I’m reminded of these famous lines by the great Walter Huston in the film The Treasure of the Sierra Madre:
“Hey, you fellas, how ’bout some beans?… Want some beans?… Goin’ through some mighty rough country tomorrow – ya better have some beans.”
A quick look at just some of what’s coming up.
Senate Banking Committee chairman Chris Dodd (D-CT) will unveil his plan for financial regulatory reform today, following months of delays in pursuit of Republican support that never materialized (again). Key issues include whether the plan will sufficiently tighten regulations on derivatives trading, really make “too-big-to-fail” banks a thing of the past, and whether the regulatory prohibition on commercial banks’ acting as investment banks or hedge funds (the so-called “Volcker Rule”) will be re-instituted.
But the biggest question is what will become of the Obama administration’s proposed Consumer Financial Protection Agency (CFPA), will it emerge as an independent agency or be contained within the Federal Reserve in a weaker, more advisory role. The latter is something many of the Federal Reserve’s current and former consumer protection advisers actually oppose.
Meanwhile, at long last the final stages of passing a significant health care reform plan appear to be approaching this week in Congress. It will have to overcome the massive insurance industry-led lobbying effort trying to stop it. A variety of votes in both the House and the Senate will be needed to pass health care reform with the crucial improvements to the Senate bill agreed to by the White House and Democratic Congressional leaders. But one thing is clear, and that is that the big student loan reform plan (SAFRA) will be included in the House and Senate reconciliation fix for health care and will need only 50 votes in the Senate. Now that would be a Win-Win.
On the all-important jobs front, the initially-bipartisan-then-not bill to provide employers with tax credits for hiring returns to the Senate for final action, where some are talking about pulling an all-nighter. A much larger bill to continue the extensions of current unemployment insurance and COBRA subsidies through the end of 2010 passed the Senate last week but because it differs from an earlier version passed by the House, the measure still awaits further action. And that can’t come too soon for the 11 million Americans now receiving unemployment benefits, as the current jobless aid extensions are still set to expire March 31.
Senate Banking Committee Chairman Christopher Dodd, a Democrat, and Republican Senator Bob Corker have worked on a bipartisan bill for weeks meant to overcome disputes on an issue of high importance to the Obama administration.
One source familiar with the Dodd-Corker talks said the two may announce an agreement on Friday and release a summary of the details of their deal next week.
One key component is to put a new government watchdog for financial consumers in the Federal Reserve, instead of making the watchdog an independent agency or housing it in another agency, two policy analysts said in a research note.
But independence is key, wherever the CFPA is located—that’s a requirement that cannot be compromised or consumer protection is compromised.
“My first choice is a strong consumer agency,” the Harvard Law professor and federal bailout watchdog said in an interview with the Huffington Post. “My second choice is no agency at all and plenty of blood and teeth left on the floor.”
I suspect that even Republicans, in their hearts, understand the need for real reform. But their strategy of opposing anything the Obama administration proposes, coupled with the lure of financial-industry dollars — back in December top Republican leaders huddled with bank lobbyists to coordinate their campaigns against reform — has trumped all other considerations.
That said, some Republicans might, just possibly, be persuaded to sign on to a much-weakened version of reform — in particular, one that eliminates a key plank of the Obama administration’s proposals, the creation of a strong, independent agency protecting consumers. Should Democrats accept such a watered-down reform?
I say no.
There are times when even a highly imperfect reform is much better than nothing; this is very much the case for health care. But financial reform is different. An imperfect health care bill can be revised in the light of experience, and if Democrats pass the current plan there will be steady pressure to make it better. A weak financial reform, by contrast, wouldn’t be tested until the next big crisis. All it would do is create a false sense of security and a fig leaf for politicians opposed to any serious action — then fail in the clinch.
Credit card company CEOs and top executives have joined the ranks of the big bonus boys at Wall Street’s biggest banks, raking in bonuses and annual compensation for 2009 in excess of $10 million each.
Leaders in the pay sweepstakes include the heads of the credit card giants Visa, Mastercard Worldwide, Capital One Financial and American Express. Joseph W. Saunders, who runs Visa, was paid about $15.5 million
Mastercard president Ajay Banga took in $13.5 million. Hans Morris, former president of Visa, got $10.7 million while the CEOs of Capital One Financial and American Express each took in $10.6 million.
The head of Wells Fargo, the bank that became bigger than ever when it took over failing Wachovia at the end of 2008, became the highest paid big bank executive.
Topping the list is John G. Stumpf, head of Wells Fargo, the bank based in San Francisco, according to an analysis of 2009 compensation in the industry. Mr. Stumpf was paid a personal best of $18.7 million in cash and stock for 2009 — up 64 percent from 2007, just before the financial crisis struck.
The bonus package given to Jamie Dimon, CEO of JPMorgan Chase, is reportedly worth $17 million, while James P. Gorman, CEO of Morgan Stanley, got an $8 million bonus despite the bank having posted the first loss in its 74-year history.
If you’re having trouble wrapping your head around such huge sums, believe me you’re not alone. Just what is an annual pay package of, say $10 million equivalent to? It’s about $192,300 a week or a mere $4,800 an hour.
Other than driving the economy into the deepest recession since the Great Depression, throwing millions of people out of work, millions more out of their homes, jacking up credit card rates and fees and forcing millions more into bankruptcy — exactly what have these elite financial executives actually done to make that kind of money?
One thing they’ve done is to take hundreds of billions of tax dollars in bailout money.
Lobbying expenditures jumped 12% from 2008 to $29.8 million last year among the eight banks and private equity firms that spent the most to influence legislation, according to data compiled from disclosure forms filed with Congress.
The biggest spender was JPMorgan Chase & Co., whose lobbying budget rose 12% to $6.2 million, enough for the firm to have more than 30 lobbyists working for it. Among other banks, spending on lobbying rose 27% at Wells Fargo & Co. and 16% at Morgan Stanley.
“I have never seen such a scrum of bank lobbyists as I have in the last year — and I’ve worked on quite a few bank issues over the years,” said Ed Mierzwinski, a lobbyist for the U.S. Public Interest Research Group, a coalition of state consumer organizations. “It seems like everybody is out of work except for bank lobbyists.”
Americans for Financial Reform is a new national coalition of more than 200 organizations including Working America — groups that are fighting back against the big banks, credit card companies and their lobbyists. A new ad from several coalition partners is being aired:
It’s time to send a message to the big banks and the credit card bonus crowd. Tell them it’s their Final Notice - Payment Past Due. Your message will tell the Senate it’s time to enact a financial crisis responsibility fee on the biggest banks and establish a Consumer Financial Protection Agency to hold Wall Street accountable.
A year ago Wall Street’s financial rupture sent the economy hurtling into a massive crisis, crushing tens of millions of Americans in an avalanche of unemployment, underemployment, home foreclosures, reduced incomes and lost benefits. That financial rupture was caused by a combination of rapacious, mindless greed on Wall Street, the then-bloated housing bubble, and the failure of both regulators and of the financial regulatory structure.
Tomorrow the Senate Banking Committee will begin to take up Senator Chris Dodd’s (D-CT) proposals for sweeping financial regulatory changes. In a statement announcing the proposed legislation last week, committee chairman Dodd said:
“Over the past year, Americans have faced the worst financial crisis since the Great Depression. Millions of Americans have lost their homes, their jobs, and their savings – and yet, they’ve watched some of the people and institutions that caused this mess collect million dollar bonuses and receive billion dollar bailouts.”
“Those hard working Americans are asking, what is the government doing to ensure their economic security?”
“It is the job of this Congress to restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them.”
“We must create a sound foundation to grow the economy and create jobs.”
“The financial crisis exposed a financial regulatory structure that was the product of historic accident, created piece by piece over decades with little thought given to how it would function as a whole, and unable to prevent threats to our economic security.”
“For decades, Washington has failed to deliver the substantial reform we need. If we fail again this time, our economy will be vulnerable to another crisis.”
Both the Obama Administration and the House Financial Services Committee have developed separate regulatory reform plans. But in the view of most observers, Dodd’s proposals would go much further in establishing a fundamentally new regulatory structure and in imposing tighter controls on financial institutions, investment instruments and trading practices — particularly for derivatives.
In a statement released by the Senate Banking Committee, and at his press conference, Dodd marked his determination to succeed with this major regulatory overhaul:
“I will not stand for attempts to protect a broken status quo, particularly when those attempts are made by some of the same special interests who caused this mess in the first place.”
“The American people have been through a lot over the past year. I hear from them every day. They are business owners forced to shutter their doors and lay off workers because their credit dried up. They are senior citizens who have delayed their retirement because their 401(k) vanished. They are ordinary Americans who did nothing wrong, but are paying a steep price. They deserve an economy in which Americans can find jobs, manage their money, and build better futures for their families. They deserve the real and meaningful change in this bill.”
Discussing two of the most critical components of his plan, Dodd continued:
“Our plan will stop abusive practices by creating an independent Consumer Financial Protection Agency with one mission: standing up for consumers. Whether taking out a mortgage, getting a credit card, or investing for retirement, Americans deserve to receive clear and accurate information, to be protected from hidden fees and abusive terms, and to know that the financial products they’re being offered are safe.”
“We will end “too big to fail.” We cannot allow the collapse of a few firms to threaten our entire economy. Our plan will create an independent council of regulators to identify risks, so that government can act to prevent a crisis. We will have a mechanism in place to safely shut down large failing companies without destabilizing the financial system. No longer will the Federal Reserve’s emergency lending authority be used to prop up a failed institution.”
Other key provisions would create a single federal banking regulator; eliminate regulatory gaps for over-the-counter derivatives, hedge funds, asset-backed securities, and payday lending; require companies that sell mortgage-backed securities to keep “skin in the game” so investors won’t be sold worthless securities; and give shareholders a greater say in how executives are compensated.
Not surprisingly, the two biggest defenders of the financial status quo are not at all happy with Dodd’s regulatory reform plan. The American Bankers Association immediately attacked the Dodd plan saying it “would tear apart the existing regulatory structure only to create a new one”. And the U.S. Chamber of Commerce has launched an effort to kill the proposed Consumer Financial Protection Agency (CFPA). These and other powerful special interests and financial industry lobbyists will no doubt be working feverishly to kill Dodd’s reform plan outright, or slice and dice it until its substantative provisions are eliminated or fundamentally weakened.
You know something is happening when top economists are calling for mass protests.
But that’s exactly what economist Dean Baker does in his latest column “Won’t You Please Come to Chicago, No One Else Can Take Your Place”.
Those disgusted by the bank bailouts, and the bankers who brought us this recession, will have a chance to make their views known when the American Bankers Association has its annual meeting in Chicago, October 25-27. A large coalition of labor, community, and consumer organizations are organizing a protest at this “Showdown in Chicago”.
A big turnout at this event can make a real difference. Just to review the scorecard, most of the country is still suffering the fallout from the bankers’ irrational exuberance of the housing bubble era. The Congressional Budget Office (CBO) and other forecasters expect the suffering to endure for years to come.
Enough is Enough.
The Banks Have Had A Recovery – Now the American People Need One.
Organizers say they will also be promoting a set of specific solutions aimed at addressing financial reform and real economic recovery, among them:
Too Big to Fail
In the US today, three banks hold almost 34% of the nation’s deposits, four banks issue 50% of the country’s mortgages and the five largest credit card lenders control 74% of the market. These companies have a stranglehold on our wallets. And as we’ve seen, when they make bad decisions, they can take the whole economy down with them.
New laws should be put in place that minimize the risk of the “too big to fail” problem. No single institution should be in control of such a large part of the market. Instead, we should encourage a vibrant, diverse, stable banking system, made up of thousands of small and medium size banks. Strong competition policies and antitrust laws will encourage financial institutions to invest in productive activity, instead of investing in changing the rules of the game or manipulating the market.
Consumer Financial Protection Agency
The Obama Administration has called for the creation of a Consumer Financial Protection Agency (CFPA) that will make protecting consumers a priority over protecting the interests of the banks. Seven different government agencies had the power to stop the reckless risk-taking that wrecked our economy, but they didn’t use it. Lax oversight helped spawn the disastrous mortgage products and practices that triggered the current crisis. What’s more there is virtually no regulatory authority over firms that have pushed bad mortgages, payday loans and other products that are overly complicated, or are simply rip-offs. The CFPA will bring the focus we need to clean up destructive and unfair financial practices, restore the integrity of our financial system, and prevent another disaster in the future.
The policies that will rein in the banks: reform of the Federal Reserve Board to make it democratically accountable, a tax on financial speculation to pay for the bankers’ mess, and restrictions on the bank abuses of consumers that caused the carnage have support from people on both the left and right.
A bill that would require the Fed to disclose what it did with more than $2 trillion in loans to banks and other financial institutions was originally co-sponsored by Ron Paul and Alan Grayson, one of the most conservative and one of the most progressive members of Congress. Due to public pressure, it now has more than 270 co-sponsors.
This is exactly the sort of alliance that gets the elite worried. Reining in the power of the financial industry will be a long, hard-fought war, but it is one that must be fought. President and Nobel peace prize winner Barack Obama may not have been able to bring the Olympics to Chicago, but everyone who wants to retake our country from the banks can bring their backside there on October 25th.
