Obama's Last Test

The final financial reform package has been dramatically watered down and is riddled with loopholes. But its supporters (and some critics) say that we shouldn't worry because it at least allows regulators to get tough on the financial industry later -- if they think it's necessary. That is actually true. It does have such provisions.

So, who those regulators are could not be more important. Right now, Tim Geithner is leading the charge to make sure the regulators are as weak and banker-friendly as possible -- as usual. So, he is fighting against Elizabeth Warren.

I don't write this to encourage the president to pick Warren as the head of the Consumer Financial Protection Bureau. That pick is the most obvious thing in the world -- if he cares to actually do consumer protection. Everybody on the planet knows this, and that's precisely why Geithner is fighting against her.

No, I write this to give you a way of knowing for yourself if this financial reform legislation has any chance of working or if it was a Democratic joke all along to pretend they're doing something while continuing to pocket corporate contributions.

Warren is not the only pivotal regulator. I think Gary Gensler at the Commodity Futures Trading Commission is even more important. He's a reformed reformer. He used to work at Goldman Sachs and previously helped to deregulate the industry in the first place. But he has been one of the toughest voices for financial industry reform recently (see, redemption is possible for him and this administration). And his agency can regulate derivatives, stop fraud and limit speculation. That's more important than the Consumer Financial Protection Bureau, which looks to protect consumers on a more micro level.

So, if in a year Elizabeth Warren and Gary Gensler are gone, then you know that it was all a sham. The industry won again and we never really had a chance. If they are still there and they're doing their job of protecting American consumers and taxpayers, then there is hope. We might just pull this economy out before the banks crash it again.

Of course, this is an over-generalization. And our fate is not bound up in just two people. I wouldn't want to put the same kind of faith in them that people did in Obama and hope that everything works out just fine. But they are important indicators. They give us a sense of which direction we're going to go.

The early signs are not good. The Obama administration is reaching out to the Business Roundtable as we speak to see how they can quietly loosen regulations on them again. The CEO of Citigroup says financial reform will not impact their derivative trading at all. And Elizabeth Warren is teetering on the edge as the tools of Wall Street attack her.

We can rally. There can be change. We can have hope. But it's all up to Obama. Which way is he going to go? Is he a smart tactician that's actually going to bring real change in subtle ways through strong regulators or does he think he can play the Washington game a little better and trick us into thinking he gave us real reform while gutting the regulators and protecting the status quo?

No more excuses about the wrong advisors. He can choose right now between good and bad advisors. And everyone knows who is actually trying to do real reform. What's it going to be? You'll know the character of the man by the people he chooses. And you'll also know the economic fate of our country.

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Obama's Last Test

The final financial reform package has been dramatically watered down and is riddled with loopholes. But its supporters (and some critics) say that we shouldn't worry because it at least allows regulators to get tough on the financial industry later -- if they think it's necessary. That is actually true. It does have such provisions.

So, who those regulators are could not be more important. Right now, Tim Geithner is leading the charge to make sure the regulators are as weak and banker-friendly as possible -- as usual. So, he is fighting against Elizabeth Warren.

I don't write this to encourage the president to pick Warren as the head of the Consumer Financial Protection Bureau. That pick is the most obvious thing in the world -- if he cares to actually do consumer protection. Everybody on the planet knows this, and that's precisely why Geithner is fighting against her.

No, I write this to give you a way of knowing for yourself if this financial reform legislation has any chance of working or if it was a Democratic joke all along to pretend they're doing something while continuing to pocket corporate contributions.

Warren is not the only pivotal regulator. I think Gary Gensler at the Commodity Futures Trading Commission is even more important. He's a reformed reformer. He used to work at Goldman Sachs and previously helped to deregulate the industry in the first place. But he has been one of the toughest voices for financial industry reform recently (see, redemption is possible for him and this administration). And his agency can regulate derivatives, stop fraud and limit speculation. That's more important than the Consumer Financial Protection Bureau, which looks to protect consumers on a more micro level.

So, if in a year Elizabeth Warren and Gary Gensler are gone, then you know that it was all a sham. The industry won again and we never really had a chance. If they are still there and they're doing their job of protecting American consumers and taxpayers, then there is hope. We might just pull this economy out before the banks crash it again.

Of course, this is an over-generalization. And our fate is not bound up in just two people. I wouldn't want to put the same kind of faith in them that people did in Obama and hope that everything works out just fine. But they are important indicators. They give us a sense of which direction we're going to go.

The early signs are not good. The Obama administration is reaching out to the Business Roundtable as we speak to see how they can quietly loosen regulations on them again. The CEO of Citigroup says financial reform will not impact their derivative trading at all. And Elizabeth Warren is teetering on the edge as the tools of Wall Street attack her.

We can rally. There can be change. We can have hope. But it's all up to Obama. Which way is he going to go? Is he a smart tactician that's actually going to bring real change in subtle ways through strong regulators or does he think he can play the Washington game a little better and trick us into thinking he gave us real reform while gutting the regulators and protecting the status quo?

No more excuses about the wrong advisors. He can choose right now between good and bad advisors. And everyone knows who is actually trying to do real reform. What's it going to be? You'll know the character of the man by the people he chooses. And you'll also know the economic fate of our country.

Young Turks on You Tube

 

Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks

Become a Fan of The Young Turks on Facebook: www.facebook.com/tytnation

 

 

Weekly Audit: Wall Street Goes to the Movies

by Zach Carter, Media Consortium blogger

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.

Senator Dodd's Sense of Urgency Long Overdue

The New York Times reports that Connecticut Senator Chris Dodd, the Chairman of the Senate Banking Committee, will unveil his own financial sector regulatory reform proposal on Monday after being unable to reach on a compromise measure with the GOP members on the committee.

The chairman of the Senate Banking Committee, hoping to break a months-long logjam on the biggest overhaul of financial regulations since the Depression, will unveil his own proposal on Monday, without yet having a single Republican endorsement.

The chairman, Christopher J. Dodd, Democrat of Connecticut, said on Thursday that the committee would take up the bill on March 22.

The breakdown in bipartisan talks dimmed hopes for a sweeping rewrite of Wall Street’s rules, nearly two years after the collapse of the investment bank Bear Stearns started a financial crisis that has cost taxpayers hundreds of billions of dollars.

Mr. Dodd suggested that he was acting out of a sense of urgency. The House adopted a regulatory overhaul — a priority of the Obama administration — in December on a largely party-line vote. But bipartisan negotiations in the Senate have repeatedly faltered over several critical points, notably the creation of a consumer financial protection agency to regulate mortgages, credit cards and other products.

While it's worth waiting to see what Senator Dodd's proposals actually are and if they include a stand alone independent Consumer Finance Protection Agency and a reigning in of esoteric derivative instruments, it is a relief to hear that Senator Dodd now has a "sense of urgency." It has long been clear that the Republicans are not interested in governing. With their interminable delays, they have sought, and frankly largely succeeded, in derailing the agenda of the Obama Administration. While it may not be too late to actually achieved wide-ranging reforms, that window of opportunity is now measured in just months. The hour of getting down to business is now.

Weekly Audit: The GOP Hates Jobs

By Zach Carter, Media Consortium blogger

Through inaction and timid legislative negotiations, Congress just keeps letting the U.S. sink deeper and deeper into the economic abyss. Last week, Congress denied relief to the jobless and is currently poised to undercut a proposal that would rein in predatory lending. With unemployment out of control and banks pillaging citizens’ pocketbooks at every turn, the economy is in dire need of serious financial reform and a major jobs package.

More than one million have lost unemployment benefits

As James Ridgeway emphasizes for Mother Jones, over a million people receiving unemployment benefits ran out of financial rope on March 1 thanks to Sen. Jim Bunning’s (R-KY) self-righteousness. As a result of bizarre Senate procedural rules, Bunning’s sole “no” vote was enough to stop a bill that would have extended unemployment benefits for those who are out of work. Of course, Bunning had plenty of moral support from his fellow Republicans. Ridgeway highlights a Think Progress post on Rep. Dean Heller’s (R-NV) preposterous argument that it is time for the government to cut off unemployment benefits, since there are so many bums.

“What makes Heller’s statement really stupid, of course, is that people could become hobos if Congress doesn’t extend unemployment benefits, rather than if they do,” Ridgeway writes. “Modest as they are, these weekly benefits are what’s keeping thousands—and perhaps millions—of families out of poverty.”

As Brian Beutler notes for Talking Points Memo, Bunning’s economic insanity also triggered a 21% cut in the fees doctors receive for treating Medicare patients. That’s a big “Screw you!” to seniors.

What happens when unemployment benefits dry up?

The degree of personal crisis attached to unemployment is also important. We’re talking about access to basic necessities. As Roger Bybee notes for Working In These Times, when a family runs out of unemployment benefits, the result is an absolute personal catastrophe in which there is simply no money left to buy food, pay rent, or meet electricity bills.

Yet when a major financial institution finds itself on the verge of collapse, the government is quick to come to the rescue. In addition to the one million people ran out of benefits on March 1, four million more are slated to run out by June—that’s roughly the combined populations of Los Angeles and Dallas. This is a tremendous national crisis. Here’s Bybee:

“There is plenty of bipartisan compassion in Congress when it comes to bailing out the wealthy and their banks. But when it comes to spending federal money to bail out folks … with unemployment compensation and a major jobs program, a bi-partisan consensus forms among conservatives in both parties eager to show ‘fiscal discipline.’”

As Nobel laureate economist Joseph Stiglitz emphasizes in an interview at AlterNet, the jobs crisis is so severe that the government needs to go much further than simply extending existing unemployment benefits. At minimum, it also needs to send a major package of fiscal aid to states on the order of $200 billion to allow states to hire teachers and cops, as well as prevent further layoffs.

Making the jobs bill accessible to all

While a new jobs bill is critical, it’s important to make sure everyone has access to its efforts, as Aaron Glantz explains for The Progressive. The economic stimulus bill that President Barack Obama signed into law last year has helped keep the economy from falling off a cliff, but it’s overwhelmingly neglected communities of color. The unemployment rate for blacks is 16.5%, nearly the double the 8.7% rate for whites, while Latinos face an unemployment rate 50% higher than whites. Not all of that disparity can be blamed on the stimulus, but the federal contracts awarded for new jobs projects overwhelmingly went to white-owned firms. We have to make sure that the funds Congress dedicates to unemployment relief are distributed fairly.

Save the Consumer Financial Protection Agency

After watching the government hurl trillions of dollars at faltering banks, it’s obvious that major financial reform is urgently needed. And one of the most important aspects of that reform is a new regulatory agency that defends consumers, not just bank balance sheets. As Tim Fernholz argues for The American Prospect:

“Shoring up our financial system to avoid new disasters remains popular with the public but only if it represents real reform. …That means closing loopholes and making clear that this bill has what it takes to protect average citizens as well as restricting banks’ bad behavior.”

And yet astoundingly, Sen. Chris Dodd (D-CT), the current Democratic leader of financial reform negotiations in the Senate, appears ready to drop Obama’s proposal to create an independent Consumer Financial Protection Agency (CFPA).

Instead, Dodd would house the regulator under the Treasury Department, and give the existing, failed bank regulators effective veto power over the CFPA’s moves. It’s a head-fake: We create a new regulator, but are instead giving that power to the same failed agencies who allowed the banks to pillage our pocketbooks, our retirement savings and our home values.

Failed negotiations with the GOP

This is supposedly all part of a set of negotiations with Republicans, but they aren’t really negotiating in any clear sense. Negotiating means going through some process of give-and-take. Right now, Republicans are just seeing how far Democrats will bend, and so far, there has been no limit. Ferhnolz is right. Voting for the banks and against taxpayers and consumers will be a very bitter pill for Republicans to swallow. Dodd and the Democrats need to make them do it instead of caving to pressure and allowing Republicans to vote for a weak bill that doesn’t protect the public from banker excess. Make the Republicans vote for real reform, or face the consequences at the polls for voting against it.

The public shame that is currently being heaped upon Bunning should prove that point. The American public wants jobs and financial reform. They want to go back to work and make sure that the bankers who tanked the economy can’t keep getting rich by hijacking their savings. Woe unto the politician who opposes that.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

 

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