High Noon On Wall Street
March 21, 2011 - 12:49am ET
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The bankers are endangering innocent people, their pals are roughing up the law, and the people who should be helping out are sitting on the sidelines doing nothing You can almost hear Tex Ritter singing "Do Not Forsake Me Oh My Darlin'," the theme song from High Noon.
You remember High Noon. That's the movie where Gary Cooper plays Will Kane, a retired gunslinger who can't find anybody to help him defend the town from a dangerous gang. In fact, the townspeople give him almost as much trouble as the gang does.
The financial system has its own sheriffs, and bankers behaved like an unruly mob with one of them this week. Meanwhile Democrats were characteristically diffident and Republicans formed a stone-throwing mob of their own.
Red Lights Everywhere
The lawmen - both women, in this case - were being baited, taunted, and thwarted at a time when the economy's dashboard is flashing red with warning signs. A lot of people think Wall Street banks are healthy again because it's making a lot of money. But they were making lots of money right before the last crash, too.
A new report from from Bloomberg Government confirms that the "too big to fail" banks at the heart of the last crisis and TARP bailout have become bigger since the crisis, not smaller. Bloomberg Government reports that "the number of 'too big to fail banks' will increase by 40 percent over the next 15 years," adding: "Today, the top 10 banks hold 77 percent of all U.S. bank assets, compared with 55 percent of the total assets in 2002."
Here's another flashing red light: The Federal Reserve's chief bank regulator said 30% of the banks in this country have "less than satisfactory" supervisory ratings. Banks are "stabilizing" overall, said Patrick Parkinson, but banks in this country are "still in the repair and recovery stage."
Meanwhile the FDIC reports that 884 banks, nearly 12% of the banks in the country, are in danger of failing. More than 150 banks failed last year, and the number of expected failures this year, while less, would have been considered catastrophic before the crisis. Profits are up but, as FDIC head Sheila Bair explained, that's not because banking is thriving. It's because banks won't be setting aside as much money to cover losses from bad loans this year.
If one-third of America's airliners had "less than satisfactory" ratings and one-twelfth of them were at risk of failure, they'd shut down every airport in the country. But politicians are all too eager to help banks keep flying the friendly skies, unsafe or not. They'll probably even serve "a complimentary beverage of your choice" if they're asked.
Take House Majority Leader Eric Cantor, who addressed the American Bankers Association this week and told them "You are at the center of what allows our economy to grow!" (That would explain our current record levels of unemployment and under-employment -- 25 million Americans at last count.)
Cantor added: "We are not overregulated, we are super-overregulated!" "Super-overregulated": It's like "Supercalifragilisticexpialidocious," the made-up word from Mary Poppins that inspires Dick Van Dyke to burst into song -- but without the intellectual heft.
Cantor and his fellow Republicans insist that "We don't need more regulation" even as too-big-to-fail banks get bigger and staggering numbers of banking institutions remain fragile, capable of collapsing at any serious external shock to the economic system. And they're backing up their words with a series of measures to repeal (rather than strengthen) the reforms put in place last year. The bills aren't likely to succeed as long as Democrats control the Senate, but the Senate could change hands next year, and it's part of the GOP's plan to argue that deregulation will lead to more jobs. (Because, you know, the deregulation-induced meltdown was so good for jobs last year ... or something .)
Tea Party Bankers
After they drove their own banks into the ground, taking the economy with it, you might have expected bankers to lay low for a while. But they're acting as self-entitled and unruly as ever. As Dave Clarke at Reuters reported, "bankers guffawed and groaned" at Bair when she told them they should support financial reform at a meeting of the American Bankers Association.
Mob psychology was the rule of the day, replacing even enlightened self-interest with blind hostility. As Reuters reported, "Audience members who complained about Dodd-Frank did not provide specific examples of what troubled them."
"I can't believe this. I really can't believe this," said Bair. These unruly bankers were mostly from community banks, which could actually benefit from financial reform. But they appeared to have been duped by objections from the "too big to fail" mega-banks, whose interests aren't aligned with theirs at all. Like Tea Partiers, these bankers were actually acting against their own interests. Like Tea Party supporters, they seemed to be easily manipulated and ... well,there's no nice way to say this ... not particularly bright.
"I would just encourage you to think for yourselves," said Bair. Good luck with that.
Imagining a World Without Warren
Meanwhile, Republican lawmakers were just as thuggish to Elizabeth Warren as the bankers were to Sheila Bair. Joe Nocera documented the ugliness in the New York Times, in an excellent piece that should be read in its entirety. "The piñata sat alone at the witness table," begins Nocera, who noted that "the real purpose of the hearing" was "to allow the Republicans who now run the House to box Ms. Warren about the ears."
Nocera quotes Warren as saying "If there had been a cop on the beat to hold mortgage servicers accountable a half dozen years ago, the problems in mortgage servicing would have been found early and fixed while they were still small, long before they became a national scandal." That's undoubtedly true. But these Republicans don't want cops on the beat. They want cops who'll sit in the diner sipping coffee when they're told to, so the gang can run wild.
Warren more than held her own, which brought the motto of the Texas Rangers to mind: "One riot, one ranger." But she deserved a little backup from the White House, and it was nowhere to be found.
"Do not forsake me, oh my darling ...."
The real story of High Noon wasn't the confrontation between the hero and the gang, but the one between Kane and the "good people" of Hadleyville who lacked the courage or conviction to act in a time of need.
The FDIC is suing senior executives at the failed WaMu bank for "recklessly disregarding" sound financial practices (along with their wives, who allegedly helped conceal their assets from creditors). It's astonishing that no executives had been held personally responsible for the destruction of the economy or a wave of illegal foreclosures, and the FDIC should be congratulated for this move. It should also be encouraged to move against executives of current banks, as well as ones that no longer exist.
But Sheila Bair must be feeling a little lonely. The Justice Department still hasn't brought any actions against executives from any of the big banks for their corporate crime wave. It needs to do so, and soon, if it doesn't want to look like those Western film sheriffs who are always saying things like, "Gee, Frank, if you want me to let the boys out of jail, just ask!"
On one hand, there are the Republicans, whose most eloquent spokesman is Rep. Spencer Bachus: "In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks." Then there's the Administration. Krugman points out that Warren "could serve (the White House) both as an able administrator and as a symbol of commitment to reform," while noting that "so far, the administration seems eager to avoid drawing any contrasts with the GOP, even when it has both justice and public opinion on its side."
This is the Administration's chance to stand with fighters like Elizabeth Warren, both in its words and in its deeds. Some well-targeted prosecutions, along with a strong defense of public champions like Bair and Warren, would be an enormous political boon. It would also be the right thing to do.
Elizabeth Warren stood alone on Capitol Hill. Sheila Bair's fighting the good fight. They're waiting for someone to step forward and help them. If it's any comfort to them, Will Kane knows exactly how they feel.
This post was produced as part of the Curbing Wall Street project.
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