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Obama's Economic Misfits Finally Get It
Now they tell us.
On Monday, two men with considerable responsibility for enabling the banking meltdown confronted the error of their ways. Not directly, of course, for accountability is hardly the mark of either Lawrence Summers, the top White House economic adviser, or Treasury Secretary Timothy Geithner.
Their careers have long been fueled by error. Summers was one of the leading prophets of radical financial deregulation in the Clinton administration. And Geithner, as head of the New York Fed, looked the other way during Wall Street's collapse and then responded by opening wide the spigot of taxpayer dollars to resuscitate Citigroup and AIG.
What they wrote this week in a joint Op-Ed article in The Washington Post is a condemnation of the Wall Street shenanigans they once abetted and celebrated. I hope their apparent sudden conversion to common sense indicates the seriousness of the banking regulation plan that President Obama will present to Congress today.
"Over the past two years, we have faced the most severe financial crisis since the Great Depression," they wrote, placing the blame squarely where it belongs, on the unregulated derivatives markets they once gushed over. "The current financial crisis had many causes ... in the widespread use of poorly understood financial instruments, in shortsightedness and excessive leverage at financial institutions. But it was also the product of basic failures in financial supervision and regulation."
What irony that Summers, who as Bill Clinton's treasury secretary pushed through legislation guaranteeing "legal certainty for Swap Agreements" and banning the regulation of securitized mortgage debt, should now admit that "securitization led to an erosion of lending standards, resulting in market failure that fed the housing boom and deepened the housing bust."
According to Summers and Geithner, the Obama plan to be revealed today promises that all derivatives dealers will be "subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse."
If such language is ever passed into law, I hope that Brooksley Born is in the gallery and gets the standing ovation she deserves. That's the woman who, when she headed the Commodity Futures Trading Commission, warned that the derivatives market needed to be regulated. Summers and his predecessor as treasury secretary, Robert Rubin, destroyed Born's career because she dared to accurately predict today's crisis.
But better late than never, although it's a shame that Obama's economic whiz kids are only now getting serious about cracking down on Wall Street hustlers after first guaranteeing their toxic paper with trillions of taxpayer dollars. Nor should we assume that the Obama plan will not be subverted by the financial industry lobbyists, whose enormous campaign treasure chest, now financed by taxpayers, allows them to slice and dice congressional voting blocs the way they did subprime mortgages.
Already there's a joker in the deck of the Obama proposal in that it relies heavily on the Federal Reserve, which on the regional level is fully controlled by the very financial industry firms that it is expected to monitor. Summers and Geithner write that "all large, interconnected firms whose failure could threaten the stability of the system will be subject to consolidated supervision by the Federal Reserve." Like we never heard that one before.
Because of bad deregulation laws, those large, interconnected firms were allowed to grow to the point where their failure indeed threatened "the stability of the system." What we need to do is return to the basic principle of the New Deal-era Glass-Steagall Act (which Clinton reversed) that broke up "too big to fail" financial conglomerates because, by definition, when such companies threaten to fail, we taxpayers are left picking up the tab.
It was depressing that the president told The Wall Street Journal on Tuesday that he favors "a relatively light touch when it comes to the government ... in terms of financial regulation." And that "[w]e had a regulatory system that was outdated that did not encompass the non-bank sector."
Nonsense. We had a regulatory system inherited from Franklin Roosevelt's New Deal that for 60 years sustained a wall between the traditional heavily regulated banks and the non-bank hustlers on Wall Street who should have never been allowed to play their funny money games with people's savings and home mortgages. That wall was torn down by President Clinton at the behest of Wall Street lobbyists and now must be restored if there is to be true reform. The reforms presented by Obama are an important start, but I worry they do not face up to the reality that financial conglomerates too big to fail are too big to be allowed to exist.
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31 Comments so far
Show AllRight, Summers and Geithner are born again reformers, even as Summers continues to collect from his buddies on Wall Street. Yawn.
Exactly. It's more window dressing. Karl Rove must be running this government; They tell us what we hunger to hear and then proceed to do the opposite. Cognitive dissonance in action.
"What irony that..."
Irony??? The correct term is BULLSHIT!
I suspect there's plenty of crocodile tears accompanying these admissions.
What's required to bring some stability to this unstable system is likely anathema to the likes of Summers and Geithner--repeal Gramm-Leach-Bliley and the Commodity Futures Modernization Act and start enforcing the Sherman Act with some renewed zeal.
Obama's had a lot of banking executives at the White House to talk about reform, but not many people familiar with how to regulate the sons of bitches.
Obama is trying not to release the names of the banking executives and specialists to whom he's talked, ala Bush and Cheney, but, whether or not those names come out, I'll bet a steak dinner to a doughnut that the list doesn't include William Black....
(On edit, I should add that neither Geithner nor Summers wants to address the fundamental problem that regulation is designed to prevent--speculation (and the excessive risk-taking it encourages) destabilizes economic systems, and the last thing they want to do is cut the speculators out, since they're generating the big fees for the banks, and, concomitantly, the big bonuses for banking execs.)
So when do these two assholes go to jail?? (I know: never)
A different take on an old saying..
"They will tell the truth only after having exhausted every lie"
In the world of American politics, post George Wanker Bush, there is NO END WHATSOEVER to the supply of lies the Republicans and Democrats have at their disposal. They can keep lying 24/7 until the sun explodes.
GwNorth, "They will tell the truth only after having exhausted every lie". Correction, not even then. Just watch.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
The fact that Scheer only points to one elected official, Bill Clinton, for the economic deregulation debacle is surprisingly disingenuous. I'm quite certain Scheer knows better, so why undermine your argument by summing up with a basically false statement?
Good point, Greg. I believe the drive to repeal Glass-Steagall was spearheaded by Senator Phil Gramm (R-Texas) who was McCain's financial advisor through early summer 2008.
BECAUSE CLINTON SIGNED THE BILL INTO LAW.
Please contact your representatives and President Obama and urge them to reject the obnoxiously idiotic plan to grant greater supervisory powers to the Federal Reserve.
Thank you,
null
Don't count your chickens before they hatch. Those two are far from being reformed. Actions speak louder than words.
So this guy gets a job guarding the beer keg. He takes off the lock, opens the tap with his mouth under it, fills his beely, and then puts the lock back on and keeps everyone else away, insisting he is the best beer guard there is.
Sioux Rose
BLUE PILGRIM: Good analogy. It hits the hot button for me. I mean first give away how many trillion and THEN consider (or talk about) regulation? What a F--king hoax! It is unGODly given that states can't even finance the needs of their most vulnerable citizens due to the housing crisis caused by twisted priorities and fake schemes. Yet there is always $ in ample supply to go to war/Mars and Mammon/Wall St-banksters. This is an INSANE as well as IMMORAL set-up.
WTF--giving regulatory powers to the FED??!!!??
Whatever happened to the SEC, which is supposed to do the regulating??!!??
The very reason we're in this financial fiasco is that Clinton and then BushCo and their congressional minions made certain the SEC didn't/couldn't do its job, which Scheer hints at. Get ready to be raped again if this bill passes and the FED is charged with SEC regulatory duties.
Robert Scheer HIT it right on the money. If Obama and his cohorts don't bring back Glass Steagall which survived over 60 years and kept the banks out of the speculation business, there will be no real reform in the financial sectors that desperately need it. The Commodity Futures Modernization Act also needs to be repealed which effectively ended the Shad-Johnson Act which was again established during the Great Depression. FDR correctly concluded that these laws were necessary for the financial well-being of the country and he was right. Only thru Bill Clinton and George Bush did these laws come apart and look at the financial destruction and havoc that has taken place. So far, it looks like only window dressing from Obama.
Yes, yes and yes. Trying to regulate too big to fail is insane. Obama must have no shame.
To Greg R, Robert Scheer is making the point that Glass Steagall was repealed during Clinton's tenure and that much of the recent financial damage is due to Clinton and Congress's collusion right before Bush took office so his statement is not false, Yes, the move toward deregulation started during Reagan but much of the damage we see today is due to the elimination of Glass-Steagall. Greg, why don't you think before you speak or is this just another ploy you learned from Hannity or O'Reily. I suspect the latter.
"That wall was torn down by President Clinton..." Scheer's choice of words was curious, echoing Reagan's, 'Tear down that wall.' And, as you said, Reagan started the damage. Perhaps I'm wrong and the 'elimination of Glass-Steagall' was basically due to Clinton and his amazing ability to control the Republican congress. Perhaps he had lots of Monica's friends lined up to service the Republican committee chairmen? Yeah, 'I suspect the latter.' jimijazz, it's ok to post your comment directly under the post with which you take issue instead of hiding your comment on down the line aways. it makes you look a wee bit timid there jimi...
Greg R, it was a joint venture. The act tearing down the Glass-Steagall Act wall was the Gramm-Leach-Bliley Act and signed into law by Clinton at the urging of no other than Robert Rubin, whose proteges are - Summers and Geithner! The backbone of Obana's financial team and straight out of Goldman Sachs. Someone accurately characterized this country as the United States of Goldman Sachs. Goldman Sachs paid to get Obama elected and their rewards have been handsome indeed.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
As I understand it, it still allows for bailouts of financial institutions.
NMBill, isn't that the point?
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
So Obama prefers a "light regulatory touch". So all those undisclosed White House visits have been productive for - guess who. We're about to get plundered again. The FED guarding the public treasury?? Surely he jests. Unfortunately he means it. This is one time he isn't lying.
Time for another screwing of the taxpayers. Pretty soon, no more taxpayers. Just a bunch of rich people who, as we know, don't pay taxes.
I hear they're planning to start up debtor's prisons again for people who have gone broke. Charles Dickens, where are you when we need you?
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
With all that cheap labor, just maybe the United States can be competitive again and get out of debt.
I know! Match debt prisoners with failed auto plants!
Ich bin ein debt prisoner! We are all debt prisoners. Like it or not, free room and board? Looks Tempting!!! (No experimental drug testing while I'm incarcerated please!)
Sioux Rose
KATHY: I always thought credit cards (functioning as debt usury) were a strategic advancement over Debtors' Prison, as there is no overhead apart from paperwork. It costs about $35,000 or more a year to house an inmate. And even though many prisons (thanks to the war on drugs and the numbers as a result incarcerated) currently function as a new modern Plantation system supplying very cheap labor to industries nearby, the bottom line is it's cheaper to have people in debt for life, existing on an invisible tether that functions as a reliable, expedient, omnipresent form of bondage. Banks now are paying UNDER 2% interest on a CD, but most credit cards still charge about 20% interest. Those are some odds... and yet they still manage to LOSE $. It's an amazing disgrace and we call it commerce!
I gather that Scheer never read "Huckleberry Finn", for then he would readily recognize the present-day equivalent of the Duke and the Dauphin, a pair of scalawag confidence tricksters with whom Huck and Jim become entangled.
Washington is crawling with such odious charlatans, e.g. Lieberman and Graham.
It sounds well to generously propose that such career mountebanks may be reformed and rehabilitated to serve the common good, but the proposition assumes unwarranted trust or confidence in the persons in question.
These foxes and buzzards will not forego stoking and tending the hottest furnaces of avarice and greed, only to stoop to reverse the process and restore financial lifeblood to a destitute and beleaguered populace.
The banksters and the bagmen; the buyers and the bought. Look not to them for reform, rescue, succor, or salvation! They are but ministers in a monarchist oligarchy operating in the guise of a constitutional democratic republic.
To believe otherwise is Scheer nonsense.
· Yr Obd't Servant
I suspect this planet to be a place of punishment. Everyone here is a misfit. Otherwise they wouldn't be here.
Only possible alternatives:
Random evolution governs life on this planet.
Random geologic forces govern this planet.
Random atomistic forces govern this universe.
If there is anything more terrifying than this I would just as soon not know about it.
Sioux Rose
NIETSCHZE: The inculcation of a driving religious philosophy forced on threat of death (which was the fate of heretics for centuries) that championed a god of anger and destruction has MUCH to do with the outcome you see today in the form of not so quiet, yet quite pervasive desperaton. (Hello record numbers of persons consuming anti-depressants to survive their lives!) The good thing about this understanding is the realization that beliefs can change. We are, as a society, what we have come to believe to be true about ourselves and the world. Periodically mankind (as enacted through various civilizations) encounters a quantum leap in its understanding. I would argue that the light bulb/electricity functions as one of those leaps, as did the founding of America with a government planned to better represent THE people, as opposed to the royal interests alone. I apologize for using the phrase over and over, that Mars rules; but it's so apt particularly when such nonsensical amounts of treasure are offered to the MIC, rather than those programs that would help regenerate our society from the roots up.
Genesis taken metaphysically relates that Creation, as in this manifest world, began with THE word. This suggests that all concrete things begin with an idea, a spoken premise or principle. If the founding ideas of a society reflect an ethos of competition and ingrained hatred of outsiders, then already unity and harmony break down. Another World is possible, and it begins with new beliefs and ideals. Since the old wounded ideas have taken us to where we now face environmental collapse, fiscal implosion, and a greater threat of war (or genuine terrorist retaliation), it's really vital to alter our direction. That begins with a shift of consciousness. It creates new fuel which doesn't replace activism, or the need for genuine, tangible efforts. Some in this forum think one precludes the other, as opposed to recognizing that events emerge when a number of factors coalesce. Out of necessity comes invention. Seems WE have arrived at that juncture.
Open the gates of avalon, History and Debt are the same thing. the first records of human acts are terra cotta debt reciptsin cuniform.
Excellent! Let us shed our old lives of competition and consumption, industry and electricity, a life characterized by disregard of the damage done to our world during the Making, by ripping from the earth to begin, all the way through to the Disposing, by reinserting into the land, or water, or air...but altered, now...dead...death-causing...unrecoverably so...
Let us love our own naturalness, and our place in the natural world...blink...imagine the world in full bloom, without human industry...yourself a part, but only a part, as all other living things are a part...let us fend for ourselves, and recover the dignity of a life lived harmoniously with the myriad plants and animals, as directed from within, according to one's own best ability, and moderated by compassion...let us share the joys of mutual mental and physical stimulation, while orienting our philosophies around hedonistic stewardship of the planet that has given us life, given us our very bodies, and continues to do so, even unto this very breath...pleasure is not to be shunned...the living world is not to be killed...one can have pleasureable life without sacrificing the mother world...the opposite?
what is pleasureable? how much of it are you getting? property ownership must go...
Global Start Date: September 22, 2012! Get those gardens growing everywhere, we're gonna need food all over, including right where you live...water and shelter to come...don't let industry wreck this for everything!