Showing posts with label Glass-Steagall. Show all posts
Showing posts with label Glass-Steagall. Show all posts

Tuesday, August 6, 2013

Baker: Glass-Steagall now, tomorrow and forever

Here's how Baker sums it up [emphasis mine]:

What is striking about the argument on re-instating Glass-Steagall is that there really is no downside. The banks argue that it will be inconvenient to separate their divisions, but companies sell off divisions all the time.

They also argue that foreign banks are not generally required to adhere to this sort of separation. This is in part true, but irrelevant.

Stronger regulations might lead us to do more business with foreign-owned banks since weaker regulations could give them some competitive edge. That should bother us as much as it does that we buy clothes and toys from Bangladesh and China.

If foreign governments want to subject themselves and their economies to greater risk as a result of bad financial regulation, that is not an argument for us to do the same.  Are we anxious to be the next Iceland or Cyprus?


By Dean Baker
August 5, 2013 | Al Jazeera

Wednesday, July 24, 2013

Black: Conservatives should back Glass-Steagall

My man Bill Black explains why real conservatives should support re-instituting Glass-Steagall.  Bottom line: if President Obama is against it, they ought to be for it!


By William K. Black
July 21, 2013 | New Economic Perspectives

Glass-Steagall prevented a classic conflict of interest that we know frequently arises in the real world.  Commercial banks are subsidized through federal deposit insurance.  Most economists support providing deposit insurance to commercial banks for relatively smaller depositors.  I am not aware of any economists who support federal “deposit” insurance for the customers of investment banks or the creditors of non-financial businesses.

It violates core principles of conservatism and libertarianism to extend the federal subsidy provided to commercial banks via deposit insurance to allow that subsidy to extend to non-banking operations.  Absent Glass-Steagall, banks could purchase anything from an aluminum company to a fast food franchise and (indirectly) fund its acquisitions and operations with federally-subsidized deposits.  If you run an independent aluminum company or fast food franchise do you want to have to compete with a federally-subsidized rival?

Deposit insurance is a material federal subsidy, but it pales in comparison to the implicit federal subsidy we provide to systemically dangerous institutions (SDIs) (so-called “too big to fail” banks).  The SDIs are precisely the banks most likely to purchase non-commercial banks. The general creditors of SDIs are protected against all loss so they funds to SDIs at a substantially lower interest rate than smaller competitors.  The largest SDIs are commercial banks that get both the explicit subsidy of federal deposit insurance and the larger subsidy unique to SDIs.

No conservative or libertarian should want the SDIs to maintain their political and economic dominance.  The SDIs’ dominance comes about not due to their efficiency but their size and the size of their lobbying wallet and force that allows them to extort greater federal subsidies than their rivals.  If conservatives and libertarians have any uncertainty about their position on Glass-Steagall they should consider these facts: (1) President Obama opposes ending the SDIs, (2) has done nothing effective to end the large federal subsidy provided to the SDIs, and (3) opposes bringing back Glass-Steagall and removing the explicit federal subsidy to banks that indirectly provides a competitive advantage to their commercial affiliates.

Monday, October 29, 2012

Taibbi on Obama's criticism of RS's bank reporting

Here are the key points from Taibbi's response to Obama's straw-man criticisms of Rolling Stone's financial reporting. First:

But it's still odd that [Obama] would focus so intently on that one point [Glass-Steagall], given that the president himself proposed and supported a sort of new version of Glass-Steagall, called the Volcker Rule. Almost all the pro-reform voices I know on Wall Street and in Washington liked the original version of the Volcker rule, and many would have been content to forget about Glass-Steagall forever had the original version of the Volcker Rule that President Obama himself supported actually made it through to become law.

But it didn't. Instead, the Volcker rule was gutted from within by members of both parties during the Dodd-Frank negotiations, and as we reported on several occasions, it was Geithner and the Obama administration that were particularly aggressive in scaling it back behind closed doors. That was what we criticized the president for – not so much for failing to reinstate Glass-Steagall, but for allowing his own policy proposal to be punched so full of holes that it would never be an effective law.

Years after the passage of Dodd-Frank, even the critically-weakened version of the Volcker rule that did ultimately pass is still not officially federal law, its implementation recently delayed again until at least 2014.

But Glass-Steagall isn't all of this story of failed reform that goes back to the Clinton Administration and his Citibank buddies:

The repeal of Glass-Steagall was just part of the decades-long deregulatory effort that led to this toxic situation. Another Clinton-era law, the Commodity Futures Modernization Act, contributed to it as well, by completely deregulating the market for derivatives (which were used to package all of those mortgages, were a major contributor to the collapse of AIG, and also played a huge role in the Jefferson County, Alabama disaster, among other things). Supreme Court decisions allowing interstate bank mergers where before they had been prohibited helped create the Wachovias and WaMus of the world. And a 2004 SEC decision to lift restrictions on leverage for the country's biggest investment banks allowed companies like Lehman to borrow forty dollars or more for every one they actually had.

Collectively, these and other policies created a market where banks were over-large, capital was lethally overconcentrated in the hands of a few huge firms, financial companies were all leveraged to the moon and the fates of federal insurance programs like the FDIC were suddenly tied to the gambling habits of some of the riskiest investment banks in the world. It wasn't just Glass-Steagall – it was Glass-Steagall plus all of this other stuff that made the world so dangerous.

So the first and most critical goal of any reform-minded administration should have been to alleviate these dangers by making things less concentrated, i.e. by making Too-Big-To-Fail companies small enough to fail. And Obama really didn't do that, on any front.

And then there is the issue of Too Big Too Fail, which with troubled bank "shotgun" mergers is now worse than ever:

Finally, Obama had a chance to physically reduce the size of Too-Big-To-Fail companies by supporting the Brown-Kaufman amendment to Dodd-Frank, which would have forced big banks to cap deposits and liabilities to under 10% of GDP. He didn't support that amendment and it died.

P.S. -- Never let it be said that I'm a hack who carries Obama's water.  He had an historic chance to put Wall Street in its place and a real bi-partisan sentiment against the bailouts and TBTF banks -- remember the Tea Parties were and are (they say) against TARP and the other TBTF bank bailouts??  But Obama let his opportunity slip.  Partly due to his inaction, then Occupy Wall Street got involved and the Right knee-jerk reacted against them, conflating OWS attacks against the bailouts and the financialization of the U.S. economy with an attack on capitalism, a reaction which the rightwing media happily helped foment.  Then the selfish, self-righteous Wall Street dickheads like Jamie Dimon who nearly destroyed the world suddenly became John Galt in the Right's eyes.


By Matt Taibbi
October 26, 2012 | Rolling Stone


Monday, October 1, 2012

Labour wants Glass-Steagall for Britain

So liberals in the UK recognize the need to institute their own version of America's now defunct Glass-Steagall Act, but American liberals and conservatives still haven't come around to re-instituting this commonsense measure that was passed in 1933 after the Great Crash to separate banks' customers' deposits from banks' investment activities.

Miliband said: "Either they can do it themselves – which frankly is not what has happened over the past year – or the next Labour government will, by law, break up retail and investment banks."

Hear, hear!  Let's take a lesson from those who have taken a lesson from us!

UPDATE: Ed Miliband is the guy Romney called "Mr. Leader" on his Partial World Tour of Complete Excellence because Romney couldn't remember his name.


Labour leader gives ultimatum to City and says: 'We will split off casino operations'
By Toby Helm, Andrew Rawnsley, Phillip Inman and Daniel Boffey
September 29, 2012 | Observer

Saturday, July 21, 2012

Reagan budget director on U.S. 'crony capitalism' -- MUST READ!

Do you need Reagan's zombie to rise from the grave and tell us the hard truth, or is the guy who ran his fiscal policy in the 80s good enough?

DAVID STOCKMAN:  Well look, I think the financial industry, over the two or three year run up to 2010 spent something like $600 million. Just the financial industry, the banks, the Wall Street houses and some hedge funds and others. Insurance companies. $600 million in campaign contributions or lobbying.

That is so disproportionate, because the average American today is struggling to make ends meet. Probably working extra hours in order, just to keep up with the cost of living, which is being driven up unfortunately by the Fed.

They don't have time to weigh into the political equation against the daily, hourly lobbying and pressuring and, you know, influencing of the process. So it's asymmetrical. And how do we solve that?  I think we can only solve it by -- and it'll take a constitutional amendment, so I don't say this lightly.  But I think we have to eliminate all contributions above $100 and get corporations out of politics entirely.

Almost everything wrong with our politics comes back to campaign finance.  Solve that, and it will solve a thousand problems in a snap.  Then we will have a real battle of ideas in politics, not a battle of wallets.


March 9, 2012 | Moyers & Company

Back in the first Gilded Age following the Civil War, with its huge concentration of wealth at the top and abject misery at the bottom, Boies Penrose was a United States Senator from Pennsylvania bought and paid for by the railroad tycoons and oil barons.

They could count on him to deliver the goods. "I believe in the division of labor," he told his wealthy paymasters. "You send us to Congress; we pass laws under which you make money…and out of your profits you further contribute to our campaign fund to send us back again to pass more laws to enable you to make more money."

Boies Penrose would be right at home in politics today. Crony capitalism – using government to deliver favors to your pals in the business world -- is alive and well. The rest of us pay for it. We pay for it at the grocery store because of sweetheart deals in Congress for the dairy industry and sugar lobby. We pay for it at drug store because politicians rented by giant pharmaceutical firms block competition. We pay for it in lowered returns on pension plans bailed out banks speculate with taxpayer money. We pay with the loss of jobs because of trade deals bought and paid for by multinational companies. We pay in tax rates higher than those of the billionaires who fund the SuperPacs. And we pay in the loss of political equality, because one person, one vote means very little when those we elect do the bidding of donors instead of voters.

We're deep now into what will be the most expensive election in our history, much of it funded by crony capitalists. So let's hear from two people who have closely watched how cozy ties between Wall Street and Washington are perverting capitalism and subverting democracy. First, David Stockman.

In the 1970s, he was a young Republican congressman from Michigan and an early proponent of supply-side economics -- some call it trickle down.

You know the theory; if you cut taxes on the wealthy, while cutting government, the economy will take off, money trickling down and creating millions of jobs.

It was the centerpiece of Ronald Reagan's 1980 campaign for president.

RONALD REAGAN: There is enough fat in the government in Washington that if it was rendered and made into soap, it would wash the world.

BILL MOYERS: Once in the Oval Office, President Reagan made David Stockman his budget director.

DAVID STOCKMAN: When President Reagan gave me this job he pointed to that budget which is some thousands and thousands of pages long, and he said go through it from top to bottom with a fine tooth comb and unless you can find a persuasive demonstration why funds must be spent, cut those budgets.

BILL MOYERS: Stockman helped Reagan usher in the largest tax cut in U.S. history, a cut that mainly favored the rich. But things didn't go exactly as they planned them. The economy sagged, and in 1982 and '84, Reagan and Stockman agreed to tax increases.

In 1985 Stockman left government and wrote a book critical of his own years in power: The Triumph of Politics: The Inside Story of the Reagan Revolution. He then took his economic expertise to Wall Street and became an investment banker. Thirty years later, he's writing a new book, with the working title The Triumph of Crony Capitalism.

I sat down with him to talk about how politics and high finance have turned our economy into a private club for members only.

What do you mean by crony capitalism?

DAVID STOCKMAN: Crony capitalism is about the aggressive and proactive use of political resources, lobbying, campaign contributions, influence-peddling of one type or another to gain something from the governmental process that wouldn't otherwise be achievable in the market. And as the time has progressed over the last two or three decades, I think it's gotten much worse. Money dominates politics.

And as a result, we have neither capitalism or democracy. We have some kind of --

BILL MOYERS: What do we have?

DAVID STOCKMAN: We have crony capitalism, which is the worst. It's not a free market. There isn't risk taking in the sense that if you succeed, you keep your rewards, if you fail, you accept the consequences. Look what the bailout was in 2008.

There was clearly reckless, speculative behavior going on for years on Wall Street. And then when the consequence finally came, the Treasury stepped in and the Fed stepped in. Everything was bailed out and the game was restarted. And I think that was a huge mistake.

BILL MOYERS: You write, quote, "During a few weeks in September and October 2008, American political democracy was fatally corrupted by a resounding display of expediency and raw power. Henceforth, the door would be wide open for the entire legion of Washington's K Street lobbies, reinforced by the campaign libations prodigiously dispensed by their affiliated political action committees, to relentlessly plunder the public purse." That's a pretty strong indictment.

DAVID STOCKMAN: Yeah and, but on the other hand, I think you would have to say it was fair. When you look at what came out of 2008, the only thing that came out of 2008 was a stabilization of these giant Wall Street banks. Nothing came out of 2008 that really helped Main Street. Nothing came out of 2008 that addressed our fundamental problems, that we've lost a huge swath of our middle class jobs. Nothing came out of 2008 that made financial discipline or fiscal discipline possible.

It was justified as sort of expediency. We need to do this. We need to stop the contagion. But it wasn't thought through as to what the long-term implications of this would be.

BILL MOYERS: How did you see it playing out?

DAVID STOCKMAN: I think there was a lot of panic going on in the Treasury Department. I call it "The Blackberry Panic." They were all looking at their Blackberries, and could see the price of Goldman Sachs or Morgan Stanley dropping by the hour. And somehow they thought that was thermostat telling them that the economy was coming unraveled.

I don't believe that was right. I think what was going on was simply a huge correction that was overdue on Wall Street. The big leverage hedge funds on Wall Street that called themselves investment banks weren't really investment banks. They were just big trading operations using 30, 40 to one leverage. And it was that that was being corrected.

But they used the occasion of the Wall Street banking crisis to create the impression that this was the beginning of a kind of black hole the whole economy was going to drop into. I think that was wrong.

And it was that fear that led Congress to do anything they wanted. You know, the Congress gave them a blank check.

BILL MOYERS: Not at first, don't you remember, Congress first refused to approve the bailout, right?

DAVID STOCKMAN: And then, the stock market dropped 600 points because all of the speculators on Wall Street all of a sudden began to think, 'Hey, they might let capitalism work. They might let the rules of the free market function.'

BILL MOYERS: You mean by letting them fail.

DAVID STOCKMAN: Yes.

BILL MOYERS: If they let them fail?

DAVID STOCKMAN: I think if they let them fail it wouldn't have spread to the rest of the economy. There wouldn't have been another version of the Great Depression. There weren't going to be runs on the bank. We weren't going to have consumers lined up in St. Louis and Des Moines and elsewhere worried about their bank. That's why we have deposit insurance, the FDIC. But it would have been a big lesson to the speculators that you're not going to be propped up and bailed out,

You're not going to have the Fed as your friend. You're not going to have the Treasury with a lifeline. You're going to have to answer to the marketplace. And until we get that discipline back into our financial system, the banks are just going to continue to grow, continue to speculate and find new ways to make easy money at the expense of the system.

BILL MOYERS: President Bush, he was still in office then.

DAVID STOCKMAN: Yes.

BILL MOYERS: He said, I have to suspend the rules of the free market in order to save the free market.

DAVID STOCKMAN: You can't save free enterprise by suspending the rules just at the hour they're needed. The rules are needed when it comes time to take losses. Gains are easy for people to realize. They're easy for people to capture. It's the rules of the game are most necessary when the losses have to occur because mistakes have been made, errors have been made, speculation has gone too far. The history has always been -- and this is why we had Glass-Steagall and a lot of the legislation in the 1930s.

BILL MOYERS: Glass-Steagall was the provision --

DAVID STOCKMAN: The division of banks between the commercial banking and investment banking and insurance and other --

BILL MOYERS: So that you, the banker, could not take my deposits and gamble with them, right?

DAVID STOCKMAN: That's exactly right. And we need not only a reinstitution of Glass-Steagall, but even a more serious limitation on banks.  And what I mean by that is, that if we want to have a way for, you know, average Americans to save money without taking big risks and not be worried about the failure of their banking institution, then there can be some narrow banks who do nothing except take deposits, make long-term loans or short-term loans of a standard, business variety without trading anything, without getting into all of these exotic derivative instruments, without putting huge leverage on their balance sheet.

And we need to say simply, that if you're a bank and you want to have deposit insurance, which ultimately, you know, is backed up by the taxpayer -- if you're a bank and you want to have access to the so-called "discount window" of the Fed, the emergency lending, then you can't be in trading at all.

Now, on the other hand, if they want to be a hedge fund, then they've got to raise risk capital and they have to take the consequences of their risks, both to the good side and the bad side. And until we really approach that issue, and dismantle these giant, multi-trillion dollar balance sheet banks, and separate retail and deposit insured banking from just financial companies, we're going to have recurring bouts of what we had in 2008.

And they haven't even begun to address that, and it's so disappointing to see that the Obama administration, which in theory should've had more perspective on this than a Republican administration under Bush, to see that one, they appointed in the key positions the same people who brought the problem in: Geithner and Summers and all of those, and secondly, that Obama did nothing about it.

It could have easily -- they could have begun to dismantle a couple of these lame duck institutions, Citibank would have been a good place to start. But they did nothing. They passed Dodd-Frank, which said, now we're going to have everybody write regulations -- tens of thousands of pages that you know, it was a full employment act for accountants and lawyers and consultants and lobbyists. But they didn't go to the heart of the problem. If they're too big to fail, they're too big to exist. And let's start right with that proposition.

BILL MOYERS: You've described what other people have called the financialization of the American economy, the growth in the size and the power of the financial industry. What does that term mean to you, financialization? And why should we care that it's happened?

DAVID STOCKMAN: Because what it means is that a massive amount of resources are being devoted, being allocated or being channeled into pure financial speculation that has no gain to society as a whole, has no real economic contribution to the process by which GNP is created, GDP is created and growth occurs.

By 2007, 40 percent of all the profits in the American economy were coming from finance companies. 40 percent. Historically it was 15 percent.

So the financialization means that as we attracted more and more resources and capital, and we made speculation easier and easier, and we funded it with almost free overnight money, managed and manipulated by the Fed, that's how the economy got financialized. But that is a casino. Casinos -- they're, you know, places for people to go if they want to speculate and wager. But they're not part of a healthy, constructive economy.

BILL MOYERS: What do you mean by the free money that banks are using overnight?

DAVID STOCKMAN: Well, by that we mean when the Fed, the Federal Reserve sets the so-called federal funds rate at ten basis points, where it is today, that more or less guarantees banks can go into the Fed window, the discount window, and borrow at ten basis points.

And then you take that money and you buy a government bond that is yielding two percent or three percent. Or buy some corporate bonds that are yielding five percent. Or if you want to really get aggressive, buy some Australian dollars that have been going up. Or buy some cotton futures. And this is really what has been going on in our markets.

The cheap funding, which is guaranteed by the Fed, the investment of that cheap funding into speculative assets and then pocketing the spread.  And you can make huge amounts of money as long as the music doesn't stop. And when the music stops then all of a sudden, the cheap, overnight money dries up. This is what's happening in Europe today. This is what happened in 2008.

And then people are stuck with all these risky assets, and they can't fund them. They owe cash to the people they borrowed overnight from or on a weekly basis. That's what creates the so-called contagion. That's what creates the downward spiral. Now, unless we let those burn out, it'll be done over and over. In other words, if, you know, if a lesson isn't learned, then the error will be repeated over and over.

BILL MOYERS: Stockman says the modern bailout culture took off under President Bill Clinton. It was engineered with the help of Federal Reserve Chairman Alan Greenspan and top economic advisors at the Treasury, Larry Summers and Robert Rubin.

BILL CLINTON: The American people either didn't agree or didn't understand what in the world I'm up to in Mexico.

DAVID STOCKMAN: I think it started with the bailout of the banks in 1994 during the Mexican Peso Crisis.

REPORTER: For investors it was a sight for sore eyes. Mexico's stock market actually soaring instead of plummeting for the first time in weeks. All this, an immediate reaction to news of a major international aid package – nearly half of it from Washington.

DAVID STOCKMAN: That was allegedly designed to help Mexico. It was $20 billion with no approval from Congress that was used, I think inappropriately out of a Treasury fund. And why were we doing this? It's because the big banks were too exposed to some bad loans that they had written in Mexico and elsewhere.

BILL MOYERS: Wall Street banks. U.S. banks.

DAVID STOCKMAN: Wall Street banks. Wall Street banks. The banks of the day, Citibank, Bankers Trust, the others that existed at that time. And so the idea got started that Washington would be there with a prop, with a bailout, with a helping hand. And then the balls start rolling down the hill.

DAN RATHER: The Federal Reserve Bank of New York has taken highly unusual action to head off what could have been a severe blow to world economies.

BILL MOYERS: When the hedge fund Long Term Capital Management blew up in 1998, it was big news.

REPORTER: Dan, the Long Term Capital fund lost billions in the recent market turmoil and last night, stood on the brink of collapse.

DAVID STOCKMAN: Long Term Capital was an economic train wreck waiting to happen. It was leveraged 100 to one. It was in every kind of speculative investment known to man. In Russian equities, in Thailand bonds, and everything in between. And it was enabled by Wall Street.

REPORTER: An emergency meeting was organized by the Federal Reserve last night, here at its New York office. At the table, more than a dozen of Wall Street's biggest bankers and brokers including David Komansky, Chairman of Merrill Lynch, Sandy Weill of Travelers and Sandy Warner of JP Morgan. One by one the firms each agreed to kick in more than $250 million to bail out Long Term Capital before its troubles sent shockwaves through the banking system.

DAVID STOCKMAN: Why did the Fed step in, organize all the Wall Street banks, and kind of sponsor this bailout? Because all of the Wall Street banks that enabled Long Term Capital to grow to this giant size, to have 100 to one leverage, by loaning them money. So when the Treasury and the Fed stepped in and bailed out, effectively, Long Term Capital and their lenders, their enablers, it was another big sign that the rules of the game had changed and that institutions were becoming too big to fail.

Fast forward. We go through one percent interest rates at the Fed in the early 2000s, we go through the housing bubble and collapse.

BILL MOYERS: Following the 2008 economic meltdown came the mother of all bailouts.

GEORGE W. BUSH: Good morning. Secretary Paulson, Chairman Bernanke and Chairman Cox have briefed leaders on Capitol Hill on the urgent need for Congress to pass legislation approving the Federal government's purchase of illiquid assets such as troubled mortgages from banks and other financial institutions.

BILL MOYERS: The Bush administration leaped to the rescue of some of the county's largest financial institutions, to the tune of 700 billion tax-payer dollars.

DAVID STOCKMAN: We elect a new government because the public said, you know, "We're scared. We want a change." And who did we get? We got Larry Summers. We got the same guy who had been one of the original architects of the policy in the 1990s, the financialization policy, the too big to fail policy.

Who else did we get?  We got Geithner as Secretary of the Treasury.  He had been at the Fed in New York in October 2008 bailing out everybody in sight. General Electric got bailed out. Morgan Stanley, Goldman Sachs, all of the banks got bailed out, and the architect of that bailout then becomes the Secretary of the Treasury. So it's another signal to the financial markets that nothing ever changes. The cronies of capitalism are in charge of policy.

BILL MOYERS: You name names in your writing. You identify several people as the embodiment of crony capitalism. Tell me about Jeffrey Immelt.

DAVID STOCKMAN: He is the poster boy for crony capitalism. Here is GE, one of the six triple-A companies left in the United Sates, a massive, half-trillion dollar company, massive market capitalization. I'm talking about the eve of the crisis now, in September, 2008.

Suddenly, when the commercial paper market starts to destabilize and short-term rates went up. He calls up the Treasury secretary with an S.O.S., "I'm in trouble here. I need a lifeline." He had recklessly funded a lot of assets at General Electric Capital in the overnight commercial paper market. And suddenly needed a bailout from the Treasury. Within days, that bailout was granted.

And therefore, General Electric was able to avoid the consequence of its foolish lend long and borrow short policy. What they should have been required to do when the commercial paper market dried up -- that was the excuse. They should've been required to offer equity, sell stock at a highly discounted rate, dilute their shareholders, and raise the cash they needed to pay off their commercial paper.

That would've been the capitalist way. That would've been the free market way of doing things. And in the future they would've been less likely to go back into this speculative mode of borrowing short and lending long. But when we get to the point where the one triple-A, a multi-hundred billion dollar company gets to call up the secretary, issue the S.O.S. sign and get $60 billion worth of guaranteed Federal Reserve and Treasury backup lines, then we are, you know, our system has been totally transformed. It is not a free market system. It is a system run by powerful, political and corporate forces.

BARACK OBAMA: Thank you. Thank you.

BILL MOYERS: So when you saw that President Obama had appointed Jeffrey Immelt, as the head of his Council on Jobs and Competitiveness, what went through your mind?

DAVID STOCKMAN: Well, I was in the middle of being very disgusted with what my own Republican Party had done and what Bush had done and the Paulson Treasury. And then when I saw this, I got the title for my book, "The Triumph of Crony Capitalism."

BARACK OBAMA: And I am so proud and pleased that Jeff has agreed to chair this panel, my Council on Jobs and Competitiveness, because we think GE has something to teach businesses all across America.

DAVID STOCKMAN: If you have a former community organizer who was trained in the Saul Alinsky school of direct democracy, appointing the worst abuser, the worst abuser of crony capitalism, GE, who came in and begged for this bailout, to head his Jobs Council, when obviously GE's international corporation, they've been shifting jobs offshore for decades, then it becomes so obvious that we have a new kind of system, and that we have a real crisis.

BILL MOYERS: Where is the shame? Shouldn't these people have been at least a little ashamed of running the economy and the financial system into the ditch and then saying, "Come lift me out?"

DAVID STOCKMAN: Yes. You know, I think that's part of the problem. I started on Capitol Hill in 1970s. And as I can vividly recall, corporate leaders then at least were consistent. They might've complained about big government, or they might've complained about the tax system.

But there wasn't an entitlement expectation that if financial turmoil or upheaval came along, that the Treasury, or the Federal Reserve, or the FDIC or someone would be there to back them up. That would've been considered, you know, it would've been considered, as you say, shameful. And somehow, over the last 30 years, the corporate leadership of America has gotten so addicted to their stock price by the hour, by the day, by the week, that they're willing to support anything that might keep the game going and help the system in the short run avoid a hit to their stock price and to the value of their options. That's the real problem today. And as a result, there is no real political doctrine ideology left in the corporate community. They are simply pragmatists who will take anything they can find, and run with it.

BILL MOYERS: So this is what you mean, when you say free markets are not free. They've been bought and paid for by large financial institutions.

DAVID STOCKMAN: Right. I don't think it's entirely a corruption of human nature. People have always been inconsistent and greedy.

But I think it's been the evolution of the political culture in which there have been so many bailouts, there has been so much abuse and misuse of government power for private ends and private gains, that now we have an entitled class in this country that is far worse than you know, remember the welfare queens that Ronald Reagan used to talk about?

We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do what is ever necessary if it involves tax relief, tax incentives, tax cuts, loan guarantees, Federal Reserve market intervention and stabilization. Whatever it takes in order to keep the game going and their stock price moving upward. That's where they are.

BILL MOYERS: You were disaffected with the party of your youth, the Republican Party, because it has-- because it's become dogmatic on so many of these issues and no longer listens to evidence and facts. I'm disaffected with the party of my youth because that Democratic Party served the interest of the working people in this country like Ruby and Henry Moyers. And so many people feel the same way. How do we overcome this pessimism about the American future? "The Wall Street Journal" had a headline on an op-ed piece that said, "The End of American Optimism." A recent survey said only 15 percent of the people were satisfied about the direction of the American people. I mean, this is a serious situation, is it not?

DAVID STOCKMAN: I think it is. And -- but we also have to recognize the pessimism that the public reflects in the surveys and polls is warranted. In other words the public isn't being unduly pessimistic. It's not been overcome with some kind of a false wave of emotion. No. I think the American public sees very clearly the current system isn't working, that the Federal Reserve is basically working on behalf of Wall Street, not Main Street.

The Congress is owned lock, stock and barrel by one after another, after another special interest. And they logically say how can we expect, you know, anything good to come out of this kind of process that seems to be getting worse.  So how do we turn that around? I think it's going to take, unfortunately a real crisis before maybe the decks can be cleared.

BILL MOYERS: What would that look like?

DAVID STOCKMAN: It will take something even more traumatic than we had in September 2008.

BILL MOYERS: But on the basis of the record, the lessons of the past. The experience you have just recounted and are writing about. Do you see any early signs that we might turn the ship from the iceberg?

DAVID STOCKMAN: No. I think we've learned no lessons. We really have not restructured our financial system. The big banks that existed then that were too big to fail are even bigger now. The top six banks then had seven trillion of assets, now they have nine or ten trillion.

Rather than go to the fundamentals which have been totally neglected-- we've simply kind of papered over the current system and continued the game of having the Federal Reserve and the Treasury if necessary prop up all of this leverage and speculation, which isn't helping the economy.

And when we talk about zero interest rates. That's not helping Main Street. Our problem in this economy is not our interest rates are too high. The zero interest rates are just more fuel for leverage speculation for what's called the carry trade and that is causing windfall benefits to the few but it's leaving the fundamental problems of our economy in worse shape than they've ever been.

BILL MOYERS: No one I know has a better understanding of the see-saw tension in our history between democracy and capitalism.

Capitalism, you accumulate wealth and make it available. Democracy being a brake, B-R-A-K-E, on the unbridled greed of capitalists. It seems to me that democracy has lost and that capitalism is triumphant -- crony capitalism in this case.

DAVID STOCKMAN: And I think it's important to put the word crony capitalism on there. Because free-market capitalism is a different thing. True free-market capitalists never go to Washington with their hand out.  True free-market capitalists running a bank do not expect that every time they make a foolish mistake or they get themselves too leveraged or they end up with too many risky assets that don't work out, they don't expect to go to the Federal Reserve and get some cheap or free money and go on as before.

They expect consequences, maybe even failure of their firm, certainly loss of their bonuses, maybe the loss of their jobs. So we don't have free-market capitalism left in this country anymore. We have everyone believing that if they can hire the right lobbyist, raise enough political action committee money, spend enough time prowling the halls of the Senate and the House and the office buildings, arguing for their parochial narrow interest -- that that is the way that will work out. And that is crony capitalism. It's very dangerous and it seems to be becoming more embedded in our system.

BILL MOYERS: So many people say, "We've got to get money out of politics." Or as you said, "Money dominates government today."

DAVID STOCKMAN: Well look, I think the financial industry, over the two or three year run up to 2010 spent something like $600 million. Just the financial industry, the banks, the Wall Street houses and some hedge funds and others. Insurance companies. $600 million in campaign contributions or lobbying.

That is so disproportionate, because the average American today is struggling to make ends meet. Probably working extra hours in order, just to keep up with the cost of living, which is being driven up unfortunately by the Fed.

They don't have time to weigh into the political equation against the daily, hourly lobbying and pressuring and, you know, influencing of the process. So it's asymmetrical. And how do we solve that? I think we can only solve it by -- and it'll take a constitutional amendment, so I don't say this lightly.  But I think we have to eliminate all contributions above $100 and get corporations out of politics entirely.

[Hallelujah! -- J]

Ban corporations from campaign contributions or attempting to influence elections.  Now, I know that runs into current free speech. So the only way around it is a constitutional amendment to cleanse our political system on a one-time basis from this enormously corrupting influence that has built up. And I think nothing is really going to change until we get money out of politics and do some radical things to change the way elections are financed and the way the process is influenced by organized money. If we don't address that, then crony capitalism is here for the duration.

BILL MOYERS: David Stockman, thank you very much for sharing this time with us.

Sunday, April 25, 2010

More heroic testimony from Rambo-regulator Bill Black

More amazing testimony from former bank regulator Bill Black. You can watch it here:


or read the following transcript:


Interview with Bill Black
April 23, 2010

BILL MOYERS: You probably heard the President speaking in New York yesterday, stumping for more regulation of Wall Street:

You've also probably heard about the government's charge that Goldman Sachs committed a highly sophisticated fraud. The claim is that this kingpin of Wall Street made a bundle by packaging mortgage debt as exotic investments some in the firm knew would fail.

That word "fraud" pops up more and more as we dig deeper into Wall Street's outrageous behavior during the run up to the great collapse of 2008. We heard it right here on the Journal, one year ago.

WILLIAM K. BLACK: Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have.

BILL MOYERS: That was Bill Black, who's no stranger to bank investigations. He was a senior regulator for the Federal Home Loan Board who cracked down on banking during the Savings & Loan crisis of the 1980s.

Just this week, he was on Capitol Hill testifying about another failed financial firm, Lehman Brothers.

WILLIAM K. BLACK Lehman's failure is a story in large part of fraud. And it is fraud that begins at the absolute latest in 2001.

BILL MOYERS: Bill Black is with me now. One of the country's leading experts on crimes in high places he teaches economics and law at the University of Missouri-Kansas City, and wrote this book, THE BEST WAY TO ROB A BANK IS TO OWN ONE.

Welcome back to the JOURNAL.

WILLIAM K. BLACK Thank you.

BILL MOYERS: What did you think of the President's speech late this week?

WILLIAM K. BLACK It's a good speech. He's a very good spokesman for his causes. I don't think substantively the measures are going to prevent a future crisis. And I was disappointed that he wasn't willing to be blunt. He used a number of euphemisms, but he was unwilling to use the F word.

BILL MOYERS: The F word?

WILLIAM K. BLACK: The F word's fraud in this. And it's the word that explains why we have these recurrent, intensifying crisis.

BILL MOYERS: How is that? What do you mean when you say fraud is at the center of it?

WILLIAM K. BLACK: Well, first, when you deregulate or never regulate, mortgage bankers were never regulated, you effectively have decriminalized that industry, because only the regulators can serve as the sherpas, that the FBI and the prosecutors need to be able to understand and prosecute these kind of complex frauds. They can do one or two or maybe three on their own, but when an entire industry is beset by wide scale fraud, you have to have the regulators. And the regulators were the problem. They became a self-fulfilling prophecy of failure, because they, President Bush appointed people who hated regulation. I call them the anti-regulators. And that's what they were.

BILL MOYERS: This hearing that, where you testified this week, looking into the bankruptcy at Lehman Brothers, had something on this.

TIMOTHY GEITHNER: And tragically, when we saw firms manage themselves to the edge of failure, the government had exceptionally limited authority to step in and to protect the economy from those failures.

BEN BERNANKE: In September 2008, no government agency had sufficient authority to compel Lehman to operate in a safe and sound manner and in a way that did not pose dangers to the broader financial system.

ANTON VALUKAS: What is clear is that the regulators were not fully engaged and did not direct Lehman to alter the conduct which we now know in retrospect led to Lehman's ruin.

BILL MOYERS: The regulators were not fully engaged. I mean, this is an old story. We all know about regulatory capture where the regulated take control of the regulators.

WILLIAM K. BLACK Yeah, but this one is far worse. That's not very candid testimony on anybody's part there. The Fed had unique authority. And it had it since 1994 to regulate every single mortgage lender in America. And you might think the Fed would use that authority.

And you might especially think that, if you knew that Gramlich, one of the Fed members, went personally to Alan Greenspan and said, there's a housing bubble. And there's a terrible crisis in non-prime. We need to send the examiners in. We need to use our regulatory authority. And Greenspan refused. Lehman was brought down primarily by selling liar's loans. It was the biggest seller of liar's loans in the world.

And when we look at these liar's loans, we find 90 percent fraud. 90 percent. And we find that most of the frauds are not induced by the borrower, but they're overwhelmingly done by the loan brokers.

BILL MOYERS: And liar's loans are?

WILLIAM K. BLACK A liar's loan is we don't get any verified information from you about your income, your employment, your job history or your assets.

BILL MOYERS: You give me a loan, no questions asked?

WILLIAM K. BLACK No real questions asked. Certainly no answers checked. In fact, we just had hearings last week about WaMu, which is also a huge player--

BILL MOYERS: Washington Mutual--

WILLIAM K. BLACK --in these frauds. Washington Mutual, which used to make, run all those ads making fun of bankers who, because they were stuffy and looked at loan quality before they made a loan. Well, WaMu didn't do any of that stuff. And of course, WaMu had just massive failures. And who got in trouble at WaMu? Who got in trouble at Lehman? You got in trouble if you told the truth. They fired the people who found the problems. They promoted the people that caused the problem, and they gave them massive bonuses.

BILL MOYERS: I watched the testimony where you were present the other day in the Lehman hearings. And there was a very moving moment with a former vice-president of Lehman Brothers who had gone and tried to blow the whistle, who tried to get people to pay attention to what was going on. Take a look.

MATTHEW LEE: I hand-delivered my letter to the four addressees and I'll give a quick timeline of what happened, May 16th was a Friday, on the Monday I sat down with the chief risk officer and discussed the letter, on the Wednesday I sat down with the general counsel and the head of internal audit, discussed the letter. On the Thursday I was on a conference call to Brazil. Somebody came into my office, pulled me out, and fired me on the spot with out any notification. I stayed, sorry.

BILL MOYERS: Matthew Lee, vice-president of Lehman Brothers, fired because he tried to blow the whistle. What does that say to you?

WILLIAM K. BLACK Well, it tells me that they were covering up the frauds, that they knew about the frauds and that they were desperate to prevent other people from learning.

BILL MOYERS: Matthew Lee told the accounting firm Ernst & Young what was going on. Isn't the accounting firm supposed to report this, once they learn from somebody like him that there's fraud going on?

WILLIAM K. BLACK Yes, they're supposed to be the most important gatekeeper. They're supposed to be independent. They're supposed to be ultra-professional. But they have an enormous problem, and it's compensation. And that is, the way you rise to power within one of these big four accounting firms is by being a rainmaker, bringing in the big clients.

And so, every single one of these major frauds we call control frauds in the financial sphere has been-- their weapon of choice has been accounting. And every single one, for many years, was able to get what we call clean opinions from one of the most prestigious audit firms in the world, while they were massively fraudulent and deeply insolvent.

BILL MOYERS: I read an essay last night where you describe what you call a criminogenic environment. What is a criminogenic environment?

WILLIAM K. BLACK A criminogenic environment is a steal from pathology, a pathogenic environment, an environment that spreads disease. In this case, it's an environment that spreads fraud. And there are two key elements. One we talked about. If you don't regulate, you create a criminogenic environment because you can get away with the frauds. The second is compensation. And that has two elements. One is the executive compensation that people have talked about that creates the perverse incentives. But the second is for these professionals. And for the lower level employees, to give the bonuses. And it creates what we call a Gresham's dynamic. And that just means cheaters prosper. And when cheaters prosper, markets become perverse and they drive honesty out of the market.

BILL MOYERS: You also wrote that the New York Federal Reserve knew about this so-called three-card monte routine. But that, the man who led it, at the time, Timothy Geithner, now the treasury secretary, testified that there was nothing he could do.

TIMOTHY GEITHNER: In our system the Federal Reserve was a fire station, a fire station with important, if limited, tools to put foam on the runway, to provide liquidity to markets in extremis. However, the Federal Reserve, under the laws of this land was not given any legal authority to set or enforce limits on risk-taking by large financial institutions like the independent investment banks, insurance companies like AIG, Fannie and Freddie, or the hundreds of non-bank financial firms that operated outside the constraints of the banking system.

BILL MOYERS: Now, what I hear is the gentleman who was then chairman of the New York Fed, saying, I, we had this job to do, but we didn't have the authority to do it.

WILLIAM K. BLACK Yeah.

BILL MOYERS: We were the fire truck, but we didn't have any water in our hose.

WILLIAM K. BLACK Yeah, this was pretty disingenuous, because other portions of his testimony, he explained why there was this gap. And he said it was because we repealed Glass-Steagall. Well, the Fed pushed for the repeal of Glass-Steagall.

BILL MOYERS: Glass-Steagall was the act that was repealed in the late nineties that separated regular banks from investment banks, right?

WILLIAM K. BLACK Correct. So this is a deliberately created regulatory black hole, created by the Fed. And then the Fed comes into the hearing, eight years later, and said, we were helpless. Helpless to do anything, because of a black hole we designed.

BILL MOYERS: Well, it doesn't stop there, because as I listened the other day, I heard that the Securities and Exchange Commission knew that Lehman was repeatedly ignoring its own risks, but it did nothing. Here's what the new chairman of the SEC, Mary Schapiro, had to say the other day, about why the commission fell down on the job. Take a look.

MARY SCHAPIRO: The SEC didn't have the staff, the resources, or quite honestly, in some ways, the mindset to be a prudential regulator of the largest financial institutions in the world. It was such a deviation from our historic disclosure-based and rules-based approach to regulation to come in and be a prudential supervisor. The staff was never given the resources. This program peaked at 24 people for the entire universe of the five largest investment banking firms in the world.

WILLIAM K. BLACK Well, this is another example, the self-fulfilling failure. This wasn't done under Mary Shapiro's watch.

BILL MOYERS: Right--

WILLIAM K. BLACK: This was Chris Cox, who was Bush's appointment. And he's the one who decided, we're only going to send 24 people to deal with all of the largest investment banks in the world. Now that's a farce. And everybody knows it's a farce. He didn't want effective regulation. We both spent time, considerable time, in Texas. And you know, the joke, one riot, one ranger, right?

BILL MOYERS: Texas ranger, right.

WILLIAM K. BLACK Treasury Secretary Geithner testified that in the circumstances they were dealing with at Lehman, "We were on the brink of the destruction of the entire global financial system." And then Chairman Bernanke testified how many people the Fed sent to Lehman to prevent us on the brink of global collapse.

BILL MOYERS: And how many?

WILLIAM K. BLACK: Two. They have a staff of thousands. This is criminal negligence except, because he's a federal employee, we can't charge him with a crime.

BILL MOYERS: Let's talk a moment about the government's allegations against Goldman Sachs. I mean, I get dizzy just reading about it. But the Wall Street Journal reporters did a terrific job this week of trying to sort it out. And they say, "It centers on a deal Goldman Sachs crafted, so that the hedge fund king, John Paulson, could bet on a collapse in housing prices." Is that your reading of it?

WILLIAM K. BLACK Yes, I mean, the complaint actually focuses on lying to investors. So it's a very traditional securities fraud complaint.

BILL MOYERS: Not about Paulson, by the way. He's not mentioned in the complaint.

WILLIAM K. BLACK No, but that's really interesting. And as to whether he will be mentioned eventually in this complaint, because Paulson has lots of potential liability on this one. John Paulson was allowed by Goldman, indeed encouraged by Goldman, to create a "Most Likely to Fail" list. So he took, within a particular category, the absolute worst stuff, because he wanted to bet that the stuff would fall in value. And they were certain to fall in value in terms of the economics.

BILL MOYERS: Wasn't he betting that people wouldn't be able to pay their mortgages?

WILLIAM K. BLACK Not even necessarily that, because most of these are liar's loans, again. And they will not pay, right? It's not an issue of liar's loans, will it work or will it not work. It's only when will it blow up. A liar's loan will blow up. If housing prices keep going up for three years hugely, then they will blow up in the fourth year.

But they will blow up. So he was betting against something that he knew was going to blow up. He didn't necessarily know the timing, but he proved to be right about the timing, because we know from the SEC complaint that he was in a rush to get this. He knew that the housing collapse was imminent. And he had to get this deal done right away. And Goldman Sachs felt the same thing. So they went and they got themselves a dupe, ACA. And they told the -- ACA is a group that puts together and supposedly checks the quality of mortgages. Not very well, as it turned out, of course. An investor would obviously want to know that this portfolio was picked to fail. Instead, they were told, according to the SEC complaint, "No, no, no, no. There's no John Paulson out there. There's only ACA, and it's in your corner. And it's picking a portfolio most likely to succeed." Now if John Paulson knew that Goldman was making those representations, then John Paulson knew those representations were false. And that could make him an aider and abettor.

BILL MOYERS: So tell me where the fraud might be in there, if the government proves its case.

WILLIAM K. BLACK Well, the fraud is, I'm representing to you, the potential investor, that a competent professional independent firm, ACA, looking after your interests, has picked this portfolio because they believe it's most likely to succeed. When in fact, the portfolio was selected overwhelmingly by Paulson and was selected because it was deliberately chosen to fail.

BILL MOYERS: The complaint names only one person, Fabrice Tourre, if I get the name correct.

WILLIAM K. BLACK That is correct.

BILL MOYERS: Who was 27 at the time. Would he have been acting without supervision on a deal of that enormity?

WILLIAM K. BLACK Oh, not even close. And this was-- this was part of a package of about 18 deals as well. So as big as this package was, and it was huge, the overall package was absolutely the type of thing that received personal attention of the leaders, the absolute top leaders at Goldman Sachs. So it's very curious to me that the SEC has failed to name the higher-ups.

BILL MOYERS: Why did it take so long for the Securities and Exchange Commission, the SEC, to kick into gear on this? I mean, have they kicked into gear?

WILLIAM K. BLACK Well, they haven't kicked into gear fully, or they'd be naming Blankfein and other senior leaders of Goldman. And they've, as you just mentioned, they've only gone after a junior person. And there would be, if they were really in gear, there would be criminal charges here. And if they were really in gear, there'd be a broad investigation, not just of Goldman, but of all of these major entities.

In the last three weeks, we have finally done a half-baked investigation, mind you. Not -- nothing like we did in the Savings & Loan days -- of Washington Mutual (WaMu), Citicorp, Lehman, and Goldman. And we have found strong evidence of fraud at all four places.

And we have looked previously at Fannie and Freddie and found the same thing. So the only six places we've looked, at really elite institutions, we've found strong evidence of fraud. So where are the other investigations? Why are there no arrests? Why are there no convictions?

BILL MOYERS: Well, Bill, where are the other investigations? Why have there been no arrests? Why have there been no convictions?

WILLIAM K. BLACK Because we have still Bush's wrecking crew in charge of the key regulatory agencies. Why are they still in place? They have abysmal records as major causes of this crisis.

BILL MOYERS: You talk about the Bush appointees still being there, but Goldman's former lobbyist, his treasury secretary, Timothy Geithner's chief of staff, the head of the Commodity Futures Trading Commission, Gary Gensler, who may soon have new power over derivatives, worked for Goldman.

So did the deputy director of the White House National Economic Council, the under Secretary of State is a former Goldman employee. Goldman's hired Barack Obama's recent chief counsel from the White House on his defense team. I mean--

WILLIAM K. BLACK Don't forget Rubin.

BILL MOYERS: Robert Rubin, whose influence is all over the place, who used to be--

WILLIAM K. BLACK It's his protégés that are in charge of economic policy, under Obama.

BILL MOYERS: So is this administration, which still has some Bush holdovers in it, and now has a lot of Goldman people in it, is this administration going to be able to pass judgment on Goldman Sachs?

WILLIAM K. BLACK Well, so far, they haven't been able to do it. They can't even get themselves to use the word fraud.

There's a huge part that is economic ideology. And neoclassical economists don't believe that fraud can exist. I mean, they just flat out -- the leading textbook in corporate law from law and economics perspective by Easterbrook and Fischel, says -- I'll get pretty close to exact quotation. "A rule against fraud is neither necessary nor particularly important." Right?

Notice how extreme that statement is. We don't need laws. We don't need an FBI. We don't need a justice department. We don't even need rules like the SEC. The markets cleanse themselves automatically and prevent all frauds. This is a spectacularly naïve thing. There is enormous ideological content. And it fits with class. And it fits with political contributions.

Do you want to look at these seemingly respectable huge financial institutions, which are your leading political contributors as crooks?

BILL MOYERS: TheHill.com website says Goldman Sachs is uniquely positioned to fight this case, that it spent $18 million over the last decade lobbying members of Congress, and put millions more in their campaigns. I mean, you've said elsewhere. That's smart business, right, to invest in the politicians who are going to be investigating you?

WILLIAM K. BLACK I would tell you, the Savings & Loan crisis, our phrase was, "The highest return on assets is always a political contribution."

BILL MOYERS: Well, all right. You're a member of Congress. The Supreme Court has said, "Goldman Sachs can spend all it wants in November to defeat you." Are you going to take them on?

WILLIAM K. BLACK Absolutely, but I would never be elected to Congress because of that. So let me -- in terms of that Supreme Court decision, if corporations are going to be just like people, let me tell you my criminologist hat. Then let's use the three strike laws against them. Three strike laws, you go to prison for life, if you have three felonies. How many of these major corporations would still be allowed to exist, if we were to use the three strike laws, given what they've been convicted of in the past?

And in most states, they remove your civil rights when you're convicted of a felony. Well, let's take away their right to make political contributions that they're found guilty of a violation.

BILL MOYERS: Bill, are you describing a political culture, that is criminogenic?

WILLIAM K. BLACK It's deeply criminogenic. And this ideology that both parties are dominated by that says, "No, big corporations wouldn't cheat. Fraud can't happen. Market's automatically excluded," is insane. We now have the entitlement generation as CEOs. They just plain feel entitled to being wealthy as Croesus with no responsibility, no accountability. They have become literal sociopaths. So one of the things is, you clean up business schools, which right now are fraud factories at the senior levels, right?

They create the new monsters that take control and destroy massive enterprises and cause global economic crises, cause the great recession. And very, very close to causing the second Great Depression. We just barely missed that. And there's no assurance that we've missed it five years out.

BILL MOYERS: This brings us back to what the president said this week. He said the crisis was born of a failure of responsibility from Wall Street to Washington. You've just described that. That brought down many of the world's largest financial firms and nearly dragged our economy into a second Great Depression. But he didn't name names. He doesn't say who specifically was responsible. You have. But the president doesn't name names.

WILLIAM K. BLACK No, and one of the most important things a president has is the bully pulpit. We have not heard speeches by the president demanding that the frauds go to prison. We have not heard speeches from the attorney general of the United States of America, Eric Holder. Indeed, we haven't heard anything. It's like Sherlock Holmes, the dog that didn't bark. And that's the dog that is supposed to be our guard dog. It must bark. And it must have teeth, not just bark.

BILL MOYERS: Bill Black, thank you for being back on the Journal.

WILLIAM K. BLACK: Thank you.

Friday, January 8, 2010

McCain is the real bank reformer?

Maybe McCain's shameful experience as one of the infamous Keating Five has informed his current belief in the need for sensible banking regulation. When it comes to financial sector reform, Obama's a lost cause: Wall Street was his biggest campaign contributor; and his administration is riddled with erstwhile bankers whose top priority is a return to the way things were right before the crash.


By Robert Scheer