It was like the movie Rocky the Democrats (Rocky) were getting pounded left and right over their heavy handed tactics. They crammed through a health care bill that an overwhelming majority of the country opposed. They moved on to financial reform and they still couldn’t get any traction. Their poll numbers continued to drop and it was looking like a dismal election coming up in the fall.
And then, just like in the movie Rocky swings from his heels and connects knocking the champ to the canvas. In this case it was the SEC charging Goldman Sachs with fraud. Now they could fire a full fusillade of class warfare at the Republicans and either get Republicans to help pass the financial reform bill or be tarred as the party of the evil bankers and greedy Wall Street robber barons. But unlike the movie, right after knocking the opponent down, when the referee sends Rocky back to a neutral corner he slips in his own sweat, flips on his back and knocks himself out. By that I mean the news came out that employees of the SEC spent an inordinate amount of their time watching porn instead of the financial markets. How do you expand the role of government on the heels of that disclosure?
Trying to Make Up for Bernie Madoff?
When Bernie Madoff’s ponzi scheme was in full swing, Harry Markopolos brought the scam to the SEC practically tied in a bow. The SEC did not respond. Perhaps they were too busy…, well never mind.
With the Democrats trusty weapon, class warfare, holstered it’s time to delve more deeply into this financial reform legislation.
In a letter to Senate majority leader Harry Reid and minority leader Mitch McConnell, luminaries including former SEC Chief Accountant Lynn Turner, former Labor Secretary Robert Reich, hedge fund owner Jim Chanos, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, former Senate Banking Committee Chief Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and others pointed out that Dodd’s proposed financial reform legislation wouldn’t have prevented the current crisis … and won’t prevent the next crisis.
So tell me again why we are doing this? It’s all about more government control and more power in Washington, not about fixing any real problem. Where are Fannie Mae and Freddie Mac in this bill? They were at the very core of the financial meltdown. In other words it’s all politics and it’s all straight out of the Saul Alinsky tome Rules for Radicals:
Rule No. 13. Pick the target, freeze it, personalize it, and polarize it. In conflict tactics there are certain rules that [should be regarded] as universalities. One is that the opposition must be singled out as the target and ‘frozen.’…
“…any target can always say, ‘Why do you center on me when there are others to blame as well?’ When your ‘freeze the target,’ you disregard these [rational but distracting] arguments…. Then, as you zero in and freeze your target and carry out your attack, all the ‘others’ come out of the woodwork very soon. They become visible by their support of the target…’
“One acts decisively only in the conviction that all the angels are on one side and all the devils on the other.” (pps.127-134)
The target in this case, is Wall Street and the Banks. Demonize them. When the “others”, meaning the Republicans, come out to challenge the ineffectiveness of the bill, then they can be attacked as being for the fat cats and against the little guys; class warfare at its ugliest.
Follow the Money
But who is really in bed with the fat cats? The Political Action Committees (PACs), employees, families of employees and other associates of Goldman Sachs gave almost $1 million in campaign contributions to Obama. In this legislation, the concept of too big to fail remains untouched. There will be a $50 billion fund created with money from the top banks to standby if needed for a bailout, but this also gives the impression that the largest banks are now safer because of this fund and therefore can get a lower interest rate on their borrowings compared to smaller banks.
Democratic Congressman Brad Sherman said:
“The Dodd bill has unlimited executive bailout authority. That’s something Wall Street desperately wants but doesn’t dare ask for. The bill contains permanent, unlimited bailout authority.”
Why ask for it when the Obama administration will give it to you. All you have to do is let them smack you around a bit to prime the class warfare pump, and you’re all set.
If you are backstopped by unlimited executive bailout, go ahead, take bigger and bigger risks. The government will step in if you fail. So here we have yet another fat cat (Wall Street/Big Banks) wolf dressed in sheep’s clothing (the little guy; Main Street).
If you want real financial reform, then in the name of capitalism, the big banks and Wall Street have to learn to play with their own money. If they hit a home run, good for them. If they strikeout, they should lose their own money and if they don’t have enough to cover their losses, goodbye. They should not be allowed to take huge risks and if they pay off, everybody there gets a new mansion in the Hamptons, but if they go bust, hand the bill to us. Fannie Mae and Freddie Mac, we were told were private entities, not part of the government, but wink, wink, nudge, nudge, everyone knew the federal government was standing behind them and would not let them go bust. So they too, got the kind of interest rates, half a point lower than their competitors, based on this implied backing not based on the strength of their balance sheet.
We have to fight this one too. This is just more smoke and mirrors from the Obama administration. Another power grab without any substantive benefit to the American people.
