The White House Needs Elizabeth Warren, Now More Than Ever

By Simon Johnson

The White House today is under pressure, with insiders asking: After the strong showing of the Republicans in the midterm elections, should the president move to the right or to the left?

This is entirely the wrong way to think about the problem – the administration needs to get beyond its mental framework of early 2009, which led it sadly astray with regard to the financial sector.  The President needs to find people and themes capable of cutting across the political spectrum; specifically he needs to promote strongly the ideas of Elizabeth Warren – what we need in financial services, above all else, is much more transparency.

The premise – and central mistake – of the Obama administration in 2009-10 can be summed up in what the president said to leading bankers on that fateful day, March 27, 2009: “My administration is the only thing between you and the pitchforks”.

The organizing notion then, provided by Larry Summers and presumably Tim Geithner, was that the “responsible” administration would protect global megabanks from “dangerous” populists, in return for cooperation and better behavior.  This kid gloves strategy turned out to be a very bad bet – not only is it far from best practice with regard to handling failed financial systems (there must be consequences for executives and shareholders, at the very least), but it also allowed banks and their close allies to bounce back to profitability and use that cash (underwritten by the taxpayer) to oppose the administration on financial reform and, according to credible public reports, to funnel large amounts of money into various “populist” anti-administration midterm campaigns. 

A lot of pitchforks ended up being paid for by the 13 Bankers, in various forms (e.g., Chamber of Commerce; American Financial Services Association).

The administration, to its credit, did see Elizabeth Warren as an important potential ally early on – hence the emphasis on the new consumer protection agency for financial products.   But the White House also should have played this card more aggressively by stressing at every turn Professor Warren’s central idea, the need to protect families from opaque small print and deceptive practices.

The Chamber of Commerce and other lobbyists help spend bank profits framing the consumer protection debate as being about “regulation,” but that is not the issue.  We have had plenty of regulation in recent decades and still have lots of regulators.  The issue is capture.  Big banks in particular disproportionately captured the hearts and minds (and maybe more) of federal regulators.

The best idea for rolling this back is Elizabeth Warren’s – require more transparency and full disclosure.  In effect, this is applying the best idea from the 1930s reforms (when it was applied to securities and other investments) to mortgages and credit cards.  In the 1920s, there were terrible abuses of consumers around the investments that they were sold (see Michael Perrino’s new book).  In the 2000s, the abuses were concentrated on the liabilities side of the consumers’ balance sheet, i.e., on what they borrowed; again these were egregious abuses.

This is the key point that Ms. Warren communicates effectively time and again – and to very broad audiences (including CEOs, in her effective no-drama style).  The nonfinancial private sector completely gets and understands this point; if you sold boxed cereal in the same way that financial services have been sold (by some people), you would be kicked out of the boxed cereal business – by your industry colleagues.  The financial sector, unfortunately, has lost its moral compass and ability to police itself.  The right approach is to require full disclosure of all material information – just as we do for the securities industry.  It’s not perfect, to be sure, but it has served us well for going on 80 years.

President Obama is worried about his left and needs to think also where the center is heading.  He needs an issue that cuts across left and right.  The left hates the abuse of power at the center of the financial system, but the right also understands that “too big to fail” is not a market – it’s an implicit government subsidy scheme, it’s a dangerous, unfair, and nontransparent form of taxpayer abuse, and it should stop.

If the administration goes onto the defensive on these issues in response to the election, the Chamber of Commerce and its fellow travelers will have a field day.  Fresh from its successes in the midterms and backed by an increasing wave of clandestine and – by the way, foreign – money, the Chamber will attack again and again.

What the president needs is someone who can take the fight to the Chamber – force them publicly to defend business practices that are unacceptable and abhorrent to responsible entrepreneurs and executives.  (If you doubt whether Elizabeth Warren can pull this off, see her recent speech to the Financial Services Roundtable.)

The problem is absolutely not “fat cat bankers” (if you know a term that more effectively unifies potential supporters of the Chamber of Commerce, let me know).  It is that a few people (and their prominent organizations) at the center of our financial system got out of control.  We can fix this problem – there is no reason to subject ourselves to the risks inherent in these individuals having excessive power and an inclination to take advantage of ordinary people.

The nonfinancial sector gets this.  Community bankers get this.  Hedge funds get this.  Even people who work in bigger banks (but not the biggest or worst behaved) get this.  And people who, until recently, worked in the global megabanks also get this.

But we need a champion.  Deputy Treasury Secretary Neal Wolin railed against the Chamber of Commerce earlier this year for its lobbying activities against reform, but he is too low profile to get much traction.  Secretary Geithner may now understand these issues but he is not the greatest communicator to the broader public.  And the rest of the Obama economic team looks, at best, rudderless – what exactly do they stand for or against?

Elizabeth Warren has the vision, the credibility, and the communication skills needed to really bring overdue changes to our financial system – and to lay the groundwork for 2012.  If the White House downplays her role or themes, the next two years will be very difficult.

65 thoughts on “The White House Needs Elizabeth Warren, Now More Than Ever”

  2. You can never heal the economy if you cannot control the military and intelligence expenses. Over and over these discussions ignore that reality. Obama, God help him, is the chief of these “defense” forces in name only.

  3. This is what happens when you hire a 2-term senator to the White House; the inexperience is showing. If the national economy doesn’t improve by 2012, New York’s Michal Bloomberg may be the next biggest challenge for the D’s and R’s.

  5. Fire Geithner right off the bat. That would rally his base, and work with independents too.

    It’s too late to fire the leadership of TBTF banks, which would have saved the Dems and Obama.

  6. When are people going to get that Warren is languishing at precisely the Arctic research station where they wanted her to be?

    (And since she can’t be naive enough as not to know that was their intent for her, I think the conclusion has to be drawn that she’s not what people thought she was.)

    I agree that the pitchfork line is the most characteristic quote of Obama’s career, and the appointment of Geithner and Summers his most characteristic act. But these are not “mistakes”. They are typical.

    Obama is a corporatist ideologue and status quo elitist, who is also politically incompetent. Go with that theory and you’ll find it explains all the evidence (which no other theory comes close to doing), and explains it far better than any competing theory.

    Regarding Obama’s corporatism, there’s no doubt at all about his visceral, knee-jerk, pro-corporate, anti-public mindset. Given any issue or proposal, in word-association test manner he calls for a corporate extraction toll booth. Say “job creation” and he automatically replies “employer tax credit” even though it’s long since been proven that employer tax credits don’t create jobs.

    That doesn’t matter. To an ideologue like Obama, the only point of any policy is to set up corporatist extraction points. If it doesn’t do that, he thinks it’s not worth doing at all. There’s no other reason to do it. I think he’d be sincerely confused at the proposition that the point of a job creation program should be to create jobs.

    I’ve previously challenged Obama hacks to name a single exception to this, just one solitary exception, where he displayed any priority at all other than facilitating corporate looting. No takers yet.

  7. Anonymous,

    You are absolutely correct. What has made our economy, and our culture, what it is, has more to do empire building than it does bankers and financiers. The ‘banksters’ are merely scapegoats, a convenient distraction that is part of an excuse based on a premise of there only being ‘a few bad apples’. This diverts scrutiny away from the true cause of the economic downturn. The actual cause of the mess though reveals just how jingoistic the US has become, and if revealed, this vast effort to control and dictate the planet would be met with much more resistance than it currently is, both domestically and abroad, especially abroad.

    If a genuine effort were being made to analyze what caused the global downturn that would start with the fact that cutting taxes during 2 wars was made affordable by foreign inflows. The trade surpluses and other dollar holdings that are recycled back through the US, in of course mostly T-bills, is a clever way of minimizing competition from foreign investment. This ‘recycling’ takes vast sums of dollars out of foreign hands and puts this capital in US hands at a very low cost. This allowed the US government to fund its obligations which in turn made the tax cuts doable and that allowed US investors increased capital formation. But it is the minimizing of foreign competition that is critical to consider, and, it is this “exorbitant privilege”, as deGaulle put it, that is most worthy of scrutiny.

    Bernanke did of course testify before Congress and explain how foreign inflows combined with excessive leverage to provide the source of excessive liquidity. Naturally, Bernanke did not mention the dollar hegemony but if the cause and effect clues are traced back it is somewhat obvious that most of the ‘financial innovations’ would not have been possible without the massive foreign inflows due to their downward influence on interest-rates. So the inflows definitely came before the ‘innovations’, broadly speaking. But of course this implicates the US Government as opposed to a ‘few bad apples’. And ultimately, the causal trail leads back to dollar hegemony taken to an irresponsible and misunderstood extreme.

    When Dick Cheney said that “deficits don’t matter anymore”, he was not of course trying to sell the MMT. What he meant, (in ’empire-building-code-speak’), was that the US could gain a ‘strategic’ economic advantage over its enemies (all foreigners), by running deficits. And, if seen from a militaristic viewpoint, he was right, deficits can be used to channel capital to US investors while tying-up capital from the enemy.

    If the progress that China has made on poverty over the past decade is removed from the global equation, global poverty, even with the questionable WB standards, is getting worse by percentage. Take Brazil’s progress out of the equation, worse yet. And this is the type of thing that threatens the US and the other so called ‘advanced nations’. It is the attrition of statistical evidence, the undeniable proof of hegemony etc., and the unprecedented growth rates of nations like China, and all of that which shows that the current institutional paradigm is detrimental to human progress, it is that, which threatens those in power (the Dick Cheney types). It is in the end that which gives undeveloped nations an alternative to the neocolonialist tyranny of the G-5 that is the primary threat.

    So… US economic policy and the vast effort dedicated to empire building, maintenance, and protection, have become so intertwined that they are one and the same. Yet, somehow we settle for the ‘it was just a few bad apples’ diversion. Then it follows that when those who are the most culpable,(government officials, [military included here]), do not push to prosecute those who are mostly just sullied scapegoats, (bankers, financiers), we are left to wonder why? But we are simply being duped again, and those who can provide intellectual support for the diversion, they will be rewarded again. They will be our most respected writers and journalists, professors, public officials, economists, and etc. And so goes the duping.

  8. warren is a left wing hack and her agency is just sinecure for herself and her HLS cronies.

    you have been totally suckered by this political entrepreneur. if you understood debt market, you would know that warren agency will make things worse, not better. it is funny to see!

  9. Russ,

    I’m not a “taker”. In fact I almost entirely agree with everything you said. I especially liked this:

    “Obama is a corporatist ideologue and status quo elitist, who is also politically incompetent. Go with that theory and you’ll find it explains all the evidence (which no other theory comes close to doing), and explains it far better than any competing theory.”

    My only variation is that I don’t think that Obama is “confused” about how to create jobs so much as he has been lead to believe that it is crucial to accept 10% unemployment as necessary to hold real wages down. Surely too it is a matter of limited financial resources but Summers & Co. have been committed from the start to the notion of making the workforce more competitive globally. All of the stimulus efforts combined, including ZIRP/QE, show a pattern of supporting plutocrats/technocrats/bureaucrats while also deftly not supporting ‘unskilled workers’. This suggests something other than confusion, instead, something by design.

  10. “if you understood debt market”

    if only we understood the debt market like the bankster financial wizards who exploded debt instruments and our economy. its ironic (and disgusting) how so-called capitalists are unwilling to let these debt instruments be priced by the market. capitalism for the debt peons and SOCIALISM for the rich.

  11. Raylove wrote:

    ” What has made our economy, and our culture, what it is, has more to do empire building than it does bankers and financiers.”

    From my perspective I see empire building taking place both internationally and domestically.

    “…we are simply being duped again, and those who can provide intellectual support for the diversion,…”

    On a positive note, things will now come to a head more rapidly.

  13. Anonymous,

    I agree, I also “see empire building taking place both internationally and domestically”. I failed to make that clear perhaps, but I did use the word ‘intertwined’ to suggest that domestic policies are part of the larger effort to dominate the globe. The Bush Tax cuts are a good example of how that which might seem domestic by design and intent, may in fact be about something global. You may remember too that I recently described the US as an engineered safe-haven for the global investment-class.

  14. I agree, although “more competitive” is code for reducing them to serfs.

    When I said he would be confused I didn’t mean he was confused about what they’re doing, or the fact that they want to politically normalize permanent 20%+ unemployment (what they fraudulently call “9.x”).

    I meant he’d be confused if someone could get to his attention with the proposition that maybe instead of handing out corporate welfare and normalizing mass unemployment, his job is actually to use fiscal policy to create jobs. Who knows how many years it’s been since he even heard of such a radical idea.

    (Of course he always despised such ideas, which is why he froze them out so many years ago in the first place. But by now he probably doesn’t even remember them.)

  15. Obama is nothing but a Republican plant. Liz Warren is co-opted already. Her best move is to distance herself from this loser/patsy NOW!

  16. About this: “The left hates the abuse of power at the center of the financial system, but the right also understands that “too big to fail” is not a market – it’s an implicit government subsidy scheme, it’s a dangerous, unfair, and nontransparent form of taxpayer abuse, and it should stop.”

    Non-experts intuitively understand the unfairness, “the abuse” at the heart of the financial crisis, but it can be hard to explain in our own words. Elizabeth Warren does it best, but she’s no longer speaking candidly to the public like she did before her appointment. So even if she’s doing something important right now, to an ordinary person it’s hard to tell because she’s sort of been silenced. So we need to keep hearing from other experts who understand this so deeply, are sympathetic to the ordinary public, and are willing to keep translating it into ordinary speak.

    In general we need an ordinary-person-centered approach to every issue regarding high finance and bread & butter personal finance. Like, Drivers Ed but for money. If the DMV was testing for learner permits to engage in contracts, purchase homes, gamble on retirement planning, what would that drivers manual look like? The tax-prep telephone books published by H&R Block? Suze Orman’s girl friend advice? Fortune cookies?

    I say this in the midst of open enrollment while my co-workers have been talking to me all day about our retirement plans. Mostly no one understands anything about the job benefit, which is changing significantly and to our detriment, and hardly anything at all about how it’s designed to supplement, not replace, Social Security. So if that many people cannot make their way around the very basics of retirement planning (much less readiness for home ownership), how can they be expected to comprehend the ways “We can fix this problem” in the financial sector?

    If understanding the financial crisis was like a Google map, we would all be able to easily zoom out to the global financial picture, zoom into the national problem, and Streetview it around the particulars of our own personal finances which is where the rubber-meets-the-road. But the public is not that adept and so they’ve joined the Tea Party.

    Among other things, right now the public needs an expert to sub for Elizabeth Warren while she’s away at the Whitehouse.

  17. Rallylove, Anon, Russ, Enjoyed so much the level of dialogue between the three of you. As a imminent ‘new boy’ heading back to Arizona tomorrow with a freshly printed finance visa I am only too aware of my lack of real knowledge about the workings of the USA.
    Nevertheless, here are my two pennies worth.

    Yes, the last 50 years or so have seen America as an empire builder. But having been born in the most outstanding empire builder of all, Great Britain, or as it was called when I was a kid, the British Empire, I think there is both good and bad that comes from empires.

    The USA has been an outstanding force for good for many decades and is highly likely to remain so.
    The present circumstances facing so many western countries is, so far as I am concerned, almost entirely down to terribly selfish greed of the banking classes.

    Governments of all varieties in a number of countries fell for the ‘sales pitch’ of a new order of economic virtue if the banks were ‘lightly’ regulated. We now know that it was a total scam.

    Unless and until proper regulation is brought in there isn’t a hope of change.

    And there’s zero need to be worried about proper independent regulation. We wouldn’t use medicines or fly in commercial aircraft without the regulatory envelope around those industries.

  19. Elizabeth,

    I too have heard rumors from people who deal with Blumenthal that he is seriously interested in runing in 2012.

  20. Federal Reserve Rains Money On Corporate America — But Main Street Left High And Dry

    11-3-10 03:51 PM – excerpts

    “Bill Gross will be one of the few to benefit from the Federal Reserve’s announcement this afternoon.

    The legendary money manager, who oversees more than $1.2 trillion at Pacific Investment Management Co., stands to profit off the plan hatched by the nation’s central bank. The Fed announced that it will buy between $850 to $900 billion of U.S. government debt, also known as Treasuries, through June to spur the recovery…

    As part of its legal mandate, the Fed is required to pursue policies over the long-term that lead to “maximum employment, stable prices, and moderate long-term interest rates.” But the extraordinary steps taken to battle the Great Recession’s persistently high unemployment rate — like buying Treasuries, mortgage-backed securities and the debt of mortgage giants Fannie Mae and Freddie Mac — haven’t been enough.”

    http://tinyurl.com/down-d-gurgler

    “It is better for civilization to be going down the drain than to be coming up it.”

    Henry Allen

  21. Elizabeth,
    I don’t think “only” 2 years Senate experience has much to do with it. I think it’s more President Obama’s general attitude to life and his natural inclination to compromise.

    Another thing you are forgetting is that one of the reasons the man ran for office, specifically was because he had short-term experience. Tom Daschle was one of his key advisors or “sounding boards” on the decision to run for President. Daschle told him if he ran later in his career he would have a long Senate voting history that he would have to defend over a long grueling Presidential campaign. I think in fact Daschle gave him extremely wise and sage advice there, probably because of his own experiences running for President.

  22. Don’t worry Paul, we won’t tell her you said that (haha). It’ll just be an elbow to the ribs and a chuckle at the “pub”.

  23. Is there any reason why a person should work hard and play by the rules in America any more?

    Would we not all live happier, healthier lives if we were to “tune in, turn on, and drop out?”

  24. Don wrote:

    “Would we not all live happier, healthier lives if we were to “tune in, turn on, and drop out?”

    Only if FDA approved. :-)

  25. While the White House may well need more than Elizabeth Warren at this point, it seems pretty clear that Elizabeth Warren will need a lot of public support from more than just the White House to accomplish anything remotely comprehensive against the current tide of reactionary economic self-righteousness.

  26. Geithner Meets With Homeowner Advocates, Homeowners Bogged Down In HAMP

    11- 3-10 – 05:46 PM

    WASHINGTON — “Treasury Secretary Tim Geithner met Wednesday with homeowner advocates and people who have struggled to get mortgage modifications from banks participating in the administration’s anti-foreclosure program.

    Ken Kelly of Antioch, Calif. said he told Geithner he asked Bank of America for help via the Home Affordable Modification Program almost a year ago. He said the bank repeatedly lost his paperwork during a “trial” period. It granted him a modification, but then said he would be kicked out because of a bankruptcy during the trial. “They had me mixed up with someone from another state,” Kelly said….

    “He actually reacted positively, so I was very hopeful because I thought he was just going to listen,” Kelly said.

    “He did say there are legislative guidelines that can hinder him on doing anything.”

    http://tinyurl.com/27lgvkk

  27. “If the administration goes onto the defensive on these issues in response to the election, the Chamber of Commerce and its fellow travelers will have a field day. Fresh from its successes in the midterms and backed by an increasing wave of clandestine and – by the way, foreign – money, the Chamber will attack again and again.”

    I followed the “by the way, foreign” link above, but it merely took me to another one of your blogs and did not give any evidence of the presence of “foreign money” in the Chamber’s spending. I expect a link to provide independent, verifiable evidence, not self-citation. Of course, we are all deeply shocked that there may have been “clandestine” (?) money in the election. Next, someone will dare to suggest that there has been gambling at Rick’s Cafe!

  28. You guys have got to bang on Obama a whole lot harder if you expect real change.

    I expect to see Obama use this as an opportunity to gut Social Security, Medicare and Medicad all on the name of “required” fiscal austerity. Of course, it’s expensive to give tax cuts to billionaires, and bail out all those failed Wall St and TBTF banks, AND fight and lose two unfunded wars.

    Ms. Warren will be showcased but carefully controlled by Geithner and Bernanke. Nothing must be allowed with the continued bailout of the Wall St and TBTF banksters that screwed the world’s economy.

  29. Issa has his pitchfork ready. This fuqr is nasty. This moderate Republican is embarrassed about the things he’s going to do.

  30. Wow, MB. I agree with everything you just said.

    Check out William Black, economics professor at the University of Missouri and an ace regulator during the S&L crisis back in the 80s.

    I think he writes in pretty plain English, and he surely knows his stuff.

  32. Why do you assume I like banksters??

    We have corporate version of Elizabeth Warren. They are called bond rating agency and they make things worse.

    Elizabeth Warren make things worse because she say you can outsource credit decision to third party and this has been epic fail. I gairantee it will fails again!

  34. Another thing, MB. Here’s what Bill Moyers said in a speech about Howard Zinn, author of “A People’s History of the United States”:

    “The last time we met, I told him that the stories in A People’s History of the United States remind me of the fellow who turned the corner just as a big fight broke out down the block. Rushing up to an onlooker he shouted, “Is this a private fight, or can anyone get in it?” For Howard, democracy was one big public fight and everyone should plunge into it. That’s the only way, he said, for everyday folks to get justice – by fighting for it.”

    And that is the truth. Ordinary people will never get justice until we start fighting for it. Nobody else is going to do it for us.

    You can read the read of Moyers’ piece at
    http://www.truth-out.org/bill-moyers-money-fights-hard-and-it-fights-dirty64766

  38. Simon, as usual, your article is cogent and well argued, and accurate to a point. That having been said, I want to say the following:

    Liz has already been named as the person who will be responsible for the Consumer Protection Agency (Bureau?) start up. According the BHO, she has been given full power to do so, essentially as she sees fit. The budget for the CFA is guaranteed, since the legislation specified its budget as a percentage of the FED’s budget. All okay so far, right? Beyond naming her, I have yet to hear anything further. Staffing? Director or nominees? Nothing yet.
    Next, I would like to remind you of something which you started for me, which, thanks to you, has enabled me to look at the political machinations of our government in an entirely different light. That is, to see each and every move they make as a part of what a plutocracy does in its governance. It takes care of those who fund the election of its membership. The other day, I was watching the conversation between Mark Shields, David Brooks and Jim Lehrer on the NewsHour, still a good show, although they seem to continue to get their political analysts from essentially “inside the Beltway,” even though it would be refreshing to occasionally invite some fresh commentary (since the “inside the Beltway crew” is essentially captured, not by the politicians, but by the paradigm of political reportage ala 2010). Anyway, what they were discussing was the funding of the competing R and D campaigns, and Brooks offered that the Dems were funded at a higher rate than the Reps (he said, according to the NYT, his employer who he said was “never wrong”). Shields countered that according to (I can’t remember the source, but the Times uses it) his understanding, the funding came to 1.59 billion for the Dems, and 1.64 billion for the Reps. Brooks didn’t argue. What does that tell us? First, we must understand that, aside from funding the operations (travel, food and other expense), the largest amount goes to advertising. Who does that benefit? The media oligarchy. Who pays for the expense (contributors)? Other than labor unions (a few millions) the rest is mostly sponsored by banks, oil companies (and other energy companies), food producers, the health care industry, the manufacturing industry, the MIC, etc., that is, the OLIGARCHS!!

    Why do you think that BHO failed to get bipartisanship to happen during the health care reform debates and the financial reform debates? Simply. The committees held their hearings (look at who they had as experts) while our representatives turned the writing of the legislation over to lobbyists and their attorneys.

    Now we have a new group of lawmakers coming to town. Some of them the tea partiers. Many of the new representatives and senators are there because of the voters’ kneejerk reactions to the fact that our government is broken. We know why people swept out many incumbents. What we also know is that those incumbents who survived the election, as well as the newbies are now in office (or will be in January), because their parties and sponsors hand picked them to continue the sham.

    Over the next two years, the Reps leader in the Senate, Mitch McConnell, has already stated that their PRIMARY GOAL, is to see that BHO doesn’t get a second term. The new speaker, John Boehner, has indicated that the voters have spoken, and are sold on the campaign theme of the Reps (and no other heard) to reduce the size of the budget, and keep the tax cuts as permanent as possible. Oh, I forgot, they also want to overturn the health care reform. So much for the possibility of constructive action for the next two years.

    But, Simon, keep making your arguments. We have to have at least one forum where honesty and clarity are prime. The Baseline is one of the few places we can go these days for anything resembling that, although, I must say that Arianna does a terrific job (sadly though she tends to buy into the liberal arguments and thus may be continuing the extremes, at least a bit.

    We all know that the answers lie entirely outside of our present political sphere, and also that those ideas and answers are not even remotely likely to gain admission anytime soon.

  39. You must be reading Chalmers Johnson. The MIC is not only the third rail of politics that no one will touch (although recently I actually heard someone say that EVEN military spending must be on the table, but whatever happens will always just be around the edges), but is also a major campaign contributor, and is also the main reason why we even have terrorism.

  40. Believe it or not, I forgot one thing that I wanted to say in my essay. That is that we need to demand an investigation of the “garbage” shipped to Fannie Mae, Freddie Mac, and the FED, and which said garbage is virtually worthless, especially since many of the notes won’t even be enforceable, and even if they are, as the foreclosures continue, the banks will become landlords or further see their assets turn to trash. BTW, it’s my understanding that much of the paper that was taken was “with recourse”, and so, if it’s faulty, the banks would technically have to buy back the trash. And, on this line of thinking, does anyone believe that Justice will actually look at the massive fraud involved in the formation of this trash dump? NOOOOOOOO!! BHO and TG have both said that they just want to be sure that this never happens again. A likely time for it to recur: maybe 25 years from now, if then, based upon our eocnomic trajectory.

  41. Maybe you’re right in the short term, but somehow we survived without the crap for decades (scams and obfuscation), and somehow I think we will do so again.

  42. “But, Simon, keep making your arguments. We have to have at least one forum where honesty and clarity are prime. The Baseline is one of the few places we can go these days for anything resembling that,”

    Well said, BW.

  43. Simon Johnson writes “a few people (and their prominent organizations) at the center of our financial system got out of control. We can fix this problem – there is no reason to subject ourselves to the risks inherent in these individuals having excessive power and an inclination to take advantage of ordinary people.”

    Well if Simon Johnson would live by what he writes, then clearly the first he would have to demand is the immediate resignation of anyone having had anything to do with Basel II, because those are precisely those who wielded excessive power and an inclination to take advantage of ordinary small businesses and entrepreneurs who lacked sufficient representation to make the regulators understand that by paying higher interest rates they were already contributing to bank equity without having to be further punished by generating higher capital requirements for the banks.

    Why does Simon Johnson or Elizabeth Warren never express any concern on the issue that those perceived as riskier, like the small businesses and entrepreneurs, on whom we depend so much for job creation, are arbitrarily slapped on higher regulatory requirements, even though, precisely because they are being perceived as riskier, they are subject to more scrutiny by the banks, they have to pay much higher interest rates to the banks, they get less money from the banks, they get shorter repayment terms from the banks and, as a group, have never ever been the source of any bank crisis.

    You can give consumers as much protection you like but if you do not give them jobs, they are screwed anyhow.

    I don’t care one iota whether you are a Republican or a Democrat, as a radical of the middle or an extremist of the center and on top of that a foreigner in this country, I am neither. But one thing I know for sure, if you want to support your side the best you could recommend it to do, are the right things…

    Get rid of that odious Basel inspired discrimination against those perceived as riskier… their lives are hard enough! http://bit.ly/cUd3vL

  44. I tell you, any females that I care for in my life, I’d have them sucking down marijuana every weekend before I would let them take 1 pill of Boniva or half the drugs FDA approves that destroy your kidneys and liver in short order. The original version of LSD was probably safer than 75% FDA approved drugs they pimp now.

    And trying to market Viagra to below 40 crowd??? Are you kidding me??? Man if you’re younger than 45 and need Viagra, you’re either a hedonist or you’ve mistaken a pubic hair for something else.

  45. …what we need in financial services, above all else, is much more transparency.

    This is almost verbatim what the corrupt businessman said to the mobsters in the movie Gormorrah.

    Make it all look good. Make it all look Elizabeth Warren good.

  46. Bayard writes: According to Mark Shields (on the PBS News Hour),”the funding came to 1.59 billion for the Dems, and 1.64 billion for the Reps.”

    In other words, $3.23 billion was spent on this midterm election cycle alone. I wonder how this compares on a per capita basis with other democracies?

  47. more stringent accountability and regulation is required to channel finance back into asset building. The middle class production line was never supported by speculative finance, in fact it is the other way around these days. The effort is to turn assets into capital to the point of liquidation. Take the money and run.

    Anyone from the World Bank that played these games against marginalized emergent economies should know. the process of financial service is running hostile to the foundations of real economy. Anyone who claims different looks to be part of the Biggest Con Game that has ever been scaled.

  48. Click to access eacb.pdf

    Please Read the above link and disseminate this wider picture of the international community.
    Paper is from the United Nations On Cooperatives in a World Crisis;… title:

    EUROPEAN CO-OPERATIVE BANKS IN FINANCIAL AND ECONOMIC TURMOIL (April 2009)

    Herve Guider (General Manager)
    EACB secretariat

    The paper indicates that fundamental banks that were solvent and not involved in irresponsible lending or profit seeking (in fact are seriously coordinated in community interests and were healthy prior to the finance fiasco) are suffering directly as a consequence of Big Money Finance. Contrary to the idea that these financial pyramid (scheme) giants are instrumental to economic health; these consequences indicate that “wealth engineering” by the financial service sector are a direct financial threat to otherwise healthy and well run infrastructures of responsible Bank Management. Perhaps just as important is the fact that ethics does exist in sound banking under cooperative policies; while aggressive competition in finance not only destroys itself (Lehman Bros.) but will destroy the very sound foundation of socially responsible banking in the process of aggrandizing its own self indulgences.

  50. To the contrary; his subsequent cabinet was/is/was stacked top heavy with Clintonestas along with Simon’s total favorite fiscal steward, Timothy Geithner.

    More experience would have better grounded him for the demands of the office.

    Obama tossed a liberal bone by appointing interim consumer advocate Elizabeth Warren to keep his base in line and improve his re-election chances. However, on Nov 1st he tells Ron Brownstein of the National Journal that he draws a line in the sand on the Bush Tax Cuts but then on Nov 3rd, he waffles and says there is room for negotiations; meaning, he will go along with the R’s by extending all of the tax cuts for the middle class, upper income, and top 1/10th of 1% of earners even if that means agreeing to extending those cuts until the national unemployment rates goes down to 0% – now, if the R’s can only get the President to apologize for being POTUS – mission accomplished says some guy that used to hold the same job.

  51. If the turnout was 90 million (as I read in the NY Post – not the best source but one that I could find in a short Google troll) the cost came out to $40 per vote. I reckon that is less per vote than in some places where votes are normally bought and sold by the political parties.

  52. Can’t say that I’m much in agreement with Simon on this post. He’s letting too many people off the hook. The cancer of the financial mess is broad and deep. You can’t just cut off a few poisonous mushrooms and think that the mycelium underground will wither away and die. We need a thousand Elizabeth Warrens or better still we needed sound statutory regulations that aren’t dependent on finding another 999 Elizabeth Warrens to stand up to the power of the Banking industry. (Bill Black and Brooksley Born are 2 others I could think of).

    I would like to hear Simon write a post on “Inside Job”, Charles Ferguson’s sharp documentary on the Financial Crisis and how it happened. There was a small clip of him in the movie. “Inside Job” has a large cast of characters; some good guys like Simon, and a whole lot of Financial Thugs. Why are those people not in the slammer where they belong???

    I think that “Inside Job” may become the adult version of Rocky Horror Show. In a dark theater mostly filled with people over 50, there were a lot groans and a few swear words and I could easily see people rising up and throwing stuff at the screen…I wanted to.

    I find this Tom Tomorrow cartoon brightens up my day, but then I have a dark sense of humor.. http://tinyurl.com/2ejn3wo
    balanceact

  53. Sorry if this is a duplicate post. The first doesn’t seem to have been posted..yet.

    Can’t say that I’m much in agreement with Simon on this post. He’s letting too many people off the hook. The cancer of the financial mess is broad and deep. You can’t just cut off a few poisonous mushrooms and think that the mycelium underground will wither away and die. We need a thousand Elizabeth Warrens or better still we needed sound statutory regulations that aren’t dependent on finding another 999 Elizabeth Warrens to stand up to the power of the Banking industry. (Bill Black and Brooksley Born are 2 others I could think of).

    I would like to hear Simon write a post on “Inside Job”, Charles Ferguson’s sharp documentary on the Financial Crisis and how it happened. There was a small clip of him in the movie. “Inside Job” has a large cast of characters; some good guys like Simon, and a whole lot of Financial Thugs. Why are those people not in the slammer where they belong???

    I think that “Inside Job” may become the adult version of Rocky Horror Show. In a dark theater mostly filled with people over 50, there were a lot groans and a few swear words and I could easily see people rising up and throwing stuff at the screen…I wanted to.

    I find this Tom Tomorrow cartoon brightens up my day, but then I have a dark sense of humor.. http://tinyurl.com/2ejn3wo

    balanceact

  54. “Obama tossed a liberal bone by appointing interim consumer advocate Elizabeth Warren to keep his base in line and improve his re-election chances”

    Unless Obama has a side which we have not seen I would say that his chance of re-winning the Presidency is nil. The true believers will go down with that ship.

    Serious minded Democrats had better start getting used to the idea that they will lose the Presidency in two years. Frankly we should start thinking alternatives or face getting hoodwinked and bushwhacked again.

    Let’s face it, Obama talks softly but carries no stick at all.

  55. Thank you Per Kurowski for the link. My input (for what it is worth to you) is that your premise that risk/rate/ratio disclosures can solve the problem of excessive risk taking is just another phrasing of the “transparency” demands (which hasn’t worked). 2nd. In order to make it work you would need lawful intervention and enforcement authorities which essentially means in situ accountability and standards of disclosure that are unequivocal and unambiguous. Once again this has not been the hallmark of financial services.
    Aside from these doubts for fulfillment, It would be so much stronger if you substantiated your claim that finance is channeled back into commercial (asset building) practices when the balloon floats on profit taking speculation. The evidence since the 1970s is that the opposite is true. This has been the case for America as well as “emergent” (as you know …a business investment term meaning sweet target for gains…) or development economies around the world.

  56. Basel II and development countries – Understanding the …

    kick-start the economy. Basel II, the critics argue, compounds ….. Malta, Norway, Philippines, Poland, Russia, Saudi Arabia, Singapore, Slovakia, …

    www2.lse.ac.uk/internationalDevelopment/pdf/WP71.pdf

    Sorry Per Kurowski the blog editors will not let me post the link. Go to Google with (above) info.

  57. I mentally formed supportive replies to many of the comments expressed but, in the end, my befuddled brain failing to sleep in an LAX motel gave up. So you’ll have to do with this.”All that is necessary for the triumph of evil is that good men do nothing.”

    There are plenty of good men on this Blog and in this new virtual world expressing the many views that get published on Baseline Scenario is making a difference.

    Honesty of thought lifts us all up.

    I’ll think I’ll get up now!

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  59. PERHAPS NOT. Perhaps he is one among the new brand of political “realists” who believe compromise and trade offs are par for the course. Where I grew up this would essentially be translated as …he is a ringer,…bought and sold; figured his place in history was well worth the gold.

  61. MB built a (pretty big) co and ran a pretty big city (well). I have about had it with Actors, Sexual Predators, Alcholic Scions etc for a while. Let’s try a smart, experienced person for a change.

  62. But that would include knowing how to start the negotiation from a relatively extreme position, especially when is in such a position of strength, as Obama and the Dems were.

    So this theory would also require such a level or ocwardice and incompetence on their part as to be implausible.

    Besides, anyone who knows how to compromise knows you compromise in proportion to your need to do so based on the preponderance of power. But for almost tow years Obama and the Dems had complete power. The Republicans were helpless. The Dems could do whatever they wanted.

    So that especially disproves the “compromiser” theory. It doesn’t count as compromise if there’s no one with whom to compromise, such that you have to invent the other party. In that case it’s not compromise, but a charade to mask the fact that you’re doing exactly what you want to do, but want to pretend you’re being forced to “compromise”.

  64. Russ: At least the Typos don’t interfere with the message at all! (…same thing happens to me by the way…can’t be perfect on the wages we reap here).

    I agree with your position Russ. Unfortunately there has been an excessive lack of will and a suspiciously abundant failure to exert a mandate to practice what was preached in the Obama Campaign Sermons for change. The only change I have noted is his own transition from Campaign promises to “servant on the mount.” Now he has an excuse to be the greatest lame duck in American History and turn the whole office over to the Republicans in two years with gift wrapping and ribbons.

    We have been Bushwhacked. You might like to get a look at a book I just finished: INSIDE JOB: The LOOTING of America’s Savings & Loans (1989;1991) expanded paperback edition by Stephen Pizzo, Mary Fricker, & Paul Muolo.

    If I were a betting man I would sware this was the dress rehearsal for the biggest Looting scheme ever devised and maybe, just maybe, the financing stolen to orchestrate the actual TAKEOVER (financial COUP DE’TATE) of the United States of America.

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