Let's Disinfect Wall Street

Wall Street needs to have some very bright sunlight shone on it.

From Commentary: Investigate Wall Street by Julian E. Zelizer:

Partisan warfare in the 1990s, including the impeachment proceedings against President Bill Clinton, made many Americans cynical about congressional investigation, as it seemed to be just another tool in the bitter culture of Capitol Hill.

But Congress can help us learn. We need another Pecora Commission, another Fulbright Committee, another Sam Ervin to use the power of Congress to shed light on the causes of our current economic meltdown.

Congress needs to learn more, not only about the kind of criminal activity for which Bernard Madoff is being charged, but also the legal practices -- such as risky home loans -- that created dangerous bubbles and put families at risk.

If voters and politicians are going to be able to evaluate legislation that is being proposed on a weekly basis, citizens must understand what has gone wrong.

This will be the first step toward restoring the confidence that the country needs if it is to start a better day.

How Low Can You Go?

From Penny Stocks? Small Change For Big-name Companies:

_ General Motors shares have fallen from $30.30 to $2.22, less than the cost of a standard spark plug (about $3.79).

_ New York Times Co. shares have fallen from $24.27 to $3.95, cheaper than the $4 cost of its Sunday edition.

_ General Electric Co. shares fell from $30.30 to $9.08, cheaper than a GE two-slice bagel toaster at Wal-Mart, selling Tuesday for clearance price of $12.

_ Office Depot is down from $38.27 to $1.26, less than a 12-pack of medium point Papermate BallPoint Stick Pens that run $1.89.

_ US Airways has fallen from $53.89 to $3.66, less than the current $4 cost of two in-flight coffees.

Too Much

From Essence of the "Rescue" Plan by Michael Shedlock:

But let's step back and ask ourselves why it is we need an office of Secretary for Financial Stability in the first place.

The answer is we have an unsound banking system based on fractional reserve lending, compounded by micromanagement of interest rates by the Fed, and runaway spending in Congress.

To date, I have not heard one single sentence from anyone important enough to matter, about what really went wrong and why. Instead we have yet another governmental body attempting to add "financial stability" while doing nothing to address the root cause of this mess.

The worst part is the Fed and the Treasury have decided the problem is that banks are not lending enough. The reality is that banks have lent too much.

What You Know And Who You Know

From Between Thee And The Bedpost by Cernig:

It simply doesn’t compare, though, with the likes of Andrea Mitchell reporting on the bank bailout plan - and blaming Obama for its failure - while married to Alan Greenspan and not making full disclosure of that fact before every report.

I was having a similar thought this morning while watching Mrs. Greenspan on the Today Show. Perhaps the assumption is that everyone knows who she is married to, although that certainly is no excuse for not making full disclosure.

Who is Henry Paulson married to? George W. Bush and Goldman Sachs and his investment banking buddies, that’s who. Are we really to believe that he cares more about the average American than he does about his current work buddies and his former work buddies?

The same thing holds true for Jim Cramer giving advice and opinions on the bail out on the Today Show. Does he really care more about my financial future than he does about his own or his investment buddies financial future?

I’m not saying that these people don’t know anything and shouldn’t be listened to. All I’m saying is we should consider who they have been associated with and who they represent. A little balance from less self-interested parties would also be nice. Plus more informative and pointed questions from the likes of Matt Lauer would help. Instead we get things like Jim Cramer scoffing at economic academics (who opposed the bail out) for not being part of the real world. (As if college buildings are less tangible than financial derivatives.) There is no analysis of content, just an attitude of superiority. “I used to trade these things, so I know better.” (I’m relying on my memory here, but I think that’s close to what he said.) And Matt Lauer just lets that go. He doesn’t ask Cramer if he helped contribute to the problem because he used to trade these things. He doesn’t ask Cramer about the uptick rule and whether he ever benefited from the elimination of it. Chances are that Cramer never did (He even called for its reinstatement), but the point is that Lauer doesn’t ask these questions. I don't know who is right here, I'm just saying that we heard Cramer's point of view, and nothing else.

Steny Hoyer and Roy Blunt were also talking to Ann Curry on the Today Show this morning. Their talk disturbed me greatly. From what they said one could infer that short term stock market moves on Wall Street are what is driving how they will decide what policies to put into place. This is scary. Short term gambling on Wall Street, rather than long term investing on Wall Street is part of the problem. To have legislation that is driven by the former, rather than the latter will only make things worse.

We seem to think that the very same “experts” that have been part of the cause of the problems we now face are going to come up with a solution. The President and Congress allowed for way too much deregulation and too little oversight. The investment bankers (like Henry Paulson), and other financial speculators “played” the market with greed as their guide while things were good, and fear as their guide when things were bad. They weren’t investing, they were gambling. And to make matters worse, they were gambling with things they didn’t understand. Now we turn to them to not only explain what they were doing, but to come up with a solution. How insane are we? Instead of reporting on the dangers of the deregulation and lack of oversight, the media focused on the ups and downs of the market on a daily basis. The roller coaster ride of greed and fear probably got better ratings than the text of the newest bill passed by Congress and the President. Yet, who is now supposed to be fixing everything, and who is telling us about it all? The very same people once again. Why should we trust any of them? Do we have any alternatives?

Let’s look at another marriage. Mr. and Mrs. General Electric. General Electric owns NBC. NBC produces the Today Show. General Electric is also largely a financial company, and as a financial company they are heavily involved with loans.

From General Electric:

Since over half of GE's revenue is derived from financial services, it is arguably a financial company with a manufacturing arm. It is also one of the largest lenders in countries other than the United States, such as Japan.

The conflict of interest of Andrea Mitchell, while important, kind of pales in comparison.

Update:
This Modern World

2008 Republican Platform On The Economy

An excerpt:

We support energetic federal investigation and, where appropriate, prosecution of criminal wrongdoing in the mortgage industry and investment sector. We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself. We believe in the free market as the best tool to sustained prosperity and opportunity for all.

They say one thing and do the exact opposite. They are not prosecuting the wrongdoers, they are bailing them out.

And Yet They Still Believe Him

Bush lies over and over and over… Yet they still believe him. It’s like some perverse version of the Boy Who Cried Wolf.

From The complete (though ever-changing) elite consensus over the financial collapse by Glenn Greenwald:

Leave aside for the moment whether this gargantuan nationalization/bailout scheme is "necessary" in some utilitarian sense. One doesn't have to be an economics expert in order for several facts to be crystal clear:

First, the fact that Democrats are on board with this scheme means absolutely nothing. When it comes to things the Bush administration wants, Congressional Democrats don't say "no" to anything. They say "yes" to everything. That's what they're for.

They say "yes" regardless of whether they understand what they're endorsing. They say "yes" regardless of whether they've been told even the most basic facts about what they're being told to endorse. They say "yes" anytime doing so is politically less risky than saying "no," which is essentially always and is certainly the case here. They say "yes" whenever the political establishment -- meaning establishment media outlets and the corporate class that funds them -- wants them to say "yes," which is the case here. And they say "yes" with particular speed and eagerness when told to do so by the Serious Trans-Partisan Republican Experts like Hank Paulson and Ben Bernake (or Mike McConnell and Robert Gates and, before them, Donald Rumsfeld and Colin Powell).

So nothing could be less reassuring or more meaningless than the fact that the Democratic leadership has announced that what they heard scared them so much that they are certain all of this is necessary -- whatever "all this" might be (and does anyone think that they know what "this" even is?). It may be "necessary" or may not be, but the fact that Congressional Democrats are saying this is irrelevant, since they would not have done anything else -- they're incapable of doing anything else -- other than giving their stamp of approval when they're told to.

Read more here.

From Thoughts On Sunday Bobbleheads by tristero:

The Republicans are also playing politics. They believed it is necessary, before actually addressing the crisis in real terms, to make sure they are carefully positioned as the "protectors of the American people" advocating a "clean" solution. Given the shared sense of imminent crisis requiring immediate action, the oversight, compensation limits, and "reciprocity" - whatever that is - put on this bill will be limited. In other words, Congress is about to hand the Bush administration the biggest blank check they have received to date.

And finally, I am confident that the American people will greatly benefit from this. Which American people? After 8 years of Bushism, you have to ask? Why, those who caused this crisis and who exploited this crisis, of course. They will slurp up the trillion dollars of our hard-earned money that's gonna be served up on a silver platter faster than you can say "Americans are suckers if they vote Republican."

Update from digby: I just have to add that when I heard Paulson say this bail out was actually going to make money for the government, I couldn't help but remember Paul Wolfowitz assuring us that the Iraq war would pay for itself.

Trust 'em?

Read more here.

From Before We Jump In by Josh Marshall:

There are subjects I know a lot about and others I know very little about. And the high-wire financial mess we're currently in falls clearly into the latter category. But I know enough to be troubled that we appear ready to give upwards of a trillion dollars in unfettered and unreviewable spending authority to the ... let's face it, the Bush administration, the folks who did such a bang up job in Iraq and New Orleans.

This morning a friend told me it's like the Iraq War all over again -- Shock & Awe, followed by an occupation of Wall Street, and all with no exit plan.

"The misguided notion that financial markets can regulate themselves"

"Government is not the solution to our problems; government is the problem." Ronald Reagan

Ronald Reagan was right. He just said those words twenty seven years too soon. He was wrong about the meaning of those words, however. He meant that government regulation was a bad thing. How wrong can you be? Thanks to him, government is not providing solutions, and it is the problem because it is not doing any oversight at all. So we are left with the financial mess we now find ourselves in because there’s no one left to mind the store, except the thieves.

I have a newfound respect for Reagan. He was able to look into the future and see the absolute mess of the government that is the Bush Administration.

From Seven Deadly Sins of Deregulation -- and Three Necessary Reforms by Robert Kuttner:

The current carnage on Wall Street, with dire spillover effects on Main Street, is the result of a failed ideology -- the idea that financial markets could regulate themselves. Serial deregulation fed on itself. Deliberate repeal of regulations became entangled with failure to carry out laws still on the books. Corruption mingled with simple incompetence. And though the ideology was largely Republican, it was abetted by Wall Street Democrats.

Why regulate? As we have seen ever since the sub-prime market blew up in the summer of 2007, government cannot stand by when a financial crash threatens to turn into a general depression -- even a government like the Bush administration that fervently believes in free markets. But if government must act to contain wider damage when large banks fail, then it is obliged to act to prevent damage from occurring in the first place. Otherwise, the result is what economists term "moral hazard"-- an invitation to take excessive risks.

Read the rest here.

The Greatest Financial Scandal In History?

From Bringing Down Bear Stearns by Bryan Burrough:

On Monday, March 10, the rumor started: Bear Stearns was having liquidity problems. In fact, the maverick investment bank had around $18 billion in cash reserves. But soon the speculation created its own reality, and the race was on to keep Bear’s crisis from ravaging Wall Street. With the blow-by-blow from insiders, Bryan Burrough follows the players—Bear’s stunned executives, trigger-happy reporters at CNBC, a nervous Fed, a shadowy group of short-sellers—in what some believe was the greatest financial scandal in history.

Read the rest here.

Will Anyone Miss George W. Bush?

Even the financial gurus think things will be better without George W. Bush.

From Democrats and your foreign portfolio by Barbara Kollmeyer:

…there is much at stake for foreign markets come November, especially if there is a changing of the guard in the White House. As far as analysts are concerned, the fallout from a Democratic win is not easy to decipher, although many say just the image of a fresh start could be a benefit.

"In general, if you want a favorable story on the Democrats win, the major thrust will be there is currently a very negative aspect to U.S. and international relations in general," said Pran Tiku, founder and CIO at Peak Financial Management.

"With that as a backdrop, [a Democrat win] would produce a more favorable climate in terms of dialogue, negotiation and trade opportunities."

Henry Paulson Proposes Big Changes

Henry M. Paulson is the United States Treasury Secretary and a member of the International Monetary Fund Board of Governors. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs, one of the world's largest and most successful investment banks. Paulson was nominated by U.S. President George W. Bush to succeed John Snow as the Treasury Secretary.

Why do we continue to pick from the same old basket of rotten fruit? Can you say “conflict of interest?” The old adages “consider the source” and "the fox guarding the henhouse" come to mind when I hear of news like this: Sweeping Changes in Paulson Plan.

U.S. Treasury Secretary Henry Paulson plans Monday to call for sweeping structural changes in the way the government monitors financial markets, capping a broad review aimed at revamping a system of regulatory oversight built piecemeal since the Civil War.

If even only some of the changes get made, they would represent a major reworking of the U.S. regulatory system for finance. Such an outcome would likely take years and would also require major compromises from an increasingly partisan Congress.

Opposition is already emerging from critics who feel the document nods too far toward deregulation. The revamp process began early last year before the credit crunch and was initially aimed at improving American competitiveness. As such, it's a hybrid that both adds new rules to deal with recent financial woes but also simplifies old structures in a way that favors some in the finance industry.