MAKING THE MEGA-BANKS PAY: New York Attorney General Eric Schneiderman has opened an important new front in his battle to force accountability on the banks that fostered the financial collapse. On August 4, he filed a challenge to the $8.5 billion settlement worked out between Bank of New York Mellon and its injured investors—an absurdly low figure, he suggested, compared with the $174 billion in toxic securities at stake.
Schneiderman has accused BNY Mellon of fraud and giving false assurances to investors. The bank was supposed to act as a neutral trustee to verify hundreds of billions in mortgage securities and housing loans generated by the biggest names in banking. If the big boys cheated on lending rules or ignored safeguards required by law, BNY Mellon was supposed to warn off investors. Looking the other way meant the banks would be liable for catastrophic claims that might wreck still fragile balance sheets like that of Bank of America.
If Schneiderman can make his case, the political and economic implications could be explosive. The White House, eager to claim that the system is cleaned up and healthy again, has mostly turned a blind eye when it comes to financial fraud. But private investors and a few gutsy public officials like Schneiderman know better. They are digging deeper and demanding a just reckoning for unpunished crimes. Now AIG, the insurance giant bailed out by taxpayers, plans to sue Bank of America, Goldman Sachs, JPMorgan Chase and Deutsche Bank on similar grounds. Coming clean on financial fraud may prove very expensive for the biggest banks—but also costly to the Obama administration’s reputation for justice. WILLIAM GREIDER
FAA FIASCO: The two-week impasse that partially shut down the Federal Aviation Administration may be over, but questions about the agency’s future are far from resolved. On August 5 President Obama signed a short-term extension of the FAA’s funding authority, allowing roughly 4,000 furloughed agency employees to return to their jobs and putting tens of thousands of others back to work on stalled airport construction projects. The bill, passed soon after lawmakers left for the August recess, also reinstated taxes on airline tickets, which the FAA had been unable to collect since July 23. The loss was more than $350 million in ticket and fuel taxes. Airlines, in an effort to exploit the fiasco, had raised their fares to mirror pre-shutdown ticket prices and pocketed the would-be tax revenue.
The compromise left in place the cuts that led to the standoff in the first place: $16.5 million in annual subsidies to rural air services. The deal extends the FAA’s operating authority only through mid-September. With such limited legislation in effect, the economic and labor issues that underlay this political theater remain largely unaddressed. Congress has just over a month to agree on a long-term legislative blueprint for the agency’s funding—or it must once again seek a temporary bill or risk disaster. MARC KILSTEIN
SAVE OUR POST OFFICES: Next to credit rating downgrades and stock market collapses, the threat by the US Postal Service to shutter at least 3,653 post offices (perhaps as many as 4,300) may not seem like a disaster in the making. But if the USPS goes forward with the plan, it will deal a blow to communities from coast to coast and further diminish one of America’s oldest public institutions.
In addition to providing employment—with an admirable record of hiring women, people of color and people with disabilities, and investing them with real authority—the USPS has kept reliable public facilities in small towns and city neighborhoods that have often been abandoned by chain stores and restaurants. Like public schools, post offices are sources of identity for communities that are otherwise neglected by big government and multinational corporations.
This is a benefit that’s hard to calculate. For decades there has been pressure to cut and privatize the Postal Service, which generally pays for itself but doesn’t return huge profits. In the current period of economic instability, the USPS has been losing money, in part because federal officials have pressured it to make huge advance payments to cover future pension costs. But its shortfalls—$3.1 billion in the most recent quarter—are negligible compared with Pentagon overages and bank bailout excesses. Rather than outsourcing work to private carriers like FedEx, the USPS should be allowed to compete with them. Postal unions are pushing back. So is a new website, savethepostoffice.com, which declares, “The Robber Barons are stealing the post office from the American people.” With smart pension reforms and an end to unnecessary outsourcing, thousands of post offices can be saved. JOHN NICHOLS
A STAR IS BORN: In 2006, The Nation recognized the outstanding talent of student journalist Sarah Stillman, awarding her the top prize in our first annual Student Writing Contest. As a student at Yale, Stillman was active in the global justice movement. Today she remains committed to exposing injustice. A story she published in The New Yorker, “Invisible Army,” which exposes the abuse of foreign workers on US military bases in Iraq and Afghanistan, recently came to the attention of California Democratic Representative Karen Bass. On July 7 Bass introduced an amendment to the Defense Appropriations Bill prohibiting the use of Pentagon funds for human trafficking. In a floor speech, Bass said, “Mr. Chair, a recent New Yorker article illustrates the urgent need for my amendment.” She then cited details from Stillman’s article. The amendment passed the House on July 7. NATASJA SHERIFF
FROM HIROSHIMA TO FUKUSHIMA: In August the world marked the sixty-sixth anniversary of the bombing of Hiroshima and Nagasaki, but with a different news hook: the ongoing nuclear crisis at Fukushima, where the highest radiation levels to date have just been recorded. This year, some of the leading survivors of the bombings (the hibakusha) have turned their protests against nuclear power plants, knowing all too well the long-term threats, physical and psychological, posed by exposure to radiation.
Meanwhile, many Japanese believe there has been a high-level corporate and government cover-up of what happened at Fukushima, a familiar theme. In my new book, Atomic Cover-Up, I probe the US suppression of evidence (particularly film footage) about the effects of the A-bombs. Surely there is no issue where transparency must be a higher priority. GREG MITCHELL