Sunday, March 24, 2013

Bailout


Niel Barofsky’s recent book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street (Free Press: 2012), is a sobering, even infuriating account by an insider who was chosen as the special Inspector General charged with overseeing the TARP program. His office was called SIGTARP, and he got an indication of how important the Treasury Department considered his oversight when he was shown his new office—a tiny hole in a basement of the Treasury building with no windows and a musty odor (in Washington, a big office with a view of iconic buildings is a sign of status). Still, Barofsky, who had trained as a prosecutor with the FBI’s renowned New York Office, brought some of his comrades with him and set out to oversee TARP. What he found shocked him, eventually forcing him to resign in frustration. It should shock every American; for what he learned, indicated by his subtitle, was that the Treasury Department, headed first by Hank Paulson, and then, under Obama, by the narcissistic former head of the New York Fed, Tim Geithner, so favored banks over homeowners that every program was shaped to help big banks, while letting homeowners, waiting for the promised modifications of their loans, basically “twist in the wind.”
            Barofsky begins his tale by showing us how the banks encouraged those subprime loans we’ve all heard about. They used the euphemistically termed “yield spread premium” as a way of offering a bonus for brokers who could “convince a borrower who qualified for a prime loan to take a more expensive, higher-interest-rate subprime loan.” That is, they paid brokers more money to steer borrowers into more expensive loans, even though they knew the borrowers had less chance of paying them. That’s because banks earned double on the subprimes: they’d get higher interest rates to begin with, and then be able to resell the mortgages for higher profits in those infamous loan packages that brought down the system. This was predatory lending in spades. But the rating agencies routinely gave these risky loans AAA ratings, and the Federal Reserve just looked the other way. When the loans and the derivatives based on them went bad, panic ensued. 
            Then came TARP. As most of us remember, Hank Paulson went to Congress and rang the alarm about the imminent collapse of the entire financial system if the people’s representatives didn’t approve the massive bailout. Even so, many in Congress were reluctant, but went along because the Treasury Department sweetened the bank bailout with the assurance that, since it would control the troubled mortgage loans that were toxic, Treasury could give relief to homeowners by modifying the terms of those loans. And this would allegedly stabilize the housing market.
            Trouble was, it didn’t work that way. Paulson instituted the CPP (Capital Purchase Program), and what it did was to use TARP funds to “inject capital directly into the banks by buying preferred shares of stock from them,” allegedly to help stimulate lending. It immediately put $125 billion of taxpayer money into nine of the largest banks, but without removing the toxic assets, or purchasing or modifying mortgages at all. The focus of CPP, and of all other government programs, would be the banks; there would be no lending, no credit flowing, no help to homeowners being foreclosed on. Some in Congress, like Georgia Democrat David Scott, cried foul:

            We have been lied to…bamboozled; they came to us to ask for money for one thing, then used it for another. They said we would have oversight, and no oversight is in place. We have given these banks $290 billion for the sole purpose of so-called buying these toxics. They change it, and all of a sudden now they [the banks] are not lending it but using it for acquisitions, using it for salaries. These are lies.” (p. 27)

            There were other programs with other acronyms (TALF, HAMP), and they were all, according to Barofsky, dedicated to the same thing: easing the pain for banks, bailing them out, and letting defrauded homeowners fend for themselves. The amounts of money either given or lent or guaranteed by the government (U.S. taxpayers) was staggering. TALF, for instance, the Term Asset-backed Securities Loan Facility, was created by the Federal Reserve to spur consumer credit lending. The NY Fed lent up to $1 trillion to the banks, with “asset-backed securities” as collateral, in effect, betting a trillion dollars of taxpayer money with the only requirement being that “all eligible bonds [the collateral] earn a AAA rating by two credit-rating agencies.” Barofsky, outraged, called William Dudley, head of the NY Fed; the exchange is worth quoting in full:

            “That’s fucking crazy, right?” I asked
            “You are correct. That is fucking crazy.”
            “Bill” I said, “Let me get this straight. We’re going to put $200 billion of taxpayer money on the line to buy asset-backed securities that are similar to those that got us into this whole mess in the first place, and we’re going to rely only on the credit-rating agencies and investor due diligence, nothing else?” I asked.
            Dudley replied, “Right.”
            I exploded. “Really? Really?” My voice rose. “Isn’t that exactly the same formula that caused this financial crisis? Exactly? What makes you possibly think that now, after all of this, the rating agencies are suddenly going to get it right?”
            Dudley paused, understandably annoyed at my tone. “Well, the rating agencies performed pretty well in these asset classes,” he continued, “and we’re confident they won’t risk being embarrassed again.”
            It was my turn to pause. “You don’t think that the credit-rating agencies will embarrass themselves again?” I challenged.
            “Correct,” Dudley confirmed.

Barofsky comments: “These guys were going to risk hundreds of billions of dollars of taxpayer money on the integrity of the exact same rating agencies that had sold their souls for a few basis points of profit.”
            When he gets to the new Treasury Secretary, Tim Geithner, Barofsky has even more trouble controlling his contempt. Geithner apparently did everything he could to stymie and sabotage the oversight function that Barofsky had sworn to implement. The Treasury Secretary’s concern was always to protect and bail out the banks, period. If this hurt homeowners losing all of their wealth, in many cases because of fraudulent loan practices by the very banks Geithner was protecting, so be it. So it was with HAMP, the Home Affordable Modification  Program, created in 2009 under Obama. Its four purposes were to 1) protect home values, college funds, retirement accounts, and life savings; 2) preserve home ownership; 3) promote jobs and growth; 4) protect taxpayer interest. But as Barofsky describes Geithner’s comments about it in a key meeting, the Treasury Secretary saw it as a way to help banks rather than homeowners: “This program will help foam the runway for them (i.e. the banks).” In other words, HAMP’s main purpose, for Geithner, was to keep an imminent tide of foreclosures from hitting the banks all at the same time. By stringing homeowners along with the illusion of relief, foreclosures would be spread out over more time, thus giving banks a chance to absorb the losses “while other parts of the bailouts juiced the bank profits.” In short, “HAMP was not separate from the bank bailouts; it was an essential part of them.” And if those who received, or never received home modifications eventually went under, as many would, that was fine; the banks would survive and thrive, as their huge bonuses shortly after the bailouts proved.
            Barofsky’s team eventually estimated what the real cost of the government bailout was, or could have been if all the pledges of all the government programs had been actually committed. The number is shocking, even to a public inured to the shenanigans and sleight of hand engaged in by government officials. Though the dollar amount outstanding at the time Barofsky’s team did their audit was “only” $3 trillion, the total amount that the government had to commit, if money markets and banks had failed, was—$23.7 trillion. That’s Trillion, with a T—more money than most nations can even conceive—and its purpose was to bail out the banks. The amount that Treasury spent to help homeowners, on the other hand, was $3 billion—paltry, even compared to the $50 billion originally allocated to HAMP.
            Now, of course, the banksters and Wall Street are riding high again, with more profits than ever, while millions of Americans still struggle without jobs and 3.5 million have lost their homes for a total loss of $7 trillion in housing wealth. As to the poor, the poverty rate has also increased from 12.5% to 15.1%  since 2007. Nor have mortgage servicers—the ones who encouraged all those subprime loans in the first place, as well as the ones who pretended to be helping homeowners under the HAMP program—been held responsible.
            Barofsky’s book is a must-read for anyone who wants to understand how banks thrive and bought-out governments facilitate their financial theft. An added benefit is that it’s written with clarity and verve, making it quite comprehensible for the average reader. Though he is precisely the type of government official the nation needs, Barofsky’s investigations and positions and refusal to play the DC game, pretty much short-circuited his government career. Rather than cash in on his government job, he’s now teaching law in New York, and writing books like this one. For that, we all owe him. 

Lawrence DiStasi

Thursday, March 14, 2013

The Truth of Appearance


In a recent piece, writing about our tendency to think we can disguise our true selves, I wrote something like this:
                        “The truth of who one is always shines through.”
I meant that though its operation is mysterious, somehow the essence of who we are and what we are is accurately conveyed to others. Despite what we might want to keep hidden, and conversely, despite our lament that somehow no one ‘really gets me’—which usually means no one understands how brilliant or empathetic or generous or loving I am—somehow those with whom we deal, even remotely, get who we are. It’s almost as if the Oscar Wilde image in Portrait of Dorian Gray—of a man whose degenerate life progressively transforms a portrait once painted of him—comes true for all of us. How we appear reflects who we are.
This is truly uncanny when you think about it. Whole areas of literature, notably in Shakespeare studies, are devoted to the truism that there is a gulf between appearance and reality. People in Shakespeare plays wear masks and disguises which fool all their adversaries. Women dress up as men and men dress up as fools or beggars, and no one finds them out until they reveal themselves in the end. Everyone dissembles and pretends to be good, especially villains like Iago, and then turn out to be the embodiment of evil. The basic idea and moral is contained in proverbs, such as, “You can’t judge a book by its cover.”
            And yet, what I just said is that, where people are concerned, you can. What a person is comes through somehow in what we see and hear and touch and sense, however vaguely. The question is, how? Given all we now know about the apparently solid world of matter, which physics now tells us is composed of smaller and smaller bits of virtual “nothing,” how does the appearance of a person or even a thing convey its inherent truth, its value, its essence? How can we judge a reality that science has proved is so fundamentally different from what it appears to us, to our normal senses, to be?
Actually, we are quite used to evaluating things based on their appearance. Men judge women, almost exclusively at first, by their appearance. Hence the multi-billion dollar cosmetic, apparel and facelift industries. Women, increasingly these days, judge men in the same way: by the cut of their clothes, which indicates apparent wealth or status, or by the prominence of their jawline, or the amount of hair they still have on their heads, or the tightness of their buttocks. It should be added that for both genders, there are different evaluation metrics used for different intentions, i.e. whether one is looking for a long-term partner or a short-term roll in the hay. But in both cases, the way someone looks figures prominently into the judgment. Nor does the “what you are shines through” statement necessarily restrict itself to looks alone. Who you are can be conveyed by a way of standing or walking, by a way of listening or talking, by the kind of attentiveness or lack thereof that one projects, not to mention what one actually says about others or life in general. But all of that is, in this arena, somewhat beside the point. What is really meant by the phrase is that each person broadcasts a signal, and in return some not-necessarily-sensory sense that we all have, to one degree or another, is able to pick up such subtle signals from every person we meet— signals about who he/she is and how he or she will behave in given situations. We have a feel for how much and whether we can trust someone in a crisis, and whether we would want to spend a lot of time with that person that goes well beyond outward appearances. And even beyond that lies the mystery governing why certain people are attracted to each other. Some scientists reduce it to pheromones and/or the compatibility between individual chemistries; astrologers attribute it to heavenly configurations at our birth; others attribute it to subtle scents that each sex, even below the level of consciousness, can perceive; or emotional pattern preferences we’ve picked up from our families. And within cultures, certain physical attributes and dress and makeup and behavior patterns tend to loom larger in how attractive any ‘other’ is perceived to be.
It makes sense, of course, that this would be the case. After all, the very essence of mating and reproduction depends, so biologists tell us, on a female making the right choice for a mate—not only a dependable one, but one who will contribute the best possible set of genes to her offspring. So the way one looks, which biologists would reduce to the sign of a prospective mate’s health and therefore possession of beneficial genes, is of crucial importance in the competition for reproductive success, and thereby, of life itself. The same is true, on a more general but no less important level, in the social need for alliances.
Such evolutionary requirements might also help explain the ubiquity of deception. If so much depends on an animal finding a mate possessed of the “right” stuff for the propagation of the species, then it might be useful for an individual to pretend to have more of it than he/she actually has. A male might pump himself up to greater size, or display more ease spending his presumed wealth than is warranted by the facts. A female might spend an inordinate amount of money and time on various aids to enhance her hips or breasts or eyes or lips or scent. Which many in our culture are routinely encouraged to do. ‘It’s fair to deceive if it gets you into the game,’ seems to be the general message. But then does this not militate against the original idea of what you see is what you get? If there is all this deception, then what you see isn’t what you get. What you get, the next morning, is often something far blander and less delicious smelling and healthy-looking.
Indeed, according to Julian Jaynes in his classic The Origins of Consciousness in the Breakdown of the Bicameral Mind, deception is the key to consciousness itself, which is to say, to human nature. But not just any deception, because Jaynes was well aware of the many forms of deception engaged in by animals, presumably not conscious, of every sort. What Jaynes was citing as a key to human consciousness was long-term deception. A human can deceive not just in the moment, but over days, months, and even years before revealing his true purpose and nature. Most humans make a practice of this in negotiations, for example: ‘Never let the other party know what you’re thinking. Make him think you’re na├»ve or dumb or his friend.’ And of course, in war, deception is the heart of the matter. The military commander who best disguises his intentions will generally win the battle. For Jaynes, much of our waking consciousness is thus spent in planning for or engaging in deception.
How, then, can we say that the truth of who and what we are shines through? How, then, can anyone have any confidence at all that he or she will be able to judge a partner sufficiently well to base a decision as important as sex or marriage upon it? And if that judgment turns out to be wrong—and results in breakup or divorce or worse—does that mean that who a person is can never be counted on, never actually shines through?
These are imponderable questions. The major task of life is trying to cut through pretense and deception in order to find the truth of another person’s, or another group’s or another nation’s real nature and intentions.
So we are back to the original question: just what can it mean that ‘a person’s essence shines through?’ Can we even say it? Perhaps. Perhaps what we can say is that we must, on some level, believe it; must believe that there is a level of knowing, not reducible to logic, that comprehends the inside based only on the outside. Though even as we say it, we must add that this belief varies between cultures. In some cultures, like the Italian for example, people almost never believe a first impression. It is taken for granted that everyone is always trying to make a better impression than is warranted (Italians refer to a whole cluster of ideas and practices relating to this creation of a good impression as bella figura), and that it is wise to expect from others not only deception but outright betrayal. That, of course, leads to the very large problem of mistrust and even paranoia in almost all Italian interactions. Most Italians accept this, since it is generally considered better to be surprised by genuineness than to be made a fool of. And where the folkway known as mal occhio is at issue, it goes even further. For those who believe in the evil eye, any attempt to admire what someone else does or has is met with the greatest suspicion by the one admired. This is because that admiration, in the evil eye world, obscures beneath it the actual intent to harm. If I admire something you have or do, it means I actually envy it, and would either like to have it as my own, or, if I can’t get it, for it to be diminished or destroyed. Better that you should suffer loss than that I should be without. On the other hand, most people in evil eye cultures would not only take precautions (hence the use of amulets), but would also assume that they know what you are really like. They would assume that you are envious and willing to do whatever you can to get what they have. But what if you have no such intention? What about your essence coming through?
One must admit that it is a very shaky thing, this essence. What do we even mean by it? Is there an essence or essential truth of a person? Some fixed, inherent way of being that is genetic or generic, one of a kind? Or would it be more accurate to say that people are more situational—good in some contexts and nasty in others? Honest and straightforward in some, and deceptive and ruthless in others?
Perhaps one could say this: that, one way or the other, via honesty or dissembling, what a person essentially is comes through (once, after several days in a sesshin, and spending endless hours finding fault with every other person’s quirks and tics, I suddenly saw each one, tics and all, as perfect; perfectly unique and thereby possessed of a transparency, an authenticity that I would not change for the world). And we realize it sooner or later. Of course, we would prefer to realize it sooner, before we make fools of ourselves. But how? For one thing, by getting to know ourselves and our proclivities better. For example, if we can keep ourselves from believing what we truly do not believe, but which our hormones or need for company or money or addiction or flattery pushes us to believe, then we might be better able to perceive what an other truly is. The problem, that is, may be as much in ourselves and our need to believe, as in the absence of that “shining through.” Which is not to say the problem is an easy one to solve. Most of us are so shaped by what the other thinks of us (Sartre noted that we are literally made by the other, our self image constructed by how the other sees us), that we are easily duped, and most of us know it. We are easily induced to like those who seem to like us, or seem to be like us. We are always inclined to evaluate such people with more goodness or genuineness than they turn out to deserve.
Given all these barriers and qualifications, perhaps it should come as no surprise that the entire mechanism, both the shining forth and the perception of that shining forth, remains a mystery. For most of us most of the time, it’s an obscured one, and we find that we cannot really and truly know another until we have taken the plunge into some sort of relationship. Taken a bite of the apple. And by then, it’s often too late. All we can do next time is try to purge ourselves of all the inducements that we are aware of, and try to uncover that inner sense we all have—that evolution has forced us to have—of what another is, and let it operate as it should. To tell us whether another is hostile or friendly, genuine or phony, a true match for us or a disaster. This sense or intuition will not necessarily be conscious, or even brain-based. It’s not necessarily amenable to practice, for it’s a commonplace of our time that most of us keep making the same mistakes in judgment over and over. Rather, it will be prior to our usual knowing. We might call it a kind of gnosis, heart knowledge perhaps. And what it comes down to is that we perceive far more than we know, far more than we give ourselves credit for. Psychologists have done numerous experiments with this, demonstrating that we perceive quickly, almost automatically, and well before we are conscious of even having a perception, much less a judgment about it. Nor, again, do we even know if all the kinds of perception involved are being measured. Is there a psychological measure for “heart knowledge,” for example? How could there be when science does not even acknowledge its existence? And yet…
And yet all we may be able to conclude is that it appears to be useful to pay attention: attention to what we actually perceive; and equal attention to what we con ourselves into perceiving for extraneous reasons or needs. After that, if we’re truly attentive, we might at some point tap into the operation of that subtler, prior kind of perception, and realize, as I did once during that sesshin, that people really do project quite uniquely who they are; and that we on our side actually can and do perceive it quite exactly.

Lawrence DiStasi

Friday, March 8, 2013

After Newtown



The principal came into the class, just before lunch, and whispered into the teacher’s ear:
            “We’re on lockdown. I’m not exactly sure what it’s for, but I’ll let you know as soon as I find out.”
            The teacher—she happens to be my daughter—knew what she had to do. She turned out all the lights. She drew the shades so the room would be nearly dark, as if no one were there. She told the children, 5th and 6th graders, to crawl beneath the desks, make themselves as small as possible, and stay there. As a reading specialist, she is supposed to teach them reading, but there would be no more of that. Something was amiss and the grammar school in Newark, CA was on lockdown.
            Now my daughter has been on lockdown before. She used to teach in a grammar school in South Central Los Angeles, and there were helicopters chasing criminals in the neighborhood all the time, so the school would go on lockdown regularly. But before today, she never worried much about it. It was clear in L.A. that the danger was outside and the targets were criminals, not children.
            After Newtown, that casual attitude towards lockdown is out of the question. No one knows anymore whether a lockdown means an external threat, or a direct threat to the school, to the innocent children in the school. That’s why the kids are told to hide and be silent. That’s why the windows are closed, the shades are drawn, the lights are extinguished, and the children shrink to zero: To create the impression, if some killer like Adam Lanza should break in searching for easy targets, that the classrooms are empty. (Whether this makes sense or not is another question). And the kids know exactly what to do; though my daughter had not been there the day they had their drill for this, the kids remembered it perfectly and did what they had been taught. That’s what teaching involves now: teaching kids to nullify themselves in case a killer comes to school. Of course, two of the boys were fooling around, until, that is, my daughter told them in no uncertain terms that this was serious. They then stopped fooling and vanished like the others.
What is the effect of such instruction on school children? It appears that it scares the bejesus out of them. One of the little girls asked my daughter if the hunted person were armed. She said he probably was. Imagine. Little kids having to disappear, imagining what might happen if automatic weapons suddenly start blazing, with them as the target. Some of them no doubt remembering nightmare images they’ve seen of Newtown.
Today, the lockdown in my daughter’s school lasted more than an hour. Kids cowering beneath their desks and tables for over an hour in a darkened room, with no idea how long the danger would last. Five of them had to go to the bathroom, and had to use the waste paper basket; they’re not allowed to leave the room. All were famished by the time they got to lunch, because those in the lunchroom at the time of lockdown likewise had to stop eating and hide beneath their tables.
Imagine being a teacher in such a situation. No information on what the hell is happening, or how dangerous it is, or how long the terror is going to last, and unable to reassure the terrified kids in her charge that it will soon be over. This is America in the 21st century, after Newtown. Schools that used to be safe places; even boring places; places that kids couldn’t wait to get out of so they could go play; are now places that can become fortresses at a moment’s notice. Fortresses of isolation filled with fear that someone armed to the teeth with the weapons that are perfectly legal and even common in America might burst in and start shooting you and your classmates for no reason.
Making this possible is what the crazies in the NRA consider freedom. Most Americans that I know most decidedly do not. I would guess that most kids in lockdowned schools don’t either. How long is it going to take for the cowardly creeps in Congress to catch up?

Lawrence DiStasi