most Americans are worth less in the market now that new technologies and globalization have made their jobs redundant.

Rubbish. There’s no reason why the “free market” would reward vast multiples of what the rich were rewarded decades ago. Besides, the market can induce great feats of invention and entrepreneurialism with lures of hundreds of thousands or even millions of dollars — not billions.
The ultra-wealthy have rigged the so-called “free market” in America for their own benefit. Billionaires’ campaign contributions have soared from a relatively modest $31 million in the 2010 elections to $1.2 billion in the most recent presidential cycle — a nearly 40-fold increase. What have they got for their money? Tax cuts, freedom to bash unions and monopolize markets, and government bailouts. Their pockets have been further lined by privatization and deregulation.

The third myth is that they’re superior human beings — rugged individuals who “did it on their own” and therefore deserve their billions.

Baloney. Sixty percent of America’s billionaires are heirs to fortunes passed on to them by wealthy ancestors. Others had the advantages that come with wealthy parents.

Don’t fall for these myths. Trickle-down economics is a cruel joke. The so-called “free market” has been distorted by huge campaign contributions from the ultra-rich. The ultra-rich were lucky and had connections.

There is no moral justification for today’s extraordinary concentration of wealth at the very top. It is distorting our politics, rigging our markets, and granting unprecedented power to a handful of people.


The last time America faced any comparable degree of inequality was at the start of the 20th century. In 1910, President Theodore Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power” could destroy American democracy.

Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916, and the capital gains tax in 1922. Since that time, both have eroded. As the rich have accumulated greater wealth, they have also amassed more political power — and have used that political power to reduce their taxes.
Years later, Franklin D. Roosevelt saw the 1929 crash not only as a financial crisis but as an occasion to renegotiate the relationship between capitalism and democracy. Accepting renomination in 1936, he spoke of the need to redeem American democracy from the despotism of concentrated economic power.

“Through new uses of corporations, banks and securities,” he said, an “industrial dictatorship” now “reached out for control over Government itself … [T]he political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people’s property, other people’s money, other people’s labor — other people’s lives … Against economic tyranny such as this, the American citizen could appeal only to the organized power of Government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people’s mandate to end it.”

FDR gave workers the power to organize into labor unions, the 40-hour workweek (with time-and-a-half for overtime), Social Security, unemployment insurance, and workers’ compensation for injuries. He raised taxes on the top. And he regulated finance — making banking boring.

Since then, these reforms have also eroded.

The two Roosevelts understood something about the American economy and the ultra-rich that has now reemerged, even more extreme and more dangerous. Wealth creates power; power creates more wealth. Unattended, this can become a vicious cycle.
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Steam Flyer

Sophisticated Yet Humble
Eastern NC
From above:
Most Americans believe that no one should be above the law, not even former presidents. But most Americans also believe that former presidents should not be prosecuted for their political beliefs.

So the underlying issue here is the same as it’s been since Trump lurched into American politics with his lies about Obama’s birth, and then continued to lie his way through the four scorching years of his presidency, culminating in his Big Lie and the attack on the Capitol: How much trust is left in the system? And how far can Trump get in exploiting the distrust?

Republican leaders are aware that the party’s base is fueled by distrust, so the GOP is already pouring oil on the fire. Speaker Kevin McCarthy, in a tweet, called the potential indictment “an outrageous abuse of power by a radical DA who lets violent criminals walk as he pursues political vengeance,”

I disagree... it's a common American expression to distrust "the gov't" but the Republican loyalty is primarily fueled by hatred of liberals and Democrats, not "distrust of the gov't."

Republicans seem to be fine trusting REPUBLICAN gov't just look at all the angry defence of Republican deregulation of banks and railroads, in the aftermath of crashes.

billy backstay

Backstay, never bought a suit, never went to Vegas
...............Republicans seem to be fine trusting REPUBLICAN gov't just look at all the angry defence of Republican deregulation of banks and railroads, in the aftermath of crashes.

Reich in an earlier missive explains very clearly how Right Wing policies for decades are responsible for previous and ongoing bank failures!!

billy backstay

Backstay, never bought a suit, never went to Vegas

What connects Trump’s likely arrest with the bank bailouts?​

Answer: the anti-democracy movement​

Robert Reich


What connects the two biggest stories now dominating the news — Donald Trump’s likely arrest and the Fed’s bailouts of shaky banks?

Start with multi-billionaire Peter Thiel, and follow the money.

You may recall that in 2016, Thiel spoke at the Republican National Convention to make the case for why Trump should be the next president of the United States.

In the midterm elections of 2022, Thiel donated $15 million to the Republican Ohio senatorial primary campaign of JD Vance, who alleged that the 2020 election was stolen and that Biden’s immigration policy meant “more Democrat voters pouring into this country.”

Thiel also donated at least $10 million to the Arizona Republican Senate primary race of Blake Masters, who also claimed Trump won the 2020 election and who admires Lee Kuan Yew, the authoritarian founder of modern Singapore.

Masters lost. But thanks to Thiel’s munificence, Vance is now in the U.S. Senate.

Thiel and other wealthy self-described “libertarians” want Trump to be re-elected president in 2024. I’ll get to the reason in a moment.

What connects Thiel to the bank bailouts?

Days before Silicon Valley Bank failed, Thiel’s venture firm, Founders Fund, advised clients to pull their deposits out. This contributed to the run on the bank.

Some $50 million of Thiel’s own money was still stuck in the bank. Then, guess what? Thiel and other rich depositors got bailed out by the Fed.

Charges of hypocrisy have been leveled at Thiel and other wealthy depositors who claim to be libertarians but were rescued by the government.

There was nothing hypocritical about it. Thiel and others like him aren’t really opposed to government, per se. They’re opposed to democracy. They prefer an oligarchy — a government controlled by super-wealthy people like themselves.


Thiel is part of the anti-democracy movement, of which Trump is the informal leader.

Their antipathy to democracy comes from the same fear that the extremely wealthy have always harbored about democracy — that a majority could vote to take away their money. That fear has been heightened by the fact that more and more of the nation’s wealth is going to the top, combined with demographic trends showing the majority of voters becoming less economically secure, more non-white, and politically left.

Thiel and his ilk see in Trump an authoritarian strongman who won’t allow a majority to take away their wealth. In December 2017, Trump and his Republican allies in Congress engineered a giant tax cut for the super-rich and the companies in which they invest. Many believe that a second Trump administration, backed by a Republican Congress, will cut their taxes even further.

They also support the Fed. Like most of the world’s central banks, the Fed is removed from democratic accountability, out of fear that financial markets otherwise won’t trust them to do unpopular things like bailing out banks or controlling inflation by slowing economies and causing millions to lose their jobs. The Fed is run largely by bankers. You might say it’s part of America’s oligarchy.

A few years ago, Thiel wrote that “I no longer believe that freedom and democracy are compatible.” Presumably he was referring to the freedom of oligarchs like himself to be unconstrained by taxes and regulations. In this narrow sense, he’s correct: Oligarchy is incompatible with democracy. Nor is oligarchy compatible with the freedom of the rest of us.

Thiel and others like him want to return to an era when American oligarchs had freer reign. In that same essay, Thiel wrote:
The 1920s were the last decade in American history during which one could be genuinely optimistic about politics. Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of “capitalist democracy” into an oxymoron.

But if “capitalist democracy” has become an oxymoron, it’s not due to excessive public assistance or because women got the right to vote. It’s because billionaire capitalists like Thiel are undermining democracy with giant campaign donations to authoritarian candidates.

I’m old enough to remember a former generation of wealthy Republicans who backed candidates like Barry Goldwater. They called themselves “conservatives” because they wanted to conserve American institutions. But Thiel and his fellow billionaires in the anti-democracy movement don’t want to conserve anything — at least anything that came after the 1920s, including Social Security, civil rights, and even women’s right to vote (except for the Federal Reserve’s bailouts for the rich and its ability to draft average workers into fighting inflation).

The 1920s marked the last gasp of the Gilded Age, when the richest Americans siphoned off so much of the nation’s wealth that the rest of America had to go deep into debt to maintain their standard of living and sustain overall demand for the goods and services the nation produced. When that debt bubble burst in 1929, we got the Great Depression.

It was also the decade when Benito Mussolini and Adolf Hitler emerged to create the worst threats to freedom and democracy the modern world had ever witnessed.

billy backstay

Backstay, never bought a suit, never went to Vegas

Distinguishing between a Chinese challenge and a Chinese enemy​

Let’s go with the former​

Robert Reich


Yesterday, lawmakers from both parties sought to tie TikTok CEO Shou Zi Chew personally to the Chinese Communist Party. Despite his pledge to keep safe the data of American users and shield TikTok from foreign manipulation, lawmakers repeatedly asserted that TikTok is a tool of China’s Communist government. Washington state’s Cathy McMorris Rodgers, the Republican chair of the House Energy and Commerce Committee, claimed “TikTok is a weapon by the Chinese Communist Party to spy on you, manipulate what you see and exploit for future generations.”

Confession: I’ve posted short videos on TikTok.

@rbreichWhat corporate America says: “No one wants to work anymore.” The truth: No one wants to be exploited anymore.

Hell, I’ve even danced on TikTok.

@rbreichThe best remedy for cynicism is action. Keep fighting. And don't forget to dance! #alleyesonme #boburnham #future

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I don’t want to make light of the challenge China represents to the United States, but the greatest danger America faces today is not coming from China. It is our drift toward proto-fascism. We must take care not to demonize China so much that we generate paranoia that further distorts our priorities, fuels American nativism and xenophobia, and encourages authoritarianism at home.

There’s a difference between seeing China as challenging American technological and economic dominance, on the one hand, and viewing China as potentially threatening America’s existence. The former is correct, and can be beneficial if it induces further investments in American education, basic research, and infrastructure — on which our future standard of living depends. The latter leads to zero-sum strategies and possible warfare.

In the 1980s, when the Soviet Union began to implode, America found its next foil in Japan. Japanese-made cars were taking market share away from the Big Three automakers. At the same time, Mitsubishi bought a substantial interest in Rockefeller Center, Sony purchased Columbia Pictures, and Nintendo considered buying the Seattle Mariners.

Hearings were held on the Japanese “threat.” Members of Congress proposed a tsunami of legislation to keep American technology out of the hands of the Japanese. Techno-nationalism became the rage.

Alarmist books demonized Japan. Pat Choate’s Agents of Influence claimed Tokyo’s alleged payoffs to influential Americans were designed to achieve “effective political domination over the United States.” Robert Zielinski and Nigel Holloway, in Unequal Equities, claimed that Japan rigged its capital markets to undermine American corporations. Daniel Burstein asserted in Yen! Japan’s New Financial Empire and Its Threat to America that Japan’s growing power put the United States at risk of falling prey to a “hostile Japanese … world order.” Clyde Prestowitz’s Trading Places argued that because of our failure to respond adequately to Japan, “the power of the United States and the quality of American life is diminishing rapidly in every respect.” William S. Dietrich’s In the Shadow of the Rising Sun claimed Japan “threatens our way of life and ultimately our freedoms as much as past dangers from Nazi Germany and the Soviet Union.”

And on it went: The Japanese Power Game, The Coming War with Japan, Zaibatsu America: How Japanese Firms are Colonizing Vital U.S. Industries, The Silent War, Trade Wars.

But there was no vicious plot. America failed to acknowledge that Japan had invested heavily in its own education, research, and infrastructure — which enabled it to make products that American consumers wanted to buy. We didn’t see that our own financial system was coming to resemble a casino, demanding immediate profits over long-term investment. We overlooked the fact that our educational system left almost 80 percent of our young people unable to comprehend a news magazine and many others unprepared for work. We didn’t notice that our infrastructure of unsafe bridges and potholed roads was draining our productivity.

The question for America — ever more diverse but more deeply divided than in generations — is whether it is possible to rediscover our identity and mutual responsibilities without creating another enemy.
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billy backstay

Backstay, never bought a suit, never went to Vegas

“Morning Joe” and the banking crisis​

A metaphor of how the Fed and bank regulators have dealt with it​

Robert Reich


When bookers for MSNBC’s show “Morning Joe” asked me to appear last Friday to talk about the banking crisis, I agreed — even though the show starts at 6 a.m. on the East Coast, which is 3 a.m. where I live.

Why do people on the East Coast assume that we on the West Coast operate on the same time schedule they do? I’ve learned (from a few embarrassing experiences) that I should never go on national television early in the morning when I’m half-asleep.

But I thought “Morning Joe” worth it. It’s a good show that’s widely watched by people interested in politics. Besides, the banking crisis isn’t being covered as it should be (as you know if you’ve been reading this letter).

I went to bed as early as I could Thursday night and set my alarm clock, hoping to get enough shuteye to be sufficiently articulate seven hours later.

When I was younger, it was easy for me to sleep on nights before I had to get up early to do national television. But I’m now old, and the sleep fairies do not favor the elderly. I tossed and turned and woke up every hour or so to check the clock.

I finally settled into something resembling sleep, only to awaken just 15 minutes before I was supposed to appear. The damn alarm hadn’t gone off. Yikes!

I sprang out of bed, switched on the lights, poured cold water on my face, pulled on some clothes, and ran into my home office. No time even for coffee. I turned on my laptop, clicked onto Zoom, and one minute later heard the “Morning Joe” producer ask if I was ready.


Within seconds I was on air. Hosts Mika Brzezinski and Joe Scarborough asked easy questions, but my responses were slow, long-winded, and meandering. (I’ve posted the segment below.) I can only hope a few people learned something from it.

Asleep at the switch, alarms didn’t go off, slow and inadequate response. A fitting metaphor for how the Fed and bank regulators have dealt with the current crisis.