“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
“Congress Reinterprets Jesus”: Serve Banksters Or Serve The Poor?
Thank God for Congress, right? When things get out of balance in America, we can always count on our legislative stalwarts to recalibrate the scales of justice.
Take greed, for example. The barons of Wall Street, whose raw greed and casino scams wrecked our real economy five years ago, are back to shoving great gobs of bonus pay into their pockets. Meanwhile, the middle class remains decimated, and millions of workaday Americans who were knocked all the way down into poverty are still stuck there. In this nation of fabulous wealth, our poverty numbers are shocking and scandalous: 50 million people are officially poor; another 51 million are “near poor.” A third of our country!
You’ll be pleased to know, then, that only last week, U.S. House members turned their legislative guns on the greed that’s sapping the moral vitality of our society. Unfortunately, their aim was a bit off. Instead of popping the privileged, they hit the most unprivileged: families who need food stamps to make ends meet.
The food stamp program is out of control, they shrieked, noting that it’s been expanding even as the unemployment rate has been coming down. Yoo-hoo, knuckleheads, the jobless rate has ticked down largely because job-seekers have become so discouraged by the absence of opportunities that they’ve quit looking. Plus, getting a job no longer gets you out of poverty — just ask the barista who’s making your next latte about the joys of working for poverty pay. Food stamp rolls have reached record numbers, because — guess what? — there are record numbers of Americans in poverty!
Yet, the House called for cutting some $2 billion a year (and 2 million Americans) out of the program. On June 20, however, the members balked — not because the cut was too severe, but because it was not enough for Tea Party Republicans, who have been demanding a total food stamp gut job, proposing to slash the program by $25 billion a year.
Also, the GOP majority lost the votes of nearly all Democrats by adding a couple of fiendish amendments to punish poor people for the crime of being poor. One was to put additional work requirements on families seeking the food benefit. “We cannot continue to deny able-bodied people the dignity of work,” blathered a worked-up know-nothing named Steve Southerland of Florida. Then, Rep. Michele Bachmann had a tempest in her teapot of a brain, offering her support of Southerland’s amendment in a sort of Biblical falsetto: “If anyone will not work, neither should he eat.”
Hello, Michele — that’s not exactly in keeping with the moral message of the Biblical Jesus. Nor is it in keeping with reality — today’s poverty does not stem from any unwillingness to work. Indeed, millions of food stamp recipients are working, but not being paid enough to put adequate groceries on the family table. And many more are in desperate search for jobs that aren’t there.
In fairness, though, let me note that House Republicans did try to give hard-hit families something extra in this legislation: drug testing. Following in lockstep with the Koch-funded American Legislative Exchange Council — which has been peddling this vile, insulting slap at poor people all around the country — the House majority added a urine-test provision to its bill. That really puts the mean in “demeaning” — and this from small-government poseurs who piously decry government intrusion into people’s lives!
Once again, the Tea Party congresscritters should have used their ever-present Bibles for instruction, rather than just for thumping. They would’ve learned that Jesus, at the Sea of Galilee, distributed free fish and loaves to everyone there — with no pee-in-the-cup requirement. And if he had wanted to test whether anyone was on drugs, he would’ve passed cups to bankers first, then to lawmakers.
A society’s response to poverty is one measure that speaks directly to its essential character. In particular, a wealthy society’s nonchalant tolerance of poverty in its midst, the willingness of that society’s leaders to disregard the spread of poverty and the callous calculations by some that it is permissible and even profitable to denigrate those mired in poverty — these are three flashing indicators of a meltdown in our society’s moral core.
By: Jim Hightower, The National Memo, June 26, 2013
“Apocalypse Not Now”: Just About Everything Is Getting Better
As a culture, we seem to be in an apocalyptic moment. Judging from the movie trailers, it looks like the human race is basically screwed this summer in After Earth, World War Z, and This Is the End—a comedy!—while Washington (and its black president) will be besieged by cyber-terrorists in White House Down. In the real world, we’re bombarded with warnings about our debt crisis, our economic crisis, and of course our political crisis, which is to say, our government’s inability to deal with all its other crises. Republicans in particular have become perennial prophets of doom, warning that President Obama’s foreign policies will destroy our standing in the world, that Obamacare will destroy our health care system, that out-of-control spending, growth-killing taxes, and loose monetary policy will turn us into a dystopia of inflation, high interest rates and economic paralysis.
Relax!
Things are OK. And while you can’t tell from following the news—the press doesn’t like to report on planes that land safely, or seemingly obvious stuff that didn’t happen yesterday—things are getting better. The apocalypse is not nigh.
We are now in the fourth year of a slow but steady recovery. The economy is adding about 200,000 jobs a month, and has added 6.8 million private-sector jobs since the end of the Great Recession. The stock market is at an all-time high, and has almost doubled since Obama took office. The housing market is rebounding. It’s true that 7.5% unemployment is way too high, but it’s better than the double-digit unemployment we had in the wake of the financial meltdown, when the apocalypse really was nigh. The government has even turned a profit on the reviled Wall Street bailouts that ended the meltdown.
Yes, the economy would be doing even better if it weren’t being dragged down by the “sequester,” $85 billion worth of haphazard spending cuts resulting from Republican demands for government austerity. Those were misguided demands after a financial crisis, the kind of demands that have turned Europe into an economic basket case. But so far, at least, fears that the sequester could scuttle the U.S. recovery have proven to be overblown. Consumer confidence just hit a six-year high.
What about the fears that inspired the sequester and the rest of the austerity push, the fears that spiraling deficits would turn us into Greece? Well, the Congressional Budget Office now estimates the deficit at $642 billion, the lowest since the crisis; it’s been cut in half since Obama took office, the fastest reduction since World War 2. We’re not Greece. The bond markets certainly don’t think so; interest rates are at historic lows. And the runaway inflation that Paul Ryan and other loose-money critics keep predicting has yet to materialize; inflation is actually below the official Federal Reserve target of just 2 percent.
In fairness, while America’s short-term deficit is shrinking fast, our long-term deficit is still a concern, because soaring health care costs have threatened the future of Medicare and Medicaid. But there’s good news there, too. According to the nonpartisan Kaiser Foundation, health care spending is now growing at the slowest rate in five decades, which is why Medicare’s trustees just upgraded the program’s budget outlook. And there is strong evidence that Obamacare’s efforts to reorient the medical system to reward providers who keep their patients healthy instead of providers who perform more services are working. For example, Obamacare imposes financial penalties on hospitals with high rates of readmissions and central-line infections; predictably, hospitals have improved their performance in both areas. The health information technology revolution—launched by Obama’s 2009 stimulus—is also bending the cost curve, dragging a pen-and-paper system into digital age.
Meanwhile, U.S. combat forces are out of Iraq, and they’ll be out of Afghanistan next year. U.S. carbon emissions are at their lowest level in two decades, and so are U.S. oil imports. By historical standards, taxes are very low and spending is very modest. General Motors and Chrysler, wards of the state four years ago, are posting their best sales numbers in years. Gays are serving openly in the military, solar installations have increased over 1,000% in four years, a cool robot is taking cool pictures of Mars, and Tesla just paid back its government loan with interest. Things are getting better, and better is better than worse.
But the headlines are all about supposed scandals—stupid IRS agents in Cincinnati, overzealous leak investigations at the Justice Department, a dopey dispute over Benghazi talking points. These are the kind of things that politicians can obsess about when there’s no crisis on the horizon; the last time the national outlook was this bright, Republicans impeached the president for sexing up an intern. It’s unfortunate, but it’s not as if the latest wannabe-scandals are distracting official Washington from any important work it might be doing. Sure, Congress ought to do something about climate change, but as long as Republicans control the House, Congress isn’t going to do anything about climate change.
I guess that qualifies as a crisis. But one of the lessons of the Obama era, along with the general advisability of DOING STUFF regardless of the political implications, is that positive change can happen in spite of a dysfunctional system. You couldn’t build a summer movie around that—”In a world where complex legislation is implemented effectively…”—but it’s still a feel-good idea, even if it seems to have limited box-office appeal.
By: Michael Grunwald, Time Magazine, June 9, 2013
“Special Hide The Money Designations”: The IRS Should Outlaw All Social Welfare Political Fronts
If you’re covered in political stink, it might be prudent to avoid yelling “dirty politics” at others.
Lately, a mess of right-wing Tea Party groups have been wailing nonstop that they have been targeted, harassed and denied their civic rights by partisan, out-of-control, Obamanistic IRS thugs (no adjective too extreme when assailing Obama or the IRS). The groups certainly are right that it’s abhorrent for a powerful agency to run a repressive witch-hunt against any group of citizens just because of their political views. After all, liberals have frequently felt the lash of such official repression by assorted McCarthyite-Nixonite-Cheneyite forces over the years, and it must be condemned, no matter who the victims.
In this case, however, the right-wing groups were not targeted by government snoops and political operatives, but tagged by their own applications to be designated by the IRS as 501(c)(4) “social welfare” groups. This privileged status would allow them to take unlimited bags of corporate cash without ever revealing to voters the names of the corporations putting up the money. The caveat is that 501(c)(4)s are supposed to do actual social welfare work and cannot be attached to any candidate or party, nor can politics be their primary purpose.
Forget what the rule says, though. Such notorious political players as Karl Rove and the Koch brothers have cynically set up their own pretend-welfare groups, openly using them as fronts to run secret-money election campaigns. Suddenly, hundreds of wannabe outfits were demanding that they be given the special hide-the-money designation, too, brazenly lying about their overt political purpose. Some even asserted that they were engaged in no political activity, when their own websites bragged that they were.
It was these groups’ stupidity and audacity that prompted the IRS inquiries, and their current hissy fit about the agency is really just a PR effort to let them continue their “social welfare” fraud.
I think of a “social welfare charity” as being an altruistic enterprise, like The Little Sisters of the Poor — not the avaricious Little Koch Brothers of the Plutocracy.
Yet the brothers have created their very own 501(c)(4) charity, which they used last year as a political front group for funneling $39 million into campaigns against Democrats. Interesting, since, the law bans these tax-exempt entities from spending more than 49 percent of their funding on political efforts to promote their “issues.”
Yet, there they are — hordes of political (c)(4)s, mostly right-wing, operating primarily as political pipelines for secretly gushing corporate money into raw, partisan campaigns. Their hocus-pocus lawyers and congressional consiglieres have badgered the IRS into handing them the (c)(4) get-out-of-jail-free card, then defied the agency to stop them as they dump millions of corrupt dollars into our elections.
For example, American Action Network, a “charity” created by Wall Street lobbyists, has spent two-thirds of its revenue on elections, including putting up $745,000 from secret donors to elect Sen. Ron Johnson of Wisconsin. How ironic, then, that Johnson is now one of the Tea Party mad dogs howling at IRS officials.
It’s scandalous, Johnson shrieks, that some Tea Party groups have not been given (c)(4) status, because IRS agents have had the temerity to question whether the groups actually are charitable enterprises — or just rank political outfits fraudulently posing as charities.
While Tea Party groups should not be singled out for IRS scrutiny, neither should they be allowed to cheat in elections by shamefully masquerading as Little Sisters of the Poor. That’s the real IRS scandal.
By: Jim Hightower, The National Memo, June 5, 2013
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