Former Fed Chair Volcker defends ban on proprietary trading in comments to regulators
February 13, 2012http://www.washingtonpost.com/business/industries/former-fed-chair-volcker-defends-ban-on-proprietary-trading-in-comments-to-regulators/2012/02/13/gIQArIwVBR_story.html
WASHINGTON — Former Federal Reserve Chairman Paul Volcker on Monday issued a broad defense of a federal rule bearing his name that would prohibit banks from trading for their own profit.
Commercial banks backed by government deposit insurance shouldn’t be able to engage in speculative trading, Volcker said in a letter supporting the so-called Volcker rule.
“Proprietary trading is not an essential commercial bank service that justifies taxpayer support,” he wrote.
The letter was sent to the five regulatory agencies that have approved a draft version of the rule, including the Federal Reserve and the Securities and Exchange Commission.
The rule is expected to be finalized by summer. Banks will then have until July 2014 to comply.
Congress directed regulators to draft the rule under the 2010 financial overhaul. It was a response to bets banks had placed on mortgage-backed securities, which hastened the financial crisis and led to taxpayer-funded bailouts.
Wall Street executives have opposed the rule. They say it would limit trading on behalf of customers and put them at a disadvantage with non-U.S. banks, which aren’t subject to the ban.
Banks, financial services trade groups and individuals have submitted hundreds of comments in opposition. Monday was the deadline for comments.
Tim Ryan, a lobbyist for the securities industry, called the rule “unworkable” and said it will slow economic growth.
The industry says the rule will reduce trading volumes, or the “liquidity” of stocks, bonds and other instruments. Banks won’t be able to trade with their own money and will likely cut back on trading for their customers to avoid running afoul of the rule. Lower trading will reduce demand for stocks and other securities, cutting into their prices.
Members of Congress from both parties have echoed the industry’s criticism. About 120 members of the House signed a letter asking regulators to drop the current proposal and draft an entirely new rule.
Volcker disagreed. He noted that excessive liquidity can increase risk by encouraging more trading.
“The restrictions... are not at all likely to have an effect on liquidity inconsistent with the public interest,” Volcker wrote.
Regarding the industry’s concerns about competition from overseas, Volcker wrote that they seem “superficial at best.” The rule’s bar on trading could make U.S. banks more appealing to many customers, he wrote.
Volcker indicated that small banks should be subject to less scrutiny under the rule. The vast majority of proprietary trading is done by a handful of large banks, he noted.
“At the end of the day, I feel confident that the restrictions imposed by the ‘Volcker Rule’ can be reasonably and effectively administered,” he wrote.
Showing posts with label Paul Volcker. Show all posts
Showing posts with label Paul Volcker. Show all posts
Wednesday, February 29, 2012
Friday, November 26, 2010
Wall Street quietly seeks to undo new financial rules
http://www.mcclatchydc.com/2010/11/16/103833/wall-street-quietly-seeks-to-undo.html
Tuesday, November 16, 2010
Wall Street quietly seeks to undo new financial rules
Kevin G. Hall | McClatchy Newspapers
WASHINGTON — The heavy hitters of finance lost big battles earlier this year during the overhaul of financial regulation, but they're working hard to win the war. They're quietly trying to soften, if not kill, some of the more controversial provisions.
Lobbyists for Big Finance are working hardest to neutralize the so-called Volcker Rule, which would force big banks to spin off their lucrative proprietary trading operations, in which they invest their own capital in speculative deals.
The measure_ named after its proponent, former Federal Reserve Chairman Paul Volcker — seeks to prevent big banks from betting against trades they made on behalf of their customers, a popular practice until the financial crisis exploded in 2008. For example, big investment banks such as Goldman Sachs sold customers overvalued mortgage bonds even as they bet secretly that those bonds would default.
Financial lobbyists also are working to soften requirements that Wall Street firms put more "skin in the game" by retaining more mortgage bonds on their books to guard against shoddy lending. They're also trying to undercut the new Consumer Financial Protection Bureau.
Through Republican lawmakers who will soon hold leadership positions in the House of Representatives, big banks are backing proposals that could lead to its being defunded or subject to conditions that weaken it.
The financial sector is also pushing to have the bureau headed by a board rather than a strong single leader.
"Taken all together, these are all proposals that were considered (by Congress) and rejected . . . these don't look like proposals that were designed to help the agency do better, but rather proposals designed to gut it," said Travis Plunkett, the director of legislative affairs for the Consumer Federation of America. "This agency hasn't opened its doors yet, and already the House Republican leadership is carrying a lot of proposals that Wall Street and big financial interests have offered to eviscerate the consumer agency."
Big global banks already succeeded in softening new global rules that would have required banks to set aside considerably more funds in reserve to guard against future losses — generally called capital requirements or loan-loss reserves.
This happened at international banking negotiations held earlier this year in Basel, Switzerland. There, powerful banks weakened a proposal for a new international standard governing how much banks must keep in reserve.
These big banks also pressured global regulators to back off a mandatory requirement that would have forced banks to set aside even more capital during good times, on the premise that economic booms lead to excessive risk taking. This so-called countercyclical reserve requirement is now voluntary.
"I think the answer is they (global regulators) caved in to the pressures of the industry," said Morris Goldstein, a former top economist at the International Monetary Fund and now a senior researcher at the Peterson Institute for International Economics. "I'd like to say that things are more positive, but I have to say a lot of the momentum is fading. . . . I think on the whole, we're losing steam."
Implementing the Volcker Rule falls to the newly created Financial Stability Oversight Council, whose members include regulators over banks, stock and commodities markets. The Treasury Department is first among equals on the council, which began taking comment in October on how to implement the rule.
Big Finance argues that the new rules are job killers.
"We believe that the Volcker Rule is in fact harmful to the ability of the United States to sustain vibrant capital markets and . . . to create private sector jobs," David Hirschman, the head of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, wrote to the council. "In its current form, the Volcker Rule will likely add to regulatory uncertainty for banking entities and will hurt the global competitiveness of the financial services industry at a time when growth is most needed."
Volcker wrote a letter to the council, urging regulators to stand pat.
"Clear and concise definitions, firmly worded prohibitions, and specificity in describing the permissible activities will be of prime importance for the regulators," he wrote. "Bankers and their lawyers and lobbyists will no doubt search for and discover seeming ambiguities within the language of the law."
Joseph Stiglitz, a Nobel Prize-winning economist from Columbia University, reminded council members in a letter that proprietary trading helped cause the near meltdown of the U.S. financial system.
"Through the rise of proprietary trading at our nation's banks and the largest non-bank financial firms, firms doubled down on the accumulation of risk, much of it with little benefit to the real economy," Stiglitz wrote. He added that "the financial system in this country and around the world became disconnected from its fundamental purposes."
Some experts warn, however, that the Volcker Rule might be harmful if other countries don't echo it.
"I'm not aware of any other country, certainly of significance, that plans to follow. This is a purely American mistake," said Douglas Elliot, a researcher at Washington's center-left Brookings Institution.
Elliot, a former investment banker, supports most of the sweeping new regulation of finance, but thinks the Volcker Rule is too vague and lacks global support.
"It requires regulators to look into the hearts of bankers and see if their motive for a particular investment was pure or not," he said. "There is a huge subjective element here."
Financial firms are also fighting the requirement that they retain 5 percent of the pool of mortgage bonds that they sell as a way of discouraging excessive risk. They're trying to expand the definition of "plain vanilla" mortgages that would be exempted from the risk-retention requirements.
"I think there's a concern about what would be defined as a plain-vanilla mortgage," said Tom Deutsch, head of the American Securitization Forum, which represents companies that package pools of mortgages into complex mortgage bonds, which now are considered toxic.
The ASF and its members want to exempt interest-only mortgages, which caused many unsophisticated borrowers to lose their homes.
"Certain types of loans aren't standard, but are appropriate for high creditworthy borrowers," Deutsch said in an interview, pointing to wealthy borrowers who seek to maximize their mortgage-interest deductions at tax time.
Tuesday, November 16, 2010
Wall Street quietly seeks to undo new financial rules
Kevin G. Hall | McClatchy Newspapers
WASHINGTON — The heavy hitters of finance lost big battles earlier this year during the overhaul of financial regulation, but they're working hard to win the war. They're quietly trying to soften, if not kill, some of the more controversial provisions.
Lobbyists for Big Finance are working hardest to neutralize the so-called Volcker Rule, which would force big banks to spin off their lucrative proprietary trading operations, in which they invest their own capital in speculative deals.
The measure_ named after its proponent, former Federal Reserve Chairman Paul Volcker — seeks to prevent big banks from betting against trades they made on behalf of their customers, a popular practice until the financial crisis exploded in 2008. For example, big investment banks such as Goldman Sachs sold customers overvalued mortgage bonds even as they bet secretly that those bonds would default.
Financial lobbyists also are working to soften requirements that Wall Street firms put more "skin in the game" by retaining more mortgage bonds on their books to guard against shoddy lending. They're also trying to undercut the new Consumer Financial Protection Bureau.
Through Republican lawmakers who will soon hold leadership positions in the House of Representatives, big banks are backing proposals that could lead to its being defunded or subject to conditions that weaken it.
The financial sector is also pushing to have the bureau headed by a board rather than a strong single leader.
"Taken all together, these are all proposals that were considered (by Congress) and rejected . . . these don't look like proposals that were designed to help the agency do better, but rather proposals designed to gut it," said Travis Plunkett, the director of legislative affairs for the Consumer Federation of America. "This agency hasn't opened its doors yet, and already the House Republican leadership is carrying a lot of proposals that Wall Street and big financial interests have offered to eviscerate the consumer agency."
Big global banks already succeeded in softening new global rules that would have required banks to set aside considerably more funds in reserve to guard against future losses — generally called capital requirements or loan-loss reserves.
This happened at international banking negotiations held earlier this year in Basel, Switzerland. There, powerful banks weakened a proposal for a new international standard governing how much banks must keep in reserve.
These big banks also pressured global regulators to back off a mandatory requirement that would have forced banks to set aside even more capital during good times, on the premise that economic booms lead to excessive risk taking. This so-called countercyclical reserve requirement is now voluntary.
"I think the answer is they (global regulators) caved in to the pressures of the industry," said Morris Goldstein, a former top economist at the International Monetary Fund and now a senior researcher at the Peterson Institute for International Economics. "I'd like to say that things are more positive, but I have to say a lot of the momentum is fading. . . . I think on the whole, we're losing steam."
Implementing the Volcker Rule falls to the newly created Financial Stability Oversight Council, whose members include regulators over banks, stock and commodities markets. The Treasury Department is first among equals on the council, which began taking comment in October on how to implement the rule.
Big Finance argues that the new rules are job killers.
"We believe that the Volcker Rule is in fact harmful to the ability of the United States to sustain vibrant capital markets and . . . to create private sector jobs," David Hirschman, the head of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, wrote to the council. "In its current form, the Volcker Rule will likely add to regulatory uncertainty for banking entities and will hurt the global competitiveness of the financial services industry at a time when growth is most needed."
Volcker wrote a letter to the council, urging regulators to stand pat.
"Clear and concise definitions, firmly worded prohibitions, and specificity in describing the permissible activities will be of prime importance for the regulators," he wrote. "Bankers and their lawyers and lobbyists will no doubt search for and discover seeming ambiguities within the language of the law."
Joseph Stiglitz, a Nobel Prize-winning economist from Columbia University, reminded council members in a letter that proprietary trading helped cause the near meltdown of the U.S. financial system.
"Through the rise of proprietary trading at our nation's banks and the largest non-bank financial firms, firms doubled down on the accumulation of risk, much of it with little benefit to the real economy," Stiglitz wrote. He added that "the financial system in this country and around the world became disconnected from its fundamental purposes."
Some experts warn, however, that the Volcker Rule might be harmful if other countries don't echo it.
"I'm not aware of any other country, certainly of significance, that plans to follow. This is a purely American mistake," said Douglas Elliot, a researcher at Washington's center-left Brookings Institution.
Elliot, a former investment banker, supports most of the sweeping new regulation of finance, but thinks the Volcker Rule is too vague and lacks global support.
"It requires regulators to look into the hearts of bankers and see if their motive for a particular investment was pure or not," he said. "There is a huge subjective element here."
Financial firms are also fighting the requirement that they retain 5 percent of the pool of mortgage bonds that they sell as a way of discouraging excessive risk. They're trying to expand the definition of "plain vanilla" mortgages that would be exempted from the risk-retention requirements.
"I think there's a concern about what would be defined as a plain-vanilla mortgage," said Tom Deutsch, head of the American Securitization Forum, which represents companies that package pools of mortgages into complex mortgage bonds, which now are considered toxic.
The ASF and its members want to exempt interest-only mortgages, which caused many unsophisticated borrowers to lose their homes.
"Certain types of loans aren't standard, but are appropriate for high creditworthy borrowers," Deutsch said in an interview, pointing to wealthy borrowers who seek to maximize their mortgage-interest deductions at tax time.
Sunday, September 20, 2009
Beast of the Month - May 2009
Beast of the Month - May 2009
Timothy Geithner
Obamanomics Mastermind
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
"While the boss man takes his bonus pay and jets on out of town
And DC's bailing out them bankers as the farmers auction ground
Yeah while they're living it up on Wall Street in that New York City town
Here in the real world they're shuttin' Detroit down"
John Rich, "Shuttin' Detroit Down"
Well, it's been 100 days into the Obama Administration, and already a picture of the next four years is becoming pretty evident. True, he isn't the combo of Hitler, Stalin and Chairman Mao that the "teabaggers" (quit snickering!) of the Beck-Hannity-Limbaugh crowd try to make him out as. On the other hand, he clearly isn't the perfect mixture of JFK, MLK & Jesus Christ that the so-called "progressive" cultists fantasize he is either.
Say what you will about the teabaggers, but their anger at Barack Hussein Obama, however misdirected, at least seems like the logical response to the looting of America that has continued under his reign. Indeed, it seems that the left is far more delusional about what Barack Obama is than the Fox News watchers could ever be as they continue to wave pom-poms for the dude. For the general direction of the Obama Administration is exactly what The Konformist warned it would be: a sniveling betrayal of the duped progressives who supported his election victory as he bootlicks Wall Street and the Pentagon.
To be fair, Prez Obama hasn't been as terrible as some predicted he'd be. (And he certainly isn't as bad as George W. Bush, though that's hardly an amazing feat.) The good news: he has yet to launch World War III against Russia and/or China. Of course, the main reason is because there's no money left to finance WWIII after the massive swindling by the banksters and Wall Street under his reign, and that of his Treasury Secretary Timothy Geithner, The Konformist Beast of the Month.
Under Geithner and Team Obama, the siphoning of bucks to prop up the Wall Street monoliths has continued unabated. And though the Obama Administration pushed through a $787 billion "stimulus" program as well as a $75 billion plan to help homeowners facing foreclosure, the general direction of the Obama years is definitely still slanted towards funneling money to the powerful few. Indeed, though the $787 billion was more than the Wall Street Bailout - no doubt done to convince the public they've received more help than the bankers have - the vast majority of these dollars will only come to the poor, working class and middle class indirectly, if at all. Likewise, the foreclosure plan appears to be just enough to help only the subprime debtors who the financial system can profit off via the aid. Tellingly, it is the stimulus program and the homeowner plan that became the focus of the rage ranted over the airwaves by reactionary blowhards like Glenn Beck, Sean Hannity and Rick Santelli rather than the Wall Street Bailout. This appears to be a calculated obfuscation by these loathsome pundits. The end result is threefold: one, to channel the legitimate anger of the masses at the economic crisis towards those who are the victims rather than the perpetrators; two, to make it seem that it is only right-wing nut jobs and racists who oppose Obamanomics; and three, to frame the Obama economic policies as far left via distortion and shift the entire debate even farther to the right than before.
After the stimulus plan was pushed through, the Obama Administration offered up a trillion dollar "toxic assets" bailout for Wall Street. (In fact, it appears the push to get the stimulus program passed so quickly was because another round of obscene Wall Street handouts without a penny to the public would've been too in-your-face class warfare.) The plan puts federal funds to back 97 percent of the money used to buy away these bad assets, with the loans and three quarters of all losses backed by Uncle Sam. The investors in this scam will thus have their losses pretty much covered with a big upside for any financial rewards. All in all, the plan seems to be born from the big business philosophy of "socialize the costs, privatize the profits."
While the Obama team has been warm and snuggly to Wall Street, they have been equally ruthless to anyone with a United Auto Workers union card. While they coddle the bankers with trillions in bailouts, the pocket change handed to the Detroit Big Three was conditional on UAW workers accepting massive layoffs, pay cuts and reductions in retiree benefits. This shouldn't be too surprising, as the head of Obama's Auto Task Force is a real life Gordon Gekko in Steve Rattner, a corporate raider who has made a living crushing worker benefits for personal profits.
All this seems to follow the reactionary pattern that's been in place since the Wall Street Bailout of last October. Which leads to a logical question: just who was behind the bailout in the first place? As it turns out, a key player in creating the TARP program was the president of the New York Federal Reserve Bank at the time. This was none other than (drum roll please) Timothy Geithner himself.
The appointments of guys like Rattner and Geithner shouldn't be too surprising either: as has been noted on The Konformist, Obama has long surrounded himself with the most right-wing elements economically tied to the Democratic Party. This includes Austan Goolsbee, the University of Chicago professor who is on the "left" side of the far-right economic program made famous thanks to Milton Friedman. Goolsbee was named staff director and chief economist for the Economic Recovery Advisory Board, whose chairman, also appointed by Obama, is former Federal Reserve chairman Paul Volcker, the man whose ruthless monetary policies (also inspired by Milton Friedman) led to a nasty recession that nearly destroyed Ronald Reagan's presidency in its first term.
Beyond just surrounding himself with right-wingers, Obama's positions, even before his election, were decidedly to the right of Edwards and Clinton. Indeed, though it is almost never acknowledged, by the end of the 2008 campaign, John McCain had offered a far more generous solution to foreclosure victims than any Obama proposal. Of course, Obama may have been too busy raising a record $650 million dollars to show any concern for these bitter financial victims. And though the sales job of Obama feigns his campaign was fueled by small donors, the Campaign Finance Institute concluded Obama "raised significantly more large-donor money in absolute terms than any of his rivals or predecessors." (It should be mentioned as almost an afterthought that Obama's VP pick, Joe Biden of Delaware, is so tied to the banking industry he has earned the nickname of "Credit Card Joe" for his efforts.)
The punch line in this rightward tilt in Obamanomics: after repeatedly being accused of being a far-left socialist by the Beck-Hannity-Limbaugh crowd, the left will be blamed for any failures in his economic programs. The general suspicion of The Konformist staff is the stimulus program will be enough to stop a major depression, but not enough to stop a lingering recession. Meanwhile, in January, economist Paul Craig Roberts warned the deficit would be $3 trillion in 2009, and his projection looks more accurate by the day than the predictions of others. With the unemployment rate looking to hit double digits soon, it appears there's a lot of failure ready to be pinned on the left in the coming years.
In any case, we salute Timothy Geithner as Beast of the Month. Congratulations, and keep up the great work, Timmy!!!
Sources:
Allen, Mike. "Volcker Will Head New Obama Board." Yahoo News 26 November 2008 <http://news.yahoo.com/s/politico/20081126/pl_politico/15997>.
"Credit Card Joe." The Real Joe Biden. 24 August 2008 <http://therealjoebiden.wordpress.com/2008/08/24/credit-card-joe>.
Eley, Tom. "Buyer Beware! Obama Named 'Marketer of the Year'." World Socialist Web Site 6 December 2008 <http://www.wsws.org/articles/2008/dec2008/obad-d06.shtml>.
Grey, Barry. "Wall Street Celebrates Government Windfall for Banks and Big Investors." World Socialist Web Site 24 March 2009 <http://wsws.org/articles/2009/mar2009/toxi-m24.shtml>.
Marshall, Bruce. "Barack 'Hoover' Obama." Rense.com 11 March 2009 <http://rense.com/general85/hoov.htm>.
"Obama: 'Everybody Thinks They’re Economists'." Infowars 6 February 2009 <http://www.infowars.com/obama-everybody-thinks-theyre-economists>.
"Reality Check: Obama Received About the Same Percentage from Small Donors in 2008 as Bush in 2004." The Campaign Finance Institute 24 November 2008 <http://www.cfinst.org/pr/prRelease.aspx?ReleaseID=216>.
Roberts, Paul Craig. "Another Real Estate Crisis Is About to Hit." Online Journal 23 January 2009 <http://onlinejournal.com/artman/publish/article_4274.shtml>.
Sirota, David. "Obama's Gordon Gekko Targets Union Workers." OurFuture.org 31 March 2009 <http://www.ourfuture.org/blog-entry/2009031431/obamas-gordon-gekko-targets-union-workers-0>.
Tarpley, Webster G. "Defeat Obama - Advice For Voters." Rense.com 3 November 2008 <http://www.rense.com/general83/advi.htm>.
Tarpley, Webster G. "Motormouth Joe Biden - Warmonger, Wordmonger And Political Hit Man." Rense.com 25 August 2008 <http://rense.com/general83/biden.htm>.
Timothy Geithner
Obamanomics Mastermind
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
"While the boss man takes his bonus pay and jets on out of town
And DC's bailing out them bankers as the farmers auction ground
Yeah while they're living it up on Wall Street in that New York City town
Here in the real world they're shuttin' Detroit down"
John Rich, "Shuttin' Detroit Down"
Well, it's been 100 days into the Obama Administration, and already a picture of the next four years is becoming pretty evident. True, he isn't the combo of Hitler, Stalin and Chairman Mao that the "teabaggers" (quit snickering!) of the Beck-Hannity-Limbaugh crowd try to make him out as. On the other hand, he clearly isn't the perfect mixture of JFK, MLK & Jesus Christ that the so-called "progressive" cultists fantasize he is either.
Say what you will about the teabaggers, but their anger at Barack Hussein Obama, however misdirected, at least seems like the logical response to the looting of America that has continued under his reign. Indeed, it seems that the left is far more delusional about what Barack Obama is than the Fox News watchers could ever be as they continue to wave pom-poms for the dude. For the general direction of the Obama Administration is exactly what The Konformist warned it would be: a sniveling betrayal of the duped progressives who supported his election victory as he bootlicks Wall Street and the Pentagon.
To be fair, Prez Obama hasn't been as terrible as some predicted he'd be. (And he certainly isn't as bad as George W. Bush, though that's hardly an amazing feat.) The good news: he has yet to launch World War III against Russia and/or China. Of course, the main reason is because there's no money left to finance WWIII after the massive swindling by the banksters and Wall Street under his reign, and that of his Treasury Secretary Timothy Geithner, The Konformist Beast of the Month.
Under Geithner and Team Obama, the siphoning of bucks to prop up the Wall Street monoliths has continued unabated. And though the Obama Administration pushed through a $787 billion "stimulus" program as well as a $75 billion plan to help homeowners facing foreclosure, the general direction of the Obama years is definitely still slanted towards funneling money to the powerful few. Indeed, though the $787 billion was more than the Wall Street Bailout - no doubt done to convince the public they've received more help than the bankers have - the vast majority of these dollars will only come to the poor, working class and middle class indirectly, if at all. Likewise, the foreclosure plan appears to be just enough to help only the subprime debtors who the financial system can profit off via the aid. Tellingly, it is the stimulus program and the homeowner plan that became the focus of the rage ranted over the airwaves by reactionary blowhards like Glenn Beck, Sean Hannity and Rick Santelli rather than the Wall Street Bailout. This appears to be a calculated obfuscation by these loathsome pundits. The end result is threefold: one, to channel the legitimate anger of the masses at the economic crisis towards those who are the victims rather than the perpetrators; two, to make it seem that it is only right-wing nut jobs and racists who oppose Obamanomics; and three, to frame the Obama economic policies as far left via distortion and shift the entire debate even farther to the right than before.
After the stimulus plan was pushed through, the Obama Administration offered up a trillion dollar "toxic assets" bailout for Wall Street. (In fact, it appears the push to get the stimulus program passed so quickly was because another round of obscene Wall Street handouts without a penny to the public would've been too in-your-face class warfare.) The plan puts federal funds to back 97 percent of the money used to buy away these bad assets, with the loans and three quarters of all losses backed by Uncle Sam. The investors in this scam will thus have their losses pretty much covered with a big upside for any financial rewards. All in all, the plan seems to be born from the big business philosophy of "socialize the costs, privatize the profits."
While the Obama team has been warm and snuggly to Wall Street, they have been equally ruthless to anyone with a United Auto Workers union card. While they coddle the bankers with trillions in bailouts, the pocket change handed to the Detroit Big Three was conditional on UAW workers accepting massive layoffs, pay cuts and reductions in retiree benefits. This shouldn't be too surprising, as the head of Obama's Auto Task Force is a real life Gordon Gekko in Steve Rattner, a corporate raider who has made a living crushing worker benefits for personal profits.
All this seems to follow the reactionary pattern that's been in place since the Wall Street Bailout of last October. Which leads to a logical question: just who was behind the bailout in the first place? As it turns out, a key player in creating the TARP program was the president of the New York Federal Reserve Bank at the time. This was none other than (drum roll please) Timothy Geithner himself.
The appointments of guys like Rattner and Geithner shouldn't be too surprising either: as has been noted on The Konformist, Obama has long surrounded himself with the most right-wing elements economically tied to the Democratic Party. This includes Austan Goolsbee, the University of Chicago professor who is on the "left" side of the far-right economic program made famous thanks to Milton Friedman. Goolsbee was named staff director and chief economist for the Economic Recovery Advisory Board, whose chairman, also appointed by Obama, is former Federal Reserve chairman Paul Volcker, the man whose ruthless monetary policies (also inspired by Milton Friedman) led to a nasty recession that nearly destroyed Ronald Reagan's presidency in its first term.
Beyond just surrounding himself with right-wingers, Obama's positions, even before his election, were decidedly to the right of Edwards and Clinton. Indeed, though it is almost never acknowledged, by the end of the 2008 campaign, John McCain had offered a far more generous solution to foreclosure victims than any Obama proposal. Of course, Obama may have been too busy raising a record $650 million dollars to show any concern for these bitter financial victims. And though the sales job of Obama feigns his campaign was fueled by small donors, the Campaign Finance Institute concluded Obama "raised significantly more large-donor money in absolute terms than any of his rivals or predecessors." (It should be mentioned as almost an afterthought that Obama's VP pick, Joe Biden of Delaware, is so tied to the banking industry he has earned the nickname of "Credit Card Joe" for his efforts.)
The punch line in this rightward tilt in Obamanomics: after repeatedly being accused of being a far-left socialist by the Beck-Hannity-Limbaugh crowd, the left will be blamed for any failures in his economic programs. The general suspicion of The Konformist staff is the stimulus program will be enough to stop a major depression, but not enough to stop a lingering recession. Meanwhile, in January, economist Paul Craig Roberts warned the deficit would be $3 trillion in 2009, and his projection looks more accurate by the day than the predictions of others. With the unemployment rate looking to hit double digits soon, it appears there's a lot of failure ready to be pinned on the left in the coming years.
In any case, we salute Timothy Geithner as Beast of the Month. Congratulations, and keep up the great work, Timmy!!!
Sources:
Allen, Mike. "Volcker Will Head New Obama Board." Yahoo News 26 November 2008 <http://news.yahoo.com/s/politico/20081126/pl_politico/15997>.
"Credit Card Joe." The Real Joe Biden. 24 August 2008 <http://therealjoebiden.wordpress.com/2008/08/24/credit-card-joe>.
Eley, Tom. "Buyer Beware! Obama Named 'Marketer of the Year'." World Socialist Web Site 6 December 2008 <http://www.wsws.org/articles/2008/dec2008/obad-d06.shtml>.
Grey, Barry. "Wall Street Celebrates Government Windfall for Banks and Big Investors." World Socialist Web Site 24 March 2009 <http://wsws.org/articles/2009/mar2009/toxi-m24.shtml>.
Marshall, Bruce. "Barack 'Hoover' Obama." Rense.com 11 March 2009 <http://rense.com/general85/hoov.htm>.
"Obama: 'Everybody Thinks They’re Economists'." Infowars 6 February 2009 <http://www.infowars.com/obama-everybody-thinks-theyre-economists>.
"Reality Check: Obama Received About the Same Percentage from Small Donors in 2008 as Bush in 2004." The Campaign Finance Institute 24 November 2008 <http://www.cfinst.org/pr/prRelease.aspx?ReleaseID=216>.
Roberts, Paul Craig. "Another Real Estate Crisis Is About to Hit." Online Journal 23 January 2009 <http://onlinejournal.com/artman/publish/article_4274.shtml>.
Sirota, David. "Obama's Gordon Gekko Targets Union Workers." OurFuture.org 31 March 2009 <http://www.ourfuture.org/blog-entry/2009031431/obamas-gordon-gekko-targets-union-workers-0>.
Tarpley, Webster G. "Defeat Obama - Advice For Voters." Rense.com 3 November 2008 <http://www.rense.com/general83/advi.htm>.
Tarpley, Webster G. "Motormouth Joe Biden - Warmonger, Wordmonger And Political Hit Man." Rense.com 25 August 2008 <http://rense.com/general83/biden.htm>.
Saturday, August 1, 2009
Federal Reserve is ‘a Ponzi scheme, an inside job’
http://rawstory.com/08/news/2009/07/25/spitzer-federal-reserve-is-a-ponzi-scheme-an-inside-job/
Spitzer: Federal Reserve is ‘a Ponzi scheme, an inside job’
Daniel Tencer
July 25, 2009
The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.
In a wide-ranging discussion of the bank bailouts on MSNBC’s Morning Meeting, host Dylan Ratigan described the process by which the Federal Reserve exchanged $13.9 trillion of bad bank debt for cash that it gave to the struggling banks.
Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”
Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.
“The reality is the Fed has blown it. Time and time again, they blew it. Bubble after bubble, they failed to understand what they were doing to the economy.
“The most poignant example for me is the AIG bailout, where they gave tens of billions of dollars that went right through — conduit payments — to the investment banks that are now solvent. We [taxpayers] didn’t get stock in those banks, they didn’t ask what was going on — this begs and cries out for hard, tough examination.
“You look at the governing structure of the New York [Federal Reserve], it was run by the very banks that got the money. This is a Ponzi scheme, an inside job. It is outrageous, it is time for Congress to say enough of this. And to give them more power now is crazy.
“The Fed needs to be examined carefully.”
Spitzer resigned as governor of New York in March, 2008, after news reports stated he had paid for a $1,000-an-hour New York City call girl.
At the time, Spitzer had been raising the alarm about sub-prime mortgages. In the wake of the economic meltdown triggered last fall by sub-prime loans, some observers have suggested that Spitzer may have been targeted by law enforcement because of his high-profile opposition to Wall Street financial policies.
Investigative reporter Greg Palast wrote that federal agents’ revealing of Spitzer’s identity as a call-girl customer was no coincidence.
Palast wrote that the principle of “prosecutorial discretion” is often used to keep the names of high-profile persons out of the media when they are tangentially linked to a criminal investigation. In the case of Spitzer, the Justice Department chose not to invoke prosecutorial discretion.
Funny thing, this ‘discretion.’ For example, Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him in diapers (ewww!), yet the Senator was not exposed by the US prosecutors busting the pimp-ring that pampered him.
Naming and shaming and ruining Spitzer – rarely done in these cases - was made at the ‘discretion’ of Bush’s Justice Department.
Spitzer recently told Bloomberg News that President Obama’s regulatory reforms of the financial sector are “irrelevant” because regulatory agencies have not been enforcing corporate laws to begin with.
“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”
Spitzer: Federal Reserve is ‘a Ponzi scheme, an inside job’
Daniel Tencer
July 25, 2009
The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.
In a wide-ranging discussion of the bank bailouts on MSNBC’s Morning Meeting, host Dylan Ratigan described the process by which the Federal Reserve exchanged $13.9 trillion of bad bank debt for cash that it gave to the struggling banks.
Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”
Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.
“The reality is the Fed has blown it. Time and time again, they blew it. Bubble after bubble, they failed to understand what they were doing to the economy.
“The most poignant example for me is the AIG bailout, where they gave tens of billions of dollars that went right through — conduit payments — to the investment banks that are now solvent. We [taxpayers] didn’t get stock in those banks, they didn’t ask what was going on — this begs and cries out for hard, tough examination.
“You look at the governing structure of the New York [Federal Reserve], it was run by the very banks that got the money. This is a Ponzi scheme, an inside job. It is outrageous, it is time for Congress to say enough of this. And to give them more power now is crazy.
“The Fed needs to be examined carefully.”
Spitzer resigned as governor of New York in March, 2008, after news reports stated he had paid for a $1,000-an-hour New York City call girl.
At the time, Spitzer had been raising the alarm about sub-prime mortgages. In the wake of the economic meltdown triggered last fall by sub-prime loans, some observers have suggested that Spitzer may have been targeted by law enforcement because of his high-profile opposition to Wall Street financial policies.
Investigative reporter Greg Palast wrote that federal agents’ revealing of Spitzer’s identity as a call-girl customer was no coincidence.
Palast wrote that the principle of “prosecutorial discretion” is often used to keep the names of high-profile persons out of the media when they are tangentially linked to a criminal investigation. In the case of Spitzer, the Justice Department chose not to invoke prosecutorial discretion.
Funny thing, this ‘discretion.’ For example, Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him in diapers (ewww!), yet the Senator was not exposed by the US prosecutors busting the pimp-ring that pampered him.
Naming and shaming and ruining Spitzer – rarely done in these cases - was made at the ‘discretion’ of Bush’s Justice Department.
Spitzer recently told Bloomberg News that President Obama’s regulatory reforms of the financial sector are “irrelevant” because regulatory agencies have not been enforcing corporate laws to begin with.
“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”
Monday, December 1, 2008
Volcker will head new Obama board
Robalini's Note: Volcker & Goolsbee as Obama's chief "economic recovery" advisors. Who saw that one coming?
http://news.yahoo.com/s/politico/20081126/pl_politico/15997
Volcker will head new Obama board
Mike Allen
Wed Nov 26, 2008
President-elect Barack Obama on Wednesday will announce the creation of a president’s Economic Recovery Advisory Board, chaired by former Federal Reserve Chairman Paul Volcker, to provide outside advice from heavyweight thinkers, officials said.
Obama, who will be the sixth president Volcker has served, plans to make the announcement in Chicago at his third news conference on the economy in three days, allowing him to dominate news coverage during Thanksgiving week.
The officials said the idea came from Obama, who wanted to preserve the advisory structure he had come to appreciate over the course of the campaign. The new body also reflects the magnitude of the nation’s economic problems, which Obama wants to solve in an integrated way – not just through attention to markets, but also to jobs, wages and housing foreclosure.
The economic recovery board’s staff director and chief economist will be Austan Goolsbee, who was senior economic adviser to the Obama campaign and will also be a member of the White House Council of Economic Advisers.
The other board members – eight to 16 people of a caliber of Eric E. Schmidt, chairman and CEO of Google Inc. – will be named later.
The board initially will exist for two years, but might well be extended for longer. Transition advisers expect it might meet roughly once a month.
Obama’s plans for the board were first reported by The Wall Street Journal.
Volcker’s official bio says he “was chairman of the Board of Governors of the Federal Reserve System from August 1979 to August 1987. He is credited with playing the leading role in ending a period of high and rising inflation and restoring a base for sustained growth. Initially appointed to that position by President Carter for a four-year term, he was reappointed in 1983 by President Reagan. On the completion of his second term as chairman, Mr. Volcker returned to private life, becoming chairman of the firm of James D. Wolfensohn, Inc., a company concentrating on the provision of investment banking services to a limited number of large domestic and international organizations. He retired as chairman and chief executive officer of Wolfensohn when that firm merged with Bankers Trust Company in 1996. In the course of his career, Mr. Volcker worked in the federal government for almost 30 years, serving in office under five presidents—John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Jimmy Carter, and Ronald Reagan.”
From Goolsbee’s official bio: “He is a professor of economics at the University of Chicago and a Fulbright Scholar. … He [formerly wrote] the ‘Economic Scene’ column for the New York Times and was the Lead Editor for the Journal of Law and Economics from 2001 to 2004. The Financial Times named him one of the six Gurus of the Future/Best Under 40 in 2005, and the World Economic Forum in Switzerland chose him one as one of the 2005 Young Global Leaders. He received his Master's Degree in Economics from Yale in 1991 and his Ph.D. in the same subject in 1995 from Massachusetts Institute of Technology.”
http://news.yahoo.com/s/politico/20081126/pl_politico/15997
Volcker will head new Obama board
Mike Allen
Wed Nov 26, 2008
President-elect Barack Obama on Wednesday will announce the creation of a president’s Economic Recovery Advisory Board, chaired by former Federal Reserve Chairman Paul Volcker, to provide outside advice from heavyweight thinkers, officials said.
Obama, who will be the sixth president Volcker has served, plans to make the announcement in Chicago at his third news conference on the economy in three days, allowing him to dominate news coverage during Thanksgiving week.
The officials said the idea came from Obama, who wanted to preserve the advisory structure he had come to appreciate over the course of the campaign. The new body also reflects the magnitude of the nation’s economic problems, which Obama wants to solve in an integrated way – not just through attention to markets, but also to jobs, wages and housing foreclosure.
The economic recovery board’s staff director and chief economist will be Austan Goolsbee, who was senior economic adviser to the Obama campaign and will also be a member of the White House Council of Economic Advisers.
The other board members – eight to 16 people of a caliber of Eric E. Schmidt, chairman and CEO of Google Inc. – will be named later.
The board initially will exist for two years, but might well be extended for longer. Transition advisers expect it might meet roughly once a month.
Obama’s plans for the board were first reported by The Wall Street Journal.
Volcker’s official bio says he “was chairman of the Board of Governors of the Federal Reserve System from August 1979 to August 1987. He is credited with playing the leading role in ending a period of high and rising inflation and restoring a base for sustained growth. Initially appointed to that position by President Carter for a four-year term, he was reappointed in 1983 by President Reagan. On the completion of his second term as chairman, Mr. Volcker returned to private life, becoming chairman of the firm of James D. Wolfensohn, Inc., a company concentrating on the provision of investment banking services to a limited number of large domestic and international organizations. He retired as chairman and chief executive officer of Wolfensohn when that firm merged with Bankers Trust Company in 1996. In the course of his career, Mr. Volcker worked in the federal government for almost 30 years, serving in office under five presidents—John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Jimmy Carter, and Ronald Reagan.”
From Goolsbee’s official bio: “He is a professor of economics at the University of Chicago and a Fulbright Scholar. … He [formerly wrote] the ‘Economic Scene’ column for the New York Times and was the Lead Editor for the Journal of Law and Economics from 2001 to 2004. The Financial Times named him one of the six Gurus of the Future/Best Under 40 in 2005, and the World Economic Forum in Switzerland chose him one as one of the 2005 Young Global Leaders. He received his Master's Degree in Economics from Yale in 1991 and his Ph.D. in the same subject in 1995 from Massachusetts Institute of Technology.”
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