Geithner must go

Please, President Obama, fire Timothy Geithner today and hire a treasury secretary to fight for the U.S. economy as hard as Geithner fights to protect bankers’ profits.

I know you’re intensely loyal to Geithner and have resisted such calls in the past.

But Mr. President, times and circumstances have changed. For your own good and especially for the good of the country, you should reconsider. You’re in an especially close election and you need to cut yourself loose from the failed policies you’ve pursued for the past four years that have coddled the financial sector at the expense of the rest of the economy.

Your loyalties are with Geithner but his, Mr. President, are with the too big to fail banks, not with the public.

The most recent evidence comes from this Huffington Reports piece which details how Geithner, while president of the New York Fed responded when he heard about the big banks manipulating a key interest rate known as LIBOR when he was chair of the New York Federal Reserve in 2007.

Recently disclosed emails show that while Geithner expressed concerns over the integrity of the LIBOR, or London Interbank Offered Rate, he did little to investigate or stop the manipulation.

What he did to was cut and paste the bankers’ own proposals into his own proposal to the Bank of England about how to address the LIBOR concerns. It should have been an early warning sign of how Geithner and his big bank cronies spoke with one voice – theirs.

The public may not understand just how critical the integrity of LIBOR is, but you do, Mr. President. You know that it’s how it’s used as a benchmark for trillions worth of transactions every day, on everything from complex credit default swaps to credit cards.

You also shouldn’t underestimate the public’s ability to grasp what’s at the root of this LIBOR scandal, which is the same theme that’s underlying JP Morgan London Whale trading losses – that bankers have been manipulating the financial system for their own interests, with your administration either fully cooperating or looking the other way.

Don’t underestimate the ability of the ruthless and hypocritical Republican attack machine to clobber you with those policies even as the Republicans embrace more banker-friendly policies than you are.

They’ll get a good shot this week when Geithner testifies before the House Banking Committee over what he knew and what he did about banks.

The public may not be focused on the LIBOR in the middle of a hot summer, Mr. President, But the scandal is just beginning to wash up on the our shores after causing tremendous damage after it erupted in England, after Barclays Bank acknowledged its own LIBOR manipulation and cut a deal with regulators. Meanwhile the investigation into 16 U.S. banks and their LIBOR shenanigans is just getting cooking.  It could be heating up at the same time as the presidential race.

Mr. President, you have another opportunity to do something that is good politics and good for the country too, and will distinguish your policy on the banks from your opponent’s do-nothing approach.

Get rid of Geithner and begin to chart a new course toward a system not rigged in favor of big bankers and their fat bonuses. We need a treasury secretary who doesn’t measure prosperity solely by the size of bankers’ wealth.

LIBOR / Martin Column - 07/16/2012

Nice recovery, if you can afford it

According to economists and the media, in June 2009 we came out of the deepest recession since the Great Depression and we’ve been on the upswing since. Unemployment’s down, with corporate profits recouping their losses from the recession and hitting new highs along with the stock market.

But it really continues to be a tale of two economies: one that works for the 1 percent and another, in which the 99 percent are increasingly falling behind.

For some striking evidence, look at the recent study by a prominent economist reported in the New York Times.

As the recovery took hold in 2010, UC Berkeley economist Emmanuel Saenz reported, the top 1 percent captured 93 percent of the income gains.

Top incomes grew 11.6 percent in 2010, while the incomes of the 99 percent increased only 0.2 percent. That tiny gain followed a drop of nearly 12 percent over the previous two years – the largest two-year drop since the Depression.

Other signs on the economic landscape also show the wreckage for those not protected by wealth.

Despite a dip in unemployment and the most the most recent more optimistic job creation numbers, the economy isn’t producing enough jobs on a sustained basis to permanently reduce unemployment. And many of the jobs that have been created pay severely reduced wages. Under the two-tiered wage systems increasingly favored by U.S. corporations, new blue-collar jobs pay start at a steeply lower hourly wage than they did in the past – $12 to $19 an hour as opposed to $21 to $32.

One in seven Americans are on food stamps, while high gas prices put the squeeze on low-income and working people alike. Meanwhile, foreclosures are on the rise in the wake of the state attorneys general announcement of a settlement over foreclosure fraud charges with the biggest banks, though the details of the settlement still haven’t been released.

The Occupy movement has put the great divide between the 1 percent and the 99 percent on the political map, forcing President Obama to acknowledge income inequality in his state of the union speech as the “defining issue” of our time, while the Republican’s front-running presidential candidate, Mitt Romney has dismissed such concerns as “envy.”

Obama’s concern about inequality has yet to translate itself into effective action, and it’s unclear, given the strong ties he’s had to the big banks and corporate titans, whether he’s capable of delivering.

Occupy, after delivering a much-needed jolt to the public discourse, likewise, has also yet to show that it can go beyond influencing the debate to actually winning gains for the 99 percent and reducing the widening inequality gap.

It’s no coincidence that income inequality has accelerated as large corporations have grown more influential in our political system through the clout of their cash, encouraging deregulation, tax cuts, trade deals and a host of other policies that benefit the 1 percent and disadvantage the rest of us. The fight against income inequality and for a more fair economy inevitably leads to the fight to rid our government of toxic corporate donations. Find out about WheresOurMoney’s constitutional amendment to undo Citizens United, the U.S. Supreme Court’s terrible decision that unleashes unlimited, anonymous corporate political donations, here.

 

 

 

Income inequality / Jobs crisis / Martin Column / Occupy - 03/09/2012

What About The Rest of Us?

In one of the most appalling aspects of our current politics, our elites – elected officials, media lords and corporate chieftains, have swept the opinions and concerns of most Americans off the table to pursue their own agenda.

So we’re stuck with sterile political games focused on the national debt, even while a majority of Americans favor higher taxes on the rich and more aggressive action to reduce unemployment.

We get the highly touted insider trading conviction of a hedge fund billionaire while the Justice Department doesn’t pursue its own FBI’s massive evidence of the too big to fail bank’s fraud at the heart of the financial collapse.

It’s clear that whoever is setting priorities is not us. Take for example President Obama’s deficit commission, which has worked hard to legitimize the austerity agenda embraced by most of both parties. Not only was it stacked with well-known deficit hawks, It was made up of a collection of lifetime politicians, bureaucrats, with a CEO thrown in – because we wouldn’t want the CEOs to feel left out of any big idea brainstorming.

But what about the rest of us? Over at Campaign For America’s Future, Dave Johnson has been asking some intriguing, relevant questions.

For one, what would the deficit commission have looked like if it truly reflected the population of the country, rather than the backroom.

If a 100-person deficit panel truly reflected the country, it would present a stark contrast to the gang the president relied on:

•                19 people on the commission would receive some form of Social Security benefits, 12 of those as retirees. And on this deficit commission they get to talk when the ones making over $250K propose cutting Social Security.

•                43 of the commission members would have less than $10,000 saved up for retirement. 27 of those less than $1,000.

•                98 of the 100 members would make less than $250,000 a year.

•                50 of the members would come from households in which the total income of all wage-earners is less than $52,029.

•                13 would have income below the poverty level.

•                14 members would be receiving food stamps.

•                16.6% of the commission members would be un- or underemployed, and would be wondering why they are on a deficit commission at all instead of a jobs commission.

•                The commission would include the right proportion of factory and construction workers, and people who work in a kitchen, and work waiting tables, and teaching, and nursing, and installing tires, and all the other things that people do except, apparently, those on DC elite commissions. (People who do hard, manual labor get an extra vote each on what the retirement age should be.)

•                74 members would not have college degrees.

•                20 would not have graduated high school.

•                18 would speak a language other than English at home.

Under present circumstances it’s highly unlikely that the president would appoint a commission to consider the deficit or anything else for that matter that wasn’t stacked with wealthy insiders intent on slashing government services for anybody who is not like them. But highlighting the disconnect does point out in a particularly graphic way why those at the top have managed to get left out when its time to divide up the sacrifices.

 

 

 

 

 

Financial Crisis / Martin Column - 05/17/2011

P.R. Won't Fix Foreclosure Mess

Will one of the nation’s too big to fail banks succeed in buying its way out of a shameful scandal stemming from dozens of improper foreclosures of military families and overcharging thousands more?

J.P. Morgan Chase, which hauled in $25 billion in the bailout, is in full damage control mode, paying out $56 million to settle a class action brought by military families – about $4,500 per family – and temporarily lowering mortgage interest to 4 percent for other military families.

But the bank is still facing a federal investigation stemming from the allegations. Whether the Justice Department finds the nerve to hold accountable one of the big banks remains an open question.

It hasn’t so far, despite evidence of widespread fraud in the bank’s use of robo-signers who verified the accuracy of thousands of foreclosure documents without ever reading them.

But our political leaders haven’t worked up the courage to call it what it is.

The bank had no choice but to acknowledge it had screwed up. To show just how serious it was about doing right by the nation’s fighting men and women, J.P. Morgan Chase appointed an actual commission with some real-life celebrities on it, including retired general William McChrystal and former football legend Roger Staubach.

The Justice Department has no excuse not to go after J.P. Morgan and other banks that have been violating the Servicemembers Civil Relief Act, which is supposed to keep military families safe from foreclosure while they’re on active duty. Military families have been particularly hard hit by the foreclosure crisis, with 20,000 facing foreclosure last year, a 32 percent increase since 2008.

Federal investigators just made the Justice Department’s job easier – in a recent study GAO found more than a couple of dozen improper foreclosures of military families. You might not think that sounds too bad, until you realize they found those bad foreclosures in an examination of just 2,800 foreclosure files.

Instead of pretending that the foreclosure mess is just going to sort itself out on its own, our political leaders need to acknowledge how deep a hole the big banks have dug for the rest of us to figure a way out of.

We don’t need more hapless PR. A realistic first step would be a foreclosure moratorium. If anybody else but the big banks were engaged in these kind of shenanigans, it would just be labeled what it is: fraud, plain and simple.

 

Around the Web / Foreclosure / Martin Column - 05/09/2011

Don't Let the Bad Guys Get Away!

Hollywood loves a good chase. Last night at the Oscars, Tinsel Town sent a strong message to the rest of the country – the bad guys are getting away, and the cops aren’t even on their trail.

For a brief instant the Obama administration’s sorry efforts in holding bankers accountable for the financial collapse took center stage at, of all places, the Academy Awards.

Accepting his Oscar for “Inside Job,” his documentary about the financial collapse, Charles Ferguson used the opportunity to remind the audience of millions that not a single banker had gone to prison for fraud.

Ferguson was saying what the mainstream media has deemed a non-story, following President Obama’s lead in downplaying accountability while highlighting evidence of economic recovery.

But Ferguson joins a handful of prominent critics, including Bill Black, Simon Johnson, former Sen. Ted Kaufman, Dean Baker and Matt Stoller, who have been sending the same message in a variety of less prominent venues.

Meanwhile the president, far from insisting that his prosecutors develop fraud cases against top bankers, appoints them to top positions in his administration.

Typical is this recent column from the New York Times oped columnist Joe Nocera, who pooh-poohs the criminal aspects of the financial meltdown, blaming it on widespread “mania.”

Make no mistake; these are hard cases to make. In the 90s I covered the prosecution of savings and loan magnate Charles Keating, the poster child for bad behavior and political shenanigans for that earlier banking fiasco that also followed a rash of deregulation. Keating was convicted in both state and federal court. Though the convictions were overturned, Keating did serve four and a half years of his five-year state sentence.

Good prosecutors don't mind tough cases. They enjoy the challenge. But their bosses set their priorities and have to give them the support they need.

The Obama administration is barely even trying, afraid of alienating the bankers it’s trying to court. The cases that have been brought are either minor sideshows or they’ve been mishandled.

A local prosecutor told me that federal authorities have shown no interest in the painstaking work of building serious cases against bank executives, which would involve authorities going after minor players such as mortgage brokers, and working their way up the chain of responsibility.

In Inside Job, former New York state attorney general Eliot Spitzer has a suggestion for prosecutors – do unto the bankers what the prosecutors did unto him: go through their credit card receipts looking for evidence of illicit activity, like paying for high-priced hookers. Bust the bankers for their bad personal behavior and then obtain their cooperation in investigating financial abuse.

It may work; it may not. But at least prosecutors wouldn’t be sitting on their hands. They’d be doing their jobs – aggressively going after the bad guys.

 

 

Around the Web / Martin Column / Uncategorized - 02/28/2011

High Court's Low Opinion of Foreclosure Practices

Apparently the Massachusetts Supreme Court neglected to read the bipartisan memo reminding politicians and judges to refrain from doing anything that might upset the banks.

Most judges have shown extraordinary deference to bankers, even amid growing evidence that those bankers haven’t been following the law in pursuing foreclosures.

That may be beginning to change, in the wake of a Massachusetts ruling against banks in a closely watched foreclosure case.

Right now the decision only has force in Massachusetts. But as other cases challenging foreclosures make their way through the courts across the country, other judges are likely to be guided by it. In addition, the ruling will also provide guidance for lawyers posing legal challenges to other mortgages scrambled in the securitization process.

The Obama administration has consistently downplayed evidence of rampant fraud and sloppiness in the way banks split up, packaged and sold off mortgages to investors in the heat of the housing bubble.

Almost all subprime mortgages as well as millions of conventional mortgages originated before the meltdown were securitized and sold to investors. Securitized mortgages account for more than half of the $14.2 trillion in the total outstanding U.S. mortgage debt.

Bankers have tried to dismiss these problems with what’s known as the securitization process as a matter of mixed-up paperwork that can be straightened out.

But the highest level court to examine the issue thus far took the issue much more seriously. Last week the Massachusetts Supreme Court invalidated what had become a common practice – banks seeking to foreclose on properties without properly holding ownership of the promissory note and mortgage as part of the securitization. The court  focused heavily on the use of the power of sale contained in mortgages; the same power exists in the vast majority of California deeds of trust.

Ruling in a closely watched case, the high court rejected arguments by U.S. Bancorp and Wells Fargo & Co. that they didn’t have to prove their authority to foreclose. The banks had argued that evidence that they intended to transfer ownership was enough to establish their standing to foreclose.

The ruling makes dense but fascinating reading, with some passages coming through loud and clear even if you’re not steeped in real estate law.

The justices stressed they weren’t creating any new interpretation of law. “The legal principles and requirements we set forth are well established in our case law and our statutes,” wrote Justice Ralph D. Gants. “All that has changed is the (banks) apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.”

Banks have argued that their “pooling and servicing agreements” allowed them to transfer mortgages to securitized trusts “in blank” without specifying whom the new owner would be.

But the justices ruled in U.S. Bank v. Ibanez that the “foreclosing party must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder and in order to have the authority to foreclose under the power of sale...”

In a concurring opinion, Justice Robert Cordy wrote: “There is no dispute that the mortgagors (borrowers) had defaulted on their obligations.”

But that’s not the legal standard. “Before commencing such an action...the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order,” Cordy stated.

The ruling could lead to an increase in complicated and expensive litigation, if those whose homes have already been foreclosed on sue to challenge the financial institutions’ authority to conduct the foreclosures. Investors may also sue, contending that the banks didn’t properly document the ownership trail on the mortgages contained in a particular investment pool.

Can banks go back in and straighten out their securitization mess? So far the banks are downplaying the significance of the ruling. But untangling the paperwork may not be so easy. Many of the entities that created the securitized pools have gone bankrupt or dissolved into other businesses. At the very least, it could pose a costly and complicated process for the bankers, one that would entail taking a hard look at the details of the deals that led to the country’s financial collapse.

Foreclosures / Martin Column - 01/11/2011

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

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