Naming Names: A Baker's Dozen of Financial Rogues

Late last week, in the penultimate edition of Bill Moyer's Journal (which ends forever this week) the best journalist in television interviewed Prof. William K. Black. Refreshingly, Prof. Black names names while discussing who should bear responsibility for bringing the world to the edge of financial collapse during the waning days of the Bush Administration.

It's a crowded, bi-partisan recitation of rogues, sociopaths, and bureaucratic nitwits. The list includes --

1. Federal regulators who did everything they could to subvert prudential financial regulations;
   
2. Alan Greenspan and other directors of the Federal Reserve;
   
3. Mortgage loan brokers who deliberately wrote and then palmed off on others "liar's loans;"
4. Corporate banking executives who fired whistle-blowers and promoted cheats and con-men;
   
5. Accountants who deliberately failed to call out liar's loans for fear of losing customers;
6. "Pathogenic" employee pay policies that rewarded fraud while punishing honesty;
   
7. Timothy Geithner, former head of the influential New York FED during the Bush Administration and now Obama's U.S. Treasury Secretary;
   
8. Bush appointees (former) SEC chairman Cris Cox and FED chairman Ben Bernanke;
9. The giant blood-sucking "vampire squid" known as Goldman Sachs;
   
10. "Top" Goldman Sachs executives from CEO Lloyd Blankfein on down the corporate chain of command;
    
11. The entire "Bush wrecking crew" of anti-regulation regulators who remain to this day embedded in the federal bureaucracy;
12. Goldman Sachs alum Robert Rubin's many "protégés" whom President Obama has named to virtually every choke-point in the financial regulatory system; and
    
13. As a bonus, the extremist ideologues in Academia and on the bench who teach and write that Wall Street doesn't need and shouldn't enforce anti-fraud laws because the system is "self-cleansing." Really. They teach that to young business students.

Undoubtedly, this is only a partial list. Prof. Black didn't even mention former Texas senator Phil (Mr. Enron") Gramm, or Wall Street's bond-rating agencies, or all of the Senators and Congressmen who voted to abolish Glass-Steagall. These self-dealing gamblers all played a major part in bringing about the near-collapse of the American economy, too.

The televised interview can be seen here. A written transcript is here.

Criminal Since the Time of Cain

When the complete history of the Bush administration is written, it will reveal a criminal enterprise engaged in brutality every bit as revolting as --

• Japanese interrogators during W.W. II, whom we prosecuted for "waterboarding" and illegal torture";
• "Indonesia" and "Iran", which for years we have publicly condemned for engaging in "psychological torture" and "food and sleep deprivation" of prisoners;
  
• "Egypt" whose torture of prisoners we have condemned because it involved "stripping and blindfolding victims, suspending victims from a ceiling or doorframe with feet just touching the floor, beating victims... and dousing victims with cold water"; and
  
• "Algeria" for using the "chiffon method" of "placing a rag drenched in dirty water in someone's mouth."

The examples, above, come from "legal memoranda" written by high-ranking Bush administration lawyers which explicitly approved torturing prisoners.

Four of those memos were publicly released yesterday:

The four legal opinions, released in a Freedom of Information Act lawsuit filed by the A.C.L.U., were written in 2002 and 2005 by the Justice Department’s Office of Legal Counsel, the highest authority in interpreting the law in the executive branch.

To be sure, President Obama revoked these very memos on his "second day in office" and "condemned what he called a "dark and painful chapter in our history." He's also promised "the interrogation techniques would never be used again."

Until the next time, that is. Because even as he released the evidence of war crimes, Obama also promised "that C.I.A. officers who were acting on the Justice Department’s legal advice would not be prosecuted."

It simply is not enough to leave each new presidential administration to decide which laws of humanity it will follow and which it will discard. In a democracy committed by Constitution and Treaty to being a republic governed by laws, crimes against humanity should not be treated like mere agency regulations or presidential signing statements, to be issued and revoked at will.

As our own nation argued successfully at the Nuremburg trials, "civilization cannot tolerate" acts which have been regarded as criminal "since the time of Cain." Those ultimately responsible for approving this must be prosecuted and, if found guilty, punished. Even if -- no, especially if -- some of them like Jay Bybee, now sit as federal judges, judging others.

At Nuremberg, we prosecuted the lawyers and judges who were complicit in the Nazi depravities. We owe it to ourselves to do no less when those depraved lawyers and judges are our own.

Dept. of Further Amplification
4-17 pm

Scott Lemieux properly points a finger at Senate Democrats who, in 2003, lay down on the job of 'advising and consenting' to give Torture Memo author-in-chief Jay Bybee a lifetime federal judgeship.

How can this be permitted to stand? Imagine the hundreds, even thousands, of lawyers who over the coming years will have to appear, in this or that case, before "the honorable" Jay Bybee, now unmasked, himself, as a key figure in the Bush cabal of war criminals. It would be like enduring proctology exams by Dr. Josef Mengele, year after year, until the criminal is, at last, hustled off to his eternal reward.

Calling Home

Friday Fun

Uncle Sam and you have just saved Wall Street from itself. It's great fun watching the heads of the laissez-faire, greed is good crowd explode on CNBC. Every capitalist principle they've clung to has been exposed as a myth.

Sound Investment Advice

This morning, short term U.S. Treasury bills have been selling at a negative rate of return. That is to say, if you want to put your money in what once was known as the safest investment vehicle in the world, you'll have to pay more to buy a Treasury bill than you'll ever get back in interest.

Buy a short-term U.S. bond and you're guaranteed a loss on your money!

Writes Princeton economics professor Paul Krugman:

This didn’t even happen in the Great Depression. Professionally, I’m fascinated. As a citizen, I’m terrified.

True, it is unprecedented. But one must remember that the alternative safe place for your money -- a mattress -- doesn't come free, either. That's why we strongly recommend using an old mattress, one that you already have on hand.

If you'd like to thank us for this investment advice, just write your thank-you note on the back of a $100 bill and mail it in.

If You Like the Credit Crisis...

If you like the mortgage mess and the credit crisis it has brought on, then you'll really enjoy John McCain's likely pick for Secretary of Treasury -- former Texas senator (and close McCain friend) Phil Gramm. Throughout his career Gramm has "worked to weaken or remove regulations that allowed the government to keep an eye on big business."

He's known as "John McCain's brain on economic matters." He drafted the "economic plan" McCain is running on. He also drafted the two laws that brought us the Enron collapse and the current banking crisis:

Gramm orchestrated the Gramm-Leach-Bliley Act in 1999 which “destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.” He also pushed the Commodity Futures Modernization Act in 2000, which made legal “the mortgage swaps distancing the originator of the loan from the ultimate collector.” The Nation writes that “those two acts effectively ended significant regulation of the financial community.

As Princeton economist Paul Krugman says, "we could manage to have another Great Depression if we work at it hard enough. I think Phil Gramm might be just the guy to do it."

Caring Conservatism

Turns out, Duncan Black was right: "We're all communists now." It cost more than twice what was estimated yesterday, but now Uncle Sam effectively owns American International Group, Inc. (AGI).

When is the first shareholders' meeting?

A.I.G. in a Nutshell

Some CNBC hair-do is talking about A.I.G. right now. "I don't see what the problem is. It has plenty of assets. It's just a liquidity problem."

Right. Only $90 billion in liquidity is needed.

"It's just that some accountant says so," he adds, acerbically.

Not quite. A.I.G. signed contracts that require it to maintain a certain amount of liquidity. It filed formal undertakings with state regulators that its insurance subsidiaries would do so. It sold bonds that guaranteed it would do so. It is required by federal and state laws to do so.

If A.I.G. doesn't abide by its contracts, assurance, guarantees, promises, and laws, then the other guy gets to foreclose. Right? Every homeowner and credit card owner in America knows this.

But Wall Street thinks they are exempt from all of that. And if they all whine loudly enough, the taxpayers will pick up the bill.

'Consoling' on Wall Street

CNN (unintentionally) captures two guys necking behind their on-screen Wall Street reporter and says they were "consoling" each other. CNN needs a dictionary.

Console: verb (used with object). To alleviate or lessen the grief, sorrow, or disappointment of; give solace or comfort.

Investment Advice in Hard Times

What to do with your money when no one trusts the U.S. financial system? Diversify, diversify, diversify. Use lots of different mattresses.

Privatization and How It Works

The conservative mantra for decades has been "privatization, privatization." Today, Princeton economist Paul Krugman tells us how it really works (emphasis added):

The case against Fannie [Mae] and Freddie [Mac] begins with their peculiar status: although they’re private companies with stockholders and profits, they’re “government-sponsored enterprises” established by federal law, which means that they receive special privileges.

The most important of these privileges is implicit: it’s the belief of investors that if Fannie and Freddie are threatened with failure, the federal government will come to their rescue.

This implicit guarantee means that profits are privatized but losses are socialized. If Fannie and Freddie do well, their stockholders reap the benefits, but if things go badly, Washington picks up the tab. Heads they win, tails we lose.

The only thing wrong with Krugman's description is that it's not "Washington" who picks up the tab for the lucky stockholders of Fannie Mae and Freddie Mac. It's you, me, and the rest of the taxpayers.

We're with Duncan Black on this one. He writes, "Both short and long term we might think that having such creatures exist to be mortgage backstops is a good idea. I probably agree with that. But there is no reason for them to be publicly traded companies."

Dept. of Amplification

Washington economist Dean Baker puts the issue more starkly:

We had to keep Fannie and Freddie in business, but we could have done this by putting conditions on the bailout. The government uses conditions all the time when it offers help to low and moderate income people. Unemployment insurance, TANF, food stamps, and even student loans come with all sorts of conditions.

It is only when it comes to giving money to extremely rich people that we find it impossible to impose conditions. Again, we could have told Fannie and Freddie that no executives will get more than $2 million a year in total compensation. We could have told their shareholders that they are out of luck, because that is what is supposed to happen when you invest in a bankrupt company.

Instead, we told the people who work as truck drivers, school teachers, and fire fighters that they will have to pay more in taxes to help some of the richest people in the country escape the consequences of their own stupidity.

We're in the Soup, Now!

The seeds of raging inflation sewn by the Bush administration's exorbitant Iraq War spending ... "morally obscene military spending" ... imprudent tax cuts for the super-rich ... dollar indifference ... and record setting federal discretionary spending are beginning to flower everywhere.

Gas over $4 a gallon; bread topping $3.50 a loaf; and Cap'tn Crunch "costing close to $6 these days." Etc. etc.

Even (or especially) the U.S. Senate can't live within its means. Do you suppose this news means that Pensacola's own McGuire's Irish Pub will soon have to stop selling Senate Bean Soup for 18 cents a bowl?

Sunday Sermon

By Prof. Elizabeth Warren, "The Coming Collapse of the Middle Class" (approx. 57 min.):

Flying Blind

Then came 'Heck of a Job' George W. Bush.
Ideology trumped reality and competence, once again.

Fred Hiatt's Pravda on the Potomac editorially wrings its hands today over this week's FAA-enforced grounding of all MD-80 airplanes, operated by American Airlines, "resulting in more than 3,000 flight cancellations and more than 250,000 stranded passengers by Friday." Then, there's this:

[L]ast month... an FAA inspector let Southwest Airlines fly its Boeing 737 jets despite reports of a crack in a fuselage. At hearings before the House Transportation and Infrastructure Committee on April 3, the Transportation Department's inspector general, Calvin L. Scovel III, bemoaned the "overly collaborative relationship" between the FAA and Southwest. According to an FAA safety inspector, this was the result of the agency treating the airlines like "customers." Meanwhile, the real customers -- the ones crammed onto crowded and late planes who are nickel-and-dimed for everything from checking an extra bag to securing an onboard meal -- are treated with disdain.

This inspires WaPo to reach the brilliant, hard-hitting conclusion that passengers "shouldn't... have to worry that the plane they're sitting on might be a disaster waiting to happen." Really? Every time we board an airplane we assumed it was our job to worry.

The trouble with the Post's editorial is that there's no hint of how, when, or why our civil air transportation industry was allowed to fall into such a disgraceful state of disrepair. For that, you have to turn to today's New York Times.

In "Behind Air Chaos, an F.A.A. Pendulum Swing" by reporters Matthew Wald and Michelle Maynard, we learn that under the Clinton administration FAA inspection reforms led to enhanced safety. "Over the next decade, the accident rate fell 65 percent, and [the] new approach is widely seen as having played a role in the drop."

Then came 'Heck of a Job' George W. Bush. Ideology trumped reality and competence, once again.

[T]he F.A.A., under the Bush administration, took on a role after the Sept. 11 attacks to help the industry recover — “through technology, through greater efficiencies, through sensible and non-burdensome regulatory schemes,” Marion C. Blakey, the F.A.A. administrator in 2002, said at the time. She declined to be interviewed for this article.

This more collaborative approach was reflected in a “customer service initiative” announced by the F.A.A. in April 2003.

The customers in this case were not passengers; they were the airlines the F.A.A. regulates. The core principles of the new initiative, which inspectors could print up on pocket-size cards, included creating for the airlines “an environment without fear of retribution if you challenge our decisions” and “clear guidance on how you can elevate your concerns to the next higher level of authority.”

The F.A.A.’s watchdog role, to many Democrats in Congress who now oversee airline regulators, grew toothless.

One notorious example is the fresh example of Southwest Airlines:

In January 2007, the airline discovered cracks on some of its Boeing 737s. Less than two months later, an unidentified whistle-blower in the F.A.A.’s Chicago office noticed a crack in a Southwest jet that had been flown the day before.

Earlier this year, Southwest told the F.A.A. that it had flown 46 planes without the required inspections of fuselage panels, operating the defective planes for up to nine months on more than 61,000 flights.

It took the persistence of brave whistle-blowing inspectors deep down in the agency to expose safety concerns which the Bush's FAA administration has been actively suppressing. The whistle-blowers, we're told, "have become 'rock stars' within aviation safety circles."

Predictably, the Bush administration hit back hard at the whistle-blowers instead of the FAA administrators who consciously endangered public safety. But when an independent inspector-general's report about the controversy began circulating on Capitol Hill, the FAA was forced to act by re-inspecting all civil airplane fleets.

By one informed estimate, some 568 unsafe aircraft have been grounded so far. And, we're told, "more groundings of other planes throughout the industry are likely to occur in coming weeks."

We're thinking we should cancel our airline reservations for a business meeting next week. In fact, we just might cancel everything, go to bed, and pull the covers pulled over our head until Bush leaves office.

Wall Street Government

Conservative political principles at their core, we were always taught, promote smaller government, a less intrusive federal authority, multiple checks and balances against abuse of power, respect for states' rights, and the sanctity of contract.

The Bush administration's proposal, announced yesterday, to reform the financial regulatory system actually "drastically" expands the powers of the Federal Reserve; would eliminate the multiple checks and balances provided by smaller agencies; virtually erases more than a century of state regulation of the insurance industry; supplants it with a federal charter system for insurance companies and brokers; and gives federal authorities the power to override and rewrite individual contracts of all kinds.

Oh, and one more thing: when it comes to investing in nationally marketed stock and bonds, it takes away the one major safeguard individual investors have relied upon since the New Deal: "The plan proposes... to reduce the enforcement authority of the S.E.C. in a variety of ways and hand that authority instead to industry groups."

In other words, stock touts and hot room bond jockeys that prey on the ordinary consumer get to police themselves. Now, that is a recognizable conservative principle. It's the same one that helped bring on the Great Depression and that has a lot to do with today's financial crisis.

The Bush administration's plan to "reform" the financial system, as Secretary of Treasury Henry Paulsen candidly admits, has nothing to do with the current financial crisis.

“Some may view these recommendations as a response to the circumstances of the day,” Mr. Paulson said. “That is not how they are intended.”

Indeed, they aren't. If anything, the administration's proposals, which are more than a year in the making, reflect an ideological commitment to not much more than governance "of America, by Wall Street, for Wall Street."

That's exactly the opposite of what is needed. As Sen. Chris Dodd (D-Conn.) puts it, "[T]he Fed helped create this crisis by ignoring the red flags as far back as five years ago. It does not make sense to give a bigger shovel to the very people who helped dig us into this hole.”

In Iraq 'Indefinitely'

WaPo's Karen DeYoung today covers the important and revealing constitutional crisis brewing between the White House and Congress over incipient "security" treaties being discussed by the U.S. and Nouri al-Maliki's Iraq. The treaties, so the White House contends, are needed because the mandate for having foreign troops in Iraq will expire at year's end.

The article appears in the 'Reality Section' of the Post, which is to say deep in the interior between pages A-14 and A-19, where the truth usually is buried.

The Bush administration yesterday advanced a new argument for why it does not require congressional approval to strike a long-term security agreement with Iraq, stating that Congress had already endorsed such an initiative through its 2002 resolution authorizing the use of force against Saddam Hussein.

The 2002 measure, along with the congressional resolution passed one week after the Sept. 11, 2001, attacks authorizing military action "to prevent any future acts of international terrorism against the United States," permits indefinite combat operations in Iraq, according to a statement by the State Department's Bureau of Legislative Affairs.

The statement came in response to lawmakers' demands that the administration submit to Congress for approval any agreement with Iraq. U.S. officials are traveling to Baghdad this week with drafts of two documents -- a status-of-forces agreement and a separate "strategic framework" -- that they expect to sign with the Iraqi government by the end of July. It is to go into effect when the current U.N. mandate expires Dec. 31.

The Bush administration says Congress shouldn't worry. Mr. Bush really isn't "trying to lock in a U.S. military presence in Iraq before the next president takes office." He just wants "combat operations" to continue 'indefinitely.'

Avatar for Pensacola Voters

Louise Roug of the Los Angeles Times thinks she's found the avatar for Northwest Florida's electorate. Sad to say, it may be so.

The stand-in for typical Pensacola voters are Charles and Rhoda Harding, a debt-ridden pawn shop proprietor and his wife. Their business is located "across the street from Dinosaur Adventure Land, a 'Bible-based creation museum."

They twice voted for George W. Bush, hate Hillary Clinton for no reason they can articulate, and are drawn to Mike Huckabee because "he sounds like he wants to help people."

The Hardings, who are in their early 60's, have suffered greatly under the Bush administration. "By almost every indicator," Roug writes, their "quality of life... has worsened since 2004."

When the Hardings voted for Bush, they trusted the war would end once U.S. troops uncovered weapons of mass destruction in Iraq. They were hopeful their wrecked world would return to normal once the insurance company paid to repair the roof blown off by the storm.

Though the couple believe in minimal government, they expected there would be emergency help -- perhaps a loan to cover the hurricane damage. Their insurance company paid only half the cost of repairing the roof, and federal officials turned them down when they applied for assistance. They never returned to an even keel.

The Hardings, who earn about $2,000 a month, could no longer afford health insurance. When their son Ronnie started suffering from bouts of fatigue, he refused to get tested because it would strain family finances, and his leukemia went undetected.

Ronnie died July 28. He was 43.

The week Ronnie spent in a hospital cost almost $100,000, and the Hardings are already $50,000 in debt. All they got from the government was $250 in assistance for their son's cremation. "That's what you're worth here in America," Rhoda says.

After two decades of running Adams Pawn, they are trying to sell their business. But in this depressed economy, there are no buyers.

So there you have it: they're anti-war, pro-national health care, for a competent FEMA, and against Bush's consumer bankruptcy law amendments. In other words, their political views almost exactly match those of a liberal Democrat -- and they don't even know it.

It's a phenomenon that we've seen before. Years ago, a legal aid worker of our acquaintance happened to win a hard-fought Social Security disability case for a horribly injured unemployed blue collar worker. What should have been an open-and-shut case -- the guy couldn't walk and was dying of an incurable lung disease -- was made extremely difficult because of changes in federal disability law forced through Congress by the Reagan administration.

The client was, of course, grateful for our friend's devotion to his case. He also was thrilled that he'd won. After profusely thanking our lawyer friend, his family loaded the man's wheelchair into their broken-down van and started off for home.

"As I was waving good-bye," our friend recounted, "I happened to glance at the bumper sticker on the back of the van. It said, 'Re-elect Reagan.'"

What makes this scene double ironic was that at the very same time, the Reagan administration also was fighting to abolish funding for the legal aid society.

The source of the disabled man's legal problems was the Reagan administration. And the only avenue for a cure was under attack by the Reagan administration. Yet, just like the the Hardings in today's LA Times story, the disabled man and his family were about to vote against their own interests -- and they didn't even realize it.

Beltway Banditry

In Washington today, telecom lobbyists have launched a full-court press to win retroactive immunity for their illegal eavesdropping on American citizens. Granting retroactive immunity will let corporate law-breakers off the hook and hamstring efforts to learn the truth about Bush's illegal spying program.

-- John Edwards

While many Americans understandably have been worrying over crime in the streets, it seems crime in the boardrooms of the Telecom corporations (that would include ATT, Verizon, and all the rest -- except U.S. West) has been running rampant. For six years they violated the U.S. Constitution and federal law by spying on thee and we.

Now, Telecom industry lobbyists and Dick Cheney are angling to have Congress grant them retroactive immunity for their past crimes. And, in the absence of real leadership from any presidential candidate other than John Edwards, Democrats in Congress are just as deeply implicated as accessories-after-the-fact as Republicans.

As Glenn Greenwald explains today --

Telecoms already have immunity under existing FISA law where they acted pursuant to written government certification or where they prove they acted in good faith (see 18 USC 2520 (d)). There is no reason that the federal courts presiding over these cases can't simply make that determination, as they do in countless other cases involving classified information.

Lots of bloggers and more traditional news sources have the low-down on what's happening, such as here and here and here. If you're short of time, Leave Us Alone! offers a succinct version. with links. Raw Story has an update for today, as well.

Click on this link to see what you can do today to defend the U.S. Constitution at no cost.

Dodd Prevails on Telecom Immunity

Majority Leader Sen. Harry Reid late tonight confirmed he will "pull" from the Senate floor the FISA bill that grants retroactive immunity to telecom companies like ATT. Firedog Lake has an early take on the courageous stance of Senator Dodd.

So does TPM Election Central:

Senator Chris Dodd had planned to filibuster the bill this evening, and it didn't look as if the other Senators running for President -- Hillary, Obama, Biden -- would lend support for the filibuster in person. Now the question's moot -- until January.

Why did Reid pull the bill now? "Sen. Reid refused to jam this bill through the Senate because he believes it’s an important bill that deserves to be debated thoroughly," a Reid aide told us.

But Dodd aides expressed satisfaction, saying that the Connecticut Senator's filibuster threat was what stopped the bill for the time being. They vowed that he'd be back to fight it again in January.

Some politicians waffle. Some just talk a good game. Some actually get up, leave the campaign trail, and do good for the Nation. Smart voters discern the difference.

Contribute to Dodd as we did? Click here.

Rule of Law In Senate Trial

UPDATED BELOW

In many ways that matter, the rule of law is on trial in the U.S. Senate today. Senator Russ Feingold (D-WI) explains in TPM Cafe.

This morning, another U.S. Senator, Chris Dodd (D-CT), interrupted his Iowa presidential caucus campaign to address the Senate in straight-forward, candid terms not often heard inside the Beltway much less in media available to the public at large. Immediately at stake is whether retroactive immunity will be granted for giant telecom companies for helping the Bush administration violate the Constitution by secretly invading the privacy of tens of thousands if not millions of private citizens.

In the event the Bush administration prevails in today's vote, Sen. Dodd has promised an old-fashioned "Mr. Smith Goes to Washington" filibuster. Think of it as an early Christmas present to those who value our Constitution -- now, in the past, and most especially in the future.

Concerned citizens want to know -- where is Hillary? And is Obama still dawdling in Iowa?

You should go here, too.

UPDATE
12-17 noon

Lawyer Christy Hardin Smith at Firedog Lake has the transcript of Sen. Dodd's "barnburner" opening speech.