“Wall Street’s Threat To The American Middle Class”: Do We Really Need To Be Reminded About What Happened Six Years Ago?
Presidential aspirants in both parties are talking about saving the middle class. But the middle class can’t be saved unless Wall Street is tamed.
The Street’s excesses pose a continuing danger to average Americans. And its ongoing use of confidential corporate information is defrauding millions of middle-class investors.
Yet most presidential aspirants don’t want to talk about taming the Street because Wall Street is one of their largest sources of campaign money.
Do we really need reminding about what happened six years ago? The financial collapse crippled the middle class and poor — consuming the savings of millions of average Americans, and causing 23 million to lose their jobs, 9.3 million to lose their health insurance, and some 1 million to lose their homes.
A repeat performance is not unlikely. Wall Street’s biggest banks are much larger now than they were then. Five of them hold about 45 percent of America’s banking assets. In 2000, they held 25 percent.
And money is cheaper than ever. The Fed continues to hold the prime interest rate near zero.
This has fueled the Street’s eagerness to borrow money at rock-bottom rates and use it to make risky bets that will pay off big if they succeed, but will cause big problems if they go bad.
We learned last week that Goldman Sachs has been on a shopping binge, buying cheap real estate stretching from Utah to Spain, and a variety of companies.
If not technically a violation of the new Dodd-Frank banking law, Goldman’s binge surely violates its spirit.
Meanwhile, the Street’s lobbyists have gotten Congress to repeal a provision of Dodd-Frank curbing excessive speculation by the big banks.
The language was drafted by Citigroup and personally pushed by Jamie Dimon, CEO of JPMorgan Chase.
Not incidentally, Dimon recently complained of being “under assault” by bank regulators.
Last year JPMorgan’s board voted to boost Dimon’s pay to $20 million, despite the bank paying out more than $20 billion to settle various legal problems going back to financial crisis.
The American middle class needs stronger bank regulations, not weaker ones.
Last summer, bank regulators told the big banks their plans for orderly bankruptcies were “unrealistic.” In other words, if the banks collapsed, they’d bring the economy down with them.
Dodd-Frank doesn’t even cover bank bets on foreign exchanges. Yet recent turbulence in the foreign exchange market has caused huge losses at hedge funds and brokerages.
This comes on top of revelations of widespread manipulation by the big banks of the foreign-exchange market.
Wall Street is also awash in inside information unavailable to average investors.
Just weeks ago a three- judge panel of the U.S. court of appeals that oversees Wall Street reversed an insider-trading conviction, saying guilt requires proof a trader knows the tip was leaked in exchange for some “personal benefit” that’s “of some consequence.”
Meaning that if a CEO tells his Wall Street golfing buddy about a pending merger, the buddy and his friends can make a bundle — to the detriment of small, typically middle-class, investors.
That three-judge panel was composed entirely of appointees of Ronald Reagan and George W. Bush.
But both parties have been drinking at the Wall Street trough.
In the 2008 presidential campaign, the financial sector ranked fourth among all industry groups giving to then candidate Barack Obama and the Democratic National Committee. In fact, Obama reaped far more in contributions from the Street than did his Republican opponent.
Wall Street also supplies both administrations with key economic officials. The treasury secretaries under Bill Clinton and George W. Bush – Robert Rubin and Henry Paulson, respectfully, had both chaired Goldman Sachs before coming to Washington.
And before becoming Obama’s treasury secretary, Timothy Geithner had been handpicked by Rubin to become president of Federal Reserve Bank of New York. (Geithner is now back on the Street as president of the private-equity firm Warburg Pincus.)
It’s nice that presidential aspirants are talking about rebuilding America’s middle class.
But to be credible, he (or she) has to take clear aim at the Street.
That means proposing to limit the size of the biggest Wall Street banks; resurrect the Glass-Steagall Act (which used to separate investment from commercial banking); define insider trading the way most other countries do – using information any reasonable person would know is unavailable to most investors; and close the revolving door between the Street and the U.S. Treasury.
It also means not depending on the Street to finance their campaigns.
By: Robert Reich, The Robert Reich Blog, January 26, 2015
“With Or Without You”: Obama Leaves Obstinate GOP Behind With State Of The Union
With his penultimate State of the Union address, President Obama gave the speech that Democrats have always wanted him to give.
After six years of hedges and qualification, the president finally offered a confident, full-throated defense of his economic record, and of his progressive vision of government.
“Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999. Our unemployment rate is now lower than it was before the financial crisis,” the president declared. “More of our kids are graduating than ever before; more of our people are insured than ever before; we are as free from the grip of foreign oil as we’ve been in almost 30 years.”
“It’s now up to us to choose who we want to be over the next 15 years, and for decades to come,” Obama said. “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”
The president went on to lay out a program of “middle-class economics,” featuring tax cuts for working families, the expansion of paid sick leave, free community college, new infrastructure spending, and a higher minimum wage. He also highlighted his administration’s work on several issues close to the hearts of liberals, such as combating climate change, protecting the rights of LGBT people around the world, closing the prison at Guantánamo Bay, defending the right to vote, and safeguarding elections from “dark money for ads that pull us into the gutter.”
While nothing the president proposed would have the impact of historically significant Obama-era achievements like the Affordable Care Act or the Dodd-Frank Wall Street reform law, most of his proposals poll extremely well with the American public. And Obama practically dared Republicans to stand in their way.
“These policies will continue to work, as long as politics don’t get in the way. We can’t slow down businesses or put our economy at risk with government shutdowns or fiscal showdowns,” Obama said. “We can’t put the security of families at risk by taking away their health insurance, or unraveling the new rules on Wall Street, or refighting past battles on immigration when we’ve got a system to fix. And if a bill comes to my desk that tries to do any of these things, it will earn my veto.”
The president’s speech featured few surprises (in fact, the White House released a full transcript of Obama’s remarks before he even entered the House chamber). But the official Republican response from newly elected senator Joni Ernst (R-IA) contained even fewer. Her sunny speech had almost nothing to do with what Obama proposed; in fact, just seconds in, she flatly acknowleged that “rather than respond to a speech, I’d like to talk about your priorities.”
Apparently, Republicans still think that those priorities include building the Keystone XL pipeline — which Ernst labeled the “Keystone jobs bill,” although it will create just 35 permanent positions — cutting taxes and spending, repealing the health care reform law, and little else.
“Americans have been hurting, but when we demanded solutions, too often Washington responded with the same stale mindset that led to failed policies like Obamacare,” Ernst lamented. “It’s a mindset that gave us political talking points, not serious solutions.”
That statement betrays Republicans’ central political problem in 2015. For years, they have claimed that President Obama’s policies would lead to disaster. But now, as the GOP takes full control of Congress, those “failed policies” have resulted in a booming economy — an irony that the president noted in his address.
“At every step, we were told our goals were misguided or too ambitious; that we would crush jobs and explode deficits,” Obama said. “Instead, we’ve seen the fastest economic growth in over a decade, our deficits cut by two-thirds, a stock market that has doubled, and health care inflation at its lowest rate in 50 years.”
Meanwhile, the GOP had no response except for the same plans that it pitched at the depth of the recession.
It’s no secret that Republicans will dismiss most of the proposals that President Obama put forth during his speech. But the rest of the nation might not follow suit. According to a new NBC News-Wall Street Journal poll, 45 percent of Americans are happy with the state of the economy — an 11-year high — and 49 percent approve of Obama’s handling of the issue. Democrats’ economic message is starting to resonate, and Republicans still don’t have a serious plan of their own.
If they don’t find one shortly, they risk seeing the national debate leave them behind just as they hope to win the White House in 2016.
By: Henry Decker, The National Memo, January 21, 2015
“While The Rest Of The Country Suffers”: The Republican Congress Has Done Nothing But Help Big Business
On Thursday and Friday this week, House and Senate Republicans are at a joint retreat in Hershey, Pennsylvania, to listen to an array of speakers on different policy and political issues. This brief respite offers an opportunity to examine what the Republican priorities have been in the first 10 days of the 114th Congress, and it shows one clear winner: Big Business.
House Republicans began 2015 by immediately trying to roll back or delay a number of regulations in the Dodd-Frank regulatory reform law. Just a day into the new Congress, the House voted on a fast-track bill that would have watered down and rolled back a number of important regulations. In fact, the legislation, officially titled the Promoting Job Creation and Reducing Small Business Burdens Act, was the combination of 11 bills that would, among other things, delay the Volcker Act for years and weaken derivative regulations. The bill was brought up under suspension of the rules and thus required a two-thirds majority to pass. It fell short of that goal, with 276 legislators voting for it and 146 against. It was an unexpected victory for progressives after 44 Democrats changed their votes, after voting for a similar bill in the 113th Congress.
But Republicans were not to be denied. They brought up the bill under the normal rules where a two-thirds majority was not required. On Wednesday, it passed, 271-154. It’s not clear if the Senate would take it up, or if Democrats would have enough votes to filibuster it. But Wall Street received another gift in the Terrorism Risk Insurance Act, which expired at the end of 2014 and allows the federal government to backstop commercial insurance companies in the case of a terrorist attack. Even if you think terrorism risk insurance should be the government’s prerogative, it undoubtedly benefits large corporations, insurers, and real estate companies. Wall Street’s real victory, though, was the inclusion of a provision to roll back another, albeit smaller, component of Dodd-Frank. President Barack Obama signed it on Monday.
In other words, Wall Street is a fan of the new Republican Congress. Other industries are, too. Republicans have also focused on energy regulations, most notably approving the Keystone XL pipeline. Last Friday, the House passed a bill to approve the pipeline. The Senate voted to allow debate on the bill and will likely take a final vote on it next week, when it is expected to receive more than the 60 votes necessary to overcome a filibuster. The question is whether Congress has the two-thirds votes necessary to overturn Obama’s veto.
The House also took a whack at Obamacare by passing a bill that would change the definition of a full-time worker from 30 hours to 40 hours for purposes of the employer mandate. The Congressional Budget Office estimated that the bill would increase the deficit by $53.2 billion over the next decade, much of it from employers no longer having to pay a penalty for not offering health insurance for employees who work between 30-40 hours. The Senate is also readying a bill to repeal the medical device tax, which a new report this week estimated would cost 47-1,200 jobs, in total.
It wasn’t hard to predict that the new Republican Senate’s top priority would be helping Big Business. Partially, that’s because enough Democrats have been eager to support these bills and overcome filibusters in the Senate (such as on the Keystone pipeline or medical device tax). Utah Senator Mike Lee explained this in November in The Federalist:
[T]he easiest bipartisan measures to pass are almost always bills that directly benefit Big Business, and thus appeal to the corporatist establishments of both parties. In 2015, this “low-hanging fruit” we’ll hear about will be items like corporate tax reform, Obamacare’s medical device tax, patent reform, and perhaps the Keystone XL pipeline approval.
As it happens, these are all good ideas that I support. But if that’s as far as Republicans go, we will regret it. The GOP’s biggest branding problem is that Americans think we’re the party of Big Business and The Rich. If our “Show-We-Can-Govern” agenda can be fairly attacked as giving Big Business what it wants—while the rest of the country suffers—we will only reinforce that unpopular image.
Lee’s worries were prescient. The 114th Congress has only just begun, of course, so Republicans have plenty of time to put forward an agenda focused on the middle class. Senate Majority Leader Mitch McConnell could support other moderate Republicans in crafting a compromise to increase the minimum wage. The GOP could make an expansion of the Earned Income Tax Credit a priority. Lee and Florida Senator Marco Rubio have proposed a number of other policies that are focused on the middle class.
But right now, there are few signs that Republicans are going to do anything like that.
By: Danny Vinik, The New Republic, January 15, 2015
“GOP Lawmakers Hit The Ground Running To The Far-Right”: House Republican Leaders Still Haven’t Mastered The Art Of Vote-Counting
In the weeks immediately following the 2014 midterm elections, there was an enormous amount of talk about the need to avoid “poisoning the well.” The point seemed to be, policymakers should be cautious about picking political fights in order to avoid partisan rancor in the new Congress.
Clearly, those concerns have been thrown out a Capitol Hill window.
House Democrats on Wednesday knocked down a GOP bill that would have delayed a key Wall Street reform known as the Volcker Rule, stunning Republican leaders who had expected it to pass with ease. […]
The bill would have allowed banks to hang onto billions of dollars in risky collateralized loan obligations for two additional years by amending the Volcker Rule, which is part of the 2010 Dodd-Frank financial reform law. The rule bans banks from speculating in securities markets with taxpayer funds, requiring them to dump their CLO holdings. A Volcker Rule delay would be a major boon to the nation’s largest banks.
Note, a majority of the House voted for the measure, but because Republican leaders brought the bill up under the suspension calendar, it needed a two-thirds majority to pass. It fell far short.There are a few ways to look at yesterday’s failure. The first, of course, is that House Republican leaders still haven’t mastered the art of vote-counting. The second is that GOP lawmakers clearly remain committed to using their power to do Wall Street’s bidding.
But even putting that aside, let’s not miss the forest for the trees: on only the second day of the new Congress, House Republicans immediately turned their attention to a controversial proposal, backed by financial-industry lobbyists. These guys really aren’t wasting any time.
Indeed, it’s amazing to see just how aggressive the new Republican majority has been since taking its oath of office on Tuesday.
Barring crisis conditions, the start of a new Congress can generally be compared to the start of new school year: folks like to get settled in before tackling a lot of work. On Capitol Hill, some members, especially the freshmen, are still unpacking and learning their way around.
And it’s against this backdrop that House Republicans this week are voting to undermine the Volcker Rule, undermine Social Security, undermine the Affordable Care Act, approve the Keystone pipeline, and impose irresponsible “dynamic scoring” rules – all in the first three days.
It’s one thing when lawmakers furiously try to get stuff done before the end of a Congress – they tend to move quickly when facing an inflexible deadline – but the House GOP majority seems desperate to get this new Congress off to a fast, far-right start, just for the sake of doing so.
What’s more, we’re not even going to touch the newly introduced legislation – including major new abortion restrictions proposed yesterday – which will be considered in the weeks and months to come. I’m just talking about measures on the House floor this opening week.
E.J. Dionne Jr. reminded us this morning, “This will be no ordinary Congress.” Republicans are eager to prove this prediction true.
By: Steve Benen, The Madow Blog, January 9, 2014
“Citigroup Becomes Its Own Self-Serving Lawmaker”: 21st Century Civics Lesson; How A Corporate Bill Becomes A Law
Congress, which has long been so tied up in a partisan knot by right-wing extremists that it has been unable to move, suddenly sprang loose at the end of the year and put on a phenomenal show of acrobatic lawmaking.
In one big, bipartisan spending bill, our legislative gymnasts pulled off a breathtaking, flat-footed backflip for Wall Street, and then set a dizzying new height record for the amount of money deep-pocketed donors can give to the two major political parties. It was the best scratch-my-back performance you never saw. You and I didn’t see it — because it happened in secret.
The favor was huge — allowing Wall Street’s most reckless speculators to have their losses on risky derivative deals insured by us taxpayers. Yes, such losses were a central cause of the 2008 financial crash and subsequent unholy bank bailout, which led to passage of the Dodd-Frank reform law, including a provision sparing taxpayers from covering future losses. But with one, compact, 85-line provision inserted deep inside the 1,600-page, trillion-dollar spending bill, Congress did a dazzling flip-flop on that regulation, putting us taxpayers back on the hook for the banksters’ high-risk speculation.
In this same spending bill, Congress also used its legislative athleticism to free rich donors (such as Wall Street bankers) from a limit of under $100,000 on the donation that any one of them can give to political parties. In a spectacular gravity-defying stunt, lawmakers flung the limit on these donations to a record-setting 15 times higher than before. So now bankers who are grateful to either party for being able to make a killing on taxpayer-backed deals can give $1.5 million each to the parties.
Perhaps you recall from your high school civics class that neat, one-page flow chart showing the perfectly logical, beautifully democratic process that Congress must go through to pass our laws.
What a bunch of kidders those chart makers were! To see how the sausage is really made, let’s take a look at that trillion-dollar budget bill that Congress squeezed out just before Christmas. It was crammed with special corporate favors, such as: reinstating a Bush rule allowing mining giants to explode the tops off ancient Appalachian mountains and then bulldoze the rubble down into the valley below, destroying pristine mountain streams; another letting long-haul trucking outfits require their drivers to be on the road more than 11 hours a day and up to 82 hours per week, filling our highways with highballing, sleep-deprived truckers; and cutting $60 billion from the Environmental Protection Agency, freeing up polluters to go unpunished for polluting.
None of these favors had anything to do with that “how a bill becomes law” flow chart in our civics textbook. No bill was filed, no public hearings, no debate, no vote. Just — BAM! — there they were, a thicket of benefits secretly slipped into the 1,600-page budget bill by … well, by whom? Largely by corporate lobbyists, though they get one of their for-hire congresscritters to do the actual dirty deed.
The taxpayer subsidy for Wall Street, for example, was written by Citigroup. The bank’s lobbyists then handed the provision to Kansas Republican Kevin Yoder, who slipped it into the bill. Thus, the Wall Street conglomerate that took a $50 billion bailout from us taxpayers just seven years ago to save itself from its own bad deals essentially was allowed to become an unelected, self-serving, do-it-yourself, backroom “lawmaker” to make sure that your and my tax dollars will be there to cover its next mess-up.
And that, boys and girls, is the real flow chart for making our laws. It’s always an amazing sight when Wall Street and Congress get together — especially when they get together out of sight.
By: Jim Hightower, The National Memo, December 24, 2014
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