Under the bus

[Political Waves]

If you don't know who Elisabeth Warren is, you've missed an American truth teller of patriotic dimensions; she's the cute little lady that finally made sense of the financial mess for Jon Stewart, who spelled it all out for Bill Moyers and the one in the Mike Moore movie trailer that, when asked where the money is, blurts with consternation, "I don't know."  Some want her to run for Congress, others pray she'll end up in some powerful Cabinet position. Me, I'd like to scrap the Prez's Money Boyz and put in Reich, Stiglitz and Warren -- then we'd get some realism, some accountability, some positive movement; most importantly, with allegiance toward none but the public interest.

There is some movement at the moment, as Obama moves the ball forward on several fronts. The Pubs will be screaming Socialist takeover and Communist co-opting as O sets his Financial Czar to police the pay for those we've bailed out, and Barney Franks kicks the can down the road on governmental authority to keep big banks in check. It will take much more than this to drive a stake through the heart of Big Bid'ness, especially when powerful financial advisers have the audacity to think this kind of statement will fly with a wounded American public:  "We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all." Smug, much? Pfffft!

Warren's final sentence in the exchange below seems to me the pivotal issue: "There needs impetus for change." If what we're looking at today is not enough, then the Universe will provide us more; and that's crazy-making projection but pretty accurate, I think ... you'll find more in my weekly piece, here.

As we faced financial free-fall a year back, Obama stepped in to slap some emergency surgical glue on the gaping wound so we wouldn't bleed out, and if we were reality-driven humans we would have thrown the e-brake and made critical changes then; now the suture is beginning to give and there will be more bleeding. Maybe then we'll look at the facts instead of the fantasy.

 

From Reagan's cuts to safety nets and regulation -- to Clinton's restructure of public welfare and Fair Trade -- to Bush's privatization schemes and Enron cronyism, we've played games with peoples lives and jobs and brought ourselves to this deeply flawed economic model. Lots of people whine that it isn't their fault; me, I think we all behaved like rubes at the carnival, drunk on fantasy, believing the hucksters and staying too long at the fair ... this is just paying the piper.

I don't know if taking control of this deadly game by little increments is workable, but it's what we're doing; at least until the next moneyquake equalizes the situation. I still think it's the Times that will push us forward, the events and emergencies, and the better part of valor is having the right people in the right place when the quakes arrive. Most importantly, until the nation decides that the Almighty Buck isn't the god we all bow down to ... and the Must Have grease that makes political cogs turn ... we're all pretty much under the bus.

If you have time this weekend, be sure to open the links to Mike Moore's interview with Warren; a little bit of truth plainly spoken is as welcome as fresh air. And in the bonus section, for those who don't get his updates, I'm adding a link to Mike's 15 Point Action Plan, proving his chops as a serious advocate/activist for the public wellbeing. Open it to get to the many additional links and resources.

Jude



SURPRISE, SURPRISE: AIG Executives Kept Bonuses They Promised To Return
Huffington Post
http://www.huffingtonpost.com/business/

Elizabeth Warren Speaks With Michael Moore (VIDEO): Exclusive Footage
10/22/09
http://www.huffingtonpost.com/2009/10/22/elizabeth-warren-speaks-w_n_329425.html

 

Outspoken As Ever, Elizabeth Warren Is Working Closely With Congress On Reform Legislation
Ryan Grim and Jason Linkins, HuffPo
10-22-09
http://www.huffingtonpost.com/2009/10/22/outspoken-as-ever-elizabe_n_329901.html

    
As Members of Congress debate the most sweeping reform of the financial industry in decades, some are working closely with an outspoken Harvard professor who has been tapped to oversee the banking bailout.

Congressional Oversight Panel chair Elizabeth Warren addressed the full House Democratic caucus Wednesday afternoon, while across Independence Avenue, a House committee was voting on elements of her brainchild, the Consumer Financial Protection Agency. The full bill passed the committee 39 to 29 on Thursday morning, and is expected to be approved by the full House.

Warren, a longtime consumer advocate and champion of the middle class in her academic research, has been deeply involved. "Last Saturday night, I think I got my last email from Elizabeth Warren after eleven," said Rep. Brad Miller (D-N.C.), who is championing her measure in the committee. "And the first one came in before seven o'clock Sunday morning... She's been very involved in all these discussions."

Progressives won a major victory against bank lobbyists this week when Rep. Melissa Bean (D-Ill.) pulled back an amendment that would have established the CFPA as the strictest regulation across the country, thereby preventing states from enacting tougher laws. With her amendment withdrawn, the CFPA would be the floor rather than the ceiling across the country.

Still, the legislative process in Chairman Barney Frank's House Financial Services Committee has taken a toll on Warren's initial proposal, and a number of lenders and financial interests continue to lobby for exemptions. Warren is watching them closely. "She hasn't gotten everything that she wanted. None of us have. But she's certainly had an opportunity to squawk," Miller said. And Rep. John Larson (D-Conn.), chairman of the caucus, said Warren, in her remarks, "lauded the efforts of Barney Frank and the committee."

Warren also made an appearance on Thursday morning's edition of Morning Joe on MSNBC, where she discussed executive compensation reform and the current state of consumer regulation. She told the show's panel that the two "watchwords" to think about when considering the Wall Street culture that continually rewards executives for failure were "arrogance" and "cozy."

The arrogance is evident, Warren says, in the way Wall Street executives "think they deserve [compensatory rewards] after they effectively bankrupted their companies and nearly bankrupted the country." Warren pointed out: "Had it not been for taxpayer bailouts, these people would be on the streets."

The coziness, Warren said, was reflected in the way that financial firms have set up their corporate boards: "Who did you get on the board, you got your buds on the board. And then what did you do? You sat on their boards."

Warren also put the odds of taxpayers getting paid back the money they sunk into the financial system as "not good." As far as the current state of regulatory reform, how's this for bad news?

So this is the single scariest part about what's happening. We have finally learned if you throw enough taxpayers under the bus you can stabilize at least the top part of the economy. Obviously what's happening with unemployment and foreclosures says we haven't stabilized the real economy. But the same rules that brought us to this crisis are still in place. We have not changed any of the basic rules, and the conversation on regulatory reform has really in large part been drowned out.

[open link for video]

SCARBOROUGH: Let's look at a full screen and have you tell us what's going on here. Citigroup borrowed $387 billion they haven't paid anything back. AIG $181 billion. they've paid $72 back. Bank of America, $101, they haven't paid anything back. Goldman Sachs has borrowed $69 billion, paid back $25 billion. JP Morgan Chase $53 billion, $10 billion back. Look at that chart and tell me what do you expect to happen over the next year with these companies? Do you suspect that JP Morgan Chase and also Goldman Sachs may pay back all of their money sooner or later?

WARREN: You know, I'm just going to -- I'm going to have to take a bit of a bump on this one. Some of them will pay back, but let's face it. The odds are not good that we're going to get repaid in full on this money. That's what makes it even more disturbing that they are draining out as much as they can for the executives right now. But let's face it. Overall, the taxpayer is the one at risk here. We're the one who stand in the last position to get paid. That's why we have an interest in this.

SCARBOROUGH: Explain the arrogance, professor. You looked into this more closely than probably than most people in America. Explain the arrogance, explain the culture in these companies that would have them behaving the way they are behaving a year after September 15th.

WARREN: You know, arrogance is exactly the right word, because what we're really talking about is not just people who can get it, they are in the legal position where they can get it until someone like the pay czar smacks them and tells them no. We're talking about people who think they deserve it. And think they deserve it after they effectively bankrupted their companies and nearly bankrupted the country. Had it not been for taxpayer bailouts, these people would be on the streets. They wouldn't have their CEOs and keys to the fancy jets and perks.

BARTIROMO: Can I jump in. where's the accountability, though, on the boards and -- and what's with the compensation committee? What's their role? What's the role of shareholders? I'm not necessarily criticizing the pay czar for making this order, and it is an order, but more so I mean, we have a structure in place, so where's the accountability on the board, on the compensation committee and what's happening with these guys? Don't they hold some responsibility for allowing this to happen?

WARREN: You bet they do. So let me point out. The first word is arrogance, the second watch word in understanding this crisis is cozy, and that is, who did you get on the board, you got your buds on the board. And then what did you do? You sat on their boards.

BARTIROMO: They're not getting pay cuts, they're not really getting -- feeling accountable.

WARREN: They slathered each other was the game here. That's why the real point is not just -- we talked about this before. How you pull the economy out of the ditch right now, it's what kind of rules we're going to have going forward. And if we're going to end up having subsidized all of these companies, we start to get the economy stabilized but we say hey, you can go back to business as usual, no real change in how corporate governance works we're going to be back here again every ten years talking about it.

BARTIROMO: We are back here again. There's still too big to fail, where's the financial reform? Elizabeth, derivatives got us into this place. We're still seeing the use of derivatives. Where is financial reform, we're all dominated by health care. So I don't know, understand what's going on here because when do you expect financial reform to actually materialize?

WARREN: Okay, so this is the single scariest part about what's happening. We have finally learned if you throw enough taxpayers under the bus you can stabilize at least the top part of the economy. Obviously what's happening with unemployment and foreclosures says we haven't stabilized the real economy. But the same rules that brought us to this crisis are still in place. We have not changed any of the basic rules, and the conversation on regulatory reform has really in large part been drowned out. So, my view on this is, let's demand that we get real changes. You know, if what came out of this craziness over executive compensation is that people had a renewed energy to go back on Capitol Hill and say we are really going to make the kinds of reforms we need to make to change thele rules of the road going forward, then it can turn out to be a good thing. There needs impetus for change. ++


Why Wall Street Reform is Stuck in Reverse
Robert Reich.Former Secretary of Labor, Professor at Berkeley
October 22, 2009
http://robertreich.blogspot.com/2009/10/why-wall-street-reform-is-stuck-in.html

At a conference in London, a Goldman Sachs international adviser, Brian Griffiths, praised inequality. As his company was putting aside $16.7 billion for compensation and benefits in the first nine months of 2009, up 46 percent from a year earlier, Griffiths told us not to worry. "We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," he said.

Eight months ago it looked as if Wall Street was in store for strong financial regulation -- oversight of derivative trading, pay linked to long-term performance, much higher capital requirements, an end to conflicts of interest (i.e. credit rating agencies being paid by the very companies whose securities they're rating), and even resurrection of the Glass-Steagall Act separating commercial from investment banking.

Today, Congress is struggling to produce the tiniest shards of regulation that would at least give the appearance of doing something to rein in the Street.

What happened in the intervening months? Two things. First, America's attention wandered. We're now focusing on health care, Letterman's frolics, and little boys who hide in attics rather than balloons. And, hey, the Dow is up again. The politicians who put off Wall Street regulation for ten months knew that the public would probably lose interest by now.

Second, the banks keep paying off Congress. The big guns on Wall Street increased their political donations last month after increasing their lobbying muscle. Morgan Stanley's Political Action Committee donated $110,000 in September, for example, of which Democrats got $43,000.

Official Wall Street PAC donations are piddling compared to the tens of millions of dollars that Wall Street executives dole out to candidates on their own (or with a gentle nudge from their firms). Remember -- the Street is where the money is. Executives and traders on the Street have become the single biggest sources of money for Democrats as well as Republicans. And with mid-term elections looming next year, you can bet every member of Congress has a glint in his or her eye directed at the Street.

That's why the President went to Wall Street to raise money Tuesday night, gleaning about $2 million for the effort. He politely asked the crowd to cooperate with reform -- "If there are members of the financial industry in the audience today, I would ask that you join us in passing necessary reforms" -- but those were hardly fighting words. It's hard to fight people you're trying to squeeze money out of.

Which is the essential problem.

Ken Feinberg, the President's "pay czar" came down hard on executive pay yesterday, for those banks still collecting money under TARP, as well he should. But Feinberg isn't trying to pass new financial reform legislation, and TARP no longer covers several of the biggest banks with the highest pay and bonuses -- although they're still getting subsidized by the government with low-interest loans.

Wall Street and the Treasury want us to believe that the TARP money will be repaid to taxpayers, but Neil Barofsky, the special inspector general keeping watch over TARP, said yesterday that just 17 percent of the TARP money has been repaid, and "[i]t's extremely unlikely that taxpayers will see a full return on their investment." Later he told a reporter that it's unlikely "we'll get a lot of our money back at all."

Brian Griffiths, the Goldman international adviser who told us inequality is good for us, doesn't know what he's talking about. America is lurching toward inequality once again, led by the financial industry. The Street is back to where it was in 2007, but most of the rest of us are poorer than we were then -- largely due to the meltdown that occurred because Wall Street overreached. The oddity is that we bailed out the Street, including Griffiths and his colleagues, but apparently won't even be repaid.

And now that Griffiths et al, knows his firm and the other big ones on the Street are too big to fail, he and his colleagues will make even bigger gambles in the future with our money. ++


Are Fed, Treasury finally giving banks some tough love?
Kevin G. Hall | McClatchy Newspapers
http://www.mcclatchydc.com/227/story/77631.html

 
WASHINGTON -- In a frontal assault on the U.S. banking system, the Federal Reserve proposed Thursday to review the pay practices of America's largest banks, while the Treasury Department outlined why it slashed executive pay at financial institutions that are receiving substantial taxpayer bailouts.

The moves potentially point to a new era of tough love for a sector that's long influenced what does -- and what doesn't -- get done in Washington.

The Treasury Department, part of the executive branch, had already moved assertively for months to press the issue of misaligned incentives for pay and bonuses in the financial sector, both through proposed legislation and high-profile pronouncements.

The newfound assertiveness, however, was striking from the independent Federal Reserve, which the Obama administration wants to arm with new powers to police the financial sector more broadly for system-wide risks to the economy.

"Compensation practices at some banking organizations have led to misaligned incentives and excessive risk taking, contributing to bank losses and financial instability," Fed Chairman Ben Bernanke said in a statement. "The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to the longer-term performance and do not create undue risk for the firm or the financial system."

In a three-page statement explaining how it will review compensation practices at 28 large banking organizations, the Fed made clear that it intends to have a say in how financial executives receive pay and bonuses.

"Because of the federal safety net, shareholders of a banking organization may be willing to tolerate a degree of risk that is inconsistent with the organization's safety and soundness," the Fed said — accusing boards of directors at major financial institutions of assessing and managing risk improperly because they think they have a federal safety net. "Thus aligning interests of employees and shareholders may not be sufficient to protect the safety and soundness of the organization or financial stability."

At the heart of the Fed's planned review of pay practices at the nation's biggest, most globally interconnected banks is a concern that in the run-up to last year's near meltdown of global finance, big financial firms were rewarding executives for short-term, unsustainable profits without regard for the long-term consequences.

Briefing reporters on the condition of anonymity, a senior Fed official said that the goal is to ensure that all major banks think of compensation over the long term, providing rewards across a horizon well beyond three months or even two or three years.

Fed critics were wary of Thursday's announcement.

"I'm impressed, but I am skeptical . . . What is new is the Fed seems to be interested in doing anything about it," said Dean Baker, an economist and co-director of the Center for Economic Policy Research, a liberal group. "I'm glad to see it, but it's a story of which you have to be skeptical."

Bernanke and other Fed officials have long known how well compensated top Wall Street executives have been, Baker said, questioning what makes the issue a top concern at the Fed just as some Democratic lawmakers want to weaken the central bank while the Obama administration tries to strengthen it.

The bank sector pleaded guilty to the Fed announcement.

"From a banking standpoint, their proposal is correctly focused on eliminating compensation practices that cause employees to take excessive risk," said Scott Talbott, the senior vice president of government affairs for the Financial Services Roundtable, the lobby for big financial firms. "The institutions did not manage their compensation risks, they were focused on the short term . . . and not over the longer-term horizon."

Compensation is front and center in the Washington debate after reports suggested that Wall Street banks are on track to pay salaries and bonuses exceeding what they paid in 2007, before the financial crisis began.

Many of the institutions paying bonuses received taxpayer bailout money. Even if some have repaid the government aid with interest, they still continue to enjoy loan guarantees and other federal subsidies designed to thaw a deep freeze in credit markets.

The Fed's compensation review, which can't begin until after a 30-day comment period, doesn't aim to equalize pay structures or cap them, but to end with a best-practices approach for the industry.

That complements actions detailed Thursday by Kenneth Feinberg, the Treasury Department's special pay czar for companies that now have significant government ownership. Feinberg announced that he's capping at $500,000 the cash pay for the 175 executives at seven large institutions receiving taxpayer support, and cutting their bonuses in half. These executives will be compensated with shares of company stock for the salaries and bonuses they're losing.

"We gave him the difficult task of cutting excessive pay, striking a balance between compensation and risk taking, and keeping strong management teams in place to help the companies recover -- all in the public interest." Treasury Secretary Timothy Geithner said in a statement welcoming Feinberg's action.

The seven institutions were Citigroup; Bank of America; American International Group; General Motors and its finance arm, GMAC Inc.; and Chrysler LLC and its finance arm, Chrysler Financial. ++


New US bill on "too big to fail" fix seen Monday
Karey Wutkowski, Reuters
Fri Oct 23, 2009
http://www.reuters.com/article/governmentFilingsNews/idUSN239264420091023

WASHINGTON - The Obama administration plans to unveil on Monday a new plan for dealing with troubled financial giants, said a senior U.S. lawmaker, who also mentioned potentially big changes for the insurance industry.

Barney Frank, chairman of the House Financial Services Committee and a chief architect of the financial regulation overhaul, declined on Friday to give details on the administration's new bill, which would give the government the power to dismantle large financial companies that get into crises.

The new draft bill is expected to take a tougher stance toward troubled financial firms than the administration's original plan, and may take out some language that would allow for temporary bailouts.

Giving the government "resolution authority" would serve as a rebuttal to the concept that some firms are too big to fail. Federal Reserve Chairman Ben Bernanke on Friday highlighted the need for this authority as well as other measures to reduce the likelihood that one firm could destabilize the financial system. [ID:nN2394774]

Frank also said Congress is discussing whether to create an optional federal charter for insurers.

Insurance companies are currently regulated by the states.

"If we do get into national chartering it will be in life insurance ... and maybe large commercial entities," Frank said during remarks to a banking symposium.

He said lawmakers would not likely try to federally regulate property and casualty insurers, however.

NO SUPER BANK COP

Frank's committee has cranked its efforts to overhaul financial regulation into high gear in recent days.

On Thursday it voted to approve legislation that would create a federal financial consumer watchdog. It has also passed new rules to police over-the-counter derivatives like the credit default swaps that helped fuel the financial crisis, and the full House has approved efforts to curb abusive pay practices.

While Frank's committee has made significant headway, the reform effort faces an uncertain future in the Senate and may be pushed into next year.

One idea that does seem to be gaining steam in the Senate is the move to consolidate all federal banking supervision into one super agency. Currently, four regulators share responsibility.

Christopher Dodd, chairman of the Senate Banking Committee, is a leading advocate of the consolidation, and has said he will push it forward despite regulators' reservations.

Frank, however, does not think it will pass.

"There is no remote chance of it happening," he said.

He said lawmakers will likely merge the Office of Thrift Supervision and the Office of the Comptroller of the Currency, but allow the Federal Reserve and the Federal Deposit Insurance Corp to keep their supervisory roles.

Frank also commented on the rulings of pay czar Kenneth Feinberg, who on Thursday slashed compensation for many of the top earners at seven firms that have received billions of dollars in taxpayer funds.

"I think he did a good job," he said.

On the same day that Feinberg released his rulings for the seven firms, the Federal Reserve revealed its own pay guidelines to encompass a larger chunk of financial firms. [ID:nN2212147]

The Fed's bank pay guidelines, while not specific, are designed to curb forms of compensation that entice employees to take large risks.

Frank said the Fed's guidelines should have a large impact and said Congress is working to finalize legislation that would clarify that the Fed does have the authority to closely police pay. ++

 

 

bonus

 

 

Mike Moore's Action Plan: 15 Things Every American Can Do Right Now

http://www.alternet.org/workplace/143444/michael_moore%27s_action_plan%3A_15_things_every_american_can_do_right_now/

"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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