Chris Dodd’s Race to the Bottom
Flickr/David Berkowitz
Cross-posted from Mother Jones.com
In just six months, Sen. Chris Dodd (D-Conn.), the stately front man of the Senate’s campaign to crack down on Wall Street, has transformed from financial-reform avenger, scourge of the Federal Reserve, and ally of the average consumer to a GOP pushover. Last fall, the veteran Senator and chairman of the banking committee opened financial reform talks as if shot out of a cannon: He rallied around an independent consumer-protection agency, labeled the Fed’s regulatory efforts “an abysmal failure,” and proposed a super regulator who would rein in banks and lenders, instead of the existing muddle of offices that let the worst financial crisis in a generation unfold under their noses. “Dodd is basically starting out by out-reforming the administration,” a congressional staffer told the Washington Post.
Now, Dodd appears to have switched his focus from out-reforming the White House to out-compromising just about everyone. As the Senate banking committee prepares to release a draft of a comprehensive reform bill as early as this week, Dodd has repeatedly conceded to his Republican counterparts on key issues, almost guaranteeing that the Senate’s measure will be far more lenient on the banking industry than the legislation the House passed in December. (A spokeswoman for the banking committee didn’t respond to an interview request for this story.) Dodd’s willingness to appease Republicans like Sen. Bob Corker (R-Tenn.), the main GOP negotiating partner, and Sen. Richard Shelby (R-Ala.), the banking committee’s ranking member, has disappointed Dodd’s fellow Democrats and reform advocates who urge a tougher crackdown. “Those who are arguing for real reform,” says one Democratic aide involved in the issue, “are arguing, ‘Why even compromise if they’re going to oppose it anyway? Why are you negotiating against yourself?’”
Obama, rhetorical fisticuffs, and the new “jobs surge”
Flickr/phil dokas
Below is a new, short piece of mine—an introduction, to be precise, to Steve Fraser’s most recent piece for TomDispatch.com, “The New Deal in Reverse: How the Obama Administration Ended Up Where Franklin Roosevelt Began.” Fraser’s piece compares the first years of Obama and FDR, and unlike any other historian, he describes how the first 365 days of these two historic presidents (albeit for different reasons) resemble mirror images of each other. My introduction to the piece follows here.
***
“A Tale of Two Presidencies”
Not long after Scott Brown, a nude model turned U.S. Senator, and his Tea Party cohort rode the public’s growing disquiet and the candidate’s everyman truck into office, you could hear the shift in Barack Obama’s voice. Out went the cool, detached president, and in came a new populism and a leader who had lost his elitist “g”s and now talked about “leakin’ ” roofs and “buyin’ ” new curtains, who spent time walkin’ the shop floor and rollin’ up his shirtsleeves. In Elyria, Ohio, he exhorted a town-hall crowd with how hard he’s been fightin’ — so hard, in fact, that he repeated the word 14 emphatic times.
Rhetorical fisticuffs aside, Obama the Populist had by now essentially sidelined health care and climate change for a far narrower focus in 2010: jobs. In his State of the Union Address, he held up the nearly $800 billion stimulus bill as evidence of his job-creating bona fides, and laid out a new $30 billion small-business initiative using repaid bailout cash to boost hiring and wages. “Jobs must be our number-one focus in 2010” was his mantra.
The president’s recent jobs “surge,” however, does little more than tilt feebly at fixin’ the country’s dismal employment landscape. Sendin’ funds to community banks to provide credit and cuttin’ taxes for businesses, as Obama proposes, are at best indirect and modest routes to creatin’ new jobs or savin’ existing ones. No indirect program of this sort is going to quickly lower an official unemployment rate hovering near 10%, with underemployment at 17%, and record numbers of people jobless for 27 weeks or more.
Looking back on Obama’s first year, there’s little to suggest he’s up to the jobs task. The stimulus, for instance, reportedly paid for around 600,000 jobs in the fourth quarter of 2009, and around 1.2 million jobs since its creation — nothing to scoff at, but scant enough improvement in the face of 2.6 million jobs lost in 2008 and nearly 4 million in 2009. Compared to presidential forebear Franklin Delano Roosevelt, who galvanized the nation during the Great Depression with truly popular direct public-works programs that created millions of jobs, Obama’s record is paltry indeed, as Steve Fraser, TomDispatch regular and author of Wall Street: America’s Dream Palace, so vividly makes clear. (To catch him in a TD audio interview discussing why Obama has ignored the jobs model Roosevelt pioneered, click here.) Andy
Lawyers, Guns, and Money: How Banks Snooze and Arms Dealers Profit
CROSS-POSTED FROM MOTHERJONES.COM
Among Bank of America’s 50 million customers, Pierre Falcone was far from ordinary. An infamous global arms dealer who unlawfully sold weapons to Angola for its civil war and an international fugitive, Falcone was convicted of tax fraud and illegal arms dealing in 2007 and 2009 and is currently serving six years behind bars. Yet for nearly two decades, Falcone and his relatives freely used 29 different bank accounts to funnel at least $60 million into the US from secretive havens like the Cayman Islands, Luxembourg, and Singapore, and from shell corporations and secret clients. Despite his criminal record and worldwide notoriety, Bank of America essentially treated him like any other depositor.
The story of how a criminal like Falcone used Bank of America—which later received billions in a taxpayer-funded bailout—and the US financial system to advance his criminal activities appears in a new report by the Senate investigations subcommittee, led by Sen. Carl Levin (D-Mich.). In revealing the operations of Falcone and others—in most cases for the first time—the report offers a lurid primer explaining how big banks, powerful attorneys, influential lobbyists, and a host of other businessmen in this country help launder dirty foreign money.
The report highlights several gaping holes in American money laundering and corruption laws, including an exemption made by the Treasury Department in 2002 to the Patriot Act. “Foreign officials still get access to our financial system at times because US officials aid and abet their actions,” Levin told reporters on Tuesday. The 325-page report sets the stage for a hearing Thursday featuring US enforcement officials as well as some of the main players who abetted secretive individuals like Falcone and the corrupt former president of Gabon, the late Omar Bongo.
The Taliban Trust Fund and the Infinite Af-Pak War
At a major conference in London today, Afghan president Hamid Karzai rolled out his much anticipated Taliban “reintegration” or buyout plan, an initiative for which Afghanistan’s allies have pledged $500 million to pay mid- or lower level fighters to stop fighting and reintegrate into Afghan society. The money could include resettling former Taliban fighters and landing them jobs, but excludes fighters with ties to al-Qaeda or other terrorist networks for inclusion in what’s being called the “Taliban trust fund.” And in discussing the future of the Af-Pak war, Karzai also reaffirmed that his country would need international help maintaining security in Afghanistan for anywhere from 10 to 15 more years; the training of Afghan’s own forces, he added, will require another five to 10 years.
For one, the Taliban trust fund idea, backed by US envoy Richard Holbrooke, will strike even casual observers of American war as little more than a repackaging of the Sunni Awakening movement in Iraq. Indeed, Karzai’s announcement comes a few months after the Los Angeles Times reported that Army Gen. Stanley McChrystal personally dragged out of retirement the key architect behind the Iraqi program, which paid Sunni Muslims to leave the insurgency and even defend against al-Qaeda and other extremist groups. Never mind the fact that Iraq and Afghanistan are wildly different countries, from their populations and political structures to the food they eat and their geographies. Sure, you could argue that the Sunni Awakening, although mired with fraud and graft, resulted in modest amounts of success, but to apply the same lessons from Iraq to Afghanistan, as the Taliban trust fund idea seems to do, doesn’t make a whole lot of sense. (Plus, as Aram Roston’s recent investigation in The Nation showed, so much US funding is already finding its way into Taliban hands that spending another $500 million will only amplify that epic fraud.)
Indeed, the $500 million Taliban buyout plan reminds me a lot of historian Andrew Bacevich’s recent critique of Obama’s Af-Pak policy—namely, that it altogether lacks any kind of imagination or rethinking of the task at hand; that US foreign policy all-too-frequently recycles the same officials toting the same tired ideas, i.e., the surge in Iraq and then in Afghanistan, and now the Awakening in Iraq and the Taliban trust fund. Obama’s national security brain trust, Bacevich adriotly argued, is “unable to conceive of a basis for national security policy that does not involve the increased commitment of American military resources.”
Which certainly dovetails with Karzai’s belief that foreign forces will be needed in Afghanistan for another 10 to 15 years. With each day, the president’s 2011 deadline for beginning withdrawal from Afghanistan resembles nothing more than smoke and mirrors; in reality, the US will be in Afghanistan training the Air Force or funding contractors or flying our drones for decades to come. In this context, Karzai’s 15-year estimate looks rather modest, and today’s conference in London is further confirmation (if you needed any) that the long haul of the Af-Pak war is just beginning.
Has Obama Won in Iraq?
Flickr/ The U.S. Army (Creative Commons)
On a day when there’s nothing but dismal, depressing news on the Obama front, Juan Cole credits the president for what Cole deems his first major foreign policy success: the US drawdown in Iraq. While he acknowledges the presence of US bases there (which will likely never leave), Cole credits Obama for his adherence to a strict timetable for withdrawing American troops from Iraq’s cities despite his generals’ opposition, for turning over security (however feeble) to Iraqi forces even in dangerous regions like Al-Anbar Province, and for essentially ending the war as we once knew it. Cole adds:
Contrary to the consensus at Washington think tanks, Obama is ahead of schedule in his Iraq withdrawal, to which he is committed, and which will probably unfold pretty much as he has outlined in his speeches. The attention of the US public has turned away from Iraq so decisively that Obama’s achievement in facing down the Pentagon on this issue and supporting Iraq’s desire for practical steps toward sovereignty has largely been missed in this country.
Not only will the US drawdown in Iraq greatly improve the image of the US in the Arab world and allow for more cooperation with Arab countries, but it will probably help US-Turkish relations, as well. Turks often blame the US for backing Iraqi Kurds and allowing a resurgence in Kurdish terrorism via the Kurdish Workers Party (PKK), to some 5,000 of whose fighters Iraqi Kurdistan has given safe harbor. The US will soon be out of that picture, and Turks and Kurds will have to pursue their relations on a bilateral basis.
I mostly agree with Cole here. That the US’ actions in Iraq haven’t made major news in quite a while—apart, that is, from their withdrawal from Iraq’s cities—is telling, and Obama does indeed deserve credit for standing up to people like Gen. Ray Odierno and sticking to the Status of Forces Agreement with the Iraqis. It’s probably the best foreign policy move Obama made in his first year as president. Iraq remains, however, in political turmoil, and Iraqi-led security leaves a great deal to be desired. (The Iraqis do claim to have thwarted another major bombing on their ministries, after several deadly attacks rocked Baghdad last year.) Sure, American troops are mostly removed from the car bombings and violence still rippling through Iraq’s cities, but the turmoil that remains is the US’ legacy. The victory may be Obama’s, but any kind of lasting success seems far off for the Iraqi people.
A Crash Course on the Financial Meltdown — Pecora Part II Begins
Cross-posted from MotherJones.com.
The 10 members of the Financial Crisis Inquiry Commission, the modern heir to the famous Pecora Commission convened in the wake of Wall Street’s 1929 crash, kicked off a marathon set of hearings on Wednesday and Thursday by grilling some of Wall Street’s most powerful executives, the regulators supposedly tasked with reining them in, and outside experts who watched the collapse. What they heard amounted to something of a crash course in the roots of the financial meltdown.
The FCIC is charged with issuing a report on the causes of the crisis—something that the Obama administration has been slow to do. That’s meant probing people like Goldman Sachs CEO Lloyd Blankfein and JPMorgan Chase CEO Jamie Dimon, who both appeared in the FCIC’s first hearing, on what caused the meltdown and what role their banks played in the process. The bankers and officials such as SEC chair Mary Schapiro pointed to a decline in underwriting standards and staggering housing bubble that combined, Dimon said, to help “fuel asset appreciation, excessive speculation, and far higher credit losses.”
One outstanding question about the financial meltdown has been how the subprime collapse spread to the broader economy. Back in 2007, Federal Reserve chairman Ben Bernanke didn’t expect any spillover from the housing crisis at all. Yet as the four Wall Street execs explained at the hearing, the mortgage securitization process—which took people’s actual mortgages and tried to make them behave like fungible assets you could trade just like stocks and bonds—led to vast amounts of Lehman Brothers-like speculation and leverage. The evaluators of these mortgage-backed securities, the credit rating agencies, only fueled the gambling by stamping their highest imprimatur on these shoddy loans. And when people stopped making their mortgage payments and the securities backed by those mortgages went sour, all these overleveraged institutions suffered huge losses that caused some to fail and others to survive only with government help. “In hindsight,” Dimon said, “it’s apparent that excess speculation and dishonesty on the part of both brokers and consumers further contributed to the problem.”
Of course, none of this could’ve happened without the proliferation of cheap cash, low interest rates, and the government’s push for greater homeownership, as seen in its handling of Fannie Mae and Freddie Mac. “The genesis of the problem wasn’t in subprime alone,” Blankfein testified. “Instead, the roots of the damage to our financial system are broad and deep. They coalesced over many years to create a sustained period of cheap credit and excess liquidity.”
Arguably the best hearing over the two days came on Wednesday afternoon, when three finance veterans who sat before Angelides and Co. and didn’t have to worry about parsing their words or pissing off their lawyers offered a refreshingly blunt and unvarnished take on the crisis. Peter Solomon, a long-time investment banker, highlighted the run of deregulation in the decades before the crisis—culminating with the Gramm-Leach-Bliley Act in 1999, which tore down the wall between investment and commercial banks—that allowed institutions to become “too big to fail,” to increase their leverage to dangerously high levels, and to keep all this hidden from regulators who didn’t try all that hard anyway. “Even for insiders,” he said, “transparency diminished so much that firms were not prepared for the extraordinary so-called Black Swan event.”
Inevitably, the FCIC’s hearings pivoted from what caused the crisis to how to prevent the next one. Investor Kyle Bass emphasized the need for regulating over-the-counter derivatives, the complex financial instruments that allowed AIG and Bear Stearns to take on so much leverage, and for letting those institutions face the consequences if those bets go bad. “Capitalism without bankruptcy is like Christianity without Hell,” he said. “There is a role for leverage and for aggressive risk taking in the economy, but that role should be played by firms that are open and susceptible to the risk of insolvency.” As for too-big-to-fail banks, Bass called for a far tougher regulatory system in which these systemically risky institutions would have to take steps to minimize risky investments or sell off certain assets.
FDIC chair Sheila Bair, in Thursday’s final hearing, echoed Bass’ remarks, making the obvious point that the financial crisis laid bare the regulatory system’s failings and inefficiencies. “We must reassess whether financial institutions can be properly managed and effectively supervised through existing mechanisms and techniques,” she said. Bair’s position, however, contrasted with that of the four Wall Street execs, who to no one’s surprise almost unanimously agreed that greater regulation isn’t the answer. Blankfein supported new regulations but warned against implementing an onerous and reactionary plan geared at “protecting us from the 100-year storm;” JPMorgan’s Dimon said he didn’t blame the regulators at all. “The responsibility for the company’s actions,” he said, “rests with the company’s management.”
The commission and its guests hit on a number of other topics pertaining to the FCIC’s fundamental question—who and what is responsible for this crisis?—but the best answer of all came from veteran investor Peter Solomon. “It was a perfect storm from inside. It was a confluence,” he said. “If you listed the number of villains in this tale, you wouldn’t have a plot.”
Michigan’s Brain Drain Continues…
Via The New York Times:
Maine, Michigan, North Dakota and Vermont had net losses of about one in 10 of their young people from 2000 to 2009, as the populations of Northeastern and Midwestern states continued to age faster than those in the Sun Belt, according to new Census Bureau data.
Since 2000, half the states registered a decline in the number of people younger than 18.
Michigan’s under-18 population declined by nearly 246,000, or 9.5 percent, surpassed in raw numbers only by New York’s loss of 266,000, or 5.7 percent.
Higher birthrates among immigrants and the migration of younger job-seekers mean that in seven states, non-Hispanic whites now constitute a minority of people under 18.
Those states are Arizona, California, Hawaii, Maryland, Nevada, New Mexico and Texas.
In addition, Florida, Georgia, Mississippi, New Jersey and New York are on the brink of reaching that benchmark.
The latest figures are from census data on the voting-age population that was released Thursday.
Among the biggest losers of young people, besides Michigan and New York, were Ohio and Pennsylvania. Vermont’s under-18 population dwindled by 14 percent.
Has Teach for America Solved the Teacher Conundrum?
Cross-posted with MotherJones.com
The Atlantic has a story in its January/February issue promisingly titled “What Makes a Great Teacher?” What indeed? As someone who follows education reform closely and occasionally writes about it, I clicked through to the article, eager to see what the writer, Amanda Ripley, had to say on one of the most puzzling, beguiling, confounding questions in all of education. What I found was far from inspiring or groundbreaking, and to be honest felt less like journalism and honest inquiry into teacher performance and more like, well, a Teach for America press release.
I guess the story’s subhead should’ve clued me in:
For years, the secrets to great teaching have seemed more like alchemy than science, a mix of motivational mumbo jumbo and misty-eyed tales of inspiration and dedication. But for more than a decade, one organization has been tracking hundreds of thousands of kids, and looking at why some teachers can move them three grade levels ahead in a year and others can’t. Now, as the Obama administration offers states more than $4 billion to identify and cultivate effective teachers, Teach for America is ready to release its data.
What follows is nearly 6,000 words that mainly focus on the Teach for America’s long-term data collecting on the performances of its teachers and their students, all in hopes of answering, as the story’s title suggests, a crucial question: What distinguishes good and great teachers, the ones whose students excel in the classroom, from the rest of the pack? (Teach for America, or TFA, for the few stragglers still unfamiliar with the program, is a nonprofit organization that takes a class of smart, talented college graduates each year; puts them through TFA’s five-week summer training program; then places them in low-income schools throughout the country where they teach on a two-year contract.) The promise of The Atlantic story is it will reveal the results of TFA’s exhaustive, long-term teacher data and offer rigorously tested, refined, definitive predictors on what makes a good teacher.
Excitedly I read on—through the author’s formulaic framing of the good-teacher-versus-bad-teacher-and-why, the story of the man behind TFA’s data-collecting, Steven Farr, her own observations of potential TFA teachers’ test lessons—until I arrived at the part where Ripley finally answers her title question. Those answers, unfortunately, arrived with a whopping thud.
After all that wind-up, great teachers, Ripley wrote, have these things in common: They set big goals; try to improve; engage with their students and parents; plan well; and persevere in the face of budgetary cuts, pesky bureaucrats, or student issues outside of the classroom like poverty. Sad to say, that’s hardly a revelation. And based on all that data and analysis, she reports, TFA recruiters have identified very specific traits to look for in future TFA teachers. Those include: grit, “life satisfaction,” past success, GPA, leadership skills.
That’s it?! 6,000 words to tell us that great teachers are good planners with big ambitions, that perseverance and good grades and a glittering resume equate to future success in the classroom? Correct me if I’m wrong, but that describes predictors of success in just about every profession out there. As the son of two teachers with 30-plus years of experience between them, I know how complex and nuanced and at times maddeningly frustrating the teaching profession is; how difficult it is to really reach students and engage them and help them excel in their work. On reading Ripley’s conclusions, though, I felt shortchanged.
What’s most irksome here, however, is that the author devotes no space at all to alternative solutions to the story’s animating question, even though any discussion of what makes a great teacher cannot begin and end with TFA and its data. Far from it. And on matters of balance here, she also fails to mention any of TFA’s downsides, quote any of its detractors. About as close as she comes is mentioning while TFA’s students outperformed their peers in math in the only independent results-based study on the organization, its students scored no better on reading. But as a recent college graduate well acquainted with TFA, I can tell you that not all applicants enter with the noblest of intentions: Some enter with no interest in teaching but to pad their resumes before grad school; some do it to get a job closer to girlfriends and boyfriends; others have quit the program midway through.
To be sure, TFA is a promising program that’s invested a lot of time and money in the future of our students. But they’re not the only solution, their data no panacea for identifying and training successful teachers. I presume that because Ripley got unprecedented access to and the scoop on TFA’s data, a narrow focus on TFA ensued. (”I had a lot of help” and “access to a treasure trove of data from Teach for America,” she writes on her blog.) But undergraduate and especially graduate programs in education around the country are doing fantastic work on both the theoretical and classroom sides of the equation trying to answer Ripley’s question—yet they get no play at all here.
That The Atlantic is committing column inches and bandwidth to the subject of education reform and teaching is encouraging, especially as fewer media outlets cover education in such depth anymore. But with so much space, why take such a narrow take on such a pressing and important question?
Blind Ben and the Fed
Cross-posted with MotherJones.com
In his column today, the New York Times’ David Leonhardt takes to task the Federal Reserve and its chairman, Ben Bernanke, for not acknowledging that they inexplicably missed the housing bubble, and questions the Fed’s ability to spot future bubbles. In the wake of Bernanke’s speech this weekend in which he deflected blame for the crisis and instead pointed to lax regulation as the culprit, Leonhardt rightly notes, as many others have, the numerous occasions in the lead-up to the crisis when Bernanke and his predecessor, Alan Greenspan, rejected the idea of a housing meltdown and the broader crisis to follow. Like Bernanke saying “We’ve never had a decline in house prices on a nationwide basis” in 2005, or that Fed officials “do not expect significant spillovers from the subprime market to the rest of the economy” in 2007. Ouch.
Still, near the end of his column, Leonhardt begrudgingly concedes that the Fed “does seem to be the best agency to regulate financial firms.” Say it ain’t so, Dave.
Leonhardt, I reckon, lets the Fed off far too easily. The Fed didn’t just miss the bubble and all its warning signs; it actively ignored them, especially when it came to protecting consumers. As our own Kevin Drum writes in his monster feature on the Big Finance lobby, “the Fed ignored years of pleading from community groups to do something about abusive mortgage lending.” That’s a reference to the Washington Post’s stellar reporting on how Fed officials turned a blind eye to the repeated pleas of community groups to rein in abusive lending practices—the kinds of predatory lending that precipitated the crisis:
[D]uring the years of the housing boom, the pleas failed to move the Fed, the sole federal regulator with authority over the businesses. Under a policy quietly formalized in 1998, the Fed refused to police lenders’ compliance with federal laws protecting borrowers, despite repeated urging by consumer advocates across the country and even by other government agencies. …
Banks and their subprime affiliates made loans under the same laws, but only the banks faced regular federal scrutiny. Under the policy, the Fed did not even investigate consumer complaints against the affiliates.
The Post article mentions that the Fed has since tried to take a proactive stance on consumer protection, but it’s clearly too little too late. And if history is any example, promises of better regulation and greater scrutiny only fade with time, and it wouldn’t be surprising to see the Fed revert back to the way it was before the housing meltdown. All of which is to say, no matter how much Ben Bernanke believes the Fed is still the right regulator for the job, we’re better off giving that power to a consumer financial protection agency.
The Curse of Cape Wind
Cross-posted with MotherJones.com
Cape Wind, the proposed 24-square-mile wind farm off Cape Cod, just can’t catch a break. Fiercely opposed by the late Sen. Ted Kennedy and his family, who didn’t want rows of spinning turbines sullying their view of Nantucket Sound (they claimed the turbines would cause environmental problems), and getting no help from an otherwise green-tilting Sen. John Kerry (D-Mass.), the alternative energy project now has a new opponent: the Mashpee and Wampanoag American Indian tribes.
Situated on Martha’s Vineyard, the two tribes say the 130 turbines would disrupt their sunrise greeting ritual, which requires a clear view of the horizon, and disrupt ancestral burial grounds. In response to the tribes’ claims, the National Register for Historic Places announced it is considering the Cape Wind location for listing on its register, potentially ruling it out as a wind farm location. While it doesn’t outright kill the project, the National Register’s announcement could force developers to relocate it elsewhere.
The decision struck some as an unprecedented move, the New York Times reports:
Others said the finding was surprising because Nantucket Sound, which encompasses more than 500 square miles, is by far the largest body of water ever found eligible for listing on the national historic register. Other eligible bodies of water have included Walden Pond in Massachusetts, which covers about 60 acres, and Zuni Salt Lake in New Mexico, which is about 6,500 feet across, said Jeffrey Olson, a spokesman for the park service.
“The decision is without precedent in terms of implicating many square miles of what is, legally speaking, the high seas,” said Ian A. Bowles, the Massachusetts secretary of energy and environmental affairs. “But as a procedural matter, it’s a good thing a decision was reached, and the secretary is getting personally involved to get it over the finish line.”
Now, Cape Wind isn’t dead yet. Interior Secretary Ken Salazar told the tribes and Cape Wind’s developer they had until March 1 to reach a compromise, and even if they don’t, Salazar himself could still make the final call himself. That said, it’d be quite a surprise to see Salazar go against the powerful Kennedy family, the two tribes, and rest of Cape Wind’s fervent opponents.