It’s nearly impossible to get 99 U.S. senators to agree on anything.
But this past weekend, 99 senators agreed to send a non-binding message that the $83 billion subsidy “too big to fail” banks get from the government needs to end. The measure was co-sponsored by senators Sherrod Brown (D-OH) and David Vitter (R-LA).
The implicit subsidy first came to light in February when a Bloomberg News report found that “recurrent bailouts of the largest financial institutions have given [big banks] a unique advantage: They get a break on their borrowing costs, because creditors expect taxpayers to support them whenever they get into trouble.”
Shortly thereafter, Attorney General Eric Holder made the shocking admission that the Justice Department exercises restraint in prosecuting big banks for fear of shocking the global financial system.
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” Holder said, during testimony to the Senate Banking Committee.
Now all of the Senate’s Republicans have joined with senators Brown and Elizabeth Warren (D-MA) — who have long warned of the big banks’ continued ability to wreck havoc on the economy — to call for an end to the implicit subsidy.
“I’m glad that Republicans and Democrats can agree: ‘Too big to fail’ needs to end, and these big-bank subsidies make no sense,” Senator Warren said.
Bank lobbyists have denied that the subsidy exists. But as a Bloomberg editorial notes, they’ve rejected any steps that would prevent the government from having to serve as their backstop in case of a crisis.
“If big banks don’t get a subsidy on their debt, it’s hard to understand why they’re so adamantly opposed to measures, such as increased capital requirements, that would put a limit on their borrowing,” the editors noted. “Large banks commonly borrow $25 or more for each $1 in equity — or capital — they get from their shareholders, compared with less than 50 cents per $1 of equity for the average U.S. corporation.”
Financial reform following the financial crisis was weakened by bank lobbying. As Senator Dick Durbin (D-IL) noted at the time, the “banks own the place.” And by “the place,” he meant Congress.
This vote shows the sentiment is swinging against the banks. Whether senators are willing to vote against them when actual legislation is on the line still remains to be seen.
By: Jason Sattler, The National Memo, March 25, 2013
Senator Elizabeth Warren (R-MA) used her speech at the Consumer Federation of America Thursday to make a wide-ranging argument defending the role of government and ripping Republicans and the National Rifle Association for intentionally keeping the American public in the dark.
After calling out the NRA’s “armies of lobbyists [that] are fighting to rig the system so that the public remains in the dark,” the senior senator from Massachusetts attacked the organization’s efforts to stop public research into gun violence.
“If as many people were dying of a mysterious disease as innocent bystanders are dying from firearms, a cure would be our top priority,” Warren said. “But we don’t even have good data on gun violence. Why? Because the NRA and the gun industry lobby made it their goal to prevent any serious effort to document the violence.”
Her defense of the Consumer Financial Protection Bureau (CFPB), which she first conceived and helped create as part of the Dodd-Frank financial reforms, was especially pointed.
“This agency is about making consumer credit clear — no more hiding tricks and traps in a thicket of fine print. It is about letting consumers see the deal — and not worrying about the things they can’t see,” Warren said.
Republicans have praised the work of CFPB director Richard Cordray, who President Obama installed via recess appointment after the GOP blocked his nomination. But they are blocking him again because they are bent on increasing congressional oversight of the bureau, while weakening its power.
“Blocking Rich Cordray is about keeping the game rigged, keeping the game rigged so that consumers remain in the dark — and a few bad actors can rake in big profits,” Warren said.
Republicans are basically working to void a federal law simply because they don’t like it. And by abusing the filibuster, they’ll likely be effective.
Senator Warren called out this unprecedented obstruction at Cordray’s nomination hearing:
“What I want to know is why every banking regulator since the Civil War has been funded outside the Appropriations process, but unlike the consumer agency, no one in the United States Senate has held up confirmation of their directors demanding that that agency or those agencies be redesigned.
By: Jason Sattler, The National Memo, March 14, 2013
Former Massachusetts Sen. Scott Brown announced today that he’s joining the government affairs department of a giant multinational law firm with major Wall Street clients.
“Brown will focus his practice on business and governmental affairs as they relate to the financial services industry as well as on commercial real estate matters,” the firm, Nixon Peabody LLC, said in a press release. Brown will not be a lobbyist, the firm said, but whether he meets the specific legal requirements to be a registered lobbyist or not, it’s clear that he will draw on his contacts and status to help advance clients’ agenda in government. “He can offer many types of legal services to his broad network of contacts,” the firm said.
The head of the Nixon Peabody’s Government Relations practice is ex-New York congressman Tom Reynolds, who now lobbies for Goldman Sachs on “[f]inancial services regulatory and tax issues.” According to the firm, Brown will also work with fellow Massachusettsian Jim Vallee, who abruptly left his job as majority leader of the state House of Representatives last year after getting hired by the firm.
Nixon Peabody contributed $2,500 to a PAC associated with Brown’s reelection campaign last year, the most it gave to any candidate in the country (tied only with a Democratic House member).
Brown was a reliable ally of the financial services industry in the Senate, where he helped water down the Dodd-Frank Wall Street reform law and influence other bills of interest to banks. It was no surprise, considering how much money they threw at his campaigns. The Securities and Investment sector was the top industry donor to Brown’s 2012 campaign, giving him $3.2 million, on top of the millions he received from the insurance, real estate and finance industries, according to Open Secrets.
The move, however, is a blow to Massachusetts Republicans, who see Brown as their best — and possibly only — hope of retaking a Senate seat or winning the governor’s mansion. Perhaps Brown didn’t think he could win or perhaps he was more interested in cashing in.
It’s notable that Massachusetts voters have replaced Brown, who is now almost literally a Wall Street lobbyist, with Elizabeth Warren, one of the most outspoken critics of the finance industry in the country.
By: Alex Seitz-Wald, Salon, March 11, 2013
In case you missed it, Elizabeth Warren made quite the splash at her first Senate Banking Committee hearing on Thursday.
In front of a panel entitled “Wall Street Reform: Oversight of Financial Stability and Consumer and Investor Protections,” Warren berated regulators for failing to prosecute a single Wall Street criminal in recent years, and for not letting institutional suspicions arise due to the fact that banks are trading at below-book value.
This, as you can imagine, did not sit well with banking executives.
According to POLITICO’s Ben White, they went apoplectic:
“We have been through more tests and thorough exams than any college student over the past four years, including many conducted by the CFPB,” said Richard Hunt, president and chief executive of the Consumer Bankers Association.
“While Sen. Warren had every right to ask pointed questions at [Thursday’s] Senate Banking Committee hearing, her claim that ‘nobody believes’ that bank books are honest is just plain wrong,” [another anonymous] executive said in an email. “As Federal Reserve Gov. [Daniel] Tarullo explained in response to her question, the low valuations are more likely due to continued economic uncertainty and concerns on the part of investors regarding the impact on banks’ profitability due to the hundreds of new regulations.”
White, however, left out key pieces of background here. The first is that Wall Street banks are performing like they were in 2006, and that their moaning about profitability rings hollow. The second is that to say the industry has a credibility problem would be the understatement of the decade: according to the Wall Street Journal and a trade publication called CFA Magazine, “one out of every ten people working on Wall Street are psychopaths.”
Not wanting to disappoint, the executive evidenced a delusional mendacity again in White’s article, when he said that “Elizabeth warren and [Texas Republican Senator] Ted Cruz are dueling for the title of ‘most extreme fringe freshman senator.’”
To this empty suit, it’s not just as if the financial crisis never happened. It’s as if Wall Street firms haven’t been mired in scandal after scandal since: foreclosure fraud, LIBOR, JP Morgan London Whale, FHA loan fraud, and MF Global to name a few. According to our faceless executive, wanting regulators to hold these well groomed pickpockets to account — for both crimes and reckless legal practices — is equal to slandering Chuck Hagel for having fictitious ties to North Korea or a blatantly made-up Hamas linked booster group (and certain publications continue to push this false equivalency in their fact-free devil-may-care attempts to be “objective” stenographers).
Fortunately for Wall Street, Warren might not have done herself any favors through her line of questioning. As Yves Smith, author of the the indispensable blog “Naked Capitalism” pointed out, the freshman Senator could have played a more subtle cat-and-mouse game to “tease out” information she claimed to have wanted – about why regulators never take cases to trial, namely, or why the fines they issue amount to a paltry “cost of doing business” amount. I suspect, however, that Warren was just trying to make a point – that whether regulators are scared of losing cases, or not wanting to find themselves shunned by Wall Street when they decide that they’ve had enough of Washington, they haven’t been doing the public any favors through inaction.
What’s important about this exchange, though, is that Warren demonstrated why she was elected. She might, thus far, be known as a one-issue kind of expert, but that issue is of massive importance to her constituents (and the American people). Her banking committee membership, I suspect, will be significantly more valuable the next time financier psychopaths pay a visit to one of the Senate office buildings to testify.
By: Brian Knight, Washington Monthly Political Animal, February 17, 2013
“She Will Be Heard”: Elizabeth Warren Knows Where A Lot Of The Bodies Are Buried, Puts AIG On Notice
When new members arrive in the US Senate, they are supposed to take a seat on a back bench and listen quietly for a couple of years. That is not in Elizabeth Warren’s nature. She had been a US Senator from Massachusetts for only about a week when she broke with etiquette. Warren was outraged that AIG investors were urging the insurance giant’s directors to join them in a lawsuit against the federal government, claiming damages from the federal bailout of their company during the financial crisis.
The freshman senator sent out a tartly worded statement to her many fans and followers. “AIG should thank American taxpayers for their help—not bite the hand that fed them,” Warren wrote. The message swept the blogosphere like wild fire. The AIG directors folded the next day. It is perhaps mistaken to assume her voice alone stopped this corporate ingratitude in its tracks, but that may well be the message absorbed in Washington politics. Try not to provoke this new senator, especially on the stuff she knows a lot about. She might bite back.
Indeed, Senator Warren has renewed the accusation about the AIG bailout she had made a year ago during her Senate campaign. While the Federal Reserve pumped a fortune ($182 billion) into saving AIG from failure and thereby protected Wall Street megabanks from huge losses, the Treasury Department was arranging its own “sleuth bailout,” as Warren charged. Treasury granted an exception to the standard tax rules that delivered billions more to AIG in the form of a special tax break.
The company was effectively relieved from paying any taxes despite the fact that it has returned to profitability and repaid the Federal Reserve loans. The senator called on her supporters to join a campaign to end AIG’s special tax break. “Enough is enough…,” she wrote. “These special tax giveaways give AIG a competitive advantage over its competitors—all the while inflating AIG’s profit numbers and compensation for executives.”
What separates Elizabeth Warren from your typical newcomer to Congress—in addition to the rare gutsiness—is her deep knowledge of banking and finance. For many years, while she taught at the Harvard law school, Warren was a lonely crusader, exposing predatory bankers and the cruel terms by which millions of families were driven into bankruptcy.
Her reputation led to appointment as the chair of the Congressional Oversight Panel that investigated the AIG bailout in great depth. The COP final report is itself an extraordinary document of government—clear and concise, an unflinching analysis that describes exactly how the Federal Reserve and the Treasury failed to serve the public interest in their incestuous bailout of Wall Street titans.
“The AIG rescue demonstrated that Treasury and the Federal Reserve would commit taxpayers to pay any price and bear any burden to prevent the collapse of America’s largest financial institutions,” Warren’s report concluded.
She will be heard. The new senator will serve on the Senate banking committee and she already knows where a lot of the bodies are buried. I suspect some of those disgruntled AIG investors are wishing they had kept their whining to themselves.
By: William Greider, The Nation, January 10, 2013