Sunday, October 30, 2011

Can Congress Pass Banking Reform?

Bill Schorr - Cagle Cartoons - Congress Cant Pass Banking Reform - English - Congress, Capital, Mastercard, Visa, American Express, Discover, banking reform, wall street, banks

Robert Reich says that since Wall Street is still out of control, that it would be a politically and economically smart move for President Obama to resurrect the Glass-Steagall Act and thereby break up the big banks.

Next week President Obama travels to Wall Street where he’ll demand – in light of the Street’s continuing antics since the bailout, as well as its role in watering-down the Volcker rule – that the Glass-Steagall Act be resurrected and big banks be broken up.

I’m kidding. But it would be a smart move — politically and economically.

Politically smart because Mitt Romney is almost sure to be the Republican nominee, and Romney is the poster child for the pump-and-dump mentality that’s infected the financial industry and continues to jeopardize the American economy.

Romney was CEO of Bain & Company – a private-equity fund that bought up companies, fired employees to save money and boost performance, and then resold the firms at a nice markups.

Romney also epitomizes the pump-and-dump culture of America’s super rich. To take one example, he recently purchased a $3 million mansion in La Jolla, California (in addition to his other homes) that he’s razing in order build a brand new one.

What better way for Obama to distinguish himself from Romney than to condemn Wall Street’s antics since the bailout, and call for real reform?

Economically it would be smart for Obama to go after the Street right now because the Street’s lobbying muscle has reduced the Dodd-Frank financial reform law to a pale reflection of its former self. Dodd-Frank is rife with so many loopholes and exemptions that the largest Wall Street banks – larger by far than they were before the bailout – are back to many of their old tricks.

It’s impossible to know, for example, the exposure of the Street to European banks in danger of going under. To stay afloat, Europe’s banks will be forced to sell mountains of assets – among them, derivatives originating on the Street – and may have to reneg on or delay some repayments on loans from Wall Street banks.

The Street says it’s not worried because these assets are insured. But remember AIG? The fact Morgan Stanley and other big U.S. banks are taking a beating in the market suggests investors don’t believe the Street. This itself proves financial reform hasn’t gone far enough.

If you want more evidence, consider the fancy footwork by Bank of America in recent days. Hit by a credit downgrade last month, BofA just moved its riskiest derivatives from its Merrill Lynch unit to a retail subsidiary flush with insured deposits. That unit has a higher credit rating because the Federal Deposit Insurance Corporation (that is, you and me and other taxpayers) are backing the deposits. Result: BofA improves its bottom line at the expense of American taxpayers.

Wasn’t this supposed to be illegal? Keeping risky assets away from insured deposits had been a key principle of U.S. regulation for decades before the repeal of Glass-Steagall.

The so-called “Volcker rule” was supposed to remedy that. But under pressure of Wall Street’s lobbyists, the rule – as officially proposed last week – has morphed into almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.

It would have been far simpler simply to ban proprietary trading from the jump. Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks’ own behalf? Bring back Glass-Steagall.

True, Glass-Steagall wouldn’t have prevented the fall of Lehman Brothers or the squeeze on other investment banks in 2007 and 2008. That’s why it’s also necessary to break up the big banks.

In the wake of the bailout, the biggest banks are bigger than ever. Twenty years ago the ten largest banks on the Street held 10 percent of America’s total bank assets. Now they hold over 70 percent. And the biggest four have a larger market share than ever – so large, in fact, they’ve almost surely been colluding. How else to explain their apparent coordination on charging debit card fees?

The banks aren’t even fulfilling their fiduciary duties to investors. Last summer, after Groupon selected Goldman Sachs, Morgan Stanley, and Credit Suisse to underwrite its initial public offering, the trio valued it at a generous $30 billion. Subsequent accounting and disclosure problems showed this estimate to be absurdly high. Did the banks care? Not a wit. The higher the valuation, the fatter their fees.

Just last week Citigroup settled charges (without admitting or denying guilt) that it defrauded investors by selling them a package of mortgage-backed securities rife with mortgages it knew were likely to default, but didn’t disclose the hazard. It then bet against the package for its own benefit – earning fees of $34 million and net profits of at least $126 million. So what’s Citi paying to settle this outrage? A mere $285 million. Its CEO at time (Charles Prince) doesn’t pay a dime.

I doubt the President will be condemning the Street’s antics, or calling for a resurrection of Glass-Steagall and a breakup of the biggest banks. Democrats are still too dependent on the Street’s campaign money.

That’s too bad. You don’t have to be an occupier of Wall Street to conclude the Street is still out of control. And that’s dangerous for all of us.

Congress would be smart to repeal the 1999 Gramm–Leach–Bliley Act and then resurrect the banking reforms found in the 1933 Glass-Steagall Act. Those reforms, which were in place for over sixty years, worked to control speculation. They also prohibited a bank holding company from owning other financial companies and as well separated commercial banking from investment banking. And for that, President Obama needs to demand the change!

Saturday, October 29, 2011

The Peoples Response to Police Violence

In Oakland, California on October 25th, 2011 an Occupy Wall Street protest turned into a confrontation between the protestors and the Oakland Police. As Marc Ash can tell you in Remember What They Did in Oakland that "no one really saw it coming. We should have."

Civil unrest, civil resistance, a paranoid, uneducated - and far too heavily armed - police force, governmental officials with no experience in managing para-military forces under their control. It was all there, flame lit, waiting to boil over.

Can anyone see it still? It's there, right there in the picture ... look closely. It's an Oakland police officer standing in broad daylight in the middle of an American city leveling a shotgun at American citizens and firing at them as they run for their lives. Think Kent State, think Chicago 1968. This happened. Mark the day, rue the day.

To the credit of the protesters, they provoked but did not engage or reciprocate in the violence. The Oakland Police Department, however, gave the United States an abject lesson in why compromising civil liberties for the sake of national security is a decision that will eventually blow up in your face.

Scott Olsen and Joshua Shepherd were trained - they thought - by the Marine Corps and the Navy, respectively, to defend freedom. Both served overseas until they realized that the real fight for American freedom is, and really has been, here in the land we call home. So they stood side by side facing down freedom's oldest enemies: fear, ignorance and authoritarianism. The police opened fire on them and Scott Olsen fell critically wounded. Not in Iraq or Afghanistan, but here. He is now in an Oakland hospital fighting for his life. He and all of those who were there with him that night in Oakland, and every city in America now occupied by Americans standing up to injustice, need our support.

What are they fighting for?

Like all revolutionary political movements the Occupy Movement is a spontaneous eruption. It was not scripted or planned in advance. It is rather, the stifled voice of the oppressed, silent no more. To understand what they want we must ask, what do we want? And we must listen to what they say, and to what is in our hearts.

The common theme is "justice." Economic justice, earth environmental justice and social justice. Do those goals sound familiar? They should. They have been at the forefront of every political demonstration in history. However, on a slightly more specific note, if you are looking for things to watch for you will probably be hearing more about the abolishment of the Federal Reserve System in the days, weeks and months to come. Perhaps growing demands for legal prosecution of financial industry managers, maybe some - real - healthcare reform, a little solidarity with our fellow citizens of earth who do not want an American military base in their back yard. Stuff like that.

If the goal of the Oakland police was to squash the Occupy movement, then the violence was not the message. The result is that Occupy Oakland and its supporters have called for a "GENERAL STRIKE & MASS DAY OF ACTION - NOVEMBER 2."
We as fellow occupiers of Oscar Grant Plaza propose that on Wednesday November 2, 2011, we liberate Oakland and shut down the 1%.

We propose a city wide general strike and we propose we invite all students to walk out of school. Instead of workers going to work and students going to school, the people will converge on downtown Oakland to shut down the city. All banks and corporations should close down for the day or we will march on them.

While we are calling for a general strike, we are also calling for much more. People who organize out of their neighborhoods, schools, community organizations, affinity groups, workplaces and families are encouraged to self organize in a way that allows them to participate in shutting down the city in whatever manner they are comfortable with and capable of.

The whole world is watching Oakland. Let’s show them what is possible.

Change may have been a campaign slogan. Now is is a reality!

Thursday, October 20, 2011

These are the 99%!

The media seem to think that Occupy Wall Street has no message. The conservative right seem to think that Occupy Wall Street are just a bunch of lazy, smelly, hippies. The media and the right-wing are both wrong.

Here are citizens are among the 99% with their message:

A College Professor