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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?

Fed Up: Down With Bernanke

President Obama can’t credibly rail against Wall Street fat cats while fighting for their chief enabler.

Here’s all you need to know right now to decipher the confusing messages from the White House and the Democratic leadership:

Ignore the faux populist rhetoric and keep your eyes on the contentious U.S. Senate vote on confirmation of Ben Bernanke to a second term as chair of the Federal Reserve.

If Obama and Democrats want to show they now “get it” on why people are so angry over the mishandling of the bailout and the economy, they should dump Bernanke without delay.

But the White House and Democratic leadership, including senators Harry Reid and Chris Dodd, continue to strongly support Bernanke. Other Democratic senators, like Russ Feingold, Bernie Sanders and Barbara Boxer, as well as Republicans such as senators Richard Shelby and John McCain, oppose him.

The prime reason Bernanke deserves to be dumped is that he is not a reformer or strong regulator during a time of reform and increased regulation. The crisis hasn’t caused him to reconsider. Bernanke even opposes a key plank in President Obama’s reform proposal – the Consumer Financial Protection Agency.

He may nod reassuringly in the direction of Main Street but he’s an insider of the Wall Street elite whose prevailing philosophy is a combination of “What’s good for Wall Street is good for the U.S.A” and “There’s a sucker born every minute.”

Some observers credit Bernanke with keeping the country from slipping into another Great Depression.

The country managed to avoid an economic fiasco on the scale of the depression. But why should Bernanke get the credit?

Everything the Fed does is cloaked in a secrecy and doublespeak that mocks the president’s promise of the most transparent administration in history.

What we know for sure about the Fed’s response is that it shoveled cash and cheap credit in the direction of its favored Wall Street targets. Bernanke and the Fed have resisted disclosure of any facts and figures about what they did. When the details do emerge, they smell fishy.

For example, Reuters reported on emails that were obtained through subpoena by Rep. Darrell Issa, R-California, who is investigating the role of the Fed in the AIG bailout.

What Reuters found was that the Fed, under Bernanke’s direction, along with the SEC, wanted to protect the details of the AIG bailout with a level of secrecy usually reserved for matters of national security. In the emails, Bernanke’s staff ridicules the clamor for more public disclosure about the bailout.

At issue are payments the Fed made to firms that carried insurance with AIG on bed bets those firms had made on investments. Those firms, called counterparties, included the likes of Goldman Sachs. The Fed paid off AIG's counterparties 100 cents on the dollar on their bad bets: extremely unusual with companies in such deep distress relying on the kindness of taxpayers not to take some losses.

Just what do Bernanke and the Fed have to hide? Whose interests are being protected? We need to get to the bottom of those questions, not reward those keeping us from the answers to them.

Even if Bernanke did get credit for his role in the bailout, that wouldn’t be enough reason to confirm him for another term. He missed the housing bubble before the meltdown and has shown no indication he would recognize another bubble when it occurs. He has also misread the impact of the economic stimulus.

In addition, the Fed under Bernanke's watch failed at on one of its cores missions – reducing unemployment. Bernanke is more afraid of increasing inflation than he is of increasing unemployment. It’s time for the Fed to shed its cloak of secrecy and elitism and push for an economy that benefits everybody, not just Wall Street. That transformation will be challenging; Bernanke has shown he’s not the kind of leader for these times.

Obama’s treasury secretary, Tim Geithner, is trying out the old scare tactics, threatening that the markets will fall if Bernanke loses his job. But these are the same kinds of scare tactics that a previous administration used on Congress to forestall debate in its haste to push a poorly considered bailout scheme. We may have expected such tactics from the Bush Administration, but President Obama set higher standards for his administration. Now is the time for him to live up to them.

Contact the president and let him know what you think. Let your senator know too.