Money Never Sleeps

Oliver Stone’s sequel to his 1984 hit "Wall Street" opens as the Bubble is about to burst on a culture of material excess that makes Gordon Gekko’s 1980s cell phone – then a symbol of extravagance available only to the mega-rich – ridiculously quaint. Stone’s Wall Street circa 2008 is set in a New York constructed of light, with ubiquitous flat screens providing instantaneous, 24/7 updates on the status of global power and wealth. When the results of decades of speculation first hit the housing market and then the stock markets, the great titans of Wall Street start eating their own. But that was only an appetizer for the main course: the American taxpayer.

I really couldn’t enjoy the love story between Shia LaBeouf and money, much less the one between Shia and his girlfriend, who happens to be Gekko’s estranged daughter and thus presents a trading opportunity for the ambitious young man. As the movie traced the collapse of Bear Stearns and then the stock market into a pile of scrap paper, I got more and more angry.

In one scene, the silver-haired heads of the giant firms that run Wall Street – surrogates for Goldman Sachs, JP Morgan, Citigroup, etc. – cloaked in bespoke suits, are gathered around an ornate table in a wood-paneled conference room with one of their former colleagues, who is now the Secretary of Treasury (aka Hank Paulson), to discuss how much taxpayer money they need in order to stay afloat. Hundreds of billions of dollars are referred to in single digits. The consensus, quickly obtained, was “seven.” It was like the Godfather movies, when the heads of the Families would convene to handle some event that threatened their criminal way of life.

I found myself remembering the scene, in the third Godfather, when small-time hood Joey Zasa locked the conference room doors from the outside, trapping the heads of the Families inside so they could be slaughtered by his assasins.

The nation hardly needs Oliver Stone’s portrayal of the markets as organized crime to stoke people’s recollection of what the debacle did to our economy and our kids’ futures. Our anger has reached a white hot point that, like the sun in a magnifying glass, is now being directed against public officials all over the country. “Money never sleeps” is Gordon Gekko’s new mantra, and vast sums of money are flowing into the political process to influence the November elections - largely an attack on incumbent Democrats in Congress.

But where was all this money back in the third week of September, 2008, when the Bush Administration’s three page proposal to bail out Wall Street with billions in taxpayer money was presented to Congress along with the threat that the United States would collapse if it wasn’t approved on the spot?

In what I must acknowledge was a serious overestimation of the impact one citizen could have at such a moment, I flew to Washington, D.C. on Tuesday, September 23, 2008, thinking I might be able to draw someone’s attention to the sheer lunacy of what was being proposed. Joan Claybrook, the President of Public Citizen, and I held a news conference just outside the House Banking Committee hearing room, where the plan was being presented by the Bush Administration. We were like two voices whispering in a hurricane. Later, I met with members of the California congressional delegation who were in shock and ready to do the bailout deed forthwith. Ok, I said, at least require disclosure of how our money was spent and a quid pro quo: that the companies receiving taxpayer dollars could not loan them back to us for more than a few percentage points profit. The legislators responded to the interest rate cap as if I had proposed that they resign from Congress.

It would have been nice back then if there had been a hugely funded campaign backed by angry Americans telling Congress not to act hastily or stupidly. But in fact, the big money we are seeing now in American politics is not from the grassroots, but from the same greedy folks who caused the debacle in the first place or who profited from the bailout. According to US News and World Report, business and conservative backed organizations are behind the  “independent expenditure” campaigns that are targeting Democrats and outspending them two to one. A recent article in the New Yorker uncovered two extremist billionaire brothers funneling over $100 million from their family oil business into Tea Party non-profits. Long-time big business Republican operatives like Karl Rove (now running a group called "American Crossroads") and Dick Armey ("FreedomWorks") are supplying more than tea for the new tea party.

The sudden resurgence of interest in politics on Main Street would be cause for great celebration, and the opportunity for real change, as citizen leader Jamie Court writes in his new primer on political activism: “The Progressive’s Guide To Raising Hell.” Instead, it’s just another dismaying example of big money corrupting our political system. If it succeeds, get ready for more speculation, more bubbles, and more pain for the average American.

"Greed is good," Gekko said back in the day, but Wall Street needs to own Washington, and Wall Street is already projecting victory in November.  Commenting on the rise of the Dow in September, an analyst said, "’There is a good chance that the strength we have seen in the market recently is due partly to an expectation about the result of the election... Investors are starting to understand that a likely result of this election is gridlock, and that is good."

Open Letters to Sens. Feinstein and Boxer

NO COMPROMISE TOP 10

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

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

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

OPEN LETTER TO SEN. DIANNE FEINSTEIN

Dear Sen. Feinstein:

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

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

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

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

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

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

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

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

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

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

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

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

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

In the Dodd bill:

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

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

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

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

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

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

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

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

Sincerely,

Martin Berg

Editor

WheresOurMoney.org

AN OPEN LETTER TO SEN. BARBARA BOXER

Dear Sen. Boxer:

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

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

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

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

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

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

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

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

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

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

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

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

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

In the Dodd bill:

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

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

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

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

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

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

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

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

Sincerely,

Martin Berg

Editor

WheresOurMoney.org

Never-Ending Bailout is Not a Partisan Issue

It would be hard to find two congressmen more politically opposite than Brad Sherman and Jeb Hensarling.

Sherman is solid Democrat from the San Fernando Valley in southern California. Hensarling is a red-meat Texas conservative protege of former senator Phil Gramm.

Sherman and Hensarling may not agree about anything else.

But the two men have been outspoken in one shared view: that the bailout known as the Troubled Asset Relief Program, or TARP has lacked accountability or transparency from day one.

Administration still won't rein in lavish pay schemes

Imagine if you could report the value of your work on your tax return, rather than your actual income. At the end of the year, you’d issue yourself a W2 or a 1099 based on a comparison of how other people who did the same kind of work valued their efforts. The lower the worth you put on your work, the lower your taxes. Let’s just say the IRS wouldn’t be too happy with a system that encouraged low-balling.

Wall Street bankers were able to arrange an equally self-serving compensation system for themselves - and they got away with it.

Happy birthday bailout!

In a week, the nation will celebrate the one-year anniversary of Wall Street’s collapse.

For most, it won’t be a festive occasion. A whopping 16% of Americans able to work are unemployed or are working fewer hours than they want. Spending is way down because people are scared and many are unable to borrow – lines of credit have been slashed and credit card interest rates are skyrocketing. Since household spending amounts to at least 30% of the nation’s economic activity, this has had a devastating ripple effect on the economy.