Wall Street CEOs Are Nuts

By James Kwak

“Geithner’s team spent much of its time during the debate over the Senate bill helping Senate Banking Committee chair Chris Dodd kill off or modify amendments being offered by more-progressive Democrats. A good example was Bernie Sanders’s measure to audit the Fed, which the administration played a key role in getting the senator from Vermont to tone down. Another was the Brown-Kaufman Amendment, which became a cause célèbre among lefty reformers such as former IMF economist Simon Johnson. ‘If enacted, Brown-Kaufman would have broken up the six biggest banks in America,’ says the senior Treasury official. ‘If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.'”

Oh, well.

That’s one passage from John Heileman’s juicy article in New York Magazine. It provides a lot of background support for what many of us have been thinking for a while: the administration is happy with the financial reform bill roughly as it turned out, and it got there by taking up an anti-Wall Street tone (e.g., the Volcker Rule), riding a wave of populist anger to the point where the bill was sure of passing, and then quietly pruning back its most far-reaching components. If anything, that’s a testament to the political skill of the White House and, yes, Tim Geithner as well.

There are two other things in the article I thought worth commenting on. Here’s one:

“Obama could be forgiven for expecting greater reciprocity from the bankers—something more than the equivalent of a Hallmark card and a box of penny candy. He had, after all, done more than saved their lives directly by continuing the bailout policies formulated by Paulson and Geithner. He and his team could credibly claim to have kept the world economy from falling off a cliff. Yet with the unemployment rate still near double digits, Obama had (and still has) received scant credit from the public for what was arguably his signal accomplishment. At the same time, the one thing that almost every slice of the electorate would have applauded wildly—the sight of the president landing a few haymakers on Wall Street’s collective jaw—was an opportunity that the president had largely forsworn.”

This is a theme you hear a lot these days — the idea that Obama (or Geithner) could have taken the easy political road and bashed Wall Street, but that would have been bad for the economy, so instead he acted like a man and saved the economy, even if it was bad for his poll numbers. But this little bit of mythologizing rests on a flawed premise. Yes, stabilizing the economy was a top priority in early 2009, and for the most part it worked. (Have you seen the CBO’s estimate of the impact of the stimulus on GDP growth rates? Hint: it’s big.) But that did not and does not preclude “landing a few haymakers on Wall Street’s collective jaw.” Just because you follow one set of policies in early 2009 to stabilize the economy, that doesn’t mean that in late 2009 and early 2010 you can’t then properly fix the financial system that caused the damage in the first place.

The other, and perhaps most important thing Heileman’s article shows is that Wall Street executives are a bunch of raving lunatics. Here’s one paragraph:

“Today, it’s hard to find anyone on Wall Street who doesn’t speak of Obama as if he were an unholy hybrid of Bernie Sanders and Eldridge Cleaver. One night not long ago, over dinner with ten executives in the finance industry, I heard the president described as ‘hostile to business,’ ‘anti-wealth,’ and ‘anti-capitalism'; as a ‘redistributionist,’ a ‘vilifier,’ and a ‘thug.’ A few days later, I recounted this experience to the same Wall Street CEO who’d called the Volcker Rule a testicular blow, and mentioned I’d been told that one of the most prominent megabank chiefs, who once boasted to friends of voting for Obama, now refers to him privately as a ‘Chicago mob guy.’ Do all your brethren feel this way? I asked. ‘Oh, not everybody—just most of them,’ he replied. ‘Jamie [Dimon]? Lloyd [Blankfein]? They might not say Obama’s a socialist, but they come pretty close.'”

This is wingnut, Tea Party, willful blindness to reality kind of stuff. Forget the whole issue of whether they should be grateful to Obama for first saving their banks from collapse and then toning down the reform bill so it (a) doesn’t break up their banks, (b) doesn’t meaningfully prevent them from engaging in proprietary trading, (c) says nothing of substance about compensation, (d) doesn’t set any hard capital requirements, (e) . . . The fact that they can see the policies this administration is pursuing and somehow think they are “anti-wealth” or “anti-capitalist” is as close to proof as you will find that they are deeply stupid, blinded by their self-interest, or both.

The White House/Treasury narrative is that they were the adults — they made the tough calls that needed to be made instead of taking the easy road politically. The Wall Street narrative is the exact opposite: the administration is a bunch of political hacks, not the adults you need to have in charge. Here’s what one lobbyist said about the AIG bonus controversy:

“First, the White House decides in this blatant way to politicize the issue. Second, they overshoot the target and the thing gets away from them. It made people realize there’s no adult in charge. If Bob Rubin or Hank Paulson were Treasury secretary, they would have walked into the Oval Office and said, ‘Mr. President, I know you’d like to do this, I know your political advisers want you do this, but I’m sorry, you can’t do this.’”

Bob Rubin and Hank Paulson, of course, were both former chairmen of Goldman Sachs.

Wall Street CEOs like to think they are the adults, the big men in the room, the ones who know how the world works. Well, you know what? They screwed up their own banks, the financial system, and the economy like a bunch of two-year-olds. Every single major bank would have failed in late 2008 without massive government intervention — because of wounds that were entirely self-inflicted. (Citigroup: holding onto hundreds of billions of dollars of its own toxic waste. Bank of America: paying $50 billion for an investment bank that would have failed within three days. Morgan Stanley and Goldman Sachs: levering up without a stable source of funding. Etc.) The financial crisis should have put to rest for a generation the idea that the big boys on Wall Street know what they’re doing and the politicians in Washington are a bunch of amateurs. Yet somehow the bankers came out of it with the same unshakable belief in their own perfection that they had in 2005. The only plausible explanation is some kind of powerful personality disorder.

The bankers also have this bizarre belief that the administration has somehow betrayed them — that this year’s supposed shift to the left constituted reneging on some kind of deal. But there have to be two parties to a deal — and what did the banks do for Obama? They didn’t put in place any kind of self-regulation — not when it comes to compensation, capital, risk management, securitization, derivatives, or anything. They didn’t cut back bonuses to merely outrageous levels, although Goldman did decide not to pay itself record bonuses when it could have. They fought the stress tests all the way to the end, too blind to realize that the stress tests, and the government guarantee they implied, were the key to their salvation.

The administration owed them nothing. The bankers are playground bullies who are used to getting their way and think that if they’re not getting their way, someone must be cheating them. But the government is the biggest bully on the playground. Congress and the president get to make up the laws; that’s what it says in the Constitution. The government doesn’t need to do a deal with Wall Street to regulate it. It always has the power to pass whatever law it wants regarding the financial sector; it doesn’t need permission (even if it acted that way for the past two decades). The bankers should be relieved that the administration happens to support policies that are relatively friendly to their interests. Instead, they are complaining as if the administration broke some kind of rule.

(Now, you could say Obama has a debt to Wall Street because of all the money it gave him in 2007-08. But I dare any Wall Street CEO to come out and say that. And besides, the politically rational thing to do is to look forward. And, as Politico reported, Wall Street has been shifting its money to Republicans recently.)

And so, in one corner, we have a bunch of Wall Street CEOs sulking, deluding themselves into thinking that Barack Obama is a socialist, and probably planning to give money to Sarah Palin (which would be a colossal blow to their own self-interest). In the other corner, we have Obama and Geithner wondering why those Wall Street CEOs aren’t showing more gratitude.

“‘[Obama] thinks the Wall Street guys are just disconnected from reality,’ says a White House official. ‘He still takes the meetings with them, but his attitude now is like, “Whatever.”‘

“Tim Geithner, too, finds himself in the odd position of battling with an industry toward which he’s never felt an ounce of antipathy; in private, he now half-mockingly refers to the megabank CEOs as ‘the warlords.’ A Washington Mandarin to his core, Geither has been ineffective at winning over either Wall Street or Main Street. His experience during his tenure has provided him a wrenching political education, but one not unlike Obama’s—which, in a way, has only strengthened the bond between them.”

Yes, they deserve more gratitude. They saved the bankers twice — once by protecting them from their own mistakes, and again by protecting them from Sherrod Brown, Ted Kaufman, and all the other “populists” who wanted fundamental changes in our financial system. As should be clear, for all my differences with Tim Geithner, I would rather have him calling the shots than Jamie Dimon or Lloyd Blankfein.

But Obama and Geithner should know better than to expect gratitude from a bunch of narcissistic, delusional crybabies. And in that sense, both parties to this toxic relationship — the Wall Street bankers and the Obama administration officials — deserve each other.

132 responses to “Wall Street CEOs Are Nuts

  1. Both parties to this toxic relationship may well deserve each other, but “Main Street” has to live with the results. Unfortunately those results are looking more and more like Tea Parties in charge, leading eventually to guillotines.

  2. James,

    “This is wingnut, Tea Party, willful blindness to reality kind of stuff.”

    No kidding. Ever listen to Larry Kudlow, Rick Santelli, et al? No surprise there.

    “both parties to this toxic relationship — the Wall Street bankers and the Obama administration officials — deserve each other.”

    Right again. However, the rest of us deserve neither our disfunctional, delusional political system nor a financial/economic system based on nothing but rapacious greed. But, since the latter effectively OWNS the former – and the mass media are in bed with both as part of our ruling corporatocracy – I don’t sense anything is likely to change.

  3. The financial system is idiotic but it works quite well for the shysters at the top and exploits everyone else, some of course more than others. The system is justified by a religion called economics, in which equilibrium plays the role of God and any attempt to introduce reality into the equation is met by a chorus of ‘you can’t do that because it would make things worse’. Meanwhile, the looting continues, the Washington bluster continues, global warming continues, and nothing but a revolution will change anything that matters. Nitpicking all this idiocy is counterproductive. Might as well play golf while we still have time.

  4. Wall Street giving money to Palin? They may be nuts but they aren’t stupid. What is the point of the bankers publically thanking the administration? If the banks come out and say, “we like this” then everybody assumes that they wrote the law and Obama looks like he has caved to Wall Street. Everybody, even Wall Street CEO’s, know that this is a compromise bill that amounts to a luke warm slap on the wrist for the financial system that could have been much worse for the wall street status quo. . Obama needs to bee seen as against Wall Street to have any credibility as a regulator and a reformer independant of the Banks. In order for this to be the case, the Bank CEO’s need to be publically against the reform.

  5. Let them all just keep pumping the global economy full of helium.

    We shall see if this time it’s different…

    And when the inevitable finally comes, we can all stand on the streets below encouraging them all to jump.

  6. Certainly the worst delusion of all is that anything could possibly have been better for America than to let the whole parasite sector go down in 2008 while the government did whatever was necessary to bolster Main Street through whatever level of pain we had to endure.

    That pain would’ve been far less than that to which we’ve now been doomed since the US was transformed into Bailout America. Now the only possible outcome remains the collapse of the sector, which is just as terminally insolvent as ever, but this inevitable eventual collapse is now bound to be far more painful, far more total, than it would have been if the bubble had been allowed to burst and reality to resume in 2008.

    But in the meantime, we’ve added the horrors of whatever level of fascism the kleptocracy will be able to resort to once the Bailout itself becomes insufficient to keep it propped up.

    This is the infinite crime of all the Bailout leaders, and it remains the insanity and/or depravity of anyone who still thinks the Bailout was/is “necessary” or “helpful”.

    As for Obama and Timmy crying about ingratitude, they’re getting exactly what they deserve. They’re right wing thugs, but they’re politically/psychologically cowardly about being thugs, so they try to pretend they represent a kinder, gentler “capitalism”. That’s the pathology of all corporate liberals.

    But their position is utterly untenable. As this post demonstrates, the true corporatists rightfully have nothing but contempt for them. Meanwhile true activists for freedom and the public interest hate them for their treachery and despise them for their cowardice.

    No matter what upheavals come in the future, the corporate liberals have no future.

  7. CasualObserver

    The Tea Party crowd in my area would support breaking up the large Wall Street banks.

    I agree with your opinion of Larry Kudlow.

  8. Did Obama “first sav[e] the banks”? I don’t recall that. I thought it was pretty much Hank-On-His-Knees and a hoodwinked (again!) Congress.

  9. Not to mention the Fed.

  10. James, I made this comment the other day under your “Structural Change” post. Seems relevant here too:

    Nationalization (i.e. Receivership, or “Pre-privatization”) was the only way that we were ever going to get meaningful structural reform. But the FIRE industry plays on people’s ignorance and fear. Obama was taken in . . .um. . . convinced to not nationalize the banks because it was the “safest course.”

    A more knowledgeable and confident leader might have seen what was at stake not allowed himself to be “guided” to a resolution that would work solely for the banks. But not only was Obama NOT that leader (at the time, anyway) but there were other items on his agenda that were closer to his heart, especially healthcare. Remember, he campaigned for 2 years and the financial crisis was less than 2 months old when he was elected.

    Obama’s ignorance and the industry momentum almost guaranteed that nationalization would NOT happen. The FIRE Industry was strong and powerful at least up to September 2008. And FIRE was, I believe, Obama’s biggest financial contributor. In Nov 2008 when Obama had to pick the people that would help sort out the financial mess he had plenty of guidance from his still-respectable friends in the industry. No surprise then that he chose Geithner and Summers. After all it was Geithner’s NYFed that made AIG pay 100% on the dollar that fall(!).

    I wonder what Obama thinks of all this now. Until September 2008, any politician would have loved to have FIRE support but the Industry and keen observers of the Industry surely knew by then that public anger would grow as the Industry excesses were revealed. Does he wish that he had chosen a different team? One that would have been more forceful with the banks?

    Ironically, the Obama administration’s support of the banks has not been visibly returned (Kabuki?). The banks never played along with Obama on helping the real economy or accepting reform (paying themselves huge bonuses was a political stick in the eye) and are now giving more money to Republicans!

    Yet, Obama and the Democrates now “own” the financial mess including the unpopular bailout and the proposed (weak) reform – and even the historical antecedents like the government push to make homes more affordable. (Perhaps the Industry is smart to flee a sinking ship? A ship they helped to gut. Sound familiar? Wall Street knows how to pump and dump: dot-com stocks, subprime . . . obama?)

  11. “lefty reformers such as former IMF economist Simon Johnson”

    Lefty? You have to be kidding me. Do they even read him?

    “one of the most prominent megabank chiefs, who once boasted to friends of voting for Obama, now refers to him privately as a ‘Chicago mob guy.’”

    Not quite right. Should have said “Chicago School mob guy”. Team Obama are True Believers in the neoliberal agenda that emerged from Chicago, with very slight modifications (e.g. Thaler’s “nudges”).

    This administration is the greatest wasted opportunity since Clinton stained a blue dress. Worst fears confirmed – Team Obama did not kill financial reform because they were concerned about political viability (as they often claim), but because they truly and deeply believe in the current system. Meanwhile, their crown jewel – health care reform – is increasingly projected to increase coverage without controlling major costs. European taxes + American sales/marketing/litigation.

  12. Obama could have landed a haymaker. He coulda been the champ, but now we are stuck with one political party that prostitutes itself to the bankers and another that is ineffective and delusional. Apparently the Dems have even decided not to regulate the activities of car dealers while they rip off our GI’s on their auto loans. Real effective bunch.

  13. Yikes, James is angry! It’d be nice to see a little of the same anger from Obama Geithner and the rest of the administration. Wishful thinking, I know.

  14. J. P. Hamilton

    You effectively give voice to our “Main Street” pain and disgust. You will be a great attorney and already, with Simon, did us a great service for the historical record with your book.

    Thanks,

    John

  15. But What Do I Know?

    To be perfectly honest, I rarely agree with your take on things–but you’ve got this one laid out and nailed down so everyone can see it. Thanks.

  16. two notes

    the meager stimpak saved the real econommy

    the great bail saved a parasite sub-economy

    —————
    “planning to give money to Sarah Palin (which would be a colossal blow to their own self-interest).”

    that strikes me as nonsense
    dear sarah –ron paul for that matter —
    knows who rules market earth

    just like timmy and ohbummer do

  17. Fascinating. Depressing. Mostly depressing.

    Keep it up guys.

    G

  18. oh if it were only so…
    here in the country that invented cowboy liberty

    ——
    i had a friend back in the spill pool days
    shortly after the high 60’s woodstock wave
    broke itself like blacl power broke itself
    against the establishment barriers

    “look owen from here on out
    your life will be full of
    mostly babbits and bobtails
    ….be prepared for tedium max
    fire works min “

  19. to link jamie D to tea baggers
    fails to gather the flowers quite right
    wall street if it goes repug..and it want really
    look at plastic ware corporate guys
    like romney that once
    screwed stockholders and cut payrolls themselves

    the poor tea party types
    are clueless innocents
    enraged innocents mind you
    but harmless teddy bear rogues

  20. BP and Wall Street both spewed toxins into the environment in recent times. BP will pay (at least in some part) for what it’s done. But Wall Street won’t have to pay for what it’s wrought. In fact, it’s been PAID handsomely by the Fed and the American taxpayer. In his tremendous new book, “A Presidency in Peril,” Robert Kuttner estimates that Goldman Sachs alone has been given $60 billion in direct and indirect subsidies by our government. And where’s Obama? Focusing on DADT and attending fund raisers for Barbara Boxer in San Francisco, that’s where. When you elect amateurs, you get amateur shows.

  21. do any of u think blankfart
    listens to larry kudlow

    ole larry is “on ”
    strictly for the sucker trade

  22. pleasant rant brother chase

    “in which equilibrium plays the role of God ”
    and benign swift flexible wage dynamics
    plays holy ghost

  23. i agree the odds favor a feint that way and a return by 12

    the repugs are now the second banana
    brand x party

    the white boy and gal rumpous party

  24. one wonders how well fdr would have done if elected in 30 not 32 ???

  25. You continue to malign the Tea Party. Just exactly how is a person who goes to work every day, pays his taxes (instead of collecting benefits funded by his neighbors), pays the mortgage, sees the returns on his savings go to zero, and sees no end in sight to government borrowing supposed to react? TARP bailed out the wealthy. Stimulus bailed out the bureaucrats. The working man pays the (endlessly mounting) bills. No wonder he’s pissed.

  26. bungalowbill

    There’s also the possibility that the Wall Street CEOs aren’t that deluded. It’s good politics for them to pretend to be truly outraged. This gives credence to the idea that the bill is really tough for them.

  27. The teabaggers are not exactly known for intellectual consistency. They also support the Austrian and unfettered free enterprise.

  28. James, remember that Wall Street and Washington are forward-looking groups. What they do today is all part of elaborate planning to lay the groundwork for a future outcome. They may talk tough in public about not liking Obama today. But they know that what they say becomes public record. And if it sways public opinion to one outcome over another, then that’s their master plan.

  29. The Tea Party has no credibility whatsoever, because they never bitched about the Iraq invasion, which cost us the better part of $1T in _direct_ costs.

  30. Watt DeFark

    “There’s also the possibility that the Wall Street CEOs aren’t that deluded. It’s good politics for them to pretend to be truly outraged. This gives credence to the idea that the bill is really tough for them.”

    This.

  31. Elected leaders were never going to do anything about this. As Simon wrote way back in the original Atlantic piece, they are all captured.

    Lawyers and regulators are going to have to bring down the banks, on whatever technicalities they can find. The SEC case against Goldman seems like a good start… Obviously the incentives for lawyers and regulators to overlook the banks’ wrongdoing are still there. But I have a lot more confidence in them than I do in our elected politicians.

  32. I think Kudlow is representative of the Wall Street mindset. And that – as James says above – they’re a bunch of raving lunatics. Maybe, as you say , it’s all for show. The end result is the same regardless.

  33. Tom Friedman, in a recent column, said we are basically on borrowed time to get some serious issues corrected, from the Wall St. situation to climate change and on and on. It sure has the feel of “11th hour” to me, too. I wish I felt more positive about our ability to head off disaster.

  34. Like it or not, TARP kept the global economy from going off a cliff. The stimulus was 1/3 unemployment benefits, 1/3 tax cuts that everyone — even teabaggers — got, and 1/3 domestic spending in health care, education, infrastructure, and clean energy.

    At the time of the bill, interest rates were already zero, so there was no option for monetary policy (and the stimulus had nothing to do with the interest rate on anyone’s savings account). There was little or no private financial movement, so the market wasn’t going to prevent the slide in unemployment.

    The current deficit is comprised almost entirely of the unfunded Medicare, Part D, the unfunded wars in Iraq and Afghanistan, and the Wall Street bailout, most of which came from the Bush Administration.

    (Source: http://www.nytimes.com/interactive/2009/06/09/business/economy/20090610-leonhardt-graphic.html)

    I don’t recall any teabaggers getting bent out of shape when Bush ran up the deficit. But they liked Bush and don’t like Obama, so they go nuclear when Obama pushes a modest and necessary step toward recovery.

  35. I don’t think the Wall Street gang will be backing Palin. I think the old neocons will be running Petraeus for president and the corporatists will gladly fund that campaign. I could be very, very wrong but it does seem to me that Palin will be the Tea Party candidate, not the Republican candidate.

  36. Not to disagree to strongly, but Bear Sterns was in March and the act of Congress to authorize the bailouts of the GSE’s were in July (if I recall accurately). Two say that Obama had other interests closer to his heart is fair, but to suggest he had only been thinking about financial issues for a couple of months prior to his election is either untrue, or, if true, frightening. Also, if other issues were much closer to his heart, what was Fannie thinking when they put him so high on their donee list? Finally, do you think GS’s interest (along with other parties) in ShoreBank is entirely without consideration of how the Obama administration has treated the banking industry? Sure, bankers are dumping pretty big Rebuplican for 2010, but 2012 will be another story, particularly if Palin or similar look to be the candidate.

  37. Might as well fight one delusion with another delusion.

    I found the July 4, 1776 “A Declaration by the Representatives of the United States of America In General Congress assembled”

    to be an acceptable “delusion” for myself to organize around…why re-invent the wheel – turning it into a square and calling that “progress and innovation”.

    You all need to read that “Declaration”. It’s as if we’re all in a sci-fi time warp movie and the POWER conditions are the same in 2010 as they were in 1776!

    Example – “He has erected a Multitude of new Offices, and sent hither Swarms of Officers to harass our People, and eat out their Substance”…

    Yup, they were p-ssed back then, also :-)

    The Multitude of New Offices all stuck a technocrat probe up everyone’s … and are calling it Homeland Security and Consumer Protection…ouch…

  38. You’re forgetting that Obama explicitly supported their actions during the campaign–while McCain stared with his eyes in the headlights and the then-President was nowhere to be seen.

  39. Mr Kwak wrote:

    “Congress and the president get to make up the laws; that’s what it says in the Constitution.”

    Laws are like sausages. It’s better not to see them being made.

    Otto von Bismarck (1815 – 1898)

  40. dale
    i think wall street can see its
    deeper interests
    eventually

    if its dragged kicking and screaming
    thru a reform process
    at the end of the day it will not
    repeal success ..tamper with it yes
    f it up eventually if it can …for sure

    the arc from 1946 to today shows one whole cycle
    in small just note the babbits’ “war ”
    against social security

    the trick is to maintain the “faith” in public
    socialization is the road to serfdom
    while looting socialized institutions
    thru various privatized back doors

  41. “i am a liberal and i’m here to hurt “

  42. if the repugs reject a pail type candidate and pick say romney
    the party will over all do worse in 12
    recall the prez ticket is not always about winning
    that race
    it can be about winning other races
    the repugs need to avoid a damaging split
    the party pros
    know they need to hold on to
    the jesus yahoos
    and liberty bell clowns
    if they want to elect lots of folks in 12

    one might think a centrist prez candidate would always be better for long run party interests
    it isn’t
    notice goldwater in 64
    yes a rout insued but the origins
    of the reagan era were sown then

  43. the repugs are america’s
    faux nostalgia shop

    sort of a cracker barrel restaurant
    serving political heart gloggers
    and useless patriotic trinkets

  44. the comment cages here
    hardly smoke with clashing swords eh ??

  45. James: this is really sloppy stuff, and not worthy of your education, training, or your work with Simon. The ability of bankers (or executives, or many others in positions of power) to find justifications for preserving their wealth and privileges is boundless, but does not in the slightest dent the suspicion of many that the President is more of a corporatist than a capitalist at heart. Some people will call this socialism because they don’t know any better, but being snotty about the tea party misses the point and diminishes you. Worse, your false dichotomy leaves you in the untenable position of suggesting that gratitude should drive public policy.

  46. Jackrabbit

    Obama surely knew of FIREs support and welcomed it like all bubble politicians. He knew there was a price for that support (I personally think the price was support for the Carbon Trading market). And, few people, outside of some independent Wall Street/Housing analysts knew how big the problems on Wall Street were until September 2008. Subprime was “contained,” remember?

    So what I’m suggesting is that Obama was played to some extent – and MAYBE he now has the knowledge and perspective to see that. The other view would be that he is completely bought and knowingly handed over all policymaking to wall street hacks: Rahm, Summers, Geithner. Both views are plausibe, but I’m giving him the benefit of the doubt (he strikes me as being more of a naive front man than a corrupt heartless bastard).

    Also, Rahm had sat on Freddie Mac board so he was a GSE insider and the GSEs contributed to everyone.

    Its difficult to look ahead to 2012. Cutting the Dem’s advantage in the Congress is a blow to Obama right now.

  47. So whaddya figure … GD 2.0 circa 2018? 2020?

  48. The Wall Street CEOs are NOT the ONLY nuts.
    The BP Cabal is another group of nuts. Prosecute them under RICO; nationalize BP; and then jail the guilty ( of course this would include current and former government “officials”.

    Cheers.

  49. God Jim! The bankers assigned DUTY is to give the public impression that Obama is really oppressing them. It’s called acting!

  50. The above message from Namazu was sponsored by The Association for Rednecks Against Oral Hygiene, Glenn Beck’s Goldbugs Club for Losers, And Alaskans for Aerial Wolf Hunting.

    (satire)

  51. engineer27

    The whole stress-test fiasco/charade was Obama/Geithner.

  52. So he looked the other way.

  53. No I’m not and I just like to get the facts straight. Not that these guys would absolve the prior administration of it’s place in history, but clearly this is an oversight/hyperbole.

  54. FYI: The SEC dude, Robert Khuzami…used to be a lawyer for Deutsche Bank, advising them on – you guessed it, derivatives.

  55. Scot Griffin

    I just ran across this passage Jack Beatty’s “Age of Betrayal:

    “As governor of New York, Cleveland incarnated the definition of a reformer as ‘one who gives to the capitalist for nothing that which the real politician holds for a price’ when he vetoed a bill cutting the fare Gould charged New Yorkers to ride on his elevated railways.’ The president of Cornell praised Cleveland for rising above the ‘sympathies for the working people’ he indulged as mayor of Buffalo by drinking beer with them.”

    Obama seems to be showing the same type of courage Grover Cleveland did.

  56. “The government doesn’t need to do a deal with Wall Street to regulate it. It always has the power to pass whatever law it wants regarding the financial sector; it doesn’t need permission (even if it acted that way for the past two decades).”

    Each year I’ve become more and more convinced that they DO have to do a deal with Wall Street. Control of a government comes from control of its money supply. Who, if not the mega banks with their hands in the Fed, has MORE control of the money supply?

    You want the government to have autonomy from these leeches? Throw out private control of the money supply.

  57. Call me cynical, but I suspect that if we dug in to ANY modern oil company we’d find the same level of incompetence and failure. Others are just better at covering it up for now.

  58. James…wow. This was a total, no b-s-ing, no parsing, no obfuscating, no “academic-ing,” no tippy-toeing around kind of post. And as a result, probably the best I’ve seen. Ever.

    Thank you, thank you, thank you for your honesty. Character with a capital “C.”

    BTW: I think I may have posted the following some time ago at baseline, but with your “narcissistic delusional crybabies” tag for the Big Boys of Wall Street (still giggling!), I feel compelled to offer it again:

    Psychopathic personality disorder: “Aggressive Narcissism” via the “Hare Checklist”…

    Glibness/superficial charm
    Grandiose sense of self-worth
    Pathological lying
    Cunning/manipulative
    Lack of remorse or guilt
    Shallow affect
    Callous/lack of empathy
    Failure to accept responsibility for own actions

    P.S. Me thinks this could also apply more broadly to many who live in or around Washington D.C.

  59. This. This RIGHT here.

    The Tea Party didn’t emerge until after the Republicans lost power, and THEN railed against “injustices” against them. Against over spending. Against loss of liberties. They were THREE PRESIDENTIAL TERMS LATE TO THE PARTY.

    The elimination of Glass-Steagal under Clinton was the last protection against the massive bailouts we wound up having to pay for. The war in Afghanistan should have been a quick run and grab for a single man. The war in Iraq shouldn’t have happened. The PATRIOT act ripped apart the Fourth amendment AND Habeas Corpus. The president still has the power to declare anyone he doesn’t like an “enemy combatant” and subject them to indefinite detention without trial. Bush stood up in front of crowds and said “There ought to be limits to free speech” in response to people making fun of him…

    … and NOW the Tea Party shows up at the behest of Fox News, crafted by Rupert Murdoch since his favored party lost power finally? Pardon me if their “righteous indignation” rings extraordinarily hollow to me. I hated ridiculous government spending, oppressive laws, and a permanent state of fear and war BEFORE the Tea Party even thought to get angry.

    The only reason the Tea Party formed is as a bitter reaction to the American version of liberalism, which is quite centrist compared to Europe. They formed because a Democrat became president, and all the wingnut “socialist” haters needed somewhere to vent. I’ve never seen a larger, more ignorant raving group of disingenuous whiners in my entire life.

  60. Sherrod Brown and Ted Kaufman are the adults.

    Geithner and Obama have been repeatedly shown that Wall St is living in a dream world and will do nothing meaningful to correct it. They are now part of the problem rather than part of the solution.

  61. Jackrabbit

    Obama’s introduction of the Volcker Rule seems to have really pissed off the banks. Obama started losing their support after that.

    The Volcker Rule itself was relatively tame so I think what really got them spooked was that Obama was not playing by the script. He was supposed to do as Rahm, Geitner, and Summers directed . . . um, “guided” him to.

    Obama has also said some kind words about reform in the interim. <<>> Where Wall Street is putting its money for 2010 is what to watch.

    Its interesting, also, to see how the Repugs are playing this. They don’t attack the Democrat-Bank relationship directly (mostly), instead they go after Big Government (BigGov = Democrats). Of course thats a common theme for them, but a bit strange in this case, because it was weak govt regulatory control that enabled the abuse.

  62. Brad Thrasher

    Oh really, “Obama could be forgiven for expecting greater reciprocity from the bankers…”

    Out here in California, right after the bank bailout our State was forced to again issue IOU’s to contractors of all type.

    Past practice had been the banks accepted the IOU’s for deposit and collected funds on the due date.

    This time, after receiving massive bailouts, much of it from California taxpayers, the banks refused the IOU’s for deposit and instead accepted same as collateral against lines of credit.

    And “Obama could be forgiven for expecting greater reciprocity from the bankers…”

    ROFLMAO.

  63. trouserman

    Good to see some fire in your belly, James.

  64. Jackrabbit

    Rahm, Geithner, and Summers are definitely attached at the hip to Wall Street. I’m not so sure about Obama. But how Obama acts in relation to reconciliation of the FinReg bill – forging a stronger bill or accepting a weaker bill will be telling.

  65. Brad Thrasher

    All this TARP saved our bacon spin is done at the expense of cementing an oligarchy from which we may never recover.

  66. Yes on the taxes end of it. But unlike Europe, where I would expect that if I lost my job the chances are against my ending up with my family living under a bridge, unlike here. So we’ll get the high taxes without the safety net.

  67. fresno dan

    Well, when you don’t let people fail, and punish failure, you get people who rewrite history.

    And frankly, I think it is tremendously naive to posit that Obama is disappointed in the bankers. Kibuki theatre. He appoints Geithner, Bernanke, and Summers – guys who believe of the banks, by the banks, for the banks.

  68. CBS from the West

    You are one of several commenters who has asserted that Wall Street won’t support the Republicans in 2012 if Palin is their nominee? Why, may I ask, do you think that?

    By resigning as Alaska’s governor and taking on a high-profile with her book, TV show, etc., she is demonstrating that she is the consummate opportunist. There may be some principles she actually stands for, but her behavior suggests that she will be quite compliant if offered the usual Wall Street graft. In fact, with her “folksy” ways I think she will have an easier time than Obama in deceiving the public into thinking that she’s fighting the financial elites while in reality she does their bidding.

    Why wouldn’t Wall Street support her? In fact, why isn’t she Wall Street’s dream candidate? What am I missing here?

  69. “There’s also the possibility that the Wall Street CEOs aren’t that deluded. It’s good politics for them to pretend to be truly outraged. This gives credence to the idea that the bill is really tough for them.”
    ================================================

    It’s not a “possibility”, it’s a definite.

    And anyone who thinks that Obama and Geithner aren’t in on this ruse will eventually find out that they were sadly mistaken.

    They are all following the same script. But sooner or later their collective charade will be exposed. All it will take is one of the key players to turn and then the “no honor among thieves” narcissist dynamic will be set in motion and they will turn on each other.

    Personally I doubt they can make it through the end of this Summer before that starts to happen. But when it does it’s going to get really ugly.

  70. It’s only lately than Obama seems to have figured out he won’t be able to work with Congressional Republicans on anything, regardless of the subject matter. Now we find that he may be puzzled and disillusioned over the reaction of the Wizards to the steps he and Geithner have taken to save Wall Street’s privileged fat asses. Maybe the president will learn a lesson here – treat all the cretins the way their actions dictate they should be treated, not like their sense of entitlement tells them they deserve.

  71. The banks may “need to be publically against reform,” but they are under no obligation to privately shift their political contributions to the Republicans. That they’re doing because they know the Republicans have even less taste for reforming Wall Street practices than the Obama administration does, and if the Republicans regain control of Congress, the watering down of even these minimal regulations will begin anew.

  72. Mr. Kwak wrote:

    “Wall Street CEOs like to think they are the adults, the big men in the room, the ones who know how the world works. Well, you know what? They screwed up their own banks, the financial system, and the economy like a bunch of two-year-olds. Every single major bank would have failed in late 2008 without massive government intervention — because of wounds that were entirely self-inflicted. ”

    “Foxconn (Chinese iPod maker) admitted that it makes workers do an extra 80 hours overtime per month while the local labor law only permits 36 hours[13] Foxconn sued Wang You and Weng Bao of China Business News, the journalists responsible for revealing these practices, for $3.77 million and filed a successful court ruling to have the journalists’ assets frozen.[14] Some disagree with the demands and the court ruling.[15]

    Reporters Without Borders sent a letter to Apple Computer CEO Steve Jobs to implore Foxconn to drop the case.[16] Later Foxconn reduced the demand to a symbolic 1 yuan (12 U.S. cents), withdrew the request to freeze the journalists’ personal assets and initiated legal proceedings to sue their employer.[citation needed]”

    http://en.wikipedia.org/wiki/Foxconn

  73. Sarah Palin is not going to run for anything in 2012 or any other time. Governing is work, and she wants no part of that. She wants fame and money and whatever level of influence she can have over her ignorant followers without having to understand anything more profound than which camera to look into. Well she has all that and continues to rake it in. Why would she want to go to work? The girl is just making hay while the sun shines, before her boobs start sagging and she can no longer parade around in 4-inch stilettos.

  74. Excuse me, Sherrod Brown is my senator and he voted for the Senate non-reform. I expected better, MUCH better from him.

  75. Which brings up a very salient point: all this “transparency in legislative deliberations” is just so much drek. The public got a pretty good dose of transparency by watching just some of the health insurance reform process, and they were disgusted. Congress’s approval rating went from a dismal 19% to 9% today. They don’t want to watch the sausage being made, they just think they do.

  76. I have to say this is the finest piece of observation I’ve read in a long time.

    It’s sad but nothing’s going to change. I hate it but I know it. Maybe when the next crash happens a few years from now we can try to shake things up in government, but I’m not holding my breath.

  77. Thanks for the kind words. Learn to tread water till the tide recedes.

  78. 1)I find the topic funny. what you ae saying has been written a long time ago. you’d have to be an idiot to think Obama was on our side. if you believe it by now it is just blind faith.
    2) I posted months ago you need to do a black box analysis of this administration, ignore what is said. look at who gets appointed, and the end policy. it gives you the answer. I have also urged this site to just come out and say it also
    3) you knoew what the story was with the appointment of geithner, re appointment of bernanke, summers in his position. how about that we own aig and can’t get the treasury aig e-mails. that doesn’t happen unless the president doesn’t want it to happen. then look at energy, and healthcare.
    4) the guy was piced by the elites ot be the anit bush to prevent civil chaos. he would sell a message of hope and do nothing except make sure the wealthy got back the wealth they lost in the crisis. at least by now almost everyone I know who voted for him is very disappointed. Hell that may have been the plan of the elites all along so they could get the republicans back in office.

  79. “But Obama and Geithner should know better than to expect gratitude from a bunch of narcissistic, delusional crybabies. ”

    by the way as an MD i can tell you this is wrong. the politicians have the narcissistic personality disorder, wall street is anti-social personality disorder (sociopaths). almost the same thing, except politicans need to be loved, and love themselves. wall street has no moral compass. look them up on wiki. since most of the traits are the same hard to tell the difference.

  80. Mr. Kwak needs to proofread his post not only for extravagant language but for logic. The fundamental contradiction of the post: Kwak concludes that Wall St. CEO’s are “nuts,” “raving lunatics,” with “some kind of powerful personality disorder,” but also complains that Wall St. got what it wanted–cosmetic regulation, with enough loopholes to make it palatable to big finance. Mr. Kwak, in common parlance “nuts,” etc., are not so spectacularly successful in advancing their perceived interests.
    Kwak’s fundamental theoretical delusion–a hallmark of bourgeois reformism–is that the political state subsists independently of the class structure of society. Kwak broadcast this delusion in the following claim, bereft of historical proof, of course: “The bankers are playground bullies who are used to getting their way and think that if they’re not getting their way, someone must be cheating them. But the government is the biggest bully on the playground. Congress and the president get to make up the laws; that’s what it says in the Constitution.” Kwak’s naivete is breathtaking and explains why he and the other reformists forever (a) claim This
    Time Will Be Different even as they fail to explain the historical pattern to the effect, in Kwak’s words, “The bankers . . .are used to getting their way . . . .”

  81. (CONTINUING THE POST) But the Constitution is but the Official Story; real, historical politics is the vehicle of economics, with class as the middle term. The very class society that Kwak wants to “save” makes a mockery of Kwak’s confession of middle school civics faith. Kwak et al. are equally naive (b) as to the social psychology of the capitalists in point. They personify capital; capitalist accumulation demands more, ever more; naturally the capitalists tend to regard even the slightest demurrer from their unfettered caprice as “anticapitalist,” “socialist,” and so on. It’s not that they hate the politicians who front for them, such as Obama and Co.; it’s just that they indeed are confident of the absolute perfection of their core, capitalist perspective. –After all, they are what earlier political economy did not fear to call the “ruling class,” whose ideas, by and large, were ever the ruling ideas of society.

  82. Re: @ SARose____ She certainly can run as VP., along with US Rep. Eric Cantor (GOP/7th Dist.Va. 2000-present) as President. PS. He’s smart, young, and has a history! Two Years is a long time,…believe me, as this clown Obama is already campaigning for 2012, pathetic!

  83. Bayard Waterbury

    I’m sorry, James, but what you are citing is just the latest of a plutocratic charade. These guys are role players. The bigs on Wall Street know which side their bread is buttered on, and, yes they are spoiled brats who want their cake and eat it too. Any new regulation which even contains a slight threat is treated vigorously as anti-capitalist. But, behind the scenes, the Obama team has played their part. If the bigs acted thankful for the “toning down” (actually much more than that) of the populist Congressional wave, they would cause their champions in the Administration to be vilified by the public as being cooperative. Only the most cogent reporters and editorialists (like Heileman) are reporting what has happened in reform as a travesty, a huge suck-up, or worse, and those few are read by those of us who understand, but the broader population will remain convinced that the reform in its final form is a positive step back towards prosperity. Those who know, know better. But then this is what happens in a well-oiled plutocracy: Nothing to help the serfs who pay the taxes.

    But now that Washington and Wall Street have conspired to give us a collapsible economy, I am anxious to see what will happen when the Federal financial house must be put in order. That will be a truly insurmountable task, now that the biggest fiscal players have risen permanently to the top of the heap. There will be fewer and fewer working stiffs to pay the taxes necessary to bring the fiscal house into balance, and their ranks are thinning by the minute.

  84. Re: @ Annie____Annie get your gun,…and stop making me laugh. This is serious stuff :-)

  85. Nice rant. I’m sure that getting tens of millions of dollars per year does wonders for the ego and makes one think of those who earn in the mere hundreds of thousands as being of considerably lesser intelligence and ability. A view that probably ocmes from observing others in the same industry who were able to earn only at the lower level.

  86. Maybe the president should have thought of this when he appointed Geithner treasury secretary. I don’t think anyone is surprised that Geithner is not the guy to have in that job if you want to have any kind of meaningful financial regulation reform! What was Obama thinking???? Certainly not about preventing the next financial disaster.

  87. Kudlow et al are basically entertainers, rah rah for bull markets, big bonuses, lack of regulation–along with the big mouth gals proudly showing their cleavage on TV.

  88. I’ve been on the blog since April 17,2010 (Bill Moyer’s Program) after watching yourself, and Simon shine bright. Although I’m very disenchanted with PBS, since they dropped Bill Moyer’s, and “World (my favorite) Focus”. This is one of the best post I,ve read to date James, Thankyou. PS. I don’t watch PBS much for the very fact its been compromised!

  89. Although the bankers may be lacking in morals or ethics, they are not lacking in intelligence or the ability to intimidate. They know that the best battle is the one that is not fought. And in this way President Obama has shown with the Collins amendment and in so many other ways he is not willing to fight for the people without jobs and having their homes foreclosed on. And in 2012, many will ask an important question “If Obama didn’t fight for me, why should I fight for him

  90. ps-thanks for a great article, James!

  91. Not only has Wall Street reform failed, but the Street is about to unleash a new generation of high-frequency trading systems that positively dwarf current latency arbitrage systems in their potential for economic devastation. Finance CEOs want these new systems deployed yesterday and don’t want to hear about regulating them.
    http://bit.ly/aTflUc

  92. These banksters who produce nothing, know nothing about Capitalism.

    They have contributed “big time” to the destruction of Capitalism as a economic system that produces value (the best products and services at the best prices), and instead hijacked the term Capitalism and given it a new meaning: survival of the greediest and most corrupt.

  93. Obama can be understood by grasping one thing: He attempts to please whoever has his attention in a given moment. He has no internal compass, and thus no moral backbone.

  94. I might have added that sloppy, randomly-partisan blogging tends to attract the kind of comments section you currently have. If you (James) prefer to take Daily Kos to Naked Capitalism as your lodestar, please carry on and accept my apologies for wasting your time.

  95. Our business mythology says that leaders of large organizations got there on the basis of talent and must know things the rest of us don’t. Apparently even the President buys this mythology.

    The truth is that leaders of major corporations, particularly the banks, are chosen by relatively incompetent groups of people called “boards of directors” on the basis of years of loyal service, not on competence. The board members themselves were chosen on the basis of personal connections, loyalty to the tribe (of financial insiders) and to former or present CEOs and for predictability. All in all, it’s the blind picking the blind… Look at the head of Goldman Sachs… a former trader…. made his bones by making deals and taking risks…. runs the company that way… into the ground.

    Those who believe in market forces should recognize that markets with a few dominant players are disfunctional. Institutions with more than 5% market shares survive solely because of their size, not because of the competitive competence of their executives.

    The behemoths must be broken up. Until that happens we’re all at risk from executives who suffer from terminal stupidity.

  96. The article has an answer to this question at the end, which I think is spot on. The author basically says that people are mistaken when they think Obama has been tricked by Wall Street. The fact is that he, like Geithner, are both technocrats at heart. Both believe the financial system is basically functional and it simply needs a bit better regulation. That is probably the most significant reason they get along so well: they both agree about the essential problem and the way it needs to be addressed.

  97. Way to go James. Pour it on; you’re dead on right and it’s good to see the reality stated bluntly.

  98. old fashioned banker

    Often enjoy you but today you’re sloppy, in a credibility-reducing way:

    “Every single major bank would have failed in late 2008 without massive government intervention.”

    I’m not sure how you’re defining “major bank” but my definition would certainly include US Bank and Wells, neither of whom were at any risk of failing at any point. I’m sure you could extend the list and find other $1B balance sheet banks that were at no risk of failure like Capital One.

  99. Dick Hertz

    The Teabaggers (their term btw) represent a peasant mentality for the information age. Like the witch trial in Monty Python’s Holy Grail, they’ve made the witch they wanted and Dick Armey and a band of white supremacists, militia types, and apocalyptic religious cultists have combined to scare a bunch of old people and resentful middle aged whites into demanding a witch burning. Obama would be the one who comes up with the “scientific” rationale for doing it, splitting the difference between the rabble and the lower chiefs-if she floats, she’s a witch, even if the carrot is not really her nose. http://www.youtube.com/watch?v=yp_l5ntikaU

    Can we split the difference between stopping socialism, protecting Medicare and SocSec,stopping the bailouts but repairing the economy, by cutting budgets and increasing services? Can we pay for it by cutting taxes completely, driving the Laffer curve into infinite overdrive (e.g. zero taxes means maximum revenues for the government, amirite!)?

  100. I have to assume that’s sarcasm you’re expressing.

    If not, I’m sure you’ll agree, if Citigroup, Morgan Stanley, GS, BoA, JPM had failed the rest would have come toppling down too.

    James’ criticism is re: a broken banking system, sum total.

    US Bank, Wells and Capital One are all a part of that broken system and none of them is any better managed than the other.

  101. This post by James is nothing but self threapy for the poor deluded soul.

    What more can one expect from someone who has made a career out of going to school.

    Only one of the lies: “Every Single Major Bank would have failed in 2008..”. This sounds very much like “9/11 was an inside job”.

  102. He’s much more well-known than you are.

  103. *VERY* well put!

  104. Someone should take a look at what the unemployment and US economy would have looked like 2001 to 2007 without the enourmous stimulus spending on increased security and invations. My guess is that without this spending the economy would have tanked earlier.

  105. Thought-provoking stuff James.

    Wall Street has no interest in concessions, karma or what seems fair. They took all they could and cannot now claim to have benefited from any support as that would have undermined their ability to pay themselves huge sums.

    By denying the past, bankers can continue to live in a bubble where they single-handedly saved themselves from the crisis. And that type of heroism deserves a bonus. Sigh.

  106. I actually laughed when I read the “lefty reformer” line. Perhaps postmodernism is much more influential than I thought. Most probably though it’s just old fashioned propaganda – discredit anyone with a comprehensive reform agenda by labelling them radicals of some kind. The “lefty reformer” phrase delivers a subtle message: “perhaps he advocates reform because he believes in socialism”. You can always tell it’s this when the press starts using descriptive words before someone’s name (e.g. the controversial leader of x country, the populist senator y etc.)

  107. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t”

    I read that quote and couldn’t believe it. When the next crisis comes, this will be the smoking gun that leads back to the Obama/Geithner team. I love our President for many things, but he is totally cognitively captured by finance, even if only by proxy. A sad day.

  108. Jeff Miller

    Best_post_ever. Keep fighting the good fight.

  109. Of course you’re absolutely correct …. they are “nuts”.

    They all very clearly exhibit the behavior of Narcissistic Personality Disorder. Sadly, that is a personality disorder that is rewarded on Wall Street and in Congress. But the rest of us pay the costs of it.

    “We see the world, not as it is, but as we are”.
    A. Nin

  110. All I can imagine is that these people who run and own the big corporations have had free rein for so long and to such a degree that even an “extreme moderate” like Obama scares them. It reminds me of people who have undisciplined children — the least restriction causes them to blow up.

    We have been living in “corporate world” for so long, and the corporations are so dominant, that they bristle at the idea that there are any interests or concerns that might restrict them in the slightest.

  111. Bruce E. Woych

    James: I truly appreciate the fact that you are widening the “baseline” from the simplistic business model and opening up the dialogue to critical thinking. Unfortunately we are locked like Parkinson’s Disease” into a close circuitry of ocillation and repetition Irecapitulations that ultimately channel “capitulation” into retexting the “normative” pathways of SOP (standard operating procedures). And while this “Sopping wet” dialogue regurgitates its diapproval and cynical bitterness, it doesn’t truly point decisively to a focai of enlistment or resolution to reverse or rally support. After all; “…this toxic relationship — the Wall Street bankers and the Obama administration officials — …” that you are speaking about are the power brokers over our future. To say that they deserve each other is to render that relationship as justified and normative given our acceptance of the overall complexity and perplexity (although I would use stronger words personally…) of the political and economic topography that defines the surface of our National economy as the bridgework between Wall ST. and Washington DC. channel capacities. This is ok for mediocre Economic theorists, but as a studied jurist …is this the postion that provokes any desireable return?

  112. Nor is defending the status quo as you seem to be. Hmmmm …. could you perhaps be a banker, or another autoitarian right-wing conservative?

  113. Are the Wall Street Bankers nut’s trying to save their turf? There is a Bloomberg piece, right now, titled ” Mortgage Lenders Seek Relief From Forced Bad Debt Repurchases” By Jody Shenn. The article discusses organized resistance by the Mortgage Bankers Association to the idea that their member’s should not be forced to buy back patently defective loans they sold to Fannie and Freddie. They claim the aggressive actions by F & F will break them. They admit the contractual responsibility to buy these loans back . They resent the heavy hand of F&F. Yet, they sold defective paper.

    So just like the TBTF’s these little shots in comparison want out of their bad acts. Just different sized pig wallows but the denizens are the same types doing what comes naturally.

    The Federal Reserve Banks own a trillion bucks worth of Fannie and Freddie guaranteed paper. How much got pushed back to F&F by the banks since the FRB’s started buying mortgage backed securities in March 2009? Obviously , F&F must be doing good work here since the take over.

    The numbers of loans being pushed back seem quite low . Freddie had $4.8 bn of repuchase requesta outstanding at the end of March.

    The mortgage originators are squealing for a fix of their rights … a political fix.

    The American way not just the Wall Street Way.

  114. Here’s a simple way to get back some ground lost to the perverse corporate/lobbyist influence on government.

    For the legislative and executive branches, amend current campaign finance rules to remove all limits on amount or source of contribution, but stipulate all contributions from all candidates be put in to a single campaign fund that is split evenly between all candidates running. In addition to making the competition for public office much more equitable, this would also greatly increase our candidate pools, and deter office holders from perpetually campaigning and fund raising, e.g. Mr. Obama, and focus on executing the duties of the office.

    As for the judicial branch, change the current Supreme Court appointment process. Create a pool of about 20 acceptable candidates from which an appointee is randomly chosen. Presidential party in power would be able to replenish the pool.

  115. Amen to that Dr. R! … or we could just Federalize all election campaign financing – including judicial campaigns …

  116. “Obama had (and still has) received scant credit from the public for what was arguably his signal accomplishment.”

    Re-priming TBTF for an encore as his signal accomplishment might inherently be hard to credit, even given the attention span and credulity of the American public.

    “The administration owed them nothing.”

    That is hardly true. Obama was a bid recipient of Wall Street donations before he was able to get the public’s change for shilling some hope-dope. He is bought and paid for, and his sponsors have the right to expect him to deliver – as he did. The elites never speak well of their serfs, it makes both sides look efete.

    And forgive me if I have little sympathy for the trillion dollar education of Geithner and Obama on their true status in this world. After all, I will be one of the many that will ahve to foot the bill.

    As far as I am concerned, if the administration cannot find it in themselves to kick the bankers in the teeth, then I will happily cheer on the bankers. Maybe dentures will expose these frauds to a complacent (yet increasingly unemployed) public.

  117. Mr. Kwak wrote:

    “Wall Street CEOs Are Nuts”

    ‘Shitty Deal': Goldman Exec Daniel Sparks Hammered Over Term Used To Describe Deal Made For Clients (VIDEO)

    “The federal prosecutors investigating Goldman Sachs are focusing on Timberwolf, the infamous “shitty deal” repeatedly cited in a tense Senate hearing last month, according to people who have been contacted by the Manhattan U.S. Attorney’s office.

    The probe raises the possibility of criminal charges against the storied Wall Street firm, which was charged in April by the U.S. Securities and Exchange Commission with civil fraud for allegedly misleading investors about another subprime mortgage-related security called Abacus.”

    http://www.huffingtonpost.com/2010/05/27/exclusive-us-probes-goldm_n_592300.html

    http://www.huffingtonpost.com/2010/04/27/shitty-deal-goldman-exec_n_553541.html

  118. Wow! Great post James Kwak. … a Grand Heresiarch letting off some steam in the right way :)

  119. old fashioned banker

    You’re flat out wrong. None of those three has or had any derivatives exposure, except of exactly the right kind (to hedge interest rate risk). None had a capital issue. None had a liquidity issue. JPM also doesn’t belong on the list of “would have failed” banks.

    What exactly do you think would have caused US Bank to fail in the event that all of those others you list had failed?

    You couldn’t be any more wrong in your failure to identify the difference b/t strong and weak mgt. There’s a reason USB trades at more than 3x tangible book value. Those guys actually know what they’re doing. Capital One gets called a bank but is really a credit card company, and they made $1B last year in the worst recession since the great depression — and they did it on unsecured loans to the supposed riskiest customers. For perspective, JPM which is a pretty well run place lost $2B on cards and BAC which is horribly run lost $5B.

  120. “This post by James is nothing but self threapy for the poor deluded soul.

    What more can one expect from someone who has made a career out of going to school.”

    “Making a career out of going to school” is what young people in the US have been doing at least since the c.1991 recession.

    Now that so much of the baby boom is headed for involuntary early retirement, we’ll see if loading up on education debt is still the only legitimate career option available to America’s high achievers.

  121. After all; “…this toxic relationship — the Wall Street bankers and the Obama administration officials — …” that you are speaking about are the power brokers over our future.

    No one GAVE them the POWER to be the power brokers over our future.

    What part don’t you understand about that FACT?

  122. It doesn’t appear that Obama has figured out that it’s a bad idea to continue to capitulate to Republicans, who will always stab him in the back, at the expense of ignoring his base. I know I won’t be voting for him again.

    Did you hear his presser yesterday? He daintily asked the R’s to meet him 1/4 of the way. As in, Obama will give into them 3/4, before negotiations even begin?

    Tell me again why we have two parties?

  123. The problem is with the premise…that without intervention the world as we know it would have ceased. Leaving aside the fact that economists and other seers routinely fail to accurately project most anything, I will offer 2 observations:
    1) We easily survived the loss of The Bear and Lehman. A year earlier you would have shuddered at the thought. But due to a NY-centric view the administration lacked the courage to allow other investment banks to fail. 2) We talk about a banking crisis (again, really an investment banking crisis) but there are still 7,900 other banks in the US. They are the true backbone of the “Main Street” economy. All the “bailout” plans did was to weaken them.
    No pity for Wall Street here. No platitudes for the administration either. Both are simply posturing for the best outcome going forward.

  124. Since the bailout crisis I’ve noticed that nobody is in a rush to do anything to prevent a recurrence. If these masters of the nation and the economy really believed all the “dire crisis” talk, fixing the problem would have been priority number one. It never was. The only priority one was getting the TARP money (as well as the trillions from the Fed). Once that money was obtained — no crisis. My conclusion from this is that the crisis was hyped, not real (at least not an “end of the world” crisis).

  125. James, they are neither stupid nor lunatics. Their behaviour betrays something far more sinister: that their (and the White House/Treasury) PR consultants are extremely good at their game.

    All this overt Obama-bashing by Wall Street CEO’s, which was doubtless ‘leaked’ and ‘reported’ in the MSM, in the midst of the passage of the Financial (non)Reform Bill through Congress is merely Wall Street’s part in the charade of convincing public opinion that their elected Senators were leading the charge for The People, when in fact they were the Fifth Column for the banksters.

  126. Derivative trading was only the most visible component of our broken banking system.

    You can’t trust the numbers being generated from any of these TBTF banks. If you want a litmus test of how they’re doing, you should ask their customers, not try and interpret their padded numbers.

    Any banker knows the numbers are fungible, but just for kicks, let’s take them at face value, and assume (as you suggest) that making huge profits is the litmus test of good management.

    JPM’s business model these days is to game the government, CapOne has been raping their customers with usurious interest rates for decades, Wells was a prime mover in our mortgage debacle. Implicit in all these firms’ business and operating models is a zero-sum game between them and their customers.

    It’s not hard to make billions by screwing your customer. If that’s your litmus test of competent management, then you’re right.

    The truth is that all big banks were bailed out. They can squawk all they want about “We didn’t really need the money…”, but the domino effect would have brought down every big bank. TARP was only one piece. Unlimited deposit insurance was another. Trillions in Fed free money another. Guarantees of Money Market funds was another. Mark-to-model GAAP another. Forbearance on a federal ban on foreclosures and/or cc interest rate (usury) limits was another. Shall I go on?

    Any unchecked runs would have brought down even the “Flight to Quality” banks, in my opinion, because their interbank loans, hung investments, mark to market impacts, and counter party risks would have swamped confidence.

  127. It’s incredible that all these high ranking company officials who run and own big companies have had the freedom to what they want for so long that even a moderate president like Obama scares them. These CEOs have been spoiled, and the slightest bit of restriction is getting to them because they don’t know how to handle it.

    my blog: http://www.theinvestmentreporter.wordpress.com/

  128. yes, these execs remind me of kids that have been spoiled by a lack of discipline — eventually only their total freedom is enough for them.

  129. The claim that Wall Street CEOs are crazy or stupid (or both) is only true if you mean “crazy like a fox” or “stupid like a genius”.

    In effect, the entire financial crisis was a kind of Rube Goldberg machine created for the purpose of stealing money. It was engineered and set in motion by keen and calculating individuals who knew exactly what they were doing and fully understood the possible outcomes. And it worked to perfection.

    A person doesn’t become a top-paid CEO by being stupider than all competitors. “Gee, Your Honor, I have no idea how these millions of dollars managed to fall into my lap. How can a boneheaded and clueless CEO like me possibly acquire all these riches? Must be dumb luck!”

    Show me a “stupid” multi-millionaire, and I’ll show you the person that 99 percent of Baseline Scenario readers wished they were.

  130. Exactly. Which is why we need civil/criminal prosecutions (where possible, given our deregulated state) that get beyond the ‘Gee, Your Honor, I didn’t really know what was going on in my company’ defense. And penalties with dollar amounts and years of real jail time that will cow the crooked going forward.

  131. M. Mosby, “In effect, the entire financial crisis was a kind of Rube Goldberg machine created for the purpose of stealing money. It was engineered and set in motion by keen and calculating individuals who knew exactly what they were doing and fully understood the possible outcomes. And it worked to perfection.”

    That’s the heart of the problem, in the final analysis.

    It’s a “culture clash”. One culture’s keen and calculating individual is another culture’s psychopath.