The GOP and the Banks: Cutting the Garlic Budget As the Vampires Attack

Richard Eskow — Wed, 22 Dec 2010 15:13:51 -0500

Van Helsing: "The strength of the vampire is that nobody will believe in him."

America's debt to Wall Street has soared since 1945 - and although the banks were rescued at public expense, the public's been left holding the bag for the recent drop in housing prices:

Hmm ... How many times has the word "vampire" appeared in books during the same period [1]?

What does this mean? Does it reflect the public's subconscious response to predatory banking? Or is it just some guy having nerdy fun with data sets by juxtaposing two trend lines that have nothing to do with one another? We report, you decide.

Here's what we do know: Like their fictional counterparts, America's banks are revenants, re-animated creatures who were brought back from the dead through the public's generosity. Now they're feasting on the rest of us again, while politicians in Washington work to rob us of the few tools we can use to defend ourselves. With some Democratic complicity, Republicans are fulfilling the promise of Rep. Spencer Bachus, who said that "Washington and the regulators are there to serve the banks."

And what they're serving them is you.

The Count: "Listen to them! The creatures of the night. What music they make ..."

The rap sheet against America's banks grows longer and longer. They keep stringing people along with phony foreclosure negotiations, and then foreclose anyway. And we're hearing more and more stories about bank agents who, as they're invading and padlocking illegally foreclosed homes, also steal the private property inside them. In a recent ghoulish case, they stole a box containing the ashes of the homeowner's husband - ironically enough, from a woman named Ms. Ash. Even vampires don't do that.

The states of Arizona and Nevada are suing Bank of America, one of corporate America's worst offenders, for repeatedly breaking the law as forecloses on homeowners. The Arizona suit says that the bank has "consistently misled homeowners about its home loan modification process."

Foreclosure fraud isn't the only kind of bank criminality, of course. Deutsche Bank just plea-bargained its way out of criminal charges for helping people get out of paying their taxes. There's that matter of laundering drug money. And countless other crimes, large and small. But the widespread criminality surrounding foreclosures strikes the closest to home, but literally and metaphorically. After their taxpayer-funded bailout, these revenants are literally biting the hand that fed them.

The financial reform bill passed this year was less than the public wanted, according to polls, and less than it needed, according to experts. But it was a start, and Wall Street didn't like it.

Renfield: "I'm loyal to you, Master! I didn't betray you!"

Fortunately for them, the bankers have friends in low places. First the GOP killed the omnibus spending bill that funded many of the financial reform bill's provisions for protecting the public against predatory bank policies. Senate Democrats are trying to avoid a shutdown of government by introducing a continuing resolution but, as Pat Garafolo points out, it doesn't include any of the additional money needed to enforce the financial reform bill.

The Democratic resolution adopts the classic right wing budget-cutting notion that government should avoid spending increases and keep its budget numbers flat - or, as their resolution puts it, "funding would continue at FY 2010 enacted levels for most programs." That's a terrible mistake, both tactically and practically.

The SEC would be particularly hard-hit but this resolution, just when it's starting to pursue foreclosure fraud more aggressively by issuing subpoenas to the big banks and loan servicers. (Is that a coincidence, too?)

One of the reforms blocked by this funding move include the appointment of an "Investor Advocate" to assist stockholders who have been misled by corporations. Apparently these "conservatives" are more than happy to interfere with a free market, even the stock market, if their paymasters direct them to do it. The broad category of "investors" includes pension plans and other plebeian organizations, after all - and private investors are merely wealthy, rather than the extremely wealthy they live to serve.

The Bacchanalians have also stalled the funding of a whistleblowers office. That action will ensure that bank criminals aren't interrupted in their wrongdoing just because some underling is struck with an excess of conscience. They've also blocked the Office for Credit Ratings,, so we're still stucked with the corrupt, rigged ratings game that led to the last economic collapse.

Our elected leaders aren't the only ones baring our necks to the predators' fangs. The Federal Reserve's also getting into the act. As the National Consumer Law Center puts it, the Fed has "proposed new rules that make it much harder for homeowners to escape abusive loans, avoid foreclosure or obtain refinancing." The timing's not coincidental. They're rushing to put this rule into place before responsibility for mortgages is transferred to the Consumer Financial Protection Bureau. In this vampire story, Elizabeth Warren is Professor Van Helsing and the Federal Reserve is Renfield, Dracula's eager human servant.

Van Helsing: "We are dealing with the undead."

We know what needs to be done. A roster of banking and economics professionals has signed an open letter to regulators asking them to step in and correct these systemic flaws and abuses. But they couldn't do that without money, even if they wanted to. The head of the Commodities Futures Trading Commission says he can't implement financial reform without these funds.

We realize that comparing bankers to vampires is harsh, excessive, and unfair ... to vampires. Vampires only target one victim at a time, after all. Vampires have the common decency not to show themselves in broad daylight. And as we all know from the movies, they're charming, polite, elegant - and terrific dancers. (I used to work on Wall Street and believe me: Bankers aren't a pretty sight when they dance.)

What's more, vampires won't enter your house without an invitation. As Ms. Ash learned to her horror, bankers aren't that civilized.
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1] Created with Google's nifty new NGram tool.

This post was produced as part of the Curbing Wall Street project.

Here Come the High Rollers!

Mary Bottari — Wed, 01 Dec 2010 12:55:02 -0500

While the Dodd-Frank Wall Street reform bill did too little to address the problem of “too big to fail” banks, one of the big wins for reformers was the bill’s strong derivatives chapter which drags risky “over the counter” derivatives trades out of the shadows and into the light of day.

Reformers won strong provisions for clearing, margin and transparency, which will force the big banks to put real money behind their bets. Reformers also succeeded in securing mandatory position limits for key commodities that will protect consumers from price spikes caused by excessive speculation.

But now that the Wall Street reform bill is in the agency rulemaking process, bank lobbyists are back in droves, descending on regulators in an attempt to force giant loopholes into the law – loopholes worth billions of dollars for the big banks. The Los Angeles Times recently counted the noses and found that 90% of the time, regulators are meeting with the big financials firms. Surprise! Goldman Sachs and JP Morgan Chase topped the list.

Case in point: The big banks and the American Bankers Association are trying to redefine what constitutes “commercial risk” under the Dodd-Frank law. The ABA wants commercial risk "to be interpreted broadly enough to include financial risk for depository institutions.” According to Heather Slavkin of the AFL-CIO, "if the Commodities Futures Trading Commission (CFTC) were to adopt this definition, risky financial firms such as hedge funds and insurance companies could avoid business conduct and safety and soundness requirements that apply to major players in the derivatives market under Dodd-Frank” adding a substantial amount of risk to the system.

On a different front, the CFTC is working on developing “position limits” or caps on the number of speculative futures a trader can hold. The intent of Congress was to crack down on the energy and food commodity speculation that serves no productive purpose other than to line the pockets of traders and jack up prices on consumers.

Remember $4 a gallon we paid at the pump in 2008? It was due to crude oil speculation and it is happening again. “Wall street speculators are driving the current run-up in crude oil prices - cashing in before federal regulators have had a chance to protect households by tightening trading rules and establishing strong position limits,” says Tyson Slocum an energy expert for the consumer group Public Citizen. But the big traders are attempting to undermine the new law behind the scenes and refusing to cooperate with regulators, prompting Bart Chilton, a Commissioner for the CFTC, to express frustration with the industry.

At some federal agencies the big banks are gaining ground. Bowing to pressure from the big banks, Treasury Secretary Tim Geithner appears to be moving ahead with an exemption to the mandatory clearing and transparency requirements for a certain type of derivatives called foreign exchange derivatives (or ForEx swaps). $4 trillion dollars of Forex swaps are traded around the globe daily – a huge market and a disastrous loophole in Dodd–Frank]. Geithner appears to be repeating the mistake of his predecessor, Larry Summers, who famously fought to keep derivatives unregulated. He is worried about the ForEx trade going overseas. Well, I say if you can’t do your business in the light of day like other American firms, let me help you pack.

Senator Maria Cantwell, a leader in the derivatives fights, thinks Geithner is on the wrong path. “I urge Treasury not to create a potentially dangerous loophole. The security of our economy depends on foreign exchange derivatives coming under the same transparency and oversight provisions as the rest of the vast derivatives market,” Cantwell told Bloomberg.

You can take action to crack down on the big banks by clicking here. And you can learn more about who is knocking on the door of regulators by visiting the CFTC website by clicking here.