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Muppets v. Goldman

It’s been a rough couple of months for the Muppets. First Fox News anchor Eric Bolling denounces their new movie as dangerous left-wing propaganda because it portrays a villainous oil company executive.

Then Goldman Sachs executive Greg Smith quits his job and discloses in a scathing hatchet job of the firm’s culture that his fellow bailed-out bankers refer to their clients in a derogatory way as Muppets.

And what do they mean by that?

Hmmm. Maybe they think Muppets are puppets that are manipulated by their handlers. Maybe Goldman Sachs bankers imagine us to be lifeless sacks of cloth and yarn without spirit and voice, but we’re not.

And no self-respecting Muppet would put up with the shenanigans of Goldman Sachs (though I suppose their corporate owners, the Walt Disney Co., might).

The Muppets have always had a strong populist streak – they articulate sharp critiques of the Greed-is-Good Wall Street culture that Goldman appears proud to embody.

Check out the song “Money,” co-written by comedian Stan Freberg and Ruby Raskin. Performed by Dr. Teeth, it ridicules the rampant desire for more, more, more money at the expense of everything and everyone else.

At the end of the song, Dr. Teeth yanks a slot-machine handle on the side of his piano – which pays off.

If you have any doubt about whether the Muppets would side with the 1 percent or the 99 percent, check out their version of a “A Christmas Carol.”

In his farewell exposé—beyond his Muppet revelation— Smith merely confirms what we’ve already known: Goldman Sachs and the other powerful too-big-fail institutions believe they can get away with screwing their clients by protecting themselves with high-level political clout, bought with political contributions and cemented with interlocking relationships between the government and the firms.

As Robert Scheer points out, it was just a day before Smith unloaded on Goldman that a former top aide to Treasury Secretary Timothy Geithner, Jake Siewert, became the managing director and global head of Goldman’s corporate communications. Siewert is just the latest of a long line of public officials to cash in at the big banks.

How perfect that a high-level member of the Obama administration, which has chosen to align itself with the interests of the big banks time and time again, will now be the one to design Goldman’s defense against the bad publicity stemming from Smith’s oped.

Scheer, along with Matt Taibbi—another astute reporter/commentator on the financial collapse and its aftermath—are full of praise for Smith’s stepping out so publicly.

For myself, I wish that Smith had been willing to step up and connect Goldman’s policies to the financial collapse, not to mention the role Goldman has continued to play in rigging our political system to escape the consequences of its devastating greed and fraud.

That may be too much to ask of somebody on his first day out of the protective Goldman bubble. Make no mistake, it’s not just clients the firm has manipulated for its own gain.

Goldman and the other to-big-to-fail banks have turned us all into puppets, holding over our heads the specter of fear, and pulling the strings to secure a hefty back-door bailout for themselves.

As for the Muppets, I’m sure they’ll weather their current troubles with aplomb. Hopefully their creators are busy at work on a scheme for revenge.

I’ve never seen a Muppet either shut up or stand still while someone ties her hands behind her back. It’s the rest of us I’m worried about.

Goldman-Sachs / Martin Column / Too Big To Fail - 03/17/2012

No-fault settlement fuels never-ending bailout

Two striking details reveal the true nature of the highly touted national foreclosure settlement.

The first is that the banks admit no wrongdoing.

Here’s a sample of the illegality and the misconduct with which the federal authorities and the 49 state attorneys general charged the banks. It goes way beyond robo-signing, the banks’ widespread practice of using forged or unverified documents in the foreclosure process:

▪ Providing false or misleading information to borrowers,

▪ Overcharging borrowers and investors for services of dubious value,

▪ Denying relief to eligible borrowers,

▪ Foreclosing on borrowers who were pursuing loan modifications,

▪ Submitting forged or fraudulent documents and making false statements in foreclosure and bankruptcy proceedings

▪ Losing or destroying promissory notes and deeds of trust,

▪ Lying to borrowers about the reasons for denying their loan modifications,

▪ Signing affidavits without personal knowledge and under false identities,

▪ Improperly charging excessive fees related to foreclosures

▪ Foreclosing on service members on active duty

▪ Making false claims to the government for insurance coverage

But the feds and the state attorneys general want to let the banks off the hook without having to admit to any of it.

This is the kind of no-fault settlement for which the Securities and Exchange Commission has increasingly come under fire, [but which companies agree to as a cost of doing business. For example, the national foreclosure settlement only costs the banks about $5 billion in real money, a drop in the bucket compared to their profits. It’s not enough to actually deter the banks from future bad conduct.

The rest of its estimated $25 billion value is supposed to be determined by a complex series of credits that the bankers get for what they should be doing anyway – modifying mortgage loans and offering principal reductions to underwater homeowners.

The authorities still have to get a judge in Washington, D.C. to sign off on it.

Too bad the settlement wasn’t presented to U.S. District Judge Jed Rakoff in New York, who’s been adamant in questioning no-fault settlements and refusing to rubber stamp them.

His comments, though directed at the SEC, are relevant to the national foreclosure settlement.

Rejecting an SEC no-fault settlement with Citigroup last November, Judge Rakoff said that such settlements are “hallowed by history, but not by reason” and create the potential for abuse because they ask “the court to employ its power and assert its authority when it does not know the facts.”

Rakoff questioned what government officials would get from the settlement “other than a quick headline.”

Though he was talking about an SEC settlement with Citigroup, he could have been describing the national foreclosure settlement, which exacts too little a price from banks for their wrongdoing and offers too little to homeowners.

The settlement provides that banks will spend $17 billion on principal reductions and another $3 billion on refinancings. But according to an analysis by the Brooking Institute’s Ted Gayer, less than 5 percent of the nation’s 11.1 million homeowners will qualify for help under the settlement.

It also presents the general laundry list of wrongdoing without any specificity – it names no names or specific facts. One of the big criticisms of the foreclosure settlement is that the authorities didn’t do a real law-enforcement style investigation to assemble a case before sitting down to “negotiate” the settlement, weakening their hand with the banks.

The second aspect of the foreclosure settlement that reveals its weakness is how the authorities are suggesting they’re going to monitor whether the banks will comply. Just exactly how are we going to make sure that the big banks deliver even the relatively small number of loan modifications and principal reductions they’ve promised?

According to the settlement, the banks themselves are going to self-report on their progress.

Then an “independent” monitoring committee is going to check these reports, and then levy fines if the banks aren’t hitting certain targets. But the monitors consist of the same regulators who have already facilitated the banks’ earlier failed foreclosure mitigation efforts, and have touted this current settlement as a “landmark.” Having already proved their reluctance to get tough on the banks so far, how much incentive do they have to get tough with banks later on?

It sounds flaky to me.

The whole robo-signing scandal stems from banks use of forged, false or unverified documents, poor recordkeeping and the inability of anybody in the courts or government to get the banks to follow the law or hold them accountable.

On top of that, when it comes to keeping their previous commitments to deliver loan modifications in earlier attempts to address the foreclosure crisis, the banks have failed miserably. The investigative journalism outfit Pro Publica has assembled reams of data about the shortcomings of previous government-sponsored loan modification efforts.

So now we think it’s a good idea for them to police themselves?

The entire settlement looks more like the government’s latest efforts to prop up the nation’s floundering too big to fail banks than a real attempt at either law enforcement or robust help for homeowners and the housing market.

Where is Judge Rakoff when we really need him?

Foreclosure / Martin Column / Outrage / Too Big To Fail - 03/14/2012

Too Big For Justice

The too big to fail banks are still in cahoots with their regulators. That’s the message coming loud and clear from the Justice Department’s highly touted $315 million deal with Bank of America to settle racial discriminatory lending charges.

The charges stem from the actions of Countrywide, the subprime lending giant, which was bought by Bank of America after the housing collapse.

The Justice Department’s publicity offensive, labeling the deal “historic” can’t hide the stink emanating from it. Shame on the New York Times for swallowing the Justice Department’s propaganda whole.

The Justice Department concluded that Countrywide charged 200,000 minority borrowers across the country higher rates and fees than white borrowers. Countrywide also steered 10,000 minority borrowers into costlier subprime loans when similar white borrowers got traditional loans.

While $315 million sounds big in a headline, for the bankers, it’s just part of the cost of doing business, less a punishment than the latest favor in the bailout that doesn’t end.

Bank of America, which received $45 billion in bailout funds, admits no wrongdoing in the deal. Victims would get between $1,000 and $1,600 apiece under the deal.

The deal also allows Bank of America to hire its own monitor to keep track of whether the bankers live up to their Justice Department agreement.

Regulators typically whine that they just don’t have the resources to take on the banks at trial.

Regulators argue that they could never get their targets to settlements if they had to wring admissions of wrongdoing from their targets, because those admissions would be used against those targets by other litigants in future lawsuits.

Without the settlements, the crack Justice Department lawyers would be forced to, horror of horrors, try their case in court.

The reasonable response from taxpayers should be: So what? Life is hard. Do your job, which is to hold lawbreakers accountable, not make their lives easier.

The Bank of America deal is only the latest to highlight the lower standard of justice prosecutors have applied to banks. Prosecutors have become part of the government’s team whose main goal Is propping up the banks. Meanwhile, the Obama administration has yet to come up with a decent, functioning program to stem the ongoing fraud in foreclosures, or to help the substantial numbers of homeowners facing foreclosure.

According to news reports, the Justice Department has another six discriminatory lending investigations cooking. This agency would be a good target for future actions

The Bank of America deal also highlights why a strong Occupy movement is needed, outside the traditional political system: neither party, nor the president, will fight for one of the most basic notions of democracy: that lawbreakers, especially the most powerful, should not receive favorable treatment from authorities.

You can read a slightly more sympathetic rundown of the Bank of America deal here, a more skeptical take here.

Bank of America (BoA) / Martin Column / Too Big To Fail - 12/22/2011

Real Fraud, Faux Enforcement

The number one question people ask me when they find out I write about the financial crisis is: “How come nobody has gone to jail?”

I think I have found an explanation. His name is Robert Khuzami and he works as chief of the Securities and Exchange Commission’s enforcement division.

He is not the literal reason. SEC enforcement is civil, not criminal. So he’s not responsible for putting people in prison.

But focusing on Khuzami puts into sharp focus the conflicts at the heart of the government’s efforts to regulate and hold accountable the big banks.

Khuzami is a former federal prosecutor. But he came to the SEC from a high-profile position he took after his stint as a lawman: he served as general counsel to Deutsch Bank, one of the world’s largest investment banks, which had a massive business in the securitized mortgage loans, and was the recipient of nearly $12 billion in “backdoor bailout” federal funds funneled through AIG.

The Wall Street Journal reported that Khuzami was the first SEC enforcement chief to come directly from a big bank. He is one in a long line of Obama economic appointments with strong ties to the financial industry, who either worked for the banks directly or in their interests by favoring deregulation that was one of the major causes of the economic collapse.

Now Khuzami’s former employer, Deutsch Bank, is in hot water with the feds, who sued the bank earlier this month alleging that the “bank committed fraud and padded its pockets with undeserved income as it repeatedly lied so it could benefit from a government program that insured mortgages,” Business Week reported.

For the SEC, it’s all kosher because its stringent recusal policy assures that Khuzami won’t work on any Deutsche Bank cases.

Remember that Khuzami was not just a guy punching a clock. He was the bank’s general counsel, so he supervised legal issues for the firm.

So here was a former federal prosecutor who, in the midst of the go-go real estate boom, apparently thought it was OK for his bank to commit mortgage fraud. Zero Hedge dug up his financial disclosure statement, which reveals he was compensated nearly $4 million in salary and bonuses between 2006 and 2009, and may lose money if Deutsche Bank suffers as a result of the government’s lawsuit.

The president and the SEC, knowing what kind of mischief the too big to fail banks were engaged in during the boom, and how Khuzami had profited from it, thought it was a terrific idea to appoint somebody like him to go after his former cronies.

Khuzami’s tenure at SEC has been marred by accusations that he gave two Citibank executives preferential treatment in agreeing to drop charges against them after he met secretly with their lawyer. In January, the SEC’s inspector general said it was investigating the matter.

Is there no one but former bankers available to work in the financial sector? The president, with $1 billion to raise to fund his reelection effort, has been unwilling to dig into the fraud at the heart of the financial collapse. Until he does, the economic recovery will be built on quicksand.

AIG / Martin Column / President Barack Obama / Securities and Exchange Commission (SEC) / Too Big To Fail - 05/11/2011

Will Afghan Bailout Trump U.S. Homeowners?

At least you know where the Tea Party stands. If it’s a government program, they want to end it.

The Democrats are murkier. They propose tepid solutions to serious problems like the foreclosure crisis, then when their programs don’t work it, ends up reinforcing the Tea Party’s arguments that government doesn’t work.

So the Tea Party-driven Republicans come along and want to whack the Obama administration’s failed foreclosure prevention scheme known as the Home Affordable Modification program. They would probably want to whack it even if it was working, but that’s another subject.

The Tea Party doesn’t offer anything in its place. Homeowners are pretty much on their own at the mercy of the banks.

So much for the American Dream.

Many people have pointed out that the HAMP program is something between an abject failure and a scam that rips off already beleaguered homeowners.

The Obama administration doesn’t offer so much of an argument in its defense as a hapless shrug. In this video, Treasury Secretary Timothy Geithner acknowledges that the foreclosure prevention program amounts to a “tragic, terrible mess.”

But hey, the administration says, it’s better than nothing.

Meanwhile, the foreclosures continue while authorities investigate massive fraud by the banks in the foreclosure process.

This is not a debate calculated to offer much confidence that our public officials can deal effectively with the problems that afflict those of us who live in the reality-based community.

I was reflecting on this tawdry spectacle while reading about the latest developments in the latest “too big to fail” bank bailout to strike at U.S. taxpayers – this one in Kabul, Afghanistan. My colleague Harvey Rosenfield warned about this brewing fiasco several weeks ago.

Apparently the wildly corrupt officials and their cronies used the bank as their private piggy bank, and the bank’s imminent collapse is now a greater threat to Afghanistan’s security than the Taliban.

As recently as last September, officials were offering assurances that U.S. taxpayers would not have to pay for a bailout. Now apparently if we don’t cough up $1 billion the war and the country will be lost and all the previous billions we’ve squandered there will have been wasted.

So we can’t afford a dime to help homeowners in this country but we must spend $1 billion to bail out the Afghans.

I don’t expect the Democrats to put up much of a fight against such an outrage.

I hope the Tea Party stands strong on this one.

Around the Web / Foreclosures / Martin Column / Outrage / Too Big To Fail - 03/02/2011

Going Without Heat For Goldman-Sachs

With all the trillions tossed around in the government’s efforts to prop up the big banks, a $2.9 billion taxpayer-funded windfall to Goldman-Sachs might not sound like that big a deal.

But imagine if we still had that $2.9 billion, if it was still in the federal coffers and not in the pockets of Goldman bankers.

Maybe President Obama wouldn’t feel the need to cut off aid for poor people to help pay for heating oil through the cold winter – that $2.9 billion would more than pay for the proposed cuts.

Maybe you’re not in favor of helping poor people stay warm in the winter.

How about space travel?

That $2.9 billion could pay for nearly a year’s worth of research on manned space travel, which is also under threat.

But what did we taxpayers get from this generosity to Goldman Sachs?

Absolutely nothing. Worse than that, we rewarded extremely bad behavior.

The $2.9 billion payment was arranged by federal authorities as part of what they have described as their emergency efforts to salvage the financial system in the wake of the financial collapse brought on by the bankers’ greed, recklessness and fraud, enabled by regulators’ laxity.

The Federal Reserve, which was supposed to be overseeing this massive giveaway to the banks, contends it didn’t intend to give the windfall to Goldman-Sachs bankers. It was just $2.9 billion that got away from them in their hurry to fill the bankers’ pockets with our cash- I mean- save the economy. McClatchy News Service, using bland journalism-speak, calls it a “potentially huge regulatory omission.”

Goldman hit the jackpot on our bailout of AIG, in which taxpayers compensated the firm 100 cents on the dollar for bad proprietary trades. That means Goldman gambled with its own money, which it is entirely entitled to do.

But when they lose their money, as the old blues song says, they should “learn to lose.”

Lucky for Goldman, we’re there to pick them up, dust them off and wish them well, no questions asked.

Just how much longer are we going to allow our public officials, Republican and Democrat, to use our money to foot the bill for these deadbeats’ bad gambling debts?

Just how many people are going to have to go cold before we cut Goldman off?

AIG / Around the Web / Federal Reserve / Financial Crisis / Goldman-Sachs / Martin Column / Outrage / President Barack Obama / Too Big To Fail - 02/18/2011

The President's Odd Jobs Choice

About the only the job that Jeffrey Immelt would be less qualified for than jobs czar would be to lead a crackdown on the influence of big money lobbyists.

Oh wait- there is no crackdown on lobbying.

So Immelt, the CEO of General Electric, will have to make do with the job the president has given him as head of the administration’s reconfigured outside economic advisory council, which is supposed to focus on job creation.

I’ve written before about G.E. as a prime example of how major corporations benefited from the bailout without exhibiting any gratitude to taxpayers.

To say that Immelt is a weird choice for a job creation initiative is an understatement.

Under Immelt’s stewardship, G.E. has shredded thousands of jobs in the U.S. while outsourcing many jobs to India and China. In the years before the financial collapse, G.E. focused on building up its enormous credit operation, which melted down under the weight of bad loans along with the rest of the financial sector. If not for the generosity of taxpayers, who gave G.E. more than $16 billion in low-interest loans to keep it afloat, Immelt himself probably wouldn’t have a job. In 2008, Forbes named Immelt one of the U.S. most overpaid executives.

His company has engaged in economic blackmail, threatening the state of Massachusetts that G.E. would close plants if state officials didn’t cough up tax breaks. It’s true that Immelt’s GE has embraced green technology – but only wherever there is a substantial government subsidy involved.

Meanwhile, GE is spending more than any other firm on lobbying, while it pays little or no taxes.

If Immelt has had any previous innovative ideas about substantially reducing unemployment, he’s kept them to himself. This is the person our president chooses to lead his jobs effort? For Immelt and other corporate and financial titans, the “too big to fail” bubble has never really burst. They’re continuing to rake in profits and shape government policies in their own interests, while the majority who don’t have access to power are shut out from financial security as well as political influence. Rather than challenging this unequal equation, our president has chosen to try to climb into the bubble himself.

Around the Web / Executive Pay / Martin Column / Too Big To Fail - 02/02/2011

Fill In the Blanks

A New Yorker story published online this morning describes yet another example of a financial debacle abetted by government corruption. As I read the first paragraph, it struck me that the basic plot is always the same – all you need to do is fill in the blanks:

In the spring of _______, as the reelection campaign of ______ was gathering momentum, a group of prominent _____ businessmen met for breakfast at the ________ to see the candidate. Among them was _____, the chief executive officer of _____, a fast and freewheeling financial institution that had brought together some of the most colorful and politically well-connected _____ in the country….

Last week’s final report of the Financial Crisis Inquiry Commission explains in intricate detail why and how the U.S. economy imploded in 2008, but isolates no single, primary cause of the crisis. The Commission says that the crisis was “avoidable” and notes that “widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets,” but this is just one Commission conclusion of many. As Joe Nocera points out, the report never gets to the bottom line.

Our report, “Sold Out: How Wall Street and Washington Betrayed America,” published in March 2009, got right to the bottom line in its title. We didn't need subpoena power or a large staff to figure out what happened, just the willingness to say what everybody in the Wall Street/Washington axis of power already knew. Between 1998 and 2008, Wall Street invested $5 billion in Washington, a combination of money for lobbying and campaign contributions that won deregulation and other policy decisions that enabled the financial industry to do as it pleased. The ensuing orgy of unbridled speculation, based on "derivatives" and other financial schemes that even the CEOs themselves didn't understand, came to a halt when the housing bubble burst and Wall Street couldn't even figure out the value of the investments it held. The financial industry panicked, threatened to shut down the system, and got the government to undertake the mother of all bailouts - trillions of dollars in loans, tax breaks and other goodies.

In short: the power of money poisoned our policies and our politics, with dire consequences for all of us who don't enjoy the special favors that only vast quantities of money can buy.

The Commission, created and appointed by Congress and composed of members of the political elite, could not possibly issue that indictment. Which is why the discussion of the bailout – the most obvious example of the special status of the privileged in our country – is a measly five pages out of 410.

The American public deserves better. In other man-made national disasters, like the explosion of the Challenger space shuttle 25 years ago, experts in the field – astrophysicists, geologists, academics – were asked to undertake an independent investigation. Their reports secured the confidence of the public, and led to remedial actions. NASA was not allowed to investigate itself, and lo and behold, it turned out that the culture at NASA was ultimately responsible for a design defect in the rocket.

Because it retreats from the fundamental truths, the Commission's report does nothing to help us come to grips with the root cause of the financial crisis: the corruption of our democracy by special interest money. I know from more than thirty years of fighting for consumer rights – particularly in the insurance marketplace – that industry lobbyists and unlimited money to politicians almost inevitably kill legislation that would help average people. Even the feeble, loophole-ridden campaign laws that limited how much big corporations could spend in elections are in jeopardy, thanks to the United States Supreme Court’s decision last year in the Citizens United case, which decreed that corporations have the same First Amendment rights as human beings. Here in California, the voters have the ability to go around a paralyzed legislature and put matters on the ballot for a direct vote of the people, but even this populist process is increasingly abused by special interests that want to block consumers from having their day in court, or by a single company like Mercury Insurance, who thought it could fool the voters into permitting auto insurance overcharging.

Naming a thing for what it is aids understanding, which leads to action and ultimately recovery. Absent the cleansing force of honesty, we remain rooted in fear for our kids, for America’s future. Indeed, there is something deeply foreboding about the country’s degraded democracy and disabled economy. Some of the old clichés are becoming a sickening reality. We used to idly wonder, are we Rome, a corrupt empire in the process of collapse? A thoughtful, almost poetic book by that name, written by Cullen Murphy, suggests we are.

The term “third world” was once a sneer, connoting abject poverty, corruption, gross disparities between rich and poor, the absence of government services, a state controlled by a cabal of self-perpetuating leaders. Now consider the statistics on post-collapse America, which Arianna Huffington marshals in her latest book, "Third World America."

This would be a good point to fill in the blanks in the piece I excerpted above from the New Yorker story. The missing words are: 2009, President Hamid Karzai, Afghan, presidential palace, Khalil Ferozi, Kabul Bank, Afghans. Yesterday’s New York Times reported that fraud and mismanagement at the largest bank in Afghanistan has resulted in $900 million in losses, potentially triggering a financial debacle. Kabul Bank is “too big to fail,” according to Western diplomats quoted by the Times. It's the same story everywhere, and thus it would hardly come as a surprise if U.S. taxpayers ended up funding the bailout of Kabul Bank.

Congress / Financial Crisis Inquiry Commission / Harvey Column / Too Big To Fail - 01/31/2011

D.C. Disconnect: Revolving Door Edition

When it comes to shaping the Obama administration’s economic policies, only those with tight connections to the nation’s too big to fail banks need apply.

The latest example is the new director of the Office of Management and Budget, Jacob Lew.

He spent most of his career working in government and academia, with one significant exception – a stint as chief operating officer of Citibank’s Alternative Investments Division, which manages about $7 billion in investments in developing countries. Lew was one of those banking executives whose huge post-bailout bonus enraged the public.

In Washington, the issue barely surfaced in Lew’s confirmation hearings. Lew suggested he was too busy running Citibank to notice that the place was drowning in toxic collateralized debt obligations that nobody even understood.

Meanwhile, the guy Lew replaced, Peter Orzag, is headed for a high-paying banking post of his own – at Citibank.

Lew and Orzag were among the large, bipartisan banking-friendly crowd who apparently failed to comprehend or question what was going on around and beneath them in the years immediately preceding the financial crisis.

During that time, one of the places where Orzag and Lew would gather was the Hamilton Project, a high-powered D.C.-based think tank within the Brookings Institute where Democratic Party politicians and bankers could get together to drink in the wisdom of the project’s founder, Robert Rubin, the treasury secretary under President Bill Clinton, a major proponent of banking deregulation, mentor to current top Obama financial advisers Tim Geithner and Larry Summers – and then, the president of Citibank.

The Hamilton Project has been described as a “bastion of the fiscally moderate wing of the Democratic Party.” But it would be more precisely described as the home of the increasingly influential too big to fail bank wing of the Democratic Party.

And who showed up to welcome the launch of the project in 2006?

None other than then-Sen. Barack Obama, who told the assembled crowd, “I would love just to sit here with these folks and listen because you have on this panel and in this room some of the most innovative, thoughtful policymakers, people who have both ideas but also ways of implementing them into action. Our country owes a great debt to a number of people who are in this room because they helped put us on a pathway of prosperity that we are still enjoying, despite the best efforts of some.” (Watch it here.)

This door swinging jovially back and forth between Wall Street and Washington is so common that it registers as a non-event, and makes a mockery of the Kabuki theater of the supposed hostility between Obama and the financial titans.

Ira Stoll at The Future of Capitalism reminds us, in case we forgot, of other members of the Obama economic team who cashed in on Wall Street before it melted down and they joined the administration, like top economic adviser Laurence Summers and $5.2 million a year, one day a week job at the D.E. Shaw hedge fund, and former chief of staff and Chicago mayoral candidate Rahm Emanuel, who got paid $16.2 million for working for a year and a half at the investment banking firm Wasserstein Perella.

As for Orzag, his departure for Citibank created a faint stir in the mainstream media, where Ezra Klein of the Washington Post notes that Orzag doesn’t appear to be in it for the money, since he’s “fairly wealthy” already, and “his lifetime of public service positions does not suggest a man particularly motivated by income.”

But at the Atlantic’s blog, James Fallow viewed Orzag’s move as an example of Washington’s structural corruption. His comments strike me as stating what is blindingly obvious to anyone who lives and works outside the opaque world of Washington. “The idea that someone would help plan, advocate, and carry out an economic policy that played such a crucial role in the survival of a financial institution – and then, less than two years after his administration took office, would take a job that (a) exemplifies the growing disparities the administration says it's trying to correct and (b) unavoidably will call on knowledge and contacts Orszag developed while in recent public service – this says something bad about what is taken for granted in American public life.

For Baseline Scenario’s James Kwak, it’s also more than a straightforward conflict of interest. Why does a young, highly educated energetic member of the elite, who presumably doesn’t need a Wall Street paycheck, want to work at Citibank?

“Orszag wanting to work at a megabank — instead of starting a new company, or joining a foundation, or joining an NGO, or becoming an executive at a struggling manufacturing company that makes things, or even being a consultant to countries with sovereign debt problems — is the same as an engineer from a top school going to Goldman instead of a real company. It’s not his fault, but it’s a symptom of something that’s bad for our country.”

Around the Web / Martin Column / President Barack Obama / Too Big To Fail - 12/22/2010

Around The Web: Nothing Natural About Financial Disaster

Maybe this is the one that will finally cause people to take to the streets.

The crack investigative journalists at Pro Publica and NPR’s Planet Money have uncovered the latest evidence of how the big bankers schemed to keep their bonuses and fees coming by creating a phony market for their mortgage-backed securities, which were tumbling in value as the housing market tanked in 2006.

The Pro Publica/NPR investigation shows how the bankers from Merrill-Lynch, Citigroup and other “too big to fail” financial institutions undermined a system of independent managers who were supposed to be evaluating the value of the securities. The banks simply browbeat the managers into buying their products rather than face losing the banks’ business.

Meanwhile, the bankers continued to make money off every deal, even though the rest of us paid a high price for their continued trafficking in complicated financial trash.

Then when the entire business unraveled in the financial collapsed, these bankers got a federal rescue and a return to profitability.

Pro Publica acknowledges it’s complex material, so they’ve accompanied their investigation with a cartoon and graphs to make it easier to understand.

My WheresOurMoney colleague Harvey Rosenfield wrote recently about the falseness of the claim that either Hurricane Katrina or the financial collapse were primarily natural disasters. The NPR/ProPublica investigation is yet more evidence that the bankers’ irresponsible self-dealing turned a downturn in the housing market into full-blown catastrophes.

Writing on his blog Rortybomb, Mike Konczai hones in on the stark contrast in the fate of the bankers and many of the rest of us: “Remember that by keeping the demand artificially high for the housing market in the post-2005, these banks created its own supply of crap mortgages. These mortgages inflated and then crashed local housing prices. Meanwhile the biggest banks got tossed a lifeline and homeowners can’t even short sale their home much less have a bankruptcy judge that can set their mortgage to the market price with a large penalty. And everyone lines up to tell those people what ‘losers’ they are, how `irresponsible’ they’ve been for being pulled into becoming the artificial supply for artificially created demand of housing debt. What sad times we are living in.”

Meanwhile the SEC is supposedly investigating the self-dealing. We’re still waiting for the tougher new SEC that the Obama administration promised. In the latest indication that we may have to wait a while longer, a federal judge has rejected the agency’s proposed $75 million settlement with Citibank over charges that the bank misled its own shareholders about the shrinking value of its mortgage-backed securities. The SEC said the bank misled investors in conference calls by saying its subprime exposure was $13 billion, when it was actually more than $50 billion. Among the pointed questions the judge asked: Why should the shareholders have to pay for the misdeeds of the bank executives, and why didn’t the SEC go after more of the executives?

The judge’s questions about accountability mirror the uneasy questions a lot of us have about this administration’s reluctance to take on the bankers whose behavior led to ruin for the country while they profited.

Around the Web / Derivatives / Executive Pay / Martin Column / Outrage / Securities and Exchange Commission (SEC) / Too Big To Fail / Uncategorized - 08/31/2010