Posts tagged with 'GritTV'
Weekly Audit: Doomsday for the CFPA?
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By Alison Hamm, Media Consortium Blogger
Just when the Democrats need to be tougher than ever on financial reform, Senate Banking Committee Chair Sen. Chris Dodd (D-CT), seems to have given up completely and put the proposed Consumer Financial Protection Agency (CFPA) at risk.
Last fall, Dodd called the Federal Reserve’s regulatory efforts an “abysmal failure.” And yet, on March 1, he proposed housing a consumer protection agency within the Fed instead of establishing the CFPA as its own independent entity. This drastic change in strategy has left many Democrats shaking their heads. WTF, Senator Dodd?
A change in focus
As Andy Kroll reports for Mother Jones:
“Dodd appears to have switched his focus from out-reforming the White House to out-compromising just about everyone. As the Senate banking committee prepares to release a draft of a comprehensive reform bill as early as this week, Dodd has repeatedly conceded to his Republican counterparts on key issues, almost guaranteeing that the Senate’s measure will be far more lenient on the banking industry than the legislation the House passed in December… Dodd’s willingness to appease Republicans like Sen. Bob Corker (R-Tenn.), the main GOP negotiating partner, and Sen. Richard Shelby (R-Ala.), the banking committee’s ranking member, has disappointed Dodd’s fellow Democrats and reform advocates who urge a tougher crackdown.” (more…)
Weekly Audit: Don’t Let Citizens United Wreck Our Economy
By Zach Carter, Media Consortium Blogger
In a landmark decision last week, the Supreme Court ruled that corporations could spend unlimited funds to influence American elections, overturning a century of legal precedent. The Court’s ruling in Citizens United v. FEC undermines the integrity of the U.S. government, as President Barack Obama emphasized at his State of the Union address. But the decision also deals a damaging blow to the U.S. economy by encouraging lawmakers to write economic rules that benefit specific companies at the expense of everyone else.
The editors of The Nation lay out the High Court’s hubris in no uncertain terms:
The Citizens United campaign finance decision by Chief Justice John Roberts and a Supreme Court majority of conservative judicial activists is a dramatic assault on American democracy, overturning more than a century of precedent in order to give corporations the ultimate authority over elections and governing. This decision tips the balance against active citizenship and the rule of law by making it possible for the nation’s most powerful economic interests to manipulate not just individual politicians and electoral contests but political discourse itself. (more…)
Special Report: Haiti After the Quake + How to Help.
By Alison Hamm, Media Consortium Blogger
Over 100,000 people are believed dead after a magnitude 7.0 earthquake struck near the Haitian capital, Port-au-Prince, on Tuesday afternoon. The quake buried countless buildings, from shantytowns to the presidential palace. All hospitals in Port-au-Prince have been leveled or abandoned. The United Nations headquarters and the city’s main prison have collapsed as well. Thousands of residents are homeless and without food, water, or electricity.
On the ground in Port-au-Prince
Haiti is in a state of chaos, as Kayla Coleman reports for Care2. “The streets…are flooded with the rubble of collapsed buildings and displaced people. … The earthquake has destroyed much of the already fragile and overburdened infrastructure.”
Because all hospitals have been destroyed, there is nowhere to take the injured. According to Coleman, the United Nations says it will immediately release $10 million from its emergency fund to aid relief efforts.
Haiti before the earthquake
And though Americans are now paying attention to Haiti in the wake of this disaster, little to no attention was paid to the “daily chaos and misery” that plagues the poorest country in the Western Hemisphere, as James Ridgeway writes for Mother Jones. “It is hard to imagine what a magnitude 7 earthquake might do to a city that on any ordinary day already resembles a disaster area.”
Ridgeway also cites a 2006 New York Times report that details how the Bush administration helped destabilize Haiti in the years leading up to the 2004 coup.
Ridgeway writes:
“For the most part, Europe and the United States have continued to sit by as Haiti has grown poorer and poorer. When I was there you could find the children just outside Cite Soleil, the giant slum, living in the garbage dump, waiting for the U.S. army trucks to dump the scraps left from the meals of American soldiers. There they stood, knee deep in garbage, fighting for bits of food. As for the old, they people every street, gathering at the Holiday Inn at Port-au-Prince in wheelchairs, waiting at the doorway in search of a coin or two. They have no social safety net. And nobody with any money—no bank, no insurance company, no hedge fund, no mutual fund—ever makes any serious investment in the country.”
Will prevailing attitudes towards Haiti change?
At RaceWire, Michelle Chen writes that Haiti, a place “where buildings have been known to suddenly collapse on their own, even without the help of a natural disaster,” was still trying to recover from the severe tropical storms last spring that leveled hundreds of schools and left tens of thousands homeless.
Now the situation is desperate. “There will be an outpouring of sympathy across borders, a spasm of humanitarian aid,” Chen writes. But “will there be an attitude shift in the power structures that have long compounded natural disaster with politically manufactured crisis?”
‘Supporting the right kind of aid’
For those in Haiti, outside help is crucial. The country is in need of search and rescue volunteers, field hospitals, emergency health, water purification, and telecommunications. To ensure that you are supporting the right kind of aid—”the kind that builds local self-resilience, strengthens the local economy, and fosters local leadership,” as Sarah van Gelder details for Yes! Magazine—donate to one or more groups with a proven track record, such as Doctors without Borders, Grassroots International, Partners in Health, and Action Aid, among others.
Hip-hop artist and Haitian native Wyclef Jean has led efforts to help Haiti for years through his charity Yele Haiti. Jessica Calefati at Mother Jones reports that Yele spends $100,000 a year on athletic programs for Haitian children and helps feed 50,000 people a month with food donated by the UN. When Jean received word of the disaster, he immediately acted, sending a “flurry of tweets” for people to donate $5 by texting 501501. He has already returned to Haiti to help.
How you can help
For more details about how you can donate effectively, check out Yes!, Mother Jones, Care2, and The Nation’s roundups. You can also watch Free Speech TV’s action update video for more information.
GritTV aired a segment on Haiti featuring Danny Glover, Marie St. Cyr, and a performance by the Welfare Poets. The video (below) covers the devastation in Haiti after the quake as well as the state of the country prior to the crisis:
How not to help
For an example of how not to help in a time of crisis, take a look at televangelist Pat Robertson, who claimed yesterday that the quake was Haiti’s payback for a “pact with the devil” that slaves made to obtain independence from French colonials. As a rebuttal, Afro-Netizen points out how Haiti’s liberation greatly benefited the United States, and Tracy Viselli at Care2 writes that “if there is a god, Pat Robertson is one of the devil’s pied pipers.”
More coverage of the crisis
For more information about relief efforts in Haiti, what you can do to help, and some historical context, check out the below list of coverage by Media Consortium members.
- Video from the Real News Network on how World Bank policies led to famine in Haiti.
- Garry Pierre-Pierre of Inter Press Service reports on humanitarian efforts of Haitian-American leaders in New York.
- Monica Potts explains why Americans should concentrate on our policies toward Haiti for The American Prospect.
- Erin Rosa at Campus Progress writes about Ansel Herz, a young journalist that is on the ground at Haiti.
- Video from The UpTake of President Obama’s pledge to send aid.
This post is a special report on Haiti and features links to the best independent, progressive reporting by members of The Media Consortium. It is free to reprint. For more updates, follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Audit, The Mulch, The Pulse, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Weekly Audit: Unemployment Fueling Political Storm
By Zach Carter, Media Consortium Blogger
Unemployment figures in the U.S. are staggering: The official rate stands at 10.2%, the highest in 26 years. A broader measure that includes people who are involuntarily working part-time or who have given up looking for work is at 17.5%. That’s a full-blown economic emergency.
But, as Joshua Holland explains for AlterNet, President Barack Obama’s response to the unemployment crisis has not matched the urgency of his response to the crisis on Wall Street. This isn’t just unfair, it’s bad economics. (more…)
Weekly Audit: Saying ‘No’ to Corporate America
By Zach Carter, Media Consortium Blogger
By proposing financial reforms that won’t curb Wall Street excess, U.S. policymakers have offered an unacceptably weak response to our enormous financial crisis. If voters don’t demand that their elected representatives help workers and consumers instead of simply boosting corporate profits, the economic downturn will last for several more years and leave the economy vulnerable to another bank-induced meltdown. (more…)
Weekly Audit: Too Big to Fail is Just Too Big
by Zach Carter, Media Consortium Blogger
Last week, President Barack Obama released key legislation designed to fight the banking industry’s too-big-to-fail problem. But Obama’s plan doesn’t actually address too-big-to-fail at all. It reinforces a broken system in which economically dangerous companies are bailed out whenever they drive themselves to the brink of failure.
If we want the economy to support all people, we have to break up the big banks and start treating the creation of good jobs as an economic priority on par with Wall Street rescues. (more…)
Weekly Audit: Bigger Than ‘Too Big to Fail’
by Zach Carter, TMC MediaWire Blogger
Now that trillions of taxpayer dollars have been pumped through the financial system, Wall Street giants JPMorgan and Goldman Sachs are reporting record profits—and giving out record bonuses. Goldman is planning to pay out $11.4 billion in compensation “earned” with our money. Even worse, attempts to regulate reckless financiers or empower ordinary workers are still being stymied by influential corporate lobbyists.
How did Goldman score the biggest quarterly profit in its history? Matt Taibbi explains in an interview with GritTV’s Laura Flanders. The $10 billion in direct capital that Goldman received from taxpayers under the Troubled Asset Relief Program (TARP) is actually one of the minor offenses. The company also converted corporate charters to become eligible for guarantees, and issued a whopping $28 billion in debt guaranteed by the government.
Banks were foundering last Fall, and very few investors were willing to supply them with emergency capital. So the FDIC guaranteed their debt, which allowed banks to raise funds at extremely low interest rates. The FDIC guarantee means that taxpayers will get stuck with the bill if the company defaults. If you can raise money at absurdly low rates, its very easy to turn over huge profits, as both Goldman and JPMorgan did.
There are other outrages: We still don’t know how much money the Federal Reserve loaned Goldman through its emergency lending facilities. The government’s bailout of AIG served as a huge windfall for the company, funneling at least $12.9 billion in taxpayer largesse directly to Goldman Sachs.
“AIG owed Goldman about $20 billion, and if AIG had gone through a normal bankruptcy, Goldman probably would have gone out of business. Instead, they got paid 100 cents on the dollar for every dollar that AIG owed them,” says Taibbi, author of a blistering take-down of the investment banking giant in the most recent issue of Rolling Stone.
In Salon, former Clinton Secretary of Labor Robert Reich says that this year’s big bank failures have resulted in a heavier concentration of financial influence in the few surviving firms, namely Goldman Sachs and JPMorgan. We have taken the “too big to fail” problem and made it bigger. JPMorgan acquired rival Bear Stearns for a pittance last March with billions of dollars in government guarantees. The company also picked up national banking giant Washington Mutual last fall. That means more risk in our economy and a greater concentration of lobbying power in our political system.
“We’ve ended up with two giants that now have most of the casino to themselves, are playing with poker chips backed by taxpayers, and have a big say in what the rules of the game are to be,” Reich writes.
Adam Schlesinger of Air America took to Wall Street to compile a hodgepodge of one-on-one interviews with bailout critics and condescending financiers. Schlesinger underscores the absurdity of Goldman’s pending bonuses by posting his own checking account balance ($13.75). The point of this massive bailout was to make the economy function for ordinary people. Instead, we’ve made sure that it benefits extremely wealthy bankers.
The government so completely resists doing anything about this staggering inequality, as Eyal Press writes for The Nation. There are two ways to approach the inequality problem. We can rein in the recklessness at the top by imposing serious regulations, and empower those at the bottom by giving them greater negotiating leverage with their employers (i.e., promoting unionization). While the bonus money flows on Wall Street, the Employee Free Choice Act (EFCA), a key bill to empowering unions, was just stripped of a crucial provision that would have made it easier for workers to organize, as David Moberg reports for In These Times.
As EFCA is gutted, bills proposing regulations for the financial sector are moving at a snail’s pace—even after two years of economic turmoil. Last week, Congressional leaders from both parties nominated members for a new panel, the Financial Crisis Inquiry Commission, to investigate the causes of the financial crisis. The investigation seems doomed to failure by its very design. Zachary Roth details the committee’s various shortcomings for Talking Points Memo. Of the panelists, six were nominated by the Democratic leadership, while four were nominated by the Republican leadership. If all four Republican nominees vote to block a subpoena, the committee cannot issue it, and without broad subpoena power, the entire exercise is futile.
Roth also emphasizes the excessively political nature of the appointees, particularly on the Republican side, which named former Rep. Bill Thomas, R-Calif., as Vice Chair. The Democratic picks are generally uninspiring, except for Brooksley Born, who fought to regulate derivatives in the 1990s as head of the Commodity Futures Trading Commission. But the Democrats have nobody anywhere near as frightening as Rep. Thomas, a vicious partisan who specialized in ushering money to special interests during his tenure as Chairman of the House Ways and Means Committee.
Mary Kane of The Washington Independent explains the troubling record of another Republican commission appointee, Peter Wallison of the American Enterprise Institute (AEI), a conservative think tank. The various conspiracy theories Wallison peddled include a robustly debunked belief that a decades-old anti-discrimination law is responsible for the mortgage meltdown. The law in question, known as the Community Reinvestment Act (CRA), dates back to 1977, and Wallison’s conspiracy theory has been rejected by nearly everyone in the financial commentariat, including regulators appointed by George W. Bush.
The Community Reinvestment Act requires banks to make loans to communities where they collect deposits. If you accept deposits at a branch in a poor neighborhood, you have to offer responsible loans in the same community. The idea is to expand access to affordable credit in the inner cities, while the subprime crisis is heavily concentrated in the suburbs. CRA loans have to be affordable, which means high-interest subprime loans do not count. CRA does not require banks to lower their lending standards, because any recipients have to be credit-worthy. Only 6% of high-interest mortgages were made by companies subject to CRA regulations, and lest we forget, this law was passed in 1977, while financial crisis erupted in 2007.
Instead of appointing toothless commissions, we should be making sure the financial oligarchs do things that are good for the rest of us. Congress should be writing regulations to curb risk in the financial system as fast as bankers are paying themselves bonuses. They’re our representatives, after all, and it’s our money.
This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.
Weekly Immigration Wire: White House Meeting a First Step to Reform
by Nezua, TMC MediaWire Blogger
After postponing twice, President Obama finally met with a bipartisan group of lawmakers on June 25 to discuss moving immigration reform legislation forward. The meeting was applauded by activists and advocates for immigration reform, as the issue seemed to have stalled, and the acrimonious tone of the debate has proven deadly.
All parties emerged from the meeting with positive feelings about the prospect for progress, as I heard on last Friday’s White House debriefing conference call. A confluence of positive factors are contributing to the momentum: Major labor leaders are united for reform, Democrats are leading much of Washington, and voters in the U.S. clearly want to see reform passed. President Obama made his intention to pass reform very clear and the White House predicts the process will begin late this year or early 2010.
New America Media calls the meeting a hopeful beginning, but makes it clear that nothing is guaranteed this year—despite the pressing need. And we can’t wait too long for reform to begin. 2010 is the beginning of the 2012 Presidential election cycle and the issue could be “too easily politicized” at that time.
Wiretap Mag’s M. Junaid Levesque-Alam writes that, while Obama complimented Senator John McCain for taking risks, he seemed averse to boldly stating what he hoped to see or would stand behind; that “nothing [Obama] said indicated significant political movement” on the issue. But, Levesque-Alam hypothesizes that Obama’s caution is related to tension caused by “core contradictions not simply between but within the political parties.” The immigration issue is contentious, even among members of the same party.
GritTV and The Nation teamed up to present a panel asking Is Immigration Reform Dead or Alive? (video). The panelists discuss a potential future in which immigration reform does not pass. Their predictions make a grim scene, centered around the horrors of a growing detention industry. Children are incarcerated in these facilities. Over 90 people have died in detention and they are damaging families. Guest Ravi Ragbir, now a member of Families for Freedom, spent two years in a detention center. Ragbir’s young daughter was so disturbed by the sight of her father in shackles that Ragbir requested she no longer visit while he was detained.
A Truthdig article titled America’s ICE Backwards Approach to Immigration details the broken legal system that further clouds the immigration process. Over 200,000 immigration cases are backlogged and the number of government attorneys who argue for deportation has risen by 35%, stressing the court system accordingly. Add a declining number of judges and a sharp increase in the number of border guards and the result is a setting where “the equivalent of death penalty cases” are heard “in a traffic court setting,” according to Judge Dana Leigh Marks, the president of the National Association of Immigration Judges.
New America Media also explores the results of a study that finds a low rate of crimes are committed by the undocumented, which is a stark contrast to the accusations of right-wing pundits. The undocumented population in Utah grew from 70,000 to 110,000 in the last four years, according to a new study released by the Sutherland Instituate, but the number of incarcerated undocumented increased by only 28. That’s 28 people, not percent. In fact, the crime rate for undocumented immigrants in Utah is only 3.9% and dropping.
Finally, RaceWire’s Michelle Chen reports on the impact of the Western Hemisphere Travel Initiative on Mexican Americans who want to deliver children using a midwife. The Initiative, which went into effect yesterday, “requires Americans passing across the Canadian and Mexican borders to have a valid U.S. passport or passport card.” Previously, only a valid driver’s license was required. This is yet another policy that refuses to recognize the long pattern of movement over the border area, and is culturally antagonistic to Mexican Americans.
Law indicates humankind’s attempt to be just; it is an extension of a civilization’s morality. Immigration reform must come soon; it is a moral duty. It must pass not just for the benefit of the undocumented community, but so we can live up to our national ideals, and also, to decisively stave off a destructive energy made possible by the lack of humane law.
This post features links to the best independent, progressive reporting about immigration. Visit Immigration.NewsLadder.net for a complete list of articles on immigration, or follow us on Twitter. And for the best progressive reporting on critical economy and health issues, check out Economy.NewsLadder.net and Healthcare.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.
Weekly Audit: Radical Inequality Fueled the Wall Street Meltdown
Now that Treasury Secretary Timothy Geithner isn’t going to impose pay restrictions on bailed out Wall Street executives, it’s critical to remember that severe economic inequality was a major factor in the financial meltdown. Our tax code funnels money into the hands of our wealthiest citizens, which means that our financial system protects the interests of the affluent—not the the average citizen. The broad divergence between our core democratic values and the existing U.S. economic structure must become part of the public debate over financial reform.
As Les Leopold notes in a roundtable discussion with GritTV’s Laura Flanders, much of the Wall Street meltdown can be traced to a steady redistribution of wealth to the wealthy dating back to the Reagan years. Poor people, after all, do not have money to invest in the Wall Street speculation machine. By 2007, the financial world accounted for over 40% of U.S. corporate profits, an astounding percentage for a business intended to facilitate the operation of other industries. According to Leopold, we need to find constructive ways to shrink the financial sector, like taxing Wall Street transactions to move money into the real economy or imposing meaningful pay caps on financial jobs.
Pay for citizens who live outside the executive class has been steadily falling for decades. As Chuck Collins and Sam Pizzigati note for AlterNet, weekly wages for average Americans are now below 1970s levels after adjusting for inflation, while CEO payouts have exploded. So far, President Barack Obama has been hesitant to fight economic inequality at either end of the spectrum. Remember the promises he made to curb extravagant CEO pay on Wall Street back when the AIG bonuses were generating outrage back in February? Treasury Secretary Timothy Geithner has already made them irrelevant, eliminating a $500,000/year salary cap.
While we’ve heard quite a bit about how Wall Street excess wreaked havoc for homeowners, relatively little attention has been paid to the plight of renters, who often face personal catastrophe when their landlord is foreclosed on. Under a new law passed by Congress, when a bank or new owner takes control over a foreclosed property, they have to give renters living in the home at least 90 days notice before evicting them. But the law does nothing to address other injustices renters face. If your landlord is foreclosed on, for instance, you can forget about getting your security deposit back, even if the house is in top condition.
Banks also are not required to hire property managers to maintain homes they take over, which means they often let houses deteriorate despite objections from tenants. Writing for The Colorado Independent, Martha White explains that these problems are easy to correct, if Congress actually wanted to: Require landlords to put security deposits in a special account that cannot be raided by creditors in bankruptcy and force banks to hire managers to maintain the properties they foreclose on. The latter policy would also discourage banks from foreclosing in the first place by making ownership of the property more expensive for the bank.
Obama recognizes the need for change, which is why he’s proposed a major overhaul of the government’s Wall Street oversight. But in many ways, his plan identifies the wrong problems and offers the wrong solutions. The Real News features a great video spot with commentary by University of Massachusetts at Amherst Economist Robert Pollin. One of the key reforms involves granting the Federal Reserve broad powers to oversee systemic risk in the economy, but the Fed already has similar authority.
“The problem is, the Fed has already had an enormous amount of regulatory power, they just don’t exercise that power,” Pollin says.
Instead of granting the Fed more power, we should be finding ways to hold its leaders accountable. By subjecting top officials at the Fed to democratic elections, we could help ensure that the top regulatory body in the U.S. answers to the people it is supposed to be protecting.
Other creative new approaches to combating the economic crisis are featured in the most recent issue of Yes!, which is devoted entirely to economic reforms. From tips on investing locally to overhauling our broken monetary system to empowering workers, the issue emphasizes solutions that rely on democratic structures, rather than the corporate status quo (full disclosure: I’ve got an article in there on community banks).
It’s time to put some political firepower behind those ideas. Ordinary people simply have no serious voice in the policy debate surrounding Wall Street. In The Nation, Christopher Hayes describes the banking lobby’s total domination over financial reform proposals.
“On the other major legislative battles—healthcare, climate change, the Employee Free Choice Act—there is an organized, mobilized permanent infrastructure to push lawmakers in a progressive direction,” Hayes writes. “They may be underdogs, but at least it’s a fight.”
Changing the too-big-to-fail financial sector must become a priority. If we defer to the banking lobby or advisers like Larry Summers, who helped create the crisis by backing wildly deregulatory laws during the Clinton years, we can guess what the end result will look like. If we want our economy to answer to us, we have to do something about it. Income inequality and unaccountable regulators were a major part of the financial collapse. Addressing those problems has to be part of the economic solution.
This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.
Weekly Audit: Obama’s Regulation Overhaul Comes Up Short
by Zach Carter, TMC MediaWire Blogger
President Barack Obama rolled out his plan to overhaul financial regulation last week. While much of the Obama plan relies on the same regulators and structures that led to the current meltdown, there is one key exception. The establishment of an independent Consumer Financial Protection Agency would give ordinary citizens a seat at the financial policy table for the first time and prevent the abuses in credit card and mortgage lending that have wreaked havoc on households all over the country.
The new agency is the brainchild of Harvard University Law School Professor Elizabeth Warren. As chair of a key oversight panel for the Treasury Department’s bank bailout program, Warren has uncovered major deficiencies in the government’s handling of the plan, including nearly $80 billion in overpayments to bailed-out banks. American News Project features footage of an interview with Warren, who explains why we need a separate agency to regulate on behalf of consumers.
Several bank regulatory agencies, the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision are already charged with writing and enforcing consumer protection rules for credit cards and mortgages, but have generally abandoned these duties to act as cheerleaders for their banks.The current structure’s problems are two-fold. First, the current regulators are funded by fees levied on the very banks they regulate. When there are several different bank regulators, regulators compete to offer the weakest oversight and attract more banks, and, in turn, more funding. The process quickly becomes a race to the bottom. When the subprime mortgage boom was surging in 2003, the OCC, a federal bank regulator, went to court to ensure that the state of Georgia’s tough predatory lending laws could not be enforced.
Second, the regulatory agencies tend to look at the health of the bank, rather than the quality of the loans it makes. If a commercial bank like Citigroup makes a really outrageous predatory loan, then sells that loan to an unregulated investment bank like Goldman Sachs, Citi’s regulator doesn’t particularly care. A new regulatory agency that answers exclusively to consumers rather than banks would be a very meaningful change for the financial system.
The rest of the overhaul is a little frightening. As William Greider explains for The Nation, instead of crafting explicit rules to curb obvious abuses, Obama’s plan relies very heavily on ceding power to the Federal Reserve. Under the new framework, the Fed would both oversee “systemic risk” in the financial architecture and regulate the banks that have become “too big to fail.” This, Greider emphasizes, is a very bad idea. The Fed has repeatedly proven itself to be uninterested in regulating banks. Citi needed $45 billion in direct cash infusions from the U.S. taxpayer and hundreds of billions of dollars in other guarantees to stay afloat, as Nomi Prins writes for Mother Jones. Who was charged with regulating the company and making sure such an outrage never occurred? The Fed.
In a video spot for GritTV, former senior banking regulator William Black argues that it makes little sense to allow banks to become too big to fail at all. Sturdier regulations are better than nothing, but the real solution is to break them up. “Why would we allow banks to be so big that they threaten the global economy?” Black asks.
Going back to Prins in Mother Jones: Elsewhere, the regulatory revamp is simply too vague to be helpful. Regarding derivatives—the financial weapons of mass destruction that destroyed AIG—it’s not clear if Obama wants to regulate the entire industry, or a small, meaningless fraction. Obama’s plan is to require that “standardized” derivatives are traded on exchanges and allow “customized” derivatives to escape investor scrutiny. But the Treasury never explains what the difference is between these “standard” and “custom” products, or how it will make sure banks don’t game the system.
Lest we forget, this crazy finance system brought us the worst economic calamity since the Great Depression. The unemployment rate, by conservative measures, is at 9.4% and rising. You may have noticed the stories about “green shoots” signaling the first inklings of economic recovery circulating through the media. But these signs are only promising, AlterNet’s Joshua Holland explains, if you take them completely out of context and ignore all of the other terrible news. The economy is in great shape … except for the millions of foreclosures that will take place this year, the skyrocketing unemployment rate, the decimated retirement funds, and the mountains of credit card debt weighing down the average U.S. consumer.
Serious consumer protections are nothing to scoff at, especially after watching an outbreak of predatory mortgage lending spawn an economic collapse. It comes as no surprise then, as Tim Fernholz notes for The American Prospect, that the bank lobby is already working to water down the new consumer protection agency’s powers. But even if a regulator for consumers makes the final legislative cut, with so many drastic problems in the current financial regulatory structure, the Obama plan simply does not do what is necessary to fend off another crisis.
This post features links to the best independent, progressive reporting about the economy. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.