Despite her longevity as a California pol, house speaker Nancy Pelosi is looking like every bit as much of a dyed-in-the-wool financial services industry backer as the Congressmen on the New York-Boston corridor.
As readers will know, this blog does not dwell much on the inside baseball of politics. But once in a while things become so obvious as to merit comment.
Recall how instrumental Pelosi was in getting the TARP passed. The widely mentioned gambit of Paulson getting on bended knee to plead for her support was a nice bit of theater to cover how readily she fell into line. The other justification for the Democratic leadership support was the claim that Treasury had given a closed door briefing to Senate and House leadership telling them the world would end if the TARP was not passed yesterday.
Some have suggested that Treasury provided data on the potentially disastrous money market fund withdrawals around the time of the Lehman failure (recall the death of Lehman led Reserve to break the buck). but that problem had already been addressed in September in part via the Fed providing non-recourse loans to purchase asset backed commercial paper, and more fully in October via yet another Fed facility. In other words, if the money market fund panic was indeed the scare tactic, the TARP was not the remedy.
But even if we give the devil its due, the performance of the Democratic leadership was pathetic. The most heinous aspect of the bill, putting the Treasury secretary outside the reach of law, was never cut back. The first draft, a doodle on a napkin, was offensive to democratic processes, the second draft added a lot more words but was still way too thin on basics, like objectives, criteria, procedures, and the final draft loaded tons of pork in to assure passage. And the ironies kept multiplying. The bill was wildly unpopular even with the media falling into line (and in the later stages, a clearly orchestrated campaign to have financial services industry employees contact legislators to counter the groundswell of opposition). And it was Senate Republicans who were the last holdouts.
Let us not put too fine a point on how brazen the TARP was on another axis. As a reader wrote at the time:
Finally, it is hard to escape the political implications of all this. Basically the President is trying almost to nullify the coming election by getting far reaching legislation in place that should have been left to the next Administration. He creates crises and then calls for comprehensive and badly drafted legislation under panic conditions, and the Democrats in Congress give the President what he wants. With both parties on board now these things will be difficult to reverse. The FISA bill was an important example of this, and TARP would be another. With important pieces of very bad policy almost fixed in stone, what will voters have left to decide in November? Other than the very crucial question of Supreme Court nominees, I am drawing a bit of a blank.
So why are we pointing a finger at Pelosi in particular? The next chapter is her appointment of one Richard Nieman to the Congressional Oversight Panel. Under the TARP rules, the House Majority leader selects one of the oversight panel members, so this choice was completely under her control.
Nieman is the New York Superintendant of Banks. He helped Goldman set up its bank holding company.
Nieman fell out with the other Democrats and wrote a joint opinion with John Sununu (see page 88 of the document). If you were somehow ignorant of the fact that the Summers/Geithner programs embody massive hidden and inefficient subsidies to banks (the Public Private Investment Partnership), questionable uses of the FDIC, and the employment of the Fed as quasi-fiscal agent, the critique might sound reasaonable. But to anyone with a passing acquaintance with the facts, the dissenting views are absurd. To give you an idea of how far they have to stretch to make their arguments sound plausible, they grasp at the straw of “oh yeah, that over 50 point spread between market price and bank valuation for toxic assets is due to a liquidity discount.”
There is also sophisticated mud-slinging, for instance, suggesting that the panel’s recommendations run against the
…preference for maintaining a private banking system via temporary public support or partnership, which is consistent with this country’s tradition of private rather than government control of business
That’s code for “Warren is a commie”. Didn’t anyone tell these clowns that no private investor with an operating brain cell would give so much money to a private enterprise without demanding a good deal of oversight and control? And at a time like this, the public versus private polarity that they invoke has been blunted. Pretending that wards of the state are entitled to the rights of normal private concerns is absurd, yet that’s the fiction that Nieman and Sununu present.
Maybe I’m too cynical, but this sure looks like the behavior of someone looking for his next, bigger meal ticket.
But then we come back to Pelosi. I can’t imagine that Nieman would have fallen in with the Republicans without at least as a courtesy informing Pelosi in advance. And if she had a big problem, she would have gotten him to back down (either not siding with the opposition or issuing a separate view that was more ambivalent). So Pelosi is at a minimum sitting this one out (which I deem unlikely) or on board with the program to undermine Warren.
And let us not kid ourselves, the knives are coming out. Here’s a mix of some stories and parsing of commentary, a random selection from Google News:
I hate to say it, but I think Warren’s days as COP head are numbered. She is clearly now boxed in by being in the weird position of being in the minority. The opposition reports took issue with the very premise of her approach. If, as I suspect, the behind the scenes fight is worse than what can be seen at a remove, the longer she stays on, the greater the risk of being tainted.
And what do we make of Pelosi’s recent sponsorship of a new version of a Pecora Commission? Her sudden interest, after the COP report came out, seems very oddly timed and inconsistent with her choice of and failure to rein in Nieman.
My reading is if any panel results, it will be a sham effort, designed to make only a superficial inquiry and shake a finger at a few extreme practices.
If Team Obama will give torturers a free pass (a very small group that has nevertheless done tremendous damage to America’s standing in the world), there is absolutely no way it has any appetite for exposing the massive fraud in the financial system. Obama does not do conflict, and his “Let’s not dwell on the past” is tantamount to appeasement of the oligarchs and coddling of the worst practices of the Bush regime.
But if we are lucky (and we’d need to be very lucky) history might repeat itself. The original Depression investigation was also a sham exercise, but Pecora, brought in to write the final report after three previous investigators were fired or quit, asked to reopen the hearings, and some initial successes, plus the arrival of the Roosevelt administration, gave the probe a new leash on life.
But with the both the Democrats and the Republicans firmly in the hold of the banking classes, it will take something more on the order of a miracle to get a serious inquiry underway.