John Reed Support A New Glass-Steagall Act

Former Citigroup CEO John Reed told the Financial Times that the repeal of Glass-Steagall helped caused the crash of 2008. Reed said high risk investments puts the commercial divisions of major banks at risk.

“As trading becomes more important then it becomes harder and harder to keep those cultures separated. And it began to work into the risk-taking culture as well. [In the past] risk officers would say to someone who wanted to make a loan: ‘I don’t like this credit. We aren’t going to do it. Stop. Period.’”

“But now they would recognise that if a certain transaction didn’t go through, his colleague wasn’t going to be paid that year. It became very difficult to say: ‘Sorry. Don’t do it.’ Your colleague was being compensated for doing transactions, not just being at work. It became infectious.”

Reed doesn't buy the arguments anti-regulation fundamentalists. Reed thinks a new Glass-Steagall Act would not overburden banks.

“I think it could absolutely be done. The finance industry is amazingly flexible. We don’t have big, fixed capital bases. It’s not like we have factories that need to be re-engineered.”

Reed told Bill Moyers that he is amazed Congress still listens to the too big to fail banks.

“I’m quite surprised the political establishment would listen to groups that have been so discredited,” Reed tells Moyers. “It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did… And then the whole system came down.”

Congress and the Obama administration listen to the big banks because of campaign contributions. Most members of Congress are economic illiterates. They couldn't tell you that the Glass-Steagall Act separated commercial and investment banks.

Moyer's interview with John Reed.

Elizabeth Warren Destroys CNBC

CNBC loves backing Wall Street and the big banks. People are becoming aware of this and CNBC's ratings are tanking.

The Squawk Box attempted to tear Elizabeth Warren for proposing to bring back the Glass-Steagall Act. That would mean the commercial and investment banks would be separated. Obviously, the Street does not like this and CNBC was going to defend the status quo. The Squawk Box was at a loss when Warren pointed out there was no major financial the crash when the Glass-Steagall Act was in place. Charles P. Pierce of Esquire summed it up best.

My god, this is a kicking of the ass. Sooner or later, they're going to realize that you really do have to bring the A-game on this stuff to the Senior Senator, or she is going to smile her Okie smile and the hook is going to come off the jab and, as the great Jimmy Breslin once put it, you will leave the ring in a blanket. She does mean business. Someone should start to believe that.

To Big to Prosecute is A Myth

Attorney General Eric Holder made news earlier this year when he told the Senate Judiciary Committee that the big banks are too big too to prosecute.

I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy, and I think that is a function of the fact that some of these institutions have become too large.

The recent House financial services committee hearing revealed that the Department of Justice based this assumption on no empirical evidence.

The U.S. Department of Justice appears to have neither conducted nor received any analyses that would show whether criminal charges against large financial institutions would harm the economy, potentially undermining a key DOJ argument for why the world’s biggest banks have escaped indictment.

Testimony by a top Justice official and fresh documents made public on Wednesday during a House financial services committee hearing revealed that financial regulators and the Treasury Department did not provide warnings to prosecutors weighing the economic consequences or fallout in the financial system of criminal indictments against large financial groups. DOJ also could find no records that would substantiate its previous claims that it weighed potentially negative economic or financial impacts when considering criminal charges, said Mythili Raman, acting assistant attorney general for the criminal division.

This is video Sen. Elizabeth Warren during her first Banking Committee hearing. Warren questioned financial regulators on when was the last time they took a major bank to trial. The answer they all the regulators gave is none. This was prior to the recent Senate Judiciary Committee hearing. Warren serves on the

The Obama administration has no interest in prosecuting major financial institutions. The Senate Judiciary Committee reveals that the Justice Department never had studies conducted on what the economic impact would be if major financial institutions were prosecuted. Holder never had the studies done because he never wanted to run the risk of an answer that would be unacceptable to the White House.

Team Obama Opposed Elizabeth Warren Nomination

I like to see how Obamabots frame this. Huffington Post reporter
Shahien Nasiripour cites sources that the Obama administration never had any intention of nominating Elizabeth Warren for the Bureau of Consumer Financial Protection. In 2010, Sen. Bernie Sanders asked President Barack Obama if would nominate Warren.

Last summer, during a White House meeting with first-term Senate Democrats, Sen. Bernie Sanders, an independent from Vermont, asked Obama whether he'd nominate Warren for the role.

Obama held up a half-full glass of water and told him: "That's the problem with you progressives. You see this as half-empty."

Obama's tone towards Sanders makes it obvious that the president does not view himself as a progressive. Wall Street got a bailout. Americans are being foreclosed upon through illegal means. The President campaigned on change and gets pissed when people call him out for protecting the dysfunctional financial system.

Rahm Emanuel made it clear that he did not want Warren confirmed.

Last July, the night before a Senate vote on the administration-backed bill to reform financial regulation, Sen. Ben Nelson (D-Neb.) told reporters that he was still unsure how he’d vote and was concerned about who might be named to run the soon-to-be-created consumer unit.

Hearing the news, Emanuel took the temperature of the administration on Warren's nomination and reported back to Senate Majority Leader Harry Reid that it was cool, according to Senate sources with knowledge of the call.

“We don’t like her either,” the then-White House chief of staff told the Nevada Democrat.

Ben Nelson's lack of support was unsurprising. Chris Dodd. Part of Dodd's problem was Warren publicly pushed back against Dodd to not soften the financial reform bill. Dodd was obsessed with getting bipartisan support for a financial reform bill that no Republican had any intention of voting for. What is it about Beltway Democrats that are obsessed with bipartisanship?

Treasury Sec. Tim Geithner is pro-corporatist. It wasn't surprising that he didn't support Warren's nomination. Warren also took Geithner to task for not knowing where money for credit default swaps went. AIG sold swaps and then couldn't cover the bets when the market crashed.

Jamie Dimon Made $21 Million Last Year

The Financial Times reports that American and European banking CEO pay went up by 36 percent in 2010. Jamie Dimon, JPMorgan Chase CEO, made $21 million in 2010.

JPMorgan Chase had to pay a $722 million fine to the SEC for attempting to brides for bonds scandal. JPMorgan Chase tried to bride politicians in Jefferson County, Alabama. JPMorgan Chase also hired inexperienced young people to deal with mortgages. The young workers were labeled the "Burger King kids."

And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids.” In many cases, the banks outsourced their foreclosure operations to law firms like that of David J. Stern, of Florida, which served clients like Citigroup, GMAC and others. Mr. Stern hired outsourcing firms in Guam and the Philippines to help.

The law firm of David J. Stern filed false foreclosure claims. The actual David J. Stern is under investigation and is a rather mysterious man.

Ask yourself if Jamie Dimon skills as a CEO is worthy of $21 million.

Rahm Emanuel: the Poster Child for Neoliberalism

Dan Froomkin tears Rahm Emanuel a new asshole for his horrible policy advice and perpetual leaking to the Beltway media.

The Rahm Emanuel that Obama hired is the poster child for the timid, pseudo-pragmatism that is inimical to the idealistic Obama agenda so many excited voters responded to last November. And it's a pragmatism that is absolutely killing the Democratic Party in the long run, because American voters have an intrinsic distrust of politicians they see as tacking with the polls or shying away from a fight. This if nothing else is the lesson of two George W. Bush presidencies: American voters have a profoundly soft spot for people with clear, strongly-held principles, almost regardless of what those principles are.

Emanuel is a Bush Democrat - but not in that he has learned the lesson about the value of holding firmly to core values. He is a Bush Democrat in that he has allowed Republicans to traumatize him into submission. Emanuel operates on a battlefield as defined by Republicans, where the terrain is littered with the specter of imaginary but profoundly terrifying GOP attack ads. His reflexive approach is the strategic retreat. Most obviously in the current debate about health care, he has empowered the Democratic and centrist Republican obstructionists by validating their fear that come campaign time, they will be portrayed as radical -- even when they are supporting measures such as the public insurance option that have public support among a super-majority of voters.

Emanuel isn't a Bush Democrat. Emanuel is a neoliberal like Harold Ford, Evan Bayh, and Ed Rendell. The neoliberals call themselves New Democrats these days. The neoliberal position has been support for Wall Street and less regulations. The most successful neoliberal was Bill Clinton.

The former President signed the repeal of the Glass–Steagall Act. The repealed law made it illegal for investment banks and depository banks to be one financial entity. Sen. John McCain supported making the Glass–Steagall Act law again. President Barack Obama would not back McCain's proposal. John McCain was actually to the Left of Barack Obama on financial reform. Obama's stance on financial reform should not be surprising.

Obama: "I am a New Democrat."

Quote of the Day

"The leader of the Republicans in the House said that financial reform was like using a nuclear weapon to target an ant. ... That [ant] is the same financial crisis that led to the loss of nearly 8 million jobs—same crisis that cost people their homes, their life savings."

President Barack Obama, on House Minority leader John Boehner.

Rep. Boehner has an amazing talent for inserting his foot in his mouth.

Scott Brown Protects the Big Banks

Freshman Sen. Scott Brown refuses to vote for a tax on banks and hedge funds with over $50 billion in assets. The $19 billion would be used for emergency bailout money fund. That way taxpayers would not have to pay relief money to troubled banks. Brown says the emergency fund can be paid for by cuts to the budget. Brown doesn't say what should be cut or where we would find this money during a federal deficit. Democrats caved in and gave Brown what he wanted.

Small banks will see an increase in FDIC fees. The big banks and hedge funds will pay no new taxes. If the big banks and hedge funds get into trouble where will bailout money come from? If you guessed the taxpayer then you are correct. Brown didn't want to see the tax on the big banks and hedge funds because he didn't want these institutions to lose assets. Unfortunately, Brown feels taxpayers and small banks should pay for the mistakes of the major financial institutions. So much for the assets of hard working Americans.

McConnell Caves on Financial Reform

Senate Minority Leader Mitch McConnell's strategy to not allow financial reform to be debated on the floor has proven to be a disaster. McConnell has finally caved.

A press release from McConnell's office:

“I appreciate the efforts of Sen. Shelby to work toward a bipartisan solution on an issue that will have an impact on nearly every American. The time afforded by my Republican colleagues and Sen. Ben Nelson was instrumental in gaining assurances from the Chairman that changes will be made to end taxpayer bailouts and the dangerous notion that certain financial institutions are too big to fail.

“Unfortunately, Sen. Shelby believes that continued talks on a number of provisions affecting Main Street will not bring the negotiators any closer to an agreement. Now that those bipartisan negotiations have ended, it is my hope that the majority’s avowed interest in improving this legislation on the Senate floor is genuine and the partisan gamesmanship is over. I remain deeply troubled by a number of provisions in this bill and will work aggressively in the days ahead to ensure that the majority does not use our mutual interest in regulating Wall Street to extend the federal government’s unwanted hand into Main Street.”

Greg Sargent spoke with a Republican Senate aide. Sargent reports Sen. Richard Shelby's strategy was to stall and get more concessions from the Democrats. The Democrats wouldn't give more concessions. Senate Democrats have forced Republicans to repeatedly vote against allowing a debate on the floor. Some Senate Republicans did not want to back McConnell on the filibuster. The short answer is McConnell could not keep his caucus together.

The political calculus for blocking financial reform is asinine. However, seen through McConnell's eyes it makes perfect sense. McConnell's seat is in a strongly red state. (However, McConnell faired less well than presidential candidate John McCain.) McConnell and Sen. John Cornyn made a deal with Wall Street executives to block financial reform.

From Fox Business:

During the meetings, both predicted that the Republicans will likely add at least six senate seats to their current total of 41, meaning they would come up just shy of control of the Senate. They predicted victories in Nevada, unseating the unpopular Senator Majority Leader Harry Reid, and said Republican Pat Toomey has a great shot at unseating Republican-turned-Democrat Arlen Specter in Pennsylvania.

They also said that they have a shot at taking control of the House by adding 40 additional seats to their current total. In New York State alone, the senators predicted a six-seat pickup.

But in order to assure those gains, and add even more, McConnell and Cornyn made it clear they need Wall Street's help. “There was no arm twisting but they did say that we should feel uncomfortable living in any country where one party has unfettered ability to pass anything including health care and anything else President Obama dreams up,” said another executive who was present.

McConnell does not care about his constituents. McConnell wants lobbying money and to be Majority Leader. His misreading of the public's contempt of Wall Street is proof of that.