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Who would squawk about giving California homeowners a little more protection against bankers, who have paid billions to settle charges of outright fraud in the foreclosure process?

Well, bankers of course.

You expect bankers to fight back when state officials take steps to rein in their illegal and improper practices.

That’s not a surprise.

Even though we bailed out the banks to help them survive, we have grown accustomed to their absolute devotion to their own interests at the expense of everybody else.

But why would an Obama administration federal regulator step in to interfere in a state’s business – on the banks’ behalf?

That’s what’s happened in California, where a proposal for a “homeowners’ bill of rights” by the state’s attorney general, Kamala Harris, has faced tough opposition from the bankers.

You would think that the Obama administration, if it were going to take a side, would want to be on the side of the state’s homeowners, not to mention Harris, who has been a co-chair of the president’s campaign and one of his strongest allies.

After all, President Obama, in his populist campaign mode, has paid strong lip service to homeowners and holding banks accountable. But that’s not what happened.

Instead, the general counsel of the Federal Home Financing Administration, Alfred Pollard, weighed in with a condescending letter to Democratic legislators fighting for the homeowners measure, warning that the legislation would “restrict mortgage credit and hamper necessary home seizures.”

Harris’s proposal sounds dramatic enough, a collection of six bills calling itself a “bill of rights.” But it’s actually a modest set of common-sense protections: for example, establishing civil penalties if banks continue their illegal practice of robo-signing in the foreclosure process, giving homeowners the right to challenge a foreclosure in court if banks don’t follow proper procedure, and prohibiting so-called “double-tracking,” in which banks foreclose while they’re negotiating a loan modification with the homeowner.

Banks have already promised to stop having their employees forge other people’s signatures on documents or verify that documents are accurate when in fact they haven’t even read them. The banks got off with barely a wrist slap for robo-signing and other foreclosure fraud in the recent “settlement” with state attorneys general and the feds. The settlement only costs the big banks $5 billion out of pocket while they negotiated another $20 billion in credits for taking a variety of remedial actions, some of which the banks were doing anyway – even without getting credit.

You might think that Pollard and his FHFA colleagues, who are responsible for overseeing Fannie Mae and Freddie Mac, might be more circumspect in lecturing others about screwing up the housing market.

During the housing bubble, Fannie and Freddie, which were originally set up by the government to support the housing market but went private in 1968, adopted all the bad behavior of the big banks, cooking its books, taking too much risk, throwing around their political muscle through lobbying and political contributions to stave off questions about their business shenanigans.

Then the government placed them in conservatorship, under the supervision of FHFA. Since the financial collapse, the agencies have not exactly put much muscle into helping homeowners facing foreclosure. The head of FHFA, a Bush Administration holdover named Ed DeMarco, has been particularly insistent that helping homeowners avoid foreclosure through principal reduction would be bad for taxpayers. But it turns out that in 2010, according to internal documents, Fannie Mae was about to launch a principal reduction program that its research showed said would save not only homes, as well as taxpayers hundreds of millions of dollars, before it was abruptly cancelled.

The principal reduction program was based on a model of “shared equity,” in which if the value of the home later rose, a homeowner would share any gains with the bank.

While the recent foreclosure fraud settlement with the big banks commits them to do some principal reduction, that agreement specifically excludes Fannie Mae and Freddie Mac.

A couple of Democratic congressman, Elijah Cummings of Maryland and John Tierney of Massachusetts, have written to DeMarco demanding an explanation.

“Based on the documents we have obtained, it appears that the shared equity principal reduction pilot program should have been implemented years ago, and the failure to do so may have resulted in unnecessary losses to U.S. taxpayers,” Cummings and Tierney wrote. “This was not merely a missed opportunity, but a conscious choice that appears to have been based on ideology rather than Fannie Mae's own data and analyses.”

Even for an administration that has been kowtowing to the banks from day one, FHFA’s failures, and its lame venture into California’s legislative process, represent a new low.

For a start, California legislators should ignore Pollard and his FHFA’s cronies lame advice. Even better, the president should pitch him and FHFA’s entire leadership out of the administration and replace them with people who know how to support the housing market, not just bankers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreclosures / Martin Column / President Barack Obama - 05/24/2012

Will the Supreme Court Split the Difference on Health Care and Immigration?

"The High Court" (c) Charles Bragg

Last November, the U.S. Supreme Court announced it would hear one of many lawsuits by conservative officials challenging the new federal health care reform law championed by President Obama. At the time, you will recall, very few observers thought there was a serious chance that the high court would invalidate the legislation.

I was among them –until three weeks later, when the Supreme Court announced it would hear the federal government’s challenge to Arizona’s immigration law, which bars illegal immigrants from trying to get a job and gives state cops the power to arrest people suspected of being illegal immigrants. The Obama Administration argues the Arizona law interferes with federal authority to control the nation’s borders.

When I heard that the Court took the immigration case, I was pretty sure I saw a trade-off in the works.

Here’s how I reckoned it: extreme conservatives loathe universal health care (and the President) and want to stop it now, before it takes effect and becomes one of those successful federal programs, like Social Security, that becomes wildly popular and hence impossible to privatize or repeal.  Liberals, by contrast, aren’t crazy about the sorely compromised product that President Obama signed, but they believe that everybody should receive the health care they need, and that the government ought to at least mandate fair rules in the marketplace. Overturning the new law would set liberals ablaze, and give President Obama a powerful campaign issue – activist judges – in the Fall.

On immigration, many liberals are uncomfortable with the harsh and arguably unconstitutional provisions of Arizona’s law. And they remember how the “state’s rights” movement was once a thinly veiled euphemism for maintaining state laws that discriminated against African Americans. But conservatives strongly support the right of Arizona to take extraordinary measures to stop illegal immigration. Overturning the Arizona statute would anger the conservative base.

See where I’m going here?

By taking both cases within a few weeks of each other, the Republican majority on the Supreme Court gave itself the kind of political cushion it didn’t have when it handed the presidency to George W. Bush in Bush v. Gore.  The high court can grant conservatives the massive victory they seek by invalidating federal health care reform, and then disappoint them by ruling in favor of the federal government in the Arizona case.

“See! Impartial!” the pundits will trumpet;  “this proves that Supreme Court ‘judges are like umpires,’” as now Chief Justice John Roberts put it during his confirmation hearings on Capitol Hill in 2005.  “Umpires don't make the rules; they apply them. The role of an umpire and a judge is critical. They make sure everybody plays by the rules,” he said at the time, and it sounded reassuring.

“Split the difference” maneuvering is a common feature in American politics. I've seen it in action ever since I first worked on Capitol Hill in the Seventies. The lawmaker votes against a bill – disappointing some – only to vote for a different bill a few days later, pleasing them. All is forgiven, or maybe not; either way, it's portrayed as proof of "independence": “If both sides are mad at me,” the politicians’ old saw goes, “I must be doing something right.”

That may fool some of the people some of the time, but such tactical machinations are of course completely improper in the judicial branch, where justice is supposed to be blind and decisions made based on the merits of the case, not whether “the base” will be thrilled or disappointed, or both.

As a lifelong student of the law, I hope I’m wrong about the U.S. Supreme Court. Those who devote their lives to justice, as most lawyers one way or another must, can only rue the public’s distrust of the judicial process.

That’s growing, and no wonder. Some conservatives indiscriminately berate “judicial activists” on the bench. Meanwhile, corporations spend increasingly vast sums of money belittling judges, juries and lawyers in the quest to pass legislation repealing the average American’s right to hold wrongdoers accountable in a court, which they call "tort reform."

And in a little noticed part of its infamous Citizens United decision, the Supreme Court granted corporations the First Amendment right to campaign for or against judges as if they were politicians. Super PACs are now targeting justices whose rulings aren’t pro-business enough – as if “pro-business” is a constitutional imperative unto itself.

I checked the Constitution – it’s not in there.

Unfortunately, what’s transpired since last winter gives me little reason to believe that the current Supreme Court will put respect for precedent over politics. During three days of hearings last month, the notion that the Supreme Court would invalidate the federal health care law went from being a right wing fantasy to a possible, even likely, outcome based on the questions and comments of the Republican justices.

In fact, after the hearing on the immigration law last week, it looked to many like the Supreme Court was prepared to rule in favor of Arizona.

The Conventional Wisdom now has the Court dumping heath care reform and upholding the immigration controls, making it a clean sweep for the anti-federal government conservatives. After all, members of the Supreme Court cannot be held accountable for their actions, short of impeachment. So why would they care whether they look like they’re “balanced”?

So much for my theory.

On the other hand, a political version of one of the laws of quantum physics may be at work on the Court at this very moment. The Heisenberg Principle posits that the mere observation of atomic particles changes their course. Since its astounding determination that the Constitution protects corporate money, the Supreme Court has come under a nearly unprecedented degree of criticism. Perhaps the public scrutiny is beginning to have an effect.

At least two members of the Court itself have said they want to reconsider it (PDF). Justice Anthony Kennedy, the “swing vote” on the bench, may end up unwilling to join in a wholesale re-engineering of constitutional law.  Some experts suggest that Chief “Umpire” John Roberts might be sensitive to how history will view his stewardship of the institution.

So I still wouldn’t be surprised to see a “split the difference” strategy play out in June, when the Supreme Court is expected to issue its decisions on both cases, just five months from the election.

Citizens United / Harvey Column / Supreme Court - 04/30/2012

Bipartisanship for dummies

Ever notice how all the dysfunctional wrangling in D.C. stops the minute our politicians need to do the 1 percent’s bidding?

When it comes to taking away your rights as an investor, consumer or citizen, politicians who can’t seem to agree on anything else seem to work together fine.

The latest proof that “bipartisanship” is a cynical gimmick is the so-called JOBS act, passed by the House with bipartisan support and now under consideration by the Senate, with the blessing of President Obama.

In this case, the bill’s original Republican sponsors came up with the idea of packaging a collection of measures that would weaken investor and consumer protections by the acronym JOBS, which stands for Jumpstart Our Business Startups.

After all, who could be against JOBS? Most Democrats in the House were happy to sign on – only 23 voted against it. Even Democratic representatives Nancy Pelosi and Maxine Waters voted for it.

Maybe these politicians thought the JOBS branding and the bipartisan marketing would conceal what the bill really was – the latest of several disastrous bills dismantling sensible financial regulation.

The JOBS act is the ugly stepchild of the 1999 Gramm-Leach-Billey Act repealing the Depression-era Glass-Steagall Act, which kept banks from mingling federally-guaranteed banking activities from riskier activities, and the 2000 Commodities Futures Modernization Act, a Frankenstein bill that kept credit default swaps deregulated and led to the Enron scandal in 2001.

Both pieces of legislation contributed directly to the 2008 financial collapse.

In the case of the JOBS act, it would gut many of the accounting reforms contained in the Sarbanes-Oxley Act, which was passed in the wake of the Enron debacle. The JOBS act would exempt emerging companies worth up to $1 billion from disclosure, reporting and governance rules. It would allow such companies to operate for 5 years without regulatory oversight.

John Coffee, securities law professor at Columbia University Law School, says it could be more accurately described as the “boiler room legalization act” because it would allow companies to raise money from small investors on the Internet, without any regulatory supervision, evoking the small operations that sold dubious investments over the phone using high-pressure tactics.

Arthur Levitt, former head of the SEC, told San Francisco Chronicle columnist Kathleen Pender the bill was “a disgrace.”

In a scathingly sarcastic column in the New York Times, Pro Publica’s Jessie Eisenger wrote: “Nigeria shouldn’t be the only country to benefit from the Web. Right here in America, the elderly are increasingly attractive to a variety of entrepreneurial spirits. If JOBS becomes the law, such innovators could flourish.”

Barbara Roper, the Consumer Federation of America’s director of investment protection suggested that “Republicans cannot believe they have suckered the Democrats into taking up their idea that deregulation is the way to promote job growth.”

I don’t think the Democrats got suckered. I think they know exactly what they’re doing. President Obama has been struggling in his fundraising because Wall Street and the big-money donors have lost their enthusiasm for him this electoral cycle.

But he’s showing signs of bouncing back, after his campaign manager, Jim Messina, issued a pledge that the president would stop demonizing Wall Street. In February, the president went on a fundraising blitz, raising $45 million, up from $29 million the previous month.

But it’s still far less than the $56 million he raised during the same month in 2008, when he was fighting Hilary Clinton in a bruising primary campaign. The president and his party have to deliver for their funders, and the JOBS act is a perfect gift to show the big donors what they can expect for their generosity.

But they all must take us for a bunch of clods if they think we can’t tell the difference between a nasty attack on our rights and real jobs promotion.

Call your senator today and remind them you can’t be fooled by an acronym.  Suggest you know how to spell jobs, and this awful piece of legislation doesn’t.

 

Congress / Derivatives / Jobs crisis / Martin Column / President Barack Obama - 03/20/2012

There Oughta Be A Law…. But There Won’t Be Unless We Change the Constitution

Are you one of those people who are constantly saying “there oughta be a law”? I am - which is probably why I ended up a consumer advocate.

Some pretty lofty assumptions about democracy are built into that quaint phrase, if you think about it. For one, it assumes that law is a good way to resolve disputes (as compared, say, to fists or guns). Also, that everybody will obey the law. Perhaps most obvious, when someone says, “there oughta be a law,” they’re asserting our right as Americans to make things better for ourselves by getting the legislative branch to address an issue of public importance.

Indeed, the "the right of the people...to petition the Government for a redress of grievances" is built into the First Amendment - the same amendment that five members of the United States Supreme Court pretty much erased from the Constitution in the Citizens United case two years ago.

By now, everyone understands that by giving corporations the same First Amendment rights as humans, and then ruling that spending money to influence elections is a form of “free speech,” the Supreme Court in Citizens United unleashed a tsunami of corporate money that will drown out the voices of 99% percent of Americans in favor of the 1% who have the wealth to determine who wins elections. “Free” speech can’t compete with hundreds of millions of dollars of paid propaganda.

What’s not been much discussed is how the Supreme Court decision actually conflicts with the rest of the First Amendment: it has negated our right to petition government for a redress of grievances.

Consider another Supreme Court-imposed debacle: in 2011, the high court ruled that consumers who sue big companies in class actions can be thrown out of court and forced to go into “arbitration” – a system in which the company hires private “judges” to determine whether the company broke the law. The Federal Arbitration Act specifically says that arbitration doesn’t apply if the arbitration clause violates a state’s consumer protection law. But the Supreme Court refused to recognize that exception. The case is Concepcion v AT&T Mobility. In that lawsuit, consumers challenged AT&T for adding extra charges to the purchase of a cell phone that the company had advertised as “free.” The decision – another enormous victory for big corporations – strips American consumers of their right to hold a company accountable for rip-offs big or small.

Unlike the Court’s ruling in Citizens United, which interpreted the US Constitution, Congress could easily amend the Federal Arbitration Act to reverse the Concepcion decision. But will it? Forget about the House of Representatives: it’s controlled by corporate Republicans who are owned by the cell phone companies. (The House was close to passing a bill that would have allowed  telemarketers and debt collectors to call consumers’ cell phones with recorded messages. A huge public outcry delayed the legislation.)

But in the Democrat controlled US Senate, a bill to override the Supreme Court’s arbitration ruling has only fifteen cosponsors.

In California, we are lucky to have the ballot initiative, which allows us to take matters into our own hands when state legislators are too beholden to special interests to deal with important issues. Using the initiative process, California voters passed Proposition 103 to restrain price gouging by auto, home and business insurance companies. My colleagues at Consumer Watchdog are now proposing an initiative to put health insurance premiums under Proposition 103’s controls. But even the people’s initiative process has been corrupted by corporate money. And attempts to ban corporate interference in ballot initiative campaigns ran smack into, once again, a decision by the United States Supreme Court.

Indeed, you don’t have to be an astute observer of politics to know that corporate money has long corrupted politics. Our report, “Sold Out: How Wall Street and Washington Betrayed America” (PDF), published in March 2009, got right to the bottom line in its title. 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 came to a halt in 2008 when the financial industry threatened to shut down the system unless they got trillions of dollars in loans, tax breaks and other taxpayer bailouts.

Laws regulating corporate spending in elections and lobbying were intended to limit the damage to democracy. Some, including me, would argue that they didn’t work anyhow. But Citizens United has eliminated any chance of righting the imbalance of political power between corporations and human beings short of changing the United States Constitution itself. We’re proposing exactly that: a 28th Amendment to the Constitution that reads “The protections of the First Amendment that apply to the spending of money on lobbying and elections, whether by contributions, expenditures or otherwise, shall extend only to human beings.” Join us right now.

Citizens United / Harvey Column - 02/06/2012

In new Hollywood role, former senator plays the heavy

Thanks to Hollywood lobbyist and former Senate banking chair Chris Dodd for telling it like it is.

Dodd warned that Hollywood’s big-money contributors, who have been very, very good to President Obama and his fellow Democrats, might withhold their cash after the president expressed reservations over a controversial Internet anti-piracy bill.

Who ever would have guessed it would be Dodd, who during his 21-year-long career in Washington collected more than $48 million in campaign contributions, much of it from the financial industry he was supposed to be overseeing, who would cut through all the lies and palaver to deliver the knockout punch to our Citizens United-poisoned political system?

“Candidly, those who count on quote  `Hollywood’ for support need to understand that this industry is watching very carefully who's going to stand up for them when their job is at stake,” Dodd told Fox News. “Don't ask me to write a check for you when you think your job is at risk and then don't pay any attention to me when my job is at stake.”

But who better than Dodd to make clear what contributors expect for their cash.  He knows exactly how the system works, from both sides of the revolving door.

It was Dodd, after all, who made sure that AIG executives got their bonuses in 2009 while taxpayers were bailing out the firm at the heart of the subprime meltdown. It was no coincidence that AIG executives had showered Dodd with  $56,000 in contributions.

Nobody knows this terrain as well as Dodd.

He was a “friend of Angelo,” one of those elected officials who personally got sweet mortgage deals – at below market rates– from Angelo Mozilo, the head of the Countrywide, the mortgage company that nearly sank under the weight of its subprime trash loans until Bank of America rescued it. (His colleagues on the Senate Ethics Committee dismissed a complaint against him.)

While he and his colleague, Rep. Barney Frank (House Financial Services Committee?), oversaw the watering down of financial reform legislation in the wake of the financial crisis, Dodd played the role of beleaguered public servant, wringing his hands in frustration over the army of lobbyists against whom he was claimed he powerless.

But now that’s he moved from Washington to Hollywood, he’s got a new script that calls for tough, public, bare-knuckled threats to the president of the United States.

And whatever he owes the American public for his perfidy as an elected official, we owe him a debt of gratitude for it. Because he has exposed the political system and the money that dominates it for what it is.

As Dodd has illustrated so eloquently, the Supreme Court got it wrong in their infamous Citizens United decision, which allows corporations to dump unlimited, unreported cash into our political system.

Money is not free speech. I don’t know whether Bob Dylan had Congress in mind when he sang nearly 30 years ago, “Money doesn’t talk, it swears,” but he was prophetic.

The impact of money in politics has put a curse on our democracy, and it won’t be lifted until we throw the corporations and the billionaires’ money out.

As Dodd’s remarks demonstrate, big money campaign contributions are a blunt force instrument, which corporate interests and the wealthy can use to control the politicians who depend on them for their livelihoods, as Dodd did when he was playing the part of the distinguished U.S. senator.

Rest assured, the people who gave him $48 million knew his real role was so serve them, whatever lines he was required to utter for the scene he was playing at the time.

 

 

AIG / Citizens United / Congress / Executive Pay / Financial Crisis / Financial Reform Legislation / Martin Column - 02/01/2012

The Lawyer With the Dragon Tattoo

This year’s most fearsome movie heroine is Lisbeth Sander, the hacker vigilante who outwits corporate and political evildoers with her superior investigatory skills, not to mention some kickboxing and the deft use of a taser. “The Girl With the Dragon Tattoo” smashes and hacks her way through the government officials, business executives and journalists that comprise Sweden’s lazy and corrupt Establishment. They do everything they can to stop her, but – I’m about to give away the ending – Sander ultimately triumphs, exposing decades-long corporate and government conspiracies.

Elizabeth Warren shares none of Sanders’ characteristics – except an exceptional intellect – ­but when it comes to inspiring fear and loathing among the denizens of Washington and Wall Street, she is every inch as frightening, as has been pointed out over the last few days in profiles and posts across the mediascape.

Warren, a bankruptcy professor at Harvard Law, long criticized the practices of America’s banks and credit card companies in law reviews and academic pieces. In 2005, when the financial industry was lobbying Congress to make it harder for the average American to declare bankruptcy, Warren penned a landmark analysis that concluded that most Americans sought bankruptcy protection not because they were freeloaders but because they could no longer afford to pay their medical bills. Long before the current crash, Warren proposed the establishment of a federal agency to protect consumers against credit card tricks and other financial abuses.

In November 2008, in a rare example of a perfect congressional appointment, Senate President Harry Reid put her in charge of the congressional task force monitoring how the $700 billion in taxpayers' bailout money was spent. She has demanded answers to the same question we ask here: “where did the money go?”  The results of her investigations, which can be found here, pull no punches.

Back in 2008, no one could have expected that Congress would create a financial consumer watchdog agency of the kind Warren advocated for years.  But her powerful and outspoken performance as chair of the bailout oversight panel has made her the obvious and only credible candidate to head the new Consumer Financial Protection Bureau created by the otherwise innocuous financial “reform” legislation Congress passed a few weeks ago.

Which, of course, has got Wall Street fired up, members of Congress tied in knots and the White House cornered. Unlike the Byzantine complexities of the financial swindles and the ostensible legislative “solutions,” none of which garnered public attention much less support, the question of whether the President will appoint a skilled lawyer/consumer advocate to protect consumers, or whether he will instead choose a Wall Street insider as he did when he appointed Treasury Secretary Geithner and White House economic advisor Larry Summers, is one the public and press can easily grasp.

The appointment raises the kind of simple and straightforward “whose side is he really on?” question that Obama has so far been able to soft peddle, though he unceremoniously surrendered on the public option in the health care bill and on “too big to fail” banks in the financial reform bill, to name just a few instances of his unilateral disarmament.

Make no mistake: Warren is a highly sophisticated lawyer that knows all the tricks of the financial industry and how to use the powers of government to stop them. This expertise will be essential. I wrote a ballot proposition, approved by California voters in 1988, that regulates the insurance industry. Having spent the last twenty-two years defending it against incessant lawsuits by industry lawyers and not infrequent efforts of elected state officials to hobble it, I can tell you that few decision-makers in the federal government have the technical skills and expertise to go head to head against the battalions of lawyering orcs deployed by big financial firms. Warren does.

Which brings us back to the fascinating spectacle of the hypocritical Washington establishment trying to grapple with her candidacy. She is, literally, made for the job, and a spontaneous grassroots campaign for her appointment is mounting around the country. But the politicians, obeying their paymasters on Wall Street, are trying to figure out a strategy to sabotage her nomination. It’s almost comic to behold. Republicans should be hailing Warren as a savior of beleaguered taxpayers, but one of their Senate leaders said that her tenure as chair of the bailout watchdog was “marked with ‘controversy”” and implied that Warren doesn’t have the necessary qualifications.

It’s the same for some Dems: Senate Finance Committee Chair Chris Dodd, who had never met a financial “innovation” (or industry lobbyist) he didn’t embrace until the whole rotten system collapsed two years ago, damned Warren with faint praise, then suggested she couldn’t be confirmed. He floated the name of FDIC Chair Sheila Bair, but she said no thanks.

Nor has the Obama administrationt been particularly supportive. Two weeks ago, Treasury Secretary Geithner was forced to dispel rumors that he is opposed to Warren by mouthing some platitudes about how “capable” and “effective” she would be in the post. A White House spokesperson told reporters, “We’ve got many good candidates. I know that the president will look at this job and the several other jobs that are created as part of this legislation and make an announcement.”

Warren’s appointment could be one of the few meaningful victories for consumers in the aftermath of the Wall Street deregulation disaster. She is not your typical accommodating political appointee. She does not appear likely to “play ball” with Team Obama or anyone else inside the Beltway when it comes to protecting consumers against the pillaging financial industry. The White House is well aware that once appointed, she would be very hard to fire, especially for doing her job with the zeal it requires. Having never served in such a position, Warren has not yet been tested, so my assessment of her political spine is partly speculation. But if I’m right, she's at least as threatening as Lisbeth Sander.

Harvey Column / President Barack Obama - 08/07/2010

Consumer Protection, Fed Style

One of the big unsettled issues for the congressional conference committee considering financial reform is whether to create an independent financial consumer protection agency.

That’s what the House bill does. The argument for an independent agency is that consumers need a strong advocate in the financial marketplace.

The Senate decided that an independent consumer financial watchdog wasn’t needed, and that the consumer financial protector should live in, of all places, the Federal Reserve. After all, the Fed already has responsibilities to “implement major laws concerning consumer credit.” We all know how well that worked out.

The problem is that the Fed has functioned as a protector of the big banks, never more so than since the big bank bailout and in the battle over financial reform.

Despite promises for greater transparency, the Fed has repeatedly resisted attempts to get it to disclose all the favors it’s done for financial institutions since the bailout. If the Fed had put up half the fight against bank secrecy that it’s waged on behalf of bank secrets, consumers would never have been subjected to all those lousy subprime loans.

It is telling that no actual consumers or consumer organizations actually think that housing consumer protection inside the Fed is a good idea. Who does? The big banks and the Fed.

For those who still need convincing that a Fed-housed consumer protection agency is a bad idea, the Fed has provided a more recent example of what it means by consumer protection.

Last month it unveiled a database that’s supposed to help people choose the most appropriate credit card.

The database might be useful to professional researchers but provides little that would be of use to ordinary consumers. It presents the credit card statements by company but provides no other search functions, such as comparing credit cards by interest rates or fees.

Some of the presentation suggests that the information was dumped onto the Fed’s website without much thought. Bill Allison, who is editorial director of the Sunlight Foundation, a non-profit organization that digitizes government data and creates online tools to make it accessible to readers, said the following:

“I don't think there's anything wrong with posting it, but this is obviously not data you can search,” Allison told Bailout Sleuth.

He also pointed out that some of the agreements themselves aren't particularly informative. He cited the entry for Barclays Bank Delaware, which notes that the bank may assess fees for late payments and returned checks. “The current amounts of such Account Fees are stated in the Supplement,” the agreement reads.

But that supplement is not contained in the Fed's database. The Fed promises to go back and refine its database. But if they’re not devoting the resources to get this right now, with their ability to protect consumers under the microscope, do you really expect they’ll do better later?

An independent consumer protector is not simply some technicality to be bargained away. We’ve learned from the bubble and its aftermath that consumers need all the help they can get. Contact your congressperson and tell them you’re still paying attention to the reform fight. Check out your congressperson and see if they’re on the conference committee. If they are, your voice is especially important. While you’re at it, contact the president and remind him we won’t settle for any more watering down of financial reform.

Action / Federal Reserve / Financial Reform Legislation / Martin Column - 06/02/2010

Funny Money

I had to laugh when I saw Treasury Secretary Geithner and Fed Chair Bernanke announce, with great fanfare, a new high-tech $100 bill. It’s supposed to ward off counterfeiters.

How big is the currency fraud the two G-men are after? Of the roughly $625 billion in “Franklins” in circulation, less than 1/100 of one percent is reported counterfeit, according to the Treasury Department.

That means that Geithner and Bernanke are trying to protect the taxpayers against the loss of $62.5 million from phony hundred dollar bills. That might seem to be a big hit on the American people – we need every dollar we can get these days - except that’s nothing when you compare it to, say, the $750 billion in taxpayer money that went to rescue Wall Street from speculation and outright thievery.

It’s less than nothing when compared to the estimated $600 trillion dollars in “derivatives” – packages of investments – that are sitting in investment portfolios throughout the global economy. That sum is about ten times the value of the entire output of goods and services by every country on earth. The geniuses on Wall Street were giddy trading derivatives with each other, getting a cut of every transaction, until suddenly the players realized they had no idea what the derivatives were worth. Indeed, many derivatives have no intrinsic economic value, but rather are simply bets on how other packages of investments will perform on Wall Street. Derivatives were at the core of the Wall Street collapse that threw our economy into a deep dive.

Our two crime-fighting government officials missed the real crime against the taxpayers – like everyone else who was supposed to be looking after the public’s interest. They sat idly by while hundreds of wealthy and politically-connected individuals made billions of dollars trading worthless securities until greed and the laws of gravity caught up with them.

Geithner and Bernanke remain at the scene of the crime. Which, of course, is still going on, day and night, and will continue until Congress puts an end to it, if our elected representatives can overcome the power of the Dark Side – derivatives lobby.

Meanwhile, we are meant to be thrilled and comforted by the spectacle of a greenback that is tough to duplicate. It’s like a cheap magic trick designed to distract us from what’s really going on.

You can see a $100 bill, after all. And it's easy to imagine some lowlife printing it up in a shed in his backyard. But no Americans ever saw a Wall Street trader concoct a derivative or try to foist one off on a clerk at the local grocery store. The derivatives that brought America to its knees exist only as electronic apparitions on a bank of monitors in front of some speculator at a Goldman Sachs or similar operation. Those are the people who were really “making” money.

Meanwhile, the new U.S. $100 bill introduced by Geithner and Bernanke has a big blue stripe down the middle, and all sorts of busy and confusing images designed to thwart criminals. It looks like something that has been run over several times by a truck. Just like our economy.

Derivatives / Harvey Column - 04/22/2010

Around the Web: Rookie Senator Fumbles Financial Reform

The news media / blogosphere have been having too much fun at the expense of the former Cosmo model who could be the key 41st vote if Republicans decide to kill financial reform.

It’s no shock Sen. Scott Brown would oppose it, given the enthusiastic support he got from Wall Street in his recent election, taking the Massachusetts seat long held by Ted Kennedy.

But Brown apparently got a little flustered when a reporter asked him to explain what exactly he was opposed to. It was one of those trick questions: What areas in the bill would Brown like to see fixed?

Brown responded by asking what the reporter thought. “Well, what areas do you think should be fixed?” Brown said. “I mean, you know, tell me. And then I’ll get a team and go fix it.’’

Eat the Press’s Jason Linkins snorted on Huffington Post: “Yes. Some reporter may want to point out the epic collapse of the derivatives market to Scott Brown, and he will assemble a team of... I don't know...sled dogs? To fix it? Is that good? Will that work?”

Brown told the Globe he opposed a consumer financial protection agency because it would add another layer of regulation.

“Which is, of course, true,” pointed out Washington Monthly’s Political Animal Steven Benen. “ That's the point of the legislation. The financial industry went unchecked and nearly destroyed the global economy. That's why the legislation is being considered – to bring oversight and accountability through regulation.”

Brown also faces some hard second-guessing on a novel argument he made against financial reform on Face the Nation last week: it’s a jobs killer. He asserted that it would cost his state 35,000 jobs – about 17 percent of the state’s financial sector workforce.

When the Globe followed up to nail down Brown’s source for that statement, his staff told the newspaper he got the figures from MassMutual, an insurance company based in the state that has opposed financial reform.

But company officials said Brown had misunderstood them; they were talking about job losses the state had already suffered. Even those figures were grossly inflated, the Globe found. According to the state’s Executive Office of Labor and Workforce Development, the state has lost about 19,000 jobs in the financial sector, which includes the insurance industry, and also at banks, securities firms, investment management companies, and real estate businesses.

A MassMutual official insisted the company agreed with Brown anyway; similar losses could result from financial reform, he insisted. Sen. Brown stood by his earlier statements.

Whatever. A Globe columnist found Brown’s projections, as well as MassMutual’s, preposterous. “The idea that anything in the Senate bill could create additional job losses on a similar scale as the damage caused by the earthquake in the real estate and brokerage industries is simply nuts,” Globe columnist Steven Syre wrote.

Perhaps sensing an opportunity in Brown’s confusion, President Obama put in phone call to Brown from Air Force One.

The president probably didn’t bring up the question posed by Washington Monthly’s Benen: “Do you ever get the feeling that maybe Scott Brown isn't quite ready for prime-time, and that his service in the Senate is more humiliating than it should be?”

Around the Web / Martin Column - 04/21/2010

Around the Web: Rewarding Fed Failure

Bottom line on the new Chris Dodd reform proposal: much watered down from his earlier proposal and maybe even weaker than the weak House bill.

Here’s the summary from A New Way Forward: “The bill contains no real solution to too-big-to-fail, no real enforcement guarantees, the bad guys are off the hook, the financial system will continue to be as big and dangerous and full of risk taxpayers will likely own. Dodd made a few good steps forward and major steps backwards”. The rest of their analysis is here.

From the Atlantic Wire, a solid roundup of assessments. The takeaway: Too many concessions to the big banks, and it is still faces many obstacles to passage. And who exactly besides Chris Dodd and Wall Street thinks it’s a great idea to house consumer protection within the Federal Reserve? Only last year, Reuters reminds us, Dodd was labeling the Fed “an abymsal failure."

But Elizabeth Warren, the congressional bailout monitor who has campaigned aggressively for strong reform, including an independent agency to protect financial consumers, offered a lukewam endorsement of Dodd’s plan.

I’ll give Alan Sherter the last word. When Dodd says that he doesn’t have the votes for an independent financial consumer protection agency, what he really means is that “lawmakers have more to gain by advocating the interests of banks than those of consumers.”

Around the Web / Consumer Financial Protection Agency / Derivatives / Executive Pay - 03/15/2010