One of the most delightful news articles I have seen in months, years- okay, maybe ever- was in The Washington Post today. This was the headline:
Lobbyists Fear Overhaul Driven by Anti-Bank Fear
Some of the quotes inside the article were truly choice:
"You've got an environment, six months before an election, where politicians are acting like politicians," said Sam Geduldig, a financial lobbyist and former Republican staffer. "They are viewing any vote as a potential campaign ad. And that might not be good for any of us."
And here's another great one, from "one of the many lobbyists who spoke on the condition of anonymity":
"Every amendment you hear about is emotionally driven. . . . The Senate has turned from a deliberative body into an emotional reactor."
Now what emotions would this lobbyist be referring to? Anger at these bankers' destroying the economy for their own greed? Disgust at their arrogance? Fear that their concentration of market power is distorting our economy? A belief in the basic human decency? Oh wait, sorry, that last one is more a value than an emotion. But yes, there is some emotionalism here. Thank God. Because while being a cold heartless lizard-like creature is an advantage for a Wall Street banker, for the rest of us, we do feel a sense of emotion at the destruction you guys have wrought.
The lobbyists want all of the deals done behind closed doors. Speaking of emotion, they fear and hate open democracy because they know politicians who have to face voters and explain their voters in the light of day are going to have trouble explaining how they were defending these bankers. That's why conservatives from the founding of our country to today have federal democracy: it gets in the way of backroom deals between elites. Alexander Hamilton called democracy "a great beast" because when that beast gets mad at the insiders cutting their quiet deals, things can happen to upset the status quo.
But fear not for our lobbyist friends: at the end of the WaPo story, another unnamed lobbyist chuckled and said, "I think it's going to be job employment for me for the next decade, doing some of this stuff."
With the health care fight finally resolved (you notice I didn't use the word "over"- the passage of this bill is only the first step in a long-term battle for a better health care system in America, so nothing is really over), everyone is turning their attention to the economy. As well they should.
In spite of certain establishment economists and pundits (and unfortunately a few administration officials who are politically tone deaf), saying that the recession is over and everything is back on track economically, the simple fact is that while we are no longer dangling over the precipice of another Great Depression, the economy is still broken in major ways. The official unemployment rate still hovers around 10%, and when you add in those who have given up looking for work, those who are underemployed and marginally employed but want fulltime work, the number of people needing full-time jobs is closer to 20%. Wages are still not going up, as even many of those who have jobs have had to take lower wage jobs to get by. Foreclosures are still happening at dangerously high rates, home values are not coming back anywhere near fast enough (or at all in some neighborhoods), and way too many homeowners are still dangerously close to being underwater. Business and personal bankruptcies are still way too high.
Now I know that the economy is officially "growing" again. The GDP is up, the Dow Jones is up, corporate profits are up. If you are an establishment economist, a trust fund baby, or a Wall Street financier, the economy feels like it's just humming along. For the vast majority of Americans, the noise they are hearing is less that of a hum and more of a car wreck. That's why voters react so poorly to Democratic politicians when they say things about how the economy is looking up.
The twin pillars to building a healthy economy are producing good jobs in big numbers, and fixing the badly broken financial system. These are not separate spheres, by the way- the two things are joined at the hip. Washington legislative policy wonks tend to divide everything into different bills they are working on, and DC coalitions follow that approach as well. But if we don't start creating decent-paying jobs, the foreclosure problems will keep getting bigger and housing prices won't recover. If we don't fix the financial sector, an economy where the finance sector is focused on gambling and bubbles rather than in actual investments that will create jobs will continue dragging us down, and endangering us in the future. With so much of America's wealth concentrated in six mega-banks, and those banks investing in little that's creating jobs, we are not going to create real private sector job growth.
Let me point you to three fascinating things worth reading that have come out over the last few days, because I think they all point to central economic issues as we go forward. The first is an important, news-breaking piece in Politico that Elizabeth Warren came out with yesterday morning. Citing a memo from the American Bankers Association from a 2006 fight against more oversight that makes the exact opposite arguments they are making now, Warren makes the absolutely central point that special interests like the American Bankers Association are hypocrites to the core. The special interests that are making out like bandits at the expense of the rest of us don't have any consistent philosophy except me first and only, and members of Congress and the administration should thus given their arguments the respect they deserve: which is to say virtually none.
The second is Sen. Ted Kaufman's brilliant speech on Chris Dodd's weak and disappointing financial reform bill. Sen. Kaufman's essential point is that Dodd is just moving the regulatory fixes around rather than doing what really needs to be done: break up the big banks. If these financial behemoths are not cut down in size, and walls are not built between the gambling financiers and the boring old bankers who loan money to invest in small businesses, the financial system will remain in danger and jobs will be far less likely to be created. Kaufman makes the argument that if you don't make real structural changes in the size, powers, and roles of the mega-banks, that you haven't changed anything important re how the banking system works. He is 100% on target. If having regulators was all that was needed to clean up the banking system, we never would have landed in the mess we did in the financial collapse. You have to change the power relationships as well- banks need to be smaller, and the trading side of the banking industry should not infect the more traditional loan and investment side of the banking industry.
Finally, I want to point you to a really thoughtful new commentary in Huffington Post by Leo Hindery. His frame on the political dynamic right now is intriguing: that Republicans are in fact the disloyal opposition, so violently opposed to Obama that they have gotten into bed with the fomenters of open and potentially violent revolution; in their place as the loyal opposition are those of us progressive populists who want Obama to take on the banks and far more aggressively create more jobs. Leo's point is that there is a growing group of people who are loyal to Obama in the sense that we very much want him to succeed, we want to help him, and certainly support him in opposition to a tea party/Glenn Beck-aligned Republican Party; but that we are in a sense in opposition as well, believing we need dramatically more progressive economic policies.
We live in a remarkable moment. We just passed a universal health care bill, something the progressive movement has been fighting for about a century or so. But we are still faced with a broken economy- a badly warped and dangerous financial sector, and a massive lack of good jobs- and we need for bolder thinking that we are getting on how to fix it. Whether or not you call us the loyal opposition, it is time for progressives to demand more- on creating jobs and fixing the banking system- in terms of fixing the economy.
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.
Why do you continue to support the banking institutions that have decimated our economy?
Pull your money out of Citi, BOA, Wells Fargo, JPMorgan Chase, etc, and put it into your local credit union. Especially move your credit card accounts.
There's a couple of reasons:
1) Increased financial stability.
2) Lower credit cards rates.
3) Didn't take our bailout money.
4) Aren't raping us with jacked up credit card rates.
Here is a quick reminder of what has happened in this country:
Corporations, banks, pundits and advertisers spent decades convincing everyone to invest their retirement saving in the stock market and that buying a house would make you rich.
The financial services industry took this money, and investing it in bad housing loans that they knew were bad.
This same industry is still incredibly rich, and has enough sway over both parties that it is still writing legislation for Congress.
I think I got all that right, but feel free to fill in details in the comments. Also, if you don't believe me on that last point, check out the financial services industry lobbyists succeeding in their efforts to delay, water down, and even entirely block housing related bankruptcy reform in the Senate (more in the extended entry):
(A helpful little model and stimulus for discussion. - promoted by Paul Rosenberg)
Analogies are never perfect, but here's one using horse racing. Don't expect a perfect correspondence to the banking situation, but I think it is close enough for government work.
Everybody aboard the McCain-Palin Express to the land of cognitive dissonance. As our government scrambles to keep the country's largest insurance company, AIG, from collapsing, John "I'm always for less regulation" McCain is calling for more government regulation.
Or, hasn't John McCain been out on the campaign trail arguing that tax cuts and less regulation are the keys to fixing our economy?
Or, isn't one of McCain's top economic advisers Phil Gramm - the guy who call Americans, "a nation of whiners," and authored the Gramm-Leach-Bliley Act to strip regulations that could have helped prevent this mess?
I read very closely about what's happening with the credit card industry, and I know when they're trying to put one past a reporter. Especially a small-town reporter that they probably don't expect to do all the research on a story that a member of the SCLM would. So imagine my (mock) suprise to find a MasterCard spokesperson trying to sneak one past a reporter for the Valley News of White River Junction, Vermont.
What do they know in Vermont anyway? Enough to make MasterCard look not just deceptive, but inept at doing it. Details after the jump.
(This piece is by Drum Major Institute Senior Fellow Mark Winston Griffith)
It's hard to imagine that there could be a serious presidential candidate who would declare a "no-action" position on the subprime loan and foreclosure crisis. John McCain, however, holds that dubious distinction.
Not a day goes by that we don't hear another grim announcement about the downward spiral of the economy, or how homeowners with subprime loans are losing their homes in record numbers. Estimates of likely foreclosures over the next few years related to subprime mortgages have ranged between two and three million. In some parts of the country, foreclosures are outpacing home sales. Recession looms and the National Association for Business Economics recently declared the subprime foreclosure crisis as the greatest threat to the American economy.
The scariest part is that hundreds of thousands of subprime loans are scheduled to re-set in the latter part of this year and into 2009, which means that the economic policies of the next president will have a profound impact on the lives of ordinary working- and middle- class Americans.
How has John McCain responded to this call to leadership? By essentially saying that nothing should be done. In his remarks at a conference in Santa Ana, California on Tuesday, McCain rejected any broad policy response and actually staked out a far weaker role for the federal government in addressing the foreclosure crisis than even the Bush Administration has offered. Although he was quick to blame homeowners and "rampant speculation", there was scant recognition by McCain of exhaustively documented predatory lending practices or the scandalous oversight failures of federal regulators, legislators and a president who arguably encouraged abusive lending practices through his ownership society".
To the extent that McCain offered any specific "solutions" at all, it was to encourage mortgage lenders to reach out to distressed borrowers - something that banks working with Secretary Paulson under the Hope Now alliance are supposedly doing already. His other bright idea was "to convene a meeting of the nation's accounting professionals to discuss the current mark to market accounting systems."
Great. Just what homeowners and the economy need: The formation of a committee of accountants.
McCain has buried his head in the sand all along about the role of the federal government in the foreclosure crisis. In December 2007 he told the editorial board of New Hampshire's Keene Sentinel that he is "not smart enough" to offer a "specific solution". While this might qualify in McCain's book as "straight talk", it's also shockingly weak-kneed and irresponsible.
In comparison, Clinton and Obama have presented specific proposals that have been subjected to intense scrutiny. Clinton has called for billions in government assistance, a foreclosure moratorium, and rate freezes. Obama has proposed a universal mortgage credit, the establishment of a mortgage refinance fund, and greater loan disclosure. While critics on the left and right may take issue with these approaches, Clinton and Obama have at least acknowledged the severe financial distress confronting homeowners and would offer Americans specific plans to address it.
But a different legacy is in store for McCain if he is elected president. As a member of the Keating Five, that notorious group of Senators accused of currying favor for Charles Keating, chairman of the failed Lincoln Savings and Loan Association, McCain became a face of the Savings and Loan crisis of the eighties and nineties. With breathtaking irony, McCain is poised to associate himself with another banking meltdown by sitting idly by, in Herbert Hoover-esque fashion, as working class Americans and communities are devastated by the effects of homeowner displacement, property devaluation, family asset depletion, and the loss of real estate tax revenue.
One possible explanation for McCain's hands off approach is that some of the biggest names in the subprime mortgage industry, Citibank, Goldman Sachs, Merrill Lynch and Lehman Brothers, for example, have been among McCain's largest campaign contributors.
But these Wall Street giants have figured just as prominently in Clinton and Obama's campaigns. And unlike during the S&L debacle, McCain, now the presumptive Republican presidential nominee, has gained the moral authority and opportunity to actually intervene.
So the issue isn't whether John McCain is "smart" enough to propose government actions and market reforms that could relieve some of the nation's financial pain while attempting to make predatory mortgage lending a thing of the past. The question is; does he care enough to bother.
The past week has been highly important in the ongoing battle between consumers and merchants vs. the credit card industry. The focus has tightened on the duopoly of Visa and MasterCard in recent years, and after many hearings and much work, a solution might be on the horizon. However, the banks have considerable lobbying assets at their disposal, which means victory is not assured. I realize it's a bit of a long-shot, but I would love to see either Hillary Clinton or Barack Obama pick this up as an issue. If John Edwards was still in this race, I'm sure he would. This is another opportunity for them to appeal to his supporters.
Two bills have been introduced in the House that could make all the difference, both for everyday cardholders and for merchant account holders. Both are hit with ostentatious fees on a daily basis, and the former can incur harsh penalties without even knowing about it. The first is called the Credit Cardholders' Bill of Rights (H.R. 5244), and the second is the Credit Card Fair Fee Act (H.R. 5546). The first is supported by Rep. Carolyn Maloney, the second by Rep. John Conyers.
I myself am the fairly recent owner of a credit card. Iv'e gone through most of my life and late into my twenties without ever needing one. I finally succumbed after many admonitions from older friends who warned, "One day you'll want to buy a house, and you'll want to have credit." So I relented. I now have a new card in my wallet. It's much shinier than my debit card. I wonder if that's on purpose.
And of course, his card has rewards, but I am loath to rack up points on it. Why? For one thing, I don't trust where the money comes from. It comes out of something called the interchange fee, which is like an ATM fee for merchants, if your ATM fees kept going up and up and up each year. Another reason is the absurdity of spending thousands to reap a small reward. Spending money on absurd little gifts is just, well, absurd. And the other problem is that you can get into massive debt chasing after these "rewards" -- it's a dangerous game to play.
What's the most absurd reward you've ever heard? Have you had a bad experience trying to collect?
The great thing about giving to charity is that you give what you can, even if it's a small amount. I didn't always think of it this way. I used to think that my donations wouldn't matter unless I could give large amounts of money. And in fact, I didn't give anything until Hurricane Katrina. Before that I was in school, and what little money I had was earmarked for Ramen. Could I have given a dollar or two for various causes? Yes, but I figured it wouldn't be worth it. And so I waited until I was done with school, and ensconced in a job with a livable wage, until I started giving back. And even now, I'm only making enough that it's 25 here or 50 there.
But I am not upset with Red Cross. And you might recognize that sign as one similar to the ones you see next to the cash register at coffee and sandwich shops and independent convenience stores. They're all facing the same problem...
(I originally posted this at Daily Kos earlier in the week, and got a decent response. I'm interested to see if it generates any thoughts here. Thanks!)
John Edwards is pretty good when it comes to the credit card industry. To be sure, he has made an issue out of it, while I can't find much anything about the issue on either Hillary Clinton's or Barack Obama's websites. I'll give credit where it's due: He's willing to take on issues that matter to real Americans.
But then the flip-side of that is that I'm addressing this diary to him, and not to the others. They should listen too. But I think Edwards is the only one who might, and maybe is the one who can make the best political use as well.
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