I have beaten up on the Obama White House enough that I'm no longer very welcome by many of the top staffers there, and on no issue have I been tougher on them than on their policies regarding dealing with the biggest banks and the TARP program. This morning, though, I am all smiles, delighted to my core, because the reports, confirmed multiple times, about the appointment of Elizabeth Warren are a big home run.
I am more than a little biased, because Elizabeth has become a good friend over the past few years, and because I have rarely seen the kinds of guts and tough bargaining strategy that I watched her show during the financial reform fight and the TARP oversight work. She publicly and repeatedly faced down Tim Geithner on a series of major issues around TARP and the overall handling of the financial crisis. She privately went nose to nose with Barney Frank and Chris Dodd and Treasury during negotiations over the financial reform bill. She had to time and again back Dodd down when he was getting ready to make bad compromises on the consumer agency. (Why do you think Dodd has fought so hard to keep Warren from being nominated?) She is the real deal, a fighter for middle class and poor families through and through.
Now, some progressives are arguing this joint appointment to the White House and Treasury is somehow a weak attempt to fool us, that Warren is being given the job as window dressing but will have no real power. The people arguing that just don't know Elizabeth very well, or understand what motivates her. I do not believe for a minute that she would meekly accept a powerless window dressing job, or would put up with it very long if that is what it turned into. She has never been interested in being in government for the sake of a title, and she isn't going to start now. The impressive thing is that I think Obama understands that, too, and gave her the job anyway.
For Elizabeth, the options here were the choice of basically being put on ice for several months at least during an extended confirmation battle, a time where she couldn't speak out or do any actual work on the agency while Geithner was free to start building it any way he wanted; being at Treasury reporting solely to Geithner, who I believe would do everything he could to undermine and disempower her; or this intriguing combination of working with Treasury to craft the agency while also reporting directly to the President. I don't know exactly how this deal went down, but it looks to me like Elizabeth helped craft something that might actually work in her mission to help consumers in dealing with the big banks. She always has the option of walking away if it doesn't- and knowing her, she would have the guts to do just that.
I think this is one time when we can give Obama credit for doing the right thing. Wall Street was determined in its opposition, and establishment insiders like Dodd did everything they could to derail Elizabeth from having any role in creating this agency. But the progressive movement fought like crazy to make this happen, Elizabeth showed her usual savvy and toughness once again, and the President did the right thing.
And here's the deal: this really does matter. I am constantly frustrated by the brain dead politics and corporate oriented policies of many of the people in the Democratic party, but there remain two reasons I still work hard to get Democrats elected. The first is that the Republicans scare the hell out of me with their extremism, but the second is that at least some of the time, Democrats who really care about working people and the poor do get placed in positions of power. Cecilia Munoz being the one to negotiate with Governors over how poor people are treated under government programs in the states matters. Melody Barnes playing a role in the crafting of domestic programs in the federal budget matters. Hilda Solis being in charge of running OSHA matters in terms of workers safety. And Elizabeth Warren being given the job of building an agency to make sure consumers are treated fairly by the big banks who dominate our country's economy is a very big deal.
This is a great day for America's working families, and we should celebrate.
I don't know Chris Dodd well, but have always liked him quite a bit. I appreciated his advocacy on behalf of children, on civil rights and civil liberties, and on many other important issues. I thought he was a great DNC chair back in the '96 cycle. I knew that his closest friends on the Hill were Ted Kennedy and Rosa DeLauro, who have always been two of my favorite people. I thought he ran an honorable and strongly progressive campaign for President in 2008.
But lately, it seems like Chris Dodd has been taken over by a Wall Street pod person. He repeatedly tried to make major compromises to please the big banks in the financial reform bill, saying that the bill could not pass without these changes when in fact the bill got steadily stronger on the floor of the Senate, and the Republicans were always too scared to filibuster it. He has come out strongly against filibuster reform. And now he is mounting a major campaign to defeat Elizabeth Warren, both with public statements (for a while using the filibuster excuse, now just blatantly questioning her ability to do the job) and especially in private. Based on everything I am hearing from insiders at the White House and Capitol Hill, the two people who are most anxious to keep the President from nominating Warren are Geithner and Dodd.
What is going on with Dodd? I am told by extremely good sources that he remains extremely angry with Warren for daring to push back against the compromises gutting the consumer protection bureau, so that at least is one reason. More disturbingly, some are suggesting that he feels like he needs to carry water for the White House on this, so that they have a good excuse not to pick her, although I am more skeptical of that idea because I know there is a strong contingent at the White House that favor her nomination as well as some who oppose. Finally, the DC rumor mills have been ablaze for months that Dodd is looking at a lobbying career when he retires, and as former chair of the Senate Banking committee, he could be in line for some pretty sweet contracts with the big banks.
Whatever the reasons, this is a very disappointing way for someone with an honorable career like Dodd to go out on. I hope he steps back from the dark side.
While the big banks won a lot of key battles in the financial reform fight we just went through, they also lost some important rounds too. Now, however, they are already fighting back on the turf they have come to dominate and master, the inside game: who gets appointed and what regs are actually written. If they win most of those battles, most of the good that was done in this bill will be undone.
The most significant of these early battles is the growing fight over whether Elizabeth Warren becomes the first head of the consumer protection agency which was her brainchild in the first place. The progressive coalition that came together to help pass the bill is pushing hard for her, as are many members of Congress. But the big banks are in full pushback mode. They have made it clear to everyone that she is their least favorite candidate- which in my mind is the exact reason for her to get the job. And they are working the Senate in earnest to have Senators make clear she is unconfirmable. Chris Dodd did some dirty work for them yesterday by starting that line going in the media dialogue about her, and now a variety of other Senators are making that point.
However, as the Huffington Post indicated today, and as Dodd knows very well as one of the prime authors of the bill, Warren can be named the interim head of the agency for as long as it makes sense to get it up and running without Senate confirmation. And here's the other thing: it would be a great boon to the Democrats to have the Republicans filibuster the leading consumer advocate in the country. The Republicans know that, too- this is not a fight they want to have. Dodd and the Democrats know they could win a fight over appointing Warren, and they know as well that she doesn't even need confirmation for the crucial early months the agency is coming into being. All this talk about whether she could win confirmation is pure political posturing on behalf of the big banks.
So now it is down to whether Obama, Geithner, and Rahm want to really take on Wall Street, or just talk about it. Sources on the Hill tell me Geithner and Rahm are not exactly falling over themselves in excitement about Warren, but I hope they are getting how important this is for the economy and their own politics. This is important to the Democratic base (see my post here about how much they need to reach out there), important to swing voters angry at the banks, and important to actually fixing the banking system.
One of Obama's closest and oldest friends told me during the transition that at his core, Obama is a true reformer. I hope he was right. Picking Warren would be the best sign yet that it is true.
Last week, the U.S. Senate rejected a plan that would have broken up the nation's six largest banks firms into firms that could fail without wreaking havoc on the economy. Even though the defeat reinforces Wall Street's political dominance, there is still room for a handful of other useful reforms, like banning banks from gambling with taxpayer money and protecting consumers from banker abuses. After looting our houses, banks are now pushing for the ability to bet on movie box-office receipts, and will keep trying to financialize anything they can unless Congress acts.
Wall Street calls the shots
Writing for The Nation, John Nichols details last week's Capitol Hill damage. Today's financial oligarchy, in which a handful of bigwig bankers and their lobbyists are able to write regulations and evade rules they don't like, will still be in place after the Wall Street reform bill is passed. The lesson is clear, as Nichols notes:
Whatever the final form of federal financial services reform legislation, one thing is now certain: The biggest of the big banks will still be calling the shots.
Still worth fighting for
As I emphasize for AlterNet, Congress has made a terrible mistake here, but there is still room for reform. It took President Franklin Delano Roosevelt seven years to enact his New Deal banking laws. It took even longer to reshape public opinion of monopolies when President Theodore Roosevelt took on Corporate America in the early 1900s.
What's still worth fighting for? We have to curb the derivatives market-the multi-trillion-dollar casino that destroyed AIG. We have to impose a strong version of the Volcker Rule, which would ban banks from engaging in speculative trading for their own accounts. We have to change the way the Federal Reserve does business and force the government's most secretive bailout engine to operate in the open. And we have to establish a strong, independent Consumer Financial Protection Agency to ensure that the horrific subprime mortgage abuses are not repeated.
As Nomi Prins details for The American Prospect, the current reform bill will not effectively deal with the dangers posed by hedge funds and private equity firms-companies that partnered with banks to blow up the economy through investments in subprime mortgages. That means that whatever happens with the current bill, Congress must again take action next year to rein in other financial sector excesses.
The derivatives casino at the movies
As Nick Baumann demonstrates for Mother Jones, banks are doing everything they can to gobble up other productive elements of the economy. The economy crashed in 2008 in large part because banks had used the derivatives market to place trillions of dollars in speculative bets on the housing market. This wasn't lending, it was pure gambling: Instead of using poker chips, bankers placed their bets with derivatives. But, as Baumann emphasizes, banks are now looking to expand the sort of thing they can make derivatives gambles with. The latest proposal is to allow banks to bet on the box office success of movies. That's right, banks would be gambling on movies.
Hollywood may be shallow, but it isn't stupid. It doesn't want to see the banking industry repeat its destructive looting of the housing industry on the movie business, and is pushing hard to ban banks from betting on movies. But we can't count on every industry having a powerful lobby group to counter every assault from the banking system.
Taking stock in schools
Consider the unsettling report by Juan Gonzales of Democracy Now!. Gonzales details how big banks gamed the charter school system to score huge profits while simultaneously saddling taxpayers with massive debts that make teaching kids supremely difficult. By exploiting multiple federal tax credits, banks that invest in charter schools have been able to double their money in seven years-no small feat in the investing world-while schools have seen their rents skyrocket. One school in Albany, N.Y. saw its rent jump from $170,000 to $500,000 in a single year.
About that unemployment rate...
It's not like public schools are flush with cash right now. The $330,000 increase in rent could pay the salaries of more than a few teachers. As the recession sparked by big bank excess grinds on, even the good news is pretty hard to swallow. As David Moberg emphasizes for Working In These Times, the economy added 290,000 jobs in April, but the unemployment rate actually climbed from 9.7 percent to 9.9 percent in March. That's because the unemployment rate only counts workers who are actively seeking a job-if you want a job but haven't found one for so long that you give up, you're not technically "unemployed." All of those "new" workers are driving the official figures up.
In other words, it's still rough out there. And likely to stay rough as state governments try to deal with the lost tax revenue from plunging home values and mass layoffs. Nearly half of all unemployed people in the U.S. have been out of a job for six months or more. And while we'd be much worse off without Obama's economic stimulus package, that percentage is likely to grow this year, Moberg notes.
This is what unrestrained banking behemoths do. They book big profits and bonuses for themselves, regardless of the consequences for the rest of the economy. Congress absolutely must impose serious financial reform this year. After the November election, breaking up the banks must once again be on the agenda when Congress considers the future fate of hedge funds, private equity firms, Fannie Mae and Freddie Mac. If we don't rein in Wall Street, banks will continue to wreak havoc on our homes, our jobs and even our schools. Congress must act.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
A real financial reform package must include an independent Consumer Financial Protection Agency, restoration of the Glass-Steagall Act, and strict new limits on the derivatives market.
To protect citizens from rapacious banks, we need a Consumer Financial Protection Agency to stop abusive mortgages and credit card terms, and other predatory financial schemes.
The Glass-Steagall Act, which separated commercial and investment banking, was enacted after the financial crash of 1929, but it was repealed in 1999. It is crucial to preventing the reckless investing by commercial banks that caused some of the greatest financial disasters in U.S. history.
Rampant speculation in the unregulated derivatives market was a major factor in the collapse of the global financial system. We need tough new restrictions on the derivatives market, or speculators will continue to imperil our country's economic stability for short-term profit.
Through inaction and timid legislative negotiations, Congress just keeps letting the U.S. sink deeper and deeper into the economic abyss. Last week, Congress denied relief to the jobless and is currently poised to undercut a proposal that would rein in predatory lending. With unemployment out of control and banks pillaging citizens' pocketbooks at every turn, the economy is in dire need of serious financial reform and a major jobs package.
More than one million have lost unemployment benefits
As James Ridgeway emphasizes for Mother Jones, over a million people receiving unemployment benefits ran out of financial rope on March 1 thanks to Sen. Jim Bunning's (R-KY) self-righteousness. As a result of bizarre Senate procedural rules, Bunning's sole "no" vote was enough to stop a bill that would have extended unemployment benefits for those who are out of work. Of course, Bunning had plenty of moral support from his fellow Republicans. Ridgeway highlights a Think Progress post on Rep. Dean Heller's (R-NV) preposterous argument that it is time for the government to cut off unemployment benefits, since there are so many bums.
"What makes Heller's statement really stupid, of course, is that people could become hobos if Congress doesn't extend unemployment benefits, rather than if they do," Ridgeway writes. "Modest as they are, these weekly benefits are what's keeping thousands-and perhaps millions-of families out of poverty."
As Brian Beutler notes for Talking Points Memo, Bunning's economic insanity also triggered a 21% cut in the fees doctors receive for treating Medicare patients. That's a big "Screw you!" to seniors.
What happens when unemployment benefits dry up?
The degree of personal crisis attached to unemployment is also important. We're talking about access to basic necessities. As Roger Bybee notes for Working In These Times, when a family runs out of unemployment benefits, the result is an absolute personal catastrophe in which there is simply no money left to buy food, pay rent, or meet electricity bills.
Yet when a major financial institution finds itself on the verge of collapse, the government is quick to come to the rescue. In addition to the one million people ran out of benefits on March 1, four million more are slated to run out by June-that's roughly the combined populations of Los Angeles and Dallas. This is a tremendous national crisis. Here's Bybee:
"There is plenty of bipartisan compassion in Congress when it comes to bailing out the wealthy and their banks. But when it comes to spending federal money to bail out folks ... with unemployment compensation and a major jobs program, a bi-partisan consensus forms among conservatives in both parties eager to show 'fiscal discipline.'"
As Nobel laureate economist Joseph Stiglitz emphasizes in an interview at AlterNet, the jobs crisis is so severe that the government needs to go much further than simply extending existing unemployment benefits. At minimum, it also needs to send a major package of fiscal aid to states on the order of $200 billion to allow states to hire teachers and cops, as well as prevent further layoffs.
Making the jobs bill accessible to all
While a new jobs bill is critical, it's important to make sure everyone has access to its efforts, as Aaron Glantz explains for The Progressive. The economic stimulus bill that President Barack Obama signed into law last year has helped keep the economy from falling off a cliff, but it's overwhelmingly neglected communities of color. The unemployment rate for blacks is 16.5%, nearly the double the 8.7% rate for whites, while Latinos face an unemployment rate 50% higher than whites. Not all of that disparity can be blamed on the stimulus, but the federal contracts awarded for new jobs projects overwhelmingly went to white-owned firms. We have to make sure that the funds Congress dedicates to unemployment relief are distributed fairly.
Save the Consumer Financial Protection Agency
After watching the government hurl trillions of dollars at faltering banks, it's obvious that major financial reform is urgently needed. And one of the most important aspects of that reform is a new regulatory agency that defends consumers, not just bank balance sheets. As Tim Fernholz argues for The American Prospect:
"Shoring up our financial system to avoid new disasters remains popular with the public but only if it represents real reform. ...That means closing loopholes and making clear that this bill has what it takes to protect average citizens as well as restricting banks' bad behavior."
And yet astoundingly, Sen. Chris Dodd (D-CT), the current Democratic leader of financial reform negotiations in the Senate, appears ready to drop Obama's proposal to create an independent Consumer Financial Protection Agency (CFPA).
Instead, Dodd would house the regulator under the Treasury Department, and give the existing, failed bank regulators effective veto power over the CFPA's moves. It's a head-fake: We create a new regulator, but are instead giving that power to the same failed agencies who allowed the banks to pillage our pocketbooks, our retirement savings and our home values.
Failed negotiations with the GOP
This is supposedly all part of a set of negotiations with Republicans, but they aren't really negotiating in any clear sense. Negotiating means going through some process of give-and-take. Right now, Republicans are just seeing how far Democrats will bend, and so far, there has been no limit. Ferhnolz is right. Voting for the banks and against taxpayers and consumers will be a very bitter pill for Republicans to swallow. Dodd and the Democrats need to make them do it instead of caving to pressure and allowing Republicans to vote for a weak bill that doesn't protect the public from banker excess. Make the Republicans vote for real reform, or face the consequences at the polls for voting against it.
The public shame that is currently being heaped upon Bunning should prove that point. The American public wants jobs and financial reform. They want to go back to work and make sure that the bankers who tanked the economy can't keep getting rich by hijacking their savings. Woe unto the politician who opposes that.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
More than 5,000 people are packing the streets of downtown Chicago this morning, chanting, marching and rallying against Big Bankers and financial institutions that have taken taxpayer money and are using it to give big bonuses to CEOs and to lobby against financial reforms that would ensure they don't go back on the public dole.
The crowd is marching to the Sheraton Chicago Hotel & Towers, site of the American Bankers Association meeting, to protest the banking industry's greed and irresponsibility that crippled our economy, leaving millions of workers behind.
After the house of cards they built collapsed, bankers and the financial industry took $700 billion in taxpayer funds for a bailout. But rather than reform their failed practices, they want to go back to business as usual-with the chance of again precipitating another financial collapse and need for taxpayer bailout in coming years.
Bailout pay czar Ken Feinberg raised a ruckus last week when he announced plans to slash cash payouts to executives at seven companies that have received massive levels of taxpayer support. While better oversight of the bailout barons is helpful, the best way to change Wall Street pay practices is to adopt a set of tough, comprehensive regulations that cover everything from the executive suite to the loan department. As is, many of the executives Feinberg cracked down on will still make millions this year from stocks and other perks, while the very banks that depend the most on bailout money are spending like mad to lobby against reform.
Feinberg's new salary limits only apply to executives at Citigroup, Bank of America, AIG, GM, Chrysler, GMAC and Chrysler Financial. But while these new rules are an effort to reduce the incentive for executives to take big risks for short-term gains, the rules of the game for non-bailout barons haven't changed at all. Risky securities trading and unenforced consumer protection regulations still allow financiers to make a killing by gambling on mortgages and credit cards.
As Greg Kaufmann explains for The Nation, Feinberg has been barred from altering some of the most egregious bonus arrangements at even the biggest fund recipients, as the employment contracts were signed prior to the government's bailout. AIG plans to pay out $198 million in bonuses in March 2010, and none of Feinberg's recent rulings will change that. As Kaufmann also notes, back in March, AIG agreed to pay pack $45 million of the bonuses it shelled out early this year. After over seven months, just $19 million has been repaid.
The government's hands-off approach to AIG employment contracts is a rather flagrant display of deference to executives. Nothing stopped the government from renegotiating contracts for union laborers when it bailed out Chrysler and GM, as Dean Baker notes for The American Prospect.
Lest we forget, the government literally owns AIG, and would own both Citigroup and Bank of America had it demanded a market rate of return for its investment. Taxpayers injected several times the stock market values of both Citi and BofA into the troubled banks, but settled for a 36% stake in Citi and preferred stock in BofA. As Mike Madden emphasizes for Salon, Feinberg is still letting executives make several times the median household income in cash alone-nevermind stock-and it's unlikely that his move will spark changes among bankers outside the handful of companies ordered to make changes.
"Executives are still taking home paychecks that dwarf what the average American earns. And it's not clear whether any other companies will get on board with the Treasury plan unless they're forced to," Madden writes.
Congress hasn't taken any significant steps to curb Wall Street paydays since the crisis broke, but lawmakers did take two other important steps toward banking reform this week. Two different House committees passed bills to rein in the wild world of derivatives trading and establish a new Consumer Financial Protection Agency (CFPA). In a video piece for the Huffington Post Investigative Fund, Amanda Zamora and Lagan Sebert detail the legislative battle to create a CFPA, which has faced an enormous lobbying push from both banks and the top lobby group for the corporate executive class, the U.S. Chamber of Commerce.
Zamora and Sebert note that top bank lobbyist Ed Yingling is arguing that if regulators simply enforced the existing consumer protection laws, all of the major abuses in mortgage lending and credit cards would have been prevented. Even for a corporate lobbyist, Yingling's disingenuousness is absolutely breathtaking. He acknowledges that existing regulators are not enforcing consumer protection laws, says he wants the laws enforced, and then says it would be a bad idea to create a new agency to enforce those laws.
The CFPA won't have any mysterious new powers. It will have the same authorities on credit cards and mortgages that existing federal regulators have. But the current regulators are focused primarily on bank profits, which often run directly contrary to fair play with consumers. Yingling and Wall Street are really afraid of a serious regulator who will stand up for consumers. They're terrified that the CFPA will actually enforce consumer protection rules against powerful banks-but are talking as if all they want is effective enforcement. It's a lie, pure and simple.
On Monday and Tuesday, thousands took to the streets in Chicago to protest a meeting of Yingling's lobby group, the American Bankers Association (ABA). Esther Kaplan details the protests in a piece for The Nation, complete with video footage. The ABA retaliated against Kaplan's reporting by revoking her press credentials, but it appears to have been worth it, as her piece describes everything from citizen outrage to police intimidation and awkward banker solidarity. As Democracy Now! explains, the ABA has spent decades lobbying against rules to strengthen the economy and prevent banker abuses, and is now at the heart of an effort to use taxpayer bailout money to lobby Congress against financial reforms.
So far, their efforts seem to be paying off. Last week, one of the CFPA's chief advocates, Rep. Brad Miller (D-NC), co-authored an amendment significantly restricting the agency's enforcement powers. As Sebert and Zamora note, Miller agreed to exempt banks with $10 billion or less in assets from regulatory examinations by the CFPA-roughly 98% of all banks. The existing, corrupted regulators who didn't lift a finger to prevent the subprime mortgage crisis will be the people actually going to the banks and reviewing their books. While the CFPA could send along one of its own regulators to participate in the exam, the new agency can't tax the bank to pay for it, which would make it very difficult for the CFPA to keep an eye on smaller banks.
Even worse, there is nothing to prevent a giant bank like Bank of America from moving all of its most egregiously predatory activities into a series of small corporate subsidiaries. By exploiting this loophole, 100% of U.S. banks could be exempt from CFPA enforcement, including the giant banks most heavily involved in subprime mortgage abuses.
The other big piece of Obama-backed financial legislation to make its way through Committee last week had to do with derivatives, also known as the wild Wall Street securities that brought down AIG. The best way to fix the derivatives mess is to require that derivatives be traded on an exchange the same way stocks are, so that companies can't make crazy bets without regulatory and market scrutiny. But Obama only wants "standardized" derivatives to be processed through a central clearinghouse-like an exchange, except without any public pricing information. And so long as a derivative contract can be deemed "customized," it would be totally exempt from even this limited reform.
But as Art Levine notes for AlterNet, the derivatives bill actually got worse in committee. Plenty of non-financial businesses use derivatives to legitimately hedge real risks: Airlines try to insure themselves against swings in oil prices, for instance. Lawmakers agreed to exempt any contract with these companies, termed "end-users" in the financial jargon, from central clearing requirements. The trouble is, big Wall Street hedge funds and private equity firms can be classified as "end-users," opening a fatal loophole in the legislation. The five banks who control 95% of the derivatives market will just conduct all of their most reckless trades with hedge funds and avoid oversight entirely.
A modest reform on paychecks for bailout recipients is nowhere near sufficient to protect our economy from banker excess. If Wall Street is going to serve any productive economic function, it has to be subject to serious consumer protection rules, and its derivatives casino has to be dismantled.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Last month, the U.S. unemployment rate surged to 9.8% as 260,000 people lost their jobs. Although the stock market and corporate profits appear to be recovering from last year's financial catastrophe, work is harder to find. President Barack Obama and Congress need to act now to get people working again and help soften epic unemployment in years to come.
Arianna Huffington's spot-on post yesterday about our country's broken financial system led with the sentence "The window for reform is closing." Which is word for word what Elizabeth Warren said to me in a conversation we had a few days ago. For all of the incredible power Goldman Sachs and JP Morgan Chase have, their Achilles heel is momentarily exposed because of the incredibly anger the American public justifiably has at them right now, and there is a window for at least some progress on this.
There is, ironically, another reason for urgency as well: as Arianna and I and others have noted in multiple articles in recent weeks, the big Wall St. traders are back to their old tricks, business as usual pure and simple. And those tricks are exactly what brought down our financial system over the last couple of years. With our economy in such fragile shape, their recklessness endangers us greatly. I've heard people say that if we don't fix the problem, we could be in danger of another financial meltdown 10 or 20 years from now, but that way understates the problem. With our economy as weak as it is, we could see another financial crisis next year, not 10 or 20 years from now.
The remarkable thing about all this is that the reforms the White House has proposed are so modest. The Consumer Financial Protection Agency is a commonsense, reasonable proposal that even the Republicans I know from the financial industry think makes perfect sense. For an old lefty populist like myself, I don't think it goes nearly far enough. But even this moderate policy is running into a violent assault by Goldman Sachs, JP Morgan Chase, and the American Bankers Association. If something this reasonable is opposed by these guys, it's a sign of how far out on the ledge these companies have gone in pursuit of making billions by unregulated gambling and chicanery.
The window is closing on financial reform, and the window is closing on health care reform. These are easily the biggest political tests of Obama's Presidency, those that will determine whether his Presidency is going to be a success. A President can come back politically from early failures on big issues, as Bill Clinton did, but if they lose the big early battles, they generally don't try to do anything big or ambitious again.
I wrote in my book The Progressive Revolution about how the pattern of American history is that every so often, the window to create big change comes open for a while, that the combination of crisis, leadership, and political movement make it possible to really make big positive changes in our country. That window is open right now, and President Obama, to his credit, is trying to keep it open by doing some big and important things. But if he gives up the fight and caves in to special interest lobbyists, or if Democrats in Congress don't back his play, or if the reform movements on these big issues can't deliver grassroots strength, then the window will slam shut. That would be an immense tragedy, because this country desperately needs some big changes, and because the Republican opposition to Obama is going down such a dark path.
This country has been very lucky for much of its history. But if we can't fight through the special interest muck and deliver big change soon, I fear that our luck could run out. The economic and political storm are gathering in the sky, and we can't afford to do nothing to change the dynamics.
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