Tuesday, May 15, 2012

Paul Krugman: Why We Regulate, Several Views on "Palestinians End Hunger Strike After Israel Agrees to Demands"

Why We Regulate
Paul Krugman
NY Times Op-Ed: May 14, 2012
One of the characters in the classic 1939 film “Stagecoach” is a banker named Gatewood who lectures his captive audience on the evils of big government, especially bank regulation — “As if we bankers don’t know how to run our own banks!” he exclaims. As the film progresses, we learn that Gatewood is in fact skipping town with a satchel full of embezzled cash.
As far as we know, Jamie Dimon, the chairman and C.E.O. of JPMorgan Chase, isn’t planning anything similar. He has, however, been fond of giving Gatewood-like speeches about how he and his colleagues know what they’re doing, and don’t need the government looking over their shoulders. So there’s a large heap of poetic justice — and a major policy lesson — in JPMorgan’s shock announcement that it somehow managed to lose $2 billion in a failed bit of financial wheeling-dealing.

Just to be clear, businessmen are human — although the lords of finance have a tendency to forget that — and they make money-losing mistakes all the time. That in itself is no reason for the government to get involved. But banks are special, because the risks they take are borne, in large part, by taxpayers and the economy as a whole. And what JPMorgan has just demonstrated is that even supposedly smart bankers must be sharply limited in the kinds of risk they’re allowed to take on.

Why, exactly, are banks special? Because history tells us that banking is and always has been subject to occasional destructive “panics,” which can wreak havoc with the economy as a whole. Current right-wing mythology has it that bad banking is always the result of government intervention, whether from the Federal Reserve or meddling liberals in Congress. In fact, however, Gilded Age America — a land with minimal government and no Fed — was subject to panics roughly once every six years. And some of these panics inflicted major economic losses.

So what can be done? In the 1930s, after the mother of all banking panics, we arrived at a workable solution, involving both guarantees and oversight. On one side, the scope for panic was limited via government-backed deposit insurance; on the other, banks were subject to regulations intended to keep them from abusing the privileged status they derived from deposit insurance, which is in effect a government guarantee of their debts. Most notably, banks with government-guaranteed deposits weren’t allowed to engage in the often risky speculation characteristic of investment banks like Lehman Brothers.

This system gave us half a century of relative financial stability. Eventually, however, the lessons of history were forgotten. New forms of banking without government guarantees proliferated, while both conventional and newfangled banks were allowed to take on ever-greater risks. Sure enough, we eventually suffered the 21st-century version of a Gilded Age banking panic, with terrible consequences.

It’s clear, then, that we need to restore the sorts of safeguards that gave us a couple of generations without major banking panics. It’s clear, that is, to everyone except bankers and the politicians they bankroll — for now that they have been bailed out, the bankers would of course like to go back to business as usual. Did I mention that Wall Street is giving vast sums to Mitt Romney, who has promised to repeal recent financial reforms?

Enter Mr. Dimon. JPMorgan, to its — and his — credit, managed to avoid many of the bad investments that brought other banks to their knees. This apparent demonstration of prudence has made Mr. Dimon the point man in Wall Street’s fight to delay, water down and/or repeal financial reform. He has been particularly vocal in his opposition to the so-called Volcker Rule, which would prevent banks with government-guaranteed deposits from engaging in “proprietary trading,” basically speculating with depositors’ money. Just trust us, the JPMorgan chief has in effect been saying; everything’s under control.

Apparently not.

What did JPMorgan actually do? As far as we can tell, it used the market for derivatives — complex financial instruments — to make a huge bet on the safety of corporate debt, something like the bets that the insurer A.I.G. made on housing debt a few years ago. The key point is not that the bet went bad; it is that institutions playing a key role in the financial system have no business making such bets, least of all when those institutions are backed by taxpayer guarantees.

For the moment Mr. Dimon seems chastened, even admitting that maybe the proponents of stronger regulation have a point. It probably won’t last; I expect Wall Street to be back to its usual arrogance within weeks if not days.

But the truth is that we’ve just seen an object demonstration of why Wall Street does, in fact, need to be regulated. Thank you, Mr. Dimon.  

* * * 

Published on Monday, May 14, 2012 by Common Dreams

'Victory': Palestinians End Hunger Strike After Israel Agrees to Demands

Though deal does not end future use of 'indefinite detention', all current detainees will be charged or released

- Common Dreams staff

Nearly 1,600 Palestinian prisoners held in Israeli prisons have ended a 28-day hunger strike after an Egypt-brokered deal was successful and amid fears that any deaths would result in a violent backlash in the occupied West Bank and in Gaza.

A Palestinian, showing solidarity with Palestinian prisoners on hunger strike in Israeli jails, stands chained to a cage during a demonstration in the West Bank city of Ramallah. (Credit: Abbas Monani / Agence France-Presse / Getty Images) The prisoners' hunger strike centered on demands for an end to solitary confinement, more family visits, and the elimination of "detention without trial", a practice condemned internationally as an affront to justice and human rights.

An Egyptian official involved in the talks, tells Al-Jazeera that under Monday's deal to end the strike, Israel had agreed to end solitary confinement for 19 prisoners and lifted a ban on visits to prisoners by relatives living in the Hamas-ruled Gaza Strip.

Palestinian Authority Prisoners Minister Issa Qaraqi called the agreement a victory, according to the Los Angeles Times.

"This is a first step toward liberation and victory," said Fawzi Barhoum, a spokesman for the Islamist group, reports Reuters.

"An agreement has been signed to bring about the end of a 28-day hunger strike by Palestinian security prisoners," the Israel Prisons Authority said in a written statement.

* * *


Most of some 1,600 prisoners, a third of the 4,800 Palestinians in Israeli jails, began refusing food on April 17 although a few had been fasting much longer - up to 77 days.

Their protest centred on demands for more family visits, an end to solitary confinement and an easing of so-called "administrative detention", a practice that has drawn international criticism on human rights grounds.

An Egyptian official involved in the talks said that under Monday's deal to end the strike, Israel had agreed to end solitary confinement for 19 prisoners and lifted a ban on visits to prisoners by relatives living in the Hamas-ruled Gaza Strip.

Israel also agreed to improve other conditions of detention,and to free so-called administrative detainees once they complete their terms unless they are brought to court, according to the official.

Hamas spokesman Sami Abu Zuhri confirmed the deal, telling Reuters that "the prisoners signed the deal after their demands were met. The deal was brokered by Egypt."

Israel also confirmed an accord had been struck.

* * *

The Los Angeles Times reports:

The deal ends the longest and one of the largest hunger strikes ever organized by Palestinian prisoners. About 1,600 Palestinians prisoners had refused food since April 17. Two detainees -- Bilal Diab, 27, and Thaer Halahleh, 33 -- began their strike Feb. 28 and are now in serious condition.

Many Palestinians leaders had warned that the death of any prisoner might spark widespread public outrage and possibly violence in the West Bank and Gaza Strip.

Palestinian Authority Prisoners Minister Issa Qaraqi called the agreement a victory. Israeli officials said they agreed to go further in making concessions than they had previously as a goodwill gesture toward Palestinian Authority President Mahmoud Abbas, who made a personal appeal on behalf of the prisoners over the weekend.

* * *

Reuters adds:

Israel did not say whether it would free any administrative detainees, but pledged in its statement that an inter ministerial team would look at prisoner requests and issue recommendations.

Around 320 of Palestinian prisoners are held in "administrative detention", a security measure Israel defends as a precaution to protect undercover sources.

Many of the other prisoners have been convicted of serious crimes, including murder. Palestinian leaders say they should be treated as prisoners of war, something Israel rejects.

Israel says the detentions without trial are necessary because some cases cannot be brought to open court for fear of exposing Palestinian intelligence sources who have cooperated with Israel.

Palestinians jailed by Israel are held in high esteem by their compatriots, who see them as heroes in what they term a struggle against occupation.

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