The Myth of Free-Market Capitalism: The Case of Freddie Mac and Fannie Mae

Craig Lamson · September 13, 2008

Define "respectable".

FDR taxed the hell out of EVERYONE, the poor and the low wage hit hardest. Thats an undisputed FACT. Excessive taxation reduces private economic activity. If you slow PRIVATE economic activity you slow the rate of recovery. Thats the true legacy of FDR.

Terry Mauro · September 13, 2008

Do you really believe President Clinton first recognized the financial crisis on September 13, 1998 and decided to make a speech to the bankers at the CFR the very next day on September 14, 1998? And you seem to believe that because the Lewinsky scandal first broke in January 1998 while Clinton's speech to the CFR occured on September 1998 that there's no connection to the scandal and Clinton's decision to threaten action similiar to that taken by FDR, some 60 years earlier? You dont think the bankers knew that president Clinton might decide to go the way of FDR? That's foolish, of course they knew that was a possibility? They knew Clinton was a threat to do this even before he became President. Clinton was attacked viciously through out his term in office.

This latest outbreak of the financial collapse had been in full swing since the summer of 1997. And there had been earlier outbreaks like the Mexico crisis in 1994. President Clinton was aware of the fundamental problems with globalization going back several years. The financial crisis didnt hit yesterday, it had simply reached a level of crisis where Clinton finally got the courage to take real action.

Here's an excerpt of his speech to the CFR where he references the 1994 Mexican debt crisis. He states clearly that he has been dealing with crisis and after crisis for three years.

"We have been working on this for three years at some level of intensity or another, going back to the Naples G-7 meeting in the aftermath of the Mexican financial crisis. I have done everything I could do personally to reach out across the country, and indeed across the world, for any new ideas from any source". [One of the sources Clinton was listening to was Lyndon LaRouche.]

Further

• So I want to encourage you, if you think we're right, to support us. But if you have any ideas, for goodness sake, share them, because I agree with what Pete said: this is the biggest financial challenge facing the world in a half-century. And the United States has an absolutely inescapable obligation to lead, and to lead in a way that's consistent with our values and our obligation to see that what we're doing helps lift the lives of ordinary people here at home and all around the world [it appears that the President agree's with Lyndon LaRouche, eh?]

Then he drops the real bomb

• Above all, we must accelerate our efforts to reform the international financial system. Today I have asked Secretary Rubin and Federal Reserve Board Chairman Greenspan to convene a major meeting of their counterparts within the next 30 days to recommend ways to adapt the international financial architecture to the 21st century. [did this meeting ever take place?][Clinton spent his remaining days in office fighting a political lynching and a multitude of legal witch hunts].

Now the bankers sure as hell know exactly where President Clinton is heading with all this. They certainly know better than you the level of crisis that exists in the financial system. They also know the available options. So this isnt about some mechanistic "fixed rates" versus "floating rates", this is politics at the very highest level. This is Clinton acting as President in defense of the nation and the general welfare [which is the law of the United States] versus the bankers who wish to destroy the nation state.

But you're right you do not need to respond any further. And I sure dont need to be spoon feeding you "information" in an effort to convince you.

Edited September 13, 2008 by Terry Mauro

David G. Healy · September 13, 2008

wasn't for FDR, AND his legacy, you'd more than likely be shootin' squirrel (instead of digital photos) for supper this evening....

Terry Mauro · September 13, 2008

The United States would not have defeated the Nazi's if not for the industrial machine built up by FDR. He returned the USA to our "American System" roots. FDR's grandfather had been a close collaborator of Alexander Hamilton. FDR studied the philosophy of the founding father's during his battle with polio and returned to politics a changed man.

How could FDR tax everyone to hell? There was a reported 25% unemployment rate at the time he took office. Who did he tax, Joe Kennedy? Old man Kennedy was working for the other side.

Edited September 13, 2008 by Terry Mauro

Craig Lamson · September 13, 2008

I don't think so dave...

Craig Lamson · September 13, 2008

FDR did NOT build an "industrial machine" he dang near KILLED it. What ende dthe depression was the END of WWII and the return to a rational system, and the removal of many of FDR's facist policies.

Who did he tax? EVERYONE! Jim Powell author of FDR's Folly writes "Federal excise taxes on beer, wine, cigarettes, soft drinks, chewing gum, radios and other things purchased by millions of ordinary people, generated more revenue than the federal personal income tax and the federal corporate income tax combined."

And "According to the standard reference work HISTORICAL STATISTICS OF THE UNITED STATES FROM COLONIAL TIMES TO THE PRESENT, in 1936 the federal government collected $674.4 million from the personal income tax, $753 million from the corporate income tax and $1.5 billion from excise taxes.

Finally "So FDR's New Deal was mainly financed on the backs of the middle class and poor people who bought things subject to the federal excise tax. To hear one of FDR's "Fireside Chats," Americans had to pay a federal excise tax on a radio and a federal excise tax on the electricity needed to run it."

Len Colby · September 13, 2008

In other words your claim that Clinton, “threatened to change the current IMF floating exchange rate system, going back to the FDR Bretton Woods system” was as I suspected a false one.

He made his aims clear and they were nothing to make bankers lose any sleep over:

Therefore, I believe the industrial world's chief priority today, plainly, is to spur growth. It seems to me there are six immediate steps we should take to help contain the current financial turmoil around the world, and then two longer-term projects in which we must be involved.

To take the immediate first, we must work with Japan, Europe, and other nations to spur growth. Second, we will expand our efforts to enable viable businesses in Asia to emerge from crippling debt burdens so they can once again contribute to growth and job creation. Third, we've asked the World Bank to double its support for the social safety net in Asia to help people who are innocent victims of financial turmoil. Fourth, we'll urge the major industrial economies to stand ready to use the $15 billion in IMF emergency funds to help stop the financial contagion from spreading to Latin America and elsewhere. Fifth, our Ex-Im Bank, under the leadership of Jim Harmon, will intensify its efforts to generate economic activity in the developing world immediately, in the next three months. And sixth, Congress must live up to its responsibility for continued prosperity by meeting our obligations to the International Monetary Fund.

Terry Mauro · September 13, 2008

What proof have you supplied to refute my statements? Nothing that I can see. Tell ya what ,why don't you write to the former President and ask him. Let him tell you what his intentions were.

I already know the answer.

Edited September 13, 2008 by Terry Mauro

Terry Mauro · September 13, 2008

Hey Craig, who built the planes, tanks, ammunition, naval ships, and infrastructure to fight WWII? Was it all done by magic? You attribute the end of the depression to the end of WWII? That sure is an interesting take on cause and effect. End the war and voila the economy is fixed. Let me ask you again, how did FDR win the war against the nazis?

What about the RFC (Reconstruction Finance Corporation)? What about all those major infrastructure projects built under FDR--Tennessee Valley Authority, major water dams, etc. Was all that magic too? Or maybe you consider these projects a waste of money?

You're a nut. FDR was a fascist? Sounds to me like you're another kook, straight from the "my money" cult.

And you're quite the historian. Jim Powell is a mouth piece for the Cato Institute. You really know how to pick em. The cato Institute is a private think tank financed by the people FDR refered to as "economic royalists" or the "American Tory" faction. They were the very faction responsible for the depression in the first place. They would love to see the removal of government so they can spread wealth and riches to all Americans :lol: . Only greedy fools swallow policy from the Cato Institute.

http://www.cato.org/people/jim-powell

The ideology of Mont Pelerin was that of radical free-trade, unrestricted free-market speculation, monetarism (financial aggregates, not men, rule society), deregulation, and so on. This witches brew was called "liberty." They reacted in fear and loathing against the General Welfare clause of the United States Constitution and Alexander Hamilton's American System of Economics. They rejected the Common Good, preferring the rats' nest of pleasure/pain-based radical "individual self-interest." The 1947 meeting occurred just two years after the death of U.S. President Franklin Roosevelt. The Mont Pelerinites viscerally hated Roosevelt's towering General Welfare achievements, the pro-development Bretton Woods fixed exchange-rate international monetary system, and among his notable domestic accomplishments, the Social Security system. This, they vowed, they would tear down.

The wealthy oligarchical families that had directed the Synarchist/Nazi movement from 1921-45—and were defeated by Roosevelt—saw in the Mont Pelerin Society the instrument to re-establish that program internationally. The Mont Pelerin Society's economics was no different than that of the Bank for International Settlements, Hitler, or Mussolini.

Take the case of Friedrich von Hayek. In the 1920s, von Hayek concocted a theory of "maladjustments" in production, which was extended into inflation and monetary quantities as well. Based on this wacko theory, in the 1930s, Von Hayek assessed that the ongoing 1929-32 Depression had been caused by a "maladjustment in production," and the collapse had to run its "natural free-market course." The evidence showed that this caused destruction of production, the labor force, and the fabric of society. But Von Hayek denounced those who would use monetary expansion or deficit spending to halt the slide. Von Hayek's only recommended program was to "bring labor into balance," which was his term for further gouging living standards. But this was Hitler's program too. In fact, Von Hayek's shrill demand that the collapse be allowed to hit rock bottom, was fulfilled in the social dislocation and impoverishment which created the recruiting ground for Hitler's Nazis.

Von Hayek was the first President of the Mont Pelerin Society, from 1947-61. The Society realized that it needed to create "satellite think-tanks" to do its work. It created the Institute for Economic Affairs in London in 1955, directed by Lord Harris and Sir Anthony Fisher. In 1977, it supervised the creation of the Cato Institute.

Cato is merely an operational arm of Mont Pelerin. The Cato Institute's headquarters at 1000 Massachusetts Avenue in Washington, D.C., is a virtual shrine to Friedrich Von Hayek. The main gathering center is the Friedrich Hayek auditorium, and the walls are festooned with von Hayek's grim, soulless visage. Fourteen members of the Mont Pelerin Society serve in core positions at the Cato Institute, either as members of Cato's Board of Directors, as Cato Adjunct Scholars or Fellows, or as members of the editorial board of The Cato Journal (see box). The Cato Institute carries out the fascist policies of the Mont Pelerin Society.

Cato promotes radical globalization (it helped sponsor NAFTA), extreme speculation (Theodore Frostmann, a Cato board member, is one of america's biggest Leveraged Buy-Out pirates), deregulation, drug legalization, and economic austerity.

"Economic hit-man" George Shultz, because of his direction of the Mont Pelerin Society's Chicago Boys, has special oversight over the Cato Institute. In 1995, Shultz's network made his protected asset, the fascist José Piñera who privatized Chile's Social Security system, the co-chairman of Cato's Project on Social Security Privatization. Its goal was nothing less than imposing the fascist Chilean model upon the United States.

Building Up the Network

Immediately after its creation, the Cato Institute began fulfilling Mont Pelerin's special purpose of assailing Social Security. By the early 1990s, Cato would be Wall Street's command-and-control center for privatization. The think-tank worked from a template with three principal points. First, claim that the Social Security faces an alleged imminent financing crisis, to spur action; second, claim the solution to the crisis is setting up private accounts managed by Wall Street, to be invested into the stock and other financial markets; and third, claim the government is not legally bound to honor Social Security obligations.

Already in 1980, Cato issued a 484-page book, Social Security: the Inherent Contradiction by Peter Ferrara.

At that time, the Social Security Trust Fund (formally, the Old-Age Survivors and Disability Insurance [OASDI] funds), did have a shortfall in incoming pay-ins (one that its 1935 designers had foreseen for approximately 1980), but not a crisis. In 1983, the enactmen of a payroll tax increase corrected that shortfall, and the basis was set into motion for the Social Security Trust Fund to build up a surplus. According to the 2003 report of the Board of Trustees of the Social Security Administration, following that 1983 payroll tax rise, there would not be a Social Security financing problem until 2042; the Congressional Budget Office says that that problem would not occur until 2052. Despite this undeniable reality, Cato has never ceased to shriek about a "Social Security crisis."

But what jumps out about the Cato Institute 1980 study is this striking assertion: "Under traditional principles of equity, therefore, the Social Security pact ... is unfair, immoral, fraudulent, and voidable" (emphasis added). While clearly rejecting Social Security in principle, it signals Cato's belief that the Social Security system does not have the force of law, and the system does not have to pay its retirees their benefits. Cato "analysts" have frequently made this statement during the past five years, and officials from the Bush Administration insinuated the point during the past few months, but Cato was asserting this 25 years ago!

During the 1980s, Cato published books with such titles as Social Security: Averting the Crisis (1982). In March, 1992, it released Cato Policy Report 14, with the provocative title, "Will the Social Security System Survive till 2001?"

In 1995, Cato went into a higher gear, establishing the Project for Social Security Privatization. It brought in George Shultz's protected asset, the butcher of Chile's Social Security system, José Piñera, to be its co-chairman. In 1973, Shultz's network had installed General Pinochet as dictator of Chile in a coup-massacre; and in 1981, under this condition, Piñera had privatized the nation's Social Security system, which (see EIR, Jan. 21) banks have since looted. Cato called on Piñera to replicate that in the United States. Showing the bankers' strong hand, Cato appointed as the Project's other co-chairman William Shipman, who has for many decades been a top officer of the Boston-based aristocratic State Street Bank, which is part of what is called the "Boston Vault" power structure.

The Privatization Project's 20-member "Advisory Committee," dominated by bankers and speculators, has a prominent Chilean connection. Conspicuous is Arnold Harberger, one of the capos of George Shultz's Chicago Boys, who regularly flew to and periodically lived in Chile during the 1970s, to give direction to the economic policy of Augusto Pinochet's dictatorship. In 1981, Harberger personally oversaw the privatization of Chile's Social Security system implemented by Piñera.

Wall Street's claim that it has no vested interest in privatization is shattered merely by the "Who's Who" list of elite financial institutions which, during the past decade, have poured big bucks into the Cato Institute, and more especially, its Project on Social Security Privatization: J.P. Morgan Chase; Citicorp/Salomon Brothers; Fidelity Investments (mutual funds); the American International Insurance group of dirty money-linked Maurice "Hank" Greenberg; American Express; Prudential Securities; the Chicago Mercantile Exchange; the Bond Market Association; the Economist of London; and others. According to a 2004 study by University of Chicago Business School Professor Austan Goolsbee, financial firms that manage the workers' Individual Accounts that would be set up by privatization, could rip off management and other fees equal to 15-25% of the value of the accounts—an immense windfall.

The Bush-Cheney Trojan Horse

In November 2000, the U.S. Supreme Court had hardly decided by a 5-4 vote to declare George W. Bush the winner of the Presidential election, when the network of the Mont Pelerin Society and Wall Street firms backing the Cato Privatization Project descended on the White House. They told Bush he needed to set up a Presidential Commission on Social Security, because the system was in crisis. Bush was compliant. In the first months of 2001, he announced the President's Commission to Strengthen Social Security.

Cato made the President's Commission a springboard for its own agenda. The Commission would have 16 members, two of whom—former New York Sen. Patrick Moynihan, and AOL Chief Operating Officer Richard Parsons—were co-chairman. Three members of the Cato Institute were made Commission members: two members of Cato's Project on Social Security Privatization, Sam Beard and Tim Penny; and Leanne Abdnor who had been the Cato Institute's Director of External Affairs. This gave Cato nearly 20% of the membership, but its influence was greatly amplified because some Commission members, like Social Security guru Estelle James of the World Bank, had worked on joint ventures with Cato for years.

But that was just the start. Much of the research and drafting for the Commission was done by its staff, and its leading staff member was Andrew Biggs, who happened to be the Cato Institute's lead Social Security analyst. Randy Clerihue, another Cato Institute member, was made the spokesman for the Commission to Strengthen Social Security. During 2001, according to a Cato Institute report, Cato's Privatization Project distributed pro-privatization "briefing books to members of the President's Commission to Strengthen Social Security."

Should anyone be surprised that in its December 2001 final report, the President's Commission, so stacked with Cato members, warned of a dangerous crisis, and came out recommending privatization? All 16 members of the Commission favored some form of privatization going in; but some members were less aggressive than Cato, which created some friction. The Commission's Model 2 plan (the principal plan) recommended that 2%, roughly one-third of the 6.2% payroll tax paid to the Social Security system, should instead be diverted into Individual Accounts managed by Wall Street (there would be a $1,000/year investment limit for each Account). This money would be stuffed into the collapsing stock and other financial markets.

The Commission's other notable proposal is austerity, and has become notorious: It recommended a change in the indexing of initial Social Security benefits from the wage-based system currently in use (consistently replacing just under 40% of a retiree's career-average wage), to a consumer-price index-based system, which change would slash retiree benefits over several decades down to about 20% of that average wage. Such deep cuts would be necessary to compensate for the shortfall in the Social Security system's funds caused by diversion of a portion of payroll taxes out of the fund, and into Wall Street.

For the first time in the 70-year history of Social Security, the Cato Institute had gotten a sitting Presidential Commission on that subject to endorse privatization.

But the onrushing financial collapse left Wall Street needing, and demanding more. On Feb. 17, 2004, the Cato Institute's Michael Tanner, executive director of the Privatization Project headed by Piñera, released the Cato report entitled, "The 6.2 Percent Solution: A Plan for Reforming Social Security." This presents Cato's maximalist demands. The report asserted that all of the 6.2% workers' payroll tax should be diverted into workers' Individual Accounts, rather than into the Social Security system, and thence into the stock market.

The Cato "6.2%" plan is premised on a sharp reduction of benefits that the Social Security system would itself pay out to retirees, although for deceptive reasons, the plan doesn't go into detail.

Finally, the plan drops the bomb of default. Tanner states that according to his reading of the law, under Social Security, "workers have no legally binding contractual or property right to their Social Security benefits, and those benefits can be changed, cut, or even taken away at any time" (emphasis added). Tanner is cold-bloodedly arguing that the government can default on the $1.5 trillion in Treasury bonds held by the Social Security Trust Fund (Treasuries securities are the way that the Trust Fund holds its surplus), and that the U.S. government can severely cut or repudiate its Social Security benefit obligations to millions of elderly citizens. Immediately after Bush's re-election, Bush Administration officials started regurgitating Tanner's treacherous argument. Tanner et al. are rabidly fighting to get the Bush Administration to adopt Cato's maximalist policy of diverting the full 6.2% of a worker's payroll tax into Individual Accounts.

Cato Gestapo Operations

In preparation to ram Social Security through during the Bush Administration, Cato recognized that it needed to create a string of captive front organizations, staffed and run by the same shop-worn crew of privatizers, to claim "grassroots support." Cato has poured big money into these fronts, and spread them outwards. This is "popular support" a mile wide, and a millimeter deep, and one can see how some of the widely cited grassroots groups really operate. As well, Cato made a power grab to take over the Social Security Administration itself, so that it could radiate its lies from inside.

Of the many cases of this, two examples are sufficent to make the point: Leanne Abdnor and Andrew Biggs.

Leanne Abdnor should be called the Madame of Cato's stringers. From 1995 through 1998, Abdnor, as Cato Institute's Vice President for External Affairs, ran the campaign to try to shove Social Security privatization through Congress, or as Cato put it, "she educated Congressional members and staff on the virtues of personal retirement accounts in Social Security reform."

In 1998-99, Cato launched Operation Front Group, and deployed Abdnor to set up the Alliance for Worker Retirement Security (AWRS), an umbrella group that drew on money and office space from the National Association of Manufacturers (NAM), and had approximately 35 other groups as participants. To push Cato's perspective, Abdnor was made AWRS's Executive Director. While campaigning for President Clinton's removal from office, on Sept. 27, 1999, AWRS director Abdnor shrieked, "President Clinton knows as well as anyone that the Social Security Trust Fund is a fraud, a pile of IOUs that amounts to nothing more than a claim on the income taxes of the future" (emphasis added).

The Social Security Trust Fund, in fact, holds Special Obligation Treasury Bonds of the United States. A fraud? Would one want to publish that statement today in Chinese and Japanese, perhaps, and speculate on the reaction in U.S. Treasury debt?

In 2001, Abdnor was selected as one of the members of the Cato Institute contingent, on the President's Commission on Strengthening SociaOBl Security.

In 2001-02, Cato deployed Abdnor again, this time to manufacture the For Our Grandchildren (FOG) organization, where she is President. This group parades as a "grass roots organization" of grandparents who are concerned that their grandchildren won't get Social Security, and targets propaganda at young workers. FOG uses the buzz-slogan, "Strip power away from Washington and return it to the individuals where it belongs." In addition to Abdnor's presidency, the chairman of FOG is Tim Penny, a Cato Institute Senior Fellow, and member of the Advisory Committee member of Cato's Privatization Project (and of President Bush's Commission). Hilariously, among the more than half-dozen Cato members who serve on FOG's National Advisory Council is that venerable American grandfather, Jose Piñera, the privatizer of butchered Chile.

Abdnor is naturally an Advisory Committee member of Cato's Privatization Project. Dorcas Hardy, former Commissioner of Social Security, a speculator who sits on the board of the Options Clearing Corporation, is also an Advisor to Cato's Privatization Project. Hardy is one of the chief organizers and leaders of United Seniors Association, Cato's main elderly "constituency group" for privatization.

The second example is the shocking scandal of Andrew Biggs. The 37-year old Biggs, a graduate of the London School of Economics, was the Cato Institute's senior Social Security analyst. In 2001, Cato made Biggs the lead researcher for the President's official Commission. In May 2003, Biggs was promoted to Associate Commissioner for Retirement Policy at the U.S. Social Security Administration (SSA), part of Cato's coup-effort to take over the whole agency. Biggs sits just below the Deputy Commissioner who runs the Office of Policy, who "is responsible for major activities in the areas of strategic policy planning, policy research, and evaluation," as well as all statistical analysis, according to the SSA.

Biggs is running a Gestapo operation inside the SSA. Last year, Biggs wrote a "policy brief" internal document that mandates that all Social Security managers are required to present the idea "that Social Security faces dire financial problems requiring immediate action," in the words of the Jan. 15, 2004 New York Times. It would require the SSA to "insert solvency messages in all Social Security publications"; that is, to say that Social Security is in crisis. It would make Social Security managers spread Wall Street-lies in every public forum, as well as at non-traditional sites like farmers' markets and "big box retail stores." Biggs is illegally using money from the Social Security Trust for this campaign.

This is but a small sampling of the myriad ways by which Cato mingles manufactured crisis, and manufactured "grassroots" support, to spread its campaign.

The Guiding Role of George Shultz

The oligarchy finds Cato Institute an indispensable instrument to "intelligently handle" many of its other major designs to tear down the nation-state.

One example is drug legalization. On Oct. 5, 1999, at its von Hayek auditorium, the Cato Institute held a major drug policy conference, entitled, "Beyond Prohibition: an Adult Approach to Drug Policies in the 21st Century," that carried the themes that drugs should be decriminalized, and that the War on Drugs was a "$50 billion waste of money." The 100 attendees featured the pro-dope denizens of the drug world: Kevin Zeese, the 1980s head of the National Organization for Reform of Marijuana Laws (NORML) and Ethan Nadelman, the head of the George Soros-funded Lindesmith Center, a leading coordinating point for decriminalization; partisans of High Times magazine, among others.

Cato was in its element. Since its inception, Cato has pushed to create a legal market for marijuana, cocaine, and heroin. Representative of this, long-time Cato Adjunct Scholar Thomas Szasz wrote Our Right to Drugs: the Case for a Free-Market in 1992, and Ceremonial Chemistry in 1974. Richard Dennis, long-standing member of Cato Institute's board of directors and a wealthy derivatives speculator, is board member and funder of the pro-drugs Drug Policy Foundation.

Ed Crane, Cato's President, speaking at Cato's Oct. 5, 1999 conference, stated, "There are reasons ... why some of the most prominent critics of the War on Drugs come from libertarian and conservative backgrounds. People like William F. Buckley, George Shultz ... Milton Friedman.... They understand what the great Nobel Laureate F.A. Hayek called the fatal conceit.... They understand the powerful forces of supply and demand."

For those Mont Pelerin Society oligarchics, George Shultz directs the drive toward Social Security privatization, and broader fascist looting of the economy's and the labor force's funds. Shultz, with Henry Kissinger, authored Pinochet's Chile dictatorship in 1973, and oversaw that country's Social Security privatization in 1981, through the Chicago Boys networks that he controlled. He tried to bring the "Chile model" into the United States as early as 1981, in the Ronald Reagan Administration (see EIR, Jan. 21).

From August 1971 to 1974, Shultz was the key figure in the Nixon Administration who blew up Franklin Roosevelt's Bretton Woods monetary system, and brought in globalization, "free-floating currency exchange rates."

Ed Crane's praise of Shultz at the October 1999 Cato pro-drug legalization conference, merely reflects Shultz's long-time broad oversight and influence over Cato. When Cato celebrated its 25th anniversary at a 2,000-person black-tie gala at the Washington Hilton Hotel in 2002, Shultz was one of the luminaries selected to give Cato congratulations on a special video tape, stating: "Keep doing what you're doing."

Edited September 13, 2008 by Terry Mauro

Craig Lamson · September 14, 2008

You want to know who built the tanks and the plane etc...the INDUSTRIALISTS...AMERICAN BUSINESS who FDR did his damnest to kill and villify. Until heneeded then that is. Even your vaunted public works projects were built by the very private industry that FDR wanted to tax and regulate to death.

I see you can't refute fact so you try and skewer the source..how original and sooo CT. Keep up the good work Terry.

Craig Lamson · September 14, 2008

BTW Terry, were did you swipe the bulk of your last post? You gave a link but it was not for the bulk of your post. So were did you crib it from?

John Simkin · September 15, 2008

What I meant was an academic historian or economist instead of some evangelical preacher or right-wing talk show host.

John Simkin · September 15, 2008

It is difficult to discuss these issues with something who thinks FDR was a fascist. Maybe you could define what you mean by this term as we are clearly using different dictionaries.

The Economic Depression was triggered by the Wall Street Crash in October 1929 and created the worst depression in American history. Herbert Hoover, a Republican was president at the time. He, like you, believed in a laissez-faire approach. It was a disastrous decision and was to keep the Republicans out of office for 20 years.

It was soon clear to almost everyone that the economy would only recover if the government intervened. This was also true of Congress but Hoover vetoed a bill that would have created a federal unemployment agency and also opposed a plan to create a public works programme. As a result, by the time of the 1932 presidential election the US had an unemployment rate of 24.9%.

Roosevelt's first act as president was to deal with the country's banking crisis. Since the beginning of the depression, a fifth of all banks had been forced to close. As a consequence, around 15% of people's life-savings had been lost. By the beginning of 1933 the American people were starting to lose faith in their banking system and a significant proportion were withdrawing their money and keeping it at home. The day after taking office as president, Roosevelt ordered all banks to close. He then asked Congress to pass legislation which would guarantee that savers would not lose their money if there was another financial crisis.

On 9th March 1933, Franklin D. Roosevelt called a special session of Congress. He told the members that unemployment could only be solved "by direct recruiting by the Government itself." For the next three months, Roosevelt proposed, and Congress passed, a series of important bills that attempted to deal with the problem of unemployment. The special session of Congress became known as the Hundred Days and provided the basis for Roosevelt's New Deal.

As a result unemployment in the US gradually came down. Here are the official statistics for the period: 1933 (24.9); 1934 (21.7); 1935 (20.1); 1936 (16.9) and 1937 (14.3).

As you point out, to do this FDR had to increase taxation. Someone had to pay for the government spending on public works. However, it was the rich, rather than the poor, who were complaining about this because those on low incomes were far better off in employment paying taxes than being unemployed and not paying taxes.

The Democratic Party relied on the rich to provide it with funds. Therefore, Roosevelt was under great pressure to reduce government expenditure. He started to do this in 1937 and as a result unemployment began to grow again and in 1938 it rose to 19.0%.

As you say, the outbreak of the Second World War, brought an end to unemployment and by 1944 the rate had fallen to 1.2% of the adult population. The reason for this is that government expenditure increased dramatically during this period. This had to be paid for by the government increasing taxation. However, during wars, the electorate do not complain about this because they realise the country is fighting for survival.

Mike Tribe · September 15, 2008

On the other hand, Ms Mauro also plays rather fast and loose with the historical record when she claims that Hitler and Mussolini followed essentially laissez-faire policies. Both favored the interests of the industrialists and big businesses, but both were also highly interventionist.

Terry Mauro · September 15, 2008

I can only assume that Lampson equates regulation and taxes with fascism. Look at the "derivatives" market, the financiers have managed to keep their derivative game unregulated for over 20 years. As a result of the derivatives scam we sit at the edge of the biggest financial collapse in all known human history. http://www.msnbc.msn.com/id/26709927/

The enclosed article referenced a projected $1 trillion dollar in losses and the closing of some major banks. If the system is not put through bankruptcy reorganization[under government supervision] as FDR did some 70 years ago, then you can bet that the losses will far exceed $1 trillion. The entire system will collapse. And under conditions of collapse fascism will become the #1 option for these bankrupt financiers. Just as they did with Adolph Hitler in Germany back in the 1930's.

What the US Government should do [in concert with other nations] is declare the system bankrupt and conduct an orderly re organization of the banking system. Making sure banks remain open, while protecting people's savings and pensions.The government should then go about writing off the entirety of the debt created as a result of derivatives speculation. The bankers will howl but what of it?

"Interesting times".

Edited September 15, 2008 by Terry Mauro

The Myth of Free-Market Capitalism: The Case of Freddie Mac and Fannie Mae

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