“True Perversity”: Mitt Romney’s Obscene Posturing As A Wall Street Critic
Among the many obfuscations of Mitt Romney last night, this was perhaps the biggest laugher of them all:
ROMNEY: Dodd-Frank was passed, and it includes within it a number of provisions that I think have some unintended consequences that are harmful to the economy. One is it designates a number of banks as too big to fail, and they’re effectively guaranteed by the federal government. This is the biggest kiss that’s been given to—to New York banks I’ve ever seen. This is an enormous boon for them. There’s been—22 community and small banks have closed since Dodd-Frank. So there’s one example I wouldn’t designate five banks as too big to fail and give them a blank check. That’s one of the unintended consequences of Dodd-Frank. It wasn’t thought through properly.
Romney—the private equity veteran running a presidential campaign funded by Wall Street, on a platform that contains a full repeal of every financial regulation over the past four years—positioning himself as an opponent of those big “New York banks” was a historic moment in presidential debate cravenness. (And a real missed opportunity for Obama to wallop his opponent).
So what exactly was Romney talking about? It’s a complicated answer, but understanding it reveals the true perversity of Romney’s posturing.
Dodd-Frank has two provisions regarding too-big-to-fail that Romney is talking about here. The first is the ability of the Financial Stability Oversight Council, created by the legislation, to name financial institutions “systemically significant.” This means they are so big that their failure could threaten the health of the financial sector, and that designation subjects them to heightened regulation and higher capital requirements.
The big banks hate this requirement, for obvious reasons—they come under increased scrutiny and restrictions. So Republicans have been dutifully attacking it. (Romney’s running mate, Representative Paul Ryan, repeatedly blasted it before joining the ticket). The GOP argument, as you heard Romney deliver it, is that by giving them the “systemically significant label, the government is officially “designating” banks as too-big-to-fail—a very bad-sounding thing indeed!
But this is nonsense—these firms are too big to fail. The FSOC designation doesn’t make them so, and is in no way a “kiss” to the big banks—again, it subjects them to higher regulation. Romney and his party would prefer to repeal this provision, full stop, and thus effectively stick their heads in the sand about too-big-to-fail institutions. It’s like saying a doctor who diagnoses someone with cancer has given it to him.
Interestingly, a key feature of this provision is that FSOC can name non-banks as systemically significant, and just this week news broke that AIG is on the verge of receiving this label. Republicans on the House Financial Services Committee have been trying to amend Dodd-Frank to protect AIG from that designation, which to me raises an interesting question about Romney’s timing here.
In any case, when Romney spoke about “guaranteeing” a bailout, and of “blank checks,” he’s echoing another GOP complaint about the resolution authority provision of Dodd-Frank. That gives the federal government the power to wind-down big banks in the event of a failure. The idea is to dissolve the bank, without taxpayer money, not save it—Rep. Barney Frank has called this a “death panel” for big banks. (Pat Garofalo wrote on this issue for us here).
Banks also hate this provision, preferring instead the inevitable ad hoc, blank-check bailout that we saw in 2008. So Republicans have been going after resolution authority—the 2012 Ryan Budget would repeal it—by arguing that the provision somehow guarantees bailouts. This is the same flim-flam as before: the bailout is going to happen either way if the firm is too big to fail, and by repealing resolution authority, you take away the increased power of the government under Dodd-Frank to deal the problem. (Former Treasury Secretary Hank Paulson said he “would have loved to have had” resolution authority in 2008 instead if issuing straight-up bailouts).
Many progressive critics have legitimate complaints about the failure of Dodd-Frank to be tougher in dealing with too-big-to-fail firms, but to be absolutely clear, that’s not what Romney and the Republicans are trying to do. They’re trying to get rid of the limited reforms that have been made. To do it while preening as tough-on-Wall-Street politicians is deeply, deeply cynical.
By: George Zornick, The Nation, October 4, 2012
“Can’t Touch This”: It’s Time To Stop Letting Mitt Romney Off Easy
Mitt Romney wants the presidential election to be all about Barack Obama. If the press doesn’t start asking Romney some difficult questions about the core arguments upon which his entire presidential candidacy is based, he may very well get his way.
Case in point: Check out Mike Allen’s preview this morning of the Romney campaign’s next attack on the President’s economic record…
A senior aide tells us Mitt Romney plans to begin hitting specific stimulus projects as he travels, arguing that President Obama has actually subtracted jobs:
“Were these investments the best return on tax dollars, or given for ideological reasons, to donors, for political reasons? He spent $800 billion of everybody’s money. How’d it work out? It was the mother of all earmarks, not a jobs plan. By wasting all of this money, you had the worst of all worlds: It destroyed confidence in the economy, and makes people less likely to borrow money. Dodd-Frank has been a disaster for the economy. Where are the steady hands? Who’s in charge of energy? Where’s the strong, confident voice on the economy?”
So Romney will now go back to claiming Obama subtracted jobs. But there’s a new twist: Romney will claim that the effect of the stimulus has been to destroy jobs. As it has in the past, the Romney camp will justify this by pointing to a bogus metric — the net jobs lost on Obama’ watch. That includes the hundreds and hundreds of thousands of jobs lost before the stimulus went into effect. Really: The Romney camp’s claim is that we can calculate that the stimulus destroyed jobs overall with a metric that factors in all the jobs destroyed before the stimulus took effect. That’s not an exaggeration. It really is the Romney campaign’s position. It’s time to ask Romney himself to justify it.
The Romney camp will also begin claiming that Obama has “never created a job.” Will anyone ask Romney about the two dozen straight months of private sector job creation we’ve seen?
And if Romney is now going to start hitting individual stimulus projects, it’s also time to ask him what he would have done if he had been president in January of 2009. He has previously said positive things about stimulus spending. Are those no longer operative? Would Romney really not have proposed any government spending to stimulate the economy when it was in free fall? What would he have done instead? This question is absolutely central. How about asking it?
Then there’s the claim that “Dodd-Frank has been a disaster for the economy.” Romney has pledged to roll back financial reform completely, but he hasn’t said with any meaningful specificity what he woud replace it with, beyond claiming (after the J.P. Morgan debacle forced him to do so) that he supports “common sense regulations.” How about asking Romney what, if anything, he would do instead to guard against future Wall Street recklessness after rolling back Obama’s regulatory response to the worst financial disaster since the Great Depression?
Many of the claims that form the foundation of Romney’s entire case for the presidency are going without any meaningful national press scrutiny to speak of. Why?
By: Greg Sargent, The Washington Post Plum Line, May 29, 2012
“A Choice Of Capitalisms”: Creative Acts vs Acts of Betrayal
In this election, we’re not having an argument that pits capitalism against socialism. We are trying to decide what kind of capitalism we want. It is a debate as American as Alexander Hamilton, Andrew Jackson and Henry Clay — which is to say that we have always done this. In light of the rise of inequality and the financial mess we just went through, it’s a discussion we very much need to have now.
The back-and-forth about Bain Capital, Mitt Romney’s old company, is part of something larger. So is the inquest into the implications of multibillion-dollar trading losses at JPMorgan Chase. Capitalism can produce wonders. It is also capable of self-destruction, and it can leave a lot of wounded people behind. The trick is to get the most out of what capitalism does well, while containing or preventing the problems it can cause.
To describe this grand debate is not to deny that President Obama’s campaign has some, shall we say, narrower motives in going after Bain. Obama’s lieutenants need to undermine Romney’s claim that his experience in the private equity business makes him just the guy to get our economy back on track.
The Bain conversation has already been instructive. Romney’s friends no less than his foes have had to face the fact that Bain’s purpose was never about job-creation. Its goal was to generate large returns to Bain’s partners and investors. It did that, which is why Romney is rich.
Romney wants to focus on the positive side of his business dealings that did create jobs. He wants to brag about the companies Bain helped bring to life, among them Staples, Sports Authority and Domino’s.
That’s fair enough. But having made an issue of Bain on the plus side, he also has to answer for the pain and suffering — or, as defenders of capitalism like to call it, the “creative destruction” — that some of Bain’s deals left in their wake.
This leads naturally to the question of how creative the destruction wrought by our current brand of capitalism actually is. Since the dawn of the leveraged buyout era three decades ago, many friends of capitalism have questioned whether loading companies with debt as part of these deals is good for companies and for the economy as a whole.
Does this approach cause unnecessary suffering among the employees of the companies in question and the communities that often lose plants and jobs as a result? Sucking pension and health funds dry to aggrandize investors seems less like a creative act than a betrayal of workers who made bargains with their employers in good faith.
More generally, while some of the innovations in the financial sphere have been beneficial to growth, it’s far from clear that this is true of all or even most of them. Some of them helped cause the downturn we are still trying to escape and created incentives for the dangerous risk-taking that led to JPMorgan’s troubles. And there’s little doubt that our new financial system has transferred wealth from other sectors of the economy to the people at the top of the financial business.
Vice President Biden’s speech last week in Youngstown, Ohio, drew wide attention for its criticism of Romney as someone who just doesn’t “get it.” But when Biden moved beyond Romney, he offered an energetic broadside against the new world of finance, and he picked the right venue to make his case: a noble blue-collar town that has been battered by the winds of globalization and economic change.
“You know the difference between having an economy that makes things that the rest of the world wants, and having an economy that is based on financialization of every product,” Biden told his listeners. “You know the difference between an economy . . . that’s built on making things rather than on collateralized debt, creative credit-default swaps, financial instruments like subprime mortgages. That’s not how you build an economy.”
Romney, by contrast, is wary of dismantling any of these nifty new Wall Street inventions, one reason why he wants to repeal the Dodd-Frank financial reforms.
We need to have this great national argument. To borrow a term pioneered by Germany’s Christian Democrats, we can try to build a social market. Or we can have an anti-social market. An election is the right venue for deciding which it will be.
By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, May 20, 2012
“Aiding And Abetting”: Scott Brown Weakened Restrictions On Goldman Sachs Abuses
In his public resignation letter in today’s New York Times, former Goldman Sachs executive Greg Smith said that one of the fastest ways to get ahead with the firm is to persuade clients “to invest in the stocks or other products that [the firm is] trying to get rid of because they are not seen as having a lot of potential profit.” He lambastes a firm culture where colleagues openly boast of “ripping their clients off.”
The sad thing is, this sort of shady might well have been on the way to being curtailed if not for the actions of Sen. Scott Brown (R-MA). After Brown was elected to the senate in 2010, he threatened to join a Republican filibuster of the Dodd-Frank Wall Street Reform and Consumer Protection Act, using that threat to significantly water down the bill. Among the industry-favored concessions he extracted was weakening of the “Volcker rule,” which was meant to curb risky speculative investments that do not benefit customers.
Thanks to Brown’s maneuver, the final bill upped the amount of risky trading big banks like Goldman could engage in, increasing the amount of gambling they’re able to do by billions of dollars. Since then, financial industry lobbyists have been hammering away at the the rule in an attempt to render it completely meaningless.
The financial sector, of course, has repaid Brown with a flurry of campaign contributions. Between contributions from the firm’s leadership PAC and contributions from company employees, Brown has already received more than $40,000 in campaign cash from Goldman Sachs this cycle.
By: Josh Israel, Think Progress, March 14, 2012
“Goldman Sachs’ Million Dollar Man”: Mitt Romney’s Ties To A “Toxic And Destructive” Bank
Republican presidential primary frontrunner Mitt Romney (R) is taking a break from the campaign trail a day after finishing third in the Alabama and Mississippi primaries, stopping in New York City for multiple fundraisers and a visit with campaign surrogate Donald Trump. Romney will attend three fundraisers and haul in an expected $2 million this week, bolstering a fundraising total that has already made him Wall Street’s favorite candidate.
More than any other institution on Wall Street, Romney has ties to Goldman Sachs, the firm that was slammed in a New York Times editorial this morning by a resigning executive director who decried the firm’s “toxic and destructive” culture. Romney and his wife, Ann, have investments in almost three-dozen Goldman Sachs funds valued between $17.7 million and $50.5 million, according to his personal financial disclosure forms.
No Wall Street bank has been as generous to Romney’s campaign, his leadership PAC, and the super PAC that backs him as Goldman. According to an analysis of Federal Election Commission reports, Goldman Sachs employees have given the Romney campaign more than $427,000 during the 2012 cycle, nearly twice as much as he has received from any other major Wall Street bank (Citigroup employees have given roughly $274,000 to Romney, the second-largest amount). According to OpenSecrets.org, total contributions to Romney from Goldman Sachs, its employees, and their immediate family members totals more than $521,000.
The Free And Strong America Leadership PAC, which is affiliated with the Romney campaign, has received $30,000 from Goldman Sachs employees during the 2012 cycle. Goldman employees and their spouses, meanwhile, have given $670,000 to Restore Our Future, the super PAC backing Romney.
After making billions of dollars in the run-up to the financial collapse of 2008, Goldman Sachs benefited from a federal bailout that saved Wall Street banks. The company, like other Wall Street firms, stood opposed to the Dodd-Frank Wall Street Reform Act that was signed into law in 2010 and also fought regulations it contained, such as the Volcker Rule, which would prevent proprietary trading that made the bank billions but left taxpayers on the hook when it nearly collapsed. Romney has rarely missed a chance to tout his opposition to the law on the campaign trail, announcing that he’d repeal it even before he read it.
By: Travis Waldron and Josh Israel, Think Progress, March 14, 2012
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