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

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

One Would Hope

The head of President Obama’s Security and Exchange Commission went before Congress Wednesday to wring her hands about how the Lehman fiasco “raises serious concerns” about the effectiveness of post-Enron reforms.

“One would hope,” SEC chair Mary Schapiro told a congressional committee wanly, that the post-Enron Sarbanes-Oxley Act “would have prevented this kind of conduct.”

Eight years after Congress passed reforms that were supposed to prevent another Enron or WorldCom scandal, the Lehman mess reminds us how the government regulators and the accountants that are supposed to be vigilant watchdogs against destructive, deceptive bookkeeping continue to fail. They have remained in cahoots to ensure that the financial titans can ignore the rules and then evade the consequences for their bad and even fraudulent decisions.

According to the bankruptcy trustee’s scathing but sober 2,200 page report, Lehman used a financial maneuver known as Repo 105s, manipulating their financial reports disguise its bad debt from investors and the public as the company’s condition worsened before it finally went bankrupt, triggering the worst economic collapse since the Depression. The Repo 105 transactions secretly moved billions of dollars of debts off of Lehman’s books.

One would hope that President Obama and the Democrats would finally recognize  in the Lehman debacle that while Wall Street chieftains like Lehman CEO Richard Fuld may indeed be masters of a universe, it’s an alternate universe far from our own.

In that alternate universe, the bankruptcy trustee’s report detailing his company’s accounting shenanigans actually absolves Fuld of responsibility for his company’s demise. He told the New York Post the report showed he did nothing illegal.

After all, Fuld was CEO, way too busy to be bothered with details like how his company was hiding $50 billion worth of bad debt. In Fuld’s alternative universe, the Sarbanes-Oxley requirement that CEO’s sign off on the accuracy of their company’s financial statements didn’t apply to him.

In that alternate universe, when a court-appointed bankruptcy states that Fuld “was at least grossly negligent,” that amounts to getting a seal of approval.

Though Fuld’s company declared bankruptcy, his own fortunes did not suffer in any sense that someone forced to live in this universe, rather than that alternative one, would recognize as suffering. Between 2000 and 2008, he took home $484 million. He left with a $22 million retirement package. In fairness to Fuld, that’s a paltry sum by Wall Street standards for the head of a failed firm. By comparison, Merrill Lynch’s Richard Prince was paid $166 million before he left.

Also in fairness to Fuld, he was not the only one whose conduct was criticized in the Lehman report. But in Fuld’s alternate universe, when the trustee found that Lehman’s accounting firm, Ernst & Young, failed to show professional standards of care, that amounts to an award for public service.

In that alternate universe, the little people are just incapable of understanding why it’s better for Lehman to have concealed its debt to make the firm look healthier while it was in fact going down the toilet in 2008.

And taking a big chunk of our economy with it.

While I and most others who are not Richard Fuld find grounds for at least a thorough  criminal investigation rather than vindication in the Lehman trustee’s temperate prose, Fuld does have one point.

Everything that Lehman did to cook its books was done under the noses of federal regulators. So, Fuld insists that everything Lehman did was hunky-dory.

One would hope that the president and the Democrats would recognize that back here in the universe the rest of us live in, millions are suffering because of the deceit, arrogance and cluelessness of the bankers who seem to have escaped the meltdown with their wealth and power intact.

One would hope that if President Obama and the Democrats were serious about real reform, they would be making the Lehman report Exhibit One in an effort to discredit the financial lobbyists and their pals in Congress who are foiling efforts at sensible, robust regulation.

One would hope that the president and the Democrats would be determined to correct the mistakes of the past and not repeat them. One would hope the Lehman report would cure, once and for all, the president and the Democrats’ stunning lack of curiosity about how the financial industry blew up the universe we all live in. One would hope that the president and the Democrats wouldn’t find it acceptable to live in a universe where its masters aren’t accountable for their actions, but the rest of us are.

Executive Pay / Lehman / Martin Column / Securities and Exchange Commission (SEC) - 03/19/2010