Is born-again bank buster for real?

Who is Sandy Weill and why should we care that he now says he thinks big banks should be broken up?

Weill built Citibank into the financial colossus whose spectacular collapse in 2008 helped tank our economy. He said he had a vision of creating giant financial supermarkets that conjured up convenience, friendly service, well-lit aisles and lots of choices. But what he was actually building were massive financial tankers fueled on fraud and risky, toxic assets no one understood, kept afloat with dirty back-room deals, hijacked regulators, lobbying and campaign contributions.

To make that vision a reality, Weill also did more than anyone else to drive the final spike through the heart of the Depression-era Glass-Steagall law, which for seventy years had kept risky investment banking separate from federally-guaranteed traditional banking, reducing the risk of bank failures. President Clinton signed the bill repealing Glass-Steagall in 1999.

For his efforts, Weill, 79, made gazillions before he retired in 2006, ahead of the financial collapse.

He also earned a spot among a very select group - Time Magazine’s “25 people to blame for the financial crisis.”  Weill, Time said, helped create the country’s “swollen banks,” which remain one of the economy most serious unsolved problems.

His Citibank is one the worst, and remains on life support only through $45 million [million?] worth of the taxpayers’ generosity.

It didn’t help Weill’s reputation that a few weeks after Citibank accepted its bailout, he used the Citibank jet to fly to his vacation in Cabo, a flight immortalized by the poets on the New York Post copy desk with the headline: “Pigs Fly.”

It was only six months ago that Weill announced he was “downsizing” and simplifying his life, selling his Central Park West apartment in Manhattan for $88 million – more than double what he’d paid for it, as well as attempting to unload his yacht for nearly $60 million. Weill moved to another apartment downstairs.

But downsizing doesn’t mean the same for an uber-banker that it does for the rest of us. He spent $31 million on the largest real estate-deal in Sonoma County’s history, buying a Tuscan-inspired villa that includes 8 acres of vineyards, seven miles of private hiking trails, and an 11,605-square-foot mansion made with 800-year-old Italian roof tiles and 200-year-old wood beams, and a fire truck that comes with seven firefighters. A real estate agent cautioned against viewing Weill’s purchase as a sign that the real estate market in the county north of San Francisco was recovering. As one Coldwell Banker agent said: “[The sale] is not an indicator of an emerging real estate recovery, but rather the ability of the world’s wealthiest individuals to buy what they desire.”

There’s been all kinds of speculation about why has now come out in favor breaking up big banks. But the best way to judge whether he’s serious, or just trying to get a little good PR, is to examine how much cash he’s willing to spend to make it happen.

When bankers, led by Weill, wanted to repeal Glass-Steagall, they fought for 20 years and spent millions in lobbying and campaign contributions before they won. The big banks would certainly put up a similar fight against its reinstatement. No one knows better than Weill that when it comes to changing banking regulations, it’s not what people say that matters; money talks.

How much is Weill willing to spend in support of his newfound conviction? Without massive amounts of money behind them, his words are no more than an old mogul’s sad, empty cry for attention.

 

 

 

Glass-Steagel / Lobbying / Martin Column - 07/30/2012

Bipartisanship for dummies

Ever notice how all the dysfunctional wrangling in D.C. stops the minute our politicians need to do the 1 percent’s bidding?

When it comes to taking away your rights as an investor, consumer or citizen, politicians who can’t seem to agree on anything else seem to work together fine.

The latest proof that “bipartisanship” is a cynical gimmick is the so-called JOBS act, passed by the House with bipartisan support and now under consideration by the Senate, with the blessing of President Obama.

In this case, the bill’s original Republican sponsors came up with the idea of packaging a collection of measures that would weaken investor and consumer protections by the acronym JOBS, which stands for Jumpstart Our Business Startups.

After all, who could be against JOBS? Most Democrats in the House were happy to sign on – only 23 voted against it. Even Democratic representatives Nancy Pelosi and Maxine Waters voted for it.

Maybe these politicians thought the JOBS branding and the bipartisan marketing would conceal what the bill really was – the latest of several disastrous bills dismantling sensible financial regulation.

The JOBS act is the ugly stepchild of the 1999 Gramm-Leach-Billey Act repealing the Depression-era Glass-Steagall Act, which kept banks from mingling federally-guaranteed banking activities from riskier activities, and the 2000 Commodities Futures Modernization Act, a Frankenstein bill that kept credit default swaps deregulated and led to the Enron scandal in 2001.

Both pieces of legislation contributed directly to the 2008 financial collapse.

In the case of the JOBS act, it would gut many of the accounting reforms contained in the Sarbanes-Oxley Act, which was passed in the wake of the Enron debacle. The JOBS act would exempt emerging companies worth up to $1 billion from disclosure, reporting and governance rules. It would allow such companies to operate for 5 years without regulatory oversight.

John Coffee, securities law professor at Columbia University Law School, says it could be more accurately described as the “boiler room legalization act” because it would allow companies to raise money from small investors on the Internet, without any regulatory supervision, evoking the small operations that sold dubious investments over the phone using high-pressure tactics.

Arthur Levitt, former head of the SEC, told San Francisco Chronicle columnist Kathleen Pender the bill was “a disgrace.”

In a scathingly sarcastic column in the New York Times, Pro Publica’s Jessie Eisenger wrote: “Nigeria shouldn’t be the only country to benefit from the Web. Right here in America, the elderly are increasingly attractive to a variety of entrepreneurial spirits. If JOBS becomes the law, such innovators could flourish.”

Barbara Roper, the Consumer Federation of America’s director of investment protection suggested that “Republicans cannot believe they have suckered the Democrats into taking up their idea that deregulation is the way to promote job growth.”

I don’t think the Democrats got suckered. I think they know exactly what they’re doing. President Obama has been struggling in his fundraising because Wall Street and the big-money donors have lost their enthusiasm for him this electoral cycle.

But he’s showing signs of bouncing back, after his campaign manager, Jim Messina, issued a pledge that the president would stop demonizing Wall Street. In February, the president went on a fundraising blitz, raising $45 million, up from $29 million the previous month.

But it’s still far less than the $56 million he raised during the same month in 2008, when he was fighting Hilary Clinton in a bruising primary campaign. The president and his party have to deliver for their funders, and the JOBS act is a perfect gift to show the big donors what they can expect for their generosity.

But they all must take us for a bunch of clods if they think we can’t tell the difference between a nasty attack on our rights and real jobs promotion.

Call your senator today and remind them you can’t be fooled by an acronym.  Suggest you know how to spell jobs, and this awful piece of legislation doesn’t.

 

Congress / Derivatives / Jobs crisis / Martin Column / President Barack Obama - 03/20/2012

Prophetic Warnings Haunt Regulation Debate

Here’s how the highly partisan, polarized view of who’s to blame for the financial crisis breaks out:

Liberals blame Bush era deregulation which allowed greedy head bankers to run amok.

Conservatives blame poor people, who encouraged Democratic politicians who cater to them to force banks to lower their lending standards. And of course, there’s ACORN.

But those clashing views break down when you look into the history of the fight to repeal the landmark Depression-era Glass-Steagal  Act.

Glass-Steagel / Martin Column - 11/13/2009