Sandy Lewis and William Cohan’s lengthy NYT op-ed from Sunday is the best opinion piece I’ve read in the financial pages in a while. Lewis is a former Wall Streeter (convicted, no less) and Cohan is an editor at Fortune and the author of House of Cards. “We have both spent large chunks of our lives working on Wall Street,” they write, “absorbing its ethic and mores. We’re concerned that nothing has really been fixed. We’re doubly concerned that people appear to feel the worst of the storm is over–and in this, they are aided and abetted by a hugely popular and charismatic president and by the fact that the Dow has increased by 35 percent or so since Mr. Obama started to lay out his economic plans in March. But wishing for improvement and managing by the Dow’s swings are a fool’s game.”
They pose a series of questions that ought to be part of the everyday political dialogue–yet compared to the course of the Obama administration and the terms on which the press has covered it, their piece reads like an excerpt from Das Kapital.
I quote:
Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo?…
Why is so much effort being put into propping up those at the top of the economic pyramid — the money-center banks, the insurance companies, the hedge funds and so forth — when during a period of deflation like the one we are in, any recovery will come only by restoring the confidence of the people down at the bottom of the pyramid?…
Why is the morphine drip still in the veins of the financial system?…
Is there to be any limit on bailouts?…
Why isn’t the Obama administration working night and day to give the public a vastly increased amount of detailed information about what happens in financial markets?…
Why is the government still complicit in making the system ever less transparent, even when it comes to what should clearly be considered public information?…
Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?…
Why are we not looking to change our current civil and criminal racketeering statutes, which are playing a perverse role in investigations of the crisis?…
William Greider has part of the answer:
If not now, when? That question ought to haunt the Democratic Party and President Obama, who has been missing in action himself on key issues. Congressional Democrats are responding to this epic conflagration with the same risk-avoidance tactics they learned during many years in minority status. In those days, they could always blame right-wing Republicans for blocking their good intentions. But whom do the Dems blame now that they have the White House and fifty-nine votes in the Senate and a seventy-eight-seat majority in the House? Their standard explanation for not doing more is, “We didn’t have the votes.” So when might we expect Democrats to achieve more? When they have eighty votes in the Senate?
The party’s ideological intentions are being defined with greater clarity in these new circumstances, and so are the President’s. It’s still early, but the implications are ominous for other issues. If Democrats are reluctant to disturb the power of other major interests, it seems improbable that fundamental change will occur on healthcare, energy conversion or the restoration of work and wages. The problem now is the Democrats, not the Republicans. The party aids and protects its free-roaming entrepreneurial politicians and does not punish those who undermine the party’s larger promises. When Republicans were in charge, they enforced party loyalty with Stalinist discipline. Democrats are the party of safe incumbents, weak convictions.
Here is a fact that surely figures in the answers, though I don’t know precisely in what way: $750 million in donations raised by the Obama campaign. These donations were not all given to promote good government.
Now if they could just do the same for tax returns…
Thank you for keeping these critical issues front and center. It is an incredible opportunity for MinnPost to take charge with pending legislation by Congressmen Keith Ellison and Collin Peterson and Senator Tom Harkin and to get more dialogue going on the future regulation that is currently being debated in Congress.
Let’s begin with an examination of BlackRock’s current role in unwinding the CDS mortgage toxic paper and lack of the Administration’s response to Freedom of Information requests from journalists on this issue.
Follow that up with an analysis of Senator Tom Harkin’s and Congressman Keith Ellison’s proposed legislation and why Congressman Peterson is correct in having the CFTC manage all derivatives.
Does speculation in credit default swaps really add value, other than trading income to corporations, such as AIG, that had mission creep, hedge funds and proprietary bank trading desks? Keep the value-added hedges for commodities, foreign exchange, interest rates, etc separate from the speculative use of credit default swaps that destroyed our financial system. There is an incredible income stream selling a credit default swap, without another side to it, but is it time to call it quits on this trade and accept the fact it just doesn’t fit in a stable financial system?
Has the SEC done anything yet to protect individual investors from credit default swaps in mutual funds that can be used for speculation and have no limits on their use and risk? These are all very basic steps that should have happened many, many months ago.
//JP Morgan has been the chief obstacle to reform of the regulatory environment for banks generally, and derivatives specifically. This latter point is critical, because JP Morgan is by far the biggest dealer in the over-the-counter derivatives market and thus has every incentive to maintain the unregulated status quo.
As regulators are “eventually forced to reform [the derivatives] market, that’s really last big source of abnormal profits for JP Morgan.” “Once the business model is eventually conformed, the profits are going to be gone and JP becomes a high-risk utility.”
The high-risk part comes in because JP Morgan is more exposed to commercial real estate and business lending than many of its competitors, who expects losses in both areas to rise dramatically in late 2009/early 2010.
Therefore, it’s in the firm’s interest to forestall reform for as long as possible and JP Morgan is spending money “like there’s no tomorrow” to lobby the “the cats and dog in Congress who are rented by the year,”//
I think there is one simple answer. There is no way to be a successful national politician without strong support from members of the financial industry. The two are completely intertwined.
It would never occur to Obama to look outside the Ivy League educated cadre that he has been part of his rise to national prominence. As it was for the Clintons, Bushes, Gore, Kerry … The last successful presidential ticket that did not include at least one Ivy League educated member was Carter-Mondale.
I am not sure how you break the stranglehold that New York and Washington have on the country. But until that happens, you cannot expect serious change of any kind on any issue from the deficit to health care to retirement funding to wages to … you name it. These are all stalled by a gridlock of interests that prefer a status quo that benefits them.