Banksters To Prison? Don't Get Your Hopes Up

Enemies of society, unpunished predators & sociopaths

Pretty late last night, the NY Times ran-- or dumped-- a story that seems like a humongous big deal: U.S. Is Set to Sue a Dozen Big Banks Over Mortgages. It's the Federal Housing Finance Agency going after Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank... and some others. Hard to imagine this is for real.

The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.



The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.



Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.



In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.



Private holders of mortgage securities are already trying to force the big banks to buy back tens of billions in soured mortgage-backed bonds, but this federal effort is a new chapter in a huge legal fight that has alarmed investors in bank shares. In this case, rather than demanding that the banks buy back the original loans, the finance agency is seeking reimbursement for losses on the securities held by Fannie and Freddie.



The impending litigation underscores how almost exactly three years after the collapse of Lehman Brothers and the beginning of a financial crisis caused in large part by subprime lending, the legal fallout is mounting.



Besides the angry investors, 50 state attorneys general are in the final stages of negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. The attorneys general, as well as federal officials, are pressing the banks to pay at least $20 billion in that case, with much of the money earmarked to reduce mortgages of homeowners facing foreclosure.



And last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.

The banksters are countering-- and this is a message that will be echoed by the Republican Party, corporate Democrats and the corporate media-- that "legal attacks on them will only delay the recovery in the housing market, which remains moribund, hurting the broader economy." Never mind that these legal attacks could be completely justified and that the culprits should be seperated from their ill-gotten gains and be imprisoned so they can't harm society again. I bet Limbaugh will be screaming his head off about this today. I'm eager, on the other hand, to hear what Bernie Sanders has to say, since I doubt Eric Schneiderman will say anything at this point.





UPDATE" $105 Billion? That Sounds About Right



Looks like no one's going to prison but $105 billion's a lot. And the suit was filed again Ally Financial Inc, Bank of America Corporation, Barclays Bank PLC, Citigroup, Countrywide Financial Corporation, Credit Suisse Holdings (USA), Deutsche Bank AG, First Horizon National Corporation, General Electric Company, Goldman Sachs & Co, HSBC North America Holdings, JPMorgan Chase & Co, Merrill Lynch/First Franklin Financial Corp, Morgan Stanley, Nomura Holding America Inc, The Royal Bank of Scotland Group PLC and Société Générale.

Probably telecom dualopolists AT&T and Verizon now hate NYS AG Eric Schneiderman as much as the banksters do -- and the more corrupt state AGs

Iowa AG Tom Miller: He's shocked, shocked, that anyone could question his toughness with the banks after he raised hundreds of thousands of simoleons from the financial sector upon announcing his intent to "investigate" the banks, which he has done so, so hard. I bet the joke'll be on the banksters when Tom hurls all that filthy lucre back at their stinking feet! (Anytime now, Tom.)



by Ken



Before we descend to the hilarity of sleazebag of the week Tom Miller, let's make sure to get the news out -- and this is big news, regarding what was looking like an unstoppable takeover of T-Mobile by AT&T. From Bloomberg:

U.S. Files to Block AT&T, T-Mobile Merger



By Tom Schoenberg, Sara Forden and Jeff Bliss - Aug 31, 2011



The U.S. Justice Department sued to block AT&T Inc.’s proposed $39 billion takeover of T-Mobile USA Inc., saying the deal would “substantially lessen competition” in the wireless market.



The government is seeking a declaration that AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom AG (DTE), would violate U.S. antitrust law, according to a complaint filed today in federal court in Washington. The U.S. also asked for a court order blocking implementation of the deal, the largest announced acquisition of the year, according to data compiled by Bloomberg.



“I don’t see any room to settle the case,” said Bert Foer, head of the American Antitrust Institute in Washington, in an interview. “They have clearly drawn a line in the sand.”



AT&T Chief Executive Officer Randall Stephenson’s proposed purchase of Bellevue, Washington-based T-Mobile, announced in March, would combine the second- and fourth-largest carriers to create a new market leader ahead of No. 1 Verizon Wireless. The new company would dwarf current No. 3 carrier Sprint Nextel Corp. (S), which argued against the deal.



“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market,” the government said in court papers. Dallas-based AT&T fell as much as 5.5 percent in New York trading after Bloomberg News broke the news of the lawsuit. . . .

Now I don't suppose the DoJ is likely to discuss how it reached the decision to intervene, but there's good reason to think that some role, and possibly a major one, was played by the office of New York State Attorney General Eric Schneiderman. Antitrust Bureau Chief Richard Schwartz issued a statement today saying that his boss "looks forward to reviewing the Department of Justice’s complaint to determine the best course forward on behalf of New York consumers and businesses."

Since March, Attorney General Schneiderman has played a major role in the review of the proposed AT&T, T-Mobile merger. Working in close partnership with the Department of Justice, this office has played a leadership role in a group of 26 states conducting interviews and gathering evidence central to this investigation. We have conducted numerous interviews of business enterprise customers throughout New York State and throughout the country to assess whether the merger would result in harm to competition to the business enterprise market, and closely analyzed the parties' claims that the merger would lower costs and improve service to consumers.



Attorney General Schneiderman remains particularly concerned that the proposed merger would stifle competition in markets that are crucial to New York's consumers and businesses. This includes concerns about vulnerable upstate communities, where concentration in some markets is already very high, and the impacts on New York City’s information-intensive economy, which is particularly dependent on mobile wireless services. Simply put, the impacts of this proposed merger on wireless competition, economic growth, and technological innovation could be enormous.

(The release notes that Schneiderman announced in March "that this office would conduct a comprehensive review of the proposed merger.")



It comes as something of a surprise to think that there are people with decision-making authority in the DoJ who might actually be listening to AG Schneiderman. The last we heard, he was being kicked off of the the coalition of state AGs' executive committee that's been exploring some sort of settlement with the big banks over their conduct in the collapsed mortgage industry, presumably out of pique over Schneiderman's outspoken opposition to the proposed "settlement," whereby the banksters would kick in some cash in exchange for being relieved of pretty much any further liability -- allowing them, in other words, to "move on" rather than being forced forever to "look back."



Which is apparently how we address all major problems in the 21st century. We just move on



To be sure, Schneiderman isn't alone among the state AGs. There's a small but hardy band (necessarily hardy, considering how they're regarded by most of their fellows) who also take their oath of office seriously. That number emphatically doesn't include the Big Cheese of the state AGs, Iowa's Tom Miller, the man who masterminded the "settlement" and the man who apparently gave Schneiderman the boot.



Miller meanwhile is feeling aggrieved. His longtime sidekick, Assistant AG Patrick Madigan, whined:

We’ve been accused of being in bed with the banks. To say that to a group of people who have spent the last seven to 10 years fighting mortgage abuses day in and day out is an insult of the highest order. It's just unreal.

Yeah, Pat, an insult of the highest order. Just unreal. I expect you and Tom were really insulted by the unreal Taibblog post Matt Taibbi wrote back in April, titled "Best Way to Raise Campaign Money? Investigate Banks," which began:

A hilarious report has come out courtesy of the National Institute of Money in State Politics, showing that Iowa Attorney General Tom Miller – who is coordinating the investigation into the banks’ improper mortgage dealings – increased his campaign contributions from the finance sector this year by a factor of 88! He has raised $261,445 from finance, insurance and real estate contributors since he announced that he was going to be coordinating the investigation into improper foreclosure practices. That is 88 times as much as they gave him not over last year, but over the previous decade.



This is about as perfect an example of how American politics works as you’ll ever see. This foreclosure issue is a monstrous story that is somehow escaping national headlines; essentially, all of the largest banks in the country have been engaged in an ongoing fraud and tax evasion scheme that among other things has resulted in many hundreds of billions in investor losses, and hundreds of thousands of improper foreclosures. Last week, the 14 largest mortgage lenders a group that includes bailout all-stars like Citigroup, Bank of America and Wells Fargo, managed to negotiate a settlement with the federal government that will mandate some financial relief to homeowners who have been victims of improper foreclosure practices. It’s unclear yet exactly what damages and fines will be involved in the federal settlement, or how many homeowners will be affected. But certainly there are some who believe the federal settlement was a political end-run around the states’ efforts to extract their own deal from the banks.

"If the banks had to pay what they actually owed" from their mortgage-related malfeasances, Taibbi wrote, "they would probably all go out of business."



In a dandy post on Tom 'n' Pat's Iowhining, Marcy Wheeler takes a closer look at this "fighting mortgage abuses" that, according to Pat, he and Tom have been doing day in and day out these past seven to ten years. (Doesn't that three-year spread leave a lot of days-to-days unaccounted for?) Notes Marcy:

As in the settlement they signed onto with Countrywide in 2008? The one that–according to NV Attorney General Catherine Cortez Masto, Bank of America has basically blown off?

In her filing, Ms. Masto contends that Bank of America raised interest rates on troubled borrowers when modifying their loans even though the bank had promised in the settlement to lower them. The bank also failed to provide loan modifications to qualified homeowners as required under the deal, improperly proceeded with foreclosures even as borrowers’ modification requests were pending and failed to meet the settlement’s 60-day requirement on granting new loan terms, instead allowing months and in some cases more than a year to go by with no resolution, the filing says.



The complaint says such practices violated an agreement Bank of America reached in the fall of 2008 with several states and later, in 2009, with Nevada, to settle lawsuits that accused its Countrywide unit of predatory lending. As the credit crisis grew, the settlement was heralded as a victory by state offices eager to help keep troubled borrowers in their homes and reduce their costs. Bank of America set aside $8.4 billion in the deal and agreed to help 400,000 troubled borrowers with loan modifications and other financial relief, such as lowering interest rates on mortgages.

(See DDay for more on Masto’s complaint.)



Perhaps Madigan doesn’t understand this. But pointing to a settlement that, in retrospect, appears to have largely been a PR stunt as proof that you’re not in bed with the banks sort of proves the point that you are.

Back in April, Matt Taibbi ventured that the flow of cash from people in and around the mortgage industry to Tom Miller was "just something to keep an eye on," adding, "It would be interesting to see a similar analysis on the money these same characters have thrown at the Obama administration in the last year."



Interesting indeed -- I wonder if anyone ever did such an analysis. As he wrote of the bonanza Tom Miller created for himself by making noises about investigating the banks: "This is about as perfect an example of how American politics works as you’ll ever see."



At least for today, however, on the matter of the AT&T takeover of T-Mobile, the Justice Department has taken a different path. It's something.

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Austerity, Rigour... And Why Do Rich People Always Just Get Greedier When They Get Richer?

Market jitters? The American financial industry is pointing to Europe and warning that a collapse of the banking system there could be nigh-- and could be catastrophic for everyone.

Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group's implosion nearly three years ago.



Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender's bonds against default is now £343,540.



The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.



"The problem is a shortage of liquidity-- that is what is causing the problems with the banks. It feels exactly as it felt in 2008," said one senior London-based bank executive.



"I think we are heading for a market shock in September or October that will match anything we have ever seen before," said a senior credit banker at a major European bank.

France isn't calling it Austerity, but the proud nation is being dragged into the clutches of the banksters and calling it a "rigour package." Compared to the Austerity measures being proposed in the U.S.-- Obama even floated a trial balloon yesterday that sounded like bringing back indentured servitude-- the French version sounds down right benign.

The measures in the rigour package, dubbed by some the "financial turn of the screw," include:



• An "exceptional contribution" of 3% on taxable earnings for those earning above €500,000 to remain in place until France's deficit had been reduced to 3% of GDP.



• Higher taxes on tobacco and alcohol.



• A modification of capital gains tax on property.



...Among other measures, Nicolas Sarkozy, the French president, is reported to be considering the abandonment of tax-free overtime for workers. This was one of the measures that, under the slogan "work harder to earn more," was a pillar of his election campaign in 2005, but it has cost an estimated €4.5bn in lost revenues. The government is also looking at ending tax breaks for companies.



Having recently abolished the "financial shield," which set a limit on the total amount of tax that the rich were expected to pay, a new tax on the wealthy would avoid accusations that his austerity measures would hit those lower down the income scale in the run-up to next year's elections.



France and Germany are also discussing proposals for a tax on financial transactions-- a measure that is vehemently opposed by Britain.

Not just Britain... Wall Street is going insane at the idea and is spending millions of dollars in lobbying and in direct bribes campaign contributions to it's most dedicated mouthpieces in government. The 25 worst Wall Street shills in the House (this year only):

John Boehner (R-OH)- $986,787

Eric Cantor (R-VA)- $610,250

Chris Murphy (D-CT)- $380,500

Jeb Hensarling (R-TX)- $350,350

Dave Camp (R-MI)- $343,800

Scott Garrett (R-NJ)- $320,185

Ed Royce (R-CA)- $318,004

Kevin McCarthy (R-CA)- $315,200

Spencer Bachus (R-AL)- $309,115

Pat Tiberi (R-OH)- $300,549

Steve Stivers (R-OH)- $282,485

Robert Dold (R-IL)- $272,006

Nan Hayworth (R-NY)- $240,006

Jim Himes (D-CT)- $233,500

Steny Hoyer (D-MD)- $226,670

Randy Neugebauer (R-TX)- $224,133

Steve Israel (D-NY)- $204,000

Carolyn Maloney (D-NY)- $199,750

Debbie Wasserman Schultz (D-FL)- $197,900

Joseph Crowley (D-NY)- $193,750

Shelley Berkley (D-NV)- $189,660

Peter Roskam (R-IL)- $188,700

Denny Rehberg (R-MT)- $187,330

Francisco Canseco (R-TX)- $183,852

Paul Ryan (R-WI)- $181,400

Bolded names are members of the Financial Services Committee, charged with "regulating" the banksters to keep them from ripping off consumers and society at large. Alan Grayson was on that committee when he was in Congress. Wall Street wasn't giving him money then and, now that he's campaigning to get back into Congress they're not donating to him either. I called Alan-- who's just back from a trip to Ghana-- this morning to get his take on all this. He told me he "always found it puzzling that business interests gave lockstep support to Republicans, despite their fondness for auctioning off the law to the highest bidder." He was just warming up:

The Republican Party may be the party of Big Business, but it is also the party of Economic Failure.

 

Let’s take the stock market, that very apt measure of how rich the rich are.  In Tommy McCall’s classic 2008 article Bulls, Bears, Donkeys and Elephants, he pointed out that $10,000 invested in the stock market under Democratic presidents would have grown to $300,671, while $10,000 invested under Republican presidents would have “grown” to $11,733. That’s a 2907% Democratic profit versus a 17% Republican profit. Is that still true? Sure enough, the stock market started to recover less than one month after Barack Obama was sworn in.

 

Since federal spending alone now equals almost a quarter of GNP, is it really good for business to make government small enough to “drown in the bathtub,” as Grover Norquist always demands?

 

And how, exactly, is the banking system supposed to function without regulations? Reserve requirements are regulations. They are the only limits on the banks’ unbridled speculation and gambling with other people’s money. Remove the regulations and a crash will quickly follow. That wouldn’t be good for business.

 

Republican economic mismanagement takes down both the rich and the poor. In other countries, the rich seem to understand that, but not here. Here, the blanket support for Republicans by Big Business and the filthy rich amounts to an economic death wish.

 

There is an old saying: “if you’re so smart, how come you ain’t rich?” I have a different question: when it comes to political self-interest, how can rich people be so dumb?

If we can't count on Congress to protect us-- and we can't-- who can we turn to? That was the whole idea of why Elizabeth Warren came up with the Consumer Financial Protection Bureau-- and why Wall Street fought so hard to cut it off at the knees. Obama has been nearly as friendly to Wall Street as any Republican president and it would be foolish to expect him to change his stripes. Matt Taibbi has done some great reporting in Rolling Stone about one of the few places where consumers can look for redress: New York's crusading Attorney General, Eric Schneiderman. Basically, Wall Street and their political puppets-- from Obama and the GOP to the rest of the states' attorney generals-- have "cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes." Schneiderman is the odd man out.

The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.



This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline.  



...But Schneiderman, who earlier this year launched an investigation into the securitization practices of Goldman, Morgan Stanley, Bank of America and other companies, is screwing up this whole arrangement. Until he lies down, the banks don’t have a deal. They need the certainty of having all 50 states and the federal government on board, or else it’s not worth paying anybody off. To quote the immortal Tony Montana, “How do I know you’re the last cop I’m gonna have to grease?” They need all the dirty cops on board, or else the whole enterprise is FUBAR. 



In addition to the global settlement, Schneiderman is also blocking an individual $8.5 billion settlement for Countrywide investors. He has sued to stop that deal, claiming it could “compromise investors’ claims in exchange for a payment representing a fraction of the losses.”



If Schneiderman thinks $8.5 billion is an insufficient, fractional payoff just for defrauded Countrywide investors, then you can imagine how bad a $20 billion settlement for the entire industry would be for the victims.



In that particular Countrywide settlement deal, it looks like Bank of New York Mellon, the New York Fed, Pimco and other players negotiated on behalf of defrauded investors. They told the Times they were happy with the deal, but investors outside the talks told Gretchen they weren’t happy with the settlement.  



Schneiderman apparently listened to those voices instead of the Mellon-Fed-BofA crowd, which infuriated the insiders who struck the actual deal. In a remarkable quote given to the Times, Kathryn Wylde, the Fed board member who ostensibly represents the public, said the following about Schneiderman:



It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street-- love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.



This, again, is coming not from a Bank of America attorney, but from the person on the Fed board who is supposedly representing the public!



This quote leads one to wonder just what Wylde would consider “indefensible,” given that stealing is pretty much the worst thing that a bank can do-- and these banks just finished the longest and most orgiastic campaign of stealing in the history of money. Is Wylde waiting for Goldman and Citi to blow up a skyscraper? Dump dioxin into an orphanage? It’s really an incredible quote.

Remember this?







She's running for the Senate now, in Massachusetts, against Wall Street's "favorite" senator, Scott Brown. Wall Street and the financial services industry are financing his campaign. Can you help Elizabeth's? Our House candidates worthy of help, like Grayson, are on another page-- this one.

Will Wall Street Try To Sabotage Elizabeth Warren's Senate Campaign? They Already Are!

This goes beyond class warriors Darrell Issa and Patrick McHenry using a Wall Street lobbyist disguised as a "staffer" to sabotage Elizabeth Warren's testimony in Congress. Keep in mind that Wall Street has showered Scott Brown with cash. His biggest single source of campaign "contributions" comes from the financial predators Elizabeth Warren has been urging government to protect consumers from. So far the financial sector has donated over $1.8 million to Brown's short career in federal politics. This year alone, he's taken in more money than any other Republican senator other than Bob Corker (TN) of the Banking Committee and, more to the point, the Subcommittee of Securities, Insurance and Investment. The crooks who run the big players in this sector will pay anything to keep Corker and Brown in office and in Brown's case-- to keep Elizabeth Warren out of office. The idea of her in the Senate drives the banksters insane.

Elizabeth Warren’s combative history with Wall Street could create a fundraising dilemma for her burgeoning Senate campaign. 



Her ardent grassroots following on the left-- forged during stints as TARP watchdog and as mastermind of the Consumer Financial Protection Bureau-- would likely make her a formidable Senate candidate in Massachusetts.



But her reputation as sheriff to Wall Street could also be a liability against Sen. Scott Brown (R-Mass.), a popular Republican who has been stockpiling campaign cash in anticipation of a tight 2012 race.



..."I think it's pretty clear she's going to run the classic, grassroots campaign here in Massachusetts," said Mary Anne Marsh, a longtime Democratic operative in the state. "That means she's going to rely on folks here to give low-dollar donations here a number of times."



But without the support of heavy-hitting donors in Massachusetts, many of whom work at hedge funds and other financial firms, Warren might find it difficult to keep up with Brown’s fundraising juggernaut.



Dubbed “Wall Street’s Favorite Congressman” in a Forbes article last year, Brown reported having more than $9.6 million in the bank at the end of June. A good portion of that money came from the financial-services sector, according to data compiled by the Center for Responsive Politics.



Employees of the Boston-based Fidelity Investments are the single biggest group of donors to Brown’s campaign committee, contributing more than $85,000 since 2007, according to the watchdog’s data. Employees at Goldman Sachs, Bank of New York Mellon, Morgan Stanley and Bank of America are also top donors.

Warren, on the other hand, is going to have to depend on... Americans who want to take back their government from the avaricious banksters. Last week, Paul Krugman made it clear just what that means: Finally, Someone to Run Against Wall Street

One of the truly amazing things about American politics in the Lesser Depression is that nobody in political life has been willing to run as the champion of ordinary Americans against the financial wheeler-dealers who brought this disaster on us. Republicans won’t, of course, because their worldview says that greed is good and government the only source of evil. But Obama has also been almost weirdly unwilling to express even the slightest populism.



So I’m glad to hear that Elizabeth Warren will apparently run for Senate. She’s no Huey Long-- her manner is more schoolteacher than rabble-rouser-- but that makes her more credible. And she’s got the best credentials on the financial crisis of any prominent figure in American life.



This should be edifying.

Yes, edifying... and expensive. Can you chip in? Blue America has only endorsed two candidates for the Senate this year, Warren and Bernie Sanders. We want to see both of them working together for regular American families... somewhat of a rarity in the good ole boys club that is the U.S. Senate. Hard to say exactly what will happen this early in the cycle but my guess is that Blue America may endorse one or possible two more Senate candidates this year. That's it. We want THE BEST, not "better than the horrible alternative."

What happens when NYS AG Eric Schneiderman tries to hold the banksters to account? The White House puts the screws to him

New York State Attorney General Eric Schneiderman -- Glenn Greenwald reminds us today that he predicted in May there was likely to be rough going for Schneiderman for refusing to roll over for Wall Street and the banksters, but he "assumed the pressure would come from the banks themselves, not from top Executive Branch officials."





"It is high time to describe the Obama Administration by its proper name: corrupt."

-- Yves Smith, the opening paragraph of her Naked Capitalism blogpost "Corrupt Obama Administration Pressuring New York Attorney General to Support Mortgage Whitewash"

by Ken



I don't know about you, but this literally makes me sick to my stomach.



You may recall that NYS Attorney General Eric Schneiderman (formerly my very own state senator, whose election as AG was one of the few bright lights to come out of the 2010 election) has been one of the few public officials unwilling to close the books on the question of criminal culpability connected with the economic meltdown. For one thing, he has refused to go along with the proposed settlement many of the state attorneys general are prepared to accept which would administer a resounding slap on the wrist to the economy-wrecking banksters. And for another, he has pursued investigations of his own.



Naturally this has annoyed the bankster nabobs. Actually, it seems to have annoyed them quite a lot. They just want to get on with their lives, which they're able to do thanks to all that cash we dumped in their laps because we were told that if we didn't, the world would come to an end. For a lot of Americans, jobless and homeless, the world pretty much has come to an end. The banksters, meanwhile, are raking in the dough and giving themselves bonuses as if they'd never been doing better. (And maybe they hadn't.)



You know and I know that it wasn't just temporary lapses in judgment on the part of those rich and powerful banksters which brought the economy down, somehow without bring the rich and powerful banksters down with it. To a lot of people who know more about this stuff than I do, it's pretty clear that crimes were committed, and at the very least somebody in law enforcement should have been taking a damned close look at where the law may have been crossed and how those lawbreakers can be called to account. Is it really not obvious that failure to hold criminals to account for their criminal behavior (a) legitimizes it and (b) contributes to the already out of control contempt those people have for the law? If they've come to think of themselves as above the law, well, can you blame them? They are above the law, aren't they?



It seems the banksters were so peeved with this Schneiderman fellow that they sent shock waves rolling all the way to our nation's capital, where it has turned out they could hardly have wished for a friendlier reception. It's hard to imagine the most business-friendly Republican administration going into action more quickly or more forcefully, bringing pressure to bear on this Schneiderman fellow to get in line with the administration line.



Here's Gretchen Morgenson writing in the NYT:

Attorney General of N.Y. Is Said to Face Pressure on Bank Foreclosure Deal



Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.



In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.



Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.



But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation. . . .

Mouthpieces for Secretary Donovan and for various functionaries in the Justice Dept. (whose nominal boss, AG Eric Holder, has -- not exactly uncommonly -- been mostly invisible) have chirped back indignantly that no, they're really on the side of the besieged homeowners and muscling this Schneiderman fellow into being sensible will actually benefit the . . . oh, I'm sorry, it's too ridiculous even to repeat.



There's really nothing for me to add to what's already been written by some of the biggest guns in the noncaptive media: Marcy Wheeler ("2 Funny Things about Obama Administration’s Effort to Pressure Eric Schneiderman"; is it necessary to specify that Marcy doesn't mean ha-ha funny?), Yves Smith (the post from which I quoted at the top, "Corrupt Obama Administration Pressuring New York Attorney General to Support Mortgage Whitewash"), and Glenn Greenwald ("Obama administration takes tough stance on banks").



Glenn has the advantage of writing after, and quoting from, Marcy and Yves (Glenn also directs attention to "this article from Joseph Stiglitz on how failure to criminally prosecute mortgage fraud would destroy the rule of law"; the Stiglitz piece, by the way, is headed "Justice for Some"), though he's at pains to point out that he wrote in May "about the commendable -- one might say heroic -- efforts of New York State Attorney General Eric Schneiderman to single-handedly impose meaningful accountability on Wall Street banks for their role in the 2008 financial crisis and the mortgage fraud/foreclosure schemes."



Near the end of his piece today, Glenn quotes from the wind-down of his May post:

It is worth keeping a watchful eye on Schneiderman's investigative efforts and doing everything possible to provide what will undoubtedly be much-needed support if, as appears to be the case, he is serious about taking on these pernicious factions and impeding the conspiring by the political class to protect their benefactors/owners.

He adds now, though: "I assumed the pressure would come from the banks themselves, not from top Executive Branch officials." He goes on to suggest that it's not just the Senate that, as Senate Majority Whip Dick Durbin put it, the banks "frankly own" -- that they hold the deeds to both houses of Congress and another piece of property on Pennsylvania Avenue as well.



Its present tenant seems to be doing all he can to ensure that the next one is the likes of, say, Willard (I'm thinking Willard Romney should be known by just one name, like Charo or Cher) or Rick Perry.

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There's just one thing I want to say about S&P's bond-rating downgrade -- then I'll turn the floor over to Andy Borowitz and Ian Welsh

Treasury Secretary Timothy Geithner, explaining his decision to hold onto his current post: “I didn’t want to look for a job -- it’s fucking scary out there.” (See "Bonus Andy" below.)

BOROWITZ REPORT



Predator Drone Seen Hovering over Standard & Poor’s Headquarters

Company Could Be in for Downgrade of its Own, Experts Say



WASHINGTON (The Borowitz Report) -– Just days after downgrading the credit rating of the United States, Standard & Poor’s was on high alert this morning after an unmanned Predator drone was seen hovering over its headquarters in lower Manhattan.



While the mission of the Predator was unclear, some insiders speculated that S & P might be in for a downgrade of its own.



The Predator appeared in the skies above the company's headquarters minutes after it was rumored that S & P was about to downgrade the United States to the same status as Pluto.



As a so-called "dwarf nation," the U.S. would no longer be accorded the same respect as a recognized country like France or Brazil, one S & P source said: "Basically, the United States would be considered a social network with parking."



At the White House, President Obama offered no comment on the Predator’s mission, saying only, “The Predator is an effective weapon against the enemies of the United States of America.”



He did offer apologies for what he called “an accidental Predator missile strike” over the weekend at a golf course in Virginia which narrowly missed Rep. Eric Cantor (R-VA).

by Ken



So, on the first day of trading after the Standard & Poors U.S. bond downgrade, "Stock market plummets after historic downgrade of U.S. credit rating" -- a 5.6 percent drop, Wall Street's "worst day of trading since the 2008 financial crisis as investors reacted to the historic downgrade of U.S. credit by selling so heavy that it wiped out $1.2 trillion of stock market wealth Monday."



There are a number of things that could be said about the bond downgrade, most of them silly -- and there's been no shortage of people saying them. I have just one point to make. For how long now has the Tools of the Oligarchy Right been warning that all sorts of catastrophic mayhem will result from our catastrophic debt catastrophe, including the collapse of the financial markets. The chief threat always has been that the bond market will punish us for our fiscal recklessness. And for how long have people like Paul Krugman been pointing out that bond interest rates showed no sign of going up, that apparently the dreaded bond market had no shortage of confidence in the U.S.'s financial stability. Bond buyers were only too happy to buy all the treasuries put on sale, at historically low interest rates.



This has to have driven the Pete Peterson Doom Via Debt prognosticators absolutely batty. Here they were trying to scare the bejeezus out of us with their phony-baloney "crisis," and the damned bond buyers were too dense to provide the chills the plutocrats' doom scenario called for.



Well, glory be, the bond buyers have suddenly had their confidence shaken, and bond interest rates will go up -- meaning that the bond-buying oligarchs not only have the "crisis of confidence" they've been threatening, but some nice new profits too!



Now here's Ian Welsh's take:

Comments on the S&P Downgrade



by Ian Welsh



Aside from hysterical laughter, here are the key points:



1. Obviously the US isn’t even close to insolvent. The gold in Fort Knox is held on the books at $37/ounce, for example. Most Federal lands are held on the books at 19th century valuations. Not to mention that the US’s debt is denominated in its own currency, which means it could simply be printed, and that the US government has a lot of unused room to tax, should it ever deign to use that on people with money, as opposed to those without.



2. As everyone is pointing out, the idea that S&P, who rated all the subprime trash as AAA, has any credibility, is a joke.



3. However, Obama and Democrats refused to destroy S&P when they had the opportunity and every reason to do so. The submprime crisis could not have been nearly as bad without S&P and the other rating’s agencies rating trash AAA so that investors who must buy AAA by law could do so. To put it simply, S&P engaged in systematic fraud. They, like everyone on Wall Street and in the major banks, have not been indicted for this. The choice to not indict is policy. Obama’s policy.



4. If Obama did not want this to happen, it would not happen. Could you imagine what LBJ, Nixon or Truman (or, hell, Bush Jr.) would have done if a rating’s agency tried this? The President has the necessary tools to utterly destroy S&P and every senior analyst working for them. You could use terrorism statutes or RICO, just as two examples. Send the FBI into their offices, seize all the assets of both the company and everyone working for it, and then got through their records. I guarantee, as absolutely as the sun will rise tomorrow morning, that there is enough evidence of fraud in those records to put them away for life. In the meantime, RICO laws are used to seize all the assets of everyone involved, meaning they will be using public defenders (don’t like a bad law? Use it against real people.) When S&P informed the White House they were going to downgrade, the White House could have quietly let them know what the consequences would be.



5. The US has effectively unlimited drawing rights from the IMF. Those drawing rights mean that if any of the core economies have an AAA rating, in effect, so does the US. (ie. if Germany is AAA, so is America.)



6. S&P knows all this. They are doing this because they know the President and Congress and the real people in the oligarchy want it done. Remember, a downgrade increases rates, and that is a direct increase to their income. And they know the US can pay, they aren’t fooled by idiotic talk about a default. The US may default at some point, but that will be a political decision.



7. This is another manufactured crisis, on top of the original manufactured debt ceiling crisis. The oligarchy wants the opportunity to buy federal assets at dimes on the dollar. They believe they don’t need the poor or middle class anymore, so they are good with getting rid of SS and Medicare. And Obama is, as he always has been, onside with this.



These people, are, however, playing with fire. Just because it’s a crisis that didn’t have to happen, a crisis, that is manufactured as another looting opportunity, doesn’t mean that it won’t have real consequences.

BONUS ANDY



In today's outing, I would say that the "other" jokes appended to the Borowitz Report are actually funnier than the report.

In other financial news:



-- In an effort to find a safe haven, rattled investors fled the dollar today and moved their money into Groupons.



-- In one rare bright spot on Wall Street, manufacturers of red ink posted record profits.



-- And finally, Secretary of the Treasury Timothy Geithner explained his decision to remain at the U.S. Treasury: “I didn’t want to look for a job – it’s fucking scary out there.”

#

H.R. 1315-- Wall Street's Revenge

Even if the exact figures aren't in your head, it probably comes as no surprise that Wall Street and the Financial, Insurance, Real Estate sector has poured more legalistic bribes into American politics than any other interest group-- $1,590,799,311 in direct "contributions" to people running for Congress since 1990. That doesn't count lobbying, an even greater amount. It should surprise no one that so far this year the two top recipients of these bribes in the House are Republican Majority Leader Eric Cantor ($378,700) and Republican Speaker John Boehner ($355,325). Among the top 10 recipients of these massive bribes from Wall Street are 9 Republicans, all members of committees dealing with financial matters and banking regulations-- Jeb Hensarling (R-TX), Spencer Bachus (R-AL), Ed Royce (R-CA), Pat Tiberi (R-OH), Steve Stivers (R-OH), Scott Garrett (R-NJ), Kevin McCarthy (R-CA). And, remember, that just this cycle. Since 1990 Wall Street has lavished $5,349,215 on Cantor, more than to any other Member of the House. House Financial Services Committee chairman Spencer Bachus has been the recipient of $4,900,624 and Boehner's cut was $4,678,643. Banksters don't give away their profits because they had a nice game of golf with someone. These are the men who pushed through Bush's TARP bailout and these are the people who voted this week to eviscerate Dodd-Frank, the bill passed last year in response to Wall Street greed nearly driving the world into another Great Depression.


H.R. 1315 passed Thursday 241-173. Only one Republican, Walter Jones of North Carolina, voted against it and Cantor had already instructed the leaders of North Carolina Republican legislature to redistrict Jones' seat to make it more Democratic-leaning. This year, Jones' voting record is more progressive than 17 Democrats, including 8 of the 10 Democrats who followed Cantor's lead in passing a bill to make sure Wall Street predators could rob the public blind-- John Barrow (Blue Dog-GA), Dan Boren (Blue Dog-OK), Ben Chandler (Blue Dog-KY), Henry Cuellar (Blue Dog-TX), Jim Matheson (Blue Dog-UT), Mike McIntyre (Blue Dog-NC), Bill Owens (NY), and Mike Ross (Blue Dog-AR).

Former Labor Secretary Robert Reich, gave an appropriate, spot on eulogy for the bill:

One full year after the financial reform bill spearheaded through Congress by Christopher Dodd and Barney Frank was signed into law, Wall Street looks and acts much the way it did before. That’s because the Street has effectively neutered the law, which is the best argument I know for applying the nation’s antitrust laws to the biggest banks and limiting their size.

Treasury Secretary Tim Geithner says the financial system is “on more solid ground” than prior to the 2008 crisis, but I don’t know what ground he’s looking at.
 
Much of Dodd-Frank is still on the drawing boards, courtesy of the Street. The law as written included loopholes big enough to drive bankers’ Lamborghini’s through-- which they’re now doing.

What kind of derivatives must be traded on open exchanges? What are the capital requirements for financial companies that insure borrowers against default, such as AIG? How should credit rating agencies be funded? What about the much-vaunted Volcker Rule requiring that banks trade their own money if they’re going to gamble in the stock market-- how should their own money be defined? What “stress tests” must the big banks pass to maintain their privileged status with the Fed?
 
The short answer: whatever it takes to maintain the Street’s profits and perquisites.
 
The law included a one-year delay, ostensibly to give regulators time to iron out these sorts of details. But the real purpose of the delay, it’s now obvious, was to give the Street time to expand the loopholes and fill the details with pablum-- when the public stopped looking.
 
Since Dodd Frank was enacted a year ago, Wall Street has spent as much-- if not more-- on lobbyists and political payoffs designed to stop the law’s implementation than it did trying to kill off the law in the first place. The six largest banks spent $29.4 million on lobbying last year, according to firm disclosures-- record spending for the group. This year they’re on track to break last year’s record. 

According to the Center for Public Integrity, the Street and other financial institutions engaged about 3,000 lobbyists to fight Dodd-Frank-- more than five lobbyists for every member of Congress. They’ve hired almost the same number to delay, weaken, or otherwise prevent its implementation.
 
Meanwhile, the portion of the law that’s now supposed to be in effect is barely being enforced. That’s because the agencies charged with enforcing it, such as the Securities and Exchange Commission, don’t have enough money or staff to do the job. Congress hasn’t seen fit to appropriate these necessities.

Several of these agencies are still lacking directors or commissioners. Senate Republicans have refused to confirm anyone. They wouldn’t even consider Elizabeth Warren to run the new consumer bureau.
 
Many of same business leaders who blame the sluggish economy on regulatory uncertainty are complicit in all this. A senior vice president of the Chamber of Commerce told the New York Times that “uncertainty among companies about the rules of the road is keeping a lot of capital on the sidelines.” The Chamber has been among the groups responsible for keeping Dodd Frank at bay.
 
But it’s the biggest Wall Street banks-- the ones that got us into this mess in the first place, and got bailed out by the public-- that have taken the lead in killing off Dodd-Frank. They can afford the hit job.

At the same time, their executives-- enjoying pay and bonuses as large as in the boom days of the housing bubble-- are busily bankrolling both political parties, although Republicans are favored in this election cycle. A significant portion of Mitt Romney’s sizable war chest has come from the Street. President Obama is no slouch when it comes to pulling at the Street’s purse strings.
 
Bankers try to justify their shameful murder of Dodd-Frank by saying tightened regulatory standards will put them at a disadvantage relative to their overseas competitors. JP Morgan’s Jamie Dimon had the nerve to publicly accost Ben Bernanke recently, complaining that the law’s implementation would harm the Street’s competitiveness.
 
The argument is pure claptrap. In the wake of global finance’s near meltdown, Europe has been more aggressive than the United States in clamping down on banks headquartered there. Britain is requiring its banks to have higher capital reserves than are so far contemplated in the United States. In fact, senior Wall Street executives have warned European leaders their tighter bank regulations will cause Wall Street to move more of its business out of Europe.
 
Wall Street is global because capital is global. JP Morgan Chase, Goldman Sachs, Citigroup, Bank of America, and Morgan Stanley are doing business in every corner of the world. Goldman even advised Greece on how to hide its growing indebtedness, before the rest of the world got wind, through a derivatives deal that circumvented Europe’s deficit rules.
 
The real reason Wall Street has spent the last year bludgeoning Dodd-Frank into meaninglessness is the vast sums of money it can make if Dodd-Frank is out of the way. If you took the greed out of Wall Street all you’d have left is pavement.
 
Wall Street is the richest and most powerful industry in America with the closest ties to the federal government-- routinely supplying Treasury secretaries and economic advisors who share its world view and its financial interests, and routinely bankrolling congressional kingpins.

How else can you explain why the Street was bailed out with no strings attached? Or why no criminal charges have been brought against any major Wall Street figure-- despite the effluvium of frauds, deceptions, malfeasance and nonfeasance in the years leading up to the crash and subsequent bailout? Or why Dodd-Frank has been eviscerated?
 
As a result of consolidations brought on by the bailout, the biggest banks are bigger and have more clout than ever. They and their clients know with certainty they will be bailed out if they get into trouble, which gives them a financial advantage over smaller competitors whose capital doesn’t come with such a guarantee. So they’re becoming even more powerful.
 
Face it: The only answer is to break up the giant banks. The Sherman Antitrust Act of 1890 was designed not only to improve economic efficiency by reducing the market power of economic giants like the railroads and oil companies but also to prevent companies from becoming so large that their political power would undermine democracy.
 
The sad lesson of Dodd-Frank is Wall Street is too powerful to allow effective regulation of it. We should have learned that lesson in 2008 as the Street brought the rest of the economy-- and much of the world-- to its knees. Now we’re still on our knees but the Street is back on top. Its leviathans do not generate benefits to society proportional to their size and influence. To the contrary, they represent a clear and present danger to our economy and our democracy.
 
They should be broken up, and their size must be capped. Congress won’t do it, obviously. So we’ll need to rely on the nation’s two antitrust agencies-- the Federal Trade Commission and the Antitrust Division of the Justice Department. The trust-busters are now investigating Google. They should be turning their sights onto JPMorgan Chase, Citigroup, and Goldman Sachs instead.

Matt Stoller a former policy staffer for Alan Grayson when Grayson served on the House committee that originated the bill now works for the Roosevelt Institute. He has always felt that the bill didn't go nearly far enough towards desperately needed Wall Street reform. "There was," he writes, "no attempt initially to ask the question, 'what happened and what should we do about it?' There was no examination of the purpose of a banking system, and how to rebuild a system that aligns the public with the financial industry. There was no attempt to build legitimacy through a public education campaign about what Congress and the administration was doing, and why. Instead, legislators and very serious men in suits started throwing around terms like 'systemic risk regulator' and 'resolution authority,' and then used the idea of a Consumer Financial Protection Bureau as a palliative for liberals.

While a shadow bailout took place through the Federal Home Loan banks and the Federal Reserve from 2007 onward, eventually a fiscal and regulatory solution would become necessary. The first significant legislation in this thrust was the famous Bazooka bill (or Housing and Economic Recovery Act) signed in June 2008 that allowed Treasury Secretary Hank Paulson to take over and pump unlimited sums into Fannie and Freddie. The second was the TARP. Both of these bills were pivotal to providing the government with enough firepower to overcome the solvency crisis.

After the immediate crisis was contained, losses were socialized, and profits returned to financial executives, Congress had to put together a “solution." It would have a giant bite at the apple in restructuring our regulatory apparatus. But in order to perpetrate the oligarchic banking structure, it would be important that no structural changes to the industry be implemented. Not one regulator was fired for his or her part in the crisis. The Justice Department adopted a posture of legalizing financial control fraud by refusing to prosecute anyone involved in the meltdown, and continues to allow millions of cases of foreclosure fraud to continue. Ben Bernanke was renominated, and the administration fought a bitter below-the-radar battle to secure his confirmation. With a few modest exceptions, the risk-taking and leverage in our financial markets continues apace, and the deregulatory neoliberal mindset is still dominant. The Federal Reserve has been audited, but the system is now accountability-free for high level operatives in finance and politics. And now that Elizabeth Warren has been thrown overboard by the administration, the lockdown of the financial system is nearly complete.

And mostly, that’s what Dodd-Frank accomplished. It rearranged regulatory offices and delivered a new set of mandates, but effected no structural changes to our banking system. Congress never asked what happened, or why, or even, what kind of banking system do we want? And that’s because Obama’s Treasury Secretary already had the answers to these questions.

Lisa Donner, the executive director of Americans for Financial Reform, reminds Americans what is at stake in this battle over financial reform and has the polling to back up her claim that voters don't buy Wall Street’s arguments against reform, and that they do want effective cops on the beat policing the financial marketplace, regardless of the lies coming out of the paid off Wall Street shills like Cantor and Boehner.

Two years ago at this time we were in the midst of a major battle about whether and to what extend Congress would stand up to Wall Street and financial industry special interests and change the failed program of deregulation that led to the financial crisis. One year ago we applauded the progress made with the passage of the Dodd Frank Wall Street Reform and Consumer Protection Act. Today we are celebrating the new Consumer Protection Bureau officially opening its doors-- so that for the first time there is a cop on the beat ensuring fair play for consumers in the financial marketplace.

But the battle for accountability and transparency is anything but over. Today the House has passed H.R. 1315 the ‘Consumer Financial Protection Safety and Soundness Improvement Act’-- a bill title that would make George Orwell blush. In fact, HR 1315 would cut the CFPB off at the knees, and make it impossible for it to do the job we need it to: standing up for Main Street, even when Wall Street doesn’t want it to.

Earlier this week, we released a poll with AARP and the Center for Responsible Lending that demonstrates widespread support for the CFPB and Wall Street reform. By a 3 to 1 margin Americans want financial firms held accountable and financial reforms to take effect. And they want the CFPB-- created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010-- to be up and running. By overwhelming margins and across the political spectrum they want the CFPB to make credit offers clearer, they want rules the road for all kinds of financial companies, and they want an end to tricks and traps.

Public Citizen was even more brutal in its assessment-- and even more on target. Bartlett Naylor, Public Citizen's Financial Policy Counsel:

Public Citizen deplores the shameful vote in the House of Representatives today to emasculate the new Consumer Financial Protection Bureau. A House majority that votes against the interests of its own constituents who continue to suffer massive unemployment from the bank-caused recession has clearly lost its moral compass.
 
There’s only one constituency that favors gutting the CFPB-- abusive bankers. Unfortunately, the banking industry continues to funnel some of its profits into a lobby offensive to dismantle the new consumer agency so as to shield itself from the new cop on the beat enacted in the year-old Dodd-Frank law. And it paid off today.

Obama claims he will veto the bill if it ever gets through the Senate.

America Wants Financial Protection From Predators-- Even Republicans Want Financial Protection

There hasn't been a poll, at least as far as I know, that asks Americans if they think life imprisonment for banksters who, carried away with greed and avarice, tanked the economy, is too lenient. Nor has their been a poll that asks if politicians who have been paid off by these banksters to enable this kind of behavior deserve even greater punishment than the banksters themselves. And why should there be such polls, when we all know perfectly well that the system is so gamed that there will never even be serious investigations of the offending banksters or politicians?

On the other hand, AARP did commission a poll to find out how strongly Americans feel about the institutional financial reforms required to make the investment and banking markets safe for consumers, safe from predators and their political whores. Not surprisingly, most Americans feel strongly that safeguards are needed. Perhaps surprisingly, that even includes Republican Party supporters!

In fact, by a 3 to 1 margin Americans want financial firms held accountable and financial reforms to take effect as soon as possible. And they want the Elizabeth Warren's Consumer Financial Protection Bureau-- so feared and loathed by Wall Street and their political puppets-- to be up and running as planned, not diluted by industry’s current attempts to weaken its funding and structure. This is what the poll found:

• Likely voters, including majorities of Independents, Democrats, and Republicans, favor the 2010 Dodd-Frank Wall Street Reform law by a 5 to 1 margin (71% vs. 14%).

• Presented with information about challenges in Congress to the law, almost two-thirds (63%) believe that policymakers should allow the law to be fully implemented.

• Three-quarters (74%) of voters support the existence of a single entity with the mission of protecting consumers from deceptive practices.

• Voters also voice overwhelming support for the following consumer protection functions of the Consumer Finance Protection Bureau: Requiring clearer explanations of rates and fees, restricting lenders from offering loans with risky or confusing features, and banning incentives to mortgage brokers to put homeowners into higher rate mortgages than they qualify for.

• Three-quarters (73%) of voters want to see federal oversight of financial companies that previously lacked national oversight, including mortgage brokers, payday lenders, and companies offering pre-paid debit cards.

Nancy LeaMond, Executive Vice President of AARP: “During the financial crisis, too many older Americans lost their savings due to the failure of an outdated and compromised financial regulatory system. That's why most Americans say they want clear, accurate information so they can make the best financial decisions for their families, and a watchdog that will protect them from financial abuse.”

Republicans in Congress will try to prevent the Consumer Financial Protection Bureau from ever functioning. Right now, it's scheduled to start tomorrow. In the clip above, Elizabeth Warren explains to Rachel Maddow why she feels that it will work despite Wall Street and right-wing Members of Congress who are dead set against fairness in the system.

I thought it might be worth mentioning that this year the financial industry is once again pouring millions of dollars into the political system in the hopes of keeping Republicans in power. Of the 6 Members of Congress who have taken the biggest legalistic bribes from the finance sector, 5 of them are dead set against any reform that would protect consumers. Mostly very familiar names, as well; in order of the amount of bribes they've accepted (just this year):

Eric Cantor (R-VA) $378,700
John Bohner (R-OH) $355,325
Jeb Hensarling (R-TX) $235,800
Spencer Bachus (R-AL) $186,515
Ed Royce (R-CA) $185,879

Frank Rich Is Back! And I Bet Obama Wishes He Never Existed

Rich is now in New York and even if the Times can ignore the treasure they lost, Obama isn't likely to. Obama's Original Sin isn't part of the program to make progressives resigned to choosing the lesser of two evils. As Frank's editor points out, "the president’s failure to demand a reckoning from the moneyed interests who brought the economy down has cursed his first term, and could prevent a second." And as Frank reminds us, "Obama arrives at his reelection campaign not merely with a weak performance on Wall Street crime enforcement and reform but also with a scattershot record (at best) of focusing on the main concern of Main Street: joblessness. One is a consequence of the other. His failure to push back against the financial sector, sparing it any responsibility for the economy it tanked, empowered it to roll over his agenda with its own. He has come across as favoring the financial elite over the stranded middle class even if, in his heart of hearts, he does not."

What haunts the Obama administration is what still haunts the country: the stunning lack of accountability for the greed and misdeeds that brought America to its gravest financial crisis since the Great Depression. There has been no legal, moral, or financial reckoning for the most powerful wrongdoers. Nor have there been meaningful reforms that might prevent a repeat catastrophe. Time may heal most wounds, but not these. Chronic unemployment remains a constant, painful reminder of the havoc inflicted on the bust’s innocent victims.

...After the 1929 crash, and thanks in part to the legendary Ferdinand Pecora’s fierce thirties Senate hearings, America gained a Securities and Exchange Commission, the Public Utility Holding Company Act, and the Glass-Steagall Act to forestall a rerun. After the savings-and-loan debacle of the eighties, some 800 miscreants went to jail. But those who ran the central financial institutions of our fiasco escaped culpability (as did most of the institutions). As the indefatigable Matt Taibbi has tabulated, law enforcement on Obama’s watch rounded up 393,000 illegal immigrants last year and zero bankers. The Justice Department’s bally­hooed Operation Broken Trust has broken still more trust by chasing mainly low-echelon, one-off Madoff wannabes. You almost have to feel sorry for the era’s designated Goldman scapegoat, 32-year-old flunky “Fabulous Fab” Fabrice Tourre, who may yet take the fall for everyone else. It’s as if the Watergate investigation were halted after the cops nabbed the nudniks who did the break-in.

Even now, on the heels of Bank of America’s reluctant $8.5 billion settlement with investors who held its mortgage-backed securities, the Obama administration may be handing it and its peers new get-out-of-jail-free cards. With the Department of Justice’s blessing, the Iowa attorney general, Tom Miller, is pushing the 49 other states to sign on to a national financial settlement ending their investigations of the biggest mortgage lenders. What some call a settlement others may find a cover-up. Time reported in April that the lawyer negotiating with Miller for Moynihan’s Bank of America just happened to be a contributor to his 2010 Iowa reelection campaign. If the deal is struck, any truly aggressive state attorneys general, like Eric Schneiderman of New York, will be shut down before they can dig into the full and still mostly uninvestigated daisy chain of get-rich-quick rackets practiced by banks as they repackaged junk mortgages into junk securities.

Those in executive suites at the top of that chain have long since fled the scene with the proceeds, while bleeding shareholders, investors, homeowners, and ­cashiered employees were left with the bills. The weak Dodd-Frank financial-reform law that rose from the ruins remains largely inoperative, since the actual rule-writing was delegated to understaffed agencies now under siege by banking lobbyists and their well-greased congressional overlords. The administration’s much-hyped Consumer Financial Protection Bureau is being sabotaged by Washington Republicans intent on blocking any White House nominee, whether Elizabeth Warren or some malleable hack, to lead it. “We can’t let special interests win this fight,” said Obama when he proposed the agency in October 2009. Well, he missed his moment to fight for both it and Warren, and the special interests won without breaking a sweat.

Rather than purge the crash’s crimes, Wall Street’s leaders are sticking to their alibi: Everyone was guilty of fomenting this “perfect storm,” and so no one is. Too-big-to-fail banks are bigger than ever, and ­Masters of the Universe swagger is back. Even Jamie Dimon of JPMorgan Chase, about the only bank chief not to be caught with a suspect balance sheet or a $1,400 office trash can, has taken to channeling Schwarzman. In June, he publicly challenged Ben Bernanke about the intolerable burdens of potential regulation—this despite a 67 percent surge in JPMorgan’s first-quarter profits and a 1,500 percent raise in his own compensation from 2009 to 2010. As good times roar back for corporate America, it’s bad enough that CEOs are collectively sitting on some $1.9 trillion in cash-- much of it parked out of the IRS’s reach overseas-- instead of hiring. (How many jobs can you buy for $1.9 trillion? America’s total expenditure on the Iraq and Afghanistan wars over a decade has been $1.3 trillion.) But what’s most galling is how many of these executives are sore winners, crying all the way to Palm Beach while raking in record profits and paying some of the lowest tax rates over the past 50 years.

The fallout has left Obama in the worst imaginable political bind. No good deed he’s done for Wall Street has gone unpunished. He is vilified as an anti-capitalist zealot not just by Republican foes but even by some former backers. What has he done to deserve it? All anyone can point to is his December 2009 60 Minutes swipe at “fat-cat bankers on Wall Street”-- an inept and anomalous Ed Schultz seizure that he retracted just weeks later by praising Dimon and Lloyd Blankfein as “very savvy businessmen.”

Obama can win reelection without carrying 10021 or Greenwich in any case. The bigger political problem is that a far larger share of the American electorate views him as a tool of the very fat-cat elite that despises him. Given Obama’s humble background, his history as a mostly liberal Democrat, and his famous résumé as a community organizer, this would also seem a reach. But the president has no one to blame but himself for the caricature. While he has never lusted after money-- he’d rather get his hands on the latest novel by Morrison or Franzen-- he is an elitist of a certain sort. For all the lurid fantasies of the birthers, the dirty secret of Obama’s background is that the values of Harvard, not of Kenya or Indonesia or Bill Ayers, have most colored his governing style. He falls hard for the best and the brightest white guys.

Frank's villain in this tragic story: Wall Street huckster and former Clinton Treasury Secretary Robert Rubin, who seems to have sold Obama not just a bill of goods, but an entire Wall Street-oriented economic team to kill any hopes for embracing a populist solution to the Wall Street caused cataclysm of the final Bush years.

By failing to address that populist anger, Obama gave his enemies the opening to co-opt it and turn it against him. Which the tea party did, dishonestly but brilliantly, misrepresenting Obama’s health-care-reform crusade as yet another attempt by the elites to screw the taxpayer. (The Democrats haplessly reinforced the charge with marathon behind-the-scenes negotiations with insurance and pharmaceutical-­industry operatives.) Once the health-care law was signed, the president still slighted the unemployment crisis. A once-hoped-for WPA-style public-works program, unloved by Geithner, had been downsized in the original stimulus, and now a tardy, halfhearted stab at a $50 billion transportation-infrastructure jobs bill produced a dandy Obama speech but nothing else.

Obama soon retreated into the tea-party mantra of fiscal austerity. Short-term spending cuts when spending is needed to create jobs make no sense economically. But they also make no sense politically. The deficit has never been a top voter priority, no matter how loudly the right claims it is. At Obama’s inaugural, Gallup found that 11 percent of voters ranked unemployment as their top priority while only 2 percent did the deficit. Unemployment has remained a stable public priority over the deficit ever since, usually by at least a 2-to-1 ratio. In a CBS poll immediately after the Democrats’ “shellacking” of last November-- a debacle supposedly precipitated by the tea party’s debt jihad-- the question “What should Congress concentrate on in January?” yielded 56 percent for “economy/jobs” and 4 percent for “deficit reduction.”

Geithner has pushed deficit reduction as a priority since before the inauguration, the Washington Post recently reported in an article greeted as a smoking gun by liberal bloggers. But Obama is the chief executive. It’s his fault, no one else’s, that he seems diffident about the unemployed. Each time there’s a jolt in the jobless numbers, he and his surrogates compound that profile by farcically reshuffling the same clichés, from “stuck in a ditch” to “headwinds” (first used by Geithner in March 2009-- retire it already!) to “bumps in the road.” It’s true the administration has caught few breaks and the headwinds have been strong, but voters have long since tuned out this monotonous apologia. The White House’s repeated argument that the stimulus saved as many as 3 million jobs, accurate though it may be, is another nonstarter when 14 million Americans are looking for work.

...There’s not much Obama can do to alter the economy by 2012, given the debt-ceiling fight, the long campaign, and nihilistic Capitol Hill antagonists opposed to any government spending that might create jobs and, by extension, help Obama keep his own. But the central question before the nation couldn’t be clearer: Who pays? The taxpayers bailed out the elite; now it’s the elite’s turn to return the favor. Massive cuts to the safety net combined with scant sacrifice from those at the top is wrong ethically and politically. It is, in the truest sense, un-American. Obama knows this, and he hit a welcome note last week when he urged some higher corporate taxes for hedge funds and the like. But his forays in this direction are tentative and sporadic. You have to wonder why he isn’t seizing the moment to articulate and fight for the big picture instead of playing a lose-lose game of rope-a-dope with the Republicans on their budgetary turf.

Some Obama fans think it’s tactical genius that’s holding him back-- his fabled long ball. Americans are no longer as angry as they were in January 2009 so much as they are defeated, depressed, and jaded by the slow recovery and by four decades of raging inequality that tells them the deck is stacked no matter who’s in Washington. Better, then, not to ruffle these still waters-- or those easily rattled independents fetishized by political consultants-- and instead scare seniors about imminent Medicare cutbacks and plot deep-think policy initiatives that (like health-care reform) might fix America over time. But the voters’ placidity hardly augurs well for Democratic turnout in 2012. And it may not last. All that’s required is one more economic panic to shatter the phony peace and whip the rage back to center stage, once again to the right’s advantage.

“A nation cannot prosper long when it favors only the prosperous,” Obama declared at his inauguration. What he said on that bright January morning is no less true or stirring now. For all his failings since, he is the only one who can make this case. There’s nothing but his own passivity to stop him from doing so-- and from shaking up the administration team that, well beyond the halfway-out-the-door Geithner and his Treasury Department, has showered too many favors on the prosperous. This will mean turning on his own cadre of the liberal elite. But it’s essential if he is to call the bluff of a fake man-of-the-people like Romney. To differentiate himself from the discredited Establishment, he will have to mount the fight he has ducked for the past three years.

The alternative is a failure of historic proportions. Those who gamed the economy to near devastation-- so much so that the nation turned to an untried young leader in desperation and in hope-- would once again inherit the Earth. Unless and until there’s a purging of the crimes that brought our president to his unlikely Inauguration Day, much more in America than the second term of his administration will be at stake.

Blue America never endorsed Obama in 2008, when there was a slim chance he might turn out to be a progressive. I'd say there's far less of a chance we'll be working towards his reelection next year. Instead, as you probably know, we'll be working to raise campaign funds for proven progressive leaders running for Congress. We've endorsed 5 who are running for the House so far and starting later this month we'll be adding to that list with candidates from Arizona and Wisconsin. Meantime, can you give us a hand? No matter who wins the presidency, we're going to need smart, aggressive progressives in Congress.

Yves Smith on Ezra Klein's weird idea that if Michael Lewis couldn't see the meltdown coming, it's no wonder that nobody could

The trailer for Inside Job

"I hope that [shredding Ezra Klein's piece] will encourage readers to take a cold, bloodyminded look at the excuses made for malfeasance in our elites."

-- Yves Smith, in her "Naked Capitalism" blogpost
"Ezra Klein Should Stick to Being Wrong About Health Care"

by Ken

A lot of progressives once had warm feelings toward Ezra Klein, before his WaPo gig sapped the juices out of his brain, so that while he's not absolutely, totally, 100 percent useless (if only by comparison with so much of what passes for "analysis" in the infotainment noozemedia), he's now pretty much a full-time dunderhead, spending most of his time trying to gussy up conventional wisdom as rarified inside knowledge.

Now he's seen the film Inside Job, which takes a look at some of the cause-and-effect of the economic meltdown and points some accusing fingers at the financial sector, and our Ezra is here to tell us that he hasn't just seen it, he's seen through it: "What 'Inside Job' got wrong."

It was an excellent documentary for people who don’t want to understand the financial crisis but want to believe they would’ve seen it coming. Watching it, you’d think that the only people who missed the meltdown were corrupt fools, and the way to spot the next one is to have fewer corrupt fools. But that’s not true. Worse, it’s dangerously untrue. In telling the wrong story about how the financial crisis happened, it misinforms about how to keep it from happening again.

Even I, a notorious financial unsophisticate, cringed at most of what I saw in Ezra's piece as I skimmed it. His basic argument is that the economic meltdown, or the housing bubble -- he sort of seems to think they're the same thing -- was such a complex phenomenon that no one could have predicted it, and no one did, not even the people who did. Maybe they just kind of got lucky, or in any case, if they didn't predict the exact sequence of events, it doesn't count.

As proof Ezra offers the fact that all so many really smart financial-sector types missed it, not least someone as fantastically brilliant as the world's greatest financial genius, Michael Lewis, and they missed it even though they all had every incentive to recognize and act on it on account of how much they stood to lose, which proves that nobody could have seen it coming. And oh, by the way, it also proves that corruption couldn't have been a major factor in the meltdown.

I hope by this point you're seething. Trust me, that's nothing compared with what Yves Smith, of the "Naked Capitalism" blog, seems to have felt while she read the piece, and the result is a humdinger of a post: "Ezra Klein Should Stick to Being Wrong About Health Care," which she begins by crediting Ezra's post with "manag[ing] the impressive feat of being spectacularly off base, rhetorically dishonest, and embarrassingly revealing of the lack of a moral compass all at once."

Since being off base is a major part of Klein's brand, I suppose one should not be surprised; those who've had the good fortune to have limited contact with his output can read Jon Walker's "Ezra Klein: Insurance Exchanges Don't Work and Must be Expanded Dramatically," or Physicians for a National Health Care Program's “Does Ezra Klein really think 'managed care didn't kill anyone'?" for two of many examples.

I'm going to shred this piece in some detail, first, because it will be entertaining, and second, I hope that it will encourage readers to take a cold, bloodyminded look at the excuses made for malfeasance in our elites.

Referencing the chunk of Ezra's post I've quoted above, Yves gets into gear:

The only objection Klein raises to Inside Job is that it punctures the favorite defense of economists, regulators, and their mouthpieces in the media "whocoulddanode?" Klein rejects the notion that corruption played a role; there no effort to rebut the evidence proffered in Inside Job and numerous other accounts (including on this blog and in ECONNED). He simply sidesteps the issue of corruption via straw-manning: "corrupt fools".

The most corrupt were decidedly not fools, they knew better and still took the destructive, profitable course. . . .

I wouldn't attempt to preempt Yves's "shredding" of the post, but let me just hit some of her basic points:

* Michael Lewis? Gimme a break! (I'm paraphrasing.) "Can Klein simply not tell the difference between Lewis, a bond salesman 25 years ago, and author/journalist since then, and a genuine in-touch expert on some aspect or other of modern finance?" Yves registers astonishment that Ezra actually cites Lewis's edge-of-the abyss deriding of the financial prophets of doom, and the neat inversion by which he makes his hero's obtuseness prove his point -- hey, if the world's smartest person couldn't see it coming, then nobody could.

* In the embarrassing matter of the unheeded but hardly insignificant body of economic observers who did see that something terrible was coming, but don't count because they didn't spell out the exact sequence of terrible events, Yves offers the analogy of the impossibility, "identified in 1899 by mathematician Henri Poincaré . . . of determining the movements of three or more celestial objects (meaning their gravitational forces could affect each other," because so many complex factors interact, then argues that the financial system has "a lot more than three actors, and --

even if you can describe the forces at work accurately, you cannot make useful predictions, at least not over anything other than very short time frames.

But you could nevertheless very clearly see in late 2006 and 2007 that Things Were Going to End Badly merely by reading the Financial Times. You could tell we were in the midst of a global credit mania. . . .

* But the most astonishing piece of inanity in Ezra's post is his assumption that --

"[so] many people who got it wrong had an incentive to get it right. Journalists. Hedge funds. Independent investors. Academics. Regulators. Even traders, many of whom had most of their money tied up in their soon-to-be-worthless firms. "Inside Job" is perhaps strongest in detailing the conflicts of interest that various people had when it came to the financial sector, but the reason those ties were "conflicts" was that they also had substantial reasons -- fame, fortune, acclaim, job security, etc. -- to get it right.

Even I in my financial unsophistication was stopped in my tracks by this. Here's Yves's reaction:

Huh? He can write this with a straight face? He has the incentives 100% wrong.

Asset bubbles are very popular. They look like increased wealth to the community. That’s why regulators are reluctant to intervene. If they do, they make people look less prosperous immediately, and they can't prove the counterfactual, if they had left things alone, the damage would have been worse. Recall the orthodoxy then was you couldn't recognize a bubble in progress, better to clean up afterwords. And that's before you get to the corruption that Klein is so keen not to discuss: regulatory revolving doors, annual bonus cycles which promote the institutionalized "devil take the hindmost" attitude, known in finance as "IBG-YBG" for "I'll be gone, you'll be gone".

Yves has much, much more to say about how we got into such a mess, how it not only could be but was seen coming, and what might be done to make it less likely to happen again. Finally, she doesn't seem to think it's an accident that Ezra arrives at a view that hey, it was a terrible shame, the meltdown, but gosh, there's just not much we can do. After all, this is the view of the people whose approval now seems to matter to him.

She comes back finally "to the issue that Klein wants us to ignore: corruption and capture."

The problem is not that there are no solutions. There are steps that we could take now to make modern finance much less risky, but that involves imposing pain on bankers. And that has not happened because, as Simon Johnson pointed out in May 2009, the US has suffered a "quiet coup" and is now in the thrall of financial oligarchs. The obstacle isn’t scariness or complexity, it’s the lack of political will.

It’s easy to understand why Klein writes this sort of piece. What is hard to fathom is why anyone, other than his patrons, continues to give what he has to say much credence.

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