Kroll’s piece, which has been picked up by The Nation, Salon and other websites, describes “six of the most blatant and alarming ways taxpayers have been scammed by the government’s $1.1-trillion, publicly-funded bailout.” Kroll notes that “the bailout has favored rescued financial institutions by subsidizing their losses to the tune of $356 billion, shying away from much-needed management changes and — with the exception of the automakers — letting companies take taxpayer money without a coherent plan for how they might return to viability.”

He points out that the TARP program (actually twelve separate programs) is only a small part of the rescue of American capitalism. It does not include the more than $12 trillion that the U.S. government and the Federal Reserve have contributed in other ways to prop up failing businesses.

Photo by alles-schlumpf,, via Flickr, licensed under a Creative Commons Attribution, NonCommercial, ShareAlike license.

Kroll accuses the U.S. Government of paying way too much for troubled TARP assets, and then providing so little transparency that there can be little serious accountability. Economist Dean Baker says that government officials “see this all as a Three Card Monte, moving everything around really quickly so the public won’t understand that this really is an elaborate way to subsidize the banks” and the nation’s richest households.

Kroll notes that the bailout’s newer programs give private investors a favored position to make money while leaving taxpayers carrying most of the risk. The idea of public-private partnerships to save the economy sounds reasonable, but what it really means is forcing taxpayers to invest most of the money and shoulder most of the risk, but letting private investors reap most of the profits. Same as it ever way, same as it ever was.

What makes this particularly depressing, however, is Obama’s failure of nerve. Kroll writes, “The government has no coherent plan for returning failing financial institutions to profitability and maximizing returns on taxpayers’ investments.” Everything is being improvised among small cliques of Wall Street insiders, with little public debate or accountability. It should come as no surprise, then, that the bailout is geared to the needs of the nation’s largest banks, giving short shrift to the troubled small and mid-sized banks that serve most Americans.

Finally, the government is not pushing for structural reforms to avoid future meltdowns. Instead of breaking up the mega-banks that are “too big to fail,” the government is propping them all up with borrowed money. Instead of prohibiting risky, over-leveraged investments, the bailout is essentially banking on the same strategies that Wall Street used before the metldown.

Instead of sending banks and financial companies a message that its reckless business practices won’t be tolerated in the future, the government is signaling that they WILL be tolerated and not punished. Indeed, beleaguered taxpayers will be coerced to subsidize such misbehavior!

The actual facts about the financial crisis probably won’t be known for years. Yet the facts already known suggest a terrible betrayal of taxpayers and citizens has occurred, and will continue. The pathologies that got the U.S. and the world into this crisis remain largely uncorrected. Our tax dollars are propping up a failed paradigm, and the very people who precipitated the crisis have not been called to account. Instead, President Obama has assigned them to supervise the recovery.

Obama may be a masterful politician with the common touch, but where is the respect for ordinary citizens? For taxpayers who are collapsing under this crisis? Who has the courage to demand equitable stewardship of taxpayer resources and, even more important, an ideological reckoning?

As I live and write in a little house on a small lot in Augusta, Maine, I breathe in the stoic veneer covering sharp anxiety all around this place. I’m unemployed, although I gave ample notice of my resignation last October, so my joblessness isn’t a result of the international financial mess and continuing rounds of layoffs. Savings I socked away while I had a job are paying the bills for now. I’m grateful for time to attend to important things, like my marriage, fleeting phone calls with my busy daughter, and long talks with Phoebe, our stray long-haired cat who moved in shortly after Sammy, the last of four long-lived short-hairs, died a couple years ago.

p(photo-credits). -photo by Charlie Bernstein_

There’s time to notice the last of the gritty snow melting in the drizzle of spring rain and listen for the postal truck as it climbs the long incline to our mailbox. I have abundant time to read and keep in touch with friends and neighbors, volunteer for community projects, make dinner and stir up a batch of pumpkin bread for breakfast. When the soil warms up and dries out a bit, there will be time to plant a garden and grow food that tastes better than produce from the grocery store, and visit the weekly outdoor market at the foot of our hill to buy food from people who produce it on their small farms outside town.

p(photo-credits). photo by Charlie Bernstein

I’m privileged to have all I need and then some, and hope the anxious people with big mortgages and other commitments they can’t pay for will be able to restructure them, because oversized consumer debt carries unnecessary obligations that divert us from necessary ones. Mortgage lenders evicting people for lack of payment leave abandoned houses, deteriorating neighborhoods, and family and social disruption that diminish our resources for building an economy and common life that make sense. Let the homeless back into their homes, keep those on the brink of foreclosure under their debt-ridden roofs, and work out a simple arrangement for each focused on what they can contribute instead of what they can’t repay.

We need economic activity that heals instead of destroys the commons. For example, the road to my house, and maybe the one to yours, is an eyesore. The tar has crumbled for years as public funds for street maintenance have been outstripped by the costs of even basic care. Many of the old houses along its route are clad in noxious vinyl siding and need weatherization and repair. The yards could produce vegetables, fruit, and flowers where ragged lawns and broken pavement now prevail. Our neighborhood is powered by heating oil and electricity from coal-fired plants, neither one sustainable nor good for our health, while a breeze blows briskly from the river to the top of the hill, where a patch of public land owned by the local utility district could serve as a wind turbine site to generate electricity for the neighborhood.

p(photo-credits). -photo by Charlie Bernstein_

The view across the river includes a car dealership with bright electric lights on its vast paved lot, and an abandoned paper mill slowly leaching chemicals into the ground and water. The obligation here is to clean up the community and fill it with healthy houses, factories, shops, and services to sustain people who call this place home. There’s no local transit system to serve as an alternative to personal vehicles. Perhaps the auto dealer could run a trolley system instead, and we could recycle our cars, exchanging that pollution of the commons for cleaner dependable transport to work, schools, libraries, city hall, and modest shops owned and run by local people.

Here the schools face budget cuts, and perhaps we spend more than we should for the system we have. The children need educations, with inspired and inspiring educators to lead them in discovering how to refashion this place to be more livable, and encourage the bright and not-so-clever alike to engage with hope and resolve to build a stronger community and cleaner economy than we’ve passed on to them.

President Barak Obama said recently, “We cannot rebuild this economy on the same pile of sand.” This gives me pause, since the neighborhood I live in is named Sand Hill, and there is no other place for me to participate in rebuilding the economy but here on this same pile of sand. The ground we live on isn’t the problem, whether vast level farmland, gritty coastal ports, bustling great cities, or the semi-abandoned mill and mining towns like Augusta scattered across the nation. Wherever we may live, the point is that the change we seek isn’t a return to the past, but a transformation of the present. We have an opportunity to imagine beyond glib beliefs in free market capitalism, brutal competition, abandonment of those least able to earn a living, passive entertainment, and mindless consumption in order to focus on producing projects and products that make improvements now and leave a legacy worth building on for generations to come.

We can take practical steps, with hope that doing so will forge new paths to a better life for all of us. We can live more satisfying lives right now not only by reducing some types of consumption, but by increasing the quality of what we actually need to produce. This means consuming less of what is cheap and flimsy, shipped around the planet for sale at energy-guzzling consumer outlets, but more importantly it means producing more goods we need most, at a high level of quality, close to home. We can wade out of our worries into our communities, not to foist ideological opinions on one another about what went wrong, but to meet more of the people who live closest to us and deepen our exploration of what we really hope for and how to get there. And we can join the visionaries and leaders who risk taking a place at the table of public policy to forge a better way forward, debating and shaping the direction of the country, globe, and our common life together.

p(photo-credits). -photo by Charlie Bernstein_

Let’s responsibly produce, rather than only consume, what we really need – high quality food, energy, shelter, health care, clothing, transportation, education, sanitation, news coverage, art and music, just and merciful care for those unable to function in society. Shifting to clean sustainable energy alone will provide us with ample worthwhile employment in healing the damage we’ve done to the commons for generations to come. The dire financial situations so many of us face, with the emotional and social tolls these take, point us to a better life, one in which we responsibly produce what we need to consume and publicly push our economic system and institutions, parts of human culture we all create and share, to honor the unearned gift of the commons that gives us air to breathe, water to drink, and land, including humble hills of sand, to call home.

p(photo-credits). -photo by Charlie Bernstein_

Here’s my working list of revelations (or more accurately, confirmations) of how our market system and political culture really work. It’s not a pretty picture.

We’ve seen the bloated sense of entitlement among the investor class. Only a cosseted elite could believe that that the executives in charge of a failing division of AIG – which, by the way, played a direct role in the global economic meltdown – should receive $165 million in bonuses. The beauty of being rich is never having to clean up after oneself.

Photo by Shaun Wong, via Flickr, licensed under Creative Commons Attribution, NonCommercial No Derivatives license.

We’ve seen the complicity of the political club that works hand-in-glove with their Wall Street friends. Clearly, Treasury Secretary Geithner, Lawrence Summers, New York Senator Schumer and other top officials thought the use of taxpayer bailout money for AIG bonuses could be slipped by with a wink and a nudge: a favor to be rewarded indirectly with campaign contributions later. What are friends for? Senator Banking Committee Chairman Chris Dodd, once the recipient for a Countryside mortgage with preferential terms, had no problems with approving a bailout package that could siphon away huge sums to pay bonuses. (“It’s Chinatown, Jake!”)

Senator Ron Wyden of Oregon says that his legislative provision limiting bonuses to $100,000 among companies receiving federal bailout money, was mysteriously stripped from the legislation in the Senate/House conference committee. He doesn’t know who eliminated the provision, but he does say that Obama Treasury officials wanted it out. So the taxpayer safeguard was eliminated.

We’ve seen the Obama Administration’s highly selective commitment to open government. Despite claiming to want “transparency” to be the touchstone of his administration, we still don’t know who stripped the Wyden provision from the bailout legislation. President Obama has failed to level with the American people. We’ve only recently learned that AIG bailout money was going to dozens of other companies (some, foreign banks!) that had contracts with AIG. This is no way to restore trust in the economy or in the Administration’s recovery plans.

Treasury Secretary Geithner knew about the AIG bonus contracts, if not last year, then when he participated in the Bush bailout of AIG, as head of the New York Fed. And if he didn’t know about the bonuses until last week, he was an incompetent steward of taxpayer resources. This makes Geithner’s more recent claims of outrage disingenuous at best. Yet Obama has declared that Geithner is doing an outstanding job.

We’ve seen the grotesque inequality between the average taxpayer and Wall Street executives. At a time when the American people are losing their jobs in record numbers and taxpayers are being asked to make enormous sacrifices, the investor class that is chiefly responsible for our economy’s’ collapse is actually rewarded! It turns out that the capitalist class, when its ox is gored, becomes a sudden convert to socialism.

We’ve seen the utter fraudulence of free market ideology, which purports to be private, self-regulating and accountable, but which invariably requires public oversight, bailouts and intervention to keep it afloat. The crisis is too urgent and severe for us to have a more leisurely, intellectual reckoning of how Milton Friedman, Ayn Rand, Robert Rubin and all the other neoliberal policy gurus were wrong, wrong, wrong. But the left must not neglect a bit of unfinished business: a thorough deconstruction of how free-market ideology, as practiced, is an intellectual scam.

A more challenging task will be to creatively re-imagine how the commons and markets can be re-integrated into a new shared model for understanding the economy. What new institutions and mental frameworks must be invented to build a more equitable and stable political economy?

We’ve seen the hypocrisy of laissez-faire champions who credit their “self-made” fortunes to their entrepreneurial skills and responsibility, now laid bare as the result of unacknowledged risk-shifting to others, especially hapless small investors and taxpayers. When such risks are undisclosed and government is forced to provide enormous bailouts to keep the market apparatus functional and restore trust to market transactions, the very idea that capitalism honors individual “freedom to choose” is a bad joke.

There are surely other illuminating insights to be learned from the AIG bonus scandal. It is one of the richest, more instructive episodes to hit our political culture in many years. The tragedy is that it has taken a devastating economic crisis to confirm what many free-market critics have been saying for years. The only question that remains is whether there will be a genuine political reckoning and reform — or more of the same, after a fresh coat of PR spin has been applied.