Seriously, now

[Political Waves]

Not ignoring you, kids -- got a bad cold at the beginning of the week, so I've been conserving energy and working on the Confidential. And of course the TV is giving us Haiti as a PTSD experience of New Orleans ... you can't not watch. I mentioned awhile back I wanted to speak to Chris Dodd's retirement and there are some new wrinkles.

Dodd had some personal sweetheart banking deals trailing behind him that were causing a too-close race in his home state, CT. To prevent a Republican from taking his spot -- much as newcomer Scott Brown threatens to grab Ted Kennedy's seat from Martha Coakley in Massachusetts -- he's leaving the stage to a well-supported Dem candidate, Richard Blumenthal. You may remember Chris as the feisty little gent with the white hair that briefly ran for president last election; I like him, he's basically a very decent man and I'm sorry to see him go, caught in the paradigm crosshairs. He played the game as it was drawn, but the game has changed now.

The head of many committee's, Dodd has worked enthusiastically to revamp the financial sector along the lines of Obama's commitment to oversight and to undercut lobbying power. He's been the leader of Obama's proposed financial regulations, but now it appears he'll back off his bid for an independent Consumer Protection Agency, what the Pubs cynically call "a Nanny state." Like a balloon with a pin-hole in it, he is quickly loosing clout and the Dems, worried about the Coakley seat, are betting they don't have necessary time to work the legislation, which will need bi-partisan votes to pass. If the Dems lose that 60th seat of Ted's, the Pubs will have the ability to filibuster ... read that STOP ... any proposal put forth in the Senate, and believe me, they will.

Obama, meanwhile, wants about 50 of the Big Banks, who can't seem to keep their outlandish bonus's in their pants, to pay back the TARP money -- sez he, "every cent." He proposes they do this by the levy of a 0.15 percent tax for the next ten years, or until paid in full. The banks have threatened to withhold loans if this happens, which is hypocrisy on its face as they're barely lending now. So you'd think all American's would be delighted to see Wall Street have to pay up, wouldn't you?

Republicans will not back this play, even with the Tea Baggers howl about the bailout money, because -- as explained so succinctly by What's The Matter With Kansas author, Thomas Frank, in his book The Wrecking Crew -- they do not support any government interference in capitalism, or much else for that matter. In fact, they don't believe in government period, which is why they govern so badly or not at all when they take power. Part of Obama's problem in getting momentum is the result of the Bushie 'burrowing' of their hard-liners in the many governmental departments who quietly stumble or fumble or obstruct as a ideological imperative. If you want a better look at this topic, visit PBS for the Moyers interview and pass it along to any of your friends who think the Republicans know how to fix the world.

Too many Liberals think Obama is a foil in the hands of the Big Banks and Dark Powers -- I'd suggest he's one lone man facing the hardened residue to an Old Paradigm and doing more to challenge it than anyone in my lifetime. Very quietly, his Justice Department has begun investigating whether lenders or Wall Street firms defrauded investors in the sale of risky mortgage securities. We're a country of a million loopholes -- and Obama appears to be a man who knows how to play Twister, attempting to close them.

If you think all this sounds serious, it is. And if you know anyone in Massachusetts, give them a call and tell them if they think things look bleak for them NOW, voting for Scott Brown will make that inevitable for the foreseeable future.  Nothing frightens Pubs more than real change and functional government, and they are dedicated to bringing down this President, no matter the cost to the commonwealth. Do whatever you can to get out the Progressive vote in MA.

Meanwhile, if you feel as if you're powerless to protect yourself from the heartless bankers, here's Bill Maher speaking on Arianna's banking move proposition. Pass this around too, everybody loves Bill.

Bonus is Tom Franks piece, A Low, Dishonest Decade, published in the Wall Street Journal.

Jude

portions cross-posted at Planet Waves


Justice Department eyes possible fraud on Wall Street
Greg Gordon,  McClatchy Newspapers
http://www.mcclatchydc.com/homepage/story/82408.html

WASHINGTON — Turning its scrutiny to bigger fish in the subprime mortgage scandal, the Justice Department is investigating whether lenders or Wall Street firms defrauded investors in the sale of risky mortgage securities, its Criminal Division chief disclosed Thursday.

"We absolutely are looking at the conduct of the securitizers themselves, and what did they say to those who purchased the (securities)," Assistant Attorney General Lanny Breuer told a commission created by Congress to investigate causes of the nation's economic collapse.

"Candidly, (we) have been looking at that for awhile and are looking at that right now in a very key matter."

Breuer didn't identify any company under scrutiny, but Wall Street's biggest investment banks bought many of the $2 trillion in home mortgages issued to shaky borrowers, converted them to high-yield bonds and sold the bonds to investors including pension funds, insurers and foreign banks. Many of the securities have since defaulted, and investors have lost billions of dollars.

Attorney General Eric Holder, who also appeared before the commission, said the economic crisis has brought concern about financial fraud "to the forefront." Holder, who recently announced the creation of a financial fraud task force, said that the Justice Department "is using every tool at our disposal, including new resources, advanced technologies and communications capabilities" to catch perpetrators.

According to Breuer, the FBI received upwards of 70,000 "suspicious activity reports" relating to possible mortgage fraud in 2009 and has 2,800 investigations under way nationwide.

The Justice Department disclosures came on the second day of Financial Crisis Inquiry Commission hearings, as federal and state enforcement officials laid bare the regulatory holes, blunders and lack of foresight that enabled the subprime mortgage industry to churn out millions of ill-fated loans that sank the economy.

Those lapses included:

_ Failing to rein in what Chairwoman Sheila Bair of the Federal Deposit Insurance Corp. called a "shadow banking system" in which major banks ramped up their risks by making hundreds of billions of dollars in exotic, off-the-books bets.

_ Deciding to scale back the FBI's resources for tracking white-collar crime after Sept. 11, and assigning scant personnel at the Securities and Exchange Commission to monitor major investment banks after they were given new freedom in 2004 to take on added risks.

_ Adopting rules in 2004 that restricted state regulators from policing predatory lending and other mortgage abuses, prompting some major lenders to seek federal charters to avoid tough scrutiny.

_ Relying too much on the credit ratings of Wall Street agencies, which had financial incentives to bestow high ratings on dubious mortgage-backed securities.

_ Failing to monitor major banks' compensation arrangements that gave bonuses for completing mortgage securities sales, regardless of the risks of default.

_ Ignoring a warning to Congress by the FBI's investigation chief in 2004 that widespread subprime-related mortgage fraud would lead to a financial crisis.

"I mean, everybody missed everything," said the panel's vice chairman, Bill Thomas, a retired Republican congressman from California.

Bair and SEC Chairwoman Mary Schapiro described a series of fixes under way, including some to address the widespread losses incurred by investors around the world in subprime-related mortgage securities.

Schapiro said her agency is conducting a "broad review" of the regulation of these securities backed by bundles of mortgages and consumer loans. The SEC is looking at Wall Street firms' disclosures in offering circulars, their public reporting and "considering several proposed changes designed to enhance investor protection in this market."

Schapiro and Bair described multiple ways in which they propose to narrow the roles of major Wall Street credit ratings agencies: Moody's Investors Service, McGraw Hill-owned Standard & Poor's and Fitch Ratings.

While the ratings agencies have to date been shielded from liability, largely via the First Amendment's protections of free speech, the SEC is weighing the idea of making them subject to experts' legal exposure, just as are lawyers and accountants, Schapiro said.

That approach, she said, "might impose some additional discipline on how they conduct their business and . . . be an effective check on their enthusiasm for highly rating everything."

Bair said she sees "major advantages" to tying the rating agencies' compensation to the longer-term performance of securities that they give triple-A ratings, the highest investment grade, parceling out their fees over time.

Both women urged creation of a systemic risk council in which financial regulatory agencies would share information so they could identify major risks across the financial system.

Also testifying were four state regulators, including attorneys general Lisa Madigan of Illinois and John Suthers of Colorado. Madigan said that, years before the subprime market exploded, state investigators uncovered "a pattern of predatory lending practices that would eventually permeate and destroy much of the mortgage industry and our economy," including higher payments to mortgage brokers for loans with the most punishing terms for borrowers.

Federal regulators, she said, showed little interest and pushed to curtail state authority, while lenders shifted to federal charters. A major lesson, she said, is that federal charters "must not be mistakenly viewed as giving lenders a blanket exemption" from state laws.

Meanwhile, Goldman Sachs issued what it called a clarification of statements by its chairman and chief executive officer, Lloyd Blankfein, at Wednesday's opening hearing.

Asked about Goldman's secret bets against the housing market while it sold $40 billion in risky mortgage securities in 2006 and 2007, Blankfein said he thought "that the behavior is improper, and we regret the result — the consequence that people have lost money in it."

On Thursday, Goldman said that Blankfein had "said no such thing" and that the question was "predicated on the assumption that a firm was selling a product that it thought was going to default" and in that case, "the practice would be improper."

Mr. Blankfein does not believe, nor did he say, that Goldman Sachs had behaved improperly in any way," the firm said.

A commission spokesman said: "The hearing was Webcast, which is available on our Web site, and a transcript will be available shortly." ++


Obama Weekly Address Slams Banks For Selfishness: 'It's A Sight To See' (VIDEO)
DARLENE SUPERVILLE, AP via HuffPo
01-16-10
http://www.huffingtonpost.com/2010/01/16/obama-weekly-address-slam_n_425779.html

WASHINGTON - President Barack Obama on Saturday pitched his proposed tax on banks to recover the cost of bailing them out during the financial crisis, saying if they can afford billions more in bonuses, they can pay back the taxpayers, too.

The banks and Republican lawmakers oppose the tax, which Obama announced this week.

"We're going to pass this fee into law," the president said in his weekly radio and Internet address.

Congress must approve the tax and that was not assured, given the immediate opposition from Republicans. Democrats also appeared in jeopardy of losing their 60-vote majority in the Senate, with Democrat Martha Coakley in an unexpectedly close race against Republican Scott Brown in Massachusetts to fill the seat held for decades by the late Democrat Edward M. Kennedy.

Brown opposes Obama's bank tax. Obama was heading to Massachusetts on Sunday to campaign for Coakley.

The White House's decision to use the weekly address to speak about the proposed tax instead of the U.S. response to the suffering and devastation caused by the earthquake in Haiti suggested one line of attack Obama would use against Brown on Sunday.

Obama spoke publicly about Haiti on Wednesday, Thursday and Friday; he was to do so again on Saturday.

The proposed 0.15 percent tax would last at least 10 years and generate about $90 billion over the decade, according to administration estimates. It would apply to about 50 of the nation's biggest banks, those with more than $50 billion in assets, and include many institutions that accepted no money from the $700 financial industry bailout.

Obama said that although the banks were facing a "crisis of their own creation," the "distasteful but necessary" taxpayer-funded bailout prevented an "even greater calamity for the country."

Most of the banks have returned the money they borrowed, and Obama said that was "good news."

"But as far as I'm concerned, it's not good enough," he said. "We want the taxpayers' money back, and we're going to collect every dime."

Six of the biggest U.S. banks are on track to pay $150 billion in total executive compensation for 2009, slightly less than the record $164 billion in 2007 before the financial crisis struck, according to the New York state comptroller's office.

Obama challenged those who say banks can't afford the tax without passing the costs on to shareholders and customers.

"That's hard to believe when there are reports that Wall Street is going to hand out more money in bonuses and compensation just this year than the cost of this fee over the next 10 years," he said. "If the big financial firms can afford massive bonuses, they can afford to pay back the American people."

 

Open link for video.

---

Remarks of President Barack Obama
As Prepared for Delivery
Weekly Address
January 16, 2010

Over the past two years, more than seven million Americans have lost their jobs. Countless businesses have been forced to shut their doors. Few families have escaped the pain of this terrible recession.
Rarely does a day go by that I do not hear from folks who are hurting. That is why we have pushed so hard to rebuild this economy.

But even as we work tirelessly to dig our way out of this hole, it is important that we address what led us into such a deep mess in the first place. Much of the turmoil of this recession was caused by the irresponsibility of banks and financial institutions on Wall Street. These financial firms took huge, reckless risks in pursuit of short-term profits and soaring bonuses. They gambled with borrowed money, without enough oversight or regard for the consequences. And when they lost, they lost big. Little more than a year ago, many of the largest and oldest financial firms in the world teetered on the brink of collapse, overwhelmed by the consequences of their irresponsible decisions. This financial crisis nearly pulled the entire economy into a second Great Depression.

As a result, the American people - struggling in their own right - were placed in a deeply unfair and unsatisfying position. Even though these financial firms were largely facing a crisis of their own creation, their failure could have led to an even greater calamity for the country. That is why the previous administration started a program - the Troubled Asset Relief Program, or TARP - to provide these financial institutions with funds to survive the turmoil they helped unleash. It was a distasteful but necessary thing to do.

Many originally feared that most of the $700 billion in TARP money would be lost. But when my administration came into office, we put in place rigorous rules for accountability and transparency, which cut the cost of the bailout dramatically. We have now recovered most of the money we provided to the banks. That's good news, but as far as I'm concerned, it's not good enough. We want the taxpayers' money back, and we're going to collect every dime.

That is why, this week, I proposed a new fee on major financial firms to compensate the American people for the extraordinary assistance they provided to the financial industry. And the fee would be in place until the American taxpayer is made whole. Only the largest financial firms with more than $50 billion in assets will be affected, not community banks. And the bigger the firm - and the more debt it holds - the larger the fee. Because we are not only going to recover our money and help close our deficits; we are going to attack some of the banking practices that led to the crisis.

That's important. The fact is, financial firms play an essential role in our economy. They provide capital and credit to families purchasing homes, students attending college, businesses looking to start up or expand. This is critical to our recovery. That is why our goal with this fee - and with the common-sense financial reforms we seek - is not to punish the financial industry. Our goal is to prevent the abuse and excess that nearly led to its collapse. Our goal is to promote fair dealings while punishing those who game the system; to encourage sustained growth while discouraging the speculative bubbles that inevitably burst. Ultimately, that is in the shared interest of the financial industry and the American people.

Of course, I would like the banks to embrace this sense of mutual responsibility. So far, though, they have ferociously fought financial reform. The industry has even joined forces with the opposition party to launch a massive lobbying campaign against common-sense rules to protect consumers and prevent another crisis.

Now, like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect. The very same firms reaping billions of dollars in profits, and reportedly handing out more money in bonuses and compensation than ever before in history, are now pleading poverty. It's a sight to see.

Those who oppose this fee say the banks can't afford to pay back the American people without passing on the costs to their shareholders and customers. But that's hard to believe when there are reports that Wall Street is going to hand out more money in bonuses and compensation just this year than the cost of this fee over the next ten years. If the big financial firms can afford massive bonuses, they can afford to pay back the American people.

Those who oppose this fee have also had the audacity to suggest that it is somehow unfair. That because these firms have already returned what they borrowed directly, their obligation is fulfilled. But this willfully ignores the fact that the entire industry benefited not only from the bailout, but from the assistance extended to AIG and homeowners, and from the many unprecedented emergency actions taken by the Federal Reserve, the FDIC, and others to prevent a financial collapse. And it ignores a far greater unfairness: sticking the American taxpayer with the bill.

That is unacceptable to me, and to the American people. We're not going to let Wall Street take the money and run. We're going to pass this fee into law. And I'm going to continue to work with Congress on common-sense financial reforms to protect people and the economy from the kind of costly and painful crisis we've just been through. Because after a very tough two years, after a crisis that has caused so much havoc, if there is one lesson that we can learn, it's this: we cannot return to business as usual.

Thank you very much. ++


bonus


A Low, Dishonest Decade
The press and politicians were asleep at the switch.
THOMAS FRANK, WSJ
http://online.wsj.com/article/SB10001424052748703478704574612013922050326.html

Stock-market indices are not much good as yardsticks of social progress, but as another low, dishonest decade expires let us note that, on 2000s first day of trading, the Dow Jones Industrial Average closed at 11357 while the Nasdaq Composite Index stood at 4131, both substantially higher than where they are today. The Nasdaq went on to hit 5000 before collapsing with the dot-com bubble, the first great Wall Street disaster of this unhappy decade. The Dow got north of 14000 before the real-estate bubble imploded.

And it was supposed to have been such an awesome time, too! Back in the late '90s, in the crescendo of the Internet boom, pundit and publicist alike assured us that the future was to be a democratized, prosperous place. Hierarchies would collapse, they told us; the individual was to be empowered; freed-up markets were to be the common man's best buddy.

Such clever hopes they were. As a reasonable anticipation of what was to come they meant nothing. But they served to unify the decade's disasters, many of which came to us festooned with the flags of this bogus idealism.

Before "Enron" became synonymous with shattered 401(k)s and man-made electrical shortages, the public knew it as a champion of electricity deregulation—a freedom fighter! It was supposed to be that most exalted of corporate creatures, a "market maker"; its "capacity for revolution" was hymned by management theorists; and its TV commercials depicted its operations as an extension of humanity's quest for emancipation.

Similarly, both Bank of America and Citibank, before being recognized as "too big to fail," had populist histories of which their admirers made much. Citibank's long struggle against the Glass-Steagall Act was even supposed to be evidence of its hostility to banking's aristocratic culture, an amusing image to recollect when reading about the $100 million pay reportedly pocketed by one Citi trader in 2008.

The Jack Abramoff lobbying scandal showed us the same dynamics at work in Washington. Here was an apparent believer in markets, working to keep garment factories in Saipan humming without federal interference and saluted for it in an op-ed in the Saipan Tribune as "Our freedom fighter in D.C."

But the preposterous populism is only one part of the equation; just as important was our failure to see through the ruse, to understand how our country was being disfigured.

Ensuring that the public failed to get it was the common theme of at least three of the decade's signature foul-ups: the hyping of various Internet stock issues by Wall Street analysts, the accounting scandals of 2002, and the triple-A ratings given to mortgage-backed securities.

The grand, overarching theme of the Bush administration—the big idea that informed so many of its sordid episodes—was the same anti-supervisory impulse applied to the public sector: regulators sabotaged and their agencies turned over to the regulated.

The public was left to read the headlines and ponder the unthinkable: Could our leaders really have pushed us into an unnecessary war? Is the republic really dividing itself into an immensely wealthy class of Wall Street bonus-winners and everybody else? And surely nobody outside of the movies really has the political clout to write themselves a $700 billion bailout.

What made the oughts so awful, above all, was the failure of our critical faculties. The problem was not so much that newspapers were dying, to mention one of the lesser catastrophes of these awful times, but that newspapers failed to do their job in the first place, to scrutinize the myths of the day in a way that might have prevented catastrophes like the financial crisis or the Iraq war.

The folly went beyond the media, though. Recently I came across a 2005 pamphlet written by historian Rick Perlstein berating the big thinkers of the Democratic Party for their poll-driven failure to stick to their party's historic theme of economic populism. I was struck by the evidence Mr. Perlstein adduced in the course of his argument. As he tells the story, leading Democratic pollsters found plenty of evidence that the American public distrusts corporate power; and yet they regularly advised Democrats to steer in the opposite direction, to distance themselves from what one pollster called "outdated appeals to class grievances and attacks upon corporate perfidy."

This was not a party that was well-prepared for the job of iconoclasm that has befallen it. And as the new bunch muddle onward—bailing out the large banks but (still) not subjecting them to new regulatory oversight, passing a health-care reform that seems (among other, better things) to guarantee private insurers eternal profits—one fears they are merely presenting their own ample backsides to an embittered electorate for kicking. ++


"I'm asking you to believe. Not just in my ability to bring about real change in Washington ... I'm asking you to believe in yours."
~ Barack Obama

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