Does Jack Lew's Citibank contract violate ethics laws?

The emerging details of prospective Treasury Secretary Jack Lew’s contract with Citibank raise fresh concerns about the persistent issue of the Obama administration’s revolving door with too big to fail banks.

During Lew’s confirmation hearing earlier this month, Sen. Orrin Hatch, R-Utah, questioned the president’s pick to run the Treasury Department about a provision in his employment contract with Citibank – where Lew landed after his previous tenure as a high-ranking official in the Clinton administration.

According to his Citibank contract, he would lose a hefty bonus worth nearly $1 million and other compensation if he left before he received it, except under two very specific circumstances – either he died or obtained  a high-level  job in the federal government.

If he became a lobbyist, he would lose the bonus. If he became a farmer or the governor of New York, no bonus. Only by getting  one of the administration's top jobs could he swim in that vast ocean of cash.

The unusual terms of the contract create a huge potential conflict of interest for Lew, who stood to gain enormous wealth if he landed a government  job. Citibank is ensuring that Lew can comfortably move back into the public sector without financial sacrifice. What do the bankers expect for their money? On many tough issues which will require Lew to represent  consumers, borrowers and taxpayers when big banks lobby authorities for weaker regulation, can we count on Lew to strongly represent us, even though we have no millions to dangle in front of him?

During his confirmation hearing, Sen. Hatch noted “your employment agreement included a clause stating that ‘your guaranteed incentive and retention award’ would not be paid upon exit from Citigroup but there was an exception that you would receive that compensation ‘as a result of your acceptance of a full time high level position with the United States Government or a regulatory body.’ Now is this exception consistent with President Obama’s efforts to ‘close the revolving door’ that carries special interest influence in and out of the government?” 

Lew’s answer doesn’t pass the smell test. “I’m not familiar with records that were kept, so I don’t have access to things that I don’t know about,” Lew testified.

Is Lew, with a reputation as a serious numbers cruncher, policy wonk and savvy political negotiator, suggesting that when it came to the terms of his own bonus, he didn’t read the relevant documents?

Either his statement is false or he just disqualified himself from any government job, especially one overseeing the nation’s complicated finances.

Lew’s response begs for further inquiry. Hatch didn’t pursue it during the hearing. Neither did any of the major media in their coverage. The only initial coverage came from Pam Martens in her “Wall Street on Parade” blog. She referred to the “bombshell” Hatch dropped during the hearing. A week later, Bloomberg columnist Jonathan Weil covered the issue, writing that it appeared that Citibank paid Lew a “sort of bounty” to get a high-powered job in the administration. Lew has certainly earned that Citibank bonus with a series of powerful positions, first in the State Department, then as director of President Obama’s Office of Management and Budget and then as his chief of staff.

Lew and the Obama administration may have other problems aside from whether Lew’s Citibank bonus disqualifies him from a job overseeing it and other megabanks. Government watchdog Bart Naylor, an analyst with Public Citizen in D.C., said, after reviewing excepts of Lew’s contract, that the Justice Department should investigate for a possible criminal violation of USC 18 Section 209, which reads:

“Whoever receives any salary, or any contribution to or supplementation of salary, as compensation for his services as an officer or employee of the executive branch of the United States Government, of any independent agency of the United States, or of the District of Columbia, from any source other than the Government of the United States, except as may be contributed out of the treasury of any State, county, or municipality; or

Whoever, whether an individual, partnership, association, corporation, or other organization pays, makes any contribution to, or in any way supplements, the salary of any such officer or employee under circumstances which would make its receipt a violation of this subsection—?”

Naylor, said: “ The Department of Justice should answer whether the contract between Citi and Mr. Lew is in accord with federal ethics law. This law prevents a private company from making `any contribution’ to an employee `for his services’ to the executive branch of the government. Citi’s contract states that Mr. Lew would sacrifice any bonus he earned unless he landed a high level federal job.  Authorities must answer whether the $1 million bonus Mr. Lew qualified for by taking a high level government job constituted a `contribution’ from Citi.”

Even if Lew’s Citibank bonus doesn’t constitute a criminal violation, it certainly violates the spirit of the law and gravely undermines the public’s confidence in him and in the administration’s ability to protect the public from the onslaught of Citibank lobbying and political contributions. If the Obama administration wishes to retain any shred of credibility in its ability to regulate too big to fail banks, it should immediately launch an investigation into the circumstances surrounding Lew’s contract – and the contracts of the many other former Citibank officials who have served in the administration.

Here’s a partial list:

•Former Citigroup chief economist Lewis Alexander, who joined Treasury in 2009 as a top adviser to former Treasury Secretary Tim Geithner. Alexander is probably best known for having incorrectly predicted, while still at Citi in 2007, that the U.S. would avoid a recession from the crash of the housing bubble. He left the Treasury Department in 2011.

•Former vice-chairman of Citigroup’s global markets Lewis Susman was named to the plum assignment of U.S. ambassador to Great Britain in 2009. He earned his job the old-fashioned way, as one of President Obama’s top contributors and bundlers during the 2008 campaign.

• Michael Froman, a veteran of the revolving door who served in the Clinton Treasury Department before his work as a chief financial officer at Citibank, is credited with introducing President Obama to Robert Rubin, the former Clinton Treasury secretary who oversaw the dismantling of the Glass-Steagall Act before becoming Citibank CEO during the financial crisis. Froman is a special assistant to the president and deputy national security adviser for international economic affairs. The New York Times reported that Froman received more than $7.4 million in compensation from Citibank between January 2008 and joining the White House in February, 2009 – including a $2.25 million bonus, which the White House claimed Froman donated to charity.

•David Lipton, another Clinton Treasury veteran who was paid huge Citibank bonuses ($1.275 million in 2008 and $762,000 in 2009) while serving as the bank’s head of country global risk management. President Obama appointed him special assistant to the National Economic Council and the National Security Council.

The administration should get a clue, withdraw Lew’s nomination, and find somebody to lead the Treasury who puts the interests of the public and taxpayers ahead of those of the big bankers.









Failed policies fuel phony housing recovery

In his State of the Union speech, President Obama cited the recovery of the housing market as evidence the economy is getting stronger.

If by “recovery,” the president meant a fabulous bargain-shopping opportunity for flush hedge funds, he was spot on.

If was he was talking about what most people understand by “recovery” – restoring families’ stability, healthy communities and a sense of economic well-being – not so much.

While the president paid lip service to bolstering the middle class, four years of his administration’s failed policies have set the stage for the financial industry’s further plundering of one of our basic needs – housing.

Before the financial crisis the wizards of high finance figured out how to turn our homes into complex investment vehicles that made them billions – before they crashed the economy. Now the financial geniuses how figured out how to make a killing picking over the carcass of the collapsed housing boom.

Certainly housing prices appear to be going up, but a large reason for that is the hedge funds that are swooping in to take advantage of the low, low prices. CNN Money reports that Blackstone Group spent $2.7 billion to buy 17,000 single-family homes. Bloomberg reported that Blackstone was spending $100 million a week to buy distressed homes to rent and hold until prices rise.The buyout firm GTIS Partners said it plans to spend $1 billion through 2016 buying single-family properties and converting them to rentals, while Oaktree Capital Management of Los Angeles started a fund that would buy $450 million worth of single-family homes, the Los Angeles Times reported. Also here in Southern California, G8 Capital of Ladera Ranch bought several portfolios of distressed properties to rent.

The real estate investment firm McKinley Capital Partners of Oakland has purchased hundreds of homes in the San Francisco Bay Area. The Urban Strategies Council reported that in Oakland, speculators had bought 42 percent of all properties that went through foreclosure.

“This is an outrage,” Oakland Councilwoman Desley Brooks told the nonprofit news site. “People in Oakland typically (buy a home) and put in roots in a neighborhood and stay there and this strategy with investors is doing away with that. It's taking away from our ability to have neighborhoods where people know each other ... we need that in Oakland.”

While interest rates are at record lows, many individual buyers in hard-hit areas don’t have the savings, credit or income to buy.

Is this just the marketplace at work? I don’t think so. The Obama administration insisted that it was implementing policies to ease the foreclosure crisis, putting in place incentives to ensure banks would help homeowners through loan modifications and principal reductions for underwater homes.

But in contrast to the massive, no questions asked shoveling of money to prop up the big banks in the bailout, help for homeowners was late, inadequate and tepid. The incentives were too small and the policies lacked teeth to hold bankers accountable when they didn’t take action or when they foreclosed using fraudulent or forged documents.

A particularly damning admission about these policies came from the mouth of former Treasury Secretary Tim Geithner, as quoted by Neil Barofsky, former special inspector-general of Troubled Asset Relief Fund, aka the bailout. In his book,”Bailout,” Barfosky contends Geithner acknowledged that the foreclosure relief programs weren’t really intended to help homeowners but instead, to help banks manage their foreclosure portfolios, or in Geithner’s colorful words, to “foam the runway for the banks.”

The president has yet to make any such acknowledgement, and wants us to believe that his policies have helped middle-class Americans regain a foothold. Nothing could be further from the truth. It looks like these policies have facilitated a massive takeover of the affordable U.S. housing market by the same speculators who brought it down.



Six reasons Republicans should get over it – and vote to raise the minimum wage

Just this once, Republicans should make an exception to their policy of opposing everything President Obama proposes and support an increase in the minimum wage.

There are many good reasons why a wide majority of Americans consistently support it. According to a 2012 poll, 73 percent of likely voters supported increasing the minimum wage to $10 an hour (the president is proposing $9 and then indexing it to the consumer price index for the first time). That’s not actually much of an increase: if the minimum wage kept pace with productivity gains it would be $16.50 an hour!

A minimum wage hike is that rare political issue which appeals across gender, age, race, education level, region and party, the poll showed.

But here are six other decent reasons for Republicans to abandon their opposition and support raising the minimum wage:

  • Before it was President Obama’s idea, many of them supported an increase. Six years ago, when George Bush was president, at least 67 Republicans still in Congress, including Rep. Paul Ryan, backed an increase from $5.75 to $7.25 an hour. Sen. Mitch McConnell, then Senate majority leader, said, “We're going to pass a good minimum wage increase bill because of Republican support and because Republicans insisted on a bipartisan package, not a partisan fight.”  The 2012 Republican presidential nominee, Mitt Romney, also supported an increase – before conservatives pummeled him for his position and he flip-flopped.
  • It doesn’t place an undue burden on small business. It’s a myth that small business is the primary employer of low-wage workers. Sixty-six percent of low-wage workers work for major corporations like Wal-Mart and McDonalds – and they’re doing better than ever.  According to a report from the National Employment Law Project, of the top 50 companies employing low-wage workers, 75 percent have higher revenues than before the recession and 73 percent are sitting on more cash. They paid their top executives an average of $9.4 million last year.
  • Several topnotch companies already pay more than minimum wage voluntarily – and they’re doing fine. Among them are two of the top fast-food companies in the country. The wildly popular In’n’Out Burger in California and Arizona pays its part-time workers $10 an hour to start and its full-time workers get health benefits. The 31-year old woman who now runs the family-owned chain is the country’s youngest female billionaire. In’n’Out’s newest California competitor, Five Guys Burgers and Fries, also pays above the minimum wage: $8 an hour plus incentives shared among shift teams.
  • It could help them with the illegal immigration issue. Back in September, 2011, Ron Unz,missing American Conservative commentator proposed that Republicans support an increase in the minimum wage as part of a comprehensive rethinking of the party’s immigration stance and broadening its base. A higher minimum wage, Unz suggested, might actually reduce illegal immigration.
  • If Republicans oppose a minimum wage hike, Democrats will clobber them with it in the 2014 election to help them take back the House of Representatives. “Dems believe that this battle goes directly to fundamental and deeply held voter beliefs  about which party is really on the side of economically struggling Americans,” the Washington Post’s Greg Sargent reported. “Having just lost an election in which they were perceived as prioritizing the interests of the rich over everyone else, Republicans understand this, which is why they wrap their opposition to the minimum wage increase in a veil of concern for low wage workers.”
  • Rep. Paul Ryan, the unsuccessful Republican vice-presidential nominee and a 2016 presidential contender said his party must do a better job convincing people it has better ideas on “fighting poverty and helping people move up the `ladder of life.’” If he’s serious about that, helping people on the lowest rung with a pay hike would be a good start.



For Jamie Dimon, it's a free country; others must pay

America's favorite banker is at it again.

At the posh gathering of the world’s global financial elite at Davos, Switzerland, J.P. Morgan Chase’s CEO has been whining that bankers have been scapegoated for the financial collapse.

You might be inclined to have some sympathy for Dimon, who got whacked with a 50 percent pay cut last year after his bank lost nearly $6.2 billion, and possibly up to $9 billion, in the notorious “London whale” trades, in which a J.P. Morgan Chase employee speculated with federally-insured deposits, as part of a hedging strategy gone awry – bets intended to reduce the bank’s risk increased it instead.

So Dimon was only paid $11.5 million and lost the distinction of being America’s highest paid banker.

If you don’t have your scorecard handy, Dimon is the one banker who managed to emerge from the financial collapse with his reputation intact, because of the widely held perception that J.P. Morgan had managed its risk well, avoiding the worst excessive behavior that typified too big to fail banks.

But since then Dimon and his bank have been tarnished by his continuing swaggering arrogance and revelations of the bank’s own numerous misdeeds.

He’s a fierce, if smooth, advocate for his fellow bankers against increased financial regulation. The “London whale” debacle, which he initially dismissed as a “tempest in a teapot” before going on Meet the Press to acknowledge the bank’s gargantuan mistakes, has not increased his capacity for introspection or self-criticism.  “Life goes on,” he observed blithely.

Federal regulators ordered the bank to improve risk management in the wake of its stupendous London whale losses and to tighten money-laundering controls. A Senate subcommittee is also investigating the London whale trades.

Nor did the London whale losses increase his humility. Last August, Dimon came out roaring in an interview with New York magazine, saying he was not going to be one of those wimpy bankers afraid to criticize increased bank regulation because of fear of retribution. “We recently had an event with a hundred small bankers here, and 85 percent of them said they can’t challenge the regulation because of the potential retribution,” he told New York’s Jessica Pressler. “That’s a terrible thing. Okay? This is not the Soviet Union. This is the United States of America. That’s what I remember. Guess what,” he said, almost shouting at Pressler. “It’s a free. Fucking. Country.”

It may be a free country, but taxpayers and customers are going to pay dearly for J.P. Morgan Chase’s business practices.

Here’s a list of some of the controversies surrounding J.P Morgan:

• The New York Times recently reported that when outside analysts discovered serious flaws in thousands of mortgages that were packaged into securities by J.P. Morgan Chase, the bank either ignored the criticisms or watered them down. Evidence of J.P. Morgan’s handling of the outside reviews surfaced in emails disclosed in a lawsuit brought by investors who said they were misled about the value of the $1.6 billion in the packaged mortgage investments.

• The bank is also one of three U.S. banks under investigation for its role in manipulating the LIBOR interest rate, which determines the interest charged for a wide variety of retail and commercial loans. Authorities have already fined the British Barclays Bank $452 million for its role in the manipulation. The cost of LIBOR rigging to taxpayers is estimated at around $3 billion.

  • J.P Morgan paid $228 million and admitted wrongdoing to settle accusations that it rigged bids to win municipal bond business. Prosecutors said the bank entered into secret agreements with bidding agents to improperly see competitors’ bids..
  • The bank has agreed to pay authorities about $2 billion to settle claims of  massive fraud and abuse in its foreclosure process across the country.
  • In 2011, the bank apologized for overcharging thousands of veterans on their mortgages and improperly foreclosed on others while they were on active duty overseas. J. P Morgan agreed to pay more than $30 million in damages.

In each of these cases, the amount of penalties is hardly going to worry J.P. Morgan, the country’s second-largest financial institution. In the fourth quarter of 2012, the company enjoyed record profits of $5.7 billion, up 53 percent over the same period a year earlier, on revenues of $23.7 billion.

Meanwhile, Dimon has found time to join with other top CEOs to champion a grand bargain to reduce the federal deficit, similar to the Simpson-Bowles plan that grew out of President Obama’s fiscal crisis commission. Dimon and other CEO’s have bravely concluded that the best way to reduce America’s debt is to shred the social safety net that Americans who suffered most through our deep recession have been clinging to.

Does Jamie Dimon’s track record really qualify him to offer us advice on the best way to fund the government and deliver essential government services like Social Security and Medicare. We can’t stop him from offering his two cents, but that’s about what’s it worth. While we’re free to ignore him, our politicians not so much, since J.P. Morgan’s PAC and individuals associated with the company spent $3.7 million on the 2012 elections. And while it favored Republicans, the bank still donated more than $236,000 to President Obama. Unless we decide to say otherwise, that could buy Jaime Dimon a lot of freedom.



Standard & Poors' defense sounds familiar

What a shame that the feds’ big lawsuit against Standard and Poors probably won’t go to trial.

The public is missing the chance to view up close many of the players whose fraud and fecklessness helped fuel the financial collapse, wriggling and squirming under scrutiny by sharp lawyers in dramatic confrontation, with prosecutors who want to prove they can take on Wall Street and its high-priced lawyers, while Standard and Poor’s fights to save its business.

The stakes are too high for the government or the credit rating agency to take their chances turning the case over to a “jury of their peers.”

Before the Justice Department filed its case, Standard and Poors had already rejected a settlement offer that required it to pay $1 billion and admit responsibility. The case will eventually settle without that grand showdown in court, so the authorities can hold their face-saving press conference and the company will survive, stripped of a painful share of its profits but with enough semblance of its professional standing to go forward.

That means most of the jousting will take place in the court of public opinion, where both sides have shown considerable prowess.

For its part, the Obama administration has convinced a sizable chunk of the electorate that its efforts actually have reformed the financial system that led to the 2008 meltdown. Standard and Poors, meanwhile, has managed to prevent meaningful reform of the questionable practices that helped create that meltdown, despite damning official reports from the Financial Crisis Inquiry Commission and the Permanent Senate Subcommittee on Investigations that laid a large chunk of the blame for the collapse squarely on the failures of the credit rating agencies.

As part of its defense, Standard and Poors has suggested that it wasn’t inflating its ratings of investments based on worthless mortgages just because that’s what the big banks were paying it do.

No, the credit rating agency insists it was taken in, along with all the other highly paid geniuses who were profiting or pumping up the housing bubble.

If the case went to trial, Standard and Poor’s could conceivably call all the top Obama administration officials who likewise have said, over the years, that the financial collapse was an unforeseeable event that came from nowhere.

They could call on Treasury Secretary Geithner and Larry Summers, Obama’s chief economic adviser until November 2010, both of whom embraced this feeble notion.

It wouldn’t be difficult for prosecutors to undermine this defense, since there are plenty of experts who were predicting the collapse of the bubble, though none of them were in the D.C.-Wall Street power axis. They were ignored before the collapse, as they are being ignored now.

If the Standard & Poor’s case did make it to trial, prosecutors would perform a real service by demolishing this phony propaganda in order to win their case.






Former bank regulator profits from foreclosure fiasco

While the foreclosure crisis has brought devastation to millions of Americans, for a few Washington insiders it’s proved quite lucrative.

One of the most recent to cash in is Eugene Ludwig, former comptroller of the currency in the administration of his one-time Yale Law School pal, former President Bill Clinton.

While it’s supposed to regulate banks, the comptroller of the currency’s office has consistently suffered from a reputation for being too compliant to those it is supposed to oversee.

Ludwig, after his government service, formed a private global financial consulting and lobbying firm named Promontory Financial, working directly for banks and other financial firms. The company’s roster is filled with a mix of veterans of financial regulatory agencies, top banks and the law firms that represent them.

Ludwig, to say the least, has done well serving the financial industry. According to Washingtonian magazine, Ludwig owns one of the most expensive homes in Washington, a 13,000 square foot, 5-bedroom stone and shingle estate just down the street from the Spanish ambassador’s residence.

Lately, Ludwig’s firm has found itself in the middle of the Obama administration’s latest botched attempt to sort out the foreclosure fraud scandal.

Announced with great fanfare in 2011, the review of bank foreclosures in the wake of robo-signing scandal was supposed to be led by the current Office of the Controller of the Currency and the Federal Reserve.

Because the government doesn’t have the resources to scrutinize the banks itself, under the terms of the investigation, the banks hired consultants including Ludwig’s Promontory and accounting giants PwC (formerly PriceWaterhouseCooper) and Deloitte to examine individual foreclosures to determine which ones contained fraud in the process.

The investigation was troubled from the start. Homeowners’ advocates questioned how  consulting firms like Promontory, with close long-standing financial ties to the banks, could do any kind of objective analysis of their foreclosures.

But that was just the beginning. Not only were the consultants often relying on the banks’ own evaluations of their foreclosures to make determinations about the validity of foreclosures, outreach was inadequate, the investigations were poorly designed and overly cumbersome and took much longer than expected. Meanwhile the consultants’ fees skyrocketed.

“This was never a well thought out process,” the National Consumer Law Center's Diane Thompson told American Banker in November. “The [lack of] independence is just one aspect of its crappiness.”

Finally, in December, the authorities ditched the entire investigation and announced an $8.5 billion settlement with the banks, with $3.3 billion in direct payments spread around between homeowners who claimed to have been the victims of fraudulent foreclosures, and promises to complete more loan modifications.

Ludwig’s firm and the other consultants didn’t suffer financially, however. They walked away from the debacle splitting a whopping $2 billion in fees.

But the stink from the settlement has attracted some attention, prompting the New York Times to scrutinize Promontory and other financial consulting firms’ role in facilitating bank misbehavior, not just in the foreclosure scandal, but in other unsavory bank business, such as drug money laundering, as well.

Several congresspeople, including Elizabeth Warren, D-Mass., Carolyn Maloney, D-New York, and Rep. Maxine Waters, D-Los Angeles, top Democrat on the House Banking Committee, are now seeking investigations into the foreclosure review and the consultants role.

The foreclosure review highlights a sad fact: more than four years after the financial collapse should have taught us the fallacy of deregulation, we’re still relying on bankers, and their former colleagues on the other side of the revolving door, to crack down on themselves.


To protect investors and taxpayers, go outside the club

Here’s who would be better than President Obama’s pick to head the Securities and Exchange Commission: Almost anybody.

Couldn’t this administration find somebody who has not been spending her time defending too-big-to-fail banks, acting as an apologist for them, and whose law firm was paid to advise the government on the bailout?

That’s a description of Mary Jo White, most recently of the elite Debevoise & Plimpton law firm, one-time U.S. attorney for the Eastern District of New York…. and now the President’s choice to head the SEC.

There’s a long list of qualified people Obama might have chosen if he wanted to go outside the government-financial complex whose members have dominated economic policy, people with credible experience who have honed a critical perspective on the financial industry.

That list would start with Neil Barofsky, the former prosecutor who served as a tough special inspector general of the Troubled Asset Relief Program, better known as the taxpayer-funded bailout. It would also include Bill Black,who helped expose congressional corruption as a fearless federal regulator during the savings and loan scandal of the 1980s, now a University of Kansas City-Missouri law professor and white-collar crime expert – and consistent critic of the Obama administration’s failure to hold bankers accountable. High on the list would be Eliot Spitzer, the one-time attorney general of New York and television commentator and a sharp thorn in the side of bankers and the politicians who protect them. Christy Romero who also be on the list. Like White, she worked as a lawyer at an elite firm, but as the current special inspector general for the bailout she has been a fierce advocate for taxpayers.

Mary Jo White, according to the president, is “tough as nails.” At one time White was a hell of a prosecutor. When she was U.S. Attorney for the Eastern District of New York, though she prosecuted no major bank executives, she won convictions of the New York Mob boss known as Dapper Dan, John Gotti, and the World Trade Center bombers.

That was before she followed the well-worn path from public prosecutor to elite lawyer, joining the white-shoe law firm of Debevoise & Plimpton, where the average partner makes $2.1 million a year.

That was before she got cozy with J.P. Dimon and J.P Morgan, representing them in the widely criticized settlement of foreclosure fraud charges in a case involving 49 state attorneys general, the Feds and the too big to fail banks.

That was before representing Bank of America’s Ken Lewis on fraud charges and Morgan Stanley’s John Mack in an SEC insider-trading investigation.

Once she got through the revolving door, she worked the system on behalf of her clients, becoming a consummate well-paid insider in the Wall Street-Washington power nexus. In the process of strenuously protecting Mack from an interview at the SEC, White got herself into the middle of a full-fledged scandal, using her clout to help get a whistleblower at the federal agency canned, according to Rolling Stone’s Matt Taibbi. In addition, White’s husband is another veteran of the revolving-door, working as a top SEC official as well under previous do-nothing SEC commissioner Christopher Cox, in between stints as a bankers’ lawyer.

One fact that tells you al you need to know about what’s wrong with White as a banking enforcer is that her former client, Jamie Dimon told Fox Business News that White was “perfect” for the SEC job.

White might have made a better candidate to protect investors at the SEC if, since the bailout, she had expressed one iota concern about bankers’ excess, fraud or recklessness that led to the financial collapse.

Instead, White has expressed concern about prosecutors unfairly targeting bankers to get scalps to feed the angry public’s thirst for justice. In a legal brief on Lewis’ behalf, White wrote: “Some have looked to assign blame for every aspect of the financial crisis...This case is a product of that dynamic and does not withstand legal or factual scrutiny.”

In remarks at a New York University Law School event last year, White said: “You should be aggressive where there is a crime,” but prosecutors shouldn’t “fail to distinguish what is actually criminal and what is just mistaken behavior, what is even reckless risk-taking, and not bow to the frenzy.”

Her law firm meanwhile was itself cashing in on the bailout, receiving a contract worth $159,175 as one of 16 law firms Treasury hired to work on the bailout, American Lawyer reported.

White obviously lives in a far different world from most Americans, who are still rankled that so few bankers have been held accountable for the financial collapse.

Maybe it’s understandable that in her role as defender of too-big-to-fail bankers, she didn’t express much empathy for investors who lost savings, for cities and towns ravaged by foreclosure or workers laid off in the worst economic downturn since the Great Depression.

And it probably wouldn’t have endeared her to her clients if she had expressed outrage at the bankers’ epic greed and recklessness that led them to wreck our economy.

In her new job, she will face many tough challenges; overseeing implementation of many of the Dodd-Frank financial reform’s unfinished regulations, and convincing a deficit-obsessed Congress and president to beef up staffing and salaries at her chronically underfunded agency so that it can compete with her former colleagues at the  fancy law firms. It’s hard to imagine White rising to this challenge, especially since after her SEC tenure she’ll probably head back to a big Wall Street firm.

Don’t get me wrong, I don’t believe there’s anything wrong with representing bankers – or mob bosses. Our legal system works best when both sides have strong, aggressive advocates. White made her choice to leave the relatively poorly paid public sector to join a private firm and provide bankers a “tough as nails” defense lawyer. But does that really qualify her as the best person to lead the SEC, an agency already reeling from a lack of credibility for not pursuing fraud in the financial sector aggressively enough? Don’t investors and taxpayers deserve protection from somebody whose primary concerns since the bailout haven't been profiting from it and keeping bankers comfortable?



For bailed-out executives, the gravy train never ends

How many bailed-out executives does it take to screw the American taxpayer?

Not many, when they have the kind of phony oversight the Treasury Department has been providing for the companies we bailed The latest report by the special inspector general for the Troubled Asset Relief Program (TARP)  - known to the rest of us as the Wall Street bailout –  portrays the Treasury Department’s bailout  overseers as more concerned with coddling corporate titans than they were with protecting taxpayers – even though excessive compensation was a main cause of bankers’ reckless risk-taking in the first place by rewarding short-term performance rather than more sustainable long-term gains.

The damning IG report, issued January 28, outlines a pattern of the Treasury Department’s  acting pay czar, Patricia Geoghegan, approving excessive compensation for the corporate executives who took public funds while ignoring previous recommendations from the special IG’s office to implement polices to restrain their pay.

Treasury’s continuing approval of the excessive salaries contradicts President Obama’s vow to rein in bank pay in the wake of bankers’ outrageous bonuses after the bailout. “It does offend our values when executives of big financial firms that are struggling pay themselves huge bonuses even as they rely on extraordinary assistance to stay afloat,” the president said in 2009.

Geoghegan, a retired lawyer for the white-shoe Wall Street corporate law firm Cravath, Swain & Moore, justified her approvals for three companies, AIG, GM and Ally Financial Inc., citing the companies’ concerns [for losing the executives while they worked to get their firms out of debt to the TARP program as quickly as possible. rephrase] AIG has since paid back its TARP money; GM and Ally remain in the program.

Geoghegan approved huge pay hikes for executives overseeing units of the companies that were not doing well – and even going bankrupt.

While her predecessor set guidelines that barred cash salaries at the bailed-out firms  exceeding $500,000 except for good cause, the IG found that Treasury in 2012 approved salaries of $3 million or more for 54 percent of the top 69 bailed-out bank executives, while another 23 percent got salaries of $5 million or more.


In her report, the special inspector general, Christy Romero concluded: “While taxpayers struggle to overcome the recent financial crisis and look to the U.S. Government to put a lid on compensation for executives of firms whose missteps nearly crippled the U.S. financial system, the U.S. Department of the Treasury continues to allow excessive executive pay.”

Rather than develop her own analysis of the company’s request for compensation, Geoghegan merely parroted what the company said to her. According to the report, “[Geoghegan’s decisions] were largely driven by the companies’ pay proposals, the same companies that historically, and again in 2012, proposed excessive pay, failing to appreciate the extraordinary situation they were in, with taxpayers funding and partially owning them.”

If the pay czar won’t question the firms’ salaries request, “who else will protect the taxpayers?” Romero asked.

Obviously not the Treasury Department, which was given a chance to address the Inspector General’s criticisms. In its written response, the Treasury Department disagreed with the IG’s findings and conclusions and did not agree to implement any of its recommendations.

The Treasury Department shouldn’t be allowed to thumb its nose at taxpayers in such a flagrant manner, or at the president’s clearly stated wishes. Or does Treasury’s cave-in to the bankers indicate that President Obama changed his mind?

We should demand that Congress conduct a thorough and public investigation into who thwarted the president’s efforts to scale back pay at bailed-out firms.

A great place to start would be contacting the members of the Senate Banking Committee to demand they look into it.


For lobbyists and their bosses, budget crisis is big winner

Turns out not everybody was distressed that Congress has been tied up in knots for months obsessed with the self-imposed fiscal cliff crisis.

The lobbying industry, which had previously been in the dumps because of the do-nothing Congress, came roaring back to life in 2012, due in large part to the prolonged budget crisis.

According to the Center For Public Integrity, about half of the country’s top 100 lobbying firms spend more in the fourth quarter last year than they did in the third quarter, and about half showed an overall increase for 2012 over the previous year.

The top spender was the U.S. Chamber of Commerce, which laid out a whopping $125 million in 2012, an 88 percent increase over the previous year. That doesn’t include the $36 million they paid to influence the outcome of the election. Another big spender was J.P. Morgan, which served up $8.8 million in lobbying and another $784,923 to influence the election.

This increased lobbying activity unfortunately goes on outside public view. Only later can we tally up the damage from this legalized corruption of our democracy – and our pocketbooks.

And when lobbyists win, so do the corporations that pay them big bucks.

I wrote earlier this month about the corporate goodies hidden away in the fiscal cliff deal that represented just a part of the lobbyists’ handiwork – a down payment from members of Congress on their debt to the corporations who foot the bill for their campaigns and other political adventures.

Because there was no grand bargain, Congress couldn’t go all the way on their corporate overlords’ agenda, such as implementing the Social Security and Medicare cuts the CEOs have been hammering away at.

One of the most recent glaring examples of how our government does corporate bidding in secret, contrary to the public good, is the recent favor Congress did for biotech and pharmaceutical giant Amgen, hidden in the fiscal cliff deal.

As revealed by investigative reporters for the New York Times, Amgen received a very profitable gift in that deal – an exemption from Medicare price controls for one its kidney dialysis drugs. It’s the second such exemption Amgen obtained for the drug, Sensipar, which accounted for $950 million in sales last year, an 18 percent increase over the previous year.

So the $7.6 million the company paid for lobbying, and another $1.7 million in political contributions the company showered on both parties, was a small price to pay the government to keep its mitts off the company’s hot property.

At the center of the fiscal cliff deal were two senators, one Democrat, Max Baucus, and one Republican, Mitch McConnell, who are prime recipients of Amgen’s generosity. Since 2007, Amgen has given Baucus $67,500 and McConnell $73,000.

Amgen has also donated $141,000 to President Obama, who signed off on the fiscal cliff deal.

Congress’ secret favor for Amgem is expected to cost Medicare $500 million.

In December, before the fiscal cliff deal was set, President Obama was stressing the importance of reducing Medicare costs.

“I’m willing to reduce our government’s Medicare bills by finding new ways to reduce the cost of healthcare in this country," Obama said. "That's something that we all should agree on. We want to make sure that Medicare is there for future generations. But the current trajectory of health care costs is going up so high we've got to find ways to make sure that it’s sustainable."

The Amgen exemption also highlights the revolving door nature of business in Washington; current lobbyists for Amgen include former chiefs of staff for Baucus and McConnell.

A Vermont congressman has introduced legislation to undo Amgen’s sweet deal. Rep. Peter Welch, a Democrat, told the Los Angeles Times:  “Amgen managed to get a $500-million paragraph in the fiscal-cliff bill and virtually no one in Congress was aware of it. It’s a taxpayer ripoff and comes at a really bad time when we’re trying to control healthcare costs. Amgen should not be allowed to turn Medicare into a profit center.”

Call your representative and senator and let them know how you feel about major corporations like Amgen getting secret favors behind closed doors.

Four ways to tell if President Obama was lip-syncing

So it turns out that Beyonce’s ardent, flawless performance of the Star-Spangled Banner may have been lip-synced. The more important and far trickier question is whether President Obama’s impassioned promise to fight for the middle class and a just society is for real, or just more lip service.

The president pushed all the right buttons to our inspire our belief, crafting a theme of “We the people,” defending the importance of collective efforts and evoking battlefields in the people’s fight for justice, from March on Selma to Seneca Falls to the Stonewall bar. And he took the oath of office with his hand on Martin Luther KIng’s traveling bible, the one the civil rights leader carried with him and scribbled notes in as he led the movement.

Many people have invested their hopes and dreams in the president’s leadership and are willing to give him the benefit of the doubt on the tepid economic recovery and unkept promises. I thought it was a terrific speech but I’m less giddy about the speech and our prospects for the next four years.

One source of my skepticism is the president’s choice to replace Treasury Secretary Timothy Geithner, under whose leadership, blessed by the president, the too big to fail banks got bigger, no bankers were held accountable for the financial collapse, and the government’s efforts to clean up the foreclosure mess floundered. Geithner, meanwhile, ridiculed efforts by others on the Obama economic team who wanted to fight for a bigger stimulus that would have helped others who weren’t bankers.

To replace Geithner, the president chose his chief of staff Jacob Lew, who enjoyed a brief, highly paid stint at  too big to fail Citigroup from 2006 to 2009, as a manager in a unit that bet against the housing market in the run-up to the financial collapse. After Citigroup reaped its share of the taxpayer-funded bailout, the bank awarded Lew a $950,000 bonus. Before his service to Citigroup, he served as head of the Office of Management and Budget during the Clinton administration, which gave bank deregulation its final push into reality. Of his Citigroup gig, Robert Kuttner wrote, “It was mainly a chance for a skilled public manager to make himself some money until the Democrats returned to power.”

Especially troubling is the lack of expertise Lew demonstrated in comments during a 2010 Senate hearing, where he candidly acknowledged he was not particularly sophisticated in his financial understanding – but went on to downplay the role of deregulation in the financial meltdown.

“My sense, as someone who has generally been familiar with these trends is that the problems in the financial industry preceded deregulation; there was an increasing emphasis on highly abstract leveraged derivative products that got us to the point that in the period of time leading up to the financial crisis risks were taken, they weren’t fully embraced, they weren’t well understood,” Lew said. “I don’t personally know the extent to which deregulation drove it but I don’t believe that deregulation was the proximate cause. I would defer to others who are more expert about the industry to try and parse it better than that.”

But the even the grandaddy of financial deregulation himself, Alan Greenspan, has acknowledged what a fiasco it was. As the Consumer Education Foundation pointed out in its March 2009 report, co-authored with Essential Information, “financial deregulation led directly to the financial collapse” by allowing banks to concoct and sell complex investments based on worthless mortgages – without any government oversight or interference.

Regardless of his expertise or lack of it in high finance, Lew is a member in good standing of the elite financial industry – government corridors of power that have been peddling austerity – a particularly hostile landscape for the hopes and dreams of the middle class. Is this really the person Obama believes is best to lead the economic team that is supposed to protect the middle class? If Obama is serious about following through about his inaugural speech promises to protect and preserve economically vulnerable Americans, he’s going to need a much more ambitious  and specific agenda than he’s offered so far, and he’s going to need to abandon some major policies he’s been pursuing.  And he’s going to need a cabinet and a political team to flesh those policies out, sell them to the country and skillfully push them through Congress. Lew will have to reach way beyond his comfort zone, in which he has functioned as a quintessential insider and number-cruncher.

A great inaugural speech is not about to convince the vast corporate interests that have poisoned our politics to pack up and go home.

To truly protect the middle class, the president is going to have get outside the austerity bubble that Washington has built up around itself with the help of the media wise men and women who judge political courage and wisdom by how much our leaders are willing to slash from social programs.

The way to protect the middle class is straightforward – but demands a departure from the conventional thinking that rules Washington.

Economist Robert Pollin suggests two very specific –  and grand  – goals for Obama to shoot for. First, cut unemployment in half by the end of 2016, back to 3.9 percent, where it was in 2000, creating an additional 13 million jobs, through a combination of federal stimulus funding,and grabbing the excess funds that the Federal Reserve has shoveled to banks. While bankers have profited from the Fed’s generosity, they have not used those funds to spur the broader economy. Here’s an interview in which Pollin details his views.

The second is creating a real program to fight and reverse rising poverty in the U.S., reducing the number of people living in poverty from 15 to 11 million, again aiming to reduce the poverty to 2000 levels. Again, Pollin says the best way to do this is by focusing on resources on job creation.

Inside Washington’s austerity bubble, this idea of dramatically reducing unemployment or poverty is never discussed any more, amid assumptions that either people are poor because of their own failings or the government can’t afford to do anything about it.

But outside the bubble, economists like Pollin and others suggest another path, and if Obama is serious about the ideals he articulated in his speech, he’ll lead the fight to burst the austerity bubble, embracing this more activist path.

If he’s really intent on helping average Americans, there are two policies President Obama is pursuing that he should immediately discard, because they will hurt the middle class.

The first is the Trans-Pacific Partnership, the latest in a long line of so-called free trade agreements like the North American Free Trade Agreement, that have been sold to the public as boosts to the economy but have really crushed low and middle income jobs by increasing outsourcing and lowering wages. While the TPP talks exclude the public, corporate lobbyists have free access.

The president and his team should acknowledge the dangers to America of these phony free trade deals, and abandon the TPP and others like them.

The president should also drop the idea of “tweaking” Social Security by adopting “chained CPI,” which is a way of calculating the “cost of living” that would reduce future Social Security payments. The president has suggested that “chained CPI” could be part of fiscal grand bargain to reduce the deficit. While the president has touted the plan as a kind of a technical fix that would strengthen the program in the long run, Social Security watchdogs say chained CPI would result in substantial benefit reductions.

You’ll know the president is serious about keeping his promise to protect the middle class when you see him following through on this short list.