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Why Bad Publicity Never Hurts Goldman Sachs

March 8th, 2012 Posted in Uncategorized

Mar, 08 2012

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My last posting focused on the widely-publicized research conducted by Stéphane Côté, PhD, Associate Professor of Organizational Behavior at the University of Toronto’s Rotman School of Management, who worked with a team of four psychologists from the University of California at Berkeley to conduct seven studies on a rather timely subject. Their article, “Higher social class predicts increased unethical behavior” was published in the February 27 issue of the Proceedings of the National Academy of Sciences (PNAS). The following excerpt from the abstract of their paper provides the general theme of what their efforts revealed:

. . . investigation revealed upper-class individuals were more likely to exhibit unethical decision-making tendencies (study 3), take valued goods from others (study 4), lie in a negotiation (study 5), cheat to increase their chances of winning a prize (study 6), and endorse unethical behavior at work (study 7) than were lower-class individuals.

I began my discussion of that paper by looking back at a Washington Post opinion piece entitled, “Angry about inequality? Don’t blame the rich”. The essay was written last January by James Q. Wilson (who passed away on March 2). On March 4, William K. Black took a deeper look at the legacy of James Q. Wilson, which provided a better understanding of why Wilson would champion the “Don’t blame the rich” rationale. As Bill Black pointed out, Wilson was a political scientist, known best for his theory called “broken windows” – a metaphor based on a vacant building with a few broken windows, which quickly has all of its windows broken because petty criminals feel emboldened to damage a building so neglected by its owners. Bill Black emphasized that Wilson was exclusively preoccupied with minor, “blue collar” crimes. Black noted that in a book entitled, Thinking About Crime, Wilson expressed tolerance for “some forms of civic corruption” while presenting an argument that criminology “should focus overwhelmingly on low-status blue collar criminals”. Bill Black went on to explain how Wilson’s blindness to the relevance of the “broken windows” concept, as it related to “white collar” crime, resulted in a missed opportunity to attenuate the criminogenic milieu which led to the 2008 financial crisis:

Wilson emphasized that it was the willingness of society to tolerate relatively minor blue collar crimes that led to social disintegration and epidemics of severe blue collar crimes, but he engaged in the same willingness to tolerate and excuse less severe white collar crimes. He predicted in his work on “broken windows” that tolerating widespread smaller crimes would lead to epidemic levels of larger crimes because it undermined community and social restraints. The epidemics of elite white collar crime that have driven our recurrent, intensifying financial crises have proven this point. Similarly, corruption that is excused and tolerated by elites is unlikely to remain at the level of “a few deals.” Corruption is likely to spread in incidence and severity precisely because it undermines community and the rule of law and it is likely to grow more pervasive and harmful the more we “tolera[te]” it.

*   *   *

Taking Wilson’s “broken windows” reasoning seriously in the elite white collar crime context would require us to take a series of prophylactic measures to restore integrity and strengthen peer pressures against misconduct. Indeed, we have implicitly tested the applicability of “broken windows” reasoning in that context by adopting policies that acted directly contrary to Wilson’s reasoning. We have adopted executive and professional compensation systems that are exceptionally criminogenic.

*   *   *

Fiduciary duties are critical means of preventing broken windows from occurring and making it likely that any broken windows in corporate governance will soon be remedied, yet we have steadily weakened fiduciary duties. For example, Delaware now allows the elimination of the fiduciary duty of care as long as the shareholders approve. Court decisions have increasingly weakened the fiduciary duties of loyalty and care. The Chamber of Commerce’s most recent priorities have been to weaken Sarbanes-Oxley and the Foreign Corrupt Practices Act. We have made it exceptionally difficult for shareholders who are victims of securities fraud to bring civil suits against the officers and entities that led or aided and abetted the securities fraud.

*   *   *

In the elite white collar crime context we have been following the opposite strategy of that recommended under “broken windows” theory. We have been breaking windows. We have excused those who break the windows. Indeed, we have praised them and their misconduct. The problem with allowing broken windows is far greater in the elite white collar crime context than the blue collar crime context.

To find a “poster child” example for the type of errant fiduciary behavior which owes its existence to Wilson’s misapplication of the “broken windows” doctrine, one need look no further than Matt Taibbi’s favorite “vampire squid”: Goldman Sachs. One would think that after Taibbi’s groundbreaking, 2009 tour de force about Goldman’s involvement in the events which led to the financial crisis . . . and after the April 2010 Senate Permanent Subcommittee on Investigations hearing, wherein Goldman’s “Fab Four” testified about selling their customers the Abacus CDO and that “shitty” Timberwolf deal, the firm would at least try to keep a lower profile these days. Naaaaw!

Goldman Sachs has now found itself in the crosshairs of a man, formerly accused of carrying water for the firm – Andrew Ross Sorkin. Sorkin’s March 5 DealBook article for The New York Times upbraided Goldman for its flagrant conflict of interest in a deal where the firm served as an adviser to an oil (and natural gas) pipeline company, El Paso, which was being sold to Houston-based Kinder Morgan for $21.1 billion. Goldman owned a 19.1 percent stake in Kinder Morgan at the time. Andrew Ross Sorkin quoted from the script which Goldman CEO, Lloyd Blankfein read to El Paso’s CEO, Douglas Foshee, wherein Blankfein confirmed that Foshee was aware of Goldman’s investment in Kinder Morgan. It was refreshing to see a bit of righteous indignation in Sorkin’s discussion of the dirty details behind this transaction:

When the deal was announced, buried at the end of the news release was a list of Wall Street banks that had advised on the deal, including Goldman Sachs. Goldman received a $20 million fee for playing matchmaker for El Paso. The fee, of course, was not disclosed, nor was the Kinder Morgan stake owned by Goldman Sachs’s private equity arm, worth some $4 billion. Nor did the release disclose that the Goldman banker who advised El Paso to accept Kinder Morgan’s bid owned $340,000 worth of Kinder Morgan stock.

Now, however, a court ruling in a shareholder lawsuit has laid bare the truth: Goldman was on every conceivable side of the deal. As a result, El Paso may have unwittingly sold itself far too cheaply. Mr. Blankfein may have said he was “very sensitive to the appearance of conflict,” but the judge’s order ruling “reluctantly” against a motion to block the merger made it clear that Goldman’s conflicts went far beyond mere appearances.

Here’s just one example: In an effort to help mitigate its clear conflict, Goldman Sachs recommended that El Paso hire an additional adviser so that El Paso would be able to say that it had received completely impartial advice. Goldman did not say it would step down, and lose its fee, it simply suggested that El Paso hire one more bank – in this case, Morgan Stanley.

After explaining that Goldman included a provision in the deal that Morgan Stanley would get paid only if El Paso agreed to the sale to Kinder Morgan, Sorkin expressed this reaction:

Goldman’s brazenness in this deal is nothing short of breathtaking.

Goldman’s conflict of interest in the El Paso deal was also the subject of an article by Matthew Philips of Bloomberg BusinessWeek. Mr. Philips reminded us of whom we have to thank for “helping Greece dupe regulators by disguising billions of dollars’ worth of sovereign debt”:

New details have also emerged about Goldman’s role in helping Greece hide its debt so it could qualify for membership in the European Union. In a Bloomberg News story out this week, Greek officials talk about how they didn’t truly understand the complex swaps contracts they were buying from Goldman bankers from 2001 to 2005, and that each time Goldman restructured the deal, things got worse for Greece.

The story reads like a cautionary tale of a homeowner who keeps returning to the same contractor to repair the damage done by the previous fix-it job. At one point, Goldman prohibited Greece’s debt manager, Christoforos Sardelis, from seeking outside price quotes on the complicated derivatives Goldman was selling to Greece.

* * *

Yet Goldman’s sullied reputation doesn’t appear to be negatively impacting its business. In fact, Goldman is outpacing its Wall Street competition recently in key areas of business. In 2011, Goldman was the top adviser for both global M&A and equity IPOs. A Bloomberg survey of traders, investors, and analysts last May showed that while 54 percent of respondents had an unfavorable opinion of Goldman, 78 percent believed that allegations it duped clients and misled Congress would have no material effect on its business.

In other words: Goldman Sachs keeps breaking windows and nobody cares. Thanks for nothing, James Q. Wilson!

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Scientists Bust the Top One Percent

March 5th, 2012 Posted in Uncategorized

Mar, 05 2012

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Ever since the Occupy Wall Street movement began last fall, we have been hearing the incessant mantra of: Don’t blame the rich for wealth inequality. In fact, Herman Cain’s futile bid for the Presidency was based (in part) on that very theme. Last January, James Q. Wilson (who passed away on Friday) wrote an opinion piece for The Washington Post entitled, “Angry about inequality? Don’t blame the rich”. Paul Buchheit of the Common Dreams blog rebutted Wilson’s essay with this posting: “So say the rich: ‘Don’t blame us for having all the money!’ ”. How often have you read and heard arguments from apologists for the Wall Street banksters, upbraiding those who dared speak ill of those sanctified “job creators” within the top one percent of America’s economic strata?

Finally, a group of scientists has intervened by conducting some research about the ethics of those at the top of America’s socioeconomic food chain. Stéphane Côté, PhD, Associate Professor of Organizational Behavior at the University of Toronto’s Rotman School of Management, worked with a team of four psychologists from the University of California at Berkeley to conduct seven studies on this subject. Their paper, “Higher social class predicts increased unethical behavior” was published in the February 27 issue of the Proceedings of the National Academy of Sciences (PNAS). Here is the abstract:

Seven studies using experimental and naturalistic methods reveal that upper-class individuals behave more unethically than lower-class individuals. In studies 1 and 2, upper-class individuals were more likely to break the law while driving, relative to lower-class individuals. In follow-up laboratory studies, upper-class individuals were more likely to exhibit unethical decision-making tendencies (study 3), take valued goods from others (study 4), lie in a negotiation (study 5), cheat to increase their chances of winning a prize (study 6), and endorse unethical behavior at work (study 7) than were lower-class individuals. Mediator and moderator data demonstrated that upper-class individuals’ unethical tendencies are accounted for, in part, by their more favorable attitudes toward greed.

The impact and the timing of this article, with respect to the current debate over income inequality, have resulted in quite a bit of interesting commentary. I enjoyed the perspective of Peter Dorman at the Econospeak blog:

The tone of the first wave of commentary, as far as I can tell, is that we knew it all along – rich people are nasty. I would like to put in a word, however, for the other direction of causality, that dishonesty and putting one’s own interests ahead of others are conducive to wealth.

* * *

The reason I bring this up is because there is a constant background murmur in our society that says that greater wealth has to be a reward for more talent, more effort or more contribution to society.

Most of the commentary written about the PNAS article has been relatively non-partisan. Two-day access for reading the article on-line will cost you ten bucks. For those of us who can’t afford that (as well as for those who can afford it – but are too greedy to pay for anything) I have assembled a number of excerpts from articles written by those who actually read the entire scientific paper. The following passages will provide you with some interesting details about the research conducted by this group.

Christopher Shea of The Wall Street Journal gave us a brief peek at some of the specific findings of the studies conducted by this team.

It went so far as to show that higher-class people will literally take candy from the mouths of children.

An excerpt quoted by Shea illustrated how the group expanded on an observation made by French sociologist Émile Durkheim:

“From the top to the bottom of the ladder, greed is aroused,” Durkheim famously wrote. Although greed may indeed be a motivation all people have felt at points in their lives, we argue that greed motives are not equally prevalent across all social strata.

Brandon Keim of Wired offered us more research data from the article, while focusing on the observations of team member Paul Piff, a Berkeley psychologist:

“This work is important because it suggests that people often act unethically not because they are desperate and in the dumps, but because they feel entitled and want to get ahead,” said evolutionary psychologist and consumer researcher Vladas Griskevicius of the University of Minnesota, who was not involved in the work. “I am especially impressed that the findings are consistent across seven different studies with varied methodologies. This work is not just good science, but it is shows deeper insight into the reasons why people lie, cheat, and steal.”

According to Piff, unethical behavior in the study was driven both by greed, which makes people less empathic, and the nature of wealth in a highly stratified society. It insulates people from the consequences of their actions, reduces their need for social connections and fuels feelings of entitlement, all of which become self-reinforcing cultural norms.

“When pursuit of self-interest is allowed to run unchecked, it can lead to socially pernicious outcomes,” said Piff, who noted that the findings are not politically partisan. “The same rules apply to liberals and conservatives. We always control for political persuasion,” he said.

For Thomas B. Edsall of The New York Times, the research performed by this group helped explain the rationale behind a bit of Republican campaign strategy:

Republicans recognize the political usefulness of objectification, capitalizing on “compassion fatigue,” or the exhaustion of empathy, among large swathes of the electorate who are already stressed by the economic collapse of 2008, high levels of unemployment, an epidemic of foreclosures, stagnant wages and a hyper-competitive business arena.

Compassion fatigue was fully evident in Rick Santelli’s 2009 rant on CNBC denouncing a federal plan to prop up “losers’ mortgages” at taxpayer expense, a rant that helped spark the formation of the Tea Party. Republican debates provided further evidence of compassion fatigue when audiences cheered the record-setting use of the death penalty in Texas and applauded the prospect of a gravely ill pauper who, unable to pay medical fees, was allowed to die.

Jonathan Gitlin of Ars Technica reported on some of the juicy details from a few experiments. When reading about my favorite experiment, keep in mind that the term “SES” refers to socioeconomic status.

Study number four involved participants rating themselves on the SES scale to heighten their perception of status; they were then answered a number of questions relating to unethical behavior. At the end of the experiment, they were presented with a jar of individually wrapped candy and told that, although it was for children in a nearby lab, they could take some if they wanted. At this point you might be able to guess what the results were. High SES participants took more candy.

Gitlin concluded his review of the paper with this thought:

The researchers argue that “the pursuit of self-interest is a more fundamental motive among society’s elite, and the increased want associated with greater wealth and status can promote wrongdoing.” However, they point out that their findings aren’t absolute, and that philanthropic efforts such as those of Bill Gates and Warren Buffet buck the observed trend, as does research which has shown a relationship between poverty and violent crime.

Meanwhile, the debate over economic inequality continues to rage on through the 2012 election cycle. It will be interesting to observe whether this scientific report is exploited to bolster the argument that most of the one-percenters suffer from a character flaw, which not only got them where they are today – but which is shared by their kleptocratic comrades, who have facilitated a system of legalized predation.

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Occupy Movement Gets Some Respect

February 16th, 2012 Posted in Uncategorized

Feb, 16 2012

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Much has changed since the inception of the Occupy Wall Street movement. When the occupation of Zuccotti Park began on September 17, the initial response from mainstream news outlets was to simply ignore it – with no mention of the event whatsoever. When that didn’t work, the next tactic involved using the “giggle factor” to characterize the protesters as “hippies” or twenty-something “hippie wanna-bes”, attempting to mimic the protests in which their parents participated during the late-1960s. When that mischaracterization failed to get any traction, the presstitutes’ condemnation of the occupation events – which had expanded from nationwide to worldwide – became more desperate: The participants were called everything from “socialists” to “anti-Semites”. Obviously, some of this prattle continues to emanate from unimaginative bloviators. Nevertheless, it didn’t take long for respectable news sources to give serious consideration to the OWS effort.

One month after the occupation of Zuccotti Park began, The Economist explained why the movement had so much appeal to a broad spectrum of the population:

So the big banks’ apologies for their role in messing up the world economy have been grudging and late, and Joe Taxpayer has yet to hear a heartfelt “thank you” for bailing them out. Summoned before Congress, Wall Street bosses have made lawyerised statements that make them sound arrogant, greedy and unrepentant. A grand gesture or two – such as slashing bonuses or giving away a tonne of money – might have gone some way towards restoring public faith in the industry. But we will never know because it didn’t happen.

Reports eventually began to surface, revealing that many “Wall Street insiders” actually supported the occupiers. Writing for the DealBook blog at The New York Times, Jesse Eisinger provided us with the laments of a few Wall Street insiders, whose attitudes have been aligned with those of the OWS movement.

By late December, it became obvious that the counter-insurgency effort had expanded. At The eXiled blog, Yasha Levine discussed the targeting of journalists by police, hell-bent on squelching coverage of the Occupy movement. In January, New York Mayor Michael Bloomberg lashed out against the OWS protesters by parroting what has become The Big Lie of our time. In response to a question about Occupy Wall Street, Mayor Bloomberg said this:

“It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

The counterpunch to Mayor Bloomberg’s remark was swift and effective. Barry Ritholtz wrote a piece for The Washington Post entitled “What caused the financial crisis? The Big Lie goes viral”. After The Washington Post published the Ritholtz piece, a good deal of supportive commentary emerged – as observed by Ritholtz himself:

Since then, both Bloomberg.com and Reuters each have picked up the Big Lie theme. (Columbia Journalism Review as well). In today’s NYT, Joe Nocera does too, once again calling out those who are pushing the false narrative for political or ideological reasons in a column simply called “The Big Lie“.

Once the new year began, the Occupy Oakland situation quickly deteriorated. Chris Hedges of Truthdig took a hard look at the faction responsible for the “feral” behavior, raising the question of whether provocateurs could have been inciting the ugly antics:

The presence of Black Bloc anarchists – so named because they dress in black, obscure their faces, move as a unified mass, seek physical confrontations with police and destroy property – is a gift from heaven to the security and surveillance state.

Chris Hedges gave further consideration to the involvement of provocateurs in the Black Bloc faction on February 13:

Occupy’s most powerful asset is that it articulates this truth. And this truth is understood by the mainstream, the 99 percent. If the movement is severed from the mainstream, which I expect is the primary goal of the Department of Homeland Security and the FBI, it will be crippled and easily contained. Other, more militant groups may rise and even flourish, but if the Occupy movement is to retain the majority it will have to fight within self-imposed limitations of nonviolence.

Despite the negative publicity generated by the puerile pranks of the Black Bloc, the Occupy movement turned a corner on February 13, when Occupy the SEC released its 325-page comment letter concerning the Securities and Exchange Commission’s draft “Volcker Rule”. (The Volcker Rule contains the provisions in the Dodd-Frank financial reform act which restrict the ability of banks to make risky bets with their own money). Occupy the SEC took advantage of the “open comment period” which is notoriously exploited by lobbyists and industry groups whenever an administrative agency introduces a new rule. The K Street payola artists usually see this as their last chance to “un-write” regulations.

The most enthusiastic response to Occupy the SEC’s comment letter came from Felix Salmon of Reuters:

Occupy the SEC is the wonky finreg arm of Occupy Wall Street, and its main authors are worth naming and celebrating: Akshat Tewary, Alexis Goldstein, Corley Miller, George Bailey, Caitlin Kline, Elizabeth Friedrich, and Eric Taylor. If you can’t read the whole thing, at least read the introductory comments, on pages 3-6, both for their substance and for the panache of their delivery. A taster:

During the legislative process, the Volcker Rule was woefully enfeebled by the addition of numerous loopholes and exceptions. The banking lobby exerted inordinate influence on Congress and succeeded in diluting the statute, despite the catastrophic failures that bank policies have produced and continue to produce…

The Proposed Rule also evinces a remarkable solicitude for the interests of banking corporations over those of investors, consumers, taxpayers and other human beings.

* * *

There’s lots more where that comes from, including the indelible vision of how “the Volcker Rule simply removes the government’s all-too-visible hand from underneath the pampered haunches of banking conglomerates”. But the real substance is in the following hundreds of pages, where the authors go through the Volcker Rule line by line, explaining where it’s useless and where it can and should be improved.

John Knefel of Salon emphasized how this comment letter exploded the myth that the Occupy movement is simply a group of cynical hippies:

The working group’s detailed policy position gives lie to the common claim that the Occupy Wall Street movement is “well intentioned but misinformed.” It shows there’s room in the movement both for policy wonks and those chanting “anti-capitalista.”

Even Mayor Bloomberg’s BusinessWeek spoke highly of Occupy the SEC’s efforts. Karen Weise interviewed Occupy’s Alexis Goldstein, who had previously worked at such Wall Street institutions as Deutsche Bank, where she built IT systems for traders:

Like Goldstein, several members have experience in finance. Kline says she used to be a derivatives trader. Tewary is a lawyer who worked on securitization cases at the firm Kaye Scholer, according to his bio on the website of his current firm, Kamlesh Tewary. Mother Jones, which reported on the group in December, says O’Neil is a former Wall Street quant.

There are parts of the rule that Occupy the SEC would like to see toughened. For example, Goldstein sees a “big loophole” in the proposed rule that allows banks to make proprietary trades using so-called repurchase agreements, by which one party sells securities to another with the promise to buy back the securities later. The group wants to make sure other parts aren’t eroded.

Chris Sturr of Dollars & Sense provided this reaction:

From the perspective of someone who’s spent a lot of time in working groups of Occupy Boston, what I love about this story is that it’s early evidence of what Occupy can and will do, beyond “changing the discourse,” which is the best that sympathetic people who haven’t been involved seem to be able to say about Occupy, or just going away and dying off, which is what non-sympathizers think has happened to Occupy. Many of us have been quietly working away over the winter, and the results will start to be seen in the coming months.

If Chris Sturr’s expectation ultimately proves correct, it will be nice to watch the pro-Wall Street, teevee pundits get challenged by some worthy opponents.

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Instead Of Solving a Problem – Form a Committee

January 26th, 2012 Posted in Uncategorized

Jan, 26 2012

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It’s become a stale joke about the Obama administration. Every time a demand is made for the White House to take decisive action on an important issue . . . the President’s solution is always the same: Form a committee to study the matter.

In my last posting, I discussed the January 20 article written by Scot Paltrow for Reuters, which revealed that Attorney General Eric Hold-harmless and Lanny Breuer, head of the Justice Department’s criminal division, had been partners in the Washington law firm, Covington & Burling. As Scot Paltrow pointed out, during the years while Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co.

Less than a week after publication of Paltrow’s report, which raised “conflict of interest” questions concerning Holder’s reluctance to prosecute banks or mortgage servicers for fraudulent foreclosure practices, President Obama delivered his State of the Union address. With Paltrow’s revelations still fresh in my mind, I was particularly surprised to hear President Obama make the following statement:

And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.

If it weren’t bad enough that critics had already been complaining about the Attorney General’s failure to prosecute mortgage fraud cases, Obama has most recently appointed Holder to supervise “investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis”. It’s hard to avoid the assumption that those “investigations” will lead to nowhere. By Wednesday, I found that I was not alone in my cynicism concerning what is now called the Office of Mortgage Origination and Securitization Abuses.

Wednesday morning brought an essay by Yves Smith of Naked Capitalism, in which she expressed dread about the possibility that New York Attorney General Eric Schneiderman may have been seduced by Team Obama to join the effort exerting pressure on each Attorney General from every state to consent to a settlement of any and all claims against the banksters arising from their fraudulent foreclosure practices. Each state is being asked to release the banks from criminal and civil liability in return for a share of the $25 billion settlement package. Ms. Smith compared that initiative with Obama’s most recent announcement about the Office of Mortgage Origination and Securitization Abuses:

So get this: this is a committee that will “investigate.” . . . Neil Barofsky, former prosecutor and head of SIGTARP, doesn’t buy the logic of this committee either:

Neil Barofsky @neilbarofsky

If task force created either b/c DOJ hasn’t done an investigation, or b/c 3-yr investigation a failure, how does Holder keep his job?

A lot of soi-disant liberal groups have fallen in line with Obama messaging, which was the plan (I already have the predictable congratulatory Move On e-mail in my inbox). Let’s get real. The wee problem is that this committee looks like yet another bit of theater for the Administration to pretend, yet again, that it is Doing Something, while scoring a twofer by getting Schneiderman, who has been a pretty effective opponent, hobbled.

If you wanted a real investigation, you get a real independent investigator, with a real budget and staffing, and turn him loose. We had the FCIC which had a lot of hearings and produced a readable book that said everyone was responsible for the mortgage crisis, which was tantamount to saying no one was responsible. We even had an eleven-regulator Foreclosure Task Force that looked at 2800 loan files (and a mere 100 foreclosures) and found nothing very much wrong.

Neil Barofsky’s question deserves repetition: Why does Attorney General Eric Hold-harmless still have his job if – after three years – the Justice Department has taken no action against those responsible for originating and securitizing the risky mortgages which led to the housing crisis?

David Dayen of Firedoglake weighed-in with his own skeptical take on Obama’s purported crakdown on mortgage origination and securitization abuses:

First of all, this becomes part of a three year-old Financial Fraud Task Force which has done approximately nothing on Wall Street accountability outside of a few insider trading arrests. So that’s the context of this investigative panel, part of the same entity that has spun its wheels. Second, the panel would only look at origination, where there have been plenty of lawsuits and where the main offenders are all out of business, and securitization, which may aid investors (that includes pension funds, of course) but not necessarily homeowners. . . .

Given the fact that this is an election year, President Obama knows that mere lip service toward a populist cause will not be enough to win back those disgruntled former supporters, who have now learned – the hard way – that talk is cheap. Obama is now going the extra mile – he’s forming a committee! Trouble is – those disgruntled former supporters have already learned that committee formation is simply the disingenuous “follow-through” on a false campaign promise. Nice try, Mr. President!

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Captive Justice

January 23rd, 2012 Posted in Uncategorized

Jan, 23 2012

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The Obama administration’s failure to prosecute any of the crimes which caused (or resulted from) the financial crisis has been a continuing source of outrage for voters across the country.

Last summer, Gretchen Morgenson of The New York Times earned a great deal of praise for her August 21 report, exposing the Obama administration’s vilification of New York State Attorney General Eric Schneiderman for his refusal to play along with Team Obama’s efforts to insulate the fraud-closure banks from the criminal prosecution they deserve. The administration has been attempting to pressure each Attorney General from every state to consent to a settlement of any and all claims against the banksters arising from their fraudulent foreclosure practices. Each state is being asked to release the banks from criminal and civil liability in return for a share of the $25 billion settlement package. The $25 billion is to be used for loan modifications.

The administration’s effort to push this fraud-closure settlement is ongoing. On January 21, David Dayen provided an update on this crusade at the Firedoglake website.

The American public is no longer content to sit back and do nothing while the Obama administration sits back and does nothing to prosecute those criminals whose fraudulent conduct devastated the American economy. On December 22, I discussed the intensifying wave of criticism directed against the President by his former supporters as well as those disgusted by Obama’s subservience to his benefactors on Wall Street. Since that time, Scot Paltrow wrote a great piece for Reuters, concerning the Justice Department’s failure to intervene against improper foreclosure procedures. Paltrow’s widely-acclaimed essay inspired several commentators to express their disgust about government permissiveness toward such egregious conduct. At The Big Picture, Barry Ritholtz shared his reaction to the Reuters article:

The fraud is rampant, self-evident, easy to prosecute. The only reason it hasn’t been done so far is that this nation is led by corrupt cowards and suffers from a ruinous two-party system.

We were once a great nation that set a shining example for the rest of the world as to what the Rule of Law meant. That is no more, as we have become a corrupt plutocracy. Why our prosecutors cower in front of the almighty banking industry is beyond my limited ability to comprehend.

Without any sort of legal denouement, we should expect an angry electorate and an unhappy nation.

Scot Paltrow wrote another great article for Reuters on January 20, which is causing quite a stir. The opening paragraphs provide us with some insight as to why our Attorney General deserves to be called Mr. Hold-harmless:

U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients.

* * *

The evidence, including records from federal and state courts and local clerks’ offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.

In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners’ lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven’t responded publicly to any of the requests.

The revelations in Scot Paltrow’s most recent report should create quite a scandal requiring significant damage control efforts by the Obama administration. Given the fact that this is an election year, Republican politicians should be smelling red meat at this point. After all, Obama’s Attorney General is being accused of conflict of interest. Nevertheless, will any Republicans (or their Super PACs) seize upon this issue? To do so could place them in a conflict-of-interest situation – as far as those banks are concerned. Dare they risk biting the hands that feed them? It could be quite a high-wire act to undertake. Will any Republicans rise to this challenge?

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Too Cool To Fool

January 16th, 2012 Posted in Uncategorized

Jan, 16 2012

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It’s always reassuring to see that there are a good number of people among us who aren’t easily manipulated by “the powers that be”. Let’s take a look at some examples:

Glen Ford is the executive editor of the Black Agenda Report. On January 11, Mr. Ford discussed how – up until now – the Occupy Wall Street movement has managed to avoid being co-opted by the Democratic Party and MoveOn.org. Unfortunately, the Obama regime may have succeeded in establishing a grip on OWS. Glen Ford offered this explanation:

The Democratic Party may have entered the Occupy Wall Street movement through the “Black door,” in the form of Occupy The Dream, the Black ministers’ group led by former NAACP chief and Million Man March national director Dr. Benjamin Chavis and Baltimore mega-church pastor Rev. Jamal Bryant. Both are fervent supporters of President Obama.

*   *   *

It appears that Occupy Wall Street’s new Black affiliate is also in “lock-step” with the corporate Democrat in the White House, whose administration has funneled trillions of dollars to Wall Street and greatly expanded U.S. theaters of war.

*   *   *

Black ministers in campaign mode routinely depict Obama’s political troubles as indistinguishable from threats to “The Dream,” whose embodiment is ensconced in the White House. That’s simply common currency among Black preachers pushing for Obama.

*   *   *

It is highly unlikely – damn near inconceivable – that Occupy The Dream will do anything that might embarrass this president. Its ministers can be expected to electioneer for Obama at every opportunity. Their January 16 actions are directed at the Federal Reserve, which is technically independent from the executive branch of government – although, in practice, the Fed has been Obama’s principal mechanism for bailing out the banks. Will the ministers pretend, next Monday, that the president is somehow removed from the Fed’s massive transfers of the people’s credit and cash to Wall Street over the past three years?

*   * *

At this late stage, there is no antidote to the potential cooptation, except to rev up the movement’s confrontation with the oligarchic powers-that-be – including Wall Street’s guy in the White House. Let’s see what happens if OWS demonstrators join with Occupy The Dream at Federal Reserve sites on January 16 carrying placards unequivocally implicating Obama in the Fed’s bailouts of the banksters, as Occupy demonstrators have done so often in the past. Will the Dream’s leadership be in “lock-step” with that? Maybe so – I’ve heard that miracles sometimes do happen.

Anyone who challenges the Obama administration’s symbiotic relationship with the Wall Street banksters invites accusations of advancing the Republican agenda for regaining control of the White House. This problem will be solved once a populist third-party or Independent candidate rises to pose a serious challenge to the incumbent. Beyond that, an African-American commentator who dares to expose Obama as a tool of Wall Street is likely to face harsh criticism. Glen Ford has demonstrated more courage than most Americans by taking a stand against this venal administration.

Another exemplary individual, whose opinions were never compromised to justify or rationalize the current administration’s tactics, has been economist Joseph Stiglitz – the Nobel laureate who found himself ignored and shut out by the Obama administration ab initio. Professor Stiglitz recently wrote a commentary entitled, “The Perils of 2012” in which he dared to predict an election year fraught with economic despair. Such conditions make for an incumbent President’s worst nightmare. As a result, non-Republican economists are expected to avoid such prognostication. Nevertheless, Professor Stiglitz proceeded to paint an ugly picture of what we can expect in the near term, after first reminding us that there has been no sound policy advanced for mitigating the devastation experienced by the middle class as a result of the 2008 financial crisis:

The year 2011 will be remembered as the time when many ever-optimistic Americans began to give up hope. President John F. Kennedy once said that a rising tide lifts all boats. But now, in the receding tide, Americans are beginning to see not only that those with taller masts had been lifted far higher, but also that many of the smaller boats had been dashed to pieces in their wake.

In that brief moment when the rising tide was indeed rising, millions of people believed that they might have a fair chance of realizing the “American Dream.” Now those dreams, too, are receding. By 2011, the savings of those who had lost their jobs in 2008 or 2009 had been spent. Unemployment checks had run out. Headlines announcing new hiring – still not enough to keep pace with the number of those who would normally have entered the labor force – meant little to the 50 year olds with little hope of ever holding a job again.

Indeed, middle-aged people who thought that they would be unemployed for a few months have now realized that they were, in fact, forcibly retired. Young people who graduated from college with tens of thousands of dollars of education debt cannot find any jobs at all. People who moved in with friends and relatives have become homeless. Houses bought during the property boom are still on the market or have been sold at a loss. More than seven million American families have lost their homes.

* * *

The pragmatic commitment to growth that one sees in Asia and other emerging markets today stands in contrast to the West’s misguided policies, which, driven by a combination of ideology and vested interests, almost seem to reflect a commitment not to grow.

As a result, global economic rebalancing is likely to accelerate, almost inevitably giving rise to political tensions. With all of the problems confronting the global economy, we will be lucky if these strains do not begin to manifest themselves within the next twelve months.

Another commentator who has been “too cool to fool” is equities market analyst, Barry Ritholtz. One of his recent blog postings documented how Ritholtz never accepted the propagandistic pronouncements of the National Retailers Association about Christmas season retail sales. Once the hype began on Black Friday, Ritholtz began his own campaign of debunking the questionable data, touted to boost unjustified confidence about the direction of our economy. Ritholtz concluded the piece with this statement:

Those of you who may have downplayed the potential for a recession to start over the next 12-18 months way want to revisit your views on this. It is far from the low possibility many economists have it pegged at.

Fortunately, not everyone has been as imperceptive as those on the Obama administration’s economic team who admitted that as late as 2009, they underestimated the extent of economic contraction resulting from the 2008 crisis. It’s time for the voting public to dis-employ the political hacks who have allowed this condition to fester. One effective path toward this goal involves voting against incumbents in primary elections. Keep in mind that America’s Congressional districts have been gerrymandered to protect incumbents. As a result, any plan to defeat those officeholders in a general election could be an exercise in futility. Voting against current members of Congress during the primary process can open the door for more capable candidates during the general election. Peter Schweizer’s cause – as expressed in his book, Throw Them All Out, should be on everyone’s front burner during the 2012 primary season.

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Keeping The Megabank Controversy On Republican Radar

January 9th, 2012 Posted in Uncategorized

Jan, 09 2012

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It was almost a year ago when Lou Dolinar of the National Review encouraged Republicans to focus on the controversy surrounding the megabanks:

“Too Big to Fail” is an issue that Republicans shouldn’t duck in 2012. President Obama is in bed with these guys. I don’t know if breaking up the TBTFs is the solution, but Republicans need to shame the president and put daylight between themselves and the crony capitalists responsible for the financial meltdown. They could start by promising not to stock Treasury and other major economic posts with these, if you pardon the phase, malefactors of great wealth.

One would expect that those too-big-to-fail banks would be low-hanging fruit for the acolytes in the Church of Ayn Rand. After all, Simon Johnson, former Chief Economist for the International Monetary Fund (IMF), has not been the only authority to characterize the megabanks as intolerable parasites, infesting and infecting our free-market economy:

Too Big To Fail banks benefit from an unfair, nontransparent, and dangerous subsidy scheme. This isn’t a market. It’s a government-backed distortion of historic proportions. And it should be eliminated.

Last summer, former Kansas City Fed-head, Thomas Hoenig discussed the problems created by what he called, “systemically important financial institutions” – or “SIFIs”:

… I suggest that the problem with SIFIs is they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to world growth. So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril.

So why aren’t the Republican Presidential candidates squawking up a storm about this subject during their debates? Mike Konczal lamented the GOP’s failure to embrace a party-wide assault on the notion that banks could continue to fatten themselves to the extent that they pose a systemic risk:

When it comes to “ending Too Big To Fail” it actually punts on the conservative policy debates, which is a shame. There’s a reference to “Explore reforms now being considered by the U.K. to make the unwinding of its biggest banks less risky for the broader economy” but it is sort of late in the game for this level of vagueness on what we mean by “unwinding.” That unwinding part is a major part of the debate. Especially if you say that you want to repeal Dodd-Frank and put into place a system for taking down large financial firms – well, “unwinding” the biggest financial firms is what a big chunk of Dodd-Frank does.

Nevertheless, there have been occasions when we would hear a solitary Republican voice in the wilderness. Back in November, Jonathan Easley of The Hill discussed the views of Richard Shelby (Ala.), the ranking Republican on the Senate Banking Committee:

“Dr. Volcker asked the other question – if they’re too big to fail, are they too big to exist?” Shelby said Wednesday on MSNBC’s “Morning Joe.” “And that’s a good question. And some of them obviously are, and some of them – if they don’t get their house in order – they might not exist. They’re going to have to sell off parts to survive.”

* * *

“But the question I think we’ve got to ask – are we better off with the bigger banks than we were? The [answer] is no.”

This past weekend, Timothy Haight wrote an inspiring piece for the pro-Republican Orange County Register, criticizing the failure of our government to address the systemic risk resulting from the “too big to fail” status of the megabanks:

The concentration of assets in a few institutions is greater today than at the height of the 2008 meltdown. Taxpayers continue to be at risk as large financial institutions have forgotten the results of their earlier bets. Legislation may have aided members of Congress during this election cycle, but it has done little to ward off the next crisis.

While I am a champion for free-market capitalism, I believe that, in some instances, proactive regulation is a necessity. Financial institutions should be heavily regulated due to the basic fact that rewards are afforded to the financial institutions, while the taxpayers are saddled with the risk. The moral hazard is alive and well.

So far, there has been only one Republican Presidential candidate to speak out against the ongoing TBTF status of a privileged few banks – Jon Huntsman. It was nice to see that the Fox News website had published an opinion piece by the candidate – entitled, “Wall Street’s Big Banks Are the Real Threat to Our Economy”. Huntsman described what has happened to those institutions since the days of the TARP bailouts:

Taxpayers were promised those bailouts would be a one-time, emergency measure. Yet today, we can already see the outlines of the next financial crisis and bailouts.

The six largest financial institutions are significantly bigger than they were in 2008, having been encouraged to snap up Bear Stearns and other competitors at bargain prices.

These banks now have assets worth over 66% of gross domestic product – at least $9.4 trillion – up from 20% of GDP in the 1990s.

* * *

The Obama and Romney plan simply appears to be to cross our fingers and hope no Too-Big-To-Fail banks fail on their watch – a stunning lack of leadership on such a critical economic issue.

As president, I will break up the big banks, end future taxpayer bailouts, and restore capitalist principles – competition and creative destruction – to our financial sector.

As of this writing, Jon Huntsman has been the only Presidential candidate – including Obama – to discuss a proposal for ending the TBTF situation. Huntsman has tactfully cast Mitt Romney in the role of the “Wall Street status quo” candidate with himself appearing as the populist. Not even Ron Paul – with all of his “anti-bank” bluster, has dared approach the TBTF issue (probably because the solution would involve touching his own “third rail”: regulation). Simon Johnson had some fun discussing how Ron Paul was bold enough to write an anti-Federal Reserve book – End the Fed – yet too timid to tackle the megabanks:

There is much that is thoughtful in Mr. Paul’s book, including statements like this (p. 18):

“Just so that we are clear: the modern system of money and banking is not a free-market system. It is a system that is half socialized – propped up by the government – and one that could never be sustained as it is in a clean market environment.”

* * *

There is nothing on Mr. Paul’s campaign website about breaking the size and power of the big banks that now predominate (http://www.ronpaul2012.com/the-issues/end-the-fed/). End the Fed is also frustratingly evasive on this issue.

Mr. Paul should address this issue head-on, for example by confronting the very specific and credible proposals made by Jon Huntsman – who would force the biggest banks to break themselves up. The only way to restore the market is to compel the most powerful players to become smaller.

Ending the Fed – even if that were possible or desirable – would not end the problem of Too Big To Fail banks. There are still many ways in which they could be saved.

The only way to credibly threaten not to bail them out is to insist that even the largest bank is not big enough to bring down the financial system.

It’s time for those “fair weather free-marketers” in the Republican Party to show the courage and the conviction demonstrated by Jon Huntsman. Although Rick Santorum claims to be the only candidate with true leadership qualities, his avoidance of this issue will ultimately place him in the rear – where he belongs.

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Cairo In America

December 26th, 2011 Posted in Uncategorized

Dec, 26 2011

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We have seen quite a bit of hand-wringing by those in the mainstream news media about the repression against protests in Cairo during the past few weeks. What we don’t see on television are the oppressive tactics used against protesters and journalists here in the United States. Never mind the fact that the Obama administration refuses to prosecute any of the crimes which led to the financial crisis. Simply protesting against the refusal of Attorney General Eric Hold-harmless to do his job can result in arrests and beatings administered by police. At The eXiled blog,Yasha Levine discussed the targeting of journalists by police, hell-bent on squelching coverage of the Occupy movement:

Remember how in November, Bloomberg and the NYPD got a lot of heat from the city’s media establishment for the arrest rampage they unleashed on journalists covering the eviction raid on Liberty Plaza? Cops arrested more than two dozen accredited journalists from major news outlets, including the New York Post, NPR, AFP and The Associated Press. Hell, cops even clubbed a couple of reporters for the baggertarian rag The Daily Caller. As a result, New York’s police commissioner made a big show of issuing an order that instructed police officers not to interfere with journalists covering OWS.

But clearly that was just for show.

Because this month the NYPD has gone out of its way to harass and arrest journalists covering OWS, especially targeting live streamers and indie journalists who can’t be counted on for propaganda support like the mainstream folks. According to Free Press’ Josh Stearns, who has been maintaining a list of journalists arrested while covering the Occupy Movement across the country, at least five journalists and seven live streamers were arrested by the NYPD in the first half of December.

* * *

The NYPD continued harassing indie journalists five days later during the D17 protests. Some were bashed with batons, others were threatened with having their official press passes revoked. By the end of the day, at least two journalists were arrested, including photojournalist Zach Roberts and Jennifer Dworkin, an independent filmmaker who had worked for PBS.

It will be interesting to see whether a new piece of technology, called the “Occucopter” will enable those reporters to obtain valuable images of abusive police tactics – without getting their own skulls crushed in the process. The Guardian provided this report:

This week in New York, Occupy Wall Street protesters have a new toy to help them expose potentially dubious actions of the New York police department. In response to constant police surveillance, police violence and thousands of arrests, Occupy Wall Street protesters and legal observers have been turning their cameras back on the police. But police have sometimes made filming difficult through physical obstruction and “frozen zones”. This occurred most notably during the eviction of protesters from Zuccotti Park in lower Manhattan, where police prevented even credentialed journalists from entering.

Now the protesters are fighting back with their own surveillance drone. Tim Pool, an Occupy Wall Street protester, has acquired a Parrot AR drone he amusingly calls the “occucopter”. It is a lightweight four-rotor helicopter that you can buy cheaply on Amazon and control with your iPhone. It has an onboard camera so that you can view everything on your phone that it points at. Pool has modified the software to stream live video to the internet so that we can watch the action as it unfolds. You can see video clips of his first experiments here. He told us that the reason he is doing this “comes back to giving ordinary people the same tools that these multimillion-dollar news corporations have. It provides a clever loophole around certain restrictions such as when the police block press from taking shots of an incident.”

The American public is no longer content to sit back and do nothing while the Obama administration sits back and does nothing to prosecute those criminals whose fraudulent conduct devastated the American economy. In my last posting, I discussed the intensifying wave of criticism directed against the President by his former supporters as well as those disgusted by Obama’s subservience to his benefactors on Wall Street. Since that time, Scot Paltrow wrote a great piece for Reuters, concerning the Justice Department’s failure to intervene against improper foreclosure procedures. Paltrow’s widely-acclaimed essay inspired several commentators to express their disgust about government permissiveness toward such egregious conduct. At The Big Picture, Barry Ritholtz shared his reaction to the Reuters article:

The fraud is rampant, self-evident, easy to prosecute. The only reason it hasn’t been done so far is that this nation is led by corrupt cowards and suffers from a ruinous two-party system.

We were once a great nation that set a shining example for the rest of the world as to what the Rule of Law meant. That is no more, as we have become a corrupt plutocracy. Why our prosecutors cower in front of the almighty banking industry is beyond my limited ability to comprehend.

Without any sort of legal denouement, we should expect an angry electorate and an unhappy nation.

Is there any hope for America or will we continue on our course of devolution toward becoming a banana republic? At his Pragmatic Capitalism blog, Cullen Roche brought a glimmer of hope to some of us when he published Saxo Bank’s list of 10 outrageous predictions for 2012. I was particularly encouraged by the third item on the list:

3. A yet unannounced candidate takes the White House

In 1992, Texas billionaire Ross Perot managed to take advantage of a recessionary economy and popular disgust with US politics and reap 18.9 per cent of the popular vote. Three years of Obama has brought too little change and only additional widespread disillusionment with the entire US political system, and conditions for a third party candidate have never been riper. Someone with a strong programme for real change throws his or her hat in the ring early in 2012 and snatches the presidency in November in one of the most pivotal elections in US history, taking 38 per cent of the popular vote.

I’m keeping my fingers crossed.

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Tsunami Of Disgust

December 22nd, 2011 Posted in Uncategorized

Dec, 22 2011

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You can count me among those who believe that the non-stop Republican Presidential debates are working to President Obama’s advantage. How many times have you heard some television news commentator remark that “the big winner of last night’s Republican debate was Barack Obama”? As Julianna Goldman reported for Bloomberg BusinessWeek, two recent polls have revealed that Obama is no longer looking quite as bad as he did a few months ago:

Forty-nine percent of Americans approve of how Obama is handling his job, according to an ABC News/Washington Post poll and another conducted for CNN. The rate was the highest in both surveys since a short-lived bump the president got following the killing of al-Qaeda leader Osama bin Laden in May.

Nevertheless, there is an unstoppable wave of criticism directed against the President by his former supporters as well as those disgusted by Obama’s subservience to his benefactors on Wall Street. In my last posting, I discussed Bill Black’s rebuttal to President Obama’s most recent attempt to claim that no laws were broken by the banksters who caused the 2008 financial crisis.

The wave of disgust at Obama’s exoneration of the financial fraudsters has gained quite a bit of momentum since that outrageous remark appeared on the December 11 broadcast of 60 Minutes. Matt Taibbi of Rolling Stone focused on the consequences of this level of dishonesty:

What makes Obama’s statements so dangerous is that they suggest an ongoing strategy of covering up the Wall Street crimewave. There is ample evidence out there that the Obama administration has eased up on prosecutions of Wall Street as part of a conscious strategy to prevent a collapse of confidence in our financial system, with the expected 50-state foreclosure settlement being the landmark effort in the cover-up, intended mainly to bury a generation of fraud.

* * *

In other words, Geithner and Obama are behaving like Lehman executives before the crash of Lehman, not disclosing the full extent of the internal problem in order to keep investors from fleeing and creditors from calling in their chits. It’s worth noting that this kind of behavior – knowingly hiding the derogatory truth from the outside world in order to prevent a run on the bank – is, itself, fraud!

* * *

The problem with companies like Lehman and Enron is that their executives always think they can paper over illegalities by committing more crimes, when in fact all they’re usually doing is snowballing the problem so completely out of control that there’s no longer any chance of fixing things, thereby killing the only chance for survival they ever had.

This is exactly what Obama and Geithner are doing now. By continually lying about the extent of the country’s corruption problems, they’re adding fraud to fraud and raising such a great bonfire of lies that they probably won’t ever be able to fix the underlying mess.

John R. MacArthur, president and publisher of Harper’s Magazine, caused quite a stir on December 14, when an essay he wrote – entitled, “President Obama Richly Deserves to Be Dumped” – was published by the The Providence Journal (Rhode Island). For some reason, this article does not appear at the newspaper’s website. However, you can read it in its entirety here. MacArthur began the piece by highlighting criticism of Obama by his fellow Democrats:

Most prominent among these critics is veteran journalist Bill Moyers, whose October address to a Public Citizen gathering puts the lie to our barely Democratic president’s populist pantomime, acted out last week in a Kansas speech decrying the plight of “innocent, hardworking Americans.” In his talk, Moyers quoted an authentic Kansas populist, Mary Eizabeth Lease, who in 1890 declared, “Wall Street owns the country.. . .Money rules.. . .The [political] parties lie to us and the political speakers mislead us.”

A former aide to Lyndon Johnson who knows politics from the inside, Moyers then delivered the coup de grace: “[Lease] should see us now. John Boehner calls on the bankers, holds out his cup, and offers them total obeisance from the House majority if only they fill it. Barack Obama criticizes bankers as fat cats, then invites them to dine at a pricey New York restaurant where the tasting menu runs to $195 a person.”

* * *

What’s truly breathtaking is the president’s gall, his stunning contempt for political history and contemporary reality. Besides neglecting to mention Democratic complicity in the debacle of 2008, he failed to point out that derivatives trading remains largely unregulated while the Securities and Exchange Commission awaits “public comment on a detailed implementation plan” for future regulation. In other words, until the banking and brokerage lobbies have had their say with John Boehner, Max Baucus, and Secretary of the Treasury Tim Geithner. Meanwhile, the administration steadfastly opposes a restoration of the Glass-Steagall Act, the New Deal law that reduced outlandish speculation by separating commercial and investment banks. In 1999, it was Summers and Geithner, led by Bill Clinton’s Treasury Secretary Robert Rubin (much admired by Obama), who persuaded Congress to repeal this crucial impediment to Wall Street recklessness.

I have frequently discussed the criticism directed at Obama from the political Center as well as the Left (see this and this). I have also expressed my desire to see Democratic challengers to Obama for the 2012 nomination (see this and this). In the December 20 edition of The Chicago Tribune, William Pfaff commented on John R. MacArthur’s above-quoted article, while focusing on the realistic consequences of a Democratic Primary challenge to Obama’s nomination:

John MacArthur’s and Bill Moyers’ call for the replacement of Barack Obama as the Democratic presidential candidate next year is very likely to fail, and any Democratic replacement candidate is likely to lose the presidency. As a veteran Democratic Party activist recently commented, this is the sure way to elect “one of those idiots” running for the Republican nomination. Very likely he is right.

However, the two may have started something with interesting consequences. Nobody thought Sen. McCarthy’s challenge was anything more than a futile gesture. Nobody foresaw the assassinations and military defeat to come, or the ruin of Richard Nixon. Nobody knows today what disasters may lie ahead in American-supervised Iraq, or in the dual war the Pentagon is waging in Afghanistan and Pakistan. The present foreign policy of the Obama government is fraught with risk.

As for the president himself, the objection to him is that his Democratic Party has become a representative of the same interests as the Republican Party. The nation cannot bear two parties representing plutocratic power.

The current battle over the payroll tax cut extension reminded me of a piece I wrote last August, in which I included Nate Silver’s observation that it was President Obama’s decision to leave the issue of a payroll tax cut extension “on the table” during the negotiations on the debt ceiling bill. My thoughts at that time were similar to William Pfaff’s above-quoted lament about the nation’s “two political parties representing plutocratic power”:

As many observers have noted, the plutocracy has been able to accomplish much more with Obama in the White House, than what would have been achievable with a Republican President. This latest example of a bipartisan effort to trample “the little people” has reinforced my belief that the fake “two-party system” is a sideshow – designed to obfuscate the insidious activities of the Republi-Cratic Corporatist Party.

It’s nice to see that the tsunami of disgust continues to flow across the country.

2008 financial crisis, 2012 nomination, 60 Minutes, ABC News, Bill Black William Black, Bill Clinton, Bill Moyers, Bloomberg BusinessWeek, Chicago Tribune, CNN, Congress, debt ceiling bill, Democratic challengers to Obama, Democratic primary, Democrats, derivatives trading, Enron, financial collapse, financial fraudsters, financial system, foreclosure fraud, fraud, Glass-Steagall Act, Harpers Magazine, John Boehner, John R MacArthur, John T Burke Jr, Julianna Goldman, Kansas, killing of bin Laden, Larry Summers, Lehman collapse, Lehman executives, Mary Eizabeth Lease, Matt Taibbi, Max Baucus, Nate Silver, New Deal, no laws were broken, Obama Deserves to be Dumped, payroll tax cut extension, plutocracy, plutocratic power, political parties, President Obama, Presidential approval polls, Providence Journal, Public Citizen, Republi-cratic Corporatist Party, Republican Presidential debates, Robert Rubin, Rolling Stone, Securities and Exchange Commission, Tim Geithner, Timothy Geithner, two-party system, Wall Street, Washington Post, White House, William Pfaff

Latest Obama Cave-in Is Likely To Further Erode His Base

December 15th, 2011 Posted in Uncategorized

Dec, 15 2011

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Well, he did it again. Despite the fact that President Obama had vowed to veto the 2012 National Defense Authorization Act (NDAA), which allows for indefinite detention of American citizens without trial, the White House announced that the President will breach yet another promise and sign the controversial bill.

Jeremy Herb at The Hill reported on the administration’s concern that if Obama were to veto the bill, there might not have been enough votes in Congress to prevent an override of that veto. In other words: Obama was afraid of being embarrassed. The report noted the defensive language contained in the official White House spin, to the effect that some minor changes in wording were made to satisfy the President:

The White House backed down from its veto threat of the defense authorization bill Wednesday, saying that the bill’s updated language would not constrain the Obama administration’s counterterrorism efforts.

* * *

The administration won some changes in conference committee, which wrapped up Monday, including the addition of a clause stating that FBI and local law enforcement counterterrorism activities would not be altered by the law.

Big deal. Let the outrage begin! At the Huffington Post, Michael McAuliff noted that the President had already decided to back down on his veto threat before the House of Representatives passed the bill:

The switch came just before the House voted 283-136 to pass the National Defense Authorization Act despite impassioned opposition that crossed party lines, with Democrats splitting on the bill and more than 40 Republicans opposing it. Numerous national security experts and civil liberties advocates had argued that the indefinite detention measure enshrines recent, questionable investigative practices that are contrary to fundamental American rights.

At the Human Rights Watch website, no punches were pulled in their criticism of Obama’s latest betrayal of those very principles his supporters expected him to advance:

The Obama administration had threatened to veto the bill, the 2012 National Defense Authorization Act (NDAA), over detainee provisions, but on December 14, 2011, issued a statement indicating the president would likely sign the legislation.

“By signing this defense spending bill, President Obama will go down in history as the president who enshrined indefinite detention without trial in US law,” said Kenneth Roth, executive director of Human Rights Watch. “In the past, Obama has lauded the importance of being on the right side of history, but today he is definitely on the wrong side.”

* * *

The far-reaching detainee provisions would codify indefinite detention without trial into US law for the first time since the McCarthy era when Congress in 1950 overrode the veto of then-President Harry Truman and passed the Internal Security Act.

* * *

“It is a sad moment when a president who has prided himself on his knowledge of and belief in constitutional principles succumbs to the politics of the moment to sign a bill that poses so great a threat to basic constitutional rights,” Roth said.

Many people might not know that quantitative equity research analyst and former hedge fund manager, Barry Ritholtz (author of Bailout Nation) is an alumnus of the Benjamin N. Cardozo School of Law in New York, where he served on the Law Review, and graduated Cum Laude with a 3.56 GPA. Here are some of the recent comments made by Mr. Ritholtz concerning the National Defense Authorization Act:

While this is shocking, it is not occurring in a vacuum. Indeed, it is part of a 30 year-long process of militarization inside our borders and a destruction of the American concepts of limited government and separation of powers.

* * *

Other Encroachments On Civil Rights Under Obama

As bad as Bush was, the truth is that, in many ways, freedom and constitutional rights are under attack even more than during the Bush years.

For example:

Obama has presided over the most draconian crackdown on leaks in our history – even more so than Nixon.

* * *

Furthermore – as hard as it is for Democrats to believe – the disinformation and propaganda campaigns launched by Bush have only increased under Obama. See this and this.

And as I pointed out last year:

According to Department of Defense training manuals, protest is considered “low-level terrorism”. And see this, this and this.

An FBI memo also labels peace protesters as “terrorists”.

At his blog, The Big Picture, Ritholtz made these points in a December 3 argument against the passage of this bill:

You might assume – in a vacuum – that this might be okay (even though it trashes the Constitution, the separation of military and police actions, and the division between internal and external affairs).

But it is dangerous in a climate where you can be labeled as or suspected of being a terrorist simply for questioning war, protesting anything, asking questions about pollution or about Wall Street shenanigans, supporting Ron Paul, being a libertarian, holding gold, or stocking up on more than 7 days of food. And see this.

Once again, President Obama has breached a promise to his supporters out of fear that he could be embarrassed in a showdown with Congress. Worse yet, Obama has acted to subvert the Constitutional right of Due Process simply because he wants to avoid the shame of a veto override. As many commentators have observed, George W. Bush was not plagued by any such weakness and he went on to push a good number of controversial initiatives through Congress – most notably the Iraq War Resolution. I find it surprising that so many of President Obama’s important decisions have been motivated by a fear of embarrassment, while at the same time he has exhibited no concern about exposing such timidity to both his allies and his opponents – wherever they may be.

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