Notes from the Left Coast

Drummond Pike’s Blog

Traveling outside the country, as I am, it is surprising how difficult it is to escape the imploding financial markets. The entire globe appears gripped in this drama, man-made and preventable, and the solutions being bandied about have yet to gain real traction or acceptance. I just glanced at a blog from the ever-sharp-eyed Paul Krugman who basically asks, “where’s the beef?” or, in other words, the boat as currently designed won’t float. He’s a good critic, who rarely pulls a punch, so I’ll go with that conclusion.

But what should candidates and public figures be talking about? Clearly, neither of the major party leaders seems willing to peel back the onion. Instead, McCain wants to blame someone, and Obama retires to the high ground of “this must not become a partisan issue.” While I agree with the latter to some extent, both fail the critical test: neither is willing to talk about why this happened.

There is a streak in the amazing American tradition of entrepreneurism that is both ugly and despicable. It is that element for whom greed trumps all other considerations. Think of the sub-prime crisis and how it started. The basic building blocks were mortgages pushed by what ACORN labelled “predatory lenders.” These unconscionable souls designed lending packages that they knew the customers could not repay, and then pushed them like heroin on unsuspecting, often low income and unsophisticated buyers hungry to join the “ownership society” their president talked so much about. The lenders could give a hoot about whether they borrowers could repay, especially after rates adjusted upward and teaser rate periods expired, because they had already sold the mortgage into “the system.” The system then theoretically spread the risk through all sorts of fancy deals that the Wall Street mavens convinced themselves had great value.

We all know what happened when it unraveled, but let’s remember the building blocks when we think about the solution. There were thousands of wing-tip shoed hustlers out there who took advantage of innocent people who will now suffer the most. Obama and McCain should begin talking about this in the terms that really matter. It was immoral. It was unchristian. It was despicable. It was driven by people who wanted to make a buck more than anything. They ought to be treated like drug-pushers. But street pushers are fed by conspiracies of people who create the product, and just because we call them investment houses and they technically didn’t break laws, they were as immoral as the loan pushers.

In the thirties when the banks failed because greedy bankers tried to ride the 20’s boom by taking depostors’ money and speculating with it, and got caught, bankers became the scourge of the time and were literally run out of towns they ruined. For the captains of Lehman Brothers, Merrill Lynch, and the like, that sounds like a far better idea than letting them softly land with taxpayer funded golden parachutes.

And you don’t have to be a finance wiz to figure that out.

On the plane to Sydney to meet up with the Organizer’s Forum delegation, I found myself thinking about the current economic “crisis” in contrast to the Great Depression to which it has been compared. Interesting. Yes, the current collapse of the credit markets has required a financial bailout by the federal government second only to that of the 1930’s when, after 7000 banks had failed without any compensation to depositors, Roosevelt and company restored faith in the banking system. Their solution, the FDIC, is being referred to frequently, though current proposals ought more aptly be compared to the S & L bailout under Reagan when those institutions got to unload all their bad debt on a government agency that then did what it could to recover for the taxpayers what value there remained. Such a proposal is at the base of what is currently under discussion by the White House and Congress.

Most striking about the contrast between the 30’s and now is the experience of working people. Then, between 25 and 30% of the workforce was jobless. Soup kitchens were a staple for millions. Tim Egan’s book on the Dust Bowl recounts that people worked a half a day in return for a basic meal – no cash involved. People really suffered for lack of food and shelter. One wonders, of course, just how far that might be away. Could this financial melt-down, courtesy of Wall Street hustlers and sharks, really lead to a depression, a truly broken economic system?

Some clearly believe so. David Brooks, the conservative commentator, suggested on tonight’s PBS Newshour show, that it was quite likely that even with a successful government intervention as is being discussed it is most likely that the next administration will have to deal with an extended recession. Born of the mistrust of the credit markets, he believes we will see an extended contraction, an ongoing caution among those capable of driving growth in the economy.  I wonder how long that could really go on before we begin to see double digit unemployment, before regular folks wind up needing a handout for an extended period.

The interesting political question is, in such circumstances, are we likely to see rising fortunes among organizing efforts among low income people as we did in the 30’s? Will the arbiters of mid-town – those who direct the giving of major philanthropies – take a risk on major support of people’s organizations the way they did during the Civil Rights movement? Since then, with rare exceptions, the risky nature of supporting edgy community organizing has more often than not been avoided. The idea of supporting poor people to build and wield power – arguably a key factor in driving a just response to the current crisis – can be more than a little discomfiting in the Board Room, whether you are Citibank or the Tides Foundation.

The complexities of this current crisis make it likely that the solution will bail out the bad actors and then we will all return to some semi-comfortable equilibrium. But if the powers that be are subjected to the accountability that in some ways only grassroots organizing can produce, we’ve got a much better shot at achieving real reforms, no?

I’m a good way into Timothy Egan’s excellent The Worst Hard Time, a history of the Dust Bowl and its survivors, those gritty people who hung on and lived through one of the worst man-made disasters of all time. It truly is an amazing tale. First, how the boom in wheat prices drove speculators and real estate sharpies to plow up the prairie for perceived short term profits, and then kept plowing up more ground to compensate for falling prices as the market got saturated. Banks, largely unregulated at the time, took depositors’ funds and invested them in the frenzy, leading to the failure of thousands of banks. And then, the drought hit and went on for 6 years. No rain and scant snow across vast areas of northern Texas, Oklahoma, and elsewhere. And the land just blew away. Dust storms were so thick, drivers had to navigate from one telephone pole to the next. In less than a decade, people in the mid-west subdivided cattle ranches into homesteads, ripped up the grass for wheat, briefly made huge profits, and then sank into inexorable poverty as the rains deserted them, and the soil took flight.

Though Egan doesn’t focus on politics much, it is interesting when he does. Hoover, elected in 1928, declared in an early address, “Americans are nearer to the final triumph over poverty than ever before in the history of the land.” Then, as the Dust Bowl and collapse of the stock market took their toll, Hoover was forever saying that we are about to turn the corner back to prosperity, as though his wish for it would make it so. “All the evidences indicate that the worst effects of the crash on unemployment will have passed during the next sixty days,” he declared on March 3, 1930 (p. 95). Egan goes on, “By the end of that year, eight million people were out of work. The banking system was in chaos. The big financial institutions had once looked invincible, with the stone fronts, the copper lights, the marbled floors, run by the best people in town. Now bankers were seen as crooks, fraud artists who took people’s homes, their farms, and their savings. In 1930, 1350 banks failed….The next year, 2294 banks went bust.” The political seachange that occurred in 1932 was unlike any other we saw in the 20th Century.

I’ve been thinking about Egan’s book as I listen to the many convention speeches about what is right and what is wrong with America from the perspective of the two major parties. Democrats see a people who need more from their government. They seem to want a government that plays a balancing role by regulating markets, a government that provides opportunity and a safety net, and a government that works. Republicans seem to want less government, less taxes, and less regulation of business, despite their record of having grown government with huge deficits over recent years. It was fascinating indeed to watch their Vice Presidential candidate decry special interest funding while she has pursued earmarks in Washington for her city and hired lobbyists to garner a share at the federal trough.

It would be very difficult to argue that we face in 2008 circumstances even remotely like those of 1931 when a quarter of the population was unemployed. Our economy may not be zipping along, but it is not in the tank (despite the best efforts of the sub-prime lending hustlers). The challenge, though, is how to galvanize public action on two related issues that will require a political shift in will as occurred with the election of Roosevelt in 1932; those issues are climate change and energy independence. Right now, it doesn’t seem likely that those issues will affect the election much in one way or another, but if you talk with any experts in those fields, the globe must curtail the growth of greenhouse gases in the atmosphere or the climate system will spin out of control with unforeseeable results – mostly catastrophic, one might imagine.

Somehow, chants such as one heard last night – “Drill, baby, drill!!!” – seem unlikely to move us in the right direction.

One of the perennial debates in the funding community revolves around the question of boundaries and role with regard to the groups we fund. Are we venture capitalists where, by virtue of the grants we have made, we have a seat at the table? Should we insist on an E.D. stepping down if we observe poor performance? Should we withhold further funding until changes we believe warranted become reality? Let’s call this the “venture” model, as many have done.

Or, should we see ourselves in a more passive role, financing the work of organizations, holding them accountable to stated goals and objectives, and observing weaknesses with constructive suggestions on what they might do? Let’s call this the “supportive” model.
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From the front page of the NY Times today described the first day of the economic policy debate that will likely dominate the upcoming presidential campaigns. Why? Simple: folks are hurting. For all the good and bad things happening in the world, it’s pretty clear that no amount of social “wedge issues,” like gay marriage, choice, or whether America is a “Christian country” or not, will obscure the pain of the subprime meltdown or $4 gasoline. Cooper and Rohter in the Times wrote, “It is a battle between Republican supply-side economics and a Democratic tradition that uses government levers to try to reduce inequality and spur the economy.” Indeed, this may well emerge as the clearest ideologically-based choice voters have had since 1932.

We have had for nearly 3 decades an unchallenged rhetoric that argues that we have to “free up” capital by lowering taxes on investments (capital gains) in order to stimulate the economy. While progressives have been shouting unheard into the media wind that real wages have been flat for YEARS and that letting the rich get richer doesn’t really help working people, somehow the notion hasn’t gotten traction that the economic policy elite wasn’t really moving on the right set of tracks. Some, like ex-Nixon speech writer Kevin Phillips, have been decrying the emergence of a new Golden Age, more similar to the 1890’s or 1920’s when the rich were fabulously so, while ordinary folks wallowed unable to get ahead. This disparity between the rich and the poor, he argued in Wealth and Democracy, threatens democracy at its roots when the wealthy gain unfettered access to the power of government, turning it to their purposes.

So, have Naomi Klein’s “disaster capitalists” been hiding out in the candy store after hours, gorging themselves on no-bid contracts, crop subsidies, military cost overruns, and government policy aided media monopolies? Sure seems so. Just listen to Larry Lessig on the toxic power of lobbyists, or Dan Rather on why corporate interests, particularly conglomerates that own some media but also a lot of other things, have everything to gain from a muzzled media. News has become all-Paris Hilton all the time. And meanwhile, who has noticed the corruption that seems to have broken out in DC?

Let’s hope the people have, and maybe that’s why folks are finally looking so closely at the economy as we enter this election process. How refreshing!

Someone to watch closely on this: Jason Furman, the new economic policy guy in the Obama campaign. Labor folks are unhappy with his strong ties to Robert Rubin, the bigtime Wall Street insider and former Secretary of the Treasury under Clinton.

It’s an incredible spring day in NYC today, and I’m reflecting on our latest marker: more Americans have died in Iraq than died on 9/11. One wonders if our misguided taste for revenge has run its course, since how else does one explain what we’ve done?

Have you ever wondered why the only thing we ever hear about is tax relief? When was the last time you can remember anyone advocating tax increases? Such is the stuff of political suicide in our “borrow now, pay later” politics. Remember Bush 1 and his famous “read my lips” statement?

So, I’ve been curious about how we got here for a long time. The fact of the matter is that we are living on borrowed time, if history is any measure. A fascinating chart on TruthandPolitics.org’s site shows the variation in our “maximum effective” tax rates for upper income taxpayers. During the two World Wars, people paid some serious taxes (77% and then 94% respectively). During Vietnam, the rate moved back up to the 77% level after having fallen steadily through the 50’s and early 60’s. Where are we now? 35%, at least until Bush 2’s tax cuts are termed out in 2010. And what do we have cooking? The most expensive war since Vietnam and a pending debate on national health insurance for all.

If the federal government was a business, it would have been abandoned in the free market ages ago as a failed enterprise.

An interesting comparison can be made to countries that have national health coverage: Canada – mid-40% (federal and province); Australia – 45%; New Zealand – 46%; and Austria – 50% (as are many European countries). Oh, and they have only a fraction of the military costs that we do.

So….when is one of these candidates running for President going to break the taboo, and return us to Kansas (from this Oz-like place we’ve been living in for the past 3 decades)?

Have you ever met Ms. American Express? Or, Mr. Exxon? No, neither have I, but the odd thing is that under the law, they are, roughly speaking, the same as any normal sentient person. This is the result not of a Supreme Court decision, but rather a Supreme Court Reporter’s description of a decided case – a statement without precedential value – that has been disputed ever since. That the reporter was a retired railroad executive and the plaintiffs were rail companies in the late 1800’s, seems to have been left in the dust of history. The rail companies, you see, were trying to reinterpret the 14th Amendment that was passed shortly after the end of the Civil War; its purpose was to address the history of slavery in the south by precluding a state’s right to pass any law that “abridge[d] the privileges or immunities of citizens of the United States…” In short, if held to be a legal “person,” a corporation could argue that a state couldn’t individually regulate its affairs; only the federal government could. In any event, by chicanery or innocent error, Santa Clara County v. Southern Pacific Railroad became the means that turned corporations into legal “people.”

There is more than a modicum of irony in this, since many of the rail corporations that benefitted from the 1886 decision, and they did so handsomely, also readily embraced the Jim Crow laws of the post Civil War period that continued the subjugation of most ex-slaves and their progeny for a hundred years. I doubt they ever made the connection between their economic advantage and the use of the Amendment intended to ensure freedoms to those freed by the passage of the 13th Amendment banning slavery.

What inspired this line of thought? I read in today’s NY Times that over recent years, the US Justice department has been signing dozens of “deferred prosecution agreements.” These have them paying fines, opening themselves to ‘outside monitors,’ and otherwise not admitting responsibility. Many of these agreements are secret, to boot, so we don’t even know about them. Now, that’s what I call having your cake and eating it, too, because I don’t think real people get anywhere near that kind of a break. No, we seem perfectly content to lock real people up or – at the very least – have them plead guilty to a lesser charge. Criminal cases don’t have “settlement agreement” options…unless you are a corporate “legal person.”

Think of all the money we could save if we allowed people indicted for crimes to have “deferred prosecution agreements.” None of those Enron guys would have gone to jail – they’d just have bought themselves out of the jam just like Monsanto evidently did. In the Times article, they described Monsanto’s deed: knowingly bribing an Indonesian official in return for looser regulations for those using their modified crop strains. The company knew about and approved the bribe (not some maverick executive, to be clear), but they never faced criminal charges of the kind that drove Authur Anderson out of business. Ah, the new era of “free market capitalism” seems to have been given a new meaning for “free.”

Evidently the current administration’s perspective is that free market corporations ought to have a permanent “get out of jail free” card. Any idea where I can get one of those?

Oh, one more thing. Remember John Ashcroft, our former Attorney General who oversaw the Justice Department? Well his firm just got a $50 million deal to monitor a “deferred prosecution agreement” between Justice and a medical services company. Sweet, huh? Just kinda makes one want to go into public service….and then jump into the greenback-lined “post-prosecutorial era.”

I learned recently that the folks at American Idol had decided to launch their own charity called “Idol Gives Back” to replace the infrastructure that we’d help put in place with Charity Projects Entertainment Fund on whose Board I sit. CPEF was formed last year after Fox and Idol had agreed with the incredibly talented Comic Relief folks from the UK to experiment with creating an on-air fundraising effort similar to the extraordinary “Red Nose Day” that has raised tens of millions in the UK for the benefit of groups working to alleviate poverty and to address the AIDS epidemic in Africa.

Comic Relief’s super CEO, Kevin Cahill, had sparked the idea of bringing a media savvy, mission focused charitable initiative to the US. On their way to LA, they’d stopped through SF to meet with us to see if Tides could help with the idea. Skipping down to LA after, they’d managed their way into the inner sanctum of American Idol and got their buy in. But it was on an unbelievable fast track and everyone scrambled to bring whatever they had to the table. Comic Relief provided all the know how, the films from the field that are so essential, and the infrastructure to make sure the money was well-used. They organized the phone banks, on-line giving portal, and all the rest. AI worked the concept into their final week’s competition. It was a collaborative effort, for sure.

The results we all know. Expecting maybe $10 to $20 million, they raised over $70 million for a pre-determined group of major charities like Save the Children, the Global Fund, and others. Desperate for skilled staff, Tides recommended three extraordinary consultants to help shape and evaluate the burgeoning grants. Karie Brown, Allison Barlow, and Anne Moses came together on very short notice to carefully structure $7.5 million grants to the US groups and to assist on the African grants. From the NY Times, yesterday:

Overall officials at the nine charities that received the money said they were pleased with the efforts of the “Idol Gives Back” charity, particularly with officials’ rigor in vetting potential uses of the money.

“Sometimes celebrity or entertainment-industry-based charities might not be the most sophisticated organizations in distributing the money they raise,” said Dr. Irwin Redlener, the president and a co-founder, with the musician Paul Simon, of the Children’s Health Fund. “But the ‘American Idol’ group got up to speed more rapidly than I’ve ever seen before. And they did a tremendous amount of investigation and due diligence among the organizations that could be potential recipients.”

So what did Fox do for this year’s event? They stiff-armed their partners, organized their own charity named after the event, and will be going it on their own. One can imagine that once they saw how much money was involved, they decided they wanted to control the action. Understandable in most circumstances, but it follows a narrative that has been often repeated in Hollywood where effective grantmaking often gives way to other considerations.
Among the first decisions for the “new” Idol Gives Back: to replace UNICEF and America’s Second Harvest with Brad Pitt’s glitzy “Make It Right” project focused on rebuilding the Lower Ninth. Hmmm.

When you google “Make it right” you get news stories about Bush’s original quote that they were going to “make it right” when asked about the abysmal failure of FEMA. When you google “Make It Right Campaign” you are given pages of Hollywood star sites, but nothing about MIR except links to Brad Pitt’s interviews announcing it. So what is it?
Announced last year with great fanfare, MIR has one of the sweetest websites you can imagine, and they’ve recruited notable “green stars” like Bill McDonough & Associates to their “core team.” More than a dozen architectural firms are listed as well. Progress to date? You tell me. I can’t find a press mention of any houses built or families helped. Is it real? Time will tell, but without the kind of rigor last year’s Idol grants program had, it’s anyone’s guess.
PS: you can find their site by googling “make it right New Orleans”. Who knew?

Through 21st Century Foundation (a grantee of Tides Relief and Reconstruction Fund), Tides Foundation is part of the Gulf South Allied Funders, a group of committed donors moving resources to grassroots groups in the Gulf Coast Region. On behalf of this group, Jason Sanders played the role of key convener and host for this Tides briefing that was designed to:

• Inform current and potential donors about the challenges and opportunities of rebuilding along the Louisiana and Mississippi Gulf Coast for the long-haul;
• Give attendees a clearer sense of approaches that are working and strategies that are needed;
• And feel inspired to pledge to rebuilding efforts thru 21st Century, and/or Tides R&R Fund.

The briefing moderator was:
Donna Edwards, Executive Director, Arca Foundation
(Donna is running for a US Congressional seat for Maryland too.)

The activist panel included:
Derrick Evans, Turkey Creek Community Initiative (JBL Awardee);
Derrick Johnson, NAACP of Mississippi;
Judith Browne-Dianis, Advancement Project;
Steve Bradbury, Louisiana ACORN;
Patricia Jones, Lower Ninth Ward Neighborhood Empowerment Network Association (LNWNENA) .

Participants also viewed a video clip from Spike Lee’s documentary, When the Levees Broke.

The briefing preceded an awards dinner honoring community heroes rebuilding the Gulf Coast. Jason reported that, “Both the donor briefing and awards dinner were great successes and folks walked away sober, fully engaged and excited about partnering opportunities.”

So…why WAS there a FEMA trailer in front of Tides?
One of the activists brought this trailer — the kind that folks are still living in on the Gulf Coast — for our viewing. For those of you who missed the chance to walk through, here are some pictures taken by Courtney McFall. This only begins to provide a real sense of the serious hardship still being faced by so many survivors of Hurricane Katrina two years ago (in 2005).