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.)
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.
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.”
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.”
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.”
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.”
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.”
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.”
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%.
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.”
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.
A welcome new report drafted by Americans for Financial Reform and Mike Konczal and championed by Senator Elizabeth Warren makes the much-needed case for further financial reform.“Today, the four biggest banks are 30% larger than they were five years ago. And the five largest banks now hold more than half of the total banking assets in the country.”
At the moment, Hillary Clinton’s 2016 ascendancy to the Democratic nomination, and subsequently the presidency, is looking like a virtual lock. But if Clinton really wants to nip a serious 2016 primary challenge in the bud, she’d start moving to the left on these matters. I’m not holding my breath. (Striking Guy Fawkes Day “Million Mask March” pic above via the OWS Twitter feed.)
In an interview with Joshua Holland, journalist and tax expert David Cay Johnston discusses how our current tax code, among other things, is fueling inequality. For example:
1) “Very, very wealthy people…are not required to report most of their economic gains and legally they can literally live tax-free or nearly tax-free by borrowing against their assets. You can borrow these days, if you’re very wealthy, against your assets for less than 2 percent interest and the lowest tax rate you could pay is 15 percent…[I]f you’re a billionaire and you borrow, let’s say, $10 million dollars a year to live on, you pay $200,000 interest, but your fortune through investing grows by $50 million. At the end of the year you pay no taxes, your wealth is up almost $40 million dollars and your cost was just the interest of $200,000.”
2) “Well, one of the reasons some Americans feel they’re being taxed to death is that if you add up our taxes, which are low compared to other modern countries, and then you add in private expenditures for things the tax system pays for in other countries — a lot of our health care costs, higher education costs, admissions and fees and tickets and licenses for a lot of things — lo and behold, we end up being a relatively high-tax country.”
“N***a, is you takin’ notes on a criminal f**king conspiracy?” Buzzfeed‘s Matthew Zeitlin explains what the banksters at J.P. Morgan could learn from Stringer Bell and the New Day-Co-Op. “[S]pelling out in a spreadsheet your exact intentions about hiring specific people for their parents’ help for specific deals is probably not considered best practices.”
Ask yourself: If you could steal $125 million, with the only downside being that if you got caught you might have to give the money back and lose a single day’s income, would you give it a go? Me too.”
It’s tempting to hate on FERC for agreeing to this sucker’s deal, but let’s face it, this type of wink-and-a-nod, Potemkin oversight is endemic across our supposed regulatory agencies. (See also: the (lack of) fallout from JP Morgan’s Whale Trade.)
It used to be, not even all that long ago, people and companies who engaged in systemic energy and financial fraud went to prison. Now…not so much. Today, they not only continue to be treated as esteemed citizens by the highest levels of government — They even have the temerity to complain they’re being over regulated.
Meanwhile, our ostensibly progressive administration spends much of its days trying to prosecute whistleblowers and poor people to the fullest extent of the law. Some system. Honestly, if you’re not disgusted at this point, you’re not paying attention.
As Summers supporters — including the President — try to push him for Federal Reserve Chairman (over the more experienced Janet Yellen), Dean Baker asks the obvious question: At this late date, why, exactly, should Larry Summers be head of anything? “In short, if we look at Larry Summers track record in dealing with crises it is pretty abysmal. But on attendance, he gets an ‘A.'”
Seriously, how many more times does this guy have to be wrong? And why pick for Fed Chair someone, as Sheila Bair succinctly put it, who was clearly “part of the deregulatory cabal that got us into the 2008 financial crisis?”
And, let’s be clear: Even putting that trillion-dollar fiasco aside — other than that, Mrs. Lincoln, how was the play — from attacking Brooksley Born in the late 90’s to his embarrassing interim at Harvard (where, on top of everything else, Wonderboy lost the endowment $2 billion) to ham-stringing the 2009 stimulus out of the gate, everything Summers touches turns to lead.
But, lo, here he is once again, being force-fed to us by the usual suspects as a brilliant speaker of economic truths. Yet another classic case of failing-up in Washington, where it’s always better to be wrong and with the herd than prescient and correct.
Update: “Although Summers had been an early advocate of Warren’s idea to establish a consumer regulator to deal with abusive lending, he was rankled by the support she received from other administration officials, particularly Christina Romer, who chaired Obama’s Council of Economic Advisers.” Among his many other sins, Summers also went out of his way to block Elizabeth Warren as CFPB head — a bureau she in effect created — apparently because of personal pique. So, yeah, let’s put this guy in charge. He is so SMRT!
I dunno…I know it’s Scorsese and all that, but at least Gatsby had period panache going for it. This looks like yet another generic Rise and Fall of the Financial Sector Douchebros, and Boiler Room, Margin Call and the Wall Streets, among other films, already covered these useless yahoos enough to my satisfaction. We’ll see.
In very related news, the Dow reaches a new high — 14,164 — even as household income hits a decade low. “As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966.”
In Rolling Stone, Matt Taibbi explains how and why the Justice Department refused to prosecute HSBC for sundry violations of the law. In short, they were Too Big to Jail. “An arrestable class and an unarrestable class. We always suspected it, now it’s admitted. So what do we do?”
In related news, Wall Street bankers throw one of their customary hissyfits over a gaggle of fully complicit, bought-and-paid-for regulators finally being asked a hard question or two by the Senate Banking Committee — thanks to its and our new champion, Senator Elizabeth Warren. “The anonymous banker followed up [with Politico, naturally]: ‘Elizabeth Warren and Ted Cruz are dueling for the title of ‘most extreme fringe freshman senator.”
Anonymous Banker, let me choose my words carefully: Go fuck yourself. If this administration’s promises of change-we-can-believe-in were worth a dime, you and so many others would be doing hard time right about now.
“Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. ‘On Wall Street, they’re in the business of making money between now and next Thursday,’ he said. ‘I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.’“
This article is seven years old now, so I don’t know if their admirable corporate policies have survived the Great Recession. (Update: Apparently, they have.) Nonetheless, from 2005 and as seen floating around on Facebook of late, the NYT’s Steve Greenhouse explains how CostCo became the anti-Wal-Mart. “[N]ot everyone is happy with Costco’s business strategy. Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco’s customers but to its workers as well. Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club.” Oh, yeah, let’s nip that in the bud, then. Assholes.
For the benefit of the willfully dense — i.e. all the telegenic denizens of the Village — Slate‘s Dahlia Lithwick explains the basic meaning behind Occupy Wall Street: “They are holding up signs that are perfectly and intrinsically clear: They want accountability for the banks that took their money, they want to end corporate control of government. They want their jobs back. They would like to feed their children. They want–wait, no, we want– to be heard by a media that has devoted four mind-numbing years to channeling and interpreting every word uttered by a member of the Palin family while ignoring the voices of everyone else.“
A brand-spankin’ new CBO report concludes what we all already know: Income inequality has surged since 1981, and government, post-Reagan, has consistently failed to address the problem. “‘The equalizing effect of federal taxes was smaller’ in 2007 than in 1979, as ‘the composition of federal revenues shifted away from progressive income taxes to less-progressive payroll taxes,’ the budget office said.” But, hey, let’s sweat that deficit.
Along the same lines, Naked Capitalism‘s Yves Smith responds to the disclosure that repeat offender Bank of America is trying — with the Fed’s help — to foist their more toxic assets into FDIC-backed accounts (meaning that taxpayers will eat the losses.) “[T]his move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral.“
Continues Smith: “The FDIC is understandably ripshit…Bill Black said that the Bloomberg editors toned down his remarks considerably. He said, ‘Any competent regulator would respond: ‘No, Hell NO!’ It’s time that the public also say no, and loudly, to yet another route for running a drip feed from taxpayers to banksters.‘” (Cartoon via here.)