// archives

Wall Street

This category contains 121 posts

The Harsh Light of Cromnibus.

“One of the frustrating things about covering American politics from a vaguely left-liberal perspective is that many of the left-left theories turn out to be true, or true enough. You try to point out to the street protesters and tenured Marxists that things are more complicated than Noam Chomsky and the late Paul Sweezy would have you believe, and, all too often, it turns out they aren’t much more complicated. The richest 0.1 per cent really is getting richer and richer while most Americans see their living standards stagnate. The C.I.A. really did torture people in secret prisons overseas, and the N.S.A. has just received authorization to carry on gathering all of your phone records. The big banks and corporations really do run Washington—or, at least, that’s how it seems on this chilly December day.”

As the terrible-idea-filled, regulation-gutting “CRomnibus” became law earlier this month — thanks to a tag-team lobbying operation by Barack Obama and Jamie DimonThe New Yorker‘s John Cassidy laments what it means for American democracy: Namely, the banks clearly write the laws. “‘It’s morally reprehensible,’ Sherrod Brown, the Ohio Democrat, told reporters. ‘They’re saying government bailouts are back.'”

By the way, if the bad news is too much to handle these days, there was one silver lining to the godawful CRomnibus: Crom may laugh at the four winds, but it does alright by space. Otherwise, well…

The Secret History of TARP.

“To put it another way, AIG owed these banks a bunch of money, but if it had to pay the banks, it would go bust. But if it didn’t pay the banks, the banks would lose money. The banks were willing to lose a little bit of money, but Geithner said no no, you don’t have to lose any money in the deal at all. The accusation is that Geithner and co. shot AIG in the head, and then let other banks feast on its rotting carcass (liberally spiced with government money). Paulson has actually confirmed this was the goal…It was an utterly selective political judgment to choose one set of actors over another set of actors.”

This one’s been in the bookmarks for awhile, but
in very related news, Matt Stoller surveys the troubling backstory of the bailouts emerging from what should be a sideshow: AIG shareholder Hank Greenberg suing the government for unfair treatment. (He only got half a sweetheart deal.) “Greenberg’s case is revealing that the bailouts were done selectively, and there was an attempt to cover up what happened…bailout opponents were largely correct, and the bailout apologists were lying and/or wrong.”

Then the Rich Got Richer.

“Through midcentury, when times were good economically, most of the benefits trickled down to the bottom 90 percent of households. Then came the Reagan era and actual trickle-down economics. Suddenly, the benefits started sticking with the rich. Since 2001, the top 10 percent have enjoyed virtually all of the gains.”

As making the rounds of late, a devastating graph of rising income inequality in America, “post-trickle-down”. “This isn’t a totally new story. But it is a vivid and visceral illustration of what we’ve basically known to be true for a while.”

Along the same lines, Mother Jones is posting a new chart on income inequality every day this week. “In the past few years, we’ve heard a lot about overtaxed ‘job creators’ and freeloading ‘takers.’ But consider this: As the income rates for the wealthiest have plunged, their incomes have shot up.”

If it’s any consolation, presumptive 45th president Hillary Clinton has recently talked to friends and donors in business about how to tackle income inequality without alienating businesses or castigating the wealthy.” Er…sorry, that’s not going to get it done.

Getting Away With It.

“I have been following the absence of legal prosecutions since 2008, and have posted on that subject more than 500 times. But this isn’t the obsession of one lone crank (i.e., me). Many others in banking, law enforcement and government who aren’t on the payroll of banks have reviewed the events of the financial crisis and have reached the same conclusion — that the law was broken repeatedly by bankers.”

In the wake of a ridiculous apologetic in the NYT — and news that the government now wants to waive sanctions for Credit Suisse — Bloomberg’s Barry Ritholtz re-asks one of the central questions of the financial crisis, and Obama’s response to it: Why have no Banksters gone to jail?

“Political access and lobbying go part way toward explaining the absence of prosecutions and, therefore, the lack of convictions…As we have repeatedly shown, Treasury Department officials, including former Treasury Secretary Timothy Geithner, had convinced prosecutors in the Justice Department of the dangers of prosecuting banks and bankers for the economy.” (Cartoon above via here.)

A Wasted Opportunity. | So Now What?

“The task facing the makers of the Obama museum, however, will be pretty much exactly the opposite: how to document a time when America should have changed but didn’t. Its project will be to explain an age when every aspect of societal breakdown was out in the open and the old platitudes could no longer paper it over — when the meritocracy was clearly corrupt, when the financial system had devolved into organized thievery, when everyone knew that the politicians were bought and the worst criminals went unprosecuted and the middle class was in a state of collapse….It was a time when every thinking person could see that the reigning ideology had failed, that an epoch had ended, that the shitty consensus ideas of the 1980s had finally caved in — and when an unlikely champion arose from the mean streets of Chicago to keep the whole thing propped up nevertheless.”

In Salon, Thomas Frank laments the wasted opportunity of the Obama years. “Why, the visitors to his library will wonder, did the president do so little about rising inequality, the subject on which he gave so many rousing speeches? Why did he do nothing, or next to nothing, about the crazy high price of a college education, the Great Good Thing that he has said, time and again, determines our personal as well as national success? Why didn’t he propose a proper healthcare program instead of the confusing jumble we got? Why not a proper stimulus package? Why didn’t he break up the banks? Or the agribusiness giants, for that matter?”

Frank’s piece is definitely a bit overwritten, with its “mausoleum of hope” and all. That being said, I’m on board with his central thesis, as I’ve said several times before. (In fact, I was glad to see when fixing the old archives lately, that however hopey-changey I felt in 2008, I was more measured in my writing than I remembered, bringing up the ominous example of Herbert Hoover in my post-election post and wondering what the heck was going on within two weeks of Obama’s inauguration.)

Also, to get a sense of what a bad place our party is at these days, just look at Kevin Drum’s ridiculous response to this Tom Frank piece. Drum, mind you, is the official blogger of Mother Jones, named after the famous labor leader. And he writes: “It’s easy to recognize this as delusional…Because — duh — the hated neoliberal system worked. We didn’t have a second Great Depression. The Fed intervened, the banking system was saved, and a stimulus bill was passed…As for Obama, could he have done more? I suppose he probably could have, but it’s a close call.”

A close call? C’mon. As I responded on Twitter: “And all is for the best in the best of all possible worlds. This neoliberal horseshit would’ve made Mother Jones blanch. This piece sidesteps O’s GWOT record. 2. It ignores O’s penchant for starting negotiations where they should finish. 3. It presumes filibuster reform impossible. 4. It ignores that financial crisis response grew inequality. And so on.”

And, remember: This fatalistic “Americans are all centrists anyway, Obama did all he could” shrug is coming from the house blogger of one of our foremost progressive journals. It’s pathetic. This is yet another example of we progressive Democrats no longer having the courage of our convictions.

See also this very worthwhile Salon piece on Zephyr Teachout’s challenge to notorious douchebag Andrew Cuomo, by my friend and colleague Matt Stoller, which talks about this exact same phenomenon.

“The basic theory of the ‘New Democrat’ model of governance is that Wall Street and multinational corporate elites produce wealth through the creation of innovative financial practices and technology, and that Democrats should then help middle class and poor citizens by taxing this wealth, and then using some of it to support progressive social programs…This method of running the economy has become so accepted among Democratic leaders that writers like New York Times columnist Paul Krugman and Vox writer Matthew Yglesias now argue that there simply is no alternative…

“There is a hunger in the Democratic Party for making the party serve the interest of regular voters, not the rich. In 2008, liberal Democrats decisively broke from the Clinton legacy and voted for Barack Obama, with his mantra of hope and change. Obama, however, stocked his administration with Clinton administration officials like Larry Summers, Tim Geithner and Janet Yellen. A joke going around Democratic circles after the election was that ‘Those supporting Obama got a president, those supporting Clinton got a job.’ Obama broke with the Clinton name, but brought the Clinton intellectual legacy, and Clinton’s Wall Street-backed machine, into governance…”

“The potentially transformative message of the Teachout-Wu campaign is that the problem is not solely one of personalities or tactical political approaches. Rather it is that the New Democrat model itself, and the Democratic party establishment, is fundamentally at odds with the party’s traditional liberalism…Teachout and Wu are trying to place the citizen at the center of policy. They do that through their proposals for public financing, for antitrust, for social insurance, infrastructure and labor.”

Without vision, the people perish. If we ever want to see the real and positive change that Americans were promised back in 2008, we progressives have to stop acting like we have no other option than to fall into line behind the leftiest of the centrists and clap harder for every occasional, diluted-to-all-hell scrap they throw our way. There’s more to life than Rockefeller Republicanism, and it’s not like we don’t have excellent historical templates to borrow from. We need to dream bigger, stop thinking the status quo is all there is, and push back.

Are Zephyr Teachout and Tim Wu going to knock out Andrew Cuomo, a guy who’s quite obviously the poster child for everything that’s wrong with our party? Alas, probably not. But one does not always fight because there is hope of winning. And New York in 2014 is as a good a place as any to start the long uphill slog of taking back our party.

Update: Right on cue, the NYT delves into Andrew Cuomo’s hobbling of the state ethics commission. “[A] three-month examination by The New York Times found that the governor’s office deeply compromised the panel’s work, objecting whenever the commission focused on groups with ties to Mr. Cuomo or on issues that might reflect poorly on him.”More here.

Meanwhile, Blake Zeff thinks Cuomo may have met his match in US Attorney Preet Bharara. “[Bharara] has not only taken possession of the files from the corruption-fighting Moreland Commission that Cuomo recently closed down as part of a budget deal, but has also publicly floated the possibility of investigating the governor’s alleged meddling in its investigations.”

The Grifter Prince.

“Geithner is at heart a grifter, a petty con artist with the right manners and breeding to lie at the top echelons of American finance at a moment when the government and financial services industry needed someone to be the face of their multi-trillion dollar three card monte…After reading this book and documenting lie after lie after lie, I’m convinced that there’s more here than just a self-serving corrupt official. There’s an entire culture, of figures at Treasury, the Federal Reserve, in the entire Democratic Party elite structure, and in the world of journalism, a culture in which Geithner is seen as some sort of role model.”

A late addition to this recent and well-deserved pile-on: Friend and fellow congressional staffer Matt Stoller writes in Vice on Geithner’s Stress Test and the “Con-Artist Wing of the Democratic Party.” “The task of reclaiming democratic power will involve making work at Geithner’s Treasury a black mark on a resume, an embarrassment and a shameful episode…Americans are not stupid, and they saw what Geithner, as the head economic official in a Democratic administration, did.”

Geithner: Wrong on Everything

“At every turn on housing — on mass refinancing, on principal reduction, on leverage for homeowners in the bankruptcy process, on forcing banks to write down mortgages, on a modern-day HOLC–the evidence points to Tim Geithner preferring whatever option put the least pressure on banks, rather than actually helping ordinary people. He made far more excuses to do nothing than any effort to make a difference…In fact, the programs were never meant to help homeowners, designed only to ‘foam the runway’ for the banks, to spread out foreclosures and allow banks to absorb them.”

In the wake of Tim Geithner’s new rehab book tour — currently being aided and abetted by Wall Street’s usual court stenographer, Andrew Ross Sorkin — Dave Dayen says not so fast. “I don’t have to just focus on housing; this is indicative of Geithner’s worldview, which sees protecting the financial system at all costs as the only thing that matters.”

Yves Smith has also ably eviscerated Geithner’s game of “Three Card Monte”: “The entire edifice of the piece is a sleight of hand…The focus on TARP (and to a lesser degree, Lehman) allows Sorkin to omit mention of actions that were clearly Geithner’s doing…The bigger point, which is not lost on the public, was there were plenty of other options for saving the system. The one chosen, that left the banks largely unreformed and no one of any consequence punished, was clearly just about the worst of the available options, unless, of course, you are, like Geithner, a banker.”

And here’re economics and finance professors Atif Mian and Amir Sufi: “Whatever reasons he had for opposing assistance to underwater homeowners, a careful evaluation of the policy effects was not among them. The evidence is pretty clear: an aggressive bold attack on household debt would have significantly reduced the horrible impact of the Great Recession on Americans. The fact that Secretary Geithner and the Obama administration did not push for debt write-downs more aggressively remains the biggest policy mistake of the Great Recession.”

Noam Scheiber has his say in TNR: “[The article] inadvertently highlights something deeper about Geithner, which is the shocking extent to which he’s accepted financialization of the economy as a benign, even admirable, development. The people who spend their days shuffling trillions of dollars around the globe are really just like you and me, except with nicer offices. They deserve the same sympathy and respect, notwithstanding their abysmal track record. That blinkered view colors pretty much every one of Geithner’s utterances as he makes the rounds hawking books.”

Also of note: Geithner doesn’t seem to understand how Social Security works, and, in classic #ThisTown fashion, he — the Secretary of the Treasury! — just parrots the same ignorant Beltway line about zomg out-of-control entitlements as all Very Serious People™ do. To wit, from Geithner’s book:

“I remember during one Roosevelt Room prep session before I appeared on the Sunday shows, I objected when Dan Pfeiffer [a senior advisor to the Obama White House] wanted me to say Social Security didn’t contribute to the deficit. It wasn’t a main driver of our future deficits, but it did contribute. Pfeiffer said the line was a ‘dog whistle’ to the left…code to the Democratic base, signaling that we intended to protect Social Security.”

And here’s the LA Times’ Michael Hiltzik: “But let’s get to the nub. Does Social Security ‘contribute to the deficit’? The answer is, bluntly, no. By law, it can’t contribute to the federal deficit, because Social Security isn’t allowed to spend more than it takes in. Those who claim — as Geithner has at one point or another — both that the program contributes to the deficit yet will be forced to reduce benefits to retirees once its trust fund is depleted are trying to have things both ways: The reasoning behind the threat of reduced benefits is that Social Security can’t engage in spending money it doesn’t have, i.e., deficit spending. Pick one, fellas. If it can contribute to the deficit, then there’s no reason to cut benefits.”

So is there’s anything positive about Geithner’s rewriting of history here? Well, the Sorkin piece does include this telling anecdote: “At another point, [Geithner] cheerfully relayed a story that also appears in his book about the time he sought advice from Bill Clinton on how to pursue a more populist strategy: ‘You could take Lloyd Blankfein into a dark alley,’ Clinton said, ‘and slit his throat, and it would satisfy them for about two days. Then the blood lust would rise again.'”

Could somebody please tell me again why I should be excited about Hillary 2016?

Update: Sheila Bair offers her take. “On his book tour, to explain the need for bailouts, Tim has used a clever analogy of a pilot trying to land a plane that is on fire and in the back, sit the terrorists who started it. He argues that the pilot can’t leave the cockpit to put them in handcuffs. He first has to land the plane. The problem with this analogy is that the plane landed at the end of 2008. And let’s face it, instead of handcuffing the terrorists, we escorted them to the executive lounge.”

The New Gilded Age.

“[This] is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.”

In the NYRB, and in very related news, Paul Krugman sings the praises of Thomas Piketty’s new magnum opus, Capital in the 21st Century. “This is a book that will change both the way we think about society and the way we do economics…Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.”

As a counterpoint of sorts, CEPR’s Dean Baker — neither a Pollyanna nor a conservative — argues Piketty has picked up some of Marx’s bad habits, and finds the book too deterministic and despairing by far:

“[T]here are serious grounds for challenging Piketty’s vision of the future…the book [suffers from a] lack of attentiveness to institutional detail…In the past, progressive change advanced by getting some segment of capitalists to side with progressives against retrograde sectors. In the current context this likely means getting large segments of the business community to beat up on financial capital…[T]he point is that capitalism is far more dynamic and flexible than the way Piketty presents it in this book. Given that we will likely be stuck with it long into the future, that is good news.”

Update: Galbraith weighs in. “[This] is a weighty book, replete with good information on the flows of income, transfers of wealth, and the distribution of financial resources in some of the world’s wealthiest countries…Yet he does not provide a very sound guide to policy. And despite its great ambitions, his book is not the accomplished work of high theory that its title, length, and reception (so far) suggest.”

“Too Fast to Fail.”

“The issue here is that people are earning large amounts of money by using sophisticated computers to beat the market. This is effectively a form of insider trading…[T]he front-running high speed trader, like the inside trader, is providing no information to the market. They are causing the price of stocks to adjust milliseconds more quickly than would otherwise be the case. It is implausible that this can provide any benefit to the economy. This is simply siphoning off money at the expense of other actors in the market.”

In the wake of Michael Lewis’ publicity blitz for Flash Boys, and per his “let’s focus on solutions” argument to Piketty above, CEPR’s Dean Baker explains how to easily fix the problem of high-frequency trading. “[O]ne simple method…would virtually destroy the practice. A modest tax on financial transactions would make this sort of rapid trading unprofitable since it depends on extremely small margins.”

A Wagonful of Crooks.

“Attorneys, forensic accountants and consumer advocates have long suspected that banks were systematically creating improper documents to prove ownership of loans. Foreclosure defense lawyers use the term ‘ta-da’ endorsement to describe situations in which they say a document appears, as if by magic, in the bank’s possession as needed in a foreclosure case…The manual…appears to provide step-by-step instructions for a Wells Fargo Home Mortgage ‘Default Docs Team’ and foreclosure attorneys if a blank endorsement is in a file and the attorney wants that note executed.”

In another example of banksters taking notes on a criminal f**king conspiracy, the NY Post get their hands on Wells Fargo’s How-To-Manual for ginning up fraudulent foreclosure documents. “Foreclosure experts called these procedures shocking. ‘It’s an explosive document,’ said forensic accountant Jay Patterson.” Hey, can somebody go to jail now?

Update: Nope, doesn’t look like it. “Four years after President Obama promised to crack down on mortgage fraud, his administration has quietly made the crime its lowest priority and has closed hundreds of cases after little or no investigation, the Justice Department’s internal watchdog said on Thursday.”

Revolving Doormen.

“One afternoon in San Francisco, Lehane explained his operating principle this way: ‘Everyone has a game plan until you punch them in the mouth. So let’s punch them in the mouth…In most situations,’ Lehane continued, ‘there are people who either have dirty hands or their own agendas. Whenever somebody complains that this stuff has happened to them, I say, “There’s a long line of people behind you.”‘”

Ever feel like maybe part of the problem with both our Party and our politics is that they tend to reward amoral, money- and power-driven, self-aggrandizing douchebags? Hey, you’re right! Exhibit A: Chris Lehane, previously Al Gore’s flak in 2000 (he also had a small part to play in Dean’s demise in 2004), who’s given the soft-focus treatment in this week’s New York Magazine. “‘You are only seeing 10 percent of what I do,’ Lehane said. The private clients have included Goldman Sachs, Michael Moore, the Weinstein Company and Boeing.”

And here’s Exhibit B: Peter Orszag, who’s currently trying to shield his big Citibank payday from public scrutiny. “Typically, documents in a civil-court proceeding are accessible to the public, but Orszag succeeded last year in quietly convincing a judge to seal financial records submitted in the case, including the salary he makes as a Citigroup vice president, from public view. In that request, Orszag worried that disclosure of his income might harm his career and ‘damage any eventual return to Federal Government service or other public office.'”

Yeah, because everybody’s clamoring for that. Sigh, This Town. Lehane’s right about one thing, tho’. Everywhere you look in DC, there are people who don’t know anything about anything strenuously clambering up the ranks, their only two skills of note shameless self-promotion and a brazen flexibility with regard to what should be basic Democratic principles. Or, as I put it more charitably a few years ago:

“That’s my rub too, and it dovetails with larger problems I have with DC political culture. More often than not, the people who tend to succeed here are the ones who keep their head down, play the DC game, stay resolutely non-ideological and unobtrusive in their opinions. never go out on a limb, never say or do anything that could hurt their bid to be a Big (or Bigger) Shot down the road. (Hence, the whole phenomenon of The Village.)The problem is, these plodding, risk-averse careerist types are exactly the type of people you don’t want making decisions in the end, because they will invariably lead to the plodding, risk-averse and too-often rudderless politics of the lowest common denominator.”

But I guess, as the The Wire made clear years ago, that’s pretty much the rule in any institution or industry, so there’s not much use in complaining about the way things are and have always been. Game’s the same, just got more fierce.

Rolling in the Deep.

“The Deep State is the big story of our time. It is the red thread that runs through the war on terrorism, the financialization and deindustrialization of the American economy, the rise of a plutocratic social structure and political dysfunction. Washington is the headquarters of the Deep State, and its time in the sun as a rival to Rome, Constantinople or London may be term-limited by its overweening sense of self-importance and its habit, as Winwood Reade said of Rome, to ‘live upon its principal till ruin stared it in the face.’ ‘Living upon its principal,’ in this case, means that the Deep State has been extracting value from the American people in vampire-like fashion.”

In very related news, and in a somewhat overwritten but otherwise worthy piece, former GOP Congressional staffer Mike Lofgren summarizes the problem of America’s Deep State (a term Lofgren did not coin, borrowed from Turkey.) Think the military-industrial complex, now infused with financial sector/Pete Peterson-style rent-seeking. “[This] is not an exposé of a secret, conspiratorial cabal; the state within a state is hiding mostly in plain sight, and its operators mainly act in the light of day.”

Those Socialists at Goldman Sachs.

“U.S. businesses have never had it so good. Corporate cash piles have never been bigger, either in dollar terms or as a share of the economy. The labor market, meanwhile, is still millions of jobs short of where it was before the global financial crisis first erupted over six years ago. Coincidence? Not in the slightest.”

Karl Marx? Try Goldman Sachs. Their chief economist, Jan Hatzius, recently argued that “strength (in profits) is directly related to the weakness in hourly wages. In fact, 2012 saw the highest corporate profits and lowest wages and salaries ever recorded, as a percentage of GDP. But, please, let’s hear more whining and ridiculously overheated Holocaust metaphors from the top 0.1%.

Banksters of America.

“‘Everyone knew that we weren’t helping people,’ said Erik Schnackenberg, a customer-service manager who left Urban Lending in 2011…’They were giving us all the pressure and none of the power to change anything. It was this absurd, self-contained ecosystem of worthlessness.'”

Bloomberg‘s Hugh Son delves into Urban Lending, the fraudulent front group/vendor that serial offender Bank of America worked with to profit from families facing foreclosure. “Instead of helping homeowners as promised under agreements with the U.S. Treasury Department, Bank of America stalled them with repeated requests for paperwork and incorrect income calculations…Tens of thousands of HAMP modifications were improperly denied by Bank of America and Urban Lending since April 2009.” Sure would be nice if somebody went to jail for this. (Image via Rolling Stone.)

Update: “As Judge Jed Rakoff recently wrote in a scathing essay in the New York Review of Books, the failure to prosecute those responsible for the biggest financial crisis since the Great Depression ‘must be judged one of the more egregious failures of the criminal justice system in many years.'” In very related news, David Dayen makes the case for Jamie Dimon’s long-overdue perp walk. “Open the business pages at random and they often read like the police blotter.”

Trolling the House of Morgan.

“JPMorgan’s bankers are getting used to business deals with young men who communicate in emojis and text-message abbreviations…Yet, when the bank devised the promotional Q&A, it may not have fully grasped the extent to which new media has transformed how people share information, and how this has tipped existing structures of power.”

Er…let’s not overdo it. Existing structures of power haven’t changed at all, and, after a bad week’s press, JP Morgan is still laughing all the way to the bank. Still, I was proud to get in early on the co-opting of JP Morgan’s inane #AskJPM forum on Twitter last week, which got tweets of mine mentioned in BusinessWeek, WaPo, The New Yorker, and various other venues — undoubtedly the strangest being a somber tweet-reading by the venerable Stacy Keach. In any case, if any of those links have led you back here to GitM this week, welcome, and thanks for dropping by.

Omsbudsdog Emeritus

Recent Tweets

Instagram

  • One of last year's book projects, launching today.
  • Roof deck season has officially commenced.

Follow Us

Photos on flickr

Pinterested

There was error in connecting to your Pinterest account. Either Pinterest.com is down or you have an error in widget configuration.

Visions



Predestination (7/10)

Currently Reading


The Invisible Bridge, Rick Perlstein

Recently Read

Homage to Catalonia, George Orwell

Uphill All the Way

Syndicate this site:
RSS 1.0 | Atom (2.0)

Unless otherwise specified, the opinions expressed here are those of the author (me), and me alone.

All header images intended as homage. Please contact me if you want one taken down.

GitM is and has always been ad-free. Tips are appreciated if the feeling strikes.

Archives