Kemstone's Journal

I got a kick out this story when I read it yesterday morning.

NEW YORK– Treasury Secretary Timothy Geithner traveled to New York City on Monday to tell bankers and the financial industry that new financial regulations are a good thing for business.

Geithner explained to an audience at NYU that while the law’s regulations would be a “foundation of a stronger economy,” the Obama administration would seek a balance that would safeguard business.

There are probably two reasons that Obama sent his Treasure Secretary to Wall Street with this message. First is to improve Geithner’s image as a complete tool of the financial industry by placing him in a role that makes him appear separate from it.

But the second reason is the funny one. Back in February, House Minority Whip Eric Cantor met with the titans of Wall Street to assure them that he and Republican Party would be doing everything they could to block reform and let the financial industry continue with business as usual. His pitch seems to have worked:

Months later, an emerging campaign theme is the Democratic Party’s trouble collecting Wall Street donations. The Republican Party, save for a handful of members, voted en masse against financial regulatory reform and some GOP lawmakers have pledged to repeal the final product. At the same time, it has been widely reported that Obama has a frosty relationship with the business community. And, perhaps most tellingly, Cantor has seen his campaign coffers bulge.

Data released on Wednesday morning by the good government group Public Campaign shows that Cantor received more than $460,000 from the financial sector during the second quarter of 2010.

So Wall Street is giving more money to Republicans and less money to Democrats. This is no surprise. But that fact that Tim Geithner had to go and try to make nice with the bankers seems to indicate that it came as a surprise to Obama.

His whole strategy with financial reform was to do what Geithner said and water down the bill enough for it to meet with Wall Street’s approval. He needed to pass some kind of reform to appease progressives, but the reform needed to be weak enough to appease the bankers.

Well this is what happens when you try to have it both ways. Not only are progressives disillusioned and angry that the legislation was so toothless, but Wall Street isn’t satisfied that the legislation was toothless enough. Democrats might serve their interests, but republicans serve them better.

Maybe next time Obama will actually try to fight for real change, seeing as how even his pocket change is too much for Big Industry. But considering that Tim Geithner is not only still around but still trying to cozy-up to Wall Street, I highly doubt it.

I’m on fire today, as you’ll know if you read the post below. I’m temporarily without internet access so until I take this computer to somewhere with a WiFi signal I can’t waste any time doing research and finding relevant links and videos—which is the most time-consuming part of blogging. So today I’m going old-school and just ranting straight from my head. As such I’m only covering the really important stuff—Sarah Palin will have to wait.

You wouldn’t know it unless you’ve been paying really close attention, but we’re approaching what will be one of the most defining moments of the Obama presidency. In fact, it may be the most important cross-roads that Barack Obama has ever come to. He’s faced with a choice—a choice that only he can make and for which the responsibility will rest on his shoulders alone. It would seem like a small decision, like just one of a thousand little decisions the president makes every day, but taken in the broader context it’s a decision that will define how he is perceived by the public for the remainder of his presidency. The decision is over who to appoint as head of the Consumer Financial Protection Bureau.

It’s no secret that the financial reform legislation that came out of the senate is weak and watered-down. It won’t change the way Wall Street does business and it won’t prevent future bailouts. The only thing it does that has the potential to do real, substantial good on behalf of the American people is the creation of the Consumer Financial Protection Bureau which would serve as a much-needed watchdog to protect consumers from corporate greed and abuses of power.

The Consumer Financial Protection Bureau will only be as strong as the people who control it. It it’s run by establishment insiders and friends of Wall Street bankers, it’s probably not going to do too much to protect consumers. It’ll just exist for the sake of public perception, to make it look like Obama accomplished reform.

The question on everyone’s mind is whether Obama wanted real reform and was just forced to accept what he could get from a congress drowning in Wall Street money, or whether he’s as complicit as they are and has no interest in changing the status quo either. When Obama chooses who to appoint as the head of the Consumer Financial Protection Bureau, we’ll know the answer.

Elizabeth Warren is the person who came up with the idea in the first place. From her current position as chairwoman of the Congressional Oversight Panel, she has been an incredibly forceful advocate on behalf of the middle-class and her zeal for standing up to big corporations on behalf of the little guy is well-known and celebrated by progressives everywhere. If she were put in control of the Consumer Financial Protection Bureau, there is no doubt that she would give the corporations a run for their money. She would take the strongest possible approach to dealing with Wall Street and while she might still not have the power to prevent another financial crisis, she’d be able to warn everyone when she sees it coming, and people would have to listen to her because she would be in a position of power. We need a progressive in a position of power. We need someone who is not beholden to Wall Street with the capability to exert pressure on Wall Street.

If Obama appoints Elizabeth Warren, then nearly all of my cynicism about the financial reform legislation will evaporate. I’ll bow my head and concede that at least in this instance, Obama delivered on some of the Change he promised.

Obviously, the rich and powerful are completely opposed to Elizabeth Warren. She’s their worst nightmare. They’d rather have anyone but Elizabeth Warren at the helm of the Consumer Financial Protection Bureau. Preferably, they want someone who isn’t really interested in protecting consumers. Someone like Tim Geithner whom they already know and whom they’re buddies with. Someone whose top priority will be protecting Wall Street first, and protecting consumers only insofar as it doesn’t interfere with the way Wall Street does business.

If Obama appoints someone other than Elizabeth Warren (assuming it’s not another progressive like Paul Krugman or Robert Reich), then you can rip the “Change We Can Believe In” sticker off your bumper and bury it six feet under ground, because the promise of the Obama presidency will be dead. It will be completely over. He will have raised the white flag and surrendered to the very establishment he said he was going to change.

Why is this decision so important as compared to all the others? Why will this be more of an indicator of Obama’s true character than, say, the fight over the public option? Because this time, there’s no one else to blame. This time the decision is squarely on his shoulders and there are no Joe Liebermans, Blanche Lincolns or Ben Nelsons to hide behind.

You can already see indications that the White House is leaning away from appointing Warren. They don’t want to piss off progressives too much so they keep insisting how much they like her and how great she is, but…

The ‘but’ is key. They’ll say “But there are other good options” when in reality the only other names being thrown around are friends of Tim Geithner—people with the Wall Street stamp of approval. They’ll say “But she’s unconfirmable because republicans will filibuster her” but in reality Obama could appoint her with the stroke of a pen. I’m pretty sure the way the legislation is written she doesn’t need senate confirmation, but even if she does there’s the option of a recess appointment.

The point is, it can be done and the only thing that would stop it is Obama deciding not to. He knows that progressives really want him to appoint Warren, but so far his whole governing strategy has been to ignore progressives and do everything he can to try and appear like a centrist moderate (see my rant below). So far, he seems to have done everything the establishment has wanted him to do.

Will the pattern continue? Will he decide not to appoint Warren because he’d take too much criticism from Fox News? There’s no doubt they’ll be throwing the entire Socialist/Maoist smear machine directly at her, but they’ll do that to anyone he appoints even it’s Lloyd Blankfein (the CEO of Goldman Sachs) himself!

Will he decide not to appoint Warren because Wall Street won’t stand for it? They’re almost certainly threatening to pull their funding from Democratic candidates this election if he goes with Warren, so he might think he has no choice but to cave in again.

Or will he just this once actually make the right decision and appoint Warren to head the Consumer Financial Protection Bureau? Will he just this once accomplish some real Change? Will he listen to the people that got him elected just this once instead of spitting in their faces?

I doubt it. But I really hope more attention gets paid to this because it’s of monumental significance. This is a moment where Obama can really change course and begin to regain some of that progressive support he’s been losing since taking office by standing up to Wall Street and doing something that will actually help average Americans.

What’ll it be, Barack? Was the promise of Change just a big fat fucking lie that you had no intention of keeping? Or are you really trying to do the best you can? Your decision will reveal the answer, and we anxiously await it.

Financial reform legislation is hurtling towards final passage, severely watered down and riddled with loopholes. Most economists agree that it’s not strong enough to prevent another crisis and does nothing to end Too Big Too Fail which makes taxpayer bailouts a necessity. The only silver lining in this cloud is the creation of a Consumer Financial Protection Agency, a government watchdog to keep an eye on Big Industry for the sake of average Americans. Among this agency’s many responsibilities would be to make sure credit card companies are straight with their customers, that they don’t hike up interest rates too quickly or charge excessive lateness penalties—things every credit-card user would appreciate.

Whether or not this agency will have any teeth depends to a large degree on who is in control of it. Most of the regulatory power in this bill goes to the treasury secretary, currently Wall Street’s favorite tool: Tim Geithner.

The effort to dramatically expand financial regulation bears the stamp of no one more than Geithner. The bill not only hews closely to the initial draft he released last summer but also anoints him — as long as he remains Treasury secretary — as the chief of a new council of senior regulators. The legislation also puts him at the head of the new consumer bureau until a director is confirmed by the Senate, allowing Geithner to mold the watchdog in coming months. And it will be up to him to settle a raft of issues left unresolved by the bill — for instance, which financial derivatives will be subject to the tough new trading rules and which risky activities big banks will be required to spin off.

Every step of the way, Geithner has fought against the strongest provisions in the bill. He opposed breaking up the banks, he opposed the Lincoln amendment to regulate derivatives, and he even opposed the Consumer Financial Protection Bureau, which he gets to control and mold in the interim before Obama appoints someone else to be in charge.

Progressives want Elizabeth Warren, the current chair of the Congressional Oversight Panel where she’s been a strong and consistent advocate for transparency and accountability. Not only that, she has a knack for boiling complex financial issues to the core and explaining them with crystal clarity:

If she were put in charge of the Consumer Protection Bureau, there’s good reason to believe she’d give Wall Street a run for their money. So naturally, Tim Geithner is opposing her nomination. Geithner’s philosophy is to do as little regulation as possible and let Wall Street handle itself. If it were up to him, there would probably be no financial reform whatsoever.

Now, Obama is once again put to the test. Simon Johnson, author of 13 Bankers, says this can only go two ways: Will he actually listen to progressives for once and appoint Warren to head the new agency (outcome #1), or will he side with his Treasury secretary, as he has done nearly every step of the way so far, and appoint someone else (outcome #2)?

Despite the growing public reaction, outcome #2 is the most likely and the White House needs to understand this, plain and clear – there will be complete and utter revulsion at its handling of financial regulatory reform both on this specific issue and much more broadly. The administration’s position in this area is already weak, its achievements remain minimal, its speaking points are lame, and the patience of even well-inclined people is wearing thin.

Indeed, Obama has been throwing progressives under the bus repeatedly since the beginning of his administration, and progressives have been remarkably patient thus far. But we’re not buying the line that this is the most sweeping reform since the Great Depression, and we don’t believe for a second his blatant lie that this reform means there will never be another bailout. If he sides with Geithner over his base yet again and appoints some weak-kneed tool of the industry to head the Financial Protection Bureau, that will be the last straw for many.

Unfortunately, it’s entirely possible that Obama will stick with his strategy of pleasing Wall Street at the expense of progressive goals because he knows progressives have nowhere else to turn in November. He keeps throwing us under the bus because he knows we could never vote republican, so he might as well keep those Goldman Sachs campaign contributions flowing. If you want to help send him the message that we’re not going to let him kick us around anymore and he’d better appoint Warren, you can sign the petition here.

Ever since becoming politically aware I haven’t been able to firmly decide if the government is made up of people who are knowingly and deliberately trying to screw us or if it’s actually just a bunch of clueless idiots who don’t know what they’re doing. To put it simply, is the demise of the average person a result of malice or just ignorance?

When it comes to Obama, I keep going back-and-forth as well. The weakness of health care reform and stories of backroom deals to get drug companies and private insurance on board led me to believe that he was a complete sell-out, another politician who won the presidency by outright lying about who he was and what he stood for. At worst, a complete tool of the power-elites, chosen and groomed for his ability to sell the American people on policies that would look like reform but would actually serve to make the powerful more powerful.

But there is the possibility that even if he was chosen and approved of by the power-elites, that he doesn’t actually know he’s working for them. He might really believe in the things he said on the campaign trail, and he might really believe that he’s doing the best he can for the American people.

Psycho-analyzing the president is always tricky business, but looking at his behavior in the run-up to the final passage of the financial reform legislation, it seems as though he really believes his rhetoric.

Ask a random economist, and it’s likely he’ll tell you that this Wall Street reform bill does even less to reform Wall Street than the health care reform bill did to reform health care. Dean Baker called it a “fig-leaf”. Paul Krugman wrote that our misguided policies are causing what will become a third Depression. John R. Talbott itemized every way in which the bill fails to implement meaningful reform.

And yet Obama is out there hailing this as the “toughest financial reforms since the ones we created in the aftermath of the Great Depression”. If he really understood what he was doing, and he knew that these reforms weren’t tough at all and another financial collapse is all-but-guaranteed, I doubt he’d be showing such swagger.

When the next financial crisis hits, he’s going to look like a damned fool. And that might very well be what he is. It’s no secret that he didn’t run on a platform of reforming the financial system. When he began his run for president, he thought he’d be campaigning against the Iraq war. He made his first major initiative health care, rather than financial reform. The guy might just not have a good grasp of macro-economics.

Neither do I, but I trust economists such as Paul Krugman and Robert Reich who point out that it was increased spending that brought us out of the Great Depression and tough rules on the banks such as the Glass-Steagall Act which prevented another collapse from happening up until the time it was repealed in 1999. This is just history. You don’t have to be a genius to just look at the charts and graphs and understand what they mean.

And yet Obama surrounded himself right from the start with people like Tim Geithner and Larry Summers, people who are nothing if not creatures of Wall Street, who believe that when all is said and done the system is fine how it is. Sure, there was a bubble and it burst, but that was just a fluke—a once-in-a-lifetime thing. The bankers have learned their lesson and they won’t let another financial collapse happen again. They were telling Obama right from the start that the most important thing was to get Wall Street back in business and the rest would follow. He’d have to pass something called “financial reform” purely for the sake of public perception, but it shouldn’t be tough enough on the banks to fundamentally change the way they operate. Everything just needed to go back to the way it was before the collapse, and the bankers would take care of the rest.

It would seem that Obama bought into this bullshit. In which case, he is not a sell-out but a fool. The bankers will do whatever is in their best short-term financial interest to do. They do not care about the economic repercussions of their actions.

The problem that caused the crisis was that it became too easy to make shitloads of money by trading bundles of pools of mortgages sold to people who couldn’t afford to repay them. It’s still too easy to do that, so of course they’re going to keep doing it. The collapse may have been prevented if the ratings agencies whose responsibility it was to accurately assess the risks of these bonds weren’t being paid by the same banks whose products they were supposed to assess. It’s still in their best financial interests to give Triple-A ratings to crappy bonds that are bound to explode, so of course they’re going to keep doing it. And the taxpayer wouldn’t have had to bail out the banks if they were small enough to collapse and not bring down the entire economy with them, but they are still Too Big to Fail so of course they’re going to keep taking these disastrous risks if they know we still have no choice but to cover their losses.

But Obama thinks he got the job done. He thinks he’s FDR. He thinks he really gave the banks a run for their money and showed them who’s boss. Meanwhile, they are laughing at him.

Then again, maybe he knows exactly what he’s doing. Maybe he’s just as much the corporate tool as every single republican is, and he’s glad he was able to help out the bankers while making it look to the American people like he really accomplished something. But if that’s the case, you’ve got to wonder what his plan is for when the next financial crisis hits. Everybody is going to look back on this moment and say, “Um…you said you fixed it. What the fuck?”

What the fuck, Obama? You’re obviously an extremely intelligent guy. I can’t believe how someone so smart could be such a damned fool.