Robert Scheer: Why the Rush on TARP 2?

First published on Truthdig, reposted January 14, at The Nation.

Why rush to throw another $350 billion of taxpayer money at the Wall Street bandits and their political cronies who created the biggest financial mess since the Great Depression? And why should we taxpayers be expected to double our debt exposure when the ten still-secret bailout contracts made in the first round are being kept from the public?

We don't have time, President-elect Barack Obama's key economic adviser, Lawrence Summers, insisted in a letter to Congress on Monday, promising that the new infusion would not be squandered as was the first installment. But given that Summers is personally as responsible for this meltdown as anyone, why should we trust him on this? Yes, it sounds wonderfully bipartisan that Obama is backing President Bush's request for spending the money now, short-circuiting congressional inquiry, but it was just that sort of bipartisan politics that created this nightmare.

How insulting that we must now accept Summers's assurance that the Obama administration will "move quickly to reform a weak and outdated regulatory system to better protect consumers, investors and businesses." This from the guy who, as President Bill Clinton's treasury secretary, pushed the deregulation legislation making the subsequent financial crimes of Wall Street legal. The "toxic derivatives" that we taxpayers are now forced to purchase from the Wall Street hustlers were deliberately shielded from all government regulation, thanks to the Commodity Futures Modernization Act, which Summers got Congress to pass in the closing days of the Clinton administration with the same urgency that he now pushes for the new Wall Street handout.

Back then, Summers was a disciple of Robert Rubin, who just last week resigned from his director's position at Citigroup, the financial conglomerate that grew to unmanageable and corrupt proportions thanks to the empowering legislation that Rubin initiated when he was Clinton's first treasury secretary. Rubin has been paid more than $115 million plus stock options at Citigroup, and despite his horrid record is a close Obama adviser. It is one of the great swindles of US financial history that Citigroup was bailed out with $45 billion in a deal that could eventually cost taxpayers an additional $269 billion to guarantee those toxic assets that would have been illegal if not for the legislation backed by Rubin and Summers.

How did Obama allow himself to become ensnared with the very same folks who are the most culpable? His treasury secretary nominee, Timothy Geithner, is another Rubin protégé, who, as head of the New York Fed, worked tirelessly with Rubin to concoct the Citigroup bailout. When candidate Obama gave his major economic address back on March 27, he couldn't have been clearer in condemning the deregulation that Rubin and Summers had engineered:

"Unfortunately, instead of establishing a twenty-first-century regulatory framework, we simply dismantled the old one--aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so, we encouraged a winner-take-all, anything-goes environment that helped foster devastating dislocations in our economy."

He was referring to the deregulation legislation that Summers hailed on the day that Clinton signed it into law as "a major step forward to the twenty-first century." Now Obama is relying on Summers to reverse a disaster of his own creation. It's like returning to the same surgeon who almost killed the patient in the first operation to once again cut open the body to repair the damage.

What we need is a second opinion.

Where is the openness and accountability that Obama promised? Why not pause for a few weeks for congressional hearings on how to spend the new money? We don't even know where the last batch went. On Monday, the Treasury Department finally agreed, and only after a subpoena threat, to turn over to Sen. Carl Levin and his Permanent Subcommittee on Investigations the ten secret contracts that it signed with top Wall Street firms in the first round of the bailout. Unfortunately, the subcommittee has no plans to make those contracts public, according to a Levin aide quoted in the New York Times.

That is outrageous. This is our money we're talking about. Why don't we get to read the fine print in what will end up being trillions of dollars in taxpayer obligations? Because we are suckers, that's why, and the folks who swindled us into this disaster can count on it.

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Naomi Klein: "In Praise of a Rocky Transition"

From the December 1 print edition of The Nation, and available online here. Also check out Naomi's interview with Amy Goodman on Democracy Now, posted at Alternet. Talking with Goodman, Klein points out that "It's not the banks that have been partially nationalized; it's Treasury that has been partially privatized by the very banks that created the crisis in the first place."

The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.

In a moment of high panic in late September, the US Treasury unilaterally pushed through a radical change in how bank mergers are taxed--a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "Treasury had no authority to issue the [tax change] notice."

Of equally dubious legality are the equity deals Treasury has negotiated with many of the country's banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, "Any use of these funds for any purpose other than lending--for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.--is a violation of the act." Yet this is exactly how the funds are being used.

Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.

Despite all of this potential lawlessness, the Democrats are either openly defending the administration or refusing to intervene. "There is only one president at a time," we hear from Barack Obama. That's true. But every sweetheart deal the lame-duck Bush administration makes threatens to hobble Obama's ability to make good on his promise of change. To cite just one example, that $140 billion in missing tax revenue is almost the same sum as Obama's renewable energy program. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

Yes, there is only one president at a time, but that president needed the support of powerful Democrats, including Obama, to get the bailout passed. Now that it is clear that the Bush administration is violating the terms to which both parties agreed, the Democrats have not just the right but a grave responsibility to intervene forcefully.

I suspect that the real reason the Democrats are so far failing to act has less to do with presidential protocol than with fear: fear that the stock market, which has the temperament of an overindulged 2-year-old, will throw one of its world-shaking tantrums. Disclosing the truth about who is receiving federal loans, we are told, could cause the cranky market to bet against those banks. Question the legality of equity deals and the same thing will happen. Challenge the $140 billion tax giveaway and mergers could fall through. "None of us wants to be blamed for ruining these mergers and creating a new Great Depression," explained one unnamed Congressional aide.

More than that, the Democrats, including Obama, appear to believe that the need to soothe the market should govern all key economic decisions in the transition period. Which is why, just days after a euphoric victory for "change," the mantra abruptly shifted to "smooth transition" and "continuity."

Take Obama's pick for chief of staff. Despite the Republican braying about his partisanship, Rahm Emanuel, the House Democrat who received the most donations from the financial sector, sends an unmistakably reassuring message to Wall Street. When asked on This Week With George Stephanopoulos whether Obama would be moving quickly to increase taxes on the wealthy, as promised, Emanuel pointedly did not answer the question.

This same market-coddling logic should, we are told, guide Obama's selection of treasury secretary. Fox News's Stuart Varney explained that Larry Summers, who held the post under Clinton, and former Fed chair Paul Volcker would both "give great confidence to the market." We learned from MSNBC's Joe Scarborough that Summers is the man "the Street would like the most."

Let's be clear about why. "The Street" would cheer a Summers appointment for exactly the same reason the rest of us should fear it: because traders will assume that Summers, champion of financial deregulation under Clinton, will offer a transition from Henry Paulson so smooth we will barely know it happened. Someone like FDIC chair Sheila Bair, on the other hand, would spark fear on the Street--for all the right reasons.

One thing we know for certain is that the market will react violently to any signal that there is a new sheriff in town who will impose serious regulation, invest in people and cut off the free money for corporations. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent USA Today/Gallup poll found that 60 percent of Americans strongly favor "stricter regulations on financial institutions," while just 21 percent support aid to financial companies.)

There is no way to reconcile the public's vote for change with the market's foot-stomping for more of the same. Any and all moves to change course will be met with short-term market shocks. The good news is that once it is clear that the new rules will be applied across the board and with fairness, the market will stabilize and adjust. Furthermore, the timing for this turbulence has never been better. Over the past three months, we've been shocked so frequently that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that clearly predates him, or fault him for honoring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories fade.

When transferring power from a functional, trustworthy regime, everyone favors a smooth transition. When exiting an era marked by criminality and bankrupt ideology, a little rockiness at the start would be a very good sign.

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Alternatives to the Bailout: Chris Hedges and Ralph Nader

On Wednesday we sent an alert to our members asking them to call Congress in support of an alternative bailout plan, featuring a $700 billion redevelopment bank to channel taxpayer money to the people who really need it and will make the best and most responsible, productive use of it: homeowners, small business owners, and the kind of economic sectors that grow our "common wealth," both socially and at the bottom line: including education, health care, and emerging energy technologies. (To see the alert and access the letter, follow this link.)

Here's Chris Hedges' take on the financial crisis, with Ralph Nader's alterantives throwing good money after bad. The article was first posted on Truthdig.org.

The lobbyists and corporate lawyers, the heads of financial firms and the crooks who control Wall Street, all those who spent the last three decades assuring us that government was part of the problem and should get out of the way, are now busy looting the U.S. treasury. They are also working feverishly inside the Democratic and Republican parties to blunt any effective regulatory reform as they pass on their distressed assets to us. The process is stunning in its hubris and mendacity, and two of the most potent enablers of this unprecedented act of corporate welfare are John McCain and Barack Obama.

The federal government, reeling backward from the meltdown of financial markets, is now considering taking responsibility for the bad assets of numerous financial companies. But if that intervention does not include robust new mechanisms of regulation, accountability and control we will see nothing more than a massive taxpayer-funded bailout of stockholders and the financial industry.

The rhetoric of the two presidential candidates about the crisis has been filled with pious outrage about the abuses of Wall Street and short on actual solutions. John McCain and Barack Obama know, after all, who funds their campaigns. The financial industry has given $22.5 million in the current election cycle to Obama and $19.6 million to McCain, according to the Center for Responsive Politics. And the financial industry has come around to collect. Two of the biggest financial groups in Washington, the Financial Services Roundtable and the Mortgage Bankers Association, have been holding meetings with McCain and Obama's economic advisers. They are working with the campaigns to protect the unregulated power of financial industries and at the same time to shift bad debt to taxpayers. The Wall Street Journal reported that the Financial Services Roundtable, made up of the very banks and firms that got us into this mess, has developed draft legislation. The Roundtable has called a meeting this week with the chief executives of more than 50 banks, brokerages and insurers. The three-day meeting includes private, closed-door sessions on Thursday with Obama economic adviser Ian Soloman and McCain adviser Ike Brannon. Those hovering around Obama-economists like Paul Volcker, Robert Rubin, Lawrence Summers and Laura Tyson-bear as much responsibility for the dismantling of government regulation as those advising McCain.

If the financial-services industry is able to suck us dry, our assets, from our homes to our retirement investments, will continue to tumble. Taxes will go up. Jobs will be lost. The grim economic indicators will get worse. The dollar, which has already lost about a third of its value against the euro, will continue to plummet. The rate of foreclosures, one in every 416 U.S. households in August, will skyrocket. Consumer spending, the engine of the U.S. economy, will continue to decline. Industrial production, which has fallen for three consecutive quarters, will fall further. Unemployment, which shot up to 6.1 percent in August from 5.7 percent in July, will get worse. These tremors presage an earthquake.

Ralph Nader, who has spent his adult life battling corporations, understands more about the rise of the corporate state and the steady fleecing of American citizens by corporations than anyone else in the country. The core of his message is that Republicans and Democrats are hostage to corporate power.

Nader warned in a letter to Congress on July 23 that the federal government's bank insurance fund may be insufficient to handle the developing crisis in the banking industry. The letter was, at the time, greeted with indifference and ridicule. Rep. Spencer Bachus, R-Ala., at a congressional hearing, mentioned the letter and assured those present that "Our banks are well capitalized, our deposit insurance fund is sound. There's absolutely no factual basis for saying that there's not money there to pay."

Two months later our federal bank insurance fund, which insures our bank deposits, is being swiftly emptied. The collapse of a huge commercial bank, such as Bank of America, which has assumed control of Merrill Lynch's losses with no real idea of how extensive these losses are, could see ordinary depositors wiped out.

Nader warned eight years ago that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) were about to tank like the savings and loan industry of the 1980s and '90s. Because his warnings were ignored, taxpayers today face losing billions of dollars to cover these bad debts.

Nader, in a letter to Securities and Exchange Commission Chairman Christopher Cox in 2006, criticized the exorbitant salaries of government-sponsored enterprise executives Jamie Gorelick, Daniel Mudd, Robert J. Levin and Timothy Howard. He noted in his letter that their financial incentives were in direct conflict with consumer financial security. A grave moral hazard was created by the accounting manipulations they sanctioned, Nader said. These manipulations benefited their personal wealth, yet there was no penalty for being caught.

Nader has called for an immediate halt to the increase in the national debt. He demands an end to corporate subsidies and unconditional taxpayer bailouts of corporations. And he has called for aggressive prosecution of corporate criminals.
"Given the contrast between the ‘free market' ideology of the Republicans and the corporate or state socialism that is their increasing practice, the time is ripe for full Congressional hearings next year on the organized power, greed and lack of regulation that is shaking the foundations of Wall Street," Nader said in prepared remarks delivered to editors at The New York Times' Washington bureau.

Nader has come up with 10 market reforms that he says need to be implemented immediately along with any bailout. These reforms are:
1. No bailouts without conditions and reciprocity in the form of stock warrants.
2. No more lobbying for any company that is bailed out.
3. No golden parachutes or get-out-of-jail-free cards for guilty executives.
4. No bailouts without public hearings.
5. Reduce the moral hazard in U.S. mortgage markets by introducing covered bonds for the majority of mortgage products, as is done in Western Europe. That gives institutions that finance mortgages an incentive to be prudent, because they cannot just unload them and wipe their hands clean of the liability, but are instead on the hook if the homeowner defaults.
6. Maintain neighborhood stability and housing security by passing a law with a sunset clause allowing below-median-value homeowners facing foreclosure the right to "rent to own" their homes at fair market value rates.
7. Avoid future housing bubbles by removing implicit government guarantees for new mortgages that exceed thresholds of greater than 15 to 20 times the annual fair market rent value of the home.
8. Make the Federal Reserve a Cabinet position, so it is accountable to Congress, as well as make sure all Federal Reserve Bank presidents are appointed by the president and answerable to Congress.
9. Reduce conflicts of interest by taking away power for auditor and rating agency selection from companies and placing it in the hands of the SEC to be administered on random assignment.
10. Implement a securities speculation tax, starting with derivatives, to deter casino-style capitalism.

You can vote for Obama or, if you are really into self-delusion, you can support McCain. But you owe it to yourself, even if you erroneously blame Nader for the election of George W. Bush, to remember these Nader reforms. Hold them up against the proposed reforms that will soon be issued by the McCain and Obama camps. If the Nader reforms are not adopted, if we bail out our corporate masters with hundreds of billions of tax dollars without instituting draconian market reform and launching criminal prosecution, we will be left to bear the cross of corporate malfeasance. We will pay for corporate crime. We will leave those who robbed us free to plunder.

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Politico.com: Hedge funds grab Wall Street spotlight

By Eamon Javers and Victoria McGraine
posted to Politico.com on Wednesday, September 24

This was the week the hedge funds ate Wall Street.

Even as the storied financial names vanish — Lehman Brothers, Merrill Lynch and Bear Stearns — they’re being quietly replaced by less familiar ones: Cerberus Capital Management, Citadel Investment Group, SAC Capital Partners and the other biggest hedge funds and private equity shops in the world.

The consensus in Washington is that the Wall Street meltdown means an inevitable resurgence of regulatory authority over the financial sector. But what it may actually portend is just the opposite: the emergence of an almost entirely unregulated financial sector that replaces investment banks that were more rigorously regulated.

It has now become very clear to market insiders that the $2.1 trillion hedge fund industry is larger in terms of capital than the remnants of the investment banking sector.

And in their understandable focus on the regulatory implications of the $700 billion bailout pending in Congress, policymakers may be missing a far more important fact: The very hedge funds that helped destroy the investment banking sector are the biggest winners in the financial world.

One man who knows much about the new emerging financial order is James G. Rickards. He works at the McLean, Va.-based market intelligence firm Omnis Inc., but he’s best-known as the former general counsel of Long Term Capital Management, the hedge fund whose late-1990s implosion sparked fears of a marketwide meltdown similar to the one happening now. That disaster was averted by the intervention of the large Wall Street players at the behest of the government. But Rickards learned a lot about meltdowns in the aftermath.

“I’m one of the people that other people call when the world is collapsing, because I’ve been there before,” he joked.

What Rickards sees now is a financial order that has been turned on its head. The irony, he says, is that the investment banks generally nurtured and encouraged the hedge fund sector’s emergence and came to largely depend on the fees that the hedge funds paid for their heavy trading activity.

“This is like people who think baby tigers are cute,” he explained. “And then one day they grow up and eat you.”

The world as Rickards sees it now is this: “The classic investment bank has gone away, and hedge funds are increasingly taking on the functions of the investment banks. Except they are unregulated.”

At the end, it was the hedge funds whose aggressive short selling killed off the investment banks. They profited in the demise of their predecessors.

To be sure, plenty of hedge funds invested in the subprime mortgage sector, and some may collapse as a result. Sept. 30 represents an important milestone within the hedge fund industry — it’s one of the dates on which investors can demand their money back from underperforming hedge funds.

The ones that have already seen a large number of so-called redemption letters asking for money back will be scrambling to raise cash. But those investors who withdraw money from suffering hedge funds will have to reinvest it someplace else. So it’s a good bet that the biggest hedge funds will be the biggest recipients of the new cash, making them ever more powerful in a world where capital is scarce.

On Capitol Hill, that means that hedge funds will go from niche player to dominant industry. Even before the meltdown, they were already flexing their political muscle: Senate Banking Committee Chairman Chris Dodd’s Senate and presidential campaigns this year have collected more from the three big hedge funds, Cerberus, Citadel and SAC, than they collected from the investment banks Lehman, Merrill and Bear Stearns. Employees of the three hedge funds gave Dodd $295,500; employees and political action committees of the three investment banks gave him $221,650.

The other big winners this week are the private equity sector, which generally buys companies or large stakes in companies and holds them for a long-term investment, and the global sovereign wealth funds, foreign-owned pools of trillions of dollars in capital.

The private equity industry is having little trouble raising new funds, according to market research. The industry raised a total of $323 billion in the first half of this year, matching fundraising from the same period in 2007, reported industry researchers at Preqin Ltd. Over the past year, the number of funds in the market increased by 40 percent.

Although sovereign wealth funds have shied away from pouring more money into the failing banks, analysts predict they will diversify their holdings with commercial real estate investments.

Private equity and sovereign wealth funds — once perceived as villains on Capitol Hill — could transform their political fortunes.

On Monday, the Federal Reserve increased the size of the stake private equity firms can hold in banks without being subject to heightened disclosure rules.

The Service Employees International Union, a longtime opponent of the industry, slammed the Fed’s decision.

“Federal regulators remain out of step with the rest of the country,” said SEIU President Andy Stern. “Allowing secretive, unregulated private equity firms to own a bigger stake and a greater say in the nation’s banks now will only ensure less stability for our financial institutions — and permit conflicts of interest in the future.”

Last year, Congress slammed private equity funds for their lack of transparency. Several legislative proposals attempted to curtail the industry by more than doubling the taxes paid by fund managers and publicly traded funds.

And sovereign wealth funds came under intense political scrutiny as lawmakers questioned high-profile investments the government-backed funds made in Western financial institutions.

Now, industry lobbyists anticipate a different environment on Capitol Hill.

“If you’re sitting on a big pile of money and people want it, they are probably going to think more of you,” said a private equity industry lobbyist.

Credit Unions Say They’ve Distinguished Themselves
Credit unions could also come out on top once the dust settles.

Representatives from both top credit union trade associations say there’s wide recognition on Capitol Hill that their members did not engage in the bad lending practices and now-toxic mortgage products at the heart of the nation’s financial crisis and have weathered the storms in a strong and secure position.

“I think we’ve distinguished ourselves in this climate as good actors,” said John Magill, senior vice president of legislative affairs for the Credit Union National Association. “We’re still lending. We are absolutely in business, and our assets are protected.”

In the wake of the announcement of the massive financial bailout, lobbyists have been busy making sure that credit unions would have access to the rescue “even if we don’t need access to it necessarily,” said Ryan Donovan, the association’s vice president of legislative affairs.

Most credit unions won’t need federal help, said the association’s chief economist, Bill Hempel. But members in the hard-hit states of California, Nevada, Florida and Arizona — where home prices have fallen as much as 30 percent — have suffered “collateral damage” from the larger market and may need a lift.

But in the longer run, the industry’s strength in the face of financial meltdown could give a boost to some credit union priorities.

Along with pushing for credit union access to the bailout, industry lobbyists continue to talk to lawmakers about how credit unions can be part of the solution, said Brad Thaler, director of legislative affairs for the National Association of Federal Credit Unions. And that could include passage of the industry’s long-sought increase in the amount of business lending that credit unions can undertake, Thaler suggested.

But that increase and several other regulatory changes have been fiercely fought by the industry’s arch nemesis, the banking industry.

Once the bailout is passed, the economy will remain weak, Donovan said, and “Congress is going to need to look for ways to help Main Street recover.” Allowing credit unions to lend to small businesses — when other institutions are cutting back — would be one good option, he said.

“Credit unions were created in the aftermath of the Depression to help the economy recover, so it makes perfect sense that, coming out of this situation, Congress and American consumers should look to credit unions to help them.”

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Greider: Paulson bailout plan a historic swindle

by William Greider, The Nation

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses--many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public--all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics--exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: "The joyous reception from Congressional Democrats to Paulson's latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington's one-party government and the Sell Side investment banks."

A kindred critic, Josh Rosner of Graham Fisher in New York, defined the sponsors of this stampede to action: "Let us be clear, it is not citizen groups, private investors, equity investors or institutional investors broadly who are calling for this government purchase fund. It is almost exclusively being lobbied for by precisely those institutions that believed they were 'smarter than the rest of us,' institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse."

Let me be clear. The scandal is not that government is acting. The scandal is that government is not acting forcefully enough--using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets. Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system. The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times. There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.

A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system. Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own--cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Only with these conditions, and some others, should the federal government be willing to take ownership--temporarily--of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets--property, houses, shopping centers--that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value--not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.

Despite what the pols in Washington think, the RTC bailout was also a Wall Street scandal. Many of the financial firms that had financed the S&L industry's reckless lending got to buy back the same properties for pennies from the RTC--profiting on the upside, then again on the downside. Guess who picked up the tab? I suspect Wall Street is envisioning a similar bonanza--the chance to harvest new profit from their own fraud and criminal irresponsibility.

If government acts responsibly, it will impose some other conditions on any broad rescue for the bankers. First, take due bills from any financial firms that get to hand off their spoiled assets, that is, a hard contract that repays government from any future profits once the crisis is over. Second, when the politicians get around to reforming financial regulations and dismantling the gimmicks and "too big to fail" institutions, Wall Street firms must be prohibited from exercising their usual manipulations of the political system. Call off their lobbyists, bar them from the bribery disguised as campaign contributions. Any contact or conversations between the assisted bankers and financial houses with government agencies or elected politicians must be promptly reported to the public, just as regulated industries are required to do when they call on government regulars.

More important, if the taxpayers are compelled to refinance the villains in this drama, then Americans at large are entitled to equivalent treatment in their crisis. That means the suspension of home foreclosures and personal bankruptcies for debt-soaked families during the duration of this crisis. The debtors will not escape injury and loss--their situation is too dire--but they deserve equal protection from government, the chance to work out things gradually over some years on reasonable terms.

The government, meanwhile, may have to create another emergency agency, something like the New Deal, that lends directly to the real economy--businesses, solvent banks, buyers and sellers in consumer markets. We don't know how much damage has been done to economic growth or how long the cold spell will last, but I don't trust the bankers in the meantime to provide investment capital and credit. If necessary, Washington has to fill that role, too.

Finally, the crisis is global, obviously, and requires concerted global action. Robert A. Johnson, a veteran of global finance now working with the Campaign for America's Future, suggests that our global trading partners may recognize the need for self-interested cooperation and can negotiate temporary--maybe permanent--reforms to balance the trading system and keep it functioning, while leading nations work to put the global financial system back in business.

The agenda is staggering. The United States is ill equipped to deal with it smartly, not to mention wisely. We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington, even if only to share their outrage.

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Klein: Now is the time to resist Wall Street's Shock Doctrine

Published on Tuesday, September 23, 2008 by the Huffington Post

by Naomi Klein

I wrote The Shock Doctrine in the hopes that it would make us all better prepared for the next big shock. Well, that shock has certainly arrived, along with gloves-off attempts to use it to push through radical pro-corporate policies (which of course will further enrich the very players who created the market crisis in the first place...).

The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to "return to a Reagan-Thatcher policy of economic growth through fundamental reforms." In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow "competition" (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling.

It would be a grave mistake to underestimate the right's ability to use this crisis -- created by deregulation and privatization -- to demand more of the same. Don't forget that Newt Gingrich's 527 organization, American Solutions for Winning the Future, is still riding the wave of success from its offshore drilling campaign, "Drill Here, Drill Now!" Just four months ago, offshore drilling was not even on the political radar and now the U.S. House of Representatives has passed supportive legislation. Gingrich is holding an event this Saturday, September 27 that will be broadcast on satellite television to shore up public support for these controversial policies.

What Gingrich's wish list tells us is that the dumping of private debt into the public coffers is only stage one of the current shock. The second comes when the debt crisis currently being created by this bailout becomes the excuse to privatize social security, lower corporate taxes and cut spending on the poor. A President McCain would embrace these policies willingly. A President Obama would come under huge pressure from the think tanks and the corporate media to abandon his campaign promises and embrace austerity and "free-market stimulus."

We have seen this many times before, in this country and around the world. But here's the thing: these opportunistic tactics can only work if we let them. They work when we respond to crisis by regressing, wanting to believe in "strong leaders" -- even if they are the same strong leaders who used the September 11 attacks to push through the Patriot Act and launch the illegal war in Iraq.

So let's be absolutely clear: there are no saviors who are going to look out for us in this crisis. Certainly not Henry Paulson, former CEO of Goldman Sachs, one of the companies that will benefit most from his proposed bailout (which is actually a stick up). The only hope of preventing another dose of shock politics is loud, organized grassroots pressure on all political parties: they have to know right now that after seven years of Bush, Americans are becoming shock resistant.

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Critics see bailout as massive blank check

by Adrianne Appel
Published on Tuesday, September 23, 2008 by Inter Press Service

BOSTON - U.S. activist networks have shifted into high gear to protest the secretive 700-billion-dollar plan to bail out Wall Street, which they say is unfair to average citizens and a giveaway to banks.

"We're outraged," Gael Murphy, founder of Code Pink, told IPS. "We want to see the people who caused this problem and profited from it, pay for it," said Murphy, echoing the sentiment of many activists, and people in general, according to weekend polls.

The skeletal, three-page plan was fielded Friday by U.S. Treasury Secretary Henry Paulson, Jr. and would grant him the authority to purchase billions in bad debts on behalf of the U.S. public, now held by U.S. and foreign banks.

Paulson and Ben Bernanke, chairman of the Federal Reserve Board, say the U.S. must purchase the debts in order to keep the banking system from certain collapse.

The plan is now in Congress and may be approved as early as Friday, when lawmakers want to adjourn to go home and campaign for the November elections. Reports Monday indicated that lawmakers may alter the plan somewhat to include some oversight of the spending, and restrict bank CEO pay, which can stretch into the hundreds of millions.

Paulson, a former CEO of Goldman Sachs who owns $523.5 million in that company's stock, has said he is opposed to placing limits on bank CEO compensation.
While the lawmakers and finance officials met behind closed doors Monday, the Dow Jones industrial average plummeted 372 points, and the price of oil shot up to 120 dollars per barrel. The Group of Seven finance ministers announced that they would keep a close eye on international markets and intervene as necessary to protect the international banking system.

Paulson's proposal does not describe which companies would benefit from his plan and by how much, and calls for no oversight.

"The lobbyists for the banking community are really out in force trying to get as much as possible for themselves," Dorene Isenberg, an economist and chair of the Economics Department at University of Redlands, in California, told IPS.

Code Pink and other groups organised throughout the weekend via phone, internet and late-night meetings, then hit the ground Monday morning and headed straight for the U.S. Treasury building. They made it there by rush hour.

"Stop Paulson's Plunder," blared just one of the large banners they held in front of the building. "Protect Main Street, not Wall Street," said another.

Members of Code Pink then went up to Capitol Hill, to encourage lawmakers to help homeowners facing foreclosure, cut bank CEO pay and boost the economy for the long term. The activists visited the leading banking lawmakers, Democrats Sen. Chris Dodd and Rep. Barney Frank.

Frank told the group of seven activists that he wants the plan to include protections for homeowners facing foreclosure, and to restrict bank CEO salaries, among other provisions, Murphy said.

Frank, known for his quick whit and sharp tongue, "became quite offended" when the activists explained they were visiting Frank out of concern that the Democrats not give in to pressure from lobbyists and the administration, as they have on other issues, Murphy said.

"He didn't like that," she said.

On Thursday, it's Wall Street's turn to hear directly from activists, when a large group from Move On, True Majority, Greenpeace, Code Pink, United for Peace and Justice and others will protest in New York City.

Other groups, like The Backbone Campaign, have already organised a petition drive on their website, calls to Congress and a conference call between activists and progressive economists to answer questions about the complex, near-meltdown of the U.S. economy.

"This is a 700-billion-dollar blank cheque for Henry Paulson to use any way he wants," said Dean Baker, co-director of the Centre for Economic and Policy Research, during one such call.

Any bailout should be overseen by a board, not just Paulson, and help should be very targeted to those institutions that absolutely cannot help themselves, and that are necessary to keep the economy active, Baker said. The U.S. should insist that CEO pay be trimmed to 2 million dollars and that companies hand over part of any future profits as payback to taxpayers.

A payback is "a fine idea economically" but politically is very unlikely, Isenberg said.

Isenberg said it's possible that the added 700-billion-dollar debt will drag down the U.S. dollar, depending on how much confidence foreign investors maintain in the U.S. economy.

"It might lead to a further decline, that's truly possible," she said.

According to Doug Henwood, editor of Left Business Observer, the bailout will not shore up the U.S. economy. The economy is fundamentally weak because the average U.S. worker's standard of living shriveled during the past decade, and at the same time the markets are not creating enough good jobs.

Meanwhile, CEO salaries grew to excess and their income taxes were reduced, especially by the George W. Bush administration.

"We can talk about derivatives but there is a fundamental polarisation of income and wealth that contributed to this meltdown," Henwood said. "We need to get the incomes of the middle class and bottom up, by taking from the incomes at the top."

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Bernie Sanders: Bailout Transfers Wealth - Upward

by John Nichols, posted on CommonDreams.org, September 21, 2008

Democratic presidential candidate Barack Obama, like rival John McCain, has yet to take a stand one way of the other on the proposal to have U.S. taxpayers bail out the worst players in the U.S. financial system with a scheme to buy up $700 billion worth of bad loans.

Obama calls McCain "the great deregulator" and warned that the Republican would do to the health care system what had been done to the banking.

McCain's campaign called Obama a "directionless driver" on the economy.

Obama was for helping Wall Street and Main Street, which was better than just helping Wall Street... but not much, when you consider that Main Street rarely wins these wrestling matches. McCain was for keeping "people in their homes and (safeguarding) the life savings of all Americans by protecting our financial system and capital markets," which is this week's variation on the "sound economy" in "crisis" dichotomy of last week.

But neither candidate took a clear stand on the proposal that's being placed on the table.

So what should the contenders -- especially Obama -- be saying?

How about borrowing a page from Vermont Senator Bernie Sanders, who served as a member of the House banking committee before his election to the Senate, where he is now a member of the budget committee.
Sanders actually understands how the current crisis got started.

And the independent senator understands that what is being proposed by the Washington and Wall Street mandarins who got us into this mess as a fix is actually bad policy on steroids.

Here's what Sanders says -- and what Obama and the Democrats should be saying:
For years, as a member of the House Banking Committee and now as a member of the Senate Budget Committee, I have heard the Bush Administration tell us how "robust" our economy was and how strong the "fundamentals" were. That was until a few days ago. Now, we are being told that if Congress does not act immediately and approve the $700 billion Wall Street bailout proposal these "free marketers" have just written up, there will be an unprecedented economic meltdown in the United States and an unraveling of the global economy.

This proposal as presented is an unacceptable attempt to force middle income families (and our children) to pick up the cost of fixing the horrendous economic mess that is the product of the Bush Administration's deregulatory fever and Wall Street's insatiable greed. If the potential danger to our economy was not so dire, this blatant effort to essentially transfer $700 billion up the income ladder to those at the top would be laughable.

Let us be clear. If the economy is on the edge of collapse we need to act. But rescuing the economy does not mean we have to just give away $700 billion of taxpayer money to the banks. (In truth, it could be much more than $700 billion. The bill only says the government is limited to having $700 billion outstanding at any time. By selling the mortgage backed assets it acquires -- even at staggering losses -- the government will be able to buy even more resulting is a virtually limitless financial exposure on the part of taxpayers.) Any proposal must protect middle income and working families from bearing the burden of this bailout.

I have proposed a three part plan to accomplish that goal which includes a five-year, 10% surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall. Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.

Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.

Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don't freeze in the winter or die because they lack access to primary health care.

Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies' executives.

These are the last days of the Bush Administration, the most dishonest and incompetent in modern American history. It is imperative that, at this important moment, Congress stand up for the middle class and for fiscal integrity. The future of our country is at stake.
Read the original posting here.

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Naomi Klein on the Shock Doctrine

Naomi Klein's The Shock Doctrine: The Rise of Disaster Capitalism is out in paperback this month. She spoke with Amy Goodman about our current economic "perfect storm" and the potential for pro-multinational economic restructuring on Democracy Now! yesterday. Here's a very brief excerpt from a discussion of how corporate-controlled policymaking is failing people and the planet on every front.

There really is a kind of a tsunami of shocks facing not just the economy but people's lives, people's real lives. They're all intersecting. They're making each other worse. And ...this is what I mean by "the shock doctrine." There is a clear political strategy, and has been for several decades, to exploit these moments when people are desperate for quick-fix solutions and more inclined to believe in a kind of a magical cure, to push through very, very unpopular policies that don't actually solve the crisis at hand, that don't actually help people, but are incredibly profitable for multinational corporations.

You can also read a transcript at Alternet, here.

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Walden Bello: Doha deal on services poses real perils

From the Bangkok Post

Desperate to clinch a new global trade deal, World Trade Organisation chief Pascal Lamy is planning to convene a "mini-ministerial" meeting in the third week of July.

The aim of the meeting is to come up with agreements to liberalise trade in agriculture, industry, and services which have been the focus of the so-called Doha Round of WTO negotiations that have dragged on since 2001.

Developing country governments have been rightly concerned about agreeing to texts which promise illusory reductions in agricultural subsidies in the European Union and United States and require them to cut their industrial tariffs proportionally more than the developed countries. They should also not allow themselves to be snookered into a bad agreement on services, which include such vital activities as the provision of water, energy, and financial intermediation.

While global attention has focused on the talks on agricultural subsidies and industrial tariffs, the US and EU have made it clear that they will not settle for a trade package that does not include services.

As US Trade Representative Susan Schwab bluntly stated in a recent opinion piece, Washington "will not support a Doha package unless it includes an ambitious outcome on services that delivers commercially meaningful results".

While Ms Schwab portrays the services talks as the poor cousin of the agriculture and industry negotiations, an equally possible outcome is a services agreement unaccompanied by deals in industrial tariffs and agriculture. With the North-South polarisation in agriculture and industry, salvaging Doha with a deal in services, which are said to account for 50-60% of economic activity in most developing countries, might be an attractive option to the EU and US.

The General Agreement on Trade in Services (Gats) requires countries to grant foreign service providers the same treatment as local firms. Developing countries are reluctant to do this, however, because of their current lack of capacity to regulate transnational businesses. Their fears have been fanned by troubles now in the global financial system, which are traceable to the absence of global regulation of developed country financial operators.

While financial services are just one of many services covered by Gats, the US and EU have made a liberalised financial sector their main demand on developing countries. It has been revealed, for instance, that the EU has demanded that some developing countries eliminate regulations that cover the activities of hedge funds, the financial groupings that are said to have triggered the collapse of the baht in 1997.

The EU has also demanded that Mexico open up its market to trade in derivatives, the slippery financial instruments that have played such a key role in the current financial chaos.

Most developing countries welcome foreign capital, but they have learned the hard way that a strong foreign financial presence demands a strong regulatory regime tailored to a particular country's needs and capacities.

It was the indiscriminate elimination of capital controls across the region at the behest of the International Monetary Fund and the US Treasury Department that brought on the devastating Asian financial crisis. With practically all capital controls lifted and investment rules liberalised, some US$100 billion flowed into the key Asian economies between 1993 and 1997, with the money gravitating toward areas of high and quick return, like the stock market and real estate.

With few controls on where the funds went, over-investment soon swamped the stock and housing markets, causing prices to collapse and triggering follow-on dislocations in the exchange rate, the balance of payments, and the balance of trade. Gripped by panic, speculators scampered toward the exit. With both entry and exit rules liberalised, there was no way for governments - except for Malaysia, which defied the IMF and imposed capital controls - to stop the stampede, and the $100 billion that fled the region in a few short weeks in the summer of 1997 brought economic growth to a screeching halt from Korea all the way down to Indonesia.

After the Asian financial crisis, the Argentine financial collapse, and the dot.com crash of 2000-2002, all of which were caused by speculative bubbles that developed owing to lack of financial regulation, one would have thought that developed country authorities would put the emphasis on seriously regulating the activities of global financial actors.

Global finance, however, resisted any move toward effective regulation. While there were calls for controls on proliferating financial instruments such as derivatives, these got nowhere. Assessment and regulation of derivatives were to be left to market players who supposedly had access to sophisticated quantitative "risk assessment" models that were being developed.

Having been burned by the consequences of financial deregulation, many developing country governments were not surprised when "self-regulation" led to the massive housing bubble whose bursting has brought the global financial system to the edge of collapse.

One of the stock scenarios of the old western movies was that of a train picking up speed towards a collision with another train as the lifeless hand of the engineer, already shot dead by outlaws, remained pressed on the accelerator. Current developments in global finance are reminiscent of this scene.

A global consensus is forming around strongly re-regulating the financial sector. But in disregard of this emerging consensus and the financial chaos around them, developed country negotiators at the WTO, much like the dead hand of the engineer, continue to press developing countries for a services agreement that would drastically liberalise their financial sectors!

The developing countries should steer clear of the train wreck that will certainly ensue from the US and EU's determination to pursue global financial liberalisation at any cost. They must not agree to a services deal that would compromise their ability to effectively regulate financial and other services.

Just as they must say no to agricultural and industrial tariff agreements loaded down with inequitable conditions, they must also not be party to a services agreement that would have no other effect but to continually drag them into the terrifying maelstroms of unregulated global finance.

Walden Bello is a professor of sociology at the University of the Philippines, and senior analyst at Focus on the Global South, a research institute at Chulalongkorn University in Bangkok.

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Our Drinkable Water Supply Is Vanishing

By Tara Lohan, AlterNet. Posted October 11, 2007.

http://www.alternet.org/environment/64948?page=entire

Thanks to global warming, pollution, population growth, and privatization, we are teetering on the edge of a global crisis.

Albert Szent-Gyorgyi, the Hungarian biochemist and Nobel Prize winner for medicine once said, "Water is life's matter and matrix, mother and medium. There is no life without water."

We depend on water for survival. It circulates through our bodies and the land, replenishing nutrients and carrying away waste. It is passed down like stories over generations -- from ice-capped mountains to rivers to oceans.

Historically water has been a facet of ritual, a place of gathering and the backbone of community.

But times have changed. "In an age when man has forgotten his origins and is blind even to his most essential needs for survival, water has become the victim of his indifference," Rachel Carson wrote.

As a result, today, 35 years since the passage of the Clean Water Act, we find ourselves are teetering on the edge of a global crisis that is being exacerbated by climate change, which is shrinking glaciers and raising sea levels.

We are faced with thoughtless development that paves flood plains and destroys wetlands; dams that displace native people and scar watersheds; unchecked industrial growth that pollutes water sources; and rising rates of consumption that nature can't match. Increasingly, we are also threatened by the wave of privatization that is sweeping across the world, turning water from a precious public resource into a commodity for economic gain.

The problems extend from the global north to the south and are as pervasive as water itself. Equally encompassing are the politics of water. Discussions about our water crisis include issues like poverty, trade, community and privatization. In talking about water, we must also talk about indigenous rights, environmental justice, education, corporate accountability, and democracy. In this mix of terms are not only the causes of our crisis but also the solutions.

What's gone wrong?

As our world heats up, as pollution increases, as population grows and as our globe's resources of fresh water are tapped, we are faced with an environmental and humanitarian problem of mammoth proportions.

Demand for water is doubling every 20 years, outpacing population growth twice as fast. Currently 1.3 billion people don't have access to clean water and 2.5 billion lack proper sewage and sanitation. In less than 20 years, it is estimated that demand for fresh water will exceed the world's supply by over 50 percent.

The biggest drain on our water sources is agriculture, which accounts for 70 percent of the water used worldwide -- much of which is subsidized in the industrial world, providing little incentive for agribusiness to use conservation measures or less water-intensive crops.

This number is also likely to increase as we struggle to feed a growing world. Population is expected to rise from 6 billion to 8 billion by 2050.

Water scarcity is not just an issue of the developing world. "Twenty-one percent of irrigation in the United States is achieved by pumping groundwater at rates that exceed the water's ability to recharge," wrote water experts Tony Clarke of the Polaris Institute and Maude Barlow of the Council of Canadians in their landmark water book Blue Gold: The Fight to Stop the Corporate Theft of the World's Water.

The Ogallala aquifer -- the largest in the North America and a major source for agriculture stretching from Texas to South Dakota -- is currently being pumped at a rate 14 times greater than it can be replenished, they wrote. And, across the country, "California's Department of Water Resources predicts that, by 2020, if more supplies are not found, the state will face a shortfall of fresh water nearly as great as the amount that all of its cities and towns together are consuming today," add Clarke and Barlow.

Demand is outstripping supply from the rainy Seattle area to desert cities like Tucson and Albuquerque. And from Midwest farming regions to East Coast cities.

The crisis is also worldwide, most noticeable in Mexico, the Middle East, China and Africa.

As population growth, development, consumption and pollution take its toll on our water resources, the ability to fight this problem has been further complicated by the spread of neoliberalism. The same ideas that have resulted in the booty of private contracts being doled out in Iraq also have contributed greatly to our water crisis. Neoliberalism is the belief in "economic liberalism," which espoused that government control over the economy was bad. It opened up the commons to commodification and let corporations privatize what once belonged to the public.

In 2000 Fortune magazine printed this telling statement: "Water promises to be to the 21st century what oil was to the 20th century; the precious commodity that determines the wealth of nations."

It has oft been expressed that the next resource wars will not be over oil -- or energy at all -- but over water. As the idea of neoliberalism, proliferated by institutions like the World Bank and the IMF, spread, the public sector has become dangerously privatized. And it may not be the wealth of nations on the line -- but the wealth of corporations.

A senior executive at a subsidiary of Vivendi, the world's largest water controller summed it up, "Water is a critical and necessary ingredient to the daily life of every human being, and it is an equally powerful ingredient for profitable manufacturing companies."

But when private companies control water resources, people's needs for survival are pushed aside in place of the bottom line. In Africa, an estimated 5 million people die each year for lack of safe drinking water. And yet Africa, with its many cash-strapped countries, is targeted by multinationals that force governments to turn over their public water systems in exchange for promises of debt relief.

When corporations control water, rates go up, services go down, and those who can't afford to pay are forced to drink unsafe water, risking their lives. This has happened across the world -- in South Africa, in Bolivia, in the United States.

This same philosophy of corporate control drives the construction of dams, which have displaced an estimated 80 million people worldwide. In India alone, over 4,000 dams have submerged 37,500 square kilometers of land and forced 42 million people from their homes.

Multinationals looking to cash in on the water business have also made giant inroads in selling bottled water in richer countries. Expensive marketing campaigns convince people that their tap water is unsafe to drink. Then, companies like Coke and Pepsi bottle municipal tap water and others like Nestle pilfer spring water from rural communities and resell it at huge profits.

The water crisis may be growing, but so is resistance to privatization as communities are fighting back against the corporate control of the world's most vital resource.

How we can fix it

We need water to survive, not just as individuals, but as communities. Author John Thorson put it perfectly when he said, "Water links us to our neighbor in a way more profound and complex than any other."

Just ask the people of the Klamath Basin of Southern Oregon and Northern California. They've experienced water wars for the last hundred years that have pitted neighbor against neighbor and tribal member against farmer.

Native American tribes in the region -- the Klamath, Hoopa, Karuk, and Yaruk -- with priority rights to water, have struggled with farmers over limited water resources. Nature has been unable to deliver as much water as the government has promised to farmers and tribal members, as well as downstream fishermen. With not enough water in the river, either crops have failed or fish have died, creating community strife and economic hardship.

But in the last year, things have begun to change. These groups have formed a coalition to save the river they all depend on for survival. They are sitting at the same table and finally beginning to hear from each other about the needs of farmers, the value of subsistence economies, the history of families on the river, the ceremony that comes with the salmon runs, the rights of nature.

Together, this unlikely alliance is taking on PacifiCorp, one of the largest multinational power companies, whose out-of-date dams are threatening the ecosystem and the economy of the region.

And just over the peak of Mount Shasta another community and tribe are battling to save their spring water from Nestle, which hopes to tap the community's greatest asset for its own wealth.

The people of the small town of McCloud and the Winnemem Wintu tribe are fighting back, and they are not alone. Across the country a backlash to the bottled-water business is gaining steam. Fancy restaurants like California's Chez Panisse, Incanto, and Poggio and New York's Del Posto have gotten on board. San Francisco has also led the way among municipalities that are beginning to cancel their bottled water contracts, understanding the great harm the industry does to the environment and communities.

It is not just bottled water that has posed a problem, but private companies buying out municipal water systems and then raising rates and lowering services. One the best examples is Stockton, Calif., which went private in the largest "public-private partnership" in the West. Since 2001 the people of Stockton have been fighting for control of their water against a multinational consortium.

The case gained international attention when it was featured in the film and book Thirst: Fighting the Corporate Theft of Our Water. The public finally won out in July, when the city council voted to get rid of the 20-year contract and send the corporation packing.

The citizen groups that have been working to defend their communities are being supported by many national and international groups pushing back against corporate control and empowering people -- groups like Tony Clarke's Polaris Institute in Canada, which has focused on public education and research around issues like the privatization of water services, bulk water exports, water security and bottled water.

In the United States, Corporate Accountability International is encouraging people to drink tap water over bottled water with their "Think Outside the Bottle Campaign." They are working to educate the public, as well as city governments and businesses, with great success.

And today, on the 35th anniversary of the Clean Water Act, Food & Water Watch, is sponsoring a National Call-In Day for action on clean water to urge representatives to support the creation of a clean water trust fund, "which is a long-term, sustainable, and reliable source of funding to upgrade and improve our public water systems." The organization has been working to protect public water systems from private takeover and to help fund municipal water so that all residents have clean, safe and affordable water.

The movement extends across the country and the world as people are also rebelling against the corporate takeover of their municipal water systems -- in California, in Ghana, in Brazil, in Canada, in France, in Indonesia -- and the list goes on.

Opposition to corporate control is rooted in the belief that water is part of the commons. Everyone should have access to clean water, regardless of their level of income or their country's international standing.

In order to ensure that all people have access to clean, affordable water, we need to make some changes.

Some see technology as the necessary fix -- or at least a step in the right direction. As the BBC reports:

New technology can help, however, especially by cleaning up pollution and so making more water useable, and in agriculture, where water use can be made far more efficient. Drought-resistant plants can also help.

Drip irrigation drastically cuts the amount of water needed, low-pressure sprinklers are an improvement, and even building simple earth walls to trap rainfall is helpful.

Some countries are now treating waste water so that it can be used -- and drunk -- several times over.

Desalinization makes sea water available, but takes huge quantities of energy and leaves vast amounts of brine.

But many warn against relying on a "techno-fix" to solve our problems.

Water experts argue that we need to reduce consumption on individual and community levels. Author Tony Clarke advises working with those closest to the problems, such as helping farmers to develop a more sustainable agriculture system. And the same goes for industry. Looking to the folks who have been on the land longest, like indigenous and traditional cultures, will also help us learn how an ecosystem works.

And experts say that we also need to start developing a comprehensive water policy that goes from the regional to international level. The World Bank and United Nations have the capability to change the designation of water from a human need to a human right, ensuring that corporations can't exploit this resource for economic gain, as Clarke and Barlow advocate for in Blue Gold.

Governments should be investing in their people, in conservation and in the infrastructure that we depend on to access clean, affordable water.

It ultimately comes down to an issue of democracy. "We came to see that the conflicts over water are really about fundamental questions of democracy itself: Who will make the decisions that affect our future, and who will be excluded?" wrote Alan Snitow, Deborah Kaufman and Michael Fox in their recent book Thirst. "And if citizens no longer control their most basic resource, their water, do they really control anything at all?"

See more stories tagged with: water, water privatization, clean water, clean water act, bottled water, nestle, coke, pepsi

Tara Lohan is a managing editor at AlterNet.

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