Throughout that day we noticed many protesters using their mobile devices to document their own experience, sometimes for themselves or their own blogs, sometimes to share with bona fide media organizations. So, midday this past Saturday, Sept. 24, we headed to Union Square, where the Occupy Wall Street protesters had marched that morning from Lower Manhattan.

When we first arrived on the scene, protesters were marching along the sidewalk in unison, chanting. There was no sense of chaos. Many held video and audio recording devices, including camera phones.

However, the stream of protesters did disrupt traffic. Pedestrians wove in and out of the mass of protesters, some on their way to do Saturday errands, others who joined in for a block or two, chanting with the masses.

Sam and I were on the sidewalk observing the action. She was taking photographs, while I was juggling my reporter’s notebook and the audio recorder we’d brought along to interview protesters about how they were using media throughout the day.

As more people spilled into the street, police started to demand that protesters stay on the sidewalk. But as people seemed to be retreating from harm’s way, police began pushing the protesters. I saw police use large nets to corral people en masse. I watched as police pepper sprayed several young women in the face. (An NYPD spokesperson confirmed the use of pepper spray to MetroFocus.) I saw senior citizens and teenagers get arrested. I saw about 20 or 30 police officers tackle people and prod them roughly with police batons.

WATCH VIDEO:

Video of the young female protesters against whom MetroFocus reporter John Farley saw the police use pepper spray. The headlines for this video was chosen by YouTube. Youtube/TheOther99Percent.

With nearly every arrest, the demonstrators called out for “cameras, cameras” — urging others to document the events — and chanted in unison “The whole world is watching! The whole world is watching!”

When I saw the young women get pepper sprayed, I ran over to interview them. While holding a microphone and wearing a badge identifying myself as an employee of “WNET – New York Public Media,” I found myself suddenly roped into one of the large nets. I was thrown against a wall and handcuffed with hard plastic zip-tie restraints. I sat on the sidewalk with about 50 others. I yelled over and over “I’m press! I’m with WNET MetroFocus! Please do not arrest me.”

I did not possess the press credentials that NYPD allocates to journalists. (As MetroFocus is less than three months old, neither I nor my journalist colleagues have yet met the NYPD’s qualifications.) So even though I work as a professional journalist, the NYPD lumped me in with everybody else.

Lumped me in indeed. I was in police custody for nine hours, eight of which I spent in a jail cell at the 1st Precinct.

An NYPD spokesperson told MetroFocus on Monday that 87 people have been arrested in total since the Occupy Wall Street protests began last weekend; however, the Daily News reported that at least 80 people were arrested on Sept. 24 alone, mostly on charges of disorderly conduct and obstructing traffic. The NYPD would not comment further on my arrest.

Before we were all jailed, they took away everybody’s possessions, including our notebooks, pens, cameras, recording devices and mobile phones. We were separated by gender.

My cellmates were about 35 other men. Most of them were protesters, with at least two bystanders who were snatched up while snapping souvenir photos in the afternoon mayhem. Most had spent quite a bit of time documenting the events of the day, including their arrests, with whatever media tools they had at their disposal.

My cellmate JRL, who preferred to be identified only by his initials, is a 23-year-old Brooklynite. He identified himself as a citizen journalist who streams live footage through Twitter. “We like the terminology ‘grassroots media,’ where people in the march were literally marching with laptops and webcams so that they could live broadcast. I think it’s an immediate, never before possible edge,” said JRL. He was arrested while carrying his Canon 7D camera.

Multiple videos from Sept. 24 show police arresting people holding cameras and audio equipment. An NYPD spokesperson told ABC News that the police were not targeting camera operators.

I don’t know precisely why I was arrested, though I have been charged with disorderly conduct. But what I realized is that in a sudden burst of urban chaos, how can the police distinguish between passersby and protesters who may be committing civil disobedience or any other type of punishable offense? Or between citizen journalists and professional journalists?

The arrest of my cell mate, Sam Queary, 24, adds another dimension to the issue: that of the inadvertent, spontaneous citizen journalist. Queary happened to be at work at Grey Dog Cafe near Union Square when the protesters marched by.

“I heard a commotion and went outside to find cops macing women and arresting people and hitting people with nightsticks, so I started taking pictures,” said Queary. “I followed a young, black male as he was being accosted by five cops. As I tried to take a picture I was pushed away. I asked why I was pushed away and then the next thing you know I was being judo flipped.”

WATCH VIDEO:

Someone with a video camera documented John Farley’s cell-mate Sam Queary being “judo-flipped” by NYPD and arrested as he was photographing others being arrested. The video, shot by an unknown citizen journalist, has been widely broadcast and linked to by media outlets around the world. The headline for this video was chosen by YouTube. Youtube/LibertyPlazaRev.

I also met Rosa A., 33, in the police van while we were being transported to the 1st Precinct for processing. She had been shopping at the Barnes and Noble on Union Square when she saw the protesters outside. As many New Yorkers do when they see something unusual, she snapped a picture. And she was arrested.

“I’ve never been arrested,” said Rosa A., in visible pain from the plastic handcuffs. “I was just there looking at magazines.” She laughed, lightening the mood in the police van. Even our arresting officer, in the van with us, chuckled.

Between when the Occupy Wall Street protests began on Sept. 17 and this weekend’s wave of media coverage stemming from the arrests, the protesters have complained about being largely ignored by traditional media, including the major national and even metropolitan newspapers, the cable TV news channels and the local network news stations. Meanwhile, argue the protesters, similarly sized Tea Party demonstrations in recent years have received considerable coverage. The general consensus among the Occupy Wall Street protesters was that it was important to document constantly what is happening, and to present their own story when other media hasn’t.

The protesters have also claimed that the media coverage they did receive painted them in an unflattering light and hasn’t accurately represented them. Saturday’s New York Time’s article characterized the protesters as uninformed, mostly white hippies and trust-funded anti-capitalists. As a result, the protesters I spoke with were quite media savvy and conscious of their need to represent themselves in an attempt to legitimize their cause, which they’ve been doing on their website, on Twitter and on Youtube. In fact, they have an entire media team assembled at Zuccotti Park in Lower Manhattan, where about a dozen laptops are being powered by a portable generator, and citizen journalists are constantly uploading new footage.

The Occupy Wall Street demonstrators have been criticized, including in the aforementioned New York Times piece, as unorganized and lacking in any concrete goals, other than to raise awareness about economic corruption.

But as we all sat in a jail, I noticed an interesting thing happen.

People began to talk very seriously about organizing in a more cohesive way than they have been. Jailhouse rookies, who had never been arrested or involved in radical political activities, listened attentively as experienced activists spoke about the need to set clear demands in order to rally broader public support for specific outcomes.

I don’t know what’s going to happen to Occupy Wall Street as a movement. Maybe it will fizzle out, maybe it will grow. I do know that whatever happens will be documented. And I know that there’s a history of activist movements being bolstered when leaders and followers alike are jailed together.

My cellmate Daniel Gross, a protester who volunteers as an organizer with the Industrial Workers of the World Union, helped create the first union for Starbucks employees.

“I think the NYPD is really going to try to spin what happened today,” Gross told the group, as he handed out his contact information. “I think that we should organize our own press conference.”

Around 10:30 p.m. the police began letting us leave our cell in groups of two. Before leaving, many traded contact information through smuggled business cards and contraband pens.

The still-jailed cheered the newly free.

The Volcker rule is supposed to prohibit  banks from making speculative bets with their own money on such a scale that they can endanger both the financial viability of the financial institution and the larger economy. The basic principle is simple: Government can’t allow banks of the size of JPMorgan to fail because the consequences for the general economy would be too disastrous — and that gives government the right to shackle the irresponsible tendencies of those banks. Unfortunately, the above-mentioned lobbying campaign had weakened the rule-writing process to the point where JPMorgan’s bet would probably have been permissible even after the Volcker rule came into effect.

As of last week, there’s suddenly a pretty widespread consensus among people not employed on or bankrolled by Wall Street that we need to tighten up the Volcker rule. But according to a report by Talking Points Memo’s Brian Beutler, this has put the Obama administration in a sticky situation:

The administration hasn’t specified any particular steps it would like regulators to take to shore up the so-called Volcker Rule — a bid perhaps to avoid an ugly public fight with powerful interests in an election year. But inaction — or a too-tepid response to JP Morgan’s losses — will hurt President Obama with key allies, who want to use the debacle to further rein in Wall Street.

Say what? Why on earth would the Obama administration want to “avoid an ugly public fight with powerful interests in an election year”? Shouldn’t the opposite be true? Shouldn’t the Obama administration be going out of its way to pick a fight with Wall Street? Could there be any better opportunity to tap enduring popular anger at the financial sector and draw a clear line demarcating Obama from his challenger, Mitt Romney?

On Saturday, in Obama’s weekly radio address, the president delivered a restrained call to action:

That’s why it’s so important that Members of Congress stand on the side of reform, not against it; because we can’t afford to go back to an era of weak regulation and little oversight; where excessive risk-taking on Wall Street and a lack of basic oversight in Washington nearly destroyed our economy … We’ve got to finish the job of implementing this reform and putting these rules in place.

But that’s nowhere near enough. President Obama needs to go back and remind himself how a previous crusader for financial sector regulation made his case when running for his second term as president. Just a few days before Election Day in 1936, Franklin Roosevelt appeared at a rally in Madison Square Garden and delivered a passionate tirade that still jumps right off the page (and YouTube).

We had to struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

That’s how you run for reelection, Mr. President, when the “moneyed interests” are backing your opponent. You don’t shy away from an “ugly” fight. You embrace it.

“If you have already got 96 percent of what you want,” Ferguson told Salon, “why not take the remaining 4? That’s where the culture of American finance is right now, and I think it’s really dangerous for the country.”

For at least 30 years the United States has been headed on the wrong track, handing over more power and wealth to a tiny percent of the American population at the expense of everyone else. But Ferguson’s story isn’t just focused on the greed and recklessness of the elite. It’s also about their criminality. The bankers who wrecked the financial system broke the law. And yet, amazingly, not only have the vast majority of responsible parties not been convicted of any crime — they haven’t even been charged. There have been a few settlements of fraud allegations with the Securities and Exchange Commission and other regulatory bodies and a smattering of slap-on-the-wrist fines, but nothing that comes close to a proper reckoning for the massive hardship and economic destruction that they caused.

Ferguson’s glowering rage spares neither political party. Clinton gets the blame for completing the process of financial sector deregulation, and George W. Bush is lacerated for his general incompetence. But Barack Obama is showered with a particularly aggrieved contempt. Obama, writes Ferguson, came into office with more hope invested in him than in any recent leader, and then proceeded to “betray” and “screw” his supporters by declining to bring Wall Street to account for its misdeeds.

“Predator Nation” hits bookstores on Monday, just in time to cash in on the headlines generated by the latest banking atrocity — JPMorgan Chase’s massively failed derivatives bet.

“Predator Nation” is an angry book. Were you this angry before you started making the film “Inside Job”?

No, I absolutely was not. I remember the first time I got any kind of inkling of what was to come was in August or September 2007, when Charley Morris sent me a copy of a galley proof of his book, “The Trillion Dollar Meltdown.” It was scary and powerful, but I couldn’t bring myself to believe it. I remember calling Charley and saying, “You lay out a very convincing case but really, these people aren’t that crazy, they aren’t that stupid. They are regulated. Can it really be this bad?”

And he said: “You just wait.” And boy, he was right.

It’s not that I thought that investment bankers were like Mother Teresa. I knew that they weren’t. But the degree of nakedness and extremity of the dishonesty and its pervasiveness was a huge shock to me. It turned out that many banks, on a very large scale, and without any disclosure, had created and sold securities with the intent of betting on their failure. And this was done with the knowledge and approval of senior management of all these banks, including the oldest and most traditional.

How do you explain this behavior? How did we get to a point where it was routine for Wall Street bankers to behave in ways that most Americans would consider frankly immoral?

I think this has its roots all the way back in the 1970s and the beginning of the era of deregulation. But there was a kind of inflection point during the five-year period between 1997 and 2003 — the late Clinton and/or early Bush administration — when all the rules just went away. You went from a period, a regime, where people did have at least some concern about going to jail, to a point where everything is legal, and derivatives couldn’t be regulated at all and nobody went to jail for anything. And looking back I would say that this period definitely started under Clinton. You absolutely cannot blame this on George W. Bush.

You say that everything is now legal, but in your book you dismiss Obama’s argument that he could not prosecute Wall Street bankers for criminal behavior because what they did was technically not illegal as “complete horseshit.”

I should be more precise. I should have said, “where everything was perceived as being legal.” There was no perception that, even when you were in fact violating the law, that there would be any legal jeopardy or legal consequence to what you were doing. And that was part of my surprise when I was making “Inside Job.” I really was surprised that people would so overtly and explicitly do things that 20 years previously probably would have gotten them landed in prison.

One can certainly argue that the penalties and prosecutions following the S&L [Savings and Loan] and insider scandals of the 1980s were vastly insufficient. No doubt about that. But there still were consequences. I don’t know whether [junk bond king] Michael Milken would have still done everything he did, if he knew that he was going to spend two years in prison and have about half of his wealth confiscated. Maybe he still would have made that bet, but still, clearly he had a few unpleasant days. And now, nothing, just nothing.

In your book, you have a laundry list of things you believe the bankers could be prosecuted for, everything from securities fraud to perjury to RICO Act violations. And then you point out, more than once, that during the Obama administration there have been no arrests or indictments of any firms or senior executives “related to causing the bubble or the crisis.” What’s your explanation for this? Is it as simple as the Obama administration being captured by the financial sector?

I’m not President Obama’s psychoanalyst, so I can’t speak to what goes on inside his head. But that is what I would say of the Obama administration generally. In the book I go through the list of his personnel appointments and it’s pretty clear.

But how do we square that with the negative Wall Street reaction to bank reform? You devote only one sentence in your entire book to Dodd-Frank, calling it “weak and ridiculously complicated.” But even so, House Republicans have introduced nine bills trying to repeal parts or all of it, Romney is campaigning on repealing the whole thing, and Wall Street hates it and has tried to kill every last part of it. There is clearly antipathy against Obama from the financial sector now, from Jamie Dimon on down, that wasn’t there when he got elected. If he was truly captured, why the antipathy?

Well, there is some antipathy. But he just held a very successful fundraiser at the home of the president of private equity group Blackstone. So the antipathy is not universal.

But you know, when I was in academia and also when I was running a software company I had a fair amount of contact with portions of the financial sector, investment banking industry, and the venture capital sector. And certainly they were already pretty rapacious and pretty politically conservative. But they would never then have said and done the things that they say and do now. I recently was at a dinner in New York City and one of the people there was a very, very successful man who is on the borderline between venture capital and private equity. And this guy went into an extended rant about how he was at a disadvantage because he had to pay 15 percent capital gains taxes. When I was first dealing with venture capitalists in a significant way, the capital gains tax rate was 28 percent, and nobody was complaining. Then they got them reduced to 20 under Clinton, and then later 15 under Bush. Plus, they got a rollover provision so if they took the proceeds of a venture capital investment and rolled it over into a new venture capital investment it was tax-free. At that point, we’ve reached nirvana, what more could there be?

But now we’re in this environment where this guy was loudly and aggressively complaining that he has to pay 15 percent to the government. And if that’s where you’re at, then of course you are going to complain about Dodd-Frank. You are going to complain about everything. If you have already got 96 percent of what you want, why not take the remaining 4? That’s where the culture of American finance is right now, and I think it’s really dangerous for the country.

Do you find it alarming that even after this huge crisis and even with a lot of populist anger on both the right and the left focused on Wall Street, Mitt Romney is running for president while promising to further deregulate Wall Street and repeal Dodd-Frank, and the polls show him neck and neck with Obama?

That is true, but I don’t think that Romney is going to get votes primarily or even secondarily for that. Most of the votes he is going to get will be because he’s religious, he’s against gay marriage, et cetera, all of these allegedly “values” issues — things like that and wanting to reduce taxes. That’s why he is going to get a substantial fraction of the popular vote. The reason he says he wants to roll back Dodd-Frank is not to get votes, it is to get money.

Ninety-nine percent of your book tells a story of how we’ve gotten ourselves into a bigger and bigger mess, and then you’ve got about a page and a half discussing what could be done to fix it. But your solutions — a legitimate third-party alternative, controlling the influence of money in politics, real tax reform, fixing education — it’s just really hard to see how we get from our current problems to those bullet points.

Yes. And we’re not. Not right now. I think it’s going to take things getting worse, either slowly or fast. Either we continue to melt away for another 25 years and then finally people wake up, or there might be another crisis. And maybe that will be sufficient. We’ll see. I don’t know. I’d be interested in your own view of this. I’ve had debates with several of my friends on this question. If Obama had really had the balls to try to do the various kind of things that he’d promised to do, or kinda sorta almost promised to do during his campaign, if he really made an effort, how far do you think he could have gotten in 2009?

At this point, I’m in the camp that believes that American government is completely broken. And we didn’t really find out how broken it was until Obama came in. In your book, you talk about Obama coming in withoverwhelming majorities, but he really only had 60 votes in the Senate from July 2009, when Al Franken was finally sworn in, to January 2010, when Scott Brown took over Ted Kennedy’s seat. And even the things that Obama did get through had to pass muster with a handful of very conservative Democrats. Nebraska’s Ben Nelson had control over the entire government. It’s a completely dysfunctional system. I think Obama severely underestimated what he was facing when he came in, and picked the wrong strategy of trying to go bipartisan, but it’s not as if he had the freedom to do what he wanted that Roosevelt enjoyed when he became president in 1932.

But there are an awful lot of things that the president can do even without the Congress. He didn’t have to choose the people he chose. He didn’t have to choose the attorney general he chose or the head of the criminal division of the Justice Department that he chose. I think that if he had said, I’m going to allocate $500 million to a special prosecutor’s office, and we’re going to find out what the fuck happened here, he could have done that.

There’s some talk now that JPMorgan’s disastrous bet on credit default swaps might lead to tighter regulation. I have to say, it was bizarre to be speed-reading your book while the Morgan news was causing post-traumatic stress flashbacks to the worst days of the financial crisis. Does what happened there fit into the narrative of “Predator Nation”?

I rather think so, yes. Mr. Dimon has long been largely correctly regarded as the best, most judicious, most careful steward of a major global bank. That he and his bank could make a mistake like this does not bode well. One thing that has actually not been widely discussed, somewhat to my surprise, in the commentary about all of this, is that this mistake — which it appears will cost them between $2 billion and $5 billion — this occurred in a very forgiving economic environment. If they made a mistake like this in September 2008, then things could look really quite different.

Does it qualify as criminal behavior?

There is some suggestion of criminality in the lack of honesty on disclosure of the positions and their potential implications. I can’t say; we don’t know enough yet. It certainly is the case that JPMorgan, although more prudent than many other banks over the last decade, has frequently been just as dishonest. It has done a number of extremely unethical things, some of which I mention in the book. So it wouldn’t be a surprise if they had not been forthcoming about this.

Do you think it will make any difference in how banks are regulated?

I fear not. Honestly. I’m sure that Mr. Dimon is momentarily chastised, and that JPMorgan will not be making any similar bets in the next couple of years. But is it going to change the overall posture of bankers and banking and is it going to change the regulatory environment in any significant way? I tend to doubt that. Unfortunately.

So where does this leave us? Your book is filled with a strong sense of personal outrage. How do you personally feel about the prospect that the only thing that could get us out of the mess we’re in is yet another crisis, perhaps even worse than the one we just lived through?

Personally, I am very fortunate. I have a very blessed life. I made some money earlier, I’m basically pretty financially secure. I can’t have private jets and private islands but I don’t have to worry about having a roof over my head or being able to eat well, unlike many people in this country going forward. And I do work that I love. I love making movies, I love writing books. Personally I’m fine.

But the country is not. But this happens to countries. This is not the first country it’s happened to. It’s not even the first time it happened to the United States. We’ll see whether we come out of it. Last time it happened we came out of it, eventually. It took a long time and it was very painful but eventually we came out of it. Will that happen again or not, I don’t know, I honestly don’t.

The SEC is investigating the massive loss, but that will take a lot of time and the eventual report will probably be very difficult for novices to understand and probably they won’t put anyone in jail. Dimon might have to be hauled before Congress to answer questions, but no one watches congressional hearings, and no one likes members of Congress. I think a big televised prime-time tribunal would be best. And then maybe some JPMorgan shareholders, unemployed people, journalists and angry bloggers can just ask him some really simple questions about why he thinks JPMorgan shouldn’t be regulated at all.

While I am definitely endorsing a humiliating show trial, we don’t have to send Jamie Dimon to jail afterward, even if a jury of people who had their houses foreclosed on them find him guilty. The point of this is to mainly have him on the record, compelled to answer questions plainly and clearly, to an unfriendly audience of non-Davos people.

This very good explainer helps us to understand how exactly JPMorgan came to misplace billions of dollars, but it raises more questions than it answers. Questions like, “Wouldn’t it have been better if that $2 billion had been used for almost anything in the world besides shady mega-bank gambling that no one understands?” And, “Doesn’t it seem you guys could save a bit of money on salaries and so forth while still achieving basically the same results if you replaced your chief investment officer with some old people who play video slots all day?”

I am just not really clear on the role JPMorgan has in a healthy and functioning economy, whether it is making billions in high-stakes gambling or losing billions in high-stakes gambling. It seems like America was actually doing pretty well with there not being any such thing as credit-default swaps, which JPMorgan invented, in the 1990s, right before investment banks were allowed to merge with retail banks and do whatever they wanted with everyone’s money.

I’d also like Mr. Dimon to have to explain whether he knew he was about to have to admit to losing billions of dollars when, on May 3, he complained about the “discrimination” faced by bankers. Dimon also argued a few days later that the economy would’ve added twice as many jobs in the last 24 months if it weren’t for a “constant attack on business” from various unnamed hippies and government bureaucrats. I would like to know how many jobs were created when JPMorgan accidentally lost some unknown amount of money that is likely to end up being more than $2 billion? Also did Dimon lie during his first-quarter earnings call last month, or did he have no idea what sort of things his chief investment office was up to (even after their actions were reported in the press)? If he didn’t have any idea, shouldn’t he maybe step down to run a smaller bank, where he can keep a closer eye on everything? Dimon said initially that the stuff that lost all the money wouldn’t have violated the Volcker Rule, even though it plainly violates the spirit of the Volcker Rule but also he’s not sure if the bank broke any laws? Jamie, I think maybe you should consider retirement; this bank is too complicated for you.

Dimon gets so defensive when people trash banks and bankers because he thinks his bank makes the world a better place. He thinks that JPMorgan making as much money for itself as possible is good for everyone, because capitalism. Much as today’s super-rich, the .01 percent who are largely CEOs and financial industry professionals, are a bunch of rentiers who’ve convinced themselves that they are job-creating titans of industry, Dimon has convinced himself that his firm is making our economy function better instead of just playing incredibly complex computer games with unimaginable sums of other people’s money.

So let’s haul him before a judge (I would be fine with Judge Judy) and ask him to explain, without jargon, what positive role JPMorgan plays for the American and world economies that a few much smaller, less leveraged firms couldn’t also play while not being at risk of losing billions of dollars by accident in a “hedge” and sending world markets reeling.

I mean, I’m sure he’d never admit to any sort of culpability for our current morass (it’s the gubmint’s fault!) because he clearly believes his own bullshit and he’s never faced any sort of serious challenge to his viewpoint, but it still might be very good television.

But for our purposes right now, all you need to concern yourselves with is Dimon’s monumentally disingenuous self-castigation. Because Dimon is not stupid. Under his tenure, JPMorgan has been the best-run of the big banks. So Dimon’s self-criticism gets it all backward. The fact that JPMorgan was so very stupid is so very scary because we can rest assured that just about everybody else is doing things even more idiotic.

The whole point of the infamous “Volcker Rule” included in the Dodd-Frank bank reform act is to restrict the banking sector’s ability to clobber the economy by doing dumb things. As the Huffington Post’s Mark Gongloff noted, if  a strict version of the Volcker rule had been in place, JPMorgan, quite possibly, would have been prevented from making a bet that would lose the bank $2 billion — or more.

However, the Volcker Rule is not yet in effect. The final details are still being hammered out, and the brutal truth is that financial sector lobbyists have almost undoubtedly ensured that the kind of “hedging” bet JPMorgan just made would be technically legal under the new rules. There’s a remote possibility that the blowback from Morgan’s disaster might strengthen the final version of the rule, but don’t hold your breath. The worst financial crisis in 80 years resulted in bank reform that at best can be categorized as tepid and perhaps fatally compromised. One bad stumble by JPMorgan that, lucky for us, doesn’t seem likely to ignite a system-wide crash isn’t going to make a dent in Washington regulatory policy.

On the other hand, there could well be real political repercussions. Because if anyone is going to come out of this mess looking even stupider than Jamie Dimon, it’s got to be Mitt Romney — the presidential candidate actively campaigning on a pledge to repeal Dodd-Frank.

Barack Obama has been rightly dinged from the left for his soft approach to Wall Street, but there’s a reason why Big Capital is shunning him and pouring money into Romney’s campaign. Romney’s answer to the financial meltdown is to do absolutely nothing; to abandon even any pretense of reining in Wall Street bad behavior, to return us to the pre-crash regulatory status quo.

That’s suicidal. The U.S. economy may well skip over JPMorgan’s folly without any serious long-term damage. But that’s not the point. What we learned from the financial crisis is that the real danger inherent in Wall Street’s endless orgy of speculative trading is the prospect that multiple bets could go bad simultaneously when there is a big external shock to the system — like the housing bust. That’s when a downturn becomes a crash.

I can’t say with certainty that Dodd-Frank will do a good job of protecting us from a replay of the great financial crash of 2008. But the prospect of electing someone as president who is promising Wall Street that he will let them blithely self-regulate? That seems even stupider than JPMorgan’s $2 billion bad bet.

Ellen Danin, writing in the Northwestern Journal of Law and Social Policy relates that: “Chicagoans learned about compensation events when CBS reported that the city’s parking meter contract required reimbursement for events like repairing streets. Public records showed that in the first quarter of 2009, the city was liable to the parking meter contractor for more than $106,000 in lost income during the slow months for street repair and street closings for festivals, parades, and holidays, as well as repairs and maintenance. At that rate, it is not unreasonable to predict that Chicago will owe roughly $500,000 a year to the private contractor.”

The city essentially acts as an insurer for the meter merchants, with the return being a one-time injection of roughly a billion dollars that the previous mayor, Daley the Second, haphazardly exhausted on closing budget deficits in the waning years of his two-decade tour at the helm.

With the current infrastructure deal, Emanuel has repeatedly claimed that this is not privatization: This is not like the parking meter deal. Can the public believe him?

Here is how the “infrastructure trust” works: the city pays for upgrades to its roads, rail or schools with dollars pooled by Emanuel’s friends from the banking and investment world. Meanwhile, the city retains “ownership” of the infrastructure, though this comes at the cost of having to ensure a revenue stream for the fund. Emanuel’s favorite example is his $225 million pet project to green-retrofit some of the city’s older buildings. The savings on energy usage stemming from the renovations are then extracted and used to pay off investors. Of course, the city could also sell municipal bonds to raise necessary funds, and then use the savings in energy costs to pay the loan back at a much lower cost to taxpayers. But then Emanuel’s friends (and campaign donors) would not be the richer for it.

While the mayor bills his plan as “bold” and “innovative,” the reality could not be further from the truth. Public-private partnerships (PPPs) have been around for decades in various forms and their track record is replete with delays, cost overruns and prolonged legal battles. What’s more, the beneficiaries of these investment mechanisms are the same rapacious Morgan Stanleys and Goldman Sachs that gave us the mortgage-backed securities scandal and the ensuing recession. Using the economic malaise they created as cause, they have ratcheted up their advocacy of PPPs as a means of helping cash-starved public entities finance capital-intensive projects.

The upshot is that they are holding us hostage all over again. They are using infrastructure built over decades with public monies as collateral to extract profit off of the back of taxpayers. A cursory look at some past projects of this nature demonstrates that PPPs are often inefficient, overly costly and inherently unjust.

The London Tube Nightmare

The granddaddy of all PPP debacles is the London Underground. Metronet PPP is the brainchild of former Prime Minister Gordon Brown. The contract design kept London Underground in public hands while privatizing the renovation and renewal elements to the system. As with the Chicago parking meter deal, the contract was replete with virtually unintelligible legalese designed to give the private partners an advantage in court, while also rendering public scrutiny of the contract exceedingly difficult. Bureaucratic costs related to drawing up contracts with external bidders ultimately surpassed 500 million pounds.

In the Guardian, Christian Wolmar notes that “the idea that the PPP would keep costs down has also proved fanciful. It is a recipe for disputes, which often end up in the hands of expensive lawyers. During the first contract, there is a mega dispute brewing over Tube Lines’ failure to complete the resignalling of the Jubilee Line which should have been finished this month and is now set to take until the autumn, with numerous extra weekend closures. In addition, the arbiter’s report says that claims involving a staggering £727m have been laid by Tube Lines, £500m of which are still outstanding.”

As bloated contractual costs and project overruns spun out of control, Metronet ultimately collapsed in 2008. A year later, the entire PPP went down with it after an arbiter refused to allow funds for the other private partner, Tube Lines, to do further renovations. The final cost to taxpayers is estimated at somewhere between 170 million and 410 million pounds, which does not account for the inconvenience of relentless service stoppages and construction delays. Former London Mayor Ken Livingstone complained at the time: “We are being asked to write a blank cheque in order to prop up failing Tube Lines. In other countries this would be called looting, here it is called the PPP.”

Orange County’s Privatized HOV Lane

Almost equal in disrepute to the London Tube fiasco was the privatization of one high-occupancy vehicle (HOV) lane on California’s SR-91. In the early ’90s, the Orange County Transportation Authority (OCTA) proved incapable of procuring necessary funding for implementation of the new HOV using traditional revenue streams, so instead developed a private partnership to construct and manage the project, which opened December 27, 1995.

This contract included “non-compete” clauses that prevented the public from providing necessary maintenance to the adjacent free lanes. The California Department of Transportation hoped to add new lanes between SR-91 and another recently completed public toll road. These improvements would have violated the non-compete terms of the contract, though CalTrans argued there were overriding safety concerns that permitted them to proceed with the construction.

The ensuing public row served to turn opinion against the private toll lane. Ultimately, the outcry led to passage of Assembly Bill 1010, which authorized OCTA to acquire the lane for $207.5 million in 2003. California’s earliest experiment with private financing of a publicly controlled entity, like the London Tube, came crashing to a premature halt on the heels of widespread public outrage.

What is most telling is that popular frustration centered on a principal term of the contract, which was publicly available for viewing prior to approval. Once again, a common ploy of instigators of these contracts is rendering the terms so confusing as to limit public scrutiny. Meanwhile, the mainstream press tends to focus on the bottom line and avoid the esoteric legal mumbo jumbo, much to the detriment of an enlightened public.

The SDX

California, ever the epicenter of political innovation, was also the site of another one of the most significant PPP boondoggles. In this case, Australian investment group Macquerie led an assortment of banks that invested in a new expressway from San Diego to the Mexican border, beginning with the project’s commencement in 2000 and lasting until the contract expiry in 2042.

However, faced with the challenges of the housing crisis and wider economic slump, the project faced persistent toll revenue shortfalls and ultimately filed for bankruptcy last year. Meanwhile, the cost of the project jumped from $360 million to $843 million, while being delayed for over a year. In the bankruptcy proceeding, the South Bay Expressway LLC was created to administer the road and ultimately purchased by the San Diego Association of Governments (SANDAG) for $344.5 million.

This project received an initial $140 million boost from funds provided by the Transportation Infrastructure Finance and Innovation Act (TIFIA). TIFIA is designed as a tool to provide federal investment in PPPs. Interestingly, Rahm Emanuel cited the program as an example of a financing tool that his Infrastructure Trust is based on. However, this is a bit misleading, as TIFIA is composed entirely of federal funds used to augment existing finances for capitol projects. Meanwhile, Emanuel’s trust is composed of $1.7 billion in funds raised from private banks leveraged against a $200 million investment by the city.

Nonetheless, the two shortcomings of this project are particularly instructive. Its primary problem was the failure to meet the initial high-shooting projections initially set out. Traffic patterns are extremely difficult to accurately anticipate: a situation not helped by the backdrop of the worldwide recession and the location of this road in a region that was particularly burdened by the foreclosure crisis. The intrinsic uncertainty of usage of public infrastructure renders it a poor focal point for private, profit-driven investment. The reality is that parks, roadways and bridges require periodic capital investment irrespective of profitability. Public entities are far more well-equipped to finance these unreliable projects for the very reason that government is not motivated by profit.

The second problem this project faced by this PPP, like so many others, was its predilection to legal wrangles. SBX was involved in legal proceedings with InTrans, the toll system provider, and a number of construction related contractors. One source speaking with TollRoadNews called the governing contract a “sue-me contract” that was “made for litigation.” Given the immense costs seen by the London Tube PPP, this should come as no surprise. These projects seem to invite costly litigation just from their sheer complexity.

Toward Sustainable Investment in Infrastructure

PPPs are purported to make additional resources available for public expenditure on capital-intensive infrastructure projects. However, the opposite tends to be the case. A report published by the Public Services International Research Unit notes: “The great majority of PPP’s rely on a stream of income from payments by government – i.e. public spending…In a context where there are political demands to cut public spending, the existence of PPP’s creates greater threats to other spending on public services. This is because PPP’s create long-term contractual rights to streams of income, and so governments are legally constrained from reducing payments to PPPs.”

Even the International Monetary Fund warns that public investment in PPPs should be subject to strict scrutiny in a July 2009 publication: “Intervention measures should be consistent with the wider fiscal policy stance, be contingent on specific circumstances, and be adequately costed and budgeted.” The IMF also argues that PPPs related to weathering the economic crisis should include a “turn off” mechanism. A green paper published by the Commission of the European Communities in April 2004 even went further, recommending against PPPs as a tool to close any budget deficits. They argue that the mechanism should be employed primarily when the private entity is providing a specific field of expertise.

After all, why should anyone trust the same racketeers who precipitated the global economic crisis to make acute investment decisions on behalf of the people? All levels of government face serious fiscal constraints stemming from a range of causes, including the ongoing recession and regressive tax policy across the board. When financiers so generously offer to open up the purse strings to invest in pet infrastructure projects, the public response ought be: “No, thank you. Instead, we are going to raise the top marginal tax rate.” That would be a far more efficient and prudent way of beginning to tackle the fiscal crises in government.