Wall Street, Romney, And Obama

By Mike Lux, cross-posted from Crooks and Liars

The most critical battle in this election year is the battle over Wall Street. Candidates all over the place, from the high profile candidates like Elizabeth Warren to a slew of others all over the country, are battling over who is on Wall Street’s side, who wants to keep bailing them out, and who is pushing them to go to jail. But nowhere is this battle being played out more prominently than in the race for the White House.

The Obama campaign is doing a major push in the coming weeks on Mitt Romney’s sordid history at the helm of Bain Capital. His fellow Republicans called it vulture capitalism, and they were right. Mitt bought companies (many of them doing just fine at the time he bought them), loaded them up with massive amounts of debt that Bain could write off on their taxes, in many cases destroyed and outsourced jobs and cut pay and benefits, and then frequently carved them up and sold off the pieces to maximize short-term profits. A few of these companies ended up surviving this brutal process and becoming more profitable, and we will hear a lot from Mitt about those examples. But way too many times, Mitt and Bain left these companies, and especially their workers, far worse for the wear, leaving behind a lot of shattered lives in the process, while Mitt and his fun-loving pals stuffed money in their pockets and walked away. High School wasn’t the only place Mitt brutalized those weaker than him, and he enjoyed doing it.

Bain Capital was Wall Street at its worst. But the cutthroat, anything-goes-in-the-pursuit-of-one-more-dollar culture at Bain has infected our entire banking system. The Obama campaign is right to attack on Bain and on the culture of Wall Street; it is in my view their single most powerful attack line. However, that attack will be undercut unless they buttress their own credibility on taking on Wall Street. Republicans aren’t going to hesitate coming after Obama hard on his ties to Wall Street (ironically with a lot of Wall Street money) in order to weaken the campaign’s credibility when they attack Bain, and we are seeing signs of that right now.

Look at how the issue has played out in recent days. Over the course of the last week, we have seen Jamie Dimon twisting himself into a pretzel trying to explain why his bank’s dangerous and irresponsible trades don’t merit any regulation, stories on how the Obama campaign is being hurt by not being tougher on Wall Street, like this one from Politico, a major new ad campaign by a Republican group attacking Obama for his ties to Wall Street, and new polling paid for by an anti-Wall Street coalition showing Obama’s numbers on housing/banking issues in swing states being pretty bad. These issues are clearly going to be huge in this campaign, and the Republicans will do everything in their power to exploit any Obama weakness in this area.

The Obama team, in the White House and in the campaign, in order to win on the Bain attack, needs to face—and turn around —the perception that the administration has been weak on Wall Street. They need to be willing to shed past caution and take Wall Street titans head on.

One of the toughest problems they have to work through is that the most visible vehicle for action on holding Wall Street accountable is the financial fraud task force announced with great fanfare at the State of the Union. This task force raised hopes that an aggressive investigation was forthcoming, that perhaps some of the big bankers who intentionally pumped up the housing market and then dumped the securities, would be brought to justice. But the best case scenario (and that is only if things really start moving) is that indictments won’t start rolling out until September, and that is a very long time to wait given the narrative being written as we speak on the Wall Street issue. And even in terms of that best case scenario, unfortunately questions continue to be raised by sources I am talking to about whether the DOJ is slow-walking this investigation, whether enough resources are being given to the task force, and whether key staff at the White House are paying enough attention. Those questions ultimately won’t be answered until the task force starts to produce something tangible, and if we have to wait until the fall, these questions are going to keep building.

The administration should act right now to give the DOJ much more in the way of staff resources to the task force, and the President and White House senior staff need to send signals that they care about what is going on and that this is a high priority for them. If, for example, the DOJ is slow-walking, the White House needs to lean hard on the DOJ to make sure they aren’t. It seems like politics 101 to me to make sure the task force has the person-power to be successful in its work, but they are failing the test.

Given that (even with extra resources, by the way) the task force isn’t going to be moving fast enough for any of us who care about the political calendar, the entire Obama administration needs to show every day that they are willing to take on the big banks on behalf of homeowners, students, credit card consumers, and everyone else who is getting taken advantage of every day by bankers. Their reaction to the JP Morgan news, for example, has been far too low key. They should be banging away on Dimon and the other speculative bankers every single day, using this news to drive and build a narrative about reckless bankers rather than being restrained in their messaging about it. When a retiring bank CEO mentions in passing that the repeal of Glass-Steagall had something to do with the banking collapse, they should have used that as part of their narrative, too. Same when a trader at Goldman Sachs quits because the ethics at the firm have gone so far south. In every case, these were tailor-made opportunities for the White House and campaign to jump in with both feet and build that narrative about how this is why we need a President willing to take on bankers rather one who was the worst kind of one at Bain Capital.

Speaking of message restraint, though, there is some major restraint they do need to employ, and that is on their lame duck Treasury Secretary. In recent weeks, Geithner has stabbed the task force in the back by downplaying banker fraud, has rejected the idea that the repeal of Glass-Steagall was a problem in the 2008 collapse, and has similarly dismissed credit default swaps as a big problem. He seems more like a spokesperson for Wall Street than a member of the Obama administration. He needs to be shut up or eased out before he destroys any chance of the President getting re-elected.

Team Obama is on the knife’s edge right now. The economy is still too slow, with too many bridges out along the way, to build up much if any speed as we head down the home stretch to the election. Even if it does pick up a little bit, voters are still in a very bad mood because things have been so slow for so long. Focusing voters’ ire on the people who set off this crisis, the Wall Street pump-and-dump gang, is our best shot at winning this election, most especially with one of their ultimate homies, Mitt Romney, as the Republican candidate. But for that to work, the White House and campaign need to be focused like a laser beam at telling the story of how Wall Street greed brought us down, and how putting Wall Street’s guy in the White House would be the ultimate mistake—and they need to have their own credibility in terms of holding Wall Street accountable built up considerably. Getting resources to the fraud task force and making sure everyone at the DOJ knows it is a priority is a huge deal in that regard. Bottom line: Team Obama needs to be focused on the Wall Street credibility dynamic every single day.

Bain Capital shows that Mitt Romney’s high school career was no fluke: He has proven himself to be the ultimate pick-on-the-weak bully. His Wall Street values are definitional about the kind of man he has always been. Obama needs to show that his values are the opposite by being tough on Wall Street, while Romney is shown to be the personification of it.

Stress Testing Tim Geithner

By Mary Bottari, cross-posted from Campaign for America's Future

DonkeyHotey

Thanks to Occupy Wall Street, in the State of the Union this week President Obama struck some of his most populist themes yet. He wants to tax millionaires, bring back manufacturing and prosecute the big banks. He touted his Wall Street reforms saying the big banks are “no longer allowed to make risky bets with customers deposits” and “the rest of us aren’t bailing you out ever again.”
But are we safe from the next big bank bailout?

Many experts are dubious and Wednesday the consumer advocacy group Public Citizen decided to test the theory in the most direct way possible. They used the administrative law process to formally petition the nation’s top bank regulators to move swiftly to break up Bank of America (BofA) asserting in their petition: “The bank poses a grave threat to U.S. financial stability by any reasonable definition of that phrase.”

A Ticking Time Bomb

BofA is not just big, its behemoth. With assets of $2.1 trillion, equal to more than 14 percent of U.S. GDP, it is bigger than many small countries. Yet, its stock is trading at $7.

What does Wall Street know that we don’t?

The petition provides a compelling list of disturbing data points. In 2008-2009, BofA publicly took $45 billion in TARP bailout funds and secretly took another $1 trillion in emergency Federal Reserve loans. Yet, several analysts predict that BofA is woefully short of capital reserves and facing potentially billions in legal liability for its role in the crisis.

Although the bank declared net profits in recent quarters, these profit comes from accounting tricks, one-time asset sales and stock swaps. BofA’s share price to tangible book value is extremely low. The market suspects the bank is worth roughly half of what management claims and the price of credit default swaps (a type of insurance) on BofA recently rose to record highs.

“The bank is a ticking time bomb,” says David Arkush of Public Citizen. “If Bank of America in its current form were to fail, it would devastate the financial system. We’re asking the regulators to make sure that never happens. The only way to be sure is to reform the institution into something safer before any crisis materializes.”

Public Citizen asked the new Financial Stability Oversight Council (FSOC), which is chaired by Treasury Secretary Tim Geithner and made up of the nation's top bank regulators, to use the tools provided in the Dodd-Frank Wall Street reform law to act before a crisis occurs and to break BofA into smaller separate institutions. The law allows the FSOC to limit big bank mergers and acquisitions, restrict products and services or order it to divest assets or off-balance-sheet items after a vote to designate the institution a “grave threat” to financial stability.

“Too Big to Fail” Alive and Well

Although President Obama said the goal of Dodd-Frank was to end the era of “too big to fail,” neither Geithner nor Fed Chair Ben Bernanke got the memo.

Geithner told the Special Inspector General for the Troubled Asset Relief Program in 2011 future bailouts are possible: “In the future we may have to do exceptional things again if we face a shock that large. You just don’t know what’s systemic and what’s not until you know the nature of the shock. It depends on the state of the world – how deep the recession is. We have better tools now, thanks to Dodd-Frank. But you have to know the nature of the shock.”

Bernanke may already be engaged in a back-door bailout of BofA. Recent news reports indicate that BofA is trying to move $22 trillion in derivatives out of its Merrill Lynch subsidiary into its FDIC-insured bank. The Fed favors the move. The Federal Depository Insurance Corporation (FDIC), which provides insurance to depositors if a bank fails, does not.

“By taking this action the Fed is allowing these derivatives to pose a direct risk to the FDIC insurance fund, keeping taxpayers on the hook for another bailout,” according to Arthur Wilmarth of George Washington Law School.

Groups like Public Citizen fought hard during the Dodd-Frank debates to insert into the bill tools to allow regulators to break up big banks and prevent the next crisis. With BofA on the brink, its time for a “test of the machinery,” said scholar Lawrence Baxter of Duke Law School.

Expand the Stress Tests

Geithner is right when he says regulators can’t predict future shocks; will it be the EU debt crisis, a multi-million dollar damage award against the bank or exposure to something out of the blue? While we may not know its origin, we know the shock is coming.

Remember in the Dodd-Frank debates, an amendment to break up the banks was rejected, efforts to restore Glass-Steagall were rejected, a proposal to force banks to spin off and separately capitalize their dangerous derivatives desks was quashed. In leading the fight against the stronger measures, Geithner instead pushed the FSOC to scan the horizon for risk and keep an eye on the behemoth banks. He also pushed “stress tests,” which all too many banks seem to pass with flying colors.
Now its time to stress test Geithner. If the FSOC fails to deliberate and vote on the very serious condition of BofA, the whole exercise will be proven a sham.

Click here to tell the President to Break Up Bank of America.

Follow The Money: Behind Europe's Debt Crisis Lurks Another Bank Bailout Of Wall Street

By Robert Reich, cross-posted from his website, October 4, 2011.

Today Ben Bernanke added his voice to those who are worried about Europe’s debt crisis.

But why exactly should America be so concerned? Yes, we export to Europe – but those exports aren’t going to dry up. And in any event, they’re tiny compared to the size of the U.S. economy.
If you want the real reason, follow the money. A Greek (or Irish or Spanish or Italian or Portugese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008.

Financial chaos.

Investors are already getting the scent. Stocks slumped to 13-month low on Monday as investors dumped Wall Street bank shares.

The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That’s no big deal.

But a default by Greece or any other of Europe’s debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.

That’s where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.



The Street’s total exposure to the euro zone totals about $2.7 trillion. Its exposure to to France and Germany accounts for nearly half the total.

And it’s not just Wall Street’s loans to German and French banks that are worrisome. Wall Street has also insured or bet on all sorts of derivatives emanating from Europe – on energy, currency, interest rates, and foreign exchange swaps. If a German or French bank goes down, the ripple effects are incalculable.

Get it? Follow the money: If Greece goes down, investors start fleeing Ireland, Spain, Italy, and Portugal as well. All of this sends big French and German banks reeling. If one of these banks collapses, or show signs of major strain, Wall Street is in big trouble. Possibly even bigger trouble than it was in after Lehman Brothers went down.

That’s why shares of the biggest U.S. banks have been falling for the past month. Morgan Stanley closed Monday at its lowest since December 2008 – and the cost of insuring Morgan’s debt has jumped to levels not seen since November 2008.

It’s rumored that Morgan could lose as much as $30 billion if some French and German banks fail. (That’s from Federal Financial Institutions Examination Council, which tracks all cross-border exposure of major banks.)

$30 billion is roughly $2 billion more than the assets Morgan owns (in terms of current market capitalization.)

But Morgan says its exposure to French banks is zero. Why the discrepancy? Morgan has probably taken out insurance against its loans to European banks, as well as collateral from them. So Morgan feels as if it’s not exposed.

But does anyone remember something spelled AIG? That was the giant insurance firm that went bust when Wall Street began going under. Wall Street thought it had insured its bets with AIG. Turned out, AIG couldn’t pay up.

Haven’t we been here before?

Republicans and Wall Street executives who continue to yell about Dodd-Frank overkill are dead wrong. The fact no one seems to know Morgan’s exposure to European banks or derivatives – or that of most other giant Wall Street banks – shows Dodd-Frank didn’t go nearly far enough.

Regulators still don’t know what’s happening on the Street. They have no clear picture of the derivatives exposure of giant U.S. financial institutions.

Which is why Washington officials are terrified – and why Treasury Secretary Tim Geithner keeps begging European officials to bail out Greece and the other deeply-indebted European nations.
Several months ago, when the European debt crisis first became apparent, Wall Street banks said not to worry. They had little or no exposure to Europe’s problems. The Federal Reserve said the same. In July, Ben Bernanke reassured Congress the exposure of U.S. banks to European nations in trouble was “quite small.”

Now we’re hearing a different tune.

Make no mistake. The United States wants Europe to bail out its deeply indebted nations so they can repay what they owe big European banks. Otherwise, those banks could implode — taking Wall Street with them.

One of the many ironies here is some badly-indebted European nations (Ireland is the best example) went deeply into debt in the first place bailing out their banks from the crisis that began on Wall Street.

Full circle.

In other words, Greece isn’t the real problem. Nor is Ireland, Italy, Portugal, or Spain. The real problem is the financial system — centered on Wall Street. And we still haven’t solved it.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley.  He writes a blog at www.robertreich.org.  His most recent book is Aftershock.

Poor Standards: 4 Steps To Ending The Ratings "Agency" Racket

By Richard (RJ) Eskow, cross-posted from Huffington Post.

There's been a great deal of complaining today about Standard & Poor's downgrade of the U.S. government's creditworthiness, but the time for talking about credit rating agencies is long past. There are four steps that can be taken now to end the rating corporations' reign of error.

These "agencies" aren't government entities, but they derive great power from authority conferred by the government. Yet banks and other institutions are allowed to hire the "agency" that rates them.
Picture a situation where the IRS has been "privatized," and taxpayers are allowed to hire the accountants that will review their payments for accuracy. (I know -- I shouldn't give them ideas.) Everybody would hire the accountant that says they're due a huge refund, and pretty soon the entire system would collapse. That's not too different from the way the rating game works.

The moment for change was in 2008, when we learned of their key role the global financial crisis. But it's not too late to act now. Here's some background and a clear plan for ending the rating racket once and for all.

Bad Sheriffs

Is it fair to call them a "racket"? Merriam-Webster's definition of a "racket' includes "a usually illegitimate scheme made possible by bribery or intimidation," and "an easy and lucrative means of livelihood." Running a rating agency is certainly the latter. These highly profitable companies enjoy a near-monopoly status that's made possible only because the U.S. taxpayer, through its elected representatives, has given them enormous (and unearned power).

These for-profit companies received their biggest gift in 1975, when the SEC gave three of them -- Moody's, Standard & Poor's (S&P), and Fitch's -- the new designation of "nationally recognized statistical research organization," or "NRSRO." Since then, they've been able to use their NRSRO status in much the same way a drunken sheriff uses his badge in a spaghetti western -- to bully, intimidate, and cajole themselves into ever-greater positions of power and wealth.

They've been lecturing the U.S. government in a lordly manner for more than a year about the need to make drastic needs to social programs. But ironically (or not), much of the government's current financial problems -- and most of the public's problems -- are due to a financial crisis they helped make possible through incompetence and moral corruption.


To fully understand the damage these bad sheriffs caused, it's important to understand three things:

1) Federal, state, and local governments, as well as pension funds and other investors, relied on their "AAA" ratings to protect their savings.
2) They traded those AAA ratings to paying customers in return for more business.
3) 90% of the mortgage securities they rated "AAA" in 2007 were later downgraded to junk-bond status.

Oh, and a couple more things:
4) Nothing has changed. Key rating provisions of the Dodd/Frank bill have been delayed and deferred. Why?
5) Because lobbyists for the big three rating "agencies" have spent $1.76 million since January, mostly directed at Congress and regulators.

Poor Standards

Here's what can be found in hundreds of pages of internal "agency" documents released by the Senate last year:

When employees of Moody's were asked what four their highest job goals were, the top three answers were 1) generating more revenue, 2) increasing market share, and 3) good relationships with their customers. Performing high-quality analytical work made the lis ... in fourth place. Consultants who performed the survey wrote, "When asked about how business objectives were translated into day-to-day work, most agreed that writing deals was paramount, while writing research and developing new products and services received less emphasis."


S&P, which has just "downgraded" the United States, was an active participant in the pay-for-play game. When a customer complained about not getting the rating he wanted he was given a better one, but an internal email read: "I don't think this is enough to satisfy them. What's the next step?"

The customer got what he wanted.

Moral issues aside, these guys are lousy at their jobs. The Treasury Department found a $2 trillion error in S&P's calculations. Among people familiar with their work, this revelation surprised... well, nobody. What did S&P do with this information? They deleted the error from their report and wrote a different justification for the downgrade - one that relied on unmeasurable "political" considerations.

Did the customer get what he wanted once again?

S&P is very, very protective of its mathematical models. Every report on their website includes this warning: "No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof may be modified, reverse engineered, reproduced or distributed in any form by any means ..."

Relax, guys. Nobody's reverse-engineering your models -- except as comic-relief for overworked spreadsheet jockeys who have watched you manufacture your prefabricated conclusions for years.


Downgrade this!

S&P's agenda has appeared to be political for a long time, and it looks as if its retrofitting its "analysis" yet again to mirror the austerity economics goals of its paymasters.

Last October S&P said the outlook for the Federal government was 'stable' for the foreseeable future, although a Republican victory in the House was widely expected. This April they said the US government needed to address its deficit problem within two years.

Somebody must have repeated S&P's memorable words of yesteryear -- "I don't think this is enough to satisfy them" -- because then came the next step: Last month they said the government had to find $4 trillion in deficit reductions within 90 days. They had no explanation for their $4 trillion figure, which coincidentally matched the goal being pursued by Democratic and Republican negotiators at the time.

The government has just conclude a deal that provides $2.5 trillion in (very unwise and unfair) reductions. Buckle your seatbelts, numberphobes, because here comes the math: $2.5 trillion (in debt-deal cuts) plus $2 trillion (overstatement of deficit by S&P) = $4.5 trillion. (Hey, modeling is my life.) That's half a billion more than the number S&P wanted. They downgraded anyway.

As you marvel at my proficiency in simple arithmetic -- a skill apparently unreplicated at the rating "agencies" -- please note this warning: "No content in this blog post (ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified or reverse engineered in any form by any means ..."

That means you, S&P!

"A little less conversation, a little more action"

Tim Geithner's right to call these guys out for incompetence, but the Elvis lyric quoted above is as relevant today as it was in 2008. And so is the line that follows, politically speaking: "All this aggravation ain't satisfactioning me." Here are four steps that can be taken to end the agency racket right now:

1. Strip Moody's and Standard & Poor's of their NRSRO status on the grounds of egregious professional errors and ethical lapses.


2. Announce an SEC policy requiring any future NRSROs to be educational institutions or nonprofit agencies. Provide a proper time frame -- two years sounds right -- to get these agencies up and running, and provide them with logistical and financial support.


3. Government law currently protects these "agencies" from being sued by defrauded investors. Lift that protection immediately -- and make sure that executives and officers are personally liable for fraudulent acts. (Nothing clarifies the mind like the risk of a lawsuit.)


4. Eliminate "pay to play" immediately by borrowing an idea from the Franken Amendment. Here's how: Automatically assign an agency to conduct a review, rather than allowing the institutions being reviewed to hire one themselves.

This is bound to be a smart political move, since it will give those much-coveted independent voters what Elvis would call "A little more bite and a little less bark, a little less fight and a little more spark."
Oh, and it could save the economy, too. That has to be worth something too, even in this era of reality-free politics.

Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. He is also highly qualified to issue proclamations on matters of taste and style, according to himself. His most recent ruling is "Cool or Lame: In Re Van Halen."

Tim Geithner is an Idiot

By Fuzzyone

Compare and Contrast:

Geithner: "The agreement removes the threat of default and lowers the prospect of using the debt limit as an instrument of coercion."

Mitch McConnell: "It set the template for the future. In the future, Neil, no president — in the near future, maybe in the distant future — is going to be able to get the debt ceiling increased without a re-ignition of the same discussion of how do we cut spending and get America headed in the right direction. I expect the next president, whoever that is, is going to be asking us to raise the debt ceiling again in 2013, so we’ll be doing it all over."

As I've said before Geithner sucks. He is way too stupid to be Secretary of anything.

The Shameful Murder of Dodd Frank

By Robert Reich, originally published at his website, July 20, 2011.

Happy Birthday Dodd Frank,
Happy Birthday to you,
You’ve lost all your muscle,
And your teeth are gone, too.

One full year after the financial reform bill spearheaded through Congress by Christopher Dodd and Barney Frank was signed into law, Wall Street looks and acts much the way it did before. That’s because the Street has effectively neutered the law, which is the best argument I know for applying the nation’s antitrust laws to the biggest banks and limiting their size.

Treasury Secretary Tim Geithner says the financial system is “on more solid ground” than prior to the 2008 crisis, but I don’t know what ground he’s looking at.

Much of Dodd-Frank is still on the drawing boards, courtesy of the Street. The law as written included loopholes big enough to drive bankers’ Lamborghini’s through — which they’re now doing.

What kind of derivatives must be traded on open exchanges? What are the capital requirements for financial companies that insure borrowers against default, such as AIG? How should credit rating agencies be funded? What about the much-vaunted Volcker Rule requiring that banks trade their own money if they’re going to gamble in the stock market – how should their own money be defined? What “stress tests” must the big banks pass to maintain their privileged status with the Fed?

The short answer: whatever it takes to maintain the Street’s profits and perquisites.


The law included a one-year delay, ostensibly to give regulators time to iron out these sorts of details. But the real purpose of the delay, it’s now obvious, was to give the Street time to expand the loopholes and fill the details with pablum — when the public stopped looking.

Since Dodd Frank was enacted a year ago, Wall Street has spent as much – if not more – on lobbyists and political payoffs designed to stop the law’s implementation than it did trying to kill off the law in the first place. The six largest banks spent $29.4 million on lobbying last year, according to firm disclosures — record spending for the group. This year they’re on track to break last year’s record.

According to the Center for Public Integrity, the Street and other financial institutions engaged about 3,000 lobbyists to fight Dodd-Frank – more than five lobbyists for every member of Congress. They’ve hired almost the same number to delay, weaken, or otherwise prevent its implementation.

Meanwhile, the portion of the law that’s now supposed to be in effect is barely being enforced. That’s because the agencies charged with enforcing it, such as the Securities and Exchange Commission, don’t have enough money or staff to do the job. Congress hasn’t seen fit to appropriate these necessities.
Several of these agencies are still lacking directors or commissioners. Senate Republicans have refused to confirm anyone. They wouldn’t even consider Elizabeth Warren to run the new consumer bureau.

Many of same business leaders who blame the sluggish economy on regulatory uncertainty are complicit in all this. A senior vice president of the Chamber of Commerce told the New York Times that “uncertainty among companies about the rules of the road is keeping a lot of capital on the sidelines.” The Chamber has been among the groups responsible for keeping Dodd Frank at bay.

But it’s the biggest Wall Street banks – the ones that got us into this mess in the first place, and got bailed out by the public – that have taken the lead in killing off Dodd-Frank. They can afford the hit job.

At the same time, their executives  – enjoying pay and bonuses as large as in the boom days of the housing bubble – are busily bankrolling both political parties, although Republicans are favored in this election cycle. A significant portion of Mitt Romney’s sizable war chest has come from the Street. President Obama is no slouch when it comes to pulling at the Street’s purse strings.

Bankers try to justify their shameful murder of Dodd-Frank by saying tightened regulatory standards will put them at a disadvantage relative to their overseas competitors. JP Morgan’s Jamie Dimon had the nerve to publicly accost Ben Bernanke recently, complaining that the law’s implementation would harm the Street’s competitiveness.

The argument is pure claptrap. In the wake of global finance’s near meltdown, Europe has been more aggressive than the United States in clamping down on banks headquartered there. Britain is requiring its banks to have higher capital reserves than are so far contemplated in the United States. In fact, senior Wall Street executives have warned European leaders their tighter bank regulations will cause Wall Street to move more of its business out of Europe.

Wall Street is global because capital is global. JP Morgan Chase, Goldman Sachs, Citigroup, Bank of America, and Morgan Stanley are doing business in every corner of the world. Goldman even advised Greece on how to hide its growing indebtedness, before the rest of the world got wind, through a derivatives deal that circumvented Europe’s deficit rules.

The real reason Wall Street has spent the last year bludgeoning Dodd-Frank into meaninglessness is the vast sums of money it can make if Dodd-Frank is out of the way. If you took the greed out of Wall Street all you’d have left is pavement.

Wall Street is the richest and most powerful industry in America with the closest ties to the federal government – routinely supplying Treasury secretaries and economic advisors who share its world view and its financial interests, and routinely bankrolling congressional kingpins.

How else can you explain why the Street was bailed out with no strings attached? Or why no criminal charges from being brought against any major Wall Street figure – despite the effluvium of frauds, deceptions, malfeasance and nonfeasance in the years leading up to the crash and subsequent bailout? Or why Dodd-Frank has been eviscerated?

As a result of consolidations brought on by the bailout, the biggest banks are bigger and have more clout than ever. They and their clients know with certainty they will be bailed out if they get into trouble, which gives them a financial advantage over smaller competitors whose capital doesn’t come with such a guarantee. So they’re becoming even more powerful.

Face it: The only answer is to break up the giant banks. The Sherman Antitrust Act of 1890 was designed not only to improve economic efficiency by reducing the market power of economic giants like the railroads and oil companies but also to prevent companies from becoming so large that their political power would undermine democracy.

The sad lesson of Dodd-Frank is Wall Street is too powerful to allow effective regulation of it. We should have learned that lesson in 2008 as the Street brought the rest of the economy – and much of the world – to its knees. Now we’re still on our knees but the Street is back on top. Its leviathans do not generate benefits to society proportional to their size and influence. To the contrary, they represent a clear and present danger to our economy and our democracy.

They should be broken up, and their size must be capped. Congress won’t do it, obviously. So we’ll need to rely on the nation’s two antitrust agencies — the Federal Trade Commission and the Antitrust Division of the Justice Department. The trust-busters are now investigating Google. They should be turning their sights onto JPMorgan Chase, Citigroup, and Goldman Sachs instead.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, most recently, Aftershock.  He writes a blog at www.robertreich.org.  

Washington Microcosm

Senator Warren?

Not only would Elizabeth Warren be the most qualified person to run the new Consumer Financial Protection Bureau, the agency that she essentially created, but fighting for her nomination would provide a perfect opportunity to contrast the anti-regulation, pro-corporate Republicans with support for the unmitigated champion of consumer protection.  Indeed, the fact that she has been so demonized by the GOP should provide a clue as to how effective she would be.  As Paul Krugman said a while back, "by the sheer craziness of their attacks . . . Republicans are offering the administration a perfect opportunity to revive the debate over financial reform, not to mention highlighting exactly who’s really in Wall Street’s pocket these days."

So, of course, President Obama decided that Warren was too much of a lightening rod and nominated former Ohio Attorney General Richard Cordray instead.  (Perhaps a more significant factor in dooming Warren's nomination was the opposition of Treasury Secretary Geithner, who feared her aggressiveness in pushing for financial reform.)  Cordray, by all accounts, is an excellent second choice and is supported by Warren herself.  But that is not the point.

By failing to nominate Warren, Obama has not only missed a golden political opportunity, he has done nothing to appease the Republicans -- because he can never appease the Republicans.  As the Times reports, already "forty-four Republican senators have signed a letter saying they would refuse to vote on any nominee to lead the bureau," demanding instead changes that would dilute the Dodd-Frank law that created the agency, including replacing the director position with a 5-person board.

So what now?  Obama needs to install Cordray as the agency’s director by using a recess appointment, which he should have done to appoint Warren, and ensure that the agency can finally start doing its important work.

As for Warren, the good news is that she may be persuaded to run for the Massachusetts Senate against Republican Scott Brown.  As Robert Kuttner put it, this is "the bigger stage and more important use of her stunning talents."  And a Steve Benen says, "If Warren runs and beats Brown next year, I wonder how much Senate Republicans will come to regret the decision to block her CFPB prospects?"

Rupert Murdoch Just Needs To Become A Banker

By Richard (RJ) Eskow, originally published at Huffington Post, July 13, 2011.

Rupert Murdoch's got problems. His employees are being arrested, he's losing his latest acquisition, and he's just been called to testify before Parliament. But there's an easy way for Mr. Murdoch to protect himself from these inquiries and save his company at the same time: Turn the News Corporation into a Wall Street bank. There won't be any prosecutions, and the government will even sweeten the deal with billions of dollars in easy money. And if Murdoch follows the trail blazed by bankers like Jamie Dimon at JPMorgan Chase, soon they'll be begging him to acquire more companies.

Murdoch and Dimon. One runs an organization that, as we now know, broke the law so many times it could be called a criminal syndicate. And the other is Rupert Murdoch. Yet Murdoch's fighting for his corporation's future while Dimon's name is being floated as a possible Treasury Secretary. Murdoch's losing his chance to expand market share, while our government helped Dimon's bank become more too-big-to-fail than ever by grabbing up Morgan Stanley.

Now that's juice. Murdoch's been a power broker on three continents and his Fox empire has reshaped this country's political landscape, but Dimon's taken the power game to a whole 'nother level.


Rupert and Jamie

The first arrests in the Murdoch organization's wiretapping and police bribery scandal included the Prime Minister's former press secretary (undoubtedly inspiring twinges of Brit-envy in the White House press corps). Now the probe has moved beyond lower-level reporters and editors. Murdoch's been called before a Committee of Parliament, along with a key aide and his heir-apparent son. The House of Commons and the Prime Minister have withdrawn their support for Murdoch's bid to take full ownership of satellite TV network BSkyB.

By contrast, despite its long list of proven crimes nobody at Dimon's bank has been arrested. Apparently arrests, like the financial consequences of one's actions, are for borrowers only. And Dimon only appears before our elected representative for cozy private get-togethers, not public inquiries.

We are two people divided by a common... well, common law. Great Britain's ruling center-right coalition is putting Murdoch on the spot, while our center-right coalition puts Dimon on a pedestal. Murdoch's trouble are front-page stuff. Dimon only makes headlines when he's posing for flattering soft-focus prose portraits, venting his pique at mild rebukes of his crime-ridden industry ("Bankers! Bankers! Bankers!"), or basking in those periodic Treasury Secretary rumors. (2008: "Dimon is the leading candidate ..." 2009: "Jamie Dimon, Treasury Secretary?" 2011: "Chasing Jamie -- Why Dimon might replace Geithner.")

Another story, headlined Jamie Dimon Seen As a Good Fit for Treasury, said fawning things like "Dimon... achieved rock star status during the financial crisis," "people familiar with Dimon's thinking said he 'would love to serve his country," and "... the timing might be right for Dimon." That story appeared in the New York Post -- Rupert Murdoch's New York Post.

It's a small world, alright. And the higher you rise, the smaller it gets.
News Corp. and JPMorgan Chase

Isn't this comparison unfair? There's a growing body of evidence that Murdoch employees wiretapped phones, tormented innocent families, and bribed police officers. JPMorgan Chase's record can't be that bad, can it?

Actually, it's worse. JPM has a long history as a serial corporate offender, and its crimes helped bring about a major financial collapse (although, come to think of it, so did the policies promoted by Murdoch's news organizations.) And we're not just talking about relatively genteel crimes like financial fraud. JPMorgan employees also committed down-and-dirty Tammany Hall-style crimes like bribery and bid-rigging. Bank employees spread $8 million around Jefferson County, Alabama to win municipal contracts, for example, and it took a settlement worth three-quarters of a billion dollars in fines and foregone fees to settle he case. (That's "billion," with a "b.")

Dimon's bank paid $25 million to settle another case involving the sale of unregistered securities -- which is a crime -- in the state of Florida. It paid more money to settle charges that it illegally propped up a failed mortgage lender, along with some other banks. (In this kind of fraud the lender has already failed, but banks make it look as if it hasn't. Think of it as a financial Weekend at Bernie's. In this case a lot of investors putting their money into a fiscal corpse, which means they were defrauded with help from Dimon's bank.)
JPMorgan's in-house foreclosure operation was described as a sleazy operation where "Burger King kids" -- untrained young people -- were hired to foreclose on homeowners. And just this week a story that got buried in the national media was prominently featured in local newspapers in towns like Boise, Idaho and Charleston, West Virginia:

 "JPMorgan Chase has agreed to pay $211 million after admitting one of its divisions rigged dozens of bidding competitions to win business from state and local governments."
When it came to graft, Dimon's dawgs were kickin' it old-school style. The national papers may yawn -- to them bank crime's just another "dog bites man" story -- but $500,000 in settlement money is a big deal to a hard-working state like West Virginia, one of many that's been left to fend for itself in the wreckage of Wall Street's crime spree.

Free to be ... Jamie and me 

"We try to do the best we can every day," Dimon said of his colleagues. (Except on the days we're bribing, bid-rigging, or committing fraud, of course; hey, nobody's perfect.) That sense of entitlement isn't just a personality trait. As we now know, it's government policy. An important story in the New York Times recently confirmed that it's been the government's official policy not to investigate criminal wrongdoing in America's banks. It's relying instead on a Wall Street self-policing plan that "outsources" law enforcement to the suspected perps.

As an experienced investigator asked, "What do you do when the bank itself is run by a criminal enterprise?"
Murdoch must be asking himself how he can get a piece of that action. Just become a bank like Goldman Sachs did, with the encouragement and support of regulators, so it could be saved with TARP and Federal Reserve money. No doubt the "bipartisan" Beltway crowd can be persuaded that Murdoch and Fox are "too big to fail," too.

Police this

"Self-policing" may seem like an foolishly naïve concept (it is), but it's not uniquely American. The British authorities tried it with News Corp., too. In response Murdoch asked executive Les Hinton to lead the "investigation," and Hinton dutifully reported that the organization was clean as a whistle. The authorities accepted his report, and a grateful Murdoch promoted Hinton to run News Corp's Dow Jones Inc. subsidiary.

Now Hinton's being investigated too, bringing the scandal to the Dow Jones offices on this side of the Atlantic. And the ethics watchdog group CREW has called for an investigation of reports that Murdoch journalists illegally spied on the families of 9/11 victims in the US. That bank status can't come a moment too soon, Mr. Murdoch.

Like reports of US bank criminality, the News Corp. story percolated for a long time before becoming a full-blown scandal. The turning point came when it was revealed that Murdoch's employees deleted email messages on a murdered child's cell phone to make room for more messages, giving her parents false hope that she was still alive. The story exploded, and now each day brings new revelations.
That should be a cautionary tale for Wall Street: Just when you think you've gotten away with it it can all blow up on you, and all because some innocent family was harmed. There are a lot of foreclosed families out there, guys, so don't sleep too peacefully in those Hamptons hideaways. As Dr. King used to say, "The moral arc of the universe is long but it bends toward justice."

In the meantime, Mr. Dimon's organization has set aside $2.3 billion to cover the fines and settlements it expects to pay for its past criminality and fraud.

Freedom is only the beginning

When a CEO can settle that many crimes with SEC so easily, he's doing fairly well. ("No SECs please, we're British!") When that many laws are broken and no executives go to prison, he's doing very well. When he's allowed to complain to sympathetic reporters in the aftermath of his corporation's crime wave that he's not being treated deferentially enough, he's doing extremely well.

But when stories keep suggesting, without a hint of irony, that he might become the Secretary of the Treasury? That's just awesome. Jamie Dimon has climbed the pinnacled Everest of self-promotion. And magically, he keeps on climbing. I bow to you, sir.

Rupert Murdoch probably won't be charged with anything, unless a "smoking gun" turns up. In the old days, the best he could do is hope the public eventually forgets that his corporation harbored a rat's nest of corruption and crime. But times have changed. If Murdoch can pick up one-tenth of Jamie Dimon's mojo, by this time next year he won't just be forgiven. He'll be Chancellor of the Exchequer.

A President On The Verge Of A Political Breakdown

By Richard (RJ) Eskow, originally published at Huffington Post, July 8, 2011.

This isn't the first time the White House has floated the idea of Social Security cuts as part of a 'grand bargain' with Republicans, and it's not the first time there's been a groundswell of opposition. But that opposition has never crystallized so quickly into something deeper and more threatening to the President's political fortunes.

Liberal pundits are turning against him and Democrats on the Hill are taking the fight directly to him. With a new poll confirming that Social Security cuts would alienate the other side's base and independents, this "grand bargain" doesn't look like much of a bargain anymore.

Sen. Bernie Sanders already laid the responsibility for unpopular cuts squarely at the President's feet on a phone call with reporters today: " We thought Social Security was off the table," said Sanders, "but by reopening this issue the White House is not only going to take on these changes, but will open the door to whatever else Republicans want."

In other words: If something bad happens to Social Security, you own it, Mr. President.

The timing couldn't be worse for a new austerity pose. Today's jobs numbers show that we're in an ongoing economic emergency. Yet instead of pushing for the spending that's needed, the President keeps reinforcing Republican arguments instead. According to the AP he told reporters in the Rose Garden that "uncertainty over whether lawmakers will raise the nation's debt limit is keeping businesses from hiring." (What was keeping them from hiring before that?) Economic advisor Austan Goolsbee evaded the issue of badly-needed stimulus funding as well as anyone could - that is, not very well at all - while repeating that ill-advised 'business confidence" mantra.

The net result is a Democratic Administration that's either afraid to speak up for government's role in fixing the economy or doesn't believe it has a role. Most people disagree, according to the polls. Now it looks like the Administration seriously overplayed its hand with this Social Security misstep (or trial balloon, or a double-triple-fakeout, or whatever this story was). That leaves it with the dual challenge of walking the story back and at the same time repairing a frayed bond between the President and many of his supporters.


The political logic's hard to fathom. Yet another poll was released this week confirming what we already knew: When voters are given a choice between reducing the deficit and maintaining benefits for Social Security and Medicare, they overwhelmingly choose benefits. Even today, after a relentless year-long drumbeat for austerity economics, 60 percent of Americans want these programs protected. That includes 72% of Democrats, which accounts for all the stories today about "Obama's problem with his base." But most Republican voters feel that way, too.

The controversy began two days ago with a Washington Post story that seems to have come from White House sources. That story was both definitive and, in keeping with the Post's ideological leanings, openly supportive of such a deal.[1] The White House only issued twisted non-denial denials like Press Secretary Jay Carney's comment that " while Social Security is not a major driver of the deficit, we do need to strengthen the program." (It doesn't affect the deficit at all.) That followed an earlier Carney remark that recycled the Administration's evasive language about the President not wanting to "slash benefits."
(That leads to another, parenthetical concern: Do they really believe that this kind of slippery politico-speak is good for the President's image?)

The generally pro-Democratic pundits who serve as a political Distant Early Warning System for Obama's base are signalling "DefCon 4" over this latest maneuver. Ed Schultz, who can usually be relied upon to defend Obama's left flank, said last night that Obama will be a "one-term President" if he makes a deal to cut Social Security. Paul Krugman's now openly speculating that the President is secretly an economic conservative whose "compromises" actually reflect his own beliefs.[2]

This morning a coalition of 300 groups sponsored a phone call with Sen. Sanders and Sen. Sheldon Whitehouse. Eric Kingson, Co-Director of the nonpartisan group Social Security Works [3], called the proposal an "outrage." Sen. Sanders was even more blunt about the political backlash if a "piece of crap" deal is sent to the Senate for approval. Sanders dismissed the chained-CPI proposal (Washington's preferred benefit-cutting method) as "about politics and not Social Security," and pointedly reminded the President of his own unequivocal pledge not to change the cost of living adjustment or raise the retirement age as McCain had proposed.

"Let me be clear," candidate Obama said in 2008. "I will not do either."

"Elections matter," said Sanders pointedly. "What the candidates say matters." To underscore his point, Sanders added that the President "made a promise to the American people. It is important that he keep his promise." Sen. Whitehouse said he "worried that the White House was taking Senate Democrats for granted," adding: ""I don't know how strong a hand the White House needs to have to play poker with these guys."

In two short days the tone of many private conversations among Democratic and progressive activists and leaders has turned from "how to we persuade the White House ..." to "how do we defeat the White House." This backlash could move beyond tactical or policy disagreements and begin to undermine the trust between Democratic voters and the White House.

Republicans won't be thrilled, either. The"chained-CPI" calculation would also affect tax brackets, giving it the dual effect of dramatically cutting Social Security benefits while at the same time raising taxes on the middle class (but not the wealthy who are already in the top bracket.) The White House finally achieved that longed-for bipartisan consensus today, as lawmakers from both parties expressed their opposition to the chained CPI proposal . [4]

Some of the President's new allies, like the business-funded and right-leaning Democratic group Third Way, are putting out the usual (decisively rebuttable) attacks on the President's critics. The President's position with the base will only get worse if he's forced to rely on attack pieces from groups that represent the Lanny Davis/Joe Lieberman wing of his party.

The stakes couldn't be higher for the President. The GOP's pursuing a strategy that excites and energizes its base, while he pursues one that depresses and discourages his own. Obama's approval ratings are still high among Democrats but, as Nate Silver demonstrates, next year's election will hinge on turnout.
Silver's piece is entitled "Why the Republicans Resist Compromise." It doesn't tell us why the President doesn't - even, as in the case of Social Security, when compromise apparently wasn't on the table.
The President and his team have a clear choice: They can either retreat from this position and fight aggressively for Social Security, or they can stake his re-election on a misguided roll of the dice. Those are the only two options. In politics, as in life, sometimes there's no "third way."
_________________________
[1] From the Post: "The White House is now seeking a plan that would slash more than $4 trillion from annual budget deficits over the next decade, stabilize borrowing, and defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation's population ages. That would represent a major legislative achievement ..."
Who would consider that "a major legislative achievement," besides the reporter herself? We're not told. Who has determined that an aging population of one of our two "biggest budgetary time bombs" - as opposed to unemployment or slow growth, for example? We're not told that, either.
[2] The "closet conservative" theory may sound conspiratorial, but there's some evidence for it. The President's key - and now apparently only - economic advisor is former Republican Tim Geithner, who has been a hardcore fiscal conservative throughout his tenure. (The non-ideological explanation for some of the White House's actions is that they've made a number of false moves that only coincidentally benefited economic conservatives.)
[3] This post was produced in conjunction with Strengthen Social Security and Social Security Works.
[4] The link takes you to a Bloomberg story that accurately reflects lawmakers' positions but makes a clear misstatement of fact. It says that "the 'chained consumer price index' has been endorsed by economists, who say the current inflation measure exaggerates how much prices increase." Many economists feel the current inflation measure understates the cost of living for seniors, and even the "chain gang's" own economists don't argue that it's a better measure of "how much prices increase." They base their proposal on changes in buying patterns that result from those price increases. (More on the chained CPI argument here.)

Obama Needs A Little Help From His Friends

President Obama's stubborn determination to focus on deficit-reduction and what Robert Reich described in yesterday's post as supply-side solutions rather than on stimulating demand to create jobs is as baffling as it is infuriating.  As Richard (RJ) Eskow argues, the Administration is capable of changing course, but not without public pressure:  "For reasons we can't know, the Administration has embraced deficits over putting America back to work. It will continue down this path until its friends and its critics come together and demand that it stop."

If The President Won't Do Something About Jobs, Who Will?

By Richard (RJ) Eskow, originally published at Huffington Post, June 10, 2011.

When it comes to jobs, sometimes it seems as if the White House is from Mars and the middle class is from Venus. And Republicans act like they're from the Death Star, patrolling the economy in their Imperial Cruisers directing laser blasts at every job initiative they can find.

The resulting political paralysis has left millions of Americans trapped in geographical or demographic pockets of full-blown depression. Unlike Wall Street's America, theirs is a bleak economic landscape from which there seems to be no escape.

The Administration's mishandling of jobs has become a Rorschach test for those who understands that more needs to be done. Is the White House following a misguided political strategy, thinking people want lower deficits more than they want jobs? Has it been "captured" by the conservative thinking of ex-Republican Tim Geithner? Are the President and his advisors too reluctant to propose measures they know will fail in the Republican House because they want success stories?

Ask anyone these questions and the answers will tell you a lot about them, but very little about the White House (unless they have inside information, of course.) But the answers doesn't really matter. The President's staunchest supporters and his harshest liberal critics have the same work cut out for them.


St. Louis Blues

Sometimes I'd rather hammer nails into my skull than look at the latest job figures. But my toolbox is in the garage and it's raining, so here I am reading some new reports from the St. Louis Federal Reserve Bank. We already know about our ongoing and staggeringly high overall unemployment. We know about sky-high youth and minority joblessness and record levels of long-term un- and under-employment.

Now, thanks to the St. Louis Fed's data, we also know that we lost more than one million retail jobs between 2007 and 2009. That's the result of lost demand, which in turn comes from joblessness, fewer working hours for people with jobs, and a lot more money tied up in real estate than it's worth. The St. Louis numbers also show that the average number of hours worked declined by nearly an hour per week.

As the states shed jobs, we need between 300,000 and 400,000 new jobs each month to make up for unemployment and for young people and others entering the work force. The number of new private-sector jobs last month was 38,000. The government needs to put people back to work, and quickly.

Friendly Fire

A lot of people think the White House wants to spend more to create jobs, but doesn't want to propose anything that won't make it through John Boehner's House. That argument was undercut by the Administration's actions this week. Democrats in the Senate proposed an additional $$600 million in public works spending over a three year period. That's a very small number - our Citizens' Commission on Jobs and the Deficit recommended much more investment in jobs and growth, as did the EPI and others - but it's a move in the right direction.

Predictably, Republican Jim De Mint attacked the measure as "another failed job stimulus" idea - a line of attack that's only made possible because the White House chose to ask for less stimulus money in 2009 than was actually needed, rather than let Republicans shoot down the right number. That approach would have allowed Democrats to explain clearly why the economy's still stagnant.

It's also exactly the approach Harry Reid was using when he labeled the Republican House a "big black hole" from which nothing escapes except "their ideas on how to kill Medicare." At last! Finally, a Democratic strategy for underscoring the difference between Democrats and Republicans and the need to invest in job creation.

How did the White House respond? "White House says Senate Dems' jobs bill is too expensive," read the headline in The Hill. "...(T)he bill would authorize spending levels higher than those requested by the president's Budget,: the Administration wrote, "and the administration believes that the need for smart investments that help America win the future must be balanced with the need to control spending and reduce the deficit."

Aaaargggh.

Instead of explaining that we spent too little on stimulus rather than too much, the President and his advisors have allowed Jim DeMint's assertion to go unchallenged. Added DeMint, "We've already wasted hundreds of billions of tax dollars on a misguided stimulus that left us with record high unemployment, and we don't need to repeat the mistake."

Come together ... over jobs

Whatever his reasons, we now know that President isn't about to use his "bully pulpit" to contradict Republicans like DeMint. So if the White House won't step up to the plate, who will? Somebody needs to take action. To paraphrase Al Franken, why not you?

Public pressure has persuaded the White House to change course before. In the run-up to the President's State of the Union address, advanced reports said he planned to announce Social Security cuts. A lot of people raised the alarm, call-ins and other actions were organized, and in the end no cuts were announced.
Those of us who supported these actions got a lot of pushback from people who consider themselves the President's supporters. This kind of comment from Democratic Underground was typical. "Don't buy the Hype. Obama will not announce cuts to Social Security or Medicare. Once again this phantom has been blown up into a major sh*tstorm by those who oppose Obama on the Right and the Left. Once again it will fail to materialize. When the dust settles, Obama will have only reiterated what he has said before ... (there will be) no big scary cuts after all. Just another false alarm."

That's exactly the kind of friend the White House doesn't need. As the Wall Street Journal later reported, the Administration "considered offering specific benefit cuts and tax increases to shore up Social Security's finances, but ultimately decided to back off." The Journal added: "The decision to hold off was made as the White House came under pressure from Democrats and liberal interest groups who oppose any cuts to Social Security benefits."

That pressure didn't just save American seniors from needless hardship. It also prevented the White House from committing political suicide.

Later, additional grassroots activity forced the White House to hold the line on Medicare cuts. That allowed Democrats to draw a clear distinction between themselves and the GOP - exactly what they can't do right now on jobs, thanks to the White House - and the resulting backlash against Republicans led to an upset Democratic victory in New York's special Congressional election last month.

Now the Administration needs to be rescued by its friends again - this time on jobs. Citizen action is needed that will force the Administration to draw a clear distinction between its policies and those of the Republicans. The public needs to hear an honest and open debate about what the economy needs. It's not small-"d" democratic of the White House to deny them that debate. And it's not big "D" Democratic to allow the President's party to be labeled the party of joblessness.

We had eight years of the Republican approach to jobs, tax cuts, and deregulation. The result is a broken and devastated economy. For reasons we can't know, the Administration has embraced deficits over putting America back to work. It will continue down this path until its friends and its critics come together and demand that it stop. There will be more opportunities to call the White House, sign petitions, and send a message in other ways. These tactics work.

The White House's staunchest supporters and its fiercest progressive critics share a common goal. They both need to persuade the President and his advisors to make the case for creating jobs. Whether the Administration wants it or not, right now it needs a little help from its friends.

Will The President Pass The Warren Test?

By Robert L. Borosage, originally posted at Huffington Post, June 9, 2011.

This is not a high bar.

Will the president name the indisputably best leader -- Elizabeth Warren -- to head the Consumer Financial Protection Bureau, the agency that she conceived, championed and constructed?

Senate Republicans, eager to curry favor with the big banks, have vowed to block ANY nominee to the post. So naming Warren will entail a fight. And if the minority succeeds in blocking the nomination with a filibuster, Warren will have to be named in a recess appointment.

This should have been done months ago. But opposition to Warren comes not only from Senate Republicans, but, by all reports, from Treasury Secretary Tim Geithner, the last man standing in the president's economic team.

So the White House has dithered. It once more would rather switch than fight. And now the administration is floating the notion that it will name a Warren deputy to head the bureau.

That trial balloon won't fly. Every informed citizen with a whit of sense, every consumer activist, and legions of legislators, bloggers, organizers and opinion leaders will be simply outraged if Elizabeth Warren is not nominated.

The Warren test cannot be ducked. There are no "acceptable alternatives." If the president names someone else, he gets the worst of both worlds. The Republicans will still block the nomination, demanding that the bureau be neutered. And the White House will be savaged across the progressive community for demonstrating once more that it caters far more to bankers than to the customers who are too often their victims.

It really is simple. Do the right thing. Name the best person to the job. Take on the fight. Help Americans see who is on their side and who is not. This is not a hard test, but it can't be postponed much longer.

(To sign a petition protesting the obstruction of the Warren appointment click here and/or click on the Support Elizabeth Warren badge on the right panel of this blog.)

[Related post:  Macroeconomics]

Is it Geithner's Fault or the Guy Who Hired Him

By Fuzzyone

I've blogged before about what a mistake it was for Obama to "pivot" and adopt the Republican frame (which is totally wrong) that deficits and not unemployment were the main economic issue. It should surprise exactly no one that this was a result of his listening to Tim Geithner, who may go down as one of the worst Treasury Secretaries ever. Of course Obama didn't have to listen to him. And of course its pretty darn tough to reverse course now. And having screwed up the economy it looks like Timmeh is gearing up to screw up the reelection too (though that's pretty much the same thing I suppose). So just move the goal posts. Not sure how this ends, but it is hard to imagine that it ends well.