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This page is graphically intense with long load times due to photos. However, the photos and narratives makes the wait well worthwhile. The opinions expressed are those of the author and in no way represents the opinions of others.

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If you wish to listen to some golden oldies from 1940s-1990s, click on the selection on the list below. There are about 80 full-length songs to choose from. (NOTE: Song audio degraded due to space limitations, but adequate for computer listening.) Click For Music 1940s: Billie Holiday_As Time Goes By 1940s: Kate Smith_God Bless America 1940s: Mills Brothers_Glow Worm 1950s: Big Bopper_Chantilly Lace 1950s: Bill Haley Comets_Youre Never Too Old To Rock 1950s: Coasters_Yakety Yak 1950s: Danny And TheJuniors_At The Hop 1950s: Del Shannon_Handyman 1950s: Doris Day_By The Light Of The Silvery Moon 1950s: Fats Domino_I Hear You Knockin 1950s: Freddie Canon_Palisades Park 1950s: Nat King Cole_Ramblin Rose 1950s: Pat Boone_Love Letters In The Sand 1950s: Red Skelton_Pledge Of Allegiance 1950s: Ricky Nelson_Listen To The Rhythm Of The Falling Rain 1950s: Ritchie Valens_Boney Maronie 1950s: Ritchie Valens_Donna 1950s: Ritchie Valens_LaBamba 1960s: Beach Boys_Surfin USA 1960s: Beach Boys_Barbara Ann 1960s: Beatles_Strawberry Fields Forever 1960s: Bobby Vee_Go Away Little Girl 1960s: Chubby Checker_The Twist 1960s: Chuck Berry_Johnny Be Good 1960s: Crosby Stills Nash_Teach Your Children 1960s: Dean Martin_Make The World Go Away 1960s: Elvis Presley_Blue Suede Shoes 1960s: Elvis Presley_Love Me Tender 1960s: Harry Belafonte_Day O 1960s: James Darren_Goodbye Cruel World 1960s: Johnny Mathis_Chances Are 1960s: Kingsman_Louie Louie 1960s: Marcels_Blue Moon 1960s: Marvin Gaye_Lets Get It On 1960s: Paul Anka_Put Your Head On My Shoulder 1960s: Harry Belafonte_Day O 1960s: Righteous Brothers_Youve Lost That Loving Feeling 1960s: Johnny Mathis_Chances Are 1960s: Peter Paul Mary_The Marvelous Toy 1960s: Roy Orbison_Only The Lonely 1960s: Roy Orbison_Pretty Woman 1960s: Sam The Sham_Wooly Bully 1960s: Shirelles_Soldier Boy 1960s: Silhouettes_Get AJ ob 1960s: Simon And Garfunkel_Bridge Over Troubled Waters 1960s: Thunderbirds_Hippy Hippy Shake 1960s: Tony Bennett_San Francisco 1960s: Ventures_Apache 1970s: Bette Midler_The Rose 1970s: Cher_If I Could Turn Back Time 1970s: Commodores_Three Times A Lady 1970s: Crystal Gayle_Ill Do It All Over Again 1970s: Dione Warwick_Ill Never Love This Way Again 1970s: Engelbert Humperdink_Release Me 1950s: Fleetwoods_Mr Blue 1970s: Lovin Spoonful_Rain On The Roof 1970s: Mamas And Papas_Age Of Aquarius 1970s: Mamas And Papas_California Dreaming 1970s: Mamas And Papas_Monday Monday 1970s: Tina Turner_Whats Love Got To Do With It 1970s: Tony Orlando And Dawn_Tie A Yellow Ribbon 1970s: Troggs_Wild Thing 1980s: Aaron Neville Linda Ronstadt_All My Life 1980s: Bruce Springsteen_Born In The USA 1980s: Kenny Loggins_Footloose 1980s: Kim Carnes_Betty Davis Eyes 1980s: Kris Kristofferson_Loving Her Was Easier 1980s: Lee Greenwood_God Bless The USA 1980s: LindaRonstadt_Desperado 1980s: Linda Ronstadt_Thatll Be The Day 1980s: Marie Osmond Dan Seals_Meet Me In Montana 1980s: Michael Jackson_Billie Jean 1980s: Michael Jackson_You Are Not Alone 1980s: Michael Jackson And Friends_We Are The World 1980s: Michael Jackson_Ill Be There 1980s: Phil Collins_In The Air Tonight 1980s: Ricky Nelson_Garden Party 1980s: Ronnie Milsap_Lost In The 50s Tonight 1990s: Kenny G_Auld Lang Syne 1990s: Luther Vandross_Id Rather 1990s: Ricky Martin_Livin La Vida Loca Free JavaScripts provided by The JavaScript Source

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OBAMANATION CHRONICLES BARACK HUSSEIN OBAMA: TRANSITION TO SOCIALISM WALL STREET BAILOUT 2009 - 2010

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RETURN TO MAIN TABLE OF CONTENTS

This is a work in progress. Graphic intensive with long load times because of photos.

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A Wall Street powerbroker for nearly 50 years who built an influential firm has confessed to a massive fraud scheme that will cost investors at least $50 billion, federal authorities say.

Bernard L. Madoff, 70, facing a single count of securities fraud, declined to speak with reporters after a federal magistrate judge in U.S. District Court in Manhattan ordered him released Thursday night on $10 million bail.

Andrew M. Calamari, associate director of enforcement in the Securities and Exchange Commission's New York office, said the SEC had filed a civil securities fraud charge as well and was alleging "a stunning fraud that appears to be of epic proportions."

Randall Hoven: In case you were wondering, take a trip to Opensecrets.org and search on Bernard Madoff as a contributor. My search says he gave $183,250 over all election cycles, with a cool $100,000 going to the Democratic Senatorial Campaign since 2005 and most of the rest going to individual Democrats.
The usual suspects such as Chuck Schumer, Charlie Rangel, Chris Dodd and Hillary Clinton show up, as well as Ron Wyden, Ed Markey, Frank Lautenberg and other Democrats. Yes, a few Republicans show up, too.

I also looked up that other rip-off artist, R. Allen Stanford. He gave $855,177 by my search. A cool $500,000 of that went to DSCC/Non-Federal Unicorp Association (Democratic Senatorial Campaign Committee). I also count another $55,000 going to the Democratic Senatorial Campaign, with Chuck Schumer and Chris Dodd again showing up as individuals. Yes, Stanford also gave to Republicans, perhaps as much as 10% of that $855,177.

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June 2009

Obama Administration to Seek New Power for SEC on Executive Pay (Jun 2009) The Obama administration will seek new powers for the Securities and Exchange Commission to force firms to let shareholders vote on executive pay and make directors who set compensation more independent, an administration official said. Today's proposal, subject to congressional approval, would cover all public companies. President Barack Obama has long supported giving shareholders nonbinding votes on bonuses, salaries and severance packages. The administration also will name a "special master" to monitor compensation plans for firms receiving exceptional assistance in the financial rescue.

The changes are aimed at reducing systemic risks and quelling a political uproar over bonuses paid to executives whose companies were bailed out by the government. Treasury Secretary Timothy Geithner has repeatedly blamed pay standards tied to short-term profits for contributing to the worst financial crisis since the 1930s.

"It clearly is going to force companies to be more transparent with their disclosure" on compensation, said Irv Becker, national practice leader for Philadelphia-based Hay Group's executive compensation practice. If the measure is implemented, it likely will take several years before shareholders begin to confront management, he predicted.

"It'll kind of be novel the first year, maybe the first two, and then likely be a little bit more serious in future years," said Becker, a former head of compensation and benefits at Goldman Sachs Group Inc.

Treasury Meeting

Geithner is scheduled to meet today (10 Jun) with SEC Chairman Mary Schapiro, Federal Reserve Governor Daniel Tarullo and executive- compensation specialists at the Treasury. The Treasury chief said yesterday that the Fed and other bank regulators will define "standards and principles that supervisors would use to help bring about reforms in compensation practices in the financial industry." "A centerpiece of sensible reforms will be to tie compensation to better measures of long-term investment and return, and to adjust them to reflect the risk"

Changing executive pay practices is part of a broader initiative by Obama to overhaul U.S. financial rules in the aftermath of the crisis. Obama will unveil his "series of specific proposals" streamlining and reorganizing regulation on June 17, White House spokesman Robert Gibbs said.

Regulation Overhaul

The Treasury will name Washington lawyer Kenneth Feinberg to review compensation at companies that have received infusions of government capital, the official said. Feinberg, who works as a mediator, is expected to take the job without pay. Feinberg is retained by corporations, insurers, government agencies and courts to help settle cases. He's best known for being named the special master of the September 11th Victim Compensation Fund, which made payments to the victims of the terrorist attack.

Geithner has been a proponent of so-called say-on-pay rules since taking office. In a May 18 speech in Washington, he said that giving shareholders a vote on compensation would bring a "kind of disclosure that can help a lot." In developing the executive compensation rules, the Treasury must reconcile the Obama administration's initial pay policy with measures since enacted by Congress. Senate Banking Committee Chairman Christopher Dodd added a provision to the $787 billion stimulus legislation passed in February that tightened pay restrictions at firms that took government capital, while also making it easier for banks to repay their aid to escape the new regulations.

Dodd's Measure

Dodd's provision restricts bonuses for senior executives and the next top 20 employees at companies getting more than $500 million from Treasury's financial-rescue fund. Limits on bonuses apply to other companies on a sliding scale based on how much assistance they received. The Obama administration's original proposal, released Feb. 4, limited salaries and required bonuses to be paid in restricted stock. This was intended to provide incentives for bank executives to consider firms' longer-term interests, without setting an overall cap on compensation.

Geithner hasn't said how he plans to reconcile the two policies, other than to say that the Treasury will implement the law. The Wall Street Journal reported that the administration intends to drop its own proposals and just leave the firms that received federal rescue money subject to the Dodd measures, citing people it didn't name. Bank of America Corp. and Citigroup Inc. are among the firms that continue to have government shares. (Source: Bloomberg.)

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Why Obama Blinked On Merging The CFTC And The SEC (Jun 2009) Barack Obama's plan to overhaul the structure of financial regulation leaves in place the split between those regulators who supervise the trading of futures at the Commodities Futures Trading Commission and those who supervise stock trading at the Securities Trading Association. And while there may be good reasons to keep the commissions separate, mostly likely none of those informed the Obama administration's decision. Instead it was probably just cold politicial calculation.

Merging the commissions has long been a popular idea with reformers. It was proposed by Hank Paulson when he was Treasury Secretary, and it is supported by many who think that the divide between the New York centered functions at the SEC and the Chicago centered functions at the CFTC has created unhealthy regulatory gaps. Opponents of merging the commissions can argue that regulatory consolidation rarely leads to greater effeciency, that the Chicago-New York divide in the regulatory structure is beneficial because it reflects a real divide among trading cultures, that years of turf battles that follow regulatory mergers would be too much during while the financial crisis continues and that competition between regulators for jurisdiction leads to bettter regulation.

But the merger's greatest obstacle weren't these ideas. Indeed, it's hard to find anyone willing to make these points--they're more like debaters points that you could imagine an imaginary opponent of reform making. Instead, what seems to have made merging the commissions is that fact that each commission is supervised by different legislative committees.

The SEC is regulated by the Senate Banking Committee and the House Financial Services Committee. The CFTC falls under the oversight of the Agricultural committees in each house. Any consolidation would deprive one set of committees of its jurisdiction, a serious loss of power, influence and access to campaign cash for the leaders and members of that committee. Most likely, it would have been the agricultural committees that would have lost their supervisory role. And, as the steadfastness of agriculutral subsidies demonstrates, those committees are some of the most powerful on Capitol Hill.

Obama needs support of Congressional and Senate Democrats to pass not only the financial regulatory reform, but also his climate and health care proposals. He mosst likely decided he couldn't risk angering the members of the agricultural committees by proposing taking away their authority. And so one of the most basic pieces of regulatory change was dropped for political considerations. (Source: Business Insider.)

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U.S. may seek new rule for money market funds (Jun 2009) Regulators should consider requiring money market mutual funds to float their share prices rather than maintain the constant $1-a-share value that has made the industry a popular haven for investors' cash, the Obama administration says. The idea is mentioned in the wide-ranging plan released this week by President Obama to revamp financial-industry oversight.

The question, the administration says, is whether it would be better for the financial system overall if investors were weaned from believing that money funds can't lose principal value. When a major money fund suffered investment losses that caused it to slightly drop its share price in September, the news triggered a run across the $3.6-trillion industry. That forced the Treasury to step in and issue a blanket guarantee of money fund assets to calm investors. "The vulnerability of money market funds to 'breaking the buck' and the susceptibility of the entire . . . industry to a run in such circumstances remains a significant source of systemic risk," the administration says in its blueprint for regulatory reform.

Because money funds own mostly short-term, high-quality corporate and government IOUs, they haven't been required to reflect daily fluctuations in the value of those IOUs in their share prices, unless the securities permanently lose value (say, in the case of a bankruptcy). That has allowed the 38-year-old industry to maintain $1-a-share pricing, which to investors has made the funds appear as safe as federally insured bank accounts. The industry fears that allowing money fund share prices to float, even if the daily changes were tiny, would destroy investors' faith in the funds.

Given the record low yields on money funds -- an average of just 0.13% currently, according to iMoneyNet Inc. -- even a slight share decline could wipe out a year's worth of interest earnings. The administration said it was open to other ideas to reduce the risk the industry poses to the financial system, including requiring the funds to buy emergency insurance from private sources to damp the risk of runs.

The Securities and Exchange Commission will take up the question of money fund reforms at a meeting Wednesday and may ask for public comment on the $1-a-share pricing issue and other possible changes in money fund regulation, Bloomberg News reported. (Source: LA TIMES.)

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September 2009

Burned by Obama -- Wall St. execs feel betrayed (Sep 2009) In the depths of the financial crisis last year, people like Morgan Stanley's John Mack, BlackRock's Larry Fink, Greg Fleming (then of Merrill Lynch), JP Morgan's Jamie Dimon and Goldman Sachs' Lloyd Blankfein were telling everyone that candidate Barack Obama was a "moderate," and moderation was what this country needed.

What a difference a year makes. They won't admit it in public -- but in private conversations, the top guys on Wall Street are feeling burned. The guy who seemed like such a steady voice -- vowing to curb runaway spending and restoring order to the banking system and the economy as a whole -- is instead so driven to achieve his big-government policy goals that he and his policy people are ignoring their own economic advisers on the severe economic costs that his agenda will cause.

O: Ignoring his own economic team?

I'm told that Treasury Secretary Tim Geithner and chief economic adviser Lawrence Summers have both complained to senior Wall Street execs that they have almost no say in major policy decisions. Obama economic counselor Paul Volcker, the former Fed chairman, is barely consulted at all on just about anything -- not even issues involving the banking system, of which he is among the world's leading authorities.

At most, the economic people and their staffs get asked to do cost analyses of Obama's initiatives for the White House political people -- who then ignore their advice. It's almost the opposite approach, the Wall Street crowd complains, from the last Democratic president, Bill Clinton, whose main first-term achieve- ment -- deficit reduction -- was crafted by his chief economic adviser, Robert Rubin.

Like Obama, Clinton and Rubin promised to raise taxes on the "rich," and they did. But Clinton didn't raise taxes to embark on a wild-eyed redistribution of wealth and massive programs. In the early Clinton years, Rubin convinced the president that he needed to avoid the grim consequences of runaway spending -- and after the Republicans took Congress in '94, it was no longer an option.

Of course, the Clinton tax hikes came at a cost -- before the tech boom ignited the economy in 1995, growth was mediocre at best. But government spending remained under control, and lower interest rates followed, as did an economic recovery. Obama, according to Wall Street people who regularly deal with his economic and budget officials, is acting as if he has a blank check to do what he wants, while ignoring the longterm costs of his policies.

As one CEO of a major financial firm told me: "The economic guys say that when they explain the costs of programs, the policy guys simply thank them for their time and then ignore what they say." In other words, the economic people feel that they have almost no say in this administration's policy decisions. Wall Street should have seen it coming. Obama was among the most liberal politicians in the country, despite his campaign rhetoric -- and his record in Illinois and the Senate showed it. He has spoken glowingly over the years of the need to redistribute wealth, a measure that always leads to taxes on small businesses, the economy's main economic engine.

The execs who had such hopes for the president are now wondering fearfully just how radical he really is. It's almost comical watching the Street's top players squirm when they hear "class warfare" rhetoric coming from the White House, and it forces them to act in ways they'd never imagined. In addition to recently giving phony speeches about the sins of large compensation packages that they had no problem taking just a few years ago, many Wall Street CEOs are so terrified of being outed as greedy capitalists that they no longer use the corporate credit cards to charge business lunches at their favorite New York restaurants.

The funniest story I've heard lately came from a former Wall Street executive and longtime Democrat who anxiously recounted a recent conversation with Obama. The executive said he told the president that he's at a disadvantage because he's relatively inexperienced in economic matters during a time of economic crisis. "That's why I have Valerie," came Obama's reply. "Valerie" is senior adviser Valerie Jarrett -- a Chicago real-estate attorney and one of Obama's closest friends, who has deep ties to the Windy City's Democratic political machine. Now you know why Wall Street is so nervous. (Source; NY Post.)

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Government widens control over paychecks (Oct 2009) The Federal Reserve joined the Treasury Department on Thursday in imposing new limits on executive pay, extending the government's control over compensation at taxpayer-owned companies to institutions that are merely government regulated. The restrictions were the latest in more than a year's worth of government intervention in matters once considered inviolable aspects of the country's free-market economy and represent a signal moment in the history of the American economic experiment. After years of setting minimum wages, the government is now telling some companies how they should structure pay for those who run them.

The actions Thursday put the United States more in line with European governments. France and Germany, in particular, have pressed for international standards to limit executive pay, a move that the United States and Britain have resisted. At Treasury, President Obama's pay czar, Kenneth Feinberg, announced sharp cuts in pay for 175 top executives at seven big banks and automakers that received hundreds of billions of dollars in federal bailout money during the financial crisis. The new structures reduced the cash salary paid to some executives by 90 percent and tied more compensation to long-term stock awards. "There is entirely too much reliance on cash, and there's got to be a better way to tie corporate performance to long-term growth," Feinberg said at a media briefing. "I'm hoping that the methodology we developed to determine compensation for these individuals might be voluntarily adopted elsewhere." At the Federal Reserve, Chairman Ben S. Bernanke proposed a broader but less proscribed plan to restrict pay at banks. The aim is to prevent them from rewarding employees for actions that could endanger the firms' long-term financial health. Unlike Feinberg's more limited plan, the Fed's guidance would cover all banks it regulates -- even those that never received a bailout -- as well as U.S. subsidiaries of foreign companies.

However, the Fed's proposed rules have wiggle room: The guidelines would let banks set their own compensation but give the Fed veto power over pay practices that it determines could threaten the safety and soundness of a bank. They would extends the regulators' reach into pay practices affecting tens of thousands of bank employees, from senior executives to traders of complex securities. "I've always believed that our system of free enterprise works best when it rewards hard work," Obama said at the White House on Thursday. "But it does offend our values when executives of big financial firms -- firms that are struggling -- pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat."

Since the crisis began, the federal government has used taxpayer money to inject capital into financial firms in exchange for ownership stakes. Failing Fannie Mae and Freddie Mac were taken over by Washington. American International Group, the world's largest insurance company, is 80 percent owned by U.S. taxpayers. The government has picked winners (Bear Stearns) and losers (Lehman Brothers). And a sitting chief executive -- General Motors' Rick Wagoner -- was effectively fired by the White House.

Executive compensation has long been linked to company performance -- the higher profits and stock prices go, the bigger the payday for top executives. But Bernanke, other regulators and many on Capitol Hill say that compensation packages were so high that they led executives to put their companies and shareholders at risk solely for the benefit of multimillion-dollar bonuses. "The Federal Reserve is working to ensure that compensation packages appropriately tie rewards to longer-term performance and do not create undue risk for the firm or the financial system," Bernanke said.

The banking industry viewed the Fed's guidelines with ambivalence. Many banks already are moving to revise compensation practices for top executives and other employees who could expose the bank to bet-the-company risks. But industry representatives are wary of the regulations, concerned that they could ensnare even relatively low-level employees of smaller banks. "If it focuses on those who really put institutions at risk, that's fine," said Ed Yingling, chief executive of the American Bankers Association. "But if you get down to the point where you have regulators looking over the shoulders of branch managers, it really does not make sense."

Long-simmering resentment over executive compensation boiled over in March when it was revealed that AIG, the recipient of a taxpayer-fueled bailout package worth up to $180 billion, was paying hundreds of millions of dollars in bonuses to a trading division that nearly brought the company and the global financial system to their knees. The seven companies included in the Feinberg's cash crackdown are AIG, Citigroup, Bank of America, General Motors, Chrysler, GMAC and Chrysler Financial.

The new pay ceilings are low by Wall Street standards, and they are by no means watertight. They still allow for hefty compensation. For instance: Feinberg reduced the cash salary of 13 top Bank of America executives by $89 million for 2009. But the total compensation for each of the 12 executives beneath outgoing chief executive Kenneth D. Lewis still averages $6.5 million this year. Feinberg's actions do nothing to stop Lewis's $70 million retirement compensation. And the companies escape the pay curbs if they pay back all of the bailout money they have received.

Still, Feinberg managed to slash about $879 million in total 2009 compensation at the seven companies, compared with 2008 levels. Sen. Charles E. Schumer (D-N.Y.) said Feinberg did not go far enough. He urged Feinberg to push the government deeper into corporate boardrooms via a number of proposals, such as forcing companies to split the jobs of chief executive and chairman. Daniel J. Mitchell, senior fellow at the libertarian Cato Institute, says he worries about the slippery slope. "I fear as politicians get a taste for interfering with executive pay for one little subset of companies where you actually could have sympathy for the approach, what's going to stop them from saying, 'Hey, this was popular. Let's do a little demagoguery before the next election and go after all the CEOs.' " (Source: Washington Post.) (SITE NOTE: The pay caps are disclaimed by the White House as their idea -- leaving it all to Kenneth Feinberg's policy.)



The Pay Czar Is Unconstitutional -- Kenneth Feinberg hasn't been confirmed by the U.S. Senate. (Oct 2009) Last week's announcement that "Pay Czar" Kenneth Feinberg slashed compensation for executives at seven large financial firms by an average of 50% stunned Wall Street, stoked the fires of populist resentment, and troubled economists. Will this government-mandated pay cut drive the most talented professionals away from these companies, endangering their recovery? Does it augur further politicization of economic decisions?

Lost in the arguments over economics and political theory, however, is a more basic question: Was this action constitutional?

Mr. Feinberg's ukase is the most prominent example (and not just by the Obama administration) of the exercise of power by an individual unilaterally appointed by the executive branch without Senate confirmation—and thus outside the ordinary channels of Congressional oversight. Earlier this month, the Senate Subcommittee on the Constitution conducted hearings into the constitutional basis for this practice, which many see as an end-run around checks and balances. The Obama administration declined Sen. Russ Feingold's (D., Wisc.) invitation to send a witness to the hearing to explain the constitutional basis for its various "czars."

So who is Kenneth Feinberg, and where did he get the power to set pay for executives at private firms?

As part of the hastily enacted and seldom-read legislation establishing the Troubled Asset Relief Program (TARP), Congress authorized the Secretary of the Treasury to "require each TARP recipient to meet appropriate standards for executive compensation." To carry out this task, last June the Treasury promulgated an emergency "Interim Final Rule," waiving ordinary requirements for a public comment period.

As part of this emergency rule, Treasury Secretary Timothy Geithner created the office of "Special Master" for compensation, delegated his TARP authority to set compensation standards to this officer, and appointed Mr. Feinberg (a lawyer and mediator) to this position, without obtaining Senate confirmation. Therein lies the problem. The Appointments clause of the Constitution, Article II, section 2, provides that all "Officers of the United States" must be appointed by the president "by and with the Advice and Consent of the Senate." This means subject to confirmation, except that "the Congress may by Law vest the Appointment" of "inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments."

There is no doubt that Mr. Feinberg is an "officer" of the United States. The Supreme Court has defined this term (Buckley v. Valeo, 1976) as "any appointee exercising significant authority pursuant to the laws of the United States." Mr. Feinberg signed last week's orders setting pay levels for executives at Bank of America, AIG, Chrysler Financial, Citigroup, GMAC, General Motors and Chrysler. They have the force of law and are surely an exercise of "significant authority" pursuant to an Act of Congress. He is not a mere "employee," acting at the direction of a superior. That means his office is subject to the requirements of the Appointments Clause.

While somewhat more disputable, Mr. Feinberg's is probably an "inferior" officer, defined as one subject to supervision and removal by a member of the cabinet. Although he has substantial discretion and independence, Mr. Feinberg reports to the secretary of the Treasury, who can fire him any time for any reason. This means that Congress could, if it wished, vest the appointment of the pay czar in the secretary, without any need for Senate confirmation.

But Congress has not done so. On the contrary, it vested the authority to implement TARP's compensation provision in the secretary of the Treasury. The secretary may sub-delegate that power to someone else—but that someone must be an "officer" properly appointed "by and with the advice and consent of the Senate."

The Supreme Court observed in Buckley v. Valeo that the provisions governing appointments under the Constitution reflect more than "etiquette or protocol." They embody the Founders' conviction that all power under U.S. laws must be exercised by officers with constitutional authority.

The Founders understood that the president and heads of the executive departments could not single-handedly carry out the law, so they required Senate confirmation as what the Federalist Papers call "an excellent check" on abuse or favoritism by the president. Yes, there are some offices so inferior that this check may be eliminated—but it is for Congress to judge which ones these may be. Congress and Congress alone has power to dispense with the safeguard of the confirmation process.

The power to set compensation at large American businesses is especially subject to potential abuse, favoritism, arbitrariness, or political manipulation. It is no reflection on Kenneth Feinberg, who has a sterling reputation and who appears to have approached these sensitive duties with a spirit of commendable integrity, to say that the checks and balances of the Constitution should be scrupulously observed. They were not. Because he is not a properly appointed officer of the United States, Mr. Feinberg's executive compensation decisions were unconstitutional.

--- Mr. McConnell is on the faculty of Stanford University Law School, director of its Constitutional Law Center, and a senior fellow at the Hoover Institution. He was a federal judge on the 10th Circuit Court of Appeals from 2002-2009. (Source: WSJ.)

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On The Road To Economic Recovery Or On The Eve Of A Great Depression (Oct 2009) Remarkable similarities between where we stand today economically and where the Country stood in 1930, one year after the collapse of the Stock Market (DJIA) in 1929 ……. The Great Depression lasted from 1929 to World War II in 1942, 12 years in length. In nearly half of those years the Dow Jones Industrial Average (DJIA) recorded advances, in some years, subtantial advances. Did any of those advances signal an "economic recovery"? Of course not! The following claims can be confirmed at these sites: http://stockcharts.com/charts/historical/djia19201940.html http://seansrant.com/ive-said-it-before-and-ill-say-it-again-the-decline-still-isnt-over-and-heres-why-im-short-the-djia/

The DJIA high in 1929 was 381.17. After the 1929 "crash" the DJIA stood at 198.69, a 48% drop. The DJIA "rebounded in 1930 to a high of 294.07, a gain of 95.38 points, a nearly 50% recovery, a recovery very similar to our current recovery in 2009. The real "crash" of the Great Depression began in late 1930 when the DJIA began a decline to a level of 41.22 in 1933. Between 1930 and 1933 there were several sharp "spikes" upward, followed by precipitous drops of the DJIA.

Does our current "spike" indicate a recovery? Certainly not!

The toxic assets are still on the Bank's books, yet the financial marklets are leading the recovery. Commercial real estate is on the brink of collapse, home mortgage foreclosures continue to climb – while the Obama mortgage assistance program has resulted in less than 2000 permanently modified mortgages - the President pledged to help 9,000,000. Credit card defaults and personal bankrupties continue to climb and the unemployment rate – incorrectly called a "lagging indicator" – continues to climb. Unemployment doesn't lag – it is "current" – unemployment can only be said to "lag" other indicators which are actually "predicting" future activity. The DJIA current level is "predciting" that "profits" and associated dividends will be better six months from now -that "prediction" is based on a set of "assumptions", one of the assumptions is that unemployment will improve and not worsen. The unemployment rate predicts nothing – it is a number that "understates" a current condition.

The DJIA is not predicative of economic health. The following from: http://www.online-stock-trading-guide.com/great-depression-stock-chart.html If you changed the dates from 1929 – 1930 to 2007 – 2009 you'd have an almost identical set of charts. http://seansrant.com/ive-said-it-before-and-ill-say-it-again-the-decline-still-isnt-over-and-heres-why-im-short-the-djia/

The DJIA has "zero" value in predicting whether our economic health has "turned" the corner. To this mix we will now add a half trillion dollars in new taxes to pay for Health Care Reform ….. this is a recipe for disaster! What is the truth about the underlying fundamentals is our economy …… (Source: McAuley's World.)

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December 2009

Matt Taibbi: Obama's Big Sellout -- The president has packed his economic team with Wall Street insiders intent on turning the bailout into an all-out giveaway (Dec 2009) Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it's not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

Then he got elected.

What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.

How could Obama let this happen? Is he just a rookie in the political big leagues, hoodwinked by Beltway old-timers? Or is the vacillating, ineffectual servant of banking interests we've been seeing on TV this fall who Obama really is?

Whatever the president's real motives are, the extensive series of loophole-rich financial "reforms" that the Democrats are currently pushing may ultimately do more harm than good. In fact, some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street's political power by institutionalizing the taxpayer's role as a welfare provider for the financial-services industry. At one point in the debate, Obama's top economic advisers demanded the power to award future bailouts without even going to Congress for approval — and without providing taxpayers a single dime in equity on the deals. How did we get here? It started just moments after the election — and almost nobody noticed

'Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It's fucking amazing. Amazing! And nobody said a thing about it."

Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency. In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama's election.

That was the day the jubilant Obama campaign announced its transition team. Though many of the names were familiar — former Bill Clinton chief of staff John Podesta, long-time Obama confidante Valerie Jarrett — the list was most notable for who was not on it, especially on the economic side. Austan Goolsbee, a University of Chicago economist who had served as one of Obama's chief advisers during the campaign, didn't make the cut. Neither did Karen Kornbluh, who had served as Obama's policy director and was instrumental in crafting the Democratic Party's platform. Both had emphasized populist themes during the campaign: Kornbluh was known for pushing Democrats to focus on the plight of the poor and middle class, while Goolsbee was an aggressive critic of Wall Street, declaring that AIG executives should receive "a Nobel Prize — for evil."

But come November 5th, both were banished from Obama's inner circle — and replaced with a group of Wall Street bankers. Leading the search for the president's new economic team was his close friend and Harvard Law classmate Michael Froman, a high-ranking executive at Citigroup. During the campaign, Froman had emerged as one of Obama's biggest fundraisers, bundling $200,000 in contributions and introducing the candidate to a host of heavy hitters — chief among them his mentor Bob Rubin, the former co-chairman of Goldman Sachs who served as Treasury secretary under Bill Clinton. Froman had served as chief of staff to Rubin at Treasury, and had followed his boss when Rubin left the Clinton administration to serve as a senior counselor to Citigroup (a massive new financial conglomerate created by deregulatory moves pushed through by Rubin himself).

Incredibly, Froman did not resign from the bank when he went to work for Obama: He remained in the employ of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm. And to help him pick Obama's economic team, Froman brought in none other than Jamie Rubin, a former Clinton diplomat who happens to be Bob Rubin's son. At the time, Jamie's dad was still earning roughly $15 million a year working for Citigroup, which was in the midst of a collapse brought on in part because Rubin had pushed the bank to invest heavily in mortgage-backed CDOs and other risky instruments.

Now here's where it gets really interesting. It's three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O'Doul's portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama's economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama's transition team that same month.

So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin's messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that's just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in. No Citi executives are replaced, and few restrictions are placed on their compensation. It's the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin's fuck-up-rich tenure at Citi. "If you had any doubts at all about the primacy of Wall Street over Main Street," former labor secretary Robert Reich declares when the bailout is announced, "your doubts should be laid to rest."

It is bad enough that one of Bob Rubin's former protιgιs from the Clinton years, the New York Fed chief Geithner, is intimately involved in the negotiations, which unsurprisingly leave the Federal Reserve massively exposed to future Citi losses. But the real stunner comes only hours after the bailout deal is struck, when the Obama transition team makes a cheerful announcement: Timothy Geithner is going to be Barack Obama's Treasury secretary!

Geithner, in other words, is hired to head the U.S. Treasury by an executive from Citigroup — Michael Froman — before the ink is even dry on a massive government giveaway to Citigroup that Geithner himself was instrumental in delivering. In the annals of brazen political swindles, this one has to go in the all-time Fuck-the-Optics Hall of Fame.

Wall Street loved the Citi bailout and the Geithner nomination so much that the Dow immediately posted its biggest two-day jump since 1987, rising 11.8 percent. Citi shares jumped 58 percent in a single day, and JP Morgan Chase, Merrill Lynch and Morgan Stanley soared more than 20 percent, as Wall Street embraced the news that the government's bailout generosity would not die with George W. Bush and Hank Paulson. "Geithner assures a smooth transition between the Bush administration and that of Obama, because he's already co-managing what's happening now," observed Stephen Leeb, president of Leeb Capital Management.

Left unnoticed, however, was the fact that Geithner had been hired by a sitting Citigroup executive who still had a big bonus coming despite his proximity to Obama. In January 2009, just over a month after the bailout, Citigroup paid Froman a year-end bonus of $2.25 million. But as outrageous as it was, that payoff would prove to be chump change for the banker crowd, who were about to get everything they wanted — and more — from the new president.

The irony of Bob Rubin: He's an unapologetic arch-capitalist demagogue whose very career is proof that a free-market meritocracy is a myth. Much like Alan Greenspan, a staggeringly incompetent economic forecaster who was worshipped by four decades of politicians because he once dated Barbara Walters, Rubin has been held in awe by the American political elite for nearly 20 years despite having fucked up virtually every project he ever got his hands on. He went from running Goldman Sachs (1990-1992) to the Clinton White House (1993-1999) to Citigroup (1999-2009), leaving behind a trail of historic gaffes that somehow boosted his stature every step of the way.

As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year's financial crisis: the repeal of the Glass-Steagall Act (passed specifically to legalize the Citigroup megamerger) and the deregulation of the derivatives market. Having set that time bomb, Rubin left government to join Citi, which promptly expressed its gratitude by giving him $126 million in compensation over the next eight years (they don't call it bribery in this country when they give you the money post factum). After urging management to amp up its risky investments in toxic vehicles, a strategy that very nearly destroyed the company, Rubin blamed Citi's board for his screw-ups and complained that he had been underpaid to boot. "I bet there's not a single year where I couldn't have gone somewhere else and made more," he said.

Despite being perhaps more responsible for last year's crash than any other single living person — his colossally stupid decisions at both the highest levels of government and the management of a private financial superpower make him unique — Rubin was the man Barack Obama chose to build his White House around.

There are four main ways to be connected to Bob Rubin: through Goldman Sachs, the Clinton administration, Citigroup and, finally, the Hamilton Project, a think tank Rubin spearheaded under the auspices of the Brookings Institute to promote his philosophy of balanced budgets, free trade and financial deregulation. The team Obama put in place to run his economic policy after his inauguration was dominated by people who boasted connections to at least one of these four institutions — so much so that the White House now looks like a backstage party for an episode of Bob Rubin, This Is Your Life!

At Treasury, there is Geithner, who worked under Rubin in the Clinton years. Serving as Geithner's "counselor" — a made-up post not subject to Senate confirmation — is Lewis Alexander, the former chief economist of Citigroup, who advised Citi back in 2007 that the upcoming housing crash was nothing to worry about. Two other top Geithner "counselors" — Gene Sperling and Lael Brainard — worked under Rubin at the National Economic Council, the key group that coordinates all economic policymaking for the White House.

As director of the NEC, meanwhile, Obama installed economic czar Larry Summers, who had served as Rubin's protιgι at Treasury. Just below Summers is Jason Furman, who worked for Rubin in the Clinton White House and was one of the first directors of Rubin's Hamilton Project. The appointment of Furman — a persistent advocate of free-trade agreements like NAFTA and the author of droolingly pro-globalization reports with titles like "Walmart: A Progressive Success Story" — provided one of the first clues that Obama had only been posturing when he promised crowds of struggling Midwesterners during the campaign that he would renegotiate NAFTA, which facilitated the flight of blue-collar jobs to other countries. "NAFTA's shortcomings were evident when signed, and we must now amend the agreement to fix them," Obama declared. A few months after hiring Furman to help shape its economic policy, however, the White House quietly quashed any talk of renegotiating the trade deal. "The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement," U.S. Trade Representative Ronald Kirk told reporters in a little-publicized conference call last April.

The announcement was not so surprising, given who Obama hired to serve alongside Furman at the NEC: management consultant Diana Farrell, who worked under Rubin at Goldman Sachs. In 2003, Farrell was the author of an infamous paper in which she argued that sending American jobs overseas might be "as beneficial to the U.S. as to the destination country, probably more so."

Joining Summers, Furman and Farrell at the NEC is Froman, who by then had been formally appointed to a unique position: He is not only Obama's international finance adviser at the National Economic Council, he simultaneously serves as deputy national security adviser at the National Security Council. The twin posts give Froman a direct line to the president, putting him in a position to coordinate Obama's international economic policy during a crisis. He'll have help from David Lipton, another joint appointee to the economics and security councils who worked with Rubin at Treasury and Citigroup, and from Jacob Lew, a former Citi colleague of Rubin's whom Obama named as deputy director at the State Department to focus on international finance.

Over at the Commodity Futures Trading Commission, which is supposed to regulate derivatives trading, Obama appointed Gary Gensler, a former Goldman banker who worked under Rubin in the Clinton White House. Gensler had been instrumental in helping to pass the infamous Commodity Futures Modernization Act of 2000, which prevented deregulation of derivative instruments like CDOs and credit-default swaps that played such a big role in cratering the economy last year. And as head of the powerful Office of Management and Budget, Obama named Peter Orszag, who served as the first director of Rubin's Hamilton Project. Orszag once succinctly summed up the project's ideology as a sort of liberal spin on trickle-down Reaganomics: "Market competition and globalization generate significant economic benefits."

Taken together, the rash of appointments with ties to Bob Rubin may well represent the most sweeping influence by a single Wall Street insider in the history of government. "Rather than having a team of rivals, they've got a team of Rubins," says Steven Clemons, director of the American Strategy Program at the New America Foundation. "You see that in policy choices that have resuscitated — but not reformed — Wall Street."

While Rubin's allies and acolytes got all the important jobs in the Obama administration, the academics and progressives got banished to semi-meaningless, even comical roles. Kornbluh was rewarded for being the chief policy architect of Obama's meteoric rise by being outfitted with a pith helmet and booted across the ocean to Paris, where she now serves as America's never-again-to-be-seen-on-TV ambassador to the Organization for Economic Cooperation and Development. Goolsbee, meanwhile, was appointed as staff director of the President's Economic Recovery Advisory Board, a kind of dumping ground for Wall Street critics who had assisted Obama during the campaign; one top Democrat calls the panel "Siberia."

Joining Goolsbee as chairman of the PERAB gulag is former Fed chief Paul Volcker, who back in March 2008 helped candidate Obama write a speech declaring that the deregulatory efforts of the Eighties and Nineties had "excused and even embraced an ethic of greed, corner-cutting, insider dealing, things that have always threatened the long-term stability of our economic system." That speech met with rapturous applause, but the commission Obama gave Volcker to manage is so toothless that it didn't even meet for the first time until last May. The lone progressive in the White House, economist Jared Bernstein, holds the impressive-sounding title of chief economist and national policy adviser — except that the man he is advising is Joe Biden, who seems more interested in foreign policy than financial reform.

The significance of all of these appointments isn't that the Wall Street types are now in a position to provide direct favors to their former employers. It's that, with one or two exceptions, they collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century. Virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy carefully articulated for years by the Hamilton Project: Expand the safety net to protect the poor, but let Wall Street do whatever it wants. "Bob Rubin, these guys, they're classic limousine liberals," says David Sirota, a former Democratic strategist. "These are basically people who have made shitloads of money in the speculative economy, but they want to call themselves good Democrats because they're willing to give a little more to the poor. That's the model for this Democratic Party: Let the rich do their thing, but give a fraction more to everyone else."

Even the members of Obama's economic team who have spent most of their lives in public office have managed to make small fortunes on Wall Street. The president's economic czar, Larry Summers, was paid more than $5.2 million in 2008 alone as a managing director of the hedge fund D.E. Shaw, and pocketed an additional $2.7 million in speaking fees from a smorgasbord of future bailout recipients, including Goldman Sachs and Citigroup. At Treasury, Geithner's aide Gene Sperling earned a staggering $887,727 from Goldman Sachs last year for performing the punch-line-worthy service of "advice on charitable giving." Sperling's fellow Treasury appointee, Mark Patterson, received $637,492 as a full-time lobbyist for Goldman Sachs, and another top Geithner aide, Lee Sachs, made more than $3 million working for a New York hedge fund called Mariner Investment Group. The list goes on and on. Even Obama's chief of staff, Rahm Emanuel, who has been out of government for only 30 months of his adult life, managed to collect $18 million during his private-sector stint with a Wall Street firm called Wasserstein-Perella.

The point is that an economic team made up exclusively of callous millionaire-assholes has absolutely zero interest in reforming the gamed system that made them rich in the first place. "You can't expect these people to do anything other than protect Wall Street," says Rep. Cliff Stearns, a Republican from Florida. That thinking was clear from Obama's first address to Congress, when he stressed the importance of getting Americans to borrow like crazy again. "Credit is the lifeblood of the economy," he declared, pledging "the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money." A president elected on a platform of change was announcing, in so many words, that he planned to change nothing fundamental when it came to the economy. Rather than doing what FDR had done during the Great Depression and institute stringent new rules to curb financial abuses, Obama planned to institutionalize the policy, firmly established during the Bush years, of keeping a few megafirms rich at the expense of everyone else.

Obama hasn't always toed the Rubin line when it comes to economic policy. Despite being surrounded by a team that is powerfully opposed to deficit spending — balanced budgets and deficit reduction have always been central to the Rubin way of thinking — Obama came out of the gate with a huge stimulus plan designed to kick-start the economy and address the job losses brought on by the 2008 crisis. "You have to give him credit there," says Sen. Bernie Sanders, an advocate of using government resources to address unemployment. "It's a very significant piece of legislation, and $787 billion is a lot of money." But whatever jobs the stimulus has created or preserved so far — 640,329, according to an absurdly precise and already debunked calculation by the White House — the aid that Obama has provided to real people has been dwarfed in size and scope by the taxpayer money that has been handed over to America's financial giants. "They spent $75 billion on mortgage relief, but come on — look at how much they gave Wall Street," says a leading Democratic strategist. Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion. And while the government continues to dole out big money to big banks, Obama and his team of Rubinites have done almost nothing to reform the warped financial system responsible for imploding the global economy in the first place.

The push for reform seemed to get off to a promising start. In the House, the charge was led by Rep. Barney Frank, the outspoken chair of the House Financial Services Committee, who emerged during last year's Bush bailouts as a sharp-tongued critic of Wall Street. Back when Obama was still a senator, he and Frank even worked together to introduce a populist bill targeting executive compensation. Last spring, with the economy shattered, Frank began to hold hearings on a host of reforms, crafted with significant input from the White House, that initially contained some very good elements. There were measures to curb abusive credit-card lending, prevent banks from charging excessive fees, force publicly traded firms to conduct meaningful risk assessment and allow shareholders to vote on executive compensation. There were even measures to crack down on risky derivatives and to bar firms like AIG from picking their own regulators.

Then the committee went to work — and the loopholes started to appear.

The most notable of these came in the proposal to regulate derivatives like credit-default swaps. Even Gary Gensler, the former Goldmanite whom Obama put in charge of commodities regulation, was pushing to make these normally obscure investments more transparent, enabling regulators and investors to identify speculative bubbles sooner. But in August, a month after Gensler came out in favor of reform, Geithner slapped him down by issuing a 115-page paper called "Improvements to Regulation of Over-the-Counter Derivatives Markets" that called for a series of exemptions for "end users" — i.e., almost all of the clients who buy derivatives from banks like Goldman Sachs and Morgan Stanley. Even more stunning, Frank's bill included a blanket exception to the rules for currency swaps traded on foreign exchanges — the very instruments that had triggered the Long-Term Capital Management meltdown in the late 1990s.

Given that derivatives were at the heart of the financial meltdown last year, the decision to gut derivatives reform sent some legislators howling with disgust. Sen. Maria Cantwell of Washington, who estimates that as much as 90 percent of all derivatives could remain unregulated under the new rules, went so far as to say the new laws would make things worse. "Current law with its loopholes might actually be better than these loopholes," she said.

An even bigger loophole could do far worse damage to the economy. Under the original bill, the Securities and Exchange Commission and the Commodity Futures Trading Commission were granted the power to ban any credit swaps deemed to be "detrimental to the stability of a financial market or of participants in a financial market." By the time Frank's committee was done with the bill, however, the SEC and the CFTC were left with no authority to do anything about abusive derivatives other than to send a report to Congress. The move, in effect, would leave the kind of credit-default swaps that brought down AIG largely unregulated.

Why would leading congressional Democrats, working closely with the Obama administration, agree to leave one of the riskiest of all financial instruments unregulated, even before the issue could be debated by the House? "There was concern that a broad grant to ban abusive swaps would be unsettling," Frank explained.

Unsettling to whom? Certainly not to you and me — but then again, actual people are not really part of the calculus when it comes to finance reform. According to those close to the markup process, Frank's committee inserted loopholes under pressure from "constituents" — by which they mean anyone "who can afford a lobbyist," says Michael Greenberger, the former head of trading at the CFTC under Clinton.

This pattern would repeat itself over and over again throughout the fall. Take the centerpiece of Obama's reform proposal: the much-ballyhooed creation of a Consumer Finance Protection Agency to protect the little guy from abusive bank practices. Like the derivatives bill, the debate over the CFPA ended up being dominated by horse-trading for loopholes. In the end, Frank not only agreed to exempt some 8,000 of the nation's 8,200 banks from oversight by the castrated-in-advance agency, leaving most consumers unprotected, he allowed the committee to pass the exemption by voice vote, meaning that congressmen could side with the banks without actually attaching their name to their "Aye."

To win the support of conservative Democrats, Frank also backed down on another issue that seemed like a slam-dunk: a requirement that all banks offer so-called "plain vanilla" products, such as no-frills mortgages, to give consumers an alternative to deceptive, "fully loaded" deals like adjustable-rate loans. Frank's last-minute reversal — made in consultation with Geithner — was such a transparent giveaway to the banks that even an economics writer for Reuters, hardly a far-left source, called it "the beginning of the end of meaningful regulatory reform."

But the real kicker came when Frank's committee took up what is known as "resolution authority" — government-speak for "Who the hell is in charge the next time somebody at AIG or Lehman Brothers decides to vaporize the economy?" What the committee initially introduced bore a striking resemblance to a proposal written by Geithner earlier in the summer. A masterpiece of legislative chicanery, the measure would have given the White House permanent and unlimited authority to execute future bailouts of megaconglomerates like Citigroup and Bear Stearns.

Democrats pushed the move as politically uncontroversial, claiming that the bill will force Wall Street to pay for any future bailouts and "doesn't use taxpayer money." In reality, that was complete bullshit. The way the bill was written, the FDIC would basically borrow money from the Treasury — i.e., from ordinary taxpayers — to bail out any of the nation's two dozen or so largest financial companies that the president deems in need of government assistance. After the bailout is executed, the president would then levy a tax on financial firms with assets of more than $10 billion to repay the Treasury within 60 months — unless, that is, the president decides he doesn't want to! "They can wait indefinitely to repay," says Rep. Brad Sherman of California, who dubbed the early version of the bill "TARP on steroids."

The new bailout authority also mandated that future bailouts would not include an exchange of equity "in any form" — meaning that taxpayers would get nothing in return for underwriting Wall Street's mistakes. Even more outrageous, it specifically prohibited Congress from rejecting tax giveaways to Wall Street, as it did last year, by removing all congressional oversight of future bailouts. In fact, the resolution authority proposed by Frank was such a slurpingly obvious blow job of Wall Street that it provoked a revolt among his own committee members, with junior Democrats waging a spirited fight that restored congressional oversight to future bailouts, requires equity for taxpayer money and caps assistance to troubled firms at $150 billion. Another amendment to force companies with more than $50 billion in assets to pay into a rainy-day fund for bailouts passed by a resounding vote of 52 to 17 — with the "Nays" all coming from Frank and other senior Democrats loyal to the administration.

Even as amended, however, resolution authority still has the potential to be truly revolutionary legislation. The Senate version still grants the president unlimited power over equity-free bailouts, and the amended House bill still institutionalizes a system of taxpayer support for the 20 to 25 biggest banks in the country. It would essentially grant economic immortality to those top few megafirms, who will continually gobble up greater and greater slices of market share as money becomes cheaper and cheaper for them to borrow (after all, who wouldn't lend to a company permanently backstopped by the federal government?). It would also formalize the government's role in the global economy and turn the presidential-appointment process into an important part of every big firm's business strategy. "If this passes, the very first thing these companies are going to do in the future is ask themselves, 'How do we make sure that one of our executives becomes assistant Treasury secretary?'" says Sherman.

On the Senate side, finance reform has yet to make it through the markup process, but there's every reason to believe that its final bill will be as watered down as the House version by the time it comes to a vote. The original measure, drafted by chairman Christopher Dodd of the Senate Banking Committee, is surprisingly tough on Wall Street — a fact that almost everyone in town chalks up to Dodd's desperation to shake the bad publicity he incurred by accepting a sweetheart mortgage from the notorious lender Countrywide. "He's got to do the shake-his-fist-at-Wall Street thing because of his, you know, problems," says a Democratic Senate aide. "So that's why the bill is starting out kind of tough." The aide pauses. "The question is, though, what will it end up looking like?"

He's right — that is the question. Because the way it works is that all of these great-sounding reforms get whittled down bit by bit as they move through the committee markup process, until finally there's nothing left but the exceptions. In one example, a measure that would have forced financial companies to be more accountable to shareholders by holding elections for their entire boards every year has already been watered down to preserve the current system of staggered votes. In other cases, this being the Senate, loopholes were inserted before the debate even began: The Dodd bill included the exemption for foreign-currency swaps — a gift to Wall Street that only appeared in the Frank bill during the course of hearings — from the very outset.

The White House's refusal to push for real reform stands in stark contrast to what it should be doing. It was left to Rep. Pete Kanjorski in the House and Bernie Sanders in the Senate to propose bills to break up the so-called "too big to fail" banks. Both measures would give Congress the power to dismantle those pseudomonopolies controlling almost the entire derivatives market (Goldman, Citi, Chase, Morgan Stanley and Bank of America control 95 percent of the $290 trillion over-the-counter market) and the consumer-lending market (Citi, Chase, Bank of America and Wells Fargo issue one of every two mortgages, and two of every three credit cards). On November 18th, in a move that demonstrates just how nervous Democrats are getting about the growing outrage over taxpayer giveaways, Barney Frank's committee actually passed Kanjorski's measure. "It's a beginning," Kanjorski says hopefully. "We're on our way." But even if the Senate follows suit, big banks could well survive — depending on whom the president appoints to sit on the new regulatory board mandated by the measure. An oversight body filled with executives of the type Obama has favored to date from Citi and Goldman Sachs hardly seems like a strong bet to start taking an ax to concentrated wealth. And given the new bailout provisions that provide these megafirms a market advantage over smaller banks (those Paul Volcker calls "too small to save"), the failure to break them up qualifies as a major policy decision with potentially disastrous consequences.

"They should be doing what Teddy Roosevelt did," says Sanders. "They should be busting the trusts."

That probably won't happen anytime soon. But at a minimum, Obama should start on the road back to sanity by making a long-overdue move: firing Geithner. Not only are the mop-headed weenie of a Treasury secretary's fingerprints on virtually all the gross giveaways in the new reform legislation, he's a living symbol of the Rubinite gangrene crawling up the leg of this administration. Putting Geithner against the wall and replacing him with an actual human being not recently employed by a Wall Street megabank would do a lot to prove that Obama was listening this past Election Day. And while there are some who think Geithner is about to go — "he almost has to," says one Democratic strategist — at the moment, the president is still letting Wall Street do his talking.

Morning, the National Mall, November 5th. A year to the day after Obama named Michael Froman to his transition team, his political "opposition" has descended upon the city. Republican teabaggers from all 50 states have showed up, a vast horde of frowning, pissed-off middle-aged white people with their idiot placards in hand, ready to do cultural battle. They are here to protest Obama's "socialist" health care bill — you know, the one that even a bloodsucking capitalist interest group like Big Pharma spent $150 million to get passed.

These teabaggers don't know that, however. All they know is that a big government program might end up using tax dollars to pay the medical bills of rapidly breeding Dominican immigrants. So they hate it. They're also in a groove, knowing that at the polls a few days earlier, people like themselves had a big hand in ousting several Obama-allied Democrats, including a governor of New Jersey who just happened to be the former CEO of Goldman Sachs. A sign held up by New Jersey protesters bears the warning, "If You Vote For Obamacare, We Will Corzine You." I approach a woman named Pat Defillipis from Toms River, New Jersey, and ask her why she's here. "To protest health care," she answers. "And then amnesty. You know, immigration amnesty."

I ask her if she's aware that there's a big hearing going on in the House today, where Barney Frank's committee is marking up a bill to reform the financial regulatory system. She recognizes Frank's name, wincing, but the rest of my question leaves her staring at me like I'm an alien. "Do you care at all about economic regulation?" I ask. "There was sort of a big economic collapse last year. Do you have any ideas about how that whole deal should be fixed?"

"We got to slow down on spending," she says. "We can't afford it."

"But what do we do about the rules governing Wall Street . . ."

She walks away. She doesn't give a fuck. People like Pat aren't aware of it, but they're the best friends Obama has. They hate him, sure, but they don't hate him for any reasons that make sense. When it comes down to it, most of them hate the president for all the usual reasons they hate "liberals" — because he uses big words, doesn't believe in hell and doesn't flip out at the sight of gay people holding hands. Additionally, of course, he's black, and wasn't born in America, and is married to a woman who secretly hates our country.

These are the kinds of voters whom Obama's gang of Wall Street advisers is counting on: idiots. People whose votes depend not on whether the party in power delivers them jobs or protects them from economic villains, but on what cultural markers the candidate flashes on TV. Finance reform has become to Obama what Iraq War coffins were to Bush: something to be tucked safely out of sight.

Around the same time that finance reform was being watered down in Congress at the behest of his Treasury secretary, Obama was making a pit stop to raise money from Wall Street. On October 20th, the president went to the Mandarin Oriental Hotel in New York and addressed some 200 financiers and business moguls, each of whom paid the maximum allowable contribution of $30,400 to the Democratic Party. But an organizer of the event, Daniel Fass, announced in advance that support for the president might be lighter than expected — bailed-out firms like JP Morgan Chase and Goldman Sachs were expected to contribute a meager $91,000 to the event — because bankers were tired of being lectured about their misdeeds.

"The investment community feels very put-upon," Fass explained. "They feel there is no reason why they shouldn't earn $1 million to $200 million a year, and they don't want to be held responsible for the global financial meltdown."

Which makes sense. Shit, who could blame the investment community for the meltdown? What kind of assholes are we to put any of this on them? This is the kind of person who is working for the Obama administration, which makes it unsurprising that we're getting no real reform of the finance industry. There's no other way to say it: Barack Obama, a once-in-a-generation political talent whose graceful conquest of America's racial dragons en route to the White House inspired the entire world, has for some reason allowed his presidency to be hijacked by sniveling, low-rent shitheads. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it, leaving even his erstwhile campaign adviser, ex-Fed chief Paul Volcker, concerned about a "moral hazard" creeping over his administration.

"The obvious danger is that with the passage of time, risk-taking will be encouraged and efforts at prudential restraint will be resisted," Volcker told Congress in September, expressing concerns about all the regulatory loopholes in Frank's bill. "Ultimately, the possibility of further crises — even greater crises — will increase."

What's most troubling is that we don't know if Obama has changed, or if the influence of Wall Street is simply a fundamental and ineradicable element of our electoral system. What we do know is that Barack Obama pulled a bait-and-switch on us. If it were any other politician, we wouldn't be surprised. Maybe it's our fault, for thinking he was different. (Source: Rolling Stone: Matt Taibbi.)

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House passes historic financial rules revamp -- Bill would give the government the right to break up big risky companies (Dec 2009) The House passed the most ambitious restructuring of federal financial regulations since the New Deal on Friday, aiming to head off any replay of last year's Wall Street failures that plunged the nation deep into recession.

The sprawling legislation would give the government new powers to break up companies that threaten the economy, create a new agency to oversee consumer banking transactions and shine a light into shadow financial markets that have escaped the oversight of regulators. The vote was a party-line 223-202. No Republicans voted for the bill; 27 Democrats voted against it.

While a victory for the administration, the legislation dilutes some of President Barack Obama's recommendations, carving out exceptions to some of its toughest provision. The burden now shifts to the Senate, which is not expected to act on its version of a regulatory overhaul until early next year. The president praised the House action Friday, and called on Congress to act swiftly to get the bill to the White House for his signature. "The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington," Obama said. "We have a responsibility to learn from it and to put in place reforms that will promote sound investment, encourage real competition and innovation and prevent such a crisis from ever happening again. "

The legislation would govern the simplest payday loan and the most complicated high-finance trades. In its breadth, the measure seeks to impose restrictions on every house of finance, from two-teller neighborhood thrifts to huge interconnected conglomerates.

A burden to business?

Democratic leaders had to fend off a last-minute attempt to kill a proposed consumer agency, a central element of the legislation and one the features pushed by the White House. The agency would take over consumer protection powers from current banking regulators, and big banks and the U.S. Chamber of Commerce vigorously opposed the idea.

Democrats said the broad legislation would help address problems that led to last year's calamitous financial crisis. Republicans argued that it overreached and would institutionalize bailouts for the financial industry. "Let's put it to the American people: Do you prefer the Republican position of doing literally nothing to rein in these abuses or should we try to rein them in?" Rep. Barney Frank, who led the Democratic effort on the bill, asked moments before the final vote. Republicans cast the regulatory bill as a burden to business and argued that it would continue to protect companies considered too big to fail. They offered an alternative that called for special bankruptcy proceedings to dismantle failing financial institutions. That alternative failed. "This house has been on a spending spree, a bailout spree and a regulatory spree that I could never have imagined in any of my prior 18 years here in Congress," Republican Leader John Boehner of Ohio said.

Consumer advocates cheered the survival of the consumer protection agency but said the overall legislation fell short, especially in the regulation of complex investment instruments known as derivatives.

An era of transparency

The legislation aims to prevent manipulation and bring transparency to the $600 trillion global derivatives market. But an amendment by New York Democrat Scott Murphy, adopted 304-124 Thursday night, created an exception for nonfinancial companies that use derivatives as a hedge against price, currency and interest rate changes rather than as a speculative investment. The amendment also provided an exception for businesses that are considered too small to be a risk to the financial system.

A Democratic effort to make more companies subject to derivatives regulations and to abusive-trading rules failed. When the Obama administration first proposed a package of regulations, it called for regulations of derivatives without any exceptions. But a potent lobbying coalition that included Boeing Co., Caterpillar Inc., General Electric Co., Coca-Cola and other big companies persuaded lawmakers to dilute the restrictions. "It does fall well short of what the administration promised and what everybody assumed we would get," said Barbara Roper, director of investor protection for the Consumer Federation of America. "It's a weakness in the bill and a win for Wall Street. Hedge funds and others that are not bona fide hedgers of commercial risk will slip through this language."

The bill would create a Financial Services Oversight Council made up of the Treasury secretary, the Federal Reserve chairman and heads of regulatory agencies to monitor the financial markets for potential threats to nation's system. It would identify firms and activities that should be subject to heightened standards, including requirements that they place more money in reserve. Companies would have to plan for their own demise, detailing how they would be dismantled if they failed. The government could dismantle even healthy firms if they were considered a grave risk to the economy. Large firms with assets of more than $50 billion, and hedge funds with at least $10 billion in assets, would pay into a $150 billion resolution fund that would cover the costs of dismantling such a company.

It was that fund that Republicans argued amounted to yet another bailout pool. The Federal Reserve, criticized for not spotting last year's crisis, would lose power in the legislation. The measure would limit the Fed's unilateral ability to inject large amounts of money into financial institutions. It also would take away the Federal Reserve's consumer regulation authority and would subject it to a broad audit by Congress' investigative arm.

The legislation also takes on Wall Street compensation. Company shareholders would get a nonbinding vote on the pay of top executives. Federal banking regulators would have to approve compensation practices, though not actual pay, at banks and bank holding companies. (Source: MSNBC.)

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Obama drags his mess into the new year.

January 2010

BEWARE: Those "Fat Cats" are Obama's big contributors Timothy P. Carney: Beware the Goldman Sachs populist (Jan 2010) "If these folks want a fight," President Obama said Thursday, tossing a rhetorical barb at Wall Street, "it's a fight I'm ready to have." But what if they don't want a fight?

To begin with the substance of his proposed regulations: Right now, all we have is a vague first draft. We know they will be fleshed out, rewritten, amended, tweaked, ping-ponged, and massaged. All along, we know Wall Street lobbyists will be at the table. The Wall Street "fat cats," as Obama calls them, probably aren't really looking for a fight as much as a seat at the table -- and the numbers suggest they've earned that seat.

For his presidential campaign in which Wall Street regulation was a mantra, Obama's top source of funds was investment bank giant Goldman Sachs, whose employees, partners, and executives gave him $995,000 -- that's the most any politician has raised from any one company in a single election since the age of "soft money" ended.

Obama is touting his proposed bank tax and financial regulations as a test of "whose side" politicians are on -- the bankers' or the people's. But check the numbers at OpenSecrets.org, and you get an interesting clue as to whose side Wall Street on. The "securities and investment" industry has favored Democrats by more than a two-to-one margin so far this cycle. The top eight recipients of Wall Street PAC money this election are all Democrats.

The Wall Street flood of cash to Democrats is not simply about buttering up those in power -- a closer look at the cash looks like Wall Street wants Democrats to win. The top recipient of Wall Street PAC money is Rep. Paul Kanjorski, D-Pa., distinguished mostly by his being a very vulnerable incumbent. Vulnerable Democratic Sens. Chris Dodd (since dropped out), Blanche Lincoln, and Harry Reid are all in the top seven.

And 10 days ago, once it was clear Martha Coakley's campaign was in trouble, Citigroup's PAC cut a $2,400 check, while many lobbyists representing Goldman, Citi, and Morgan Stanley shelled out for her Capitol Hill wine-bar fundraiser.

Those Wall Street lobbyists Obama likes to badmouth -- they're his friends, too. The lead Wall Street lobbyist is Thomas Nides, chairman of the Securities Industry and Financial Markets Association.

Nides is an old Democratic hand. During the Clinton administration, Nides was vice president for human resources at Fannie Mae, which was basically a taxpayer-underwritten money-laundering operation enriching well-connected Democrats.

Nides gave the maximum to Obama in late 2007 even before Obama was the Iowa front-runner, and then he gave Obama the maximum again for the general election. He also donated to the campaigns of Joe Biden and Rahm Emanuel, now the vice president and White House chief of staff. All in all, he's given more than $70,000 to Democrats and none to Republicans.

Bank of America's K Street lobbyists include Obama administration alumnus Oscar Ramirez and Chuck Schumer's former press secretary Izzy Klein, both at the Podesta Group, co-founded by John Podesta, who served as Obama's transition director, and has visited the White House more than 15 times. Obama's record as a bailout booster also makes it tough to buy his current schtick as anti-Wall Street crusader.

Remember, Obama, as the presidential nominee and head of the party controlling Congress, could have blocked Bush's bailout in late 2008. Instead, he rallied behind it, and rewarded its architects -- Timothy Geithner and Fed Chairman Ben Bernanke -- by promoting Geithner and renominating Bernanke. So when Obama, touting his bank tax, says "we want our money back," recall that it was Obama who helped the banks take your money -- without asking you. It's as if a mugger took your wallet and gave it to Goldman Sachs Chief Executive Officer Lloyd Blankfein, and then posed as your champion by promising to raise Blankfein's taxes.

But everyone who opposes the bank tax -- which, of course, the banks will just pass it through to customers -- will be tarred by the Democratic machine as siding with Wall Street over Main Street. Same with Obama's proposed financial regulations, even though they would institutionalize bailouts by dubbing Goldman Sachs and its ilk "Tier One Financial Institutions."

The press will follow Obama's rhetoric over the coming months, and paint him as the scourge of Wall Street. It's more illuminating, though, to follow the legislation -- and follow the money.

Timothy P. Carney is The Washington Examiner's lobbying editor. His K Street column appears on Wednesdays. (Source: Washington Examiner.)







Goldman Sachs under investigation for its securities dealings (Jan 2010) One of Congress' premier watchdog panels is investigating Goldman Sachs' role in the subprime mortgage meltdown, including how the firm sold securities backed by risky home loans while it simultaneously bet that those bonds would lose value, people familiar with the inquiry said Friday. The investigation is part of a broader examination by the Senate Permanent Subcommittee on Investigations into the roots of the economic crisis and whether financial institutions behaved improperly, said the individuals, who insisted upon anonymity because the matter is sensitive.

Disclosure of the investigation comes amid a darkening mood at the White House, in Congress and among the American public over the long-term economic impact of the subprime crisis, prompting demands to hold the culprits accountable. It marks at least the third federal inquiry touching on Goldman's dealings related to securities backed by risky home mortgages.

The separate, congressionally appointed Financial Crisis Inquiry Commission, which was created to investigate causes of the crisis, began holding hearings Jan. 13 and took sworn testimony from Goldman's top officer. In addition, the Securities and Exchange Commission, which polices Wall Street, is investigating Goldman's exotic bets against the housing market, using insurance-like contracts known as credit-default swaps, in offshore deals, knowledgeable people have told McClatchy Newspapers.

Goldman, the world's most prestigious investment bank, has denied any improprieties and said that the use of "hedges," or contrary bets, is a "cornerstone of prudent risk management." Asked about the Senate inquiry late Friday, Goldman spokesman Michael DuVally said only: "As a matter of policy, Goldman Sachs does not comment on legal or regulatory matters."

A spokeswoman for the Senate subcommittee declined to comment on the investigation, which was spawned by a four-part McClatchy Newspapers series published in November that detailed the Wall Street firm's role in the debacle, which stemmed from subprime loans to millions of marginally qualified borrowers. The subcommittee, part of the Homeland Security and Governmental Affairs Committee, is led by veteran Democratic Sen. Carl Levin of Michigan, who said last year that his panel was "looking into some of the causes and consequences of the financial crisis."

The panel has a history of conducting formal, highly secretive investigations in which it typically issues subpoenas for documents and witnesses, produces extensive reports and sometimes refers evidence to the Justice Department for possible criminal prosecution. It couldn't immediately be learned whether the panel has subpoenaed Goldman executives or company records. However, the subcommittee has issued at least one major subpoena seeking records related to Seattle-based Washington Mutual, which collapsed in September 2008 after being swamped by losses from its subprime lending. J.P. Morgan Chase then purchased WaMu's banking assets.

Goldman was the only major Wall Street firm to safely exit the subprime mortgage market. McClatchy Newspapers reported, however, that Goldman sold off more than $40 billion in securities backed by over 200,000 risky home loans in 2006 and 2007 without telling investors of its secret bets on a sharp housing downturn, prompting some experts to question whether it had crossed legal lines.

McClatchy Newspapers also has reported that Goldman peddled unregulated securities to foreign investors through the Cayman Islands, a Caribbean tax haven, in some cases exaggerating the soundness of the underlying home mortgages. In numerous deals, records indicate, the company required investors to pay Goldman massive sums if bundles of risky mortgages defaulted. Goldman has said its investors were fully informed of the risks.

Federal auditors found that Goldman placed $22 billion of its swap bets against subprime securities, including many it had issued, with the giant insurer American International Group. In late 2008, when the government bailed out AIG, Goldman reaped $13.9 billion - a gigantic return on the modest premiums it had paid under the contracts.

Goldman's chairman and chief executive, Lloyd Blankfein, appeared to acknowledge last week that the firm behaved inappropriately when he was asked about the secret bets in sworn testimony to the Financial Crisis Inquiry Commission. Blankfein first said that the firm's contrary trades were "the practice of a market maker," then added: "But the answer is I do think that the behavior is improper, and we regret the result - the consequence that people have lost money in it." A day later, Goldman issued a statement denying that Blankfein had admitted improper company behavior and said that his ensuing answer stressed that the firm's conduct was "entirely appropriate."

Senate investigators were described as having pored over Goldman's SEC filings in recent weeks. Underscoring the breadth of the Senate investigation is the disclosure by federal banking regulators in a recent filing in the WaMu bankruptcy case. In it, the Federal Deposit Insurance Corp. revealed that the Senate subcommittee had served the agency with "a comprehensive subpoena" for documents relating to WaMu, whose primary regulator was the Office of Thrift Supervision.

The subcommittee's jurisdiction is "wide-ranging," the FDIC's lawyers wrote. "It covers, among other things, the study or investigation of the compliance or noncompliance of corporations, companies, or individual or other entities with the rules, regulations and laws governing the various governmental agencies and their relationships with the public." The subpoena, they said, "is correspondingly broad." The Puget Sound Business Journal first reported on the FDIC's disclosure.

Goldman's former chairman, Henry Paulson, served as Treasury secretary during the bailouts that benefitted the firm and while other Wall Street investment banks foundered because of their subprime market exposure, its profits have soared. In reporting a $13.4 billion profit for 2009 on Thursday, the bank sought to quell a furor over its taxpayer-aided success by scaling back employee bonuses. It also has limited bonuses for its 30 most senior executives to restricted stock that can't be sold for five years. (Source: Miami Herald.)

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