I wrote the other day about all the ironies abounding in the elections, especially Mitch McConnell’s protégé being destroyed by the tea partiers while Mitch was in DC taking care of Wall Street’s business. But the irony doesn’t stop with electoral or legislative politics at all. Now Glenn Beck, of all people, is attacking poor people who are losing their homes for having the gall to protest against the bankers.
Remember, Beck is the same guy who has been cheering the tea partiers on, urging anti-Obama forces to protest vehemently and loudly every single chance they get. But when people who are losing their homes after getting mistreated by Bank of America dare to protest, he gets all squeamish. Suddenly, they become dangerous “mobs” threatening children.
Beck and his banker buddies sure do have glass jaws. There was no violence at this protest, no threats of violence, no hint of it: just a bunch of folks protesting bankers who have destroyed millions of jobs and cost millions of people their homes by their recklessness.
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.
“This is not a left vs. right debate. Voters care about who is going to fight for them in Washington against special interest lobbyists.” – Charles Chamberlain, Political Director DFA
Last night DFA commissioned a poll from Research 2000 to see why Democratic voters went to the polls in Arkansas yesterday.
Here is what we found: Democrats in Arkansas want someone who will stand up for them, not stand with corporate lobbyists in DC. And, Bill Halter is ahead in the run-off 48-46.
Last week, the U.S. Senate rejected a plan that would have broken up the nation’s six largest banks firms into firms that could fail without wreaking havoc on the economy. Even though the defeat reinforces Wall Street’s political dominance, there is still room for a handful of other useful reforms, like banning banks from gambling with taxpayer money and protecting consumers from banker abuses. After looting our houses, banks are now pushing for the ability to bet on movie box-office receipts, and will keep trying to financialize anything they can unless Congress acts.
Wall Street calls the shots
Writing for The Nation, John Nichols details last week’s Capitol Hill damage. Today’s financial oligarchy, in which a handful of bigwig bankers and their lobbyists are able to write regulations and evade rules they don’t like, will still be in place after the Wall Street reform bill is passed. The lesson is clear, as Nichols notes:
Whatever the final form of federal financial services reform legislation, one thing is now certain: The biggest of the big banks will still be calling the shots.
Still worth fighting for
As I emphasize for AlterNet, Congress has made a terrible mistake here, but there is still room for reform. It took President Franklin Delano Roosevelt seven years to enact his New Deal banking laws. It took even longer to reshape public opinion of monopolies when President Theodore Roosevelt took on Corporate America in the early 1900s.
What’s still worth fighting for? We have to curb the derivatives market-the multi-trillion-dollar casino that destroyed AIG. We have to impose a strong version of the Volcker Rule, which would ban banks from engaging in speculative trading for their own accounts. We have to change the way the Federal Reserve does business and force the government’s most secretive bailout engine to operate in the open. And we have to establish a strong, independent Consumer Financial Protection Agency to ensure that the horrific subprime mortgage abuses are not repeated.
As Nomi Prins details for The American Prospect, the current reform bill will not effectively deal with the dangers posed by hedge funds and private equity firms-companies that partnered with banks to blow up the economy through investments in subprime mortgages. That means that whatever happens with the current bill, Congress must again take action next year to rein in other financial sector excesses.
The derivatives casino at the movies
As Nick Baumann demonstrates for Mother Jones, banks are doing everything they can to gobble up other productive elements of the economy. The economy crashed in 2008 in large part because banks had used the derivatives market to place trillions of dollars in speculative bets on the housing market. This wasn’t lending, it was pure gambling: Instead of using poker chips, bankers placed their bets with derivatives. But, as Baumann emphasizes, banks are now looking to expand the sort of thing they can make derivatives gambles with. The latest proposal is to allow banks to bet on the box office success of movies. That’s right, banks would be gambling on movies.
Hollywood may be shallow, but it isn’t stupid. It doesn’t want to see the banking industry repeat its destructive looting of the housing industry on the movie business, and is pushing hard to ban banks from betting on movies. But we can’t count on every industry having a powerful lobby group to counter every assault from the banking system.
Taking stock in schools
Consider the unsettling report by Juan Gonzales of Democracy Now!. Gonzales details how big banks gamed the charter school system to score huge profits while simultaneously saddling taxpayers with massive debts that make teaching kids supremely difficult. By exploiting multiple federal tax credits, banks that invest in charter schools have been able to double their money in seven years-no small feat in the investing world-while schools have seen their rents skyrocket. One school in Albany, N.Y. saw its rent jump from $170,000 to $500,000 in a single year.
About that unemployment rate…
It’s not like public schools are flush with cash right now. The $330,000 increase in rent could pay the salaries of more than a few teachers. As the recession sparked by big bank excess grinds on, even the good news is pretty hard to swallow. As David Moberg emphasizes for Working In These Times, the economy added 290,000 jobs in April, but the unemployment rate actually climbed from 9.7 percent to 9.9 percent in March. That’s because the unemployment rate only counts workers who are actively seeking a job-if you want a job but haven’t found one for so long that you give up, you’re not technically “unemployed.” All of those “new” workers are driving the official figures up.
In other words, it’s still rough out there. And likely to stay rough as state governments try to deal with the lost tax revenue from plunging home values and mass layoffs. Nearly half of all unemployed people in the U.S. have been out of a job for six months or more. And while we’d be much worse off without Obama’s economic stimulus package, that percentage is likely to grow this year, Moberg notes.
This is what unrestrained banking behemoths do. They book big profits and bonuses for themselves, regardless of the consequences for the rest of the economy. Congress absolutely must impose serious financial reform this year. After the November election, breaking up the banks must once again be on the agenda when Congress considers the future fate of hedge funds, private equity firms, Fannie Mae and Freddie Mac. If we don’t rein in Wall Street, banks will continue to wreak havoc on our homes, our jobs and even our schools. Congress must act.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
In America, conservatives couldn’t kill the welfare state because it was too popular, so they decided to re-purpose it for conservative ends. These are their stories.
If you thought that Wall Street couldn’t get more destructive, think again. And if you that the charter school movement couldn’t get even more removed from serving the public good, you also need to think again. On Friday, NY Daily News columnist Juan Gonzalez wrote a column about how big investors can double their money in seven years using a special tax credit to invest in charter schools, and he also discussed what he uncovered in a brief segment on Democracy Now! which he co-hosts with Amy Goodman. Here’s how he summarized it on the air:
One of the things I’ve been trying now for a couple of years is to try to figure out why is it that so many hedge fund managers, wealthy Americans, and big banks, Wall Street banks, executives of Wall Street banks, have all lined-up supporting and getting involved in the development of charter schools. I think I may have come across one of the reasons. There’s a lot of money to be made in charter schools, and I’m not talking just about the for-profit management companies that run a lot of these charter schools.
It turns out that at the tail end of the Clinton administration in 2000, Congress passed a new kind of tax credit called a New Markets tax credit. What this allows is it gives enormous federal tax credit to banks and equity funds that invest in community projects in underserved communities and it’s been used heavily now for the last several years for charter schools. I have focused on Albany, New York, which in New York state, is the district with the highest percentage of children in charter schools, twenty percent of the schoolchildren in Albany attend are now attending charter schools. I discovered that quite a few of the charter schools there have been built using these New Markets tax credits.
What happens is the investors who put up the money to build charter schools get to basically or virtually double their money in seven years through a thirty-nine percent tax credit from the federal government. In addition, this is a tax credit on money that they’re lending, so they’re also collecting interest on the loans as well as getting the thirty-nine percent tax credit. They piggy-back the tax credit on other kinds of federal tax credits like historic preservation or job creation or brownfields credits.
The result is, you can put in ten million dollars and in seven years double your money. The problem is, that the charter schools end up paying in rents, the debt service on these loans and so now, a lot of the charter schools in Albany are straining paying their debt service–their rent has gone up from $170,000 to $500,000 in a year or–huge increases in their rents as they strain to pay off these loans, these construction loans. The rents are eating-up huge portions of their total cost. And, of course, the money is coming from the state.
Wall Street’s gone wild and Congress seems disinclined to rein it in. The Justice Department may stray slightly from the president’s goal of “looking forward, not backward.” But there’s a weakness in the master plan for Goldman Sachs’ domination of the world: Wall Street is in New York State, and the leading candidate for New York State Attorney General is Elizabeth Holtzman.
If Liz runs on a campaign to clean up Wall Street, regulate it, and deter crimes by enforcing laws, she will likely gain the backing of many national organizations, including the labor movement, which share this agenda. And a campaign that garners support, and funding, nationally would add significantly to her advantage, and to our chances of combatting the kleptocracy in courts of law.
By way of Digby, the Financial Times brings us this bit of free range condensed Wallnuttery, an email that apparently is ripping around the trading desks of greater Randor:
Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours. We get up at 5am & work till 10pm or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t demand a union. We don’t retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we’ll eat that.
For years teachers and other unionized labor have had us fooled. We were too busy working to notice. Do you really think that we are incapable of teaching 3rd graders and doing landscaping? We’re going to take your cushy jobs with tenure and 4 months off a year and whine just like you that we are so-o-o-o underpaid for building the youth of America. Say goodbye to your overtime and double time and a half. I’ll be hitting grounders to the high school baseball team for $5k extra a summer, thank you very much.
It goes on like that. Read it if you can stomach tantrums from multimillionaires. My thoughts went immediately to the same place as this witty reply found in the comments of the FT piece:
Go ahead and continue to take us down, but you’re only going to make yourselves feel better. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to discover, just like everyone else, that people tend to gravitate towards jobs they have an aptitude for, and in our case there’s probably going to be less demand for abstruse parasitic deal making and tricking people out of their money by lying to them. We get up at 5am & work till 10pm or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t demand a union. We don’t retire at 50 with a pension. You too would do all of these things if you could make as much money as we do simply by being comfortable with morally bankruptcy.
This person covers all the major glaring points of conceit motivating the original rant, and those eagerly forwarding it. The biggest being their conceit that they can just up and do everyone else’s jobs. I particularly like his point that working hours like 5am to 10pm has a lot to do with being very well paid to do so, and the motivation to work like that tends to be in short supply at the sub $50,000 salaries most people make, and absent a bonus scheme that is multiples of base salary.
I do agree they’re vicious on a level comparable to dinosaurs though. Go with that line guys. In fact, I take it back about Galting yourselves. Please, write more emails like this. It’s better than any ad MoveOn could craft in support of financial reform. But it’s still galling.
I was in NYC yesterday for the big march on Wall Street, and it was really great, one of the most fun marches I have been at in many years. Big, boisterous crowd; great speeches; lots of good chants. It’s always great to have a gorgeous spring day to do a march on (I guess God hates the Wall Street bankers, too). And it was wonderful to see so many different organizations- labor unions and community organizations from all around the region- represented as well.
This march is part of a month of big actions going after Wall Street. In San Francisco, in Kansas City, in North Carolina, this week was a series of big marches and actions. On the weekend of May 15-17, there will be some big, fun, creative demonstrations targeting K Street (since they “own the place”, as Dick Durbin put it).
These demonstrations aren’t just random marches. There is a movement growing to take this country’s democracy and economy back from these big banks. It’s not just the legislative fight in Washington, DC. It’s the Move Your Money campaign. It’s the LA City Council pushing back against the big banks. It’s students on college campuses starting to talk about a divestment campaign. It’s activists discussing state and local ballot initiatives targeting the big banks. It’s investigative journalists at The Huffington Post and The Nation and Rolling Stone and other blogs and media outlets digging deeper into the sleazy deals these Wall Street guys have been doing.
Something is building out there, and the big bankers and their political cronies had better keep looking over their shoulders. They still have their power and their money, but when people in this country rise up in anger, power and money can still be defeated.
Check out these pictures and videos on-site blogging from the event. And come on down to DC May 15-17 to take on K Street.
For those of us trying desperately to wrap our heads around the Security and Exchange Commission’s allegations against Goldman Sachs, the Wall Street Journal’s recent article on the alleged fraud is a real boon. The article is clear and concise (or at least as clear and concise as can be expected when a describing multi-stage transaction that involved more than 500,000 mortgages in 48 states), and, perhaps just as importantly, it frames the events in a way that recognizes that the economic collapse was a fundamentally human event—caused by human greed at the cost of human suffering, and leading to even greater human suffering.
According to the article, the allegations involve a massive bet, booked by Goldman Sachs and placed by hedge fund manager John Paulson, that would pay off if people across the country could not pay their mortgages. He allegedly took a particular interest in adjustable rate subprime loans issued to people with poor credit scores, rightly believing that the people who had taken out these shady mortgages didn’t really understand how big their monthly payments would eventually become. As we all now know, Mr. Paulson was all too right, and he profited to the tune of more than $1 billion as foreclosure rates shot up.
You can feel it starting to grow, a momentum around doing something real to take on the big banks on Wall Street. People are taking to the streets. The SEC is finally beginning to do its job. Democratic politicians are getting more aggressive, and Republicans are getting more nervous. And as John Paul Jones might have put it, we have not yet begun to fight.
Let me stipulate right away that we haven’t won anything yet, and that no matter what happens with the financial reform bill currently in front of Congress, this is going to be a very long, very hard fight. Companies as powerful as these Wall Street monsters will not be reined in anytime soon. Even if the best of the House bill gets combined with the best of the Senate bill (and that is a very big if), we won’t be even close to where we need to be in terms of breaking up the big banks and bringing them to a reasonable size and a reasonable amount of power. We won’t be done with Wall Street cozying up to and capturing regulators or politicians. We won’t be done with Wall Street financiers trying to talk corrupt or naïve local officials into doing deals that are terrible for their communities. And even with the best intentions of legislators, we can expect that the price of passage for any bill will be loopholes inserted by Wall Street lobbyists that the clever lawyers and financiers on Wall Street will immediately start worming through.
This will be a long battle, not unlike health care reform in my view. Working to pass the best possible bill is just the first step for progressives, but we need to keep organizing to open up multiple fronts in a long-term battle. Just like with health care, we have to continue to expose Wall Street/insurance company abuses of power, push regulators to do the right things and expose them when they don’t, fight battles at the state and local levels, and fight for stronger reforms year after year in Congress.
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.
Today the House passed a far-reaching bill to reform the financial industry, a useful and much-needed endeavor.
Out of all the possible things Congress can do, making life tougher for Wall Street probably constitutes a can’t-go wrong effort. One would expect this bill to pass with a soaring bipartisan vote, a pledge of unity that would make everybody – Democrats, Republicans, the president, and the government itself – look good. Who would be against punishing those who initiated the economic crisis?
175 Republicans and 26 conservative Democrats (plus Dennis Kucinich), it turns out.
Next week, the debate over financial reform will begin in earnest when Congress returns from its Easter break. Both political parties are gearing up for a major fight, and the stakes couldn’t be higher. An out-of-control banking sector has cost the economy over 7 million jobs since 2007, and without major reforms, Wall Street could repeat this disaster in just a few years’ time. But thanks to Wall Street’s lobbying might, all of the necessary reforms are currently in jeopardy.
Key Reforms
Writing for The Nation, Christopher Hayes offers a useful primer on financial regulation, highlighting three reforms that are crucial to any bill.
With no effective regulation of consumer protection issues for years, the existing banking regulators were more focused on preserving bank profitability than on going to bat for ordinary citizens. If banks could make big profits with unfair gimmicks (or even fraud), regulators usually looked the other way. The solution is a strong, independent Consumer Financial Protection Agency (CFPA) charged with nothing but protecting consumers from banker abuses, an agency with the broad authority to both write rules and enforce them.
We need to rein in the $300 trillion market for derivatives, the complex financial contracts brought down AIG. Unlike ordinary stocks and bonds, derivatives are not traded on exchanges, so nobody really knows what is going on in this tremendous market. When something goes wrong, like with the collapse of Lehman Brothers, nobody can tell who the problem will effect. Without information, markets panic, and the entire financial system can collapse within a matter of days. Fortunately, this problem has a simple solution: require all derivatives to be traded on exchanges.
Too-big-to-fail is too big to exist. The U.S. has never had banks as large as those that exist today, and their size gives them enormous political clout. It’s part of the reason why regulators didn’t make banks obey consumer protection laws, and why banks have been so effective in derailing reform. It’s been almost two years since the Big Crash, yet we are still wrangling over reform because giant banks deploy giant lobbying teams, and have almost unlimited resources to devote to their lobbying efforts. If we can’t scale back the banks’ power by breaking them up into smaller institutions, it’s unlikely that other reforms will be effective.
As Margaret Dorfman emphasizes for American Forum, a strong CFPA would help protect small businesses, since a huge proportion of them are financed with credit cards and home equity loans (Dorfman is CEO of the U.S. Women’s Chamber of Commerce, an advocacy group for women that should not be confused with the U.S. Chamber of Commerce-a nasty lobbying front for a few hundred high-flying executives). As Dorfman notes, small businesses are where most new jobs come from– if a regulator can ensure that these businesses are not pushed around by abusive banks, they can help repair our jobs.
Unfortunately, all three reforms are in real jeopardy as the bill moves to the Senate floor for a vote, as Simon Johnson notes in his Baseline Scenario blog carried at AlterNet. Senate Banking Committee Chairman Chris Dodd (D-CT) hasn’t included any language on breaking up the banks, he has significantly watered down the CFPA proposal President Obama put forward, and derivatives reform was almost entirely gutted in the House.
What’s at stake
So what’s at stake? For some perspective, consider last week’s jobs report. As Steve Benen notes for The Washington Monthly, the U.S. economy added 160,000 jobs in March, the first significant monthly gain since the start of the recession, and the best jobs report in three years. But while it’s good to see the economy actually adding jobs, at the March rate, it would take more than three-and-a-half years to win back the 7 million jobs lost since 2007.
This jobs disaster was not caused by faceless and unpreventable forces-it was the direct result of a reckless and unregulated banking system. Without major reforms, banks will always have this economic leverage when that recklessness overpowers them: bail us out, or watch your economy collapse.
This is an issue of basic democratic fairness, as Noam Chomsky explains for In These Times. Wall Street has purchased the right to bend public policy to anything that benefits banks-the rest of society is not their concern. The bailouts of 2008 and 2009 make that clear. After wrecking the economy to enrich themselves, bank executives then looted the public coffers with the threat of still further economic havoc.
And the political clout of America’s largest banks insulates them from criticism when they profit from abuses-particularly when those activities don’t spark wider economic crises. As Andy Kroll highlights for Mother Jones, J.P. Morgan Chase is currently making a killing by financing mountaintop removal mining (MTR). MTR is an ecological nightmare-literally a bombing campaign in which entire mountains in Appalachia are destroyed to make way for cheap coal. That’s meant billions in profits for J.P. Morgan, and an environmental catastrophe for the United States.
Obama and Congress have a choice. They can play financial reform for campaign contributions, pushing a watered-down bill that will function as a set of reforms-in-name-only. Alternatively, they can do their jobs, confront a dangerous financial oligarchy head-on, and help build an economy that works for everyone.
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.
While the poor judgment of top-level officials at Treasury and the Office of Management and Budget frequently makes the news, there is another, unrecognized economic crew doing terrific work: Officials at the Department of Labor are restoring workers’ rights after nearly a decade of neglect.
To top it all off, President Barack Obama appears ready to make another set of strong, though less high-profile, economic appointments that will help rein in Wall Street excess.
DoL All-Stars
As Esther Kaplan documents in a masterful piece for The Nation, the Department of Labor (DoL) has been transformed from an agency that enabled corporate excess to one that holds companies accountable. In less than a year, Labor Secretary Hilda Solis and her team of deputies significantly leveled the playing field between ordinary workers and high-flying executives.
For decades, when conservatives have attempted to confront social problems, they’ve relied on the mantra of enforcement. If we had more cops, we’d fix everything. But as Kaplan documents, under President George W. Bush and his Labor Secretary Elaine Chao, the DoL simply stopped enforcing worker protection laws. From wage theft to mine safety, the Department essentially allowed corrupt employers to do anything they wanted.
That neglect has already ended. Armed with a budget of just $1.5 billion-that’s roughly 0.2% of the Troubled Asset Relief Program-Solis and company have cultivated a list of economic accomplishments that seemed impossible when they took office. As Kaplan details:
“Facing badly depleted enforcement ranks, Solis hired 710 additional enforcement staff, including 130 at OSHA and 250 for the crucial wage-and-hour division, upping inspectors by more than a third. Another hundred will come on next year to staff a crackdown on the misclassification of millions of employees as “independent contractors”–a dodge to avoid paying taxes and benefits–a move that has set off enormous buzz on business blogs. Her team took a plunger to the stagnant regulatory pipeline, moving forward new rules on coal mine dust, silica, and cranes and derricks. She restored prevailing wages for agricultural guest workers and is poised to restore reporting rules on ergonomic injuries.”
Fixing the Fed
Obama also appears ready to make another slate of strong economic appointments at the Federal Reserve, an agency stuffed with free-marketers who helped engineer both an economic catastrophe and resulting bailouts. Obama’s rumored picks-economists Janet Yellen and Peter Diamond and bank regulator Sarah Bloom Raskin-are aggressive about making the economy work for everyday citizens, as I emphasize for AlterNet.
If Congress passes financial reforms similar to what Senate Banking Committee Chairman Chris Dodd (D-CT) has proposed, the Fed’s regulatory responsibilities will actually expand, despite its failures over the past decade. The Fed has never effectively regulated anything and it’s not very concerned with unemployment as an economic problem.
That makes Obama’s pending slate of officials who prioritize bank regulation and broader employment very important. Raskin, in particular, stands out with her strong record as a state banking regulator. If Obama ultimately nominates her, she’ll be the first pure regulator ever appointed to the Fed. The potential picks don’t make up for Obama’s reappointment of bailouteer Ben Bernanke as Federal Reserve Chairman, but they do show that the President is capable of sound judgment.
Strengthening the Dodd bill
But the strength of Obama’s potential Fed nominees doesn’t justify the weakness of Dodd’s financial regulation bill. As Amy Goodman and Juan Gonzalez of Democracy Now! reveal in interviews with economist Robert Johnson and ColorLines Editorial Director Kai Wright , the bill leaves plenty to be desired. Dodd is currently making the rounds and declaring that his bill will end the abuses giant banks deployed against the broader economy, but the truth is, the bill has largely been gutted by bank lobbyists. Here’s Johnson:
“We’re engaged in a Kabuki theater right now, hoping the material is too complex for the American people to understand, declaring victory, and yet basically encoding into law current practices of the banks. Every one of your listeners should ask the question, given this legislation, if the President, House and Senate pass it, will we be in a place where AIG couldn’t have happened, Lehman Brothers couldn’t have happened, Bear Stearns couldn’t have happened, and, more importantly, nine, ten percent unemployment caused by the banking crisis couldn’t have happened? I argue this bill does very little.”
The importance of trust-busting
So Dodd’s bill needs to be substantially strengthened as it moves through the Senate. But there’s plenty of other economic work to be done outside of Wall Street. As Barry C. Lynn and Phillip Longman explain for The Washington Monthly, the steady expansion of corporate monopolies has resulted in a fundamentally unstable economy.
The U.S. simply does not create jobs at the rate it once did, and companies aren’t held accountable to market forces like competition. Many of our monopolies are hidden, as Lynn and Longman note. Macy’s and Bloomingdale’s seem like competitors, but they’re owned by the same holding company. The same dynamic holds true in auto manufacturing, banking, pet food, health care and IT. Consumers think they’re choosing between competing goods and services, when in fact they’re shopping in different divisions of the same corporate Goliath.
All hope is not lost. As Laura Flanders emphasizes for GRITtv, the passage of health care reform proves that the Obama administration and Congress can make substantive progressive changes when they put their minds to it. The question is whether Obama is willing to limit his economic accomplishments to lower-level issues, or go big and take on the deep-pocketed corporate campaign contributors.
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.
