lobbying

India And Philippines Declare War On Call Center Bill

Dave Johnson — Mon, 09 Jan 2012 13:10:36 -0500

Last month I wrote about a bill before Congress that would both help fight the offshoring of call-center jobs and protect consumers. Now the countries where we have been sending those jobs are organizing a lobbying campaign to fight the bill.

The Bill

There is a bipartisan bill before Congress, The U.S. Call Center Worker and Consumer Protection Act, that would let the public know which companies are engaging in sending jobs out of the country, let customers ask to use an American call center instead, and ban federal grants or guaranteed loans to American companies that move call center jobs out of the US. In Call-Center Bill Would Let Customers Ask To Talk To Americans, I wrote about some of the specifics and the reason the bill is needed,

Today many call-center jobs are being moved out of the country to India and the Philippines. This costs American jobs, and can be very frustrating to consumers who have to speak to people who they cannot understand because of language problems or cultural differences. The The U.S. Call Center Worker and Consumer Protection Act gives consumers the right to ask where the person they are speaking with is based, and ask for an American-based representative instead. Among the things this bill would accomplish:

Require the Department of Labor to publicly list firms that move call center jobs overseas.
Make these firms ineligible for any direct or indirect federal loans or loan guarantees for five years.
Require 120 day advance notification of a proposed move off-shore.
Require call center employees to tell U.S. consumers where they are located, if asked.
Require that call centers transfer calls to a U.S. call center if asked.

Lobbying Campaign

India and the Philippines are organizing a lobbying campaign here -- yes, foreign countries lobby Congress to take our jobs -- to keep this bill from even being considered. An article in The Hindu explains,

India's ambassador to the United States Nirupama Rao said that India would work to protect its business interests in the context of a proposed U.S. legislation against outsourcing call centre works to countries, including India.

The Manila Bulletin gets specific,

President Benigno “Noynoy” Aquino III was urged to create and send a strong contingent of Filipinos that would persuade lawmakers in the US Congress to stop the passage of a bill that could kill the US$9-billion business processing outsourcing (BPO) in the country.

Eastern Samar Rep. Ben Evardone, chairman of the House Committee on Public Information, lamented that US House Bill No. 3596 or the Call Center and Consumers Protection Bill will discourage American companies from outsourcing services in other countries like the Philippines.

“We have to act immediately by sending a strong lobby team in the US. I believe this will kill the BPO industry in the country,” Evardone said.

In, Anti-Outsourcing Bill Stirs Fears In India, Philippines at the Huffington Post, Dave Jamieson quotes Rep. Tim Bishop's (D-N.Y.) reaction to this effort by India and the Philippines,

When asked about such reactions, Bishop said that the fears in India and the Philippines reinforce the argument for the legislation.

"Frankly, the fact that both the Indian government and the Filipino government are reacting like this says that our bill is very badly needed," he said. Most of the call center jobs lost in the U.S. are "sent primarily to India and the Philippines. So I hope [the bill] does have an impact."

... While discussing the call center legislation last month, Bishop said that "outsourcing is one of the scourges of our economy and one of the reasons we are struggling to knock down the unemployment rate and reduce the number of Americans who are out of work ... We can't prohibit it, but we can certainly discourage it."

Consumer Protection

This is not just an offshoring issue, it is also a consumer-protection issue. In Who Protects Info You Give To Offshored Call Centers?, I wrote about a study showing that offshoring of call centers causes us to lose protections on our privacy and financial information,

Not JUST Jobs Lost -- Data Privacy Is Lost, Too

A new study by the Communication Workers of America backs up the need for that bill. The report is called, Why Shipping Call Center Jobs Overseas Hurts Us Back Home. The study found that offshoring call-centers undoes protection of Americans’ private information. Personal data can be available to people who could use it for criminal purposes. Also, once information is sent across borders governments do not need warrants to collect this info.

The full text of the bill is available here:

H.R.3596 - To require a publicly available a list of all employers that relocate a call center overseas and to make such companies ineligible for Federal grants or guaranteed loans and to require disclosure of the physical location of business agents engaging in customer service communications.

And The Door Revolves . . .

Zach Carter — Thu, 09 Dec 2010 14:24:32 -0500

Sen. Tim Johnson, D-S.C., is almost certain to be chairman of the Senate Banking Committee next year, once current chair Chris Dodd, D-Conn., is out of office. Johnson has never had a good reputation with consumer advocates, in large part because he's opposed nearly every piece of legislation designed to thwart predatory lending.

That perspective is not likely to change with his chairmanship. Johnson just hired a top bank lobbist named Dwight Fettig to be a "senior policy adviser." Fettig's clients included some of the chief scumbags that wrecked the economy, secured epic bailouts, and opposed financial reform: the American Bankers Association, JPMorgan Chase, the National Association of Mortgage Brokers and the Vanguard Group hedge fund. Prior to peddling influence on behalf of the too-big-to-fail gang, he was the top "government relations" man at Freddie Mac. During the housing bubble.

By hiring Fettig, Johnson is sending the clearest signal possible to Wall Street: I've got your back.

This isn't Fettig's first trip through the revolving door. Before entering the bank lobby, he worked as a Johnson aide in the House.

So the bad news is, Congress is totally corrupt. The good news? It already was.

UPDATE:

And hey! Obama's former Budget Director Peter Orszag just joined Citigroup! It's really pretty sick. The Republicans just spent an entire year promising to give Wall Street whatever they wanted on anything, but the public still thinks it's the Democrats alone who are in bed with Wall Street. This is why.

This also is not the Office of Management and Budget's first turn through the revolving door this year. The current director, Jack Lew, made $1 million running Citi's Alternative Investments unit into the ground.

The political optics here are just horrible. Obama is pushing a tax cut deal that provides huge benefits for the super-rich . . . as his former budget director take a job as Vice Chairman at Citigroup, thus joining the ranks of the super-rich.

Merry Christmas, Wall Street.

Why Wall Street Reform Should Hammer Bank Profits

Zach Carter — Tue, 05 Oct 2010 13:11:42 -0400

Of the universal-policy-bloggers who occasionally wade into financial waters, Matt Yglesias is generally one of the best. But sometimes he's just flat wrong, and his post today on financial profits is one of those times. Matt argues that looking to financial profits to measure the effectiveness of Wall Street reform is not a good idea, and he's missing the point. The good news is, Annie Lowrey wrote a great piece explaining the current landscape surrounding Wall Street reform, one in which responsible policymakers understand that lower bank profits are an important sign of economic progress.

Here's the key passage from Matt's blog:

"Much has been made, for example, of financial sector profits as a share of overall corporate profits. The numbers are sufficiently striking as probably constitute cause for alarm, but as a metric this is an odd one. If competition between cell phone carriers becomes more robust, leading to falling prices for consumers that’s a good thing. But since it implies smaller profits for Verizon and AT&T it means banking sector profits will rise as a share of overall profits. But who cares?"

This is silly. When people cite this statistic—and I'm one of the people who like to do so—they're not comparing Citibank's profitability to Verizon's. They're comparing the entire financial sector to the entire corporate economy. The idea that innovations in corporate governance, technology and overall corporate efficiency could be applicable to the entire economy except finance should be extremely suspect. Many of these innovations should apply to corporations generally—whether they're banks or boat-manufacturers. Moreover, there is no reason to believe that literally every sector of the economy except finance has found a way to make itself more efficient over the past few decades, while finance has remained the same old bloated bureaucratic beast.

And if we look at the actual recent history of finance, we see that there have, in fact, been dozens of major financial innovations—but innovations that served to extract rents from other players in the economy. Finance, and banks in particular, figured out great ways of simply gobbling up other peoples' money. This didn't create new, better economic activity—it destroyed economic activity and converted it into bonuses for bankers and traders.

And you can measure this phenomenon by examining financial profits as a share of overall corporate profits. It's one way of analyzing the extent to which finance is cannibalizing the real economy. That problem is very significant, even if you ignore the fact that big banks need to be bailed out and create financial crises that have brutal effects on the broader economy. The crashes and bailouts are bad, but finance is eating jobs and converting them into bonuses without them. That's worse.

Matt also emphasizes the need for international coordination on financial reform. It's true to a point, but essentially meaningless so far as U.S. policy is concerned. Sure, if the U.S. adopts really tough Wall Street regulations, and the rest of the world doesn't, then reckless financial activity will move overseas. And eventually, financial excess elsewhere can create trouble here.

But financial recklessness abroad doesn't create the same kind or degree of economic fallout that financial excess at home does. It's bad for the U.S. if global credit markets freeze up because of a real estate bubble in France. It's much worse for the U.S. if global credit markets freeze up because millions of Americans are in foreclosure. "International cooperation" has become a lame excuse not to regulate finance at home, but we can only expect our friends abroad to be as stringent as we are here. If the U.S. continues to allow its banks to take on huge risks as taxpayers guarantee losses, then we're setting ourselves up for economic trouble—much worse economic trouble than we'd have if Europe alone was allowing financial excess.

Matt is commenting on Annie Lowrey's excellent write-up of the Roosevelt Institute conference organized by finance blogger Mike Konczal. Lowrey's piece is a superb summation of the event, and an excellent snapshot of where financial reform stands at this moment—both its enormous economic potential and its perilous political straits.

I'll have my own write-up on the conference tomorrow, but here's a quick summary: Getting Congress to pass any legislation reining in Wall Street was a major task, and the bill we got gives regulators several useful tools. The trouble is, it doesn't give regulators all of the tools, and the regulators who want to fix problems are about to get badgered to death by a Republican Congress that has already threatened to de-fund key parts of the legislation. We'll know if Wall Street reform works if bank profits decline for the right reasons-- not just because the economy sucks, but because banks aren't devouring other economic activity.

Crony Capitalism: Wall Street's Favorite Politicians

Zach Carter — Tue, 28 Sep 2010 17:02:59 -0400

A full 90 members of Congress who voted to bailout Wall Street in 2008 failed to support financial reform reining in the banks that drove our economy off a cliff. But when you examine campaign contribution data, it's really no surprise that these particular lawmakers voted to mortgage our economic future to Big Finance: This election cycle, they've raked in over $48.8 million from the financial establishment. Over the course of their Congressional careers, the figure swells to a massive $176.9 million.

The complete list of these Crony Capitalists is below, along with the money they pulled in from Big Finance, according to data compiled by the Center for Responsive Politics (opensecrets.org). The career data goes back to 1989. Of the 69 House members who voted with Wall Street on both the bailout and financial reform, 60 are Republicans, while nine are Democrats. All 21 Senators who voted with Wall Street on both issues are Republicans, and Republicans raked in over 90 percent of the total campaign contributions. Here's a chart showing Wall Street's total contributions to this crowd for the 2010 cycle, by political party:

And here's one showing total Wall Street contributions over the course of their careers:

These aren't the only politicians carrying water for Wall Street—only the most flagrant. Some of the bank lobby's savviest servants on Capitol Hill do their dirty work early in the legislative process. They push through technical amendments and deploy complex procedural tricks to defang a bill, but when the final vote comes, they can still create the appearance of taking a stand against Wall Street's interests. Rep. Melissa Bean, D-Ill., is a master of this technique, and Tea Party favorite Sen. Scott Brown, R-Mass., was able to claim credit for voting in favor of reform after demanding—and receiving—a host of big bank giveaways in return for his vote.

Nor are Republicans the only recipients of Wall Street largesse. Bean, for instance, has pulled in over $773,000 from Wall Street in the 2010 cycle alone, while working overtime to carve loopholes into new consumer protections (she's scored $2.4 million over the course of her Congressional career). And the Democratic leadership has received millions as well.

When it comes to dealing out economic damage, no special interest group has been able to wreak more havoc that Big Finance. After inflating an $8 trillion housing bubble and sparking a recession that has cost the economy over 8 million jobs, public pressure to crack down on Wall Street was intense. And the public is still clamoring for Wall Street accountability—after two years in office, the Wall Street reform bill remains the most popular legislative effort championed by President Barack Obama, and getting tough on Big Finance has been a reliable re-election strategy for embattled incumbents.

But harnessing the Wall Street beast proved a tortuously long and difficult process, taking nearly two years despite its economic urgency. And while the bill that Congress approved this year has plenty of virtues, many of the most critical reforms were simply not addressed by the legislation. The too-big-to-fail financial behemoths that taxpayers bailed out in 2008 are even bigger today, banks can still gamble with taxpayer money, and the foreclosure crisis continues to ravage neighborhoods across the country. Until these issues are addressed, the U.S. economy will remain beholden to Wall Street's bonus-crazed whims.

But if you follow the money, it's obvious why so much work remains to be done on financial reform. This year alone, Wall Street spent a staggering $251 million fighting financial reform. According to a separate analysis of campaign contributions performed by Public Citizen, lawmakers who voted with Wall Street on both the bailout and reform received nearly triple the campaign cash of those who opposed Wall Street (figures in the Public Citizen study don't correspond to those I've compiled, as Public Citizen examined contributions from 2007 through July of 2010).

Despite the popularity of Wall Street reform, 90 members of Congress didn't even want to publicly pretend to support reining in almost universally reviled banks. When you're trying to decide which bums to throw out in November, here's one place to start. These members of Congress are okay with setting up economic calamities, and they don't mind paying for them with your tax dollars.

Here's how Wall Street's contributions break down among Wall Street's 21 Senate Cronies. For 2010:

For their careers:

And here are all of the Cronies, along with their Wall Street hauls:

Senator	2010 Wall Street Cash	Career Wall Street Cash
Sen. Lamar Alexander (R-TN)	$1,600,000	$4,900,000
Sen. Robert Bennett (R-UT)	$1,500,000	$2,600,000
Sen. Kit Bond (R-MO)	$333,600	$3,300,000
Sen. Richard Burr (R-NC)	$1,500,000	$3,300,000
Sen. Saxby Chambliss (R-GA)	$2,500,000	$3,500,000
Sen. Tom Coburn (R-OK)	$451,700	$1,200,000
Sen. Bob Corker (R-TN)	$3,100,000	$3,300,000
Sen. John Cornyn (R-TX)	$3,200,000	$4,700,000
Sen. John Ensign (R-NV)	$1,300,000	$2,600,000
Sen. Lindsey Graham (R-SC)	$1,100,000	$2,000,000
Sen. Judd Gregg (R-NH)	$233,200	$1,100,000
Sen. Orrin Hatch (R-UT)	$1,400,000	$2,600,000
Sen. Kay Bailey Hutchison (R-TX)	$1,400,000	$4,700,000
Sen. Johnny Isakson (R-GA)	$1,500,000	$4,200,000
Sen. John Kyl (R-AZ)	$2,800,000	$3,800,000
Sen. Dick Lugar (R-IN)	$412,200	$2,500,000
Sen. John McCain (R-AZ)	$947,600	$34,000,000
Sen. Mitch McConnell (R-KY)	$4,300,000	$5,300,000
Sen. Lisa Murkowski (R-AK)	$268,200	$909,700
Sen. John Thune (R-SD)	$1,600,000	$3,900,000
Sen. George Voinovich (R-OH)	$435,200	$2,800,000
21 Republicans
0 Democrats
Senate Total	$31,881,700	97,209,700

House Member	2010 Wall Street Cash	Career Wall Street Cash
Rep. Rodney Alexander, R-La.	$106,500	$422,300
Rep. Spencer Bachus, R-Ala.	$611,600	$4,400,000
Rep. Gresham Barrett, R-S.C.	$20,400	$806,700
Rep. Marion Berry, D-Ark.	$24,900	$663,700
Rep. Judy Biggert, R-Ill.	$395,000	$1,900,000
Rep. Roy Blunt, R-Mo.	$1,200,000	$3,800,000
Rep. John Boehner, R-Ohio	$1,300,000	$3,700,000
Rep. Jo Bonner, R-Ala.	$90,400	$702,200
Rep. Mary Bono Mack, R-Calif.	$190,000	$733,400
Rep. John Boozman, R-Ark.	$257,700	$491,000
Rep. Dan Boren, D-Okla.	$123,100	$722,200
Rep. Rick Boucher, D-Va.	$92,700	$1,400,000
Rep. Charles Boustany Jr, R-La.	$226,300	$934,600
Rep. Kevin Brady, R-Texas	$157,000	$840,500
Rep. Henry Brown, R-S.C.	$35,700	$494,000
Rep. Vernon Buchanan, R-Fla.	$336,800	$1,400,000
Rep. Ken Calvert, R-Calif.	$180,300	$940,300
Rep. Dave Camp, R-Mich.	$588,000	$1,700,000
Rep. John Campbell, R-Calif.	$413,400	$1,200,000
Rep. Eric Cantor, R-Va.	$2,100,000	$4,400,000
Rep. Mike Castle, R-Del.	$749,100	$3,200,000
Rep. Howard Coble, R-N.C.	$23,400	$502,500
Rep. Tom Cole, R-Okla.	$110,000	$686,000
Rep. Mike Conaway, R-Texas	$161,500	$711,800
Rep. Ander Crenshaw, R-Fla.	$86,100	$717,000
Rep. Henry Cuellar, D-Texas	$90,600	$606,900
Rep. Charlie Dent, R-Pa.	$177,900	$881,000
Rep. Chet Edwards, D-Texas	$324,200	$1,900,000
Rep.Vernon Ehlers, R-Mich.	$8,500	$292,200
Rep. Jo Ann Emerson, R-Mo.	$143,900	$904,400
Rep. Mary Fallin, R-Okla	($1,000)	$340,700
Rep. Rodney Frelinghuysen, R-N.J.	$86,200	$840,300
Rep. Jim Gerlach, R-Pa.	$251,600	$1,800,000
Rep. Kay Granger, R-Texas	$140,000	$1,100,000
Rep. Wally Herger, R-Calif.	$171,500	$1,100,000
Rep. Peter Hoekstra, R-Mich.	($1,000)	$300,600
Rep. Bob Inglis, R-S.C.	0	$572,800
Rep. Peter King, R-N.Y.	$173,900	$1,600,000
Rep. Mark Kirk, R-Ill.	$1,900,000	$4,200,000
Rep. John Kline, R-Minn	$170,900	$989,100
Rep. Jerry Lewis, R-Calif.	$31,800	$748,000
Rep. Daniel E. Lungren, R-Calif.	$147,700	$622,500
Rep. Howard McKeon, R-Calif.	$132,100	$1,100,000
Rep. Gary Miller, R-Calif.	$144,500	$902,000
Rep. Harry Mitchell, D-Ariz.	$130,900	$558,000
Rep. Sue Myrick, R-S.C.	$93,600	$1,200,000
Rep. Soloman Ortiz, D-Texas	$40,200	$381,700
Rep. George Radanovich, R-Calif.	$24,900	$462,000
Rep. Mike Rogers, R-Ala.	$128,200	$1,000,000
Rep. Hal Rogers, R-Ky.	$50,200	$468,000
Rep. Ileana Ros-Lehtinen, R-Fla.	$127,000	$986,000
Rep. Paul Ryan, R-Wis.	$531,500	$1,900,000
Rep. Jean Schmidt, R-Ohio	$121,900	$519,700
Rep. John Shadegg, R-Ariz.	$39,700	$1,200,000
Rep. Bill Shuster, R-Pa.	$30,700	$403,600
Rep. Mike Simpson, R-Ind.	$20,500	$266,900
Rep. Ike Skelton, D-Mo.	$112,500	$524,200
Rep. Lamar Smith, R-Texas	$258,900	$1,300,000
Rep. Mark Souder, R-Ind.	$40,500	$405,800
Rep. Zack Space, D-Ohio	$169,300	$476,300
Rep. John Sullivan, R-Okla.	$79,200	$494,800
Rep. Lee Terry, R-Neb.	$202,600	$1,400,000
Rep. Mac Thornberry, R-Texas	$42,500	$603,400
Rep. Patrick Tiberi, R-Ohio	$555,500	$2,800,000
Rep. Fred Upton, R-Mich.	$81,700	$929,400
Rep. Greg Walden, R-Ore.	$180,700	$732,400
Rep. Zach Wamp, R-Tenn.	0	$715,700
Rep. Joe Wilson, R-S.C.	$155,500	$580,200
Rep. Frank Wolf, R-Va.	$90,400	$1,100,000
60 Republicans	$15,873,400	$72,443,800
9 Democrats	$1,108,400	$7,233,000
House Total	$16,981,800	$79,676,800

America Still Needs Elizabeth Warren, And The Bank Lobby Is Still Lying About Her

Zach Carter — Sat, 07 Aug 2010 04:15:40 -0400

Of all the accomplishments Elizabeth Warren has amassed during her lifetime, one of the most impressive is also one of the least well-known to the general public. Warren was a co-founder of Credit Slips, a very technical, influential blog on banking and bankruptcy. She hasn't blogged there since taking up her post as Chair of the Congressional Oversight Panel for the Troubled Asset Relief Program, but a review of her posts reveals a set of truths that Warren's opponents in the bank lobby do not want to acknowledge. While Wall Street bankers like to smear Warren as an ideologically driven crusader, Warren's blogging reveals her to be the exact opposite: a serious student of economic evidence, eager to embrace good ideas from any source.

Take a look at this post from September 2008, in which she praised economists Greg Mankiw and Ken Rogoff. Both of these economists are, let's say, unpopular among liberals. Mankiw was chair of President George W. Bush's council of economic advisors, and Rogoff is an alum of the International Monetary Fund, where he pushed draconian cuts in social programs in developing nations in the name of balanced budgets.

But it turns out that both Mankiw and Rogoff had something interesting to say at a forum back in September 2008. And what did Elizabeth Warren have to say about it? She calls them "interesting," "terrific," "calm," and "funny." She doesn't blast them for their backgrounds with institutions that are generally reviled by progressives, she just emphasizes that they're serious thinkers who are making good points about the role the bank bailout played in the economy:

Greg's work with the current administration and Ken's background with the IMF and on the Board of the Federal Reserve add a certain credibility to their assessments of conditions on Wall Street. If they are right, the $700 bailout is saving some investment bankers' jobs in the short term, but overall it is just making the financial system worse.

Aside from seeking out common ground with aggressive conservatives, Warren also displays a deep-rooted intellectual curiosity throughout her blog postings. One of the most obnoxious bank-lobby smears against Warren is that she doesn't fully appreciate the benefits of financial innovation, and that she'll cut off useful credit to poor people by pushing overzealous consumer protection. Even some otherwise respectable bloggers have taken up the chant, without really bothering to investigate whether there's any shred of truth to it. Even a casual browsing of Warren's blog work reveals this to be a silly charge.

In a post from May 2008, she details a Wells Fargo customer who was quite clearly ripped off by her bank. Warren provides a very cautious analysis of the situation. While Wells Fargo's actions were an obvious disgrace to the bank itself and the regulatory regime, the appropriate response is not obvious. Maybe the kind of product Wells Fargo was selling should be banned outright. Maybe it should only be provided with more rigorous disclosures. Maybe consumers should have to ask for the product before bankers are allowed to discuss it. The point is, Warren isn't eager to claim that an obviously abusive product should simply be banned—she wants to make sure that policymakers don't unnecessarily cut off credit to well-informed adults who want it.

Again and again, Warren reveals herself to be a devout student of data in her blog work. It isn't sexy, it sure as hell doesn't traffic in the broader blogosphere, but it's the mark of someone who truly cares about getting it right, rather than merely developing a set of popular talking points. Warren clearly loves reading economic papers on the effects of various credit policies, and determining their effects on both individuals and society at large. That's exactly what we need from a bank regulator, especially at the Consumer Financial Protection Bureau.

You can find all of Warren's Credit Slips blogs here. I'll be highlighting more of her blogging in future pieces, but it's clear from these posts alone that she is not an ideological crusader. This fact, in truth, is why the bank lobby so fervently opposes putting her in a position of regulatory authority. For decades, all of our bank regulators have been driven by ideological agendas. They've aggressively pursued any policy that creates short-term profits for Wall Street, under the view that anything that generates money for Wall Street is expanding credit in society and furthering productive economic growth. President George W. Bush even appointed a bank lobbyist to the top regulatory post in the nation. The results of this plan were disastrous, as everyone living through the current recession can attest.

Of course, there is an alternative to appointing regulators who will always put bankers and brokers first. We need a rigorous scholar who cares about finding the right policies to elevate the middle class and further healthy economic growth. We need Elizabeth Warren.

Do Democrats Want Toxic Campaign Cash From Goldman Sachs?

Zach Carter — Tue, 06 Jul 2010 20:46:13 -0400

Heavy-hitting Wall Street political donors are withholding their money from the Democratic Party's campaign coffers, according to a Washington Post report making the rounds on Capitol Hill today. In a political environment in which almost no group is as publicly reviled as a Wall Street executive, Democrats just scored a tremendous public relations coup. Good riddance.

The Post story from this morning reads like a campaign ad for embattled Democrats. After spending more than a year fighting for Wall Street reform, Democrats did such a good job that the bailout barons turned on them—are any Democratic strategists sorry to see that narrative emerge?

For the purposes of this post, set aside the fact that elected officials ought to answer to the public interest, rather than the narrow preferences of entrenched wealthy elites. Politics are still politics, and like it or not, money matters in elections. But the public perception of the current fund-raising situation will play very well for Democrats come election season. No politician likes seeing campaign money walk out the door. But there's one thing they hate even more than losing contributions: Losing elections. Sure, overstuffed campaign coffers make it easier to win in November. But not when the opposition can highlight those contributions as toxic money from corrupt bailouteers.

What are Democrats missing out on? Lloyd Blankfein, CEO of Goldman Sachs, the second-most-hated company in the country, has not contributed his usual $50,000 to the Democratic Party this year. Does anybody in Congress want to pose for a photo-op with Lloyd before November? Maybe give a speech explaining how betting against your own clients is a prime example of doing "God's work"? Of course not. If I were a Democratic strategist, I'd be printing the "Goldman Sachs Hates Democrats" posters right now.

There is, however, a class of politicians from both parties who are sweating bullets as the fund-raising numbers roll in. Everybody who voted against financial reform is starting to realize that they made a big mistake. Wall Street's campaign contributions are weak overall—they're down more for Democrats, but Republicans haven't raised all that much, either. Our economy is still coping with an economic calamity that everyone knows was caused by banker excess and weak regulation. For all but a handful of strident reformists who believe the banking overhaul legislation does not go far enough, all of the bill's opponents were making a naked political bet: The money I get from this vote will matter more to my electoral prospects in November than the damage to my reputation. But now it looks like that bet won't be paying off after all. Politicians who opposed reform not only cast an unpopular vote, they won't be getting their kickbacks, either.

But even if they did get the money, there is only so much they can do. The public outrage against banks is not unique to the progressive left. It's a phenomenon that crosses the ideological spectrum, and has been a major motivation behind much of the Tea Party movement. Sen. Robert Bennett, R-Utah, was a down-the-line conservative who voted in favor of the bank bailout with most of his Senate Republican brethren (and most Senate Democrats). But when primary time came this year, his vote for the banks cost him his seat. Lawmakers from both parties can expect similar treatment from the general electorate this fall.

The activists who turn out the vote during midterm elections are not happy with economic policy that puts bankers and traders first, while leaving jobs and foreclosures out to twist in the wind. That dissatisfaction applies to both traditionally Republican and traditionally Democratic activists. Winning Wall Street cash by capitulating on Wall Street reform is not going to impress voters of any ideological orientation, much less the moderates who are disgusted by the bank bailouts.

Of course, the banking overhaul is unnecessarily weak. It will not prevent another financial meltdown, and it does little to realign the interests of the banking elite with those of society at large. But there's a lesson here, too. The fact that Wall Street is doing its best to punish the Democrats right now shows how silly it is to try and curry favor with corporate interests who wreck the economy.

When you have to reform a broken industry, the executives from that industry are going to cry foul, whatever you do. The trillions of dollars in bailout money that the U.S. government funneled to Wall Street should leave no doubt in anyone's mind that Big Finance is broken—the need for reform is as imperative a policy priority as can be imagined. Watering down the bill, adding loopholes and refusing to consider tough reforms to appease lobbyists ultimately doesn't help much. Top executives will still be angry that you had the audacity to ask them to change something, because they spend their whole lives getting paid a fortune to do whatever they want.

Money is money. It matters in elections, and one would have to be aggressively naïve to believe otherwise. But Wall Street's money only matters to the politicians who made the wrong choice on reform—lawmakers who gambled with the public interest, and deserve to lose. For the rest of the Democrats, Wall Street's reluctance to fork over chests of bailout money should be seen as a political gift, not a setback.

Wall Street Reform: A Good First Step

Zach Carter — Fri, 25 Jun 2010 13:27:23 -0400

Members of Congress finished ironing out their differences on Wall Street reform last night, and the resulting bill deserves unequivocal support from progressives and conservatives alike. But while the final package is a necessary first step to overhauling the nation's out-of-control financial sector, it will do very little to change the destructive status quo on Wall Street. The bill is a good first step. The public deserves too see stronger reforms from Congress next year.

As a matter of history, sweeping financial change takes several years to secure. It took Franklin Delano Roosevelt seven years to enact all of his New Deal banking regulations, and President Barack Obama appropriately sees the 1930s crisis as the historical analog to today's meltdown-and-reform process. Obama is correct to state that the legislation approved by Congress late last night is the most significant since the Depression—but it is a hollow truth. The U.S. government has been steadily deregulating the banking industry ever since Roosevelt, and the mere act of moving policy in the opposite direction is enough to claim the mantle of dramatic reform. Actually living up to the precedent set by Roosevelt will take several years of serious work, and major legislative action during the next electoral cycle.

As for the current bill, Congressional leaders decided late last night to gut the only two serious structural reforms still on the table. With the political wind at their backs, and the finish line clearly in sight, lawmakers decimated an effort to end outright gambling by the nation's largest banks, and sabotaged a plan to rein in rampant speculation in derivatives—the out-of-control market that brought down AIG and necessitated the bailouts of every major U.S. bank. By adopting the plan from Sen. Blanch Lincoln, D-Ark., to fix derivatives and implement a strong version of the Volcker Rule banning proprietary trading, Congress could have made significant strides toward ending the too-big-to-fail financial oligopoly that held taxpayers hostage in 2008. Instead, Congress chose to reinforce the current destructive banking regime.

But while the resulting legislation will not end too-big-to-fail, prevent future bailouts, or significantly rein in risk-taking on Wall Street, it is nevertheless worth supporting. Three important measures made it through that will make the global economy a fairer and more just marketplace. Those three reforms will not be enough to prevent future financial crises, nor will they be able to ameliorate the fallout from those crises once they occur, but they are nevertheless critical.

First, we will get a thorough audit of the Federal Reserve, an agency which has funneled $4 trillion in bailout funding to the nation's financial system without any oversight or transparency. The public will finally know how it's money is being spent, and credit is due to Rep. Alan Grayson, D-Fla., Rep. Ron Paul, R-Texas, and Sen. Bernie Sanders, I-Vt., who fought hard for the plan in the face of overwhelming Wall Street lobbying. Kudos are also due to activist journalists Mike Elk and Jane Hamsher, who cobbled together a coalition of good government supporters across the political spectrum and made the Fed audit a centerpiece of the legislative debate. The Fed's blunders on the bailout of AIG have created significant momentum for real reforms, and further information about the secretive agency's operations will help build momentum for next year's financial fights.

The legislation also includes a critical overhaul of the nation's consumer protection regime wherever banks are concerned. For the first time, the public will have a regulator dedicated to defending consumers against bank abuses, with no other conflicts. The new Consumer Financial Protection Bureau has been pilloried with unnecessary loopholes, but the resulting agency will nevertheless be able to write and enforce meaningful regulations on the financial sector. This is a major accomplishment, made all the more significant by the fact that the front-runner to head the new agency has already established herself as one of the most important voices on U.S. economic policy.

As Chair of the oversight panel for the Troubled Asset Relief Program, Elizabeth Warren has taken a position with extremely limited statutory power and converted it into the only mouthpiece for the American middle class in Washington, D.C. She has done a far better job than even the most optimistic good government activists had hoped for, and giving her free reign to crack down on consumer abuses will be a major victory for the American economy. She has not been formally nominated for the post yet, but the world will be a better place once she is.

Finally, while Lincoln's derivative overhaul was largely destroyed, she did manage to preserve tough new rules regulating both food and gas derivatives. The resulting legislation will not keep Wall Street from gambling with our future, but it will make it much more difficult for financiers to jack up the prices of basic necessities in their quest for bigger bonuses. Back in the spring and summer of 2008, prices for food went through the roof as a result of heavy speculation in market for agricultural derivatives—raw bets placed on the future price of corn, rice and other farm products. The resulting price increases forced consumers the world over to pay too much for food, and sparked outright starvation in regions that could not afford the increases.

The same thing happened with gasoline. Remember paying over $4.00 a gallon? That had nothing to do with the fundamentals of supply and demand—it was a direct result of wild speculation in the market for energy derivatives. The bill approved last night will end that abuse. As a result of Lincoln's efforts, two excesses that created real, tangible hardship for millions of people will be eliminated.

This bill is unquestionably deserving of support. It will make the global economy a fairer marketplace. But it will not end the too-big-to-fail incentives that encourage Wall Street to take wild risks and stick taxpayers with the tab, nor will it sufficiently overhaul the market that brought down AIG, nor will it end the widespread practice of bigwig bankers gambling with taxpayer money. All of those reforms could have been enacted—explicit, concrete amendments were offered on all three, and Congressional leaders rejected them in an overt effort to rake in campaign contributions from Wall Street. Republicans resort to such political calculations all the time—catering to entrenched corporate interests has been their only economic strategy since the Reagan years. But it is enormously disappointing to see significant swaths of the Democratic Party adopt the same strategy (particularly the New Democrats, who should rename themselves the Wall Street Democrats after this episode) and even more frightening to see the Democratic leadership incapable of corralling these turncoats.

So support the Wall Street reform bill: it's a good first step toward building an economy that works for all citizens, not just bankers. But demand that your elected leaders finish the job next year. Too-big-to-fail lives on, and must be defeated.

The Bank Lobby Gets Desperate on Derivatives

Zach Carter — Wed, 23 Jun 2010 14:10:13 -0400

Astonishingly, as Wall Street reform enters its final hours a tired, generic corporate refrain against regulation is gaining traction. As bigwig bankers and their lobbyist brethren fight to defeat tough new rules on derivatives—the crazy casino that brought down AIG—all their sloganeers can come up with is the trite wail that serious rules will send this risky business overseas. It'd be funny if members of Congress weren't taking it seriously.

"Oh no—the business will go overseas!" is the last-ditch, we're-about-to-lose-this-one cry of despair for corporate executives in every industry. Crack down on a profitable abuse in the United States, and the entire business will move to London or Mumbai, sending jobs and tax revenue abroad-- or so the argument goes. You only hear this line when CEOs know they have no case, and have to divert attention away from the real substance of the policy debate. In the case of Wall Street abuses, this nonsense is especially ridiculous. The bank lobby really just doesn't have any good arguments to launch in its favor, so it's falling back on generic corporate jargon.

In reality, the U.S. has extremely broad authority to crack down on derivatives activity abroad, we just don't have a whole lot of good rules on derivatives for regulators to enforce. It's extremely difficult for financial institutions to simply offshore their risky derivatives business to avoid oversight. Under current law, the Commodity Futures Trading Commission has the authority to regulate any trading done by foreign firms on behalf of U.S. clients, any trading of U.S. assets conducted by foreign institutions and any trading that causes a "substantial disruption" in U.S. markets. Just about anything the CFTC wants to get its hands on, it can, and the current CFTC Chairman, Gary Gensler, is a committed reformer. We just need to write good rules for his agency to enforce.

Moreover, finance tricksters will have no incentive to move their destructive derivatives trading abroad, because the rules in other countries are, in fact, much tougher than those the U.S. is currently considering.

There are a lot of ways to crack down on Wall Street, but none of them will work without reining in the insane, secretive market for derivatives—speculative instruments that allow financiers to gamble on anything from subprime mortgages to the price of corn. Right now Wall Street is making a big push to roll-out new derivatives on movie box-office receipts, allowing the financial world to place raw bets on how much money a movie is going to make. It sounds crazy and destructive, and it is.

Germany is leading the way on derivatives reform by simply banning this kind of naked gambling outright. The U.S. effort is critically important, but much more modest. Instead of banning the casino, reformers in Congress are hoping to shrink it by ending the taxpayer subsidies that fuel it. This is at the heart of the proposal from Sen. Blanche Lincoln, D-Ark., that has earned so much ire from the bank lobby. Bankers love their taxpayer subsidies, and love converting them into bonuses—who wouldn't? The trouble is that this business is inherently risky, and can jeopardize the entire economy, as the collapse of AIG attests.

But ending subsidies is still not as strong as banning gambling, which Germany is doing. The entire European Union is currently making a move to follow Germany's lead. Businesses can't exit U.S. markets to skirt regulations if their Wild West trading schemes are outlawed everywhere else.

In the U.K., officials are poised to impose a hefty tax on all financial assets, prevent banks from ballooning their balance sheets with derivatives trades. That means, U.S. banks can't send their derivatives operations to the U.K. without paying a big price.

Outside of Europe, few nations have the financial infrastructure to support derivatives trading on the scale of what we currently have in the U.S., where $300 trillion in trades are housed at just five banks. Some Asian nations do have this kind of infrastructure, big financial firms in Asia all realize that they will have to comply with U.S. rules if they want to keep doing business in the U.S. And indeed, policymakers in Hong Kong and other financial centers are looking to the U.S. for leadership on derivatives, and are likely to mimic whatever reforms are adopted here.

But more broadly, we have to ask why the U.S. should be worried about this activity being offshored at all. Raw gambling by financial institutions brought on one of the greatest economic catastrophes in American history. It forced the government to pony up over $4 trillion in bailout funds, expanded the national debt by 40 percent, and killed over 8 million jobs. If this business goes overseas, so be it! Let other nations bailout their megabanks and wreck their own economies if they want to. Today's derivatives casino is a job-killing nightmare that produces nothing other than megabonuses for bankers. Taxpayers have no business subsidizing such economic destruction.

Compared to international efforts, Blanche Lincoln's derivatives bill is overpoweringly mild, but it remains the only serious attempt to rein in the speculative casino that crashed our economy. The fact that the bank lobby's only tactic left is the wail "offshore!" shows how desperate our bank executives have become. Congress has no business caving to such nonsense at this stage of the reform process.

JPMorgan Still Hates The Economy

Zach Carter — Tue, 04 May 2010 16:06:20 -0400

J.P. Morgan Chase, America's largest warehouse of arrogant financial elites, has issued yet another deceptive lobbyist smear in the guise of an "analyst report." Yesterday, the megabank's Chief Economist James Glassman launched a broadside against Sen. Carl Levin (D-MI) for having the audacity to publicly investigate allegations of financial fraud at Goldman Sachs. Glassman—a top official at one of America's most rapacious institutions-- then indulges in a vaguely worded assault on financial reform, arguing that Congress is about to ruin the economy by cracking down on Wall Street. Don't believe a word of it.

First, I want to talk about Glassman's complaints about both financial reform and the Goldman Sachs hearings. After that, I want to talk about all the horrible things J.P. Morgan has done to the American economy over the past decade. Let's look at Glassman's objections to the current Wall Street reform legislation:

What flaws need fixing? The financial system is highly interconnected. The bankruptcy laws need to be modified to allow for an orderly unwinding of a failing financial institution (for example, ending the exemption given derivatives has attracted some attention) . . . . It's time for the grownups to step in. In its present form, financial reform will make credit more expensive and more difficult to obtain and businesses will find it more difficult to shed risk, harming the very people we are trying to help.

It's difficult to take Glassman seriously, because his objections are vague lobbyist talking points rather than specific arguments backed up by actual economic research. They are, nevertheless, preposterous claims.

Glassman thinks we can end too-big-to-fail by tweaking the bankruptcy code. That's a joke. Even Glassman's boss, J.P. Morgan CEO Jamie Dimon, doesn't believe such garbage. Bankruptcy is a slow and tedious process that cannot provide markets with the immediate certainty necessary to prevent massive fallout from a megabank failure. If you rely on bankruptcy, policymakers will have no choice but to resort to bailouts, and everybody in the market knows it. This could be a terminology mismatch—perhaps Glassman is actually referring to the resolution authority that both President Obama and Dimon want. But of course, that resolution mechanism is actually in the bill, which would mean Glassman is complaining about the bill for doing exactly what he wants it to do.

If Congress really wanted to kill too-big-to-fail, it would break up the behemoths like J.P. Morgan into institutions that are small enough to fail. Needless to say, the research report makes no mention of breaking up the banks.

Glassman seems very upset about the prospect of serious derivatives reform, and it's easy to see why: J.P. Morgan alone controls almost half of the entire $3.3 trillion market (over $500 trillion in face-value). This is the crazy casino market that destroyed AIG. The critical reform is to require that derivatives be traded on open and transparent exchanges, but all Glassman wants to do is change their status in bankruptcy. The idea of transforming this secretive hotbed for abuse into an open and transparent market never crosses his mind.

I wonder why. Right now, J.P. Morgan's derivatives clients don't have access to pricing information, but J.P. Morgan does. That imbalance allows Glassman's firm to make a lot of money by simply gouging its own customers. How much money? Dimon said the company would lose up to $2 billion a year under the derivatives reforms circulating through Congress in early April. That's $2 billion that stays in the real economy, instead of being cannibalized by J.P. Morgan. But good news for the economy is bad news for Glassman, whose bonus depends on profits, however they're collected.

But of course, the point of Glassman's "research report" is not to raise substantive objections to reform. He's just trying to say nasty things about the big bad government clamping down on the righteous and productive activity on Wall Street. This is an exercise in distraction, not debate.

And so Glassman spends a lot of time focusing on Michigan's chronic unemployment problems in an effort to discredit Sen. Levin. This is a disingenuous and irrelevant attack. The U.S. economy has shed over 8 million jobs since the financial crisis set in. We're slogging through a brutal recession caused by unregulated Wall Street excess. If you have to bring up the Michigan unemployment rate in 1981 to counter this view, you're really grasping at straws.

From there, Glassman moves on to point out that banks couldn't have done so much damage to the economy without real borrowers who actually took out lousy loans:

Folks may like to hear that someone else is to blame for the mistakes they made, but everyone knows -- including those who bought houses far beyond what they could afford and then walked when the promise of endless capital gains died and including investors who bought funky financial instruments that enabled the housing bubble out in West Florida to inflate – that Wall Street isn't the only culprit in the housing debacle. Sir, Goldman was no more culpable in the housing debacle than Congress.

That last line is a doozey. Indeed, Congress shares responsibility for the housing debacle—because it listened to the lobbyists and executives from megabanks and deregulated the industry.

Blaming the borrower, of course, ignores the harsh reality that banks fueled a predatory lending epidemic over the past decade, both with their own in-house lending operations and with those of other companies that they financed. Much of this lending was simple fraud, and according to the FBI, 80 percent of mortgage fraud is perpetrated by the lender. This is exactly the sort of behavior that needs Congressional scrutiny, so that the public can understand what financial reform is supposed to accomplish. That's why Levin's hearing on Washington Mutual—an unrepentant predator which J.P. Morgan now owns—was so productive. Educating the public is no easy task when banks are spending millions on misinformation campaigns and deploying epic squadrons of lobbyists to Capitol Hill.

Still, there were and still are plenty of irresponsible borrowers out there. It's hard to see how this lets Wall Street off the hook. Bankers shouldn't have been stupid enough to extend loans to people who couldn't afford them— distinguishing a good loan from a bad loan is, in fact, the most fundamental responsibility of a banker. In Glassman's absurd narrative, a bank's failure to underwrite prudently is being disguised as the immoral behavior of a borrower.

Banks made these destructive loans for a reason—they made tons of money when they packaged them into securities and sold them to investors. The borrowers who bought houses they couldn't afford lost a ton of money and ruined their credit. The banks that kept these lousy loans on their balance sheets and bought these lousy securities got bailed out by taxpayers. We need financial reform to stop precisely this kind of behavior, and it has to occur at the bank, where the loan is funded and extended.

Let's not forget, it wasn't just "investors" clamoring for mortgage bonds and derivatives that fueled the housing bubble. There were also investment banks, like Goldman Sachs and J.P. Morgan, who were eager to make big bucks by packaging and selling the securities. Investors ignored the havoc they were wreaking, and so did the bankers. Even if Goldman avoids any penalties from its Abacus deal, the company's role in inflating the housing bubble is not a matter for dispute. Goldman's only serious defense in this regard is that other firms—notably J.P. Morgan—played a larger role. If you want to fix this problem—banks selling lousy securities to investors—you have to explain it to the public and tighten bank regulations.

So what has J.P. Morgan been up to for the past decade that makes its chief economist such an expert on the virtues of weak regulation? It had a $30 billion subprime mortgage operation. It operated a credit card business completely dependent on unfair and deceptive practices. It fleeced local governments by bribing public officials in order to raid taxpayer coffers. It is one of just a handful of banks that skims from the tax rebates of poor people with predatory Refund Anticipation Loans. It is the only major bank in the country that finances mountaintop removal mining, a bombing campaign for Big Coal that is destroying Appalachia. It spends more money on lobbying than any other bank in the country.

After the dot-com scandals, the government imposed a strict separation between the research departments at investment banks and the rest of the company's operations. Analysts were giving bogus stock advice in order to lure investors into buying bad stocks that would prove profitable for the analyst's banking team. J.P. Morgan is making it increasingly clear that we need a new separation, this time between the research department and the lobby shop.

Sarah Palin is Seizing The Populist Moment -- Will Democrats?

Zach Carter — Fri, 23 Apr 2010 12:30:55 -0400

Sarah Palin's broadside against the Obama administration's Wall Street reform proposal is an interesting study in, well, hackery. One the one hand, her latest Facebook post is a disingenuous smear, loaded with outright lies. On the other, she's kind of onto something, in her own horrible way.

It's a little silly to offer a serious critique of right-wing posturing posted on Facebook, but I'm going to do it anyway. Palin only makes one substantive critique of the Wall Street bill, and it's flat-out wrong. She claims the bill will "institutionalize the 'too big to fail' mentality" by "institutionalizing" the ability of regulators to pick and choose what banks fail and what banks get saved. That's wrong. Just wrong.

Regulators are not—repeat, not—empowered to save companies on the verge of collapse. Under the new law, they are legally compelled to shut down banks when they get into trouble. Shareholders are wiped out and creditors must take losses. Obama is not institutionalizing too big to fail. Too big to fail is currently institutionalized in the U.S. political economy, and Obama is making a serious effort to eradicate it.

But then Palin's piece gets interesting. She touts Wall Street's massive lobbying machine and suggests that the big banks will be bailed out again in the future thanks to their political clout. The regulators will never "choose" to kill off a big Wall Street titan because of Wall Street's political connections, Palin says.

I actually agree with this, in a way. Palin is certainly being disingenuous (if she understands the plan at all) when she claims that Obama will formally legalize the right of regulators to bailout influential firms. The bill would explicitly codify the opposite. But I do believe that when push comes to shove in a financial crisis, regulators are not going to shut down major financial institutions, regardless of the letter or intent of this legislation. And I also believe the firms that get saved will be the banking behemoths that employ armies of lobbyists. Courts give federal agencies very broad leeway to interpret statutes, and when the next major financial crisis hits, I doubt there will be any serious challenge to the Fed or the FDIC invoking some arcane clause in a law from 1913 to justify a bailout. Even if courts could intervene, they wouldn't. In the middle of an economic meltdown, no judge wants to step in and tell regulators how to do their jobs.

In other words, I believe that economic policy becomes in a sense lawless during financial crises. The administration effectively declares an economic state of emergency and asserts whatever powers it deems necessary to curb the crash. There is no official declaration, of course, but that's how it works. The response is ad-hoc, uncoordinated and inconsistent, but megabanks tend to find themselves in good shape afterwards. Nobody knew the Federal Reserve had the authority to lend to investment banks prior to 2008. It had literally never happened in the 95-year history of the institution. Suddenly, they found the clause in an ancient statute, and voila!—it turns out the Fed can also lend to AIG, and no court is ever going to say otherwise.

So the problem with Obama's plan is not that it institutionalizes bailouts. It just doesn't address the cause of bailouts, or deal with the way they occur. Bailouts are not carried out according to laws, they are dictated by networks of power. If you want to stop bailouts, you have to attack the political power of major Wall Street firms. And to do that, you have to cut them down to size. Break them up into companies that are small enough to fail without jeopardizing the economy, and the firms lose their economic leverage over politicians.

You also have to take aim at the revolving door between Wall Street and Washington. Palin notes that the Obama administration is full of Goldman Sachs alums. Progressives were sharply critical of how closely Obama tied himself to Wall Street with his early appointments, and it remains a fundamental problem with his administration's economic thinking. But it's not as if Obama is the first president with close ties to Wall Street. President George W. Bush's Treasury Secretary was from Goldman Sachs, President Bill Clinton's Treasury Secretary was from Goldman Sachs, President George H.W. Bush's Treasury Secretary was a Wall Street icon. . . we can keep this going all the way back to Herbert Hoover and Andrew Mellon. It doesn't excuse Obama, but it does put his capitulation in context. He didn't invent bailouts and he didn't invent the revolving door.

There's also an important political lesson in Palin's post for Democrats. If they don't break up big banks, Republicans are going to seize this faux-populism to derail or defame other useful Wall Street reforms. Palin doesn't offer any alternatives to the Obama plan or the Dodd bill at all. She's not trying to solve any problems. She's just trying to say nasty things about Democrats. There are good policy reasons to break up big banks. But it's also good politics—nobody can accuse you of being in bed with Wall Street when you cut it down to size.

I have now officially spent far too much time discussing a cheap political hit from Sarah Palin.