OurFuture.org Blogs: Isaiah J. Poole

Message To Energy Department: U.S. Greenbacks For U.S. Green Jobs

Isaiah J. Poole — Fri, 06 Nov 2009 07:47:13 -0800

News of the potential use of U.S. stimulus funds for a wind power project in Texas that will produce 2,000 Chinese manufacturing jobs—but a scant number of American jobs—has generated justifiable outrage, including a letter from Sen. Charles Schumer, D-N.Y., to Energy Secretary Steven Chu urging him to "deny Recovery Act funding to this project" unless the majority of the manufacturing of the wind turbines is done in the United States.

It's therefore not surprising that today the Chinese firm that is a primary investor in the project, A-Power Energy Generation Systems, is doing some PR tap-dancing to quell the fury.

But PR tap-dancing from A-Power, and especially from the Department of Energy, which opened the door to the potential of this happening, is not enough. Energy Secretary Steven Chu needs to heed a simple demand: American tax dollars for America's economic recovery must support American jobs. Period.

That's the thrust of the grassroots push the Campaign for America's Future is launching today, which aims to flood Chu's office with this message:

The news that a Texas wind farm is seeking stimulus money to create only 30 jobs here but 2000 jobs in China is disturbing, especially since unemployment in America has surpassed 10%.

China has understandably taken steps to stimulate its economy with its funds and move towards clean energy. We should be taking similar steps at home, not using our tax dollars to offshore jobs that could be created here.

I support Sen. Chuck Schumer's call for you to reject any request for stimulus money unless the high‐value components, including the wind turbines, are manufactured in the United States.

This battle goes to the heart of the economic strategy that this nation will pursue to work its way out of recession and lower unemployment, which today was announced at 10.2 percent.

One reason we are having to fight this battle to begin with is the flawed conservative ideology pursured by the Bush administration and its predecessors. A must-read investigation published lat month by Russ Choma at the American University School of Communications pointed out that while European governments were laying the groundwork for a green manufacturing economy, we "dithered."

The reliance on foreign companies for development of wind energy appears to be at least partially tied to the U.S. government’s resistance to subsidize a home-grown wind energy industry until now. With so few U.S. companies in the business, the door was open for foreign companies to walk away with the bulk of the grants. European companies, in particular, are well positioned to collect stimulus benefits for clean energy.

“Europe was light years ahead of us, in terms of developing these alternative resources,” said Gregory Jenner, a tax attorney and former acting and deputy assistant secretary of the treasury for tax policy, who co-authored a guide for energy companies hoping to collect stimulus money. “The fact that a lot of the European companies are coming over to the U.S., they just see this as an untapped market. Now that the incentives are starting to work out ... it's going to be just like a gold rush for them.”

While the U.S. has dithered with temporary tax incentives for producers, European governments have awarded permanent tax breaks and large subsidies to wind energy companies and poured vast sums into research and technology.

As a consequence, the article says, "European turbine-manufacturers have dominated the world market and continue to do so in the U.S. Indian-manufactured turbines are swiftly moving into the U.S. market as well, complementing Japanese manufacturers who have long been here."

As for China, The Washington Post reported last month that "the government has closed down old cement and coal plants [and] subsidized row upon row of new wind turbines," seeking to generate 120 gigawatts of power from wind by 2020, four times what the United States generates from wind today. And China's government, unlike the United States, sets demands for domestic production.

Earlier this year, a report by the Renewable Energy Policy Project, a think tank that has worked with labor and environmental groups, warned the Obama administration and Congress that it was important that the country has a deliberate policy of focusing government green-energy resources on creating American jobs.

For every megawatt of new wind power capacity — enough potential clean electricity to power up to 300 homes — REPP estimates 4.85 Full Time Equivalent (FTE) jobs are created to manufacture, install and then operate and maintain the wind farm. About 70-75 percent of the total labor required for a typical wind turbine or solar panel is in manufacturing the various component parts that could be supplied by existing U.S. businesses. These are the potential “green jobs” that are key to revitalizing the U.S. and global economy. Without new policies promoting domestic manufacturing, an unnecessarily large portion of these jobs will remain overseas.

We are now seeing that prophecy about to come true. It is time for the Obama administration and Congress to work together on the policies and incentives that will foster the growth of green-energy manufacturing, not just green-energy consumption. It makes no sense to substitute dependence on Middle Eastern oil with dependence on Chinese or European wind and solar technology—not when we have the expertise, the workers and the facilities to build renewable energy products, and especially when taxpayers rightfully demand that every stimulus dollar possible be used to get U.S. workers back into solid jobs.

Let's send Chu that message today.

Message To House: Don't Allow Mini-Madoffs

Isaiah J. Poole — Wed, 04 Nov 2009 08:09:11 -0800

The financial reform effort was dealt a significant setback in the House Financial Services Committee today when the committee approved a regulatory bill (HR 3817) that would exempt firms with a market capitalization of as much as $75 million from accounting rules designed to prevent Enron-style corrupt practices. But that fight is not over.

The issue is the application of the Sarbanes-Oxley law, which was passed in 2003 in the wake of the Enron scandal to require publicly traded firms to conduct independent audits of their finances to expose fraud and accounting errors. Ever since the law was passed, the small business lobby (with considerable help from their big-business buddies) has complained that the law imposes an undue burden on them, and Congress has deferred enforcing the law for firms worth less than $75 million while the Securities and Exchange Commission studies the issue.

The truth is that, as the Consumer Federation of America said in a statement it issued last week, the amendment "ignores the fact that both the SEC and PCAOB [the Public Company Accounting Oversight Board, a private, nonprofit entity created under Sarbanes-Oxley] have already extensively revised these requirements to make them more scalable based on company size and complexity and have reported dramatic implementation cost reductions as a result."

Committee members Scott Garrett, R-N.J., John Adler, D-N.J., and Carolyn Maloney, D-N.Y., have been the leaders in the effort to dilute accountability and disclosure requirements for these smaller firms. These three member happen to be receiving significant campaign contributions this cycle from companies that the committee oversees. So far in this election cycle, based on data from OpenSecrets.com, Maloney has received more than $329,000, Adler about $169,000 and Garrett about $140,000.

The consequence of the amendment these members backed is that while these companies can't individually do the damage Enron did through its fraudulent accounting and its manipulation of energy markets, millions of investors who have small-cap stocks in their portfolios could be ripped off by hordes of mini-Bernie Madoffs. These companies should not be considered too small to play by the rules.

This bill, however, still has to get through the House floor. Heather Booth, the director of Americans for Financial Reform, is one of the activists who has been working the phones today to mobilize opposition to the exemption and to other provisions in the legislation that fall short of the robust reform needed to protect consumers and the Main Street economy.

"It's stunning that at a ime when we're looking for greater regulation, there woiuld be a reversal of the kinds of protections that we need to prevent another Enron-type disaster," Booth told me. "This is moving in the wrong direction."

The full House of Representatives could reject this amendment, however. But to do that the voices of ordinary people are going to have to be loud and strong to compete with the millions of dollars the financial services sector is spending to fight virtually any form of regulation that would curb their reckless behavior. Anyone who has lost a job because the company they worked for can't get credit, anyone who has seen the value of their retirement funds shrink, anyone who has faced a home foreclosure or a sharp drop in their home value—in short, anyone affected by this financial crisis—has a reason to contact Financial Services Committee Chairman Rep. Barney Frank and the members of the House Democratic leadership and tell them not to go along with dilutions to financial reform like the Sarbanes-Oxley exemption written into the bill the Financial Services Committee approved today.

Make Them Afraid Of Wall Street's Money

Isaiah J. Poole — Tue, 03 Nov 2009 08:19:00 -0800

Economist Robert Johnson says progressive activists are going to have to fight more aggressively against the forces on Capitol Hill and the White House who are working on behalf of the financial services industry to block financial reform, given the kinds of deals now being cut by the Obama White House and some Democrats in Congress.

Johnson, in the video interview above, says that while there is some good news in the recent moves toward creating a financial consumer protection agency, legislative proposals to curb the behavior of so-called "too-big-to-fail" banks remain seriously flawed.

The bottom-line problem, Johnson says, is that the campaign and lobbying dollars from the financial service industry is speaking louder than the general public. "I'd like to see voters mobilized to make people afraid to take Wall Street money," Johnson says.

Earlier, Johnson had a similar message in an interview with Democracy Now's Amy Goodman. In that interview, he tells a personal story that dramatizes the difficulty reform advocates are having in getting their views heard in Congress. Johnson was invited at the last minute to testify before the House Financial Services Committee, after Americans for Financial Reform helped pressure the committee to allow alternate voices from outside the banking industry. Johnson's testimony was cut short, however, by Rep. Melissa Bean, who was presiding over the committee hearing at the time and who is one of the committee's top recipients of banking industry campaign contributions.

Johnson is now the director of the newly created Institute for New Economic Thinking, which will use a 10-year, $50 million grant from financier George Soros to counter the "free-market fundamentalism" that helped set the stage for the financial crisis.

Progressive Breakfast: The Net Domestic Product

Isaiah J. Poole — Fri, 30 Oct 2009 06:30:34 -0700

The daily Progressive Breakfast serves up what progressive movement members need to know to start their day. Bill Scher is traveling; he will return Monday.

Thursday's news that the nation's gross domestic product grew at an annual rate of 3.5 percent in the third quarter comes with a lot of asterisks. A few of them:

*The Wall Street Journal reports that the White House recovery plan will claim responsibility today for creating or saving 650,000 jobs with a bit less than half of the $339 billion in recovery funds spent through September 30. "The White House sees the data as proof that its $787 billion American Reinvestment and Recovery Act of 2009 will meet its goal of creating or saving at least 1 million jobs," the WSJ writes.

*John Authers of the Financial Times critiques what helped drive the GDP increase:

Household disposable incomes actually fell during the quarter, by 3.4 per cent, but consumer spending rose, also by 3.4 per cent. This is not a pattern that can be sustained for long, and it is inconsistent with the need for US families to pay down their debts.

Consumption rose largely because of a huge increase in expenditure on durable items, led by motor cars. Government subsidies through the “cash for clunkers” programme, removed before the quarter had ended, largely explain this.

Meanwhile, tax credits for homebuyers, which helped revive activity in the housing market, are due to be withdrawn later this year. The question now is whether higher consumption can be sustained without government support.

... Thursday’s new data on initial claims for unemployment insurance confirmed that the rate of the rise in joblessness has slowed significantly – but the jobless rolls are still rising faster than at any time this decade, before the financial crisis took hold.

*At BusinessWeek, Michael Mandel sees in the numbers evidence "that companies are robbing the future to pay for short-term profits," and if we measured economic growth to take into account the impact of these business decisions, we'd find GDP growth to be significantly lower:

...[T]he official statistics are not designed to pick up cutbacks in "intangible investments" such as business spending on research and development, product design, and worker training. There's ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation. Without investment in intangibles, the U.S. can't compete in a knowledge-based global economy. Yet you won't see that plunge reflected in the GDP and productivity statistics, which are still too focused on more traditional sectors, such as motor vehicles and construction.

... Over the past year, U.S. employment of scientists and engineers—the people who create the next generation of products and make the U.S. more competitive over the long term—has fallen by 6.3%, according to a BusinessWeek tabulation of unpublished data. Yet overall employment has fallen only 4.1%. "There are really bright people who are struggling to find a job," says Josh Albert, managing director at Klein Hersh International, an executive search firm for life scientists.

*Bloomberg News reminds us that the future prognosis is for anemic growth:

The economy will likely grow at a 2.4 percent annual rate from October through December, the median forecast in a survey

earlier this month showed. GDP will also grow 2.4 percent next year and 2.8 percent in 2011, the survey showed, compared with an average of 3.4 percent growth over the past six decades.

*In Olathe, Kansas, a suburb of Kansas City, a side effect of the economic downturn is playing out that is happening around the country. From The Olathe News:

The Olathe Salvation Army Food Pantry continues to see an increase in people needing help during these difficult times. The need, however, has changed in recent months.

“We’re seeing people we normally don’t serve,” said Mindia McManness, volunteer coordinator for the Olathe Salvation Army. “They call us not knowing even how to get help because they’ve never needed it before. They don’t know where to begin.”

They’ve lost their jobs or are experiencing other difficulties because of the floundering financial markets.

“They’ve run out savings or maxed out credit cards, something that usually helped them through short-term difficulties in the past,” McManness said.

This recession has gone on much longer than expected, and the impending recovery will take even longer, leading to a new pool of people needing assistance.

Shelves once filled with canned corn, spaghetti noodles, chili, pork and beans or peanut butter and jelly are empty more frequently, and tight food supplies have become the rule, not the exception, all around the metro area.

Health Care: House Moves Ahead

House Democrats unveiled the long-awaited health care reform legislation Thursday that will be up for debate on the House floor, and the best that can be said about it, at least according to a headline this morning on Politico, is that "liberals don't bolt" from it:

...[T]he bill [House Speaker Nancy Pelosi unveiled Thursday includes big pieces of what the most liberal members of her party wanted — most likely setting up a serious battle when negotiators try to merge it with the far more moderate Senate legislation.

The public option stays, even if it’s not the same one the House speaker preferred. So, too, does the so-called millionaire’s tax to help offset the $894 billion price tag. Individuals will be required to own insurance. Most employers will be legally mandated to offer it.

And in return, the House speaker won assent — if not complete agreement — from the liberals in her caucus, as well as a surprising amount of support from Democratic moderates who have long railed against some of these provisions.

Liberals expressed frustration that the speaker bowed to political reality by allowing doctors and hospitals participating in the public option to negotiate payments directly with the Department of Health and Human Services, and some promised to request an amendment that would allow them to scrap the current plan for one tied to Medicare. But few pledged to vote against the bill.

Adele Stan at AlterNet says that at least the House bill is "almost (dare we say it?) progressive" when compared to what's pending in the Senate:

So, okay, it isn't the "robust" public option promised to AlterNet readers by Ways and Means Committee Chairman Charles Rangel, D-N.Y., this summer, but it doesn't include that silly opt-out plan. Unlike the lonely Harry Reid, who stood alone to face reporters on Monday, Pelosi was surrounded by members of her caucus, all smiles. Implicit in her timing was a message to the Senate: Keep noodling all you want, but here's a bill, a decent bill -- the bill we're gonna pit against yours in a conference committee if you ever get around to passing one. So, you might want to hop to it. And the more yours looks like ours, the easier it's gonna be for all of us.

As for the compromises in the House bill...

The deficit neutrality of the House bill presumably wins the support of the White House, while the less-than-robust public option seems to have passed muster with the big labor unions, who are surely influenced by another important distinction between the House and Senate bills: the House bill helps pay for itself through a new tax on the nation's most well-off citizens, while the yet-to-be-finalized Senate bill will likely pay for part of its cost by taxing high-priced, fully-loaded health-care plans -- like the plans many unions have negotiated in lieu of salary increases (and even as trade-offs for give-backs) by their members. Within hours of Pelosi's unveiling, both the AFL-CIO and the Service Employees International Union (SEIU) released statements praising the House bill.

Some ConservaDems are still refusing to get behind the House bill, reports McClatchy's David Lightman, claiming they need to hear from constituents:

"The plan on the table has some good points and some bad points. I want to look at it," said Rep. Lincoln Davis, D-Tenn.

Blue Dogs wanted to hear from constituents, many of whom are more conservative than those represented by most Democrats. "I have both sides of the health care debate well-represented in my district," said Rep. Allen Boyd, D-Fla.

... Blue Dogs and some party moderates have been concerned about the plan's cost, as well as its impact on small business and expansion of government. Those concerns remain.

But Pelosi thinks that there's already been so much debate on the merits and impact of all aspects of the legislation that she wants the nearly 2,000-page bill to face an up-or-down House vote without a lengthy amendment process. Ryan Grim at The Huffington Post:

House Speaker Nancy Pelosi said Thursday that there's been plenty of time for amendments already, so neither her caucus nor members of the minority party should expect a chance to amend the health care bill when it gets to the House floor.

"I've considered all of that input as our amendment process," Pelosi said on a conference call with bloggers, citing "probably 78 caucuses on this subject where we've listened to members [and] 2,000 town meeting on this subject."

A stinging rebuke of one feature of the House health-care bill comes from FireDogLake's Jane Hamsher, who says as a breast-cancer survivor she felt "tremendous disappointment" that the bill places higher hurdles the marketing of generic versions of biologic anti-cancer drugs:

Nancy Pelosi made a choice with regard to the lifesaving biologic drugs I took when I was in chemotherapy that will cost many of my fellow breast cancer survivors everything they own, and quite possibly their lives. ... Thanks to Representatives Anna Eshoo and Joe Barton, there will be no generic versions of these drugs. At least not for 12 years, if the House health care bill announced today passes. And because of an “evergreening” clause that grants drug companies a continued monopoly if they make slight changes to the drug (like creating a once-a-day dose where the original product was three times per day), they will never become generics. Instead of the Waxman-Deal amendment that granted much more reasonable terms to biologic patent holders, Speaker Pelosi chose the Eshoo-Barton amendment. And we could all be paying for that choice for the rest of our lives.

Hamsher is helping to organize with Public Option Please "treat, not trick" Halloween-themed protests at 3 p.m. at the Russell Senate Office Building, the Baltimore office of Maryland Sen. Barbara Mikulski and the offices of Rep. Sen. Kay Hagan and Rep. Anna Eshoo.

'Too Big To Fail' Reform Too Bad To Work?

The Obama administration's plan to change the rules for so-called too-big-to-fail financial institutions so that taxpayers will not be compelled again to prop them up when they engage in reckless gambles is receiving significant criticism on Capitol Hill. The Washington Post:

Under legislation unveiled this week by the committee chairman, Rep. Barney Frank (D-Mass.), in close coordination with the Obama administration, an oversight council of regulators would act as a monitor of systemic risk throughout the financial system and impose tougher regulatory standards on the largest companies. Compared to an earlier draft put forward by President Obama's team, the current bill expands the role of the council, entrusting it to identify risks to the system. The Fed would be the enforcer of the council's recommendations.

But that structure came under fire from Sheila C. Bair, chairman of the Federal Deposit Insurance Corp., who argued the new council should be headed by an independent chairman rather than by the Treasury secretary, and that the council should have greater authority.

Bair also joined both Republican and Democratic lawmakers in questioning the government's plan to pay for the cost of winding down large, failing financial firms. The plan calls for companies with more than $10 billion in assets to be assessed fees only after a large collapse, rather than contributing ahead of time into an insurance-like fund. [Treasury Secretary Timothy F.] Geithner and Frank have said the intent is to shift the burden of such failures from taxpayers to the financial industry itself, but Bair argued for the insurance approach.

The Washington Independent also details the objections that Treasury Secretary Timothy Geithner faced when he testified before the House Financial Services Committee:

“Mr. Secretary, I’m not a man that fears this administration or you,” Rep. Paul Kanjorski (D-Penn.) told Geithner. “But I do fear the accumulation of power exercised by someone in the future that can be extraordinary.”

Rep. Brad Sherman (D-Calif.) echoed those concerns, arguing that the bill represents “the most unprecedented transfer of power to the executive branch to make decisions about both spending and taxes in history — all without congressional approval.”

... [S]ome lawmakers are attacking the proposed bailout tax on large institutions, arguing that it should be collected beforehand as a type of insurance fund, rather than imposed after a competitor went under.

“No more TARP. No more bailouts,” said Rep. Luis Gutierrez (D-Ill.). “Let them [the companies] create the fund, the systemic risk fund, that will guarantee that the American taxpayer will no longer have to be involved should they cause such a crisis ever again.”

Beyond Chicago: The Showdown Shifts To D.C.

Isaiah J. Poole — Tue, 27 Oct 2009 16:42:15 -0700

Now that thousands of demonstrators confronted bankers at the "showdown in Chicago" during the American Bankers Association convention there this week, activist energy is now urgently shifting to Washington and to communities across the country.

James Mumm, the director of organizing for National People's Action, in this interview declared that the Chicago demonstrations were a success, with about 5,000 people at the concluding rally Tuesday in front of the convention demanding that the banks stop lobbying against a consumer protection agency and regulatory reform.

At that rally, Service Employees International Union president Anna Burger didn't mince words:

“The big bankers came here to Chicago to celebrate because they think they’ve won again. They got their bailouts, they are raking in profits, and they think they can continue to use taxpayers as their personal ATM.

“That’s why, this week, we are launching a national call to action.

“We cannot rest until we begin to break the power that big banks and corporations have over our economy. They have spent decades rigging a system so that no matter what they do, they will always win at our expense.

"We know who the architects of our economic collapse are—Goldman Sachs CEO Lloyd Blankfein. JPMorgan Chase CEO Jamie Dimon, Bank of America CEO Ken Lewis, Wells Fargo CEO John Stumpf, and others.

"We have to investigate them and, if necessary, we have to prosecute them for what they've done to our country."

Mumm also discusses in the interview one of the highlights of the three days of demonstrations, an address Monday from Federal Deposit Insurance Corporation chair Sheila Bair.

Bow, with the Obama administration late Tuesday proposing legislation to rein in so-called "too big to fail" banks and with a comprehensive financial reform bill, in Hamm's words, limping out of the House Financial Services Committee, activists have a lot of work to do.

Mumm says that the financial services industry, having been extended a $17 trillion taxpayer lifeline to bail them out of their reckless behavior, is committing millions of dollars to fighting financial reform, and so it will take "constant messages to members of Congress" to counter that lobbying onslaught. The message to Congress, Hamm said, is, "It is time to choose between the American people and real financial reform or you can stay on the side of the big banks. There is a risk there; on the one side is a bunch of money and on the other side is a bunch of people. But it is time to choose."

There will also be grassroots actions around the country, including a community meeting Sunday outside Boston with Federal Reserve Board Chairman Ben Bernanke and other Fed staff members. That meeting would be the climax of a series of community meetings NPC has held around this country since early summer.

The Showdown in Chicago website will remain active in the coming weeks as a resource for people interested in getting involved, as will the National People's Action site.

Progressive Breakfast: Wall Street Feels A Tremblor

Isaiah J. Poole — Fri, 23 Oct 2009 04:42:13 -0700

The daily Progressive Breakfast serves up what progressive movement members need to know to start their day. Bill Scher will return Monday.

Wall Street did feel a bit of an earthquake on Thursday as a result of actions in Washington, but whether the shaking did more than rattle some gold-plated dishes remains a hotly debated question. The progressive assessment, backed by some mainstream commentators, is that we're still barely nicking the flawed foundations of how Wall Street operates.

Still, there were qualified cheers for the moves by the House Financial Services Committee to create a consumer watchdog agency that would police some financial institutions and for actions by both the White House and the Federal Reserve to rein in Wall Street CEO pay practices.

The Wall Street Journal's reporting on the House committee bill:

The agency would be charged with policing consumer financial products and practices, such as mortgages, credit cards, and overdraft fees, regardless of whether they are offered by banks, finance companies, or most any other type of firm. Democrats have argued that a lack of consumer protection helped fuel the financial crisis, pointing to the defaults on subprime mortgages that nearly toppled Wall Street.

... "We now have a standalone consumer protection agency that has very significant powers," said Rep. Barney Frank (D., Mass.), who is chairman of the Financial Services Committee.

Just one Republican, Rep. Michael Castle (R., Del.), voted for the bill, with many of the rest saying Democrats were creating a federal bureaucracy that would take away consumers' ability to make their own financial choices. "If the Democrats really comprehended what they just did, they would not have supported it so eagerly," said Rep. Scott Garrett (R., N.J.).

Reuters reports that in spite of the disappointments the bill received praise from a source progressives respect:

Elizabeth Warren, the top watchdog for the government's $700 billion bailout program and early advocate of the consumer agency, voiced delight the powerful banking lobby was unable to knock down the wider plan.

"When I first came to Washington with the idea of this agency, everyone told me 'the banks always win, quit now because the banks always win.' They didn't win today," Warren told reporters.

Campaign for America's Future co-chairman Robert Borosage said that Frank deserved credit for resisting relentless efforts by the financial services industry to weaken the bill or kill it altogether. But even with Frank's efforts:

The Committee limited enforcement authority for 98 percent of the nation’s banks, which control 20 percent of assets; exempted auto loan and insurance products; and omitted provisions to enforce important community lending standards. Most damaging, it replaced President Obama's proposed independent oversight board with an advisory committee of financial regulators who failed to protect the American public from Wall Street in the first place.

The House bill is a good first step. It should be strengthened on the floor of the House. It will take a major mobilization to protect it against obstruction in the Senate.

David Dayen at Firedoglake says:

The auto dealer exemption is probably the worst amendment in the entire Financial Services Committee markup on regulatory reform. You can make a case for some of the other amendments, and Rep. Frank said on Rachel Maddow’s show last night that the committee will pass the reform bill today that gives Democrats and the Administration “90% of what we wanted.” But this is part of that other 10%. Auto financing is typically the second-largest purchase a family makes, behind housing, and the horror stories of auto loan customers being ripped off are voluminous. The amendment was authored by Rep. John Campbell (R-CA), a former auto dealer who has been ripped by consumer groups for having major conflicts of interests. (He used to receive rent payments from six auto dealerships, two of which are still in business and provide him income. He's also received $170,000 in campaign contributions from auto dealerships.)

Dayen also reports that Change Congress has an act.ly petition demanding that Congress cancel the exemption from oversight for car dealers.

Bloomberg News on the pay actions:

Both the Treasury and the Fed are seeking to rein in the excessive risk-taking blamed for triggering a recession that has cost 7.2 million American jobs. The danger is that the oversight once exercised by shareholders and directors will now be replaced by the government, economists said.

... “Regulatory reform is really up for grabs right now,” said Richard Sylla, a financial historian at New York University’s Leonard N. Stern School of Business. The Fed’s announcement, coming on the same day as the Treasury’s, “is almost a part of their campaign to say ‘Yes, we can do this.’”

... The Fed’s guidelines, while less rigid than Feinberg’s rules, are more far-reaching, applying even to banks like Goldman Sachs Group Inc. and JPMorgan Chase & Co. that have returned government aid. The central bank doesn’t impose pay caps or bans on particular practices. The guidance is aimed instead at discouraging banks from adopting practices that might endanger the federal deposit insurance fund or the larger financial system. “Compensation practices at some banking organizations have led to misaligned incentives and excessive risk-taking, contributing to bank losses and financial instability,” Fed Chairman Ben S. Bernanke said in a statement yesterday.

... The Fed’s rules will not take effect for months while the agency considers public comments and makes revisions. Banks won’t have the luxury of waiting. The Fed expects them to start reviewing their pay practices immediately. It also plans to launch a review of compensation at the 28 largest banks, which it didn’t name.

New York Times columnist Joe Nocera says the pay moves won't bring fundamental change to Wall Street. That's something, he writes, "only shareholders can do."

[I]t’s worth noting that certain contentious pay issues were either ignored or shoved under the rug. Ken Lewis, the soon-to-be-retired chief executive of Bank of America, has declined to take a salary in 2009, at Mr. Feinberg’s urging. But he is still going to get around $70 million in retirement pay — which Mr. Feinberg could do nothing about. And so Mr. Lewis will soon join the ranks of other top Wall Street executives who walked away with millions after doing a miserable job. That’s the kind of pay practice that makes people justifiably angry.

And the American International Group is contractually obliged to make bonus payments of nearly $200 million in March 2010. The company has promised to try to reduce that amount by 30 percent. But once again, there is nothing Mr. Feinberg can do because those bonuses were already written into contracts — and there is a high likelihood that the bonuses will create another furor in Congress, just as they did earlier this year.

Washington Post columnist Steven Pearlstein makes an interesting point about the argument that the pay controls will cause the reined-in banks to lose the talent they need to stay competititve.

They may be right, of course, but if it turns out that these pay rules wind up steering the riskiest activity to smaller, more focused institutions whose failure won't require them to be bailed out by the taxpayer, that might be a good thing.

After all, we know what happened when the button-down commercial bankers were let loose a decade ago to start competing with, and behaving like, investment bankers. And we can be pretty sure what will happen in the future if Citigroup, J.P. Morgan Chase and Goldman Sachs continue down the path of competing with, and acting like, hedge funds.

Indeed, there are tentative signs that what Pearlstein predicts is already beginning to happen:

Credit Suisse Group AG this week introduced two new mechanisms that ties the bonuses of managing directors to share price performance over four years and returns on equity over three years. One plan adjusts down if the employee’s business unit losses money. The firm, based in Zurich, has also shut down business lines where risk-adjusted returns were too low.

“We have closed down some businesses that had very good profit potential but the returns weren’t there given the risks, like commercial mortgage-backed securities,” Paul Calello, CEO of the firm’s investment banking unit and a member of the executive board, said in an interview yesterday. Compensation “needs to be aligned with the strategy of the firm,” he said.

The Credit Suisse model may prove a template for rival banks, said Mark Poerio, a partner focusing on compensation at

Paul, Hastings, Janofsky & Walker LLP in Washington. “Hopefully Wall Street will follow that lead,” he said.

Dean Baker argues in The Huffington Post today:

This is a good first step, but it is only a first step. The pay caps involve only a relatively small number of people in an industry where hugely bloated salaries are the norm. Even in these cases it is too early to know that the pay caps will actually prove to be binding. After all, Wall Street's main craft is evading regulations and taxes. It is entirely possible that those clever Wall Street boys will find a way to get around whatever pay restrictions Mr. Feinberg puts in place.

Baker repeats what he's been arguing for some time: Perhaps the most important tool to bring Wall Street back to its senses and to get some public benefit from Wall Street's money games is a financial transactions tax. Unfortunately, "an FTT will not get an airing in a Congress where the banks continue to wield enormous power. Congress will only consider an FTT, as opposed to more regressive proposals like a national sales tax, if the public demands it."

You can make that demand—and other demands for fundamental change on Wall Street—next week at the Showdown in Chicago. On our blog, AFL-CIO President Richard Trumka lists four key demands: the creation of a strong Consumer Financial Protection Agency, a council of regulators to identify and fix systemic risks that could threaten the entire financial system, open regulation of such "shadow markets" as hedge funds and derivatives, and reform of corporate governance and CEO compensation.

Terrance Heath blogs on OurFuture.org this morning:

If you're tired of hearing about the recovery you can't feel, while seeing headline after headline about how well Goldman Sachs is doing ... If you're enraged that the same banksters we bailed out are doing everything in their power to stop much-needed consumer protection, and you're ready for a showdown, come to Chicago and tell the banksters "No!"

Public option ebbs and flows

Jonathan Cohn at The New Republic this morning captures the atmosphere around the health care debate during the past 24 hours.

Thursday was as crazy a day as I've seen in Washington. The flurry of legislative activity over the public insurance option--and the flurry of media coverage it generated--made it difficult to keep up and, at times, to separate truth from rumor or hyperbole.

But over the course of the day, one thing became increasingly clear. At least for the moment, the debate isn't over whether to include a public option. It's over what kind.

But whatever kind of public option there is, there are reports that Sen. Olympia Snowe will oppose it. McJoan at Daily Kos reacts:

All these months Baucus and the administration have been courting her for this, she's waving her own veto pen. Presumably, it will be her trigger or nothing, but with momentum gaining behind a much stronger opt-out option, she's threatening to take her marbles and go home. Last week Tom Harkin asked whether 52 Democratic Senators should bend to the will of 5. But they should also be questioning whether the 52 Democratic Senators should be bending to the will of one Republican.

It's time for Harry Reid to dust off the reconciliation procedures book. If Snowe is going to side with AHIP and the rest of the Republicans, they're going to have to do this without her.

Both TPM and The Huffington Post highlight Sen. Arlen Spector's prediction on MSNBC that Democrats can pass a public option bill without Snowe. Via TPM:

"We have 60 votes without Sen. Snowe, so we can still invoke cloture and move to a vote on the public option," he said. Some moderate Democrats, he added, might oppose the public option, but they'd still vote for cloture.

On Snowe, he said, "I hope we have her, but we may be able to do it without her."

David Dayen at FDL posted a rundown on the state of play on the public option midday Thursday that noted House Speaker Nancy Pelosi at a news conference "sounded like she was still searching for votes" for a "robust" public option bill. The co-chair of the Progressive Caucus, Rep. Raul Grijalva, is quoted as saying there appear to be at least 210 votes for such a bill in the House —which leaves eight more votes to be nailed down.

Cohn notes that today "brings another caucus meeting and there, perhaps, the House Democrats will make a final decision about which way to go. There isn't much time, given the schedule Pelosi wants to keep. She wants to unveil a bill early next week and, perhaps, have a floor vote the week after that. The leadership has already sent language over to the Congressional Budget Office for scoring. As one staffer says, "it's all locked in--except for the public plan."

Obama Speech Headlines Major Day For Climate Bill

Politico previews the day in climate: "Massachusetts Democratic Sen. John Kerry, the lead sponsor of a Senate climate bill, plans to meet with Senate Majority Leader Harry Reid on Monday to set a timeline for committees to finish work on the legislation – possibly as soon as Thanksgiving. And Environment and Public Works Chairwomen Sen. Barbara Boxer said she plans to release new sections of the climate bill that she co-authored with Kerry on Friday. The release of her bill comes as the EPA is set to release a study of the economic impact of the Senate version of the global warming legislation. While Democratic senators make their push in Washington, Obama will deliver a speech on clean energy and climate change at the Massachusetts Institute of Technology ... on Thursday, West Virginia Sen. Rockefeller indicated that the [Kerry-Boxer coal] provisions would be insufficient to gain his support. 'There is no deal on coal,' he said on Thursday."

EPA expected to deliver positive cost estimate. CQ: "Sponsors of a Senate climate change bill anticipate that a preliminary EPA cost estimate of the legislation due Friday will diminish fears about the expense of creating a cap-and-trade system."

Grist's David Roberts encourages enviros to retain some swagger: "...greens have the Big Mo. There’s a self-reinforcing cycle of positive stories happening. Deniers and delayers are on the defensive. It feels good! Yes, it’s certain to change, and change again, over the course of the long fight in the Senate. But confidence is everything. Greens aren’t used to being the ones with muscle and momentum, but now that they’ve got them the thing to do is get a little swagger. Nothing succeeds like success, and nothing is more powerful in politics than the aura of inevitability."

Grist's Jonathan Hiskes questions if tomorrow's worldwide 350.org rallies will unify or fracture environmental movement: "350.org is taking a big-tent approach to activism on its International Day of Climate Action this Saturday, inviting anyone who wants to help to join a climate-change demonstration, or create one of their own. That open invitation means not everyone will be pushing the same message. In fact, a trio of groups will use the day, and the number 350, to highlight their opposition to ... cap-and-trade, the mechanism integral to the clean energy bill in Congress and to the United Nations approach."

Researchers pen W. Post oped arguing we can afford to cut down carbon levels to 350: "With investments of roughly 1 to 3 percent of global gross domestic product, or $600 billion to $1.8 trillion, we could rapidly transition from oil and coal to renewables and clean energy sources, including wind and solar, and replenish global forests, which would help trap billions of tons of carbon. These efforts would create jobs and stabilize the climate in the process. Fluctuations or changes in some factors, such as the price of oil, could mean these investments might actually save us money."

Scientists discover accounting problem that overstated carbon benefits of biofuels. NYT: "In emission calculations, all fuel derived from plants and other organic sources — including ethanol — is generally treated as if it has no effect on carbon dioxide in the atmosphere, even though though biofuels do emit carbon dioxide when burned. This might make sense if the source of the fuel were, say, a crop of corn grown on barren land specifically for use as fuel, because the crop would have absorbed carbon dioxide as it grew, offsetting what it emits when ultimately burned. But if an existing stand of forest land is cleared for fuel, its ability to absorb carbon dioxide is lost, and the net balance of the gas in the atmosphere goes up." Time adds: "'Biofuels can be an important part of the portfolio of climate-change activities,' says Steve Hamburg, chief scientist for the Environmental Defense Fund and a corresponding author on the second Science paper. 'But we have to make sure we incentivize the right way, or we could end up with perverse outcomes.'"

Democracy Corps Probes The 'Separate World' Of Conservatism

Isaiah J. Poole — Mon, 19 Oct 2009 08:22:40 -0700

Commentators, including our own Sara Robinson and author Neal Gabler, have observed a resurgent brand of conservatism that has taken on the characteristics of religious zealotry. It is a brand of conservatism that cannot be negotiated with because its adherents see themselves as the bearers of the one true faith and as victims of a host of apostate "others" who they feel must not be appeased through compromise.

Elements of that brand of conservatism can be seen in a report issued Friday by Democracy Corps based on interviews with groups of conservatives and moderates in Cleveland, Ohio.

"The self-identifying conservative Republicans who make up the base of the Republican Party stand a world apart from the rest of America," the report says, not because they stand in fervent ideological disagreement with President Obama and the mainstream of the Democratic Party but because they "identify themselves as part of a ‘mocked’ minority with a set of shared beliefs and knowledge, and commitment to oppose Obama that sets them apart from the majority in the country."

Among the characteristics of what the report calls "a world apart":

These conservative Republican voters believe Obama is deliberately and ruthlessly advancing a ‘secret agenda’ to bankrupt our country and dramatically expand government control over all aspects of our daily lives. They view this effort in sweeping terms, and cast a successful Obama presidency as the destruction of the United States as it was conceived by our founders and developed over the past 200 years.

This concern combines with a profound sense of collective identity. In our conversations, it was striking how these voters constantly characterized themselves as part of a group of individuals who share a set of beliefs, a unique knowledge, and a commitment of opposition to Obama that sets them apart from the majority of the country. They readily identify themselves as a minority in this country – a minority whose values are mocked and attacked by a liberal me- dia and class of elites. They also believe they possess a level of knowledge and understanding when it comes to politics and current events, one gained from a rejection of the mainstream media and an embrace of conservative media and pundits such as Glenn Beck and Rush Limbaugh, which sets them apart even more. Further, they believe this position leaves them with a responsibility to spread the word, to educate those who do not share their insights, and to take back the country that they love. Their faith in this country and its ideals leave them confident that their numbers will grow, and that they will ultimately defeat Barack Obama and the shadowy forces driving his hidden agenda.

These voters can't be viewed in partisan terms, the report goes on to say. They are as likely to label Republican politicians as political infidels as their Democratic counterparts. Nor, the report says, do the views of this group appear overtly to be racially motivated hatred toward Barack Obama as the first biracial president. Rather, "they are actively rooting for Obama to fail as president because they believe he is not acting in good faith as the leader of our country... [T]hey explicitly believe he is purposely and ruthlessly executing a hidden agenda to weaken and ultimately destroy the foundations of our country."

It sounds to some of us like the stuff that is babbled by mentally ill homeless people, but it's very real to the significant segment of the electorate that gets its framing of the political debate from Glenn Beck, Rush Limbaugh and their ilk. The danger for progressives, and for democracy as a whole, as Gabler wote, is this:

Having opted out of political discourse, they are not susceptible to any suasion. Rationality won't work because their arguments are faith-based rather than evidence-based. Better message control won't work. Improved strategies won't work. Grass-roots organizing won't work. Nothing will work because you cannot convince religious fanatics of anything other than what they already believe, even if their religion is political dogma.

David Corn, writing about this in Mother Jones, believes that it is not Obama that is in the most peril from this wing of conservatives but the Republican Party:

So is this a problem for Obama? Probably not. The White House can dismiss this group as a right-wing fringe. The real dilemma is for the Republican Party. How can it speak to (or appease) these voters without appearing extreme and without alienating reasonable Republicans and independents? After all, GOP chairman Michael Steele, Republican congressional leaders, and the party's 2012 presidential contenders will have a tough time remaining in the real world while courting conservatives who reside somewhere else. But if GOP leaders don't join the underground movement hailed by these conservatives, won't that indicate they, too, are part of the Obama conspiracy?

The report finds that the independent voters they interviewed are not being won over by this group of extremists. They see the Republican Party as one that "advances the interests of the rich and big businesses at the expense of the middle class. They worry about the Democratic Party’s proclivity to spend tax dollars and provide ‘freebies’ to those who do not do their fair share, but they appreciate the Democrats’ focus on ‘the little people’ (among which they included themselves) and the fact that ‘it’s not all about the money.’"

This summer, Sara Robinson wrote a three-part series on what she provocatively called "fascist America." In Part III of her series, Robinson discussed the political contract that through much of American history promised "the upper classes predictable, reliable wealth in return for their investments ... the middle class mobility, comfort, and security ... [and] the working classes fair reward for fair work, chances to move ahead, and protection against very real risk that they'll be forced into poverty if they can't work any more."

For the past four decades, conservatives have done everything in their power to dismantle that essential contract, and thus destroy our mutual confidence in the fundamental agreements that allow any democratic system to function. (None dare call it treason -- but a solid case could be made.) This isn't news: by now, most of us can recite the litany, chapter and verse, of the all the many ways they hacked away at America's essential ability to function as the Constitution intended.

... America's best (and perhaps only) chance to keep the shreds of its tattered democracy intact is to get serious about cutting working Americans back into the democratic contract -- and repair their broken trust by making damn sure those promises are actually kept. Once they're back on board, the system will begin to work again for everyone. Until then, the accelerating breakdown is just going to continue.

In the Democracy Corps report, there is more hope that progressives can win the hearts and minds of independent voters with a message of using the power of government to protect ordinary Americans from the conservative-inspired excesses of capitalism run wild, while putting forward concrete plans for restoring their ability to find good-paying jobs and enjoy an improved quality of life.

Alan Greenspan's Latest Epiphany

Isaiah J. Poole — Fri, 16 Oct 2009 08:07:17 -0700

Mr. Big Stuff himself, as he used to be called on CNBC during his heyday, has spoken once again. But this time, Alan Greenspan has uttered an inconvenient truth. So, will Washington and Wall Street listen?

The former Federal Reserve chairman's statement Thursday before the Council of Foreign Relations in New York about today's megabanks—"if they’re too big to fail, they’re too big"—is so self-evident a fifth-grader would get it. But the adults who are formulating economic policy at the Treasury Department and on Capitol Hill have treated that simple statement as heresy. There has been no serious move on either side of Pennsylvania Avenue to address the increased concentration of the banking sector that has been the consequence of the Wall Street bailout actions of the past year.

Neither has there been much of a ripple in the financial press over Greenspan's comments. (CNBC, which used to slavishly pore over every Greenspan utterance for hours on end when he was Fed chairman, did not mention the Greenspan speech on its website.) They were reported by Bloomberg News:

“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”

At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc.

“It’s going to be very difficult to repair their credibility on that because when push came to shove, they didn’t stand up,” Greenspan said.

... The former Fed chairman said while “just really arbitrarily breaking down organizations into various different sizes” goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.

“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said.

“Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those who should be shrinking, it undermines growing standards of living and can even bring them down.”

The earnings reports from the financial sector that have come out this week help underscore how the too-big-to-fail problem has been worsened by the policy decisions that have been made by both the Bush and Obama administrations. As the Christian Science Monitor noted this week in reporting on JPMorgan Chase's blockbuster third-quarter earnings of $3.6 billion:

Before the financial crisis, in May 2007, these firms accounted for about 55 percent of the market value of financial firms within the S&P 500. Smaller banks and insurance firms accounted for the other 45 percent, according to numbers crunched earlier this year by Bespoke Investment Group.

Today, those 18 firms account for nearly two-thirds of the financial-sector market value in the index, according to numbers from S&P and the Yahoo! Finance website.

The Washington Post reported in August:

J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.

You may recall that this is not Greenspan's first come-to-Jesus moment. It was about a year ago when Greenspan, testifying before the House Committee on Oversight and Government Reform, admitted that he got the whole unbridled-capitalism-is-always-good thing wrong. "Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief," he said. Back then, our Robert Borosage wrote:

Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. Greenspan dismissed that goofiness in response to a question from one of its right-wing purveyors, Rep. Todd Platts, R-Pa., noting that subprime loans grew to a crisis only as the unregulated shadow financial system securitized mortgages, marketed them across the world, and pressured brokers to lower standards to generate a larger supply to meet the demand. Private greed, not public good, caused this catastrophe.

But to look at what came out of the House Financial Reform Committee Thursday is to question whether anyone seriously considered Greenspan's change of heart. That committee approved legislation that exempts virtually every bank in the country from policing by a new Consumer Financial Protection Agency. While the argument is that the agency would still have the authority to oversee about 150 of the nation's largest banks, the fact that the remaining 8,000 can escape the scrutiny of an agency charged with safeguarding consumer interests is another jaw-dropping example of the extent to which the banking industry, and not the people, "own" Congress. That 8,000, by the way, includes banks that have assets of as much as $10 billion.

Further, that same legislation creates regulations for derivatives—the shadowy financial transactions that set the stage for the Wall Street financial collapse—that are so full of holes that even Gary G. Gensler, chairman of the Commodity Futures Trading Commission, told The New York Times that he hoped a second congressional committee would rework the legislation to make it stronger.

The anonymous creator of iStockAnalyst, a stock tip site, captured the import of Greenspan's Thursday comments when he wrote on his blog, "You know we've reached code red 'Outrageous' when even 'hands off' Alan Greenspan believes the banks have become too large. As many sensible people have said, anything that is 'too big to fail' is TOO big period."

He goes on to write: "Will it change? No - but now you even have the Chief Provider of Narcotics to the financial industry for two decades worried about the Frankenstein he has helped birth."

That should give everyone pause. We should make sure it does.

Voters Want The Banks Reined In

Isaiah J. Poole — Wed, 14 Oct 2009 07:43:23 -0700

House members should beware when bank lobbyists come calling: Ceding to their wishes might get you campaign cash but it will likely cost you the next election.

That's the message of a new poll released today by Celinda Lake and done for Americans for Financial Reform. That poll says that two-thirds of voters in "Blue Dog" or conservative Democratic districts and those in politically competitive Democratic districts support the creation of a Consumer Financial Protection Agency with the teeth "to enforce a strong set of rules" for banks and financial services businesses.

When asked how a Congress member's vote against a Consumer Financial Protection Agency would affect their vote for that member on the next election, 41 percent of those surveyed said such a vote would make them less likely to re-elect that member, while only 14 percent said that they would be more likely to vote for an anti-CFPA member.

Roughly 60 percent of voters in these districts also favor strong controls on derivatives, the exotic financial products that caused the collapse or near-collapse of several large Wall Street institutions. These voters said they want these “complex financial transactions [to] happen on an open marketplace that is subject to oversight."

Despite these poll results, the legislation currently being considered today by the House Financial Services Committee to create the consumer protection agency and to regulate derivatives is moving in the opposite direction of what a majority of voters demand. Robert Borosage's post on Tuesday outlines the problems: the consumer protection proposal has been stripped down at the behest of the banking lobby, and the derivatives legislation is widely derided as being weaker than current law.

Borosage goes into more detail today at The Huffington Post, and adds this message:

Backroom deals are no longer safe. Americans have been fleeced of trillions in the value of their homes and their savings because of Wall Street's reckless excesses. Then as taxpayers, they were extorted to ante up literally trillions more to forestall economic collapse by bailing out the banking sector. Insult was added to that injury when the Federal Reserve refused to tell the Congress who got the money and on what terms.

Legislators would be well advised to understand the cozy old ways of doing business are no longer acceptable. Americans are livid and paying attention. Legislators who rely on Wall Street to finance their campaigns and then lead the effort to block or dilute reforms will discover that their constituents know what they have been up to.

Americans for Financial Reform is urging people who support a real crackdown on derivatives and a Consumer Financial Protection Agency with teeth to contact these members of the House Financial Services Committee and House Democratic leadership:

Melissa Bean, D-Ill.
Paul Kanjorski, D-Pa.
Dennis Moore, D-Kan.
Gregory W. Meeks, D-N.Y.
Carolyn McCarthy, D-N.Y.
Charley Wilson, D-Ohio
Ed Perlmutter, D-Colo.
Joe Donnelly, D-Ind.
Bill Foster, D-Ill.
Walt Minnick, D-Idaho
Mary Jo Kilroy, D-Ohio
Ron Klein, D-Fla.
Travis W. Childers, D-Miss.
Steve L. Driehaus, D-Ohio
Jim Himes, D-Conn.
Gary Peters, D-Mich.
Dan Maffei, D-N.Y.
John Adler, D-N.J.
Joseph Crowley, D-N.Y. (not a member of the committee, but is chief deputy whip and is the chairman of the New Democrat Coalition.)

Movement To Block Bernanke Gathers Steam

Isaiah J. Poole — Tue, 13 Oct 2009 10:47:34 -0700

The renomination of Ben Bernanke as chairman of the Federal Reserve should not be rubber-stamped by the Senate until Bernanke and the Fed are more transparent and accountable to the public, says a growing coalition of activists roused by Reps. Alan Grayson and Ron Paul, who have asked the Senate to put a hold on Bernanke's nomination.

Grayson, a Florida Democrat, and Paul, the libertarian Texas Republican, have together launched a petition drive on the website UnmaskTheFed.com that calls on the Senate to "vote no on Ben Bernanke's confirmation until the Federal Reserve comes clean on what it has done with OUR money."

The two members of Congress sent a letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., asking that hearings on Bernanke's confirmation be postponed until Bernanke discloses some basic information about the taxpayer dollars used to bail out Wall Street financial institutions.

At the top of the list is a demand that the Fed supply information sought by the Bloomberg financial news service through a Freedom of Information Act request. That request was filed last year at the height of the Fed's bailout activity and requested details on the collateral arrangements under which the Fed issued $1.5 trillion in loans to some of the nation's largest financial institutions. In August, a U.S. District Court judge ordered the Fed to grant Bloomberg's information request. The members specifically want disclosure of tax dollars used to rescue the Bear Stearns brokerage from collapse and merge it with JPMorgan Chase.

The letter also asked for all Federal Reserve documents that went to New York Attorney General Andrew Cuomo’s office relating to the Bank of America/Merrill Lynch merger, which has been overshadowed by charges of deception and fraud by executives on both sides of the merger. Finally, the members want full disclosure of so-called "off-balance-sheet" Fed transactions, many of which were used to prop up specific institutions and for which taxpayers are ultimately liable, and the release of the minutes of Federal Open Market Committee meetings, during which these transactions would likely have been discussed.

In an article posted today on The Huffington Post, Grayson writes:

It would simply be unreasonable for the Committee to confirm Bernanke to another term given how little is known about what he has actually done. Remember, Ben Bernanke didn't see the crisis coming and has added $1.2 trillion to the Fed's balance sheet through covert bailouts.

The Senate cannot hope to have a full debate over his record if nothing is public.

[In a conference call with bloggers, I asked Elizabeth Warren, the chair of the Financial Oversight Board, her reaction to the movement to put a hold on the Bernanke renomination. While she did not explicitly embrace the idea, she said, "Any examination of the activities of the Fed, and particularly the data that the Fed has about the economic crisis, is fair game. ... I just regard that as part of due diligence."]

So far, Bernanke has sought to put a friendly face on what has otherwise been a business-as-usual posture of the Fed when it comes to public disclosure of key decisions that have put tax dollars and the Main Street economy on the line. The Obama administration, by supporting Bernanke's renomination, has given this behavior political cover.

But if Bernanke chooses to stonewall on these critical questions when his confirmation hearings get underway later this month, all it takes is for one member of the Senate to object to moving Bernanke's nomination to the floor of the Senate. The tactic of placing a hold on a Senate nomination has been frequently used by Republicans against Obama administration appointees for for less consequential reasons than what is happening with trillions of taxpayer dollars in the name of staving off the next Great Depression. What's unclear is whether a member of Congress will be bold enough to stand up to Wall Street and to what William Greider calls "the temple."

Until the answer to that question becomes clear, the public has at least one good avenue to channel its outrage over how the Fed has operated in the shadows to cover Wall Street's bad bets at our expense.