John Amato Interviews Naomi Klein About The Next Shock Doctrine: 'The Wall Street Bailout Giveaway'

Part 1 Part 2 Thursday night I was joined by the brilliant Naomi Klein, author of The Shock Doctrine,” to talk about the current economic Shock C

Part 1

Part 2
Thursday night I was joined by the brilliant Naomi Klein, author of The Shock Doctrine,” to talk about the current economic Shock Capitalism that is taking place right now, thanks to Bush and Paulson's 700 billion dollar plan to bail out Wall Street. And all the wealthy free-market conservative CEOs that drained Main Street for ungodly sums of money until all the financial institutions began to crash and burn are cheering. Bush's base is comprised of these CEOs and they pulled off the ultimate "complexity scheme" on the American people. Naomi hits on some very important ideas during this twenty minute interview.

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Klein: But I think that it's important to stress that this is money that could be used for actively preventing foreclosures. They could be using this money - a fraction of it - to keep people in their homes. They could be stimulating and rebuilding the fundamentals of the economy by investing in infrastructure, public works projects, a green-style New Deal - all of the investments that are so desperately needed. New technology, investing in the real economy and getting away from this casino economy. And because they want to throw all this money at Wall Street, that is money that will not be available for those real investments.

Say goodbye to Universal Health Care if McCain is elected. John and the House Republicans are now trying to pull another scam on the American people ,which is another tried and true method that conservatives use. As Digby says: They run as Populists, but govern as Aristocrats. It works all too well. It's a wonderful scam. Now, I'm not saying that a deal shouldn't take place, but a cautious approach should be paramount. As Krugman says: The Dodd-Frank changes make the plan less awful, mainly by creating an equity stake... Also, the oversight means that Treasury can be prevented from making the plan a pure gift to financial evildoers. If the plan looks not-awful enough, I'll be pro. But I won't be cheering - I'll be holding my nose.


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Klein: And they all knew it. They all knew it and they were making money as fast as they could based on their belief that they would get bailed out. Because it is entirely consistent with the Bush administration over the past 7 years. One of the other big lies floating around is this is somehow a departure from the way the Bush administration usually does business. It's not a departure; it's just a change in the direction of the flow. This is what they have been doing for 7 years: transferring public money, public wealth, into the hands of private crony contractors. And now as their final act they are taking the bad debts of the corporate sector and transferring them to the taxpayer. There is no aberration here; there is no big surprise. This is entirely consistent with everything they've done.

As Rachel Maddow notes:

For instance, where the heck did this $700 billion figure come from in the first place? A Treasury Department spokeswoman told Forbes.com this week, quote, "It's not based on any particular data point, we just wanted to choose a really large number." A really large number? That's the calculus among our nation's leading economic theorists and managers? We just need a ton of money; we don't know how much, just make the pile really tall? Isn't economics a science? Not reassuring.

Just think about that figure. They pulled it out of thin air. Here's the interview. (full transcript below the fold)

Amato: Hey this is John Amato with Crooks and Liars and I am joined by a very special guest, Miss "Shock Doctrine" herself Naomi Klein. Naomi thanks for joining Crooks and Liars and jumping back into the blogosphere.

Klein: Great to talk with you.

Amato: Well, it's a busy time today. I'm sure everybody is asking your opinion on what's going on. Just real quick, tell people what the Shock Doctrine is and what is Disaster Capitalism?

Klein: Well, the Shock Doctrine is a political strategy that the Republican Right has been perfecting over the past 35 years to use for various different kinds of shocks. They could be wars, natural disasters, economic crises, anything that sends a society into a state of shock to push through what economists call "Economic Shock Therapy" - rapid-fire, pro-corporate policies that they couldn't get through if people weren't in a state of fear and panic. This is a move that the Bush administration is very fond of; they did it after 9/11, privatized the War on Terror. We are seeing the Shock Doctrine in action right now with the exploiting of people's fear trying to deepen that fear (we saw that with Bush's address) to ram through unprecedented corporate giveaways which will later be used to rationalize cuts to social programs and more privatization and deregulation in the name of getting the economy back on track after they've screwed it up.

Amato: That's it in a nutshell. We are really witnessing it first hand, up close and personal. Now at least with your book and your ideas we have a blueprint to draw on and to actually see how all this has taken place. When you look at $700 billion and then you go how much is Barack Obama's nationalized health care - I saw a figure $85 billion. When you are talking about $700 billion and $85 billion -

Klein: The $85 billion is the AIG bailout alone.

Amato: There you go. We'd rather bail out AIG than help people with universal healthcare. It's really a sad state of affairs. Today, as you know, has been a 3-ring circus.

Klein: It has and I think it's really important for people to understand that this bailout is as bad tomorrow as it was today. The only thing that has changed is its bipartisanship. A couple of fig leaves have been put in front of it to make it a little more presentable, but the core of this deal is totally corrupt. It is a bad plan. The only people this plan is good for is Wall Street. There is no guarantee that it is going to fix the problem that it is supposedly going to fix, but one thing we do know is that it is a bomb that will explode on U.S. taxpayers because of this massive debt that has been incurred. I mean, this $700 billion is twice as large as the projected deficit for this year, so this is an incredible burden. These bad debts were described as sticks of dynamite in these companies that the government is taking out of their hands. Well, they're not just taking them out of their hands because now the dynamite is now in Washington and it's going to explode and then it will be used against whichever administration. If Obama wins, then this will be the dynamite to say that he can't forward his health plan.

Amato: That's right, and if McCain gets in he can cut every program he wants in the name of saving America: "I'm cutting this to save America." I mean, this jingoism is just sickening. You know what the Democrats should do? When McCain said he was going to suspend his campaign and go to Washington they should have all just left and said "if John McCain is coming in we will not have a deal." This is all political theater. We all know what is going on and I think a lot of people do see it too. Usually, people get frustrated about the average American voter because they're worried about their lives and they're not into the whole nuts and bolts of what's going on but I think the American people (we've seen the polls) know it's a political stunt. This is textbook Republican disaster capitalism. They come in - Paulson, Bernanke- the sky's falling, we have to do something now. And now they're going to make John McCain swoop in. And who will foot the bill? Americans.

Klein: And the other thing I think we need to stress is the extraordinary level of responsibility in the Bush Administration in allowing this crisis to get to the point that it got to, which was not just predictable but predicted. Alan Greenspan was saying a year ago that there was a housing bubble, and what bubbles do is they burst because they are filled with hot air. Everyone knows it. This was entirely predicted, and they end up with a two and a half page - barely two and a half page - plan with one idea, which is to turn the U.S. government into the world's biggest trash can. Take all of this trash and give it to the taxpayers. That is their only idea, their only preparation.

Amato: That was one of the most insane things I've ever seen, and of course John McCain hasn't read those two and a half pages yet.

Klein: He didn't have time. I have to say - I've said this before that their biggest mistake was how short it was because it was short enough that people actually read it. Usually what they do is ram through legislation that's hundreds of pages long and say we have to do it in two days and nobody has a chance to read it, then they read it after the fact. But I think in its case brevity really was their downfall

Amato: For the first time!

Klein: One thing I think is important is to resist this bipartisanship. At this point this is not a moment that the priority is bipartisanship; the priority is intelligence. The priority is in getting to the root of this problem. The financial sector has abused the trust of the American people. There's a couple of other points I want to stress. This idea of John McCain scapegoating greedy CEOs is obviously a joke because he is flanked by some of the greediest CEOs in the world. But the real thing is you can't be shocked by the fact that CEOs want to make as much money as they possibly can. That's like being shocked that movie stars want to be famous and that politicians want power. This is what corporations are built to do, this is what CEOs are built to do and it's the role of government to regulate them.

Amato: Right. You know, that CEO pay, it's almost like the MacGuffin of this whole thing. They got $42 million or they got $20 million and that's horrible. But when you talk about $700 billion, $20 million is really inconsequential. It's about the abuse that you were talking about, this whole system. Did you get a chance to read Paul O'Neil's book that Ron Suskind wrote? In it the most interesting chapter was when he wanted CEOs to be accountable. And it was the CEOs that called Bush! In the book he said they were his "base." And in the book the CEOs revolted and said they'd rather resign than actually sign a paper that said their books were in order. This is insane.

Klein: Let's remember that Henry Paulson was chosen to replace Paul O'Neil because he was a team player.

Amato: Again, this bubble was not only going to burst, it was going to explode like no other bubble before it.

Klein: And they all knew it. They all knew it and they were making money as fast as they could based on their belief that they would get bailed out. Because it is entirely consistent with the Bush administration over the past 7 years. One of the other big lies floating around is this is somehow a departure from the way the Bush administration usually does business. It's not a departure; it's just a change in the direction of the flow. This is what they have been doing for 7 years: transferring public money, public wealth, into the hands of private crony contractors. And now as their final act they are taking the bad debts of the corporate sector and transferring them to the taxpayer. There is no aberration here; there is no big surprise. This is entirely consistent with everything they've done.

Amato: I completely agree. The shock of the American people - this isn't like 9/11. When we - I'm from New York and I had friends in the World Trade Center - when I saw that I was truly shocked. And I was in shock for two weeks after I saw the towers go down. With this whole financial market - when people read we had to bail out AIG and Lehman Bros. went under - to the average American that's still not that kind of a shock. That's why Bush and Paulson had to go on TV and give you that exclamation point. You can go read Paul Krugman; I think Richard Shelby was waving some paper out there. He has 20 economists (he doesn't say which ones) saying Paulson's idea is wrong. Does anybody really know what's going to happen?

Klein: Well of course not. What Bush was saying when he went on television last night was that we have to bail out the people at the very top because it's going to trickle down back to you. There are many more ways of helping Americans who are in foreclosure on their homes and even helping companies that are not able to access credit. You can actually do it directly, you can do it from the bottom up instead of saving the people at the top and hoping it trickles down. And I think that the anger of Americans directed at Wall Street in this bailout is a very fair comeuppance for Wall Street because there has been a total severing between what is good for Wall Street and what is good for Americans. In the '90s this was the line "What's good for Wall Street is good for Main Street." Americans do not believe that; they know it's not true. It's been Wall Street's predatory practices - not just subprime - bedding up companies that laid off workers, rewarding companies for moving jobs overseas, just acting in predatory ways in myriad ways and exacerbating the climate crisis and acting in completely irresponsible ways. They have severed themselves from regular people and now when they're going down regular people don't believe that things are bad for them too. And that was Bush's job was - to try to scare people to say what's bad them is bad for you. But after so many years of what's good for the elite not being good for regular people, it's a much harder sell.

Amato: Again, it's almost a different set of rules with this one.

Klein: But I think that it's important to stress that this is money that could be used for actively preventing foreclosures. They could be using this money - a fraction of it - to keep people in their homes. They could be stimulating and rebuilding the fundamentals of the economy by investing in infrastructure, public works projects, a green-style New Deal - all of the investments that are so desperately needed. New technology, investing in the real economy and getting away from this casino economy. And because they want to throw all this money at Wall Street, that is money that will not be available for those real investments.

Amato: No... which has been a complete failure. I've been writing that conservatism is dead. One of the fundamental problems (I don't want to get into the election too much) has been this bipartisanship notion which kind of drives me off the rails. The Republicans run this country and the whole goal is to get rid of the New Deal and destroy every program that's helped Americans because it lessens their profit margin. They've been able to do that over these last 8 years and Americans see this. That's why there's so much more anger towards Wall Street because the wealth now - it's like we're going into royalty, right? These people used to be buying houses and now they're looking for villas. And people are really feeling this crunch.

Klein: The smartest thing that the Obama campaign could do is oppose this bailout.

Amato: I completely agree and I think they should get out in front of it because McCain is going to come out tomorrow and he's to go to the debate, but he's going to say...again, do you watch that show "Mad Men"? It's like they are the perfect ad men because their jingoistic talking points are so simple to sell. Even though they're destroying you, they can paint it so they're saving you. Obama should say no, he should get out in front of this.

Klein: The more he has taken direct aim, the more he has stood up to the ideology of Wall Street these past two weeks, the better his numbers have been. He is in line with where people are at. He's worried about those blue collar votes? Go and get them. Oppose this bailout. It's unpopular.

Amato: I agree. The Republicans needed to do something. Once this bailout started - this has been planned for a long time. It's at the end of his administration. It didn't all of a sudden today "oh, we need this $700 billion." They've been planning this.

Klein: They've been planning this for six months.

Amato: And it's really sickening. He should probably demand that Paulson be fired. If Paulson comes up with a two and a half page - can you imagine? If you were working in a corporation like Paulson was, say Goldman-Sachs. Imagine if one of his employees came up to him and gave him a two and a half page plan to bail out his company. What would he do to that guy?

Klein: [laughing] No, it's truly extraordinary. It is born of a lack of transparency, a lack of accountability. The Paulson plan is "Let me dig a really big, deep dark hole and throw $700 billion into it."

Amato: We talk about these numbers - again, they're so incomprehensible. Until you break down what you can buy with $700 billion or a trillion dollars...

Klein: And we're up to a trillion. If you include AIG, Bear Stearns, and Fannie Mae and Freddie Mac we're over a trillion.

Amato: Wall Street is quite all right with their wingnut welfare. But where is O'Reilly saying "Just pull up your boot straps"; "This is America"; "You too can be successful if you just work hard enough." But that's not true with Wall Street.

Klein: That thing that's important that you get out there now is that we had a window where we had people like Chris Dodd speaking out against this plan because they were getting bombarded with calls from their constituents. But starting tomorrow the Democrats are going to be spinning this as hard as the Republicans because they're going to claim that they won big victories. They're going to say that they got equity, that they protected against corporate greed, they won the most token concessions. None of it is meaningful; all of it can be gotten around. The sickness at the core - that $700 billion - this deal is bad. It was bad yesterday, it's bad tomorrow and everybody should be opposing it.

Amato: I agree. We are all speaking out. One of the hard things -

Klein: The reason why people have to do that is because then both parties are going to hear from their constituents that they don't want it.

Amato: I agree. When we get into the economic world, it is difficult. If economists had all the answers then nobody would ever lose money in the stock market. If it was that easy, everybody would go "OK, here's $1000 to my broker and in 10 or 12 months I'll have $100,000." It's all unpredictable.

Klein: I do think that Americans grasp what's going on and that is that they're being robbed and we got into this mess through the tyranny of complexity and the way in which economists and financial experts use complexity to shield themselves from regulation, democracy and any accountability. So people should trust their gut on this.

Amato: Right and they are. They really are. People are just looking at this and saying "Whoa, hold on a second." They have frightened people enough for people to say that we probably need to do something. But let's face it: Is the stock market at 6000 today? Did they lose 1200 points today? Did they lose 1200 points yesterday? No they haven't.

Klein: John I think they did their best to scare the market. His speech last night was completely irresponsible. He's lucky the market didn't dive. And John McCain announcing he's suspending his campaign in the name of America? That's ridiculous. He's sending completely alarmist messages to the market and he knows it.

Amato: Again, it's like our economy, a lot of it is based on perception, all these numbers. It's like this confidence factor, and that's why you never hear a president talk the way you heard President Bush talked the other night. You never hear that doom and gloom, especially on economic issues. You can be honest without making it sound like they're going to explode a nuke over Cleveland.

Klein: [laughing]

Amato: Listen, I don't want to keep you any longer.

Klein: That was a good note to end on.

Amato: I want to thank again Naomi Klein for joining Crooks and Liars. Our readers love you; we love you, and let's talk again real soon.

Klein: Absolutely. Thanks John.

Make sure you read: Demolition accomplished

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