By Simon Johnson
During the Dodd-Frank financial reform debate in early 2010, newly elected Senator Scott Brown of Massachusetts was referred to as an ATM for the bankers – meaning that whenever they needed some more cash, they would stop by his office. It was not paper money he was handing out, of course, it was something much more valuable – rule changes that conferred a greater ability to take on reckless risk, damage consumers, and impose higher future costs on the taxpayer.
Mr. Brown had this ability because he represented the final vote needed to pass Dodd-Frank through the Senate. He could have asked for many things – including greater consumer protection, a more thorough investigation into mortgage practices, and reforms that would have cleaned up unscrupulous lenders. He asked for none of those changes – or anything else that would have made the financial system safer and fairer.
Instead, Senator Brown’s requests were designed to undermine the Volcker Rule – i.e., he was opposing sensible attempts to limit the ability of big banks to place highly dangerous bets (and to blow themselves up at great cost to the rest of us). Mr. Brown seems to have been particularly keen to allow big banks to invest in hedge funds of various kinds – and the Boston Globe reported recently that he has continued to push in this direction behind the scenes.
Such risky investments earn high returns when times are good (and big bonuses for senior executives), but they also imply large losses when something goes wrong. The special interests involved naturally like, “heads I win, tails you lose”, but this is absolutely not in the broader social interest. Banks with FDIC-insured deposits absolutely should not be allowed to engage in such speculative activities. This was the original insight of former Fed Chairman Paul Volcker – and it remains the right view today.
The economy absolutely does not need banks that can go crazy on various kinds of “proprietary” trading. In fact, it is exactly this kind of mismanagement of risk that brought the financial system to its knees and inflicted great damage on the economy in 2008-09.
Very large financial institutions get implicit government support and effective taxpayer subsidies – this is what it means to be “too big to fail”. This point is widely agreed on the right and the left of the political spectrum. One sensible idea is to offset these subsidies with a levy on large financial institutions, for example based on how much leverage they have – as large amounts of debt relative to equity is precisely what makes these firms so prone to failure. And there was a “bank levy” of exactly this kind in the Dodd-Frank legislation until the very end. Then Senator Scott Brown killed it – again, a form of cash withdrawal for the banks (and big future liability for everyone else).
Senator Brown knows the financial sector well – in fact, he recently acknowledged working specifically on real estate transactions during the boom years. His lobbying of the US Treasury and other government agencies has been sophisticated and exactly in line with the positions of the most dangerous big banks. He has drawn a great deal of support from financial sector donors, both to his campaign and running ads in parallel with his efforts (including through Karl Rove’s Crossroads groups.)
In his bid for re-election, Mr. Brown presents himself as some sort of Massachusetts moderate, looking out for our common interest. But his record is unambiguously someone who sticks up for the special interests of big banks – and creates great risk to the rest of us.
Mr. Brown had a chance to make a difference and he did, ensuring more cash now for big banks and more danger and destruction for the economy later.
Mr. Brown knows the banking sector well and his staff includes sophisticated financial services professionals. They understand exactly what they want and why they want it.
Fortunately, Massachusetts has a choice. The voters can either choose Scott Brown and his allies, the big banks. Or they can choose Elizabeth Warren who has worked hard to make the financial system safer, fairer, and less prone to collapse.
Mr. Brown fooled Massachusetts voters once, in his original election. Who thought they were electing someone to stick up for the global megabanks?
Will he fool them a second time – when his achievements in diluting sensible financial reform are apparent for all to see?
Vote for Scott Brown if you want to hand the megabanks a mandate to ruin the economy, again.
The Baseline Scenario 
Never mind some kind of moderate, he’s from Mass. home of the M.I.T. big hitters. The same ones who send competitive energy comrades down the road in the name of their industry’s monopoly. If you think anyone from that State can help anyone outside that region, you are sadly mistaken, and could be taken for a fool, if you got taken more than once.
I do not support Scott Brown and will not vote for him. Elizabeth Warren is just as bad and I will not vote for her either.
This post reads like a slimy TV attack ad; it’s probably the lowest quality, most overtly professing and cheering laden post I’ve seen on this site. It’s really disappointing that you try to spoon feed us your opinions with such one sided reporting. I will no longer read your blog.
By an enormous margin, the finance, insurance, and real estate sector forms the largest donor group to Brown. Given the very widespread and deep hostility to these businesses among voters, there is no way to explain Brown’s voting record as an attempt to appease the median voter. I see no way to interpret the combination of Brown’s record and the pattern of donations as anything other than an industry buying a senator’s votes. The language characterizing Brown’s corruption can be made more decorous, especially for the Beltway brigade, but however diplomatic (for those subject to the delusion of American democracy) Brown is voting to please his donor base.
Lazy false equivalence there mr coffee. Do your homework. Brown is bought & paid for, are you?
Simon, thank you for informing voters. The media studiously avoids “details” like how a senator works to undermine financial regulation. Keep up the good work.
The FED is already handing over billions to the POS bankers. Hard to name even one elected official who is NOT bought and paid for. Obama and Romney are both owned. Do we really have any choices at all? Methinks not.
I don’t care for either one of them. Neither are worthy of the position to which they aspire. As for the banks. one ought to just say no…say no to the risky business, period, and return to banking 101, their former core business. Setting forth a zillion rules will just enrich lawyers who’ll find endless loopholes, just as they always do. It’s like Authur Andersen. Once upon a time consulting was viewed skeptically, but somewhere along the way they went off track, got into it, and greed prevailed, as it inevitably does. They should have stayed with auditing, their core, but now they’re no more. It’s way past time to get the bankers off this path to disaster.
“Ye shall know the truth, and the truth will set you free.”. The good people of Massachusetts might want to look into it. This single election could shape the future of what’s left of America for decades. Pouring trillions of taxpayer dollars to predatorclass finance oligarchs – or holding those oligarchs accountable. The choice could not be clearer.
A thousand thanks Mr. Johnson for shining hot lights on the big issues!
I think it speaks to a major void of nothingness in the MSM (Diane Sawyer, Brian Williams, CNBC, FOX, etc) when a respected economist writes about the details of a politician’s public record, someone describes it as a “slimy TV attack ad”. I guess the illiterate Teabagger portion of society cannot differentiate the difference anymore. Or maybe these are the same idiots who ran editorials on the front page of the major “Okie” newspaper?? Could these “coffeemug”/Teabagger types be the bast*rd children (speaking metaphorically) of Edward L. Gaylord?? Writer Bruce Selcraig spelled it out pretty well in the Columbia Journalism Review back in 1999 and very little has changed at the newspaper since:
“One Sunday morning many months ago the Rev. Robin Meyers stood before some five-hundred members of his eclectic flock at Mayflower Congregational Church in Oklahoma City and ruminated about what he might do if he ever won a lottery jackpot. ‘I said I would give a lot of money to education, children, the homeless, that sort of thing,’ he recalls. ‘Then I mentioned that if there were any money left over I would start what this city really needs — a competing daily newspaper to The Daily Oklahoman . . . Well, everyone just started applauding. The place went wild. And this is not a wild church. Even the Republicans were clapping.’
That same Sunday, like every day in Oklahoma City, a group of news-starved citizens ranging between five thousand and ten thousand, depending upon the quality of the football season, bought what many here call the most respected daily newspaper in town — a paper produced two-hundred miles away, The Dallas Morning News.
‘I simply won’t subscribe to The Daily Oklahoman. They skew the news,’ says one of the local defectors, junior college professor Frank Silovsky.
‘I’m always encouraging my students to read newspapers,’ says former Oklahoman city editor Randy Splaingard, a journalism professor at Oklahoma City University, ‘but I never require that they read the Oklahoman. The Constitution forbids cruel and unusual punishment.’
‘I have to read it,’ says Oklahoma Democratic political consultant and former Oklahoma City reporter Mike Carrier, ‘but it is without question the worst metropolitan newspaper in America.’
Maybe you could find critics like these in any American city where an influential newspaper and billionaire publisher reign, but it’s doubtful they could match the fervor of these aggrieved Oklahomans, these Democrats and Republicans of all colors and classes, ranchers, teachers, oil executives. They live with a civic wound that’s been festering for twenty-five years, a newspaper whose unflattering nickname has become so ingrained in the state lexicon that from Muskogee to Guymon hardly a literate soul doesn’t know of “The Daily Disappointment.”
What other major newspaper in a metro area of one million people, and with a newsroom of 145 full-time reporters and editors, has only three African-Americans on its news staff?
Where else can you find a big-city editorial page — run by a Christian Coalition devotee plucked from Washington D.C.’s right-wing Free Congress Foundation — that not only demonizes unions, environmentalists, feminists, Planned Parenthood, and public education, but also seems obsessed with lecturing gays? From an Oklahoman editorial titled, sin no more?: “There’s no solid proof that anyone is born a homosexual . . . . Homosexuality is a sin . . . . But to deny that a sin is a sin and wallow in it is the first step toward damnation. To recognize bad behavior as a sin, repent of it and ‘go and sin no more’ is the first step toward salvation.”
Want lots of enterprising, in-depth stories with plenty of world and national news in your newspaper’s front section? How about praline recipes instead?
At the Oklahoman, which runs a front-page prayer every day, the news-lite front section is larded with cooking contests, horoscopes, Dear Abby, Billy Graham, Zig Ziglar, and women’s fashion tips. Need a good chuckle? Try the six-day-a-week column on page two by “clean, keen, and topical” stand-up comedian Argus Hamilton, the son of an Oklahoma City Methodist minister. Hold on to your funny bone:
A whale is dead after a whale-watching boat hit it Monday off Boston Harbor . . . no wonder Monica Lewinsky won’t come out of her apartment . . . .”
I also think it’s absolutely ironic. Just who else is going to bring us these details of Scott Brown’s anti-consumer and anti-smalldepositor legislating?? Are we supposed to wait for someone like Barbara Walters to take a hiatus from her phoney eyelid flutters at celebrities to ask Scott Brown why he always chooses banks over consumers?? Should we expect Oprah Winfrey to make a written account of Scott Brown’s dealings with large banks in the darker parts of his Congressional offices?? Friends, sorry, not in this lifetime.
commenter coffeemug, I think you’d better join the Teabaggers Party. They’re trying to get black women and Hispanic women who can read a newspaper and know where Paul Ryan stands on seniors’ issues and know how Mitt Romney stands on women’s issues off the voter registration rolls. The Republicans have already F*cked up one election d*cking around with chads, so this witch-hunt on voter rolls may be your last chance to take a sh*t on “darkie”.
Niiiiice Moses Herzog. If you hate women, maybe. If you hate dems, OK. But if you are informed – what would compel anyone to disparage Elizebeth Warren. She has been a stalwart champion of the people’s best interests her entire career. All those idiots who are mesmerized by the gospel according to fox relentless litany of disinformation, distortion, propaganda, and patent lies cannot be reached. Those people are far to dim and ignorant to ever make intelligent decisions. They should not have any sway on any issue. It’s up to those who are intelligent and informed to make these important decisions. Failing that – we all suffer the consequences of dim ignorant rednecks deciding elections.
@ Tony Foresta,
I suggest you take a reading comprehension class, see if there is an Elizabeth Warren supporting faction of Teabaggers, or both. Until then, I suggest you give your keyboard to someone with above 5th grade reading skills or STFU.
Reading comprehension is fine brother. Perhaps there was a misunderstanding because I was applauding you commentary and challenging the teabagger ignorance and collective dimness and redneckery. A thousand pardons for the miscommunication – but I’m on your side of this issue.
This is a typical example of what is wrong in Washington. Instead of having a government “for the people and by the people’, our institutions are corrupted by lobbyists who have created the paradigm “for the special interests and by the special interests”. Our economy won’t improve unless we strictly prohibit lobbyism.
I agree with Simon that we need safer and curtailed financial system. Give vote to people who would fight the money driven system…..
This is what defines Scott Brown. In the debate, he was asked, “Do you believe in Global Warming?”. He reflected the question to how we should support building Keystone Pipeline? We should call him “Slick Scott”. Primary, Keystone will have no impact on jobs in Massachusetts while at the same time mouthing a Republican talking point. He talks a bipartisan game but in reality he is a Big R-republican much farther to the right then previous MA Republican Senators Cabot, Saltonstall or Brooke. Only willing to work across the party lines when it suit his agenda not for the good of the country. For example, he comes up with lame excuses to not support Kagan’s nomination to Supreme Court while supporting Blunt Amendment plus what is stated in this article.
Warren richly deserves to win this election — she has a long and coherent record of investigating the myriad ways the financial sector has rigged the system in ways that hurt millions of people. She has long worked for reasonable, constructive financial reform. Her insights about the systematic abuses committed by financial institutions and the bi-partisan conspiracy to undermine useful regulation compel her to run; she is not running out of vanity. If she were she would have run in he special election four years ago.
Bipartisanship is not a principle I want my senator (or president) to endorse.
Warren’s record leaves much to be desired. The CFPB at best has no real teeth or real purpose. For example it is loated and funded by the Fedreal Reserve. The FR is exempt from FOIA. The FR is also funded and controlled by the banks themselves so this argument that the CFPB will police banks is the fox guarding the henhouse.
There is nothing wrong with being bipartisan as if each person subscribes 100% to a given party then they will be 100% predictable and thus pointless on a personal level.
Warren can slam Brown for being affiliated with businesses that don’t pay taxes but the same can be said for Warren. Each time MIT or Harvard expands in Cambridge it means less tax income for them. Education does not pay taxes, religions don’t pay taxes and plenty of non profits don’t pay taxes. There is a high culture in Mass in not having to pay taxes overall.
@ commenter Matt
You say the CFPB “has no real purpose”. That’s very fascinating to me, since I read in the papers this morning American Express payed a $112 Million fine, $85million of which is going as a refund to 250,000 customers for illegal late fees, abusive debt collection practices, and deceptive marketing (“deceptive marketing” here translated as boldface F*cking LIES to their customers). Now you can debate that the fine should have been higher, but to say the CFPB is “useless” and “has no teeth” makes all your statements seem incredulous to those who can read. See here:
http://www.washingtonpost.com/business/economy/amex-to-pay-1125-million-for-violating-consumer-protection-laws/2012/10/01/fa064ae6-0bd4-11e2-a310-2363842b7057_story.html
commenter Matt, You might try that baloney in a FOXnews diatribe aimed at illiterate Teabaggers though (is illiterate Teabaggers a redundant tag??). In which case it might be highly convincing stuff. I have a feeling it’s the type of thing Sarah Palin would scream “Amen Sister!!” to after she’s done with her intense political exam cram reading the morning comics.
Off topic, I apologize, but it is politically related and I couldn’t resist putting this one up as FYI for the readers of BaselineScenario. This goes to a Rachel Maddow story that explains the details of the Republican Party attempting voter registration fraud. There will probably be a 30 second advertisement at the beginning, but if you bear with it I think it is worthy:
http://alturl.com/dvi43
Now what will be interesting to see is, since the MSM was very happy to pick up the story on ACORN and scream bloody murder about that for months (maybe because the girl posing as prostitute made it more “MSM worthy”??), would they talk about this Republican instigated voter fraud at all?? You only get one guess on the answer to that question.
Sorry Moses, you are wrong about Matt this time, nothing to be worried about though, it’s just people operating on a stronger and different conscious level. But you are right about the Lame Main Stream Media, they should have talked about the merits of following crazy people around in airplanes and not getting to see the clincher, what was really the point of it all? The perception of perceived power?? And then suddenly play the adult-vs-children role as if you should do as I say and not as I do and change the subject? The media is turning out to be the very worst offender, I can’t wait to tax the britches off of them.
Matt, “…There is a high culture in Mass in not having to pay taxes overall….”
Indeed, the same could be said about Utah. But when you look at the data, Mass. pays more into the federal kitty in taxes than it gets back, whereas Utah is more heavily supported by fed tax money collected from other states.
I’m not doing the cut and paste for you all regarding the welfare queen STATES…
BTW, this article is about Scott Brown’s shenanigans and I haven’t seen one rebuttal of the facts presented by Prof Johnson – so I guess it’s all true?
@Annie It is all true.
@Matt There is a lot wrong with being bipartisan when it amounts to capitulating to corrupt fanatic fundamentalists such as the majority of elected Republicans at the national and state level.
@Terry, in a less visual media environment where it is all too easy to ugly-fy (is that a real word? :-)) everything and take it out of context, if I was Liz, I’d do a political satire visual that would look like Brown’s Cosmo photo except I would be dressed up in a Paris designer interpretation of “Native American” skins. :-)) I would also concoct a “deep history” research based on the scientific speculation that in order for there to have been a Native in my geneology, s/he would have to have been tough and might have had to win at least one mortal combat mano et mano fight in order to pass on the genes to Liz’s tree.
Did I already mention the possibility of having Ghengis Khan in my family tree? LOL. “….Hi Uncle Ghengis! You smell bad. Can I draw you a bath? Which perfume did you bring back with you that I can use?”
Fanatical fundamentalists with common sense is one thing – odd tension in a personality, but a liveable acceptance of separation of church and state. Fanatical fundamentalists having already proved themselves to be nihilistic in managing the BASICS of civilization – as explored in books like “The Wrecking Crew” – is another story altogether. What is there to “compromise” about…?!
Captain Picard and the crew would not deign to land on Planet Fundy based on the Prime DIrective. And yet here we are on earth, in the same country, trying to negotiate with “Deliverance” boyz…as Spock would say, “Fascinating”. Set the taser on “stun”.
‘…she has a long and coherent record of investigating the myriad ways the financial sector has rigged the system in ways that hurt millions of people. She has long worked for reasonable, constructive financial reform.’
How, by running her mouth? Contributing plagiarized recipes to, “The Art of Injun’ Cooking”? Getting a position at Harvard by pretending to have suffered the slings and arrows of outrageous racism?
Maybe a little thought of how we came to move from a few sparsely populated colonies to the richest nation on earth, might include the contributions of modern finance;
http://www.voxeu.org/article/financial-innovation-good-and-bad
‘Our finding that financial innovation is associated with higher levels of economic growth, even when controlling for aggregate indicators of financial development, in our sample of high-income countries, suggest that it is not so much the level of financial development, but rather innovative activity of financial intermediaries, which helps countries grow faster at high levels of income.’
The rest of the world should follow the UK Vickers approach. Ringfence the traditional banking business, which should be capitalised separate from any investment banking business.
@Paddy – Liz Warren would be considered a normal candidate for any public trust position in Denmark – the country with the most financial innovation according to your link:
http://en.wikipedia.org/wiki/Economy_of_Denmark
Yeah, why would we vote for a senator who watches out for some of the most important institutions in the Mass economy?
The “enthusiasm gap” is ripe for exploitation in this election – Rethugs can always count on the “Deliverance Boyz” taking action – banksters used armies of them kicking in doors and manning the phones and entering in “data” to foreclose – why do I keep picking on this 1972 movie? Think about it:
yeah, you’re all geniuses…and it didn’t help to let this gene pool have a bible to “interpret”
@Patrick Sullivan I am not opposed to financial innovation per se; I assume Warren is not either. Glass-Steagall was a productive financial innovation. Privatizing the up-side while socializing the down-side is not. Reordering customers’ transactions in order to maximize overdraft fee revenue, a common tactic used a few years ago in order to increase fee revenue to the tune of $30 billion a year, was not a productive innovation. Exorbitant credit card transaction fees are a innovative way to transfer money in a counterproductive direction.
http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/
This is an absolutely ridiculous use of FIAT $$$$ distributed through fraction reserve banking. Especially when “rule of law” is being reworked by the Deliverance Boyz gene pool…
Here come the “Deliverance Boyz” motivated voting BLOCK – In some places, the National Guard is going to protect voting sites so women don’t get raped and beaten or mugged if they show up!
No taxation without representation….
Appeal from Kristen:
“….When John Boehner announces he’s coming to western New York for a fundraising breakfast this weekend, we need to take notice.
Boehner has made Tea Party extremist Chris Collins’ race against Rep. Kathy Hochul a top priority. Now he’s taking a page out of Karl Rove’s playbook and opening a so-called GOP “Victory Center” to turn out their right-wing base.
This is serious. Polls show this race absolutely deadlocked – and far-right groups have bought more than $775,000 in TV airtime to attack Kathy. If we want to take back the House, we must make sure Kathy wins.
I’ve set a goal of raising $30,000 this week to help give Kathy the resources to win her tough new district. Are you with me?….”
http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/
http://www.msnbc.msn.com/id/49306739/ns/local_news-new_york_ny/#.UHBZ8k3W1Kk
Those people that spontaneously jumped in to lift the car off Grandma and the kids are going to be put on a LIST in Utah because they have their own minds and values that make them a threat to “national security” as defined by the f’n whackos in front of their computer screens – I kid you not. Got any proof of who gets on LISTS…? Didn’t think so…