Banking Reform, Blowouts, Plumes, etc.
A few items (apologies again for so few posts lately–the energy I’d be putting into posting has gone into fixing the blog):
(1) On Banking Reform. Now that the banking regulation bill is in reconciliation, it will be interesting to see what comes out the other end of the sausage-maker, and in particular whether all the good bits get discarded.
We’re working on our July/August issue right now, and one of the feature articles, “Not Too Big Enough,” by Rob Larson, will look at the too-big-to-fail banks, how they got that way, and why the current reform is unlikely to solve the TBTF problem. We’ll also have a review of the banking legislation, what got in, what got left out, and what never got considered. The next few weeks will obviously be crucial.
Mary Bottari of the Center for Media Democracy and BanksterUSA has been on top of the reconciliation process. This is from a recent email from her:
THE FINAL FIGHT: NO MORE GAMBLING WITH TAXPAYER MONEY
Even thought the bank reform bill working its way through Congress is far from perfect, there are some strong provisions well worth fighting for as the bill moves to a House-Senate conference committee.
Two recent articles illustrate the pros and cons of this behemoth bill. New York Times reporter Gretchen Morgenson, does a great job reminding us that the original Glass-Steagall legislation was only 34 pages long and it was key to keeping our financial system stable for 60 years. She points out that the two bills that the Senate and the House have now passed are a whopping 3,000 pages combined.
Yet despite all that verbiage, there are flaws in both bills that would let Wall Street continue devising financial black boxes that have the potential to go nuclear. And even if the best of both bills becomes law, investors, taxpayers and the economy will remain vulnerable to banking crises.
We agree, the bills are far from perfect and will not prevent the next crisis. But while some will walk away in frustration, we think there are a few things left in the legislation that are worth fighting for. Chief among these is the Senate derivatives chapter, which is head and shoulders better than the House version. The main goal of the Senate derivatives chapter is to separate reckless Wall Street gambling from the taxpayer guarantee. Morgenson’s article notes that this language is under attack and highlights the fact that taxpayers are now backstopping and unbelievable 59% of the financial sector.
Lawmakers who are charged with consolidating the two bills are talking about eliminating language that would bar derivatives facilities from receiving taxpayer bailouts if they get into trouble. That means a federal rescue of an imperiled derivatives trading facility could occur. (Again, think A.I.G.)
Surely, we beleaguered taxpayers do not need to backstop any more institutions than we do now. According to Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, Va., only 18 percent of the nation’s financial sector was covered by implied federal guarantees in 1999. By the end of 2008, his bank’s research shows, the federal safety net covered 59 percent of the financial sector.
Because the Senate derivatives language is so strong, it is under attack from all sides. Michael Lewis, New York Times writer and author of the best selling book on the crisis “The Big Short,” had a spot-on analysis of the bill in a very funny Sunday op-ed called “Shorting Reform.” The article is written as a memo from a lobbyist to his bosses at the big banks.
Shockingly, the Senate version of the bill more or less would require us to cease to trade derivatives entirely. This unpleasant idea was introduced by Senator Blanche Lincoln of Arkansas, and it leads me to a point that is worth underscoring: We do not have a problem with the American people, we have a problem with American women. Elizabeth Warren, our TARP supervisor, continues to ask questions about what we did with our government money; Mary Schapiro has used her authority at the S.E.C. to sue Goldman Sachs. Of the four Republican senators who crossed over to vote with the Democrats, two were women – and one of the guys posed naked for Cosmopolitan magazine.
Going forward, we should discourage women from seeking higher office – or indeed, any position in which they might exert influence over our activities. More immediately, in your private conversations with Larry Summers, Tim Geithner and male Republican senators, you should simply refer to Blanche Lincoln as “unhinged.” They’ll get it.
This must indeed be the backroom banter. How else can the Obama administration defend its opposition to the Lincoln measure?
At this point, these strong provisions are in the bill. To preserve them we need to focus like a laser on the conference committee and force all proceedings into the light of day. All amendments to the bill need to be posted online days in advance so the public can read them and analyze them. Each amendment needs to be subject to a roll call vote, and all proceedings must be televised. Citizen journalists should be in the room along with live bloggers.
Tell Us Your Ideas
Do you have other ideas on how to hold the Bankster Party accountable? Send them our way in the comments section of our Bankster blog. At BanksterUSA.org will be working on transparency and accountability during this next stage of the fight. We will be outing the conferees who are against strong derivatives reform and supporting those who do the right thing. Thanks to the many who called your Senators about the Lincoln derivatives language and reported back to us on our 1st ever Bankster whip list. We will do it again for the conferees soon. We hope you will stay tuned in, stay in the fight and tell your friends and family to sign up for email alerts at BanksterUSA.org.
(2) The Oil Spill. A second feature in our July/August issue will be on the Yasuni region of the Amazon, in eastern Ecuador, where Pres. Rafael Correa has proposed to keep crude oil in the ground in exchange for payment to Ecuador from the international community. This innovative proposal–opposed by the oil industry–to keep the oil in the ground has multiple advantages: avoiding the ecological harm of extraction (now so obvious because of Deepwater Horizon in the Gulf of Mexico); less oil out there to burn, so reducing greenhouse gas emissions; plus the payments Ecuador would get would be used to develop alternative energy sources and conservation measures.
Anyhow, a couple of interesting items have come to our attention. One is from the Christian Science Monitor, about a study of “blowout preventers” that the oil industry produced (but did not publicize) that shows that measures to prevent blowouts of the sort that led to the current disaster in the Gulf are not very effective.
Second item, from Good Morning America, via the Center for Media Democracy’s PR Watch (thanks again, Mary!): what BP doesn’t want you to see–underwater plumes of oil mixed with chemical dispersant, as viewed by a GMA dude and the grandson of Jacques Cousteau, clad in hazmat dry-wetsuits. Ick. Poor fish, poor marine life in general. View here.
That’s all for now. I promise to try to post more frequently.
One Response to “Banking Reform, Blowouts, Plumes, etc.”
C.Loera says:
June 9, 2010 at 1:03 am
Looking forward to the next issue. The article should provide a great insight into the ‘compromise’ needed to water down banking bill.