Since my comment would not go through on American Banker’s BankThink blog, I post it here. Perhaps there is a restriction on comment length, I don’t know. However, since formatting is removed in those comments, it is better off elsewhere, anyways.
The BankThink post dumping on Elizabeth Warren’s speech at DNC2012 is titled, “Elizabeth Warren’s Warped Reality” in which the author manages to blame Warren, unions, the liberal left and god knows who else. It is the type exemplar of narrow-minded, my-way-or-the-highway thinking which demands we ignore things already well known. It is the perfect example of someone not trying to be heard, but rather someone running an agenda on his/her readers.
Specifically, it claims:
- Elizabeth Warren was wrong about the system being rigged in favor of oil companies, Wall Street, and billionaires
- Elizabeth Warren is wrong about Obama trying to support the middle class
- Mitt Romney didn’t say (or didn’t mean it) when he said “corporations are people”
- Obama knew he had to clean up Wall Street
- Banks who were “innocent” are harmed by the regulatory regime
Half-truths, distortions and above all, a blindness to what we already know characterize this drivel.
Let us take Un-Reality Check’s fantasies in turn, shall we?
1) It was unions which pushed Chrysler and GM over the brink, it’s all the union’s fault.
GM was bailed out because it, through it’s GMAC/Ally Bank subsidiary exposed itself to a falling housing market. Did union workers benefit? Surely. So did a lot of other people, including shareholders who were on the verge of losing it all. The author would rather we did not know that those same union workers helped pay for these bailouts through concessions to Chrysler and concessions to GM including cuts to health insurance and pension contributions as well as an end to the indefinite payments to workers when factories were idled. However, I would point out that we would hardly be better off had we allowed GM to fail now would we? More broadly, where would homeowners be were it not for the price supports on real estate these bailouts (and the shadow inventory housing embargo) represent? We may well ask exactly whose reality is warped here because above all, someone really doesn’t want us to like unions.
Furthermore, corporations are wonderful at demanding favors. During my association with Occupy Boston, complaints were leveled at us over less than $2 million in police overtime charged to the city. Fair enough. However, none of these people complained about the $19.5 million tax payer handouts extorted from the tax payers by Liberty Mutual and JP Morgan Chase. Want more examples of this? I can pull out my copy of David Cay Johnston’s Free Lunch and I can go on like this for hours on end. My personal favorite among subsidies, however, remains the hundreds of billions in tax payer subsidy of Wall Street itself in the form of retirement plan contributions. I wonder what would happen if the penalties on redemption were lifted and people were allowed to demand access to their own money freely and without penalty?
2) Retirees and savers are hurt by through the Fed’s easy money policies and Obama is not trying to level the playing field.
This is simply disingenuous. Banks stopped offering significant interest back in the 1980’s and the rate of return on passbook savings accounts has been below the rate of inflation for decades. Savers? Does he mean those who contribute to IRA’s and 401k’s? I have news for the author. Those aren’t savers, those are investors who have undertaken the same risks Bruno Iksil did. They could lose it all. This is exactly what’s wrong with defined contribution plans. They may not be worth it.
I’ve spoken with Neil Barofsky too. His objection to the way TARP was implemented is that it did not comply with the law, under which it was required to give help to homeowners. It helps to read the actual legislation, as apparently, this author, as well as one CNBC anchor who claimed there was no such requirement to help homeowners. The TARP legislation does, in fact, do so. Let me direct your attention to Section 109 of the Emergency Economic Stabilization Act of 2008, cunningly titled, “Foreclosure mitigation efforts”.
3) “Mitt Romney’s the guy who said corporations are people” or maybe he didn’t mean it.
Regardless of what Mitt said, the fact of the matter is that corporations have benefited from a subtle redefinition of the word “person” in the 14th Amendment. In this, he seems to support the collectivization of persons under the corporate logo, yet criticizes the collective expression which unions represent? This is hypocrisy of the rankest sort. Do unions contribute mightily to political campaigns? Indeed, which is yet another reason to heed the Occupy movement and get all the money out of politics. ALL OF IT.
4) “After the financial crisis, President Obama knew that we had to clean up Wall Street.” But evidently has failed to do so.
The author is essentially correct here. None on Wall Street have gone to jail, as they would have for these practices by anyone not on Wall Street. Of course, the fix was in from the start when Obama chose Eric Holder, late of bank and Wall Street lobbying firm Covington and Burling as his AG, and for all practical purposes, our top law enforcement official works for Wall Street from his desk at DoJ. On this matter, Barry Ritholz says that with the paper trail as it exists today, these should have been easy prosecutions, and in this, I agree with his assertion that the rule of law is dead in the United States. However, anyone who follows breaking news about insider trading and FCPA violations, as I do, enforcement has indeed skyrocketed. I would also point out that it was Obama who compelled Switzerland to give up the names of thousands of tax evaders and has returned some $5 billion to the Treasury.
This is not enough. Every time I read of some fine being levied for legal or regulatory violations, I always report the size of that institution’s bonus pool, and invariably, the fines are revealed to be only a fraction of what boards feel is appropriate executive compensation. Even the record-setting $452 million fine levied on Barclays for its role in LIBOR rigging pales in comparison to its bonus pool, reduced to ‘only’ $4.8 billion. Nouriel Roubini confirms my suspicion that the penalty regime imposed on TBTF banks and Wall Street pretty much amounts to disgorgement, and that’s hardly any enforcement at all. I don’t hear Scott Brown clamoring for stronger enforcement. If he did (and if I could believe him), he might get my vote.
5) Little banks are hurt by the regulations imposed on the big ones.
Again, the author should read the legislation. Part of the intent in Dodd-Frank was to contain systemic risk, and therefore significant carve-outs for community banks were included. For example, restrictions on the kinds of assets which can be counted as Tier 1 capital on banks with less than $500 million exposure are much looser.
By his choice of targets and talking points, the author reveals himself acting as a right wing ideologue attempting to inject himself into the race rather than engage honestly. Were he, he would recognize that Elizabeth Warren is no enemy of free market capitalism. She is a champion of transparency. Such is the state of our national
debate cage-match, that this is considered acceptable. It wasn’t always the case. I am old enough to remember when lying to voters was the kiss of death for any politician caught doing it. Sadly, election cycles have degenerated into America’s biggest major league sport, and with so much at stake, this is nothing less than a tragedy in the making.
As I said before, I am told that I’m some sort of socialist. I believe in banking as a public utility; protected from competition, guaranteed a modest profit and regulated through a defined business model (prescriptive regulation) rather than defining and outlawing practices as abusive (proscriptive regulation). I want soundness and reliability, not innovation, in my banking system. There’s more than enough evidence that unregulated markets don’t really function as advertised and to be accurate, the vast majority of regulation, both public and private, stems from efforts to make them do so. To abandon regulating and enforcement of efforts to do so only ensure that the sleaziest of businessmen rise to the top.
What we don’t need are businesses and banks treating their customers as mere counter-parties. What we do need are businesses and banks who prize the value they provide to their customers in the goods and services they offer. Business leaders who do not crush managers like Don Blankenship, who quite literally got away with murder, denounced John Paulson and Goldman Sachs for the frauds they perpetrated, publicly recognize that there is nothing a human being could possibly do to earn a multi-million dollar bonus——etc., have zero credibility.
As for Elizabeth Warren, a law professor with extensive expertise in bankruptcy law, she demonstrates an unmatched mastery of one aspect of the economic history of the US since 1970 (The coming collapse of the middle class and The Two Income Trap). She has the numbers—using the best available data—and has documented dynamics on which I have only reported anecdotally. I, for one would rather see her with a billion dollars running a research foundation than in politics, but compared to Warren, Scott Brown is a lightweight in almost every sense.
I am an independent voter living in Massachusetts, where I have worked hard to get four small businesses off the ground, and who recognizes that Scott Brown isn’t even in Elizabeth Warren’s league.