I sure hope Jack Lew got the message loud and clear. Senator Elizabeth Warren is not going to allow him to mollycoddle banks the way Tim Geithner did. In Wednesday's Senate hearing, she asked him a few pointed questions intended to send a very straightforward message.
Warren began by speaking about a string of scandals that emerged as a result of the continued existence of "too big to fail banks." Despite this evidence and the fact that many officials have admitted the dangers to the economic system posed by big banks, Warren noted that various members of President Barack Obama's administration have appeared unwilling to prescribe concrete measures to address them. She then pointed specifically to a quote from a Treasury official during former Treasury Secretary Tim Geithner's tenure that suggested the department had been instrumental in scuttling an earlier bipartisan amendment that would have enacted restrictions on "too big to fail."
The day may come when the worst nightmare a crooked banker or compromised regulator can have begins with the words, "You have a letter from Senator Warren."
But before we get to that, here's an experience that may seem familiar: You're at a party or family get-together - a Sunday barbecue, perhaps - and someone says something like, "We need less government regulation." Next thing you know you're having an argument.Here's some advice for the next social event: There's no need to get into an argument. You can just ask, "How do you figure?"
With every unreasonable assertion you can ask a reality-based question like, "Where's the study that says that?" Once in a while they may cite a shallow white paper from sine right-wing foundation, but more often than that they won't even get that far. Soon the conversation will peter out with a "Well, uh ..."We can never go wrong asking questions. We only go wrong when we don't ask questions.
The Senator's letter should be the start of a public conversation. But that will only happen if Sen. Warren gets widespread and very vocal support.
That's what makes this letter from Sen. Elizabeth Warren so important. For five years we've watched the Justice Department ignore overwhelming evidence of bank crime, on grounds that Attorney General Eric Holder made explicit only last March when he said that "the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute... it will have a negative impact on the national economy, perhaps even the world economy."
The Securities and Exchange Commission, which has responsibility for pursuing civil bank fraud, has taken the same approach. So has the Federal Reserve, which has regulatory responsibility for the banking industry. They've all been saying pretty much the same thing: That criminal prosecution would destabilize the financial sector and put the world's economy at risk.
With this letter, Sen. Warren is asking these agencies a very simple question: "How do you figure?"
In my 33-year-and-counting career in politics, I have done my share of both candidate campaigning and issue campaigning. In the last 15 years or so, frankly, I have been more inclined to spend most of my time on the latter, because just fighting the candidate battles doesn’t necessarily move the ball forward in terms of making our country better. I got into politics to fight for the working class and poor families I grew up with in the Midwest, and I have found it far more satisfying to help them through issue fights than in helping candidates who may or may not help them someday. The last several months since the last election are a reminder that even when Democrats win elections, it is no guarantee that good things will happen for regular folks.
Having said that, I do get reminded how important it is to elect people who will actually fight for working families- not just part of the time, not just when it is convenient, but fighting for those families every day with all their heart and all their soul. Senators like Elizabeth Warren and Sherrod Brown remind me every week why it was a great use of my time to have been involved in helping them in last year’s elections.
Warren and Brown are making a huge difference, showing us that if we get a real live two-fisted fighter for working families in the ring on our behalf, it matters.
Brown’s recently filed bill to put pressure on the Too Big To Fail banks is a shot across the bow that has the biggest banks on the defensive; Warren’s perfectly framed bill to let students pay back their college loans at the same rate of interest that the banks get from the Federal Reserve discount window has the bankers and their allies like Third Way screaming bloody murder; and it seems like every time there is a Banking Committee hearing and Warren starts asking someone questions, important issues that desperately needed attention get raised. Warren and Brown are making a huge difference, showing us that if we get a real live two-fisted fighter for working families in the ring on our behalf, it matters.
That’s why I spent most of my time in the 2012 election cycle, where I was working on behalf of Warren and Brown. I knew they would fight hard for the same people I was fighting for, and I knew they would make a difference. And that is why I decided early in this cycle to get involved in helping Rick Weiland run for Senate in South Dakota.
In a recent speech, the influential economist Jeffrey Sachs made the following statement, one that was both remarkable and yet predictable about the culture of Wall Street:
"I'm going to put if very bluntly. I regard the moral environment as pathological...these people are out to make billions of dollars and nothing should stop them from that. They have no responsibility to pay taxes. They have no responsibility to their clients...to counter-parties in transactions.
They are tough greedy aggressive and feel absolutely out of control...and they have gamed the system to a remarkable extent. And they have a docile President, a docile White House, and a docile regulatory system that can't find its voice. Its terrified of these banks. If you look at the campaign contributions the financial markets are the #1 campaign contributors in the US now.
We have a corrupt politics to the core...and both parties are up to their necks in this. The corruption is as far as I can see everywhere. But what it's led to is this sense of impunity that is really stunning...and it very unhealthy. I have waited four, five years now to see one figure on Wall St. speak in a moral language and I've not seen it once.
Minds are changing on Too Big to Fail. A month ago, it was just something in the air. Now, it looks like we're headed for a real legislative confrontation. And man, is the finance sector freaking.
Last week, on April 24th, Democratic Senator Sherrod Brown of Ohio and Louisiana Republican David Vitter introduced legislation called the "Terminating Bailouts for Taxpayer Fairness Act of 2013 Act," or the "Brown-Vitter TBTF Act" for short. The bill is a gun aimed directly at the head of the Too-Big-To-Fail beast.
During the Dodd-Frank negotiations a few years ago, Brown teamed up with Delaware Democrat Ted Kaufman to introduce an amendment that would have physically capped the size of the biggest banks. The amendment was bold and righteous but was slaughtered on the floor by a 61-33 margin, undermined by leaders of both parties – 27 Democrats voted against it.
Brown-Vitter offers a different and, in a way, more elegant solution to the problem than Brown-Kaufman. Rather than impose size limits, it simply insists that banks with over $500 billion in assets maintain higher capital reserves than are currently required. Companies like J.P. Morgan Chase, Wells Fargo, Morgan Stanley, Goldman Sachs, Citigroup and Bank of America will have to keep capital reserves of about 15 percent, about twice the current amount.
The bill only has such tough requirements for just those few megabanks, which sounds unfair, except that the aim of the bill, precisely, is to level the playing field. Right now, the biggest U.S. banks enjoy a massive inherent market advantage in that they're able to borrow money far more cheaply than other banks, because everybody on earth knows the government will never let them fail and will always bail them out in a pinch, making their debt essentially U.S.-government guaranteed. Studies have shown that these banks borrow money at about 0.8 percent more cheaply than other banks, and that this implicit government subsidy is worth about $83 billion a year just to the top 10 banks in America. This bill would essentially wipe out that hidden subsidy and make the banks bailout-proof.
As soon as Brown-Vitter was introduced, a very interesting thing happened. The Independent Community Bankers of America, or ICBA, issued a press release boosting the bill. "ICBA strongly supports this legislation," the release read, "and urges all community banks to join the association in advocating passage of legislation to end too-big-to-fail."
The inside-the-beltway world of Washington, DC rarely deals with truly foundational economic issues. When they do, it is only because they are being forced to by crisis or a political movement forcing something onto center stage. The big fundamental issues make the powers that be uncomfortable simply because they may cause big changes that do damage to the wealthy economic incumbents who don’t want their privileged status upended. This is why DC seems so disconnected to people in the real world: while Congress is goofing around with stupid stuff like sequesters, the things that really matter to people go unaddressed.
Occasionally, though, the real issues are forced onto the DC scene by some combination of smart, gutsy politicians and political movements whose time has come. It’s too early to tell, but on what I believe are the two most central economic issues of the next generation, I’m hoping DC is finally going to be forced to pay attention.
The first of these issues is the steady destruction of the American middle class by the massive expansion of the low-wage worker economy. There is a movement on this issue that is coming together to take this issue on, and we are seeing the early signs of it in the New York and Chicago fast food strikes, and the huge nationwide day of action at Wal-Marts around the country last year. There will be more to write about this in the coming weeks, so that will be Part 2 of this story, but you heard it here first: this will be a big deal.
There is a new report out this morning once again reminding us of the greatest disappointment progressives have in the Obama administration: the lack of toughness in regards to Wall Street. The report, issued by the Campaign for a Fair Settlement (full disclosure: this is a coalition I have helped in various ways since their founding), is probably the most harshly critical analysis yet by a coalition aligned with traditional progressive Democratic groups. The report opens with this damning list of hard-to-dispute facts, and then just goes on from there:
• The Administration has yet to prosecute a single major bank or top level executive for the widespread fraud leading to the system’s collapse.
• Civil penalties have similarly failed to be imposed on top executives, and fines levied against the banks have been so small as to amount to a minor cost of doing business.
• Settlements have left the banks themselves in control of providing relief and restitution to homeowners, giving them credit for cleaning up their balance sheets more than preventing foreclosures.
• Far from showing any signs of having been chastened, the biggest banks are now even bigger, and have successfully slowed down or weakened key elements of the financial reform bills passed in the wake of the collapse.
And signs even early on in the second Obama administration are not encouraging:
• With no mention of Wall Street and the banks anywhere in either his second inaugural speech or his 2013 State of the Union address, the President appears to be wishing the crisis behind him more than addressing its still festering wounds.
• Statements by new appointees like Treasury Secretary Jacob Lew have suggested that they view the “too big to fail” problem as having been largely solved, even as new studies confirm how much the systematically risky banks still benefit from market assumptions that they retain that status.
• Despite having faced withering rebukes for their handling of key cases and settlements, agencies like the Office of the Comptroller of the currency have reignited that criticism in their attempts to amend the disastrous Independent Foreclosure Review settlement, yet again constructing terms far more favorable to the banks than to homeowners and borrowers.
You know that feeling you get when you watch Elizabeth Warren take apart the bad guys, the ones who have crashed the economy, cheaped out on our wages and just made our lives all-around miserable? It's like that childhood nightmare when you're cornered by the Mean Girls, but miracle of miracles, your big sister shows up -- just in time to kick ass and take names.
In fact, it is the kind of behavior that would get a lot of new lawmakers smacked down hard, or marginalized into ineffectiveness. Few new Senators behave this way — other than the occasional bomb-thrower more interested in headlines than results. (Ted Cruz of Texas currently fits this category.)
But Warren has an independence and authority that frees her to be outspoken without getting alienated. She can embarrass the Barack Obama administration for failing to send bankers to jail without fear.
She can also react with righteous outrage when I asked about Obama's recent support of "chained Consumer Price Index (CPI)," which liberals view as a cut to Social Security benefits. When I suggest that most brand-new senators would not undercut their own party's president that way, she responds: "Better I should say this now, than wait to have anybody surprised about it later on."
There's a reason for her confidence: not only does Warren have tremendous credibility on the issues, she is simply too popular, with too broad and devoted a following, for anyone to threaten — up to and including the Obama administration.
She is not a career politician, entangled by the favors and deals traded on her way up the ladder. Some $25 million of the $41 million raised for her campaign came not PACs or big-dollar donors, but from individuals giving less than $200 each — an almost unprecedented national grassroots following, who stand ready to move as one to help Warren and her allies, and to oppose those seen as obstacles.
That gives an extraordinary amount of independent power to a woman who isn't the least bit shy about wielding it.
She is, in her own way, too big to fail.
But as we know, there's no easier way to become a target of the Democratic establishment, the librul media and the right-wing attack machine than to act like a real progressive:
"Behind the scenes she is being herself," Franken says. "She has strong progressive views. But, in her interactions she's a lovely, nice person."
She also has the advantage of being able to work on a six-year time horizon — and, realistically, as long as she wants to stay there.
And that might be what scares her Wall Street enemies the most. There is no amount of money, or scurrilous attacks, likely to cause her downfall at the polls.
That will only make them more eager to find other ways to halt her efforts. They will counter-attack at every opportunity — as with the current attempt to derail Cordray's re-nomination — and undoubtedly plan longer-term strategies to limit her sway.
After all, they are supposed to be too big to fail, not her. It will take much longer than three months to see which of them will ultimately left standing.
So here's the thing: The more effective she becomes, the worse the attacks will be. We all know this. So it's really, really important that we have her back. Any time they go after her, we need to unleash the hounds of hell. And when we get those emails from Warren's PAC asking for contributions, we need to give her a few bucks, whenever we can spare it.
Because we have a national treasure in Sen. Warren, the People's Lobbyist.
Thank you, Attorney General Holder, for finally being so blunt and definitive about DOJ’s unwillingness to prosecute the biggest banks:
But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.
Again, I'm not talking about HSBC, this is more of a general comment. I think it has an inhibiting influence, impact on our ability to bring resolutions that I think would be more appropriate.
I rarely agree with Chuck Grassley, but when he calls this “stunning”, he couldn’t be more right. This is the ultimate Big F’ing Deal: the nation’s top prosecutor openly admitting that some people and institutions are so big, wealthy, and powerful that it is the policy of the United States to hesitate to prosecute them no matter how terrible their crime. And it isn’t just American banks, either: HSBC, while operating here, is a foreign based bank.
Right wing forces in this country are obsessed with the size of government, but the fundamental debate we should be having is not about size but what the goal of government should be. What is government’s central mission?
There are four major views on this question in modern American politics, two in each political party.
The first Republican view is boiled down to the central organizing principle that government should be as small as possible. That’s it.
Size (the small variety) not only matters, but is the only thing that matters. Any mission or goal that government has is overridden and overwhelmed by the urgent desire to make it smaller. Whether cuts in the size of government are rationally planned doesn’t matter, as their rhetoric on the sequester makes clear. Whether cuts in the size of government hurt people or hurt the economy as a whole doesn’t matter either. I've heard heart-breaking stories, for example, of parents with disabled kids lobbying against the cuts that will devastate the programs that help their children, with Republican congressmen telling them it doesn’t matter, we just have to cut the size of government. Grover Norquist famously said that he wants to make government so small that he can drown it in a bathtub, and his Tea Party comrades are clearly trying to do exactly that at the cost of everything else.
While all Republicans talk about wanting to make government smaller, the other Republican view on what the mission of government should be is less focused on size, and more focused on this central thing: serving the needs of big business. This idea was most famously (or infamously) articulated by the former Republican chair of the House Committee on Financial Services in 2011 when he said “In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”
