“The Wall Street That Cried Wolf”: Banks Complain About Onerous New Regulations While Reaping Record Profits
The headlines have been nothing short of dazzling: “Bank of America profits soar“; “Citigroup’s profits surge“; “Bank boom continues: Goldman Sachs profit doubles.” In fact, the six biggest Wall Street banks – Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Wells Fargo and Morgan Stanley – all beat their profit expectations in the most recent quarter, according to results announced over the last week. JP Morgan Chase is even on pace to make $25 billion (yes, billion with a b) this year.
If you’re thinking that these numbers don’t at all square with the ominous warnings of bank executives and lobbyists, who have been saying non-stop that new regulations meant to safeguard the financial system and prevent a repeat of the 2008 financial crisis are going to irreparably harm their ability to do business, you’re right. But that hasn’t stopped the banks’ griping.
The latest iteration of this argument played out after regulators recently announced new rules regarding bank capital – the financial cushion banks must keep on hand to guard against a downturn. Failed presidential candidate turned bank lobbyist Tim Pawlenty, for instance, said that the new rules “will make it harder for banks to lend and keep the economic recovery going.” JP Morgan Chase CEO Jamie Dimon, who has been scaremongering for years about various regulations, warned that the new rules would put U.S. banks at a competitive disadvantage with foreign lenders.
But this same dynamic has been playing out since the Dodd-Frank financial reform law was signed by President Obama in 2010. Banks and their allies complain about onerous new regulations, while at the same time reaping record profits.
And as the New Yorker’s John Cassidy explained, those profits are due to many of the same practices that helped cause the 2008 debacle in the first place: “an emphasis on trading rather than lending, a high degree of leverage, and implicit subsidies from the taxpayer.” That would seem to make the case that new regulations, rather than going too far, have not gone far enough.
Perhaps that’s why banks haven’t been crowing about their new avalanche of profits, and Dimon is even warning about an upcoming profit squeeze. As the Financial Times’ U.S. banking editor Tom Braithwaite explains:
In the next 12 months the Fed will hit the banks with a new flurry of measures. … Those are coming, they are serious and the banks fear them. There is an outside chance that lawmakers will go even further, such as by restoring the split between investment banking and commercial banking known as Glass-Steagall. There is still plenty to play for in deciding how painful the next round of regulations will be.
But, with every earnings season, warnings of calamity look more and more hollow.
One of the major knocks against Dodd-Frank – beyond the obvious one that it left the biggest banks even bigger than they were before the financial crisis – is that it left too much discretion to regulators to write new rules. Corporations and trade organizations familiar with how the agency rule-writing process works are almost inevitably going to have the upper hand in such a system. And there are still so many rules left to be written – some 60 percent, according to the law firm Davis Polk – that Wall Street will have ample opportunity to water the law down to meaninglessness.
But it’s hard to keep saying with a straight face that new regulations will spell doom for the industry when the new rules that are in place so far, which were accompanied by similarly dire warnings, have done nothing to even dent Wall Street’s bottom line. In fact, the huge pile of profits may be the best thing that could have happened for those trying to bring a modicum of sanity back to Wall Street regulation.
By: Pat Garofalo, U. S. News and World Report, July 18, 2013
“The Story Of Our Time”: The Most Crucial Thing To Understand Is The Economy Is Not Like An Individual Family.
Those of us who have spent years arguing against premature fiscal austerity have just had a good two weeks. Academic studies that supposedly justified austerity have lost credibility; hard-liners in the European Commission and elsewhere have softened their rhetoric. The tone of the conversation has definitely changed.
My sense, however, is that many people still don’t understand what this is all about. So this seems like a good time to offer a sort of refresher on the nature of our economic woes, and why this remains a very bad time for spending cuts.
Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.
Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.
And that’s what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.
Why did spending plunge? Mainly because of a burst housing bubble and an overhang of private-sector debt — but if you ask me, people talk too much about what went wrong during the boom years and not enough about what we should be doing now. For no matter how lurid the excesses of the past, there’s no good reason that we should pay for them with year after year of mass unemployment.
So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again. The crucial point is that under current conditions, the government is not, repeat not, in competition with the private sector. Government spending doesn’t divert resources away from private uses; it puts unemployed resources to work. Government borrowing doesn’t crowd out private investment; it mobilizes funds that would otherwise go unused.
Now, just to be clear, this is not a case for more government spending and larger budget deficits under all circumstances — and the claim that people like me always want bigger deficits is just false. For the economy isn’t always like this — in fact, situations like the one we’re in are fairly rare. By all means let’s try to reduce deficits and bring down government indebtedness once normal conditions return and the economy is no longer depressed. But right now we’re still dealing with the aftermath of a once-in-three-generations financial crisis. This is no time for austerity.
O.K., I’ve just given you a story, but why should you believe it? There are, after all, people who insist that the real problem is on the economy’s supply side: that workers lack the skills they need, or that unemployment insurance has destroyed the incentive to work, or that the looming menace of universal health care is preventing hiring, or whatever. How do we know that they’re wrong?
Well, I could go on at length on this topic, but just look at the predictions the two sides in this debate have made. People like me predicted right from the start that large budget deficits would have little effect on interest rates, that large-scale “money printing” by the Fed (not a good description of actual Fed policy, but never mind) wouldn’t be inflationary, that austerity policies would lead to terrible economic downturns. The other side jeered, insisting that interest rates would skyrocket and that austerity would actually lead to economic expansion. Ask bond traders, or the suffering populations of Spain, Portugal and so on, how it actually turned out.
Is the story really that simple, and would it really be that easy to end the scourge of unemployment? Yes — but powerful people don’t want to believe it. Some of them have a visceral sense that suffering is good, that we must pay a price for past sins (even if the sinners then and the sufferers now are very different groups of people). Some of them see the crisis as an opportunity to dismantle the social safety net. And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain.
What has happened now, however, is that the drive for austerity has lost its intellectual fig leaf, and stands exposed as the expression of prejudice, opportunism and class interest it always was. And maybe, just maybe, that sudden exposure will give us a chance to start doing something about the depression we’re in.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 28, 2013
In retrospect, George W. Bush’s legacy doesn’t look as bad as it did when he left office. It looks worse.
I join the nation in congratulating Bush on the opening of his presidential library in Dallas. Like many people, I find it much easier to honor, respect and even like the man — now that he’s no longer in the White House.
But anyone tempted to get sentimental should remember the actual record of the man who called himself The Decider. Begin with the indelible stain that one of his worst decisions left on our country’s honor: torture.
Hiding behind the euphemism “enhanced interrogation techniques,” Bush made torture official U.S. policy. Just about every objective observer has agreed with this stark conclusion. The most recent assessment came this month in a 576-page report from a task force of the bipartisan Constitution Project, which stated that “it is indisputable that the United States engaged in the practice of torture.”
We knew about the torture before Bush left office — at least, we knew about the waterboarding of three “high-value” detainees involved in planning the 9/11 attacks. But the Constitution Project task force — which included such figures as Asa Hutchinson, who served in high-ranking posts in the Bush administration, and William Sessions, who was FBI director under three presidents — concluded that other forms of torture were used “in many instances” in a manner that was “directly counter to values of the Constitution and our nation.”
Bush administration apologists argue that even waterboarding does not necessarily constitute torture and that other coercive — and excruciatingly painful — interrogation methods, such as putting subjects in “stress positions” or exposing them to extreme temperatures, certainly do not. The task force strongly disagreed, citing U.S. laws and court rulings, international treaties and common decency.
The Senate intelligence committee has produced, but refuses to make public, a 6,000-page report on the CIA’s use of torture and the network of clandestine “black site” prisons the agency established under Bush. One of President Obama’s worst decisions upon taking office in 2009, in my view, was to decline to convene some kind of blue-ribbon “truth commission” to bring all the abuses to light.
It may be years before all the facts are known. But the decision to commit torture looks ever more shameful with the passage of time.
Bush’s decision to invade and conquer Iraq also looks, in hindsight, like an even bigger strategic error. Saddam Hussein’s purported weapons of mass destruction still have yet to be found; nearly 5,000 Americans and untold Iraqis sacrificed their lives to eliminate a threat that did not exist.
We knew this, of course, when Obama became president. It’s one of the main reasons he was elected. We knew, too, that Bush’s decision to turn to Iraq diverted focus and resources from Afghanistan. But I don’t think anyone fully grasped that giving the Taliban a long, healing respite would eventually make Afghanistan this country’s longest or second-longest war, depending on what date you choose as the beginning of hostilities in Vietnam.
And it’s clear that the Bush administration did not foresee how the Iraq experience would constrain future presidents in their use of military force. Syria is a good example. Like Saddam, Bashar al-Assad is a ruthless dictator who does not hesitate to massacre his own people. But unlike Saddam, Assad does have weapons of mass destruction. And unlike Saddam, Assad has alliances with the terrorist group Hezbollah and the nuclear-mad mullahs in Iran.
I do not advocate U.S. intervention in Syria, because I fear we might make things worse rather than better. But I wonder how I might feel — and what options Obama might have — if we had not squandered so much blood and treasure in Iraq.
Bush didn’t pay for his wars. The bills he racked up for military adventures, prescription-drug benefits, the bank bailout and other impulse purchases helped create the fiscal and financial crises he bequeathed to Obama. His profligacy also robbed the Republican Party establishment of small-government credibility, thus helping give birth to the tea party movement. Thanks a lot for that.
As I’ve written before, Bush did an enormous amount of good by making it possible for AIDS sufferers in Africa to receive antiretroviral drug therapy. This literally saved millions of lives and should weigh heavily on one side of the scale when we assess The Decider’s presidency. But the pile on the other side just keeps getting bigger.
By: Eugene Robinson, Opinion Writer, The Washington Post, April 25, 2013
The dedication this week of the George W. Bush Presidential Library and Museum was more than an opportunity for the five living U.S. presidents to compare notes on what Stefan Lorant called “the glorious burden” of the office.
It also was the beginning of Bush’s campaign for rehabilitation. As Bill Clinton said at the ceremony, all presidential libraries are attempts “to rewrite history.”
Bush’s ultimate goal — already hawked by his former political advisor Karl Rove — is to become another Harry S. Truman, a regular-guy commander in chief whose stock rose sharply about 20 years after he left office.
The superficial comparisons are intriguing. Vice President Truman only became president because Franklin D. Roosevelt died in office in 1945. The failed haberdasher and product of the Kansas City political machine was unlikely to make it to the top on his own. He was a plain-spoken, unpretentious man who cared enough about racial injustice that he desegregated the armed forces.
Bush became president because he was born on third base, to paraphrase Texas governor Ann Richards’ quip about his father, and because of the Supreme Court decision in Bush v. Gore in 2000; an unexceptional man who drank heavily until he was 40 probably wouldn’t have made it on his own. He’s a blunt, compassionate conservative who, as Jimmy Carter pointed out at the dedication, saw the ravages of AIDS in Africa and elsewhere and did something about it. (Bush also appointed two black secretaries of state.)
Like Iraq in Bush’s era, the Korean War was hugely unpopular when Truman left office in 1953, and his decision to drop two atomic bombs on Japan was at least as controversial as Bush’s support for torture.
Still, you don’t have to be Arthur Schlesinger Jr. to know that the differences between Bush and Truman are much greater than the similarities.
In Korea, Truman was responding to communist aggression, not hyping unconfirmed stories about weapons of mass destruction.
While Truman’s “Marshall Plan” (named for his secretary of state, George C. Marshall) produced spectacular results in postwar Europe, Bush apparently didn’t even have a plan for postwar Iraq.
His decision to disband the Iraqi army was catastrophic. Iraq and the simultaneous neglect of Afghanistan are only the best-known Bush administration fiascos that are all but airbrushed out of the museum, though not out of the historical record.
A broader list would include weakening bank-capital requirements and prohibitions on predatory lending that helped pave the way for the financial crisis; botching the response to Hurricane Katrina; gutting federal rules on worker safety, education, veterans’ affairs and other protections; endorsing a Constitutional amendment banning gay marriage; editing climate-change reports to the specifications of ideologues; reinstating the global gag rule on family planning in deference to right-wing anti-abortion activists, and politicizing appointments to the federal bench and federal law enforcement.
All this is ignored by Bush apologists. Ed Gillespie, a longtime Republican operative who last year helped the party’s presidential nominee, Mitt Romney, offered a defense of Bush in National Review that sought to absolve him of any blame for the budget deficit. As if the trillion-dollar wars, unaffordable tax cuts, the $550 billion (unpaid-for) prescription-drug benefit and hundreds of billions of lost revenue in the recession that began on his watch could be erased from history.
The new museum on the campus of Southern Methodist University in Dallas is cleverly designed to subsume Bush’s record within the burdens of the presidency. It includes a “Decision Theater” that puts visitors in the shoes of a president forced to make tough calls on a variety of pressing issues.
The subtext is that this is an extremely hard job and that you, the visitor, couldn’t do it any better than Bush did.
While this may make for a thought-provoking museum experience, it’s a low bar for presidential performance. Allowing for some mistakes, we should admire our presidents not because they have to face tough decisions but for making the right ones.
The “moral clarity” that is Bush’s claim to presidential respectability is only worth something if it results in clear achievement.
As a sign that even Bush knows his batting average on big decisions was low, the museum barely mentions Vice President Dick Cheney, Defense Secretary Donald Rumsfeld, and other officials who helped him make them.
Cheney’s churlish behavior and frequent shots at President Barack Obama over the last four years have made Bush, who has refrained from criticism, look restrained and classy by comparison.
But you can’t flush a disastrous war down the memory hole. At the dedication, the word “Iraq” wasn’t mentioned once, and the museum covers the subject in a section devoted to “the Global War on Terror.”
Continuing to conflate Iraq with the Sept. 11 attacks is an insult to truth that historians will never be able to overlook.
On Sept. 14, 2001, I was in the White House press pool and was five feet from Bush as he stood atop a crushed truck as rescue workers at Ground Zero shouted that they couldn’t hear the president speak.
“I can hear you! I can hear you,” Bush said through a bullhorn. “The rest of the world hears you, and the people who knocked these buildings down will hear all of us soon!” It was a defining moment for his presidency.
The problem that Bush can never get around is that “the people who knocked these buildings down” — namely, Osama bin Laden — didn’t hear from Bush, while others unconnected to the attacks did.
The bullhorn is in the museum. And so is the bull.
By: Jonathan Alter, The National Memo, April 26, 2013
“Should You Still Despise George W. Bush?”: He Hasn’t Initiated A Disastrous War Or Bankrupted The Government In Years
Twitter was alight this morning with mockery of this post from Washington Post conservative blogger Jennifer Rubin, explaining a marginal improvement in George W. Bush’s post-presidential approval ratings (from 33 percent when he left office to 47 percent now) by noting that Bush won that ugly Iraq War (who started that again?), gave us a great economy, and pretty much solved the Israeli-Palestinian conflict, among other accomplishments, and also had a “tender, tearful love of country,” unlike some people she could mention. I’ll leave it to others to respond to the particulars of Rubin’s journey to Bizarro World, but if we assume this poll to be accurate, the question is, why might Americans’ opinions of Bush be somewhat less dreadful than they used to be?
Let’s think about it this way: How do you feel about Bush? If you’re like me, your contempt for him isn’t what it once was. Back in the day, I took a back seat to no one when it came to displeasure with him. But I’ll admit that in the four years since he left office, my own feelings toward him have softened. Not that I now think he was anything other than a terrible president, but I’m not actively mad at him anymore. My rational judgment hasn’t changed, but my more emotional feelings have dissipated somewhat.
That’s partly because of the rise of the Tea Party and its takeover of the GOP, which made Bush look like a moderate by comparison with the lunatics who are now exerting so much influence over his party. But more than that, I think, is the fact that he’s just not in our faces every day. If you were a liberal in the 2000s, Bush was pissing you off all the time. But give the guy some credit: he hasn’t initiated a disastrous war or bankrupted the government in years!
I suspect if you asked conservatives about Bill Clinton, a few might admit to the same evolution. When Bubba was president, their hatred of him burned with the fire of a thousand suns. But now? There are so many other things to get mad about, and if Clinton is spending his time raising money to buy mosquito nets to stop malaria, well there’s nothing wrong with that. And if Bush is spending his days painting pictures of dogs, it’s hard to get worked up about it.
There will no doubt now be a campaign to resuscitate Bush’s image; National Journal‘s Ron Fournier does his part with a column noting that Bush has been known to write a thank-you note, and is also very punctual. Nobody could argue he did nothing good; for instance, he put resources toward addressing the AIDS crisis in Africa, knowing that there was little domestic benefit to be had. And from what one can tell, in person Bush was usually a nice guy. But we shouldn’t let the mists of time make us forget all the awful things he did, too. Presidents have to be judged by their actions and the effects those actions have on the country and the world. Bush’s eight years in office were a string of disasters, and not little ones either. His disasters were grand and far-reaching, from the hundreds of thousands who died in Iraq to the squandering of trillions of dollars to the abandonment of New Orleans during Katrina. A few years later those things may no longer make us boil with rage. But we shouldn’t forget them.
By: Paul Waldman, Contributing Editor, The American Prospect, April 23, 2013