Critics of the Obama administration’s remarkably friendly policies towards Wall Street have recently been encouraged by the appointment of Elizabeth Warren and the announced departure of Larry Summers. Unfortunately, these two developments do not solve our problems, or even indicate that President Obama is interested in solving them.
As usual with this administration, Elizabeth Warren’s semi-appointment was a cosmetic measure; she is there temporarily, reporting to Tim Geithner, and the new consumer protection agency has limited scope and enforcement powers, typical of the watered-down financial “reform” bill recently signed. As for Larry Summers’ departure, well, one down, about fifty more to go.
The Treasury Secretary is still Tim Geithner, who as president of the New York Federal Reserve did nothing to stop the fake economy created by the financial sector, and who then helped Henry Paulson botch the bankruptcy of Lehman Brothers and force AIG to pay off Goldman Sachs. Geithner’s successor at the New York Fed is William C. Dudley, formerly chief economist of Goldman Sachs.
Geithner’s chief of staff at Treasury is Mark Patterson, a former Goldman Sachs lobbyist. On the White House staff we have David Lipton and Mike Froman, fresh from Citigroup, which gave Froman a $2 million bonus just after his appointment. Chairing the SEC we have Mary Schapiro, formerly head of FINRA, the investment banking industry’s self-regulatory body, which stood by happily while all those AAA-rated securities were being sold, often by investment banks that were secretly betting they would fail.
At the Commodity Futures Trading Commission we still have Gary Gensler, a former Goldman Sachs executive who helped ban the regulation of derivatives in the Clinton administration. And Ben Bernanke still runs the Federal Reserve, despite Bernanke’s abysmal record before and even during the crisis.
Given this cast, their movie has been utterly predictable, as my movie makes painfully clear. In the wake of the financial crisis, Britain imposed a 50% tax on banking bonuses, and the European Parliament passed strict regulation of banking compensation to eliminate the ‘heads we win tails you lose’ pay structures that helped cause the crisis, and made it so much worse. The Obama administration has done nothing, and in fact has resisted attempts to tax or control financial compensation.
There have been no antitrust investigations of banking, despite the fact that five U.S. firms control more than 95% of global derivatives trading. No attempt to break up the biggest banks or control the “too big to fail” problem, despite a financial industry even more concentrated than before the crisis. The three big rating agencies are still paid by the banks who issue the securities they rate. Lobbying continues unabated and quite obviously, there are no controls on the revolving door, given who runs this administration. No attempts to force disclosure of the massive financial conflicts of interest that have corrupted academia and the economics discipline, turning supposedly independent professors into cheerleaders for the banks. No reforms of corporate governance, and no attempts to get back the billions of dollars that financial executives looted from the companies they destroyed.
And finally, we have the Justice Department’s absolutely perfect record — literally zero prosecutions; not a single Wall Street executive or company arrested or charged, much less tried and convicted. In the worst financial bubble in history, nobody committed a crime. It was possible to conceal liabilities, inflate assets, bet against the securities that you sold as totally secure, without committing a single fraud. Isn’t that amazing? So, yes, it’s nice that we won’t have Larry Summers making policy anymore, but it will take a lot more departures, and a lot better decisions, before we approach even minimal decency.
In fact, the most depressing part of the CNBC Town Hall was President Obama’s reaction when that amazing woman told him off — his timid evasions as the great orator was stripped away to reveal — emptiness. But people are getting angry and ever more impatient with a President who has turned out to be a wimp rather than a fearless agent of change.
It is unfortunate that so far, the only organized response has been the Tea Party; it might be time for a third party in America based on nothing more than common sense and honesty. With Arianna Huffington warning of Third World America and Paul Krugman writing “Banana Republic, here we come,” it might just be time to rise up and throw the rascals out, rather than waiting for them to comfortably resign.