Protecting American Consumers

There is a battle brewing over who President Obama will choose to fill the position of Bureau of Consumer Financial Protection. This bureau was created by the Wall Street reform legislation that passed recently in Congress.

David Corn points out that there is controversy over who will become the head of this agency.

No sooner had President Obama and his congressional Democrats achieved victory in passing Wall Street reform legislation last week when an internal catfight broke out over who would lead the new Bureau of Consumer Financial Protection created by the bill. The Wall Street reform package is a mixed bag. Former Labor Secretary Robert Reich calls it "a mountain of legislative paper, a molehill of reform." Progressives, though, have generally cheered the new consumer protection board, which will possess the independent authority to pursue and punish abusive lenders, including credit card companies and mortgage firms. But how this outfit operates will partly depend on who runs it. And that's the fight at hand.

An obvious choice.

The obvious candidate for this new financial sheriff position is Warren, the Harvard law professor who first proposed such an agency in 2007 -- before the Wall Street meltdown. As head of a congressional panel overseeing the TARP bank bailout, she's been an outspoken and plain-speaking foe of Wall Street and the big banks. She has denounced shifty credit card companies and shady mortgage lenders. She deserves this position. And progressives love Warren. But Geithner may not. Last week, the Huffington Post, citing one "source with knowledge of Geithner's view," reported that Geithner was opposing Warren for this position.

Geithner's statement.

That story created a firestorm within the world of people who care about such things. The Treasury Department quickly put out a statement: "Given her strong leadership on consumer protection, Secretary Geithner believes that Elizabeth Warren is exceptionally well qualified to lead the new bureau, and, ultimately, that's a decision the president will have to make." But this was only an endorsement of her qualifications. You didn't have to hold inside information to know that Geithner prefers another contender for the post: Michael Barr, an assistant secretary of the Treasury, who was one of the architects of the Wall Street reform measure. Barr fought against GOP efforts to weaken the consumer agency and could well be a strong head of the bureau, but he does lack the prominence and communications skills of Warren, who has already proved herself a media-savvy consumer champion.

Warren, a thorn in Geithner's side.

That Geithner would not be hot on Warren is no surprise. As head of the bailout oversight panel, Warren has fiercely called out Geithner and Treasury on a number of fronts: for providing a backdoor bailout to AIG, for botching homeowner relief programs, for failing to get mega-banks to resume lending. Moreover, she's an articulate and thoughtful populist, who applies a Main Street-first perspective toward financial matters and who has been a scourge of credit card companies and banks. Geithner is a member of the Big Finance establishment; he's no crusader. Whether or not he's actively lobbying the White House against Warren, he obviously would be far more keen on Barr, his department colleague. There's also a third candidate: Gene Kimmelman, a Justice Department official who's worked for numerous consumer organizations. (He'd be a good pick, too.)

Progressives are worried.

This whole dust-up has progressives worried. (MoveOn, the Progressive Change Campaign Committee, and the Project on Government Oversight have each called on the White House to nominate Warren.) On Friday, White House senior adviser David Axelrod told reporters, "Elizabeth Warren is a great, great champion for consumers. She's obviously a candidate to lead this effort." But he didn't refer to her as a leading candidate, and he made it clear there were other well-positioned contenders. And while the Treasury Department was officially praising her qualifications last week, a Geithner aide, speaking on background, said that Treasury has "some concerns about a nomination fight," should Warren be appointed.

Arguments for and against Warren.

That might be Geithner's best argument against Warren: The banks and many Senate Republicans do not like her and a Warren nomination could turn into a battle royal, akin to a contentious Supreme Court fight. But this is also an argument for Warren.

Presently, Obama's economic policies are made and sold by people like Geithner and Lawrence Summers, Obama's chief economic adviser. How many Americans really believe these guys are looking out for them? The president's economic team is short on non-Wall Streeters who can connect with folks at home. Placing Warren in a high-profile position would show that Obama recognizes that protecting American consumers is as important as bailing out big banks and auto companies. He would be adding a vital and clear voice to his administration. And in an election season -- when Obama cannot do much to create 8 million jobs to make up for the ones lost before and after he became president -- waging a fight against the banks and GOPers on behalf of a passionate consumer advocate would have political benefits.

Obama vs Progressives

Though Treasury has tried to downplay the Warren drama, this is an important moment for Obama. Progressive reformers are already defining a potential rejection of Warren as a White House betrayal. Simon Johnson, the former chief economist of the International Monetary Fund, writes,

This can now go only one of two ways.

1. Elizabeth Warren gets the job. Bridges are mended and the White House regains some political capital. Secretary Geithner is weakened slightly but he'll recover.

2. Someone else gets the job, despite Treasury's claims that Elizabeth Warren was not blocked. The deception in this scenario would be nauseating -- and completely blatant. "Everyone was considered on their merits" and "the best candidate won" will convince who exactly?

He adds, "Failing to appoint Elizabeth Warren would be the straw that breaks the camel's back. It will go down in the history books as a turning point -- downwards -- for this administration."

If Obama dumps Warren, the White House will justifiably enrage reformers and progressives -- that is, part of its base. If Obama nominates Warren, the White House will have a major fight with banks and GOPers. "That may be a fight worth having," a Treasury Department official says, "but that's up to the White House to decide." It's a mighty big decision.

Public Citizen believes that Warren is the correct choice.

A real reformer will have the power to crack down on predatory mortgage loans, hidden bank fees, college loan traps and much more. Under a lesser leader, the new agency will quickly degenerate into just another part of the Washington bureaucracy.

There's no doubt who would be the most effective leader of the new bureau: Harvard law Professor Elizabeth Warren.

If you think President Obama should appoint Warren to lead the new consumer bureau...
SIGN THE PETITION HERE!

No to Socialsm, Yes to Corporatocracy!

The Tea Bag Movement, the Republican Party and the right-wing pundits are all claiming that Obama and the Democrats are socialists. Let's call these groups the 'anti-socialists.' They believe that Obama wants government ownership of everything. They claim that people should be able to control their own destinies, their own economic choices and their own health care. They are against government regulation and against social assistance. But, what history has shown is that without sufficient regulation, society becomes very unbalanced.

For example, in the 19th century the Robber Barons took advantage of an unregulated banking and commercial system. They amassed enormous personal wealth. In response to the Great Depression of 1929, Congress enacted banking regulations in 1933 known as the Glass–Steagall Act which introduced banking reforms. It wasn't until 1999, that certain provisions that prohibited a bank holding company from owning other financial companies were repealed by the Gramm–Leach–Bliley Act.

It was the Glass-Steagall Act that prohibited any one institution from consolidating an investment bank, a commercial bank, and an insurance company into one entity. The Gramm-Leach-Bliley Act then allowed commercial banks, investment banks, securities firms, and insurance companies to consolidate. A bi-partisan congress passed the Gramm–Leach–Bliley Act and President Clinton signed it into law.

Recently, President Bill Clinton said that even before the repeal of Glass-Steagall the principles of the legislation had been breached. "Clinton said he regretted not trying to regulate derivatives."

“On derivatives, yeah I think they were wrong and I think I was wrong to take [their advice] because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don’t need any extra protection, and any extra transparency. The money they’re putting up guarantees them transparency.” [...]

Clinton said he regretted not trying to regulate derivatives, but that Republicans would have stood in the way. “Now, I think if I had tried to regulate them because the Republicans were the majority in the Congress, they would have stopped it. But I wish I should have been caught trying. I mean, that was a mistake I made.”

That brings us to today.

During a recent interview on Bill Moyers Journal with economists James Kwak and Simon Johnson, Bill Moyers discussed with his guests the devastating financial crisis of '08. The discussion focused on "whether the financial powers are more profitable, and more resistant to regulation than ever."

Bill Moyers: Let me get to the blunt conclusion you reach in your book. You say that two years after the devastating financial crisis of '08 our country is still at the mercy of an oligarchy that is bigger, more profitable, and more resistant to regulation than ever. Correct?

Simon Johnson: Absolutely correct, Bill. The big banks became stronger as a result of the bailout. That may seem extraordinary, but it's really true. They're turning that increased economic clout into more political power. And they're using that political power to go out and take the same sort of risks that got us into disaster in September 2008.

Bill Moyers: And your definition of oligarchy is?

Simon Johnson: Oligarchy is just- it's a very simple, straightforward idea from Aristotle. It's political power based on economic power. And it's the rise of the banks in economic terms, which we document at length, that it'd turn into political power. And they then feed that back into more deregulation, more opportunities to go out and take reckless risks and-- and capture huge amounts of money.

Bill Moyers: And you say that these this oligarchy consists of six megabanks. What are the six banks?

James Kwak: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.

Bill Moyers: And you write that they control 60 percent of our gross national product?

James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

Bill Moyers: And what's the threat from an oligarchy of this size and scale?

Simon Johnson: They can distort the system, Bill. They can change the rules of the game to favor themselves. And unfortunately, the way it works in modern finance is when the rules favor you, you go out and you take a lot of risk. And you blow up from time to time, because it's not your problem. When it blows up, it's the taxpayer and it's the government that has to sort it out.

Bill Moyers: So, you're not kidding when you say it's an oligarchy?

James Kwak: Exactly. I think that in particular, we can see how the oligarchy has actually become more powerful in the last since the financial crisis. If we look at the way they've behaved in Washington. For example, they've been spending more than $1 million per day lobbying Congress and fighting financial reform. I think that's for some time, the financial sector got its way in Washington through the power of ideology, through the power of persuasion. And in the last year and a half, we've seen the gloves come off. They are fighting as hard as they can to stop reform.

Simon Johnson: I know people react a little negatively when you use this term for the United States. But it means political power derived from economic power. That's what we're looking at here. It's disproportionate, it's unfair, it is very unproductive, by the way. Undermines business in this society. And it's an oligarchy like we see in other countries.

Today, six banks control 60% of the Gross National Product (GNP) which according to Simon Johnson and James Kwak is considered an oligarchy.

This brings us back to the 'anti-socialists.' They are extremely fearful. They rant and rave that President Obama wants the federal government to own all means of production. Although they accept their medicare payments and social security checks, they have railed against the recent health care legislation even though it is an insurance company for-profit health care plan.

What is the anti-socialist position on the issue of economics and banking regulation? Are the anti-socialists content with an oligarchy of our banking industry? Are they ranting and raving, yelling and screaming, demonstrating against the corporate oligarchy (corporatocracy) of banking? Are they outraged that only 6 banks own 60% of GNP?

Sarah Palin:

Palin apparently thinks that the solution to our economic mess in the United States is less government regulation rather than more to rein the bankers and Wall Street in for their bad behavior.

Tea Party:

This movement is against stronger regulation. As Republicans softened their stance against the financial regulation bill, tea partyers reacted by lashing out against the GOP.

GOP Conservatives:

For conservatives the best bank regulation is no regulation. Conservatives, of course, think we need less regulation, not more.

Judging from the rallies on Wall Street yesterday, the capitalists haven't bought into the GOP talking points about socialism quite to the extent of the Glenn Beck/Rush Limbaugh crowd of modern day Know Nothings. But if you think the conservatives dig in on healthcare reform, just watch them on financial reform-- the real line in the sand for the representatives of institutionalized Greed and Selfishness.

After foot (and knuckle) dragging all year, the GOP was left out of the final legislation entirely-- although far, far too many of their reactionary demands were met as Dodd and the Democrats compromised with good sense for no reason, unless currying favor with the banksters is considered reasonable in Inside the Beltway Democratic circles. Yesterday the Senate Banking Committee approved Dodd's financial overhaul legislation 13-10, without a single Republican vote.

The 10 crooked, bribe-taking handmaidens of the Wall Street banks who have vowed to throw themselves under the bus of progress are Richard Shelby (R-AL- $5,213,130), Robert Bennett (R-UT- $2,354,767), Jim Bunning (R-KY- $2,580,305), Mike Crapo (R-ID- $1,728,513), Bob Corker (R-TN- $3,058,330), Jim DeMint (R-SC- $2,463,860), David Diapers Vitter (R-LA- $2,083,149), Mike Johanns (R-NE- $687,621), Kay Bailey Hutchison (R-TX- $4,702,438) and Judd Gregg (R-NH- $1,077,149).

Dodd says his bill will end taxpayer-funded bailouts of companies supposedly "too big to fail," regulate-- for the first time-- the multitrillion-dollar derivatives market, and bring long-overdue consumer protection to financial products. The Republicans have watered down the most important aspects of real reform and are expected to filibuster the eventual bill, no matter how weak and crappy the Democrats make it to please them. Sound familiar?

WATCH Fox News explain the Republican position.

Are you confused yet? Totally. The Fox News guy says that there are already enough laws on the books to handle every economic situation. Both he and Professor Bill Black seem to be blaming the economic situation on both Obama, Geithner and the Democrats. But on April 3, 2009, Bill Black was interviewed by Bill Moyers. Here is what he had to say. Click HERE to watch the program.

BILL MOYERS: If I wanted to go looking for the parties to this, with a good bird dog, where would you send me? WILLIAM K. BLACK: Well, that's exactly what hasn't happened. We haven't looked, all right? The Bush Administration essentially got rid of regulation, so if nobody was looking, you were able to do this with impunity and that's exactly what happened. Where would you look? You'd look at the specialty lenders. The lenders that did almost all of their work in the sub-prime and what's called Alt-A, liars' loans.

The anti-socialists want small government, individual liberty, and free markets. They don't want any banking regulation. They don't want government control. Yet, what we now have is a corporate oligarchy which controls our economic system and inhibits individual freedoms and free markets.

The right-wing motto has now become: No to Socialism, Yes to Corporatocracy!

The Return of the Bankster

Ron Chernow had an Op-Ed in the January 2009 New York Times, Where is Our Ferdinand Pecora? The issues raised by Chernow are as relevant today as they were in 1929 after the Wall Street Crash. Ferdinand Pecora was chief counsel for the Senate committee hearings in the 1930's regarding the investigation of Wall Street banking and stock brokerage practices.

BARACK OBAMA has assigned a top priority to financial reform when the new Congress assembles today. If history is any guide, legislators can perform a signal service by moving beyond the myriad details of the rescue plans to provide a coherent account of the origins of the current crisis. The moment calls for nothing less than a sweeping inquest into the twin housing and stock market crashes to create both the intellectual context and the political constituency for change.

Ted McGrath; Photograph of Ferdinand Pecora by Associated Press

For inspiration, Congress should turn to the electrifying hearings of the Senate Banking and Currency Committee, held in the waning months of the Hoover presidency and the early days of the New Deal. In historical shorthand, these hearings have taken their name from the committee counsel, Ferdinand Pecora, a former assistant district attorney from New York who, starting in January 1933, was chief counsel for the investigation. Under Pecora’s expert and often withering questioning, the Senate committee unearthed a secret financial history of the 1920s, demystifying the assorted frauds, scams and abuses that culminated in the 1929 crash.

The riveting confrontation between Pecora and the Wall Street grandees was so theatrically apt it might have been concocted by Hollywood. [...]

Pecora not only documented a litany of abuses, but also paved the way for remedial legislation. The Securities Act of 1933, the Glass-Steagall Act of 1933 and the Securities Exchange Act of 1934 — all addressed abuses exposed by Pecora. It was only poetic justice when Roosevelt tapped him as a commissioner of the newborn Securities and Exchange Commission.

Our current stock market slump and housing bust can seem like natural calamities without identifiable culprits, creating free-floating anger in the land. A public deeply disenchanted with our financial leadership is desperately searching for answers. The new Congress has a chance to lead the nation, step by step, through all the machinations that led to the present debacle and to shape wise legislation to prevent a recurrence.

The remedial legislation of the 1930's which confronted the banking abuses that were exposed by the Pecora hearings are the very same stopgaps that were removed in the 1990's. With bipartisan legislation that was signed into law by ihen President Bill Clinton, these safeguards were reversed. Thereby the door was opened to the abuses of banks and financial institutions that are prevalent today.

There is a lesson to be learned. Congress are you educable?

Ghosts of Money Past

Too funny!!!!!

Funny or Die's Presidential Reunion from Will Ferrell

Goldman Sachs and Market Manipulation

In the following five videos Matt Taibbi takes on the Wall Street investment bank Goldman Sachs.

Click here to read Matt Taibbi's entire piece, "The Great American Bubble Machine."

Illustration by Victor Juhasz

Watch all the videos.

Part 1


Part 2


Part 3


Part 4


Part 5

Big Banks Helping Only Themselves

The nation's banks will be bombarding customers with new fees and products in 2010.

The nation's banks will be bombarding customers with new fees and products in 2010 as they try to replace more than $50 billion in revenue wiped out by new rules that clamp down on certain business practices.

So far, the changes are mostly concentrated in checking accounts and credit cards. In addition to attaching new fees to old products, banks are introducing new types of accounts that they hope will reel in new customers and reduce their funding costs. [...]

In addition to the credit-card rules, the government will crack down next year on ways banks charge overdraft fees, which are assessed when a customer overdraws an account. [...]

Other banks are expected to eliminate free checking completely, raise fees on safe-deposit boxes and charge customers more for issuing a stop-payment on a check.

Arianna Hoffington and Rob Johnson think you should Move Your Money To Community Banks.