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...

Krugman: What The Financial Industry Takes And What America Doesn't Get In Return

Krugman's title, Three Expensive Milliseconds, refers to a tunnel being bored through the Allegheny Mountains in Pennsylvania for the purpose of running fiber‑optic cables which will cut the time it takes trading information and instructions to travel between New York's stock markets and Chicago's futures markets... by three milliseconds. That's right: 0.003 seconds. This tunnel will carry, not people in cars, or freight on rail or in trucks, but bucks on wings, for the exclusive benefit of America's masters of the universe... the financial industry. And the financial industry does great things for... um... well, in any case, probably not you and not me; read Krugman's discussion on that issue.

...  made visible!

In the past 20 years, aside from the broker who handled my tiny investment account before he retired comfortably, I have met two people in the high end of the finance industry. Both were startlingly young. One was going back to college so she could get in on the gravy train. The other one was already rich... dripping, filthy rich, no apologies. I can't say either one displayed exceptional virtues that made them worthy of excessive wealth. They would probably tell me about that invisible hand, and how it pointed its finger at them. I would agree, except that the same hand seems to have pointed a different finger at me and 99.999% of Americans.

What Has The Consumer Financial Protection Bureau (CFPB) Ever Done For Me?

The CFPB is actually working! Via Bill Moyers, from Erika Eichelberger at Mother Jones, here is a list of 10 things the CFPB, brainchild of now Sen. Elizabeth Warren (D-MA), has done to protect you from various sorts of finance industry fraud. Read the list; one or more items may apply to you.

Jed Morey: 'The Book Of Morgan'

Yes, this video is an ad for a book. But the assertion Jed Morey makes is breathtaking: Morgan Stanley owns and/or controls most resources required for the delivery of gasoline to the pump, hides everything behind offshore corporations, trades on offshore exchanges whose operation is not visible to ordinary mortals, and makes bundles of money... your money... by doing this. Cynthia Kouril of FDL provides the video:



For me, there is real irony here. Back in my working days, when I began to accumulate a bit of money (it happens if you have an overpaid occupation, no house and no kids), I phoned around to find an advisor to help me do "socially responsible" investing. After considerable telephoning I fould one guy... one investment advisor in all of Houston... who was known to be willing to put up with the eccentricities of someone like me. He was a veep at Morgan Stanley (actually Morgan Stanley Dean Witter in those days).

The story does not have a happy ending: if you are a millionaire or above, Morgan Stanley probably takes the trouble to make money for you, 'cause you're "one of them." If not, well, your money is just fodder for the monster. The best I can say is that I did not lose too much of my hard-earned cash. But, socially responsible or not, I didn't provide myself a very good retirement, either. Younger folks, take note.

Sen.-Elect Elizabeth Warren (D-MA)...

Senator-Elect Elizabeth Warren

... don't you love the sound of that? ... is said by several sources to be slated for appointment by Harry Reid to the Senate Banking Committee.

Warren, surely Wall Street's worst nightmare, is one of the most knowledgeable people in Washington about banking and finance, bar none, and is on our side, and to all appearances, not for sale.

If she is indeed seated on that committee, you'd better lay in extra popcorn; there will be plenty of action to watch!

Fire The Motherfucking Mother

I realize that CNBC might as well be Fox News as far as its blatant political bias is concerned, but this is outside the pale. Here's Evan McMorris-Santoro at TPM:

Fortune-Teller
Caruso-Cabrera

At around 3:30 PM Eastern Tuesday, CNBC anchor Michelle Caruso-Cabrera noted a sell-off in the stock market, an entirely unremarkable occurrence in the course of the financial network’s daily coverage. But what separated this particular sell-off from others, according to Caruso-Cabrera, was that it could be traced directly to the appearance of one of the House’s top progressives on her show.

Rep. Raul Grijalva (D-AZ) tanked the market, she said, by refusing to budge on his contention that Medicare cuts should be off the table in negotiations surrounding the so-called fiscal cliff. Democrats accused the anchor of trying to “shame” them into cutting entitlement cuts by directly blaming Grijalva’s words for the market’s decline.

Grijalva, co-chair of the House Progressive Caucus, appeared on CNBC to talk about the debt talks and his view that it was unfair to talk about Medicare and other entitlement programs when Republicans remain publicly unwilling to significantly increase government revenues.

Caruso-Cabrera said Grijalva’s words were literally hurting the economy in real time. It’s something that’s happened before when members of Congress appear on the air, she added.

...

If she is capable of explaining the deep cause of a sudden market movement in real-time, Caruso-Cabrera's talents are sorely wasted as a mere news anchor. She should be an obscenely highly paid market analyst. Or maybe she should be provided with a crystal ball and a Gypsy scarf...

Seriously: a remark like that is completely unprofessional for a news anchor. Fire her fucking ass.

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.")

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.

Dean Baker: Tax Wall Street Trades

Specifically, Baker advocates a per-trade tax of 0.03 percent, as a discouragement to financial speculation... i.e., gambling... as proposed in the Joint Tax Committee of Congress by Sen. Tom Harkin and Rep. Peter DeFazio:

As the presidential election builds up steam, the Washington elites in both parties are actively scheming to find ways to cut Social Security and Medicare benefits for retired workers. The media have widely reported on efforts to slip through a version of the deficit reduction plan developed by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson. Since the vast majority of voters across the political spectrum reject cuts to these programs, the Washington insiders hope to spring this one on us after the election, when the public will have no say.

That is the sort of anti-democratic behavior we expect from elites who naturally want to protect their own interests. Of course the rest of us are more concerned about the well-being of the country as a whole rather than preserving the wealth of the richest 1 percent.

For the 99 percent there are much better ways of dealing with whatever deficit problems may arise down the road. Most obviously, insofar as we need more revenue we can look to tax the sort of financial speculation through which the Wall Street gang makes its fortunes. A very small tax on trades of stocks, options, credit default swaps and other derivative instruments could raise a vast amount of money.

The Joint Tax Committee of Congress estimated that a tax of just 0.03 percent on each trade, as proposed by Senator Tom Harkin and Representative Peter DeFazio, would raise more than $350 billion over the first nine years that it is in place. This is real money. It is an order of magnitude larger than the measures that have been suggested to go after the wealthy, such as President Obama's bank tax or most versions of the Buffet Rule.

...

This sounds right to me. People and corporations that use algorithms to execute ceaseless trades every millisecond or so are not contributing to the soundness of society or the economy, whether they make tons of money or not, and they should be made to pay for the practice. Slightly off topic, I also see no reason why capital gains should be taxed at a dramatically lower rate than earned income, but as far as I know, changes to that practice are not even on the table.

(Full disclosure: I have a relatively small amount of money invested. Literally none of my investments were speculative: all were chosen after I did considerable research to be as certain as I could be that the companies behind them are socially responsible (or better still, socially useful), and all have been held long-term. For my troubles, I have lost a fair amount of money in the market; I'd have done better with money in the mattress. But at least I didn't fund bombs, nuclear plants or genetically modified organisms. I sleep well with my decision. But in a legitimate market, I'd have been able to do well by doing good.)

If Baker is right, and the plans of Bowles and Simpson are sprung upon us after the election, it may well be that in this respect (as in so many others) it really doesn't matter who you vote for. Obama's advisors and cabinet members (i.e., department heads) are straight from the Street; none of them are going to do a damned thing in behalf of the 99 percent. Then again, there's Rmoney... he's the man who milks and then discards successful corporations, destroying jobs, using other people's money and taking a large cut himself, not to mention refusing to talk about his offshore accounts. Given that Rmoney apparently has Crossroads support, I guess you could call him a "Rove-ing gambler." So no matter who wins the presidency, no per-trade tax will happen, Washington will be awash in money as always, and the 99 percent... well, we lose. We always do.

Still, it's good to keep a per-trade tax in mind, just in case there's ever (ahem) an extraordinary change in the climate in Washington and actual change is possible. One can dream.