The Wonk Roomreports that just as it looked like Senator Blanche Lincoln’s (D-AR) pre-primary Hail Mary pass, a proposal that might actually put some real teeth in derivatives reform, was gaining traction, the New Democratic Coalition has stepped in to put the kibosh on it. The Coalition, which counts our Russ Carnahan (D-03) as a member, has prepared a letter asking that the Lincoln proposal, known as Section 716, be removed and replaced by the much weaker derivatives proposals in the House legislation.
According to Gary Gensler, Chairman of the Futures Trading Commission, a kind of de facto derivatives overseer, the House bill :
… may be read to provide for a more liberal exemption for entities using derivatives to hedge commercial, balance sheet or operational risk, … . Every exemption for financial companies creates a link in the chain between a dealer’s failure and a taxpayer bailout. Every slice of the financial system that we cut out through an exemption could allow one bank’s failure to spread like fire throughout the economy. It is essential that financial reform does not allow loopholes that leave interconnectedness in the system. Such exemptions will only come back to haunt us in the future.
Sen. Blanche Lincoln’s derivatives proposal, usually referred to as the divestiture or “push down” requirement, is the only worthwhile proposal in the Senate financial regulation bill. The rest of the derivatives regulation component of both the House and Senate bills is meaningless filler.
You get the idea: Lincoln’s Section 716 is the real thing; the House bill is window dressing. Even Barney Frank (D-MA), Chairman of the House Financial Services Committee, admits that the Lincoln proposal would do a better job of regulating derivatives.
Politico asserts that the force behind the New Democratic Coalition letter is Rep. Michael McMahon (D-NY), known for having, as the Wonk Room’s Pat Garofalo puts it:
…argued for the extension of the Bush tax cuts for the wealthy on the grounds that people making $250,000 per year are “barely making ends meet.
So does Russ Carnahan really support McMahon’s position on derivatives? And if he does, why?
An even bigger question is why do I have to keep writing about actual Democrats, and my Democrats from Missouri at that, engaging in maneuvers that we expect from Republicans? Why do the guys who promise to support the middle and working classes put themselves out so readily to defend the interests of the big guys, in this case the big banks that, thanks to the era of lax regulation ushered in by the GOP, have dumped us into the biggest financial crisis since the Great Depression?
What do Claire McCaskill and Kit Bond have in common? They were both part of the 61 member majority in the Senate that voted down the SAFE Banking Act (S.AMDT. 3733). This proposed amendment to Senator Dodd’s financial regulatory legislation (S. 3217) was intended to guarantee that there would be no more too-big-to-fail bank catastrophes in our future – a good thing, right?
… the largest banks three years to transform themselves into leaner, more sustainable institutions – while maximizing shareholder value and without sacrificing any of the economies of scale. Importantly, a hard cap will also prevent new financial services firms from growing too large in the future.
Michael Tomasky notes that this amendment “was considered by liberal activists and economists to be the element that would add real teeth” to Dodd’s reform package.
I will be very interested to learn just why McCaskill joined with 27 Senate Democrats and all but three Republicans to defeat this legislation. Wasn’t it Claire “Carry Nation” McCaskill who postured for the cameras just a week or so ago, waving a metaphorical hatchet at the malefactors who head up the too-big-to-fail Goldman Sachs? If the financiers’ bad behavior gets her so riled up, why did she vote against making it just that much more difficult for these greedy clowns and the rest of their wall street pals to make our economy go crash again? How can she scold the big bankers and financiers and then turn around and help them to a great big victory?
Maybe McCaskill had good reasons – but I want to hear something other than hemming, hawing and the usual temporizing before I am convinced. Until then, I am afraid that Tomasky might be correct about what the behavior of timid centrists like McCaskill means:
This vote should demonstrate to liberals that the conditions for rapid change just don’t exist in this country and that part of the task is to create those conditions
“I am deeply disappointed that Senate Republicans voted in a block against allowing a public debate on Wall Street reform to begin. Some of these Senators may believe that this obstruction is a good political strategy, and others may see delay as an opportunity to take this debate behind closed doors, where financial industry lobbyists can water down reform or kill it altogether. But the American people can’t afford that. A lack of consumer protections and a lack of accountability on Wall Street nearly brought our economy to its knees, and helped cause the pain that has left millions of Americans without jobs and without homes. The reform that both parties have been working on for a year would prevent a crisis like this from happening again, and I urge the Senate to get back to work and put the interests of the country ahead of party.”
….What McConnell did not mention was that, last week, he traveled alongside National Republican Senatorial Committee chairman Sen. John Cornyn (TX) to New York City for a private meeting with elite hedge fund managers and other Wall Street executives. The purpose of the meeting between the top Republicans and the financial executives was to enlist “Wall Street’s help” in funding Republican campaigns in the fall and killing any tough financial reform…
“I’ve thrown my cap over the wall for Roy,” Pawlenty told the Post-Dispatch in an interview Thursday. (…)
Pawlenty, the keynote speaker at tonight’s session, said he will talk about getting the Republican Party back to its roots. He criticized his party’s failures in the last couple of election cycles, mentioning that the party “blew it” and got fired for not living up to its principles.
“When we talk about being the party of personal and financial responsibility, then we have to do that,” he said.
“Big Spender Congressman Blunt was part of the Congressional leadership team that turned a $128 billion surplus into a $1.2 trillion deficit and quadrupled the number of earmarks from 2,838 in 1999 to nearly 12,000 in 2008.”
But Pawlenty doesn’t sweat those details:
“I don’t think it should disqualify somebody for service, just because they served in the past,” Pawlenty said of Blunt.
But…but…Roy Blunt didn’t just “serve” in the past. He was part of the leadership that “blew it”.
Pawlenty would shake his head sadly if he heard that remark and wish that he really could live in 1984, where Big Brother would have me thrown in a cell with Winston Smith for such thoughtcrime.
Despite Pawlenty’s proficiency at doublethink, Blunt takes no back seat to his fellow Republican when it comes to ignoring the obvious. Roy claims to represent average Missourians. This, despite the fact that he accepted more funds from big banks in the last two years than any other member of Congress. Missouri Pro-Vote’s press release last Friday summed it up:
[ University City , MO ] – Local advocates of financial reform will construct and investigate a mock crime scene outside the University City Commerce Bank this Friday, February 26th in a demonstration to call out Missouri Congressman Roy Blunt and Commerce Bank for their complicity in the crime of killing consumer protection legislation that would benefit millions of Missourians. This action is being performed to encourage Congressman Blunt to stop representing the interests of big banking and financial institutions, and to start protecting Missouri ‘s taxpayers and small business owners from the greedy and reckless behavior of “Too-Big-To-Fail” financial institutions.
The American Banking Association, of which Commerce Bank is a member, along with several other big banking advocates and lobbyists have donated over $170,000 to Congressman Blunt in the last two years alone, making him the top receiver of banking industry money in all of Congress. In 2009, Congressman Blunt voted to block financial reform measures by voting against the Consumer Protection Act. The ABA, Commerce Bank and Roy Blunt are complicit in the killing of financial and banking reforms Missourians want and deserve.
Yeah, well, according to Blunt, those Pro-Vote heretics deserve to join me and Winston Smith in a crowded cell.
Go on. Tell me you know somebody who isn’t pissed at the big banks. Even many of the tea partyers hate them. It doesn’t matter which side of the spectrum people are on; they’d like to see those bloodsuckers at Wells Fargo and Bank of America hung naked by their toenails over a bonfire.
Unfortunately, the financial environment that bred the current crisis was also bipartisan. Oh sure, we could blame Republicans Phil Gramm, Texas, and Jim Leach, Iowa, for introducing in 1999 the bill that repealed the Glass Steagall Act of 1933, an act which kept speculation tamped down. But those two Republicans only led the charge. In their wake was a 90-8 vote in the Senate, a 362-57 vote in the House, and a signature–as if it were needed–by Bill Clinton.
Not until January of 2010, a year and a half after the global economy wobbled on the edge of a chasm, only to be pulled back from the brink by almost a trillion bucks loaned to the very villains who caused the wipe-out, did Obama, with Paul Volcker at his side, propose reinstating many of the Glass-Steagall regulations. What took you so long?! And anyway, it’s not as if a proposal strong enough to do the job will survive the butchering, compromising, and selling out that will go on during markup. If such a miracle did occur, Congress would freeze in a bi-partisan iceberg (real Dems vs. Rs and Blue Dogs) when it came time to vote on actual reform.
Part of the reason adequate reform isn’t likely to pass is the banks themselves. They used taxpayer money from the bailouts to lobby against reform–and, they know how to spread the moolah to the right campaign coffers. Meanwhile, in 2009 the top five banks made their highest profits ever. And they paid bonuses amounting to $140 billion–about the amount of money it would take to cover the shortfalls in fifty states from the Great Recession that the banks caused.
Damn straight we’re pissed.
The banks “have their boot on the neck of the American Dream.” It’s time to take it to the streets. At least that’s part of the strategy that National People’s Action has mapped out for pressuring the banks to stop ripping people off and start lending to small businesses and investing in communities. Last October, NPA led a coalition of groups that turned out thousands of protesters at the annual American Bankers Association convention in Chicago. They called it Showdown in Chicago, and now every time a TV station wants to illustrate the anger of the populace at the banks, they dredge some video of those protests out of the archives.
It’s time to give MSNBC and CNN new footage. NPA plans to double down, triple down, quadruple down on the protests. There will be regional demonstrations in late April through mid-May. The plan is to focus on the two worst offenders and to turn the clubby atmosphere of their annual stockholders’ meetings into circuses. All the members of last October’s coalition–SEIU, for example, and the AFL/CIO–are itching to get going. Each march will involve at least a thousand, maybe far more–a flood of loud, angry and yet articulate protesters.
The NPA strategy is two pronged.
First, progressives can accomplish a lot by focusing their energy on regulators rather than on legislators: Ben Bernanke at the Fed, Sheila Bair at the FDIC, and John C. Dugan at the OCC (Office of the Comptroller of the Currency). In Mexico, MO, Jordan Estevao, an NPA organizer, recently explained the strategy to activists at GRO, one of the members of the Showdown in Chicago coalition.
He asked how many of us had been to Bernanke’s house to discuss the banking problem. Lotsa laughter. But, referring to the protests against Bernanke’s nomination, Estevao said that “because we ‘went to his house,’ he’s now … afraid of us.” NPA is scheduled to meet with Bernanke on March 9th to discuss the actions they feel the Fed needs to be taking. For example, NPA will urge Bernanke to see that the Community Reinvestment Act is enforced.
Sheila Bair at the FDIC is even more on board. She showed that she supports NPA’s goals when she spoke at the Showdown in Chicago in support of a Consumer Financial Protection Agency:
“In looking at indecipherable credit card statements and documents, mortgages you can’t understand and APRs from payday loans and high overdraft fees, I don’t see how anyone can say we’ve done a good job protecting consumers from financial services.”
And here’s a sentiment to endear her to us: “‘It’s time to put an end to the ‘too big to fail’ doctrine… Yes, no more bailouts, no more bailouts!'”
That leaves John C. Dugan at the OCC. Estevao shrugged and opined:
“We’ve met with him before, but we don’t know if he’s quite there yet. What that means is that, with the first two, we can negotiate. With the third one, we can act, we can do action. It’s how, you know, how do we bring people to the negotiating table? We hit ’em. And when we hit him, it sends a signal to the other two that they should stay at the table. And then eventually this guy will crack when he’s the odd one out that isn’t working with the community. And, you know, these two [Bernanke and Bair] both have something to protect, they both have something to lose: both of them are under, you know, scrutiny, and are facing the prospect of their powers being rolled back. So we can weigh in on either side of that fight, either help those changes happen or stop them from happening.”
On the Big Banks, it’s ACTION, ACTION, ACTION.
And that’s the second prong of the plan. The coalition will focus on Bank of America and Wells Fargo. Not that it won’t go after, say, Chase Manhattan if its CEO gets an outrageous pay package, but the main idea is to make the other big banks sweat that they could be next when they see how NPA keeps hammering the two worst.
As for what makes Bank of America and Wells Fargo the worst, B of A is the biggest bank and it has the most foreclosures. Wells Fargo has a lot of lawsuits against it for discriminatory practices in lending. The other factor that determined NPA to focus on these two entities is that they are accessible. Bank of America is in every area where NPA affiliates operate, and Wells Fargo is in most of them.
So protesters are going to shine a media glare on the annual stockholder meetings of these two banks on April 27th and 28th. Crowds of demonstrators will show up for the Wells Fargo meeting–Showdown in San Francisco–and for the Bank of America meeting–Showdown in Charlotte. GRO (Grass Roots Organizing) is considering organizing a Heartland Showdown in the Kansas City financial district. That one is still iffy. But there will be a Showdown on Wall Street in early May.
Estevao explained why such actions work:
“If we focus on these two and make them the bad guys of the financial collapse, and every time that we do a protest we’re naming them as the ones that collapsed our economy, eventually that’s gonna be bad for business. And, you know, we don’t even have to like really … they’ll start to lose a little bit of money, but what’s worse is that their stock prices will go down.
So when we were fighting Wal-Mart in Chicago, you know, we wanted them to pay a living wage and we wanted them to pay health insurance because they would have put a lot of other businesses out of business that were paying health insurance in Chicago. That’s the problem with them. And, so we introduced this ordinance that would force them to do those two things, to pay a living wage and pay health benefits. And, you know, at the same time all over the country a lot of other organizations were going after Wal-Mart too, particularly in urban areas. Wal-Mart’s expansion strategy right now, because they’re already all over the suburbs and rural areas … they’ve saturated that market, so they’re trying to get into the cities. And we were stopping them from getting into the city, and it was hurting their stock prices. Their worst nightmare is that a protest would actually start to hurt their stock prices.
We can totally do that with Bank of America and Wells if we’re relentless and if we do big enough … big enough actions that they get a media profile.”
Oh yeah? Like that skinny guy in blue jeans is seriously going to harass the suits at Wells Fargo? It can happen. This is the most unifying issue of our time. Like I said, you don’t know anybody that doesn’t hate the big banks. And if you get enough skinny guys in blue jeans together, suddenly Clark Kent is Superthrong. I own blue jeans. And if GRO gets that K.C. action off the ground, I’m buying an AMTRAC ticket out of St. Louis.
But Pawlenty doesn’t sweat those details: