Saboteurs of Wall Street reform count on indifferent public
When an average American looks at causes of the Great Recession - often-fraudulent housing loans bundled full of hidden fees and terms - a question quickly comes to mind: Why haven't any of the perpetrators gone to jail?
Instead, banks that fueled the crisis were bailed out with billions of taxpayer dollars. They got the uranium mine while U.S. homeowners received the shaft: Two million have lost their homes, two million more are in serious default, and 20 percent of our homes are worth less than the outstanding mortgages.
Future abuses were supposed to be curbed, and future bailouts prevented, as of July 21, 2010, when Congress passed Wall Street reform (aka the Dodd-Frank Act). Now, behind the scenes, banks, financial industry lobbyists and Republicans in Congress seek to de-fang and de-fund the law -- guarded, they hope, by the smokescreen of an uncomprehending, passive public.
"People are betting on the complexity of this issue so the consumer can continue to be defrauded," said Sen. Maria Cantwell, D-Wash., adding:
"There's a Bernie Madoff, laissez-faire approach that markets can police themselves: We learned a lesson for which families will be paying for decades . . . People have lost pensions. Families have lost college funds because of this. Homes have been lost. Families have lost their middle-class standing."
Is Cantwell crying wolf? Nope. The $50 million lobbying campaign by what President Obama calls "an army of lobbyists and lawyers" is beginning to pay dividends sure to be spent on mansions in Westchester (N.Y) County, and the consumption competition of the East Coast rich.
For instance, the GOP-run House Appropriations Committee has cut the 2012 budget of the Securities and Exchange Commission by $222.5 million (to $1.19 billion), even though the SEC was given major new responsibilities under Dodd-Frank.
And that means money goes straight into Wall Street's pocket: The SEC gets its operating money by fees charged to those it regulates, including major securities firms that were, of course, too big to fail.
"A little-noticed provision in Dodd-Frank mandates that those fees can't exceed the SEC's budget: So cutting its requested budget by $225.5 million saves Wall Street the same amount, and means regulated firms will pay $136 million less in FY 2012 than they did the previous year," James B. Stewart wrote last week in the New York Times.
President Obama talks tough in the briefing room, but has sounded an all-too-familiar bugle call: Retreat!!!
Harvard law professor and consumer advocate Elizabeth Warren has been organizing the new Consumer Financial Protection Bureau, a centerpiece of Dodd-Frank. But the woman who grew up on a farm in Oklahoma -- and genuinely believes the Consumer Bureau should protect the ordinary citizen and homeowner -- is anathema to the forces of power and greed.
Obama passed on Campbell and picked ex-Ohio Attorney General Richard Cordray to head the new bureau. Still, Cordray might not even make it to Senate confirmation. Forty-four Republican senators have vowed to filibuster any floor vote unless powers, scope and structure of the Consumer Bureau are seriously weakened.
Haven't these people read their history? America did not get out of the Great Depression by trusting speculator-driven markets that caused the crash of 1929. Instead, Franklin D. Roosevelt brought in a thief to control the thieves: As chairman of the Securities and Exchange Commission, Joseph P. Kennedy (aided by a Yakima boy, future U.S. Supreme Court Justice William O. Douglas) wrote rules by which Wall Street was forced to live.
Ordinary Americans can't afford to be indifferent to this stuff. Just listen to the words of Ann Yerger, head of the Council of Institutional Investors, which speaks for pensions and employee benefit funds that invest billions in the stock market:
"Excessive risk by Wall Street fueled the market meltdown that wiped out millions of U.S. jobs and billions in retirement savings. The Dodd-Frank Act, if implemented as intended, will be a critical bulwark against such massive abuse of investors."
In the Northwest, we can see -- in our electricity bills -- the need for critical bulwarks and the cost of manipulation.
The now-defunct Enron Corp. used market manipulation to intensify a 2001 electricty shortage and skim more than $1 billion from ratepayers in the West. Its energy traders used schemes with names like "Death Star" and "Fat Man," and chuckled in e-mails about fleecing elderly widows.
Using Dodd-Frank and other devices -- i.e. public humiliation -- Cantwell has worked to force federal regulators to do their jobs. Manipulation of the oil futures market poses as much, or more, danger to America's economy as "Death Star" and other schemes posed to West Coast electrical ratepayers a decade ago.
I needed recreational reading on two recent air trips, on both occasions picking up the latest issue of Vanity Fair. The glossy magazine contained its usual article mix: Monster houses in the Hamptons, competition over who can make the splashiest donations to arts causes, and coups that have made, broken and restored hedge fund billionaires.
Looking at pictures of houses built by "dark market derivatives," another query comes to mind: What have the homeowners done that improves the lives of people, and actually contributes to American society? In most cases, nothing.
"I want us known for MAKING something outside of creating exotic financial instruments," said Cantwell.
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