CEOs Blame Consumer Class for Joblessness

Eric Blair | Sunday, August 22, 2010 | Activist Post

The economic debate has been going on for decades: if only we give more money to the wealthy Elite, they will create jobs and some crumbs will trickle down to the hungry public. Many in the middle-class herd bought this carrot in hopes of heehawing their way into the next tax bracket.

Indeed, this approach may have been effective during the industrial revolution when entrepreneurs used the capital to open American factories. And surely this method can also work if fair trade agreements existed that would motivate job growth at home, but that is just not the world we live in anymore.

These days it seems ludicrous to give the international robber barons even more when they have exited the U.S. manufacturing stage and have no intention of returning. They also seem to have no intention of investing in America until public consumption resumes -- admitting that middle-class consumption drives domestic job growth, not them with even more money in their already fat pocketbooks.

The Washington Post reported Friday in a revealing article titled, "With consumers slow to spend, businesses are slow to hire."

Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they've yet to amp up hiring or make major investments -- the missing ingredients for a strong economic recovery.

Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes.

But here in the heartland of America, senior executives say neither side's assessment fits.

They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.

In other words, if we could only get more money to the consumer-class so they can spend it, then maybe then we can create more jobs. The article stated that David Speer, CEO of Illinois Tool Works which employs 60,000 people worldwide, "As long as U.S. consumers remain deeply strained, he is unlikely to undertake aggressive expansion."

Siemens Industries' CEO, Daryl Dulaney, was also quoted as saying "It's a different era. Our hiring and investment decisions have to be prudent and reflect that."

Dr. Paul Craig Roberts, former Assistant Secretary of Treasury in a scathing article this week, describes this "different era" and how Globalism and transnational corporations have mutated " the New Economy:"

Wall Street and shareholders and executives of transnational corporations have made billions by moving 39% of US manufacturing offshore to boost the GDP and employment of foreign countries, such as China, while impoverishing their former American work force. Congress and the economics profession have cheered this on as “the New Economy.” 

Bought-and-paid-for-economists told us that “the new economy” would make us all rich, and so did the financial press. We were well rid, they claimed, of the “old” industries and manufactures, the departure of which destroyed the tax base of so many American cities and states and the livelihood of millions of Americans. 

The bought-and-paid-for-economists got all the media forums for a decade. While they lied, the US economy died.

And in Robert's other article this week he describes how the tax and cut debate is flawed in this New Economy:

Perhaps economists lack imagination, or perhaps they don't want to be cut off from Wall Street and corporate subsidies, but Social Security and Medicare are insufficient at their present levels, especially considering the erosion of private pensions by the dot-com, derivative and real estate bubbles. Cuts in Social Security and Medicare, for which people have paid 15 per cent of their earnings all their lives, would result in starvation and deaths from curable diseases. 

Tax increases make even less sense. It is widely acknowledged that the majority of households cannot survive on one job. Both husband and wife work and often one of the partners has two jobs in order to make ends meet. Raising taxes makes it harder to make ends meet -- thus more foreclosures, more food stamps, more homelessness. What kind of economist or humane person thinks this is a solution? 

Ah, but we will tax the rich. The rich have enough money. They will simply stop earning.

In July I wrote, "The deficit panic mode is ramping up the rerun political show as fiscal conservatives echo the age-old mantra 'cut taxes and spending,' while the progressives pretend to be for the little guy and demand more public spending. However, every economist (and central banker) worth their salt knows that when the money supply contracts, the economy goes into a depression -- while expanding the money supply to the consumer class stimulates economic growth."

Although the monetary base has spiked off the charts, mostly to absorb toxic financial products by bailing out the banks, the supply of money has not yet trickled into the real economy. The Elite are flush with cash, as the Post article states, but they refuse to spend it until consumers start spending -- like a game of Chicken. And as Dr. Roberts wrote, the rich "already have enough money" and are unlikely to invest it domestically in this "New Economy."

Since we have bailed out the top (banksters) with flawed hopes that they will begin lending again, it seems the money would have been better spent going directly to the consumer class without the Elite filter. This would have directly added money supply into the real economy instead of being hijacked by the criminal financial system that caused the collapse.

Unfortunately, because of the engineered deficits to feed the military-industrial complex, off-shore multinationals, and the banksters, we no longer have enough resources should the states or average Americans need help -- but the wars are likely to continue and Social Security is likely to be cut. God Bless America -- the shining city on the hill.

Corporations Want Fewer Workers, But Still Need Everyone to Be Consumers

The Economic Crunch We're in
The recession has been a way for employers to cull payrolls -- and to discover that many jobs don't have to be filled again.
By Robert Parry, Consortium News
July 16, 2010

A hard truth about the U.S. economy is that corporations don’t need as many of us as workers but still need us as consumers. That dilemma helps explain why unemployment is stuck near 10 percent and why the economic recovery is stumbling toward a double dip.

The Washington Post reported Thursday that nonfinancial companies are sitting on $1.8 trillion - about one-fourth more than at the start of the recession - but won't add personnel in part because they're waiting for consumer demand to pick up, which isn't happening because many Americans don't have jobs or are afraid of losing theirs.

Yet, even if that vicious cycle could be broken, there's another reason for the lack of hiring: companies have found they can make do with a lot fewer American workers. The recession has been a way to cull payrolls - and to discover that many jobs don't have to be filled again, either because of new technologies or because the jobs have been shifted overseas.

Both these trends predated the recession but the rapid shedding of jobs since the Wall Street financial crash in 2008 - some eight million jobs lost - has spotlighted this structural change. Further, corporate determination to remain "lean" has turned the worker-surplus issue from a personal crisis for many American families into a systemic one for the country's economy.

Predictably, the free-marketers at CNBC and the Wall Street Journal have echoed the political message of the Chamber of Commerce and other right-wingers who blame the sluggish rehiring on the Obama administration's health-care reform and the likelihood that President George W. Bush's tax cuts for the rich will lapse.

That view fits with Ronald Reagan's economic orthodoxy which has dominated the United States for the past three decades. It holds that the answer to the nation's economic woes is always to cut taxes especially for the rich, to trust in corporate self-regulation, and to crack down on unions.

Yet, the realistic answer to America's sorry economic state would seem to be the opposite: to raise taxes on the rich so investments can be made in the national infrastructure of education, transportation and technology; to impose reasonable regulations on corporations to prevent dangerous excesses and risks; and to ensure that workers (and consumers) get a fair shake.

Through the federal taxing power, Washington could put Americans to work preparing the nation for the future, building high-speed rail, developing clean energy, improving education for all, advancing medical technologies, repairing the environment, and addressing a host of other national priorities.

The Media Imbalance

But a second hard truth about today's America is that the political/media structure is such that these steps are almost unimaginable. In the power centers of New York and Washington, in particular, Corporate America and its right-wing allies have built a propaganda apparatus that makes any serious discussion of these options political suicide.

This propaganda machinery, which reaches across the United States through right-wing talk radio, Fox News and a variety of other outlets, guarantees that any politician (or media personality) who pushes too hard or too effectively for questioning the Reagan orthodoxy will be demonized.

President Barack Obama is only the latest politician to learn this lesson. Though many on the American Left denounce Obama as a weak-kneed centrist too eager to compromise, he is portrayed to the rest of America as a radical socialist, sometimes even likened to Hitler and Stalin.

It doesn't matter that these comparisons are as absurd as they are offensive. The point about propaganda is that if ugly attacks are repeated enough about some individual, many in the public will be influenced, consciously or subconsciously, to think of the person in a negative light.

And as that trend gains momentum - as the politician's polls sink - the mainstream media will go with the flow, endlessly reprising stories about the person's slipping popularity and thus hastening the political decline.

This pattern is almost inevitable unless there is a counterforce within the media that challenges the lies and distortions. But today's America has almost no Left media to speak of, at least nothing that compares with what the Right has built, and what Left media does exist tends to resent the political compromises that Obama and other Democrats have made.

Thus, the media asymmetry causes Democratic politicians to make more compromises, hoping to limit the Right's ability to demonize them but further alienating and demoralizing the Democratic base.

So, the outcome of Election 2010 seems likely to follow the same course as Election 1994, the last time a new Democratic president was in office and tried to enact some watered-down reforms. Again, Republicans are expected to win - and win big - which would then put them in position to block whatever is left of Obama's agenda and thus turn him into an actual (or virtual) lame duck.

Though Bill Clinton did win reelection in 1996 against a weak Republican opponent (Bob Dole) with the help of a third-party candidate (Ross Perot), Clinton had to confine his second-term ambitions to "micro-programs" and to changes favored by the Republicans, such as the removal of Great Depression-era regulations of the banking system (a "modernization" that set the stage for the 2008 financial collapse).

Investigating Obama

If Republicans gain control of at least one house of Congress, they would surely launch a wave of investigations against Obama, much as the GOP did against Clinton.

Unlike the Democrats who shy away from investigative controversies - turning their backs even on historic scandals such as Iran-Contra, Iraq-gate and contra-cocaine trafficking in the 1980s as well as George W. Bush's torture abuses and illegal wars last decade - the Republicans have no such qualms.

They pounced all over trivial Clinton "scandals" like Whitewater and Travel-gate and impeached Clinton for lying about sex (though they could not muster a super-majority in the Senate for conviction). And Rep. Darrell Issa, R-California, has vowed to be similarly aggressive now if he gains control of the House oversight committee next year. [Washington Post, July 4, 2010]

So, with Obama embattled and the Democratic congressional majorities likely to shrink or disappear, the chances for the United States to confront its structural problems will only worsen.

With unemployment staying high, many middle-class Americans will sink into a growing under-class. The rich will fight to keep as much of their oversized salaries and bonuses as possible, with the Republicans ensuring that the one political sure-thing will be that legislated tax increases won't happen.

Indeed, the simplest way to address the nation's myriad of problems - by restoring the marginal tax rates for the rich back to the historical levels of, say, the Kennedy era (around 60 percent on their top income) - is the one thing that is almost impossible to contemplate.

Since Reagan's presidency, the Republicans have been determined to "starve" the government of resources so it can't address problems like climate change, renewable energy, education, transportation, health care, housing, etc. The only big expenditure that the GOP won't cut is military spending, especially for overseas wars.

Though the Republican vision of the future appears to guarantee a continued decline in the quality of American life, the Right's propaganda machinery makes any suggestion about the need to tax the rich more heavily akin to socialism. The Revolutionary War slogan, "no taxation without representation," has been transformed to something close to "no taxation, period."

Remember the famous encounter between candidate Obama and "Joe the Plumber," who decried Obama's idea about the need to redistribute wealth from the upper-income levels to middle- and working-class Americans so the economy would work better.

That debate remains at the center of America's economic struggles, as it has been since the Great Depression when income inequality and financial speculation were two key factors in the mass unemployment that followed the Crash of 1929. Two lessons learned were that a strong middle class and reasonable government regulations were necessary for a healthy economy.

New Consensus

That New Deal consensus held until 1980 when a new Reagan-era consensus took hold, claiming that tax cuts tilted toward the wealthy and reduced regulation of corporations were the route to prosperity. A corollary was that the wealthy deserved the lion's share because of their intelligence and hard work.

Reagan and the Right sold many Americans, including large numbers of people from the lower economic strata, on the idea that it was unfair for the government to use the tax system to reverse the consolidation of wealth and the political power that went with it.

However, the counter-argument is that virtually every rich person in the United States has benefited from the investment of taxpayers' money in creating the conditions for business success, from public education of workers, to the transportation infrastructure for shipping goods, to the research and development that opened opportunities in computer technology, medicines and the Internet.

Indeed, to ensure that the benefits from these government investments are shared with some equity would require that the excess income at the top be recycled into other improvements of the nation's infrastructure and the quality of life for all Americans.

In other words, by raising taxes on the rich, Washington could help create the jobs needed for addressing national problems and simultaneously break the vicious cycle that has left nearly 10 percent of Americans unemployed, the key fact that has depressed consumer demand.

However, to change the dominant Reagan-era ideology - and thus to change America - would require smart investments from progressives in the information battles for the hearts and minds of the American voters.

Only with the Right's orthodoxy challenged and the American people understanding their real choices might politicians gain the confidence and courage to do what's needed to get the United States back on the path of a healthy economy - and toward a revived democracy.

MASTERS OF MAIN STREET

by James Surowiecki | JULY 12, 2010 | The New Yorker

The financial-reform bill that Congress appears ready to pass is not the panacea for financial crises that some wanted. But, given the influential Wall Street lobbies that were trying to emasculate the law, it’s surprising that it turned out to be as tough as it is. The bill limits banks’ trading activities, brings transparency to the derivatives market, gives the government the power to take over troubled institutions, and creates a new consumer financial-protection agency. This means that it will have a real impact on the bottom lines of some of the country’s biggest firms, including powerhouses like Goldman Sachs and J. P. Morgan. Yet there was one group of businessmen that succeeded where Wall Street failed, beating back regulation and insuring that Congress would let them carry on with business as usual. These unexpected masters of Capitol Hill? The nation’s auto dealers.

The reform bill was potentially alarming for auto dealers because they’re major players in the consumer-credit business. There are close to eight hundred and fifty billion dollars’ worth of auto loans outstanding in the U.S.—about as much as our total credit-card debt—and car dealers broker about eighty per cent of them. Since the central task of the new consumer financial-protection agency is to oversee the market for consumer credit, which has become something of a cesspool in recent years, it would have been natural for car dealers to fall under its jurisdiction. Instead, the dealers won a special exemption: the agency can’t touch them.

The dealers argue that this is as it should be, since they are just middlemen between borrower and lender. The subprime crisis, though, taught us that middlemen can do enormous damage: mortgage brokers (the housing market’s middlemen) were among the key culprits, originating loans based on little or no documentation, encouraging borrowers to fudge their income, and brokering loans for more than borrowers could actually afford. Auto dealers aren’t that shady, but they’re no angels, either. As a recent study of the industry by Raj Date and Brian Reed shows, dealers routinely get incentive payments for steering customers toward particular lenders, and sometimes use the financing process to tack on additional fees. Some also mark up loans to a higher rate than the lender is charging and pocket the difference—a practice that, the Center for Responsible Lending estimates, cost car buyers more than twenty billion dollars in one year.

The auto dealers won their exemption the old-fashioned way, by lobbying the hell out of Congress. But the fact that they succeeded where bigger, more powerful companies didn’t reveals something important about the politics of influence on Capitol Hill: lobbying isn’t just about money. The companies that lobbied most successfully around the financial-reform bill didn’t necessarily pay the most. Instead, they were able to bring grassroots pressure to bear on individual congressmen and to present themselves as remote from Wall Street. The auto dealers were perfectly placed to make this pitch: there are some eighteen thousand auto dealerships around the country, employing close to a million people, which means that every congressman has lots of constituents whose livelihood depends on a dealership. Auto dealers have long been among the most powerful lobbies at the state level, and that influence helps in Washington, too. The dealers leveraged their power by defining themselves as clean-living Main Street businesses rather than plutocratic Wall Street ones. It seemed like every communiqué from the dealers’ association included the phrase “Main Street auto dealers.” This was a disingenuous argument—something like seventy per cent of auto loans are securitized or financed by Wall Street—but rhetorically effective. Auto dealers may collectively make up a huge industry, but most of them are small businessmen, just the kind of regular Americans that congressmen like to be seen as standing up for.

The dealers’ victory wasn’t an anomaly: associations of small businesses and producers are often surprisingly influential. A classic example is the wool-and-mohair subsidy, which was first put in place after the Second World War, to subsidize the production of material for soldiers’ uniforms. But the subsidy stayed in place long after its military purpose disappeared, because there were wool producers in nearly every state, and they all cared a lot about keeping the subsidy intact. Similarly, among the most vociferous opponents of tougher regulations in the financial-reform bill were small banks and credit unions (which will also be exempt from the new agency’s jurisdiction). This time around, at least, the fact that small and community banks opposed a provision may well have mattered more than what a behemoth like Citigroup thought.

One could say, of course, that this is just the way interest-group democracy is supposed to work—enabling little guys to band together into effective lobbies. The problem is that the system does nothing for the littlest guy of all—the consumer. In giving the dealers their exemption, Congress may have said that it was helping Main Street over Wall Street. But what it was actually doing was putting the dealers’ interest in no oversight ahead of the public’s interest in a fair marketplace. The result is a consumer financial-protection agency that’s prevented from overseeing one of the most common, and most important, financial products that consumers buy. It’s like creating the F.D.A. and then denying it authority over pain relievers.

Consumers Sued Over Negative Comments Made Online

Venting Online, Consumers Can Find Themselves in Court
By DAN FROSCH

After a towing company hauled Justin Kurtz’s car from his apartment complex parking lot, despite his permit to park there, Mr. Kurtz, 21, a college student in Kalamazoo, Mich., went to the Internet for revenge.

Outraged at having to pay $118 to get his car back, Mr. Kurtz created a Facebook page called “Kalamazoo Residents against T&J Towing.”Within two days, 800 people had joined the group, some posting comments about their own maddening experiences with the company.

T&J filed a defamation suit against Mr. Kurtz, claiming the site was hurting business and seeking $750,000 in damages.

Web sites like Facebook, Twitter and Yelp have given individuals a global platform on which to air their grievances with companies. But legal experts say the soaring popularity of such sites has also given rise to more cases like Mr. Kurtz’s, in which a business sues an individual for posting critical comments online.

The towing company’s lawyer said that it was justified in removing Mr. Kurtz’s car because the permit was not visible, and that the Facebook page was costing it business and had unfairly damaged its reputation.

Some First Amendment lawyers see the case differently. They consider the lawsuit an example of the latest incarnation of a decades-old legal maneuver known as a strategic lawsuit against public participation, or Slapp.

The label has traditionally referred to meritless defamation suits filed by businesses or government officials against citizens who speak out against them. The plaintiffs are not necessarily expecting to succeed — most do not — but rather to intimidate critics who are inclined to back down when faced with the prospect of a long, expensive court battle.

“I didn’t do anything wrong,” said Mr. Kurtz, who recently finished his junior year at Western Michigan University. “The only thing I posted is what happened to me.”

Many states have anti-Slapp laws, and Congress is considering legislation to make it harder to file such a suit. The bill, sponsored by Representatives Steve Cohen of Tennessee and Charlie Gonzalez of Texas, both Democrats, would create a federal anti-Slapp law, modeled largely on California’s statute.

Because state laws vary in scope, many suits are still filed every year, according to legal experts. Now, with people musing publicly online and businesses feeling defenseless against these critics, the debate over the suits is shifting to the Web.

“We are beyond the low-tech era of people getting Slapped because of letters they wrote to politicians or testimony they gave at a City Council meeting,” said George W. Pring, a University of Denver law professor who co-wrote the 1996 book “Slapps: Getting Sued For Speaking Out.”

Marc Randazza, a First Amendment lawyer who has defended clients against suits stemming from online comments, said he helped one client, Thomas Alascio, avoid a lawsuit last year after he posted negative remarks about a Florida car dealership on his Twitter account.

“There is not a worse dealership on the planet,” read one post, which also named the dealership.

The dealership threatened to sue Mr. Alascio if he did not remove the posts. Mr. Randazza responded in a letter that although Mr. Alascio admitted that the dealership might not be the worst in the world, his comments constituted protected speech because they were his opinion.

While the dealership did not sue, that outcome is unusual, said Mr. Randazza, who conceded that sometimes the most pragmatic approach for a Slapp defendant is to take back the offending comments in lieu of a lawsuit.

In the past, Mr. Randazza said, if you criticized a business while standing around in a bar, it went “no further than the sound of your voice.”

Now, however, “there’s a potentially permanent record of it as soon as you hit ‘publish’ on the computer,” he said. “It goes global within minutes.”

Laurence Wilson, general counsel for the user review site Yelp, said a handful of lawsuits in recent years had been filed against people who posted critical reviews on the site, including a San Francisco chiropractor who sued a former patient in 2008 over a negative review about a billing dispute. The suit was settled before going to court.

“Businesses, unfortunately, have a greater incentive to remove a negative review than the reviewer has in writing the review in the first place,” Mr. Wilson said.

Recognizing that lawsuits can bring more unwanted attention, one organization has taken a different tack. The group Medical Justice, which helps protect doctors from meritless malpractice suits, advises its members to have patients sign an agreement that gives doctors more control over what patients post online.

Dr. Jeffrey Segal, chief executive of Medical Justice, said about half of the group’s 2,500 members use the agreement.

“I, like everyone else, like to hear two sides of the story,” he said. “The problem is that physicians are foreclosed from ever responding because of state and federal privacy laws. In the rare circumstance that a posting is false, fictional or fraudulent, the doctor now has the tool to get that post taken down.”

The federal bill, in the House Subcommittee on Courts and Competition Policy, would enable a defendant who believes he is being sued for speaking out or petitioning on a public matter to seek to have the suit dismissed.

“Just as petition and free speech rights are so important that they require specific constitutional protections, they are also important enough to justify uniform national protections against Slapps,” said Mark Goldowitz, director of the California Anti-Slapp Project, which helped draft the bill.

Under the proposed federal law, if a case is dismissed for being a Slapp, the plaintiff would have to pay the defendant’s legal fees. Mr. Randazza would not disclose specifics on the legal fees he has charged his clients, but he said the cost of defending a single Slapp suit “could easily wipe out the average person’s savings before the case is half done.”

Currently, 27 states have anti-Slapp laws, and in two, Colorado and West Virginia, the judiciary has adopted a system to protect against such suits. But the federal bill would create a law in states that do not have one and offer additional protections in those that do, Mr. Goldowitz said.

In Michigan, which does not have an anti-Slapp measure, Mr. Kurtz’s legal battle has made him a local celebrity. His Facebook page has now grown to more than 12,000 members.

“This case raises interesting questions,” said the towing company’s lawyer, Richard Burnham. “What are the rights to free speech? And even if what he said is false, which I am convinced, is his conduct the proximate cause of our loss?”

On April 30, Mr. Kurtz and his lawyers asked a judge to dismiss the suit by T&J, which has received a failing grade from the local Better Business Bureau for complaints over towing legally parked cars. Mr. Kurtz is also countersuing, claiming that T&J is abusing the legal process.

“There’s no reason I should have to shut up because some guy doesn’t want his dirty laundry out,” Mr. Kurtz said. “It’s the power of the Internet, man.”

Keep the Fed Away From the Consumer

Why We Should Keep the Fed Away From the Consumer: the Hurt Incident
By ANDREW COCKBURN

Buoyed by the thrill of seeing Goldman Sachs squirm just a little at the witness table it may be that a financial “reform” bill emerges from congress some time this summer. Without a doubt, human wave assaults by Wall Street’s famously effective lobbyists will produce many amendments and alterations to the draft legislation currently under debate. Some of these may be momentous in effect yet scarcely visible to anyone but a securities lawyer – think the Commodity Futures Modernization Act, slipped through congress without debate in December 2000, that unleashed credit default swaps on a defenseless world. Other compromises congenial to the financial industry have already been incorporated in Senator Chris Dodd’s Senate Banking Committee bill, with little prospect of reversal. Chief among these is the internment of the proposed Consumer Finance Protection Agency within the Federal Reserve – an early Dodd concession to the Republicans.

There are a lot of good reasons why the Federal Reserve should not be allowed anywhere near the consumer, not least its prior record in consumer financial protection. Consider the experience of Adrienne Hurt, a career staff attorney at the fed. In 2003, Hurt was Associate Director of the bank’s Division of Consumer and Community Affairs and a potent influence in the arcane but vital field of consumer-related financial regulation, where the Fed plays a commanding role. It is thanks to her, for example that car and truck leasing agreements must set out clearly what we will have to pay. “Adrienne Hurt was by far the most talented and responsible person on the Fed’s consumer affairs staff,” says Professor Patricia McCoy, of the University of Connecticut Law School, herself a recognized authority on consumer finance law.

Among the Fed’s responsibilities are the administration of various consumer-finance laws such as the Truth in Lending Act, the Equal Credit Opportunity Act, etc. These laws generally require that disclosures to the borrower be “clear and conspicuous.” But the regulations implementing several of these laws differed in the way they defined “clear” and “conspicuous.”

In 2003 Hurt thought it would be a fine idea if all these regulations were to be standardized, a concept on which she thought all reasonable people would agree. So she crafted a regulation defining “clear and conspicuous.” Credit card companies, for example, would have to spell out card charges, fees and penalties “in clear, concise sentences, paragraphs, and sections,” while avoiding “legal or highly technical business terminology whenever possible.” Conspicuous would mean using “a typeface and type size,” such as 12 point type, “that are easy to read.” Banks would have similarly to clarify such important matters as overdraft fees.

As Hurt told me recently, “I was hoping to get people using mouseprint to stop using mouseprint.” And so the proposed regulation changes were drawn up and duly published for review and comment in a highly technical 19-page press release on November 26, 2003.

The financial services industry – banks large and small, credit card companies, mortgage lenders, in her words, “went crazy.” Written protests poured in, mostly via the industry’s politically muscular trade associations. The regulations would require “costly compliance.” They would be “litigation bait” for unscrupulous tort lawyers. Credit card companies argued that their customers could better understand how an account operates “when required disclosures are interspersed among other contract terms.” Some advanced the bizarre claim that printing disclosures in larger type with wider margins would be actually be a disservice for the consumers because “they would be less inclined to read them.” Meanwhile the board of governors, chaired at the time by Alan Greenspan, were deluged with personal calls from senior financial services industry executives.

Normal procedure in such matters calls for such proposals to be reviewed by a three-person committee drawn from the seven federal reserve governors. In January 2004, the relevant committee, Consumer Affairs, was chaired by the late Edward Gramlich, now remembered for having warned Greenspan of the perils lurking in the subprime lending boom. One of the other two members was a Tennessee banker, Susan Bies, quoted after the crash (when she had left the board) as saying that regulators had been caught by surprise by the subprime boom, and that she regretted there was not quicker action taken to protect borrowers. The third member was a mild mannered academic economist soon to leave the Fed to serve as Chairman of George Bush’s Council of Economic Advisers, Ben Bernanke.

Though the committee did not meet until January 2004, the writing was already on the wall. The offical notice withdrawing the proposal did not appear for another six months, but in a cruel irony, Hurt had had to write a formal memo to the board recommending withdrawal.

At the end of a recent long conversation in her current small, bare office at Federal Reserve headquarters, – on the same floor but a long, long way from the grand chamber where the Board of Governors meet -- I asked Hurt about the episode’s impact on her career. “I am no longer involved in consumer affairs,” she answered drily. She is instead an “adviser” to the Staff Director for Management Affairs.

“The fed board caved to the banking industry and Hurt was exiled,” says McCoy. “That’s all you need to know.”