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.)
“The contrast in fortunes between those on top of the economic heap and those buried in the rubble couldn’t be starker. The 10 biggest banks now control more than three-quarters of the country’s banking assets. Profits have bounced back, while compensation at publicly traded Wall Street firms hit a record $135 billion in 2010. Meanwhile, more than 24 million Americans are out of work or can’t find full-time work, and nearly $9 trillion in household wealth has vanished. There seems to be no correlation between who drove the crisis and who is paying the price.“
As Bank of America pays a pittance to other banks for its malfeasance, former chair of the Financial Crisis Inquiry Commission Phil Angelides looks into how the winners are now rewriting the history of the 2008 financial collapse. “So, how do you revise the historical narrative when the evidence of what led to economic catastrophe is so overwhelming and the events at issue so recent? You and your political allies just do it. And you bet on the old axiom that a lie is halfway around the world before the truth can tie its shoes.” Attorney General Schneiderman, our nation turns its lowly eyes to you.
As the alleged perps try to get off by paying the (to-them) meager sum of $5 billion, a confidential audit conducted by HUD finds (surprise, surprise) compelling evidence of rampant foreclosure fraud at the big banks. “The audits accuse the five major lenders of violating the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government…The audit on Bank of America finds that the company — the nation’s largest handler of home loans — failed to correct faulty foreclosure practices even after imposing a moratorium that lifted last October.“
And, in very related news, someone has finally stepped up to the plate with regards to the roots of the financial crisis: New York Attorney General Eric Schneiderman has announced he’s officially going to look into the Street’s role in precipitating the meltdown. “The inquiry appears to be quite broad, with the attorney general’s requests for information covering many aspects of the banks’ loan pooling operations.” Godspeed, Mr. Schneiderman.
“‘This was maybe America’s last chance to fight back against the greed of the Wall Street oligarchs and corporate plutocrats, to generate some serious discussion about public interest and common good that sustains any democratic experiment,’ West laments…’I thought Barack Obama could have provided some way out. But he lacks backbone.“
In a discussion with TruthOut‘s Chris Hedges, Cornel West — who admittedly is nursing some rather petty personal grievances here as well — lays hard into the DLC-centrism of President Obama. “I have to take some responsibility,’ he admits of his support for Obama as we sit in his book-lined office. ‘I could have been reading into it more than was there.‘” You and me both, brother. You and me both.
In Rolling Stone, a simile-happy Matt Taibbi reiterates the open-and-shut fraud and perjury case against Goldman Sachs that was laid out last month in the Levin report — a case that, thus far, nobody in a prosecutorial position seems to be taking up. Too busy going after Wikileaks, I guess.
“To recap: Goldman, to get $1.2 billion in crap off its books, dumps a huge lot of deadly mortgages on its clients, lies about where that crap came from and claims it believes in the product even as it’s betting $2 billion against it. When its victims try to run out of the burning house, Goldman stands in the doorway, blasts them all with gasoline before they can escape, and then has the balls to send a bill overcharging its victims for the pleasure of getting fried.”
“The outlook isn’t sunshine and roses: Rick Raymond, of the College Parents of America, notes, ‘Graduates are not the first to be hired when the job markets begins to improve. We’re seeing shocking numbers of people with undergraduates degrees who can’t get work.’”
According to a new poll conducted by Twentysomething, a whopping 85% of college grads are moving back in with their parents after graduation. They’re also facing the worst job market on record and holding a record amount of college debt.
In other words, it’s crisis time. Should we ramp up government spending and fashion 21st-century versions of jobs programs like the CCC, WPA, and NYA? Or should we cut public sector jobs and just concentrate on lowering corporate taxes? hey, Win the Future™ and all that.
In very related news, see also NYT columnist William Cohan on the same subject yesterday: “Not only did the government’s theory fail in practice — unemployment remains relentlessly and historically high and American businesses seem intent on hoarding, rather than spending, the $2 trillion in cash on their collective balance sheets — but it also lost a once-in-a-century opportunity to change the mores of a momentarily chastened Wall Street, which remains badly in need of substantive reform. This is more than a shame; it is prima facie evidence of how deep Wall Street’s hooks have been — and continue to be — into the powers that be in Washington (and vice versa).“
“This chart puts the class war in simple, visual terms. On the left you have the ‘shared sacrifices’ and ‘painful cuts’ that the Republicans claim we must make to get our fiscal house in order. On the right, you can plainly see WHY these cuts are ‘necessary.’” Via JackDean and several other sites, This is What Class War Looks Like.
But, hey, Win the Future and all that.
“‘There can be no conceivable justification for requiring a soldier to surrender all his clothing, remain naked in his cell for seven hours, and then stand at attention the subsequent morning,’ he wrote. ‘This treatment is even more degrading considering that Pfc. Manning is being monitored — both by direct observation and by video — at all times.‘”
Sometimes I don’t post here because I’m really busy. Sometimes I don’t post here because the news is too damned depressing: The United States takes another big step towards Miniluv by applying Dubya-era torture and intimidation techniques to an American citizen in custody for leaking, Bradley Manning. (Y’see, it’s a four lights = five lights kinda thing. Manning has to break — and then, like Zubadayah and KSM, voice untruths — for there to be any sort of possible criminal conspiracy case against Wikileaks.)
What is there to say, really? State Department spokesman P.J. Crowley already correctly stated that this abusive treatment of Manning was “ridiculous, counterproductive, and stupid,” and, within days, he was fired for stating the obvious.
The president, meanwhile, assures us everything is ok because the Pentagon said so: “I have actually asked the Pentagon whether or not the procedures that have been taken in terms of his confinement are appropriate and are meeting our basic standards. They assure me that they are.” This, as Glenn Greenwald (who’s been on top of this all the way) points out, is exactly the same rationale Dubya used to use: “‘When [Bush] asked ‘the most senior legal officers in the U.S. government’ to review interrogation methods, ‘they assured me they did not constitute torture.’” Well, ok then.
So let’s review. Dubya’s administration constructs an illegal and unconstitutional torture regime — Nobody goes to jail, and nothing changes. (Look forward, not backward!) The Dubya administration lies to the American people in order to prosecute a war of choice in Iraq. Nobody goes to jail, and nothing changes. Through greed and outright fraud, Wall Street traders implode the global economy to the tune of trillions of dollars, and, with the convenient exception of Bernie Madoff, nobody goes to jail, and nothing changes. (Synthetic junk, anyone?) Big banks continue their crime spree by engaging in a massive epidemic of foreclosure fraud, and nobody goes to jail (but we’ll make them promise not to do it again!)
Oh, and an Army private leaks “secret” documents (so secret they were available to millions of people) because “[h]e wanted people held accountable and wanted to see this didn’t happen again” — the very definition of whistleblowing — and now we’re treating him like Winston Smith. (Then again, our president does despise whistleblowers.)
Should Manning be in U.S. custody right now? Yes. He took an oath to the United States military and, knowing full well the consequences, broke it in an act of civil disobedience. If you can’t do the time, don’t do the crime — I get that. But should Manning be abused and tortured in U.S. custody? Of course not — Nobody should be. In fact, I thought we elected Barack Obama as president to make sure this never happened again.
Nope, sorry. Instead, President Obama fired Crowley and is owning what’s happening to Manning right now. He also just reinstated and normalized indefinite detentions at Gitmo. (Obama the constitutional scholar? Meet the Fifth and Sixth Amendments.) And when not perpetuating Dubya-era illegalities, he (and new lefty-bashing chief of staff) spend their days talking up the deficit, talking down regulation, and hoping the Chamber and the NRA take their meetings. Feel those winds of change, y’all. (Obama meme pic above via here.)
Update: “Based on 30 years of government experience, if you have to explain why a guy is standing naked in the middle of a jail cell, you have a policy in need of urgent review.” P.J. Crowley reflects on his recent firing. “I stand by what I said. The United States should set the global standard for treatment of its citizens – and then exceed it. It is what the world expects of us. It is what we should expect of ourselves.“
Strange powers have our enemies, and strange weaknesses! In Wired, Nate Anderson of Ars Technica fdelves into the story behind the highly troubling HBGary leaks. Among other things, these leaks have already revealed that:
In other words, they do not fear the law because it has forsaken these lands. And, hey, when you consider that nobody has yet gone to jail for lying the American people into a trillion-dollar war, setting up an illegal, unconstitutional, and inhumane torture regime, or fraudulently abetting or even precipitating a multi-trillion-dollar economic meltdown, their brazen calculation seems like a pretty safe bet.
“The Fed accepted a total of $1.31 trillion in junk-rated collateral between Sept. 15, 2008 and May 12, 2009 through the Primary Dealer Credit Facility. TARP was nothing compared to this.” (Also, $500 billion of that junk was rated CCC or below, which — given the rampant grade inflation going on at all the rating agencies — means it was really garbage.)
So, yeah, Wikileaks isn’t the only document dump in town this week. As mandated by the Dodd-Frank Act (after much pushing from below), the Federal Reserve today released information about some of its dealings from December 2007 to July 2010. And, while folks are just now delving into the intel, it already seems that some of the bodies buried during the financial crisis are now floating to the surface: “A quick analysis…indicates that Citigroup was the greatest beneficiary, drawing on a total of $1.8 trillion in loans, followed by Merrill Lynch, which used $1.5 trillion; Morgan Stanley, which drew $1.4 trillion; and Bear Stearns, which used $960 billion.“
In very related news, former Alan Grayson staffer (and a Hill friend of mine) Matthew Stoller lays out a compelling case for a harder stance against the Fed from the Left from now on. Some brief excerpts:
“It is good that this debate is happening. It means that we will be able to examine the real power structure of the American order, rather than the minor food fights allowable in our current political system. This will bring deep disagreements, profound ones, but also remarkable possibility. Modern American industrial policy is to push capital into housing, move manufacturing abroad, build a massive defense establishment, and maintain an oligarchic financial sector. This system isn’t a structural inevitability. People built it, and people are unbuilding it…
Like most American institutions, the Fed has shrouded itself in myth, with self-serving officials discussing the immaculate design of the central bank as untouchable, secretive, an autocratic and technocratic adult in the world of democratic children. But the Fed, and specifically the people who run it, are responsible for declining wages, for de-industrialization, for bubbles, and for the systemic corruption of American capital markets.”
Also on this topic, it comes out today that Bank of America was given a break by the SEC on a securities fraud settlement “‘because of the nation’s perilous economic situation at the time’ and the fact that it had received billions of dollars in taxpayer aid, according to the report by the SEC’s inspector general…Specifically, during settlement negotiations, Bank of America won relief from sanctions that could have hurt its investment banking business.“
To tie this back to the top, according to Bloomberg’s Lizzie O’Leary, who’s also been parsing the new Fed data, “52% of the collateral Bank of America pledged to the #Fed’s PDCF was rated Ba/BB or lower, or didn’t have available ratings.” (And, let’s keep in mind, PDCF was only one of several emergency programs.)
So, in other words, the government kept banks like BoA alive by buying up trillions in toxic assets and looking askance at their illegal activity. They repaid us with record bonuses for themselves and an epidemic of foreclosure fraud — the “getaway car for the financial crisis,” as a friend well put it — that’s screwing over millions of American families. And in terms of fixing bad behavior on the Street, nothing changed whatsoever. Boy, that’s some deal.