Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Guardian, Men's Journal, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndyKroll.

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The Army of Chronic Unemployment

| Fri Mar. 5, 2010 11:39 AM EST

There aren't any major shockers in the latest monthly employment report for February out today from the Bureau of Labor Statistics. The most commonly used unemployment rate held steady at 9.7 percent, and the economy shed 36,000 jobs—up from 22,000 in January. What you should care about in the latest jobs report is the army of unemployed Americans who remain chronically unemployed, meaning they've been without work for 27 weeks or more. As you can see in the graph below from the invaluable economics site Calculated Risk, in the past two years the number of chronically unemployed Americans has skyrocketed, shattering the previous record in the early 1980s.

Today, 4 percent of the population has been without work for 27 weeks or more. No story of the ongoing job crisis is complete without the graph below, especially given that the longer people are out of work, the harder it is for them to get back into the workforce. Likewise, no solution to our job nightmare will be sufficient without addressing this army of the long-term unemployed.

UnemployedOver26WeeksFeb2010

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How to Grill Citigroup

| Thu Mar. 4, 2010 11:55 AM EST

The Congressional Oversight Panel (COP), the watchdog investigating the government's bailout and other financial rescues, is set to question Vikram Pandit, the CEO of Citigroup today. Simon Johnson, former chief economist of the International Monetary Fund, says the grilling offers the COP an easy chance to ask some tough questions of the leader of one of the nation's biggest supermarket banks. "This is an important opportunity," Johnson writes, "because, if you want to expose the hubris, mismanagement, and executive incompetence—let's face it—Citi is the low hanging fruit."

To that end, Johnson offers five questions of his own, each well worth reading, that the COP should ask Pandit today:

  1. As far as anyone can judge, Mr. Pandit, you are completely unqualified to restructure and run a disaster prone global bank. Can you please explain in detail how you got the job? 2.
  2. Your hedge fund. Old Lane Partners, was closed by Citi in June 2008. Please elaborate on why it was closed, including how much money you lost on what kinds of securities. (Hint: follow the NYT through the sad story.)
  3. Please review for us the details of your promised compensation package and how much you have actually received – including cash, deferred compensation, stocks, and perks (including executive jet travel, valued at market rates); do not forget your chunk of the Old Lane deal. How much taxpayer money has been injected into Citi and on what basis?
  4. Of course, as you understand full well, the true cost to society of Citi’s misdeeds is vastly more than the direct taxpayer injections of capital. Please tell us – as specifically as you can – what other burdens Citi has generated for the rest of us. (Hint: there is a right answer here, which includes more than 8 million jobs lost since December 2007, a 30-40 percent increase in net government debt held by the private sector, and much higher taxes for everyone in the future.)
  5. Mr. Pandit, your proposed restructuring plans simply make no sense; there is nothing you have put on the table that would reduce the risks posed by Citi to the national interests of the United States. Even John Reed, the man who built Citi as a global brand, now says that it should be disbanded. There is no evidence – and I mean absolutely none – for economies of scale in banks over $100bn in total assets. Richard Fisher, head of the Dallas Fed, calls for immediate action in terms of breaking up large dysfunctional banks such as yours; please explain to us why the Fed should not move immediately to apply his recommendations to Citi – surely, the safety and soundness of our financial system is on the line.

Senate "Very Close" on Financial Deal

| Thu Mar. 4, 2010 10:16 AM EST

The Senate banking committee is reportedly "very, very, very close" to reaching a deal on a consumer-protection agency, which in turn could lead to a breakthrough on a broader agreement on financial-reform legislation. The latest news from the Senate's grueling, ongoing talks is that several more Senate Republicans—Sen. Mitch McConnell (R-Ky.), Sen. Mike Crapo (R-Idaho), and Sen. Judd Gregg (R-NH)—have joined the negotiations already being lead by Sen. Chris Dodd (D-Conn.), chair of the banking committee, and Sen. Bob Corker (R-Tenn.), Dodd's main GOP negotiator, the Wall Street Journal reports. It's unclear why the additional Senate GOPers jumped on board, perhaps to help finish off the closed-door talks.

The WSJ also reported that a deal to house a consumer-protection agency within the Federal Reserve, an idea of Corker's, remained on the table. The Fed option has been roundly panned by consumer advocates—John Taylor, president and CEO of the National Community Reinvestment Coalition, said he'd rather put the agency at the National Zoo than the Fed—and if passed, would be viewed as a win for the Big Finance. The Senate's financial-reform negotiations continue today, and a agreement within the banking committee could come as early as this week.

Obama Defends Risky Trading Ban

| Wed Mar. 3, 2010 5:26 PM EST

President Obama looks ready to fight to ensure the survival of his plan to ban risky trading within the same walls as taxpayer-backed US banks, according to draft language from the administration obtained by Reuters today. Obama's proposal would also place limits on the same kinds of trading at other big non-bank institutions, like Goldman Sachs. This new proposal, which will reportedly be sent to lawmakers today, reinforces a tough stance the president took back in January when, standing alongside former Federal Reserve chair Paul Volcker, for whom the idea is named, he called for new safeguards preventing federally-insured banks that take deposits from essentially gambling in venutres like hedge funds and private equity funds.

The proposal for non-banks would involve a cap on their risky trading levels and subjecting them to more enhanced regulation—the latter a proposal sure to irk the financial-services community. According to Reuters, the draft says, "These proposals are part of a comprehensive package of reforms to create a safer, more resilient financial system."

It's unclear right now how much of the Volcker proposals will make it into draft legislation now being hammered out in the Senate banking committee, led by Sen. Chris Dodd (D-Conn.), the committee's chairman. Earlier this year, Dodd had lightly criticized the Obama administration for rolling out the proprietary-trading ban, saying the president's proposal "seemed to many to be transparently political." The banking committee is expected to release its financial-reform framework as early as this week. The Volcker Rule has also been downplayed by experts, like former IMF chief economist Simon Johnson, who say a firewall between proprietary trading and more boring banking activities wouldn't get at the root of the problem:

For one thing, proprietary trading is but a small part of what these banks do. For most of the major banks, such activity accounts for less than 5 percent of total revenue—even at Goldman Sachs, which is, in some senses, the largest hedge fund in the world (backed by the US government through its access to the Fed’s discount window), proprietary trading accounts for only around 10 percent of total revenue on average. Even if we could strip this activity from the banks, it would reduce their size only slightly—and the too-big-to-fail banks would find ways to take similar-sized risks because their upside during a boom would still be big, and their downside in a bust would dramatically damage the economy, thereby forcing the government into some sort of rescue.

I'd recommend reading more of Johnson's take on the Volcker plans here. And hearing what Johnson has to say, Obama's continued backing for Volcker's idea looks even more political. We'll have to wait and see whether the Senate banking committee takes a cue from Obama or makes up its own mind on the issue.

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