Who’s Afraid Of Elizabeth Warren?

By Simon Johnson

The next big political battle in Washington – after the budget debate is declared “over” – will likely feature the Consumer Financial Protection Bureau, in particular the fight to determine whether Elizabeth Warren can become as the agency’s first official head.

But will this fight feature a classic left vs. right set-piece confirmation showdown in the Senate?  Or it will it be resolved with cloaks and daggers closer to the White House – with Treasury Secretary Tim Geithner managing to prevent Professor Warren’s nomination?

There is much to commend the left vs. right scenario.  The Republicans, after all, want to argue that regulation is excessive in general and regulation of financial products is somewhere between unnecessary and dangerous for economic growth in particular.  This theme came up during the Dodd-Frank legislative debate on financial reform last year but it was largely lost in the larger conversation.

Now Spencer Bachus, Republican chair of the House Financial Services Committee, has Elizabeth Warren firmly in his sights – with the mortgage settlement negotiations as the flashpoint.

In a recent letter to Secretary Geithner, Mr. Bachus says,

“”In addition, reports about the role played by political appointees in the Treasury department — including those affiliated with the [CFPB], an agency that does not yet have any regulatory or enforcement authority — raise further questions about the [mortgage settlement] process.”

No matter that the CFPB only became involved when state law enforcement officials, in the form of attorney generals, asked for provide advice.  Mr. Bachus is taking the opportunity to follow up on what he is reported to have said recently,

“In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

The industry is unhappy because the proposed settlement – or, you could say, their transgressions with regard to foreclosures — could cost them up to $20 billion.

Mr. Bachus would not have a direct voice in any nomination hearing, of course, but there are plenty of Republican Senators who are inclined to share his views – including Senator Richard Shelby, the ranking minority member of the Senate Banking Committee (and, like Mr. Bachus, from Alabama).

Ms. Warren actually represents a much more nuanced view – arguing that transparency and simplicity, from the perspective of customers, creates a more even playing field and is good for the industry.  At least some community bankers seem to be on her side.  She is also good at explaining this view and a confirmation hearing would be the perfect place for the country to witness and hopefully participate in this discussion.  (Read her recent speech to the Credit Union National Association and make up your own mind.)

As Senator Sherrod Brown (D, OH), also a member of the Senate Banking Committee, pointedly framed the issues for the foreclosure debacle,

“No person or company is above the law.  And that’s good for capitalism, it’s not anti-business, and it’s not a minor inconvenience that can be ignored in pursuit of bigger profits.”

But before you set aside time in the early summer for potentially gripping television from Capitol Hill, Ms. Warren has to get past Secretary Geithner. 

If anything, Mr. Geithner at this stage is more pro-banking lobby than even Mr. Bachus.  During the Dodd-Frank reform debate, Mr. Geithner would frequently argue that “capital, capital, capital” was all we really needed to fix the financial system. 

Yet his team agreed to Basel III, which requires banks to have less equity funding than Lehman had the day before it failed.  There is no sign that systemically important financial institutions will be required to have a significant extra capital buffer – although this is supposedly not yet decided.  And despite the undecided capital standards and large evident problems still facing banks (the foreclosure fiasco, commercial real estate woes, continuing high unemployment), the Financial Stability Oversight Council – which Mr. Geithner chairs – is about to sign off on letting banks increase their dividends.

This makes no sense at all in terms of economic policy, but this is exactly what Mr. Geithner is presiding over.  (If anyone you know at Treasury thinks this assessment is unfair, send them to Anat Admati’s webpage at Stanford.)

And having Elizabeth Warren on the scene – providing an alternative pro-consumer perspective – is apparently increasingly inconvenient to Mr. Geithner.  For example, he has expressed displeasure at her engagement in the mortgage settlement process.

President Obama missed his best opportunity to reform the financial system when advisers – including Mr. Geithner – recommended that he defer to the top 13 bankers in March 2009.  His team further punted when they failed to push for real change in spring and summer 2010, when the financial legislation was before the Senate.  Mr. Geithner and his people were instrumental in defeating the Brown-Kaufman Amendment, which would have limited the size and the leverage (debt relative to equity) of the largest banks in the United States.

Will Mr. Geithner go for the trifecta?  He was instrumental in bailing out the big banks without any strings.  He held back serious attempts at legislative reform.  Will he now prevent Elizabeth Warren, our potentially most effective modern regulator, from even coming up for a vote in the Senate?

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

61 thoughts on “Who’s Afraid Of Elizabeth Warren?

  1. Simon, Trifecta, all the way, he’s a puppet, everyone knows it, and he dances whichever way his masters in the banking industry demand. Ditto for his boss.

    Also, that quote by Bachus about the government being there to serve the banks….if anyone had even the slightest doubt that fascism is now at its’ apotheosis in USA, what more will need to convince?

    Simon, keep up the good work.

  2. When Bachus served us his repugnant quote about government being there to (give me an airbag please!) “serve the banks”, I was amazed (and I should not have been) by the deafening silence of the Beltway punditocracy.

    To me, this was the tell tale sign that we ARE a Banana Republic; we AREN’T number 1 anymore, and winning back our country will take much much more than a bunch of roid-rage driven Tea Partiers carrying slogans.

    This whole rift with Warren is just another symptom of the profound corruption and slothful mendacity affecting the centers of power in this country.

    My prediction about this whole thing: Obama shall capitulate once again, (let’s never forget that he needs a billion to get re-elected…) UNLESS the Warren nomination become such a flash point of discontent among his base that he will grow a set and locate his spine.

    Otherwise…the Durbin Axiom will be proved again.

  3. Keep it up indeed!

    How can Obama stomach Geitner, Summers, and the rest of the advisers who bow to the oligarchs?? Do they need more money that badly?

    When people like Bachus are elected to the Senate, one can only wonder whether the national IQ is sliding to zero. It seems to me we’re on the road to revolution sooner or later.

  4. As for Timmy Turbo Tax Geithner, only Sharron Angle had a valid solution to the problem he represent.

  5. “Do they need more money that badly?”

    The cost of a presidential election doubles every cycle. It’ll cost Obama north of 1 BILLION to get re-elected…and he is the incumbent.

    I cannot wait to see what it is going to be in 2016. No one that is not a total slave-bot of Das Kapital will stand a fighting chance of even get on the radar screen of zee Amerikan Izvestia, a.k.a. the Village, a.k.a. the morally depraved mainstream media.

  6. The CFPB will never be enough. There needs to be a National Association of Bank Robbers, who, like Robin Hood, will steal money back from the banks and give it to the poor…Wait, as I see in the attached post, the bankers have already foreseen this and are taking action before the Senate Committee on Financial Innovation to make sure that the “wealth transfer market” (i.e. theft) remains unidirectional… My bad. Good luck, Elizabeth Warren.


  7. I always thought that Timmy was abit squirrelly from the start. But once you are committed you have to tow the line at ANY cost, and that is what we have been witnessing since before the gvt changed hands. I don’t know of her overall abilities but if she is anything like Anita Hill she will be run over like road kill. If not, she will have to take down the entire administration or go along with scam, there are no other options.

  8. The government is “owned” by the interests that need to be contained for the economy to move in a positive direction for “the small people.”

    We are beyond the point of no return.

    Geithner is a crook, and just another front-man for the bankster gang. Obama is no more, no less.

    We truly live in a Kleptocracy. Most people are unaware of what has happened or are ignorant.

    Warren will be put out to pasture.


    I am a progressive independent and I approve this message.

  9. Here is a good example of how Republicans want less regulation.

    In Florida, teacher pay will soon be tied to their students’ performance on standardized tests. How is that less regulation? How short-sighted and idiotic is that initiative? Why should a teacher be evaluated on student performance, something they have little control of? (Teachers should be evaluated on teaching performance. What a concept.) Any talented FL teacher with a modicum of self-respect would get out of the public education system.

    On the other side of the fence, FL Repubs want to hold FL doctors less accountable for THEIR OWN performance. (Think tort reform.)

    So this is just another example of the twisted politics current at play across the nation.

  10. Well . . the process could possibly serve to raise her image in the public awareness. She could possibly be president some day. Of course, if she stayed true, they would just assassinate her.

  11. All we see that is a civilization can be most fundamentally (and quite literally) defined as a product of decisions: ideas + actions.

    For convenience I call it social energy. (btw, I hate the name… too many overhanging connotations.)

    *Social Energy: individual and collective decisions operating within the limits of available resources and natural law which result in the product you see as a civilization. A decision here is defined as an idea + an action. Decisions can be motivated by any number of factors. Technologies result from previous decisions thus becoming available resources. And decision here is defined broadly… everything from “Let’s build a pyramid for the pharoah!” to “I’ve got a headache I think I’ll lie down.”

    This brings up a question regarding the role of ‘money’…

    I suggest that this leads to the clear conclusion that money not only is a ‘social technology’

    (unlike a hammer, a pile of cash or a pile of gold is of no use as money to a man alone on an island except as a commodity to burn or pound into something useful.)…

    but that it is more usefully understood as a DECISION technology!

    I.e. Money and finance are decision technologies… they transmit decisions from a payer that motivate one or more associated decisions (idea + action) to a payee. (e.g. You get the ‘idea’ go to work at a job in expectation of the receipt of a currency which acts to transfer the intention of the employer to the employee that that job should be done. And you, in turn use that currency to impel ‘decision’ in others.)

    I contend this has a great number of implications economists don’t attend to.

    But the big one that hit me in relation to this piece was Geithner’s assertion that all that was needed was “Capital, capital, capital”…

    In a way I agree. However I don’t believe he or his associated clowns have a real clue as to the true nature and source of capital…

    Which cannot escape the bounds set by that definition of social energy… and THAT, in turn is tied up with the state of the the social contract and the mutual obligations which arise out of that contract… in other words… a justice imperative.

    A much more functional definition of capital must be found. The childish, narrow and self-serving (intentional?) ignorance displayed by our economic and political ‘leaders’ is simply not excusable.

    Decision Technologies: Currencies and the Social Contract

    On the Birth of the Global Social Organism http://culturalengineer.blogspot.com/2009/05/on-birth-of-global-social-organism.html

    Finding Roots in a Shifting Landscape: Facebook and the Future of Social Networks

  12. I would like to add that some of those clowns are at least parallels associated with true nature. Yes they are missing substance, just as you are missing substance to their beliefs.

    And I would like to think that if one of those clowns was around shortly before the crash of 29, they somehow would have been able to idle out the crash. As in not make a Rockefeller or Kennedy killing, but didn’t lose any money either. Now I know for a fact that none of those clowns were around at that time, but history somehow has a way of repeteing itself, and I am certain they would fair as well with the same situtation.

  13. The entire government is the puppet, as it serves the interests of corporations. With or without Elizabeth Warren. So all this talk about her nomination is a waste of time, a distraction at best, a diversion at worst.

  14. It’s not twisted. Teachers traditionally support/fund the Democrats, (rich) doctors traditionally support/fund the Republicans.

  15. Another informative post, Simon. Thank you. This and James Kwak’s post from yesterday (immediately preceding this one) point up just how insane things have become.

    One begins to appreciate how the few good senators in the last days of the Roman Republic felt, seeing their values and heritage squandered as it was by those willing and eager to do the bidding of some truly vile actors.

  16. The democrats better get ready for a rival candidate opposing Obama’s 2012 presidential re-election bid, and pronto!
    He won’t give her the position when congress is in recess…and for that matter, if he does, Timmy will hamstring her with a budget no bigger than the one the GOP will strip from NPR – 2012 she’s gone for a “GOP`ster!

    Pur – if your out there…”the Basel III and banking regulators have explicitly made clear that small, and medium size businesses must pay a higher borrowing fee/cost as opposed to TBTF Bank’s, for the very rational that they’re entitled too this advantage because of their very size,…? This is true…can’t make it up!

  17. Johnny boy, Not able to understand your reasoning, I estimate that bank transgressions with regard to foreclosures are worth $5B.

    Why would they be happy with a $20B settlement? How do you justify $20B? I am interested in hearing your analysis.

    Moreover, two days back the wall street journal reported that Elisabeth Warren admitted that she is “still learning about the banking industry”. Likely she is just making up the $20B number. Why would you want America to be run this way? Unaccountable Regulators got us in this mess to begin with.

  18. “How can Obama stomach Geitner, Summers, and the rest of the advisers who bow to the oligarchs?”

    Obama is no different than Geithner or Summers.
    They want the same things and bow to the same masters. I really liked the appointment by Obama of GE’s outsourcing CEO to the presidents jobs panel. Then of course his new JP Morgan sponsored Chief of staff.

    Obama fooled you didn’t he?

    Change = no change.

  19. With Geithner, Obama has proven, again and again (by backing completely weak and ineffectual financial reform, etc.) that he represents change. But not change for the better unless you are a global corporatist or a bankster. He was very clever, but the sun on his behind has shown that he may be black, but he’s all about green, and not the environment.

  20. Elizabeth Warren is the quintessential social fascist, the embodiment of every naive hope of the non-profit and limousine liberal sets for reforming the irreformable. Content last year with half measures and beltway abracadabra, she now awaits the final humiliation, and a more deserved one simply cannot be imagined. One supposes that we’ll see her again from time to time, trotted out whenever the regime needs to evince the aura of the League of Women Voters. Yet on the day we have our own Tahrir Square, don’t expect to see Liz up there in the front row.

  21. If they screw Warren it’s time to break out the ammo. I just called those idiot GOP congressman and chewed them all out. Idiots. Warren is beyond reproach, she’s brilliant, and she’s earned the spot.
    Seriously, if they keep her out I’m ready to declare war.

  22. ■ Read the SAFER commentary on implementation of the Dodd-Frank financial reform law
    http://www.peri.umass.edu/525/ ( PERI = Political Economy Research Institute)
    From TripleCrisis U.S. Financial Reform: The End of the Beginning, or Simply the End?
    by Gerald Epstein August 10, 2010
    concluding excerpt:
    “It is important to remember that within the framework of the law itself there is currently the potential authority for breaking up the banks, outlawing dangerous derivatives, controlling dangerous compensation schemes, and ending tax payer bailouts. But if the bankers and their allies win, there is also the real possibility of just hitting the restart button and going back to the bad old days.

    To prevent this, the Americans for Financial Reform, SAFER, and other groups need economists and other specialists to get involved in the analytical/educational fight. If you want to and are able to help, please contact: Wendi Wallace, Americans for Financial Reform, 202-263-4571 (www.ourfinancialsecurity.org).”

    also critical:

    Wall Street’s Big Win :Finance reform won’t stop the high-risk gambling that wrecked the economy — and Republicans aren’t the only ones to blame… By Matt Taibbi August 4, 2010

  23. Until _______ (fill in the blank) becomes “such a flash point of discontent among his base that he will grow a set and locate his spine.” We’ve been saying this about every issue since approximately 6 months after the guy took office.

    How about the American people “grow a set and locate their spine”? Now THAT would be something to see!

  24. [Western] Rome’s last few days were literally centuries; this was AFTER it stopped being a republic.

    Even, centuries, before that republic prostrated itself before the institution of the emperor it had many wretched souls controlling (and wanting more) power at the expense of its peons.

    Pissing away prosperity is something people consistently do well.

  25. Like “To Serve Man” was horribly misinterpreted in one of the classic Twilight Zone episodes, many in the United States (and the world) were guilty of the same folly. I admit being one of the suckers.

    We understood what we wanted to believe.

    Obama did bring change; just not what was desired.

  26. the 20th century – with all it’s “ism” wars – was a heist of prosperity

    a smaller and smaller psychotic few having it all, is the last gasp of a kleptocracy

    they’re gasping and grasping

    how did the all powerful “consumer” come to need a separate “legal” protection agency?

  27. Your problem is that in reality an incombant president should have to spend exactly ZERO dollars to be reelected. They simply run on their accomplishments of the past 4 years. Its the inefficiency of the democratic system itself, that bankrupt this country, in addition to your need to double the cost every cycle. Its bad business all around.

  28. Here’s the real threat of Elizabeth Warren: She been presenting a vision that’s not only pro-consumer, it’s also pro-small-business. All she’s really advocating is a level playing field between all banks and consumers. The last thing a Goldman or JP Morgan Chase or Bank of America wants is a level playing field, because on a level playing field they will lose to a proverbial Bailey Savings and Loan.

    And that’s the reason she’ll never make it in Washington – she’s just too smart and too accurate to be easily bought out.

  29. “…[A]rgue that regulation is excessive in general and regulation of financial products is somewhere between unnecessary and dangerous for economic growth in particular.”

    Similar to differentiating “risk” from “uncertainty,” is the need to differentiate regulation (see footnote 7 in Comments on Release No. 34-49695, File No. S7-22-04 (June 9, 2004)
    http://sec.gov/rules/policy/s72204/saboyko060904.pdf ) from rule-writing.

    Rules are codified best-practice procedures that define operational efficiency. Rule-writing is the proscriptive description of an undesirable situation. It does not necessarily produce a net benefit but has become conflated as the same as governance. Rule-writing is ad hoc policymaking that Band-Aids over the current problem. It expects buy-in from society by describing the undesirable situation and prefacing it by saying “don’t do this.” Former SEC Secretary Jonathan G. Katz commented, that when “the SEC adopts a rule, it believes it has solved whatever problem it is addressing. … The solution is to rethink the rulemaking process. Instead of assuming, as lawyers do, that rules are self-effectuating, the SEC should adopt a scientific approach.”

    Mr. Geithner’s trifecta will prevail so long as Ms. Warren’s supporters advocate the governance of “gotchas” tied to the ineffective metrics of one-size-fits-all.

  30. Was that bit about the public witnessing her point of view in the confirmation hearings said with tongue in cheek?

    One thing that should be clear by now is that the version of events that reaches the public (and sinks into their consciousness) is rarely contaminated by any actual words or deeds of the parties involved.

    Opinions and even the understanding of factual data (such as the actual text of quotes even) are now established third- or fourth-hand, highly edited, and often purely fabricated.

    In an environment like this, the nuances of a concept that cannot be reduced to sound bytes and is in opposition to the Washington consensus, stands zero chance of making it to the public’s ears.

    I fully expect the public’s understanding of who Warren is and what she stands for will receive the full Breitbart/O’Keefe treatment, and will be reduced to a single phrase that she may or may not even had actually said.

  31. Well, at least today we can hear a woman spoken of in such terms of respect, by men. That is hopeful, even though we are captured and enslaved. Solidarity across all social divisions — that is our best hope.

  32. Matt Taibbi

    Stephen Boyko:
    The so-called “free market” system is a fraud, and the deregulation that permitted the fraudulent era was a product of financially induced political manipulation that destroyed working limits on that fraud. Your thesis is based on the belief that “free market” supersedes the rule of law: and your spurious argument is that free markets are an economy onto themselves.

    Matt Taibbi
    as a reminder of where we have been following your rule of no-rule and disorder!

  33. Annie,

    The [U.S.] consumer messed himself up by reckless use of leverage. The [U.S.] citizen messed herself up with their willful apathy, ignorance and cynicism in their political machine.

  34. “financially induced political manipulation that destroyed working limits on that fraud.”

    I agree!!!

    In numerous posts on this blog, I have argued that the current system is ineffective requiring real reform. If you believe the market to be:

    • OK, why troubling trend of larger and more frequent crashes

    •Inefficient, then what has to be done better
    – One-size-fits-all (OSFA), deterministic metrics governs both risk and uncertainty to create vapor assets
    – If Citigroup’s one-size-fits-all financial supermarket could not cross-sell, then SEC cannot cross-regulate non-correlative information

    • Ineffective, as I do, then I propose to do things differently by segmenting TRTR (not TBTF) into predictable, risky, and uncertain domains

    Your mischaracterization as to “spurious argument” is devoid of factual support. Ad hominem attacks in the absence of either factual content or real-world experience reflect the biases of a policy wonk making comments on Matt Taibbi’s comments.

    To your credit I find that you do good research and therefore read your posts. It is not so much problem identification or problem analysis that is lacking in “been-there” credibility but problem solutions that fail to connect the dots as to what occurred.

    To provide illustration reference is made to pages 12-13 of the “We’re All Screwed” discussion of fraud.

    Scienter is a legal term that refers to intent or knowledge of wrongdoing. This means that an offending party has knowledge of the “wrongness” of an act or event prior to committing it. If a man sells a car with brakes that do not work to his friend, and he does not know about the problem, then the man has no scienter. If he sells the car and knew of the problem before he sold the car, he has scienter.

    Also to be considered is the buyer’s perspective as consumer rights must be proportionate to consumer responsibilities to mitigate free-riding and moral hazard. Having transparent disclosure as to the interests of the counter-party changes the buyer’s due diligence depending upon whether the seller was:
    • a new car salesman from a recognized dealership (predictability),
    • a used car salesman from a recognized dealership (probability), and,
    • an individual selling a car on his front lawn (uncertainty)?

    This point is further amplified in an excerpt of an email correspondence with Ohio State University law professor, Paul Rose who agrees “that it is still too easy to sue companies based on information that, with a hindsight bias, turns out not to have come about the way management said it would. Those plaintiffs almost never win at trial, though, unless the plaintiffs can show that the managers knowingly lied about what their beliefs were. In other words, if I make a prediction that turns out to be incorrect, most courts would only hold me liable if the plaintiffs could show that I didn’t believe my own prediction (an almost impossible task, given that discovery is delayed until after plaintiffs win against my motion to dismiss). They would not win if my prediction did not turn out to be correct, though, so long as I stayed within the safe harbors granted by the courts , SEC rules, and the PSLRA (essentially, these safe harbors require identifying information that is forward-looking, and acknowledging that it may turn out to not come true). In the end, I don’t think that the doctrine of scienter works against your system (randomness segmentation—author insert), but largely aligns with it.”

    From a practitioner’s perspective, unless and until you provide a separate regulatory regime for uncertainty (i.e.,innovative entrepreneurial enterprises) it is difficult to prove the negative of knowing in an inherently unknowable environment. I argue that the rule of law must be made more robust by segment one-size-fits-all deterministic governance.

  35. If a man sells a car with brakes that do not work to his friend, and he does not know about the problem, then the man has no scienter. If he sells the car and knew of the problem before he sold the car, he has scienter.

    That only holds true if the individual has a history of telling the truth. Unfortunitly that is no longer the case among most financial people. Today we insist on trust that can only be proven, (most likely in a court of law). Where the cost of covering up the lies has become insurmountable as each day passes because of ones history of telling the truth can be proven false over and over again.

  36. Too risky to rescue?

    Trifecta Tim: http://prospect.org/cs/articles?article=blowing_a_hole_in_doddfrank

    Robert Kuttner writes:

    Geithner has already made his own views clear. In testimony before the Senate Agricultural Committee in December 2009, he declared that the foreign-exchange market needed no special regulation. “The FX [foreign exchange] markets are different,” he said. “They are not really derivative in a sense, and they don’t present the same sort of risk, and there is an elaborate framework in place already to limit settlement risk.”

    Me: Trifecta Tim went on to say that market “actually works quite well”.

    Try not to laugh.

    Kuttner continues:

    However, previously confidential information recently made public by the Federal Reserve Board reveals that in the aftermath of the collapse of Lehman Brothers in September 2008, the Fed pumped in $5.4 trillion over a three-month period to keep the foreign-currency market from collapsing. The Fed’s peak injection of dollars on any one day occurred on Oct. 22, 2008, when it reached $823 billion, according to a Wall Street watchdog group’s, Better Markets, analysis of the Fed data release.

    Can someone help me with this? We have a statement post facto by the Secretary that this particular market works, and works well, uttered one year after the Fed, according to its’ own data release, over three months, transfused $5.4 trillion into THAT market.

    That seven figure job with the sweet corner office is coming, after all, Trifecta Tim earned it.


  37. Stephen A. Boyko : I might note first that attacking your premise and conclusion; or the reasoning that links them is not ad hominum…and I certainly mean you no disrespect. I do see your position as something of a “royalist’s apologia” for “unfettered vertical integration” and perhaps that is (legitimately) where you butter your bread. I take no bones in that direction.

    However, in a recent National Review Online memo (commentary: 2/18/11) you repeated the mantra that essentially underscores your premise. These are your words quoted precisely:

    “In a pluralistic society, one-size-fits-all monolithic metrics such as Glass Steagall create errors of conflation that perpetuate the troubling trend of larger and more frequent boom-bust bubbles.”

    Now I don’t think I take you out of context when I point out that a good many of us would say that you have placed the proverbial “cart before the horse” when you blame Glass Steagall. After all, it was this legislation that kept the “monolithic” one size fits all (monetarian/speculative) banking system separated.

    I have found it interesting that when I replace the “one size fits all” over big bankster finance rather than over the regulations you overtly highlight…the reasoning seems more valuable. I do agree that regulations can become tyrannical (power seeking in its own right…) but our recent history is not loaded down with that precise problem. The problem has been deregulation no over regulation. the problem has been crony affiliations with the revolving door syndrome, not professional interference. The problem has been lack of enforcement, not overly stringent enforcements or barriers to successful innovation. And the problems of language obfuscation has only created more confusion than it solves in pointing to regulatory constraints that are unjustifiably restricting. Typically, it sounds to the outsider like the Mafia Kingpins complaining about the ambitious prosecutor. The truth is, as Taibbi decries…NOBODY HAS BEEN PROSECUTED~ !!!
    Finally, I would like to add the most un-transparent factor and that is capture and control fraud. It is rampant and the agencies like SEC have been all too chummy with oversights that might have saved the country and very real people from serious “damages” which are so often overlooked and glossed over when we speak to the elegant delivery of “created” wealth by these deals that you defend as merely the attributes of “free markets” that are supposedly the nuclear reactors of our economy. And now after there has been a major melt down…we want to break up these nuclear reactors and modify them with regulatory agencies we can trust.

    I don’t see how going after the consumer protection side of finance is anything less than checks and balances. I think we need a clear definition of laissez faire finance in your equations; and a balanced perspective on how to get back in charge over this run a way train (…sorry for the mixed metaphores…but I think you understand perfectly well what I am stating. Afterall, didn’t you reverse language when you called the regulators “toxic” and transferred the blame to the consequence in the process? Check your logical fallacies and you will find that one prominently displayed.
    Respectful Regards:

  38. But in essence Lavern, we can reduce anyone to ashes when considering judging ones final humilation. How is it that you are any different using your 61 IQ than others are using slightly less? Or do you have some magic appeal that can judge anyone who does not share your views, or bad mouth them as if it really does make a difference.

  39. BEW: Let’s take it one step at a time

    BEW: “royalist’s apologia” –

    SAB: I am a Coasean proponent of consumer choice. The TBTF regulatory construct enables/ subsidizes oligopolies and other forms of crony capitalism. To paraphrase Coase (illustrated by the GAAMA model), once society establishes a critical demand for a product, regulation doesn’t stop the activity, it merely specificies how much it costs and where the transaction takes place.

    You correctly quote, but miss the point that I was trying to make. Glass-Steagall will be contracted around to the point of ineffectuality. Look how SOX and Dodd-Frank. have been circumvented.

    I am not an anarchist who is against all regulation. Rather in echoing Katz, I believe that regulation should be codified best practices that lead to a net benefit. I know of no other way for constructive societal buy-in.

    BEW: “Now I don’t think I take you out of context when I point out that a good many of us would say that you have placed the proverbial “cart before the horse” when you blame Glass Steagall”

    SAB: my independent variable is information non-correlation not scale. As said in an earlier post, it is what Taleb argues in the “Black” when he says that “correlation is charlatanism.” And, what I argue in “We’re All Screwed (page 82) from a governance perspective that “protection is a racket, whether enforced by Don Corleone on the streets of New York, or Don Columbia Law School at a government regulatory agency.” Since robust regulation requires segmenting OSFA metrics into predictable, risky, and uncertain regimes, Glass-Steagall is an inappropriate tool by which to measure “randomness.”

    To the above point, Mr. Taibbi would be hard press to find a better enforcement attorney than SEC Director Khuzami. However, I would argue that the enforcement problem lies with deterministically trained regulators (attorneys, accountants, and economists) that have conceptual difficulty when faced with outliers.

  40. @JDM “The [U.S.] citizen messed herself up with their willful apathy, ignorance and cynicism in their political machine.”

    Yeah, but that is what qualified her to be a VP candidate and media darling.

    “The [U.S.] consumer messed himself up by reckless use of leverage.”

    Viagra. Leverage. Get it?

    Keep watching thy neighbor’s crotch – you might find the answer to life there, yet….

  41. Normally, I make it habit not responding to disinformational hit-pieces, but $5 B is the tippity-top of the old iceberg. The mortgage fraud valuation is seriously understated in your transgression analysis. The part of “unaccountable regulators” is also seriously inaccurate, as a causal factor in this planned debacle.

    The Rupert Murdoch Journal is embarked on a quest of character-assassination, as defamation, rumor, innuendo, and fear-mongering has shown itself to be the metier of the right wing corporatists who are literally ruining this country.

    Who you going to believe, a former Goldsacs operative, or your own lying eyes?


    Also, you make a mockery of all things sacrosanct, by spurious and sarcastic claims of doing God’s work. I’ve thought about this, and in my view, it’s the work of Satan being carried out at so many levels.

  42. “Elizabeth Warren and the Consumer Financial Protection Bureau (CFPB)” is a no-brainer for the american public, if, and only if, we can get the word out!

    The problem lies in the “MSM control of cable/newsprint/blogs info networks!

    Unfortunately, we now have dual (Hillary and Rahm’s motto, don’t waste a good disaster…pathetic?) diversions (Libya and Japan) that takes the public’s eye off (ball?) the most important domestic issues. Fast forward – the quarterback sneak, indeed, the playbook our D.C. Politician’s excel upon (home alone?)?

    CNN is now a useless network with scrubbed data, on a continuous loop of nonsense, scripted sound bites for, and of, selfish financial gain / polling rating for gullible myopic eyeballs! Lou Dobbs was the final straw piled on by Rich Sanchez firing; a mis-spoken no-no of a late- night buffoon[?]!

    Fox is a “bought and paid” for Right-Wing network that is simply “garbage in – garbage out” (ironically, now Lou Dobbs has just hooked up with them…what gives Lou?) with the likes of Liz Cheney, and “The Weekly Standard” idiots, not to forget accolades for the “Circus Master” Bill “the shill” O’Reilly from such fame as the World Trade Center/ Red Cross Debacle”…unbelievable, huh?

    MSNBC is the consumers last hope with Dylan Ratigan (I hope I’ve got that spelled correctly – terrible speller that I am?) “The DR Show” host, from Bloomberg News Financials via CNBC. He is outspoken but spot-on, and hits the hot-button-issues square-on with “questions anybody, and everyone with answers from anyone or everybody” – a pure progressive (Yes, opinionated slightly with perfect flavoring/seasoning) journalist (my kind of guy)!
    His side kick Chris Matthews should retire, and open up the “DR Show” to a better time slot, preferably Matthew’s time slot! (JMHO – I think Matthew knows how I feel about his lame & suck-up reporting)!

    Lastly we have Public TV – “The Nightly NewsHour” which in my opinion (I didn’t say humble this time) has been compromised by it’s new producer Shapiro (a shill from ABC) and edits out controversial talking points as not to upset the God’s ?
    Cancelled, Bill Moyer’s (yea, I heard all the excuses), and “World Focus” because of Al Jezerra (them nasty lying Arab’s)!
    Their programming has been pigeonholed by…guess who [?]: the list of contributor’s such as Bectel Corp., ExxonMobil, Gates Foundation, etc., etc., and the worst moderator of all “Gwin Iffel”!

    So let’s review: Dylan Ratigan !!!
    The N.Y. Times!!!
    The Rolling Stone!!! (I’m sured to have missed many so feel free too add to the list? ha ha – no I’m serious)
    The “Baseline Scenario Blog” (have enjoyed since 4/2010)

    Thankyou Simon and James for your great digging, “For America’s Sake”….and God Bless You- Julian Assange!

  43. FACT: As of December 2010, Wells Fargo is still serving foreclosure complaints in New Mexico, claiming a valid assignment and attaching an unsigned document as proof of assignment. For a moment, consider that Wells Fargo claims ownership of the note of your house, tells you it’s going to foreclose and evict you, and shows you an unsigned document as the only proof of its foreclosure claim. Anyone out there still think the banks will regulate themselves?

  44. I hate to say it but I hope she doesn’t get the government gig. She won’t be effective surrounded by Geithner types and they’ll end up keeping her busy (TARP) and quiet. She needs to make better use of her celebrity, get a publicist and be herself, just on a grander scale with the objective of keeping the public informed. I wish she wrote a blog or had some kind of public platform.

  45. Money is human power. It makes people do things that animals would not do. Concentrate the power sufficiently in the hands of a few and the masses start to feel discontent, unless they can be distracted with quality Fox programming like Dancing With The Stars or American Idol.

  46. http://action.workingfamiliesparty.org/p/dia/action/public/?action_KEY=3694


    The 5 Worst Tea Party Plans for Financial Un-Reform

    1. Prevent special oversight of undercapitalized and highly leveraged institutions such as AIG that maintain major swaps positions and threaten U.S. financial stability. (“Major Swap Participant” oversight)

    2. Hayworth authored an amendment to repeal the requirement in Dodd-Frank that companies disclose internal pay comparisons between their median workers and their CEOs, allowing CEO salary to remain secret.

    3. Create a special registration exemption for private equity advisers, which would remove accountability for leverage buyout funds.

    4. Create SEC exemptions for public offerings up to $50 million, opening up a wide opportunity for fraud.

    5. Exempt rating agencies from the same standards that apply to other experts who give opinions related to asset-backed securities. This would essentially create legal immunity for the very people who created the financial panic in the first place.

    Can you help us gather 10,000 signatures in support of financial regulation ASAP?


  47. As Mr. Johnson hints, there are plenty of Democrats who share Mr. Bachus’s view — Timothy Geithner (if he is a Democrat), Chuck Schumer, Barney Frank, and of course Barack Obama.

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