Rearranging the Deck Chairs Tonight

U.S. Senator Mark Udall, Democrat of Colorado, thinks Republican and Democratic members of Congress should sit with each other, rather than separately by party, when President Obama makes his State of the Union speech tonight in the Capitol. In a letter to the leadership of the House and the Senate that has gotten a lot of attention in D.C., Udall said that “partisan seating arrangements at State of the Union addresses serve to symbolize division instead of the common challenges we face in securing a strong future for the United States…. The choreographed standing and clapping of one side of the room – while the other side sits – is unbecoming of a serious institution.  And the message that it sends is that even on a night when the President is addressing the entire nation, we in Congress cannot sit as one, but must be divided as two.”

Udall is right about the symbolism of the tradition, which dates back two centuries, but his proposal is just more symbolism.

This isn’t one of those dinner parties where the hosts break up the married couples to inspire more lively conversation. Sitting next to each other isn’t going to stop the Democrats from applauding, or the Republicans from sitting on their hands or worse, like when a congressman from South Carolina screamed “you lie” during a health care speech by Obama to a joint session of Congress in 2009, or when at last year's State of the Union, Supreme Court Justice Samuel Alito visibly disagreed when the President criticized one of the Roberts court’s more extreme examples of judicial activism. With differences so deep, putting congresspeople within reach of each other may not be a good idea at all.

So what exactly is the attraction of Udall’s proposal? As in every mass tragedy in recent years – from JFK’s assassination to 9/11 to the carnage in Arizona – there is a brief period in which people want to reach out, beyond politics, for reassurance that we are all, or at least most of us, still human beings. We’re still within that gauzy penumbra. Speaking in Tucson, Professor Obama got high marks from the opinionators and the public for pointing out that incivility cannot explain insanity – and thus smothering the debate over the name-calling and extreme partisan politics of our era. But is that really the problem in America today?

True, the majority of Americans probably are uncomfortable with the current decibel level. We remember wistfully an America when things were better all around – or perhaps merely seemed so. But there is, without any question, plenty of reason to be angry right now. Not since the Depression have so many people suffered while so few prosper. Our American spirit has been shaken, maybe shattered. We have been betrayed by those we entrusted to protect us.

I don’t agree with many of the loudest, angriest people, but I don’t blame them for being loud or angry.

Sometimes that’s the only way you get things done.

Addressing another exercise in symbolism – a new non-profit political organization called “No Labels” dedicated to “bipartisanship” – New York Times columnist Frank Rich recently made the point: “The notion that civility and nominal bipartisanship would accomplish any of the heavy lifting required to rebuild America is childish magical thinking, and, worse, a mindless distraction from the real work before the nation.”

When you look at what has happened to this country, the dire conditions at home and the dangers we face abroad, and what we have to do to make sure our kids have some measure of the security and prosperity we enjoyed, talking about where members of Congress sit is like rearranging the deck chairs on the Titanic.

Congress / Harvey Column / Outrage / President Barack Obama / Uncategorized - 01/25/2011

Happy Thanksgiving to You from California First LLC, the New Owner of Your State

This isn’t a tale about turkeys. It’s about pigs.

With America’s economy smashed, and American consumers no longer consuming, these are tough times for everybody, and that includes Wall Street investors and hedge funds. What are they supposed to do with the billions of dollars they have amassed courtesy of the US taxpayers?  Wouldn’t it be great if they could figure out a way to help us while helping themselves?

Harvey Column / Outrage / Uncategorized - 11/23/2010

Around The Web: Nothing Natural About Financial Disaster

Maybe this is the one that will finally cause people to take to the streets.

The crack investigative journalists at Pro Publica and NPR’s Planet Money have uncovered the latest evidence of how the big bankers schemed to keep their bonuses and fees coming by creating a phony market for their mortgage-backed securities, which were tumbling in value as the housing market tanked in 2006.

The Pro Publica/NPR investigation shows how the bankers from Merrill-Lynch, Citigroup and other “too big to fail” financial institutions undermined a system of independent managers who were supposed to be evaluating the value of the securities. The banks simply browbeat the managers into buying their products rather than face losing the banks’ business.

Meanwhile, the bankers continued to make money off every deal, even though the rest of us paid a high price for their continued trafficking in complicated financial trash.

Then when the entire business unraveled in the financial collapsed, these bankers got a federal rescue and a return to profitability.

Pro Publica acknowledges it’s complex material, so they’ve accompanied their investigation with a cartoon and graphs to make it easier to understand.

My WheresOurMoney colleague Harvey Rosenfield wrote recently about the falseness of the claim that either Hurricane Katrina or the financial collapse were primarily natural disasters. The NPR/ProPublica investigation is yet more evidence that the bankers’ irresponsible self-dealing turned a downturn in the housing market into full-blown catastrophes.

Writing on his blog Rortybomb, Mike Konczai hones in on the stark contrast in the fate of the bankers and many of the rest of us:  “Remember that by keeping the demand artificially high for the housing market in the post-2005, these banks created its own supply of crap mortgages. These mortgages inflated and then crashed local housing prices. Meanwhile the biggest banks got tossed a lifeline and homeowners can’t even short sale their home much less have a bankruptcy judge that can set their mortgage to the market price with a large penalty. And everyone lines up to tell those people what ‘losers’ they are, how `irresponsible’ they’ve been for being pulled into becoming the artificial supply for artificially created demand of housing debt. What sad times we are living in.”

Meanwhile the SEC is supposedly investigating the self-dealing. We’re still waiting for the tougher new SEC that the Obama administration promised. In the latest indication that we may have to wait a while longer, a federal judge has rejected the agency’s proposed $75 million settlement with Citibank over charges that the bank misled its own shareholders about the shrinking value of its mortgage-backed securities. The SEC said the bank misled investors in conference calls by saying its subprime exposure was $13 billion, when it was actually more than $50 billion. Among the pointed questions the judge asked: Why should the shareholders have to pay for the misdeeds of the bank executives, and why didn’t the SEC go after more of the executives?

The judge’s questions about accountability mirror the uneasy questions a lot of us have about this administration’s reluctance to take on the bankers whose behavior led to ruin for the country while they profited.

Around the Web / Derivatives / Executive Pay / Martin Column / Outrage / Securities and Exchange Commission (SEC) / Too Big To Fail / Uncategorized - 08/31/2010

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

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

Back to the Future of Reform with Sen. Chris Dodd

Dodd moves to scale back Consumer Financial Protection Agency plan

In an attempt to lure the Republican votes needed to get a sweeping overhaul through the Senate, the Banking Committee chief is circulating a plan for a less powerful Bureau of Financial Protection.

-- Los Angeles Times, March 2, 2010

Dodd Proposes Financial Protection Committee Housed in Treasury Department

In new attempt to lure the Republican and Democrat votes needed to get semi-sweeping overhaul through Senate, the Banking Committee chief is circulating a plan to create a Financial Protection Committee inside the U.S. Treasury.

-- Los Angeles Times, March 28, 2010

Dodd Proposes Professor of Financial Protection at University of Connecticut

In renewed attempt to lure the Republican and Democrat votes needed to get modest financial fixes through Senate, the Banking Committee chief is circulating a plan to give the University of Connecticut $150,000 to hire a professor to teach the public about financial protection.

-- Los Angeles Times, April 15, 2010

Dodd Proposes Dial 1-900-4Protection Line

In a leisurely attempt to lure the Republican and Democrat votes needed to get itsy-bitsy, not too scary reform bill through Senate, the Banking Committee chief is circulating a plan to set up a 900 number to be answered on weekends by volunteers from credit card customer service departments. Costs of the program will be defrayed by charge of 99 cents per call.

-- Los Angeles Times, May 20, 2010

Dodd Proposes Facebook Financial Protection Page

In further attempt to lure the Republican and Democrat votes needed to get any kind of friggin’ bill through Senate, the soon to retire to the financial industry Banking Committee chief is circulating a plan to create a Facebook page where consumers can share financial protection ideas with each other.

-- Los Angeles Times, June 15, 2010

Dodd Proposes Wall Street Protect Consumers

Fuhghettaboutit.

-- Los Angeles Times, July 4, 2010

Consumer Financial Protection Agency / Harvey Column / Uncategorized - 03/02/2010

Obama Strikes Out

That didn’t take long.

Just a couple of days after the New York Times reported that Wall Street was unhappy with the return on its massive investment in the Democratic Party; President Obama softens his rhetoric on the big bankers. He told Business Week he didn’t “begrudge” bailed-out too big to fail bankers their bonuses, benignly comparing them to all the top baseball players who earn fat salaries yet don’t make it to the World Series.

“That’s part of the free-market system,” Obama opined.

Obama knows some of the bankers personally, he tells Business Week, and finds them “savvy businessmen.”

Before the bankers complained publicly about their lack of return on campaign contributions to Obama and the Democrats, the president had recently been trying out a tougher stance: suggesting “too big to fail” banks, their risky behavior and the fat bonuses that fuel it should be reined in.

President Obama has been consistently inconsistent in the fight over financial reform. He’ll make strong proposals one day (judicial cram-downs to help homeowners in foreclosure, for example) and then leave them to die without his support in Congress under withering assault by bank lobbyists. He’ll blast the bankers’ bonuses one day and cozy up to them the next. It was less than a month ago that the president labeled the bonuses “obscene” and pledged to tax them.

By contrast, the bankers have been relentless and shrewd in their fight to delay, confuse, stymie and water down attempts at reform. They have fought in the back rooms, in the media and the floors of Congress, using checkbooks and rhetoric.

The president is spot on, however, when he refers to the remaining big bankers as savvy. After they wrecked the economy, they didn’t waste the financial crisis. They’ve come back bigger and stronger than ever, with fewer competitors, with a firm grasp on a steady pipeline of cash from the federal treasury.

For a more clear-eyed view of the bankers, what they’ve been up to and what they have to do, we have Elizabeth Warren, the Harvard Law professor and congressionally appointed bailout monitor. “This generation of Wall Street CEOs could be the ones to forfeit America’s trust,” she wrote Monday in the Wall Street Journal [no link]. “When the history of the Great Recession is written, they can be singled out as the bonus babies who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies. Or they can acknowledge how Americans’ trust has been lost and take the first steps to earn it back.”

With his wish-washy approach, the president is in his own real danger of losing America’s trust as a champion of reform. Making lame comparisons between ruthless bank CEOS and clueless overpaid athletes doesn’t help the president’s credibility any.

Even the analysts on ESPN Sports Center know that.

Contact the president yourself and let him know what you think of the bailed-out bankers’ bonuses.

Executive Pay / Martin Column / Too Big To Fail / Uncategorized - 02/10/2010

It's Alive!

Wall Street has weighed in with powerful evidence that the United States Supreme Court was right when it concluded a few weeks ago that corporations are the same as human beings. Turns out, Wall Street has feelings, and they are hurt.

Wall Street is so “irked” at President Obama and the Democratic Party that it is rebuffing their requests for political money, according to the New York Times. “[I]t doesn’t feel good,” when Obama talks about Wall Street greed, complained a Morgan Stanley executive. “The expectation in Washington is that ‘We can kick you around, and you are still going to give us money,’” whined a major Wall Street executive. He warned: “‘We are not going to play that game anymore.’”

That’s just a bluff, of course, because Wall Street has been playing the Washington money game for decades – in fact, as we documented in our two hundred page report (PDF) last year, the nation’s economy is in the toilet now because between 1998 and 2008, Wall Street spent $5 billion on Washington, and Washington, without even a hint of partisanship, rolled over – deregulating the industry and encouraging the orgy of speculation that led to the crash.

The Supreme Court’s decision last month in the Citizens United v. Federal Election Commission case guarantees that big business will always be happy by solidifying corporate control over the nation’s legislative process. Discarding one hundred years of previous decisions, the court held that, under the First Amendment, when corporations spend money in the political process, it’s the same as when people make speeches.

This is a travesty. The practical effect of the decision is to accord huge multinational corporations the power to nullify the First Amendment rights of individual Americans. While you and I are “free” to drag a soapbox on to a street corner and  proclaim to our heart’s content, credit card companies, hedge funds, insurance companies are now “free” to unleash tens of millions of dollars from their corporate treasuries in an attempt to fix the outcome of any political debate in their favor. Sometimes that will backfire, as it did when insurance companies spent $80 million trying to persuade voters to defeat Proposition 103, the insurance reform I wrote back in 1988.  Californians figured out who was on the their side, and who wasn’t. But in the vast majority of lower profile issues, in which elected officials are called upon to choose between the policy choice favored by a huge money donor and the one that’s better for constituents, the money talks.

That’s why, despite the near-collapse of our financial system at the hands of the Money Industry, their lobbyists have still been able to stymie just about every congressional proposal to prevent another crash: reform of derivatives and the student loan system, creation of a Consumer Financial Protection Agency, and the recent proposal by the White House to ban banks from speculation.

The tyranny of the British monarchy led to the American Revolution. The Supreme Court’s decision substitutes a corporatocracy for the oppression of kings. So far, the tea parties that seem to be erupting spontaneously around the nation are directing their fire at the bailouts and other encroachments of government. They also need to keep an eye on the corporations that are arguably more powerful than the government already, or will soon be so thanks to the Supreme Court.

Harvey Column / Uncategorized - 02/09/2010

Wall Street Gives Thanks

(Translated into English by Harvey Rosenfield)

November 22, 2009

Dear People of the Rest of the Country:

The holidays are here. Like you, we have all worked very hard during this difficult and trying year.  Now it’s time for all Americans to take a well-deserved few days off, chill out at your favorite Caribbean getaway, crack open a bottle (we like the 2006 Antinori Cab), gather around family and friends and yachts, and recognize how blessed we are for getting to “do God’s work,” as Master Blankfein says.

Harvey Column / Uncategorized - 11/23/2009