Taking Aim at Wall Street - With Jack Bauer

After a day consumed with the Goldman-Sachs hearings, last night I caught up with the latest installment of  the television show “24.”

Spoiler alert: I’m going to disclose what’s happening in “24, ” which focuses on the life of a mythical high-level super antiterrorism agent, Jack Bauer, who is pitted constantly and single-handedly not only against the wily, relentless terrorists but against the corrupt and inept politicians and government officials who are his bosses, usually at the same time.

I don’t always agree with the politics of “24.” But I find it insanely entertaining and profoundly troubling. It’s also one of the few public entertainments that confronts directly the issues of authority and morality we’ve been grappling with since 9/11.

In the latest episode, Bauer actually goes against his president, to whom he’s previously shown the utmost loyalty, because he finds out she’s covering up evidence of an assassination. She’s doing it for the greater good of course; to promote a fragile Middle East peace agreement.

At some point, Bauer finds that the principle of accountability is stronger than his ingrained loyalty to his president.

Accountability, Bauer says, is so fundamental to democracy that it cannot be compromised.

When one of his former colleagues, now his new boss, hears what he’s scheming, she cautions him not to go against his president. “You’re not thinking clearly,” she says.

“I’m the only one who’s thinking clearly,” Bauer shoots back.

After a day of watching Goldman’s officials studiously avoid answering questions in the Senate, “24” put a grim exclamation point on one of the most infuriating aspects of the financial crisis: the utter lack of accountability the financial industry has borne for how it wrecked our economy, through fraud, ineptitude, greed and recklessness.

The Obama administration has made clear it’s not interested in punishing bankers: for the greater good of repairing  the economy, we’re told,  we don’t want to look backward too closely.  We need to move forward.

Left unspoken are the millions in contributions that Wall Street has lavished on the Democrats, and the web of interconnections between the administration and the financial industry, most notably Goldman-Sachs.

We’re offered the faux accountability in the emotionally gratifying theater of the Senate Goldman hearings, the SEC’s attempt at reviving its abysmal reputation after missing the Madoff and Stanford massive fraud schemes by suing Goldman for fraud, and the limp, clumsy Financial Inquiry Commission led by Phil Angelides.

Which are fine as far  as they go. I hope they provide some impetus to put real muscle into financial reform, and they serve some purpose in reminding people how angry and ripped off they feel.

But let’s not forget they’re mostly theater. For example, the Republican senators took turns with their Democratic colleagues beating up on Goldman for CSPAN, while outside of camera range they get their Wall Street fundraising mojo back.

One of the sharpest critics of the lack of accountability has been Bill Black, a former bank regulator during the S&L crisis, who emphasizes that it was multiple robust criminal investigations that uncovered the widespread wrong-doing at the heart of that financial meltdown.

One official who gets it is Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, aka the bailout, who has raised the possibility of criminal investigations and tangled with the Treasury Department.

Meanwhile the mainstream media  serves up pap about how the mild financial reform proposed by the Obama administration is “the biggest overhaul of the nation’s financial system since the Great Depression.”

That’s just not true. The largest overhaul of the system would be the 1999 repeal of the Depression-era Glass-Steagall Act, which had kept federally guaranteed traditional banking from riskier casino-style gambling activities which banks found fabulously lucrative before they blew up the economy. The current reform proposals contain nothing as earth-shattering as that.

Despite happy talk of an economic recovery  that still looks far off to many on Main Street, the politicians are finding the public’s outrage over their handling of the financial crisis is not abating, fueled in part by the political grandstanding.

Like Jack Bauer, we’ve had it with the corruption and the blundering. Public outrage over Sen. Chris Dodd’s close ties to subprime cronies forced him to retire. Conservative Democratic Senator Blanche Lincoln, facing a tough reelection battle, wrote a tough bill that would regulate toxic derivatives. Then she was forced to give away  her Goldman-Sachs campaign contributions. On Tuesday, 62 members of Congress wrote a letter demanding that the Justice Department, not just the SEC, investigate Goldman-Sachs. And a handful of senators are preparing amendments that would toughen financial reform.

I know “24” is a fantasy but one of the reasons it’s so compelling is the way it embodies and scrambles the desperation of our current moment, and Jack Bauer, armed to the teeth in a stolen helicopter, touched a nerve this week. Accountability is our most important arsenal.

Martin Column - 04/28/2010

Just Who is Us, Mr. President?

President Obama went down to the playground where Wall Street bullies have been beating up kids and taking their lunch money. He suggested that the bullies should help create rules that would stop them from beating up kids.

How lame is that?

One blogger compared Obama’s timid performance to FDR’s attack on Wall Street for its rabid opposition to the New Deal. But I kept thinking about the other Roosevelt, the one who took on the railroad trusts.

While Teddy Roosevelt was far from perfect, he had his moments: “A typical vice of American politics,” he said, “is the avoidance of saying anything real on real issues.” He could have been talking about Obama.

What we saw on Thursday was a terrible thing: a brilliant and articulate president of the United States unwilling or afraid to tell it like it is.

It’s not the Republican minority who pose the greatest danger to real financial reform. It’s the powerful Wall Street wing of the majority Democrats who don’t want to offend the bankers. Our representatives need to know we want real reform, not just lip service that basically preserves the status quo. Our representatives need to have the courage to support the stronger proposals by Sens. Kaufman, Brown, Shaheen, and Merkley that would do more to actually break up the big banks and put limits on their risky gambling.

Mr. President: Let’s get real. Let’s say out loud that banks and bankers have grown too powerful.

Let’s get real. It’s absolutely not in the banks’ interest to “join us” in supporting reform. By suggesting that as the solution, you abandon your own credibility and avoid the “real issues” of a government corrupted by those bankers’ money.

Stop negotiating with Wall Street. Cop to their massive financial support for your campaign, and those of your colleagues in Congress. And tell Wall Street change is coming whether they like it or not.

Martin Column / President Barack Obama / Too Big To Fail - 04/23/2010

The Reform Charade

Remember when the president’s chief of staff, Rahn Emmanuel,  strode onto the political stage and stirringly channeled Churchill, saying: “Never waste a crisis?”

It turns out that what he was really saying was: “Never waste an opportunity to reward your campaign contributors.”

Two years after the credit meltdown that crippled our economy, the financial system remains way too complicated and continues to reward high risk and focus on short-term profits that offer few benefits to those who aren’t bankers.

And even after the fiasco we’ve been through, the banks continue to  snooker the snoozing watchdogs.

Last week, the Wall Street Journal reported how 18 banks have continued to manipulate their financial reporting to disguise from regulators their real level of risky borrowing.

And this is after the generous, no strings attached bailout that put trillions of taxpayer-backed dollars into the hands of the big banks.

We need a massive overhaul. What we’re getting instead is a charade, tricked out by a Democratic leadership intent on rewarding failure, propping up the status quo and labeling that reform.

One of the few U.S. senators who’s offering a stronger version of reform and consistent candor on the shortcomings of the leadership’s proposals is the man who replaced Vice President Joe Biden. Sen. Ted Kaufman, D-Delaware, said last month: “After a crisis of this magnitude, it amazes me that some of our reform proposals effectively maintain the status quo in so many critical areas, whether it is allowing multi-trillion-dollar financial conglomerates that house traditional banking and speculative activities to continue to exist and pose threats to our financial system, permitting banks to continue to determine their own capital standards, or allowing a significant portion of the derivatives market to remain opaque and lightly regulated.”

The Democratic senators would do well to be guided by the words of someone who was one of them not long ago, who was particularly astute about the toxic influence of lobbyists and campaign cash on our economy and the political process.

Back when he was a U.S. senator, President Obama wrote in the Financial Times in 2007 that the subprime crisis “was also a parable of how an excess of lobbying and influence can defeat the common sense rules of the road, placing both consumers and the nation’s well-being at risk.”

Washington, Obama wrote, “needs to stop acting like an industry advocate and start acting like a public advocate.”

Candidate Obama wouldn’t have been shocked by the new report from the Treasury Department’s Inspector General about how the two regulating agencies which were supposed to watching over Washington Mutual bungled the job before the bank collapsed in 2008, under the weight of worthless subprime mortgages, resulting in the largest bank failure in U.S. history.

It turns out that regulators were well aware of the foul odors coming off the carcass of Washington Mutual’s loan business. But the Office of Thrift Supervision continued to find the bank “fundamentally sound” and didn’t raise alarms until days before it collapsed.

We can’t let our leaders ignore these harsh lessons that came with such a high price. They may be able to squander a crisis, but without some meaningful change to rein in the financial industry, the crisis may waste the rest of us.

Martin Column - 04/12/2010

Letting Go Of Principals

After more than a year of ineffective attempts to stem the foreclosure crisis, the Obama administration this week may be edging toward acknowledging reality.

This sick housing market isn’t going to heal itself, and won’t get better with the band-aids they’ve applied so far. The stakes are high not just for the homeowners: without some stability in housing, the rest of the economy can’t heal either.

The administration announced today that it would begin to encourage banks to write down the principal when modifying borrower’s underwater mortgages. Bank of America also said this week it would tiptoe into principal reduction.

Time, and follow-through will tell whether the administration intends the principal write-downs as another band-aid or something more substantial. Time will also tell whether the administration will fight for write-downs or wilt in the face of the inevitable backlash. It’s also important to note that all of the administration’s foreclosure initiatives rely on the voluntary cooperation of lenders, with modest incentives paid by the government.

There is every reason for healthy skepticism of the administration and the banks’ ability to tackle the problem. As John Taylor, president of the National Reinvestment Coalition testified before a congressional panel this week: “We rush to give banks tax breaks, but we dawdle to help homeowners who through no fault of their own lost their jobs because of the economic crisis or bought defective loans that caused the economic crisis.”

Foreclosures / Martin Column - 03/26/2010

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

Tea Party For Two

Is the Democratic Party obsolete?
That’s the question that keeps nagging me as I watch President Obama and the Democratic leadership fumble away their opportunities to fight for meaningful reform of health care and the financial system.
The president and congressional leaders consistently shy away from fighting for reforms they themselves propose, such as the public option or the consumer financial protection agency.

They obsess over whether someone will accuse them of partisanship, or whether they will spook the markets if they crack down on reckless profligate bankers. They appear to find any excuse to avoid pushing the kinds of fundamental of changes that would challenge the health care and financial industry.

I don’t think you can blame the Republicans, whatever their own faults. They oppose reform. They’re fighting Obama and his policies as a way to regain power. They’re pursuing that opposition determinedly, and they’re betting it will pave their way back to a majority. It’s not the Republicans’ fault if they set traps for the Democrats and the Democrats continually fall for them.

Members of the Democratic leadership have shown profiles in cowardice when it comes to fighting for any reforms opposed by the insurance or financial industries. In the latest display, House and Senate leaders are furiously trying to blame the other for the death of the public option, even though it’s supported by a majority of Americans and even 40 members of the U.S. Senate.

But the insurance companies have fought the public option, which would provide those forced to buy health insurance under reform an alternative to private insurance. So the Democratic leadership has shown determination to find a way to eliminate the provision without leaving their fingerprints on the corpse.

The same with financial reform, where the Democrat leadership has zigged and zagged but hasn't won the fight for strong independent consumer protection or meaningful regulation of the complex investments that blew up in the meltdown. Sen. Chris Dodd, the long-time friend of insurers and financial titans who serves as Senate Banking chair, flirted with a strong reform proposal when he was running in a tough reelection campaign. But he backed off after he decided to retire and now appears ready to resume his traditional role in service to the bankers’ lobby. As an industry publication recently noted, insurance companies will miss Chris Dodd.

The Democratic leadership don’t seem to stand for any strong principles.
The president and Democratic leaders pay only lip service to the deep anger in the country over the erosion of the middle class, and the bank bailout that pumped up Wall Street while leaving Main Street on life support. The Democrats fear that anger because they know that their own Wall Street-friendly policies have helped fuel the series of speculative bubbles that brought prosperity and then a crash that wiped out the financial security of millions of Americans.
The president and his party are banking that the economy will improve enough by later this year, and 2012, to blunt voters’ anger.
If it does, the Democrats will claim credit for setting the economy right without having unduly upset their contributors in the financial and insurance industries. Even better for the Democrats, they will be able to bolster their fundraising by showing how they hung tough against the call for stronger reforms.
The Democrats came into office promising not to “waste a crisis.” But their efforts to reform health care and the financial system and to put Americans back to work have shown a distinct lack of urgency.
Could there be another way?

Obama will face voters on the 100th anniversary of the last presidential election in which a third-party candidate beat a major party candidate. The third-party candidate was a former president, Teddy Roosevelt, running on the progressive Bull Moose ticket promising to bust up the powerful big corporations of the day, known as trusts. Roosevelt was angry that the president who followed him, Republican William Howard Taft, hadn’t followed in his activist political footsteps. The former president was not afraid to show his ire, calling on his followers to launch “a genuine and permanent moral awakening.”
Taft, for his part, favored a laissez-faire policy toward business and regulation that resonates with the era that we’ve been through. “A national government cannot create good times,” Taft said. “It cannot make the rain to fall, the sun to shine, or the crops to grow.” But by meddling, government could “prevent prosperity that might otherwise have taken place.”
Sound familiar?

Roosevelt lost the election to Woodrow Wilson, but he got more votes than hands-off Taft.
Today the tea party is rumbling on the right, threatening revolt against the Republicans. There’s already the beginnings of a coffee party. If the economy doesn’t cooperate with the Democrats, the tea party’s discontent could be just the beginning of the end of the two-party stranglehold on our government.

Consumer Financial Protection Agency / Martin Column / Outrage / President Barack Obama - 03/12/2010

Obama to Bailout Cop: Beat It!

The Obama administration, which has increasingly been adopting a can’t do attitude when it comes to putting real teeth into financial regulation, now wants to take out the teeth already in place.

Treasury officials are signaling they’d rather not have the same aggressive special inspector general overseeing the $700 billion federal bailout anywhere near their new $30 billion bank subsidy to encourage lending to small business.

I wrote about that inspector general, Neil Barofsky, a couple of weeks ago, suggesting he was one of the few public officials actually trying to protect our money rather than just acting as a rubber stamp for Wall Street’s raid on the U.S. Treasury.

Barofsky has issued a series of scathing reports raising questions about federal officials’ handling of the Troubled Asset Relief Program.

Treasury officials contend that although the $30 billion would come from unspent TARP funds, it’s technically not TARP. So Barofsky should butt out. Their real reason for not wanting Barofsky around is simple: the banks don’t like him looking over their shoulders.

You can’t blame the banks for that. No doubt it’s a lot more fun to spend your federal handout without some nosy former federal prosecutor scrutinizing every move you make.

But for the Obama administration to go along with it is troubling and baffling. The president promised an unprecedented level of accountability, understanding that openness would go a long way toward restoring credibility in the financial system and the government’s ability to oversee it.

But Treasury officials appear to be more concerned with keeping the bankers happy than they are with keeping them honest.

The news about Barofsky surfaced as the administration appeared to be backing away from its recent embrace of former Fed chief Paul Volcker, who favors limits on bank size and risky financial trading. Predictably, the financial titans were balking at the proposals.

The administration’s move against Barofsky is both bad policy and bad politics. It seems designed to hand live ammunition to the mistrustful antigovernment troops of the Tea Party.

Meanwhile, Congressional Democrats have been quiet on the issue. The president and the Democrats have accomplished what at one time would have been seen as a nearly impossible task: handing the mantle of accountability and openness over to Republicans, who are howling with outrage over the idea of keeping Barofsky away from the small-business lending subsidy.

Rep. Darrell Issa, R-Ca., said earlier this week: “Denying SIGTARP the ability to defend taxpayers sends a chilling message that IGs who conduct real oversight will be punished for holding this Administration accountable.”

At the very least, the administration needs to come to its senses and regain its commitment to transparency. Let Barofsky do his job. The administration should be paying better attention to his criticisms, not trying to get rid of him.

Action / Martin Column - 02/25/2010

Strong Financial Consumer Protection Not Optional

While a key Democrat has been wobbling in his support for an agency to protect financial consumers, President Obama and members of his administration have recently come out strongly in support.

But will they fight for it in the face of relentless opposition from bank lobbyists, Republicans and Blue Dog Democrats?

The Obama administration’s abandonment of the public option in the health care debate provides a grim omen for the financial reform battle.

Some have compared the public option to the Consumer Financial Protection Agency. Both enjoyed broad public support but have been fiercely opposed by the businesses they would challenge: insurance companies fought hard against the public option while financial institutions fiercely oppose the consumer protection agency.

Aside from industry opposition, the public option and the CFPA shared the potential to provide a shield for consumers against abuses.

At various times, the president also supported the public option. Today his spokesman said the public option just didn’t have the votes. But that assessment was something of a self-fulfilling prophecy. There’s little evidence that President Obama put much pressure on legislators in support of the public option, and his ambiguity in public didn’t help it, either.

After initially supporting the public option, the president signaled it was not a crucial aspect of health-care reform.

But the public option offered the only potential check on the insurance companies, which are about to get a glut of new customers forced to buy policies from them. Democrats are suggesting a tepid combination of subsidies and insurance cooperatives that won’t provide meaningful accountability for the insurance companies.

Now Republicans are digging in their heels in opposition to the CFPA, with the usual rhetoric about wasteful government bureaucracy. It’s nothing but a thinly disguised fundraising pitch to woo the financial industry back from Democrats. Chris Dodd, soon to be retired head of the Senate Banking Committee, has suggested the consumer protection function might co-exist within some other agency. That’s a very bad idea. Just look at how much consumer protection the Federal Reserve, Treasury Department and other agencies accomplished in the housing bubble and its aftermath.

If that’s not enough to convince you, look at the recent shenanigans by banks and credit card companies piling on new fees.

The New York Times reported this morning how banks are getting ever more aggressive in socking their customers with higher over-draft protection fees. Credit card companies, even in the face of new regulations, are finding new ways to gouge their customers, charging fees for paying off your card on time, or even charging fees for not using a card.

There’s nothing stopping the Treasury and the Fed from using their bully pulpits to rail against these continuing abuses now. But they don’t. They ignored warnings about predatory lending during the housing bubble and have shown no stomach for protecting consumers since the economic collapse.

Dodd is supposed to unveil his latest version of financial reform this week. Let President Obama and your senators know that you won’t be fooled by financial reform in name only. Whether President Obama is capable of staying the course we don’t know. But we do know we need a strong, independent Consumer Financial Protection Agency.

Consumer Financial Protection Agency / Martin Column / President Barack Obama - 02/23/2010

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

Less Kabuki, More Reform

Does the president get it yet on financial reform?

Or is his tougher stance toward the bankers part of a kabuki performed for the public while real reform is compromised away backstage?

The politics around the battle for a Consumer Financial Protection Agency are thick with intrigue and shifting positions.

A separate agency is a crucial aspect of any reform because the present regulators have done such a dismal job of protecting consumers’ interests.

We have every right to be suspicious of the president and the Democrats, based on their timidity in fighting for stronger regulation and holding accountable those responsible for the crisis.

The latest cause for doubts stems from the unsavory spectacle of Democrats and Republicans falling over themselves to reassure Wall Street that they are the bankers’ best bet to represent the interests of the financial industry.

Meanwhile, the president appears be jawboning the key Senate author of reform, Chris Dodd. A long-time recipient of Wall Street largesse, Dodd was facing a tough reelection campaign, based on some of his more unsavory dealings with Wall Street. In the midst of that campaign last November, he came out with a tough reform proposal, including an independent Consumer Financial Protection Agency.

But as his campaign looked increasingly hopeless, Dodd decided to retire. Since then he’s been signaling that he wants to back off the independent consumer agency.  President Obama met with Dodd last month and insisted that the independent agency is “non-negotiable.”

President Obama has his own changing political calculations. He originally supported a milder version of bank reform passed by the House. After the Democrats lost Ted Kennedy’s Massachusetts Senate seat several weeks ago, the president all of a sudden decided to haul out his lone financial adviser who has advocated breaking up big banks, former Fed chief Paul Volcker. (Previously Obama had been ignoring him, letting a cast of Wall Street insiders run his handling of the banking crisis.)

Obama, with Volcker by his side, voiced support for breaking up the largest big banks as well as placing some new limits for some of the banks’ riskier activities.

Earlier this week at a Senate hearing, Dodd aimed unusual criticism at the president, questioning the timing of his announcement, labeling the president’s embrace of Volcker’s ideas “transparently political.”

Dodd didn’t stop there: he suggested that the president’s proposals to get tough on the big banks threatened the process of crafting a reform proposal that would get bipartisan support.

Key Republicans have already indicated what that would mean – no independent consumer financial protection agency, for one thing.

The Democrats are caught: The bankers who fund their campaigns are demanding watered-down reform that will ensure business as usual. Angry voters are demanding robust regulation and accountability.

The president has to demonstrate that his embrace of Volcker’s ideas isn’t just a gimmick. He’s got to flesh his proposals out with details and fight for them in public and not compromise them away in the back rooms.

Contact the president and let him know what you think. Let your senator know, too, that you’re tired of political theater. It’s past time for real reform.

Consumer Financial Protection Agency / Martin Column / President Barack Obama - 02/04/2010