It was Bill Moyers who used the expression “incestuous orgy” in this interview with former head of SIGTARP Neil Barofsky to describe the relationship between major financial firms and the Federal government. That beats the anodyne “revolving door” all day and I hope becomes part of the lexicon for describing the capture of Washington by Wall Street.
Read the Rest…

I thought that Clinton’s speech at the Democratic Convention was disgustingly dishonest, even for him. The simple fact is that both Parties are owned by the Oligarchs and nothing is going to change until the system is reformed. If Romney is so concerned about the “47%” eating and getting medical care, why isn’t he equally worried that government intrusion into private capitalism, orchestrated by a former CEO of Goldman’s, pretending simultaneously to represent the interests of all the Republic was bailing out banksters who weren’t allowed to lose. Hypocrites all.

When it collapsed, due in part to bank-friendly policies that Rubin advocated, he made more than $100 million while others lost everything. “You have to view people in a fair light,” says Phil Angelides, co-chair of the Financial Crisis Inquiry Commission, who credits Rubin for much of the Clinton-era prosperity. “But on the other side of the ledger are key acts, such as the deregulation of derivatives, or stopping the Commodities Futures Trading Commission from regulating derivatives, that in the end weakened our financial system and exposed us to the risk of financial disaster.”

“Nobody on this planet represents more vividly the scam of the banking industry,” says Nassim Nicholas Taleb, author of The Black Swan. “He made $120 million from Citibank, which was technically insolvent. And now we, the taxpayers, are paying for it.”

Rethinking Robert Ruben

“The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true.

It really happened. These suspicions are valid.”

Neil Barofsky, TARP Inspector General

The Fed is not the solution; the Fed is a creature of the biggest banks, and very much a part of the problem.

Once again we hear a lone voice of common sense, and reason for reform, in this case Sarah Bloom Raskin, speak out forcefully for reform.

You may recall ‘The Warning’ which featured Brooksley Born, who sounded the alarm about the growing dangers of the unregulated derivatives market during the Clinton Administration. And who was thwarted and bullied by team Greenspan-Summers-Geithner.

And you might remember how the Wall Street Banks used the NY Fed and the Treasury’s Tim Geithner to block the reforms proposed by the FDIC’s Sheila Bair.

I do not think that these men who block reform and serious change are evil. Rather, I think they are just dead wood, who know nothing more than the system of privilege that has elevated them, and rewarded them, and which they are loathe to see change.

But the times are getting difficult, and so it is time for a change, which is necessary for there to be a sustainable economic recovery.

And in the election of the President this year the people are being given a choice, as someone so aptly put it, between an ineffective and compromised gamekeeper and one of the worst and greediest of the poachers. Obama was marketed as an independent outsider, but he is not. They are both owned by the system, each in their own way.

And that means change is not going to come from the top. But it will come nonethless.

If this continues the capitalists will eventually destroy themselves, because none of them will want to be the first that calls a stop. And that will be a tragedy.

Baseline Scenario
Fed Governor Speaks Out For Stronger Rules
By Simon Johnson
July 28, 2012

From Glenn Greenwald:
“These executives knew that they could take these huge risks and even break laws and pay no real price, and that’s what happened. It’s not just a travesty of justice that we haven’t punished them for past transgressions. The real danger is that we’re continuing to send the signal to the world’s most powerful financial actors that they don’t have any fear of criminal accountability when they commit these obvious crimes.”

On What Has To Happen:  We have to stop the dynamic that produces recurrent intensifying crises. This one devastated the nation. The next one will probably be equivalent to the Great Depression. Part of that is to hold folks accountable, especially the most elite. They did it through fraud – via the “C” Suites – as in the CEO’s and the CFO’s.  The absolute top.

On Fraud: Fraud is using deceit to steal something from someone. So the essence of fraud is I get you to trust me and then I betray that trust, for gain. As a result, there is no more effective acid for destroying trust, than fraud – particularly at the elite levels. And when you destroy trust, you destroy economies, families, democracies.

On The Legacy of Deregulation and The Savings and Loan Experience: It begins in the Carter administration. By the Reagan administration they supported deregulating everything, at the worst possible circumstances… when you had no one looking. The result was a disaster. It was the Savings and Loan Crisis. If it had not been contained, it would have been at least a trillion dollar crisis. It was contained despite the Reagan administration and despite a lot of prominent democrats as well.  So we acted against the president, against a majority of Congress, the Keating 5, and most of the media, what the political scientists considered the third most powerful trade association in America. And by the way, that’s why I have a message of hope. If we could succeed in those circumstances, it’s far easier to succeed now.

On Why There Have Been No Meaningful Criminal Prosecutions: It all starts with the regulators, which is why it never started here – because we have Bush’s wrecking crew, (what Tom Frank called them), in charge. And they stopped making criminal referrals. Our agency, during the Savings and Loan Crisis, made over 10,000 criminal referrals to the FBI. That same agency, in this crisis, made zero criminal referrals. If you don’t get people pointing the way and pointing to the top of the organization, you don’t get effective prosecutions. At the peak of the savings and loan crisis, we had a thousand FBI agents. This crisis has losses 70 times larger than the Savings and Loan Crisis. And the Savings and Loan Crisis, when it happened, was considered the largest financial scandal in U.S. history. So we’re now 70 times worse. And as recently as 2007, we had 120 FBI agents—one-eighth as many FBI agents for a crisis 70 times larger. And they looked not at the big folks, but almost exclusively at the little folks.

On Obama’s Record, How It Was Done in the 1990′s, the FBI’s 2004 Warning, and the Lunacy of Alan Greenspans Setting the Stage for Collapse and then Blaming Government: And we’ve been living for some years in the time of President Obama, and he has done absolutely nothing to reestablish the criminal referral process. And as a result, there are virtually no prosecutions of any elites. When people tell you this crisis couldn’t have been stopped… I will say two things about that: First, these liars’ loans that caused this crisis—and it is overwhelmingly lenders that put the lie in liars’ loans—they were big in 1990 and 1991. We killed them by regular regulatory means and stopped a crisis for a decade. Our successors—I mean, how hard is it to figure out that something called a “liar’s loan” shouldn’t be allowed? This was not tough. The second thing is that the FBI warned, in open testimony in the House of Representatives, picked up by the national media, in September 2004, that there was an epidemic of mortgage fraud and predicted it would cause a financial crisis—their exact words. And the regulators did nothing, because you had the Alan Greenspans of the world and the Harvey Pitts of the world, who were selected because they were the leading opponents of effective regulation in America. Well, you know, you create a self-fulfilling prophecy of regulatory failure, and then turn around and say, “Well, you can’t trust the government. It fails.”

On Occupy Wall Street: They don’t have official spokespersons with clear plans. They think of that as one of the great strengths of democracy now, right? That things bubble up, and they have different ideas. However, if you look, not just nationwide, but worldwide, you will see some pretty consistent themes developing. And those themes include: we have to deal with the systemically dangerous institutions, the 20 biggest banks that the administration is saying are ticking time bombs, that as soon as one of them fails, we go back into a global crisis. Well, we should fix that. Right? There’s no reason to have institutions that large. That’s a theme. That accountability is a theme, that we should keep—put these felons in prison, and there’s no action on that. That we should get jobs now, and that we should deal with the foreclosure crisis. So those are four very common themes that you can see in virtually any of these protest sites. And they have asked me, for example, to come to New York to talk about some of these things. So, I think, over time, you won’t necessarily have some grand written agenda, but you’ll have, as I say, increasing consensus. And it’s a very broad consensus. It’s not left, it’s not right; it’s not Republican, it’s not Democrat.

On Corporations as People (Citizens United): I’m a lawyer. It’s bad law.  One of the best ways to change this is simply to appoint better justices to the Supreme Court. And this is a five-four decision, so one justice could make an enormous amount of difference.

On the History of Corporations as People: It goes all the way back to the civil right era, civil rights amendments after the Civil War. Those amendments were supposed to protect the freed men and women. They were quickly perverted by the Supreme Court, which is a really ultra-right-wing, pro-slavery group for most of our history, into saying we’re not going to protect the slaves—freed slaves very much, but we are going to protect corporations. And so they interpreted the 14th Amendment and 15th Amendment, in particular, as giving due process rights to corporations as persons. Over time, they extended that under First Amendment cases that said they have not the same rights, but substantial rights that need to be protected in the First Amendment. And now they’ve gone whole hog in Citizens United and produced an atrocity. In a country that was already overwhelmed with corporate influence, they said all the restraints, essentially, are off, and you have almost complete constitutional protection to do anything. And so, the domination by corporations, and in particular by finance, which is now the biggest funder of both parties, is going to grow very substantially, unless we fight back.

On Current Public Policy: It just broke yesterday that affiliates of Bank of America—this is Merrill Lynch—with really bad derivatives, has been allowed by the Federal Reserve to transfer perhaps many billions, or perhaps even trillions—we don’t know—of these derivatives to Bank of America, which is where we come in as a federal guarantee, and it puts us on the hook as the government. This is obscene public policy, the kind that would have never been permitted in our era. And now, under a Democratic president that rails about excess influence and not putting the taxpayers at risk, that’s exactly what they’re doing. So, the story on the regulatory side, we had the leading failed regulator in a Federal Reserve Bank, Geithner, and they promoted him to Treasury secretary. We had the leading failed regulator in America, Bernanke, and he was reappointed. So that—and most of the wrecking crew was left on as temporary folks, so most of the wrecking crew is still in place. We have almost no effective regulation, and it’s showing up. They hid the losses by changing the accounting rules through congressional extortion of the Financial Accounting Standards Board. And these problems don’t go away. They just fester, and they pop up three years later. And they’re going to keep popping up until we start telling the truth. In terms of the student debt, this is a grand disaster in America. The one thing that you want for—almost everybody agrees with—for an international competitiveness, for simply just for our kids, is simply to have free public education, and that anybody with a talent, where it makes sense for them to go to university, should go to university and not be a debt slave for the rest of their lives. So this is insane public policy that is crushing the nation. We can change it at any time. It’s a perfect win-win in a Great Recession, because you want to spend to get out of the recession, anyway. So that’s one of the things we should spend on. And the fact that we’re doing it shows just how insane the policy paralysis has become.

On Geithner, Holder, and Bernanke: Well, Geithner should be fired, because you can fire him. Holder, who is the Attorney General, should be fired. They need to be replaced. The other folks running the banking regulatory agencies can be replaced by effective actings. You don’t have to go through the confirmation process to jumpstart that. Bernanke, you can’t fire, but you can ask for his resignation, and it’s long since time to ask for his resignation. And, you know, you can give him a nice ceremony and have him go.

More on Obama: But that is not where we’re headed, and that is a grave disappointment to folks who thought that—well, someone campaigned saying, “Yes, we can.” And now it’s become, “Well, actually we’re not even going to try,” on the prosecutorial side. Right? So, if he continues this way, it’s conceivable the Republicans will nominate someone so bad that he will be reelected, but he will destroy the effectiveness of his administration and do tremendous damage to the nation.

Bill Black: Fire Geithner, Fire Holder, Ask Bernanke to Resign, and Prosecute CEO’s and CFO’s

21st Century Economics: 1. Rampant fraud and reckless mismanagement in the financial sector, 2. Public bailouts of the worst actors in the financial sector, 3. Private debt and liability imposed on taxpayers, 4. Monetary policy aimed at recapitalizing insolvent and recidivist banks, 5. Promotion of business leaders and policy-makers who are chronically compromised, 6. Conglomeration of Systemically Dangerous Institutions into a more empowered menace.