Trapped: Is It Too Little, Too Late for Real Financial Reform?

Progress is, as we have seen, "stalled" in Haiti six months after an
earthquake that struck with the impact of a nuclear bomb. A country, we
are told, that is trapped in its past actually may exemplify a more
frightening future - a world whose institutions, agencies, governments
and corporations are sinking in a swamp of their own making, unable and
perhaps unwilling to repair catastrophic crises that are morphing into
each other,

In Haiti, only 2% of pledged aid arrived, a sign not only of
ineptitude and hypocrisy, but of deeper financial shortages in many
countries that are cutting back across the world. Haitians are living
and dying in filth with the real threat of coming hurricanes poised to
wash them all away, an outcome that some say is what the elite there
wants to do with the country's growing impoverished population. (A
storm devastated one "model" tent encampment yesterday.)

The rubble there is a metaphor for all conflicts that can't be
resolved, and all the problems that are not being addressed. Call it
apocalypse now but don't call it over. Haiti is not the only country
with tent cities. They have popped up in California and some are now
called "Obamavilles."

Here in the US, the financial "reform" bill is expected to pass now
that Massachusetts Republican Scott Brown has signed on. His vote is
probably the most expensive in history costing some $19 billion in lost
revenues that the Congress had hoped to pass on to the banks to pay for
the calamity they caused. Democrats had to drop the provision to get
his vote.

The Boston Globe reported on how financial interests prevailed:

"He signed onto the legislation only after winning several changes
that benefited Boston-based State Street Corp. and Springfield-based
MassMutual. He also used his leverage as a key swing vote to force top
House and Senate lawmakers, including House Financial Services
Committee chairman Barney Frank, to change how the bill is financed.

Although Democrats embraced Brown's support of the financial
regulation bill, they have so far not been able to win his support on
legislation that would extend unemployment checks for millions of
Americans and hundreds of thousands of Massachusetts residents."

Even as the vote is due this week, the financial lobby still has its
scalpels out weakening it further. Yves Smith of the excellent Naked
Capitalism blog notes, "When I was in the UK earlier this year, I saw a
very senior financial regulator speak. In the Q&A session, someone
asked him to comment on US financial reform. His reply was tantamount
to "Wake me when it's over," and it was clear his expectations were low.

"One source of frustration is that the legislative battle over
reform, which went through elephantine labor to produce, at best, a
mouse, has gotten most of the media attention, while important fights
on the regulatory front are largely hidden from view." She is referring
to the way the industry is hard at work softening the impact of
expected rules and regulations to be adopted by the regulatory agencies
the bill creates.

It was not reassuring to read that former Goldman Sachs CEO Hank
Paulson, Bush's Treasury Secretary and bailout engineer, likes the bill
that President Obama who backed his TARP initiative, is now pushing for
passage.

This will take time. Crains New York points out that the
implementation of the bill will be stalled until "federal authorities
complete an estimated 150 studies required by the reform bill and draft
what Barclays Capital estimates could be 20,000 pages of new rules,
with 13 new agencies to be created. This is all expected to take at
least two years.''

So much for the urgency we keep hearing about on why we need to rush
to re-regulate Wall Street lest a new crash occur, one that seems
likelier by the day. The "rubble" from the last crash has still not
been moved even as corporate profits are up and as Bob Herbert writes
in the New York Times, Wall Street "parties on."

Financial reformers like Mary Bottari of Banksters USA is happy with
the provision for a new consumer protection agency, explaining, "The
Bureau has independent regulatory and enforcement authority over a wide
array of consumer financial products such as credit cards, mortgages,
and even payday loans. Unfortunately, auto dealers escaped its
jurisdiction and the institution will be housed at the Federal Reserve."

You have to be worried about that connection to the Fed not only
because it failed to protect consumers when they needed that protection
the most, Fed head Bernanke has been reduced to begging banks to start
lending again to small business. The fact that they aren't suggests
that all the noise about easing the credit crunch has been bogus. The
banksters continue to do what's in their interest, the public interest
be dammed. In Europe, new rules limit banker bonuses; here, they are
free to continue to be obscenely rewarded.

At the same time, international summits have failed miserably to
come with an agreement on any plan, just as there is still no plan to
rebuild Haiti. As Larry Chin writes,

"Having seen the results that the G20 achieved prior to the Toronto
Summit, in the height of the global crisis (from late 2008 to mid
2009), do we need to be alarmed that in Toronto, the basic outcome was
that the G20 members 'agreed to disagree' on bank taxes and on exit
strategies from their domestic fiscal stimulus packages?"

Now the IMF is pressuring the US not about financial reform but cutting social security. Notes economist Dean Baker:

"The IMF both bears much of the blame for the imbalances in the
world economy and then for failing to clearly sound the alarms about
the dangers of the bubble. While the IMF has no problem warning about
retired workers getting too much in Social Security benefits, it
apparently could not find its voice when the issue was the junk
securities from Goldman Sachs or Citigroup that helped to fuel the
housing bubble."

It's hard to believe that after all the speechifying and anguish,
proposed "reforms" will not change much. The only hope is on two other
fronts: the courts and the streets.

On the legal front, class action lawsuits are being filed by
investors and homeowners. (We need suits like that by citizens.) Some
federal agencies are sending out subpoenas to issuers of
mortgage-backed securities and other entities in an effort to probe
whether the firms misled Fannie Mae and Freddie Mac, two of the biggest
investors in privately issued bonds.

Others like ripped off customers at the Washington Mutual Bank
(WaMu) have set up websites to organize and press for compensation.
Groups like The Center for Responsible Lending are going after
money-grubbing payday lenders while The Neighborhood Assistance
Corporation of America (NACA) is returning to Washington to serve
homeowners threatened with foreclosure.

On the activist front, a new effort called ONE NATION hopes to
organize a coalition to fight for jobs. The UAW is joining up with
Jesse Jackson's Rainbow Push to stage a march for jobs and economic
reconstruction in Detroit on August 28, the anniversary of the big l963
March on Washington.

A New Way Forward, the group pushing for real financial reform will
be launching a new website to help us keep track of what's happening on
the financial front. They also issued an action alert urging pressure
on Bank of America to speak out on extending benefits to the
unemployed. They want the bank to lean on John McCain, a politician they
helped fund.

Jobs With Justice sums up the challenge, "Let's be real: The
Dodd-Frank bill, already passed by the US House, is not the end of the
struggle. The big banks are still too big. They still need to be broken
up and reined in further, and Dodd-Frank will not end the foreclosure
crisis nor put workers and communities in charge of corporate/bank
decisions. The struggle between people and Wall Street must continue."