Make The Call Or Get Out Of The Booth: After The President’s “Wall Street” Speech

By Simon Johnson, co-author of 13 Bankers: The Wall Street Takeover And The Next Financial Meltdown

Update: The Progressive Change Campaign Committee has a petition that takes you to a page with your senators’ names and phone numbers, as well as a script to use when calling them.

The president’s rhetoric today at Cooper Union was impressive and his body language indicates a major shift in administration attitudes towards the big banks over the past year.  This is commendable.

But there is still the awkward question of legislation that would actually reduce the political power of big banks – and make our financial system significantly safer.  The latest indications from the Senate are that there will be some sort of “Dodd minus” compromise bill brought to the floor early next week.  The Republicans have substantially backed down from Senator McConnell’s “hell, no” position of last week because the polling is crystal clear: Anyone perceived as opposed financial reform will lose badly in November.

But the Democratic leadership is not seizing on this advantage and on the opportunity presented by the SEC case against Goldman Sachs – key figures in the Democratic establishments are too worried about upsetting financial sector donors.  As a result, come November, independents will view the Democrats with scorn, while the Democratic base will be far from energized; you do the math.

What can you do?  What makes sense in both economic and political terms?

Call your Senator, call Senator Harry Reid (Senate majority leader), and call the White House.  Tell them that you support the Brown-Kaufman SAFE banking act (unveiled yesterday) – as an amendment that would greatly strengthen the Dodd bill by capping the size and leverage of our biggest banks.  Politely ask the people who answer the phone to make certain that this amendment gets an “up or down vote” in the Senate.

The Brown-Kaufman act is our best near-term chance to reduce the size of Wall Street megabanks that are too big to fail and that threaten our economy.   (If you don’t understand why this is important, read 13 Bankers; quickly – this could all be over by this time next week.)

Tell everyone you know why this makes sense and ask them to make the call also.  These calls will determine the outcome.  If the Democratic leadership understands the groundswell of support for breaking up big banks, the Brown-Kaufman proposal has a chance to come to the floor – and who exactly on the Republican side would like to be on the record as opposing it?

If no one who reads this post speaks out (and makes the call), the Brown-Kaufman amendment will not come to the floor.  If some of you speak out, there is a sliver of a chance.  And if all of you – and everyone you know and everyone they know – make three simple, short, and friendly phone calls, there will be a vote.

125 responses to “Make The Call Or Get Out Of The Booth: After The President’s “Wall Street” Speech

  1. We need some judges that would make Isaac Parker look like a slacker. Personally I prefer a good Stalinist purge from the top down. Start with treason and war crimes and by the time we get down to tailgaters we might have a population we could build sustainable society with.

  2. Michael Lang

    Simon,

    Your credibility is not helped when the only reason you write a daily column in the Huffington Post is to shill your book. Your as bad as a synthetic derivative salesman.

  3. Done. Thanks for your good work Mr. Johnson.

  4. huh? oh that was really helpful.

    who are you? Is this a personal message?

    what are YOU doing to help?

  5. Simon, This all looks so surreal from a Canadian’s POV looking in from outside. The system of democracy, although probably the best choice we have, seems to have run it’s course. People have learned how to game the system and then propagandize their political positioning to make it all look quite legitimate. Yes, the people need to get on the phones but even if they do the propaganda has triumphed. The Republicans are going to come back in a big way, they will offer little fixes that won’t hurt their bottom line, and the whole scam will continue. This is surely going to destroy your country and bring it down, although that will be delayed a little. What a sad situation, even as Obama tries his best to bring about huge changes for the better. One of the greatest presidents your people have ever had is being made into a horrible crude joke.

  6. K, I’ll make those calls and forward this post to others in the hope they will as well.

    Ignore Mr. Lang. Some people are just haters.

  7. Michael,

    The synthetic derivatives sold by Wall Street brought down the U.S. economy; some of them were sold based on intentionally misleading information (the SEC’s words, not mine). Simon’s book helps expose the fraud. The difference couldn’t be greater, in my view.

  8. “The Republicans are going to come back in a big way, they will offer little fixes that won’t hurt their bottom line, and the whole scam will continue.”

    @ Ken:

    Just because the minority is loud and benefits from the megaphone of fox news does not mean that the the rest agree. Hopefully your worries will be revealed to be unfounded.

  9. Contact two Senators and the White House. Check.

  10. Brooks Kirkbride

    Michael,

    I suspect Simon Johnson does not need the money; the fact is that he’s been in a unique position as an academic and IMF officier to understand the complexities of the whole sheebang and make recommendation based on his executive level experience.

    An honorable man IMO who is making sacrifices to education the public as to his (educated) point of view.

  11. Congratulations Simon and James !! The senators have read your book and have made it simple for the ‘elected few’ to understand. Hst tip Senator kaufman !! Hopefully on the way to something meaningful,at last !

  12. Just curious… Simon is British but must have a Greencard… has he become a naturalized citizen of the U.S.? Can he vote? Ironic that the efforts of a British intellectual are America’s best hope at saving itself from itself…

  13. just another kabuki dance by the president.
    He is very good in speeches but doesn’t
    deliver. action speak louder than words.

  14. I called Senator Reid and Senator Kerry.

    Senetor Brown (MA) must need more staff. No one would pick up his phone.

  15. Great presidents do not allow themselves to become horrible crude jokes.

  16. The White House comment line is (202) 456-1111.

    Senator Reid’s line is (202) 224-3542.

    A directory for other Senators’ phone numbers is at http://www.senate.gov/general/contact_information/senators_cfm.cfm

  17. Ben Franklin

    I just called Harry Reid’s office in Washington… that’s 202-224-3542. They were very polite and took note.

    Support the act. check
    Up or Down vote. check

    done and done

  18. Another Done, and another thank you for your good work Mr. Johnson. Ditto that to Mr. Kwak. To Mr. Lang, I have not shelled out any shillings for the book. I didn’t need the book in order to understand the importance of this legislation. But I will after the dust settles (hopefully on the side of sanity).

  19. The resolve of the congress will continue to be “tepid” as long as there is no political campaign reform. For all of us this is a no brainer and the only reason the train of thought of the average american, who sees the abuses of the financial community, does not follow in congress is the amount of money that congress is receiving from the banking community.

  20. PNWarrior Woman

    Check, check, check, check….WA State Senators Patty Murray and Maria Canwell, then Harry Reid’s office, then WH. Now laundry.

  21. Thank you for all your good info Mr. Johnson.

    Have contacted my two senators, the President, and Harry Reid. Brown-Kaufman are the two great statesmen on this issue. Let everyone know. We’ve GOT to win this one.

  22. Siimon, when I read your statements and interviews from a year ago this month, and then I read today’s request for your fellow citizens to take practical action, I realize how you have moved beyond a mere academic to a true patriot.

    Thanks to both Simon and James for wisdom and leadership on reform.

  23. SJ is in fact a naturalized American citizen.

  24. Ken,
    I must differ with you on your characterization of Obama – if he is serious about “too big to fail”, he would make it clear that he will veto any bill that does not contain Brown-Kaufman or its equivalent.

    With regard to calling, I’ve done that and I commend Mr. Johnson for suggesting that such calls do make a difference; Congresspersons need to openly vote on these issues so we can see where “our” guys and gals stand on these issues and then WE must vote on them, knowing the same.

    Not until we hold them accountable at the polls for their votes will we stand a chance of fixing this mess. Without their open and direct vote, they will, indeed, be able to do what you suggest – obfuscate, twist and propagandize these issues, and that applies to both Reps AND Dems.

    I do believe that what has been allowed to pass as healthcare “reform” proves my point – the only thing that would have qualified as true reform was single payer, and that was taken “off the table” from day 1, leaving the insurance companies, as a group, in “the too big to fail” mode.

    Don’t let that happen here.

  25. Simon: Great suggestion. I called and emailed both my senators and the White House. I have watched from the sidelines long enough, thanks for the call to action. People up.

  26. just read the first chapter of “13 Bankers” and you’ll be more than convinced.

  27. Really? You think Abe Lincoln wasn’t made into a horrible crude joke back in the day? Or FDR?

  28. some of ur readership are not citizens of the usa, but i did “LIKE” it via my google reader, LOL

  29. I just made my calls! This is great opportunity to root out where our government really stands on this issue.

  30. Hi Simon,

    I just wanted you to know how grateful I am that you gave us some direction on what we could do to help. I have called Senator Reid’s office and also the White House. I sent a contact form to the White House also as I feel it is good to have something in writing. I plan to send a fax to Senator Reid’s office as well.

    Thank you for all that you’re doing to put some teeth into this much needed bill. Thank you!!!

  31. Simon, do you think emails are just as effective? I find it easier and time efficient, and perhaps readers will be more likely to contact their senators in such a manner.

    Here is a link to Senate email addresses:

    http://www.senate.gov/general/contact_information/senators_cfm.cfm

  32. Sorry, just realized Nelson beat me to it.

  33. MoveableBeast

    SIMON, GREAT POST. BUT PLEASE, TELL US HOW WE SHOULD CALL OUR SENATORS, HARRY REID, AND THE WHITE HOUSE! WHAT NUMBERS SHOULD WE DIAL? WHAT SCRIPT SHOULD WE READ OUT TO THEM? IS THERE A PETITION AFLOAT? NOTHING WILL HAPPEN UNLESS YOU MAKE IT DEAD EASY TO MOBILIZE THE MASSES!

    PLEASE POST SOMETHING TO THIS EFFECT IF YOU ARE SERIOUS!

  34. Mr. Johnson –
    How are the megabanks and their influence in Washington different from the Unions and their influence, the Big Auto and their recent government bail out (see Unions), agribusiness and farm subsidies and their lobbyists?

  35. mondo pinion

    And Republican opposition is so absolute I am starting to wonder if it should be called treason.

  36. Sometimes it seems those who have chosen to be Americans hold her more dear than those who were born to it.

  37. OhReginaldIDisagree

    Dr. Johnson,
    Do you believe the same folks who ignored your points in front of the Banking Committee at numerous times (specifically wrt the fact that there’s no resolution mechanism for multi-national banks) will listen to a more diffuse group of people, rather than their own experts?

  38. Patrice Ayme

    Some work, hard, and build things, some divert capital and starve the world economy of real work and achievement, while becoming a kleptocracy ruling the world.

    Unions and farm subsidies are a problem, sometimes, true. But the difference of scale with the mega sabotage of the entire economy and world society by mega private banks subsidized by accomplices in government does not compare.
    PA

  39. When Pres. Obama says things like “Join us instead of fighting us” that certainly sounds naive. I’m sure they’re a more sophisticated political calculation at work but Obama’s words would seem to belie that.

    Which isn’t to say that there aren’t people deep within the financial system who wouldn’t like to see things change for what we consider the better. But I think it can be assumed they’re a minority and they don’t have the upper hand.

    However that group may prove useful.

  40. “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

    http://en.wikiquote.org/wiki/Upton_Sinclair#Quotes_about_Sinclair

  41. Simon writes on these matters because he is a world-class expert, not because he is shilling. Do you also post comments on the websites of Glenn Beck and other entertainers because they often write books that appeal to the Walmart / Jerry Springer crowd? By the way, the correct expression is “You’re as bad” not “Your as bad.”

  42. Have already contacted my Congressman and will be contacting Oregon’s two Senators within the hour. I’m using a metaphor of the similarity between the financial system and the transportatin system, which equates un-regulated markets with unregulated highways and intersections. It should make the destructiveness of deregulation obvious to those who are not steeped in economics…. and to those who are. Just posted the comparison on my blog.

    Part of the problem is an irrational mystique about free markets and Capitalism that assigns to them abilities they do not possess. It is accompanied by a complete misunderstanding of the constructive role of regulations; pro-active regulations, education and infra-structure investment which enable the flow of commerce or traffic, and re-active ones which prevent a few from gaming and ultimately destroying a largely self regulating (homeostatic) system.

    This shouldn’t be a partisan issue as leaders in both parties have brought about this financial meltdown. No doubt the bankers will use partisanship and largess to prevent real reform. In the long run, that won’t even help the behemoths as the system collapses, but the bankers aren’t strategic thinkers, they are paid by the year for last year’s performance.

  43. Oh, look here, it’s Republican Senator Mitch McConnell licking the hedge funds’ rear. Yes, REPUBLICAN Mitch McConnell of Kentucky (pay attention Kentucky voters/savers/depositors). Oh no!! Oh Mitch, your tongue is turning brown Mitch. Mitch, you are a REPUBLICAN Senator Mitch, have some self-respect!! Oh Mitch quit licking the hedge funds’ rear in private office meetings. Oh Mitch, I can’t look anymore. This is not supposed to be an erotic experience Mitch!!

  44. Thank you Mr. Johnson.

    called Senators Durbin, Burris, Reid, and the White House.

  45. The President’s speech is purely political, as it should be. The speech is Obama putting up his political risk to force key hold outs to his desired compromise financial reform outcome from Congress. The deal alternates have been made and the outlier positions conveyed by those that will make or break the passage of a bill that Obama can sign.

    A heavy break up bill is now beyond the political process of the current bill. TBTF , the break up concept, is now the cudgel to aid in concluding the political process of enacting a bill. The tone of moderation in Obama’s speech publically limits his outlier with the proviso that failure of the bill to become law opens up break up as a centerpiece in efforts to enact a future bill should this one fail.

    The shot first was fired against Goldman. Presidential minions must have a big list of state legal actions they will forgo for a deal now. In short, here is a certified check for $20,000 to get Fontaine out of his contract. This is an offer you should not refuse. Imagine just what kinds of Luca Brasi’s hide in the Justice and other departments. Depart in peace doing a deal now. If not…… Understand Wall Street, I need a huge political victory now.. next week. Do not test me further and a defeated bill unleashes everything I can muster. Convey this to the people in Congress you own. This is politics. The Roosevelt kind.

    TBTF is the nuclear option should the current bills not be signable by Obama. It is now survival politics time.

  46. Called W.H., Reid and Feinstein; fwd’d this piece to friends & fam asking them to do the same. BTW, saw you on Bill Moyers’ — very informative.
    Thank you Mr. Johnson.

  47. Emailed Cornyn, Reid, and the White House. Hope their email boxes overflow. Not much chance that Cornyn will vote for the amendment, but who knows. Asked some friends to check this post out. Thanks for letting me know about it and for being on Bill Moyers Journal last week.

  48. Called Virginia Senators Warner and Webb. Let’s hope they’re all getting an earful.

  49. Or, maybe Simon wants people to read his book because he thinks breaking up the banks is important for the future of our republic.

  50. This monstrosity of a bill contains provisions that will stifle the economy!

    It will make it significantly harder for startups to raise angel financing.

    What do startups have to do with financial reform regulation? Did they cause the crisis?!?!

    NO!

    This administration/congress wants to destroy the private economy so they can “come to the rescue” by completely taking it over and instating full on socialism.

  51. Scot Griffin

    I love this quote from a Wall Street broker:

    Clemente was particularly annoyed that Obama criticized the financial industry after having accepted political contributions from Goldman Sachs (GS, Fortune 500) during his presidential campaign.

    “He took their money before, so it’s kind of hypocritical to attack them now,” he said.

    http://money.cnn.com/2010/04/22/news/economy/obama_wall_street_reaction/

    I think the word Mr. Clemente was looking for is “disloyal,” not “hypocritical.” Apparently, he thought Wall Street had bought Obama.

    Seriously, though, how is it hypocritical to criticize somebody from whom you’ve accepted campaign donations when they are worthy of criticism? It seems like a principled thing to do to me. Is this one of those arch-conservative dog-whistle things like when they hear that somebody is a vegetarian and feel compelled to point out their “hypocrisy” by noting that the vegetarian wears leather shoes?

  52. Phoned Gillibrand and Reid; the staffer at Gillbrand’s office knew immediately which bill I was talking about and promised to deliver the message. I think it helped that I told her that I work at one of the TBTF banks and still want to see this passed, but who knows.

    I can never seem to get the folks at Schumer’s office to pick up the phone.

  53. Just a thought:

    Supposing there’s U.S. legislation to limit the size and leverage of our largest half-dozen or so banks, how does it get applied say to Royal Bank of Scotland ($3.8t in assets), Deutsche Bank ($2.9t in assets), BNP Paribas ($2.4t in assets), etc.? Wouldn’t the United States be unwise to jump off a cliff by itself? (I assume no one contemplates trying to break up foreign banks.) Wouldn’t we expect capital flight? Maybe there’s a good answer, but for now I question whether international cooperation will prove essential.

  54. I called the office of Senator Reid, however I am unable to get through to the White House. This is very important, not just for right now but for untold generations in the future.

  55. TBTF is more important to some than others politically. What would be the political consequences of introducing a specific type break up procedure into the bill? Certainly, many supporters would drop away. How are they compelled back. Even more to the political pint of the moment, those that would vote for the present bill would not be induced into political compromise.

    Would Iron Tailed TBTF break up features derail the present bill? Obama now has gone out on a limb.

    What is now evident is that Obama in an election year must produce a regulatory / sanctions law or else.

  56. Thank you for this timely information. I’ve written both my senators and senator Reid. I’ve also written more than a dozen friends and family urging them to do the same. I’ve enjoyed your book and passed it along to a friend. I’ll be buying more copies to give away when it comes out in paper back.

  57. I think you’re right on the money.

  58. Michael Lang wrote:

    “Your as bad as a synthetic dervivative (sp?) derivative salesperson.”

    Please reserve judgement tell you’ve seen the usual suspects.

    ” I new they I hadn’t done anything they could do me for”

    (Warning – contains mature language)

    Big bonuses are back. Backlash isn’t.

    April 22, 2010: 1:15 PM ET – Fortune.com

    “Yet few batted an eye this week when Wall Street revealed its latest round of pay excess. Giant Wall Street banks set aside $39.2 billion to pay their workers in the first quarter.

    That’s up 9% from a year ago, driven in part by a return to bubble-era profit levels.”

    http://money.cnn.com/2010/04/22/news/economy/bonus.rage.fortune/index.htm

    Looks like business as usual. :-(

  59. Called White House, Reid, and both senators.

  60. Simon, I called my two Senators, the White House and Harry Reid. Besides talking to a staffer, you can also leave a recorded voice message for Harry Reid himself. So, I did that, too.

    Please, everyone, encourge your family members to call.

  61. MoveableBeast, just speak from your heart. Petitions are all well and good, but I find talking to the offices of my congress critters and lets them know a real, live constituent is out here. I also fax letters rather than mailing them-with the anti-terrorist screenings, it takes a snail-mail letter forever to be seen. The main thing is – do SOMETHING to let them know you are paying attention. Politely, but firmly. :-)

  62. ROFLMAO! Crude, but hilarious. Talk about a shill – now THERE’S a shill!

  63. I admire Prof Johnson’s call for activism, yet first a serious practical concern:

    Supposing there’s U.S. legislation to limit the size and leverage of our largest half-dozen or so banks, how does it get applied say to Royal Bank of Scotland ($3.8t in assets), Deutsche Bank ($2.9t in assets), BNP Paribas ($2.4t in assets), etc.? Wouldn’t the United States be unwise to jump off a cliff by itself? (I assume no one contemplates trying to break up foreign banks.) Wouldn’t we naturally expect capital flight? Regulatory arbitrage? Maybe there’s a good answer, but for now I question whether international cooperation will prove essential.

  64. I just finished calling Senator Barbara Boxer, Senator Dianne Feinstein, Senator Harry Reid and the White House. I hope that the young staffers I talked to about the Brown-Kaufman SAFE banking act took note of my support and that the amendment will get an “up or down vote” in the Senate.

  65. It doesn’t matter for U.S. tax payers if foreign banks are reckless and TBTF. It will be their tax payers who are on the hook.

  66. Bill Gilwood

    I called and emailed both of my senators.

  67. Bill Gilwood

    and Harry Reid.

  68. Brad Thrasher

    The answer to the political question is federally funded elections.

  69. Maybe sort of, but what about the prospect of hundreds of billions in financial assets leaving the U.S.? I’m not convinced the solution fits the problem. It may be the better path is to work towards a consensus among G20 states for some size and leverage limits on member banks, so the U.S. doesn’t invite lasting damage to its global competitiveness.

  70. I faxed Barney Frank on September 26,2008 and explained in two pages how the problem was the CDS market and the solution was to tax both sides of every transaction, as a result of which we could have retired the National Debt and forced Wall Street to pay for its crimes.

    Barney’s office sent back an email thanking me for my interest in his reelection.

    I did not listen to Obama’s speech because I am no longer responsive to politician bul*s*it. I will tell you that the financial reform bill now germinating in Congress will solve nothing of importance. Incidentally, today on Naked Capitalism is an interesting post about the $600 trillion interest rate swap market. I recommend it to anyone with a serious interest in these matters.

  71. Heartily agree with DM.

    Having formerly been a Wall Street broker for 13 years, I’ve lived the culture.

    In theory, Volker’s approach to breaking them down to size is smart business, making us sleep better at night, (though I haven’t heard a peep about reinstating the Glass-Steagall Sandy Weill and Robert Rubin so heavily lobbied to bring down. Glass-Steagall’s defeat is really at the heart of the “size” issue of “too big to fail”, especially as many investment banks are now owned by commercial banks.

    These megapowers won’t sit idly by, letting themselves become financial eunuchs relative to their international brethren.

    They will vote with their feet, leaving US shores, except for their branch offices, just as their foreign competitors do.

    Not sure if Simon Johnson addresses the issue of these companies going offshore and how to address it, but he should…NOW.

    If implementing smart and logical solutions were as easy as writing about them, all the world’s challenges wouldn’t be so long, painful and drawn out.

  72. Please, please post this on Daily Kos and FireDog Lake.

    It will get much more recognition (and recommends) with your name attached. And these two sites do have a large activist readership.

  73. Re. foreign megabanks: let them be TBTF anywhere but here. Revoke their corporate charters to operate in the US.
    Let the parasitic squids find the weaker regulatory and/or tax hosts anywhere else. Please.

  74. Just finished watching the archived interview with Bill Moyers. James mentioned at one point that this wild west sort of environment is bad for business interests and bad for homeowners, but he didn’t mention common, garden variety workers – JOBS have been lost, and not just from the melt-down. For years the M&A activity and the “economies of scale” take-off euphoria has cut payrolls as the quickest way to bolster the bottom line. Often as not, these “marriages” end in divorce, when it’s shown that the only benefits accrued to the investment banks who did the deal. Why isn’t this more widely discussed?

  75. I think the SEC action against GS last week was a political tipping point, even if the charges are weak.

    I think some of the Dems have figured out that throwing the banks under the bus is a great way to win votes. The GOP has’t figured it out yet. I will predict that a new party will rise and either replace the GOP or (more likely in the short/medium term) directly compete with it. We’ll end up with social conservatives in one branch and small gov’t conservatives in the other, each competing with the other for people who are both.

    Then again, it could be the bottle talking now…

  76. Re: @ OceanChevy…..Harry Reid (Up or Down Vote) Check – Check

  77. Re: @ Wyndtunnel….oh boy,I hope he isn’t reading my post,…;^)

  78. Re: @ Nelson….right on man

  79. Re: @ DM… Yes,…let us sit on our hands,and wait for the chair to collapse – why do today what we can do tommorrow – so the roof leaks,our bath water is on the house – I’ll just go soak my head,while you bar the back door,…what do you mean its been stolen?

  80. I’ve done my duty, and I feel good! Thanks Simon

  81. It’s all kabuki. If it weren’t, you’d have the banksters threatening suicide or claiming the world as we know it was going to end, and you’d have the moderate voices trying to talk them off the ledge. There’s nothing like that, so their fundamental interests aren’t being threatened at all.

  82. I’m glad to see people calling, but I called on FISA reform, I called on TARP, I called on single payer (over and over again). In each case I was calling in favor of the best policy, and one that had broad support (if one believes polling). In no case did my calls make a bit of difference. Versailles did what it was going to do.

    So the reason I’m glad to see people calling is that I believe the lack of results — and the baseline is that any result short of a perp walk by banksters, plural, in orange jumpsuits and the breakup of the TBTF banks is a FAIL — will lead more people to conclude, as I have, that the legacy parties are both moribund and must go the way of the Whigs and the Federalists if “provide for the general welfare” is something the government starts doing again.

    Hoping I’m wrong, but so far the Cassandras have been right.

  83. Redleg, I’d like to agree with you, however if we look at the cases of Iceland and Greece, who’ve each recently become economic basketcases, neither had megabanks inside their borders, yet each suffered.

    It would appear the best solution is for the world’s bank regulators to convene and for the economic safety of the world, establish common “too big to fail” guidelines requiring ALL the world’s megabanks to periodically shrink to a size so that what has happened to the world’s economies from this recent chapter never repeats itself.

  84. Yes, and perhaps it could be under the auspices of the G20, which I suspect have most if not all of the largest banks. Ironically the one point everyone serious seems to agree upon is the global economy today is so tightly integrated that it doesn’t sound very reassuring to argue that the costs of any future meltdowns would be borne exclusively by the taxpayers of states with megabanks. Rather it would seem some collection of the G20 might build consensus around dealing w the extreme risks cited by Prof Johnson posed by the TBTF institutions.

  85. Bill Black’s eye-popping opening statement at House FinServ hearing on Lehman Bros failure

  86. Is there a cogent case made by the big bank CEOs in objection to reform regulation? While it’s possible, the resistance is based on basic human nature: the inclination to keep with the status quo–even when distasteful and uncomfortable because change means uncertainty. In a sense the bank players are prisoners of an illusion: that they have a relatively predictable method for success. Nothing remains constant, and the banks will transform with or without new rules. SJ and JK are most clear in showing the inevitability of failure, that the builders of the Titanic are intent on building Titanic II, twice as big with half the lifeboats. The 1929 stock market crash prompted the Federal Reserve banks (most of them) to tighten; an obvious folly in historical perspective to all, excusable by ignorance at the time. Monopolies and oligopoliies always become stultified, hollow out and eventually crumble. And with efficiency comes rigidity. The financial system is so critical to society that it must be over-engineered. We should all be reciting: “Fool me once shame on you; fool me twice shame on me.”

  87. The politicians will respond to a known personal risk to their incumbency. What though is a “known” here? If the incumbent currently understands TBTF in the version called financial reform is a threat to their incumbency, they will address the issue before their primary election. This means , every incumbent has a very current understanding of their own risk in their constituencies.

    These calls and emails will reinforce their conclusions if they understand themselves at risk of being turned out. If not, the calls are useless. At this point, they seek the minimum solution to get past their personal incumbency issue.
    If there is a general consensus of risk, a law will result before the first important primary date on May 4th. Incumbency is a non partisan issue. Voting anti incumbency sentiment is either real or a concoction of the media. We shall soon see. Certainly, the anti incumbency issue will be a known item by Super Tuesday on June 8th if a law is not on the books before Super Tuesday.

    I would really like to get a handle on voter sentiment about financial reform as opposed to all the non voter angished utterances. Non voter righteous cacaphony is simply useless noise to be filtered out from a political perspective.

  88. Except Simon’s friend’s up in Canada are already refusing to go along with new banking policies out of the G20. Best Quote: “We are a sovereign country. We can regulate our banks and our other financial institutions as we see fit,” said Flaherty, who is in Washington for annual meetings of the IMF and the World Bank.
    “As finance minister of Canada, I’m not going to impose a tax on our banks that performed well during the financial crisis. It seems to me a very odd thing to do — to punish our banks that got the job done adequately.”

    I am curious when Simon or anyone else is going to start to attack Canadian Finance Minister Jim Flaherty

  89. Hey,
    Some direct phone numbers would have been good to see. It makes people more willing to pick up the phone if they don’t have to go through the red tape of figuring how to get to the right people.

  90. SJ should locate his naturalization papers and make sure he carries them should he have occasion to travel in Arizona…just in case.

  91. DM assumes, implicitly anyway, that a trillion $ plus balance sheet confers might on a bank that a syndicate-of-willing-lenders might not assemble, deploy and better. Where is the empirical evidence?

  92. I agree with you lambert.

    And no offense intended toward Simon, but his stating Obama’s body language and rhetoric today marks some change seems incredibly naive.

    Obama hasn’t changed. He’s just engaged in theatre. IF Obama really had broken away from the bankster gang, the FIRST – and clearly most obvious – move would be to ditch Geithner, publically and with force.

    Obama is just a front-man. Plain and simple.

    At this point there is absolutely nothing, and I mean nothing, that could change perspective on this without Obama engaging in a stark and vehement dismissal of Geithner, Summers, Storch, and Bernanke.

  93. For anyone who wants to call and doesn’t know the number, start here:

    http://www.contactingthecongress.org/

  94. Obama, talking to the banksters, “Ultimately, there is no dividing line between Main Street and Wall Street. We rise or we fall together as one nation.”

    Please!!! Does Obama think the banksters believe this drivel? Does Obama think Main Street believes the banksters believe this drivel?

    This is really pathetic theater.

  95. Give me FDR….

    “We had to struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering,” Franklin Delano Roosevelt said in a 1936 speech. “They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today.

    “They are unanimous in their hate for me — and I welcome their hatred.”

    ~~~~~~~~~~

    Obama wants to befriend the (financial) terrorists.

    The only explanation for this is either he is stupid or an accomplice. You choose.

  96. So you’re suggesting other financial institutions are TBTF? Does that really address the concern of one state attempting to set strict limits and thereby incentivizing capital flight?

  97. Naw, they just got a better education and have more self-discipline than to sit around watching the boob-tube.

  98. Then perhaps just multilateral discussions among states w megabanks. Still probably a difficult long term process, but query whether anything less would be effective and prudent for just the US.

  99. But there has to be an answer to capital flight for it to provide a complete answer. The US megabanks could take their assets elsewhere. So you wouldnt want to explode the gas main while fixing the leaking roof right?

  100. The plugs are getting a little heavy. Why the need for more than “Simon is author of…” at the bottom of each post.

  101. Analyzing body language — if such a pop psychology technique can be called analysis — is a classic Versailles tell. There used to be whole columns and talk shows devoted to Bush’s body language, and now we’re doing the same thing with Obama.

  102. I understand the logic completely. All I can do is tell you, again, that a lot of people have tried this before, and it hasn’t worked. The legacy parties simply are not responsive to the electorate — and why would the author of the Quiet Coup think they are, all of a sudden?

    http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

    * * *

    Now, remember the idea that “an honest politician is one who stays bought?”

    The possibility does exist that Obama’s not an honest politician, and that he’ll throw anybody under the bus; that was certainly his practice during the primaries — where GS was one of his top donors.

    In that scenario, the outcome would be that GS becomes the sacrificial lamb, and the rest of the banksters skate away clean. Though rich with irony, that’s not a recipe for systemic change.

    Break up the big banks; orange jumpsuits and the perp walk for bankster CEOs (plural. Definitely plural). That’s the policy baseline.

  103. Obama of Lloyd Blankfien and Jamie Dimon:

    “I know both those guys; they are very savvy businessmen.”

    Assuming Obama has fixed views on anything, I’d like to know what changed them.

  104. No matter what, move your money out of the big banks and into a local bank or, better, a credit union.

    That’s the vote these guys really understand. It’s also the only thing, to them, that isn’t kabuki: Putting a crimp in their parasitical rent-seeking behavior.

  105. What script? Or, rather, what SCRIPT?

    Sandi’s advice to speak from the heart is correct.

  106. Obama a socialist? I wish!

  107. please, please sign the petition if you want to help take some air out of the politically broken system:

    http://act.boldprogressives.org/cms/sign/petition_breakup/

  108. I would love to call my senator, but his name is… Brown… and I’m very proud of him. ;)

  109. Reading Johnson and Kwak’s book “quickly” here in Marin County will be problematic for umemployed folks like me who can’t afford to buy a copy: There are currently 23 holds on the one copy of “13 Bankers” in the Marin County free library system (mine is number 24). If everybody takes their allotted two or three weeks to read the book, I should get it in time for next year’s Memorial Day weekend.

    It would be nice to think that by that time President Obama will have fired Timothy Geithner and the rest of the Goldman Sachs mafia and replaced him with Paul Volcker.

  110. I am no financial expert but my United States Senator Charles Schumer along with Mayor Michael Bloomberg released a study named, “Sustaining New York’s and the US’
    Global Financial Services Leadership” on January 22, 2007. If I read it correctly especially the first 65 pages Schumer and Bloomberg argued for less regulation for the financial industry and less liability. Read the section of the report on leveraging and derivatives. Has Schumer changed his beliefs? How can a senator from New York have so little to say publicly on this crisis? Senator Schumer only removed this document from his senate website after the collapse of Lehman and the stock market.
    I watch him move around NYS with his personal PR announcements and not one journalist questions his values on Wall Street regulation. I read with interest his campaign and lobbying donations that come from Wall Street. With his seniority and political power in the senate is he acting covertly to weaken any reform.
    Now that Bloomberg has been reelected he has come out in defense of Wall Street. Will Senator Schumer and Senator Gillebrand ( our other NY Senator) be allowed to remain silent on financial reform and regulation? We cannot wait until after the election to hear the values and beliefs of our two senators.

  111. I see postings (on other sites) how the gov’t forced banks into bad loans…So, the economic crash is the gov’ts fault….Then I read it’s really the banks fault…
    Who’s right?…sort of both?..One more than the other?…
    This stuff is kinda’ over my head…Can someone briefly ‘explain’ this?…

  112. A “megabank” is any bank larger than some set percentage, say 3%, of GDP. By that definition, Iceland’s banks certainly qualified, as they were far larger than 3% of Iceland’s GDP.

    Pesonally, I think 3% is way too large. In the U.S., 1% would still allow for $130 billion bank holding companies.

  113. I see three key ingredients in the crisis, all of which were involved in the infamous GS Abacus 2007 CDO: (1) TBTF; (2) Opaqueness of Derivatives; and (3) Complicity of the three ratings agencies.
    The president failed to mention (3).
    In fact, the proposed legislation only strengthens the oligopoly enjoyed by Fitch, Moody’s and S&P, without changing a broken business model where the seller pays the ratings agency. This model used to operate in the U.S. residential real estate market, where the seller hired a broker that was used by both seller and buyer. We now have a system where the buyer also hires a broker, whose fiduciary duty is to the buyer, not the seller, yet is paid by the seller. Why can’t we come up with a similar system for ratings of securities?

  114. Current reform efforts cannot reverse history to the conditions that existed before November 12, 1999 when the Gramm–Leach–Bliley Act repealed the last remnants of Glass-Steagall.

    The conflation of “risk” and “uncertainty” exacerbates capital market structural problems thus accelerating the troubling trend of larger and more frequent economic dislocations. The issue is whether it is more preferable to solve the “symptomatic problems” of scale that is Too Big To Fail and scope that is Too Random To Regulate, or whether it is preferable to fix the “market” by segmenting the underlying economic condition in terms of predictable, probabilistic, or uncertain governance regimes.

    Controls historically have resulted in either a supply shortage in terms of less quantity or quality of services or black markets evidence by transfer pricing or asset stripping. Once an investment process reaches a critical level of demand, regulation does not stop it. Rather, regulation just determines where it is transacted and how much it costs. People will vote with their feet as in the case of SOX and SMEs with the AIM Market.

  115. Free minds and free market require full disclosure and vetting of ideas. Where better to test Simon’s ideas. Would you rather the echo chambers of only friendly blogs? Above commentator, Stephen A. Boyko, is author of “We’re All Screwed: How Toxic Regulation Will Crush the Free Market System” and many articles on capital market governance.

    http://w-apublishing.com/Shop/BookDetail.aspx?ID=D6575146-0B97-40A1-BFF7-1CD340424361

  116. the huffington post reports that the audit the fed bill in the senate would do nothing:

    http://www.huffingtonpost.com/2010/04/22/dodd-bill-would-allow-fed_n_548588.html

    when you sign the petition I would also urge you to support the congressional version of audit the fed!!

  117. Made the calls, in the middle of contact list update but will follow up asap. thanks for helping the populace with information that can be understood and acted upon. a peaceful revolution is sure to follow.

  118. Re: @ JN….How would you as a small micro-economy such as Greece,and Iceland (Greece a peninsula,and Iceland an island) compete with the macro-economies of today. Their both completely dependent upon their export industry – not a good scenario.____Greece 2009 /population/density(/km/squared)~=11.3ml/85.3;___ Iceland 2009/pop./density/~=320k/3.1. Note:Greece @ #19 Connecticut/USA~= Worldwide(GDP)#30 at $222bn},..and Iceland doesn’t even show up on the radar(sadly totally insignificant),but perhaps comes in at Guila Bend, AZ. gdp revenue? Ref: http://strangemap.wordpress.com/2007/06/10/131-us-states-renamed-for-countries-with-si..

  119. If we force a $1,000bn bank to shrink to $100bn, won’t there be smaller US banks competing to grow themselves? Isn’t that the nature of trust-busting anyway? It promotes competition instead of allowing big players to make rules that merely entrench them and benefit them at the expense of everyone else?

    Perhaps capital will flee, but if we have a more stable economy where most people can live and love more comfortably, isn’t that worth it?

    And, to continue my pie-in-the-sky dreaming, perhaps if we do something that makes our society better, the international cooperation will follow.

    Ok, coming down off my dream cloud now…

  120. Think of legislation to limit the size and leverage of the largest half-dozen or so banks as a Prom dance…everyone is a little bit timid at being the first couple on the dance floor. Once a pair enters the floor and begin to dance, everyone less follows their lead.

  121. What other country would give these guys the kind of backstop we did? Or will be on the hook forever, regardless of their domicile?

  122. Watt DeFark

    Hear, hear, Patrice

    Union influence is nothing compared to the megabanks and financial skanks.

    But do remember that the unions were very instrumental in creating the middle class in this country. That “big auto” you seem to hate set the standard for everyone regarding pay and benefits. I look at it as profit sharing, where everyone benefited and not just the few at the top.

    Why do we begrudge a union member making $50K? That money gets spent, creating more jobs. How much economic benefit is there to paying $1 billion to a Lloyd Blankfein?

  123. Watt DeFark

    And by “you” hating big auto, I do mean Herman, not Patrice :)