reform - Page 4 - Represent Consumers

Urgent Challenges, Modest Responses

The good thing about President Obama’s state of the union speech is that he acknowledged the public’s anger over the financial crisis.

The bad thing is that he appears to reject it. “Look,” he said. “I’m not interested in punishing banks.”

As expected, the president put the rhetorical focus on jobs and the economy in his state of the union. But the actual proposals, a combination of tax cuts and subsidies were relatively modest. But the combination of his proposed freeze on most discretionary spending and continuing Republican opposition make the possibility of dramatic improvement in jobs and the economy unlikely. The speech didn’t contain the kind of dramatic response that 18 percent real unemployment and a continuing foreclosure crisis demand.

President Obama insisted he would veto any financial reform that wasn’t real. But he didn’t spell out what that might mean. Does that mean he’ll veto financial reform that doesn’t contain a Consumer Financial Protection Agency or meaningful derivatives regulation? The president didn’t say. He also didn’t pledge to fight for any specific reforms in Congress. The only specific he mentioned was his proposed bank fee to recoup costs of the bailouts.

President Obama blames his legislative frustrations on his own inability to fully explain his policies. But the president who has repeatedly promised no more business as usual remains afraid to tap into, and act on, the public’s honest passion for real change.

Obama's 'Hostage' Crisis

Tonight’s state of the union speech will be the least important of President Barack Obama's political career. No doubt it will be a dazzling performance, as the president pivots from pugilistic to professorial, from left to right. We know the president comes through with the rhetoric in the clutch. But the true test of his presidency is no longer what he says he will do or how he says it.

The test is whether Obama and his team wage a credible and effective fight for financial reform and economy recovery for Main Street, with the same vigor and urgency they threw into the Wall Street bailout. That will take more than a speech or even a series of speeches. It will take a real self-critical assessment of the president's strategy up til now and a tough, savvy and sustained political battle plan in the face of significant obstacles.

Both have been lacking in the president's approach so far. That’s the real pivot he needs to make now, and it has only partly to do with oratorical skills.

Obama’s credibility is suffering because he and his team keep suggesting that they have overseen a recovery that most people aren’t enjoying. They helped engineer a bailout that they say was absolutely necessary that helped the financial sector but left out the rest of us. Obama and his team don’t have credibility because they’re working Capitol Hill as hard as they can, not to create jobs for millions of out of work Americans, but to save the job of one of the few Americans who could have helped forestall both the financial crisis and the Wall Street –friendly bailout but didn’t, Ben Bernanke, head of the Federal Reserve.

Sen. Tom Harkin summed up what many people are feeling in reacting to comments from Tim Geithner, Obama’s treasury secretary who had warned that the stock market would tumble if Bernanke were not confirmed.

Geithner was just acting as a messenger boy for Wall Street, Harkin suggested. “How long will our economic policy be held hostage to Wall Street who threaten us that there’ll be total collapse if we don’t do everything they want? Wall Street wants Bernanke,” Harkin said. “They’re sending all these signals there’ll be this total collapse if he’s not approved. You know, I’m tired of being held hostage by Wall Street.”

Wall Street doesn’t like key planks of the president’s financial reform plan, like the Consumer Financial Protection Agency and his recently announced plan to separate some of the largest bank’s risky business from its more traditional functions. The Senate’s banking committee chair, Christopher Dodd has signaled he’s ready to surrender on the consumer protection agency. Will the president announce tonight how he and his team plan to win that fight when congressional leaders are giving up? Or will the president treat the consumer protection agency and bank size as just details that should be left up to Congress, as he did in the battle over crucial aspects of health care reform?

A different kind of hostage crisis helped bring down a previous Democratic president. All Jimmy Carter had to grapple with were a bunch of Iranian revolutionaries holding 53 Americans in an embassy in Tehran. President Obama’s challenge is much tougher – 250 million people and our entire political process held hostage by some of the world’s wealthiest corporations and individuals. Carter’s hands were tied. Are Obama’s?

Martin Column / President Barack Obama - 01/27/2010

Fed Up: Down With Bernanke

President Obama can’t credibly rail against Wall Street fat cats while fighting for their chief enabler.

Here’s all you need to know right now to decipher the confusing messages from the White House and the Democratic leadership:

Ignore the faux populist rhetoric and keep your eyes on the contentious U.S. Senate vote on confirmation of Ben Bernanke to a second term as chair of the Federal Reserve.

If Obama and Democrats want to show they now “get it” on why people are so angry over the mishandling of the bailout and the economy, they should dump Bernanke without delay.

But the White House and Democratic leadership, including senators Harry Reid and Chris Dodd, continue to strongly support Bernanke. Other Democratic senators, like Russ Feingold, Bernie Sanders and Barbara Boxer, as well as Republicans such as senators Richard Shelby and John McCain, oppose him.

The prime reason Bernanke deserves to be dumped is that he is not a reformer or strong regulator during a time of reform and increased regulation. The crisis hasn’t caused him to reconsider. Bernanke even opposes a key plank in President Obama’s reform proposal – the Consumer Financial Protection Agency.

He may nod reassuringly in the direction of Main Street but he’s an insider of the Wall Street elite whose prevailing philosophy is a combination of “What’s good for Wall Street is good for the U.S.A” and “There’s a sucker born every minute.”

Some observers credit Bernanke with keeping the country from slipping into another Great Depression.

The country managed to avoid an economic fiasco on the scale of the depression. But why should Bernanke get the credit?

Everything the Fed does is cloaked in a secrecy and doublespeak that mocks the president’s promise of the most transparent administration in history.

What we know for sure about the Fed’s response is that it shoveled cash and cheap credit in the direction of its favored Wall Street targets. Bernanke and the Fed have resisted disclosure of any facts and figures about what they did. When the details do emerge, they smell fishy.

For example, Reuters reported on emails that were obtained through subpoena by Rep. Darrell Issa, R-California, who is investigating the role of the Fed in the AIG bailout.

What Reuters found was that the Fed, under Bernanke’s direction, along with the SEC, wanted to protect the details of the AIG bailout with a level of secrecy usually reserved for matters of national security. In the emails, Bernanke’s staff ridicules the clamor for more public disclosure about the bailout.

At issue are payments the Fed made to firms that carried insurance with AIG on bed bets those firms had made on investments. Those firms, called counterparties, included the likes of Goldman Sachs. The Fed paid off AIG's counterparties 100 cents on the dollar on their bad bets: extremely unusual with companies in such deep distress relying on the kindness of taxpayers not to take some losses.

Just what do Bernanke and the Fed have to hide? Whose interests are being protected? We need to get to the bottom of those questions, not reward those keeping us from the answers to them.

Even if Bernanke did get credit for his role in the bailout, that wouldn’t be enough reason to confirm him for another term. He missed the housing bubble before the meltdown and has shown no indication he would recognize another bubble when it occurs. He has also misread the impact of the economic stimulus.

In addition, the Fed under Bernanke's watch failed at on one of its cores missions – reducing unemployment. Bernanke is more afraid of increasing inflation than he is of increasing unemployment. It’s time for the Fed to shed its cloak of secrecy and elitism and push for an economy that benefits everybody, not just Wall Street. That transformation will be challenging; Bernanke has shown he’s not the kind of leader for these times.

Obama’s treasury secretary, Tim Geithner, is trying out the old scare tactics, threatening that the markets will fall if Bernanke loses his job. But these are the same kinds of scare tactics that a previous administration used on Congress to forestall debate in its haste to push a poorly considered bailout scheme. We may have expected such tactics from the Bush Administration, but President Obama set higher standards for his administration. Now is the time for him to live up to them.

Contact the president and let him know what you think. Let your senator know too.

Federal Reserve / Martin Column / President Barack Obama - 01/25/2010

Finding Opportunity Among Democrats' Troubles

It’s the bankers, stupid!

President Obama, fresh from a stinging defeat in Massachusetts, came out swinging Thursday against the banks, promising a return to the spirit of Glass-Steagall.

The rhetoric was strong but the details were a little vague. It sounds like he’s suggesting limiting the size of banks as well as their ability to gamble with taxpayer backing. You can be sure the finance lobby will fight to block whatever new initiative the president offers.

Obama’s rhetoric is a year late but does provide opportunity nonetheless. The key thing is that Obama and the Democrats’ problems put real financial reform back on the table.

The debate over breaking up the banks has been fraught with fear-mongering and propaganda: supporters of the big banks argue business won’t have the resources to make big deals. Even smart people say dumb things in the debate, as Dean Baker points out. Broken-up banks will still be huge by any standard, just not quite so capable of taking the entire economy with them when they crash.

The obstacles to reform remain the same as they have been:

1.) a financial industry with unlimited resources for the fight

2.) politicians squeamish to take on their contributors in that industry, and only too willing to let bankers squiggle out of regulation in the legislative fine print

But Obama and other Democratic leaders have felt the sharp prick of the pitchforks in their rear ends.

They know that the public is aware of their clueless response to the financial crisis, shoveling billions to the titans of finance while failing to stem rising unemployment and foreclosures.

One step Obama didn’t take this morning was to scrap his entire financial team, the engineers of his too-comfy relationship to Wall Street and timid response to the crisis that has afflicted Main Street.

Except for 80-year-old Paul Volcker, the former Fed chief who has been born again as a reformer, they should all be fired.

On Thursday, Obama insisted he wasn’t afraid of a fight with the bankers. Certainly none of his team except Volcker have shown any inclination for doing or saying anything that would upset the bankers, let alone a brawl.

The current Fed chief, Ben Bernanke, is also feeling the chill from Massachusetts. Roll Call is reporting that his confirmation for another term may be in peril, while The Hill reports that Senate Majority Harry Reid has “serious concerns” about how Bernanke, who has strong backing from Obama, plans to deal with the economy.

Now is the time to hold the president to his word. By all means contact Obama and applaud his tough speech Thursday. Contact your congressperson and senator and remind them that you’re paying attention to the reform battle and aren’t about to be fooled. Check out my open letters to Sens. Boxer and Feinstein for my bottom line on real reform.

We need to tell the president and Congress that we won’t settle for phony reform that lacks transparency or a piddling tax on banks that represents just a fraction of their revenues. We need to tell them that we won’t settle for legislation alone – we need an antitrust crackdown to break the power of the big banks.

If you need ammunition for your phone calls and emails, here’s a study that shows how the financial industry has managed to thwart meaningful reform so far: it spent $344 million lobbying Congress – just in the first three quarters of 2009!

Meanwhile, Goldman-Sachs announced record profits last year, while it doled a mere $16.2 billion for bonuses.

Time will tell whether Obama is capable of delivering the fight he promised to back up his newfound populist punch. But let’s not give the president, or Congress, any excuse to back off or get distracted. Only relentless jabs from you and others will keep them from getting cozy again with their financial industry cronies.

The question right now is not whether Obama is up for the fight. The question is: can we turn our anger and frustration into a political force?

Glass-Steagel / Goldman-Sachs / Martin Column / Outrage / President Barack Obama - 01/21/2010

Open Letters to Sens. Feinstein and Boxer

NO COMPROMISE TOP 10

As the debate over financial reform moves to the Senate I’ve written a couple of open letters to my senators. I’m not endorsing any particular legislative proposals but I do outline the items that shouldn’t be compromised.

Feel free to borrow my ideas for letters to your own senators, or to disagree. Whether you agree or disagree, I’d like to hear what you think.

What’s your bottom line on what financial reform should contain?

OPEN LETTER TO SEN. DIANNE FEINSTEIN

Dear Sen. Feinstein:

Throughout the economic crisis, you have continued to raise serious questions about whether the bailout was protecting the financial industry or the public. Now is the time to turn that skepticism into constructive action.

Sen. Feinstein, voters are counting on your continuing leadership to make sure Congress provides real financial reform to prevent future meltdowns and bailouts stemming from reckless practices and lack of government oversight.

Though you voted for the bailout, at the time, in September 2008, you compared the preparations for the so-called financial rescue to the build-up to the war in Iraq. "There is a great deal of cynicism among those of us who have to live with having voted to go into Iraq based on misinformation and intelligence that later turned out not to be truthful," you said.

On March 23 of this year, you were among a group of senators who met with President Obama to express concern that his administration’s proposals didn’t go far enough, and that his economic advisers were many of the same people who oversaw the deregulatory fever that played such a key role in our financial crisis.

Unfortunately, Sen. Feinstein, your concerns have been borne out.

Financial reform as passed by the House of Representatives is filled with loopholes. Lobbyists from financial firms recently rescued from ruin by taxpayers have mounted a fierce campaign to maintain a system in which “too big to fail” institutions” can manipulate the regulatory system.

The good news is that Sen. Chris. Dodd has proposed much stronger legislation, the Restoring American Financial Stability Act of 2009. By all accounts, his proposal faces a bruising battle as the financial industry gathers all its forces to protect its interests. Sen. Dodd has indicated that compromise is inevitable.

But Sen. Feinstein, the stakes are too high to compromise on the most important aspects of reform. Some of these are contained in Sen. Dodd’s proposal. Others are contained in other legislative proposals under consideration in the session about to begin.

Please help make sure that these key elements of reform are not the victims of compromise:

• Vote against the confirmation of Ben Bernanke to another term as Federal Reserve chair. He was at the center of the bubbles before the meltdown and also helped engineer a bailout that profited Wall Street while Main Street suffered.

•Reinstate a modern-day form of Glass-Steagal, as proposed by Sens. McCain and Cantwell.

•Audit the Federal Reserve, as proposed in legislation sponsored by Reps. Paul and Grayson, which would open up the operations of the institution to public scrutiny for the first time.

•Reconsider and approve judicial cram-downs, which would give bankruptcy judges the power to lower mortgage payments. This would put real teeth in the Obama Administration’s anti-foreclosure efforts.

In the Dodd bill:

• Support creation of a strong, independent Consumer Financial Protection Agency, with regulatory oversight of the Community Reinvestment Act (not provided in the House bill)

•Support creation of a an Agency for Financial Stability, responsible for identifying, monitoring and addressing systemic risks posed by large complex companies and their products, with the authority to break up firms if they pose a threat to the financial stability of the country

• Remove exemptions (contained in the House reform bill) for banks and credit unions with assets of less than $10 billion – about 98 percent of deposit-taking institutions in the country.

• Bar pre-emption (also allowed in the House bill), which would let states, if they choose, to pass tougher financial regulations for nationally chartered banks.

• Don’t exempt other consumer-financial businesses, such as auto dealers from oversight by the Consumer Financial Protection Agency (as the House bill does.)

• Give two agencies, the Commodities Futures Trading Commission and the Securities and Exchange Commission broad authority to force derivatives markets onto exchanges where they pose less risk.

I’m urging you to put everything you’ve got behind this fight to protect consumers and homeowners. Voters put their trust and faith in you to see that their interests are protected, not compromised away. We’re relying on you to convince your colleagues to put the public’s interests ahead of the private profits and the power of the financial giants.

Sen. Feinstein, your skeptical instincts have been right since the Bush administration tried ramrod through a 3-page $700 bailout. Now everyone in the country can plainly see how that bailout benefited the large financial institutions but did little for small business, consumers and homeowners. Thank you for your raising the right questions in the past. Thank you for helping us get back on the right track now.

Sincerely,

Martin Berg

Editor

WheresOurMoney.org

AN OPEN LETTER TO SEN. BARBARA BOXER

Dear Sen. Boxer:

Voters are counting on your continuing leadership to make sure the promise of real fundamental financial reform becomes a reality.

In 1989, you were one of a handful of senators to vote against repeal of the Glass-Steagall Act, the Depression-era law that had kept banks’ traditional business separate from their riskier speculative business.

Though you were in the small minority opposing the deregulatory fever sweeping Washington, your vote showed tremendous leadership, courage and prescience.

You withstood the pressures from financial industry lobbyists and contributors as well as the demands of your own party. As you know, then-President Clinton and his economic advisers, after initially opposing the repeal, eventually made a deal to sign off on the dismantling of Glass-Steagall.

We all know what happened over the last decade – record profits for financial institutions while the economic foundation for American families has gotten increasingly shaky. Voters have watched with dismay as the massive federal bailout has helped create even fewer financial institutions, with even greater wealth and wielding even more political power.

Neither the Obama administration’s proposals nor the bill passed by the House of Representatives offer sweeping reform, nor do they do anything to break up the power of the “too big to fail” institutions. They also don’t do enough to ease the threat these banks continue to pose to the rest of the economy.

Now Sen. Christopher Dodd has proposed much stronger legislation, the Restoring American Financial Stability. By all accounts, his proposal faces a bruising battle as the financial industry gathers all its forces to protect its interests. Sen. Dodd has indicated that compromise is inevitable.

But Sen. Boxer, the stakes are too high to compromise on the most important aspects of reform. Some of these are contained in Sen. Dodd’s proposal. Others are contained in other legislative proposals under consideration in the session about to begin.

Please help make sure that these key elements of reform are not the victims of compromise:

• Vote against the confirmation of Ben Bernanke to another term as Federal Reserve chair. He was at the center of the bubbles before the meltdown, helped engineer a bailout that profited Wall Street while Main Street suffered, and has fought increased transparency in the financial system.

• Reinstate a modern-day form of Glass-Steagall, proposed by Sens. McCain and Cantwell.

• Audit the Federal Reserve, as suggested in the proposal by Reps. Paul and Grayson, which would open up the operations of the institution to public scrutiny for the first time.

• Reconsider and approve judicial cram-downs, which would give bankruptcy judges the power to lower mortgage payments. This would put real teeth in the Obama Administration’s anti-foreclosure efforts.

In the Dodd bill:

• Support creation of a strong, independent Consumer Financial Protection Agency, with regulatory oversight of the Community Reinvestment Act (not provided in the House bill).

• Support creation of a an Agency for Financial Stability, responsible for identifying, monitoring and addressing systemic risks posed by large complex companies and their products, with the authority to break up firms if they pose a threat to the financial stability of the country.

• Remove exemptions (contained in the House reform bill) for banks and credit unions with assets of less than $10 billion – about 98 percent of deposit-taking institutions in the country.

• Bar pre-emption (also allowed in the House bill), which would let states, if they choose, to pass tougher financial regulations for nationally chartered banks.

• Don’t exempt other consumer-financial businesses, such as auto dealers from oversight by the Consumer Financial Protection Agency (as the House bill does).

• Give two agencies, the Commodities Futures Trading Commission and the Securities and Exchange Commission broad authority to force derivatives markets onto exchanges where they pose less risk.

Sen. Boxer, you were right in 1989 when you were in the minority. Now everyone in the country can plainly see the wreckage from the great deregulatory experiment you opposed. Thank you for your vision. Thank you for helping us get back on the right track now.

Sincerely,

Martin Berg

Editor

WheresOurMoney.org

Action / Consumer Financial Protection Agency / Glass-Steagel / Martin Column - 01/10/2010

A Trifecta of Failure

The near calamity on Christmas Day capped a year - a decade - when the ability of our government to protect its people was tested and, when it counted most, failed.

As Maureen Dowd at the New York Times put it: “If we can’t catch a Nigerian with a powerful explosive powder in his oddly feminine-looking underpants and a syringe full of acid, a man whose own father had alerted the U.S. Embassy in Nigeria, a traveler whose ticket was paid for in cash and who didn’t check bags, whose visa renewal had been denied by the British, who had studied Arabic in Al Qaeda sanctuary Yemen, whose name was on a counterterrorism watch list, who can we catch?”

To that, I add: “If our elected representatives can’t overcome the Money Industry’s lobbyists and legislate a ban on speculation in derivatives, enact a cap on credit card interest rates and regulate the rating agencies after these evil-doers trashed our economy and after Congress saved them from bankruptcy by giving them trillions of taxpayer dollars, what can they do?”

Then there is health care reform, a seven decades-long fight for fairness and financial security that has ended up in an unprecedented gift to the very companies that are responsible for our ridiculously expensive and cruel system. “Congress is effectively making private insurers unnecessary, yet continuing to insist that we can’t do without them,” the New Yorker points out.

From any viewpoint, liberal or conservative, our government’s record over the last ten years is dismaying and alarming. First came 9/11, when the religious ideologues attacked our nation and we turned out to be defenseless against a bunch of amateurs even though the Pentagon, the intelligence agencies and the White House knew a catastrophic assault was in the works. It is an outrage that despite hundreds of trillions of taxpayer dollars spent on defense and weaponry, there were only a handful of fighter jets available to protect our homeland that day, and they were too late. Next came the free market ideologues who brought us the Mini-Depression of 2009 (We’re supposed to pretend it was a recession and that it's over but it wasn’t and it ain’t). There were plenty of warnings about the inevitable collapse of the Speculation Economy, but Congress, the White House and federal regulators all looked the other way.

What has been accomplished by the government’s efforts to protect us against foes foreign and domestic? After an almost unfathomably large expenditure of public resources by the government, not to mention considerable pain and suffering for the public, we seem to be right back to square one.

Which is of course why so many Americans have given up on health care reform.

The stakes are great for the Republic: once Americans lose confidence in government, Democracy itself is in danger. Restoring their trust will be the preeminent challenge of the next decade, which starts today.

Harvey Column - 12/31/2009

Stuck in the Fog

One thing is clear: Citigroup executives thought they had a deal with the government to pay back their bailout money so they could pay themselves as much as they wanted.

Then it all started to unravel. The Washington Post disclosed that the IRS granted Citigroup huge tax breaks (meaning billions) as part of the exit strategy the "too big too fail" bank worked out with Treasury officials.

After that the stock market rejected the government and Citigroup’s assessment of the bank’s health and the deal fell through.

Goldman-Sachs / Martin Column / President Barack Obama - 12/17/2009

Loopholes and Lumps of Coal

While the financial industry got a stocking stuffer, we got stiffed.

House Democrats passed something they called reform and handed it over to the Senate.

But the bill is laden with loopholes, put there by Blue Dogs and New Democrats doing the bidding of the financial institutions.

Democratic leaders, from President Obama to Rep. Barney Frank have demonstrated that they are at best ineffectual in spearheading efforts to win real reform that puts consumers and taxpayers’ interests first. At worst, they're undermining those efforts.

The resilience shown by the financial industry in blunting efforts at sensible regulation has been nothing short of breathtaking.

Despite these setbacks, the battle may not be lost.

Glass-Steagel / Martin Column / President Barack Obama - 12/15/2009

If You Can't Explain it, You Can't Regulate it

Imagine if government officials who controlled some crucial aspect of our lives, say the war in Afghanistan, spoke about it in public only in another language.

Greek, say.

Only those who understood Greek would be able to talk about it or ask questions.

Now imagine that those who controlled the policy were unelected, appointed by a mysterious group of Greek-speaking weapons manufacturers whose business would benefit from the war.

Got it?

That’s about what we have in the U.S. Federal Reserve, a quasi-government agency that speaks in its own language, whose members are appointed by banks, and are not accountable to anybody else.

Federal Reserve / Martin Column - 11/24/2009

The real story behind "make him do it"

By now it’s a familiar story: when the legendary labor and civil rights leader A. Philip Randolph met with FDR before World War II to get the president to take action against discrimination, the president boomed back: “I agree with you, now go out and make me do it.”

Lots of people have been retelling the story as a call to action, comparing Obama to the wise, liberal Roosevelt. It urges supporters of everything from Middle East peace to health care and financial reform to keep the pressure on in order to get President Obama to do what he essentially wants to do, but cannot do—on his own because he’s being forced into unpalatable compromises by political pressures.

Martin Column / President Barack Obama - 09/15/2009