Prof Radhika Balakrishnan and Prof. Diane Elson / US HRNetwork & Global Research & Barry Grey / WSWS & Information Clearinghouse – 2008-11-03 22:43:13
The US Financial Crisis Is a Human Rights Issue
Prof Radhika Balakrishnan and Prof. Diane Elson / US HRNetwork & Global Research
(October 28, 2008) — The US financial crisis and the $700 billion rescue plan do not simply involve huge monetary costs. Both the crisis and the proposed bailout involve violations of the human rights of millions of Americans. Any short- and long-term solutions to the problems must take human rights into account.
The Universal Declaration of Human Rights, crafted under the leadership of Eleanor Roosevelt in the aftermath of the great depression and the Second World War and signed by the US, declares that everyone has inalienable political and civil and economic and social rights. Governments have obligations to respect, protect and fulfill those human rights, which include the right to an adequate standard of living, the right to housing, and the right to education, as well as the right to freedom of peaceful assembly and association.
The obligation to respect requires that states refrain from interfering with the enjoyment of human rights. The obligation to protect requires that governments prevent violations of human rights by third parties. The obligation to fulfill requires that governments take appropriate legislative, administrative, budgetary, judicial and other measures towards the full realization of human rights. The system of international human rights law provides a framework through which governments can be held accountable for their discharge of these obligations.
While neither the financial crisis nor the rescue plan violates the obligation of the US government to respect human rights, the former reflects a lack of compliance with the obligation to protect and the latter with the obligation to fulfill.
The US government has been complicit in the emergence of the financial crisis. It deregulated the financial sector, failing to provide adequate protection for Americans against violations of their human rights by financial institutions. It failed to provide sprotection for Americans needing safe assets to achieve an adequate standard of living in their retirement, and good-quality affordable mortgages to purchase housing.
The US government allowed the financial sector to become dominated by speculation, creating an unstable house of cards that was bound to collapse. Financial institutions have now lost all confidence and trust in one another, and are failing to provide the credit required for businesses to produce and workers to be paid and houses to be bought and sold. Americans have been left unprotected against the loss of their businesses, homes and jobs; against the falling value of their savings, and homes; against the falling value of revenue from property taxes, leading directly to a decrease in the availability of resources for public education.
Belatedly, the government has awoken to the idea that it has some responsibility. But neither legislators nor the administration have proposed to re-regulate the financial sector in order to end the abuses that have violated the human rights of Americans. Instead, they have proposed to divert resources which could have been used to fulfill human rights to bail out the financial sector.
Think of what could be done to fulfill human rights with $700 billion – improvements in public education, support for job creation, support for homeless people and health care for all to name a few. The financial sector does not need a bailout, but rather thorough reform and restructuring. It is legitimate to spend public money to reconstruct the financial sector, if that is done in a way that serves to fulfill human rights through regenerating the flow of productive, rather than speculative, credit that are essential to prevent a recession. The $700 billion plan, even as amended by the Senate, does not do that.
As several respected economists and financial commentators have been explaining, the government should not be spending money to buy the bad debts of banks; instead, it should be organizing a restructuring of the capital of banks in ways that make those who have profited from financial deregulation bear the bulk of the costs, and give the public more control and oversight over what banks do through forms of social ownership.
Better regulation, control and oversight of banks is not a curtailment of rights and freedoms, it is an expansion of rights and freedoms: the rights and freedoms of ordinary Americans to make a decent living, have a home, have savings that won’t disappear, get a good education – freedoms that are now in jeopardy. When the supposed freedoms of a few threaten to destroy the freedoms of the many, it is time to hold the US government accountable to comply with obligations it undertook in signing the Universal Declaration of Human Rights.
Radhika Balakrishnan is a Professor of Economics and International Studies at Marymount Manhattan College and chairs the board of the US Human Rights Network. Diane Elson is a Professor of Economics and Sociology, Human Rights Center, Essex University.
© Copyright Radhika Balakrishnan, www.ushrnetwork.org, 2008
The “Dirty Little Secret” of the US Bank Bailout
Barry Grey / WSWS & Information Clearinghouse
(27 October 2008) — In an unusually frank article published in Saturday’s New York Times, the newspaper’s economic columnist, Joe Nocera, reveals what he calls “the dirty little secret of the banking industry” — namely, that “it has no intention of using the [government bailout] money to make new loans.”
As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers–the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks.
Nocera cites an employee-only conference call held October 17 by a top executive of JPMorgan Chase, the beneficiary of $25 billion in public funds. Nocera explains that he obtained the call-in number and was able to listen to a recording of the proceedings, unbeknownst to the executive, whom he declines to name.
Asked by one of the participants whether the $25 billion in federal funding will “change our strategic lending policy,” the executive replies: “What we do think, it will help us to be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling.”
Referring to JPMorgan’s recent government-backed acquisition of two large competitors, the executive continues: “And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way, and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”
As Nocera notes: “Read that answer as many times as you want–you are not going to find a single word in there about making loans to help the American economy.”
Later in the conference call the same executive states, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.”
“It is starting to appear,” the Times columnist writes, “as if one of the Treasury’s key rationales for the recapitalization program–namely, that it will cause banks to start lending again–is a fig leaf…. In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation.”
Early this month, he explains, “in a nearly unnoticed move,” Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.
Paulson and other Treasury officials have made public statements calling on the banks that receive public funds to use them to increase their lending activities. That, however, is for public consumption. The bailout program imposes no lending requirements on the banks in return for government cash.
Already, the credit crisis has been used to engineer the takeover of Bear Stearns and Washington Mutual by JPMorgan, Merrill Lynch by Bank of America, Wachovia by Wells Fargo and, last Friday, National City by PNC.
What the Wall Street Journal on Saturday called the “strong-arm sale” of National City provides a taste of what is to come. The Treasury Department sealed the fate of the Cleveland-based bank by deciding not to include it among the regional banks that will receive government handouts. It then gave Pittsburgh-based PNC $7.7 billion from the bailout fund to help defray the costs of a takeover of National City. PNC will also benefit greatly from the tax write-off on mergers enacted by Treasury.
All of the claims that were made to justify the bank bailout have been exposed as lies. President Bush, Federal Reserve Chairman Ben Bernanke and Paulson were joined by the Democratic congressional leadership and Barack Obama in warning that the bailout had to be passed, and passed immediately, despite massive popular opposition. Those who opposed the plan were denounced for jeopardizing the well being of the American people.
In a nationally televised speech delivered September 24, in advance of the congressional vote on the bailout plan, Bush said it would “help American consumers and businessmen get credit to meet their daily needs and create jobs.” If the bailout was not passed, he warned, “More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account…. More businesses would close their doors, and millions of Americans could lose their jobs … ultimately, our country could experience a long and painful recession.”
One month later, the bailout has been enacted, and all of the dire developments–banks and businesses disappearing, the stock market plunging, unemployment skyrocketing–which the American people were told it would prevent are unfolding with accelerating speed.
While Obama talks about the need for all Americans to “come together” in a spirit of “shared sacrifice”–meaning drastic cuts in Medicare, Medicaid, Social Security and other social programs–and the cost of the bailout is cited to justify fiscal austerity, the bankers proceed to ruthlessly prosecute their class interests.
As the World Socialist Web Site warned when it was first proposed in mid-September, the “economic rescue” plan has been revealed to be a scheme to plunder society for the benefit of the financial aristocracy. The American ruling elite, utilizing its domination of the state and the two-party political system, is exploiting a crisis of its own making to carry through an economic agenda, long in preparation, that could not be imposed under normal conditions.
The result will be greater economic hardship for ordinary Americans. The big banks will have even greater market power to set interest rates and control access to credit for workers, students and small businesses.
While no serious measures are being proposed, either by the Bush administration, the Republican presidential candidate or his Democratic opponent, to prevent a social catastrophe from overtaking working people, the government is organizing a restructuring of the financial system that will enable a handful of mega-banks to increase their power over society.
Posted in accordance with Title 17, Section 107, US Code, for noncommercial, educational purposes.