Elizabeth Warren likes to tell the story about how when she first met with Barney Frank about the financial reform issue, he told her, in no uncertain terms, that the banks would win on the issue of establishing a Consumer Financial Protection Bureau and that she had no hope of getting the CFPB as part of the law. She tells the story not to embarrass Barney -- who was very supportive of Elizabeth in her fight to get the CFPB in place -- but to rally people who feel like there is no hope of beating the banks on anything. However, the story does, in fact, carry a lesson about Barney: he is intimately familiar with what the big banks want and don't want, and is not inclined to take on the bankers unless people as strong as Elizabeth refuse to take no for an answer.
The latest example is that Barney has jumped on board with the big banks and their credit card company subsidiaries on the debit card "swipe fee" issue. He has been saying he would be happy to work with Republicans in Congress to roll back the related new Federal Reserve regulations.
Now, I love Barney Frank, and he is a good guy on most issues, but this is pure craziness. The basic question is: Politically or policywise, why would you want to help the big banks in opposition to Main Street businesses? On one side, you have six big banks that already own assets equal to 64 percent of our country's GDP. They own 80 percent of the debit card market, and the swipe fees they charge, by their own admission, are almost pure profit. On the other side you have retail stores, restaurants, hairdressers, cabbies - representatives of Main Street businesses who have lacked the ability to bargain with these behemoth credit card companies. Is there any question policywise as to who it would be better to help? What about politically -- which side do you think is more popular with the American public?
Here's the other thing that is nuts about what Frank is doing: Why would you want to give the Republicans the political cover and opportunity to re-open the financial reform bill just passed? Does Barney really think Republicans would stop with debit cards if Congress were to start debating financial reform again? Thinking about all the changes banking lobbyists would make in John Boehner's conference room if the financial reform legislation passed last year were re-opened is enough to make my head spin. (A little "tweaking" of derivatives regulations here, a little amendment or two to the CFPB there... Oh, and don't forget the legal bailout we need so that we can foreclose on people faster.) I can see the whole bloody scenario pass in front of my eyes, with Republicans just telling the media, "Well, even Barney Frank said we should fix a few of these things."
I think that Democratic members of Congress who have been in Washington a long time sometimes forget what is really at stake in issues like this. They have old friends -- former staffers in many cases -- who have gone on to work for the banks talking to them at fundraisers about little tweaks they want to make on this issue or that issue, and they forget what matters to the American public. Members of Congress -- even the good ones sometimes -- get to think it is just a battle between lobbyists, and they forget what really matters. I got involved in this swipe fee issue, helping retailers and consumer groups that care about the issue, because it is a $15 billion battle in which the money either will go straight into the pockets of the big banks or back into the Main Street economy. It is easy for me to pick sides, and it should be easy for Barney Frank as well.
You may be thinking that when you get a clear victory in a legislative fight that an issue is settled and the fight is over. No such luck, especially in a system where regulators are so very, very close to those they regulate.
Remember the whole swipe fee fight that was a part of the bigger financial reform battle? It was one of the clear victories reformers won against the bank and credit card lobbyists. Basically, the banks/credit card companies (which are essentially the same thing, as the big credit companies are owned by the big banks) were siphoning $40 billion a year out of the pockets of retailers, restaurant owners, taxi cab drivers, and consumers in swipe fees on every credit or debit transaction. The bill allowed for this to be regulated for the first time. And that's where the new fight comes in. Guess who has been in to see the regulators at the Federal Reserve a whole lot since the bill was passed? You got it: officials from the banks and credit card guys- over and over and over again. There have been nine folks who have been in to see Federal regulators on the swipe fee issue from Mastercard, ten from Amex, sixteen from Bank of America, six from JP Morgan Chase, six from Wells Fargo, and twelve from First Data. A whopping 26 different people have come in from Visa. There's been folks from the American Bankers Association, from Barclays, from HSBC, from US Bancorp, from Capitol One, from Citi and Citi Holdings both. Many of these individuals have come back more than once, a lot more than once in some cases.
Okay, you are saying, the bankers and credit card guys are making their case, that's their right- but surely they have been meeting with retailers and merchants and cabbie associations and the restaurant associations as well. Um, well, not so much. After the Retailers and Merchants groups kept banging on them for a meeting, they finally scheduled their first meeting with retail business people on election day.
The retailers I worked with before on this issue came back to me, and I agreed to work with them again on the issue, because regulators should not be creating this policy with only bankers in the room. Main street businesspeople and consumers ought to be there as well. This kind of stuff is what makes people convinced that the big banks own the government, because even when they get beat on the floor of the Congress, they steal the game by romancing the regulators. This issue is important: $40 billion is a lot of cash.
With the Wall Street reform bill finally cleared through Congress, activists and intellectuals are pushing hard to make sure that this bill isn't the last word Congress utters about Big Finance. We need deeper and more robust reforms, but it's also critical to ensure that the new bill is implemented as effectively as possible. Part of that means appointing officials with a proven record as robust reformers-people like Elizabeth Warren.
The need to not investigate allegations of criminality has become a common refrain in Washington, but there are some obvious and unpleasant consequences that come from doing so.
For more on pruning back executive power see Pruning Shears.
I haven't written yet about Senator Byrd's passing because there have been so many fine tributes written and spoken by people who knew him far better than I.
I am saddened to see him go. He was a Washington institution, and a delightful character to be introduced to for any young person who came to this town to do national politics in the last half century. Any fundraising event where he was a host, he came and played his fiddle and told some stories, making those events far more fun and interesting than most boring cocktail parties in this town. He was a beloved statesman, who kept getting better with age- some of his finest moments came in the last decade as he battled George Bush and his wrong headed wars.
What is stunningly appalling is to see his death used as a PR tool by special interest groups. There may have been other groups tacky enough to do this, but I haven't seen this bad in a response to a member of Congress dying in my memory:
Sen. Byrd leaves an extraordinary legacy of service and commitment to the Senate and the legislative process. His passing will affect the regulatory reform debate as the Democrats work to secure the 60 votes they need to achieve cloture. Sen. Byrd was a champion of Main Street, and we hope his colleagues will give careful consideration to the harmful impact the interchange amendment could have on the 92 million Americans who depend on credit unions for basic financial services, including debit cards.
In other words: "Sorry you're gone, Bobby. You were great and all, but we're glad your death gives us another chance to block cloture and lobby for a change in one provision of the financial reform bill."
This is as bad as it gets in Washington. The longest serving member of either body in the history of the US Congress, a former Majority Lader, Minority Leader, and Appropriations Chair, a legend in American history, has died. But all some tacky interest group can think is to do a press release about how they hope it gives them another chance to tinker with an amendment they don't like.
I used to like the credit union guys, had always been a big supporter of them as compared to the big banks on Wall Street. As an avid supporter of the Move Your Money campaign, I still am. But their trade association needs to clean up its act and have some people fired. This is pathetic stuff.
Scott Brown, after succeeding at weakening the entire financial reform bill so that he could carve out exemptions for his Boston bank buddies, is now threatening to pull his support for the bill over a tiny tax on banks to pay for the costs of implementing the new bill. With Robert Byrd's death, Brown's defection would leave us one vote short of the 60 votes needed to end cloture. Chris has more on the vote-counting below.
Call his bluff. Call their bluff.
If the Republicans want to create a huge news story going into the July 4th break by standing with the big banks to keep this bill from becoming law, and then spend the entire July 4th recess talking with their constituents as to why they were with the banks instead of helping to clean up the system, God bless them all. That is a complete winner for Democrats on our strongest issue going into the fall elections. It would be a godsend. And if in order to get this bill passed, Democratic leadership has to go back and negotiate with Russ Feingold regarding how to toughen the bill up in order to get his vote, that's ok too (of course, that would mean Feingold would have to actually negotiate instead of playing the I'm-too-pure-to-get-serious-about-strengthening-this-bill-by-negotiating act he has been doing throughout the process). If the deal is with Feingold, not Brown, all those carveouts for Boston banks go bye-bye, and maybe the bill actually gets better instead of worse.
Make my day, call his bluff. Let the Republicans marinate in their juices with their friends from Wall Street, and let the Bank of Boston get screwed. It's a political windfall all the way around.
I'm going to let economists and policy people better qualified than I go through the details of the financial reform deal that came out of conference committee in the 5 AM hour last night. In terms of where it is on a scale of -10 to +10, that all depends on whether you are an optimist or not. Both of the following are true:
There were some bad compromises made on very important issues like derivatives and the Volcker rule, and the bill will not fundamentally restructure or reform the way Wall Street does business.
There was some surprisingly impressive progress that got made on a range of really important issues. The Fed will be audited, derivatives will be more transparent, the big banks will be under more pressure to split off risky trading practices, the retail economy won a key battle with the bankers, consumers and investors will be far better protected.
The short version is that reformers won some and lost some. But however you feel on the upbeat/downbeat scale, the fact that we won anything is pretty remarkable at all, and should not dismissed by the cynics. The fact is that American democracy is in pretty rough shape: big corporations generally run this town. Watching the Wall Street lobbyists and PR gurus and PAC money roll through DC the past few weeks took my breath away, and I'm a cynical old insider with two decades here. Our side was outspent 500 to 1. The big banks had 2000 of the best-paid lobbyists in the city; our side had a few policy wonks cobbled together from various underfunded public interest groups. Their side had the biggest PR killers in the country; our side had a few intrepid bloggers. Their side had PAC dollars flowing like the Mississippi River; ours had a modest amount of labor dollars and a few $25 netroots contributors. On a few issues, like the swipe fee thing, our side had some business allies; on most issues, and the entire bill overall, the big bankers talked the Chamber of Commerce and many other business interests into helping do their dirty work for them.
So, yeah, I'm bummed that we lost some big things to this Mordor's army of Wall Street lobbyists, and I know this bill goes nowhere far enough. But my hat is off to the people in this progressive movement who fought their hearts out to win some important victories. The outgunned reformers fought the good fight against the most powerful industry seen in this nation at least since the days of the robber barons, and you won some things that mattered. This bill, assuming it doesn't yet get derailed, is just one step forward on the path to a saner financial system, but it's been worth doing.
Legislative battles on big, complicated bills are like the huge wartime battles you read about in books, although usually there's less actual physical violence (psychological violence, financial violence, the death of truth, the death of souls? Oh yes, all that- but generally not actual physical violence).
The armies of the big bankers surged forward in the middle of last week, and from everything I have heard and could tell, were about to sweep away most of the remaining reforms progressives have been fighting. But give our side some credit: there was a major pushback from Americans for Financial Reform, the AFL, SEIU, MoveOn, and other groups, and by Friday we had regained our traction and stopped the retreat. Because this is a conference committee it's hard to know what is real and what is not, but in spite of being outspent more than 500 to 1, our little band of guerrilla fighters is hanging in there.
We still don't know the fate of derivatives, the Volcker rule, or numerous other critically important parts of the legislation that relate to the size, power, and speculatory practices of the biggest banks. If this were a typical issue, the Blue Dog banking buddies, the Republicans in the Senate, and the pro-banker elements of the Obama White House would have already broken through our lines and forced retreat. But the public hates Wall Street, Democrats need the seal of approval of the reform groups in order to convince people they won something, and the Democrats also need a campaign issue in the fall, so there's a different dynamic. While some Senate Republicans are making threatening noises about a filibuster, and Blue Dogs are threatening to vote no on a final bill if their banker buddies aren't coddled, everyone knows that it will be very difficult politically to vote against the final financial reform bill. Republicans already tried to filibuster and had to fold in record time, so they don't want to go through that again. Anyone in conference or in the White House saying we have to make concessions to bankers because otherwise there will be a filibuster is saying it because they want to be in bed with the banks.
So we keep fighting back against wave after wave of bank money and all that it buys: lobbying, PR, advertising, campaign contributions, fake coalitions, bogus research, etc. But we seem to be winning a few. Main street businesses and consumers (who I am consulting on the side of) seem to be winning over the banks on the swipe fee issue- the compromise announced yesterday had a couple of concessions, but the language in the bill is pretty solid. The bill includes compromises that satisfied the state treasurers' concerns, making this a completely clear choice: bankers vs. Main street businesses and consumers. Should be pretty simple how a Democrat should vote. There is a last minute drive by the banks to gut the compromise, so we still have to hang on.
We lost having the financial products consumer agency completely independent, but the Federal Reserve has no power over its staff or regulatory power, and that's a big deal. The audit of the Federal Reserve seems to be an area in which we won most of what we wanted.
Just like a long, gory battle on the field of a war, every day feels like a year, and much of what we are fighting for could still get swept away. But the Democrats who are trying to do the right thing and have some political advantages they don't normally have, so even with 500 to 1 odds in terms of spending, we still are in the ball game in terms of getting some decent things done.
Let the conferees know where you stand, and if the bankers haven't stolen all your money yet, send some over to the folks at Americans for Financial Reform- they are doing a great job given the odds.
You would think that having won some of the key battles in financial reform in spite of destroying the world economy with their greed that bank lobbyists would be counting themselves lucky and relaxing a little. But they believe it is their God-given right to win every single legislative battle and run all things finance-related with no oversight, regulations, barriers, or fairness to other economic sectors. And because they are so completely used to getting their way in all things, the idea that they might possibly, actually lose a few of these legislative fights is making them frantic.
Elizabeth Warren gave a (great, if I hear right) speech to the House Democratic caucus yesterday, rallying the troops to pass a bill with real muscle in terms of consumer protection, derivative regulations, and putting money back into the main street economy with such provisions as regulating credit card swipe fees. Joe Stiglitz did a press conference for Americans for Financial Reform (AFR) where he raised hell about derivatives and pushed that issue forward. AFR has put together a remarkable lobbying operation focused on the House and Senate conferees (which you can find here if you want to know who the targets are to give them a call). An exciting new consumer-business coalition has come together around the Durbin amendment on swipe fees, which I'm proud to be consulting on. You can check out a new ad on the issue here. Good things are happening on our side, but the bankers are spending money like drunken sailors because they don't like to lose. They are hiring lobbyists all over town at rates of $50,000 a month or more. They are paying PR lobbyists huge money, and then spending tens of millions in advertising. They are giving politicians massive amounts of PAC dollars- Greg Meeks, who is a key conference committee negotiator on the swipe fee issue, for example, has raked in over $90,000 in campaign contributions from big banks in recent months. The big banks have also made good friends with state treasurers like Shane Osborn from my beloved home state of Nebraska to shill for them, and with credit unions who have come to town today to lobby on the bank's behalf on the swipe fee issue even though the issue doesn't impact the credit unions much. (Side note here, just because I am annoyed with these guys for selling out to the bankers: credit unions, according to a report from the Tax Foundation, have a $31.3 billion tax break, so they can serve low-income people, even though the vast majority of their clients are now middle income or wealthy folks. I just had a new idea for cutting the deficit.) The question on financial reform is very simple: do the big banks, which have more concentrated money and power than any industry since the giant monopoly trusts of the 1890s, win on all these key issues in conference committee? Or do consumers, homeowners, and main street businesses?
Politicians like to talk about how complicated everything is, and some issues do get pretty wonky, it's true. But the age-old which side are you on question remains pretty simple. Let's hope the Democrats understand they need to be on the opposite side of the guys on Wall Street.
I was talking with some friends this weekend who were part of the movement to pass the Civil Rights bills of 1964. They were telling me how many compromises had to be made to get the '64 bill passed, that voting rights and housing were both stripped out of the bill before it got through, and that these compromises were especially painful because they assumed that no more civil rights bills would be passed in the near term because it had taken so long to get just one big civil rights bill through. The '64 victory, though, gave them momentum to get the Voting Rights Act in '65 and then the Fair Housing bill in 1968. Each struggle was very difficult and very painful, each one had compromises that hurt, but they became the victories that ended Jim Crow in this country once and for all and firmly established the idea of equality as the accepted norm in how this country should operate.
Each victory made the others possible. King and Lewis and the other civil rights leaders understood this foundational principle of organizing, as Alinsky and Reuther and John L. Lewis in the decades before. Winning some thing makes people believe they can win something else.
In the epic battles progressives are facing today, we need to remember that lesson.
The legislative process is irritating and exhausting. Its two steps forward and one step back - on a really good day. The last couple of days have been relatively good days. The two steps forward were on the Defense Authorization bill: Don't Ask Don't Tell is blessedly about to become history, and we got a big boost for the idea of buying American and preserving America's industrial base with the passage of the Fair Defense Competition amendment, which directs the Department of Defense to consider unfair competition from foreign companies when awarding defense contracts. The step backward was on the "jobs" bill, where the deficit hawks are turning the bill into blue smoke and a mirror or two (Reminder to the deficit hawks, from my time as a Clinton advisor: the best way to get rid of deficits is to create a strong economy with full employment).
The biggest legislative news, though, is now behind the scenes: the conference committee negotiations over the banking bill. I am very concerned about a dynamic developing, and I want to beg every progressive activist and writer to stay deeply engaged in this fight. I'm getting the feeling form a lot of people I'm talking to and a lot of posts I'm reading that people are seeing the fight over this bill as pretty much done. The posts I'm reading have a retrospective quality, people speaking in past tense about how the bill is pretty good versus those who say it didn't go far enough, etc. This fight is a very long way from being over, however.
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.
The first is that Democrats are not Republicans. The modern Republican has become a bizarre and twisted hybrid of Ayn "selfishness is a virtue" Rand economic libertarians and Pat Robertson-style pseudo-Christian conservatives. This new hybrid has taken the worst of each of these two kinds of extremists, and made it more dogmatic and more bizarre in its synthesis. Anti-intellectualism has morphed into being opposed to reality-based policy. Morality has become on what people do in their bedrooms, but never about them stealing money from the public or lying about public policy. Support for the free market has become opposition to any kind of regulation or anti-trust laws or civil rights laws. The conservatism of Ronald Reagan and George H. W. Bush became the cronyism and twisted extremism of George W. Bush, Dick Cheney, Sarah Palin and Glenn Beck.
The other reason I am a Democrat is that a majority of Democrats are reasonably progressive folks- about 75% of House Democrats, about 60% of Senate Democrats. That doesn't give us enough to pass strong progressive legislation, but I'd certainly rather be with a party that's 60-75% pretty good as opposed to the Republican alternative, which is 95-100% pretty awful. Having said all that, which is extremely obvious to any OpenLefters, let me get to my main point: the Democrats in power make me crazier than any woman the Fine Young Cannibals may have been singing about. Both the policy and the politics of this banking issue could not be clearer: take on the power of the big banks and rein them in. It is as simple as it could be. But Chris Dodd is playing footsie with the bankers, Tom Carper is shilling for them on a full-time basis, and the lobbyists are working their magic. The message is getting muddled, the base is getting pissed, and the clear political edge Democrats have had on this issue is being lost.
The last couple of days have been reformers' worst days since this issue first was brought to the floor. The mess yesterday on the cloture vote was a classic episode. Look, I am very sympathetic to Harry Reid. The Senate rules are a mess, his caucus is very divided between progressives who want to do something and the full-time shills for the Wall Street lobby, and there really is other pressing business the Senate needs to take up: a supplemental appropriations bill and the bill to extend COBRA and unemployment insurance need to be taken up sooner rather than later. And there is legitimate danger here: the longer the bank lobby has to work on members out of the public eye, the more dangerous our odds get for good legislation. But the Democratic Senators like Carper who are working with lobbyists and Republicans to mess up this bill are playing with fire, and they should be exposed and excoriated. The Republicans who won't even let a manger's amendment come to the floor without objection should be attacked and taken on. If that means a little more delay while the defenders of the big banks marinate in the sun for a few more days and good amendments are pushed forward, it's worth the extra time.
Democrats need to keep being aggressive on this issue, and not let the Republican/banker delay tactics win the day.
The good news on the Senate financial reform bill these days is that we have a few provisions worth fighting for. Senator Blanche Lincoln (D-Ark.) has introduced one of the most important - a bold section in the Dodd bank reform bill (Section 106) that will force the biggest banks to spin off their swaps (or derivatives) desks into a separate entity. That entity will be regulated and can remain part of the bank holding company, but it no longer has access to the Federal Reserve's flow of funds, FDIC insurance and the taxpayer guarantee. Supporters include legendary economists and public policy experts such as Robert Reich, Joseph Stiglitz, Nouriel Roubini, and Michael Greenberger.
In one fell swoop, Lincoln's measure will effectively protect taxpayers, downsize the behemoth banks, and end the federal guarantees behind big bank gambling. It's the strongest structural reform measure in the bill. These swaps have previously helped the 5 largest banks grow to mega-size and then take down the country. The 5 of them - J.P. Morgan Chase, Citibank, Bank of America, Goldman Sachs and Morgan Stanley - account for 90 percent of these derivatives. Lincoln's amendment will go right after the deals that Goldman Sachs is now being officially investigated for and Lincoln's language is #1 on their hit list.
But the problem of course is that the Goldman Gang in Congress, like Senators Gregg and Chambliss, are lining up to strip this provision one way or other. They are being aided and abetted by conservative democrats like Indiana Senator Evan Bayh. Watch this smug interview where he talks about his hopes to defeat every good amendment. I, for one, am thrilled that he announced he will be retiring this year.
We have a right to know if our Senators will vote to end the federal funding of the Wall Street casino or vote to take Blanche Lincoln's language out of the bill.
We know what we need to do -- it's time for a whip count and a little push and shove. We need to find out which senators will support real reform and which ones won't. Just follow these three easy steps to make sure Senators work on our behalf. Please make your call today. It takes two minutes to reach out to two Senators.
1. Call (202) 224-3121 and ask for your Senators representing your state.
2. Ask them: "Does Senator XXXX support Blanche Lincoln's proposal for spinning off swap desks?" and you can follow up with something like "I expect my Senator to support the Lincoln language and to reject any amendments that weaken derivatives reform in the bill, such as Senator Gregg's amendment to kill Lincoln's language."
"In my view, banks were never intended to perform these activities, which have been the single largest factor in these institutions growing so large that taxpayers had no choice but to bail them out in order to prevent total economic ruin," says Lincoln.
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."
STATE BLOGS
