Jul 192010
Elizabeth Warren
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There’s been much discussion of late regarding President Obama’s appointment to head the new Consumer Finance Protection Bureau (CFPB). It’s no secret that Tim Geithner has made it clear that he doesn’t want Warren to receive the appointment. So, everyone knows that the President will sign the finance “reform” bill into law sometime later this week, but as of right now, nobody knows who he will appoint to head the CFPB.

This appointment will be a watershed event for the Obama administration. President Obama has repeatedly chosen compromise over reform, even when there was nothing to gain from compromise. On the topic of Wall Street, it initially seemed that the President would fight for common Americans, but that hope was soon dashed. With the appointments of Tim Geithner and Larry Summers, it became difficult to see how a president who surrounded himself with Goldman insiders could actually have the people’s best interest at heart.

From the beginning of the effort to “reform” Wall Street, President Obama supported the formation of the CBPB. In the face of conservative attacks attempting to place blame for the subprime disaster on the average people who overleveraged themselves, Obama stood fast and promoted an agency that would prevent lenders from misleading and otherwise abusing unknowledgeable borrowers. But where President Obama has been stringent in his support for the CFPB, Elizabeth Warren is its intellectual mother.

Of course, it’s easy to see why Geithner doesn’t want Elizabeth Warren. First of all, they just didn’t get along very well as Warren routinely raked him over the coals regarding the TARP payout. But more importantly, the finance “reform” bill leaves its eventual effectiveness almost entirely in the hands of the regulators who will enforce it. That means that the strength of the CFPB will rest squarely in the hands of its chair. Geithner has thus far been able to avoid an audit of the Fed; the last thing he wants is a real regulator watching over its inner workings.

It’s also possible that Tim Geithner’s concerns don’t end with the mere presence of a regulator. John R. Talbot expressed the potential for deeper issues in a Huffington Post article this morning. According to Talbot, the plan proposed by Geithner and Summers to restore profitability to the banks requires that they slowly write off their bad debts instead of taking a major hit. This enables them to offset the losses with profits as they move forward over time. Talbot states that, “the trillions of dollars of underwater mortgages, CDO’s and worthless credit default swaps are still on the banks books.” He then suggests that Warren’s type of oversight may prove detrimental to the bank’s ability to “find increasing sources of profitability in their business segments to balance out their annual loan loss recognition from their existing bad loans.” Of course, the sources he’s referring to are new methods of extracting fees and other payments from small retail customers.

In the end, the decision belongs to President Obama. He has the choice to either renew the belief that he is the president of The People, or conversely, to remove all doubt that his loyalty is actually to Wall Street and big business. If he appoints Elizabeth Warren, he will send a message to all middle class Americans that somebody in Washington is looking out for our interests. Alternatively, he can again follow Geithner’s advice and prove for once and for all that he’s just another corporatist in Democrat’s clothing.

From my perspective, this is a litmus test for the President, and I don’t think I’m alone in that position. President Obama’s choice will finally reveal his true colors: American red, white and blue or Wall Street green.

If you want to help make sure Elizabeth Warren is appointed to head the new consumer finance protection agency, please take a minute and sign this online petition that will be presented to the President and then use the accompanying email opportunity to invite your friends to do the same.

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Jun 262010

The House and Senate have reached an agreement and we have a financial reform bill. That means we’ll see significant improvements over the status quo as it existed yesterday. It also means we still haven’t addressed the gravest risks to the economy. And for those of us who care about this country, it means that we still have work to do.

Richard (RJ) Eskow, Huffington Post

President of the United States Franklin D. Roo...
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I agree with the major premise of this article and support efforts to combat the Republican attempt to regain control. The conservatives have proven that they care nothing about the average American and will say and do anything to return to power.

That said, I think the article is a little disingenuous on multiple points. The first and most glaring is the comparison between Obama and FDR. It is true that FDR had an appreciation for fiscal conservatism, but he was also very bold in his positions to spend and promote the common person.

It was during his first 100 days that the New Deal was born. In his first inaugural address, FDR openly condemned the same caliber of criminals who Obama has brought into his inner circle:

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

And while FDR did balance the standard budget, he also created a second, “emergency” budget. It was through the emergency budget that funded the jobs programs that cut unemployment in half between the time he took office and 1936.

Once again, we need jobs. We don’t need temporary stimulus; we need federal government investment in infrastructure. Unless that happens, we will see a double-dip recession. What would FDR do? What will Obama do?

FDR did finally succumb to the pressure of the deficit hawks in 1938 and cut back spending. The result was that after growing at a compound annual rate of 9% since 1933, the economy took its first step backward.

We need Obama to take a lesson and stop playing pragmatic politician. His bent for passing marginal legislation is nothing more than a façade over business as usual. We need him to stand and be counted. I’d like to see Obama follow the model of FDR and call it the way he did on election eve 1936:

We had to struggle with the old enemies of peace–business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

We need bold, courageous leadership, not more milquetoast. This financial “reform” legislation is just the latest farce of a captured Congress. And the notion that, as Obama has said, it’s “most significant financial reform since the 1930s” is patently absurd. Has he forgotten about the Financial Services Modernization Act of 1999, the repeal of Glass-Steagall that set the stage for the Great Banking Rip-off of 2007? Perhaps he was simply referring to the heft of the 2,000 page legislation?

Read the Article at HuffingtonPost

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Jun 242010

If the Senate accepts the House changes, however, one of two things will happen, said Michael Greenberger, a University of Maryland professor and the former head of the Commodity Futures Trading Commission’s Division of Trading and Markets. “Either we’re going to have a bill that’s regulation in name only or we going to have no regulation, which means no consumer protection infrastructure, no resolution authority and the whole of the benefits the reform provides,” said Greenberger.

Ryan Grim, Huffington Post

bank crash
Image by Cau Napoli via Flickr

Another sellout of the American people. Does anyone really think we’ll wind up with something resembling real financial reform? The dynamic works something like this:

The Democrats feign reform. Their original legislation lacks teeth, but it does contain certain stipulations that Wall Street opposes. The Republicans meanwhile do absolutely NOTHING to help and instead attempt to block even the meager “reform” offered by the Democrats. The Democrats then respond by proposing compromises that are ostensibly needed in order to gain passage. These new offers further weaken legislation that was already marginal at best.

In the end, we wind up with either legislation with so many loopholes that it really changes nothing or no legislation at all — either way the status quo is maintained.

The Congressional maneuvering is really just a dance to present the appearance of legitimate government. In reality, neither side really wants any change. They have their big money benefactors to worry about. The financial sector spends a pile of money to ensure that Congress meets their needs — over $20 million between the securities/investment and commercial banking lobbies thus far in the 2009/2010 election cycle. Together, their spending is second only to lawyers and law firms.

Real finance reform would not only address derivatives but also force size limits and leverage ratios on the banks. We’re better off passing nothing than this sugar pill.

This same scenario repeats itself on every major issue. Healthcare was ostensibly about providing needed services to Americans without. Of course, the only way to achieve that without deepening the federal debt was to incorporate the public option. But since a public option would have created real competition for the medical lobby, it was quickly dropped. There weren’t enough votes to get is passed. Why? Because between doctors, pharmaceuticals, hospitals, and other healthcare services, there’s been nearly $43 million in campaign cash this term alone.

The sad truth is that the American Congress serves only a very small group of Americans. They are captured by Big-Money, and we will not see any change until and unless The People join together, from both sides of the political debate, and coalesce around the topic of campaign finance reform. Public campaign financing is already working in several states in the form of Clean Elections. And there’s a bipartisan bill in House and also the Senate to bring similar reform to Washington.

With public campaign financing, we just might get our politicians back to work for the people. Actually, since estimates place their efforts spent on fund raising at 20 percent to 40 percent of their time, we just might actually get them back to work — period. Couple public financing with preferential voting, which would allow a significant increase in votes for third party candidates, and we may see a revitalization of government. Add term limits and solid bars closing the revolving lobbyist door, and we just might return to a government of the people, by the people, for the people.

Read the Article at HuffingtonPost

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