Monday, November 8, 2010

Welcome to the Plutocracy! Fraudulent Christians Enjoy Sex House Writeoffs - Outing 'Thugs and Rethugs - Advice to Treasury: Resist Slick Banker Talk

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The Family's C Street House provided cover (and a tax writeoff that all taxpaying citizens (and certainly not companies like Exxon which don't pay any taxes at all) have to defray) for the Rethuglican ongoing sex scandals. Still does. (Donations Desperately Needed! If you have a few extra dollars to give to a good cause run by one who has been unemployed for a very long time, please make a donation to this blog ASAP! I would truly appreciate any aid that anyone could offer at this increasingly dire time for economic opportunities.) And now back to our regularly scheduled enlightening essays.

Did you know Hillary was a willing and cheerleading participant at the Prayer Breakfasts sponsored by the rightwing financial guys?

Watch this video to see Jeff Sharlet out her giving a tax-free contribution of a house to an anti-abortion group run by Mother Teresa, who immediately flipped it for profit. The Abortion Story itself is outted as a huge money maker for the righties.

Eye opening to say the least. And you wondered how the Clintons got to be so "popular" in a city rife with legions that had already tried him after impeaching him, and had humiliated them both?

But it wasn't that hard to figure out was it? After all, they progressed from a couple with very little to one who could pay $3 million for their daughter's wedding after careers of "government service." Not a bad advertisement for working for the government.

Welcome to the Plutocracy!

In a letter to the Financial Stability Oversight Council, Roosevelt Institute Senior Fellow Rob Johnson explains how banks will try to evade regulation.

We are lucky enough to have a letter from a Roosevelt Institute Senior Fellow, Rob Johnson, to Tim Geithner explaining how the banksters are acting. As if Timmie needs an explanation.
Johnson to Treasury: Resist Slick Banker Talk in Implementing the Volcker Rule

Financial Stability Oversight Council

Department of the Treasury

1500 Pennsylvania Avenue, NW Washington, DC 20512

c/o The Honorable Timothy Geithner, Chairman

Re: Docket Number FSOC-2010-0002, Financial Stability Oversight Council Study on Section 619

The previous five years has proven with ringing clarity that the health of Wall Street is not sufficient to guarantee the health of Main Street, and may in fact be detrimental to the health of the non-financial economy. Following the disastrous financial crash of 2008 and the continuing economic consequences, the recent financial reform effort should, at its core, be about putting Main Street back in the driver seat economically: making investment in the real economy rather than investment in bubble financial assets the focus of our policy incentives, restoring the health and vitality of community and regional financial networks, and getting rid of the tricks, traps, and conflicts of interest of financial engineering, at every level. The Volcker Rule is a central part of that effort.

I believed strongly that a full return to the separation between banking and securities dealing would be in the best interests of our nation. At the same time, recognizing that Congress was unlikely to go down that path, I also endorsed the work of Senators Merkley and Levin — and their two dozen Senate co-sponsors — who crafted a strong version of the Volcker Rule that seeks to achieve many of the same objectives. Congress adopted their framework, and it is now incumbent upon you as regulators to implement that vision.

I fully expect that Wall Street will continue to place many obstacles in the path of strong implementation, just as they sought to do so during legislative consideration. Powerful interests will undoubtedly put forward arguments as to why specific details ought to be implemented in ways that do not disturb their business models or put them at perceived disadvantages with their international counterparts. You should recognize their arguments for what they are — distractions — and reject them.

Quite simply, banks under the protection of taxpayer guarantees should be in the business of banking: holding deposits, making loans, and serving clients. The Merkley-Levin provisions let them remain in certain parts of securities dealing, but sets limits on what those activities can entail. You should be certain to implement those limits to the full extent of your authority and ensure that the permitted activities do not swallow the protections offered by our taxpayers.

In particular, terms like “market-making-related” and “risk-mitigating hedging” should be defined narrowly. Market making is where a firm provides liquidity to trading markets but avoids long or short exposures to the instruments being traded. The goal is to provide clients with buy and sell opportunities without incurring substantial risk. This contrasts with the goal of proprietary trading, where firms seek to accumulate financial holdings and profit from changes in the value of the held financial instruments. Similarly, hedging is where firms take a position in order to reduce a specific financial exposure created by another position or holding. Market participants know full well when they are marking a market in a product or hedging a position in that product, versus when they are making proprietary bets. You should dive deeply into the inner workings of financial entities and subject their trading records to close inspection. Talk directly to the traders inside and outside of these institutions who will tell you how things really work. In short, do the hard work necessary to implement the Congressional directive.

It is also critical that terms such as “trading account” and “short term” or “near term”, as well as “material conflict of interest,” “high risk asset” and “high risk trading strategy” be defined so as to capture the full range of risk that the Congress intended section 619 to cover. When studying how to define these terms, you should look carefully at the nature of the exposures that brought down Long-Term Capital Management in 1997, Amaranth Advisers in 2006, and the major Wall Street firms, including Bear Stearns and Lehman Brothers, in 2008. The definitions of these terms should flow from those investigations, as they were clearly the types of failures that Congress is seeking to keep out of the nation’s critical financial infrastructure.

Your study should also pay close attention to the provisions governing how firms relate to private funds. I agree with Chairman Volcker that our banking system would be better off if banks did not maintain any connection channel investments into hedge funds or private equity funds. There is simply no reason why the bank needs to pool client funds into these entities to invest. But Congress chose a compromise position that permitted firms to organize and manage funds, seed funds, and maintain de minimis fund investments to “align their interests” with their clients. To achieve the intent of the Merkley-Levin Volcker Rule, these provisions should be interpreted narrowly. In particular, I urge you to do a broad survey of market participants (including major competitors of the banks) regarding precisely how large seed funds need to be. I believe most will tell you that true seed funds are quite small, in the $5 million to $20 million range. Your regulations should reflect your findings, and not permit the de minimis exception to allow $100 million revolving “seed” funds.

As to the argument that nothing should be done until the international community acts, that argument should be rejected outright. The United States remains the world’s most important financial market, largely because of its reputation for integrity and security built on the back of decades of thoughtful regulation. The world needs U.S. leadership, and our foreign counterparts need you to take a strong position to counter the increasingly global reach of the banking lobby, which now conducts lobbying efforts through several industry-sponsored channels. If the giant U.S. banks have concerns regarding perceived competitive disadvantages from being unable to take the same kinds of extraordinary risks that certain of their “too big to fail” foreign peers may be permitted to continue to take (and in fact, the world seems to be converging towards the U.S. approach of tougher regulation anyway), then the better approach would be to protect U.S. depositors and taxpayers from those risks by directing the Federal Reserve to reject applications to acquire U.S. institutions by foreign firms with material exposures to the risks of proprietary trading and investments in hedge funds and private equity firms. This is well within U.S. regulators’ discretion under the prudential safeguards of global trade rules.

Lastly, I urge you to be aggressive in your inclusion of nonbank financial companies for supervision by the Board, and therefore, coverage by the Volcker Rule. The weakness of Glass-Steagall was its failure to keep up with the shadow banking system. The Merkley-Levin Volcker Rule properly corrects that oversight by subjecting nonbank financial companies supervised by the Board to significantly higher capital charges for their proprietary trading and fund investments. These capital charges accommodate the diversity of financial firms that could pose a risk to U.S. financial stability, but can only do their job if vigorously applied and if the right firms are covered.

If the financial reforms of 2010 are to keep the U.S. out of another financial crisis and recession, you as regulators must not be unduly influenced by the smooth talking bankers who lobby you on a daily basis. Conduct your study on implementing section 619 with an eye on keeping our nation’s banks out of the business of gambling, and back in the business of serving clients and the real economy. Sincerely, Robert A. Johnson Director of Global Finance, Roosevelt Institute

The first Howard Zinn Memorial Lecture was delivered by veteran journalist, Bill Moyers, and this video should provide a kick in the rear to all of us who haven't tried hard enough to stop that steam locomotive coming down the tracks to run over the rest of our country.

"Citing Zinn as his inspiration, Moyers focuses on the challenges facing our democracy. He decried what he says has been a 30-year trend toward plutocracy, where the rich get richer at the expense of the average citizen. Howard Zinn, the political activist and author who taught for 24 years in the College of Arts & Sciences Political Science department, died in January."

Click here for the full video.

Today's paper (NYT, no less) has some comments from Frank Rich that I would have liked to have heard on every channel preceding that last despicable "election."

Fat chance.

You can’t win an election without a coherent message. Obama, despite his administration’s genuine achievements, didn’t have one. The good news — for him, if not necessarily a straitened country — is that the G.O.P. doesn’t have one either. This explains the seemingly irrational calculus of Tuesday’s exit polls. Voters gave Democrats and Republicans virtually identical favorability ratings while voting for the G.O.P. They gave Obama a slightly higher approval rating than either political party even as they punished him. This is a snapshot of a whiplashed country that (understandably) doesn’t know whose butt to kick first. It means that Obama can make a comeback, but only if he figures out what he has to come back from and where he has to go.

The president’s travails are not merely a “communications problem.” They’re also a governance problem — which makes them a gift to opponents who prefer no governance at all. You can’t govern if you can’t tell the country where you are taking it. The plot of Obama’s presidency has been harder to follow than “Inception.”

Health care reform remains at the root of this chaos. Obama has never explained why a second-tier priority for him in the 2008 campaign leapt to the top of his must-do list in March 2009. For much of the subsequent year spent fighting over it, he still failed to pick up the narrative thread. He delayed so long in specifying his own priorities for the bill that his opponents filled the vacuum for him, making fictions like “death panels” stick while he waited naïvely for bipartisanship to prevail. In 2010, Obama and most Democrats completed their transformation of a victory into a defeat by running away from their signature achievement altogether.

They couldn’t talk about their other feat — the stimulus, also poorly explained by the White House from the start — because the 3.3 million jobs it saved are dwarfed by the intractable unemployment rate. Nor could they brag stirringly about a financial regulatory reform effort that left too many devilish details unresolved, too many too-big-to-fail banks standing and nearly all the crash culprits unaccountable.

With a cupboard this bare, Blame Bush became the Democratic message by default. But a message that neither boasts of any achievements nor offers any specifics for the future is a political suicide note.

Oh yeah. Suzan ____________________

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