Archive for the ‘Congress’ Category
Pam Martens and Russ Martens write in Wall Street on Parade:
There has been much focus on the fiery speeches that Senator Elizabeth Warren delivered from the Senate floor in an effort to stop the roll-back of a key derivatives provision of the Dodd-Frank financial reform legislation that was slipped into the giant $1.1 trillion spending bill that was signed into law this week by President Obama – who campaigned for passage of the bill despite the weakening of protections against Wall Street abuses. The bill became known as the Cromnibus because it is part Continuing Resolution and part Omnibus spending bill to fund the government through September of 2015. Those who voted against the bill in the Senate are provided here; in the House, here.
But Warren was far from alone in expressing outrage at Citigroup writing most of the provision that was quietly slipped into a spending bill that was critical to pass to avoid a government shutdown. Members of both the House and Senate, from broadly diverse political leanings, not only spoke out against the provision but voted against the spending bill to back up that outrage.
We’ll get to the still festering outrage among members of Congress in a moment, but first a warning for the next member of Congress who might be asked by a slick Wall Street bank lobbyist to try a similar maneuver. The House Rep who slipped the provision into the spending bill, which was effectively written by Citigroup according to Mother Jones and the New York Times, is Kevin Yoder of Kansas.
Yoder is now being viciously assailed on his own Facebook page and held up to public ridicule in Kansas newspapers. On Facebook, a woman identifying herself as Amy Hanks calls Yoder the “lowest of the low” and adds: “Hope you burn in hell.” Another woman calls Yoder “one greedy immoral coward.” OpenSecrets.org shows “Securities and Investment” as the number one industry contributing to Yoder’s campaign committee and leadership PAC.
Citigroup received the largest taxpayer bailout in history during the financial crisis as a result of its unchecked derivatives: $45 billion in TARP funds; over $306 billion in asset guarantees; and more than $2 trillion in low-cost loans from the Fed according to the General Accountability Office. The abject repulsion that the very bank that got the biggest handout and played a pivotal role in collapsing the economy should now be gaming Congress to repeal financial protections drew a joint letter of protest from Republican Senator David Vitter of Louisiana and Democratic Senator Sherrod Brown of Ohio. (See Senators Sherrod Brown and David Vitter Ask House to Remove Citigroup Provision on Derivatives from Cromnibus for full text of letter.)
In a separate statement, Brown said: “This giveaway to Wall Street would open the door to future bailouts funded by American taxpayers. It’s been just six years since risky financial practices put our economy on the brink of collapse and cost millions of Americans lost jobs, homes, and retirement savings. This provision, originally written by lobbyists, has no place in a must-pass spending bill.”
Vitter added: “Ending too big to fail is far from over. Before Congress starts handing out Christmas presents to the megabanks and Wall Street, we need to be smart about this. Removing these risky derivatives that aren’t even necessary for normal banking purposes is important, and Members of Congress need to rethink repealing this critical provision.”
One Senator who appeared as visibly outraged as Senator Warren was Cory Booker, Democrat from New Jersey. (See video here.) Booker said what Wall Street had done to the country during the crash was “cataclysmic” and said any “changes to financial regulations should be done in a much more transparent process” and not through a must-pass omnibus spending bill. He said he was “outraged” and “frustrated.”
Senator Charles Grassley, a Republican member of the Senate Finance Committee who has observed Wall Street’s serial ability to game the system, voted against the bill and issued the following statement: “This bill continued a bad pattern the Senate has fallen into in recent years under the current leadership. Instead of hastily considering a 1,600-page, $1.1 trillion spending bill, we need to return to considering annual appropriations bills. So much spending deserves debate, consideration and an open, transparent amendment process…A poor process leads to bad policy, like scaling back banking derivatives laws without debate or accountability. It also leads to the distrust the American people have in their government…”
Perhaps no one in Congress better understands the intense danger that the roll-back of this provision creates than Senator Carl Levin, retiring Chair of the Senate’s Subcommittee on Permanent Investigations. . .
Very interesting longread in the Washington Post by Jim Tankersley:
The thing Deborah Jackson remembers from her first interviews at Goldman Sachs is the slogan. It was stamped on the glass doors of the offices in the investment bank’s headquarters just off Wall Street, the lure of the place in two words, eight syllables: “Uncommon capability.”
Jackson joined Goldman in 1980, fresh from business school and steeped in the workings of government and finance. She found crackerjack colleagues and more business than she could handle. She worked in municipal finance, lending money to local governments, hospitals and nonprofits around the country. She flew first class to scout potential deals — “The issue was, can you really be productive if you’re in a tiny seat in the back?” — and when the time came to seal one, she’d welcome clients and their attorneys to Manhattan’s best restaurants.
The clients would bring their spouses and go to shows. Everyone drank good wine. Her favorite place, in the heyday, was the 21 Club, which felt like an Old World library and went heavy on red meat. More than the perks, Jackson loved the work — the shared struggle of smart people trying to help the country, even as they banked big money. “It was all about solving problems,” she said.
Years later, she would come to see it differently, growing disenchanted with an industry she didn’t think was fixing much anymore.
Economic research suggests she was onto something. Wall Street is bigger and richer than ever, the research shows, and the economy and the middle class are worse off for it.
There’s a prominent theory among some economists and policymakers that says the big problem with the American economy is that a lot of Americans don’t have the talent to compete in today’s global marketplace. While it’s true that the country would be better off if more workers had more training — particularly low-skilled, low-income workers — that theory misses a crucial, damaging development of the past several decades.
It misses how much the economy has suffered at the hands of some of its most skilled, most talented workers, who followed escalating pay onto Wall Street — and away from more economically and socially valuable uses of their talents.
The financial industry has doubled in size as a share of the economy in the past 50 years, but it hasn’t gotten any better at its core job: getting money from investors who have it to companies that will use it to generate growth, profit and jobs. There are many ways to quantify how that financial growth-without-improvement hurts the economy.
In 2012, economists at the International Monetary Fund analyzed data across years and countries and concluded that in some countries, including America, the financial sector had grown so large that it was slowing economic growth. Using a different methodology, the most prominent researcher on the size and economic value of Wall Street, a New York University economist named Thomas Philippon, estimates that the United States is sinking nearly $300 billion too much annually into finance.
In perhaps the starkest illustration, economists from Harvard University and the University of Chicago wrote in a recent paper that every dollar a worker earns in a research field spills over to make the economy $5 better off. Every dollar a similar worker earns in finance comes with a drain, making the economy 60 cents worse off.
It’s not that finance is inherently bad — on the contrary, a well-functioning financial system is critical to a market economy. The problem is, America’s financial system has grown much larger than it should have, based on how well the industry performs.
To understand how and why that is, think of money as water and the financial system as a series of pipes. Ideally, the pipes deliver the water from people who have stockpiled it (investors) to people who want to put it to productive use (entrepreneurs, executives, home buyers, etc.).
Over the past half-century, America’s financial industry built a whole bunch of new pipes. The sector grew six times as fast as the economy overall during the past three decades. Other advanced countries didn’t see anywhere close to that growth in their financial sectors.
Some of America’s growth was driven by Washington. Lawmakers kept encouraging financial innovation, which built a market for smarter investment bankers. They did that by changing the tax code to encourage businesses to hire financial whizzes who could spin ordinary income into certain, preferred types of investment income, and by loosening restrictions on the kinds of financial activities that the titans of Wall Street could engage in.
Extra pipes attracted better plumbers — the more the finance industry grew, the more it tugged at highly educated workers. Philippon is a French economist at NYU’s Stern School of Business. He and a co-author, Ariell Reshef of the University of Virginia, have shown that from the end of World War II until the early 1980s, finance was just like any other desk job: The average Wall Street worker was paid about as much as the average worker in the private sector and was only slightly more educated.
But starting at about the time that Jackson joined Goldman, when Congress began tweaking investment-tax rates, Wall Street started drawing more educated workers. This made the average finance salary go up — from less than $50,000 a year in 1981 (which is about $100,000 in today’s dollars) to more than $350,000 a year in 2012.
Salaries rose even faster in the mid-1990s. The average finance worker began to earn more than a similar non-finance worker who had the same amount of schooling. Wall Street executives began to command salaries several times the rate that non-finance executives could.
In sheer dollar terms, it became irrational for almost any qualified American graduate to pass on a Wall Street job. By the mid-2000s, finance workers earned about 50 percent more than they would have in a similar job anywhere else in the economy. There are almost twice as many financial professionals in the top 1 percent of American income earners today as there were in 1979, according to researchers from Williams College, Indiana University and the Treasury Department. Almost 1 in 5 members of the top 0.1 percent work in finance.
You might think finance workers earned all that money because they were selling new and improved financial products that delivered more value — that helped get money more efficiently from investors who had it to entrepreneurs who could put it to profitable use. Research suggests that’s not the case.
A few years ago, Philippon set out to study 130 years of financial-sector performance. He expected to find that performance improved as the industry grew in recent decades.
Philippon tracked the fees that banks and other asset managers take when they move money between investors and borrowers. In theory, the managers should charge less as their technology improves, because they become more efficient and more competitive with one another. (Or, if they charge the same amount, they should generate better returns for investors.)
That’s how it works with, say, your laptop: As the technology improves, you can either buy a better computer for the same price as your last one or you can buy a clone of your last one for less.
In finance, Philippon found, the opposite is true. Financial firms pocket about 2 percent of the money that passes through their hands. That’s basically unchanged from the price of finance in 1920, and it’s actually an increase from the mid-1960s. “It seems that improvements in information technologies over the past 30 years have not necessarily led to a decrease” in the price of financial intermediation, he concluded in the paper.
What that means is that the growth of complex financial products has served primarily to boost income for the firms themselves, Philippon said. A new paper from researchers in the United Kingdom supports his findings. It analyzes decades of data on individual workers and finds no connection between financial professionals’ specific skill sets and why they make so much more money than similarly skilled workers in other industries. . .
It’s part of a series:
ABOUT THIS SERIES: The American middle class is floundering, and it has been for decades. The Post examines the mystery of what’s gone wrong and shows what the country must focus on to get the economy working for everyone again.
Chapter 1: Why America’s middle class is lost
Chapter 2: The devaluation of the American middle class
Chapter 3: The college trap that keeps people poor
Coming Wednesday: What’s killing entrepreneurship?
Peter Maass writes at The Intercept:
Have you heard the screams of a prisoner who is being tortured in America’s war on terror? I can’t forget them.
They pierced the walls of a detention center I visited in Samarra during an offensive by American and Iraqi forces in 2005. In a small room, I was interviewing a frightened detainee whose head was bandaged from an injury he unconvincingly attributed to a car accident during his capture. Bloodstains dripped down the side of a desk, and there was an American military adviser with us, as well as a portly officer of Iraq’s special police commandos.
Suddenly there was a chilling scream.
“Allah,” someone wailed. “Allah! Allah!”
As I wrote at the time, this wasn’t a cry of religious ecstasy. It was the sound of deep pain, coming from elsewhere in the town library, which had been turned into a detention center by Iraqi security forces who were advised by American soldiers and contractors. I was embedded with the Americans for a week, and I had already heard two of them, from the Wisconsin National Guard, talk about seeing their Iraqi partners trussing up prisoners like animals at a slaughter. During raids, I had seen these Iraqis beat their detainees — muggings as a form of questioning — while their American advisers watched.
The CIA’s violations of its detainees is the tip of the torture iceberg. We run the risk, in the necessary debate sparked by the Senate’s release of 500 pages on CIA interrogation abuses, of focusing too narrowly on what happened to 119 detainees held at the agency’s black sites from 2002-2006. The problem of American torture — how much occurred, what impact it had, who bears responsibility — is much larger. Across Iraq and Afghanistan, American soldiers and the indigenous forces they fought alongside committed a large number of abuses against a considerable number of people. It didn’t begin at Abu Ghraib and it didn’t end there. The evidence, which has emerged in a drip-drip way over the years, is abundant though less dramatic than the aforementioned 500-page executive summary of the Senate’s still-classified report on the CIA.
Continue reading. Keep reading—it makes a good point with an interesting anecdote.
The piece ends with a reading list:
Here’s a partial reading list of essential reporting on torture in Iraq and Afghanistan:
Senate Report on Abuses of Military Detainees (2008):http://media.washingtonpost.com/wp-srv/nation/pdf/12112008_detaineeabuse.pdf
Haditha Killings by Tim McGirk:http://content.time.com/time/world/article/0,8599,1174649,00.html
Taguba Report on Abuses at Abu Ghraib:https://www.aclu.org/sites/default/files/torturefoia/released/TR3.pdf
Abu Ghraib Abuses by Seymour Hersh:http://www.newyorker.com/magazine/2004/05/10/torture-at-abu-ghraib
Special Forces in Afghanistan by Matt Aikens:http://www.rollingstone.com/feature/a-team-killings-afghanistan-special-forces
Constitution Project’s Task Force on Detainee Treament (See especially chapter 3): http://detaineetaskforce.org/report/
“The Dark Side” by Jane Mayer: http://www.amazon.com/The-Dark-Side-Inside-American/dp/0307456293
“None of Us Were Like This Before” by Joshua Phillips:http://www.amazon.com/None-Were-Like-This-Before/dp/1844678849
The Killing of Dilawar by Carlotta Gall:http://www.nytimes.com/2003/03/04/international/asia/04AFGH.html
“Pay Any Price” by James Risen (See especially Chapter 7):http://www.barnesandnoble.com/w/pay-any-price-james-risen/1117916812?ean=9780544341418
“Dirty Wars” by Jeremy Scahill (a founder of The Intercept):http://www.amazon.com/Dirty-Wars-The-World-Battlefield/dp/156858671X
“How to Break a Terrorist” by Matthew Alexander:http://www.amazon.com/How-Break-Terrorist-Interrogators-Brutality/dp/B0085S1S5K
“The Black Banners” by Ali Soufan: http://www.amazon.com/Black-Banners-Inside-Against-al-Qaeda/dp/0393079422
“Kandahar’s Mystery Executions” by Anand Gopal:http://harpers.org/archive/2014/09/kandahars-mystery-executions/
“No Good Men Among the Living” by Anand Gopal:http://www.amazon.com/No-Good-Men-Among-Living/dp/0805091793
Glad Coburn’s leaving the Senate, and his swan song is to block efforts to prevent veteran suicides. What a shit. As the post at the link states, the program is $22 million—not much considering the cost of the Iraq War—and as the post notes:
“This is why people hate Washington. Senator Coburn is the only person stopping this bill from becoming law,” said IAVA CEO and Founder Paul Rieckhoff. “If Senator Coburn blocks the Clay Hunt SAV Act, an enduring part of his legacy will be killing an overwhelmingly supported bipartisan suicide prevention bill for our veterans. That has real implications. If it takes 90 days to revisit this issue in the next Congress, the statistics tell us that 1,980 additional veterans will die by suicide. Senator Coburn needs to think carefully about that number in addition to his concerns about the minimal financial costs of this bill.”
Jane Mayer has a very good article in the New Yorker:
It’s hard to describe it as a positive development when a branch of the federal government releases a four-hundred-and-ninety-nine-page report that explains, in meticulous detail, how unthinkable cruelty became official U.S. policy. But last Tuesday, in releasing the long-awaited Senate Select Intelligence Committee report on the C.I.A.’s interrogation-and-detention program, Senator Dianne Feinstein, the committee chairman, proved that Congress can still perform its most basic Madisonian function of providing a check on executive-branch abuse, and that is reason for gratitude.
It is clear now that from the start many of those involved in the program, which began in 2002, recognized its potential criminality. Before subjecting a detainee to interrogation, a 2002 cable notes, C.I.A. officers sought assurances that he would “remain in isolation and incommunicado for the remainder of his life.” Permanent, extrajudicial disappearance was apparently preferable to letting the prisoner ever tell what had been done to him. That logic may explain why no “high value detainee” subjected to the most extreme tactics and still in U.S. custody in Guantánamo has yet been given an open trial.
The report also demonstrates that the agency misrepresented nearly every aspect of its program to the Bush Administration, which authorized it, to the members of Congress charged with overseeing it, and to the public, which was led to believe that whatever the C.I.A. was doing was vital for national security and did not involve torture. Instead, the report shows, in all twenty cases most widely cited by the C.I.A. as evidence that abusive interrogation methods were necessary, the same information could have been obtained, and frequently was obtained, through non-coercive methods. Further, the interrogations often produced false information, ensnaring innocent people, sometimes with tragic results.
Other documents illustrate how the agency misled. In June of 2003, the Vice-President’s counsel asked the C.I.A’.s general counsel if the agency was videotaping its waterboarding sessions. His answer was no. That was technically true, since it was not videotaping them at the time. But it had done so previously, and it had the tapes. The C.I.A. used the same evasion on Senate overseers. A day after a senator proposed a commission to look into detainee matters, the tapes were destroyed. Similar deceptions on many levels are so rife in the report that a reader can’t help but wonder if agency officials didn’t simply regard their cloak of state secrecy as a license to circumvent accountability.
After Feinstein introduced the report on the Senate floor, John McCain rose to speak. He praised the document as “a thorough and thoughtful study of practices that I believe not only failed their purpose—to secure actionable intelligence to prevent further attacks on the U.S. and our allies—but actually damaged our security interests, as well as our reputation as a force for good in the world.” His endorsement was important not only because, as a former prisoner of war who survived torture, he has particular authority on the issue but also because he is a Republican. He lent the report credibility against torture apologists hoping to discredit it as a political stunt. The tableau of the two elder senators putting aside their differences to stand together was a relic of bipartisan statesmanship.
It remains to be seen, though, whether the report will spur lasting reform. Darius Rejali, a professor of political science at Reed College and an expert on torture regimes, doubts that it will. For one thing, despite McCain’s testimony, torture is becoming just another partisan issue. This wasn’t always the case—it was Ronald Reagan who signed the U.N. Convention Against Torture, in 1988. But polls show both a growing acceptance of the practice and a widening divide along party lines. “It’s becoming a lot like the death penalty,” Rejali said. . .
So long as I seem to be blogging about the financial industry, take a look at this Washington Post article by Tom Hamburger and Steven Mufson:
Wall Street’s biggest banks squeezed out a victory this week when the House narrowly approved a spending bill with provisions that would weaken a section of the Dodd-Frank financial regulations. But the win came at a high cost for the banks — in spending down their political capital and inflaming public opinion.
In fact, the apparent losers in the legislative debate – such as Rep. Maxine Waters (D-Calif.) and Sen. Elizabeth Warren (D-Mass.,) – sounded like winners on Friday.
“I think we broke through,” Waters, the ranking member of the House Financial Services Committee, said in an interview Friday afternoon. Both legislators made fiery speeches before the vote, saying the change was a favor to powerful banking interests such as J.P. Morgan Chase and CitiGroup that put taxpayers at risk.
“Under the cover of ‘must pass’ legislation, big bank lobbyists are hoping that Congress will allow Wall Street to once again gamble with taxpayer money – by reversing a provision that prohibits banks from using taxpayer-insured funds, bank deposits, to engage in derivatives trading activity,” Waters said on the House floor. Derivative trades are basically a bet on the future value of things, such as commodities. For example, major airlines use derivatives to hedge against future price changes for jet fuel, as a way to keep ticket prices stable. Most of these transactions carry little risk.
But before the 2008 financial crisis, Wall Street firms used more complicated derivative formulas to place risky bets on the mortgage market. Their excesses nearly brought down the financial system. Dodd-Frank was intended to curb that behavior. Banks have pushed for exceptions to the regulations so they can once again use their deposits to underwrite some more complex derivative trades. Those deposits are often backed by federal insurance, which means taxpayers are on the hook for any risk.
The new language would effectively repeal portions of the “push-out” provision of Dodd-Frank, which requires banks to push some derivatives trading into separate units that do not have access to federal deposit insurance.
On Friday, Waters and her staff made plans to get together with allies on the left to discuss how to “better educate the public about what is at stake” in the debate over financial regulations, which will likely expand next year.
Among bank lobbyists, there was a similar discussion Friday. Several banking industry advocates interviewed by The Post said they expressed concern about the rapidly mobilized opposition to banking interests that developed on the left and the right this week.
In addition to labor and consumer groups sounding the alarm, some conservative opinion leaders also objected to the language added to the spending bill. . .