Big Banks Bought the SAFE Banking Vote

On May 9, 2010, in The Public, by Donny Shaw

The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.

– Sen. Dick Durbin

On Thursday night, the U.S. Senate took what is probably the most clear-cut vote for or against the big banks they will ever take. The question: should we force the “too big to fail” banks to shrink themselves back to the size they were in 2003, or should we let them keep growing as big and systemically risky as they want? The overwhelming answer from the Senate: let them keep getting bigger!

The Brown-Kaufman SAFE Banking Act amendment voted on Thursday night created a confounding division in the Senate. Some of the most conservative Republicans sided with a bunch of the most liberal Democrats in favor of forever doing away with “too big to fail.” However, the vast majority, a mix of so-called liberals, conservatives and moderates, voted to keep things just as they are.

There has been a lot of speculation over where exactly the division was on this amendment. Dylan Ratigan called it “The People’s Party” vs. “The Bankster Party.” And Matt Taibbi wondered if there wasn’t some kind of sick joke involved.

It was a strange roll call, but I think I’ve figured it out. It was all about campaign contributions.

Looking at finance/insurance/real estate sector campaign contribution data from OpenSecrets.org, I found that senators who voted against the Brown-Kaufman SAFE Banking amendment have received nearly twice as much money from the big banks as the senators who voted in favor of it. Specifically, the average senator voting against the amendment has received $3,578,898 from the financial sector over the course of their career, while the average senator voting in favor has received only $1,846,292. It’s very close to double for those opposed. And when we are talking about millions of dollars, double is a whole lot of money and a whole lot of influence.

We can’t keep letting the banks receive public support to get bigger and riskier through hidden subsidies and bailouts. They are bigger right now than they were when they were first deemed too big to fail. The current financial reform bill does almost nothing to solve too-big-to-fail. It is business as usual. I really wonder, will Obama be proud of this bill when he passes it — does he really believe it will help to prevent the next crisis and the next round of bailouts, or does he just think it’s a political winner?

Below are the individual contribution totals for each senator from the finance/insurance/real estate sector divided by how they voted on the Brown-Kaufman SAFE Banking amendment. The data makes it perfectly clear — senators voting against the amendment were bought off and doing the bidding of the banks. The senators voting for the amendment were acting with independence and doing the only reasonable thing — voting to limit the size of the too-big-to-fail banks.

The 33 Yes Votes

Senator Career $ from Finance
Sen. Mark Begich [D, AK] $412,637
Sen. Jeff Bingaman [D, NM] $1,059,499
Sen. Barbara Boxer [D, CA] $2,765,288
Sen. Sherrod Brown [D, OH] $1,620,430
Sen. Roland Burris [D, IL] $4,900
Sen. Maria Cantwell [D, WA] $1,878,690
Sen. Ben Cardin [D, MD] $2,756,636
Sen. Bob Casey [D, PA] $1,355,841
Sen. Tom Coburn [R, OK] $1,078,264
Sen. Byron Dorgan [D, ND] $1,455,834
Sen. Richard Durbin [D, IL] $3,055,424
Sen. John Ensign [R, NV] $2,589,370
Sen. Russell Feingold [D, WI] $990,917
Sen. Al Franken [D, MN] $1,022,598
Sen. Thomas Harkin [D, IA] $2,534,445
Sen. Ted Kaufman [D, DE] $0
Sen. Patrick Leahy [D, VT] $615,682
Sen. Carl Levin [D, MI] $2,260,576
Sen. Blanche Lincoln [D, AR] $2,447,809
Sen. Jeff Merkley [D, OR] $721,157
Sen. Barbara Mikulski [D, MD] $1,301,068
Sen. Patty Murray [D, WA] $1,687,337
Sen. Mark Pryor [D, AR] $1,345,008
Sen. Harry Reid [D, NV] $4,389,858
Sen. Jay Rockefeller [D, WV] $2,213,734
Sen. Bernie Sanders [I, VT] $181,095
Sen. Richard Shelby [R, AL] $5,371,330
Sen. Arlen Specter [D, PA] $6,406,258
Sen. Debbie Stabenow [D, MI] $1,899,835
Sen. Tom Udall [D, NM] $1,062,336
Sen. Jim Webb [D, VA] $563,161
Sen. Sheldon Whitehouse [D, RI] $1,222,607
Sen. Ron Wyden [D, OR] $2,658,024
TOTAL $60,927,648

The 61 No Votes

Senator Career $ from Finance
Sen. Daniel Akaka [D, HI] $556,295
Sen. Lamar Alexander [R, TN] $4,940,775
Sen. John Barrasso [R, WY] $295,932
Sen. Max Baucus [D, MT] $4,790,487
Sen. Evan Bayh [D, IN] $4,393,347
Sen. Michael Bennet [D, CO] $835,796
Sen. Kit Bond [R, MO] $3,255,538
Sen. Scott Brown [R, MA] $1,015,364
Sen. Samuel Brownback [R, KS] $1,336,269
Sen. Richard Burr [R, NC] $2,988,952
Sen. Thomas Carper [D, DE] $2,311,778
Sen. Saxby Chambliss [R, GA] $3,483,860
Sen. Thad Cochran [R, MS] $662,234
Sen. Susan Collins [R, ME] $2,273,113
Sen. Kent Conrad [D, ND] $2,507,437
Sen. Bob Corker [R, TN] $3,150,750
Sen. John Cornyn [R, TX] $4,597,492
Sen. Michael Crapo [R, ID] $1,779,063
Sen. Chris Dodd [D, CT] $14,367,412
Sen. Michael Enzi [R, WY] $1,087,043
Sen. Dianne Feinstein [D, CA] $3,657,556
Sen. Kirsten Gillibrand [D, NY] $2,334,456
Sen. Lindsey Graham [R, SC] $1,951,429
Sen. Chuck Grassley [R, IA] $2,605,399
Sen. Judd Gregg [R, NH] $1,070,249
Sen. Kay Hagan [D, NC] $585,694
Sen. Orrin Hatch [R, UT] $2,481,543
Sen. Kay Hutchison [R, TX] $4,694,038
Sen. James Inhofe [R, OK] $1,477,202
Sen. Daniel Inouye [D, HI] $1,453,487
Sen. John Isakson [R, GA] $3,849,408
Sen. Mike Johanns [R, NE] $697,621
Sen. Tim Johnson [D, SD] $3,143,865
Sen. John Kerry [D, MA] $18,112,577
Sen. Amy Klobuchar [D, MN] $734,117
Sen. Herbert Kohl [D, WI] $73,950
Sen. Jon Kyl [R, AZ] $3,741,994
Sen. Mary Landrieu [D, LA] $2,500,584
Sen. Frank Lautenberg [D, NJ] $3,478,817
Sen. George LeMieux [R, FL] $0
Sen. Joe Lieberman [I, CT] $10,084,996
Sen. John McCain [R, AZ] $33,474,029
Sen. Claire McCaskill [D, MO] $863,393
Sen. Mitch McConnell [R, KY] $5,247,103
Sen. Robert Menéndez [D, NJ] $4,151,772
Sen. Lisa Murkowski [R, AK] $875,690
Sen. Bill Nelson [D, FL] $3,213,078
Sen. Ben Nelson [D, NE] $2,844,056
Sen. Jack Reed [D, RI] $2,897,782
Sen. James Risch [R, ID] $228,711
Sen. Pat Roberts [R, KS] $1,647,286
Sen. Charles Schumer [D, NY] $15,918,336
Sen. Jeff Sessions [R, AL] $2,158,535
Sen. Jeanne Shaheen [D, NH] $1,046,765
Sen. Olympia Snowe [R, ME] $1,700,184
Sen. Jon Tester [D, MT] $603,993
Sen. John Thune [R, SD] $3,636,776
Sen. Mark Udall [D, CO] $1,781,168
Sen. George Voinovich [R, OH] $2,770,340
Sen. Mark Warner [D, VA] $2,632,766
Sen. Roger Wicker [R, MS] $1,263,098
TOTAL $218,312,780

Too Big to Fail

On April 26, 2010, in The Public, by Joe Costello

The morning light.
Another fresh fight.
Another row, right, right, right, right.
And I’m Totally Wired. Just Totally Wired
The Fall

Greider has a good piece on Larry Summers. The best part he admits to yelling at the TV, which is why I neither watch much TV or listen to Larry Summers. But it certainly would

have been a good thing to have taped the cracking of Greider’s wizened elder demeanor to see he can curse and bellow like like a sailor in the middle of a three day binge. After all, he was a real newspaper man for many years. Lord knows we could use plenty more of that from people who actually have things to say. Larry Summers is the personification of the American political disease of failing-up, unaccountable power, an increasingly dangerous malignancy coursing through our body politic. Greider takes Summers to task for several prevarications, notably his babbling in favor of “too big to fail“, which of course Larry’s going to support, he’s been working for the mega-corporations his whole career.

Quashing too big to fail is one of the most important concepts in American politics today, but it has little organized political constituency. Recently, it’s been floating around the margins of debate, such that is, on financial reform, given new life by Joe Biden’s Senate cost of viagra replacement Ted Kaufman. There’s some irony there, as a post-New Deal Liberal, Old Joe never was and is no anti-too big to fail guy — cheers to Mr. Kaufman. Breaking up the big banks is completely in the American tradition of anti-trust, which grew as a reaction to the burgeoning power of our industrial and financial corporations at the turn of 19th and 20th centuries. Anti-trust was a solution in the American tradition, its roots in Jefferson’s seminal understanding that democracy is necessarily decentralized. Unfortunately, anti-trust fell by the wayside during the New Deal. The European import of Bismarkian welfare statism came to the forefront.  An attempt was made to balance the centralized power of industrial corporatism by growing the power of the federal government. It failed, the corporations took over the government.

A genuine and solid critique of some aspects of the New Deal, grounded in the American tradition against centralized power, was propagated by both some genuine conservatives and a few liberals. But for the most part, this critique disappeared a long time ago. What is called conservatism today is some sort of rotten mutation, offering no critique of corporatism, its leadership for the most part mega-corporate shills. On the other side are the liberals, and I’ll say over the years, I’ve met few who were small “d” democrats, Bismarkian statism had become the liberals’ North star. By the mid 20th century, the doctrines of industrialism such as economies of scale replaced republicanism, proliferating the politics of oligarchy.

Anti-too big to fail offers an excellent opportunity for reform politics today. Not just as another campaign to call your DC mega-corporate shill, but as the foundation for a real effort to organize republican reform. A place to begin a political dialog that cuts across the dysfunctional, effete, and increasingly empty categories promoted by the political class and the corporate media. A conversation asking how do we evolve self-government in the 21st century by restoring some of the principles of its 18th century founding combined with the knowledge and technologies of today.

Cross-posted from Too Big to Fail

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Anyone who is not serious about fixing Too-big-to-fail and thinking about the implications of big banks and their size is not serious about reform. Just plain not serious.

Surprise: Hedge Fund Managers made a killing last year with help of Treasury. Shows that big investors perceive Wall St. as a game of people’s lives, the sneaky win the money and the outcome for regular people is inconsequential. April 1 joke is always on us.

Top from left: David Tepper, George Soros, James Simons, John Paulson, Steve Cohen; Bottom from left: Carl Icahn,

At least the notion of TBTF is gaining traction and the word on the street is that more insider people are going to attack size. “Speeches by central bankers tend to be dry affairs. For this reason alone, remarks by Andrew Haldane, the Bank of England’s executive director in charge of financial stability, deserve attention. In a discussion about bank size, he made reference to the limits of Facebook friendship and the structure of Al Qaeda. Rhetorical flourishes aside, Mr. Haldane delivered a serious message: regulators are thinking increasingly radical thoughts about tackling big banks.”

Geithner says “it’s “deeply unfair” that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.” Well, we have a sense that he might push harder now that health care is over in Congress. He should have some leverage to go after size and if he doesn’t, he’s not being sincere about fixing the disparity.

Here’s another win, NYFed is going to reveal where the bailout billions went.

To know who else is not serious about the interests of a safe/fair/prosperous economy, look at who is in bed with Wall Street. This is a great article that chronicles Wall Street’s “best hope” (Clinton and Obama have chummed up with them in the past too):

Republicans are stepping up their campaign to win donations from Wall Street, trying to capitalize on an increasing sense of regret among executives at big financial institutions for backing Democrats in 2008.

In discussions with Wall Street executives, Republicans are striving to make the case that they are banks’ best hope of preventing President Barack Obama and congressional Democrats from cracking down on Wall Street.

GOP strategists hope to benefit from the reaction to the White House’s populist rhetoric and proposals, which range from sharp critiques of bonuses to a tax on big Wall Street banks, caps on executive pay and curbs on business practices deemed too risky. [Wall Street Journal, 2/4/10; emphasis added]

Senator Kaufmans’ speech the other day is certainly the most full and most thoughtful speech/writing coming out of Congress. It was a pleasure to read, I could feel the bats hitting home runs with each paragrah. He has a bright mind and thinks carefully about structural and fundamental change. This speech gets technical, but if there is anything worth referencing that is also comprehensive, this is the speech. Amazing, where has Kaufman been. Now is the time to show him your support. I think we should put this on our policy page.

Senator Kaufman breaks from the silence

Wall Street Reform That Will Prevent The Next Financial Crisis

March 11, 2010

Introduction:  Where the Burden of Proof Lies

Financial regulatory reform is perhaps the most important legislation that the Congress will address for many years to come. Because if we don’t get it right, the consequences of another financial meltdown could truly be devastating.

In the Senate, as we continue to move closer to consideration of a landmark bill, however, we are still far short of addressing some of the fundamental problems – particularly that of “too big to fail” – that caused the last crisis and already have planted the seeds for the next one.  And this is happening after months of careful deliberation and negotiations, and just a year and a half after the virtual meltdown of our entire financial system.

That is why I believe that reorganizing the regulators and giving them additional powers and responsibilities isn’t the answer.  We cannot simply hope that chastened regulators or newly appointed ones will do a better job in the future, even if they try their hardest.  Putting our hopes in a resolution authority is an illusion.  It is like the harbor master in Southampton adding more lifeboats to the Titanic, rather than urging the ship to steer clear of the icebergs.  We need to break up these institutions before they fail, not stand by with a plan waiting to catch them when they do fail.

Without drawing hard lines that reduce size and complexity, large financial institutions will continue to speculate confidently, knowing that they will eventually be funded by the taxpayer if necessary.  As long as we have “too big to fail” institutions, we will continue to go through what Professor Johnson and Peter Boone of the London School of Economics have termed “doomsday” cycles of booms, busts and bailouts, a so-called “doom loop” as Andrew Haldane, who is responsible for financial stability at the Bank of England, describes it.

The notion that the most recent crisis was a “once in a century” event is a fiction.  Former Treasury Secretary Paulson, National Economic Council Chairman Larry Summers, and J.P. Morgan CEO Jamie Dimon all concede that financial crises occur every five years or so.

Without clear and enforceable rules that address the unintended consequences of unchecked financial innovation and which adequately protect investors, our markets will remain subverted.

These solutions are among the cornerstones of fundamental and structural financial reform.  With them we can build a regulatory system that will endure for generations instead of one that will be laid bare by an even bigger crisis in perhaps just a few years or a decade’s time.  We built a lasting regulatory edifice in the midst of the Great Depression, and it lasted for nearly half a century.  I only hope we have both the fortitude and the foresight to do so again.

Thank you, Senator Kaufman, for your clarity, rigor, and service.

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What Too-big-to-fail Means for Compensation

On February 1, 2010, in Background and Research, by Tiffiniy Cheng

These are great visuals from WSJ, and Econompic Data did a fantastic job boiling down for us:

from WSJ: “executives, traders and money managers at 38 top financial firms can expect to earn nearly 18% more than they did last year, and slightly more than they did in the record year of 2007.”

from ED: “the lack of competition among the largest banks has caused compensation within the industry to become even more concentrated.”

“the increase in compensation (and risk) is now concentrated among only these top banks. Bonuses at these “big four” banks are up a whopping 25% since 2007 (all other firms are down 18% since that time) and 40% since 2006 (whereas all other firms are down 2%).”

“For all the talk and supposed intervention, nothing has changed (actually, with these banks even more “too big too fail”, things may actually be worse).”

The debate over banks and banking came front and center this week. In his toughest language yet, President Barack Obama vowed to veto financial reform legislation that is not tough enough on Wall Street. “The lobbyists are already trying to kill it,” Obama told Congress in his State of the Union address. “Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.”

The President’s rhetoric offers an important measure of progress. Now we can be assured that the political elite are paying attention to the poll numbers showing an unprecedented anger at the big banks and the Wall Street bailouts. Democrats are starting to figure out if they don’t take up this populist message and run with it in November, the Republicans will.

But the rest of the President’s speech and the other dramatic developments in the banking world this week indicate that Democratic actions are falling far short of their rhetoric, a pattern that voters are sure to notice.

First, the speech. Many had anticipated a big announcement on jobs. With jobless rates in the double digits and a projected 5-10 year haul to get employment back to normal levels, workers were hoping for something big and bold. Instead, Obama proposed $30 billion in TARP funds to get credit flowing to small businesses. $30 billion to put 16 million Americans back to work? $30 billion when the Wall Street bonus pool for a few thousand bankers was $140 billion this month? Democrats will live to regret this missed opportunity.

Also on Wednesday, U.S. Treasury Secretary Tim Geithner was called on the carpet once again by irate members of the House for his mishandling of the AIG bailout. To their credit, several Democrats asked the toughest questions. But Geithner bobbed and weaved and no knock-out punches were landed. This is a problem for the Democrats. The whole incident paints an ugly picture of the federal response to the financial meltdown, best described by Representative Edolphus Towns (D-NY): “The taxpayers were propping up the hollow shell of AIG by stuffing it with money and the rest of Wall Street came by and looted the corpse.”

On Thursday, Federal Reserve Chairman Ben Bernanke was reconfirmed by the Senate for another four year term. His nomination had been in trouble and a record number of senators voted no, but Obama stood by his man and pushed him through. The problem with Bernanke is best summarized by economist Simon Johnson: “Bernanke is an airline pilot who pulled off a miraculous landing, but didn’t do his preflight checks and doesn’t show any sign of being more careful in the future – thank him if you want, but why would you fly with him again (or the airline that keeps him on)?” While Bernanke may have saved Wall Street, he has shown little interest in using his power as Fed Chairman to aggressively aid Main Street. He is not the man for the job in these tough economic times and that will soon be apparent to the detriment of the Democrats who secured his confirmation.

Ultimately, however, the most important developments of the week were played out behind closed doors in the Senate. Senate Banking Chairman, Chris Dodd, made the decision some time ago to try to devise a bipartisan financial reform package. His package of reforms was then handed over to four bipartisan working groups. With thousands of bank lobbyists swarming the hill, it is no surprise that these groups are busily making the Dodd bill worse.

The derivatives language is being weakened and bankruptcy is emerging as the preferred method of unwinding financial institutions, which could leave taxpayers to foot the bill for this expensive procedure. To truly end the “too big to fail” problem and crack down on the reckless behavior of the biggest banks, we need strong, specific preventative measures such as leverage limits, capital and margin requirements, limits on counterparty exposures, a ban on proprietary trading and limits on bank size through a low cap on total liabilities. Even Obama’s signature reform, an independent consumer agency is in danger of being whittled down to a corner desk in a failed federal agency.

The President understands that the Wall Street bailout was “about as popular as a root canal.” But if Democrats continue to peddle this type of rhetoric while neglecting meaningful reform as they have done this week, the Republicans will run away with the anti-bailout message and with the election in November.

Crossposted from http://www.banksterusa.org/

Rep. Dingell on Breaking up The Banks:

In the latest broadside from Democrats against big banks, U.S. Rep. John Dingell (D., Mich.) introduced a bill Tuesday that would direct the government to simply break up banks deemed too large to fail. Banks ordered to restructure would also face higher capital requirements.

The bill, called the “Financial Services Industry Stability Act of 2010,” goes much further than legislation that passed the House of Representatives in December, which would give the government more power and discretion to determine if a company is too big to fail (that bill wouldn’t necessarily require these firms be broken up). It’s unclear whether Rep. Dingell’s bill will attract much support, though there is at least one ominous sign for banks: his proposal was modeled after a section of the Endangered Species Act.

“Amazingly, more than a year after these superbanks nearly bankrupt our country, they continue to be very big, very powerful, very arrogant and very greedy,” Mr. Dingell said. “Nothing has changed from this time 15 months ago, including the banks’ desire to make big bets that produce even bigger bonuses for executives. We need to send a clear message to our banks and the executives who run them this behavior has to change.”

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This article is written by our guest blogger and ANWF member, Robert Roth

The Three Stooges – Moe, Larry and Curly Joe – gave a comic definition to the term “stooge.”  But one of the dictionary definitions of “stooge” is “one who plays a subordinate or compliant role to a principal” – “principal” meaning one who calls the shots.  “Puppet” is said to mean the same thing.  The dictionary I’m looking at even gives, to illustrate the definition of “stooging,” “congressmen who stooge for the oil and mineral interests.”  So how apt is the use of the term for Ben, Larry and Curly Tim – Federal Reserve Chair Ben Bernanke, Larry Summers, director of the National Economic Council, the White House office that coördinates economic policy in the Obama Administration, and Treasury Secretary Tim Geithner?

In a general way, all three are stooges for Wall Street, in that their reaction to the near-collapse of the financial system that nearly brought us a Second Great Depression – and still could, in my view – has been to try to revive the institutions and practices that gave rise to the problem in the first place.  In short, they have been representing financial interests, rather than Main Street.  More specifically, Ben Bernanke supported and now continues the low-interest policies that helped inflate the Bubble Economy, enabled widespread fraud by failing to exercise the Fed’s regulatory powers while the Bubble was inflating, and has arranged trillions in backing for the credit markets, making more billions for Wall Street at the expense of the rest of us.  And it seems entirely fair to give Larry Summers, as the chief advisor to the White House on economic policy, an ample helping of blame for Obama’s failure to fight for a more substantial jobs program.  And there is evidence Tim Geithner arranged for a secret bailout of AIG when he was chairman of the New York Fed.  Others have made the case in more detail – see, for example, Chris Hedges, “Wall Street Will Be Back For More” and the other sources cited below – but I think it’s clear the terms are apt, and a useful way to draw attention to the need for President Obama not only to do an about-face on the subject of financial regulatory reform, but to clean the White House of the influence of those who have until now served as stooges for Wall Street while occupying positions of public authority and trust.  And a good start would be firing Ben, Larry and Curly Tim.

Perhaps in desperation after the Democrats’ loss in Massachusetts, President Obama has finally come out swinging at Wall Street.  Previous “reform” efforts were a smokescreen, but there is potential for real change in the latest proposals.  Those should be evaluated against our own program for fundamental restructuring of the financial system and the economy, and as their impact is complex and they will surely change, I don’t propose to evaluate them fully here.  Suffice it to say that in adopting the proposals of former Fed Chief Paul Volcker, Obama may have taken a page directly out of the playbook outlined by Simon Johnson a few days previous.  But as the dust flies and may not settle for some time, there are some things we can and should do to impact the situation.  This article outlines some of those first steps and provides a toolkit of information resources for following the action.

First, Obama should conduct a clean sweep, and divest his administration of those who produced the near collapse of the financial system and the economy and have thus far been working to preserve the pre-crisis status quo.  That means dumping the Three Stooges who laid so much of the groundwork for the recent near collapse of the economy and have worked ever since to preserve in its current form the financial system that caused it:  Amid the talk of possibly replacing Bernanke at the Fed, Summers’ name has been floated as an alternative.  That would be a change we could believe in – from the frying pan to the fire, or vice versa, take your pick.  Instead, progressive forces should mobilize behind figures like FDIC Chair Sheila Bair or economists like Joseph Steiglitz or James K. Galbraith.  And the few Senators who have thus far announced opposition to Bernanke’s reappointment – Oregon’s Jeff Merkley, Wisconsin’s Russ Feingold, and California’s Barbara Boxer – should hear from us in support, and the rest should hear from us in protest until they change their tune.

Second, something constructive should come out of the hearings of the Financial Crisis Inquiry Commission.  Thus far, we’ve seen softball questions lobbed at the giants of the finance industry on heavily reported Day One, while the media all but ignored the second day, at which Sheila Bair and Illinois Attorney General Lisa Madigan, among others, systematically described the ways in which the Fed helped enable the rampant fraud that led to the crisis and proposed serious steps to avoid a repetition.

Third, we should understand generally Wall Street’s program at this point – so we can oppose it – and devise and promote specific steps toward genuine and effective reform.  Ms. Bair’s testimony before the Commission is a wonderful resource for this purpose, and in reviewing it, we should also recognize that the People have a genuine champion in Sheila Bair.  Ms. Bair deserves our thanks, praise and support for taking on the – literally – Old Boys network who have empowered Wall Street’s fraud machine and are working to preserve it.

I published last May a comprehensive assessment of the financial and economic crisis, and a set of proposals for restructuring the economy.  Nothing in my assessment has changed, and I suggest it to your attention as a starting point if you want one.  Fast-forwarding to the present, possibly the best short resource I’m aware of on the background to the current situation and how it is evolving is Michael Hudson’s “The Revelations of Sheila Bair: Wall Street’s Power Grab (CounterPunch, January 19, 2010).

There are some straightforward proposals, already on our table if not Wall Street’s, that we should keep sight of and continue to mobilize behind.  Wall Street’s program provides a sort of mirror image of what they are and ought to be.  First, the Old Boys want to be allowed to continue to gamble with other people’s money and the financial system as a whole, and they want the financial sector to stay as it is even though it is already too big a part of the overall economy and is full of institutions whose practices continue to pose systemic risk.  Second, they want the proposed new Consumer Financial Protection Agency to be dumped.  Third, they want to avoid any structural reforms like reenactment of Glass-Steagall.  And of course, they want their own Three Stooges – Ben, Larry and Curly Tim – to remain in charge at the Fed, the Treasury, and the White House.  So if they lost Bernanke at the Fed, for example, they’d want to replace him with Larry Summers.  Flip those coins and we have the beginnings of our own program.

First, the big banks should be broken up.  Too big to fail means too big to be allowed to exist.  However, the financial system has evolved so that there are now institutions other than banks whose failure can pose systemic threats.  That’s one reason Obama’s proposals are more complex than the old Glass-Steagall firewall between commercial and investment banking.  There should be limits on the size of financial institutions.  But just as importantly, any institution engaged in financial activity should be required to hold sufficient reserves to cover its deposits if it takes them, and its bets if it makes them.  Simon Johnson recommends tripling capital requirements so banks hold at least 20-25 percent of their assets in core capital.  Peter Boone and Simon Johnson, “A bank levy will not stop the doomsday cycle,” Financial Times, January 19, 2010.  If implemented, such a requirement would make it more expensive for financial entities to expand beyond their usefulness or to pose systemic risk by making bets they couldn’t cover.  Of course, such a rule would have to be vigorously enforced, and that would require a regulator with integrity as well as authority.

Another key proposal is creation of a Consumer Financial Protection Agency.  On the need for it, see “Elizabeth Warren: Pass A Consumer Protection Agency Or Forget Regulatory Reform,” and Michael Hudson’s article including his report of Sheila Bair’s testimony.  In the meantime, Connecticut Senator Chris Dodd, who has floated the idea of dumping such an entity or burying it in another agency in order to obtain, excuse the expression, bipartisan support, should hear from his constituents by all available means.

And the financial sector itself should be reduced in size to the point where it can serve the needs of the economy without putting it at risk.  As Ms. Bair pointed out, “our financial sector has grown disproportionately in relation to the rest of our economy,” from “less than 15 percent of total US corporate profits in the 1950s and 1960s…to 25 percent in the 199s and 34 percent in the most recent decade through 2008.”  While financial services are “essential to our modern economy, the excesses of the last decade” represent “a costly diversion of resources from other sectors of the economy.”  In other words, what is spent on financial services is not available for investment in plant, equipment, research and development, training, or the production of goods, services and jobs outside the financial sector.

As the battles that have now been joined proceed, I’d suggest, among many excellent resources, those listed below, and the ongoing commentary of Simon Johnson, Michael Hudson, Mike Whitney (often posted on the website of CounterPunch, and others whose work appears here and on the home page of Progressive Democrats of America).

Robert Roth is a retired public interest lawyer who prosecuted marketplace fraud for the Attorneys General of New York and Oregon.

Other valuable reads from Robert:

Dan Geldon, http://baselinescenario.com/2010/01/20/how-supposed-free-market-theorists-destroyed-free-market-theory/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BaselineScenario+%28The+Baseline+Scenario%29″>“How Supposed Free-Market Theorists Destroyed Free-Market Theory”

Robert Roth, “Fixing the Economy: For Starters, Fed Chief Ben Bernanke Should Not Be Re-Appointed”