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Democrats Share The Blame

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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.


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Tool-Trashing Time

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I never liked Joe “The Tool” Lieberman.  If you run that name (nickname included) on the search bar at the upper-right corner of this page, you will find a total of 13 previous entries wherein I discussed him in uncomplimentary terms.  What bugs me most about Lieberman is that so many people consider him as the personification of centrism.  I believe that Lieberman gives centrism a bad name because he is simply an opportunist.    The guy doesn’t really appear to stand for anything in particular – he is simply a tool for whatever lobbyist or other interest group is willing to play his quid pro quo game.  After Lieberman lost the Democratic Primary for his Senate seat in 2006, he chose to run as an Independent and in the process, he betrayed those individuals who contributed to his election campaign, believing that Lieberman would champion the causes he advanced before he had to sell his soul to Bush and Cheney in order to save his political hide.  It was only because Ned Lamont (the man who defeated him in the Democratic Primary) came down with a bad case of  The Smug – spending more time vacationing than campaigning for the November election – that Lieberman managed to win a fourth term as junior Senator from Connecticut.

Needless to say, Emily Bazelon’s recent article for Slate, “Good Riddance, Joe Lieberman – Why I loathe my Connecticut Senator” was a real treat.  It was nice to see that a good number of people were as thrilled as I to hear that The Tool was calling it quits.  While discussing the celebratory outpouring of enthusiasm by anti-Lieberman-ites Ms. Bazelon mentioned this:

Another friend, Judy Chevalier, burned up her iPad tonight when I asked her to enumerate why she hates Joe Lieberman.  She ticked off a half-dozen reasons and then said, “The thing is, I did not come up with most of these myself.  They come from many rounds of playing the peculiar Connecticut liberal cocktail party game ‘I hated Joe Lieberman before you hated Joe Lieberman.’ ”  Longtime Lieberman haters, she says, look all the way back to 1993, when Lieberman led a hedge-fund-friendly charge in the Senate against the Financial Accounting Standards Board, which at the time wanted to close the accounting loophole that let corporations duck the recording of stock options on their balance sheets.

As an aside, the first half of that passage was characterized as “the money quote” by the Red State blog and other far-right commentators, anxious to avenge Sarah Palin since her “crosshairs” SarahPac campaign ad was criticized after the attempted assassination of Representative Gabrielle Giffords.  The magic word, “hate” gave the hard right the opportunity to argue that “liberals hate politicians, too”.  Actually, the real “money quote” can be found by clicking on the highlighted language discussing the fight over the Financial Accounting Standards Board rules:

Corporate America aligned with the accounting industry to fight the FASB proposal, with the result that in 1994, the Senate, led by Senator Joseph Lieberman (D-Conn.), passed a non-binding resolution condemning the proposal by a vote of 88-to-9.

“It wasn’t an accounting debate,” says Jim Leisenring, the vice chairman of FASB from 1988 to 2000.  “We switched from talking about, ‘Have we accurately measured the option?’ or, ‘Have we expensed the option on the proper date?’ to things like, ‘Western civilization will not exist without stock options,’ or, ‘There won’t be jobs anymore for people without stock options.’ … People tried to take the argument away from the accounting to be just plainly a political argument.”

Does that rhetoric sound familiar?

After his 2006 victory, Lieberman continued to betray the people of Connecticut by abandoning his duties in the Senate to follow John McCain all along the 2008 campaign trail (including McCain’s trip to Afganistan) in the hope of securing a place for himself in the would-be McCain administration.  The Tool knew he would never win a fifth term in the Senate.  His only hope was to latch on to McCain’s pantsleg and hang on for dear life.  In the wake of that fiasco, The Tool’s approval rating continued to slide and by October of 2010, it was down to 31 percent.  A fifth term in the Senate was definitely out of the question.  His campaign war chest could be put to better uses – such as buying “friendships” before beginning a new career as a lobbyist.

Despite Lieberman’s crucial effort in the repeal of the military’s “don’t ask – don’t tell” policy, it is interesting to observe how many gay people are willing to overlook that good deed while celebrating Lieberman’s retirement.  A review of the comments at the joemygod blog exposes these reactions:

Good riddance.  DADT capped an otherwise awful career as a spoiler.

*   *   *

Thanks for DADT, but not terribly sorry you’re leaving the Senate.  And I really didn’t want the anxiety of watching a 3-way race in CT, which might have sent a wingnut from the Right to the Senate.

*   *   *

good riddance to the man who killed the public option to satisfy his insurance industry friends in Connecticut. a terrible person

So much for that legacy thing   .   .   .

Daniela Altimari of The Hartford Courant’s CapitolWatch blog, revealed a wide spectrum of reactions to Lieberman’s announcement.  As one might expect, the remarks from politicians were painfully cordial, polite and not worth our time here.  I’ll provide you with two of the more interesting quotes:

“Joe Lieberman took millions from insurance companies, Wall Street banks, and other corporate interests – and then did their dirty work in Congress, including killing the public option.  As a result, Lieberman’s poll numbers were disastrous in Connecticut.  His decision to quit in the face of assured defeat is a huge victory for the progressive movement and all Americans who want Democrats to put regular families ahead of corporate interests.”

—  Keauna Gregory, Progressive Change Campaign Committee

*   *   *

“Of all the horrible things Joe Lieberman has done in his hideous career, depriving everyone of the joy at seeing him lose is near the top”

—  Glenn Greenwald of Salon (via Twitter)

The Connecticut Mirror provided these reactions:

“It’s the first thing he’s done in 10 years to make Connecticut Democrats completely happy.”

—  Bill Curry, former state comptroller, as quoted in The New York Times

*   *   *

“He couldn’t leave the Senate fast enough as far as I’m concerned. He’s not only driving Democrats nuts down here, but he’s become a right-wing extremist on everything except the environment and gay rights.”

—  Ralph Nader, as quoted in The Hartford Courant

*   *   *

“He will leave behind a long list of achievements, from helping to consolidate the nation’s intelligence gathering services in a way that appears to make it more difficult to gather intelligence, to threatening to filibuster the health care reform act until it had been watered down to suit his own high principles.  You will find it all in my upcoming book, ‘Everything Bad Is Joe Lieberman’s Fault.’ ”

—  Gail Collins, writing in The New York Times

As we approach The Tool’s final days in the Senate, I will be looking forward to similar tributes.


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