Wall Street Is Still Playing Us For Suckers
As a mere youth, I bought a used car in New York to drive to California to be with the woman of my dreams. Inexplicably, she decided to rush back to New York, so I promptly took the car back to the dealer. He made a shockingly low offer. The car had been in an accident, he explained. The chassis was bent. I was flabbergasted. I had just bought the car from him. If the chassis was bent, it was bent when I bought it. The salesman offered me a take-it-or-leave-it shrug. He probably now works on Wall Street.
That the morality of the used car lot has been adopted by Wall Street is now abundantly clear. Citigroup recently settled a civil complaint in which it was accused of selling mortgage-related investments that it knew were dogs. It was so certain that the investments were the financial equivalent of my used car that it bet against them — heads I win, tails you lose — and even selected the investments themselves, choosing from a cupboard of depleted and exhausted financial instruments. An investment in the Brooklyn Bridge would have been safer.
These investments are known as collateralized debt obligations (CDOs), and they consisted of the sort of mortgage securities that nearly sunk the U.S. financial system. According to federal regulators, they were sold with the full knowledge that they were careening toward worthlessness and that, by deduction, their buyers were patsies. The bank made substantial profits on them. But when the Securities and Exchange Commission decided to act, it got Citigroup to pony up a mere $285 million fine that, to presumed chuckles, will doubtlessly be taken out of petty cash. The bank last quarter reported a profit of $3.8 billion.
Mirth must have turned to guffaws when Citigroup read on. It did not even have to admit guilt — “without admitting or denying” is the language the SEC used — and no single executive was held culpable. The CDOs, apparently, were contrived by no one and sold by no one. There’s a Nobel Prize in something (maybe alchemy) for anyone who can explain how that happened.
The Citigroup settlement is being reviewed by a perplexed U.S. District Court Judge Jed S. Rakoff. Among other things, he wants to know why he should authorize a settlement “in which the SEC alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing.” This is a marvelous question that goes to the heart of the matter. The settlement is itself a CDO, a legal version of a black hole in which next to nothing is disclosed. Why no guilt? Why no guilty people? Why such a non-punishing punishment? The SEC will have to tell it to the judge.
I do not want to be excessively harsh on dear Citigroup. It was not the only one selling smoke. Goldman Sachs and JPMorgan did something similar. In the words of Jesse Eisinger of the online journalistic group ProPublica, “This was the Wall Street business model.” And it was a model permitted and encouraged from the top, by people who became filthy rich from filthy practices and now take umbrage when President Obama calls out their industry for approbation. They should first spend a year in community service and then, if they still feel slighted, denounce Obama.
As for Obama’s government, it has been too gentle with these miscreants. Why not a single major banker has been cuffed and frog-marched to some Financial District Guantanamo is unclear. Why their firms have gotten off with modest fines and non-confession confessions is not clear, either. That, in itself, is a crime.
Somebody has to break this culture. In this sense, Wall Street is no different than the New York Police Department, where it apparently has been customary to fix traffic tickets for friends, family and — almost certainly — the odd person with some cash. When 16 of the alleged ticket-fixers were arraigned last week, hundreds of off-duty cops came to cheer them, denounce the DA and manhandle reporters. Their union took a firm position in defending this behavior. An appalled city awaits firm action by the mayor and police commissioner.
An appalled nation awaits a similar response to what went on in the financial sector. What we would like to see is some version of a public hanging, the appropriate reaction to the breathtaking fleecing of investors. In the end, those investors got their money back.
That’s more than we can say about our lost faith in justice.
By: Richard Cohen, Opinion Writer, The Washington Post, October 31, 2011
“Descending From The Mountaintop”: House Republicans Keeping The Faith
After preaching for weeks about the urgency of Washington taking action to create jobs, lawmakers decided to put their mammon where their mouths are. And so on Tuesday evening they descended from the mountaintop and came forth to anoint a jobs bill of biblical proportions:
“H.Con.Res 13 — Reaffirming ‘In God We Trust’ as the official motto of the United States.”
The grace of this legislation, taken up on the House floor, was not immediately revealed to all. “In God We Trust” has been the nation’s official motto for 55 years, engraved on the currency and public buildings. There is no emerging movement to change that. But House Republicans chose to look beyond the absence of immediate threats and instead protect the motto against yet-unimagined threats in the future.
The legislation “provides Congress with the opportunity to renew its support of a principle that was venerated by the founders of this country, and by its presidents, on a bipartisan basis,” supporters claimed in their analysis. “This Congress can now show that it still believes and recognizes those same eternal truths by approving a resolution that will allow today’s Congress, as representatives of the American people, to reaffirm to the public and the world our nation’s national motto, ‘In God We Trust.’ ”
The infidel opposition took a rather different view. “We are focused on jobs measures,” said Brian Fallon, spokesman for Senate Majority Leader Harry Reid. “The House Republicans will hopefully get the message to do the same, God willing.”
In a dissenting analysis of the legislation, a group of House Democrats took a similarly skeptical stance. “Today we face the highest budget deficit in our nation’s history, a national unemployment rate of nearly 9 percent, and an ongoing mortgage foreclosure crisis,” they wrote. “American forces are deployed in combat on several fronts. . . . Yet, instead of addressing any of these critical issues, and instead of working to help American families keep a roof over their heads and food on their tables, we are debating whether or not to affirm and proliferate a motto that was adopted in 1956 and that is not imperiled in any respect.”
Then there’s the matter of whether Republicans violated their own promises by bringing up a ceremonial resolution and taking the God bill to the floor without a hearing. House GOP rules forbid suspending House rules to pass a bill if it “expresses appreciation, commends, congratulates, celebrates, recognizes the accomplishments of, or celebrates the anniversary of, an entity, event, group, individual, institution, team or government program.” (It might be argued that God, though an entity, is exempt from the provision.)
So what, pray tell, are Republicans up to? They can tell their constituents that they are doing the Lord’s work in the devil’s town. Because it is still too early to complain about efforts by the ACLU to snuff out Christmas, the In-God-We-Trust legislation provides a stand-in straw man. There’s certainly some appetite for this: Internet rumors proliferated after President Obama’s inauguration warning that he was seeking to remove “In God We Trust” from U.S. coins.
But it also conveys an impression to independent voters that, at a time of economic crisis, Republicans continue to focus on God, gays and guns.
Of course, there may be innocent explanations for the In God We Trust bill. “God” and “job” are both three-letter words with the same vowel. House Republicans may have been confused by the similarity, much like the dyslexic agnostic who wonders if there is a dog.
Notably, the House majority saw no need to protect the nation’s other motto, the one from the Great Seal of the United States that also appears on currency: e pluribus unum. But give the GOP credit for its tenacity: To continue to pursue social policies even while the nation cries out for economic relief requires the patience of Job — not to be confused with jobs.
In support of the God bill, the legislation’s champions quoted John F. Kennedy: “The rights of man come not from the generosity of the state but from the hand of God.” But they left out a better-known Kennedy passage, from his inaugural address: “let us go forth to lead the land we love, asking His blessing and His help, but knowing that here on earth God’s work must truly be our own.”
By: Dana Milbank, Opinion Writer, The Washington Post, November 1, 2011
Little Sympathy For Bernie Madoff’s Family
Surely, it’s been a difficult time for the wife and son of Bernie Madoff, the man now serving a 150-year prison sentence for running a $65 billion Ponzi scheme and bilking investors out of their life savings. The couple’s other son, Mark Madoff, committed suicide, hanging himself with a black dog leash while his two-year-old son slept nearby. Ruth Madoff, Bernie’s wife, says she knew nothing about her husband’s crimes while they were happening, but must endure the harassment, shame, and upsetting newspaper headlines that have come as a result of the scandal. And Andrew Madoff, the other son, feels betrayed.
They’ve been through an ordeal, no question about it. But is this really the time to be making a mass appeal for sympathy?
It seems the Madoffs think so. In a new book, Truth and Consequences: Life Inside the Madoff Family, Ruth and Andrew Madoff, along with Andrew’s fiancee, Catherine Hooper tell all about their time with Bernie Madoff. The book was written by Laurie Sandell, but “arranged,” CBS’s 60 Minutes reports, by Hooper. And the complaints about Bernie Madoff are many.
Said Andrew Madoff to 60 Minutes:
It was one of the hardest things to come to grips with, in trying to get my head around this, was that feeling that I had been used—almost as—as a human shield by him. He—it’s—it’s unforgivable. No—no father should do that to their sons.
A “human shield”? He wasn’t in the middle of a revolution in Libya. He was the son of a crooked financier and involved in the family business. And while he may well not have known about his father’s transgressions, he surely lived well from the deception his father engineered.
Ruth Madoff was allowed to keep $2.5 million of the couple’s stash, an amount she acknowledged to 60 Minutes is a lot of money to some people. But she added quickly that she’s spending a lot on legal fees. And Andrew, while portraying himself as something of a victim, was a bit more coy with CBS’s Morley Safer:
Safer: Let me ask a really intrusive question. How much are you worth as we speak?
Andrew: Well, I was fortunate over the years, running the business that Mark and I ran. It generated many millions of dollars in profits and enabled my brother and I both to live a comfortable lifestyle.
Safer: You haven’t answered the question.
Andrew: I made, in—in good years—several million dollars. My life, at this point, is an ope—is an open book. The details of my financial past have been laid bare completely in the lawsuit against me. I haven’t enjoyed it. But that’s the reality that I live in.
Safer: Do you fear ending up broke?
Andrew: I think that it’s a very real possibility, but I am prepared to start over again and build myself back up.
Think of all the people who have been unemployed for many months, even years. The people who have lost their homes and actually still owe money on the mortgage because their houses are worth so much less than they paid for them. The people who don’t have health insurance, and live in fear of developing some illness they won’t be able to afford to treat. Does Andrew Madoff think a few million dollars a year is still just “comfortable”?
The Madoff family has indeed endured a great deal of upheaval. But this is not the time to ask the rest of the country for support.
By: Susan Milligan, U. S. News and World Report, October 31, 2011
John Boehner And The Notion Of “Common Ground”
House Speaker John Boehner (R-Ohio) made an appeal to super-committee members yesterday, urging them to work towards a debt-reduction solution built on areas of agreement between the parties. If only his argument was as sensible as it sounds.
Boehner encouraged the committee to hone in on working to reform entitlements such as Social Security, Medicare and Medicaid in order to meet the committee’s mandate to drop $1.5 trillion from the deficit in the next decade. […]
Explaining that common ground is not analogous to compromise, the speaker called on Democrats and Republicans to come together on areas of agreement without violating the principles that brought them to elected office.
“Common ground doesn’t mean compromising on your principles. Common ground means finding the places where your agenda overlaps with that of the other party, locking arms, and getting it done, without violating your principles,” Boehner said. “The jobs crisis in America today demands that we seek common ground, and act on it where it’s found.”
That seems fair, doesn’t it? Democrats have a policy agenda; Republicans have a very different agenda; and to get something done, the two sides should focus on areas of commonality.
The context, however, makes all the difference. In this case, Boehner was talking about entitlements, and support in both parties for making structural “reforms” to Social Security, Medicare, and Medicaid. If Democrats and Republicans agree that entitlement changes are worthwhile to address long-term financing challenges, in the Speaker’s mind, it means the parties should “lock arms” and adopt these changes.
House Majority Leader Eric Cantor (R-Va.) made a very similar argument over the summer: “We both agree on doing something that’s good for the country, which is dealing with entitlements. Why don’t we just do that? Why do we have to sit here and say we still got to raise taxes when we don’t agree on that?”
The problem here is that GOP leaders don’t seem to understand what the words “compromise” and “common ground” mean.
Consider an example. Let’s say I go to pick up some lunch at the sandwich shop around the corner. The guy behind the counter and I are prepared to engage in a transaction — I’ll give him $5 and he’ll give me a sandwich. But I decide I’m not fully satisfied with the terms. “Look,” I tell the guy, “both of us agree that I should get the sandwich. It’s already right there on the counter, and this is the area where both of our agendas overlap. So, let’s focus on this area of common ground, I’ll eat the sandwich, and we can argue about the $5 later.”
This is, in effect, what Republican leaders are telling Democrats. Leading Dems in Congress and at the White House have told the GOP they’re willing to accept some entitlement “reforms” in exchange for some additional tax revenue from the wealthy. It’s a balanced approach that calls for broad sacrifice, which addresses the debt problem created by Republicans over the last decade.
Boehner and Cantor are saying, “Well, we both want to tackle entitlements, but we disagree about taxes, so just give us what we want since it’s an area of ‘common ground.’”
What GOP leaders don’t seem to understand — or at least choose to be confused about — is that giving one side everything it wants, and demanding no concessions at all from that side, is in no way similar to “finding the places where your agenda overlaps with that of the other party, locking arms, and getting it done.”
By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, November 1, 2011
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