Enemies from Within
Unless there is a meaningful reform which curbs the influence of the financial sector on the economy and politics, the economy will remain vulnerable to major shocks. Yes, by reform I mean regulation. A regulation that worked for several decades, Glass Stegal Act was, eliminated in 1999. Senator Phil Grahm and Treasury Secretary Summers worked hard at removing that obstacle for non-banks to start lending in consumer space. The problem was not lending. Rather, lending without any capital requirements. This nonsensical deregulation created
You know who else threatened congress to allow more leverage to the financial sector, or he will move his company off-shore? The then Goldman Sachs CEO, Hank Paulson. The irony of this whole deregulation was that, a few years later what Paulson campaigned for has come back to bite Goldman Sachs in its ass. Having friends in high places does help! Treasury Secretary Paulson rescued his old firm, in which he has a significant financial state.
Now they say that the financial system is “saved” and needs no reform. I don’t think so. Without meaningful change in rules, the next crisis triggered by the speculators on Wall Street will be far worse. The banks are fighting reform via intense lobbying – with the money they got from the tax payers ! Aiding them in their fight are the very people who should be working in the best interest of the public – not in the best interest of the Goldman shareholders!
Who are they? Timothy Geithner, Larry Summers, Ben Bernanke, Mary Shapiro, Gary Gensler. Jesse says:
The President’s Working Group on Financial Markets, aka the ‘plunge protection team,’ is apparently acting to block financial reforms being proposed by Sheila Bair’s FDIC, according to the attached piece from Chris Whalen of Institutional Risk Analytics, an authoritative source on US Banking.
The President’s Working Group on Financial Markets consists of:
Time Geither, The Secretary of the Treasury, as Chairman of the Working Group;
Ben Bernanke, The Chairman of the Board of Governors of the Federal Reserve System,
Mary Shapiro, The Chairman of the Securities and Exchange Commission; and
Gary Gensler, The Chairman of the Commodity Futures Trading Commission.
This is reminiscent of the actions of Larry Summers, Robert Rubin, and Alan Greenspan to block attempts by Brooksley Born, then head of the CFTC, to head off the derivatives crisis back the 1990’s, the very crisis which brought the US to the brink of disaster last year.
Obama has no credibility as a reformer, not with Tim Geithner and Larry Summers as the key members of his financial team. And the Fed is proving itself again to be little more than a mouthpiece and servant to the Wall Street Banks, completely unworthy of any additional supervisory powers.
Personally, I thought Chairman Bernanke’s testimony in front of Congress yesterday to be both embarrassing and disgraceful.
It is more than disappointing, it is an outrage, if this is true. The actions of the President’s Working Group on Financial Markets is a sore point with many, as it is repeatedly linked to secret dealings with the Wall Street banks, and efforts to manipulate US markets to support government policy.
If this is true, then we would hope that the Congress will be motivated, at least after the November elections when many new members will be joining, to launch a thorough investigation of Mr. Geithner and his activities both at the NY Fed and the Treasury, and the actions of the President’s Working Group on Markets. […more:]