Bank Lobby Blitz Targets Elizabeth Warren
Here’s my latest from MotherJones.com, on the bank lobbying quietly underway to block Elizabeth Warren, the consumer advocate and bailout watchdog, from leading the new Bureau of Consumer Financial Protection (which, of course, was her idea).
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“She Will Build That Agency In Her Image”
That’s why banking industry reps are lobbying against Elizabeth Warren, the consumer protection bureau contender “who scares bankers most.”
Elizabeth Warren, the bailout watchdog and consumer advocate, has earned a reputation as a defender of the American family, the middle and working classes, the little guy. If appointed to lead the new Bureau of Consumer Financial Protection, the creation of which was her idea, Warren would have the power to crack down on the type of abuses that hurt regular citizens, led to the subprime mortgage crisis and economic meltdown, and bled more than $7 trillion in household wealth out of average Americans. But do the banks that say they serve average Americans, especially in the US heartland, want Warren in charge of this bureau? The answer, according to the heads of multiple state banking associations, is a resounding “no.”
While these industry reps are quick to tout Warren’s intelligence and tough reputation, they’re not keen on her bringing her no-nonsense style to bear on the community banks in their respective states. Top officials from industry associations in states like Nebraska, Iowa, and Oklahoma say she simply doesn’t understand how small, community banks do business or misjudges how the bureau’s actions could unfairly restrict these banks’ ability to lend to customers. Nor does she grasp, they claim, the harmful impact the bureau and the Dodd-Frank financial reform bill as a whole could have on community banks, which comprise 97 percent of all banks (pdf) in the US. (Warren declined to comment.)
Visiting Washington this week for the American Bankers Association’s annual “leadership” meeting, these banking association chiefs preemptively lobbied their congressional representatives to oppose a potential Warren nomination—a position some say is shared by the banking community at large. “With my colleagues at the ABA, these views about her would be shared,” says George Beattie, the Nebraska Bankers Association’s president and CEO.
Why Won’t the GOP Criticize BP?
Flickr/talkradionews
First published at MotherJones.com.
Elected Democrats haven’t been shy about slamming BP for the horrific oil spill in the Gulf of Mexico. Last month, Senate majority leader Harry Reid emotionally declared on the Senate floor that the oil company’s “greed led to 11 horrific and unnecessary deaths. It has harmed an enormous tourism industry, threatened business at countless fisheries and disrupted life for many along the Gulf Coast. As the pollution grows worse, those consequences will only compound.” This week, House Speaker Nancy Pelosi blasted the petro-giant: “We have been told that the technology is such that we could go all the way down, miles into the sea…and that this was safe. Nobody said, ‘But if it doesn’t work, we don’t have the faintest idea what to do.’” President Barack Obama has decried the “scandalously close relationship” between oil firms (like BP) and federal regulators, noted that he is “furious” that BP “didn’t think through the consequences of their action,” and raised the prospect of a criminal investigation targeting BP.
As for the top Republicans in Washington, they’ve hardly said boo about BP. When it comes to the Gulf tragedy, there’s been a partisan outrage gap.
Let’s look at House minority leader John Boehner. He’s an active tweeter, but how many times has he mentioned BP on his Twitter feed? None. Unless you count a May 12 tweet about a USA Today editorial that urged politicians not to use the spill as an excuse to stop drilling. His congressional website blog has had no postings on BP or the spill. Boehner has called for BP to bear the entire financial burden of clean-up. But he has refrained from criticizing the company. Yet he has not hesitated to blame the Obama administration for “not fulfilling their responsibility to the people of the Gulf Coast area or the people of the United States.”
Rep. Eric Cantor (R-Va.), the minority whip, has followed his leader’s example. He has not tweeted a negative word about BP. And he’s blamed Obama for imposing a quasi-moratorium on drilling and for blaming others: “Pointing fingers, placing blame, and reversing previously made policy decisions is not the kind of leadership people want and deserve in times of crisis.” Rep. Jim Sensenbrenner, the senior GOPer on the House select committee on energy independence (which is chaired by Democrat Rep. Ed Markey, a fierce critic of BP), has not fired any noticeable shots at BP.
GOP Senate leader Mitch McConnell has also refrained from slapping BP. Last month, he appeared on Meet the Press and emphasized the “administration’s involvement in this” more than BP’s role. He, too, chastised Obama for spending “a whole lot of time pointing the finger at” BP. McConnell argued vigorously against lifting the cap on BP’s liability. Sen. John McCain (R-Ariz.), an active Twitterer, has not tweeted about the spill. His Senate office has issued no press releases regarding the spill.
In May, Sen. James Inhofe (R-Okla.), the senior Republican on the environment and public works committee, attended two hearings that the committee held on the spill. In each of his opening statements, Inhofe, long a supporter of the oil industry and a global warming denialist, did not say anything about BP. He griped that the Exxon Valdez spill of 1989 “was politicized, and continues to be politicized, by certain activist groups bent on blocking access to America’s domestic resources.” Inhofe did note that that if there was “gross negligence or other violations of federal law on the part of oil companies or their subcontractors, then we will hold them accountable.” He just didn’t mention BP or the others by name.
For leading Republicans, it seems BP practically stands for Beyond Pronouncing.
We’re All Bernie Madoff: Welcome to the Ponzi Nation
This story first appeared on the TomDispatch website.
Every great American boom and bust makes and breaks its share of crooks. The past decade—call it the Ponzi Era—has been no different, except for the gargantuan scale of white-collar crime. A vast wave of financial fraud swelled in the first years of the new century. Then, in 2008, with the subprime mortgage collapse, it crashed on the shore as a full-scale global economic meltdown. As that wave receded, it left hundreds of Ponzi and pyramid schemes, as well as other get-rich-quick rackets that helped fuel our recent economic frenzy, flopping on the beach.
The high-water marks from that crime wave, those places where the corruption reached its zenith, are still visible today, like the 17th floor of 885 Third Avenue in midtown Manhattan, the nerve center of investment firm Bernard L. Madoff Investment Securities—and, as it turned out, a $65 billion Ponzi scheme, the largest in history. Or Stanfordville, a sprawling compound on the Caribbean island of Antigua named for its wealthy owner, a garrulous Texan named Allen Stanford who built it with funds from his own $8 billion Ponzi scheme. Or the bizarrely fortified law office—security cards, surveillance cameras, hidden microphones, a private elevator—of Florida attorney Scott Rothstein, who duped friends and investors out of $1.2 billion.
The more typical marks of the Ponzi Era, though, aren’t as easy to see. Williamston, Michigan, for instance, lacks towering skyscrapers, Italian sports cars, million-dollar mansions, and massive security systems. A quiet town 15 miles from Lansing, the state capital, Williamston is little more than a cross-hatching of a dozen or so streets. A “DOLLAR TIME$” store sits near Williamston’s main intersection—locals affectionally call it the “four corners”—and its main drag is lined with worn brick buildings passed on from one business to the next like fading, hand-me-down jeans. It’s here, far from New York or Antigua, that thanks to two brothers seized by a financial fever dream, the Ponzi Era made its truest, deepest American mark.
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.
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“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.