TheCenterLane.com

© 2008 – 2022 John T. Burke, Jr.

Democrats Share The Blame

Comments Off on Democrats Share The Blame

January 21 brought us Episode 199 of HBO’s Real Time with Bill Maher.  At the end of the program, Bill went through his popular “New Rules” segment.  On this occasion, he wound it up with a rant about how the Republicans were exclusively at fault for the financial crisis.  Aside from the fact that this claim was historically inaccurate, it was not at all fair to David Stockman (a guest on that night’s show) who had to sit through Maher’s diatribe without an opportunity to point out the errors.  (On the other hand, I was fine with watching Stephen Moore twist in the wind as Maher went through that tirade.)

That incident underscored the obvious need for Bill Maher to invite William Black as a guest on the show in order to clarify this issue.  Prior to that episode, Black had written an essay, which appeared on The Big Picture website.  Although the theme of that piece was to debunk the “mantra of the Republican Party” that “regulation is a job killer”, Black emphasized that Democrats had a role in “deregulation, desupervision, and de facto decriminalization (the three ‘des’)” which created the “criminogenic environment” precipitating the financial crisis:

The Great Recession was triggered by the collapse of the real estate bubble epidemic of mortgage fraud by lenders that hyper-inflated that bubble.  That epidemic could not have happened without the appointment of anti-regulators to key leadership positions.  The epidemic of mortgage fraud was centered on loans that the lending industry (behind closed doors) referred to as “liar’s” loans — so any regulatory leader who was not an anti-regulatory ideologue would (as we did in the early 1990s during the first wave of liar’s loans in California) have ordered banks not to make these pervasively fraudulent loans.

*   *   *

From roughly 1999 to the present, three administrations have displayed hostility to vigorous regulation and have appointed regulatory leaders largely on the basis of their opposition to vigorous regulation.  When these administrations occasionally blundered and appointed, or inherited, regulatory leaders that believed in regulating, the administration attacked the regulators.  In the financial regulatory sphere, recent examples include Arthur Levitt and William Donaldson (SEC), Brooksley Born (CFTC), and Sheila Bair (FDIC).

Similarly, the bankers used Congress to extort the Financial Accounting Standards Board (FASB) into trashing the accounting rules so that the banks no longer had to recognize their losses.  The twin purposes of that bit of successful thuggery were to evade the mandate of the Prompt Corrective Action (PCA) law and to allow banks to pretend that they were solvent and profitable so that they could continue to pay enormous bonuses to their senior officials based on the fictional “income” and “net worth” produced by the scam accounting.  (Not recognizing one’s losses increases dollar-for-dollar reported, but fictional, net worth and gross income.)

When members of Congress (mostly Democrats) sought to intimidate us into not taking enforcement actions against the fraudulent S&Ls we blew the whistle.

President Obama’s January 18 opinion piece for The Wall Street Journal prompted a retort from Bill Black.  The President announced that he had signed an executive order requiring “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive”.  Obama’s focus on “regulations that stifle job creation” seemed to exemplify what Black had just discussed one day earlier.  Accordingly, Bill Black wrote an essay for The Huffington Post on January 19, which began this way:

I get President Obama’s “regulatory review” plan, I really do.  His game plan is a straight steal from President Clinton’s strategy after the Republican’s 1994 congressional triumph. Clinton’s strategy was to steal the Republican Party’s play book.  I know that Clinton’s strategy was considered brilliant politics (particularly by the Clintonites), but the Republican financial playbook produces recurrent, intensifying fraud epidemics and financial crises.  Rubin and Summers were Clinton’s offensive coordinators.  They planned and implemented the Republican game plan on finance.  Rubin and Summers were good choices for this role because they were, and remain, reflexively anti-regulatory.  They led the deregulation and attack on supervision that began to create the criminogenic environment that produced the financial crisis.

Bill Clinton’s role in facilitating the financial crisis would have surely become an issue in the 2008 Presidential election campaign, had Hillary Clinton been the Democratic nominee.  Instead, the Democrats got behind a “Trojan horse” candidate, disguised in the trappings of  “Change” who, once elected, re-installed the very people who implemented the crucial deregulatory changes which caused the financial crisis.  Bill Black provided this explanation:

The zeal, crude threats, and arrogance they displayed in leading the attacks on SEC Chair Levitt and CFTC Chair Born’s efforts to adopt regulations that would have reduced the risks of fraud and financial crises were exceptional.  Just one problem — they were wrong and Levitt and Born were right.  Rubin and Summers weren’t slightly wrong; they put us on the path to the Great Recession.  Obama knows that Clinton’s brilliant political strategy, stealing the Republican play book, was a disaster for the nation, but he has picked politics over substance.

*   *   *

Obama’s proposal and the accompanying OMB releases do not mention the word or the concept of fraud.  Despite an “epidemic” of fraud led by the bank CEOs (which caused the greatest crisis of his life), Obama cannot bring itself to use the “f” word. The administration wants the banks’ senior officers to fund its reelection campaign.  I’ve never raised political contributions, but I’m certain that pointing out that a large number of senior bank officers were frauds would make fundraising from them awkward.

Black targeted Obama’s lame gesture toward acknowledgement of some need for regulation, encapsulated in the statement that “(w)here necessary, we won’t shy away from addressing obvious gaps …”:

Huh?  The vital task is to find the non-obvious gaps.  Why, two years into his presidency, has the administration failed to address “obvious gaps”?  The administration does not need Republican approval to fill obvious gaps in regulation.  Even when Obama finds “obvious gaps” in regulatory protection he does not promise to act.  He will act only “where necessary.”  We know that Summers, Rubin, and Geithner rarely believe that financial regulation is “necessary.”  Even if Obama decides it is “necessary” to act he only promises to “address” “obvious gaps” — not “end” or “fill” them.

At the conclusion of his Huffington Post essay, Black provided his own list of  “obvious gaps” described as the “Dirty Dozen”  —  “. . .  obvious gaps in financial regulation which have persisted and grown during this, Obama’s first two years in office.”

Bill Black is just one of many commentators to annotate the complicity of Democrats in causing the financial crisis.  Beyond that, Black has illustrated how President Obama has preserved – and possibly enhanced — the “criminogenic” milieu which could bring about another financial crisis.

The first step toward implementing “bipartisan solutions” to our nation’s ills should involve acknowledging the extent to which the fault for those problems is bipartisan.


wordpress visitor


Jackass Of The Year Award

Comments Off on Jackass Of The Year Award

January 1, 2009

At year’s end, we see retrospectives of the most important events, numerous top ten lists and recognitions of achievement in one area or another.  2008 brought a record level of cynicism to the American people because of the economic catastrophe, the Bernie Madoff scandal and the cartoon-like escapades from the Presidential campaign.  Accordingly, it seems only appropriate to pay homage to the biggest Jackass of the Year.  Since I advertise this website as a “Blago-free zone”, the current Governor of Illinois is automatically disqualified from the competition.  So, let’s take a look at some of the runners-up and finally, the winner of the Jackass of the Year Award.

Our first contestant is John Ensign.  He is chairman of the National Republican Senatorial Committee, representing the State of Nevada in the United States Senate.  On November 2, 2008 he appeared on the CBS television program, Face The Nation with Bob Schieffer.  Election day was two days away and Ensign found it necessary to blame the likely Republican losses on the economic downturn.  He described the Republicans’ fate in these terms:

“And we were starting to do very, very well, but when the financial crisis hit, that financial crisis really is — has been a — almost a body blow to Republicans.  And unfortunately, it was allowed to be portrayed that this was a result of deregulation, when in fact it was a result of overregulation.”

That’s right.  Ensign Douchebag thought he could convince the public that the economic crisis was the result of over-regulation of the financial system, rather than the deregulation described by everyone else in the world.  That noble statement certainly rates runner-up status for the Jackass of the Year Award.

Our next contestant is Reverend Jeremiah Wright, former pastor of Chicago’s Trinity United Church of Christ and embarrassment to Barack Obama.  Thank God Reverend Wright’s fifteen minutes of fame are finally over.  Although his infamous sermon with the less-than-patriotic remarks about America was given in 2003, by April of 2008, Rev. Wright made a point of resurrecting the controversy concerning his disappointing association with Barack Obama.   At that time Wright hit the road, appearing on Bill Moyers Journal, speaking before the NAACP and giving a grand performance before the National Press Club.  He made a fool of himself all three times and (perhaps to his disappointment) his bad karma never rubbed off on Barack.  The pastor has also been a disgrace to the name of the Right Reverend Carl Wright (comedic sidekick of Chicago blues maven, Pervis Spann).  Although Jeremiah Wright rated recognition, the competition for the Jackass Award was tough this year.

We cannot overlook the valiant efforts of Joe “The Tool” Lieberman to win this honor.  Although the people of Connecticut elected Joe to represent their state in the Senate, The Tool spent most of 2008 looking like a stray dog, following candidate John McCain around the campaign trial.  You can find my prior rants about Senator Lieberman here, here, here and here.

We must also give consideration to Christopher Cox, the chairman of the Securities and Exchange Commission.  John McCain was on to him.  It just wasn’t fair that poor, old Senator McCain took so much heat for pointing out that Cox had to go.  McCain made the mistake of stating that he, as President, would have authority to fire Cox.  Although he was wrong about that, he was right about the notion that Cox had been a problem for the SEC.  On December 16, Jessie Westerbrook of Bloomberg news reported that Cox was blaming his subordinates for the enforcement lapses that allowed the scam, perpetrated by Bernie Madoff, to continue for several years after the SEC should have stopped it.  Cox apparently believes in the doctrine that “the buck stops” several levels below himself on the SEC food chain.  The environment at the SEC, with Cox at the helm, was best summed up in a December 27 article from the Los Angeles Times by Amit Paley and David Hilzenrath.  Here’s what they had to say about the tenure of Chairman Cox and his performance during the economic crisis:

Though Cox speaks of staying calm in the face of financial turmoil, lawmakers across the political spectrum counter that this is actually another way of saying that his agency remained passive during the worst global financial crisis in decades.  And they claim that Cox’s stewardship before this year — focusing on deregulation as the agency’s staff shrank — laid the groundwork for the meltdown.

“The commission in recent years has handcuffed the inspection and enforcement division,” said Arthur Levitt, SEC chairman during the Clinton administration.  “The environment was not conducive to proactive enforcement activity.”

*    *    *

But former officials said enforcement suffered during his tenure.  A pilot program begun last year required enforcement staff to meet with the commissioners before beginning settlement talks in certain cases involving nonfinancial firms.  Some former officials said the change was just one example of new bureaucratic impediments that slowed enforcement work.  The commissioners also made clear that they thought staff members were being too aggressive in some cases, the officials said.

”I think there has been a sentiment communicated to rank-and-file staff, lawyers and accountants that you don’t go after the establishment,” said Ross Albert, a former special counsel in the enforcement division.
*    *    *
An analysis by law firm Morgan, Lewis & Bockius showed that the SEC’s actions against broker-dealers, who serve as intermediaries in financial trades, dropped about 33%, from about 89 cases in fiscal 2007 to 60 cases in fiscal 2008.

Heckuva’ job, Coxey!   Nevertheless, you have been overshadowed in this year’s competition.

The winner of the 2008 Jackass of the Year Award is a professor from Russia, named Igor Panarin.  He is a former member of the KGB, who is apparently so upset over the breakup of the Soviet Union, that for the past ten years, he has been predicting that the United States would also break up.  On December 29, Andrew Osborn reported in The Wall Street Journal that Panarin has been doing two interviews per day, discussing how “an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S.”  The article explained:

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar.  Around the end of June 2010, or early July, he says, the U.S. will break into six pieces — with Alaska reverting to Russian control.

Worse yet, the other five parts of the country will supposedly become republics that will be part of or under the influence of Canada, the European Union, Mexico, China or Japan.  Osborn’s article included a picture of Panarin’s map, showing how the various segments of the country would be apportioned.  Panarin’s ideas have brought him quite a bit of publicity  . . . and TheCenterLane.com’s Jackass of the Year Award for 2008!  Congratulations, Jackass!