Third World America (22 page)

A perfect example of this came in May 2010 when, on the same day, the Senate approved a nearly $60 billion funding bill for the war in Afghanistan while the House took a hatchet to a spending bill, cutting out provisions that would have offered $24 billion in aid to cash-strapped states and helped laid-off workers pay for health insurance.
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The juxtaposition spoke volumes about what we’ve come to value in this country.

That’s got to change. As a nation, we need to start redefining the meaning of “national security” by making sure our ports are protected, our railways are secure, and our nation’s nuclear facilities, chemical plants, and storage facilities aren’t vulnerable to attack. And we need to make sure that with all the budget cuts happening in states across the nation, we don’t underfund our police and first responders. We’ve got to stop robbing our homeland security Peter to pay our foreign wars Paul.

For example, we are planning to spend $12.6 billion on ballistic missile defense in 2011.
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For the same amount, we could hire an additional 190,873 police officers for a year.
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So let’s end our disastrous—and Treasury-draining—nation-building forays in Afghanistan and Iraq. And let’s stop making
a debate about cutting defense spending an electrified third rail that must never be touched.

There is plenty of fat in the Defense Department. Representative Barney Frank suggests a good place to start cutting: doing away with one prong of America’s hugely expensive nuclear triad—bombers, submarines, and intercontinental ballistic missiles—designed to deal with Cold War–era threats, but still siphoning off twenty-first-century dollars.
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“My radical proposal,” said Frank, “is that we say to the Pentagon that they can pick two of the three, and let us abolish one.”

Targeting Defense Department waste is not the exclusive province of progressives like Frank.
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Senator Tom Coburn, a social conservative and fiscal hawk—and a Republican member of President Obama’s deficit commission—has called for a full audit of spending by the Pentagon. He sums up the need succinctly: “The Pentagon doesn’t know how it spends its money.” In a damning letter to the deficit commission’s chairmen, calling for an audit, Coburn said, “An ethic continues to predominate in the Pentagon that consistently paints an inaccurate picture—one that is biased in the same unrealistic and ultimately unaffordable direction. The errors are not random: actual costs always turn out to be much higher than, sometimes even multiples of, early estimates.” According to a Coburn aide, there hasn’t been a Pentagon audit in fifteen to twenty years because the department’s “books are so disorganized it would be impossible to do.” Not exactly the description you want to hear about a place receiving more than $700 billion in taxpayer money this year.
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Bottom line: We could trim the defense budget, change our national security priorities, and make the nation more secure. Even after cutting billions, defense spending would
remain significantly higher, in real dollars, than it was at the height of the Reagan arms buildup.
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As Defense Secretary Robert Gates put it in a speech at the Eisenhower Library (fitting given Ike’s warnings about the military-industrial complex): America cannot survive as “a muscle-bound, garrison state—militarily strong, but economically stagnant and strategically insolvent.”
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We cannot truly secure our homeland without also protecting America’s besieged middle class. The best place to start is finding a way to reduce foreclosures, allowing people to keep their homes.

The single most valuable thing the government could do to help people facing foreclosure is to pass a cramdown bill allowing homeowners in bankruptcy to renegotiate their mortgages under the guidance of a bankruptcy judge.

Cramdown legislation, facing intense opposition from mortgage-industry lobbyists, has been repeatedly voted down in Congress.
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But those senators and members of the House representing the interests of average Americans—as opposed to the special interests—need to keep trying. The banks’ resistance to the idea of judicial modification is showing signs of weakening. Some, including Bank of America and Citigroup, have already changed their tune and expressed support for it.
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We should also make it mandatory that homeowners and lenders engage in mediation prior to any final foreclosure.
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A pilot program along these lines, the Residential Mortgage Foreclosure Diversion Program, started in Philadelphia in 2008, has
proven very successful in preventing or delaying foreclosures in 75 to 80 percent of the cases that have made it to mediation. Currently, many homeowners don’t even talk to their lenders until they have been foreclosed on—partly because the lenders often make it next to impossible to reach them.
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Or, if your mortgage has been sliced up and sold to speculators, to even find them.

“I’ve been to the City Hall courtroom where the mediation hearings take place,” Senator Bob Casey of Pennsylvania told me, “and they are crammed with lenders and borrowers and counselors and lawyers, and they are remarkably effective.”
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Judge Annette Rizzo, who has been working hard to keep Philadelphians in their homes, told the
Philadelphia Daily News:
“There is hand-to-hand outreach to each client here.
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There is individual caretaking here. The lender lawyers get to know the homeowners as people here. We put a human face on this and they embrace it. So as I work the room, I feel a humanism here on both sides. If necessary, our volunteer lawyers pick up clients and bring them here. Housing counselors make house calls. Our mission is to save lives, one address at a time.”

The foreclosure prevention program has worked so well in Philadelphia, it has spread to Boston, Pittsburgh, Cook County, Prince George’s County, Louisville, and New Jersey.
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We should take this model and apply it on a national level.

Until we do, we’ll need to rely on officials like Judge Rizzo and Judge Arthur Schack of the New York State Supreme Court in Brooklyn, described by the
New York Times
as “a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale.”
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Judge Schack regularly refuses banks’ petitions for foreclosure
if every “i” is not dotted and every “t” is not crossed. “If you are going to take away someone’s house,” he told the
Times
, “everything should be legal and correct. I’m a strange guy—I don’t want to put a family on the street unless it’s legitimate.”

His humanity—and his rulings—should become a national model.

We also need to protect middle-class Americans from all the tricks and traps being set by credit card companies and banks. And make no mistake: While the new credit card reform law that took effect early in 2010 reined in some of the industry’s most egregious practices, credit card companies are working overtime to come up with new ways to separate us from our money. So the game of “catch you because I can” continues.

Of course, our elected officials made sure to include some banking lobbyist—designed loopholes in the legislation. For example, the new law still allows promotional teaser interest rates that hook in new customers for a short period of time—before the far higher real rate kicks in.
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As Elizabeth Warren sees it, “That’s exactly the sweet spot for the credit card companies. It’s the person who can just barely make it, who’s lost a job, who’s having trouble finding another job, diligently tries to pay, and struggles to pay.
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Boy, that’s the one you want. And that’s the one you want to hit with 29 percent interest.… Those are staggeringly profitable accounts. I mean, that’s the big bucks. That’s where it happens.”

According to the new law, the credit card issuer needs to
give a forty-five-day notification before it raises interest rates.
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But you must stop using the card if you refuse to accept the new rate. And the banks, of course, know the havoc it would create in most peoples’ lives to have to regularly close down their credit cards and seek new ones. However soul sapping it may be, you have to read all the stuff that comes from your credit card company—including the small print about service fees on top of late fees on top of “inactivity” fees. If you can, set up automatic bill pay so you don’t miss a payment. Because fees account for 39 percent of credit card issuers’ revenue, the banks will keep dreaming up new ways to trick us that are not covered, or even contemplated, by existing laws.
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And the new law doesn’t prevent banks from gouging their credit card customers with sky-high interest rates.
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Senator Bernie Sanders, whose attempts at capping credit card interest rates have been voted down by his colleagues, says, “When banks are charging thirty percent interest rates, they are not making credit available.
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They are engaged in loan sharking”—also known as usury.

Throughout history, usury has been decried by writers, philosophers, and religious leaders. Aristotle called usury the “sordid love of gain” and a “sordid trade.”
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Thomas Aquinas said it was “contrary to justice.”
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In
The Divine Comedy
, Dante assigned usurers to the seventh circle of hell.
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Deuteronomy 23:19 says, “Thou shalt not lend upon usury to thy brother.” Ezekiel 18:8–13 compares a usurer to someone who “is a shedder of blood … defiled his neighbor’s wife … oppressed the poor and needy … [and] committed abomination.” The Koran is equally unequivocal: “God condemns usury.”

We need to return to that approach to outrageous lending
practices. We need to once again become a country where it’s not acceptable to financially trick millions of working families, binding them to the whims of bankers who have lost all sight of fairness.

Right after President Obama’s election, Rahm Emanuel famously declared, “Rule one: Never allow a crisis to go to waste.
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They are opportunities for big things.” But since the financial meltdown, it is actually the very people who created the crisis who have taken advantage of it and achieved “big things”—especially big profits and bonuses.

We obviously need to fix Wall Street. Desperately. And there is much to be fixed. But on a nuts-and-bolts level, the three things we absolutely must do are:

1. Regulate all derivatives and other exotic “financial instruments” that played such a big part in the meltdown and have turned Wall Street banks into much shadier versions of a Las Vegas casino (at least in Vegas, you know the odds going in).
   

2. Create a Glass-Steagall Act for the twenty-first century, restoring the Chinese wall between commercial and investment banking.
   

3. Follow the path of Teddy Roosevelt and break up the big banks. It’s essential to end “too big to fail” in order to ensure that taxpayers are not on the hook next time.
   

Even Alan Greenspan, the oracle of free markets and a longtime cheerleader for banking deregulation, thinks the megabanks are too big.
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In October 2009, he said, “If they’re too big to fail, they’re too big.… So I mean, radical things—you know, break them up. In 1911, we broke up Standard Oil. So what happened? The individual parts became more valuable than the whole. Maybe that’s what we need.”

After the near-collapse of the economy, precipitated by Wall Street, you would have thought that reining in the big banks would have been a no-brainer. But the best Washington can muster are diluted reforms that won’t prevent another meltdown.

Beyond new regulations, we need a new mind-set. We need to think bigger and begin eradicating the culture of greed and corruption that has come to dominate Wall Street. Discussing the economic crisis, Michael Lynton, chairman and CEO of Sony Pictures, told me, “I’m often asked if, given Hollywood’s struggles, I were building a movie studio system from scratch, is the current model what I would build?”

The answer was no.
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Likewise, given the chance to rebuild America’s economy, is the current system, even with a few hundred billion dollars’ worth of patches, the one we would want to build? Of course not. Even Greenspan conceded there was a “flaw in the model.”
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But there’s not a flaw in the model—the model itself is flawed. It’s not that capitalism isn’t working. It’s that what we have right now is not capitalism. What we have is corporatism. It’s welfare for the rich. It’s the government picking winners and losers. It’s Wall Street having its taxpayer-funded cake and eating it, too. It’s socialized losses and privatized gains.

A magnetic compass should always point north; a moral compass should always point out that cheating and fraud are dead wrong. But demanding that companies stop being bad is not enough. We have to demand that they start being good. That has to be the bottom line on financial and corporate reform.

We need to create an economy where productivity doesn’t come at the cost of quality of life. In 1967, speaking at the University of Kansas, Robert F. Kennedy called on Americans to look at our economy in a radically different way.
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“Our gross national product is now over $800 billion a year,” he said, “but that GNP—if we should judge America by that—counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors, and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets.”