Obama reassures Wall Street on bank regulation bill

[Antid Oto]

REPLY TO: D66 at nic.surfnet.nl

Obama reassures Wall Street on bank regulation bill
23 April 2010

President Barack Obama went to lower Manhattan Thursday to deliver a message to
Wall Street: Your profits and bonuses will not be disturbed by the regulatory
overhaul making its way through Congress.

In a deferential speech pitched to top bankers in the Cooper Union audience,
Obama urged what he called the “titans of industry” to call off their lobbyists
and “join us” in passing his so-called reform. The subtext was that the White
House and congressional Democrats had already removed most of the provisions to
which the bankers objected, and were prepared to go even further in
accommodating them.

The speech came less than a week after the Securities and Exchange Commission
(SEC) indicted Goldman Sachs, the most profitable Wall Street bank, for
defrauding its clients in order to cash in on—and encourage—the collapse of the
subprime housing market in 2007. Obama did not mention the indictment. Nor did
he suggest that what he called a “failure of responsibility” on Wall Street
included criminal activities.

Among those in the audience to whom Obama appealed was Lloyd Blankfein, the CEO
of Goldman, who attended the event to underscore his contempt and defiance of
the SEC.

It was also a week in which the top five banks reported combined profits of more
than $15 billion for the first three months of 2010—a huge increase over the
previous year.

As the Goldman indictment makes clear, these profits are bound up with rampant
fraud that helped crash the financial system--driving millions in the US and
around the world into unemployment and poverty—followed by trillions of dollars
in taxpayer bailouts and virtually free credit from the Federal Reserve.

Obama took pains to affirm his obeisance to capitalism. “I believe in the power
of the free market,” he declared. “I believe in a strong financial sector …” To
reassure Wall Street that his financial overhaul would not impose serious
restrictions, he said, “We do not have to choose between markets that are
unfettered by even modest protections against crisis, or markets that are
stymied by onerous rules that suppress enterprise and innovation.”

There was no suggestion that a single banker or trader should be held
accountable for the social catastrophe he helped create. Yet less than two
months ago, addressing the US Chamber of Commerce, Obama hailed the mass firing
of teachers in an impoverished school district in Rhode Island as a positive
educational “reform” measure. “There’s got to be a sense of accountability,”
Obama said.

With complete cynicism, Obama and congressional Democrats, with the assistance
of the media, are presenting their regulatory proposals as a sweeping reform
comparable to the banking measures implemented by the Roosevelt administration
in the Great Depression.

In reality, the Senate measure, like the bill passed last December by the House
of Representatives, proposes certain marginal changes in the way government
agencies monitor financial firms, but does nothing to reverse the deregulation
of banking carried out over the past three decades, which dismantled the
restrictions imposed during the 1930s. It introduces no structural reforms to
limit, let alone ban, the speculative practices that have become central to the
accumulation of profit and personal wealth by the American ruling class.

Obama and the congressional Democrats have rejected capping executive pay or
banning credit default swaps, collateralized debt obligations, structured
investment vehicles and other exotic forms of speculation that played a major
role in the financial crash and global recession. Provisions to regulate
derivatives markets, a major source of profits for the top Wall Street banks,
are loaded with loopholes and exemptions. A financial consumer protection body
will have no power over 98 percent of banks or any car dealerships, and will be
subject to a Federal Reserve veto.

The most important innovation in the House and Senate bills is the establishment
of a procedure for the government to wind down large financial firms, including
insurance companies and other non-bank entities, whose failure could trigger a
systemic collapse. This is being billed as an end to “too-big-to-fail” financial
companies and a guarantee against future taxpayer-funded bailouts.

It is nothing of the kind. The proposal would institutionalize government rescue
operations to protect the interests of bank executives, shareholders and
creditors and the wealth of the financial elite as a whole, ultimately at public
expense. It is designed to keep the banking system in private hands while
preparing for the inevitable consequences of allowing the banks and big
investors to continue “business as usual,” i.e., another financial crisis on the
order of the crash of 2008.

In his speech on Thursday, Obama declared that “a vote for reform is a vote to
put a stop to taxpayer-funded bailouts.” This is a lie. The
administration-backed bill passed by the House would give the Federal Deposit
Insurance Corporation, with the consent of the treasury secretary and the
Federal Reserve, the power to “extend credit or guarantee obligations … to
prevent financial instability during times of severe economic distress.” This
amounts to a blank check to use taxpayer funds for future bailouts.

Obama has continued Bush administration policies that, far from reining in Wall
Street, have strengthened the power of the biggest financial firms. The share of
all banking industry assets held by the top 10 banks rose to 58 percent in 2009,
from 44 percent in 2000 and 24 percent in 1990.

Nothing other than a license for Wall Street to continue stealing from the
American people could possibly emerge from a political system dominated by an
all-powerful financial aristocracy and awash in corruption and bribery. The
financial industry has to date spent $455 million to lobby Congress on the
financial overhaul.

The securities and investment industry has thus far handed out $34 million for
the 2010 election cycle. Goldman Sachs is the second biggest corporate donor to
political campaigns, after AT&T. Since 1989, the bank’s political action
committee and employees have given $31.6 million in campaign contributions,
two-thirds of the total to Democratic candidates.

The financial industry funded Obama’s presidential election campaign to the
amount of $15 million. Goldman was Obama’s single biggest donor, giving nearly
$1 million.

One indication of the ties between Wall Street and the White House: Gregg Craig,
who until January was Obama’s White House counsel, has been hired by Goldman
Sachs to defend the firm against the SEC indictment.

Barry Grey

http://wsws.org/articles/2010/apr2010/pers-a23.shtml

**********
Dit bericht is verzonden via de informele D66 discussielijst (D66 at nic.surfnet.nl).
Aanmelden: stuur een email naar LISTSERV at nic.surfnet.nl met in het tekstveld alleen: SUBSCRIBE D66 uwvoornaam uwachternaam
Afmelden: stuur een email naar LISTSERV at nic.surfnet.nl met in het tekstveld alleen: SIGNOFF D66
Het on-line archief is te vinden op: http://listserv.surfnet.nl/archives/d66.html
**********