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Obama Rejects Bipartisan Bank Deal
Although Senate Banking Committee Chair Chris Dodd and his sometime Republican ally Richard Shelby continued to make noises on the Sunday talk shows about a possible bipartisan deal, both President Obama and House Financial Services Chairman Barney Frank have personally urged Dodd not to cut a deal with Republicans. I asked Frank point blank why Dodd would want such a deal, and he said--on the record--"I have no idea, but both President Obama and I have urged him not to."
This is a welcome sign that Obama realizes that public opinion is moving in the direction of tougher banking reform, and that he learned from the health debate that bipartisan compromise on key reform issues is a snare and a delusion. Kudos to Chairman Frank and to the President.
Assuming that Dodd doesn't cave, the Democrats still need 60 votes if Republicans decide to filibuster the motion to take up the bill. But with tide turning strongly against coddling Wall Street, it is hard to imagine that a few Republicans won't break ranks. If so, there may be no filibuster at all.
On one of the most contentious issues, derivatives reform, Maine Republican Senator Olympia Snowe sent a letter to Majority Leader Harry Reid on Friday urging him to back Senator Blanche Lincoln's tough derivatives provision, which not only narrows exclusions in the draft legislation, but keeps big banks from trading derivatives for their own accounts. It's hard to imagine Snowe backing this measure and then joining in a filibuster to block consideration of the reform altogether. Here is part of her letter:
"I believe that strong derivatives regulation goes to the heart of an effective financial reform bill and that Chairman Lincoln's legislation is a strong step towards realizing this fundamental component to financial reform......I believe that we should err on the side of caution and finally bring full transparency to these markets once and for all and allow regulators to preemptively identify these damaged firms.Then we have the case of the accidental senator from Massachusetts, Scott Brown, who is facing re-election in just two years. His special election last January was a fluke--a perfect storm of voter backlash against recession and a weak Democratic campaign. Brown ran as a kind of regular-guy economic populist. I can't believe that Brown will stand up for Wall Street against Main Street and vote to filibuster against even taking up the bill (Elizabeth Warren should run for the Democratic nomination to take him on in 2012. Now that would be one helluva race.)"Accordingly, I believe the Senate should start with a comprehensive, strong derivatives reform proposal and defend attempts to weaken it, not the other way around and the legislation produced by the Senate Agriculture Committee includes the strongest safeguards and most robust transparency provisions on our expansive derivatives market.
I urge the Majority Leader to incorporate these provisions into the regulatory reform bill."
In short, Republican leaders McConnell and Shelby are bluffing. They know they can't hold their troops, and that's why they so desperately want a deal with Dodd for a weaker bipartisan bill that Republicans can support.
If Dodd avoids such a deal, my hunch is that several Republicans will not support the filibuster and that debate will proceed. And once it does, there will be several votes on key strengthening amendments. These will also put Republicans in a bind.
Senator Chuck Grassley supported the Lincoln bill in the Agriculture Committee. Will he now join Snowe and vote to add it to the reform bill? How could Grassley vote to strengthen the derivatives position, but vote to block taking up the whole bill?
My sources tell me that one key Democrat, Treasury Secretary Tim Geithner, is actually somewhat more pro-banker than moderate and heartland senate Republicans when it comes to derivatives reform. He is sympathetic to Wall Street complaints that the Lincoln bill would eat into derivatives profits, and has weighted in on the side of watering down her bill. Happily, he doesn't vote, but President Obama should decide the administration position and not leave it to Geithner.
Two other key amendments: One will be offered by Senators Sherrod Brown, Ted Kaufman, Bob Casey and Sheldon Whitehouse, limiting the size of large banks; another by Senators Jeff Merkley and Carl Levin would write into law the Volcker Rule separating commercial banking from financial gambling. These will also put Republicans in a deliciously awkward spot--though they may also be opposed by pro-Wall Street Democrats such as Evan Bayh of Indiana and Mark Warner of Virginia. And watch closely to see how Chuck Schumer votes on these strengthening amendments. Schumer, once known as the senator from Wall Street, is remaking himself as a financial reformer in preparation for a possible run for majority leader against Dick Durbin should Harry Reid go down this November.
Bottom line: If the Senate Democratic Leadership can resist the snake oil of a bipartisan deal and if Obama personally works the phones and takes control of his own administration, the bill will probably get stronger as it works its way through Congress. This is the right kind of bipartisanship--a progressive bill so clearly demanded by public opinion that many Republicans don't dare to oppose it.
Even so, this bill is far from the final chapter of reform. While banks will not be able to do quite as much damage to the rest of the economy, entire areas of abuse such as credit rating agencies, hedge funds, and private equity are largely untouched and the basic business model of the financial conglomerates will be only partly constrained. Real mortgage relief is also put off for another day.
A little history is reassuring. For all of his personal resolve, it took Franklin Roosevelt seven years and several pieces of landmark legislation to complete the New Deal structure of financial regulation that kept Wall Street well harnessed until the late 1970s - including the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Act of 1935, ending with the Investment Company Act of 1940. Even in that golden age of reform, Wall Street wasn't tamed in a day.
If the Democrats don't extinguish the momentum with a premature bipartisan deal, public understanding and indignation are still building. Regulatory agencies are beginning to do their jobs, and Democrats are starting to sound like a progressive party. It's about time.
56 Comments so far
Show AllWhat a tough spot the Democrats are in. How can they thread the needle? How can they placate their indignant base and yet still collect huge campaign donations from the financial industry? It will have to appear as real reform and yet have deep loopholes. It will have to called comprehensive even if it is only partial. It will have to allow parasitic financial instruments yet appear to regulate them. Maybe the Dems could use some help from someone with "progressive" credentials to help whitewash it. Yes-- that's the ticket.
tammons:
A very cogent analysis of the REAL questions the dems will find answers to in terms of keeping their "lobbying money flowing" before any legislation is passed. We have a two-faced government (republican and democrat) which has morphed into one physical body!
Kuttner is delusional thinking that the Democrats are starting to sound progressive. Didn't he hear Larry Summers on PBS and NPR last week spouting the worn out "can't break up Wall Street banks and stifle innovation" mantra. If that doesn't tell us what Obama's bankster "reform" bill will look like, what will?
Kuttner's comparison with the New Deal is not an apples to apples comparison and is most definitely NOT reassuring.
While it is true that New Deal regulations continued to be codified right up until WWII in 1941, the initial legislation during the first two years was high impact pro-consumer, pro-worker and not pro-corporate.
Obama's first two years are turning out to be a series of pro-corporate, anti-consumer, anti-worker schemes that further empower the corporations that caused the problems we are allegedly trying to solve.
Here we go again. This time the Bill is 1,408 pages long. Most likely it will be written in the same language as Obama's Health Care Bill. That way neither the people voting on it nor the American people will really know its real content.
Yes, Obamacare refined the art of putting lipstick on a pig and declaring victory. Bankster "reform" will end up the same way and the banksters will be laughing all the way to the bank.
"Even so, this bill is far from the final chapter of reform. While banks will not be able to do quite as much damage to the rest of the economy, entire areas of abuse such as credit rating agencies, hedge funds, and private equity are largely untouched and the basic business model of the financial conglomerates will be only partly constrained. Real mortgage relief is also put off for another day."
The glaring truth of this statement notwithstanding, the bill in question - especially if the amendments described in the article are made - would actually represent SOME progress (not a lot but some), unlike the "healthcare reform" monstrosity which actually makes things worse in that realm.
q
There is no such thing as partial progress with respect to corporate control of government.
Each day that the insurance industry, drug makers, banksters (or any other corporate interest) is out of control, they are raking in additional boatloads of money that they will use to increase their bribes to politicians and gain more control.
The idea that Obamacare or bankster reform are "baby steps forward" would be laughable if the consequences were not so serious.
"There is no such thing as partial progress with respect to corporate control of government."
The banking industry gained its power incrementally and can lose it in the same way. Your statement is hyperbolic and incorrect.
Any restrictions on the banking industry's predations are welcome. The efforts to draw parallels between financial reform and "healthcare" reform are premature at this time.
q
Quite naturally Wall Street will do everything they can to hold on to all their potential profits, but the realists know that all that easy money and high-flying risk taking is going to be tamped down. Time will tell how good of a tamping job we get. "Tamp 'em up solid, so they won't come down..."
Nothing will be tamped down.
It will be like the kid in high school who got a new car from his parents every time he wrecked the previous new car they bought him.
Now that Obama is institutionalizing too big to fail bailouts for the banksters, every other industry will be jumping on the bandwagon so they can also put the pinch on taxpayers.
I don't buy the "institutionalizing too big to fail" stuff. Certainly if we allow the same thing to happen again, then yes, you're right, but the hope is that they'll get enough regulation change that an orderly 'allow to fail' process is put back in place.
Until Congress reeled him in, Obama wanted to have the authority to bail out banks without even getting Congress to rubber stamp the bailouts !
If that isn't an example of institutionalizing bailouts (not to mention the unitary executive aspect), what is?
Obama is fighting against limiting the size of banks and re-establishing New Deal firewalls. If the too big to fail banks are not broken down (into $100 billion asset maximums) the banksters will find it very profitable to create serial meltdowns followed by ever larger taxpayer-funded bailouts.
I believe that the bailout scheme being advocated is to be financed from the banks themselves. This makes intuitive sense and is what is done in some parts of Europe. And no taxpayer pinch.
The banksters are writing the rules, so no matter what the banks may theoretically be "financing", the US taxpayer will be the saviour of last resort.
What?
Kuttner is delusional thinking that Scott Brown's victory was a fluke.
The people of Massachusetts have had a dress rehearsal for Obamacare since Romneycare infected their state.
Kuttner better be prepared for a lot more flukes on the morning of Nov. 3.
I SAID, "Cream AND sugar???"
" My sources tell me that one key Democrat, Treasury Secretary Tim Geithner, is actually somewhat more pro-banker..."
Kuttner is great, but he needs 'sources' to tell him that?
Maybe the screw is turning and this will have some real reform efforts. With Obama, there is no way to know until the final bill; that's for sure.
"...the Democrats still need 60 votes if Republicans decide to filibuster the motion to take up the bill."
Is anyone else sick and tired of this worn out excuse? Let them filibuster, bring the US Senate to a halt for as long as it takes for that body of pompous condescending elistists to really figure out which side of banking reform the American people stand.
An extended filibuster would do this country good - bring it on!
If a bill is 1,408 pages long, it means that the bill is full of exclusions and special circumstances designed to benefit the obscenely rich as is the case with the tax code and health care legislation. The extreme verbiage is just camoflage to obstruct the reality from the non-lawyered masses.
Eagle Bill, thanks for the heads up. 1408 pages so soon? Imagine what it will be by the time it does pass. I knew something was off. Why doesn't anyone ever mention these simple flaws?
I worked for a corporation in the 80s whose unwritten motto was PROFIT IN CONFUSION.
Obamacare and the bankster bill are shining examples of PROFIT IN CONFUSION.
Profit in confusion? I don't think those corporations are confused about profit and know what they're up to. I take it that the motto means profiting from people's confusion.
WTF does the number of pages have to do with anything?
Have you read your home and car insurance policies lately?
Interestingly, even some of the comments on Huffpost are somewhat indicative of awareness. I think that the harsh reality of Obamacare is finally hurting them.
Assuming "Dodd doesn't cave". Typical horsesh@t from HuffLiberal.
" Senator Dodd was among the prominent politicians who may have received favorable mortgage deals from Countrywide, a mortgage lender at the heart of the current mortgage crises. According to an investigation conducted by Conde Nast's Portfolio, Countrywide's V.I.P program may have bent rules to offer Senator Dodd a better deal on his Washington town house and Connecticut home mortgages. " - sourcewatch.
You are correct but doing so would take an act of courage that the Senate Democratic leadership doesn't have.
Reid is crapping in his pants at the prospect of losing his seat in November and Dodd is too deeply in the pockets of the banking industry to extricate himself.
q
Same old theater, same old play, same old owners of the box office.
L'il Bo Peep will be played by Dodd.
The "Big, Bad Wolf" will be anything which makes sense.
The ineffectual superhero phony will be played by Obama the pragmatist.
The Bipartisan choir will sway with the exstacy of a chrushing dullness.
No one will like the play (except the owners).
The owners will make a killing.
I'll love to read Robert Kuttner's final review, NOT.
"This is a welcome sign that Obama realizes that public opinion is moving in the direction of tougher banking reform, ..."
And the superfical "political analysis" crap reproduced in this site's main column is looking more and more like Daily Kos every day.
The argument about public opinion doesn't make sense to me. Public opinion was strongly in favor of single-payer, and our leaders clearly didn't care.
Public opinion is significant only inasmuch as political gamesmanship must find ways and means to deal with it.
That most definitely does NOT imply allowing public opinion to shape the end result in any meaningful way. To the contrary, it does mean expending some energy on reshaping, diverting and counteracting the opinion itself so that the politics can proceed in accordance with the dictates of the paid sponsors who actually matter while sustaining at least a minimal illusion of "representative democracy."
Even that may not be necessary for much longer as most Americans seem quite willing to equate periodic election theater with democracy itself, regardless of whether those theatics actually result in any true representation of their governance wants and wishes. Foreigners upon whom the same theatrical "freedom and democracy" is imposed by force of imperial arms seem somewhat less convinced. Recalcitrant ingrates!
Do you think that the,"Not only No, but Hell No" GOP had anything to do with it?
Kuttner sez: " I asked (Barney) Frank point blank why Dodd would want such a deal, and he said--on the record--'I have no idea ...'"
***
I, too, have "no idea" whether the lame-duck Dodd is lining up a seven-figure deal as a 'consultant' or 'advisor' or 'associate' in the bankster underworld when he steps down this autumn.
Oh yes, more incremental reform. Baby steps. While Congress works out a bipartisan consensus on the precise arrangement of the deck chairs the corporate class is already filling the liferafts with all the cash they can carry. Don't worry, they'll save a little room for their favorite congressional toadies.
The Dominant Paradigm will play itself out. Thesis will meet Antithesis and the snake will eat its own tail.
Will humanity wake up in time to wrest control from the elites before it's too late? Don't look to the "progressives" or the "liberals" on Huffpost to lead the way; they're still enjoying cocktails and dancing down in the Ballroom.
Cheers
Let's face it, the President is a 'half-a-loaf" kind of guy. But he does accumulate. My sister always advised against that "hop to the top". "Slow and easy" might prove best in the long run.
Ready to hurl, read this palp:
"My sources tell me that one key Democrat, Treasury Secretary Tim Geithner, is actually somewhat more pro-banker than moderate and heartland senate Republicans when it comes to derivatives reform."
Reader laughter should follow the urge to vomit. Besides the fact that he's a Goldman crony with a Golden Parachute, here's Robert Reich:
"Much of what Ben Bernanke and Tim Geithner did (when Geithner was at the New York Fed) in 2008 was presumably necessary. But the public has no way of knowing. The public doesn’t even know who else the Fed has bailed out, or what entities it will bail out in the future. All we know is the Fed secretly bailed out Bear Stearns and AIG and thereby subjected taxpayers to risks that remain even today, without informing the public. That’s not a record on which to build public trust."
L. Randall Wray is a Professor of Economics at the University of Missouri-Kansas City:
"Just when you thought that nothing could stink more than Timothy Geithner’s handling of the AIG bailout, a new report details how Geithner’s New York Fed allowed Lehman Brothers to use an accounting gimmick to hide debt. The report, which runs to 2200 pages, was released by Anton Valukas, the court-appointed examiner. It actually makes the AIG bailout look tame by comparison. It is now crystal clear why Geithner’s Treasury as well as Bernanke’s Fed refuse to allow any light to shine on the massive cover-up underway."
Thank God for Bob Kuttner, he is the one doing God's work (and not the folks at Goldman-Sachs).
But we're up against a monster, Bob, in that there seems to be two seemingly intractable problems involved in solving our economic woes:
First. Making money the derivatives/gambling casino way is easy money--much easier than the Henry Ford way of large plants, massive work force, harnessing of natural resources --iron, coal, rubber. Currently, nearly half of corporate profits are made in the financial sector. The money men of today sit at computers and make millions betting on the price of oil futures, the housing market and even how long your mother-in-law might live. They are not going to be later day Henry Fords.
Secondly, Wall Street owns the government. If need be, banking billionaires can run circles around a $400,000 a year president and the millionaire senators.
So, our bankers are addicted to easy money and they run the show. Now what? Like other addicted to easy money former financial powers --the Dutch, Spain and England--we're heading for tier two status. Which might not be so bad. It will give us a chance to become a kinder, gentler nation, one that takes care of its own, rather than trying to stamp out "evil" in the world.
Great example. At one point, no one could hold a candle in Michigan to the corruption of Henry Ford. Ford went from being the most enlightened and generous employer (compared to other exploiters) paying his employees just enough to buy one of his cars. Henry Ford did that without even a union pressuring him, or even existing, or any strike happening. Ford simply believed that such an action would make his employees very happy, loyal, and more productive. Other industrialists believed that Ford was insane and destroying the industry.
As Ford's profits soared in the following twenty years, he changed into a hateful union-buster who hired thugs and goons to beat up and shoot strikers and union organizers. What a guy!
I suppose there is a parallel here to Goldman Sachs; in that they are sophisticated enough to inflict enormous damage without actually caving someone's head in. Information technology at Ford was more of the pencil/paper variety.
Of course Geithner is pro bank. He helped craft some those derivitives. When you appoint a teen-ager as Treasury Secretary, there are bound to be problems.
There has been a populist movement to oust Geithner since he was appointed. If Obama had even a smidgen of integrity, he'd have asked for his resignation a long time ago.
Will the Democrats cave? Is the Pope Catholic?
Cadawa,
Thank you.
Chelsea
This attempt at "reform" is another round of political kabuki for liberals who refuse to admit that we don't have an opposition party. If we had more than one party, there wouldn't be a moment's hesitation to make each corporate water-carrier filibuster for 20 hours (I'd pay to see Mitch McConnell's pasty white carcass toe the line at 3AM)...but that's a red herring as well. All this sturm und drang over 60 vs. 59 votes is more theater, as there are enough tools to make unwise congressional loudmouths very sorry for their actions.
In the absence of opposition and clarity, where does that leave us? In the Soviet Union, circa 1989. Put on your crash helmets, America. The fun 'n' chaos hasn't yet started. It will make W's eight years look like the New Deal.
Cheers.
When, oh when, is President Obama going to wake up, smell the coffee and FIRE Timothy Geithner? He is a smart man who comes across as defensive, inarticulate and frightened--and we know his sympathies are with the big banks! LONG PAST TIME FOR TIM TO GO!!!
Do you really think Geithner is THE problem?
Geithner is just one of the nasty side effects of the Obama drug.
And Obama's sympathies are with whom? Sorry Chuck, but Freddie is right about voting out Obama.
More Kabuki theatre..........
Since Obama does not have the heart or the willingness to fight for the Working Classes, on this Banking Bill, a movement must be started immediatley to remove him from a second term. Like the damage Bill Clinton did with Deregulation and Nafta,
it proves to us that they are "On the job Trainees" for the office of the Presidency, and we must act before they cause any more damage to the country.
Another voice from a tea bag partier.
What we never hear and what Congress refuses to acknowledge is that they aided and abetted the Wall Street banksters by repealing the Glass-Steagall Act. If they hadn't done that, we wouldn't be bailing out too-big-to-fail.
Like most people, I didn't know anything about the banking industry a couple years ago. However, it seems to be one topic we have all (right, left, and bottom) gotten up to speed on. Can we come up with a list of consensus demands? My top ten:
1. Break 'em up. Limits as a percent of GDP (2%) AND maximum share of savings (5%). Re-institute G-S (either bank or brokerage, not both).
2. Limit leverage. 12-1 or so.
3. Establish a consumer protection agency independent of the Fed and with teeth. Hire Elizabeth Warren to head (or for whatever job she wants, see #6).
4. Audit the Fed. If the audit suggests it, take it over. It is our money after all. We deserve sunshine on our own finances.
5. End the ongoing bailouts!!! This includes the front door bailouts with newly minted Fed money and the backdoor bailouts through Fanny and Freddie.
6. Fire Summers, Geithner, Bernanke, Emanuel, and anyone else on the government payroll dirty with Gold In Sacks filth. Replace with Prins (even though she did work for same), Born, etc.
7. Pardon Brad Birkenfeld. Pay him what he's owed from the taxes collected. Make a big deal out of it. Improve protections for whistle blowers.
8. Prosecute all banks to the full extent of the law. Do not pass Go, do not collect 20 trillion dollars.
9. Pass a financial transaction tax. One half of one percent. Will fund new agency (see #3) and then some.
10. 100% windfall profits tax on all salary and bonuses over $500,000 for anyone working at a bank that has received any type of bailout. This needs to happen soon.