So — What's In The New FY 2015 Federal Budget, And What Does It Do To Financial Regulations?

See how your money flies!

Sharmini Peries, executive producer at The Real News Network (TRNN), interviews Gerry Epstein, codirector of the Political Economy Research Institute (PERI) at UMass Amherst:

PERIES: So, Gerry, let's begin with what you see as changes as a result of this budget to Dodd-Frank rules and legislation.

EPSTEIN: Well, it's outrageous what is going on. The Republicans and the Democrats are negotiating this huge budget bill, as you described, in order to prevent another government shutdown, which is an admirable thing to do.

But, of course, when this happens, people try to sneak in all kinds of irrelevant sort of wish-list bills in--provisions into these bills. And one of the most outrageous ones is the banks have stuck in a provision that's going to [blunt (?)] one of the most important aspects of the Dodd-Frank legislation, which, as you said, was designed to reduce the chances of another big financial crisis, and therefore it was designed to reduce the chances that the taxpayers would have to bail out these massive banks.

A provision of the Dodd-Frank that they're repealing by sticking this into this budget bill was designed to prevent the big banks from speculating using derivatives. These derivatives are these complex financial instruments that they use to speculate to make billions of dollars. But when they turn south, they caused Citicorp and Bank of America and these other big banks to virtually go bankrupt, and then the government bailed them out.

So the Dodd-Frank bill said, look, financial institutions can engage in these kinds of complex derivatives speculation if they want, but banks that are supported by the government through FDIC insurance, through deposit insurance, and through having access to the Federal Reserve bailouts and so forth, they can no longer engage in this kind of speculation. ...

And now they see the chance to get into this big must-do bill, and it's going to gut even further the Dodd-Frank legislation and make it much more likely that these big banks could start speculating or continuing to speculate, and it makes it much more likely that the taxpayer is going to have to bail them out again. ...

EPSTEIN: Well, first of all, they don't need to be doing this. There are all kinds of other institutions that can do it. But second of all, that's not how they use the derivatives. They use the derivatives to speculate on commodities. They use derivatives to speculate on municipal bonds, as we saw in Detroit. They use derivatives to cheat their customers. They use derivatives to cheat homeowners when they write these mortgages and pack them into these complex products, like collateralized debt obligations. And they do it with subsidized funds. That is, when these big banks that have deposit insurance and that they know the Federal Reserve will bail them out if they get into trouble, they get to borrow money more cheaply. Therefore, they get to speculate using cheaper money. They make much more profits. They pay their CEOs and their rainmakers millions and millions of dollars each year. And then, when things go bust, we have to bail them out.

...

Read the whole thing; see the whole sorry scam. As CSN&Y sang in "Deja Vu," we have all been here before. Remember the S&L scandals and bailouts from about 1986 to 1995? Who paid for that? (Hint: it wasn't the scandalous S&Ls themselves!)

Now the banks want to do it all over again. Now that there's no distinction between commercial banks and investment banks, the whole of Wall Street is one big criminal enterprise... backed by your tax dollars, if this bill passes and is signed into law.

Better start stuffing those mattresses, folks...

Blogger wendydavis at FDL quotes Lambert Strether at Naked Capitalism:

What could go wrong? The bottom line here is that the legalities and the contractual relations and whatever moral commitments were made don’t really matter. What does matter is that whenever there’s a big pot of money lying around that theoreticallly should go to working people — say, retirement funds, but it could be anything — Congress can retrade whatever deal put the money into the pot, and years after the fact, too. Oh, and workers lose the right to challenge the cuts in court. Nice!

Nice indeed. Nice screw job, from Wall Street to your ear...

Ain't We Got Funds?

There's nothing surer:
The rich get rich, and the poor get poorer.

- "Ain't we got fun," 1920, Whiting - Egan and Kahn
(wiki) (lyrics)

Yep, that's right, though some conservative singers rendered it "and the poor get children," which is IMO inhumanely inexcusable. But the canonical version, the one that rhymes properly, is the one that is to the point of this post.

Your bank account goes south

This post is about banks, and banksters, and how they're about to rob us all this time around. You know how they did it last time; they had to be bailed out by the government with our tax money, and then... and then, what? To all appearances, they didn't do a damned thing to correct the problems that got them in trouble in the first place, and they didn't do a damned thing to help people with their home loans; indeed, they... oh, you know, and this graf is getting out of hand.

So they're planning to get into trouble again. Yes, planning: it worked so well last time... for the banks and the banksters. But this time, things will be different. How? psychomax at Kos gives a good summary, citing Ellen Brown at The Web of Debt (the blog, not the book):

...

Since the financial crisis of 2008 central bankers and regulators have been busy drawing up plans for avoiding the next bank melt-down. Here in the US, banks considered by the government Too Big To Fail (TBTF) were bailed out six years ago with our tax money on the arguable rationale that if they were permitted to fail, they would take the entire economy down with them. The crisis led to a loud outcry from taxpayers and many savvy experts. ...

... the big banks, like Bank of America, Wells Fargo, JP Morgan Chase, were not broken up, contrary to the public interest. In fact, they are far larger today than they were in 2008, making the TBTF threat worse than ever.

So what plan have the geniuses come up with that both pacifies taxpayers and still saves the TBTF banks? You will be appalled.  ... Theoretically. deposit accounts are insured by the FDIC for up to $250,000. The wrinkle is that the amount of money in the FDIC insurance fund is approximately $25 billion, while the total of deposits at US commercial banks is approximately $9,300 billion, yes that's $9.3 trillion The failure of just one mega-bank would easily wipe out that fund. Since the FDIC would be unable to keep failing huge banks solvent an alternative is required.

...

(Bolded sentence original. - SB)

So what is this mysterious alternative? It's no wonder they're not loudly broadcasting their plans, as you'll soon see.

The Financial Stability Board (FSB), an unofficial international organization whose recommendations for maintaining banking system stability almost always become law in the G20 nations, has made a recommendation regarding bailouts. Here's psychomax again:

At the G20 meeting last month in Australia, the FSB presented and received approval for their latest plan for conducting the "resolution proceeding", i.e. bankruptcy, for a troubled TBTF bank. Cutting to the chase, the pertinent part for my dear readers is that instead of their tax money going to bail out the banks, it will potentially be their bank deposit money! The FSB recommended that governments make statutory the confiscation of depositors' money (also known as unsecured debt) if the assets of the bank plus all secured debt is insufficient to keep them afloat. This has come to be known as a bail-in.

Jeebus! IOW, if the bank's assets and the secured debt it holds, taken together, are not enough to keep them solvent, they can confiscate the money in your bank accounts to solve their bankruptcy. (NOTE: it is not clear to me that this is the only meaning of bail-in; see FT's lexicon entry on it.)

And indeed, Ellen Brown's current newest post, December 1, is this: New G20 Rules: Cyprus-style Bail-ins to Hit Depositors AND Pensioners. So your pensions could go bye-bye, too.

What gives? Have I misunderstood? If not, why is this not front-page news around the country? or have I simply missed such news?

Question And Answer On American Economic Policy

Reading Stiglitz's The Price of Inequality, I came to the following realization:

Q: What does Superman have, that the Federal Reserve
     is in sore need of?
A: Supervision.

Here's how Stiglitz puts it:

... It is evident now [2012] that the Fed failed to maintain economic stability — and after the crisis, it failed to restore the economy to health; it is evident, too, that the economic doctrines on which its policies were based were badly flawed. No policy is without risk. But the policies chosen by the Fed forced the brunt of the risk to be borne by homeowners, workers, and taxpayers, while the upside was captured by the banks. There were other policies, with other risks, in which the rest of our society would have fared far better, and the banks worse. We need to recognize that a central bank's decisions are essentially political: they should not be delegated to technocrats, and they certainly can't be left to those who disproportionately represent one of the vested interests.

From The Price of Inequality, p.254.

Holy (Bleep)ing (Bleep)! Could Banks Simply Take Your Deposits?

Read Lawrence E. Rafferty at Jonathan Turley's blog and Ellen Brown at Nation Of Change... but have a change of underwear handy before you read them.

Were you appalled at what happened to the bank depositors in Cyprus? Most of us were; one doesn't expect depositors to have their money confiscated... let's be blunt: stolen... to bail out failing banks. But it could happen in the US and the UK. Ah, you say, but the FDIC will save you? Uh-uh. It's the FDIC that is cooking up plans to raid the depositors' accounts. Your money would be at risk for all the shaky derivatives and such that the bank might have unwisely invested in. How do you like them rotten apples?

As a depositor, you already cede your money to banks in exchange for a promise to repay it to you in cash on request; that's the basic arrangement of ordinary banking. The threat now is to the second part of that. Under the proposed new arrangement, you would still cede your money to a bank, and in exchange receive not a promise to pay, but a sort of equity in the bank. If the bank went belly-up, you would be a "stockholder" in the failed bank, with all the losses... and responsibilities... that holding equity entails. And you would have no choice in the matter: you would have no option to retrieve your money in cash.

My mattress is beginning to look better all the time...

Imagine The Convenience! Banks To Choose Political Leaders For You... No Need To Think About Anything!

David Dayen of FDL:

The American Bankers Association, a trade group for thousands of banks headed by former Oklahoma Governor Frank Keating, voted to start a legal entity for this federal campaign cycle, adding millions of dollars into an already overstuffed election.

The ABA entity would reportedly donate to existing Super PACs, so that the member banks can keep their donations secret. 

Candidates Can
Take It To The Bank

The contributions from member banks into this fund could total at least $6 million, if not more. Bloomberg reports that much of this money will be used on 6-12 contested US Senate races. But according to Lee Fang, “Keating has been featured as a financial services policy advisor” to the Romney-Ryan campaign at various fundraisers throughout the year. So it appears likely that at least some of this bank money will get funneled into SuperPACs supporting the Republicans on the Presidential ticket. Banks have turned away from funding Obama, as they did in 2008, and moved the majority of their money toward Romney, probably because of feeling slighted by random comments rather than because of any actual policy differences. ...

...

Oh, you poor things; did the O-man hurt your feelings? Were his bailouts not generous enough? There, there, now; let's dry those tears by giving a few million bucks to Rmoney...

This kind of crap is a direct result of Citizens United and an affront to the notion that citizens elect their leaders. Could it come any closer to the raw purchase of elections than having banks contribute millions of dollars to campaigns? But of course, as Rmoney reminds us, "Corporations are people, my friend" (video), and clearly the corporations are his friend, not ours.

The late great Justice Brandeis was right: "We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both." ABA contributions to super PACs are shining examples of why this is so.

'Romney Girl'

... thanks to Enfant in comments. I know this song ("Barbie Girl") has been parodied a lot, but this is superbly well done:

---

Also please note the addition to the blogroll of Lynda Lovon (Lynda Williams), The Physics Chanteuse (commercial site) (blog). She's an excellent performer, a commenter on issues of science in society, and not least, a feminist activist. Ms. Lovon has (somewhere...) recorded a parody called "Hi-Tek Girl," not of this song but of "Material Girl." I discovered The Physics Chanteuse years ago; I don't know why I didn't add her to my blogroll then.

ADDED: search for her on YouTube as "Lynda Lovon". I recommend "The Lovon Song" (some physics knowledge helpful) and "We are Toxic" (much more somber).

SEC Will Not Prosecute Goldman Sachs Re: Subprime Mortgages And MBSs

From Ben Protess and Azam Ahmed at NY Times:

...

In a rare statement late Thursday, the Justice Department said there was “not a viable basis to bring a criminal prosecution” against Goldman or its employees after a Congressional committee asked prosecutors to investigate several mortgage deals at the bank. ...

The Senate’s Permanent Subcommittee on Investigations had examined troubled mortgage securities that Goldman sold to investors, who later sustained steep losses during the crisis. ...

Separately, Goldman Sachs announced early Thursday that the Securities and Exchange Commission had ended an investigation into a $1.3 billion subprime mortgage deal, taking no action.  ...

“We are pleased that this matter is behind us,” a bank spokesman said Thursday.

...

No doubt they are pleased. Clearly the fix is in. Prosecution of financial misdeeds is for lesser mortals, not for the MOTU. And Golden Sacks clearly qualifies for the royal treatment.

Tong Thung (Golden Sacks)

(Looking at those makes me hungry. Hungry, not greedy.)

(Respelled from "Tung Thong" to "Tong Thung" because it seems more prevalent on the web. I don't know which transliteration is correct. Mother Google suggests "tong thong.")

TBTF-Man Has Come-To-Jeebus Moment

According to Robert Reich, Sanford Weill, the individual Reich says is more responsible than anyone else for Wall Street banks' "too big to fail" status, has finally got religion and thinks TBTF is a bad idea... after he has already cashed in, of course:

...

[Sanford] Weill created the business model that Wall Street uses to this day — unleashing traders to make big, risky bets with other peoples’ money that deliver gigantic bonuses when they turn out well and cost taxpayers dearly when they don’t. And Weill made a fortune – as did all the other executives and traders. JPMorgan and Bank of America soon followed Weill’s example with their own mega-deals, and their bonus pools exploded as well.

Citigroup was bailed out in 2008, as was much of the rest of the Street, but that didn’t alter the business model in any fundamental way. The Street neutered the Dodd-Frank act that was supposed to stop the gambling. JPMorgan, headed by one of Weill’s protégés, Jamie Dimon, just lost $5.8 billion on some risky bets. Dimon continues to claim that giant banks like his can be managed so as to avoid any risk to taxpayers.

Sandy Weill has finally seen the light. It’s a bit late in the day, but, hey, he’s already cashed in. You and I and millions of others in the United States and elsewhere around the world are still paying the price.

...

"Summertime... and the livin' is eeeeeasy..." if you live by banksters' rules.

You Don't Know About LIBOR?

Avedon Carol points us to this Pro Publica article as a starting point. Of course, if you want a blow-by-blow, the signature blog on the issue is Matt Taibbi's.

Bill Moyers Interviews Yves Smith And Matt Taibbi:How The Banks Are As Criminal As The Mafia

This excellent interview should be on your must-view list. Each of these authors has a new book out (which I'll leave to them to describe) about the intimate and frequently criminal relationship between the federal government and the banks which, in these Glass-Steagall-free days, allows banks to take unjustifiable risks with their account-holders' money, defraud the depositors about those very risks, and expect the taxpayers to pick up the losses because the banks are "too big to fail." Often enough, the few remaining honest conservatives advocate allowing these TBTF banks to fail anyway, but that is just another way of transferring the disaster to the public through their relationship, not with the government directly as taxpayers, but with the banks as account-holders.

I am not certain there is any way out of this bind, but holding the banksters directly accountable, as fully as possible, would be a good start. And that means, in the November elections, electing, um... not Republicans because they're in bed with the banks, and, er... not Democrats, because they're in bed with the banks. Never mind.

(Via Glenn Greenwald at Salon. For more by Taibbi, see Taibblog [on blogroll]. For more by Yves Smith, see Naked Capitalism [on blogroll])

Krugman's Wrap Of Greek Elections

Krugman's perspective sees "Greece as Victim". There is much substance in this short op‑ed, which takes the position that Greece's fundamental problems are not primarily internal and stem rather from attitudes in the economically powerful nations in the euro zone: major failures in the framing of the currency itself, failures not soluble by any amount of Greek austerity. Here's a sample:

...

On the other hand, many things you hear about Greece just aren’t true. The Greeks aren’t lazy — on the contrary, they work longer hours than almost anyone else in Europe, and much longer hours than the Germans in particular. Nor does Greece have a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of G.D.P., the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well.

So how did Greece get into so much trouble? Blame the euro.

...

As so often happens here in America, the banksters in Europe are flinging poo like a great ape. Don't let it hit you! Use some judgment in how much credence you give to the self-interested emissions of northern European leaders.

Greece: Elections, Currency, Threats From Lenders

The Parthenon, or
The Greek Economy
After Enforced Austerity

Of course I don't have information on all those things apart from what is in the news. According to Laurence Knight of BBC News, Greek elections are on Sunday; a growing number of Greeks are withdrawing their money from banks (in euros, I presume), "the radical left-wing upstarts of Syriza" (Knight's description, not mine) are poised to become the biggest party in the parliament (though not necessarily a majority), and Germany and other lenders are saying to Greece, again in Knight's words, "Vote Syriza and you are out." Ah, tradition! It's good to see Germany as committed to democracy as it has always been. [/snark] The fun never ends in euro-land...

AFTERTHOUGHT: this is my second post in a week containing a photo of a building with a lot of columns. (The other was the US Supreme Court building.) I suppose what my highly admired high school English teacher once told me is true: "Steve, you have an edifice complex." <grin_duck_run />

Elizabeth Warren: Reinstitute Glass-Steagall

Asked by FDL's David Dayen if she was confident that the current investigations by the task force co-chaired by Eric Schneiderman, into mortgage abuses and similar malfeasance, would result in an adequate accountability of the biggest Wall Street banks and their leaders, Elizabeth Warren was blunt beyond any mistaking of her meaning:

I am not confident. No. And that’s the answer to your question. The American people are pushing for more accountability. They need to keep on pushing until it happens.

As to re-establishing Glass-Steagall, she said this:

As you remember, the Volcker rule, which I supported, was designed to permit biggest financial companies to stay in trading, but to do it in a way which was safe. Many of [the] experts say that’s not possible. If you look at a trade, or a hedge, it’s often hard to tell in advance what it is. They both exhibit the same kind of properties. So the question is what to do with that. If it’s true that the Volcker rule can’t adequately manage the risks that the largest banks are determined to take on, then the right answer is Glass-Steagall. A modernized Glass-Steagall. Separate commercial banking from Wall Street. I held a meeting and someone asked me, why support Glass-Steagall. And I said, because banking should be boring.

[Commercial] Banking should be boring: hear, hear! In this week in which banking (commercial/investment, no distinction) was anything but boring and quite possibly criminal to the tune of $3 billion, we need to learn and implement that lesson more than ever.

If Warren is elected to the Senate and (Dog forbid) Rmoney takes the presidency, Rmoney is going to shit his pants every time she enters a room...