It is always fascinating when businesses admit they have been lying to or scamming customers when they are trying to invent a new argument to influence a regulatory or court decision. The swipe fee issue is opening up some of these kinds of admissions, and it is pretty entertaining.
Take the Bank of America's spokesperson Anne Pace' recent statement that "Customers have never had free checking accounts. They always paid it for in other ways, sometimes with penalty fees." Good to know, Anne. For about thirty years, I have been hearing banks advertise free checking accounts, spending ungodly amounts of money to tell Americans over and over and over again (because advertising only works with repetition, after all) that customers should come to X bank because of their free checking accounts. Thanks for admitting that the entire industry has been lying their butts off for all that time.
Of course, it's not just free checking accounts. The big banks on Wall Street seem to mislead about a great many things. Their fine print credit card forms were so abusive to consumers in so many ways that even Congress, as dominated as it is by banking lobbyists, came around to passing a bill stopping some of the worst abuses. Banks lied about what was going in the housing market, and it led to an economic collapse. They hid overcharge fees on checking accounts from customers, and gouged them with penalties. They illegally phonied up so many false documents on foreclosure proceedings that we may have a full scale legal and economic crisis on our hands. And now they are lying about financial reform causing new fees for customers, when they are quite clearly just trying to shift costs to customers to make up for their other bad business decisions.
Here's another quote that I love. TCF Financial recently filed a lawsuit against the Federal Reserve to stop the new swipe fee regulations from going forward. TCF CEO William Cooper was pretty blatant in his analysis of the lawsuit, saying to a group of investors that they needed to overturn the new law/regulation because "Most of that revenue drops directly to our bottom line." Which is funny, because that is precisely the argument I have been making: the biggest banks and their credit card companies (which control over 80% of the market) pocket about 40 billion dollars a year of pure profits on swipe fees. As with most other aspects of banking in our too big to fail banking system, they have such enormous market power that they are in a take it or leave it non-negotiable environment with the small businesses all over the country that use debit and credit cards. All us folks on the other side (an oddfellows coalition of retailers and consumer advocates like myself) are asking is for some basic regulation of the industry so that they can't set the terms on the swipe fees.
I am heartened that bankers like Pace and Cooper are coming clean, and making such open admissions about their past lies and profit margins. Keep it coming, friends. It sure does help folks like me make our case.
The recent troubles faced by Greece bring to mind a fascinating way in which this financial crisis has been different from so many others. Namely, it has been the wealthy, Western countries that have been hit hardest and who have been made to look bad.
It was troubles in the United States, the world's preeminent economic power, which first initiated the recession. Its sophisticated, modernized financial system self-destructed in a manner previously thought only possible in places like Indonesia or Argentina. For the first time since the Great Depression, First-World banks were in danger of falling; Great Britain even had an old-fashioned bank run.
And it was rich Westernized Iceland that was the first to collapse. Not some Latin American Argentina or Asian Indonesia - but Iceland. Today the country is still in financial chaos - an Icesave bill to restore stability has proven deeply unpopular, much like the bail-out bill for the banks. The bill is being put into a national referendum, where it will almost certainly lose.
More than two years after the collapse of Bear Stearns, the House and Senate finally ironed out their differences on Wall Street reform in the wee, small hours of Friday morning. The bill now goes back to both the House and Senate for final approval, but it's fate in the Senate is uncertain following the defection of Tea Party Sen. Scott Brown (R-MA).
On Monday, I watched Enron: The Smartest Guys in the Room on CNBC--not a network I normally watch. But I'd only seen it once before, and it seemed like a good idea to see it again. Boy, was it.
The amounts of money ripped off, the number of lives ruined, it all seemed so terrible at the time. The response seemed terribly inadequate as well. But seeing it again almost two years after financial collapse, it seemed at once almost Normal Rockwell quaint, because of the relatively piddling amounts of money involved (billions, not trillions), and almost HP Lovecraft horrific, because of the sense of Cthulu-like deep evil still slumbering while we foolish mortals go cheerily about our doomed lives.
There it all was again, the birth of Enron in 1985, a year after Reagan's Day-Glo "Morning in America" re-election campaign. His plan for "revolutionizing" the energy business on "free market" principles by creating a mammoth monopoly. The incredible hubris that lead to all sorts of grandiose plans-some of which put Enron deeply into debt. The phony accounting premise of "mark-to-market" that allowed hypothetical future profits to be treated like actual present-day income. The massive deception of the business press that created the aura of an invincible company. The collusion of accountants and bankers as well. The bedazzlement of the California legislature that lead to a deregulatory scheme that no one understood, but that Enron alone dedicated itself to figuring out, the better to exploit. The various schemes Enron came up with--Ricochet, Death Star, Get Shorty, and the like. The rolling blackouts that came out of nowhere, beginning in the middle of winter, when California's energy demands were around half of its summer peak. The psychopathic banter of the energy traders as they wrecked havoc on the nation's wealthiest state. The heaping of blame on Democratic Governor Gray Davis. And the sudden decline of Enron's fortunes when the Democrats gained control over the Senate, and the Federal Energy Regulatory Commission finally instituted regional price caps, signaling the beginning of the Enron's end. The blame-shifting, finger-pointing and self-serving breast-beating. The lies. The lies. The lies. The lies. And one former trader reflecting on his own uneasiness that he never acted on, who remarked on his failure to live up to Enron's ironic motto, "Ask Why".
Weekly Audit: Want Economic Justice? Then It's Time To Act.
by Zach Carter, Media Consortium blogger
On Thursday, the U.S. Senate passed a financial reform package that includes a handful of important reforms, but it won't fundamentally change the relationship between banks and society. Wall Street still has a vice grip on our economy, and lawmakers still find it very difficult to stand up to bigwig financiers.
The real fight for our economy will involve future legislative battles with bankers. Winning those battles will require sweeping action by engaged citizens. The good news is, critical progressive mobilization is already happening. Public outcry helped fuel the fire for Senate reform. Rep. Barney Frank (D-MA), has said that the Wall Street reform bill he pushed through the House last year would have been much stronger in today's atmosphere of outspoken economic unrest.
Focus on the Fed
So what's good about the bill the Senate just passed? As Annie Lowrey explains for The Washington Independent, the Federal Reserve's emergency lending programs will finally be subjected to public scrutiny.
The Fed served as the U.S. government's chief bailout engine during the crisis. It injected trillions of dollars into the banking system without any oversight. We still don't know who got the vast majority of that money, or what collateral the Fed accepted in return. There are all sorts of potential scandals, ranging from sweetheart deals the Fed cut with hedge funds to the trillions of dollars in loans to megabanks with no strings attached.
Of particular interest are the "Maiden Lane vehicles"-programs the Fed devised to purchase or guarantee assets from Bear Stearns and AIG. These were explicit bailouts for individual firms. We know almost nothing about the Bear Stearns bailout, and what little we do know about the AIG bailout is unsavory to say the least- big bonuses for AIG's employees, with little or no effort to limit the impact on taxpayers.
Reconciliation
There are still a handful of important fights as the House and Senate iron out the differences between their respective versions of the bill. As I emphasize for AlterNet, a host of major issues are still on the table, including consumer protection rules and fixing the derivatives casino. These changes could be gutted entirely or dramatically strengthened during negotiations between the House and Senate.
The final bill will not dramatically alter Wall Street. As Roger Bybee explains for In These Times, the Democratic leadership has been trying to both establish meaningful reforms and simultaneously maintain its campaign finance relationship with megabanks. Republicans have almost universally attempted to block any reform altogether.
Regulators will get a handful of important new tools, including the authority to shut down complex banks on the verge of collapse, the ability to monitor derivatives and a have new set of powers to protect consumers. That's all good, but we'll still be living with too-big-to-fail behemoth banks that engage in reckless trading and exploit consumers.
Engaging activists
That means that the real business of fixing the financial system is still to come. And, as Christopher Hayes emphasizes for The Nation, that business is not going to be accomplished without serious, organized progressive activists putting pressure on political leaders to act in the public interest, rather than the interests of the corporate class.
When the country suffered a trauma that massively discredited the establishment rulers, the Democratic Party became the establishment. And progressive groups in DC, under stern White House orders not to cause trouble (don't show up at his door! he's a donor! we might nominate him for something!), descended into what one organizer calls "grotesque transactionalism" . . . . If we're going to get reform on the scale we need, bank lobbyists and members of Congress alike have to be confronted with the terrifying thought that the system from which they profit might just be run over-that 700 angry protesters might show up on their lawn.
As Hayes details, Bank of America lobbyist Gregory Baer woke up last Sunday with exactly that-- 700 protesters in his front yard. That kind of pressure gets results. It took Franklin Delano Roosevelt seven years to enact his New Deal financial reforms. Earlier in the 20th Century, it took more than a decade for public opinion to align itself with the corporate crackdowns pushed by Republican President Theodore Roosevelt. It's reasonable to expect the fight for fair finance to take more than two years, and important to fight hard for it.
The minimum reforms are already clear. Essentially, we need to bring banking back to the model that persisted from the 1930s into the 1980s-an era with no serious financial crises or bailouts. Our current financial woes stem from the systematic dismantling and deregulation of this system over the past 30 years.
State-run banks?
But we also need to learn from more recent economic experiments. As Ellen Brown notes for Yes! Magazine, the state of North Dakota has been largely insulated from much of the fallout from the financial crisis of 2008. Part of the reason for the state's relative stability lies in the fact that it operates its own bank.
North Dakota's direct supervision of one institution among the hundreds of banks that operate in the state has helped insulate it from the credit storm on Wall Street. The state has its own engine of credit, and can keep funds flowing to businesses that need it, even in the middle of a crisis.
The prospect of state-run banking may seem radical, but it isn't. It's a practical proposal based on the established, real-life success of the Bank of North Dakota. As Brown notes, five other states have legislation pending that would create their very own banks-Massachusetts, Virginia, Washington, Illinois and Michigan, while Hawaii recently approved a study to determine the usefulness of a bank run by that state.
The financial reform bill the Senate just passed was a good start, but we've got a long way to go. We're not going to get there without a committed community of progressive activists who demand that the economy serve society, not only entrenched corporate interests.
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 night, Senate Republicans proved beyond any doubt that when it comes to the economy, they stand with Wall Street and against everybody else. Joined by lone Democrat Sen. Ben Nelson (D-NE), Republicans successfully filibustered the procedural technicality of opening debate on Wall Street reform. It's an unmistakable ploy to kill the bill and collect campaign cash from bigwig bankers. The coming weeks won't be pretty.
Republicans are going to be battered by this filibuster. Financial reform is popular, and nobody on Capitol Hill wants to be seen as the agents of Wall Street in Washington come November. Republicans are hoping to rhetorically counter Obama's proposals, negotiate a fatally weakened reform package, and then vote with Democrats for reform-in-name-only before the elections. But the U.S. financial system is broken and voters know it needs strong medicine.
In a speech last week before Cooper Union Hall in New York City, Obama laid out what's at stake in the reform fight. Our biggest banks don't fear failure because they know the government will bail them out in a crisis. As a result, they take massive risks that endanger the economy. Our current regulators ignored predatory lending in order to protect Wall Street profits. To top it off, the risky, multi-trillion-dollar market for derivatives-the financial weapons of mass destruction that brought down AIG-remains beyond the scope of regulatory authority altogether.
Without major changes, the U.S. economy is doomed to repeat the destruction of the past two years. Epic bailouts, consumer predation and heavy job losses will become the new national norm, not just the conditions of a single, terrible crisis. Last night's Republican-plus-Nelson filibuster was an effort to preserve an unacceptable status quo.
Phony populism
As Matthew Rothschild emphasizes in a podcast for The Progressive, Wall Street Republicans have been spreading all kinds of crazy lies about Obama's reform legislation. While the legislation that cleared the Senate Banking Committee in March isn't perfect, it isn't a massive bailout for Wall Street, either. But Senate Minority Leader Mitch McConnell (R-KY) has been making the rounds calling it just that, in a dishonest effort to kill the bill. This is phony populism. McConnell says he's against bailouts, but his goal is to prevent reform from overturning the current system, which, as we saw in 2008, has bailouts baked in.
While Obama did a good job identifying what's wrong on Wall Street, the solutions he proposed are either too weak to end abuses, or simply not included in the Wall Street reform bill in its current form. Obama's initial proposal for a new Consumer Financial Protection Agency was great, but Sen. Chris Dodd (D-CT) watered down in the Senate Banking Committee to appease Republicans. The same thing happened to Obama's proposal to fix the wild market for derivatives, the financial weapons of mass destruction that brought down AIG.
How to make reform a reality
As Sarah Ludwig of the Neighborhood Economic Development Advocacy Program (NEDAP) emphasizes in an interview with GRITtv's Laura Flanders, most of the reforms currently under consideration are a "good first step." That is to say they are useful and productive-but not enough to fundamentally change the way Wall Street does business.
Fortunately, there are several amendments that can fix these shortcomings, most notably the SAFE Banking Act, introduced by Sens. Sherrod Brown (D-OH) and Ted Kaufman (D-DE). As Peter Rothberg emphasizes for The Nation, the amendment would force our largest banks to split up into institutions that could fail without jeopardizing the broader economy. It would also place a hard cap on the total amount that banks could bet in the financial markets.
Those amendments, of course, can only be added to the bill if Republicans allow debate on financial reform to begin. Progressives should be fighting hard to make sure that the break-up-the-banks measure is included in the bill that the Senate eventually votes on. And as Rothberg notes, there will be plenty of opportunities to do so this week. Protests calling for Major Wall Street reform have been organized all over the country. On Tuesday, protesters will speak out against predatory banking behemoth Wells Fargo in San Francisco. On Wednesday, they will target too-big-to-fail titan Bank of America in Charlotte, N.C. On Thursday, reformers will march straight into the lion's den on Wall Street itself to demand change. It's called the Showdown in America, and you can find out more here.
It's only just begun-but how did we get here in the first place?
But whatever happens with this bill, the fight to rein in Wall Street is just beginning. As Robert Kuttner emphasizes for AlterNet, President Franklin Delano Roosevelt had no shortage of verve for Wall Street reform, but it still took him seven years to enact all of the New Deal banking laws. And as Simon Johnson and James Kwak detail for The American Prospect, reining in Wall Street means overturning the ideology that has dominated the halls of power in Washington, D.C. for three decades.
Since the Reagan era, politicians from both political parties have sincerely believed that what is good for Wall Street is good for America. The subprime mortgage monstrosity and Great Crash of 2008 put cracks in the foundation of that ideology. But the process of demolishing it may very well take longer than the legislative cycle that will end with the November elections.
Even if we do get a strong bill-one that breaks up the biggest banks, bans them from placing risky bets in the derivatives and securities markets and establishes a new Consumer Financial Protection Agency-other important aspects of the financial sector will need to be addressed in other legislation. Hedge funds, whose pivotal role in the crisis is only now being identified, will need to be reined in. Rating agencies, who actively fueled the subprime bubble, and whose business models are founded on conflicts of interest, must be restructured. The future of Fannie Mae and Freddie Mac must be decided. Families across the country still need foreclosure relief.
We need a strong Wall Street reform bill. There is no excuse for any politician from either party to be standing with bigwig bankers against the rest of the country. And with two-thirds of the nation supporting reform, any political party that throws in its lot with Wall Street will pay a major price come November. No amount of Wall Street campaign cash can counter the voter outrage over bank bailouts and bonuses. There's no way to know when Republicans will come to their senses, but whatever happens this week, there will still be much work to do this year and the next.
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 night, Senate Republicans proved beyond any doubt that when it comes to the economy, they stand with Wall Street and against everybody else. Joined by lone Democrat Sen. Ben Nelson (D-NE), Republicans successfully filibustered the procedural technicality of opening debate on Wall Street reform. It's an unmistakable ploy to kill the bill and collect campaign cash from bigwig bankers. The coming weeks won't be pretty.
Republicans are going to be battered by this filibuster. Financial reform is popular, and nobody on Capitol Hill wants to be seen as the agents of Wall Street in Washington come November. Republicans are hoping to rhetorically counter Obama's proposals, negotiate a fatally weakened reform package, and then vote with Democrats for reform-in-name-only before the elections. But the U.S. financial system is broken and voters know it needs strong medicine.
In a speech last week before Cooper Union Hall in New York City, Obama laid out what's at stake in the reform fight. Our biggest banks don't fear failure because they know the government will bail them out in a crisis. As a result, they take massive risks that endanger the economy. Our current regulators ignored predatory lending in order to protect Wall Street profits. To top it off, the risky, multi-trillion-dollar market for derivatives-the financial weapons of mass destruction that brought down AIG-remains beyond the scope of regulatory authority altogether.
Without major changes, the U.S. economy is doomed to repeat the destruction of the past two years. Epic bailouts, consumer predation and heavy job losses will become the new national norm, not just the conditions of a single, terrible crisis. Last night's Republican-plus-Nelson filibuster was an effort to preserve an unacceptable status quo.
Phony populism
As Matthew Rothschild emphasizes in a podcast for The Progressive, Wall Street Republicans have been spreading all kinds of crazy lies about Obama's reform legislation. While the legislation that cleared the Senate Banking Committee in March isn't perfect, it isn't a massive bailout for Wall Street, either. But Senate Minority Leader Mitch McConnell (R-KY) has been making the rounds calling it just that, in a dishonest effort to kill the bill. This is phony populism. McConnell says he's against bailouts, but his goal is to prevent reform from overturning the current system, which, as we saw in 2008, has bailouts baked in.
While Obama did a good job identifying what's wrong on Wall Street, the solutions he proposed are either too weak to end abuses, or simply not included in the Wall Street reform bill in its current form. Obama's initial proposal for a new Consumer Financial Protection Agency was great, but Sen. Chris Dodd (D-CT) watered down in the Senate Banking Committee to appease Republicans. The same thing happened to Obama's proposal to fix the wild market for derivatives, the financial weapons of mass destruction that brought down AIG.
How to make reform a reality
As Sarah Ludwig of the Neighborhood Economic Development Advocacy Program (NEDAP) emphasizes in an interview with GRITtv's Laura Flanders, most of the reforms currently under consideration are a "good first step." That is to say they are useful and productive-but not enough to fundamentally change the way Wall Street does business.
Fortunately, there are several amendments that can fix these shortcomings, most notably the SAFE Banking Act, introduced by Sens. Sherrod Brown (D-OH) and Ted Kaufman (D-DE). As Peter Rothberg emphasizes for The Nation, the amendment would force our largest banks to split up into institutions that could fail without jeopardizing the broader economy. It would also place a hard cap on the total amount that banks could bet in the financial markets.
Those amendments, of course, can only be added to the bill if Republicans allow debate on financial reform to begin. Progressives should be fighting hard to make sure that the break-up-the-banks measure is included in the bill that the Senate eventually votes on. And as Rothberg notes, there will be plenty of opportunities to do so this week. Protests calling for Major Wall Street reform have been organized all over the country. On Tuesday, protesters will speak out against predatory banking behemoth Wells Fargo in San Francisco. On Wednesday, they will target too-big-to-fail titan Bank of America in Charlotte, N.C. On Thursday, reformers will march straight into the lion's den on Wall Street itself to demand change. It's called the Showdown in America, and you can find out more here.
It's only just begun-but how did we get here in the first place?
But whatever happens with this bill, the fight to rein in Wall Street is just beginning. As Robert Kuttner emphasizes for AlterNet, President Franklin Delano Roosevelt had no shortage of verve for Wall Street reform, but it still took him seven years to enact all of the New Deal banking laws. And as Simon Johnson and James Kwak detail for The American Prospect, reining in Wall Street means overturning the ideology that has dominated the halls of power in Washington, D.C. for three decades.
Since the Reagan era, politicians from both political parties have sincerely believed that what is good for Wall Street is good for America. The subprime mortgage monstrosity and Great Crash of 2008 put cracks in the foundation of that ideology. But the process of demolishing it may very well take longer than the legislative cycle that will end with the November elections.
Even if we do get a strong bill-one that breaks up the biggest banks, bans them from placing risky bets in the derivatives and securities markets and establishes a new Consumer Financial Protection Agency-other important aspects of the financial sector will need to be addressed in other legislation. Hedge funds, whose pivotal role in the crisis is only now being identified, will need to be reined in. Rating agencies, who actively fueled the subprime bubble, and whose business models are founded on conflicts of interest, must be restructured. The future of Fannie Mae and Freddie Mac must be decided. Families across the country still need foreclosure relief.
We need a strong Wall Street reform bill. There is no excuse for any politician from either party to be standing with bigwig bankers against the rest of the country. And with two-thirds of the nation supporting reform, any political party that throws in its lot with Wall Street will pay a major price come November. No amount of Wall Street campaign cash can counter the voter outrage over bank bailouts and bonuses. There's no way to know when Republicans will come to their senses, but whatever happens this week, there will still be much work to do this year and the next.
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.
Congress returns from its April recess this week with financial reform at the top of its to-do list. With millions of Americans still bearing the brunt of the worst recession in 80 years, Congress needs to start protecting our economy from Wall Street excess, and repair the shredded social safety net that has allowed the Great Recession to exact a devastating human cost.
Big banks are an economic parasite
In an excellent multi-part interview with Paul Jay of The Real News, former bank regulator William Black explains how the financial industry has transformed itself into an economic parasite. Black explains that banks are supposed to serve as a sort of economic catalyst-financing productive businesses and fueling economic growth. This was largely how banks operated for several decades after the Great Depression, because regulations had ensured that banks had incentives to do useful things, and barred them from taking crazy risks.
The deregulatory movement of the past thirty years destroyed those incentives, allowing banks to book big profits by essentially devouring other parts of the economy. Instead of fueling productive growth, banks were actively assaulting the broader economy for profit. None of that subprime lending served any economic purpose. Neither do the absurd credit card fees banks charge, or the deceptive overdraft fees they continue to implement.
As Matt Taibbi explains in an interview with Amy Goodman and Juan Gonzales of Democracy Now!, banks didn't just cannibalize consumers. They also went directly after local governments, bribing public officials to ink debt deals that worked wonderfully for the banks, and terribly for communities. In Jefferson County, Ala., J.P. Morgan Chase helped turn a $250 million sewer project into a $5 billion burden for taxpayers. The deal generated nothing of value for either citizens or the economy, but J.P. Morgan Chase was still able to line the pockets of its shareholders and executives. This kind of behavior was illegal, but the transactions involved were complex financial derivatives, which are not currently subject to regulation. To this day, nobody at J.P. Morgan Chase has been prosecuted for bribery or corruption.
Congress set to avoid tough regulations
There is a clear need for Congress to enact some firm restrictions against risky and predatory bank activities. But at the behest of Treasury Secretary Timothy Geithner, Congress is doing its best to avoid inserting any hard terms in legislative language, instead leaving the specifics to federal regulators to work out. As Tim Fernholz emphasizes for The American Prospect, this is an exercise in futility. Regulators already have the power to impose more stringent rules on nearly every arena of Wall Street business that matters (derivatives are a very noteworthy exception). If they wanted to fix things, they could do it without Congressional help. The trouble is, the financial sector has polluted most of the regulatory agencies, so that many regulators now act more like lobbyists for the banks they regulate, rather than law enforcers. Indeed, as I note for AlterNet, the top bank regulator in the U.S. spent over a decade lobbying for the nation's largest banks before taking up his current job. If Congress doesn't establish firm rules, regulators under future administrations would be free to simply undo any measures that the current agencies actually implement.
Megabanks equal mega risks
As Stacy Mitchell illustrates for Yes! Magazine, most of the problems in the financial sector are connected to the size of our banking behemoths. Big banks have enormous power-if they fail, the economy goes off a cliff. As a result, any responsible government wouldn't allow any of our megabanks to actually fail. But knowing that the government will protect them from any true catastrophes, big banks take bigger risks-if the risk pays off, they get rich, if it backfires, taxpayers will suck it up. That puts the interests of big banks at odds with the public interest, and creates an economy where bankers don't try to finance useful projects with a safe and steady return, but instead back crazy bets that just might pay off.
You can't fix that problem with regulations or idle threats of taking down a big bank when it gets itself in trouble-the markets won't believe it, and the banks will still take risks. The only solution, Mitchell notes, is to break up the banks into smaller institutions that can fail without wreaking havoc on the economy.
Economic inequality weakening the economy
All of this ties into rampant economic inequality in the United States. Since the 1970s, conservatives have waged a constant battle on the social safety net, shredding protections for ordinary people, while empowering corporate executives to take advantage of them. In an illuminating blog post for Mother Jones, Kevin Drum highlights the fact that average income has only rose from about $20 an hour in 1972 to $23 an hour today. This isn't because workers were slacking off-productivity has increased at roughly five times that rate. In other words, nearly all of the economic gains since the Nixon era have accrued to the wealthy.
When people don't have access to strong and improving income, they finance things with credit. But if wages never actually improve, that debt becomes a significant burden. When an entire society finds itself overly indebted, people stop buying things, and the economy tanks. The predation in the American financial sector makes this problem even worse.
But political theatrics are even trumping efforts to provide relief to those hit hardest by the recession. Sens. Jim Bunning (R-KY) and Tom Coburn (R-NE) have blocked the extension of unemployment benefits twice in the past month. As Kai Wright emphasizes for ColorLines, that recklessness puts up to 400,000 Americans at risk of losing their unemployment checks. That's a human tragedy-hundreds of thousands of people will have no way to pay the bills. It's also bad for business, since those people won't have any money to buy things that businesses produce. It is, in short, short-sighted economic insanity.
The economy is supposed to work for everybody, not just the rich, not just bankers. For that to happen, politicians have to establish meaningful regulations to make sure finance works for the greater good-- and safety nets to make sure that anyone who falls through the cracks doesn't see her life prospects permanently diminished.
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.
Now that health care reform has finally been enacted, a host of critical economic issues are taking center stage, including financial reform, unemployment and deeply rooted economic inequality. But it's important to note that with its health care vote, the U.S. House of Representatives actually approved a very important, and often overlooked financial reform: Student lending.
Pedro de la Torre III of Campus Progress explains the current student loan nightmare in an interview with The American Prospect's Rebecca Delaney. For years, the U.S. government has paid massive subsidies to some of the worst-run companies in the country.
Thanks a lot, Sallie Mae
As de la Torre notes, instead of directly making loans to students, the government spent years funneling money to firms like Sallie Mae to actually make the loans. When things went sour, taxpayers covered the lender's losses from student loans that ultimately went bad.
Taxpayers were also footing the bill for the loans and taking on the risk, while private companies and their executives enjoyed the benefits. The executives made quite a haul. In 2008 alone, Sallie Mae CEO Albert Lord took home an astonishing $46 million. Even among CEOs, that's a princely sum-more than double what Halliburton CEO David Lesar made the same year. All of that money could have financed a lot of college educations.
Fortunately, the student loan landscape is almost certain to change as a result of the health care vote. The House bill included a provision to end student loan subsidies and boost funding for direct grants from the government to students.
Since the student loan reform and health care were both eligible for reconciliation in the Senate (meaning only 51 votes are needed for passage instead of the 60 to clear a filibuster), House Democrats decided to move on both at the same time. It's a significant reform, and one that will soon become law with President Barack Obama's signature.
What would an overhaul of the consumer finance industry entail?
The student loan system is just one aspect of the consumer finance industry that needs a major overhaul. On mortgages, credit cards, overdrafts, and payday loans, the banking status quo is one of outright predation. As Heather McGhee of Demos explains to The Nation's Christopher Hayes, there's a reason why federal agencies do a lousy job regulating consumer banking abuses.
Right now there is no agency responsible for consumer protection alone. Every regulator also focuses on making sure banks don't fail, which generally means that regulators support anything that increases short-term profits. Egregiously predatory practices generally lead to big short-term gains in banking.
A new consumer financial protection bureau
Last week, Senate Banking Committee Chairman Chris Dodd (D-CT) introduced a bill that would create a new bureau of consumer financial protection, with no constraints from bank profitability. It's a step in the right direction, but as McGhee notes, there are plenty of problems with Dodd's proposal. Most problematically, the bill gives existing agencies a veto power over any new consumer protection rules. That's a terrible loophole. Existing regulators have actively opposed consumer protections in the past, and there is every reason to expect that practice to continue.
Rapid tax refunds scam the poor
It's late March, which means tax season is getting into full swing. All over the country, mascots from Liberty Tax are spilling into the streets wearing goofy costumes, trying to win your business. But millions of Americans don't realize that Liberty, along with H&R Block, Jackson-Hewitt and hundreds of smaller businesses are engaged in a monstrous scam disguised as a complicated accounting service.
As Alexander Zaitchik emphasizes for AlterNet, these tax preparers have used deceptive advertising and slick salesmanship to con people into taking out "refund anticipation loans," also known as "rapid refunds" and a handful of other pleasant euphemisms. It's a simple gimmick: H&R Block does your taxes, and then presents you with your tax refund, right away, no waiting. But the check you receive is not actually your tax refund-it's your tax refund minus a truckload of fees that you didn't realize were being deducted. This is the tax-time equivalent of payday lending.
When the government sends in your actual, larger tax refund one-to-two weeks later, you won't see it-it goes straight to H&R Block's bank partner. Those banks are making big money taking from your tax returns. Here's Zaitchik:
"In 2008, more than eight million Americans spent nearly a billion dollars paying interest and fees on RALs-often based on misleading or incomplete information-swelling the profits of tax preparers and their partner banks."
The one break low-income people get under the U.S. tax code is the Earned Income Tax Credit (EITC), the nation's largest anti-poverty program. Only about 16% of taxpayers qualify for the EITC, but as Zaitchik notes, nearly two-thirds of the people who take out refund anticipation loans receive the credit. Tax preparers are making a concerted effort to prey on the poor, making the EITC program more expensive and less efficient for all taxpayers-not just those who go to H&R Block or Liberty Tax.
More action needed on jobs
Beyond finance, the U.S. economy has a serious jobs problem. Last week, Congress approved an $18 billion jobs package that is simply far too small to make a serious dent in the nearly double-digit unemployment rate. As Art Levine explains for Working In These Times, the package will create 250,000 jobs at best. That number shouldn't be acceptable to anyone watching the U.S. economy, which has shed about 7 million jobs since the recession began.
There are much stronger options available than the $18 million bill the Senate approved. Rep. George Miller (D-CA) has introduced a bill in the House that would quickly save or create one million jobs, and the House has already passed a separate $154 billion jobs package that would prevent 900,000 lay-offs. If the Senate moved on either one, the result would be a major economic boost.
The link between poor economies and poor health
All of these problems-unemployment, student loan scamming, refund anticipation loan sharking and other forms of financial predation-reinforce economic inequality in the United States, which is at levels unseen since before the Great Depression. That inequality is ultimately actively damaging to public health, as epidemiologist Richard Wilkinson explains in an interview with Brooke Jarvis for Yes! Magazine. Rampant economic inequality in the United States is literally making us sick.
"We looked at life expectancy, mental illness, teen birthrates, violence, the percent of populations in prison, and drug use," Wilkinson says. "They were all not just a little bit worse, but much worse, in more unequal countries."
With health care finally finished, Congress and the administration have an opportunity to make serious headway on the economy. They've got plenty of work to do.
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.
Senate Banking Committee Chairman Chris Dodd (D-CT) unveiled his latest financial reform proposal on Monday, and the stakes for the new legislation couldn't be higher. After consumer groups raised a major ruckus, Dodd has dropped one of his most egregious concessions to the bank lobby-cutting enforcement authority from the proposed Consumer Financial Protection Agency (CFPA). That's good news: Without a major regulatory overhaul, the U.S. economy's destructive boom and bust cycle will start all over again.
We've been down this road before. The Enron fiasco should have served as a wake-up call for policymakers, but instead, the weak federal response to Enron's major fraud helped pave the way for the current economic slump.
What does Enron have to do with the crisis?
As Megan Carpentier emphasizes for The Washington Independent, one of the key "reforms" Congress enacted in the Enron aftermath was a law requiring every CEO to sign-off on their company's accounting statements-but it has accomplished almost nothing.
Enron collapsed due to accounting fraud. Its executives weren't stupid or careless-they made their money by engaging in deliberate and coordinated acts of illegal deception. But CEOs of companies like Enron had always been able to deny that they knew about the shenanigans that were playing out in their accounting departments. By forcing CEOs to sign off on their accounting statements, Congress was attempting to "deny them plausible deniability," as Carpentier puts it.
But accounting fraud has plagued the U.S. economy, even after the Enron scandal. It also plays a major role in the Wall Street crisis. A recent court report from Lehman Brothers' bankruptcy examiner reveals that the company arranged a series of complicated transactions to hide $50 billion in debt, making Lehman appear healthier than it was. By hiding this debt, Lehman was able to make bigger bets on the mortgage market. The defense issued by Lehman CEO Richard Fuld? He apparently didn't know the accounting hijinks were happening
An epidemic of fraud
Most U.S. policymakers are still having a hard time coming to grips with the fact that our financial system is rife with fraud at almost every level. Writing for AlterNet, Joe Costello reports on a recent Roosevelt Institute conference featuring several major economic luminaries. Costello argues that some of Wall Street's biggest problems were driven by run-of-the-mill fraud. And a key vehicle for this fraud, Costello notes, was the derivatives market-the same market that allowed Enron to perpetrate its own frauds. Many of the scams aren't even particularly new or creative. They're simply the same cons that helped usher in the Great Depression.
"If we're going to get our economy up and running again, the first thing we're going to have to do is end the fraud," Costello writes.
Protecting Whistleblowers
But astonishingly, even after the worst financial crisis in history, bigwig bankers have been able to avoid fraud charges and investigations. Even when the Justice Department went after Swiss banking Giant UBS for a massive tax evasion scheme, they let the company's U.S. executives off the hook and instead jailed the very whistleblower who told the government about the fraud.
The whistleblower, Bradley Birkenfeld, is by no means innocent of wrongdoing-he even smuggled diamonds in a toothpaste container for a wealthy UBS client. But as Corbin Hiarr notes for Mother Jones, jailing the man who blows the whistle sends exactly the wrong message to anybody in Big Finance who recognizes a problem. Not only will your employer come at you with everything it has, but the government you aid will actually send you to prison. The fraudsters you finger get to retire to the Caymans.
This is part of the reason that successful financial reform is not just what the rules are, but who gets to enforce them. There were many reasonable rules against predatory lending that bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency (OCC) could have used to thwart the financial crisis early on, but neither agency was interested in doing so. They were more concerned with short-term banking profits, and up until 2007, sketchy accounting was allowing banks to book big gains on the subprime market.
Why we need a CFPA
That's why all the way back in June of 2009, President Barack Obama proposed establishing a CFPA focused exclusively on defending consumers against banks. With no concerns for bank profitability, CFPA regulators could go after unfair practices and fraud because they were wrong, regardless of what they did for bank balance sheets.
The proposal was watered down significantly in the House, as Kai Wright notes for The Nation, and just a week ago it appeared that Dodd was ready to completely torpedo the new regulator in an effort to craft bipartisan support for a so-called "reform" bill.
He's backed off since then, but without strong enforcement authority, nothing is gained-the same corrupt regulators will simply continue to look the other way. But Dodd would still house the new agency at the Federal Reserve. Dodd insists the Fed would have no authority over the CPFA, but if that were the case, why would he introduce the provision at all?
"Reform in name alone will be useless to both consumers and politicians," writes Wright.
Strong financial reform is overwhelmingly popular. While it's good to see Dodd backing away from some of the gifts he'd previously proposed to bank lobbyists, progressives must keep the pressure high to ensure that financial reform is strengthened as it moves through the Senate.
It's easy for a corrupt lawmaker to vote against a weak bill: He can always plead that the bill wasn't good enough and be right. But serious, popular reform is not so easy to oppose. If Dodd and the Democratic leadership make the politicians backed by the bank lobby-that's literally every Republican, plus a handful of conservative Democrats-stand up and vote against a good bill, many of them will have to choose between their lobbyist friends and their political future.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. 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.
Over the past thirty years, Wall Street has waged a steady war against governments around the globe, convincing policymakers of various ideological stripes that whatever raises profits for bankers and traders will be good for the rest of society. It's a very simple and appealing portrait of how the world works. Unfortunately, it's completely wrong.
Profiting from hunger
In an interview with AlterNet's Terrence McNally, economic luminary Raj Patel explains the connection between widespread global poverty and wild Wall Street profits. Markets are defined by a set of rules-if those rules completely disregard social welfare, then the participants in those markets will ignore them as well. When traders can make a quick buck speculating on the price of rice, they will, even if that speculation drives up the price of a basic necessity and makes people go hungry.
We've known this for a long time, but as Patel illustrates, governments have allowed financial bigwigs to rewrite the basic rules of the road so that Wall Street can extract profits from anything-even hunger. That process created several crises in the developing world over the past few decades, and has now ravaged the economies of the United States and Europe. As Patel notes:
By basically gaming the system with regulations -- that they authored -- which encouraged a certain kind of playing fast and loose with the numbers, it was possible through some creative accounting for huge amounts of systematic risk to be kicked off into the future and ignored. And of course when the catastrophic risk was realized, everyone ran for the hills and started demanding public support.
Financial turmoil in Greece
This political sleight-of-hand is demonstrated by the looming fiscal crisis in Greece. As Richard Parker explains for The Nation, Goldman Sachs colluded with prior Greek administrations to hide the nation's fiscal situation from both its own citizens and investors (Parker is an adviser to current Greek Prime Minister George Papandreou). Goldman was not interested in fair play-it was interested in making money off of the Greek government in any way it could. If that meant actively sabotaging the market by hiding important information, well, Goldman didn't care.
First Greece, then ...
Now that this budget façade has been stripped away, Goldman and other investors are now profiting from making things very difficult for Greece. As Matthew Yglesias explains for The American Prospect, the rational, profit-maximizing choices of investors are now actively helping to drive Greece into a default that hurts everyone:
When Greece starts looking shaky, the interest rate it needs to pay on its deficit goes up, which makes the country look even shakier. This cycle can push a vulnerable country into a default situation.
Various Greek administrations clearly bear significant responsibility for the situation. Nobody forced them to get in bed with Goldman Sachs, just as nobody forced U.S. administrations to gut our financial regulatory system. But the problem in Greece is not just a problem for a single Mediterranean nation-there is very real risk that the investor "unease" could spread to Portugal, Ireland, Spain, Italy, and by extension the European Union and the global economy. The bonuses at Goldman Sachs and J.P. Morgan Chase this year were not a sign of renewed strength in the global economy.
Community Security Clubs to the rescue
So if Wall Street can't save us, what can? Our communities could play a significant role, as Andrée Collier Zaleska explains for Yes! Magazine. Zaleska profiles Common Security Clubs in Portland, Boston and Fort Lauderdale to show how people hit hard by the economic downturn are banding together to make ends meet, and organizing for political action.
"[Jared] Gardner, a busy organizer in Portland, launched four CSCs in his church, two of which were comprised almost entirely of unemployed people. By the time his own group had met five times, they were planning tours of local co-housing projects, organizing to fight locally for progressive taxation, and wondering how to bring the rest of their church into the time bank they had created."
Markets are supposed to serve human needs, not the other way around. But Wall Street isn't going to give up its stranglehold on the U.S. political process for nothing. While community-driven efforts are a good start, we need much larger actions and reform to restore balance to the global economy.
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.
Two key lawmakers on the House Financial Services Committee, Reps. Alan Grayson (D-FL) and Ron Paul (R-TX), are pushing to authorize a full, comprehensive audit of the Federal Reserve. The plan has sparked fury from both the Fed and the corporate banking industry, but the proposal is so appealing that the controversy is almost laughable.
The Federal Reserve is one of the most powerful economic institutions in the world, but most of its operations are conducted in total secrecy. The Fed's rescue activities have dwarfed the $700 billion Troubled Asset Relief Program, but without any public accounting. Some of these efforts may have been entirely appropriate, but we don't even know who the Fed is helping. That fact is a major barrier to establishing effective and fair economic policy.
"The Fed is a typical Washington institution that operates un-democratically and in virtually total secrecy, and a Congressionally-mandated audit that they (and much of the DC establishment) desperately oppose would be a serious step towards changing the dynamic of how things function. At the very least, it would provide an important template for defeating the interests which, in Washington, almost never lose."
Under the Grayson-Paul plan, which is offered as an amendment to the Financial Stability Improvement Act of 2009, the Government Accountability Office would be given the authority to audit all of the Federal Reserve's activities, just as it can audit other public programs and institutions.
Last week, the House Financial Services Committee approved the audit-the-fed bill, despite opposition from panel Chairman Barney Frank (D-MA), who tried to gut the plan. Even on the Financial Services Committee, where the banks concentrate their campaign contributions, Grayson was able to convince 14 other Democrats to stand up to the financial establishment.
The vote of approval scarcely registered on mainstream media's radar, and even then, the Grayson-Paul legislation was portrayed as an assault on the Fed's "political independence." As Dean Baker notes for Talking Points Memo, it's hard to see how a simple, public accounting can be construed as a political hit on the Fed's policy-making.
By setting interest rates, the Fed has enormous power to do almost anything under the economic sun, from fueling quick growth to destroying jobs. All of these powers have useful functions under the right circumstances, and we really don't want Congress to make decisions about the economy based on the interests of powerful lobby groups. The Grayson-Paul bill wouldn't do anything of the sort. As John Nichols explains for The Nation, audits of sensitive economic policy decisions would be subject to a six-month lag before they could be publicly released. If the Fed needs to act fast, Congress won't be able to get in its way. The public will eventually know how its own money is being spent, however, and learn how a public institution is conducting itself.
"In other words, this is about simple transparency, which everyone should favor," Nichols writes.
The White House and the Congressional Democratic leadership need to support a full and comprehensive audit of the Federal Reserve. It's an issue of basic democratic accountability. There is no good reason why economic policy should be conducted in secret.
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.
I don't want to get too gooshy as we go into the Thanksgiving holiday weekend by giving you all the stuff I'm thankful for, but it does seem like an appropriate moment to be a little more reflective than usual. The thing I want to focus on today is the hope for a better world.
It is very easy to be pessimistic and cynical about the chance for things to get better as we fight our issue and political battles. Wealthy powerful special interests are entrenched and seem able to run everything. Too many politicians are incompetent or corrupt. Well-intentioned organizations are sometimes pretty ineffectual. The establishment's conventional wisdom seems set in stone. And I think we have seen so many things in the last few decades that have made us cynical about our government and questioning about our leaders, it is easy to think that nothing will ever change. I know for me, reading the Church committee report about the CIA, The Pentagon Papers, and the Nixon White House tapes transcripts as a young man was enough to make me very skeptical about the nature of our government at the time.
I think a certain level of healthy skepticism about our government and the establishment is a very good thing, and should be cultivated. The problem arises when skepticism turns cynical and pessimistic, and infects how we view every single thing in life and politics. At the heart of progressivism is the hope that it is possible to make a better world, that progress is indeed within our reach. When Barack Obama ran a campaign with a slogan he borrowed from Cesar Chavez and the United Farmworkers, Yes We Can, and preached his gospel of hope, he was tapping into a long progressive tradition dating back to our very founding as a country. Heading into that terrible winter at Valley Forge, Tom Paine, wrote: "Let it be told to the future world, that in the depth of winter, when nothing but hope and virtue could survive, that the city and the country, alarmed at one common danger, came forth to meet it and repulse it." Lincoln at Gettysburg, at that terrible moment honoring those tens of thousands of fallen soldiers at their gravesites, spoke of the hope "that these dead shall not have died in vain, that this nation shall have a new birth of freedom, and that government of the people, by the people, and for the people shall not perish from the earth." Martin Luther King, Jr., in a discouraging moment in his great work, said that "the arc of the moral universe is long, but it curves toward justice", and the civil rights movement anthem's chorus sang out "We Shall Overcome".
We progressives should embrace the hope that our movement, the progressive movement, has always carried as its banner. It is conservatives who have always feared change and doused the flames of hope, conservatives who said government could not do anything right or make progress for the American people.
I write this because I see too often the deep cynicism of many friends in the progressive movement, the assumption that virtually every politician is corrupted by being an insider, that every compromise in the legislative process is a sleazy one, that every progressive group is a sell-out. I see it in the responses I sometimes get when I write about my hopes for passing legislation that could be improved on in the future, where people ask why I think any piece of legislation will be improved on given that corporations run America. I see it in articles by progressive thinkers like Jamie Galbraith, who wrote on Monday an entire blog post about how hopeless everything was in terms of making changes in economic policy. I see it in progressive talk show hosts and comedians and media figures: a sense of gloom about any prospects for a better future are everywhere I look.
While righteous anger and cynical humor are an important part of our work, progressivism that is at its core cynical and pessimistic doesn't work over the long run. For one thing, it will burn itself out. When I was a young organizer being trained, I was told that you can't organize people if you are too depressed to be hopeful, that if you were feeling burnt out, you should take a vacation or even get into a different line of work. I still believe that to be true. Righteous anger is a great thing, and can feed you for a while, but if it's not leavened with hope, it won't sustain you over the long good fight. But it also doesn't work because the internal contradiction is too great. Telling people that we can change things for the better while being cynical about any hope for change is a self-defeating philosophy.
Albert Camus wrote in The Plague that "once the faint stirring of hope became possible, the dominion of the plague ended." It is our job as progressives not just to attack the powers that be, not just to fight against the establishment, but to breathe life into those faint stirrings of hope, and to believe in them ourselves. It is easy to be a cynic with all the bad things that happen in the world. It takes more courage to believe that we can, someday soon, overcome. It is our hope and optimism that gives us the strength to keep fighting the odds against us, that keeps us going in the face of the money and power of the entrenched special interests. And history is very clear on this point: those with the faith and hope that they could indeed overcome the odds did quite often prevail. The abolitionists won their 40-year battle, the suffragists prevailed after 90 years of struggle, Jim Crow was finally beaten 90 years after African-American rights were abandoned by the North with the end of reconstruction. Through decades of violence, derision, arrests, intimidation, our progressive ancestors never gave into despair and defeatism. We should take their example to heart, and have hope for the future, hope that we can make progress, hope that we can build a more perfect union. Hope and virtue have survived: now let's make them flourish.
McClatchy is out with an incredibly important series on Goldman Sachs, the first two parts of which have gone up already, that raises questions about whether Goldman committed securities fraud at a massive level. I am guessing the next three parts of this series are going to be really explosive as well. What Goldman essentially did was to have one big group of their traders, call them Group 1, marketing mortgage securities as triple-A investments, while other traders in the company, call them Group 2, were secretly betting that there would be a steep drop in housing prices, which would mean the values of those securities Group 1 was selling would drop off a cliff. Goldman Sachs was making money coming and going, and it is virtually impossible to believe senior management did not know that the securities they were selling were junk. Now I'm not a securities lawyer but that sure sounds like fraud to me.
Gordon's superbly researched series follows on Matt Taibbi's brilliant Rolling Stone article on Goldman Sachs earlier this year, which walks through many of the same issues. With what Gordon and Taibbi have both been able to document, folks at the DOJ sure ought to be looking at whether criminal charges should be filed against Goldman. And the Obama White House should be coming down on the executives at Goldman Sachs with both feet, hard. This kind of financial manipulation, which has cost public pension funds and other investors many billions of dollars, needs to be stopped, and huge conglomerates like Goldman need to be broken apart. This story is not just a story about simple greed or securities fraud, it's a story about a company that has gotten so big and powerful that it can manipulate markets at will. This story goes to the heart of the recent financial collapse, for which Goldman Sachs deserves a sizable share of the blame. They need to be broken into pieces so that they can't wreak this kind of havoc again. And it sounds increasingly like some of their executives might deserve to go to prison for a long time.
"Now you don't talk so loud/Now you don't feel so proud/ About havin' to be scroungin' for your next meal"-Bob Dylan
It is not that the big banks themselves are "too big to fail". They are too big because they can cause all of us to fail. In the military terms, that tragedy is cleansed by the use of the innocuous sounding term, "collateral damage".
The problem is this: One is just as dead from collateral damage as from a targeted hit.
We launched www.BreakUptheBigBanks.com because the political power wielded by the big banks is incompatible with a functioning democracy. Such political power renders regulation inadequate-we have already seen Congress bow to the will of the very people whom a year ago it rescued from oblivion.
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