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Damage Control

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December 17, 2009

Matt Taibbi hit another grand slam with his recent Rolling Stone article: “Obama’s Big Sellout”.  It was another classic work in his unique style.  The ugly truth it drove home was that Barack Obama used a “bait and switch” tactic in his Presidential campaign:  promising to reform Wall Street — until the day after he got elected — at which time he immediately jumped into bed with the culprits of the financial crisis.  The reaction of the Obama apologists to the Rolling Stone piece involved the usual tactic of attacking the messenger (in this case:  Taibbi himself).  It didn’t work.  The best way to see how this played out should begin with a reading of  Taibbi’s retort to a critique appearing in The American Prospect — a feeble attempt to demonstrate that Taibbi got his facts wrong.  A neutral judge, Felix Salmon of Reuters, then stepped in and ruled in favor of Taibbi.  The online responses to Felix Salmon’s essay are a great read.  At the Open Left website, David Sirota upbraided Taibbi’s critics, who spanned the political spectrum — many of whom expressed condescension at the “naïve” decision of an outside-the-beltway reporter to expose the breach of a campaign promise:

It’s certainly true that a lot of politicians’ words mean nothing – but if reporters start treating that as a non-newsworthy assumption in their coverage, then the whole journalistic system becomes a joke – a miasma of personality profiles and puff pieces that assumes that the only thing that must be valued in politics is personal intangibles like “charisma” and “charm” and “toughness” and all those other incessant cliches. And what a joke that makes of our democracy.  In a republic where we only get to vote our politicians in or out every few years, all we have to go on are their promises.  If we now must assume their promises aren’t true, and attack people for being “naïve” for daring to try to hold them to their promises, then we’ve made a joke of our whole political system.

Matt Taibbi’s article immediately forced the White House into a damage control mode.  Another softball interview was immediately set up with Steve Croft of 60 Minutes, wherein Obama attempted to redeem his false image as an adversary of the Wall Street investment banks.  The President took advantage of that opportunity to present himself as an antagonist of those he described as “fat cats”.  On the following day, Obama held a meeting in the White House cabinet room with some banking representatives who found the event important enough to attend.  Immediately afterward, Charlie Gasparino revealed the backstory behind Obama’s meeting with the bankers.  After informing us that the administration provided the bankers with Obama’s “talking points” in advance of the meeting, Gasparino disclosed this:

.  .  . people with first-hand knowledge of the sitdown said, it was a heavily scripted affair — with none of the fireworks Obama displays in public.

*   *   *

Said one CEO who attended:  “I expected to be taken to the woodshed, but the tone was quite the opposite.”

Said another senior exec with knowledge of the meeting: “The whole thing was so telegraphed that not much was accomplished, other than giving Obama a PR stunt.   . . .  He might have sounded mean on ‘60 Minutes,’ but during the meeting he was a hell of a lot nicer.”

Many commentators were quick to point out that by the time Obama started talking tough about “fat cats”, he had already given them all they wanted by allowing them to pay back their TARP loans on an expedited basis.  As Henry Blodget explained for The Business Insider:

And in case you missed what is really going on here, the banks that repaid TARP are now getting all the benefits of government help with none of the drawbacks.  They just ditched the bad stuff — namely, pay caps — and kept the good stuff (implicit bond guarantees, subsidized super-low interest rates, no obligation to do anything for anyone).  Obama can jawbone all he wants about “fat cats,” but that’s all he can do.

At The Washington Post, Steven Pearlstein bemoaned the fact that the TARP beneficiaries had been “let off their leash”.  Pearlstein expressed concern that this move created the potential for more problems in the future:

By rushing to cash in their chips, however, the administration not only gave up political leverage and additional profit, but took the risk that one or more of the banks may find that it can’t make it on its own.  While the financial system has rebounded faster than anyone could have imagined, potential threats still loom — a further collapse of commercial real estate, for example, or a string of sovereign debt defaults.  And bank profits, while having rebounded, remain significantly dependent on the availability of cheap funding from the Federal Reserve and other central banks that cannot be expected to last indefinitely.

The administration’s damage control effort turned out to be worthless.  With his centerpiece healthcare reform effort floundering in the Senate, Obama the President is appearing to be significantly less effective than Obama the candidate.  The President’s critics have been quick to pounce.  George Will noted that Obama has “seen his job approval vary inversely with his ubiquity”.  The New York Post’s Michael Goodwin alleged that Obama “doesn’t look like he cares that big chunks of the country, left, right and center, are giving up on him.”  However, the best analysis of the confidence crisis afflicting the Obama Presidency came from Dan Gerstein of Forbes.com.  Gerstein observed that the new Preisdent’s leadership style was to blame — something Gerstein described as “the Reverse Roosevelt:  Talk boldly and carry a toothpick.”  While debunking the administration’s claim that it had lost the leverage it had over Wall Street with the TARP paybacks, Gerstein argued that such an excuse “doesn’t pass the laugh test” because the banking industry is the most regulated industry in the country.  The task Obama faces is to cultivate a leadership style that will be useful in confronting the challenges he undertook when he assumed office:

For those center dwellers, the issue is not that Obama is too liberal or too pragmatic (the chief complaints of the noisemakers on the left and right), but that he is not effective enough.  They question whether he has what it takes to get results:  to find the right balance on health care, to admit and fix the inadequacies of the stimulus, to begin taming the deficit without impeding growth.  It is a crisis of confidence that at its heart is, as Brookings scholar and former Clinton adviser Bill Galston points out, a crisis of competence.

*   *   *

But regardless of the reasons, Obama signed up for these missions, and his ability to succeed in them will largely hinge on whether he can grow as a leader.  Can he overcome his inhibitions, whatever their cause, and learn from the legacies of our most effective presidents about how to wield the full power of his office?  He clearly knows how to don the velvet glove (often with substantial impact) — will he come to understand when to unleash the iron fist?

Obama’s pattern so far is far from encouraging.  But I would not give up hope for growth.

It appears as though we are back to the themes of “hope” and “change”.  This time we’re hoping that Obama will change.




That Sinking Feeling

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December 10, 2009

President Obama must have thought that a regimen of constant speechifying on television would maintain his popularity.  While enduring criticism from his fellow Democrats after his most recent speech on December 8, Obama must be aware that the poll numbers show how his continuous oration strategy is not working.  During these desperate economic times, the voters — even Obama’s own supporters — want more than speeches.  On December 1, poll results released by Rasmussen Reports not only revealed that the President’s approval rating sank to 48 percent — his disapproval rating actually reached 52 percent!  On December 9, Quinnipiac University published the results of a poll conducted during December 1 – 6.  The results gave the Preisdent a job approval rating of only 46 percent, and those disapproving Obama’s performance amounted to 44 percent.  Peter Brown, assistant director of the Quinnipiac University Polling Institute, discussed the results:

“President Barack Obama’s job approval rating continues to slide and it’s evident the deterioration stems from voter unhappiness over domestic policy matters,” Brown added.

American voters disapprove 54 – 41 percent of Obama’s handling of the economy, down from a 52 – 43 percent disapproval November 18 and his worst score ever on this issue.  The biggest shift is among Democrats who approve 71 – 24 percent, down from 77 – 18 percent three weeks ago.

The biggest drop in Obama’s overall approval is among independent voters, who disapprove 51 – 37 percent, down from 46 – 43 percent disapproval.

Although the health care issue had an impact on the poll’s results, the Quinnipiac team found that the deterioration in support for Obama resulted from those favoring the public option, despite the spin effort in many quarters to suggest that the poll revealed dissatisfaction with the public option itself:

Voters disapprove 52 – 38 percent of the health care reform proposal under consideration in Congress, and they disapprove 56 – 38 percent of President Obama’s handling of health care, down from 53 – 41 percent in a November 19 survey by the independent Quinnipiac (KWIN-uh- pe-ack) University.

But voters support 56 – 38 percent giving people the option of being covered by a government health insurance plan, compared to 57 -35 percent November 19.

The Ipsos/McClatchy Poll, taken during December 3 – 6, gave the President an even 49 – 49 percent split on his approval rating.  The interesting segment of these results was the breakdown on voter satisfaction concerning particular issues.  That section of the poll revealed that Obama received his highest “unsatisfactory” rating on the issue of  “jobs and the economy” with 45 percent giving the President an unsatisfactory grade (D or F) while only 36 percent gave him a satisfactory grade (A or B) and 19 percent gave him a C.

The disappointment expressed by Obama’s supporters concerning his handling of the economy was not limited to polling results.  Robert Reich, former Secretary of Labor during the Clinton administration, wrote a piece for his blog on December 8 entitled:  “The Preisdent’s Job Initiative Doesn’t Measure Up”.  Reich was not alone in his assessment of Obama’s performance to date:

No president in modern times walks a tightrope as exquisitely as this one.  His balance is a thing of beauty.  But when it comes to this economy right now — an economy fundamentally out of balance — we need a federal government that moves boldly and swiftly to counter-balance the huge recessionary forces still at large.

Reich implied that the time for the “balancing act” is over.  It is now time to solve problems:

The word in Washington is we’re out of the woods.  The rate of unemployment dipped from 10.2 percent in September to 10 percent in October.  In our nation’s capital, a one-month trend marks a turnaround.  Don’t believe it for a moment.  The real story of October was the increasing number of Americans who dropped out of the labor force, too discouraged even to look for work.

Whether or not one agrees with Reich’s proposal of spending $400 billion over a two-year period to put people back to work, even Reich’s opponents would likely agree with his assessment of Obama’s initiative:

We don’t know exactly how much the President is proposing to spend, but sources tell me it’s in the range of $70 billion, redirected from the $200 billion in TARP savings.  The President’s small, calibrated attempt to balance a stimulus with deficit reduction will in fact make the deficit worse over the long haul.  It postpones the day when we’re back to near full employment, when almost all Americans who need a job get paychecks on which they pay taxes.  This isn’t really balance at all.   It prolongs the economic imbalance.

At The New Republic, William Galston wrote a piece entitled “Obama Has a Problem Prioritizing his Agenda” which he began by discussing the importance of timing:

Timing is to politics what location is to real estate.  Good policy ideas are useless if the time is not right.

*   *   *

But the larger point is that the president is beginning to realign his agenda.

But he’s just beginning.  To complete the pivot and make 2010 the year of jobs, two other things must happen.  First, the White House must fully integrate the jobs focus into the president’s schedule.

*   *   *

Second, the legislative agenda for 2010 must reflect and reinforce the renewed focus on job creation.  That means postponing items that the American people are bound to regard as diversionary as long as unemployment remains high.

*   *   *

Great presidents from Lincoln to FDR have understood that “now or never” is the ultimate false choice in politics.  All too often, now means never.  The “fierce urgency of now” should be reserved for what is truly urgent.  As for the rest, patience is more than a virtue; it is a necessity.

On of my favorite centrist commentators, Dan Gerstein of Forbes.com, wrote a piece on Wednesday entitled:  “Obama Not Cutting It On The Economy”.  Although Gerstein began by complimenting Obama on his “balancing act”, he moved on to focus on the absence of “hope and change” promised during the election campaign.  As we have seen, Gerstein was not alone in emphasizing the need to immediately address this problem:

Indeed, we’re confronting an unprecedented combination of grave economic challenges that, while not as immediate as the financial collapse we avoided last fall, may be more consequential.

Gerstein explained how Obama’s initiative is a step in the right direction, but just a step, nonetheless:

The modest job-creation proposals the administration unveiled Tuesday individually have their merits, and they seem much more mission-focused than the mish-mashed stimulus bill that Congressional Democrats constructed.

*   *   *

That’s because the new jobs plan was not designed to be a policy game-changer but a political stopgap, to tide the public over and buy the White House time for the second half of the stimulus plan to kick in.  They are betting the national farm — soy beans to servers — that the old stimulus combined with the new “stimulus lite” will provide enough demand to spur enough new hiring to calm the country.

Gerstein provided a good explanation of the core difficulty the President faces in tackling the multitude of problems arising from the economic crisis:

This unwillingness to make tough decisions strikes me as arguably the worst leadership failure of the Obama presidency.  That’s in large part because cutting outlays and shifting resources would be such a relatively easy lift in this environment.  For starters the federal government is filled with programs and set-asides that are either outdated, wasteful, largely symbolic or designed to serve narrow interest groups.  And the administration (not to mention many think tanks) has already identified dozens of suitable targets in budget hit lists.  No one would be better positioned than Obama, given his baseline support on the left, to call for the elimination and reduction of programs that we can’t defend as national priorities at this moment.

*   *   *

This was the great missed opportunity of the president’s speech — the watchdog that didn’t bark.  He could have done more than repackage his economic policy; he could have helped restore public confidence in his leadership and our shared future.  Instead, the juggler-in-chief did the opposite of his Afghanistan speech — he settled for the safe play and in doing so dropped the most important ball.

That’s great advice!  If only the President would listen to it.




Awareness Abounds

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November 12, 2009

When I started this blog in April of 2008, my focus was on that year’s political campaigns and the exciting Presidential primary season.  At the time, I expressed my concern that the most prominent centrist in the race, John McCain, would continue pandering to the televangelist lobby after winning the nomination, when those efforts were no longer necessary.  He unfortunately followed that strategy and went on to say dumb things about the most pressing issue facing America in decades: the economy.  During the Presidential campaign of Bill Clinton, James Carville was credited with writing this statement on a sign in front of Clinton’s campaign headquarters in Little Rock:  “It’s the economy, stupid!”  That phrase quickly became the mantra of most politicians until the attacks of September 11, 2001 revealed that our efforts at national security were inadequate.  Since that time, we have over-compensated in that area.  Nevertheless, with the demise of Rudy Giuliani’s political career, the American public is not as jumpy about terrorism as it had been — despite the suspicious connections of the deranged psychiatrist at Fort Hood.  As the recent editorials by Steve Chapman of the Chicago Tribune and Vincent Carroll of The Denver Post demonstrate, the cerebral bat guano necessary to get the public fired-up for a vindictive rampage just isn’t there anymore.

President Obama’s failure to abide by the Carville maxim appears to be costing him points in the latest approval ratings.  The fact that the new President has surrounded himself with the same characters who helped create the financial crisis, has become a subject of criticism by commentators from across the political spectrum.  Since Obama’s Presidential campaign received nearly one million dollars in contributions from Goldman Sachs, he should have known we’d be watching.  CNBC’s Charlie Gasparino was recently interviewed by Aaron Task.  During that discussion, Gasparino explained that Jamie Dimon (the CEO of JP Morgan Chase and director of the New York Federal Reserve) has managed to dissuade the new President from paying serious attention to Paul Volcker (chairman of the Economic Recovery Advisory Board) whose ideas for financial reform would prove inconvenient for those “too big to fail” financial institutions.  As long as JP Morgan’s “Dimon Dog” and Lloyd Bankfiend of Goldman Sachs have such firm control over the puppet strings of “Turbo” Tim Geithner, Larry Summers and Ben Bernanke, why pay attention to Paul Volcker?  The voting public (as well as most politicians) can’t understand most of these economic problems, anyway.  I seriously doubt that many of our elected officials could explain the difference between a credit default swap and a wife swap.

Once again, Dan Gerstein of Forbes.com has directed a water cannon of common sense on the malaise blaze that has been fueled by a plague of ignorance.  In his latest piece, Gerstein tossed aside that tattered, obsolete handbook referred to as “conventional wisdom” to take a hard look at the reality facing all incumbent, national politicians:

It’s the stupidity about the economy in Washington and on Wall Street that’s driving most voters berserk.  Indeed, the financial system is still out of whack and tens of millions of people are (or fear they soon could be) out of work, yet every day our political and economic leaders say and do knuckleheaded things that show they are unfailingly and imperviously out of touch with those realities.

Gerstein’s short essay is essential reading for a quick understanding of how and why America can’t seem to solve many of its pressing problems these days.  Gerstein has identified the responsible culprits as three groups:  the Democrats, the Republicans and the big banks — describing them as the “axis of cluelessness”:

We have gone long past “they don’t get it” territory.  It’s now unavoidably clear that they won’t get it — and we won’t get the responsible leadership and honest capitalism we want–until (as I have suggested before) we demand it.

Surprisingly, public awareness concerning the root cause of both the financial crisis and our ongoing economic predicament has escalated to a startling degree in recent weeks.  This past spring, if you wanted to find out about the nefarious activities transpiring at Goldman Sachs, you had to be familiar with Zero Hedge or GoldmanSachs666.com.  Today, you need look no further than Maureen Dowd’s column or the most recent episode of Saturday Night Live.  Everyone knows what the problem is.  Gordon Gekko’s 1987 proclamation that “greed is good” has not only become an acceptable fact of life, it has infected our laws and the opinions rendered by our highest courts.  We are now living with the consequences.

Fortunately, there are plenty of people in the American financial sector who are concerned about the well-being of our society.  A recent study by David Weild and Edward Kim (Capital Markets Advisors at Grant Thornton LLP) entitled “A wake-up call for America” has revealed the tragic consequences resulting from the fact that the United States, when compared with other developed countries, has fallen seriously behind in the number of companies listed on our stock exchanges.  Here’s some of what they had to say:

The United States has been engaged in a longstanding experiment to cut commission and trading costs.  What is lacking in this process is the understanding that higher transaction costs actually subsidized services that supported investors.  Lower transaction costs have ushered in the age of  “Casino Capitalism” by accommodating trading interests and enabling the growth of day traders and high-frequency trading.

The Great Depression in Listings was caused by a confluence of technological, legislative and regulatory events — termed The Great Delisting Machine — that started in 1996, before the 1997 peak year for U.S. listings.  We believe cost cutting advocates have gone overboard in a misguided attempt to benefit investors.  The result — investors, issuers and the economy have all been harmed.

The Grant Thornton study illustrates how and why “as many as 22 million” jobs have been lost since 1997, not to mention the destruction of retirement savings, forcing many people to come out of retirement and back to work.  Beyond that, smaller companies have found it more difficult to survive and business loans have become harder to obtain.

Aside from all the bad news, the report does offer solutions to this crisis:

The solutions offered will help get the U.S. back on track by creating high-quality jobs, driving economic growth, improving U.S. competitiveness, increasing the tax base, and decreasing the U.S. budget deficit — all while not costing the U.S. taxpayer a dime.

These solutions are easily adopted since they:

  • create new capital markets options while preserving current options,
  • expand choice for consumers and issuers,
  • preserve SEC oversight and disclosure, including Sarbanes-Oxley, in the public market solution, and
  • reserve private market participation only to “qualified” investors, thus protecting those investors that  need protection.

These solutions would refocus a significant portion of Wall Street on rebuilding the U.S. economy.

The Grant Thornton website also has a page containing links to the appropriate legislators and a prepared message you can send, urging those legislators to take action to resolve this crisis.

Now is your chance to do something that can help address the many problems with our economy and our financial system.  The people at Grant Thornton were thoughtful enough to facilitate your participation in the resolution of this crisis.  Let the officials in Washington know what their bosses — the people — expect from them.




Pay More Attention To That Man Behind The Curtain

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October 15, 2009

Reading the news these days can cause so much aggravation, I’m surprised more people haven’t pulled out all of their hair.  Regardless of one’s political perspective, there is an inevitable degree of outrage experienced from revelations concerning the role of government malfeasnace in causing and reacting to the financial crisis.  We have come to rely on satire to soothe our anger.  (For a good laugh, be sure to read this.)  Fortunately, an increasing number of commentators are not only exposing the systemic problems that created this catastrophe – they’re actually suggesting some good solutions.

Robert Scheer, editor of Truthdig, recently considered the idea that the debate over healthcare reform might just be a distraction from the more urgent need for financial reform:

The health care issue should never even have been brought up at a time when the economy is reeling and we are running such immense deficits to shore up the banks.  Instead of fixing the economy by saving Americans’ homes and jobs, we are preoccupied with pie-in-the-sky rhetoric on a hot issue that should have been addressed in calmer times.  It came up now because, despite all the hoary partisan posturing, it is a safer subject than the more pressing issue of what to do with Citigroup, AIG and General Motors, which the taxpayers happen to own but do not control.  While Treasury Secretary Timothy Geithner plots in secret with the top bankers who got us into this mess, we are focused on the perennial circus of so-called health care reform.

There is an odd disconnect between the furious public debate over health care reform, with its emphasis on the cost of an increased government role, and the nonexistent discussion about the far more expensive and largely secretive government program to bail out Wall Street.  Why the agitation over the government spending $83 billion a year on health care when at least 20 times that amount has been thrown at the creators of the ongoing financial crisis without any serious public accountability?  On Wednesday, the Wall Street Journal reported that employees of the financial industry that we taxpayers saved are slated to be paid a record $140 billion this year.

Remember, taxpayers:  That $140 billion is your money.  The bailed-out institutions may claim to have repaid their TARP obligations, but they also received trillions in loans from the Federal Reserve — and Ben Bernanke refuses to disclose which institutions received how much.

William Greider wrote a superb essay for the October 26 issue of The Nation, emphasizing the importance of the work undertaken by the Financial Crisis Inquiry Commission, led by Phil Angelides, as well as the investigation being done by the House Committee on Oversight and Government Reform:

Even if Congress manages to act this fall, the debate will not end.  Obama’s plan does not begin to get at the rot in the financial system.  Wall Street’s most notorious practices continue to flourish, and if unemployment rates keep rising through 2010, the public will not set aside its anger.  The Angelides investigators could put the story back on the front page.

*  *  *

Beyond Ponzi schemes and deceitful mortgage lending, a far larger crime may lurk at the center of the crisis — wholesale securities fraud.  “Risk models” reassured unwitting investors who bought millions of bundled mortgage securities and derivatives like credit-default swaps.  But as Christopher Whalen of Institutional Risk Analytics has testified, many of the models lacked real-life markets where they could be tested and verified.  “Clearly, we have now many examples where a model or the pretense of a model was used as a vehicle for creating risk and hiding it,” Whalen said.  “More important, however, is the role of financial models for creating opportunities for deliberate acts of securities fraud.”  That’s what investigators can examine.  What did the Wall Street firms know about the reliability of these models when they sold the securities?  And what did they tell the buyers?

*  *  *

Surely the political system itself is a root cause of the financial crisis.  The swollen influence of financial interests pushed Congress and presidents to repeal regulation and look the other way as reckless excesses developed.  Efforts to restore a more reliable representative democracy can start with Congress.  The power of money could be curbed by new rules prohibiting members of key committees from accepting contributions from the sectors they oversee.  Regulatory agencies, likewise, need internal designs to protect them from capture by the industries they regulate.

The Federal Reserve, having failed in its obligations so profoundly, should be reconstituted as an accountable federal agency, shorn of the excessive secrecy and insider privileges accorded to bankers.  The Constitution gives Congress, not the executive branch, the responsibility for managing money and credit.  Congress must reassert this responsibility and learn how to provide adequate oversight and policy critique.

Reforming the financial system, in other words, can be the prelude to reviving representative democracy.

At The Huffington Post, Robert Borosage warned that the financial industry is waging a huge lobbying battle to derail any attempts at financial reform.  Beyond that, the banking lobbyists will re-write any legislation to make it more favorable to their own objectives:

The banking lobby is nothing if not shameless.  They hope to use the reforms to WEAKEN current law.  They are pushing to make the federal standard the ceiling on reform, stripping the power of states to have higher standards.  Basically, they are hoping to find a way to shut down the independent investigations of state attorneys general like New York’s Eliot Spitzer and Andrew Cuomo or Illinois’ Lisa Madigan.

*  *  *

Historically, the banks, as Senator Dick Durbin decried in disgust, “own the place.”  And they’ve succeeded thus far in frustrating reform, even while pocketing literally hundreds of billions in support from taxpayers.

*  *  *

But this time it could be different.  Backroom deals are no longer safe.  Americans have been fleeced of trillions in the value of their homes and their savings because of Wall Street’s reckless excesses.  Then as taxpayers, they were extorted to ante up literally trillions more to forestall economic collapse by bailing out the banking sector.  Insult was added to that injury when the Federal Reserve refused to tell the Congress who got the money and on what terms.

Legislators would be well advised to understand the cozy old ways of doing business are no longer acceptable.  Americans are livid and paying attention.  Legislators who rely on Wall Street to finance their campaigns and then lead the effort to block or dilute reforms will discover that their constituents know what they have been up to.  Organizations like my own Campaign for America’s Future, the Sunlight Foundation, Americans for Financial Reform, Huffington Post bloggers will make certain the word gets out.  Legislators may discover that Wall Street’s money is a burden, not a blessing.

The most encouraging article I have seen came from Dan Gerstein of Forbes.  His perspective matched my sentiments exactly.  Looking through President Obama’s empty rhetoric, Mr. Gerstein helped provide direction and encouragement to those of us who are losing hope that our dysfunctional government could do anything close to addressing our nation’s financial ills:

The Changer-in-Chief long ago gave up on the idea of dismantling and remaking the crazy-quilt regulatory system that Wall Street (along with its Washington enablers) rigged for its own enrichment at everyone else’s expense.

*  *  *

Instead, Team Obama opted to move around the deck chairs within the existing bureaucracy, daftly hoping this conformist approach would be enough to prevent another titanic meltdown.

*  *  *

In the end, though, the key to success will be countering Wall Street’s influence and putting the politicians’ feet to the ire.  Members of Congress need to know there will be consequences for sticking with the status quo.      . . .  Make clear to every incumbent: Endorse our plan and we’ll give you money and public support; back the banks, and we will run ads against you telling voters you are for corrupt capitalism.

As I have said before, this is all about power.  Right now, Wall Street has the political playing field to itself; it has the money, the access it buys and the fear it implies.  And the public is on the outside, looking incredulous that this rigged system is still in place more than a year after it was exposed.  But if the frustrated middle can organize and mobilize a focused, non-partisan revolt of the revolted — as opposed to the inchoate and polarizing tea party movement — that whole dynamic will quickly change.  And so too, I’m confident, will the voting habits of our elected officials.

Fortunately, individuals like Dan Gerstein are motivating people to stand up and let our elected officials know that they work for the people and not the lobbyists.  Larry Klayman, founder of Judicial Watch, has just written a new book:  Whores: Why And How I Came To Fight The Establishment.  The timing of the book’s release could not have been better.




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Spread The Word

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September 29, 2009

I’ve seen quite a few articles and broadcasts from “mainstream” news sources during the past few weeks that have actually made me feel encouraged about the public’s response to the financial crisis and our current economic predicament.  Six months ago, the dirty picture of what caused last year’s near-meltdown and what has continued to prevent the necessary reforms, was something one could find only by reading a relatively small number of blogs.  Michael Panzner wrote a book entitled Financial Armageddon in 2006, predicting what many “experts” later described as unforeseeable.  Mr. Panzner now has a blog called Financial Armageddon (as well as another: When Giants Fall).  At his Financial Armageddon website, Mr. Panzner has helped ease the pain of the economic catastrophe with a little humor by educating his readers on some novel measurements of our recession level — such as the increased use of hair dye and “The Hot Waitress Index”.   (He ran another great posting about the increasing number of disastrous experiences for people who tried to save money by cutting their own hair.)   Meanwhile, Matt Taibbi has continued to serve as a gadfly against crony capitalism.   Zero Hedge keeps us regularly apprised of the suspicious activities in the equities and futures markets, which are of no apparent concern to regulatory officials.   Some bloggers, including Jr Deputy Accountant, have criticized the manic money-printing and other inappropriate activities at the Federal Reserve — which resists all efforts at oversight and transparency.  One no longer experiences the stigma of “conspiracy theorist” by accepting the view that our financial and economic problems were caused primarily by regulatory failure.

On September 23, Dan Gerstein wrote a piece for Forbes, about the impressive, 25-page article concerning last year’s financial crisis, written by James Stewart for The New Yorker, entitled:   “Eight Days”.  At the outset, Mr. Gerstein noted how the New Yorker article provided the reader with some shocking insight on someone we all thought we knew pretty well:

But the biggest eye-opener was that the most incisive and damning questions raised by any of our leaders during this existential crisis came from none other than the era’s top free-market cheerleader in Washington, George W. Bush.

*   *   *

Paulson and Bernanke alerted Bush that AIG was about to fail, warned of the massive ripple effect AIG going bust would have on the global economy, and explained why the Fed could not intervene with an insurance company to stop this systemic threat.  In response, Bush asked  “How have we come to the point where we can’t let an institution fail without affecting the whole economy?”

The question raised by President Bush is still tragically apt, since nothing has been accomplished in the past year to break up or downsize those institutions considered “too big to fail”.  Mr. Gerstein’s experience from reading the New Yorker article helped reinforce the understanding that our current situation is not only the result of regulatory failure, but it’s also a by-product of something called “regulatory capture” –  wherein the regulators are beholden to those whom they are supposed to regulate:

Once disaster was averted and the system stabilized, Paulson, Geithner and Bernanke had no excuse for not laying down the law to Wall Street — figuratively and literally — in the ensuing weeks.  By that I mean restructuring the deals we struck with the banks to get far better returns for taxpayers and rewriting the rules governing the financial system to prevent them from ever thinking they could gamble risk-free with our money again.

*   *   *

There’s no apparent sense of apartness or independence between regulator and regulated.  To the contrary, there’s a power imbalance in the wrong direction, with the regulators dependent on and even at the mercy of the regulated.  What does it say about the integrity and even the sanity of this system when the doctors have to ask the inmates how to restructure their treatments?

I was particularly impressed by Dan Gerstein’s closing remarks in the Forbes piece.  It was encouraging to see another commentary in a mainstream media source, consistent with the ranting I did here, here and here.  Mr. Gerstein expressed dismay at the lack of attention given to the unpleasant truth that we live in a plutocracy which won’t be changed until the people demand it:

That’s why I was so disappointed to find Stewart’s epic article buried in the elite pages of the New Yorker.  It should have been serialized on the front pages of every newspaper in the country last week, so every American would be reminded in full detail of just how warped and rigged our financial system has been — and why it still is.  Maybe then it might sink in that getting mad won’t get us even in the power struggle with the financial elites for control of our economy, and that change won’t happen until taxpayers demand it.  You want public accountability for Wall Street?  Let’s start with an accountable public.

Each time an article such as Dan Gerstein’s “Too Close For Comfort” gets widespread exposure, we move one step closer to the point where we have an informed, accountable public.  It’s unfortunate that his commentary was buried in the elite pages of Forbes.  That’s why I have it here.  Spread the word.




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