Cornel West on Barack Obama and Wall Street

Wall Street wins again- Surprise!

Wall Street Wins Again

Posted on Nov 8, 2010 By Nomi Prins

The Republicans may have stormed the House, but it was Wall Street and the Fed that won the election. Regardless of party power plays and posturing, there are two constants that remain unaltered after the election. First, Wall Street will continue on with business as usual while shifting its campaign and lobbying dollars to the new winning team. And second, the Fed will keep on pretending to prop up the economy by buying more U.S. debt, thereby keeping interest rates low, the dollar weak and money cheap for the banking system to inhale. This fictional boosting of the financial economy, absent the real boosting of the general economy, will march on sans debate, inspection or restriction.
In the wake of the election, the Fed pulled off a move detected only by downtown Manhattan. It quietly announced a purchase of $600 billion in Treasury securities (read: our debt) while pundits on the left and right were dissecting the role of the tea party in political life as we know it, the Obama dissatisfaction quotient, and the chance of Sarah Palin heading for the White House in 2012.



That $600 billion figure was about twice what the proverbial “analysts” on Wall Street had predicted. This means that, adding to the current stash, the Fed will have shifted onto its books about $1 trillion of the debt that the Treasury Department has manufactured. That’s in addition to $1.25 trillion more in various assets backed by mortgages that the Fed is keeping in its till (not including AIG and other backing) from the 2008 crisis days. This ongoing bailout of the financial system received not a mention in pre- or postelection talk. No one in Congress or the White House gets a say on the maneuver. Yet, it was the Fed buying more treasuries, and not the fact that the Republicans gained control of the House, that caused the Dow to shoot to a 2010 high and bank stocks to rally 2 percent on average.
Like many other Americans, as the results of the elections were pouring in for insta-analysis I was obsessively flipping cable TV channels. It didn’t matter whether I landed on Fox, CNBC or MSNBC, the same two main items were being debated: (1) the tea party’s rise and (2) the other victorious Republicans (including the ones labeled as tea party candidates—even though they did not actually run as candidates of a separate party, a trick that progressives have never managed to pull off or even try).
All the Republicans sang their refrain from the same song sheet, vowing to work on extending George W. Bush’s tax cuts, killing what they refer to as Obamacare, cutting spending (though none gave specific details as to how) and, of course, getting Americans back to work. The catch—and this was a notion taken up by President Barack Obama and ignored by the Fed the very next day—is that the Republicans wanted to do so the free-market way, by reducing government constraints on businesses so they can stop worrying about obstacles like rules, and thus somehow spontaneously start hiring more. (Note: To underscore this strategy, CNBC paraded a bunch of chief executive officers on screen throughout the election night.)
But, for the most part, the Republicans left the so-called financial reform bill alone as a topic, except to make it clear, as incoming House Majority Whip (aka 2012 contender) Eric Cantor did, that they don’t want onerous regulations (it is much better to wait for the next leg of this crisis and the loss of more jobs and homes, apparently, than to bar Wall Street from financial innovation).
Here’s what wasn’t mentioned during the election or postelection chatter: the cost and logic of bailing out, subsidizing and now propping up Wall Street as it heads decisively (despite Obama’s promises of those days of fill-in-the-blank being over) to another year of record bonuses.
No winning Republican mentioned repealing the financial reform bill, since it doesn’t really actually reform finance, bring back Glass-Steagall, make the big banks smaller or keep them from creating complex assets for big fees. Score one for Wall Street. No winning Democrat thought out loud that maybe since the Republican tea partyers were so anti-bailouts they should suggest a strategy that dials back ongoing support for the banking sector as it continues to foreclose on homes, deny consumer and small business lending restructuring despite their federal windfall, and rake in trading profits. The Democrats couldn’t suggest that, because they were complicit. Score two for Wall Street.
In other words, nothing will change. And that, more than the disillusionment of his supporters who had thought he would actually stand by his campaign rhetoric, is why Obama will lose the White House in 2012.
Then, there’s the Fed. Ben Bernanke, who like Treasury Secretary Timothy Geithner has survived two administrations under different parties to have a hand in bailing out the banking system and fictitiously stabilizing the markets, continues to run the country into the path of massive debt in the name of easing money, so as to avoid the Second Great Depression from which Obama thinks he saved us (along with Geithner and former Treasury Secretary Hank Paulson).
Last Wednesday morning, Obama had the chance to at least attempt to re-engage the voters who believed in his mantra of change. In his contrition speech, he took responsibility (read: apologized) for having made it seem he extended government too much (thereby taking on the language of the Republican opponents), explaining that we were in an emergency situation (not that the banks screwed up and stole the life rafts). He assured businesses he was still on their side (in case the fact that he’s keeping Wall Street lackey Geithner on and his ringing praise for Larry Summers on “The Daily Show” weren’t sufficient signs).
It is likely that, going forward, Democrats will fear losing more seats in 2012 and vote more with the pro-bank center. That would be a mistake for them and bad for the country.
Yet sadly, Obama showed pre-emptive signs of capitulation with two words: free market. Toward the end of the Q&A session after his speech, Obama said that the free market has to be “nurtured and cultivated” and that he has to take responsibility to make clear to the business community and the country that the most important thing we can do is boost and encourage our business sector and make sure that companies are hiring. His facial expression was as hollow as his words. He added that “we” have been talking to CEOs constantly (and don’t we all feel good about that?)—and that on his trip to Asia this week his whole focus will be on opening up markets, so “we can prosper, sell more goods and create more jobs in the United States” (that playbook comes from Bush Treasury Secretary Paulson, but that policy has been shown only to enable CEOs to outsource more, not less). He also pointed out that a whole bunch of corporate executives will join “us.”
And that is the second reason he will not be re-elected: Businesses won’t need to fund his next campaign when they can fund the Republicans now that they are back in vogue. Businesses will meanwhile just extract what they can as long as they can, like better deals abroad in the name of free markets—the kind that the Fed is subsidizing back here at home. Obama and his supporters will see this in 2012 if they don’t now. The president could go all out and ignore the CEOs and focus on the general populace, but signs point to the contrary. If he has learned something from the November elections about loyalty to his voters, he isn’t showing it. So maybe progressives should stop defending him and start yelling at him … or seriously look for another 2012 candidate to run against Sarah Palin.

Finance Reform bill passes - finally

Democrats successes so far.

2009
January 29: Lilly Ledbetter Fair Pay Act


February 4: Children’s Health Insurance Reauthorization Act


February 11: DTV Delay Act


February 17: American Recovery and Reinvestment Act;

         Allocation of some $8 billion to California schools allowing districts

         to preserve some 16,000 teacher jobs and 15,000 jobs in higher ed.


March 30: Omnibus Public Lands Management Act of 2009


April 21: Edward M. Kennedy Serve America Act


2010. Plus. 3 allocations of addition funds for Supplemental Unemployment insurance to the states.  Currently Unemployment Insurance can extend up to 99 weeks.  Appropriations to extend the supplemental unemployment are currently blocked by a Republican filibuster in the Senate.

July 17,2010.  Financial regulation bill passed. ( Wall Street Reform).

This is as important as the Health Care reform bill. 

2009.

May 20: Fraud Enforcement and Recovery Act


May 20: Helping Families Save Their Homes Act of 2009

May 22: Credit Card Accountability, Responsibility, and Disclosure Act of 2009


June 22: Family Smoking Prevention and Tobacco Control Act

August 6: Cash For Clunkers Extension Act

October 22: Veterans Health Care Budget Reform and Transparency Act


October 28: Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act


October 30: Ryan White HIV/AIDS Treatment Extension Act


November 6: Worker, Homeownership, and Business Assistance Act of 2009



2010
March 4: Travel Promotion Act


March 18: Hiring Incentives to Restore Employment Act (HIRE Act)
March 23: Patient Protection and Affordable Care Act


March 30: Health Care and Education Reconciliation Act of 2010


May 5: Caregivers and Veterans Omnibus Health Services Act of 2010

Plus. 3 allocations of addition funds for Supplemental Unemployment insurance to the states.  Currently Unemployment Insurance can extend up to 99 weeks.  Appropriations to extend the supplemental unemployment are currently blocked by a Republican filibuster in the Senate.

July 17,2010.  Financial regulation bill passed. ( Wall Street Ref

California budget cuts must stop !

As reported in each of the major papers, the Governor’s office is preparing a proposal to “balance” the state budget.  It increases the pain and suffering of the poor, the ill, and the unorganized. Even Schwarzenegger recognizes that these will be terrible, painful, cuts.

The major problem is not the  coming legislative conflicts, it is the deep, agonizing, unpopular cuts being imposed, including  lay offs of sheriffs, teachers, health care workers, child protective services, and the loss of the services which they provided.  Neither the government, nor the legislature  caused these cuts, they were created by the grand theft on Wall Street. The current  economic crisis has forced the cutting of higher education, of k-12 education, and of social welfare systems.

What caused this crisis ? It was caused by the greed and avarice of the financial class and aided by the politicians of both major political parties.

Major banks and corporations looted the economy creating an international meltdown.  Now, they have been rewarded with bail out money.  The crisis was not caused by students, teachers, public employees  nor recipients of social security.   The major bankers, finance capitalists in the U.S. robbed the bank last year  – and the federal treasury.  They took hundreds of billions of dollars – and you and I are being forced to pay for this theft with cuts in jobs and services.

 Over 40 states have severe budget problems caused by the Great Recession and there will be more next year.  In Oklahoma, Nevada, and Arizona, the cuts are more draconian than in California- and these are low benefit states.

The solution ? Make Wall Street Pay. They caused this crisis.  All sale of stocks and derivatives should be taxed 2%.  That would pay for the services we need, and limit  the Casino Capitalism of the rich and well connected.

Assembly hopeful Roger Dickinson urges county to sue Wall Street

The BEE had an article on May 6, 2010 about a press conference held by Roger Dickinson for Assembly.  This is a response to the article.

The point of view of this article is strange.  Wall street caused the current economic crisis. For evidence see 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, by Johnson and Kwak.   Or, you can watch the current Economic Crisis Investigation on CSPAN co- Chaired by  Phil Angelides.  This crisis almost brought the world economy to its knees.  Locally, the crisis produced unemployment, a severe reduction  in tax receipts, cuts in Sheriff patrols, closing health clinics, clinics for the mentally disabled, Child Protective Services, and others. 

 Dickinson criticized the Wall Street role in the crisis.   You bring out spokespersons for the rating agencies – that is spokespersons for Wall Street, to claim that Dickenson’s threat to sue might hurt Sacramento’s credit rating.  Excuse me!

Sacramento is borrowing $134 million and paying interest on it because of the economic crisis.  Now  the debt officer claims that criticizing Casino Capitalism on Wall Street is the problem!  No, the problem is the economic crisis.  And, the pain will last for several years. 

No one disputes that Sacramento  county's revenues are drastically down. There has been a  nearly 30 percent drop in sales tax for Sacramento County over the past five years. Property tax funds an even larger share of county budgets, and plummeting real estate values have meant even less income for counties to pay their bills.

During the current fiscal year, Sacramento's assessed property values dropped by 6.4 percent, and the outlook is for a continued decline into next year. And, the  ongoing budget-crisis impacts from the state also caused by the financial recession, which cut funding for counties, yet still requires them to provide costly programs. The reality is that almost all of California's counties are facing significant budget shortfalls resulting in cuts in programs, services and staffing. 

We need to look for ways to Make Wall Street Pay .  One possibility is to charge a 2% tax on all sales of derivatives and CDO’s.  I pay almost 8% sales tax when I buy anything in the county.  That pays for police, fire, utilities, and services.  But, when the Wall Street Casino sells billions in mortgage backed derivatives, they pay less than 1% tax.  If they would have to pay a tax on their sales, it would slow down the casino.  And, it would provide funds for the police protection, health clinics, Child Protective Services, and the many services which we are losing.

Make Wall Street Pay

Obama’s Ties to ACORN Show Complicity in Financial Crisis Caused by Bad Mortgages

By Bob Dienstbach
Guest Blogger

While Americans were busily distracted by undercover videos exposing outrageous behavior on the part of ACORN this week, Congress appropriated ALL lending authority for higher education. ACORN (read Obama) forced banks to make high risk loans to pimps and prostitutes to buy homes (foreclosed now…causing massive banking bailouts at taxpayer expense), and now President Barack Obama wants to put pimps and prostitutes in college.

The mortgage crisis that sent a shock wave through Wall Street and panicked world financial markets with the Community Reinvestment Act signed into law in 1977 by President Jimmy Carter. The CRA was Carter’s answer to a grassroots activist movement started in Chicago (Jesse Jackson’s Rainbow Coalition), and forced banks to make loans to low income, high risk customers. PhD economist and former Texas Senator Phil Gramm called it “a vast extortion scheme against the nation’s banks.” It is no coincidence that Carter played the race card the same week in September 2009 that ACORN was under attack.

In 1991, Acorn took over the House Banking Committee room for two days to protest efforts to scale back the CRA [Note: Obama, by the way, represented ACORN in the Buycks-Roberson v. Citibank Fed. Sav. Bank, 1994 suit against redlining]. When banks don’t lend to pimps and prostitutes, Obama calls it red-lining. Most significant of all, ACORN was the driving force behind a 1995 regulatory revision pushed through by the Clinton Administration that greatly expanded the and laid the groundwork for the CRA/Fannie Mae/Freddie Mac-borne financial crisis we now confront [Note: Again, Obama was the attorney representing ACORN in this effort]. With this new authority, ACORN used its ACORN Housing subsidiary to promote subprime loans more aggressively and, as we now know, even to pimps and prostitutes.

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed “the most flexible underwriting criteria permitted.” That lender’s $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

Remember, it was Obama’s Chicago neighbor, the Rainbow Coalition run by Jesse Jackson, that forced private lenders to make risky loans. The lender that Fannie Mae was speaking of was Countrywide, which specialized in subprime lending and had a working relationship with ACORN, who was represented by Obama. When Congress voted to defund ACORN this week, Jesse Jackson Jr. voted against the majority opinion (i.e., to allow ACORN to continue to receive your tax dollars).

The U.S. has failed to control Wall Street

For all Obama's talk of overhaul, the US has failed to wind in Wall Street

With a blank cheque from taxpayers and no real reform the perverse incentives for risk-taking are bigger than ever

by Joseph Stiglitz
The Guardian (U.K.)
9/14/09

What went wrong? Have the right lessons been learned? Could it happen again? The anniversary of the Lehman Brothers' bankruptcy and the freezing of the credit markets that followed is an occasion for reflection. I fear that our collective response has been mistaken and inadequate – that we may just have made matters worse.

The financial sector would like us to believe that if only the Federal Reserve and the Treasury had leapt to the rescue of Lehmans all would have been fine. Sheer nonsense. Lehmans was not a cause but a consequence: a consequence of flawed lending practices, and of inadequate oversight by regulators.

Financial markets had lent on the basis of a bubble – a bubble in large part of their making. They had incentive structures that encouraged excessive risk-taking and shortsighted behaviour. And that was no accident. It was the fruit of vigorous lobbying, which strived equally hard to prevent regulation of changes in the financial structure, new products like credit default swaps – which, while supposedly designed to manage risk, actually created it – and ingenious devices to exploit poor and uninformed borrowers and investors. The sector may not have made good economic investments, but its political investments paid off handsomely.

Lehmans was allowed to fail, we were told at the time, because its failure did not pose systemic risk. The systemic consequences its failure entailed, of course, were used as an excuse for the massive bailouts for the banks. Thus the Lehmans example became at best a scare tactic; at worst it became an excuse, a tool, to extract as much as possible for the banks and the bankers that brought the world to the brink of economic ruin.

Had more thought gone into how to deal with Lehmans, the Treasury and Fed might have realised that it played an important role in the shadow banking system, and that it was important to protect the integrity of the shadow system which had come to play such an important role in the US and global financial payments system. But many of Lehmans' activities had no systemic importance. The administration could have found a path between the false dichotomy of abandonment or bailout. That would have protected the payments system, providing the minimum amount of taxpayer money. Shareholders and long-term bondholders would have been wiped out before any public money had to be put in.

Bailing out the US banks need not have meant bailing out the bankers, their shareholders, and bondholders. We could have kept the banks as ongoing institutions, even if we had played by the ordinary rules of capitalism which say that when a firm can't meet its obligations to creditors, the shareholders lose everything.

Unquestionably we should not have allowed banks to become so big and so intertwined that their failure would cause a crisis. But the Obama administration has created a new concept: institutions too big to be resolved, too big for capital markets to provide the necessary discipline. The perverse incentives for excessive risk-taking at taxpayers' expense are even worse with the too-big-to-be-resolved banks than they are at the too-big-to-fail institutions. We have signed a blank cheque on the public purse. We have not circumscribed their gambling – indeed, they have access to funds from the Fed at close to zero interest rates, and it appears that "trading profits" have (besides "accounting" changes) become the major source of returns.

Last night Barack Obama defended his administration's response to the financial crisis, but the reality is that a year on from Lehmans' collapse, it has failed to take adequate steps to restrict institutions' size, their risk-taking, and their interconnectedness. Indeed, it has allowed the big banks to become even bigger – just as it has failed to stem the flow of profligate executive bonuses. Obama's call on Wall Street yesterday to support "the most ambitious overhaul of the financial system since the Great Depression" is welcome – but the devil, as ever, will be in the detail.

There remain many institutions willing and able to engage in gambling, trading and speculation. There is no justification for this to be done by institutions underwritten by the public. The implicit guarantee distorts the market, providing them a competitive advantage and giving rise to a dynamic of ever-increasing size and concentration. Only their own managerial competence, demonstrated amply by a few institutions, provides a check on the whole process.

The Lehmans episode demonstrates that incompetence has a price. That there would be serious problems in our financial institutions was apparent since early 2007, with the bursting of the bubble. Self-deception led those who had allowed the bubble to develop, who had looked the other way as bad lending practices became routine, to think that the problems were niche or temporary. But after the fall of Bear Stearns, with rumours that Lehmans was next, the Fed and the Treasury should have done a serious job of figuring out how to manage an orderly shutdown of a large, complex institution; and if they determined that they lacked adequate legal authority, they should have requested it.

They appear, remarkably, to have been repeatedly caught off-guard. They claim in the exigency of the moment they were doing the best they could. There was no time for thought. And that explains how they veered from one solution to another: after saying that they did not want to bail out Lehmans because of a concern about moral hazard, they extended the government's safety net further than it had ever been. Bear Stearns extended it to investment banks, and AIG to all financial institutions. Perhaps they were doing the best they could at the time; but that is no excuse for not having anticipated the problems and been better prepared.

Lehman Brothers was a symptom of a dysfunctional financial system and regulatory failure. It should have taught us that preventing problems is easier, and certainly less costly, than dealing with them when they become virtually intractable.

How Wall Street stole your investments and pensions

Long, but well worth reading.
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?page=0

Bail outs and Wall Street

Wall St, Autos:
Cyclical Crisis
or Structural?

By Robert Reich

First prediction for 2009: A widening gap between the public's view of the bailouts of Wall Street and Detroit, and the views of the direct beneficiaries. The public believes the bailouts will permanently change these industries, but industry insiders don't really want to change.

Exhibit one is Goldman Sach's CEO Lloyd Blankfein, who says the firm's business strategy doesn't need to change.

What? Goldman got $10 billion of taxpayer money precisely because it and other big banks were so over-leveraged they threatened the whole financial system. I can understand why Blankfein doesn’t want to change. He took home $54 million last year. (He has foregone a bonus this year and is taking home a piddling $600,000.) But the public expects real reform for its $10 billion at Goldman and tens of billions more in other major banks.

Blankfein isn't alone. I've heard the same thing from CEOs and directors all over the Street. They see the problem as cyclical, not structural. "The economy stinks," they tell me, "but it'll turn around in 18 months, and then we're back to the same business."

Or take the Big Three. They've agreed to become far more fuel efficient, as a condition for their bailout. But they promised this before -- during the oil crisis of the 1970s, when Congress threatened higher fuel-economy standards. But after the crisis passed, they never delivered. Why? Because their biggest profits were in gas guzzlers that consumers wanted to buy as soon as the first oil crisis was over.

Will history repeat itself? Now that gas prices are half what they were six months ago, consumers who can afford it are suddenly less interested in fuel efficiency. They're buying fewer hybrids and showing renewed interest in SUVs. So why should we think Detroit will revolutionize itself?

I'm not so cynical as to accuse anyone of bad faith. It's just that both Wall Street and Detroit earned big bucks from their old strategies, before the bottom fell out of the economy. So it’s natural they’d view the bailouts as ways to hold on until the economy rebounds. And it's clear they see their problem as cyclical, not structural.

Right now, Wall Street and Detroit are willing to say whatever they need to say to keep the taxpayer money coming. But when the economy begins turning up, my betting is that their Washington lobbyists will push back hard against any major restructurings the government wants to impose on them. New regulations of Wall Street will be watered down and circumvented; new requirements on the Big Three for green technologies will be resisted.

Yet the bailouts have been sold to the public as means toward fundamental change in finance and autos. If the bailouts are to do what they're supposed to – stop Wall Street from wild risk-taking with piles of borrowed money, and push the auto industry into making fundamentally new products that conserve energy -- Washington will not only have to set strict standards now and in the months ahead when the bailout money flows, but also hang tough when the economy begins to revive.

The emerging debate over Wall Street's and the Big Three's ongoing obligations to reform themselves is but one part of a much larger national debate we'll be entering upon in 2009 and beyond -- whether the economic crisis we're experiencing is basically cyclical (in which case, nothing really needs to change over the long term, after the economy gets back on track) or structural (in which case, many aspects of our economy and society will needs to change permanently).
Robert Reich was Secretary of Labor in the Clinton Administration