Independent Senator Bernie Sanders of Vermont is attempting to block President Obama's nominee--Gary Gensler--to head the Commodity Futures Trading Commission by putting a senatorial "hold" on the nomination (along with a second, as yet unnamed senator). Gensler, like so many other other people around Obama (Larry Summers & Geithner through Robert Rubin, Goldman CEO; Mark Patterson, Geithner's CofS who was a lobbyist and VP for Goldman; Treasury's Neel Kashkari a former Goldman VP) has close ties to Goldman Sachs, who employed him as a partner. "Gensler worked with Sen. Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of A.I.G. and has resulted in the largest taxpayer bailout in U.S. history," Senator Sanders said. Gensler also worked with Mr Deregulation, Robert Rubin, Clinton's Treasury Secretary. There Gensler pushed for the repeal of Glass-Steagall (regulation of financial industries). The Commodity Fugures Trading Commission, according to Wikipedia, has "jurisdiction over $5 trillion in trades." Source: http://en.wikipedia.org/...
I. Sen. Sanders Temporarily Blocks Gensler Appointment.
Independent Senator Bernie Sanders was elected in 2006 to the Senate after having served 16 years in the House, the longest period of any independent in American history. Here he describes to www.democracynow.org and radio host Amy Goodman his reasons for opposing Obama's pick:
GOODMAN: Why don’t you want Gensler to be confirmed?
SEN. BERNIE SANDERS: Well, I don’t believe that we need more of the same old same old. The philosophy that Gensler espoused when he was working for Bill Clinton in the Treasury Department was strongly deregulation, was the Robin Rubin theory of economics. And in many respects, accentuated by eight years of George Bush, that type of deregulation activity, the repeal of Glass-Steagall, the putting derivatives under the radar screen, deregulating that and allowing these transactions to take place without public notice, these are the actions that took us to where we are right now.
I happen to be a very strong supporter of President Obama. ... I think, in terms of his financial advisers, he has people who have come from the Wall Street crowd who are looking at the world in a certain way, and I want to see some different points of view involved in this discussion.
AMY GOODMAN: Well, explain exactly what Gensler did, exactly what your concerns are around the issue of credit default swaps. And explain what these are, because I think why so much of this has happened is that regular people don’t understand what this is all about.
SEN. BERNIE SANDERS: Well, Amy, not only do regular people not understand; very few people understand. And that’s exactly what the problem has been.
We—during the Depression, what the government did is said, "Look, we’re going to have to regulate Wall Street, and we’re going to separate—have walls separating, for example, consumer banks, regular banks from investment banks, from insurance companies, because when you put all of these huge institutions together, when they fall, they cause systemic damage, and they can bring down the entire economy," which is exactly what we’re seeing right now. And the legislation that was put into practice in the early 1930s was called Glass-Steagall, after two members of the Congress.
What people like Gary Gensler did, with Bob Rubin, with Phil Gramm, with Alan Greenspan, accentuated in the last eight years by George Bush, was to deregulate, deregulate, deregulate. And I used to have great debates with Alan Greenspan, who would come before the House Financial Institutions Committee and say, "Look," in so many words, "greed is good. If you get government off the backs of Wall Street, if you let these guys do their magic and make all of these investments and don’t regulate them, somehow or another we’re going to have prosperity for all of the people in our country. That’s what we need to do." I never believed that. So, what happened under Clinton, accentuated under Bush, was a massive effort at deregulation.
Just think for a minute that you had Bernie Madoff running a $60 billion Ponzi scheme, and Bush’s SEC couldn’t discover it. And the reason for that is that anything that Wall Street did, anything that corporate America did, was good, and you don’t want the government investigating or regulating.
And unfortunately, Gary Gensler was in the middle of that. Gensler, as part of the Treasury Department under Robert Rubin, pushed for the repeal of Glass-Steagall, the breakdown of those walls, which have led us precisely to where Citigroup is today, where AIG is today. So, essentially, this is a hard-working guy. He is a decent guy. I don’t have any animus against him personally. But I think President Obama has brought around him a lot of the Rubin mentality, which is not only deregulation, it’s unfettered free trade. And I think we need some more progressive-type thinking to advise the President.
Source: http://www.democracynow.org/...
A Nation editor, Robert Scheer explains that Sen. Bernie Sanders temporarily blocked the nomination by putting a hold on it (emphasis added):
Bernie Sanders, the senator from Vermont who is independent in spirit as well as party label, has placed a hold on President Obama's nomination of Gary Gensler to head the Commodity Futures Trading Commission. Sounds like a minor issue to get worked up about, but the senator is right. Like most Americans, I am eager for Barack Obama to succeed, but I see this appointment as further evidence that the president has entrusted his economic policy to the wrong people.
Source: http://www.thenation.com/...
Scheer points out, in the same source, why this is such a bad appointment for the country:
Gensler helped create this financial crisis when he was in the Treasury Department back in the Clinton era, when bipartisan cooperation with Wall Street lobbyists was all the rage. ...
Sanders' hold will not stop the Gensler nomination, because Congress and the president, recognizing the nation's mood, want to give Wall Street whatever it wants to make the stock market go up. And Gensler is a reassuring figure to the moguls of finance; he was a partner at Goldman Sachs before being brought by Goldman honcho Robert Rubin to the Clinton Treasury Department.
After Rubin left to take a $20-million-a-year job at Citigroup, which he helped run into the ground, Lawrence Summers, his protege and replacement at Treasury, elevated Gensler to be an undersecretary. Gensler then performed as Summers' point man in advocating for deregulation legislation that enabled the current debacle.
The explosion of toxic assets is a direct result of the laws pushed through by Rubin and his followers, and in the decade since, we have had a twenty-fold increase, to more than $530 trillion, in the value of those newfangled financial instruments, which Warren Buffett in February 2003 correctly termed "financial weapons of mass destruction."
Yet when one member of the Clinton administration, Brooksley Born, then head of the Commodity Futures Trading Commission, attempted to sound a warning, she was treated by the rest of Clinton's economic team as the enemy.
In response to Born's warning, they drove her from government and pushed through the Commodity Futures Modernization Act, which summarily exempted from regulation the derivatives that now haunt us. The claim at the time by Summers, now top economic adviser in the Obama White House, was that "[t]his legislation promotes innovation and competition in the U.S. financial markets and may help to reduce systemic risk." Of course now we know, as Born predicted, that it did quite the opposite. What irony that Gensler is being rewarded with Born's old job for getting it wrong.
In congressional testimony supporting the radical deregulation of the financial derivatives market, Gensler had insisted with great enthusiasm that "OTC derivatives directly and indirectly support higher investment and growth in living standards in the United States and around the world." As to the many trillions of dollars in credit swaps that now afflict the world economy, Gensler specifically called for freeing swaps of this kind from existing government regulation in the Commodity Exchange Act, which regulated other futures such as wheat sales. He said, "...[S]wap transactions should not be regulated under the CEA. ..."
His key argument, and that of Summers as well, was that even raising the prospect of regulating what have proved to be toxic derivatives would deny these financial instruments the "legal certainty" they needed to thrive. What a loss that would be, warned Summers, who called the financial derivatives market "a powerful symbol of the kind of innovation and technology that has made the American financial system as strong as it is today."
So "they"--Summers, Gensler, Treasury Secretary Timothy Geithner and their ueber mentor, Rubin--were as wrong as anyone could be. Perhaps such error is human, but aren't there folks out there with a better prospect of getting it right that Obama can rely on?
A great deal is at stake, and we are being asked to support the president's plans as a matter of trust in a hopeful new leader. But the latest administration plan, announced by Geithner on Monday, seems to be more of the same. We taxpayers are being asked to buy back from the banks the very toxic assets that the members of Obama's economic team once celebrated as an unmitigated blessing. Only this time, instead of trusting the banks, we will turn over control, but little risk, to hedge funds that are totally unregulated. Here we go again.
II. The Commodities Future Exchange and its Importance.
In the same interview, Sen. Sanders tells Amy Goodman exactly what the role of the Commodities Future Exchange is and why its important:
AMY GOODMAN: So, what would his job be now, if he gets confirmed?
SEN. BERNIE SANDERS: He would be head of the Commodities Future Exchange Commission, which is a very important regulatory body. You may recall that when, among other things, the price of oil went up—the price of gas went up to $4 a gallon, there was a lot of belief on Congress and among the American people, and among the oil industry, I should tell you, that one of the reasons for this rapid increase in gas prices had to do with speculation coming from Wall Street. The Commodities Futures Exchange Commission under Bush was very, very weak in taking a look at that. And obviously we want somebody to be very strong and to look—looking at futures trading and excessive speculation. That would be, among other things, the job that Gensler would have.
According to Wikipedia, "The stated mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets." Source:http://en.wikipedia.org/wiki/Commodity_Futures_Trading_Commission
And this from the same source:
The CFTC is authorized to regulate commodity pools and commodity trading advisors. Many hedge funds operate as commodity pools. In an address to the Securities Industry Association in 2004, Sharon Brown-Hruska, acting director of the CFTC, said that 65 of the top 100 hedge funds in 2003 were commodity pools, and 50 out of the 100 largest hedge funds were CTAs in addition to being commodity pools.
III. More about Gensler
Gary Gensler is the nominee of President-elect Barack Obama to be the chairman of the U.S. Commodity Futures Trading Commission. After receiving a BS and an MBA from the Wharton School of the University of Pennsylvania, Gary Gensler spent 18 years at Goldman Sachs, making partner when he was 30, becoming head of the company’s fixed income and currency trading operation in Tokyo by the mid-’90s, and eventually the company’s co-head of finance. Gensler was Undersecretary of the Treasury (1999-2001) and Assistant Secretary of the Treasury (1997-1999) in the United States, serving under Robert Rubin, former CEO of Goldman Sachs. Wikipedia notes:
As the Treasury Department’s undersecretary for domestic finance in the last two years of the Clinton administration, Gensler found himself in the position of overseeing policies in the areas of U.S. financial markets, debt management, financial services, and community development. Gensler advocated the passage of the Commodity Futures Modernization Act of 2000, which exempted credit default swaps and other derivatives from regulation.
Source: http://en.wikipedia.org/...
The same Wikipedia article notes that "Gensler has a twin brother Robert Gensler who runs an actively-managed fund for T. Rowe Price."
Further, The American Banker notes that Gensler celebrated the killing of the Glass-Steagall Act (an effective bill for 66 years that regulated banks) by drinking champagne and eating cake with, among others, Phil Gramm, Larry Summers and Alan Greenspan:
Copyright American Banker Inc. - Bond Buyer 1999)
The reaction on Capitol Hill to passage of the financial reform bill last week ranged from revelry to morbid humor. To mark the historic occasion, House Banking Committee Chairman Jim Leach played host to a group of his closest collaborators on the bill, including Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Lawrence H. Summers, Comptroller of the Currency John D. Hawke Jr., Treasury Under Secretary Gary Gensler, and Rep. John J. LaFalce, D-N.Y. They joined staff members, lobbyists, and reporters in drinking champagne and devouring a large cake, which bore an epitaph for the Depression-era separation of commercial and investment banking that the bill undoes. It read: " Glass-Steagall, R.I.P., 1933-1999."
(Note I thank TocqueDeville for providing this information in a comment to this diary which was edited to include it)
So let's see, Obama has chosen in this most important position that oversees trading: 1) someone who worked for 18 years at Goldman Sachs (one of the firms at the center of the financial crisis and a huge bailout recipient); 2) someone who not only opposed regulation of the financial services, a position that helped lead to the crisis but was a champion of deregulation and drank champagne and ate cake to celebrate the death of Glass-Steagall; 3) someone whose twin brother is currently running a fund. Where is the accountability? Where is the transparency?
IV. Why so many Goldman Sachs ties to the Obama Administration?
Gary Gensler is not the only person in the Obama administration with ties to Goldman Sachs. Geithner (through Robert Rubin), Larry Summers and others lurking in the background (like Robert Rubin, former CEO of Goldman); Mark Patterson, Geithner's Chief of Staff at Treasury, was a registered lobbyist for Goldman Sachs from 2005-2008 and also Vice President for Government Relations [Mother Jones notes the irony that Patterson, "a Washington influence-peddler who worked against Obama's effort to limit excessive corporate pay is now a key member of the Obama administration team that is supposed to contain excessive compensation in the AIG case and in general."]. Neel Kashkari, a holdover from Paulson's time at Treasury heads the Office of Financial Stability, the office set up to buy troubled financial assets from U.S. financial firms under the $700 billion U.S. Government Troubled Asset Relief Program. Prior to joining the Treasury Department, Kashkari was a Vice President at Goldman, Sachs & Co. in San Francisco, where he led Goldman's Information Technology Security Investment Banking practice, advising public and private companies on mergers and acquisitions and financial transactions. http://en.wikipedia.org/...
Additionally, POGO, the Project On Government Oversight reports that New York Fed President, William Dudley, and New York Fed Chair, Stephen Friedman, were once executives, directors or lobbyists for Goldman. http://pogoblog.typepad.com/... According to Wikipedia, Dudley "worked at Goldman Sachs from 1986 to 2007..." http://en.wikipedia.org/...
Whorunsgovernment.com reports that:
"Friedman joined Goldman Sachs & Co. in 1966, the same year as Robert Rubin, with whom he would later share chairmanship of the investment bank. He stayed for 28 years, rising through the ranks to become a partner in 1973, and was named vice chairman of the investment bank in 1987 and co-chairman in 1990.
...Friedman’s long career at Goldman Sachs put him in close contact with many who shuttle between Washington and Wall Street. Henry Paulson was a protégé of Friedman’s at Goldman. Paulson, a former Dartmouth wrestler, told the New York Times about a memorable weekend in the mid-1970s.
"He [Paulson] made the mistake of challenging his mentor to a wrestling match at a gathering of the firm's executives. Mr. Paulson, a tall, broad-shouldered former wrestler and football player, went to the mat with Mr. Friedman, unaware of the wiry Mr. Friedman's accomplishments. Mr. Friedman repeatedly pinned Mr. Paulson.
Source: http://72.14.235.132/...
Moreover, former Treasury Secretary Paulson, who oversaw TARP I, was like Rubin, a Goldman Sachs CEO. Moreover, AIG chief Liddy, who was appointed by Paulson, came directly from the Board of Directors of Goldman. In short, the Obama administration is infested with people with links to Goldman Sachs.
Wikipedia notes that "Goldman the second largest donor to the Barack Obama campaign... ." Goldman Sachs, through its employees and bundlers, gave more than $1 million to Obama's presidential campaign. Sources:http://en.wikipedia.org/wiki/Goldman_Sachs ;
Opensecrets.org ; and, http://209.85.175.132/...
During the campaign, Mr. Obama had strong connections with Goldman Sachs, as he was invited to a private Goldman Sachs dinner in May 2007 when his candidacy was in its infancy. When it came time to name a vice presidential running mate, Mr. Obama turned to Goldman Sachs Board Member James Johnson. Mr. Johnson was forced to vacate the post under controversy.
Source: Joe Murray, "Goldman Sachs Reaps $6B after $1M Obama Contribution" http://thebulletin.us/...
LA Congresswoman Maxine Waters recently grilled Timothy Geithner on all the Obama administrations close ties to Goldman. Here is a section from the Amy Goodman show at www.democracynow.org that demonstates this:
AMY GOODMAN: I wanted to play for you an excerpt of the grilling of Timothy Geithner, the Treasury Secretary, by the LA Congress member Maxine Waters. She’s questioning him about why Goldman Sachs was at the AIG bailout meeting.
REP. MAXINE WATERS: Was Goldman Sachs involved with the decision that was made that weekend before they came to the Congress—
TIMOTHY GEITHNER: No.
REP. MAXINE WATERS: —to ask for money on the sale of Bear Stearns?
TIMOTHY GEITHNER: No.
REP. MAXINE WATERS: Was anybody from Goldman Sachs involved in that discussion that weekend?
TIMOTHY GEITHNER: Well, let me go back on this. At the time when Bear Stearns was on the brink of default and the Federal Reserve then acted to try to avoid default, there were a range of institutions that considered buying and assuming the obligations of Bear Stearns. And in that context—
REP. MAXINE WATERS: OK, I really wish I had time for you to go into it, but Goldman Sachs was involved in some way in that decision, based on whether or not—
TIMOTHY GEITHNER: No, not in the decision.
REP. MAXINE WATERS: —they were considering the purchase themselves or they were advising about it. Is that correct?
TIMOTHY GEITHNER: No, not in the decision. And certainly not advising us.
REP. MAXINE WATERS: In some way.
TIMOTHY GEITHNER: Certainly not advising us, no.
REP. MAXINE WATERS: In some way, they were involved.
TIMOTHY GEITHNER: Well, there were a whole range of institutions that Bear Stearns approached [inaudible]—
REP. MAXINE WATERS: Were they also involved in the decision to not support Lehman Brothers?
TIMOTHY GEITHNER: No.
REP. MAXINE WATERS: In no way?
TIMOTHY GEITHNER: No.
REP. MAXINE WATERS: Alright, that—
TIMOTHY GEITHNER: Those are decisions made by your government.
REP. MAXINE WATERS: Just—I am just asking the questions, because the talk is, underneath, which you may not know about, is that this small group of decision makers at the center of it is Goldman Sachs, and that’s what’s causing a lot of the distrust, because people are thinking or believing that Goldman Sachs, because of the connections, have had a lot to do with the decisions that are being made.
AMY GOODMAN: That’s LA Congress member Maxine Waters questioning Treasury Secretary Timothy Geithner.
Obama has long had ties to Robert Rubin, Goldman's exCEO; he even calls him "Bob". When Rubin and other DLCers set up and funded the Hamilton Project named after America's first Treasury Secretary - to advocate market-based solutions to America's problems and free trade. As Firedoglake notes, a young senator took time out from his busy schedule to address the launch of the Hamilton Project:
I would love just to sit here with these folks and listen because you have on this panel and in this room some of the most innovative, thoughtful policymakers, people who have both ideas but also ways of implementing them into action. Our country owes a great debt to a number of people who are in this room because they helped put us on a pathway of prosperity that we are still enjoying, despite the best efforts of some. (Laughter)
I want to thank Bob [Rubin] and Roger [Altman] and Peter for inviting me to be here today. I wish I could be here longer. I am going to have to run after a few minutes because we do have an important issue relating to U.S.-India relations. But when Roger originally called to invite me, not only to this forum but to invite me to engage in this project, I couldn’t help but think that this was the sort of breath of fresh air that I think this town needs.
We have all known for some time that the forces of globalization have changed the rules of the game—how we work, how we prosper, how we compete with the rest of the word.
We all know that the coming baby boomers’ retirement will only add to the challenges that we face in this new era. Unfortunately, while the world has changed around us, Washington has been remarkably slow to adapt twenty-first century solutions for a twenty-first century economy. As so many of us have seen, both sides of the political spectrum have tended to cling to outdated policies and tired ideologies instead of coalescing around what actually works.
For [liberals - kjm], and I include myself in that category, too many of us have been interested in defending programs the way they were written in 1938, believing that if we admit the need to modernize these programs to fit changing times, then the other side will use those acknowledgements to destroy them altogether. On the right, there is a tendency to push for massive tax cuts, as Peter indicated from my speech at Knox College, no matter what the cost or who the target is, a view that stems from the belief that there is no role for government whatsoever in the challenges we face. Of course, neither of these approaches really works.
[snip]
That is what I hope we will see from The Hamilton Project in the months and years to come. You have already drawn some of the brightest minds from academia and policy circles.... So I know that there are going to be wonderful ideas that are generated as a consequence of this project.
Not every idea will I embrace, and I hope that one of the roles that I can play, as a participant in this process, is to not only encourage the work but occasionally challenge it. I will give one simple example. I think that if you polled many of the people in this room, most of us are strong free traders and most of us believe in markets. ...So, hopefully, this is not just going to be all of us preaching to the choir. Hopefully, part of what we are going to be doing is challenging our own conventional wisdom and pushing out the boundaries and testing these ideas in a vigorous and aggressive way.
But I can’t think of a better start, given the people who are participating today. I am glad that Brookings has been willing to provide a home for this wonderful effort.
Source: http://firedoglake.com/...
As Firedoglake continues:
"Oh - the Senator who made time for the christening of the new corporatist think tank... the love child of the Clintons' BFF Robert Rubin?
Sen Barack Obama."
V. Conclusion
President Obama promised us in his presidential campaign a fair and open administration in addition to fundamental change. Yet, his administration, especially his economic team, is dominated by Wall St. insiders (many of them from Goldman Sachs). How can the administration fashion an answer to the financial crisis that helps Main St. when it has so many ties and has accepted to much money from Wall St in general and Goldman Sachs in particular?
