F**king Grandmothers, Widows and Orphans

“They’re fucking taking all the money back from you guys? All the money you guys stole from those poor grandmothers in California?”

"Yeah, Grandma Millie man. But she’s the one who couldn’t figure out how to fucking vote on the butterfly ballot."[Laughing from both sides]

"Yeah, now she wants her fucking money back for all the power you've charged right up, jammed right up her ass for fucking $250 a megawatt hour."

– Transcript of two Enron traders discussing the blackouts in California caused by the company’s manipulation of electricity prices in 2000.

“I’ve managed to sell a few Abacus bonds to widows and orphans that I ran into at the airport….”

– Email from Fabrice Tourre, Goldman Sachs trader, joking about derivatives he was selling that later proved worthless.

I have a job I really love – fighting injustice – so I always thought that being a Wall Street trader was just about as boring and inconsequential a job as you could think of. I mean, how enjoyable could it be to sit in front of a computer all day, doing nothing but moving an artificial construct around – “a ‘thing,’ which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price'" as the Goldman dealer described the derivatives he was peddling.

But it seems these guys were able to have a few laughs after all. Turns out the money ain’t bad either.

It would all be very amusing if their antics – “God’s work,” as Goldman’s CEO Lloyd Blankfein described it not long ago – hadn’t cost the country trillions of dollars, and many Americans their jobs, homes and pensions.

Not so funny.

Something is seriously wrong when the pursuit of wealth unabashedly becomes the preeminent aspiration of a culture. And when those who succeed in obtaining vast riches and privilege have nothing but disdain for the rest of the nation, and aren’t a bit embarrassed to say so.

The financial collapse was not an isolated, once in a century deviation. During the 1990’s, Enron and other energy companies, California’s public utilities and the Chamber of Commerce got together and, with the aid of a few million dollars in campaign contributions, got the California Legislature to deregulate electricity rates. Wall Street loved the idea. As soon as the law took effect, in late 2000, the traders jumped in and engineered phony shortages that ultimately cost California taxpayers $70 billion. We’ll be paying off the debt from that debacle for another twenty years.

With hindsight, it is clear that the California energy crisis was merely a forerunner of the current financial collapse. And I’ve noted the disturbing similarities between how Governor Gray Davis and President Obama responded to an emergency not of their own making. As I pointed out in “The Smartest Guys in the Room,” an action movie figure is the Governor of California today as a result.

Two crises in the same decade. Both the product of avarice. How could we let that happen?

9/11 had something to do with it. For most of the years that followed, the American people were told that our greatest enemy lived in a cave half way around the world. That was wrong, as it was eighty years ago, when in the midst of the Great Depression President Franklin Roosevelt told Americans, “our enemies of today are the forces of privilege and greed within our own borders.”

We now know that the enemies of American consumers and taxpayers were sitting in front of multiple computer screens by day, living in palaces and yachts and on their own private islands. Their weapons were pieces of paper that were backed by other pieces of paper that were backed by packages of mortgages, student loans and credit card debt, the complexity and value of which no one understood.

The people who were supposed to defend us against financial mayhem were overtly or covertly working for our enemies. They betrayed us, as we have painfully documented, and whether it was a few million to California lawmakers or $5 billion over ten years to Washington, it all came down to money.

The Republicans rail against the Democrats. The Tea Partiers rail against both. But where's the debate over the culture of greed that is eroding our values, not to mention our strength as a nation? When will our universities and religious institutions weigh in? When the Times of London asked Goldman’s Blankfein if it were “possible to make too much money,” he replied: ““Is it possible to have too much ambition? Is it possible to be too successful?” My answer to those questions is “yes.” What's your answer?

Goldman-Sachs / Harvey Column / Outrage - 05/04/2010

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

Around the Web: Can WAMU be the Blue Cross of Financial Reform?

During the debate over health care reform, the public was galvanized by the disclosure of  outrageous insurance rate increases by Blue Cross.

It was that public outrage that finally got the healthcare legislation passed over Republican opposition.

Now Senate backers of  a strong overhaul of the financial system hope that televised hearings on the details of the reckless lending, incompetent management and multiple regulatory failures that sank the nation’s largest savings and loan will fuel support for financial reform in the face of relentless opposition from Wall Street.

The hearings got underway Tuesday in the Senate’s Permanent Subcommittee on Investigations, headed by Sen. Carl Levin,D-Michigan.

In strong contrast to hearings  held recently by the congressionally appointed committee to investigate the financial crisis, Levin’s opening hearing was tough, pointed and thorough. Levin said he intended for the hearings to serve as a case study for what happened at financial institutions during the meltdown. He compared WAMU’s selling and packaging of  high-risk option ARM and no-doc loans to dumping “pollutants into a river.”

Calling Washington Mutual’s former CEO Kerry Killinger “a forgotten villain of the financial crisis", Fortune’s Colin Barr sets the stage here. Business Week recounts the testimony here. CSPAN carried the hearings live they can be viewed here.

The star witnesses from WAMU were Killinger and former Chief Operating Officer Stephen Rotella. Killinger testified that WAMU was unfairly targeted by regulators because it not “too clubby to fail” as were larger financial institutions. Killinger insisted WAMU could have worked its way out of the crisis if regulators hadn’t eventually shut it down.

On Friday, we’ll hear from the regulators, who were well aware of WAMU’s questionable lending and securitization but continued to find that the savings and loan was financially sound.

Around the Web / Martin Column / Outrage - 04/13/2010

Tea Party For Two

Is the Democratic Party obsolete?
That’s the question that keeps nagging me as I watch President Obama and the Democratic leadership fumble away their opportunities to fight for meaningful reform of health care and the financial system.
The president and congressional leaders consistently shy away from fighting for reforms they themselves propose, such as the public option or the consumer financial protection agency.

They obsess over whether someone will accuse them of partisanship, or whether they will spook the markets if they crack down on reckless profligate bankers. They appear to find any excuse to avoid pushing the kinds of fundamental of changes that would challenge the health care and financial industry.

I don’t think you can blame the Republicans, whatever their own faults. They oppose reform. They’re fighting Obama and his policies as a way to regain power. They’re pursuing that opposition determinedly, and they’re betting it will pave their way back to a majority. It’s not the Republicans’ fault if they set traps for the Democrats and the Democrats continually fall for them.

Members of the Democratic leadership have shown profiles in cowardice when it comes to fighting for any reforms opposed by the insurance or financial industries. In the latest display, House and Senate leaders are furiously trying to blame the other for the death of the public option, even though it’s supported by a majority of Americans and even 40 members of the U.S. Senate.

But the insurance companies have fought the public option, which would provide those forced to buy health insurance under reform an alternative to private insurance. So the Democratic leadership has shown determination to find a way to eliminate the provision without leaving their fingerprints on the corpse.

The same with financial reform, where the Democrat leadership has zigged and zagged but hasn't won the fight for strong independent consumer protection or meaningful regulation of the complex investments that blew up in the meltdown. Sen. Chris Dodd, the long-time friend of insurers and financial titans who serves as Senate Banking chair, flirted with a strong reform proposal when he was running in a tough reelection campaign. But he backed off after he decided to retire and now appears ready to resume his traditional role in service to the bankers’ lobby. As an industry publication recently noted, insurance companies will miss Chris Dodd.

The Democratic leadership don’t seem to stand for any strong principles.
The president and Democratic leaders pay only lip service to the deep anger in the country over the erosion of the middle class, and the bank bailout that pumped up Wall Street while leaving Main Street on life support. The Democrats fear that anger because they know that their own Wall Street-friendly policies have helped fuel the series of speculative bubbles that brought prosperity and then a crash that wiped out the financial security of millions of Americans.
The president and his party are banking that the economy will improve enough by later this year, and 2012, to blunt voters’ anger.
If it does, the Democrats will claim credit for setting the economy right without having unduly upset their contributors in the financial and insurance industries. Even better for the Democrats, they will be able to bolster their fundraising by showing how they hung tough against the call for stronger reforms.
The Democrats came into office promising not to “waste a crisis.” But their efforts to reform health care and the financial system and to put Americans back to work have shown a distinct lack of urgency.
Could there be another way?

Obama will face voters on the 100th anniversary of the last presidential election in which a third-party candidate beat a major party candidate. The third-party candidate was a former president, Teddy Roosevelt, running on the progressive Bull Moose ticket promising to bust up the powerful big corporations of the day, known as trusts. Roosevelt was angry that the president who followed him, Republican William Howard Taft, hadn’t followed in his activist political footsteps. The former president was not afraid to show his ire, calling on his followers to launch “a genuine and permanent moral awakening.”
Taft, for his part, favored a laissez-faire policy toward business and regulation that resonates with the era that we’ve been through. “A national government cannot create good times,” Taft said. “It cannot make the rain to fall, the sun to shine, or the crops to grow.” But by meddling, government could “prevent prosperity that might otherwise have taken place.”
Sound familiar?

Roosevelt lost the election to Woodrow Wilson, but he got more votes than hands-off Taft.
Today the tea party is rumbling on the right, threatening revolt against the Republicans. There’s already the beginnings of a coffee party. If the economy doesn’t cooperate with the Democrats, the tea party’s discontent could be just the beginning of the end of the two-party stranglehold on our government.

Consumer Financial Protection Agency / Martin Column / Outrage / President Barack Obama - 03/12/2010

Bad Government

In his weekly address last Saturday, President Obama said, “What’s being tested here is not just our ability to solve this one problem, but our ability to solve any problem.” Obama’s speech was about health care reform, but his point goes to the heart of the debate underway in this country – a debate that the Tea Party movement has given a sharp edge.

American’s have lost their confidence in the basic institutions of our democracy. It’s not just the President’s rating that is down in the polls, it’s Congress’s, the United States Supreme Court, even the college system.

There is more than ample justification for this stark collapse of trust. As I wrote last summer, I believe it all begins with the crash of the Money Industry after years of deregulation by federal officials who, quite simply, sold out – and then showered billions of taxpayer dollars to save the speculators while the rest of the economy, along with millions of people’s jobs and savings, went into the tank. Even now, the Wall Street execs whose greed and speculation caused the crash continue to call the shots in D.C.

After that pitiful performance by our government, who can blame people for distrusting Washington’s plan to fix the health care system?

Lately I’ve been pondering two other disasters that might have been averted had government done its job.

An appendix (PDF) to the 2004 report of the 9/11 Commission describes in agonizing detail how our government was unable to mount a defense of the nation that day despite trillions of dollars spent on defense and the military in preceding years. That morning, there were only fourteen jet fighters guarding the country. Flight controllers couldn’t connect the dots as the multiple hijackings unfolded; FAA officials failed to follow procedures to communicate with the military; scrambled fighters were too far away and sent to the wrong locations; the military never even knew how many or which commercial airplanes were involved until all four were down. A fateful order from the White House to shoot down any commercial planes that refused to land never even reached the fighter pilots who by then were flying combat cover over the East Coast.

On that horrible morning, it was only when individuals took matters into their own hands – the passengers of United 93 who fought the terrorists as their plane headed for a strike on he nation’s capitol, or an FAA manager who ignored protocols and unilaterally ordered all planes in the air to land – that more lives were spared.

Or, consider the case of Amy Bishop, the University of Alabama professor who shot six colleagues a few weeks ago. As rendered by the New York Times, her profile now, after the deed, reads like the description of “angry loner” we have grown familiar with from previous mass murders, but no one ever connected the dots of her obviously deranged life. In 1986, she killed her brother but claimed it was an accident and got off, perhaps due to political connections; in 1993, she was questioned in connection with a pipe bomb sent to one of her college professors; in 2002, she punched a women in the head at a House of Pancakes for taking the last booster seat.

What to do, then, about such profound failures by government? Do we follow the suggestion of Glenn Beck, who over the weekend blamed progressivism – the philosophy of engaged government championed by Theodore Roosevelt – for our nation’s ills?

I’m not one of those people who is offended by the eruption of angry Tea Party organizations around the country. To the contrary, the TP’rs are raising questions, pointing out problems and demanding answers from elected officials – just what an active citizenry is supposed to do.

But I disagree with their premise, which is that government is responsible for all that is wrong with our country, and that the solution therefore is a castrated federal government or no federal government at all.

That’s stupid.

We need police. We need the military. We also need a cop on the corporate beat in the executive suites of Wall Street. And we need rules and regulations to prevent health insurance companies from ripping us off or condemning us to death.

When our government institutions fail us, as they have, through incompetence and corruption, the answer is not to get rid of government, but to make it work better. How to do that? Read my next column.

Harvey Column / Outrage - 02/22/2010

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

Attention Unhappy AIG Employees: Good Riddance

Looks like the top lawyer and other fat cats at AIG, whose salaries are now paid by American taxpayers, are maneuvering to be able to escape limits on their pay. Today’s Wall Street Journal reports that a Ms. Anastasia Kelly, the General Counsel of AIG, and four other insurance executives gave notice last week that they were “prepared” to leave by the end of the year if their pay is cut by Kenneth Feinberg, the government “pay czar” who sets compensation levels for companies that got bailout money. AIG got $182 billion in taxpayer dollars. AIG’s top employees want to bust the $500,000 pay cap set by Feinberg.

Harvey Column / Outrage - 12/07/2009

Too Big To Get Sick: Vaccine for the Swine

If they are “too big to fail” then they are obviously “too big to get sick.” Guess that’s why Goldman Sachs, Citigroup, and JP Morgan Chase are getting doses of the H1N1 flu vaccine from the government ahead of virtually everyone else in the country. The firms are on a special list approved by the Centers for Disease Control & Prevention, a federal agency. Most doctors here in Los Angeles still can’t obtain the vaccine for their patients.

Harvey Column / Outrage - 11/05/2009

The Summer of Our Discontent

There’s been a lot of speculation that the Town Hall confrontations over health care reform have been generated by political operatives enlisted by politicians and other partisans who are in the pockets of the insurance and medical industries.

Harvey Column / Outrage - 08/26/2009