Taking Aim at Wall Street - With Jack Bauer

After a day consumed with the Goldman-Sachs hearings, last night I caught up with the latest installment of  the television show “24.”

Spoiler alert: I’m going to disclose what’s happening in “24, ” which focuses on the life of a mythical high-level super antiterrorism agent, Jack Bauer, who is pitted constantly and single-handedly not only against the wily, relentless terrorists but against the corrupt and inept politicians and government officials who are his bosses, usually at the same time.

I don’t always agree with the politics of “24.” But I find it insanely entertaining and profoundly troubling. It’s also one of the few public entertainments that confronts directly the issues of authority and morality we’ve been grappling with since 9/11.

In the latest episode, Bauer actually goes against his president, to whom he’s previously shown the utmost loyalty, because he finds out she’s covering up evidence of an assassination. She’s doing it for the greater good of course; to promote a fragile Middle East peace agreement.

At some point, Bauer finds that the principle of accountability is stronger than his ingrained loyalty to his president.

Accountability, Bauer says, is so fundamental to democracy that it cannot be compromised.

When one of his former colleagues, now his new boss, hears what he’s scheming, she cautions him not to go against his president. “You’re not thinking clearly,” she says.

“I’m the only one who’s thinking clearly,” Bauer shoots back.

After a day of watching Goldman’s officials studiously avoid answering questions in the Senate, “24” put a grim exclamation point on one of the most infuriating aspects of the financial crisis: the utter lack of accountability the financial industry has borne for how it wrecked our economy, through fraud, ineptitude, greed and recklessness.

The Obama administration has made clear it’s not interested in punishing bankers: for the greater good of repairing  the economy, we’re told,  we don’t want to look backward too closely.  We need to move forward.

Left unspoken are the millions in contributions that Wall Street has lavished on the Democrats, and the web of interconnections between the administration and the financial industry, most notably Goldman-Sachs.

We’re offered the faux accountability in the emotionally gratifying theater of the Senate Goldman hearings, the SEC’s attempt at reviving its abysmal reputation after missing the Madoff and Stanford massive fraud schemes by suing Goldman for fraud, and the limp, clumsy Financial Inquiry Commission led by Phil Angelides.

Which are fine as far  as they go. I hope they provide some impetus to put real muscle into financial reform, and they serve some purpose in reminding people how angry and ripped off they feel.

But let’s not forget they’re mostly theater. For example, the Republican senators took turns with their Democratic colleagues beating up on Goldman for CSPAN, while outside of camera range they get their Wall Street fundraising mojo back.

One of the sharpest critics of the lack of accountability has been Bill Black, a former bank regulator during the S&L crisis, who emphasizes that it was multiple robust criminal investigations that uncovered the widespread wrong-doing at the heart of that financial meltdown.

One official who gets it is Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, aka the bailout, who has raised the possibility of criminal investigations and tangled with the Treasury Department.

Meanwhile the mainstream media  serves up pap about how the mild financial reform proposed by the Obama administration is “the biggest overhaul of the nation’s financial system since the Great Depression.”

That’s just not true. The largest overhaul of the system would be the 1999 repeal of the Depression-era Glass-Steagall Act, which had kept federally guaranteed traditional banking from riskier casino-style gambling activities which banks found fabulously lucrative before they blew up the economy. The current reform proposals contain nothing as earth-shattering as that.

Despite happy talk of an economic recovery  that still looks far off to many on Main Street, the politicians are finding the public’s outrage over their handling of the financial crisis is not abating, fueled in part by the political grandstanding.

Like Jack Bauer, we’ve had it with the corruption and the blundering. Public outrage over Sen. Chris Dodd’s close ties to subprime cronies forced him to retire. Conservative Democratic Senator Blanche Lincoln, facing a tough reelection battle, wrote a tough bill that would regulate toxic derivatives. Then she was forced to give away  her Goldman-Sachs campaign contributions. On Tuesday, 62 members of Congress wrote a letter demanding that the Justice Department, not just the SEC, investigate Goldman-Sachs. And a handful of senators are preparing amendments that would toughen financial reform.

I know “24” is a fantasy but one of the reasons it’s so compelling is the way it embodies and scrambles the desperation of our current moment, and Jack Bauer, armed to the teeth in a stolen helicopter, touched a nerve this week. Accountability is our most important arsenal.

Martin Column - 04/28/2010

Quotable: Neil Barofsky

“There’s a reason there are Tea Partiers out there, and when you look at it, anger at the bailout is one of the first things they talk about...This Treasury Department and the previous Treasury Department bear some of the responsibility for not being straightforward with the American people."

Neil Barofsky

TARP inspector general

Bloomberg News

April 28

Uncategorized - 04/28/2010

Around the Web: Taking Reform Fight to the Streets

The Republicans apparently think it’s too soon to start debating Wall Street reform, and the Democrats didn’t seem to mind too much.

After all, their secret weapon is coming to town: The banker America loves to hate, Goldman-Sach’s Lloyd Blankfein, who will testify Tuesday before the Senate’s Permanent Subcommittee on Investigations.

But the political theater can’t conceal what’s really happening. The lobbyists are working overtime working to kill, dismember or water down legislation.

The public’s continuing frustration and rage over the on-going bailout and continuing disconnect between Wall Street and Main Street finds little expression in what passes for debate in D.C.

A handful of Democratic senators – Kaufman, Shaheen, Merkley, Brown, Sanders, Levin and Cantwell – are waging a battle for the party’s soul against a leadership and administration that wants only as much reform as will not offend Wall Street. Meanwhile, the Republican leadership postures and preens and preaches about how the Dems’ proposals will hurt Main Street while they try to woo Wall Street campaign donors away from the Democrats.

What we have been getting from the Obama administration are words of caution, from the president to top economic adviser Lawrence Summers.

The Fourteenth Banker suggests a disinvestment campaign like the one that brought pressure on South Africa.

There will also be demonstrations across the country all week to galvanize public support for reform.

Around the Web / Martin Column - 04/26/2010

Quotable: The Marx Brothers

"You can have any kind of home you want. You can even get stucco. Oh, how you can get stucco."

The Marx Brothers

`Cocoanuts,' 1929

Quotable - 04/26/2010

Just Who is Us, Mr. President?

President Obama went down to the playground where Wall Street bullies have been beating up kids and taking their lunch money. He suggested that the bullies should help create rules that would stop them from beating up kids.

How lame is that?

One blogger compared Obama’s timid performance to FDR’s attack on Wall Street for its rabid opposition to the New Deal. But I kept thinking about the other Roosevelt, the one who took on the railroad trusts.

While Teddy Roosevelt was far from perfect, he had his moments: “A typical vice of American politics,” he said, “is the avoidance of saying anything real on real issues.” He could have been talking about Obama.

What we saw on Thursday was a terrible thing: a brilliant and articulate president of the United States unwilling or afraid to tell it like it is.

It’s not the Republican minority who pose the greatest danger to real financial reform. It’s the powerful Wall Street wing of the majority Democrats who don’t want to offend the bankers. Our representatives need to know we want real reform, not just lip service that basically preserves the status quo. Our representatives need to have the courage to support the stronger proposals by Sens. Kaufman, Brown, Shaheen, and Merkley that would do more to actually break up the big banks and put limits on their risky gambling.

Mr. President: Let’s get real. Let’s say out loud that banks and bankers have grown too powerful.

Let’s get real. It’s absolutely not in the banks’ interest to “join us” in supporting reform. By suggesting that as the solution, you abandon your own credibility and avoid the “real issues” of a government corrupted by those bankers’ money.

Stop negotiating with Wall Street. Cop to their massive financial support for your campaign, and those of your colleagues in Congress. And tell Wall Street change is coming whether they like it or not.

Martin Column / President Barack Obama / Too Big To Fail - 04/23/2010

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

Giving Toxic Waste a Bad Name

Face it, if we found out that a Vegas casino was run like our banking system, the worst strung out addict wouldn’t gamble there.

Even they wouldn’t be able to stand the stench.

Casino operators know you have to provide at least the appearance that the games aren’t crooked.

Casino operators know they can’t force people to spend their hard-earned money gambling on a toxic waste dump.

But the bankers and their political cronies who have been playing us for suckers forced us to pay to clean up the shambles, as well as the continuing costs of the broken economy.

Now the casino operators are trying to assure us that everything is hunky-dory, but that same foul scent is still wafting from their dumpsite. Goldman Sachs shrugs off  the Securities and Exchange Commission’s fraud charges, hiring the president’s former lawyer to fight them, while it rakes in eye-popping profits that beat even the most optimistic projections.

The man we hoped would clean up the mess, President Obama, appears at long last to be taking a more nimble, hands-on approach to financial reform than he did on health insurance reform. But the plans endorsed by him and the Democratic leadership contain too little actual reform and too much reshuffling of the same weak hand regulators have been bringing to the casino.

We’ll never win against the sharks the way the game is rigged now.

That’s the bitter lesson brought home by the revelations of the last month, from probes into the tragic bank follies of the Lehman and Washington Mutual collapses, and the  SEC lawsuit charging Goldman-Sachs with fraud.

As we learn more details of each of these debacles, they provide potent weapons  in the fight to overhaul the system that led to the financial meltdown.

Far from being an unforeseeable natural disaster, it was a predictable consequence of the system we still have in place today. In each case, the financial giants rigged the game with fraudulent bookkeeping and lack of disclosure while regulators looked the other way. And far from being isolated instances of improper conduct, the Lehman, WAMU and Goldman fiascoes are prime examples of how far the financial industry has fallen in common sense and ethical standards.

But the Democrat leadership has squandered its credibility on financial reform, offering legislation that largely preserves the status quo.

Rather than galvanizing public outrage against Wall Street into support for fundamental change to rebuild a financial system that truly serves our economy, the president and the Democratic leadership are caving in to Wall Street lobbyists and Republican obstructionists who pay lip service to reform while they block and dilute it.

Meanwhile, we’re treated to the truly disgraceful spectacle of each party accusing the other of having taken more campaign cash from Goldman-Sachs and the other major casino operators than the other.

The truth is they’re both beholden to the cash generated by the toxic dump of our financial system. The Democrats may be ahead in the fundraising game right now, but the Republicans are working hard to curry favor from Wall Street and catch up.

Meanwhile, the rest of us are left on the sidelines.

Fortunately we don’t have to stay there.
Several other Democratic senators have proposed amendments worthy of support.

Among the most articulate voices for a stronger version of reform is Sen. Ted Kaufman, D-Delaware. Along with senators Jeff Merkley, D-Oregon, Carl Levin D-MI, Sherrod Brown, D-Ohio and Jeanne Shaheen, D-N.H., Kaufman has proposed a bill that moves toward rebuilding the wall that used to separate traditional, federally guaranteed banking activities from high-risk speculative gambling. That wall was torn down when the Depression-era Glass-Steagall Act was repealed during the Clinton Administration. In addition, a conservative Democrat who faces a tough reelection fight, Blanche Lincoln, D-Arkansas, has proposed derivatives regulation that is substantially tougher than that which has been proposed by the Obama Administration.

Now is the time to clean up the casino. We have to channel our  genuine, justified anger into action to push our politicians to do the right thing, whether they want to or not.

Action / Glass-Steagel / Goldman-Sachs / Martin Column / President Barack Obama - 04/20/2010

Around the Web: SEC Takes a Bite of Squid

So is it just coincidence that the SEC brings it first major fraud case against  “a too big to fail” Wall Street bank just as the president and the Democrats gear up for battle over financial reform in the Senate?

I don’t think so. Not any more than it’s an accident that a Senate committee was holding a continuing series of tough hearings on the Washington Mutual collapse putting WAMU’s lame leadership and regulators under the harsh glare of the spotlight. Story here, documents here.

Last year, journalist Matt Taibbi immortalized Goldman in Rolling Stone as the “world’s most powerful investment bank…a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

That may have sounded like colorful hyperbole at the time. But now with what we know about how Goldman functioned in Greece, California and other places, it turns out to be a factual statement.

The SEC has charged Goldman with deceiving investors who bought collateralized debt obligations tied to the performance of residential mortgage-back securities. The press release is here; complaint here. The investment bank failed to tell the investors that a hedge fund that had played a major role in selecting the collection of mortgages that went into the CDO was also taking a short position against the CDO, according to the SEC complaint. Meaning Goldman and the hedge fund knew the mortgages stunk but peddled it to investors anyway. Nice.

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” said Robert Khuzami, the director of the SEC's Division of Enforcement.

Also charged is a 31-year old Goldman senior VP, Fabrice Tourre, the author of the following 2007 email to a friend, quoted in the SEC complaint, which should become an especially potent weapon in the fight to bolster financial reform as it moves through the Senate in the coming weeks.

“More and more leverage in the system, The whole building is about to collapse anytime now...Only potential survivor, the fabulous Fab[rice Tourre]...standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”

Goldman-Sachs / Martin Column / Securities and Exchange Commission (SEC) - 04/16/2010

Roll Back Interest Rates Now!

Washington has spent trillions of taxpayer dollars to bail out the Money Industry – not just the $700 billion cash life preserver, but also loans at near zero percent interest. Then the banks and credit card companies turned around and loaned us our own money at ten times the interest rate they paid, forcing us to pay through the nose coming and going.

And there’s no sign of relief. The New York Times reports that interest rates on mortgages, car loans and credit cards are reaching historical records. Credit card rates could climb another three points by the fall, according to one expert.

And that doesn’t include the endless creation of other techniques to fleece beleaguered consumers – ATM charges, minimum balance requirements, and my personal favorite, “billing fees.” That’s a fee you pay the company for the privilege of receiving a bill. To catch a glimpse of where this is all headed, just look at how the airlines are unbundling their services. Last week, Spirit Airlines announced that flyers will be required to pay up to $45 for carry on baggage.

Having abetted the financial collapse with decades of deregulatory coddling of Wall Street (PDF), Washington spared no expense to rescue its patrons. But regular Americans never got any relief.

In fact, now that Washington has declared “mission accomplished” on the economy, it's shutting down programs that were designed to benefit Wall Street but indirectly affected the rest of us. For example, last month the Federal Reserve stopped buying risky mortgage-based securities from banks – a two-year, $1.25 trillion bailout that relieved the banks of the risks of these speculation-driven investments. It was intended to encourage the firms to expand their lending. The end of this federal subsidy is one reason why experts are saying mortgage rates are going to go up.

On the very day in 2008 that the Bush Administration first proposed the $700 billion bailout, I urged that Congress slap a cap on the interest rates that recipients of any bailout would turn around and charge American consumers. And I’ve repeated that call since. But there was no quid pro quo for the public in the deal. Even in the so-called Credit Card Reform Act of 2009, Congress not only placed no cap on credit card rates, it gave the industry months in which to raise interest rates through the roof before the new rules kicked in.

Congress has gone back to work on “financial reform.” The purpose, supposedly, is to pass new laws that would prevent another financial collapse. There’s no reason why Congress can’t include some relief for Americans who are still suffering from the last debacle. My proposal: a rollback of credit card interest rates. Although there’s no reason to do it, lets be generous and let the banks and credit card companies earn three percentage points more from us than they have to pay when they borrow our money from the Federal Reserve. That would knock interest rates down to around 4%. Citibank, which is alive today only because it got $45 billion of taxpayer support, is charging upwards of 15% for its best credit card customers. Most of the other big card companies are doing the same.

Lowering interest rates would provide needed relief for tens of millions of American families, and would jumpstart the economy by stimulating more spending. No doubt some would say that we should not return to the era of “cheap money” when everybody was encouraged to spend more than they had by putting lifestyle improvements on plastic. I’m not advocating fiscal irresponsibility, but right now that argument sounds more than a little patronizing. True, some Americans got in over their heads, but the financial collapse itself was the fault of greed-driven Money Industry speculators, many of whom walked away with millions of dollars in pay and bonuses. So they’re all set; they got theirs – in fact, are still raking it in – but now average Americans are told they need to scale back at a time when many are struggling to put food on the table and might need to use a credit card to pay for a doctor’s visit? Why should Americans pay exorbitant rates to fatten the coffers of the firms that got us into this mess?

I say, roll ‘em back!

Harvey Column / Outrage / Uncategorized - 04/14/2010