Perhaps the most stunning part of the Goldman Sachs hearing the other day came at the end of the hearing, after most of the press had left for dinner. Carl Levin challenged Lloyd Blankfein on something he had said to staffers. Blankfein claimed that he “never thought” of the fact that AAA ratings were important to sales and that some buyers only buy AAA rated products.
Somehow I have a feeling this claim is going to come back to haunt Blankfein.
The big outrage de jour making the rounds in the media currently is the porn scandal at the Securities and Exchange Commission (SEC). This report from the Washington Post is typical of the reporting coming out of the main media:
Republicans are stepping up their criticism of the Securities and Exchange Commission following reports that senior agency staffers spent hours surfing pornographic websites on government-issued computers while they were supposed to be policing the nation’s financial system.
California Rep. Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, said it was “disturbing that high-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation’s economy on the brink of collapse.”
He said in a statement Thursday that SEC officials “were preoccupied with other distractions” when they should have been overseeing the growing problems in the financial system.
Would it be too much for the media to actually think for a moment before they perform stenography for alarmist Darrell Issa? Because even a moment’s pause would yield the realization that Republican outrage on this is absurd and duplicitous. In fact the SEC – IG report produced for another of the Republican howlers, Iowa Senator Charles Grassley, proves the pornification of the SEC was born and grown during the Bush/Cheney Administration and the leadership of Republican stalwart and longtime Issa colleague and friend Chris Cox. The IG Report also demonstrates quite clearly that the vast majority of the incidents occurred during Cox’s reign during the second Bush term, although there were some that continued on during the Obama Administration.
But it is not just that the problem was born and matured under Bush and Cox, it is the fact that it is symptomatic for the emasculation and gutting of the SEC which occurred at their hands and express direction. It was not a bug, but a feature. As Bloomberg News reported last year:
Under former SEC Chairman Christopher Cox, the agency instituted policies that slowed cases and led enforcement-unit lawyers to conclude commissioners opposed fining companies, the Government Accountability Office said in a report today. An unidentified attorney said it was “widely felt” commissioners prevented the division from “doing its job,” according to the report.
“Some investigative attorneys came to see the commission as less of an ally in bringing enforcement actions and more of a barrier,” the GAO said. Cox’s policies “contributed to an adversarial relationship between enforcement and the commission.”
The non-partisan GAO report on the Bush/Cox SEC found poor management, determination to not pursue cases, lack of transparency, and collusion with business interests. It was the Republican philosophy and direction which neutered the SEC. It is little wonder they took to surfing the net for porn, they literally had nothing else to do under Republican “leadership”.
So perhaps the media stenographers ought to remember this when suddenly howling duplicitous Republican shills like Issa and Grassley want to tar, feather and undermine the SEC now that Democratic leadership, led by Mary Schapiro, have cleaned the agency up, turned it around and put it back to work doing its oversight and enforcement job.
On a related note in things financial, our friend Selise is going to be along in comments to discuss her Seminal Diary on financial reform and the commendable Fiscal Sustainability Conference and Teach-In occurring next week in Washington DC. This is a worthy effort and is supported by a variety of progressive interests including Jamie Galbraith and my friend and former colleague, Ian Welsh.
(graphic by nathan bransford)
ThinkProgress has an absolutely devastating report on 111 Republican members of Congress who have attacked last year’s stimulus bill, but who have since taken credit for it. Click through for details on Republican hypocrisy close to you, but for a taste, here are the MI GOP stimulus hypocrites.
Rep. Fred Upton (R-MI) Signed A Letter Hailing Stimulus Funds As An ‘Important First Steps For Individuals And Their Families.’ The letter, signed by other members of the Michigan congressional delegation, was sent to the Director of Recovery Auto Workers and Communities. [Letter from Michigan Delegation to Ed Montgomery, 5/6/09]
-Rep. Upton Voted Against The Recovery Package Twice [Roll Call Vote #46; Roll Call Vote #70]
Rep. Vern Ehlers (R-MI) Signed A Letter Hailing Stimulus Funds As An ‘Important First Steps For Individuals And Their Families.’ The letter, signed by other members of the Michigan congressional delegation, was sent to the Director of Recovery Auto Workers and Communities. [Letter from Michigan Delegation to Ed Montgomery, 5/6/09]
-Rep. Ehlers Voted Against The Recovery Package Twice [Roll Call Vote #46; Roll Call Vote #70]
Rep. Dave Camp (R-MI) Signed A Letter Hailing Stimulus Funds As An ‘Important First Steps For Individuals And Their Families.’ The letter, signed by other members of the Michigan congressional delegation, was sent to the Director of Recovery Auto Workers and Communities. [Letter from Michigan Delegation to Ed Montgomery, 5/6/09]
-Rep. Camp Voted Against The Recovery Package Twice [Roll Call Vote #46; Roll Call Vote #70]
Rep. Thad McCotter (R-MI) Signed A Letter Hailing Stimulus Funds As An ‘Important First Steps For Individuals And Their Families.’ The letter, signed by other members of the Michigan congressional delegation, was sent to the Director of Recovery Auto Workers and Communities. [Letter from Michigan Delegation to Ed Montgomery, 5/6/09]
-Rep. McCotter Voted Against The Recovery Package Twice [Roll Call Vote #46; Roll Call Vote #70]
Rep. Candice Miller (R-MI) Signed A Letter Hailing Stimulus Funds As An ‘Important First Steps For Individuals And Their Families.’ The letter, signed by other members of the Michigan congressional delegation, was sent to the Director of Recovery Auto Workers and Communities. [Letter from Michigan Delegation to Ed Montgomery, 5/6/09]
-Rep. Miller Voted Against The Recovery Package Twice [Roll Call Vote #46; Roll Call Vote #70]
Rep. Mike Rogers (R-MI) Signed A Letter Hailing Stimulus Funds As An ‘Important First Steps For Individuals And Their Families.’ The letter, signed by other members of the Michigan congressional delegation, was sent to the Director of Recovery Auto Workers and Communities. [Letter from Michigan Delegation to Ed Montgomery, 5/6/09]
-Rep. Rogers Voted Against The Recovery Package Twice [Roll Call Vote #46; Roll Call Vote #70]
But I think another Republican–along with her “moderate” buddies, Joe Lieberman, Ben Nelson, Arlen Specter, and Claire McCaskill–who deserve some scorn today. Among the $100 billion they demanded be stripped from the stimulus package before they’d support it was money for school modernization and state fiscal stabilization funds.
We now know that–as predicted–states are reeling with budgetary problems to an extent that may cause 900,000 further job losses.
States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1. These cuts could lead to a loss of 900,000 jobs, according to Mark Zandi, chief economist of Moody’s Economy.com.
Granted, the money that Collins took out of education stimulus last year would not have made up the difference in the cuts we’ll see from states in the upcoming fiscal year. But Collins and her buddies do deserve a reminder that their so-called fiscal moderation last year has lasting effects on the Americans losing their jobs.
Count me among those who are grateful that Harry Reid scaled back the Senate jobs bill instead of letting MaxTax Baucus and Chuck Grassley use it to push through another estate tax break for Paris Hilton. That said, what he is pushing is another poorly-designed tax break that will do little to support jobs. More importantly, it offers no relief for states, trying to keep teachers and cops and firemen on the job. And that means as many as 900,000 people will lose their jobs because the Senate is unwilling or unable to do what the House has already done. (h/t Calculated Risk)
Federal aid to the states was among the top priorities in an early Senate job creation bill, as well as in a $154 billion measure passed by the House in December. But it has fallen off the list as Senate Democrats look to craft legislation that will attract bipartisan support.
Senate Majority Leader Harry Reid, D-Nev., on Thursday unveiled a jobs bill that does not contain state aid. A Senate Democratic aide said Reid hopes to back a state aid measure in the future. Republican support, however, remains questionable.
[snip]
States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1. These cuts could lead to a loss of 900,000 jobs, according to Mark Zandi, chief economist of Moody’s Economy.com.
The article goes on to describe CA’s well-publicized woes. But it also notes that Senator Scott Brown’s state of Massachusetts may have to dramatically cut back because it is not getting $600 million in federal Medicaid funds they were counting on.
Just so long as we make it clear that Scott Brown bears a great deal of responsibility for holding that money up.
This story is several days old. But I wanted to go back and show how, after a pack of lobbyists killed one attempt to get government to use its power to save money and improve health care, another pack of lobbyists are trying to do the same with higher education.
Eric Lichtblau (who, IMO, does much better at digging out DOJ scandals than reporting legislative battles) describes how the plan to replace privatized student loans–in which the government guarantees student loans that lenders then repackage and profit off of–with direct loans form the government is in political trouble.
But an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.
House and Senate aides say that the administration’s plan faces a far tougher fight than it did last fall, when the House passed its version. The fierce attacks from the lending industry, the Massachusetts election that cost the Democrats their filibuster-proof majority in the Senate and the fight over a health care bill have all damaged the chances for the student loan measure, said the aides, who spoke on the condition of anonymity because they were not authorized to discuss the matter publicly.
The effort to return to using direct loans to students rather than using government guarantees to support student loans stems from a series of scandals under the Bush Administration. Loan companies gave school administrators kick-backs to make their loans preferred at the schools, regardless of whether those loans made sense for the students. Lenders manipulated a subsidy (and churned some loans) to take advantage of a 9.5% profit guarantee that they weren’t otherwise entitled to. And, given a revolving door between the industry and DOE, students had little protection against fraud. As a result, students were paying far more than they should have for loans, and when they ultimately faced default, they had far fewer options for getting out of that debt assumed under what were basically fraudulent conditions.
By passing government-backed loans through private companies rather than lending money directly, students became captive consumers to an industry with little real competition and even less protection against fraud. The whole scheme turned college education from a necessary step to achieve a middle class lifestyle (and more broadly, to keep America competitive internationally) into a mere profit center for the finance industry.
The legislation before the Senate would curtail that system, replace a corporate welfare program, and use the savings to support the same number of loans plus many more education programs.
The money that would be saved by cutting out the private-industry middlemen — about $80 billion over the next decade, according to a Congressional Budget Office analysis — could instead go toward expanding direct Pell Grants to students, establishing $10,000 tax credits for families with loans, and forgiving debts eventually for students who go into public service, administration officials say.
The bill would also shift tens of billions of dollars in expected savings to early learning programs, community colleges and the modernization of public school facilities.
So back to my parallel with the battle over the public option.
The choices now being made in health care risk making the same mistake we’ve made in the student loan industry. Captive consumers will be asked to support higher overhead (20% or more, in the case of the Senate bill) without adequate regulatory controls to make sure those consumers get the health care they’re paying for in return. A public option would have served as one check on this system by offering consumers one option that didn’t include that 20% overhead that also benefited from more direct government oversight. It would have saved $100 billion–in the same neighborhood of savings we’ll get by reverting the student loans to direct government assistance. But corporatist Senators like Ben Nelson and Joe Lieberman killed that plan, and as a result, we have to hope (assuming a bill passes at all) the HHS Secretary proves better at regulating a powerful industry than the Secretary of Education under Bush.
And now, having seen how easy it was to kill the public option, a solution that would save the government money and better achieve the underlying goal–health care (as distinct from insurance)–some of the very same corporatist Senators are turning their sights on direct student loans.
Brian Beutler reports that the Republicans are prepping to make sure no additional support for jobs gets passed next week.
Senate Democrats want to vote on the first installment of a jobs package as early as Monday, amping up the pressure on Republicans to get aboard. But for the moment, they’re not biting.
“We’ll have a vote on a jobs bill on Monday,” Senate Majority Leader Harry Reid said at a press conference today.
There’s just one wrinkle: According to the Senate’s top vote counter, there is currently no Republican support for the proposal Democrats are putting forth–and with Scott Brown to be seated today as the 41st Republican Senator, they’ll need at least one member of the minority to come aboard.
“You need two to tango. And you need Republicans for bipartisanship,” said Senate Majority Whip Dick Durbin (D-IL).
Now, there’s an interesting subplot to this.
Current Majority Leader (and very endangered incumbent) Harry Reid says no Republicans currently support the bill.
Majority Whip and second-most senior Democratic Senator Dick Durbin suggests there are no Republicans supporting the bill.
Meanwhile, Vice Chairman and third-most senior Democratic Senator Chuck Schumer has been working on a deal–at least for tax credits for businesses that create jobs–with Republican Orrin Hatch.
Sens. Chuck Schumer (D-N.Y.) and Orrin Hatch (R-Utah) released a plan Wednesday to give tax breaks to companies that add new workers, a proposal that is likely to become a key component of the jobs bill Senate Democratic leaders are hoping to unveil this week.President Obama has called for employers to receive a $5,000 tax credit for each new employee they hire, while other lawmakers have floated different proposals for a job tax credit. The Schumer-Hatch plan, which would allow companies to avoid paying Social Security taxes for the duration of 2010 on each unemployed worker they hire, appears to have the most momentum in the Senate.
“Our payroll tax cut is a simple, cost-effective and bipartisan solution. It will help put more Americans to work right away,” Schumer said in a press release. Hatch added: “While Senator Schumer and I disagree on most issues, we’ve been able to come together on an affordable, effective and targeted proposal to get the American people back to work.”
Democratic leaders emphasize that they haven’t yet settled on an exact combination of items that will go in the Senate’s jobs package, but Senate Majority Leader Harry Reid (D-Nev.) suggested Wednesday that he was taking a close look at the Schumer-Hatch bill.
Mind you, the Schumer-Hatch deal only deals with one aspect of the deal, not with things like COBRA subsidy extension. And I’ve got concerns about any plan that defunds social security.
Nevertheless, it seems that the drama over whether Democrats will squabble themselves into irrelevance–and/or whether Republicans will sacrifice the interests of their constituents for partisan gain is playing out large on the jobs front.
Whatever is happening, it is preventing Americans from getting back to work.
You know that Frank Luntz memo telling Republicans how to kill Wall Street reform?
Republican message guru Frank Luntz has put together a playbook to help derail financial regulatory reform.
In a 17-page memo titled, “The Language of Financial Reform,” Luntz urged opponents of reform to frame the final product as filled with bank bailouts, lobbyist loopholes, and additional layers of complicated government bureaucracy.
“If there is one thing we can all agree on, it’s that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated,” Luntz wrote. “This is your critical advantage. Washington’s incompetence is the common ground on which you can build support.”
Well, as Ben Smith points out, Luntz used a funny picture to illustrate his section on how best to reach out to small businesspeople.
Pollster Frank Luntz picked an unusual poster boy in his new memo instructing Republicans to kill attempts to tighten financial regulations by tying the new laws to the bailout: Michigan Democratic Congressman Mark Schauer.
Schauer and his wife, Christine, are used to illustrate a section suggesting Republicans “personalize the impact” of the legislation by claiming it will effect specific small business owners.
In his research, “”The most popular images of small business owners both projected optimism with signs saying ‘grand opening’ or ‘open.'”
The image above, which appears on page 14 of the memo, appears to be taken from Scheuer’s campaign website, which celebrated the opening of his wife’s store in a July, 2008 posting headed, “Mark Schauer: Small Business Owner.” The Battle Creek, Mich. shop, according to the item, is a kind of upscale consignment store.
Mark, of course, is the Congressman from just west of Ann Arbor. He is speaking like a proud progressive in one of the most closely contested districts this year. And, as Ben points out, Mark voted for Wall Street reform but opposed the bailout (he was first elected in 2008 so was not in Congress at the time).
I guess not only are Democrats better for the economy. But even astute political observer Frank Luntz recognizes that Democrats make the ideal businesspeople too.
Update: Mark Schauer’s office issued the following in response to Luntz’s gaffe:
To be clear, Frank Luntz is a paid consultant for Wall Street banks and big credit card companies, and this memo was written with one goal in mind – defeating a bill to end taxpayer-funded bailouts and clean up the mess on Wall Street.
As a small business owner himself, Mark understands the economic challenges entrepreneurs in Michigan are facing. That’s why he plans to support a new tax credit for businesses that hire more workers, and a measure that will make it easier for small businesses to obtain credit and expand their operations by taxing excessive bonuses at bailed out Wall Street banks.
I didn’t watch the SOTU last night–though I did follow along on Twitter. It seems like those actually watching came away with a renewed belief in American exceptionalism, which I suppose is one important–but not necessarily wise–point of the SOTU. Huzzah! USA! USA! USA!
And I’ll have more to say later about other parts of the content of the speech. But for the moment, I wanted to call attention to one word not spoken: foreclosure.
Mind you, the mortgage crisis did not go without mention. Here are the places where the giant trauma that has devastated our economy was discussed:
One year ago, I took office amid two wars, an economy rocked by severe recession, a financial system on the verge of collapse, and a government deeply in debt. Experts from across the political spectrum warned that if we did not act, we might face a second depression. So we acted – immediately and aggressively. And one year later, the worst of the storm has passed.
But the devastation remains. One in ten Americans still cannot find work. Many businesses have shuttered. Home values have declined.
[snip]
These struggles are what I’ve witnessed for years in places like Elkhart, Indiana and Galesburg, Illinois. I hear about them in the letters that I read each night. The toughest to read are those written by children – asking why they have to move from their home, or when their mom or dad will be able to go back to work.
[snip]
Our most urgent task upon taking office was to shore up the same banks that helped cause this crisis. It was not easy to do. And if there’s one thing that has unified Democrats and Republicans, it’s that we all hated the bank bailout. I hated it. You hated it. It was about as popular as a root canal.
But when I ran for President, I promised I wouldn’t just do what was popular – I would do what was necessary. And if we had allowed the meltdown of the financial system, unemployment might be double what it is today. More businesses would certainly have closed. More homes would have surely been lost.
[snip]
Let me repeat: we cut taxes. We cut taxes for 95% of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. As a result, millions of Americans had more to spend on gas, and food, and other necessities, all of which helped businesses keep more workers.
[snip]
We cannot afford another so-called economic “expansion” like the one from last decade – what some call the “lost decade” – where jobs grew more slowly than during any prior expansion; where the income of the average American household declined while the cost of health care and tuition reached record highs; where prosperity was built on a housing bubble and financial speculation.
[snip]
As hard as it may be, as uncomfortable and contentious as the debates may be, it’s time to get serious about fixing the problems that are hampering our growth.
One place to start is serious financial reform. Look, I am not interested in punishing banks, I’m interested in protecting our economy. A strong, healthy financial market makes it possible for businesses to access credit and create new jobs. It channels the savings of families into investments that raise incomes.
[snip]
The steps we took last year to shore up the housing market have allowed millions of Americans to take out new loans and save an average of $1,500 on mortgage payments. This year, we will step up re-financing so that homeowners can move into more affordable mortgages. [my emphasis]
Now, I get it. The point of the SOTU is to speak of the positive, to look forward, not back. You don’t want to plant a bummer word like “foreclosure” in the middle of such a speech, like a turd in a punchbowl, to kill the buzz. I get it–pundits were looking to count the number of times Obama said “jobs” (23, by my count), and so were not focused on the housing crisis that is at the root of the jobs crisis.
Who’d a thunk it? When given a choice, voters are happy to impose higher taxes on those who have been getting rich while everyone else faces higher costs and stagnant wages.
Yesterday Oregon voters delivered a huge victory for progressives by approving Measures 66 and 67, raising taxes on incomes over $250,000 and large corporations to generate $733 million to close the state’s budget deficit. The Oregon legislature had approved the taxes last summer, but a corporate/teabagger alliance organized to put it to voters in a referendum.
One wonders if the national media will cover this victory at all – much less at the levels of the Massachusetts Senate race.
[snip]
The opposition ran a well-funded campaign, led by Nike, Columbia Sportswear, and other big businesses. They were joined by Ari Fleischer’s FreedomWorks and the libertarian publisher of the Oregonian, who used to be at the Orange County Register before it went belly-up. Together they ran a campaign arguing that the tax increases would worsen unemployment. But 55% of voters have rejected that, and instead showed that when a truly progressive campaign is waged, the right-wingers can be beaten. Even on taxes.
What it also shows is that progressive policies, supported by smart progressive organizing led by folks such as former US Senate candidate Steve Novick and the Oregon Bus Project, which reached out to younger voters and had a strong ground game, can beat well-funded, well-organized corporate/teabagger alliances.
Their message was deeply progressive:
These reforms protect nearly $1 billion in vital services like education, health care and public safety. These funds preserve class sizes, save jobs for teachers, provide seniors with in-home care, and provide health care for thousands of Oregonians through the Oregon Health Plan. In this time of economic crisis, we must protect those who have been hit the hardest – seniors, children and the unemployed – without putting more of a burden on the middle class.
Like Cruickshank, I’m not holding my breath for Cokie Roberts and George Will and Chris Matthews to drone on about how this is a game-changer. But it really must be read as the book-end to the MA Senate vote. Progressive messaging and policies do work. If only national Democrats can muster some progressive politics and messaging.
There’s a lot to say about Obama’s foolish call for a spending freeze in the middle of the Great Recession.
But for now, consider the point that Chris Bowers is making: the spending freeze won’t happen. It won’t happen because Congress, whose remaining power in the era of post-Cheney has been reducted to clutching purse strings, will not let it happen.
In the midst of the rightful outrage over President Obama’s call for cuts in social spending during poor economic times, keep in mind that the likelihood of social spending actually being frozen or cut remain pretty low.
This is because the people who actually write spending bills–members of the House Appropriation and Budget committees–say they won’t be freezing or cutting social spending:
House Democrats are rejecting an idea floated by the Obama administration to freeze or cut discretionary spending in 2011.
Key members of the House Appropriations and Budget committees told The Hill this month they would not go along with alternative spending plans being requested by White House Budget Director Peter Orszag, which are part of the administration’s plan to reduce the deficit.
Months ago, the White House asked the relevant House Democrats to prepare three budget drafts, including one with a freeze on discretionary spending and one with a 5% cut in discretionary spending. They didn’t even prepare the drafts.
Members of Congress write and vote on the budget, and members of Congress like to bring the bacon home to their districts. As such, the legislative process will ultimately make President Obama’s call for a spending freeze a hollow one. Like the President’s deficit commission, not much will actually come of this.
This call for a spending cut is a press release.
But it’s more than a press release. It is a promise that is conveniently scheduled to come due just in time for the 2012 election season. In mid 2011, Obama will be haranguing Congress about helping him fulfill his promise. And Congress, up for election like they always are, will ignore him.
And then Obama, who has already saddled Congress with accepting unpopular legislation over popular legislation, appears to be putting his perceived self-interest above Congress’. And this may be no different–by the time the 2012 election comes around, Obama will be in full Deficit Troll mode, blaming those mean Democrats in Congress for his own failures. Maybe I’m wrong on this, but the only logical explanation I can fathom for this obtuse policy is to set up an Obama-vs-the-Dems narrative for Obama’s reelection.
And mind you, I spoke of Obama’s “perceived self-interest” above, because no matter how you look at it this policy simply makes no sense. Voters in 2010 are going to be voting on their pocketbook. Voters in 2012 are going to be voting on their pocketbook. They don’t really care about deficits. Rather, they care about a working economy. And this little PR stunt will only make it harder for Obama to do what he needs to do to get the economy working again.
Hopefully, though, it’ll serve to clarify the issue for Congress: Obama’s not looking out for them, so they’re going to have to pass sensible legislation without Obama if need be. Including more spending to stimulate the economy.