Newsweek’s “Why is Barney Frank So Effing Mad?” is supposedly about the Congressman from Fidelity but is really about how the banksters are succeeding in neutering financial reform. One Congressional staffer has told me that everyone involved recognizes the measures don’t go far enough, but feel they can’t do much more (Congress can step out only so far ahead of the Executive, and this one clearly is in no mood to take a more aggressive stand).
The article does not come down on Frank; in fact, it repeats some of his PR uncritically:
Now, gazing from behind thick glasses, his mouth set in its trademark grimace, Frank fires back. “The big banks have no influence,” he says. “They couldn’t stop the credit-card [reform] bill. They get the full blast of the [new] Consumer Financial Protection Agency.”
Ahem, let’s turn the mike over to Dick Morris:
The widely heralded credit card reform legislation making its way through Congress is a sellout to the credit card companies. Obama has proposed and Congress has passed a series of minor reforms that deal with the fringes of the problem – late billings, retroactive interest rate hikes, misapplication of payments and such – but fail to reform the most basic offense of the companies: their usury.
Congress explicitly rejected any limitation on the interest rate credit card companies can charge. It remains perfectly legal for them to charge rates that would make a loan shark blush.
And let us not forget that the new rules phase in, with one set of changes already in force and more to come in February and August 2010. Issuers have been merrily jacking up interest rates in the meantime on wide swathes of customers, including those with pristine credit scores, even though the banks’ funding costs have plunged. The House, frustrated with their conduct, voted to accelerate the implementation.
And the consumer protection agency? Frank fails to mention that its most powerful provision, of requiring banks to offer plain vanilla products, was excised. WTF? Banks are not merely state-chartered franchises, they are state-backstopped franchises. They are utilities and should be treated as such. Requiring them to offer stripped down, simple products would send a powerful message: banks’ first duty is to provide essential services. But no, we can’t have anything that might interfere with their profits, now can we?
But the article does rebut Frank’s whopper, that the big bank have no influence:
Not even critics accuse Barney Frank of being in the pocket of Wall Street. The real question is whether he and -others are being swayed by the legislative legerdemain that Wall Street lobbyists have long practiced. The story of how those loopholes got into the derivatives bill, even with Frank at the helm and the wind of public outrage at his back, shows just how powerful the Wall Street banking lobby remains—and how complex Wall Street’s financial instruments have become. “I don’t think he ever fully understood the legislation” in its early stages, says Greenberger. Many of the key lobbyists now are the same gang that helped get us into this mess before, and they’re spending huge sums once again. In the first three quarters of 2009, financial-industry interests have spent $344 million on lobbying efforts, putting them on pace to break all records, according to the Center for Responsive Politics. That’s just for lobbyists’ and lawyers’ salaries, junkets, and dinners, and doesn’t include political donations and issue ads. Even more impressive is the lobbying strategy that money is buying. According to insiders and industry e-mails obtained by NEWSWEEK, the banks have sought to stay in the background and put their corporate customers—a who’s who of American business, including Apple, Whirlpool, and John Deere—out in front of the campaign. “This is an orchestrated, well-funded effort by the banks to manipulate our legislation and leave no fingerprints,” says a congressional staffer involved in drafting the legislation. The staffer, who would speak only on condition of anonymity, passed on to NEWSWEEK nine pages of proposed changes in the legislation intended to protect trading from open scrutiny—all of it on paper without a letterhead—that she says came from Goldman Sachs. Samuel Robinson, a spokesman for Goldman, says “it’s not our document” but adds that Goldman has “an active and appropriate involvement in the process of government” and supports “sensible reform.”
Actually, the person who sent me the article, who was once on a first name basis with Frank, would argue vociferously that Frank is doing Wall Street’s bidding. The idea that he didn’t understand the implications of the end-user loophole in the derivatives reform bill is a real stretch. And the bill has other serious flaws: the idea that only standardized derivatives are cleared centrally (ie, customize and you are scot free); that the clearing organization will be self-policing.
And of course, we have the allegation by the Congressional staffer of revisions to the derivatives bill coming from Goldman, but in a form where the firm has plausible deniability, and of course, it insists it had nothing to do with this missive. Guess they are being a bit more careful now that Matt Taibbi has been posting various Goldman lobbying documents.
But Frank insists he was acting in good faith:
Frank heatedly denies that he’s been fooled, though he concedes he is still catching up on some of the details of the bills he is pushing through. “I’ve become responsible for dealing with a lot of things that are new to me. I didn’t have a great deal of knowledge. I’ve been relying on a whole lot of people,” Frank says. In allowing some exemptions from exchange trading, Frank says he is merely accommodating the corporate end users—not Wall Street—who want to continue doing these private trades in derivatives. “The Wall Street lobbyists are not end users. Is Boeing a Wall Street lobbyist? Is John Deere a Wall Street lobbyist?” he asks, citing two big companies that have supported the “end-user exemption.” But critics like the CFTC’s Gensler have said that the exemption intended for nonfinancial companies might let many other players avoid regulation, including hedge funds, private-equity funds, and other financial firms. Other critics, such as Barbara Roper of the Consumer Federation of America, say some of the corporations themselves are being used by the banks.
Frank ultimately is resorting to “Gee this fancy finance stuff is SOOO complicated! How can you blame us for being had?” Funny, that’s the posture the Administration has more or less taken, in giving the banks unduly favorable terms for their various bailouts, adding hidden subsidies to the explicit subsidies (as one reader noted today, since the US paid well in excess of Citigroup’s market cap, why doesn’t it own it 100%?). I certainly don’t buy that excuse made on behalf of Team Obama, and I have trouble with it coming from Frank.
Maybe we can turn bank management over to someone not sullied by our politics, say ummm, President of Venezuela Hugo Chávez?
They seem to be having a bit of a banking crisis down there and there have been some arrests. Here is a rather choice quote from:
Mr. Chávez, seeking to calm the population, said he was simply seeking to protect depositors. In his Sunday newspaper column, he reserved some vitriol for the arrested bankers, calling them “vulgar thieves, white-collar robbers, pickpockets.”
In other words, Chavez took a page out of the Reagan playbook. As William Black points out, the S&L crisis lead to thousands of criminal convictions, and nobody called receivership “nationalization” in an attempt to invoke the specter of socialism.
Frank and Dodd are financial industry sockpuppets. Their anal sphincters gave it up long ago to the “invisible hand” of Goldman and the other banksters.
There are various aspects of this that are hilarious in a thoroughly unfunny way. The first is that Barney Frank, the Chair of the House Financial Services Committee, is saying that he pushed through legislation that he was clueless about. The second is that this is marked contrast to his usual pose as a “financial expert.” All of this leads to the more general question how best to qualify the membership of the House and Senate Financial Services committees? Are they charlatans or crooks?
But of course the idiocy and bad faith do not stop there. Frank says he didn’t have people to explain this stuff to him. Well, duh! He knows who Michael Greenberger is. If he had wanted solid, insightful views on derivatives, I am sure Greenberger would have made himself available. Heck, he could have gotten on the phone to Brooksley Born. The truth is that not only did Frank not seek out the views of those who have a record of being right on these issues, but as we saw with the way Melissa Bean shut down Simon Johnson his committee actively suppresses them.
I see a lot of articles like this one on all kinds of issues in the media. They have an otherworldly, alternate history air about them. It has to do with the narratives that both the reporters and their subjects buy into. As here, it is taken as a given by all parties that the financial reform under discussion is real, and not a joke, that politicians like Frank are acting diligently and in good faith, and that any less than optimal results do not reflect on those involved but are the natural consequence of a difficult to understand problem. What is overlooked by all concerned is that there are people who understand these problems and that they have much better and more effective ways of dealing with them. But again as we see on so many issues, it is precisely because they do that they and their ideas are eliminated from the discussion.
“Frank and Dodd are financial industry sockpuppets. Their anal sphincters gave it up long ago to the “invisible hand” of Goldman and the other banksters.”
You just made my day….and it hasn’t really started yet!
Thanks for properly contextualizing this whole thing… I think you got it about right.
AFAIC it was the same w/Iraq, HC “debate”, climate/energy (why does nobody report Inohe’s near 100% contributions from big oil?)… pretty much everything that matters. Congress is just the dog’s tail wagging w/the changing winds.
I’ve learned to pay attention, but not get depressed about it. Rather, observe and map out the landscape so that I can avoid hazards that my observations red flag.
But this shit sure does take some of the juice out of optimism, that’s for sure.
Again, good post Hugh.
Oops… Apologies to Sen Inohe… he’s the guy in pocket of defense contractors (among others), not big oil.
That would be Sen. Inhofe
Apologies for being so brutal but I am at the point that I sincerely wish President Obama will be a one-termer like Carter.
His constant surrendering to Wall Street makes me want to puke. He clearly does not want to understand that people are more than fed up with the financiers. Should we get the much heralded second leg of this Great Recession, this obtuseness will cost him dearly in 2010, and even more so in 2012.
Of course, the problems won’t come from the Republicans; they are way passed the fruitcake stage to be any real threat. But with an economic situation worsening again, I expect a challenge from within his party.
Things could get unbelievably ugly if Obama doesn’t smell the coffee pretty soon.
At the rate Obama AND the Democratic leadership in Congress are going, the Democrats are going to lose control to the Republicans come mid-term elections (just like in 1996) and Obama will be a one-term president.
Of course, the ‘pubs do something really stupid again like run a Cheney/Palin ticket.
The gods of absurdity are working over time, choose your words carefully, unless you wish to ware them.
I have a hard time keeping the players and teams straight, making it hard to know whom to blame and seek vengeance upon. McGee was out to get his kid’s teacher fired for her “leftist invective” about bankers. By implication, she’s some kind of leftist – since nobody who agrees with Ron Paul or anybody like him is opposed to bailing out Wall Street and bankers. Barney Frank is both the Senator from Fidelity and, given everything else we are told about him from Teabaggers Incorporated, some kind of lefty liberal.
Not that I’m here to defend Frank – I’m all about terms and agreements in 12 point type that fit, at most, on both sides of a single piece of paper…
But I’m losing the ability to translate all these competing narratives into and out of each other…
Nah, they all fit together! All the real lefties, like the hapless teacher and the principal and headmaster, are to be fired by the powerful banking interest if they step too far out of line. They are then replaced with pseudo lefties or cowardly lefties to main appearances that there is diversity of thought and action.
In Congress, you don’t need to fire the incumbents, just suborn them.
Who cares about teams and scores when you own the entire league, you can orchestrate the fans like a WWF match lol. And if people eat that garbage up just think of the fun ya can have with complex systems like banking, investments or politics ha ha.
Yes and that’s the problem. The voters are taken in by labels, and the media is very subtle about the way it “marks” people, and those Marks do a great deal in creating public opinion. It is through this subtle manipulation by the media that “public opinion” gets distorted.
Until everyone understands Who the media is, and in whose interest it operates, then yes, it’s very hard to identify who the real crooks are.
And yes, they eat it up like WWF, and more. Have you watched Glenn Beck lately? These are the people who are defining the lines along which this conflict will take place. Who the good guys are and who are the bad. That frightens me.
Thanks for the post… a good marker along the way.
Think you could’a done w/out the Dick Morris quote, however… I’m all for taking care of people and stuff, but making a self-absorbed guy dependent-on-meds-so-he-doesn’t-take-a-drink-then-pick-up-the-phone-to-call-a-comfort-hooker in between advising a president…
My magic glasses reveal him dressed in a clown suit in perpetuity… can’t you see it?
I had to proofread one of Morris’s recent books. It was an astonishing masterwork of lies, distortion, and factual and logical errors. He’s just as much of a useless shill as Frank or Dodd, or perhaps even worse because he just works for whoever pays the bill, he doesn’t really even seem to care very much what he’s saying.
Here is the answer to the ususrious credit card interest rate problem:
GET YOUR CREDIT CARD FROM A CREDIT UNION
They are prohibited from charging more than 18% interest.
Granted many may consider 18% usurious, but it’s nothing like the rates some of the banks can charge
I don’t understand why people like Frank can use not knowing as an excuse when most of the things they do affect so many people. That is not a good excuse and I don’t know why we allow them to use it.
My local paper reprinted this quotation this morning. Unfortunately it is always appropriate:
When all is said and done, no literature can outdo the cynicism of real life; you won’t intoxicate with one glass someone who has drunk up a whole barrel.
I’ve watched Frank and Dodd in action. I find nothing appealing about them.
The nine pages of changes, from whatever source, need to be scrutinized to understand the extent to which Frank and Dodd are being manipulated by the financial lobbysts. Mass and Conn need to vote these two out as soon as possible.
The push to move up the implementation of the credit card reform act from Feb 22, 2009 to Dec 1, 2009 has failed in the senate.
Apparently the senate pushed to change the legislation they had already agreed was fine for Feb 22, 2009.
All just political theatre. Barney Frank is an openly Criminal politician.
“…the person who sent me the article, who was once on a first name basis with Frank, would argue vociferously that Frank is doing Wall Street’s bidding.”
This certainly tracks with Frank’s attempt to gut the Paul/Grayson bill to audit the Fed. We’ll see where that goes, but campaign bribes have been increasing for good reason. They are highly profitable.
If fed-up Dems allow more Repubs to get into Congress, we will remain completely screwed and probably worse off. Do you expect the party of No to actually do something? I’d rather progressive Dems run in the primaries and win.
Be careful of what you wish for.
Sorry, but I’ve got a really dumb question that maybe someone with a finance or legal background can answer:
Let’s say that the markets tank again, and that the mutual funds and hedge funds and what not lose their shirts because they hold stock or debt or are counterparties to other (future bankrupt) companies’ agreements (eg: the next LEH and BSC). Can they now sue the government (Fed) for doing things that artificially inflated those companies’ books? If so, hasn’t the government just taken on an infinite amount of liability
You’re mistaking the Fed with the government. They are NOT the same. The Fed is a privately owned institution, with power and oversight supposedly provided by congress.
On the idea that our government would be liable for infinite losses and that this is somehow a problem…let’s just say that IF this whole house of cards starts to collapse again, government solvency will be a big question. Can’t squeeze blood from a turnip, so it’s really irrelevant.
I can almost believe this latest fiction that Frank simply didn’t understand what was going on as his former staffer, Michael Paese, recently left Frank’s employ to become a lobbyist for Goldman Sachs, taking over Mark Patterson’s former position (he left to become Chief of Staff for Treasury Secretary Timmy Geithner (a k a, Geithner the Clown); Paese was probably the GS lobbyist who directly handed those Goldman Sachs derivatives’ changes into Barney’s dainty little pinkies.
And as to that “central clearinghouse” mentioned in the blog: that would be ICE US Trust, which is owned by Goldman Sachs, JPMorgan, Morgan Stanley (et al.) and ICE and the Markit Group.
ICE, or InterContinental Exchange, in turn, is owned by Goldman Sachs, Morgan Stanley and the Oil Cartel.
Markit Group was orginally financed (and I believe still secretly owned) by Goldman Sachs, JPMorgan, Citigroup and BofA.
Funny how it all appears to tie in together, huh?????
Thanks for your usual clear analysis. Unlike many supposedly “serious” commentators you aren’t afraid to say that what looks, feels and tastes like corruption really is corruption. Perhaps you went to the Jimmy Breslin school of plain speaking? I loved the way he unabashedly use the plain English word for large campaign contributions: bribes.
One thing I disagree with though is your statement “Congress can step out only so far ahead of the Executive”. Why? The Constitution gives congress to power to make laws. Other than the veto the president can’t stop them. Yes, I know that political considerations push congress (at least members of the president’s party) to tow his line to a certain extent, the power of the bully pulpit, yada, yada, yada. But ultimately these are all excuses. Especially as many senators and representatives are more secure in their positions than the president, and Obama isn’t riding any great wave of popularity. Congress, and congress alone has the Constitutional power to draft laws. Any failure to do so in the interests of the American people should be treated with the same opprobrium that they get when they do the lobbyist’s bidding.
If congress could (as you strongly and correctly advocate) reject the president’s nomination for Fed chairman, why couldn’t they pass laws that are more effective than what the president wants?
“Frank heatedly denies…”
The guy gets heated about everything. Guys like that are all heat and no light; the man’s opinion of himself is highly distorted.
Yves – I’ve been a lurking fan of your blog for at least three years, and I owe you a huge thank you for all I learned from NC in the year before the crash.
So please forgive my rudeness for not saying that before I blast you for using prostitute-toe-sucking, wrong-more-often-than-a-broken-watch Dick Effing Morris as some credible voice in your blog. What the hell were you thinking?
I don’t care if this is the once-in-a-decade where Morris is right. Associate with his garbage and it damages your credibility, too.