Holiday Season Takedown

Alan Greenspan has gotten innumerable takedowns, most notably in person by Henry Waxman. Binyamin Appelbaum and David Cho of the Washington Post are working on Ben Bernanke. Appelbaum and Ellen Nakashima already got James Gilleran (and, of course, there is the Photo). Now Zach Carter has nailed John Dugan. Some of the guns aren’t as smoking as one might like–Dugan only became head of the OCC in 2005, meaning he had less time to do serious damage, although he had established his bank-loving credentials long before. But he did what he could, such as preventing state regulators from gathering information (information!) from federally-chartered banks. Now, of course, he is lobbying Congress to protect his turf and kill the CFPA.

Why the Obama administration even acknowledges his existence is a mystery. I mean, Geithner is a centrist technocrat; I may disagree with him, but I see why he’s there. Dugan seems like the Stephen Johnson of banking regulation.

And to all a good night.

By James Kwak

29 responses to “Holiday Season Takedown

  1. The group photo with Gilleran is tooooooo funny. But you know if you cornered him on it he’d probably weasel and tell you how proud of it he is. James, man don’t get me on one of my rampages on Christmas ok??

    Rortybomb has some awesome stuff on OTC/derivatives corruption http://jrvarma.wordpress.com/2009/12/20/how-broken-are-the-otc-markets/ nothing but a slap on the wrist there for market manipulation and destruction of “the market mechanism”.

    This Jayanth Varma guy reminds me of Mike Konczal, he really has his shit together. James having the “Washington’s blog” link with the “nakedcapitalism” link is a little redundant yes??? How about adding this guy Varma to your blogroll or inviting him for some guest posts???

    I’m not trying to give you and Simon a hard time, just trying to get the efforts properly focused. The Bernanke attacks are useless at this stage. We need the focus of the attack to be on the finance reform legislation currently in Congress and ESPECIALLY LOOKING TO THE FUTURE ON THE CLEARING HOUSE vs. REGISTERED EXCHANGES IN THE OTC DERIVATIVES MARKET.

    CLEARING HOUSE vs. REGISTERED EXCHANGES IS A CRUCIAL ISSUE FOR AMERICA’S FUTURE!!!!!

  2. James, did you say takedown or smackdown????

  3. Although a less well known figure, Dugan’s existence as part of this administration is perhaps even more distilled proof of Obama’s fundamental continuity from Bush than Emanuel, Summers, and Geithner are.

    After all, although they represent the continuation of Bush policy they weren’t literally Bush political commissars the way Dugan is. Even Robert Gates was supposedly a center-ward retrenchment on Bush’s part. But this is like Obama bringing back Karl Rove.

    Oh well, anybody who follows this stuff and doesn’t understand by now that this is just Bush’s third term is utterly impervious to evidence or reason.

    And it’s also clear by now who really opposed Bush on policy, and who only opposed him out of partisan hackdom and personal hatred, but who actually had no problem with the policies.

    So let’s go into the new year with those clear demarcations.

  4. Nothing in Dugan’s background qualifies him to be a bank examiner.

    But, this is how business is done in Washington, be the administration Democrat or Republican.

    Merry Christmas and Happy Holidays to all.

  5. The man is going to lose his base and a lot of disillusioned voters are going to go straight to work and straight home to eat dinner in November 2012 if the man doesn’t get his head out of his rear and start talking about issues that mean something to Democrats. And Yes Rahm Emmanuel, that means he has to get out and stump for things.

    Rahm, why don’t you go back to taking Freddie Mac hush money and let Obama do what he does best: Communicate.

  6. Well military spending is going up, but also some obstacles before scientific research are disappearing.

    I’ll also reply to a comment you sent before. Every system will be corrupted in time and needs to reform to retain its usefulness. I just think that the political system cannot change from the inside and only way to change it is to act from the outside. Like your former president said: ”Fool me once…”, well the point is that if you get fooled twice or more often, it’s your fault.

  7. That’s exactly right. That’s what I’ve been saying all year.

    But like I said to you the last time, just because people let someone get away with stealing from them doesn’t absolve him of the crime of stealing.

    The day they choose to call him to account, he’s guilty.

    So I still don’t get why, other than an inherent pro-elite criminal, anti-public bias, the natural inclination of you and others is to side with the con man.

    Nor will anyone answer, if you really want change, what you think is the political utility of letting criminals off for their crimes on the grounds that alot of people were passive in the face of those crimes for a long time.

    (And at any rate, there are a lot of us who have long opposed Bush corporatism and are still going to oppose it in whatever form it appears, like the vile Emanuel-Summers-Obama version. So you seem to be saying that we shouldn’t be allowed to speak to disillusioned Obama voters at all, since we’re not going to blame them for it.)

    By now I’m convinced there are a lot of nihilists around who don’t care about what’s happening and would rather maintain their own sense of superiority, however impotent, than try to figure out ways to change things.

    Any activist you like faced exactly the same problem, an inertial mass, and what did he do? The same thing every time – kept plugging away at exposing the lies and the crimes and trying to rile up rage over them.

    He usually didn’t bother with trying to put them through confession camp for all their foibles.

    Especially when they’re up against a chorus of liars like we have today with all the hacks who are still trying to claim this is anything other than Bush redux.

    So the only way to get people to act from the outside is to get them outside in the first place, and the way to get them there is to get them to accept the fact that:

    1. From here on this system will produce only Bushes;

    2. Everyone will claim not to be Bush;

    3. But that this will always be a lie;

    4. So there’s nothing left but to build a new movement outside the Washington system, from the bottom up.

    Yet you and your ilk want, for some unfathomable reason, to censor (2) and (3).

    I can attribute it only to elitist bias. All too many “liberals” have it, unfortunately.

  8. We have long lived in the greatest bureaucratic system of all time once massive government and and the massive publically held corporation came into it’s own as a center of power. These two centers of elite bureaucratic power have now fully evolved their common elite educational system.

    I managed to survive an entire lifetime as a bureaucrat of this evolving system. What counts is your ability to make alliances within the two systems. They call it networking. Power is what you make of it by realizing how to get and keep your niche within the system.

    Without this complex system, present complexity that builds on complexity would not be possible. As far as I can figure things out, the vast majority love complexity and would never willingly give it up. At some point complexity collapses in on itself and all the social parameters that evolved to allow complexity will require a sudden wrenching change that flushes out excesses.

    Are we really at the emerging revolt of the masses stage of theories like the Social Cycle Theory esposed by thinkers like P R Sarkar in India?

    Dugan looks to be master bureaucrat.

  9. and conservatives don’t? I am sure the next Republican running for president will tell us they aren’t Bush either? But they will be

  10. 2 Obamaphiles I know have “converted.” I don’t know of any independents who will vote for Obama again. He will be a one term President, barring election rigging (which wouldn’t surprise me). I think Obama knows this now, which is why he won’t respond adequately to his base – now or in the future.

    “Our democracy is but a name. We vote? What does that mean? It means we choose between Tweedledee and Tweedledum. We elect expensive masters to do our work for us, and then blame them because they work for themselves and for their class.” ~ Helen Keller

  11. There is no “internal” way to fix what is currently wrong with the United States – we are completely immersed in grift-n-graft.

    We live in an Orwellian Wonderland, where attempting to manage perceptions is the primary activity of government PR – at all levels, but especially from the top of the pyramid. And those who were to be holding others accountable are just other players within “the brotherhood.”

    The is no turning back. This is 100% crystal clear to me.

    Things will worsen for those outside the elitist circles until there is a natural disaster or a violent uprising.

  12. I am choking!!! Dugan? As Charlie Brown has been known to say, “Yeeeaach!!” Tell me it ain’t so!! Do we want a country, or to look more like Ghana? Before you know it, Lloyd Blankfein will be running for President, right after he buys up all of the media in the country and only allows discussions as to how it’s possible to put a couple of sparrows in every pot. Is there any chance at all the in 2010 the voters will select someone with real guts to go against the entreanched interests and get our nation back for us, or do we have to wait until they take away the vote from anyone earning less than a $1,000,000 a year?

  13. I didn’t mention Reps because the subject was Obama and the Dems, and because for the time being the Reps remain discredited beyond their own hardcore base (in spite of all the best efforts of the MSM: once again we see how the people are far more intelligent and responsible than the “elites”), whereas more people still want to believe in the Dems.

    (Of course, Obama and the Dems seem intent on delegitimating themselves and relegitimating the Reps.)

  14. I have ilk? Which one is that? And lying is not a crime. I don’t side with the con men. All I’m saying is that the public put them in power in the first place.

    The worst punishment of modern civilized society is to outcast an individual. (S)He is discredited, isolated and deprived of opportunities to thrive in the field where (s)he used to. In fact, it is very effective. Too few want to sacrifice themselves for the common good of the public. I suppose that this will change when sufficient amount of people get to taste freedom i.e. they have nothing more to lose.

  15. The real problem is that they already took away the ability think by inventing the TV.

  16. The growing policy short coming is that regulators are governing with two-dimensional metrics in a three-dimensional world. Regulators are using maps when they should be using GPS. The U.S. capital market regulatory structure is a hierarchical command-and-control process similar to the Soviet Union’s Gosplan. Gosplan lacked the information system to restructure and, therefore, was unable to address effectively complexities required by the Information Age. U.S. regulators find themselves in a similar situation given greater demand for resources required by global mass markets and greater complexity required by innovative products.

    Regulators can no longer effectively govern with a deterministic, one-size-fits-all regulatory regime that conflates risk with uncertainty. Robust markets create an exponential demand for compliance in comparison to the CFPA’s linear ability to supply regulatory resources. This creates a no-win choice for regulators either to constrain market dynamics (errors of omission) or fall behind the compliance curve (errors of commission).

    We no longer can provide a fail-safe governance system that is based only on financial capacity. We need to qualify investor capabilities. Critics say that you can’t qualify everyone; it is a monumental task. My response is that you have a driver’s license but not an 18-wheeler or cab license. We qualify people every day. Substituting “too dumb to succeed” for “too big to fail” is not a commercially viable strategy. Ask GM!

  17. We do have 18-wheeler licenses. It’s called a CDL. And if I hadn’t already used up my 9 lives on this site, I’d tell you how dimwitted you are for that last paragraph, because truck drivers have to meet much higher standards to get a CDL. Including safety, ability to accurately drive a 53′ trailer in reverse (If you want to try that Boyko, I’d like to see it) , yearly physicals and drug tests, etc… etc….
    Truck driving is not an extended vacation across America like some bean counters like you think it is.

  18. Fascinating comments. Is it just me or is there a deeply pessimistic streak running through many of your words?

    Where is this all leading? What are the chances that the next British government, probably led by David Cameron of the Conservatives, or the next American government, will bring the sort of real change that many here seem to be voicing?

    My concern is how far have our Governments (I’m a British ex-pat) departed from the needs and aspirations of common folk and when this is finally recognised widespread, what happens?

    It worries me greatly.

  19. You misunderstood. The comment was to illustrate the need to qualify investors to the same high standards that we qualify drivers.

    Regulation is knowledge-driven, operational insurance. Pass driver’s ed. and reduce your insurance. Similarly, qualifying investors should reduce regulatory costs.

    PS. I was born and raised on a vegetable farm in NJ. I can back-up a 40′ trailer, but my brother is much better than I am.

  20. That is why the book is entitled “We’re All Screwed: How Toxic Regulation Will Crush the Free Market System” and a series of five SFO articles on capital market governance.
    http://w-apublishing.com/Shop/BookDetail.aspx?ID=D6575146-0B97-40A1-BFF7-1CD340424361

    See Book Review by Brenda Jubin, Ph.D Thursday, October 8, 2009
    http://readingthemarkets.blogspot.com/2009/10/boyko-were-all-screwed.html#comments

  21. Stephen A. Boyko “the need to qualify investors to the same high standards that we qualify drivers.”

    What on earth are you talking about? Who is going to do the qualification? Our current crop of regulators? Those who came up with the regulations that created the mess? You’ve got to be joking!

  22. How about a little ‘restraint of market dynamics’? Reinstate Glass Steagall; strip rating agencies of power to make any bundled or synthetic security investment grade. Let the investment banks trade this $hit among themselves and good luck to them.

  23. Governments have hijacked themselves and now suffering from a self-inflicted Stockholm syndrome. Just like Elvis’ “They’ve caught in a trap, they can’t get out, because they love it too much”

    At this moment, just like Citigroup’s Chuck Prince, governments are not mentally or physically able to stop runaway spending or to abandon their disproven regulatory paradigms… until the market silences the music. Can’t you hear them arguing and pleading? “How can you expect me to stop it while you keep buying and trusting any paper or guarantee I issue?” “Please distrust me so that we can all stop and get out of this folly!”

    And the people, naturally, hating the unknowns, do not dare to distrust them…and that’s just like Sinatra’s “That’s life!”… c’est la vie.

  24. That is the easy part– see pages 6-7

    Reprinted from “The National Interest”
    Number 77 – Fall 2004 “Small is Beautiful” and Presented at SEC Small Business Conference in 2004
    http://www.findarticles.com/p/articles/mi_m2751/is_77/ai_n6353167/print

    Authors: Steve Boyko and Aron A. Gottesman

    There are many testing companies and test-teaching companies that could do this. The concept was developed in the 1970s. The LSE AIM has been successful with advisors.
    I was once a regulator before going into the industry for 20 years. Educated consumers force regulators to justify their contribution to a societal net benefit.

    The current financial dilemma is nothing more than a problem-solving exercise. The flaw in the current construct are linear, binary constructs in a 3-D non-linear world. As discussed in a series of four SFO Magazine articles, regulatory inefficiencies have become such that they have reached the point of operational ineffectiveness. These articles are expanded upon in an interview http://www.sfomag.com/article.aspx?ID=1366&issueID=c what needs to take place to do the right things for governance effectiveness and how to do things right for governance efficiency. The articles go beyond simply profiling patterns of governance to build upon proven market and mathematical metrics that uncover principles of governance. Regulation in the Conceptual Age requires adding a third dimension for effective and efficient capital market governance. Before you can think outside of the box, you first must think outside the square.

  25. I disagree. Yes there are many subsectors of financial regulations where you can benefit from testing the capacity of the regulators, but the problem of the current financial regulatory paradigm which channels bank credit to what credit rating agencies perceived as having less default risk is fundamentally flawed, as it has regulators playing God… and do not tell me you have a test for gods too.

  26. No, you do not need to strip credit rating agencies of any powers… let them be. What you must get rid of though, is of the credit rating discrimination in the capital requirements of banks, which is giving the opinions of the credit rating agencies too much undue influence.

  27. By the way, as appeared in the Washington Post here is my take on the worst idea of the decade. http:/bit.ly/5zE4ka