Skip to main content

Very early on Thursday, in my last diary, I asked a rhetorical question in the headline: "Have We Been Sold-Out On Economic Reform?" I posted it a few minutes after reading this in the upcoming day's Wall Street Journal: "Democrats Soften Financial Bill."

In Damian Paletta's and Kara Scannell's WSJ piece, we learned that congressional Democrats were, essentially, caving into the special interests on many (if not most) of the critical aspects of various pieces of legislation that, collectively, comprise our government's current efforts to reform Wall Street (i.e.: "Wall Street" being the status quo, whether it's United Healthcare or Goldman Sachs, etc., etc.).

Throughout this nightmare which many have called the "Great Recession," a constant theme--a veritable undercurrent of commentary as it were--has arisen which reiterates the same basic story: the status quo (a/k/a Wall Street) runs the show, not just as far as our economy's concerned, but across-the-board, from our government on down.

Putting it another way, as a business acquaintance of mine repeated that well-worn phrase, "It's the golden rule. They who own the gold, rule."

As I've said in at least a few recent diaries:

 Whether it's tacitly-condoned-but-unethical lawyering vis-a-vis the Bernie Madoff case, Wellpoint drafting Max Baucus' version of our corporatized health care plan, or Goldman-Sachs having no business being in the room when the AIG bailout decisions were made, the point is, our elected officials aren't calling the shots, the corporations, the status quo and their respective lawyers are running the show.


To this list of three, well-documented instances where we now know the patients were (and still are) running the proverbial asylum, I will now add a fourth example (and, perhaps the most outrageous one of  all): our entire legislative branch now appears to be blatantly capitulating to an extremely well-orchestrated effort by a new Wall Street trade organization known as:  "The CDS Dealers Consortium." (CDS, as some reading this may know, stands for "credit default swaps.")

Yes, at least until I hear otherwise, it now appears that our legislative branch is doing precisely what "The CDS Dealers Consortium" has been lobbying for since last November.

You want to know what was one of the first things Wall Street did with at least a small fraction of a percent of our hard-earned taxpayer bailout? As I noted in a diary I posted on June 1st, "Another Ranking Member of Congress: 'Banks Run The Place,'" the New York Times' Gretchen Morgenson gave us the skinny (almost four damn months ago): "Even in Crisis, Banks Dig in for Battle Against Regulation."

In Crisis, Banks Dig In for Fight Against Rules
Published: May 31, 2009

As the financial crisis entered one of its darkest phases in October, a handful of the nation's largest banks began holding daily telephone sessions. Murmurs were already emanating from Washington about the need for a wide-ranging regulatory overhaul, and Wall Street executives girded for a fight.

Atop the agenda during their calls: how to counter an expected attempt to rein in credit-default swaps and other derivatives -- the sophisticated and profitable financial instruments that were intended to limit risk but instead had helped take the economy to the brink of disaster.

The nine biggest participants in the derivatives market -- including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America -- created a lobbying organization, the CDS Dealers Consortium, on Nov. 13, a month after five of its members accepted federal bailout money...

#   #   #

From my June 1st Diary (linked before the blockquote, immediately above):

Morgenson tells us that on November 13th, 2008, a month after the nine biggest players in the derivatives market accepted bailout money, these same folks created a lobbying group: "The CDS Dealers Consortium."

The new group has been lobbying intensively this session to limit the amount of regulatory oversight that'll be imposed upon them by Congress with regard to their efforts to put a saddle on the credit default swaps industry.

Morgenson does a very credible job providing us with extensive historical background on the matter. (The article's worth the read for this alone.)

We're told there are two schools of thought with regard to the development of legislation to impose stricter controls over the industry; two camps as it were:

"One camp, which includes legislative leaders, is pushing for trading on an open exchange -- much like stocks -- where value and structure are visible and easily determined. Another camp, led by the banks, prefers that some of the products be traded in privately managed clearinghouses, with less disclosure."

Treasury Secretary Geither is very much in favor of the Wall Street solution to this effort (privately managed clearinghouses with less disclosure).

Critics in both the financial world and Congress say relying on clearinghouses would be problematic. They also say Mr. Geithner's plan contains a major loophole, because little disclosure would be required for more complicated derivatives, like the type of customized, credit-default swaps that helped bring down A.I.G. A.I.G. sold insurance related to mortgage securities, essentially making a big bet that those mortgages would not default.


"The banks want to go back to business as usual -- and then some. And they have a lot of audacity now that everyone has bailed them out," said Yra Harris, an independent commodities trader who was involved in an effort to regulate derivatives nine years ago. "But we have to begin with the premise that Wall Street doesn't want transparency, because more transparency means less immediate profits."

She cites an anecdote mentioned by Senator Tom Harkin (D-IA) about a visit Geithner made to the Democratic caucus on Capitol Hill about three weeks ago: "Mr. Harkin said, he challenged Mr. Geithner to 'define customized swaps.' Mr. Harkin said the Treasury secretary told him he would have to get back to him."

Harkin, discussing the government's efforts to more heavily regulate the credit default swaps' marketplace, said:

"The swaps and derivatives people are all over the place up here," Mr. Harkin said. "They sure are trying hard to win. A lot of money is on the line."

Morgenson reminds us that Wall Street forked over no less than $152,000,000 in political contributions in 2007 and 2008.  She also informs us that Representative Collin C. Peterson, (D-MN), has introduced a bill that specifically bars derivatives  trading in clearinghouses regulated by the New York Federal Reserve. Peterson said:

...a clearinghouse regulated by the New York Federal Reserve, which he said in an interview "is a tool of the big banks" that "wouldn't do much" to regulate the contracts.


"The banks run the place," Mr. Peterson said. "I will tell you what the problem is -- they give three times more money than the next biggest group. It's huge the amount of money they put into politics."

In a highly publicized story about a month ago, the number two ranking Democrat in the Senate, Senator Dick Durbin (D-IL), said pretty much the same thing: "Frankly, banks own the place."

(End of my excerpt from June 1st diary.)
#   #   #

This week, we've learned that the House Financial Services Committee has decided to "soften" regulatory legislation, in: "Democrats Soften Financial Bill."

Let me translate this for you: Until we hear otherwise--and as you'll see from a closer look at the stories, linked immediately above and from Gretchen Morgenson on June 1st--our legislative branch is going to do  EXACTLY what Wall Street (more precisely, The CDS Dealers Consortium) has directed them to do, as they've been cunningly calculating it since just days after they received hundreds of billions of dollars from us last Fall.

For more information on the extent of this travesty as it relates to the critical nature of regulating our derivatives market, you have to look no further than to review a diary, posted yesterday, from one of my favorite DKos diarists, gjohnsit:  "A Through-The-Looking-Glass peek into our dysfunctional banking system."


Yesterday, in a succinct statement posted on,  Vermont Senator Bernie Sanders posted this: "Senator Sanders Unfiltered: US Congress Bought & Paid For?"

Senator Sanders Unfiltered: US Congress Bought & Paid For?
By Sen. Bernie Sanders . Posted September 25, 2009.

Over a year ago, we suffered the most significant financial collapse since the Great Depression, and the result of that is massive unemployment and underemployment.
People lost their savings. People lost their homes. Now, despite the greed and illegal behavior of Wall Street, there is a massive effort to make sure that Congress does nothing about it. You know what? That might end up being the result.

How does it happen that Wall Street was able to convince Congress to deregulate their industry, to be in a position to bring the economy down? How does it happen that they are able to fend off serious efforts in Congress to try to re-regulate the financial institutions to protect the American people? Here's the answer: In the last 10 years, Wall Street and big financial institutions have spent over $5 billion in campaign contributions and in lobbying activities. It doesn't matter whether you are a Democrat or a Republican; if you have any influence they are going to go after you.

How is it that we pay, by far, the highest prices in the world for prescription drugs? How does that happen that we are the only country on earth that doesn't in one way or another regulate the cost of drugs to prevent the reality that when you walk into the drug store tomorrow the price you are paying may in fact be doubled. It may have something to do with the fact that since 1998 the pharmaceutical industry has spent over $1.6 billion on lobbying and they employ over 1,100 lobbyists - more than two lobbyists for every member of Congress.

What about health care? How is it that we are the only country in the industrialized world that does not have a national health care plan guaranteeing health care to all people? How is it that in the health care bill that's now being debated in the Finance Committee the private insurance companies and the drug companies are doing pretty well? Might it have something to do with the fact that since 1990, the health care industry has spent over $850 million dollars in campaign contributions?

Why is it that we have record breaking defense budgets despite the end of the Cold War? Well, over the last decade the defense industry has spent more than $447 million on lobbying and made $144 million in campaign contributions.

Big Oil is the same story. Exxon-Mobil makes record-breaking profits. Working people pay very high prices at the gas pump. Do you think that has something to do that the oil and gas industry has spent more than $830 million dollars on lobbying and $240 million in campaign contributions over the past two decades?

On and on it goes. The reality of Washington, to a very significant degree, is that those people who have the money are able to influence public policy. Big money controls the agenda. If you don't have the money, you get to the end of the line...

Bold type is diarist's emphasis.

Yes, Senator Sanders spells it out for us.


Are you listening?

But, more importantly I ask:  What are you going to do about it?

Healthcare reform--assuming we end up with anything even close to real reform, and that's a big assumption, IMHO--is but one piece of a much bigger puzzle.  

It would be phenomenal to see healthcare accessible to all in our society. It would be triumphant. The economic benefits of it would cascade throughout America, benefitting everyone from small business all the way on down to the working poor.

In fact, maybe some of us folks on Main Street would even have enough money available at that point to take advantage of all of that newfangled financial innovation that they're talking about on Wall Street and in D.C.

You know, like this "innovative" product on which I posted a diary earlier this month:  "Breaking: Above-Ground Nuclear Test Set For Peoria, IL."

Those folks on Wall Street...always looking out for the little guy.

Originally posted to on Sat Sep 26, 2009 at 04:24 PM PDT.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site