Bad Sign

Thirteen months ago, Business Insider's Josh Barro criticized liberals for defending former President Obama's decision to accept a $400,000 speaking fee from investment bank Cantor Fitzgerald. Evidently, it was even worse, given that we soon afterward learned that the 44th President had already been paid $800,000 for having delivered speeches to two other Wall Street firms. 

Still, Barack Obama is no longer in public office and since Hillary Clinton, running for a third Obama term, was defeated in a stunning upset, Democratic losses in backlash to his presidency are diminishing. Consequently, as Barro noted

The concern is not that Obama receiving such a fee will influence Obama's future policy decisions about Wall Street (he won't make any) but that if he goes around collecting such fees, he will make voters more wary of the intentions of future center-left politicians who run in his mold, as happened with Blair. Bernie Sanders' strong appeal in the 2016 primaries, which wasn't limited to far-left voters, shows that many voters are concerned about such matters.

Evidently not enough voters, or  at least not enough voters for Democratic members of Congress to stand firm against Wall Street donors.  Barro's employer reported Tuesday

The House finalized on Tuesday the largest package of Wall Street banking reforms since the financial crisis, rolling back regulations on financial firms, from community banks to credit-reporting agencies.

The legislation — most commonly referred to as the Crapo bill after its author, the Senate banking committee chair Mike Crapo — is the result of more than a year of negotiations among House Republicans, Senate Republicans, and a group of Senate Democrats that support the measure.

The bill passed by a vote of 258 to 159 and will head to President Donald Trump's desk for his signature. He is expected to sign the legislation.

Of course, the bill will be signed by The Great Populist as he continues to kick to the curb his working-class supporters- even if they're not black or Hispanic- in favor of corporate America. Charlie Pierce notes the measure is one

which very likely will neither grow the economy nor protect consumers, but which will offer most of America’s biggest financial institutions relief from the regulations put in place so that those institutions would have a harder time lighting the world on fire next time. This comes at a time when the banking industry is so terribly burdened by regulations that it’s making record profits—and that is small banks as well as the large ones.

The legislation not only passed the House with 33 Democrats in support but with the support of 17 Democrats in the US Senate, including seven from states won by Hillary Clinton. 

These included the two female Senators from New Hampshire,  Shaheen and Hassan. Three other Democratic women, Heitkamp of North Dakota, McCaskill of Missouri, and Stabenow of Michigan, voted aye. They are up for re-election in states won by Trump, as are Indiana's Donnelly, West Virginia's Manchin, Florida's Nelson, and Montana's  Tester, all men who voted in favor of the measure.

Three Democrats facing re-election,  Casey of Pennsylvania, Brown of Ohio, and Tammy Baldwin of Wisconsin, voted against the bill. 

Seven to three.  Of ten Democrats in Trump states trying to win re-election to the Senate thisfall, seven voted in favor of loosening regulations on Wall Street, helping to (as Pierce puts it) "free up the Masters of the Universe to do some more damage, for which we once again will have the choice of bailing them out or buying cornflakes with beads and trinkets."

Josh Barro may have been right when he maintained in April 2016 that voters are "concerned about such matters" as the intentions of center-left politicians who "run in the mold" of Barack ObamaHowever, there clearly also are Democratic members of Congress in competitive states  (Florida, Michigan) and Republican states (North Dakota, Missouri, Indiana, West Virginia, Montana) who believe otherwise. And of course, Republicans  voted nearly in lockstep, with only one (Rep. Jones of North Carolina) voting against this thing.

Or maybe they're simply selling out for donations from Wall Street. In either case, it's telling, as it is that five female Democratic senators voted to please the financial services community. It's fewer than the number of Democratic women- twelve- who voted nay, but it does suggest that even with the growing number of women who will enter Congress next year, utopia is not upon us.

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Bipartisan Approval For Financial Disaster

In a brilliant, July 2016 article, Alex Nichols wrote about a celebrated musical "The most obvious historical aberration is the portrayal of Washington and Jefferson as black men, a somewhat audacious choice given that both men are strongly associated with owning, and in the case of the latter, raping and impregnating slaves."

The New York Times observed "Conservatives were particularly smitten" over Hamilton, and Rupert Murdoch labeled it "historically accurate," somehow appropriate for the guy who ultimately presides over the fanciful editorial page of The Wall Street Journal.

Naturally, then-President Obama also gushed, remarking "I'm pretty sure this is the only thing that Dick Cheney and I have agreed on-during my entire political career." Nichols added  "That is, of course, false. Other points of agreement include drone strikes, Guantanamo, the NSA, and mass deportation."

Fortunately, President Obama was a little less favorably disposed than Bush-Cheney toward the financial institutions which disrupted, and nearly destroyed, the world economy in the latter stage of the previous administration. Though only one Wall Street executive went to prison, Obama did sign into law in July 2010 Dodd-Frank, which, the New York Times explained at the time

subjects more financial companies to federal oversight and regulates many derivatives contracts while creating a consumer protection regulator and a panel to detect risks to the financial system.

A number of the details have been left for regulators to work out, inevitably setting off complicated tangles down the road that could last for years.

But “because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes,” Mr. Obama said before signing the legislation. “There will be no more taxpayer-funded bailouts. Period.”

Not so fast, big guy. There may be more "taxpayer-funded bailouts" In part for the same reason there was widespread acclaim for Hamilton:  the spirit of bipartisanship.

On Wednesday, the Senate passed by  67-31 the Economic Growth, Regulatory Relief, and Consumer Protection Act, presumably named because it will reduce government oversight on banks with assets of up to $250 billion and provide comfort and relief to billionaire bank executives, referred to here as "consumers."

Earlier this month, the Boston Globe had pointed out that critics of  the legislation- the opening salvo of the Masters of  the Universe in overturning Dodd-Frank- "say that threshold is too  high, since the  failure of two or three of those mid-sized banks would be the equivalent of one big bank failing."
The Globe writes that one change "would empower big banks to secure more favorable treatment fromthe government" because it would require "the Federal Reserve to tailor regulations on the biggest banks individually for  each firm rather than aplying the same rules across the board."  Warren maintains it "may be the single most dangerous provision in the entire bill" and would result in "systematic weakening of  the  rules for all the big banks"





But as with Hamilton, there was bipartisan comity, with16 Democrats joining all 50 Republicans in voting for passage.  Senate Banking committee member and Democrat Joe Donnelly of Indiana commented "This legislative package is an example of what we can achieve by working together and shows Democrats and Republicans can break the gridlock. I’m proud my bill passed the Senate" and "look forward to the passage of my bill in the House, so that it can head to the president’s desk.” But Charlie Pierce recalls

All of those “compromises” of the early- and mid-19th century did nothing but delay the inevitable cataclysm over slavery. Support for Jim Crow often was “bipartisan,” as was the foreign adventurism that overthrew governments in places like Iran and Guatemala and that reached its bloody apex in Vietnam. The panic that produced the Patriot Act after the 9/11 attacks was bipartisan, as was the support for the war in Iraq for which that panic was exploited by a bunch of think-tank cowboys. More to the point, a lot of the measures that led to the financial collapse that led to the regulations now under assault were quite bipartisan. To say something is to be praised simply because it is something that “got done” in our “polarized age” is a simpleton’s view of politics.

Once the bill is approved by the House, President Trump will take a break from assailing members of Congress as "a low-IQ individual" or "a total phony" and sign the bill, citing it as an example of how he can get everyone to work together. And as one, the "liberal media" will join other opinion-makers in standing and applauding.

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The Class War Continues

While We Were Looking Elsewhere

Writing for Daily Kos, Laura Clawson reports

A staggering 84 percent of New York City fast food workers reports having been a victim of wage theft, a new survey finds. Things are even worse for fast food delivery workers—100 percent of them report wage theft. The New York State attorney general is reportedly investigating pay practices in New York City fast food, and the new survey and report from Fast Food Forward offer a detailed picture of what that investigation might find.

Employers cheat workers out of wages in a number of ways, forcing them to work off the clock before or after their shifts or during break times, not paying overtime when workers work more than 40 hours a week, making delivery workers pay for equipment they're required to have to do their jobs, or just plain not paying the minimum wage.

Blogging for Daily Kos, Laura Clawson finds

A staggering 84 percent of New York City fast food workers reports having been a victim of wage theft, a new survey finds. Things are even worse for fast food delivery workers—100 percent of them report wage theft. The New York State attorney general is reportedly investigating pay practices in New York City fast food, and the new survey and report from Fast Food Forward offer a detailed picture of what that investigation might find.

Employers cheat workers out of wages in a number of ways, forcing them to work off the clock before or after their shifts or during break times, not paying overtime when workers work more than 40 hours a week, making delivery workers pay for equipment they're required to have to do their jobs, or just plain not paying the minimum wage.

That's what goes on in an industry without unions.  It's happening not only in the fast food biz nor only in New York City but with retail behemoths including Walmart and Home Depot and franchisees including McDonalds and Taco Bell. The New York Times reports

paper paychecks and even direct deposit have been replaced by prepaid cards issued by their employers. Employees can use these cards, which work like debit cards, at an A.T.M. to withdraw their pay.

But in the overwhelming majority of cases, using the card involves a fee. And those fees can quickly add up: one provider, for example, charges $1.75 to make a withdrawal from most A.T.M.’s, $2.95 for a paper statement and $6 to replace a card. Some users even have to pay $7 inactivity fees for not using their cards. These fees can take such a big bite out of paychecks that some employees end up making less than the minimum wage once the charges are taken into account, according to interviews with consumer lawyers, employees, and state and federal regulators...

Many employees say they have no choice but to use the cards: some companies no longer offer common payroll options like ordinary checks or direct deposit.

At companies where there is a choice, it is often more in theory than in practice, according to interviews with employees, state regulators and consumer advocates. Employees say they are often automatically enrolled in the payroll card programs and confronted with a pile of paperwork if they want to opt out.

Chris Hayes comments

The reason for the growth of the practice, you won`t be surprised to hear, is that it is a sweet deal for the participating banks like Citibank, Bank of America, JPMorgan Chase and Wells Fargo, and for the largest issuer  of payroll cards, Net Spend. The banks are making swipe fees. The kind of  swipe fees they were prohibited from making with regular ATM cards under  Dodd Frank Financial Reform.

Natalie Gunshannon, an employee at a McDonalds "restaurant" in Dallas, Pennsylvania was required to use the payroll card, sued, and quit.  The joint changed its policy but Gunshannon's lawsuit is ongoing and she is seeking punitive damages.  In New York State, Attorney General Eric Schneiderman has begun an investigation of the practice.

These policies persist despite their impact on the working poor... or maybe because of it.   While most of the progressive world and the mainstream media are fascinated with bright, shiny objects- today, "marriage equality" and immigration reform- income inequality continues to grow.  From information supplied by Emanuel Saez and Thomas Piketty and a graph (below) from nationalaffairs.com via Daily Kos, we learn that the top 1% of earners now possess 20% of the nation's income. Between 1979 (shortly before the "Reagan Revolution" lauched) and 2007, real income for the top 1 percent of households (as judged by total income) rose 240.5%, by 19.2% for the middle fifth and 10.8 percent for the bottom fifth of households.  Wealth is always distributed even more unequally and when in 2010 the top 1% had 17.2% of income, they controlled 35.2% of the wealth (graph, further below, from the Economic Policy Institute via Ezra Klein's Wonkblog).

The generals in the financial industry have been waging class warfare in the U.S.A. for over three decades.  They've won nearly every major battle, and now they're just rubbing our noses in it.

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Misdirection On Two Issues

This post is not about the Social Security trust fund but....

Daily Howler's Bob Somerby refers to a Gallup survey from July which found " Six in 10 Americans who have not yet retired believe they will get no Social Security benefits when they retire, more pessimistic than at any time since Gallup began asking this question in 1989." Continuing his campaign (usually justified, sometimes not) against liberals who sell out their principles to advance their career, Somerby points out

Tremendous energy has been invested in making Americans voters believe that there is something odd about the process which created this so-called fund. In fact, the story is simple, and here it is: In the past three decades, the United States government has borrowed lots of money, from many different sources. It has borrowed money from the Social Security trustees (those pre-planned over-payments). It has borrowed money from big Chinese banks, and from many other sources.

You may not like the fact of this borrowing, but this borrowing has occurred. And guess what? The money all gets paid back! No one will ever tell those Chinese banks, “Sorry, we can’t pay you back. The money isn’t there –it’s already been spent!” But the loans from those payroll tax over-payments are no different from the loans from the Chinese. The money was borrowed, just as Reagan designed. And now, it will all be paid back.

Decades of aggressive, skilled effort have gone into that Gallup result. The conservative world invented a series of slick, slippery scams—and the liberal world slept in the sun. The fruit of that pairing can be seen in the numbers who think they won’t ever see any benefits. It may also be seen, in coming months, in new cuts to the program.

Sixty percent of Gallup respondents said they would never get any benefits! People like that are ripe for the slaughter—and decades of skilled, unrebutted disinformation went into preparing the feast. That said, we liberals have remarkable skill at failing to see how things really work.

It's not only Social Security about which professional conservatives have been bamboozling Americans. I've seen no polls, but if 100 Americans were asked whether the federal government played a major role in our economic collapse by aggressively encouraging individuals to buy homes when they were unable to do so, a sizable number would agree. Blameworthy are people like Rush Limbaugh, who on Monday ("The New American Dream: Renting Your House") claimed

In fact, the regime, forget who it is, I've got in the stack here, someplace the regime is saying that the American dream is now renting a house. You know, home ownership is fini, the American dream is now renting. People should have rented in the first place. This is from people who gave us the subprime mortgage crisis, encouraging people who had no business getting a loan to go out and buy a house they had no business buying because everybody knew that they would never be able to repay it.

Who are these people? President Obama? Rahm Emanuel? David Axelrod? Barney Frank? Chris Dodd? The entire Department of Housing and Urban Development? No one really knows, because Rush doesn't say, because Rush characteristically has no facts.

Generally, when conservatives repeat this myth- it was the government's fault!- they are alluding to the Community Reinvestment Act, enacted in 1977, decades before the sub-prime mortgage crisis. Most high-cost loans were made by independent mortgage banks or bank affiliates, which are not covered by the CRA. The CRA did have a minor impact- but only because in the 2000s, the act was weakened through regulatory and legislative reform, gutting enforcement of the law. These changes, opposed by community groups and some Democratic officials, were sought by industry and undoubtedly praised by Rush Limbaugh- if he even knew the CRA existed.

The right similarly exaggerates the role of Fannie Mae and Freddie Mac in the housng crisis. These companies were never involved in the commercial real estate business, yet over half of all commercial mortgages due before 2014 were underwater as of October, 2009.

Another target of conservative myth-makers is Representative Frank, and not only because he is openly gay, Jewish, and a bad dresser. GWB economic adviser and tax-cut architect Lawrence Lindsey, though, has written "in fact, Rep. Barney Frank (D., Mass.) is the only politician I know who has argued that we needed tighter rules that intentionally produce fewer homeowners and more renters. Politicians usually believe that homeownership rates should- must- go even higher."

Corporate shills like Limbaugh will never attribute responsibility to the huge investment banks, which popularized exotic financial instruments, or to the banks which promoted destructive NINJA loans. Nor will they raise the topic of racial discrimination by financial institutions such as Wells Fargo, which reportedly "pushed customers who could have qualified for prime loans into subprime mortgages" and whose " employees had referred to blacks as 'mud people' and to subprime lending as 'ghetto loans.'"

When Limbaugh decried public officials "encouraging people who had no business getting a loan to go out and buy a house they had no business buying," he should have been thinking of Lindsey's boss, whom the New York Times reported

pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

It's a little better with housing than with Social Security. With the latter, the mainstream media is actively pushing the myth of insolvency; with the former, it is merely looking the other way in pursuit of a "balanced" approach that denies historical reality.

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Down With Government, He Says

The New York Times early this month reported on a federal lawsuit against Wells Fargo. Former loan officer Beth Jacobson said in an interview that the firm

.... saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans....”

We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally.

Another (black) former loan officer for the company

offers a sort of primer on Wells Fargo’s subprime marketing strategy by race.

In 2001, he states in his affidavit, Wells Fargo created a unit in the mid-Atlantic region to push expensive refinancing loans on black customers, particularly those living in Baltimore, southeast Washington and Prince George’s County, Md.

“They referred to subprime loans made in minority communities as ghetto loans and minority customers as ‘those people have bad credit’, ‘those people don’t pay their bills’ and ‘mud people,’ ” Mr. Paschal said in his affidavit.

He said a bank office in Silver Spring, Md., had an “affinity group marketing” section, which hired blacks to call on African-American churches.

“The company put ‘bounties’ on minority borrowers,” Mr. Paschal said. “By this I mean that loan officers received cash incentives to aggressively market subprime loans in minority communities.”

Confronted with this allegation of widespread racial discrimination, Wells Fargo Home Mortgage spokesman Kevin Waetke contended

We have worked extremely hard to make homeownership possible for more African-American borrowers. We absolutely do not tolerate team members treating our customers or others disrespectfully or unfairly, or who violate our ethics and lending practices.

Give this guy Waetke credit. At least he does not blame others for what the Court might conclude was systematic racism in pushing upon black customers subprime loans it Waetke's massive firm knew they could not afford. He did not claim "the devil made me do it," unlike the nation's most popular talk show host and GOP shill:

It is the subprime mortgage business, which was a creation of Democrats and leftists. It was based entirely on leftist ideology, and that is that life is unfair. "If somebody can afford a house, everybody should be able to be in a house. It's not fair that some can't own a home. Not in an America that's just and moral...." So we had to come up with a way because market economics doesn't work that way, because not everybody is equal. No two people can ever be equal if there is indeed genuine free will and freedom. It's not possible. But that doesn't stop the left. So it was created with, whatever, the Investment Redevelopment Act or whatever the name of the laws were. The banks were forced to make loans to people who could never pay 'em back.

Note what Waetke did not say: the government made me do it; Fannie Mae and Freddie Mac put a gun to our head; we did it because that's what all us liberals do.

It's almost a Pavlovian response- whenever anyone says "housing crisis," a conservative will say "Fannie Mae and Freddie Mac"! Ever manipulative (and lying- all these worthless mortgages?), Rush did not disappoint:

So they came up with "Mortgage-Backed Securities," and they came up with "Collateralized Debt Obligations," and who the hell knows what else, and they started selling them to each other as insurance policies. Then Fannie Mae and Freddie Mac come along and buy up all these worthless mortgages and thus guarantee them, all because a bunch of liberal Democrats were buying votes and making sure that people who had no business owning a home owned them.

Perhaps the right has seized on Fannie Mae and Freddie Mac as scapegoats because, as Paul Krugman here notes, they are "private companies with stockholders and profits(but also) 'government-sponsored enterprises' established by federal law." Or, given that conservatives don't do nuance, ambiguity, or detail, maybe the two entities simply sound like 'government' to them. Either way, Krugman explains

Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.

Partly that’s because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn’t do any subprime lending, because they can’t: the definition of a subprime loan is precisely a loan that doesn’t meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.

So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works.

It's foolish to expect Limbaugh to explain to his audience of "dittoheads" the role- accurate or otherwise- of Fannie and Freddie, conservative talk radio being a fact-free zone. Nor would Rush have mentioned that increasing home ownership was a goal of politicians across the political spectrum, no more so than President George W. Bush, who on June 15, 2002 declared

Owning a home lies at the heart of the American dream. A home is a foundation for families and a source of stability for communities. It serves as the foundation of many Americans' financial security. Yet today, while nearly three-quarters of all white Americans own their homes, less than half of all African Americans and Hispanic Americans are homeowners. We must begin to close this homeownership gap by dismantling the barriers that prevent minorities from owning a piece of the American dream.

All of this is part of the history which has been little told and even more poorly understood. Into the vacuum charges the leader of the Repub Party who, facts be damned, shouts "Liberalism! Socialism, Marxism, whatever you want to call it, that's what led to the economic crisis that we're in, not capitalism." It's a simple, even mindless, cry but if no one challenges Limbaugh's gross distortion of events, much of the electorate will believe that a financial crisis enabled by a government dominated by the corporate sector was created by a powerful, leftist state.

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Duo Of Destruction

Fresh off creating the Congressional Tea Party Caucus, and contemplating a Repb takeover of the House, Representative Michelle Bachmann of Minnesota on July 22 told a gathering of the GOP Youth Convention in Washington, D.C.

Oh, I think that’s all we should do. I think that all we should do is issue subpoenas and have one hearing after another. And expose all the nonsense that is going on. And it’s very important when we come back that we have constitutional conservative leadership because the American people’s patience is about this big.

This is no idle wish from the hard-right Republican. Representative Darrel Issa of California is now ranking Republican on the Oversight and Government Reform Committee and probably would become chairman if his party wins a majority of seats in the House in November. Politico reports he

has told Republican leadership that if he becomes chairman, he wants to roughly double his staff from 40 to between 70 and 80. And he is not subtle about what that means for President Barack Obama.

At a recent speech to Pennsylvania Republicans here, he boasted about what would happen if the GOP wins 39 seats, and he gets the power to subpoena.

“That will make all the difference in the world,” he told 400 applauding party members during a dinner at the chocolate-themed Hershey Lodge. “I will use it to get the very information that today the White House is either shredding or not producing.”

While Issa is more likely than Bachmann to wield the gavel (and subpoena power) that would threaten to paralyze the Obama administration in the second half of its term, it appears their motives are similar. The Californian assured his audience "I won't use it to have corporate america live in fear that we're going to subpoena everything." Bachmann is no less subtle, telling the conventioneers

So we have to make sure that we do what the people want us to do because one thing that you should is that the most dramatic story that’s happened in the last 18 months is that the federal government – before 18 months ago, the private economy was 100 percent held in private hands,” she said. “But today 65 percent of the economy is now held in government’s hands – either in direct ownership or in control we’re talking about. So we got to unravel that and we got to get the private sector back to being private and the government back to being government.”

The near-destruction of the American economy by Wall Street wasn't quite enough for these Republicans, for whom the corporate domination of the nation is still insufficient. It's anyone's guess as to where she gets her figure of 65 percent of the economy now being in "government's hands." Perhaps she and Issa are unaware that

In 1995, the assets of the six largest banks were equivalent to 17 percent of G.D.P.; now they amount to 63 percent of G.D.P. Meanwhile, the share of all banking industry assets held by the top 10 banks rose to 58 percent last year, from 44 percent in 2000 and 24 percent in 1990.

But then, they probably do know of this growing concentration of power in the hands of a relatively few, unelected, individuals. And their verdict is: not enough.

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Eric Cantor, Unintentionally Hopeful

By their enemies, you shall know them (or, in this case, it).

A vote against the Dodd-Frank Wall Street Reform and Consumer Protection Act was not unreasonable for individuals who have been awake the past couple of years and recognize that huge financial institutions must be regulated.

Mark Thoma at CBS Moneywatch observes

This bill is not going to end the problem of too big to fail. If the banking system is threatened, then one way or the other it will be bailed out. The consequences to the economy would be too large to do otherwise. Thus, banks that are big enough to pose a systemic risk enjoy an advantage over other banks. Banks that pose a systemic risk will be assumed to be safer than other banks due to the implicit government guarantee. This gives large banks an advantage over smaller banks that do not, on their own, threaten the financial system if they fail.

In addition, the implicit guarantee gives large banks the incentive to take on too much risk, and this is a reason to regulate the amount of risk they can take (and I don’t think the proposed legislation does enough in this regard).

More comprehensively, Senator Russ Feingold of Wisconsin, who has been "a lonely voice for sanity in the financial markets," explained

At the start of this process I made clear that I had a simple test for financial reform -- will it stop another financial meltdown? This bill fails that test, and I won't support legislation that fails to protect the people of Wisconsin from the pain of another economic disaster. And I don't need to be lectured about this issue by people who supported the repeal of Glass-Steagall, which paved the way for this terrible recession.

I had hoped I would be able to support the legislation, given the clear need for strong reform. I cosponsored a number of critical amendments during Senate consideration of the bill including a Cantwell-McCain amendment to restore Glass-Steagall safeguards, Senator Dorgan's amendment that addressed the problem of "too big to fail" financial institutions, and another "too big to fail" reform offered by Senators Brown and Kaufman that proposed strict limits on the size of those institutions. Each of those amendments would have improved the bill significantly, and each of them either failed or was blocked from even getting a vote.

After that, it wasn't a close call for me. It would be a huge mistake to pass a bill that purports to re-regulate the financial industry but is simply too weak to protect people from the recklessness of Wall Street. That would be like building an impressive-looking dam without telling everyone that it has a few leaks in it. False security is no security at all.

This bill is not going to end the problem of too big to fail. If the banking system is threatened, then one way or the other it will be bailed out. The consequences to the economy would be too large to do otherwise. Thus, banks that are big enough to pose a systemic risk enjoy an advantage over other banks. Banks that pose a systemic risk will be assumed to be safer than other banks due to the implicit government guarantee. This gives large banks an advantage over smaller banks that do not, on their own, threaten the financial system if they fail.

In addition, the implicit guarantee gives large banks the incentive to take on too much risk, and this is a reason to regulate the amount of risk they can take (and I don’t think the proposed legislation does enough in this regard).

(Open Left's Chris Bowers here summarizes both the weaknesses and strengths of the final bill and its deficiencies are detailed here by professor Michael Hudson)

The strongest argument in favor of the legislation, however ironically, comes from a fervent opponent, House Minority Whip Eric Cantor of Virginia. He contends

This legislation is a clear attack on capital formation in America. It purports to prevent the next financial crisis, but it does so by vastly expanding the power of the same regulators who failed to prevent the last one.

This reasoning one hears from professional Republicans, officeholders, pundits, and talk show hosts, though generally not, to their credit, from the conservative rank-and-file. The proposed legislation would strengthen the hand of regulators who enabled the current crisis when they were too weak to regulate industry. Therefore, it must be stopped.

Stop us before we serve the American public! Regulation failed because conservative ideology demanded that it do so, that it be passive in the face of opposition from business. This bill, if Cantor is to be believed, expands their power and thus is destructive.

Thank you, Representative Cantor. You have confirmed that some opponents fear that the financial services industry may no longer have their way with the American people. We can only hope your fear is realized.

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Scott Brown For Financial Reform, Sort Of

Scott Brown's Facebook page is replete with comments from individuals angry about the 60th vote he provided in the U.S. Senate in favor of financial reform. Cindi Scott Benton remarks

We have to know... we HAVE to KNOW... what was it that changed your mind on this today??? You said NO... and then said YES??? WTF????????

Michael Wall more simply asks, rhetorically,

You voted for this bill, 2000+ pages of regulation? Why, just why?

Perhaps we can help them. In order to pay for the legislation, a House-Senate conference committee had inserted a provision which

would raise the level of funds the FDIC is required by law to hold in reserves to insure bank customer deposits. The FDIC would increase its so-called reserve ratio from 1.15 percent to 1.35 percent, or $1.35 for every $100 in deposits. The fund is supported through fees on the banking industry.

The change would shift the burden to the largest U.S. banks since the earlier plan would have also assessed hedge funds. Dodd said small banks would be exempt from having to pay for the increase.

As of June 28th, the Massachusetts Republican supported financial reform, which had passed the Senate with his vote after the Volcker Rule was weakened. wherein

Lawmakers agreed to an exemption pushed by Brown, for example, that would allow banks to continue to invest at least a small amount of their capital in hedge funds and private equity. The measure would prohibit a bank from placing more than 3 percent of its capital in such investments.

In English, a blogger at Alternet explains:

Brown demanded that the Volcker Rule—a ban on risky proprietary trading by banks—be watered down. Proprietary trading doesn’t serve any client or help any business, it’s just a naked bet, and when those bets are made through the commercial banking system, they’re subsidized by taxpayer perks (those perks are designed to boost economically productive lending).

One of the biggest banks in Massachusetts is State Street Bank. It’s a pretty boring institution—except for its prop trading operations. Throughout the crisis, it made decent money, and generally didn’t run into any trouble—except from its prop trading operations. State Street’s gambling operations backfired big-time, forcing taxpayers to step in with billions of dollars in bailouts.

What did Brown learn from this episode? Why, that State Street deserves to keep gambling with taxpayer dollars! Prior to Brown’s efforts, the Volcker Rule would have banned any proprietary trading at major banks. After Brown’s efforts, banks can put up to 3 percent of their capital into a proprietary hedge fund. That dealt a tremendous blow to the substance of the reform. When banks sponsor proprietary hedge funds, they collect lots of money from outside investors. If those hedge funds go under, the bank’s reputation is immediately on the line, and it faces a tremendous amount of pressure to bailout other investors in the hedge fund. If they don’t stand behind the hedge fund, investors wonder why, and it can spark a run on the bank.

So even if only a small amount is initially invested in the fund, banks often end up paying out several times their original investment to cover losses (Bear Stearns put about $40 million into a hedge fund and had to pay $3.2 billion when it went under). There are some provisions in the reform bill limiting the degree to which big banks can bailout their hedge funds, but they will be extremely difficult to enforce.

In sum, Brown actively weakened U.S. financial stability, and hit taxpayers with unnecessary fees, and did it all for the express benefit of a handful of special interests.

Still, on June 29th, however, Brown wrote a letter to Senate Committee on Banking Chairman Chris Dodd and House Committee on Financial Resources Chairman Barney Frank vowing to oppose the bill when it came back to the Senate because of the new provision. Of course, the conferees amended the bill to Brown's liking because, in Obamaworld, no bill may be passed without Republican support, even if it means losing the support of progressive Democrats. (Ultimately, this provision was dropped because at the last moment it was found to violate Paygo rules.)

The Administration had a choice. It could have accomodated Democrats Russ Feingold of Wisconsin, who wanted the original, powerful Volcker language, and Washington States's Maria Cantwell, who advocated the stronger derivatives language initially proposed. But it chose instead to placate Massachusetts' Scott Brown and Maine's Susan Collins (sound familiar?). And it proved easier to appease an opportunist like Scott Brown, bereft of any ideological underpinning, rather than to demand a bill which would have effectively addressed the abuses of the nation's financial institutions.

Really, then, notwithstanding the shock of Scott Brown's right-wing followers, the financial reform bill (now named after Senator Dodd and Representative Frank) followed a similar script to that of health care reform (although the Republican support there ultimately failed to materialize), one highly favorable to their side.

While giving appropriate blame to the Blue Dogs, Open Left's Chris Bowers observed on June 29

Just in case you hadn't noticed, the New England Republican party is, in fact, the governing party of America right now.

Consider Wall Street reform, which is now going back to conference committee in order to appease Scott Brown and Susan Collins.

Consider unemployment benefits and jobs. The bill was defeated at the behest of Olympia Snowe, Susan Collins, and Scott Brown. However, now that Snowe has said unemployment extensions should be passed as a stand-alone bill, well, it looks like Congress is going to try and do just that (the House failed to pass such a bill a few minutes ago, but only because it required a two-thirds majority since the rules were suspended).

The country is being run by a regional rump party.

Have no fear, conservatives. All this is occurring with 253 Democrats in the House of Representatives, 59 (once the replacement for West Virginia's Bob Byrd takes the oath of office, expected this coming week) Democrats in the Senate, and the "Si Se Puede" Democrat in the White House. Imagine what will transpire once there is a GOP majority in Congress and/or a Republican president.

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Gratitude from BOA

Bank of America, one of the six financial institutions which together possess 63% of assets in the nation's economy, has been one lucky bank. On October 28, 2008 it received $15 billion of the roughly $200 billion from the American taxpayers to save the lowly entrepreneurs. Bank of America then decided to acquire Merrill Lynch, and received $20 billion for its troubles while the federal government agreed to

guarantee part of a pool of $118 billion in illiquid assets, including residential and commercial real estate and corporate loans. Bank of America will be responsible for the first $10 billion in losses; the Treasury and the FDIC will take on the next $1.

The generosity of the American taxpayer (and the "socialist" government Rush Limbaugh and many other Republicans keep reminding us of) seems to have paid off. On April 16 The Huffington Post noted

Bank of America Corp. on Friday followed JPMorgan Chase & Co. in reporting a big first-quarter profit and that it sees a healing economy. Bank of America said its earnings rose 0.7 percent to $2.83 billion from $2.81 billion a year earlier.

Making money and racking up profits is a good thing, even if the biggest sector of the private economy needed a boost from big government to get it done. But how has it been done?

Loans to fledgling businesses and to the American people, without whose generosity Bank of America might no longer be in existence. Perhaps, though, through cutting expenses, as the India Times reports:

Workers for Bank of America Corp, one of the nation's largest employers, have sued the company for allegedly failing to pay overtime and other wages.

The lawsuit filed Friday in federal court in Kansas City, Kansas, consolidates 12 lawsuits filed on behalf of employees in California, Florida, Kansas, Texas and Washington.

It seeks nationwide class-action status on behalf of employees at retail branches and call centers over the last three years. The federal Judicial Panel on Multidistrict Litigation in April directed that the cases be combined.

According to the 44-page complaint, the largest U.S. bank by assets requires employees to work in excess of eight hours per day or 40 hours per week, yet fails to pay them both for overtime and for all straight time worked.

The complaint also accuses the bank of requiring employees to work during unpaid breaks, failing to provide meal and rest breaks, and failing to timely pay terminated employees for earned wages and accrued vacation time.

"Bank of America enjoys millions of dollars in ill-gained profits at the expense of its hourly employees," violating either the federal Fair Labor Standards Act or various state labor laws, the complaint said.

Bank of America will get its day in court (unless it settles out of it). Still, one can wonder if this arrangement is what Rush Limbaugh meant when he imagines the Obama Administration sayin "This what we're about. This is how we're going to make you dependent on us. This is how we're gonna destroy the private sector."

Yep, give them billions so they can stay in business and make billions- each year- with the help of free labor. That Socialist in the White House sure knows how to break the private sector.

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Cleaving To Wall Street

Let's give the Republican Party some credit. Let's assume its sincerity. By that standard, Senator Orrin Hatch is only partially paranoid. Daily Kos reported Tuesday that the Utah Republican

seemed to imply on Fox News today that the administration may have pushed for a civil suit against Goldman Sachs to be filed at a time that benefited Democrats' financial reform push, saying that "the timing is very suspect."

"This whole Goldman Sachs thing, isn't that a little odd that all of a sudden, right at the height of this legislative period, we suddenly have the SEC filing suit against Goldman Sachs?" Hatch asked.

"I think the timing is very suspect," he said.

He continued:

There's something terribly wrong here and I don't know what it is, but to do that right at this particular time, you know, the timing is very suspect in my eyes.

If that seems a little paranoid, though, it's nothing compared to the conspiracy Rush Limbaugh uncovered today:

The regime is denying any conspiracy between themselves and the SEC and Goldman Sachs over an effort to get this financial regulatory reform bill passed with Honest Obe heading to the Cooper Union Thursday in New York to make the first big pitch.

So now President Obama and the Securities and Exchange Commission and Goldman Sachs are in it together! Therefore, you might conclude, Rush is in favor of reform of the financial industry. You would be thinking logically, but would be wrong:

Folks, let's go back to the premise of this whole financial regulatory reform bill. The whole premise of this is that is based on the fact that Wall Street's to blame for the financial meltdown, and it's not. Government is to blame for the meltdown....

"Whoa, what happened there? Why, how did those people on Wall Street pull the wool over our eyes on this one? These thieves! We gotta go in there and regulate these people. Why, look! You can't trust the private sector at all. Private sector always screws you." That's why we're here. The whole thing, the whole Dodd bill for financial regulatory reform is bogus. The only reform that's need is a reformation of government, a reformation of the Congress, a reformation of what's going on at the White House. I mean, even without getting into any other specifics, the whole premise of this is wrong. A lot of us are, frankly, fed up. Every time the government makes a mistake, which is frequently, they sit back and turn it around and blame it on the private sector, which is the golden goose of this country, and they exonerate themselves!

This really is genius- no, really. The President, dictator that he is, controls the SEC; Obama decides to persecute Goldman Sachs, which is in on the conspiracy; Wall Street, however, is blameless because government, which is conspiring with Goldman Sachs, is completely to blame. This particular firm, which has a connection with Robert Rubin and other powerful Democrats, is thus demonized- and so is Barack Obama and the federal government. But no regulation of Wall Street, on which Goldman Sachs is a prime player, can ever be justified.

It may not make sense, but as a way of ginning up hostility to financial regulation and not appearing to be supportive of a mega-corporation under a criminal cloud, it is even more brilliant than Senator Hatch's more pedestrian fantasy.

Better Quote Of The Week

"If the orgy of financial deregulation that led to the crash had two prime sponsors, the Democratic one was Rubin and the Republican one was Greenspan. Inviting these characters to a fiscal summit to devise a way out of the crisis is like inviting arsonists to design a seminar on fire prevention."

Journalist, writer, and economist Robert Kuttner, criticizing composition of the fiscal summit sponsored by the Peter G. Peterson Foundation

Abdication

Blogger extraordinaire Digby has a post up today about how the Democratic Party failed to recognize the building popular revulsion at the bailout of financial institutions represented by TARP. Now, with the election in Massachusetts of the banks' front man as U.S. Senator

The Democrats either didn't see that (or chose to ignore it) and foolishly went on to allow this populism to get caught up in health care reform and tie the agenda up in knots. We watched it, aghast, every day.

In September of 2008, she recalls, she was

watching Pelosi and Reid, Frank and Dodd stand there all by themselves taking "credit" for this bill. They are handing out plaudits to all the others who "helped" them get it done like members of "the Hills" at the MTV awards.

All that is true, and turned out probably to be bad policy- and clearly bad politics. Democrats now are being blamed for the bank bailout (supported by many members of both parties), resurrection of huge bonuses to bank executives (while Republicans oppose the bank tax proposed by Obama), raising taxes (though they have been lowered for most working Americans), the stimulus package (averting a depression), "big government" (allowing financial institutions to resume risky investments that brought us to the brink of that depression), and the decline of the Roman Empire (or at least of this country). But the identification in the minds of the American people of the Democratic Party with Wall Street has had little to do with the House Speaker, the Senate Majority Leader, the Chairman of the House Financial Services Committee, or the Chairman of the Senate Banking Committee.

Someone else is much more responsible, though we can be confident Chris Matthews won't hold him accountable. Firedoglake's Jane Hampshire explains

Back in the day (2008) the unions were waging aggressive campaigns against private equity groups that were buying up companies, slashing their staffs, breaking their union contracts, selling off their assets and reaping millions. They led the way on the issues of corporate governance, Wall Street accountability and the Bush bailout that gave banks a blank check.

But just as the tea parties were getting going in April of 2009, the White House met with bankers in the wake of the AIG scandal who told them to put the kibosh on the harsh anti-bank rhetoric.

The banks’ message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.

And so calls went out from the White House to the unions to put a pin in it (they were holding EFCA over their heads).

They did.

Which left the field wide open for the tea parties (who were being heavily juiced by Fox News) to reap all of the economic discontent. “Our side” abandoned the field.

I remember standing out in front of the White House with Bill Greider, David Swanson, Jason Rosenbaum and three Code Pink people for the protest organized by A New Way Forward in April, the day before the tea party protests began. Bill and I shook our heads and said “this is bad.” There was no institutional support coming from liberal groups whatsoever.

And for millions of people justifiably pissed at the banks, the tea parties became the only game in town.

Congressional leaders and the unions bear some blame, of course. They could have stood tall for the party's traditional principles, defending the middle class against corporate greed. But they seem to have staked everything on the popularity of the neo-liberal in the White House, which seems to be O.K. with him. Politico reports a story told to a reporter from the Arkansas Democrat-Gazette by retiring U.S. Representative Marion Berry (D.-Ark), who warned the Administration of impending Democratic Congressional losses in 2010:

I’ve been doing that with this White House, and they just don’t seem to give it any credibility at all,” Berry said. “They just kept telling us how good it was going to be. The president himself, when that was brought up in one group, said, ‘Well, the big difference here and in ’94 was you’ve got me.’

The President's complacence, naivete, or disinterest already helped drag Martha Coakley down to defeat. And as Digby notes, "It's not clear to me how the Dems catch up, but they'd better come up with something quick if November isn't going to be a bloodbath."

The Los Angeles Times reports that the economic stimulus plan, developed jointly by House Democratic leaders and the White House, includes approximately $550 billion in new spending and $275 billion in tax breaks and

emphasizes stimulating economic demand with fast-acting tax breaks for workers and businesses, creating jobs through direct government spending on infrastructure and other projects, and investing in energy and the environment to promote long-term growth.

President Obama proposes direct government spending on infrastructure has ordered the detention camp at Guantanamo Bay closed. Why not combine the two proposals?
Answering critics, primarily Repubs, who charge that housing alleged terrorists in the continental United States is hazardous, Representative John Murtha of Pennsylvania, chairman of the House Committee on Appropriations, remarked on January 23 "There are thousands of dangerous prisoners being held securely behind bars in supermax prisons across the United States."

Except that the Department of Corrections reports that the maximum-security prisons in Murtha's economically depressed district are full, and the New York Times reports there is no "supermax" (whatever that is) facility there. Still


"We're looking for some jobs down here and Congressman Murtha has been exceptional with helping us with that," said Brad Geyer, a councilman in Connellsville, Pa., when asked about Guantanamo prisoners. "My constituents ... would probably err on the side of enjoying the possibility of some new jobs."

State Sen. J. Barry Stout, whose district overlaps Murtha's, said a new maximum-security facility would certainly have to be built to accommodate the prisoners. And he said a new prison is a reliable, 'round-the-clock employer.

"It could be constructed and operated in a safe manner, and it would have an economic impact in the region," Stout said. "You never shut a prison down."


New jobs. A prison to house the 245 detainees now in Cuba. And an opportunity to build a facility according to the strict, and possibly different, security specifications necessary to incarcerate terrorists/suspected terrorists safely. It may not be a perfect use of funds, but it surely beats how most of the money donated to banks as part of the Troubled Asset Relief Program have been spent.

Attack On The Middle Class

Normally, discussion of a law enacted 2-3 years earlier would be of little interest to anyone, but this should be an exception, and, given that I started blogging only a few months ago, I couldn't have commented then.

On April 20, 2005 President Bush signed into law the euphemistically and absurdly named "The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," a harsh attack upon the middle class and main street America. Originally introduced eight years earlier, the act, pushed by lobbyists from the credit card and banking industries, established a means test for filing for bankruptcy protection. According to Project Vote Smart, this restriction "determines whether the individual would be allowed to file under Chapter 7, essentially exonerating their debts after they have liquidated their assets, or if they would be forced to file under Chapter 13, requiring them to pay back creditors on a court-approved timetable."

This law was, and is, a serious blow to the middle class. Testifying against the bill, Elizabeth Warren (who teaches bankruptcy law at Harvarad University) warned it would "increase the cost of bankruptcy protection for every family, regardless of income or the cause of financial crisis, and decrease the protection of bankruptcy for every family, regardless of income or the cause of the financial crisis." Supporters were unconcerned that: in the eight years since the bill was conceived, credit card profits had increased 163%, from $11.5 billion to $32 billion; effective interest rates often are hidden in the fine print of many contracts and sometimes range to 29%; and approximately half of personal bankruptcies are due to illness or medical bills (according to commondreams.org).

Why the interest in the legislation now? The bill first passed in the House, 302-126 with zero(0) Republicans having enough interest in the average American to vote against it. The bill then passed by 74-25 in the Senate, where zero (0) Republicans voted against it. (Can you detect a pattern?) I don't have to tell you how John McCain, Duncan Hunter, Sam Brownback, Ron Paul, and Tom Tancredo voted.

All votes opposing the bill came from the Democratic side of the aisle. Five Democrats currently running for President were serving in the U.S. Congress at the time. Representative Kucinich and Senators Obama and Dodd voted against this egregious bill. Senator Biden of Delaware, a state dominated by banking interests, voted for it. Senator Clinton was recorded as "not voting." A characteristic profile in courage.