As the deeply-captured souls on Capitol Hill negotiate away what little substance remains in Dodd-Frank financial reform, we now hear of a bipartisan consensus being reached concerning a right-of-center (i.e.: faux centrist) solution to our country's growing budget deficits.
In fact, both "realities" are little more than spin created to obfuscate and manipulate the greater truth that "the banks run the place." And, both faux centrist initiatives--if successful, and it appears they may be--now run the risk of doing much to undermine our nation's economic recovery, not to mention exacerbate the still-growing and record-breaking economic abyss of inequality that separates our nation's haves and have-nots.
DODD-FRANK
The ongoing pillaging of the U.S. underclasses by our country's status quo continues. As far as financial reform's concerned, many would say it's becoming more--not less--egregious (and devious) by the day. In large part, the reason it may be thus was noted by DKos FPer Joan McCarter in her post on Saturday evening, entitled: "Wall Street still spending against Wall Street reform."
In it we learn that Wall Street's spending more, right now, fighting regulatory reform (where it counts most, amongst the regulators, as they "interpret" the legislation), as it relates to the actual regulatory implementation rules of Dodd-Frank FinReg legislation, than it did this time last year, when the original, broadly-worded legislation was actually passed.
Hand-in-hand with "McJoan's" commentary, last night, the New York Times' editors noted, less than a month ago, in "Who Will Rescue Financial Reform," the areas to watch are derivatives regulatory reform guidelines and the related budgets for the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), as well as a myriad of strategies being implemented to eviscerate the power of Elizabeth Warren's Consumer Financial Protection Bureau. (And, even this last sentence is spin. Make no mistake about it; until the CFPB has a formal chair, Tim Geithner is legally and officially in charge of it.)
Who Will Rescue Financial Reform?
Editorial
New York Times
March 28, 2011
...A direct assault on Dodd-Frank would be so blatantly biased toward banks that it would be sure to provoke a public backlash. So the Republican plan is to delay and disrupt reform. The effort is partly ideological--an insistence that regulation is unnecessary, no matter the evidence to the contrary. It is also a campaign fund-raising ploy, because Wall Street will reward the opponents of reform. Of course, Democrats are themselves not indifferent to Wall Street campaign cash, which raises the question of how effectively they will counter the Republicans’ aims. Here are areas to watch...
Note the NYT's reference to this being a truly bipartisan affair. And, of course, we all know what the end result of an affair is, right? Ultimately, someone's getting screwed.
DERIVATIVES Budget cuts could cripple the Securities and Exchange Commission and the Commodity Futures Trading Commission — which share the vital task of regulating the multitrillion-dollar derivatives market. The budget impasse in Washington has already frozen the agencies’ budgets, even as their rule-writing duties have exploded. Worse, prevailing Republican rhetoric, adopted in part by Democrats, portends more budget cuts, which would leave the agencies unable to enforce current rules, let alone new ones. Settling for less than President Obama’s requested amounts for the agencies would be acquiescing in the derailment of Dodd-Frank.
...
REPEAL BY ANOTHER NAME House Republicans have unveiled several bills to undo Dodd-Frank piece by piece. One would rewrite the law so that the C.F.P.B would be run by a five-member bipartisan board, rather than one director, a recipe for delay and division. Another would exempt an array of derivatives users from the new rules, perpetuating the deregulated market.
...
Dodd-Frank is no cure-all, but properly implemented and enforced, it would close dangerous regulatory gaps. That won’t happen if Republicans get their way — and they will, unless the fight is engaged in no uncertain terms...
We learn from the NYT's editors that "...another bill would repeal a requirement for private equity firms to register with the S.E.C, in effect ignoring the systemic risks in leveraged pools of private capital. And one would repeal a requirement that publicly traded companies disclose the ratio of a chief executive’s pay to that of a typical employee, a move that would deprive analysts of data to detect bubbles that correlate to skewed pay. The list goes on."
CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)
Here's Elizabeth Warren, from last month, summing up the still quite static situation as far as the CFPB is concerned...
Elizabeth Warren: “Problems Lurking” in Same Banks Tim Geithner Says Are “Much Stronger”
By Peter Gorenstein
Daily Ticker--Tue, Mar 1, 2011 10:33 AM EST
...Three years ago this month, the first major financial domino fell as Bear Stearns was forced to accept a "take-under" offer from JP Morgan. We've come a long way from the dark days of 2008 and "the core of the American financial system is in a much stronger position than it was before the crisis," Treasury Secretary Tim Geithner's recently declared. (See: Geithner's Victory Lap: Claims Financial System "Much Stronger" vs. Before Crisis)
Indeed U.S. banks posted net income of $87.5 billion in 2010, the best since 2007. But former TARP Cop Elizabeth Warren isn't as sure as Geithner that the coast is clear.
"I think there are parts [of the system] that have changed but I still worry, a lot," she says. "We have more concentration in the banking industry than we had before [and] we're going to have a 'too big to fail' problem lurking around the edge of this financial system until we've demonstrated how we're going to deal with financial institutions who take on too much risk..."
As Joan McCarter closed out her post Saturday night, she wrote...
...It's much, much harder for grassroots and public advocacy organizations to lobby on the regulatory side than the legislative side. After all, the regulators aren't elected and don't have constituents to answer to. The rule-making process is even less transparent than the legislative process, and industry lobbyist can have tremendous influence. They sure as hell are not going to be wielding that influence on behalf of American consumers.
BERNANKE'S QE2: $600 BILLION TO "GOOSE THE MARKETS."
As it is, the Federal Reserve will be actively involved in "oversight" and budget "support" for both organizations. And, as we are also learning in Sunday's NY Times, Bernanke & Company more or less screwed the Main Street pooch on the latest $600-billion round of quantitative easing, since it appears (I'm shocked! Shocked, I say!), that "most Americans are not feeling the difference," from it. Then again, as the Times also tells us, Wall Street's loving them some Ben because the second round of quantitative easing "...pumped up the stock market, reduced the cost of American exports and allowed [only our largest] companies to borrow money at lower interest rates."
Naked Capitalism Publisher Yves Smith was not as kind, and comes right out and tells it like it is in the headline of her commentary on this latest travesty, "Mirabile Dictu! Economists Agree All The Fed Has Done Is Goose Financial Markets!" Meanwhile, here's Appelbaum in Sunday's Times telling us the same thing, albeit a little more politely. (Sometimes I forget that I'm told we bloggers are supposed to maintain some sense of "civility" about Wall Street's ongoing stripmining of the rest of America.)
Stimulus by Fed Is Disappointing, Economists Say
BINYAMIN APPELBAUM
New York Times
April 24, 2011
WASHINGTON — The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.
But most Americans are not feeling the difference, in part because those benefits have been surprisingly small. The latest estimates from economists, in fact, suggest that the pace of recovery from the global financial crisis has flagged since November, when the Fed started buying $600 billion in Treasury securities to push private dollars into investments that create jobs.
As the Fed’s policy-making board prepares to meet Tuesday and Wednesday — after which the Fed chairman, Ben S. Bernanke, will hold a news conference for the first time to explain its decisions to the public — a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.
“It’s good for stopping the fall, but for actually turning things around and driving the recovery, I just don’t think monetary policy has that power,” said Mark Thoma, a professor of economics at the University of Oregon, referring specifically to the bond-buying program...
MEANWHILE, BACK AT THE DODD-FRANK "NEGOTIATIONS" ON CAPITOL HILL...
This brings us to Joe Nocera's column from Saturday's NY Times, where we learn the grey lady's new opinion columnist managed to extract his head from T. Boone Pickens' ass long enough to actually provide us with a rather amazing set of inconvenient facts about what's happening up on the Hill as far as the derivatives piece of this regulatory fail is concerned.
As Nocera notes it, in "Sewers, Swaps and Bachus," to sum up what's happening with derivatives regulatory reform in D.C. into two words--if House Financial Services Committee Chair Spencer Bachus has his way--it's not much.
Sewers, Swaps and Bachus
JOE NOCERA
New York Times
April 23, 2011
Let me tell you a story about Jefferson County, Alabama, whose county seat is Birmingham, and whose congressman is Spencer Bachus, the Republican who chairs the House Financial Services Committee.
Once upon a time — back when too many people viewed derivatives as glittering innovations with magical powers to hedge against risk--from fixed rates to variable rates. It did so because some investment bankers at JPMorgan persuaded the county to purchase derivative contracts, in the form of interest rate swaps, that would supposedly allow it to avoid paying higher interest if rates went up. Magic indeed...
We learn from Nocera that, today, Jefferson County is broke and considering bankruptcy. And, this is due to the fact that Jefferson County is now in the hole some $4 billion due to this fiasco. As you'll see, below, this was due to, among other things, JPMorgan making illegal payments to politicians, so that they could, "allegedly," handle the bond deal and overcharge taxpayers for their services in the process of so doing. (I put quote marks around, "allegedly," since I'm sure part of JPMorgan's settlement with the SEC included the firm "not acknowledging any wrongdoing.")
...Has Spencer Bachus, as the local congressman, decried this debacle? Of course — what local congressman wouldn’t?
In a letter last year to Mary Schapiro, the chairwoman of the S.E.C., he said that the county’s financing schemes “magnified the inherent risks of the municipal finance market.” (He also blamed, among other things, “serious corruption,” of which there was plenty, including secret payments by JPMorgan to people who could influence the county commissioners.)
But, as Nocera reminds us, we're talking about Spencer Bachus,
"not just your garden variety local congressman," but the Chairperson of the Financial Services Committee. Nocera states,
"...he is uniquely positioned to help make sure that similar disasters never happen again — not just in Jefferson County but anywhere..."
Highlighting the escalating intransigence of GOP thuggery that we're currently witnessing on the Hill, Nocera reports: "...last week, along with a handful of other House Republican bigwigs, he [Bachus] introduced legislation that would do just the opposite: It would delay derivative regulation until January 2013."
For much, much more on this travesty, brought to you by both Democrats and Republicans, checkout my diary from April 13th, entitled: "Too Close For Comfort." After reading it, you'll realize that JPMorgan Chase is up to its neck in SEC fines, fraud allegations and pillaging charges, as far as their efforts to stripmine Main Street are concerned.
Click on these stories for more info, as well:
-- "Breaking DoJ: 12+ Wall St. Firms Conspired In Muni Ripoffs"
-- "Dimon Says a Hundred Municipalities in U.S. Won’t ‘Make It’ Out of Debt"
-- "Former JPMorgan Executive Llodra May Face SEC Suit Over 2007 CDO Marketing."
As I noted at the end of my diary on April 13th, "Too Close For Comfort," the inconvenient truth is that our President's Chief of Staff, William Daley, was, among other things, JPMorgan Chase's National Director of Corporate Responsibility throughout ALL of this.
THE ONGOING BUDGET "DEBATE"
And, this brings us to the last topic, the ongoing budget "debate" (heh) and/or "negotiations" currently underway amongst the "Gang of Six" senators. (Here's a link to the latest on their "spin" from the LA Times' Washington Bureau's Lisa Moscaro, on Saturday: "Gang of Six gives old-time politics a try."
But, the entire concept that this is a real "debate," leaves much to be desired, as we hear about it from both former Clinton administration Labor Secretary Robert Reich, this past Thursday, and Paul Krugman, in today's (Monday's) NY Times (a little more politely than Reich, IMHO).
Beware the “Middle Ground” of the Great Budget Debate
Robert Reich
RobertReich.org
Thursday, April 21st, 2011
How debates are framed is critical because the “center” or “middle ground” is supposedly halfway between the two extremes.
We continue to hear that the Great Budget Debate has two sides: The President and the Democrats want to cut the budget deficit mainly by increasing taxes on the rich and reducing military spending, but not by privatizing Medicare. On the other side are Paul Ryan, Republicans, and the right, who want cut the deficit by privatizing Medicare and slicing programs that benefit poorer Americans, while lowering taxes on the rich.
By this logic, the center lies just between.
Baloney.
According to the most recent Washington Post-ABC poll, 78 percent of Americans oppose cutting spending on Medicare as a way to reduce the debt, and 72 percent support raising taxes on the rich – including 68 percent of Independents and 54 percent of Republicans.
In other words, the center of America isn’t near halfway between the two sides. It’s overwhelmingly on the side of the President and the Democrats...
...
...To think of the “center” as roughly halfway between the President’s and Paul Ryan’s proposals is to ignore what Americans need and want. For our political representatives to find a ”middle ground” between the two would be a travesty.
I strongly urge you to read all of Reich's column from Thursday.
Meanwhile, here's Krugman, a bit more politely than Reich (Krugman promotes the Progressive Caucus' budget proposals) from today's/Monday's NYT...
Let’s Take a Hike
PAUL KRUGMAN
New York Times
April 25, 2011
When I listen to current discussions of the federal budget, the message I hear sounds like this: We’re in crisis! We must take drastic action immediately! And we must keep taxes low, if not actually cut them further!
You have to wonder: If things are that serious, shouldn’t we be raising taxes, not cutting them?
My description of the budget debate is in no way an exaggeration. Consider the Ryan budget proposal, which all the Very Serious People assured us was courageous and important. That proposal begins by warning that “a major debt crisis is inevitable” unless we confront the deficit. It then calls, not for tax increases, but for tax cuts, with taxes on the wealthy falling to their lowest level since 1931.
And because of those large tax cuts, the only way the Ryan proposal can even claim to reduce the deficit is through savage cuts in spending, mainly falling on the poor and vulnerable. (A realistic assessment suggests that the proposal would actually increase the deficit.)
President Obama’s proposal is a lot better...
Krugman tells us that, "At least [President Obama's proposal] it calls for raising taxes on high incomes back to Clinton-era levels. But it preserves the rest of the Bush tax cuts — cuts that were originally sold as a way to dispose of a large budget surplus."
However, he notes that it "...still relies heavily on spending cuts, even as it falls short of actually balancing the budget."
He rhetorically asks why someone isn't offering a proposal that acknowledges that the Bush tax cuts were a "huge mistake?"
Then he answers: "...the only major budget proposal out there offering a plausible path to balancing the budget is the one that includes significant tax increases: the “People’s Budget” from the Congressional Progressive Caucus, which — unlike the Ryan plan, which was just right-wing orthodoxy with an added dose of magical thinking — is genuinely courageous because it calls for shared sacrifice."
And, therein lies the rub. As Krugman notes in another rhetorical question, why isn't it "...getting anywhere near as much attention as the much less serious Ryan proposal? It’s true that it has no chance of becoming law anytime soon. But that’s equally true of the Ryan proposal."
But, he explains, the Progressive Caucus' proposal avoids "savaging" the middle and lower classes.
Reiterating, here's a few sentences from that New York Times' editorial, from just under a month ago, which I quoted at the beginning of this diary...
...So the Republican plan is to delay and disrupt reform. The effort is partly ideological--an insistence that regulation is unnecessary, no matter the evidence to the contrary. It is also a campaign fund-raising ploy, because Wall Street will reward the opponents of reform. Of course, Democrats are themselves not indifferent to Wall Street campaign cash, which raises the question of how effectively they will counter the Republicans’ aims...
Basic question: As far as our government's concerned, how can we have a "bipartisan consensus" on ANYTHING related to our economy, when an Independent is running the Treasury Department, a Republican is running the Federal Reserve, the Republicans are in the majority in the House, and "the banks run the place," as none other than the one, so-called "progressive" senator in the "Gang of Six" told us was the true state of affairs in the U.S. Senate?
What Krugman's saying, today, is very similar to what Reich told us a few days ago: We're witnessing another "debate" between centrists and those on the far right. And, last I checked, that's not a "bipartisan consensus" at all.
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