Holding Wall Street Accountable

ECONOMY

"We cannot let the narrow interests of a few come before the interests of all of us," President Obama said last year in a call for "an overhaul of U.S. financial regulations." Buoyed by success in the long battle to pass comprehensive health care reform behind them, Congress has set its sights on reining in Wall Street's recklessness and providing new protections for consumers, reducing risk, and increasing transparency. The bill introduced by Senate Banking Committee chair Chris Dodd (D-CT) "would create a new consumer protection bureau within the Federal Reserve to guard against lending abuses," "create oversight of the enormous derivatives market,"and "give the government authority to wind down large, troubled financial institutions in an orderly way." If institutions that are "too big to fail" repeat the kind of disastrous behavior that sent the global economy into a tailspin in 2008, "the Senate bill gives the government the authority to wind down the firm with no exposure to the taxpayer," Treasury Secretary Timothy Geithner described. "No more bailouts. Instead, we will have a bankruptcy-like regime where equityholders will be wiped out and the assets will be sold." The legislation's wind-down provisions are similar to the insurance fund and resolution authority that the FDIC has to safely shut down smaller banks, and the fund is paid for by big banks, not taxpayers. Since September, Dodd has tried to work with committee Republicans Richard Shelby (AL) and Bob Corker (TN) to find bipartisan consensus. However, as a vote grows near, Republicans have been on the attack. Last week, Senate Minority Leader Mitch McConnell (R-KY) declared his opposition to the financial reform bill, claiming that it "institutionalizes...taxpayer-funded bailouts of Wall Street banks" and would give the Federal Reserve "enhanced emergency lending authority that is far too open to abuse."

MCCONNELL'S 'BAILOUT' LIE: McConnell has touted his opposition to financial regulation by pretending to speak on behalf of American citizens, opposing "bailouts" and "abuse." As Time's Adam Sorensen noted, McConnell's attack made "the exact argument pollster Frank Luntz urged Republicans to make earlier this year in a widely publicized memo." Luntz told the GOP to attack reform as "bailouts" and blame "Fannie Mae, Freddie Mac, the Federal Reserve" for creating the "bubble." A number of other Republicans -- including House Minority Leader John Boehner (R-OH) -- have repeated this false right-wing talking point. However, the disingenuous attempt at populist posturing to kill reform has fallen flat. CNBC's Ron Insana laughed when trying to explain McConnell's views, and MSNBC's John Harwood said that "Senator McConnell's argument is a little silly when you look at the text of the bill." Time's Mark Halperin told MSNBC's Joe Scarborough, "They are willfully misreading the bill or they are engaged in a cynical attempt to keep the president from achieving something." On Monday, Corker called his leader's attacks "silly," saying that the fund he designed with his colleague Sen. Mark Warner (D-VA) "is anything but a bailout." Yesterday, fellow banking committee member Sen. Judd Gregg (R-NH) praised the resolution authority as a "good approach." Following an in-depth analysis, the nonpartisan PolitiFact rated McConnell's claim that the financial regulation bill "actually guarantees future bailouts of Wall Street banks" completely false.

IN BED WITH WALL STREET: McConnell did not mention in his attack on Wall Street regulation that the week before he traveled alongside National Republican Senatorial Committee chairman Sen. John Cornyn (R-TX) to New York City for a private meeting with elite hedge fund managers and other Wall Street executives. The purpose of the meeting between the top Republicans and the financial executives was to enlist "Wall Street's help" in funding Republican campaigns in the fall and killing any tough financial reform. McConnell takes more money from the finance industry than any other sector. He has taken $1,147,924 for his current re-election campaign, including PAC contributions from megabanks like Citigroup and Bank of America. When pressed by reporters for details about his meetings on Wall Street, McConnell repeatedly refused to discuss the matter. But as the Wall Street Journal reported in February, Republicans have been "stepping up their campaign to win donations from Wall Street," "striving to make the case that they are banks' best hope of preventing President Barack Obama and congressional Democrats from cracking down on Wall Street." In a January meeting, Boehner told JP Morgan CEO Jamie Dimon that "congressional Republicans had stood up to Mr. Obama's efforts to curb pay and impose new regulations." Since 2009, contributions from JP Morgan, Citigroup, and Bank of America have all "trended toward Republicans." Hedge funds similarly shifted, going "from giving 2 to 1 to Democrats at the start of 2009 to providing almost half of its donations to Republicans by the end of the year."

MCCONNELL FOLDS, FOR NOW: Yesterday, a battered McConnell abandoned his "bailout" lie, saying, "I'm convinced now there is a new element of seriousness attached to this, rather than just trying to score political points. ... I think that's a good sign." The change in tone came, the Washington Post writes, "as the Security and Exchange Commission's lawsuit against Goldman Sachs for allegedly defrauding investors continued to dominate headlines, underscoring public anger at Wall Street and reminding lawmakers of the potential consequences of inaction." Senate Majority Leader Harry Reid (D-NV) said yesterday that he plans to "wait until early next week to introduce the financial overhaul package on the Senate floor," to give Dodd and Shelby "more time to try to reach a compromise." However, hurdles to cleaning up the financial industry remain. "I think there's a continuing tension in the caucus between those who hold out hope for meaningful and sincere bipartisan negotiations," Sen. Sheldon Whitehouse (D-RI) said, "And those who see Lucy yanking the football away from Charlie Brown for the umpteenth time." Economist Paul Krugman is similarly concerned that the White House isn't taking seriously the "possibility that Republicans will filibuster financial reform." Sen. Bernie Sanders (I-VT)warns that the fine print of the final legislation will determine "whether the Congress has the ability to regulate Wall Street or Wall Street continues to regulate the Congress." Lobbyists are fighting the effort by Sen. Blanche Lincoln (D-AR) and Sen. Maria Cantwell (D-WA) to bring transparency and price discovery to the shadowy derivatives market. Tomorrow, the President will go to New York City to begin the final push, reminding "Americans what is at stake if we do not move forward with changing the rules of the road as a part of a strong Wall Street reform package." It has been three years since the over-inflated housing market began to crash. It has been a year and half since the Wall Street meltdown and over a year since Treasury rolled out its principles for reform. It's time to get this done.

Let The Sun Shine In......

A Short Citizen’s Guide to Reforming Wall Street

Tuesday, April 20, 2010

The real scandal isn’t the Street’s unlawful acts (i.e., Securities and Exchange Commission vs. Goldman Sachs) but legal acts that have reaped the Street a bonanza and nearly sunk the rest of us.

It’s good we finally have an SEC on which three out of five commissioners are willing to enforce laws already on the books. Hopefully other enforcement agencies (CFTC, FDIC, and the Fed) will follow suit. But we also need to make illegal the recklessness that’s now legal.

The Dodd bill now being considered in the Senate is a step in the right direction. Yet despite the hype, it’s a very modest step. It leaves out three of the most important things necessary to prevent a repeat of the Wall Street meltdown:

1. Require that trading of all derivatives be done on open exchanges where parties have to disclose what they’re buying and selling and have enough capital to pay up if their bets go wrong. The exception in the current bill for so-called “unique” derivatives opens up a loophole big enough for bankers to drive their Ferrari’s through.

2. Resurrect the Glass-Steagall Act in its entirety so commercial banks are separated from investment banks. The current bill doesn’t go nearly far enough. Commercial banks should take deposits and lend money. Investment banks should be limited to the casino we call the stock market, helping companies issue new issues and making bets. Nothing good comes of mixing the two. We learned this after the Great Crash of 1929, and then forgot it in 1999 when Congress allowed financial supermarkets to do both.

3. Cap the size of big banks at $100 billion in assets. The current bill doesn’t limit the size of banks at all. It creates a process for winding down the operations of any bank that gets into trouble. But if several big banks are threatened, as they were when the housing bubble burst, their failure would pose a risk to the whole financial system, and Congress and the Fed would surely have to bail them out. The only way to ensure no bank is too big to fail is to make sure no bank is too big, period. Nobody has been able to show any scale efficiencies over $100 billion in assets, so that should be the limit.

Wall Street doesn’t want these three major reforms because they’d cut deeply into profits, and it’s using its formidable lobbying clout with both parties to prevent these reforms from even from surfacing. It’s time for Main Street — Tea Partiers, Coffee partiers, and beer drinkers — to be heard.

Let The Sun Shine In......

Financial Reform Goes Full Tilt

Monday, April 19, 2010

Democrats Call Out GOP Leaders On Wall Street Dealings 

With the Senate planning to begin debate this week on the largest regulatory overhaul of the financial industry since the Great Depression, Democrats are demanding that GOP divulge details of "backroom negotiations" with Wall Street executives.

Advocates of reform, both inside and outside the Senate, are pushing the chamber to adopt the strongest possible measures to regulate banks and financial institutions so as to give consumers the most protection possible.

"With the announcement that the Senate is now scheduled to begin floor debate on a comprehensive financial regulatory reform package this week, we urge Senators to enact real reform to protect Americans and our financial system," says John Morton, managing director of the Pew Economic Policy Group, a division of The Pew Charitable Trusts that promotes policies and practices that strengthen the U.S. economy. "Senators from both sides of the aisle can and should work together to pass a final bill that: creates an early warning system; ends 'Too Big To Fail' and bailouts; increases transparency in markets; and provides meaningful consumer protections. Financial reform must significantly reduce the likelihood of future crises and ensure that, should a crisis occur, the American taxpayer is not left covering the tab."

Sen. Bernie Sanders of Vermont, a left-leaning independent who led an unsuccessful campaign to deny Ben Bernanke a second term at the head of the Federal Reserve, outlined the four provisions that he thinks are needed provisions in a final financial reform bill.

Financial reform is another high priority for President Obama, and the legislation that the Senate will vote on is a package put together by Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking Committee.

“Disgust at Wall Street is profound. The American people want us to change in a very profound way how Wall Street functions, and Congress must deliver,” Sanders says, adding that he would offer amendments to the Dodd bill.

Although Dodd had worked with key GOP senators in crafting his reform bill, including Sen. Richard Shelby of Alabama, the ranking Republican on Banking, no Republicans have thus far been willing to support the Senate bill.

Senate Majority Leader Harry Reid, however, cited public comments by Shelby who has indicated that Republicans could agree on 70 to 80 percent of the Dodd proposal.

“Holding big banks accountable for the enormous economic crisis of recent years is about more than dollars and cents. It is about fairness and justice. It’s also about learning lessons from the mistakes of the past so we are not bound to repeat them,” Reid says in remarks Monday on the Senate floor.

The Senate majority leader also notes that federal regulators last week began legal action against the firm Goldman Sachs for allegedly illegal, fraudulent dealings that contributed to the 2008 financial meltdown.

Reid and his spokesman each called out Senate Republican Leader Mitch McConnell and Sen. John Cornyn (R-Texas) for "secret" meetings with Wall Street executives eager to derail the new reforms. Cornyn is chairman of the Senate GOP campaign operation. Republicans reportedly for months have been seeking campaign contributions from the financial industry in exchange for working to kill the reform legislation.

“Republicans also refuse to admit whose side they’re on,” Reid says. “Earlier this month, the Republican Leader and the head of the Republicans’ Senate campaign committee went to Wall Street. They met with the bankers and hedge-fund managers who benefited more than anyone from the broken system and are trying harder than anyone to stop us from fixing it.”

In a separate statement and citing television news interviews (video), Reid spokesman Jim Manley says McConnell and Cornyn refuse to disclose just what they have said in their talks with bankers behind closed doors. Prior to dissatisfaction due to financial reform, Wall Street executives generally gave more in recent years to Democrats.

“Senators McConnell and Cornyn should immediately reveal what they discussed earlier this month during secret, closed-door meeting with Wall Street executives in New York City,” Manley says. “Years of greed and excess on Wall Street cost 8 million jobs and trillions in wealth for middle-class families and small businesses. Since Republicans appear to be conducting backroom negotiations with these same people who took our economy to the brink of collapse, the public deserves to know what secret deals and carve-outs Republicans are offering Wall Street executives in exchange for their support.”

Let The Sun Shine In......

Here Comes Another Colossal Republican Lie

In a hotly contested election year where the stakes are huge, how will Republicans fight financial reform without appearing to defend Wall Street's interests at the expense of Main Street? The answer is simple: lie. And lie big, as always. Craft a disingenuous campaign to convince voters that regulating big banks--and thus the GOP's rich fatcat pals--will hurt the little guy. Brilliant. Turn financial reform into a populist movement. Convince the Average Joes to get all fired up, march in the streets, and fight against the very reforms that will in fact help them considerably. Turn them, once again, against their own self-interests by lying to them. As Lenin said, "A lie told often enough becomes the truth."

And where have we seen this before? If you said health care reform, you're right. The Republicans may be the Party of No, and may not have a lick of ideas of their own, but they are very effective liars, highly adept at framing issues to turn public sentiment their way. The recent health care battle is a stunning example of this. How else do you explain all the Tea Bagger rage over legislation that truly protects them and their families?

A perfect illustration of this duplicity is the "death panel" lie, where the "government takeover" of health care, according to the GOP, would result in President Obama getting to decide whether Granny lives or dies. Makes a great soundbyte. Republicans are masterful at creating devastatingly effective talking points.

Which brings us to financial reform and the Senate bill proposed by Democrats. A bill which seeks to place further regulations on Wall Street and aimed at the sort of high-risk trading practices that caused the meltdown of 2008. Here's the lie which we can bet will become the new ad nauseum "death panel" talking point:

"We cannot allow endless taxpayer-funded bailouts," said Senate Minority Leader Mitch McConnell this week. "That’s why we must not pass the financial reform bill that’s about to hit the floor. The fact is this bill wouldn’t solve the problems that led to the financial crisis. It would make them worse."

That's right. Get out there and fight, Mr. and Mrs. Average American. Fight for your Wall Street executives! We need to protect them. We need to make sure they stay rich, fat and happy, because if we attempt to rein in their reckless cowboy investment activities, that'll be bad for you and bad for America! It'll cost you in taxes! No! We must let them do whatever the hell they want, without restriction! No more 'big government' intervention! Power to the people! The Wall Street people! Financial reform, like health care reform, is terrible for you! No more death panels and bailouts! Don't let Democrats hurt you. We Republicans are looking out for you. Have your best interests at heart. And by helping us protect the insurance industry, the big banks and corporate America...we're really protecting you. God bless America!

A note of interest: McConnell himself supported President Bush's emergency $700-billion Wall Street bailout back in the Fall of 2008. Oh, how quickly those pesky little Republicans forget...

posted by The Ostroy Report @ 7:38 AM
Let The Sun Shine In......

Bring On Those Unpopulist Republicans

Go for the gold, Obama!

As predictions of a GOP takeover of Congress abound -- most handicappers are now laying at least even money on the House, since it is the "people's," meaning an erratic abyss of populist whim and mobocratic anarchy -- the GOP itself seems oddly intent on playing its cards as populism denied.

The party is trapped in an inescapable bind: its demagoguery is being nakedly outstripped and betrayed by its core, authoritarian-corporate values; and Democrats, finally, are exploiting this -- the GOP's internal antithesis. With pressure maintained, they can split the vaporous Tea Party-GOP alliance, dooming ultraconservatism's November comeback.
This divorcing objective is, of course, key. As I mentioned yesterday, a recent Gallup poll indicates that a whopping 43 percent of swing-voting independents express support of the Tea Party movement, which is a horrifying margin of democratic error.

Yet the movement is shatterable. It is leaderless, already fractured, ill defined and immensely sophomoric; what's more, as a fresh populist surge of mostly economic intent -- as opposed to the older Christian right of social conservatism -- it couldn't be in bed with a more faithless lover.

This central contradiction is what the liberal faction among Senate Democrats understands. And it's trying its best to drag its conservative Democratic colleagues onto the road of epiphany, which is actually far less muddied than it seems.

Compromise and accommodate on financial reform? For heaven's sake why? Not to do so is not only good policy, it's great politics.

Let Republicans explain to all those Tea Party-warming independents why, for instance, an independent consumer protection agency is an insufferable inconvenience to their pocketbooks; let Republicans explain why unregulated derivatives couldn't possibly blow us up again; let Republicans explain why commercial bankers should be allowed to gamble Everyman's deposits on those previously defended, unregulated hedge funds; and -- my favorite -- let Republicans explain to usury-soaked consumers with a taste for tea why credit-card interest rates shouldn't be capped by law, as Sen. Bernie Sanders insists they should.

Politically speaking, the Tea Party-GOP alliance in broadest terms is better than just unholy. It is, as mentioned, antithetical to itself. Recently, in comments to reporters, DCCC Chairman Chris Van Hollen shrewdly noted, in CQ's rather inadequate paraphrasing, that "Republicans are dealing with a 'double-edged sword' with the conservative Tea Party movement, which he acknowledged is helping revive Republican grass-roots efforts but also wrenching the party further to the right."

In other, more comprehensible words, let the public face of the movement wrench away. Nothing could be more rewarding to the politically sober. By aligning themselves with Wall Street's Republican protectors on Capitol Hill, Tea Party activists -- that would be the idiots with those Joker posters you see on the evening news -- are merely wrenching and alienating the moderately intrigued, which is to say, the mother lode of that aforementioned 43 percent.

But, as also mentioned, Democrats can only effect the estrangement by keeping the pressure applied through good policy and great politics.

That means, chiefly, populist financial reform that outpopularizes the right-wing populists. But I'm beginning to think that Obama (and by extension his party) has an additional shot at a truer populist renaissance through the humdinger of an unmistakably progressive nomination to the Supreme Court; and not, as is Obama's wont, a surer thing.

The key here -- in the confirmation process -- is to place in the political forefront this conservative Court's dreadfully offensive decision in Citizens United. Without, of course, tethering the nominee to a stated prejudgment of future and similar cases, Senate progressives can make it clear in those endless cable-news interviews to come that this nominee would never side with, well, those corporatist dogs on the judicial right -- you know, the ones whom corporatist Republicans love.

And why not, Mr. President? Let's face it. You could nominate Mitch McConnell -- and Senate Republicans and their scandalously dyspeptic ultraconservative "think tanks" would still put you and your political allies through a right-wing hell of a confirmation. It's what they do.

So why not further divide and conquer those decidedly anti-big-business Tea Party sympathizers through the nomination of a decidedly progressive judicial mind -- someone, say, along the populist-politico-judicial lines of a William O. Douglas. Then sit back and watch Senate Republicans squirm, as they're forced to defend the Wild West of Wall Street and the wholesale corporate appropriation of the electoral process.

Please respond to P.M.'s commentary by leaving comments below and sharing them with the BuzzFlash community. For personal questions or comments you can contact him at fifthcolumnistmail@gmail.com

THE FIFTH COLUMNIST by P.M. Carpenter

Let The Sun Shine In......

Accounting Fraud Continues to Plague U.S. Economy

By Zach Carter, Media Consortium blogger              Care2

Senate Banking Committee Chairman Chris Dodd (D-CT) unveiled his latest financial reform proposal on Monday, and the stakes for the new legislation couldn’t be higher. After consumer groups raised a major ruckus, Dodd has dropped one of his most egregious concessions to the bank lobby—cutting enforcement authority from the proposed Consumer Financial Protection Agency (CFPA). That’s good news: Without a major regulatory overhaul, the U.S. economy’s destructive boom and bust cycle will start all over again.

We’ve been down this road before. The Enron fiasco should have served as a wake-up call for policymakers, but instead, the weak federal response to Enron’s major fraud helped pave the way for the current economic slump.


What does Enron have to do with the crisis?

As Megan Carpentier emphasizes for The Washington Independent, one of the key “reforms” Congress enacted in the Enron aftermath was a law requiring every CEO to sign-off on their company’s accounting statements—but it has accomplished almost nothing.

Enron collapsed due to accounting fraud. Its executives weren’t stupid or careless—they made their money by engaging in deliberate and coordinated acts of illegal deception. But CEOs of companies like Enron had always been able to deny that they knew about the shenanigans that were playing out in their accounting departments. By forcing CEOs to sign off on their accounting statements, Congress was attempting to “deny them plausible deniability,” as Carpentier puts it.

But accounting fraud has plagued the U.S. economy, even after the Enron scandal. It also plays a major role in the Wall Street crisis. A recent court report from Lehman Brothers’ bankruptcy examiner reveals that the company arranged a series of complicated transactions to hide $50 billion in debt, making Lehman appear healthier than it was. By hiding this debt, Lehman was able to make bigger bets on the mortgage market. The defense issued by Lehman CEO Richard Fuld? He apparently didn’t know the accounting hijinks were happening


An epidemic of fraud

Most U.S. policymakers are still having a hard time coming to grips with the fact that our financial system is rife with fraud at almost every level. Writing for AlterNet, Joe Costello reports on a recent Roosevelt Institute conference featuring several major economic luminaries. Costello argues that some of Wall Street’s biggest problems were driven by run-of-the-mill fraud. And a key vehicle for this fraud, Costello notes, was the derivatives market—the same market that allowed Enron to perpetrate its own frauds. Many of the scams aren’t even particularly new or creative. They’re simply the same cons that helped usher in the Great Depression.

“If we’re going to get our economy up and running again, the first thing we’re going to have to do is end the fraud,” Costello writes.

Protecting Whistleblowers

But astonishingly, even after the worst financial crisis in history, bigwig bankers have been able to avoid fraud charges and investigations. Even when the Justice Department went after Swiss banking Giant UBS for a massive tax evasion scheme, they let the company’s U.S. executives off the hook and instead jailed the very whistleblower who told the government about the fraud.

The whistleblower, Bradley Birkenfeld, is by no means innocent of wrongdoing—he even smuggled diamonds in a toothpaste container for a wealthy UBS client. But as Corbin Hiarr notes for Mother Jones, jailing the man who blows the whistle sends exactly the wrong message to anybody in Big Finance who recognizes a problem. Not only will your employer come at you with everything it has, but the government you aid will actually send you to prison. The fraudsters you finger get to retire to the Caymans.

This is part of the reason that successful financial reform is not just what the rules are, but who gets to enforce them. There were many reasonable rules against predatory lending that bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency (OCC) could have used to thwart the financial crisis early on, but neither agency was interested in doing so. They were more concerned with short-term banking profits, and up until 2007, sketchy accounting was allowing banks to book big gains on the subprime market.


Why we need a CFPA

That’s why all the way back in June of 2009, President Barack Obama proposed establishing a CFPA focused exclusively on defending consumers against banks. With no concerns for bank profitability, CFPA regulators could go after unfair practices and fraud because they were wrong, regardless of what they did for bank balance sheets.

The proposal was watered down significantly in the House, as Kai Wright notes for The Nation, and just a week ago it appeared that Dodd was ready to completely torpedo the new regulator in an effort to craft bipartisan support for a so-called “reform” bill.

He’s backed off since then, but without strong enforcement authority, nothing is gained—the same corrupt regulators will simply continue to look the other way. But Dodd would still house the new agency at the Federal Reserve. Dodd insists the Fed would have no authority over the CPFA, but if that were the case, why would he introduce the provision at all?

“Reform in name alone will be useless to both consumers and politicians,” writes Wright.

Strong financial reform is overwhelmingly popular. While it’s good to see Dodd backing away from some of the gifts he’d previously proposed to bank lobbyists, progressives must keep the pressure high to ensure that financial reform is strengthened as it moves through the Senate.

It’s easy for a corrupt lawmaker to vote against a weak bill: He can always plead that the bill wasn’t good enough and be right. But serious, popular reform is not so easy to oppose. If Dodd and the Democratic leadership make the politicians backed by the bank lobby—that’s literally every Republican, plus a handful of conservative Democrats—stand up and vote against a good bill, many of them will have to choose between their lobbyist friends and their political future.
 
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint.

Let The Sun Shine In......

Congress: GET IT RIGHT ON FINANCIAL REORM....

.....or else. 

We mean it! 

We are tired of corporate types getting, literally, away with murder. Just remember where the votes are and don't think for a minute that you can get away with what you once did. We are watching you and informing our friends.

by Meg White

Like most political writers, I like studies. Sometimes the data give me semi-factual fodder for my opinions and other times a reason to reexamine my preconceptions.

Thing is, there are so many studies that people often only read the ones that have conclusions with which they already agree. In the worst cases, the request for a study to be undertaken in the first place is not an attempt to gain further knowledge, but a delay tactic.

And I'm afraid such is the case with the proposed government studies folded into the financial reform legislation working its way through Congress.

The New York Times writes today that those studies (roughly 38 in the House bill and 24 in the Senate) will "effectively delay for up to two years the possibility of addressing" the problems that led up to the financial crisis in the first place, and may prevent new regulations from being implemented until then. Reading between the lines of the piece, it's clear that the studies are less about information-gathering and more about mollifying the banking industry (emphasis mine):

Overly optimistic credit ratings and investors’ dependence on the credit rating agencies, for example, were shown to have contributed to the subprime mortgage mess. But the Senate and House bills call for four to six separate studies of up to 30 months’ duration of how credit ratings agencies work, how they are compensated and what can be done to make their ratings more relevant to investors.

Regulators have been investigating some of these same matters, and issuing new directives about them, since at least the early 1990s.

Several of the studies focus on proposals that are vigorously opposed by banking industry groups or Wall Street firms, like a change that would make stock brokers subject to the same fiduciary standards as financial advisers — that is, to act in the best interest of their customers. 

The Senate bill calls for a new study even though the Securities and Exchange Commission commissioned a similar report in 2008. At the same time, the new bill leaves the S.E.C. with no power to act on the subject of either review.

Opponents of new regulations say that the prescribed studies are warranted because they can help derail overly burdensome rules that can strangle growth, particularly for small companies, which often lack the resources required to meet the demands of regulators. 

...Some of the proposals for studies are so specific that they raise questions about whose interests are being watched over.

Any time the banking industry is clamoring for something these days, questions should be raised. The fact that The New York Times is (sort of) raising them should in turn raise eyebrows among progressives.

In a statement today calling for more robust financial reforms than are in the Senate bill currently, Sen. Bernie Sanders (I-VT) specifically criticized (among other things) the fact that the GAO is authorized to study the actions of the Federal Reserve Bank, but is not allowed to spur action based on its findings:

The legislation proposed by the Senate Banking Committee chairman would allow the Government Accountability Office to audit the Fed's emergency lending programs, but bar GAO from naming loan recipients and detailing the terms. “As long as the Federal Reserve is allowed to keep secrets about its loans, we will never know the true financial condition of the banking system. The lack of transparency could lead to an even bigger crisis in the future,” Sanders said.

He added a sense of urgency toward the end of the press release:

“We cannot wait for the next crisis to solve this problem... We have got to take action now.”

If financial reform is going to proceed in the same manner as healthcare legislation has, however, progressive action will not amount to more than such press releases. Reading the Times piece, there's an indication that pragmatism might indeed rule the day in Congress:

Consumer advocates say they believe that too often studies are used to push an issue down the road, perhaps with the hope of never having to address it.

Representative Barney Frank, the chairman of the House Financial Services Committee, said there was truth to that, but political realities often dictate that studies be included.

“If you shoot them down, the other side will say, ‘What, are you afraid of, the facts?’ ” Mr. Frank said. “Occasionally it is a legitimate thing, but mostly it is political folderol.”

But being realistic about future attacks from "the other side" is unlikely to win elections in this populist climate, at least when it comes to financial reform.

In her interview with Treasury Secretary Tim Geithner yesterday, MSNBC's Rachel Maddow noted that this is one of the key pieces of legislation for Democrats facing reelection in the fall:

After health reform, a lot of Democrats in the Congress are looking forward to being able to run on Wall Street regulation, these new rules for Wall Street.  And with Republicans essentially signaling that they‘re mostly going to oppose them, it gives Democrats an opportunity to say we are running against Wall Street, which I think a lot of them are salivating at the chance to do that.

Later in the interview, Maddow noted that the slow downs and weaknesses in the bill may prevent that from being a believable election year argument. Geithner's following response struck me as evidence of him giving too much credit to the rationality of the voters during an election year. But he clearly does understand the need for quick action, as evidenced by the many times he referenced swiftness (emphasis mine):

MADDOW: ...If, though, people do not believe that this administration and the government in general is on their side against predation from big firms, Wall Street, the result of that is that there‘s going to be a lot of people elected in November who, if they don‘t show up with actual pitchforks, probably will have flaming torches. And we are going to get very, very, very populist very fast unless this administration takes a more populist tone and people start to believe in it because that is the mood of the country. 

GEITHNER:  I will say a different view.  I think people are going to judge me and then judge the president.  They‘re going to judge their elected representatives in Washington by what they do to make a difference in the lives of Americans. So we are overwhelmingly focused on trying to make sure that we are acting as quickly and as forcefully as we can to make things better here.  And we -- this president -- he moved with enormous speed and care and force doing incredibly important, difficult and, you know, these unpopular things because they were necessary to save the economy from collapse and make sure we had an economy that was growing again, creating jobs again. That is what people are going to measure us by.  If we don‘t focus on that every day, then, we are going to be in a position where, you know, we are going to leave the economy much weaker, Americans losing even more faith in their government. And that is what guides all the actions we are making.  We are trying to focus on what is going to make the biggest difference as quickly as possible and things that matter to, not just the basic lives of Americans, but their confidence in their government again.  Because again, this government, the government of the country, failed them terribly.

Now, I know what you're thinking. Calling on Congress (especially the Senate) to act quickly on anything is like selling 3-D glasses to a blind guy. But the truth of the matter is that Maddow is right about the optics here.

The financial reform issue is different from healthcare in a historic way. Show me anyone who tries to convince the American people that the financial system is neither broken nor in need of an immediate fix, and I will show you a 2010 loser.

We don't need a study to tell us that deregulation created a huge casino to develop where our country's financial bedrock used to be. We had an enormous case study to tell us that: It was called the financial collapse of 2008.

If we can't appeal to facts or a sense of basic decency in Congress, at least we should be able to appeal to lawmakers' desires to keep their jobs. Studies can happen any time, but we need financial reform now or we will face dire circumstances well beyond the losses the Democrats will suffer in November.

Let The Sun Shine In......

Don't Like the Sound of This!

March 7, 2010

Op-Ed Columnist

The Up-or-Down Vote on Obama’s Presidency

By FRANK RICH

WEDNESDAY’S health care rally was one of President Obama’s finest hours. It was so fine it couldn’t be blighted even by his preposterous backdrop, a cohort of white-jacketed medical workers large enough to staff a hospital in one of the daytime soaps that refused to be pre-empted by the White House show.

Obama’s urgent script didn’t need such cheesy theatrics. At last he took ownership of what he called “my proposal,” stating concisely three concrete ways the bill would improve America’s broken health care system. At last he pushed for a majority-rule, up-or-down vote in Congress. At last he conceded that bipartisan agreement between two parties with “honest and substantial differences” on fundamental principles wasn’t happening. At last he mobilized his rhetoric against a villain everyone could hiss — insurance companies. In a brief address, he mentioned these malefactors of great greed 13 times
.
There was only one problem. This finest hour arrived hastily and tardily. At 1:45 p.m. Eastern time, who was watching? Of those who did watch or caught up later, how many bought the president’s vow to finish the job “in the next few weeks”? We’ve heard this too many times before. Last May Obama said he would have a bill by late July. In July he said he wanted it “done by the fall.” The White House’s new date for final House action — specified as March 18 by Robert Gibbs, the press secretary — is already in jeopardy.

“They are waiting for us to act,” Obama said on Wednesday of the American people. “They are waiting for us to lead.” Actually, they have given up waiting. Some 80 percent of the country believes that “nothing can be accomplished” in Washington, according to an Ipsos/McClatchy poll conducted a week ago. The percentage is just as high among Democrats, many of whom admire the president but have a sinking sense of disillusionment
about his ability to exercise power.

Now that we have finally arrived at the do-or-die moment for Obama’s signature issue, we face the alarming prospect that his presidency could be toast if he doesn’t make good on a year’s worth of false starts. And it won’t even be the opposition’s fault. If too many Democrats in the House defect, health care will be dead. The G.O.P. would be able to argue this fall, not without reason, that the party holding the White House and both houses of Congress cannot govern.

For the sake of argument, let’s say that Obama does eke out his victory. Republicans claim that if he does so by “ramming through” the bill with the Congressional reconciliation process, they will have another winning issue for November. On this, they are wrong. Their problem is not just their own hypocritical record on reconciliation, which they embraced gladly to ram through the budget-busting Bush tax cuts. They’d also have to contend with this country’s congenitally short attention span. Once the health care fight is over and out of sight, it will be out of mind to most Americans. We’ve already forgotten about Afghanistan — until the next bloodbath.

The 2010 election will instead be fought about the economy, as most elections are, especially in a recession whose fallout remains severe. But that battle may be even tougher for this president and his party — and not just because of the unemployment numbers. The leadership shortfall we’ve witnessed during Obama’s yearlong health care march — typified by the missed deadlines, the foggy identification of his priorities, the sometimes abrupt shifts in political tone and strategy — won’t go away once the bill does. This weakness will remain unless and until the president himself corrects it.

Those who are unsympathetic or outright hostile to Obama frame his failures as an attempt to impose “socialism” on a conservative nation. The truth is that the Fox News right would believe this about any Democratic president no matter who he was and what his policies were. Obama, who has expanded the war in Afghanistan and proved reluctant to reverse extra-constitutional Bush-Cheney jurisprudence, is a radical mainly to those who believe a conservative Republican senator like Kay Bailey Hutchison of Texas is a closet commie.

The more serious debate about Obama is being conducted by neutral or sympathetic observers. There are many hypotheses. In Newsweek, Jon Meacham has written about an “inspiration gap.” He sees the professorial president as “sometimes seeming to be running the Brookings Institution, not the country.” In The New Yorker, Ken Auletta has raised the perils of Obama’s overexposure in our fractionalized media. (As if to prove the point, the president was scheduled to appear on Fox’s “America’s Most Wanted” to celebrate its 1,000th episode this weekend.) In the Beltway, the hottest conversations center on the competence of Obama’s team. Washington Post columnists are now dueling over whether Rahm Emanuel is an underutilized genius whose political savvy the president has foolishly ignored — or a bull in the capital china shop who should be replaced before he brings Obama down.

But the buck stops with the president, not his chief of staff. And if there’s one note that runs through many of the theories as to why Obama has disappointed in Year One, it cuts to the heart of what had been his major strength: his ability to communicate a compelling narrative. In the campaign, that narrative, of change and hope, was powerful — both about his own youth, biography and talent, and about a country that had gone wildly off track during the failed presidency of his predecessor. In governing, Obama has yet to find a theme that is remotely as arresting to the majority of Americans who still like him and are desperate for him to succeed.

The problem is not necessarily that Obama is trying to do too much, but that there is no consistent, clear message to unite all that he is trying to do. He has variously argued that health care reform is a moral imperative to protect the uninsured, a long-term fiscal fix for the American economy and an attempt to curb insurers’ abuses. It may be all of these, but between the multitude of motives and the blurriness (until now) of Obama’s own specific must-have provisions, the bill became a mash-up that baffled or defeated those Americans on his side and was easily caricatured as a big-government catastrophe by his adversaries.
Obama prides himself on not being ideological or partisan — of following, as he put it in his first prime-time presidential press conference, a “pragmatic agenda.” But pragmatism is about process, not principle. Pragmatism is hardly a rallying cry for a nation in this much distress, and it’s not a credible or attainable goal in a Washington as dysfunctional as the one Americans watch in real time on cable. Yes, the Bush administration was incompetent, but we need more than a brilliant mediator, manager or technocrat to move us beyond the wreckage it left behind. To galvanize the nation, Obama needs to articulate a substantive belief system that’s built from his bedrock convictions. His presidency cannot be about the cool equanimity and intellectual command of his management style.

That he hasn’t done so can be attributed to his ingrained distrust of appearing partisan or, worse, a knee-jerk “liberal.” That is admirable in intellectual theory, but without a powerful vision to knit together his vision of America’s future, he comes off as a doctrinaire Democrat anyway. His domestic policies, whether on climate change or health care or regulatory reform, are reduced to items on a standard liberal wish list. If F.D.R. or Reagan could distill, coin and convey a credo “nonideological” enough to serve as an umbrella for all their goals and to attract lasting majority coalitions of disparate American constituencies, so can this gifted president.

He cannot wait much longer. The rise in credit-card rates, as well as the drop in consumer confidence, home sales and bank lending, all foretell more suffering ahead for those who don’t work on Wall Street. But on these issues the president, too timid to confront the financial industry backers of his own campaign (or their tribunes in his own administration) and too fearful of sounding like a vulgar partisan populist, has taken to repeating his health care performance.

And so leadership on financial reform, as with health care, has been delegated to bipartisan Congressional negotiators poised to neuter it. The protracted debate that now seems imminent — over whether a consumer protection agency will be in the Fed or outside it — is again about the arcana of process and bureaucratic machinery, not substance. Since Obama offers no overarching narrative of what financial reform might really mean to Americans in their daily lives, Americans understandably assume the reforms will be too compromised or marginal to alter a system that leaves their incomes stagnant (at best) while bailed-out bankers return to partying like it’s 2007. Even an unimpeachable capitalist titan like Warren Buffett, venting in his annual letter to investors last month, sounds more fired up about unregulated derivatives and more outraged about unpunished finance-industry executives than the president does.

This time Obama doesn’t have a year to arrive at his finest hour. Not to put too fine a point on it, but the clock runs out on Nov. 2.

IN ACCORDANCE WITH TITLE 17 U.S.C. SECTION 107, THIS MATERIAL IS DISTRIBUTED WITHOUT PROFIT TO THOSE WHO HAVE EXPRESSED A PRIOR INTEREST IN RECEIVING THE INCLUDED INFORMATION FOR RESEARCH AND EDUCATIONAL PURPOSES. PELICAN BLOGS HAS NO AFFILIATION WHATSOEVER WITH THE ORIGINATOR OF THIS ARTICLE NOR ARE PELICAN BLOGS ENDORSED OR SPONSORED BY THE ORIGINATOR.


"VIEW SOURCE ARTICLE" LINKS ARE PROVIDED AS A CONVENIENCE TO OUR READERS AND ALLOW FOR VERIFICATION OF AUTHENTICITY. HOWEVER, AS ORIGINATING PAGES ARE OFTEN UPDATED BY THEIR ORIGINATING HOST SITES, THE VERSIONS POSTED ON THIS BLOG MAY NOT MATCH THE VERSIONS OUR READERS VIEW WHEN CLICKING THE "VIEW SOURCE ARTICLE" LINKS.

Let The Sun Shine In......

Investement Banker Quits Lehman, Exposes Wall Street

Leaving Lehman, exposing Wall Street
September 20, 2009:

Leaving Lehman, exposing Wall St Pt.5 Kapoor: The financial reforms on the table are not enough  September 20, 2009

Derivatives and tax havens Kapoor Pt4: One-third of all global economic activity passes through tax havens, with little difficulty  September 18, 09

More volatility equals more profit Sony Kapoor PT3: The more volatile the financial environment is, the more profit investment banks make  September 17, 2009

Wall street musical chairs continues Sony Kapoor: Leaving Lehman, exposing Wall Street Pt.2  September 16, 2009

Leaving Lehman, exposing Wall Street Sony Kapoor left life as an investment banker to reveal the "dark magic" of finance capital  September 14, 200

IN ACCORDANCE WITH TITLE 17 U.S.C. SECTION 107, THIS MATERIAL IS DISTRIBUTED WITHOUT PROFIT TO THOSE WHO HAVE EXPRESSED A PRIOR INTEREST IN RECEIVING THE INCLUDED INFORMATION FOR RESEARCH AND EDUCATIONAL PURPOSES. PELICAN BLOGS HAS NO AFFILIATION WHATSOEVER WITH THE ORIGINATOR OF THIS ARTICLE NOR ARE PELICAN BLOGS ENDORSED OR SPONSORED BY THE ORIGINATOR.


"VIEW SOURCE ARTICLE" LINKS ARE PROVIDED AS A CONVENIENCE TO OUR READERS AND ALLOW FOR VERIFICATION OF AUTHENTICITY. HOWEVER, AS ORIGINATING PAGES ARE OFTEN UPDATED BY THEIR ORIGINATING HOST SITES, THE VERSIONS POSTED ON THIS BLOG MAY NOT MATCH THE VERSIONS OUR READERS VIEW WHEN CLICKING THE "VIEW SOURCE ARTICLE" LINKS.

Let The Sun Shine In......