Rolling Stone: Obama's Big Sellout

On October 20th, the president went to the Mandarin Oriental Hotel in New York and addressed some 200 financiers and business moguls, each of whom paid the maximum allowable contribution of $30,400 to the Democratic Party. But an organizer of the event, Daniel Fass, announced in advance that support for the president might be lighter than expected — bailed-out firms like JP Morgan Chase and Goldman Sachs were expected to contribute a meager $91,000 to the event — because bankers were tired of being lectured about their misdeeds.

“The investment community feels very put-upon,” Fass explained. “They feel there is no reason why they shouldn’t earn $1 million to $200 million a year, and they don’t want to be held responsible for the global financial meltdown.”

Which makes sense. Shit, who could blame the investment community for the meltdown? What kind of assholes are we to put any of this on them?

This is the kind of person who is working for the Obama administration, which makes it unsurprising that we’re getting no real reform of the finance industry. There’s no other way to say it: Barack Obama, a once-in-a-generation political talent whose graceful conquest of America’s racial dragons en route to the White House inspired the entire world, has for some reason allowed his presidency to be hijacked by sniveling, low-rent shitheads. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it, leaving even his erstwhile campaign adviser, ex-Fed chief Paul Volcker, concerned about a “moral hazard” creeping over his administration.

“The obvious danger is that with the passage of time, risk-taking will be encouraged and efforts at prudential restraint will be resisted,” Volcker told Congress in September, expressing concerns about all the regulatory loopholes in Frank’s bill. “Ultimately, the possibility of further crises — even greater crises — will increase.”

Taken together, the rash of appointments with ties to Bob Rubin may well represent the most sweeping influence by a single Wall Street insider in the history of government. “Rather than having a team of rivals, they’ve got a team of Rubins,” says Steven Clemons, director of the American Strategy Program at the New America Foundation. “You see that in policy choices that have resuscitated — but not reformed — Wall Street.”

But the real kicker came when Frank’s committee took up what is known as “resolution authority” — government-speak for “Who the hell is in charge the next time somebody at AIG or Lehman Brothers decides to vaporize the economy?” What the committee initially introduced bore a striking resemblance to a proposal written by Geithner earlier in the summer. A masterpiece of legislative chicanery, the measure would have given the White House permanent and unlimited authority to execute future bailouts of megaconglomerates like Citigroup and Bear Stearns.

Democrats pushed the move as politically uncontroversial, claiming that the bill will force Wall Street to pay for any future bailouts and “doesn’t use taxpayer money.” In reality, that was complete bullshit. The way the bill was written, the FDIC would basically borrow money from the Treasury — i.e., from ordinary taxpayers — to bail out any of the nation’s two dozen or so largest financial companies that the president deems in need of government assistance. After the bailout is executed, the president would then levy a tax on financial firms with assets of more than $10 billion to repay the Treasury within 60 months — unless, that is, the president decides he doesn’t want to! “They can wait indefinitely to repay,” says Rep. Brad Sherman of California, who dubbed the early version of the bill “TARP on steroids.”

The new bailout authority also mandated that future bailouts would not include an exchange of equity “in any form” — meaning that taxpayers would get nothing in return for underwriting Wall Street’s mistakes. Even more outrageous, it specifically prohibited Congress from rejecting tax giveaways to Wall Street, as it did last year, by removing all congressional oversight of future bailouts. In fact, the resolution authority proposed by Frank was such a slurpingly obvious blow job of Wall Street that it provoked a revolt among his own committee members, with junior Democrats waging a spirited fight that restored congressional oversight to future bailouts, requires equity for taxpayer money and caps assistance to troubled firms at $150 billion. Another amendment to force companies with more than $50 billion in assets to pay into a rainy-day fund for bailouts passed by a resounding vote of 52 to 17 — with the “Nays” all coming from Frank and other senior Democrats loyal to the administration.

Even as amended, however, resolution authority still has the potential to be truly revolutionary legislation. The Senate version still grants the president unlimited power over equity-free bailouts, and the amended House bill still institutionalizes a system of taxpayer support for the 20 to 25 biggest banks in the country. It would essentially grant economic immortality to those top few megafirms, who will continually gobble up greater and greater slices of market share as money becomes cheaper and cheaper for them to borrow (after all, who wouldn’t lend to a company permanently backstopped by the federal government?). It would also formalize the government’s role in the global economy and turn the presidential-appointment process into an important part of every big firm’s business strategy. “If this passes, the very first thing these companies are going to do in the future is ask themselves, ‘How do we make sure that one of our executives becomes assistant Treasury secretary?’” says Sherman.

Thanks for posting, Brian. Taibbi’s articles are good reads.

Which fits with his administration opposing a tax on trades that the EU wants introduced as an insurance against this kind of thing happening again.

Sad face.

It’s Condoleezza Rice syndrome :/.

The Errors of Matt Tabbibi


I don’t know whether every error he points out is correct, but I wholeheartedly agree with this summation

Is it disconcerting that employees of the financial industry make a ton of money? Yes. Is it the revolving door between Washington and Wall Street problematic? Yes. Does the Administration take it too easy on the banks? Absolutely. Are White House advisers too centrist for progressive tastes? Sure. But when you try and tell that story with a lot of lies and innuendo, and misunderstand the basic policies that these people are producing, you don’t hurt them. Now anyone who criticizes the Administration will just be lumped in with Taibbi’s meandering conspiracy. (Sidenote, I thought it was Goldman Sachs we all had to be worried about?) The problems Taibbi tries to describe aren’t some kind of ridiculous cabal. They come from group-think and structural influences and as a result of a complex interplay of interests and institutions; the policies they produce aren’t either good or evil, they’re in need of analysis to determine which help regular people, which hurt them and how to change the latter into the former.

The biggest problem I have with people like Taibbi, and honestly much of the criticism I hear about Obama from the left (and politicians in general), is that their answer as to why we have bad policy comes down to simplistic and inadequate explanations, and mainly focus on character defects of the individual participants. When in actuality the problems are far more systemic and structural and necessitate an in-depth analysis of our institutions to understand why our policy makers make the decisions they do. But instead we get screeds like this that want to put all the blame on corruption, nepotism, greed, and political self-interest. Now is some of that involved? Of course. But if that’s all you got, then you have an inadequate diagnosis of the problem, which means you won’t be able to find an adequate solution.

Everytime I hear progressives argue “we just need the right people in place” i bang my head against a wall. There’s far more that leads to bad policy besides the failure of individuals. And I remain convinced that if you put many of the individuals beloved by progressives in positions of power, you’d find them doing many of the same things that piss them off about the current leadership.

Less bitching about personalities, more analysis of systems and institutions please.

analysis = paralysis in washington. heads need to roll. regulations need to be slammed down like prison gates.i need to see real effort by the obama administration and democrats that they recognize what got us into this fiscal crisis – because we DO have the analysis of that – and i wanna see immediate solutions. instead, we see cramdown fail a vote, weak cc reform, and taxpayer money getting funneled by the house of geithner into the pockets of their banking peeps. fuck THAT noise, and fuck complaints about taibbi’s “lack of nuance”. sometimes, shit gotta get real.

I thought this article was spot on, and have been extremely disappointed in both Obama’s policies and the people he has appointed to positions of power.

Heads need to roll indeed.

Bah. The same bozos who made themselves rich creating these problems in the first place are still around screwing things up, if anything with an even freer hand. There’s a “systemic” problem? Yeah, it’s these “old boy” rich bastards. They’ve consistently run the government for their own benefit, and stolidly opposed any significant reform or regulation. They’re not misguided or mistaken, they know exactly what they’re doing and are just straight up greedy.

There’s no way to fix the system so it doesn’t run primarily for their benefit without axing them straight out of the loop. Thinking otherwise to my mind is equivalent to believing you could have stopped pre-emptive war with Bush and Dick Cheney at the helm.

Him screwing up the details is sad, but unfortunately the gist of what he’s getting at is still essentially true.

I suppose I’m willing to cut him more slack on such errors than I generally would, simply because a good bit of rage seems to me the only thing that’s likely to make a significant policy dent.

Also, I like the comments beneath his blog post. Dead on, IMHO.

Since the “errors of Matt Taibbi” got his first bullet point wrong, should I bother fact checking the rest? What Taibbi incorrectly stated is that he was an ambassador for Clinton - everything else about him was spot on.

Taibbi gets things wrong at times with respect to actual evidence available, but he’s got nothing on guy. I love the whole “stating contested counter opinions and difference-of-slight-degree variations as if they were factual errors” approach he embraces throughout his fact check. It seems a thoroughly disingenuous piece, particularly given its title. As he would say in order to reduce his responsibility for his words, that’s just from a brief skim.

It’s reminiscent of the recent NPR piece on the many euphemisms business people have for “no one wants to lend us money right now”, if those differences were used in breathlessly outraged screeds about someone calling them bad loan risks.

the guy refuses to take on the meat of taibbis article so no

He’s saved us the trouble:

Here’s some interesting stuff on the Gensler angle to all of this:

Ah, nice to see Taibbi responding. Thanks for the link, Joe.

Here are my main problems with the article.

First of all, he gives the impression that Obama’s entire economic advisory team is full of people with ties to wall street and ignores people like Melody Barnes (former director of American Progress and now the director of Domestic Policy Council), Christina Romer (Chairmen of the Council of Economic Advisers, and felt that the stimulus package was too small), gives a distorted view of Peter Orszag talking about his Rubinite connections but ignoring that he was mentored by Joe Stiglitz, a progressive to the left of Paul Krugman. and ignores the work that Gary Gensler has done in regulating the financial industry (linked earlier in this thread). To give the impression that the only guy in the White House that’s fighting for the little guy and cares about financial regulation is Jared Bernstein is absurd.

Second, he suggests that poor financial regulations are Obama’s fault when in actuality he proposed financial regulations that are stronger than anything that is going to come out of the house or senate. You can read it yourself here They’re not perfect, but it’s better than the Senate draft that Taibbi praises in the article. So again explain to me how it’s the White House’s fault? Of course it’s possible that Taibbi wasn’t aware of the proposal. But if that’s the case, then he did some poor fact checking. Which makes me wonder how careful he’s being in making his case.

I’m still looking into the 27.5 trillion figure he cites.

I haven’t read the Taibbi article nor the response to it, but I saw this story and knew you guys were talking about it, so here you go. Salon’s Andrew Leonard weighs in.

Hah! Nice to see that apologist get a swift and well deserved kick to the nuts, rhetorically speaking.

Obama has done literally no arm-twisting with his ‘proposals’. He wants a public option but he isn’t willing to threaten conservadems by pulling support in the next elections (oh, but he’s willing to threaten progressives). He proposes financial reform and he will simply watch it be gutted by the House or Senate instead of making sure real, effective reform gets through. All talk, no substance.

Agreed, Jasper!