Wall Street, Romney, And Obama

By Mike Lux, cross-posted from Crooks and Liars

The most critical battle in this election year is the battle over Wall Street. Candidates all over the place, from the high profile candidates like Elizabeth Warren to a slew of others all over the country, are battling over who is on Wall Street’s side, who wants to keep bailing them out, and who is pushing them to go to jail. But nowhere is this battle being played out more prominently than in the race for the White House.

The Obama campaign is doing a major push in the coming weeks on Mitt Romney’s sordid history at the helm of Bain Capital. His fellow Republicans called it vulture capitalism, and they were right. Mitt bought companies (many of them doing just fine at the time he bought them), loaded them up with massive amounts of debt that Bain could write off on their taxes, in many cases destroyed and outsourced jobs and cut pay and benefits, and then frequently carved them up and sold off the pieces to maximize short-term profits. A few of these companies ended up surviving this brutal process and becoming more profitable, and we will hear a lot from Mitt about those examples. But way too many times, Mitt and Bain left these companies, and especially their workers, far worse for the wear, leaving behind a lot of shattered lives in the process, while Mitt and his fun-loving pals stuffed money in their pockets and walked away. High School wasn’t the only place Mitt brutalized those weaker than him, and he enjoyed doing it.

Bain Capital was Wall Street at its worst. But the cutthroat, anything-goes-in-the-pursuit-of-one-more-dollar culture at Bain has infected our entire banking system. The Obama campaign is right to attack on Bain and on the culture of Wall Street; it is in my view their single most powerful attack line. However, that attack will be undercut unless they buttress their own credibility on taking on Wall Street. Republicans aren’t going to hesitate coming after Obama hard on his ties to Wall Street (ironically with a lot of Wall Street money) in order to weaken the campaign’s credibility when they attack Bain, and we are seeing signs of that right now.

Stress Testing Tim Geithner

By Mary Bottari, cross-posted from Campaign for America's Future

DonkeyHotey

Thanks to Occupy Wall Street, in the State of the Union this week President Obama struck some of his most populist themes yet. He wants to tax millionaires, bring back manufacturing and prosecute the big banks. He touted his Wall Street reforms saying the big banks are “no longer allowed to make risky bets with customers deposits” and “the rest of us aren’t bailing you out ever again.”
But are we safe from the next big bank bailout?

Many experts are dubious and Wednesday the consumer advocacy group Public Citizen decided to test the theory in the most direct way possible. They used the administrative law process to formally petition the nation’s top bank regulators to move swiftly to break up Bank of America (BofA) asserting in their petition: “The bank poses a grave threat to U.S. financial stability by any reasonable definition of that phrase.”

A Ticking Time Bomb

BofA is not just big, its behemoth. With assets of $2.1 trillion, equal to more than 14 percent of U.S. GDP, it is bigger than many small countries. Yet, its stock is trading at $7.

What does Wall Street know that we don’t?

The petition provides a compelling list of disturbing data points. In 2008-2009, BofA publicly took $45 billion in TARP bailout funds and secretly took another $1 trillion in emergency Federal Reserve loans. Yet, several analysts predict that BofA is woefully short of capital reserves and facing potentially billions in legal liability for its role in the crisis.

Although the bank declared net profits in recent quarters, these profit comes from accounting tricks, one-time asset sales and stock swaps. BofA’s share price to tangible book value is extremely low. The market suspects the bank is worth roughly half of what management claims and the price of credit default swaps (a type of insurance) on BofA recently rose to record highs.

“The bank is a ticking time bomb,” says David Arkush of Public Citizen. “If Bank of America in its current form were to fail, it would devastate the financial system. We’re asking the regulators to make sure that never happens. The only way to be sure is to reform the institution into something safer before any crisis materializes.”

Public Citizen asked the new Financial Stability Oversight Council (FSOC), which is chaired by Treasury Secretary Tim Geithner and made up of the nation's top bank regulators, to use the tools provided in the Dodd-Frank Wall Street reform law to act before a crisis occurs and to break BofA into smaller separate institutions. The law allows the FSOC to limit big bank mergers and acquisitions, restrict products and services or order it to divest assets or off-balance-sheet items after a vote to designate the institution a “grave threat” to financial stability.

Follow The Money: Behind Europe's Debt Crisis Lurks Another Bank Bailout Of Wall Street

By Robert Reich, cross-posted from his website, October 4, 2011.

Today Ben Bernanke added his voice to those who are worried about Europe’s debt crisis.

But why exactly should America be so concerned? Yes, we export to Europe – but those exports aren’t going to dry up. And in any event, they’re tiny compared to the size of the U.S. economy.
If you want the real reason, follow the money. A Greek (or Irish or Spanish or Italian or Portugese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008.

Financial chaos.

Investors are already getting the scent. Stocks slumped to 13-month low on Monday as investors dumped Wall Street bank shares.

The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That’s no big deal.

But a default by Greece or any other of Europe’s debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.

That’s where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.

Poor Standards: 4 Steps To Ending The Ratings "Agency" Racket

By Richard (RJ) Eskow, cross-posted from Huffington Post.

There's been a great deal of complaining today about Standard & Poor's downgrade of the U.S. government's creditworthiness, but the time for talking about credit rating agencies is long past. There are four steps that can be taken now to end the rating corporations' reign of error.

These "agencies" aren't government entities, but they derive great power from authority conferred by the government. Yet banks and other institutions are allowed to hire the "agency" that rates them.
Picture a situation where the IRS has been "privatized," and taxpayers are allowed to hire the accountants that will review their payments for accuracy. (I know -- I shouldn't give them ideas.) Everybody would hire the accountant that says they're due a huge refund, and pretty soon the entire system would collapse. That's not too different from the way the rating game works.

The moment for change was in 2008, when we learned of their key role the global financial crisis. But it's not too late to act now. Here's some background and a clear plan for ending the rating racket once and for all.

Bad Sheriffs

Is it fair to call them a "racket"? Merriam-Webster's definition of a "racket' includes "a usually illegitimate scheme made possible by bribery or intimidation," and "an easy and lucrative means of livelihood." Running a rating agency is certainly the latter. These highly profitable companies enjoy a near-monopoly status that's made possible only because the U.S. taxpayer, through its elected representatives, has given them enormous (and unearned power).

These for-profit companies received their biggest gift in 1975, when the SEC gave three of them -- Moody's, Standard & Poor's (S&P), and Fitch's -- the new designation of "nationally recognized statistical research organization," or "NRSRO." Since then, they've been able to use their NRSRO status in much the same way a drunken sheriff uses his badge in a spaghetti western -- to bully, intimidate, and cajole themselves into ever-greater positions of power and wealth.

They've been lecturing the U.S. government in a lordly manner for more than a year about the need to make drastic needs to social programs. But ironically (or not), much of the government's current financial problems -- and most of the public's problems -- are due to a financial crisis they helped make possible through incompetence and moral corruption.

Tim Geithner is an Idiot

By Fuzzyone

Compare and Contrast:

Geithner: "The agreement removes the threat of default and lowers the prospect of using the debt limit as an instrument of coercion."

Mitch McConnell: "It set the template for the future. In the future, Neil, no president — in the near future, maybe in the distant future — is going to be able to get the debt ceiling increased without a re-ignition of the same discussion of how do we cut spending and get America headed in the right direction. I expect the next president, whoever that is, is going to be asking us to raise the debt ceiling again in 2013, so we’ll be doing it all over."

As I've said before Geithner sucks. He is way too stupid to be Secretary of anything.

Washington Microcosm

Senator Warren?

Not only would Elizabeth Warren be the most qualified person to run the new Consumer Financial Protection Bureau, the agency that she essentially created, but fighting for her nomination would provide a perfect opportunity to contrast the anti-regulation, pro-corporate Republicans with support for the unmitigated champion of consumer protection.  Indeed, the fact that she has been so demonized by the GOP should provide a clue as to how effective she would be.  As Paul Krugman said a while back, "by the sheer craziness of their attacks . . . Republicans are offering the administration a perfect opportunity to revive the debate over financial reform, not to mention highlighting exactly who’s really in Wall Street’s pocket these days."

So, of course, President Obama decided that Warren was too much of a lightening rod and nominated former Ohio Attorney General Richard Cordray instead.  (Perhaps a more significant factor in dooming Warren's nomination was the opposition of Treasury Secretary Geithner, who feared her aggressiveness in pushing for financial reform.)  Cordray, by all accounts, is an excellent second choice and is supported by Warren herself.  But that is not the point.

By failing to nominate Warren, Obama has not only missed a golden political opportunity, he has done nothing to appease the Republicans -- because he can never appease the Republicans.  As the Times reports, already "forty-four Republican senators have signed a letter saying they would refuse to vote on any nominee to lead the bureau," demanding instead changes that would dilute the Dodd-Frank law that created the agency, including replacing the director position with a 5-person board.

So what now?  Obama needs to install Cordray as the agency’s director by using a recess appointment, which he should have done to appoint Warren, and ensure that the agency can finally start doing its important work.

As for Warren, the good news is that she may be persuaded to run for the Massachusetts Senate against Republican Scott Brown.  As Robert Kuttner put it, this is "the bigger stage and more important use of her stunning talents."  And a Steve Benen says, "If Warren runs and beats Brown next year, I wonder how much Senate Republicans will come to regret the decision to block her CFPB prospects?"

Rupert Murdoch Just Needs To Become A Banker

By Richard (RJ) Eskow, originally published at Huffington Post, July 13, 2011.

Rupert Murdoch's got problems. His employees are being arrested, he's losing his latest acquisition, and he's just been called to testify before Parliament. But there's an easy way for Mr. Murdoch to protect himself from these inquiries and save his company at the same time: Turn the News Corporation into a Wall Street bank. There won't be any prosecutions, and the government will even sweeten the deal with billions of dollars in easy money. And if Murdoch follows the trail blazed by bankers like Jamie Dimon at JPMorgan Chase, soon they'll be begging him to acquire more companies.

Murdoch and Dimon. One runs an organization that, as we now know, broke the law so many times it could be called a criminal syndicate. And the other is Rupert Murdoch. Yet Murdoch's fighting for his corporation's future while Dimon's name is being floated as a possible Treasury Secretary. Murdoch's losing his chance to expand market share, while our government helped Dimon's bank become more too-big-to-fail than ever by grabbing up Morgan Stanley.

Now that's juice. Murdoch's been a power broker on three continents and his Fox empire has reshaped this country's political landscape, but Dimon's taken the power game to a whole 'nother level.

A President On The Verge Of A Political Breakdown

By Richard (RJ) Eskow, originally published at Huffington Post, July 8, 2011.

This isn't the first time the White House has floated the idea of Social Security cuts as part of a 'grand bargain' with Republicans, and it's not the first time there's been a groundswell of opposition. But that opposition has never crystallized so quickly into something deeper and more threatening to the President's political fortunes.

Liberal pundits are turning against him and Democrats on the Hill are taking the fight directly to him. With a new poll confirming that Social Security cuts would alienate the other side's base and independents, this "grand bargain" doesn't look like much of a bargain anymore.

Sen. Bernie Sanders already laid the responsibility for unpopular cuts squarely at the President's feet on a phone call with reporters today: " We thought Social Security was off the table," said Sanders, "but by reopening this issue the White House is not only going to take on these changes, but will open the door to whatever else Republicans want."

In other words: If something bad happens to Social Security, you own it, Mr. President.

The timing couldn't be worse for a new austerity pose. Today's jobs numbers show that we're in an ongoing economic emergency. Yet instead of pushing for the spending that's needed, the President keeps reinforcing Republican arguments instead. According to the AP he told reporters in the Rose Garden that "uncertainty over whether lawmakers will raise the nation's debt limit is keeping businesses from hiring." (What was keeping them from hiring before that?) Economic advisor Austan Goolsbee evaded the issue of badly-needed stimulus funding as well as anyone could - that is, not very well at all - while repeating that ill-advised 'business confidence" mantra.

The net result is a Democratic Administration that's either afraid to speak up for government's role in fixing the economy or doesn't believe it has a role. Most people disagree, according to the polls. Now it looks like the Administration seriously overplayed its hand with this Social Security misstep (or trial balloon, or a double-triple-fakeout, or whatever this story was). That leaves it with the dual challenge of walking the story back and at the same time repairing a frayed bond between the President and many of his supporters.

Obama Needs A Little Help From His Friends

President Obama's stubborn determination to focus on deficit-reduction and what Robert Reich described in yesterday's post as supply-side solutions rather than on stimulating demand to create jobs is as baffling as it is infuriating.  As Richard (RJ) Eskow argues, the Administration is capable of changing course, but not without public pressure:  "For reasons we can't know, the Administration has embraced deficits over putting America back to work. It will continue down this path until its friends and its critics come together and demand that it stop."

If The President Won't Do Something About Jobs, Who Will?

By Richard (RJ) Eskow, originally published at Huffington Post, June 10, 2011.

When it comes to jobs, sometimes it seems as if the White House is from Mars and the middle class is from Venus. And Republicans act like they're from the Death Star, patrolling the economy in their Imperial Cruisers directing laser blasts at every job initiative they can find.

The resulting political paralysis has left millions of Americans trapped in geographical or demographic pockets of full-blown depression. Unlike Wall Street's America, theirs is a bleak economic landscape from which there seems to be no escape.

The Administration's mishandling of jobs has become a Rorschach test for those who understands that more needs to be done. Is the White House following a misguided political strategy, thinking people want lower deficits more than they want jobs? Has it been "captured" by the conservative thinking of ex-Republican Tim Geithner? Are the President and his advisors too reluctant to propose measures they know will fail in the Republican House because they want success stories?

Ask anyone these questions and the answers will tell you a lot about them, but very little about the White House (unless they have inside information, of course.) But the answers doesn't really matter. The President's staunchest supporters and his harshest liberal critics have the same work cut out for them.

Will The President Pass The Warren Test?

By Robert L. Borosage, originally posted at Huffington Post, June 9, 2011.

This is not a high bar.

Will the president name the indisputably best leader -- Elizabeth Warren -- to head the Consumer Financial Protection Bureau, the agency that she conceived, championed and constructed?

Senate Republicans, eager to curry favor with the big banks, have vowed to block ANY nominee to the post. So naming Warren will entail a fight. And if the minority succeeds in blocking the nomination with a filibuster, Warren will have to be named in a recess appointment.

This should have been done months ago. But opposition to Warren comes not only from Senate Republicans, but, by all reports, from Treasury Secretary Tim Geithner, the last man standing in the president's economic team.

So the White House has dithered. It once more would rather switch than fight. And now the administration is floating the notion that it will name a Warren deputy to head the bureau.

That trial balloon won't fly. Every informed citizen with a whit of sense, every consumer activist, and legions of legislators, bloggers, organizers and opinion leaders will be simply outraged if Elizabeth Warren is not nominated.

The Warren test cannot be ducked. There are no "acceptable alternatives." If the president names someone else, he gets the worst of both worlds. The Republicans will still block the nomination, demanding that the bureau be neutered. And the White House will be savaged across the progressive community for demonstrating once more that it caters far more to bankers than to the customers who are too often their victims.

It really is simple. Do the right thing. Name the best person to the job. Take on the fight. Help Americans see who is on their side and who is not. This is not a hard test, but it can't be postponed much longer.

(To sign a petition protesting the obstruction of the Warren appointment click here and/or click on the Support Elizabeth Warren badge on the right panel of this blog.)

[Related post:  Macroeconomics]

Is it Geithner's Fault or the Guy Who Hired Him

By Fuzzyone

I've blogged before about what a mistake it was for Obama to "pivot" and adopt the Republican frame (which is totally wrong) that deficits and not unemployment were the main economic issue. It should surprise exactly no one that this was a result of his listening to Tim Geithner, who may go down as one of the worst Treasury Secretaries ever. Of course Obama didn't have to listen to him. And of course its pretty darn tough to reverse course now. And having screwed up the economy it looks like Timmeh is gearing up to screw up the reelection too (though that's pretty much the same thing I suppose). So just move the goal posts. Not sure how this ends, but it is hard to imagine that it ends well.