Category Archives: Policy and Reform

Let the Mea Culpas Begin, Part 1

Posted on January 5, 2010 by | 3 comments

RUBIN AND BERNANKE APOLOGIZE (SORT OF) FOR PAST SINS
Alan Greenspan has already apologized for the damage he wrought, admitting the crisis reveals that his approach to economics is fundamentally flawed.
Apparently it is now time for mea culpas from the rest of the team most responsible for creating this mess: Rubin, Summers, and Bernanke. Rubin and Bernanke just provided theirs (here and here) —albeit somewhat half-heartedly, a bit more Tiger Woods than David Letterman.
Don’t hold your breath for an apology from Summers, who never owns up to his mistakes, ranging from his proposal to use developing nations as toxic waste dumps to his argument that females suffer from congenital handicaps that render them incapable of doing science (here and here).
Still, with three out of the four acknowledging errors, this could indicate a New Year’s trend. Next we can hope that the University of Chicago—the institution most responsible for producing the theories that guided our misguided policymakers—will apologize for its indiscretions. That could set an example for all mainstream economists who, as the Queen pointedly put it, failed to foresee the crisis.
The statements by Rubin and Bernanke are quite interesting—both for what they say and for what they leave out. Rubin claims to have learned that we “need to reform the financial system to better protect against systemic risk and devastating crises in the future.” Nice deduction, Sherlock! But he goes further, admitting he has long had misgivings about the shape of the financial system: “About four years ago, a well-known London investor said to me that the only undervalued asset in the world was risk. I had the same view, as did many others, and often said that markets, including credit, had gone to excess and that would probably be followed by a cyclical downturn—perhaps a sharp one—though the timing, as always, was unpredictable.” Really? Four years ago? Did he try to warn the Bush administration’s regulators? Or his protégé, Timmy Geithner at the NYFed who was busy (by his own admission) NOT regulating banks?
At that time did he feel any guilt, since he was among the most important deregulators who had created the conditions that would ensure undervaluation of risk? Did he push for re-regulation of the financial institution he was running into the ground?
To be fair, Rubin notes other problems with the “free market” approach he used to advocate, indeed, his complaints sound remarkably similar to the arguments long made by progressives (including heterodox economists). For example, the market should not be counted on to determine income distribution:

“Even before the recession hit, our current model had displayed major shortcomings that markets, by their nature, won’t address and that need to be met through public policy. For example, market-based economics, global integration, and the strong growth that has resulted have been accompanied by serious income-distribution problems around the world, though the circumstances differ among countries.”

He even engages in a bit of class warfare:

“For example, market-based economics, global integration, and the strong growth that has resulted have been accompanied by serious income-distribution problems around the world, though the circumstances differ among countries. In the United States, median real wages have lagged behind productivity growth for more than three decades (except for the second half of the 1990s), and income has become more heavily distributed toward the most affluent.”

Hold it a second. The redistribution of income toward the affluent occurred as Wall Street “fat cat bankers” grabbed an ever rising share of corporate profits—the source of the bonuses paid to Rubin and his cronies. In 2006 Rubin received $29.4 million from Citigroup. That was four years ago, when he was supposedly fretting that the whole financial bubble was heading toward collapse (see here).
How about some clawbacks? Compensation caps? Investigations for fraud and significant jail time for fat cat bankers? Ban Goldman Sachs alum from Washington? Unfortunately, Rubin is mum on these issues.
After acknowledging the real suffering generated by Wall Street’s excesses, Rubin concludes:

“…virtually no one involved in the financial system—whether institutions, investors, regulators, analysts, or commentators—recognized the breadth of forces at work or the possibility of a megacrisis, and this included the most experienced among us. More personally, I regret that I, too, didn’t see the potential for such extreme conditions despite my many years involved in financial matters and my concern for market excesses.”

The sentiment is touching, but the attempt to share the blame is factually incorrect. Many financial market participants and commentators saw this coming. Many warned of the consequences of allowing banksters to run wild—but they were mostly ignored or even ridiculed by Rubin and his buddies. There was a very strong will to believe that when the crash came, government would be able to quickly bail-out the financial institutions, as it had so many times before over the course of the postwar period. Of course, that will to believe was bolstered by a strong financial interest in engaging in those practices that would eventually lead to crisis. Perhaps Rubin’s claim that he had not foreseen such a deep crisis is correct, but many others did. He chose not to listen to them.
There are, however, two quite disturbing arguments raised by Rubin in his apology. First, he cites a fundamentally flawed study put out by the Commission on Growth and Development (a task force founded by the World Bank and a collection of “advisors” including Rubin) that purports to prove that market liberalization is a necessary condition for growth and development:

“In the six decades since the end of the Second World War, there has been a broad movement around the world toward a model of market-based economics, public investment, and global integration. With that move came enormous economic progress in industrial countries, including the recovery of war-torn Europe and Japan and, as time went on, in various developing countries.” Further, “The commission also found that no economy anywhere in the world had been successful with largely state-directed activities and high walls against global integration. The evidence, in other words, strongly suggests that a market-based model is still the best way forward.”

Surprisingly, the countries he cites as examples of the success of the Neoliberal market model are South Korea, Singapore, China, and India. While it is true that these nations have relaxed constraints on markets, none is a good candidate for demonstrating the wondrous advantages of market-based economics. Indeed, most analysts recognize that there is a highly successful alternative Asian model of development that opens markets only as development reaches a sufficient level to compete in international markets. Development then continues almost in spite of markets, guided by the very visible hand of government.
And China? Can Rubin actually believe that China’s success is due to reliance on free markets? True, the Chinese government uses international markets when it sees an advantage. And it squelches markets when that is advantageous. Its ability to avoid any of the damages of the “market fall-out” occasioned by the crisis is proof not that markets “work” but that a sovereign government does not have to allow markets to dictate economic outcomes. China grows at an 8% pace in spite of markets. Maybe to spite them—to show off the superiority of its government-led model. And unlike Obama, its premier has no fear of being called a socialist as its government ramps up spending and reigns-in errant entrepreneurs (occasionally sentencing particularly nefarious individuals to death—a practice Rubin might want to adopt here?). It avoids financial crises by avoiding financialization of the sort that Rubin pushed onto the US economy.
The other error is even more serious, as Rubin continues his role as cheerleader for deficit hawks. Clearly he learned nothing from his term as Clinton’s Treasury Secretary, when budget surpluses killed the economy and helped to bring on the NASDAQ-led equities crash. (Memo to Rubin: a decade later, stocks still have not recovered their values.) He still, mistakenly, believes that the Clinton boom was due to budget surpluses, failing to realize that the boom created the surpluses (as tax revenue exploded) and this fiscal drag sucked so much income and wealth out of the private sector that a crash was inevitable. He now wants to prevent recovery or at least kill one should it get underway:

“Putting another major stimulus on top of already huge deficits and rising debt-to-GDP ratios would have risks. And further expansion of the Federal Reserve Board’s balance sheet could create significant problems. Second, while the measures taken were absolutely necessary, unwinding the stimulus, restoring a sound fiscal regime, undoing the expansion of the Federal Reserve Board’s balance sheet, and reducing government’s involvement in the financial system will be very difficult, both substantively and politically.”

So what we have is a former head of the Treasury, and who still plays an outsized role in advising Obama administration policy-makers like Geithner, who does not understand how the Treasury works (or, for that matter, how the Fed works). It spends by crediting bank accounts; it taxes by debiting them; and any net spending by the Treasury (called deficit spending) adds to the nongovernment sector’s net income and wealth. There are no risks that would arise from additional stimulus; but there are huge risks of not doing enough. Rather than focusing on the budget deficit—which provides no information of importance to guide policy-makers—Rubin ought to be recommending policy that could create the 25 million or so jobs we will need to restore the nation’s health.
As to unwinding the Fed’s balance sheet, that will be done simply and following normal Fed operational procedures. That is the topic for the next blog, which will also examine Bernanke’s mea culpa.

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“Fixing the Economy”

Posted on December 31, 2009 by | 7 comments

By Warren Mosler*

I was asked by a reporter to state how I’d fix the economy in 500 words and replied:

Fixing the Economy

1. A full ‘payroll tax holiday’ where the US Treasury makes all FICA payments for us (15.3%). This will restore ’spending power’ allowing households to make their mortgage payments, which ‘fixes the banks’ from the ‘bottom up.’ It also helps keep prices down as competitive pressures will cause many businesses to lower prices due to the tax savings even as sales increase.

2. A $500 per capita Federal distribution to all the States to sustain employment in essential services, service debt, and reduce the need for State tax hikes. This can be repeated at perhaps 6 month intervals until GDP surpasses previous high levels at which point state revenues that depend on GDP are restored.

3. A Federally funded $8/hr job for anyone willing and able to work that includes healthcare. The economy will improve rapidly with my first two proposals and the private sector far more readily hires people already working vs people idle and unemployed.
In 2001 Argentina, population 34 million, implemented this proposal, putting to work 2 million people who had never held a ‘real’ job. Within 2 years 750,000 were employed by the private sector.

4. Returning banking to public purpose. The following are disruptive and do not serve no public purpose:

a. No secondary market transactions
b. No proprietary trading
c. No lending vs financial assets
d. No business activities beyond approved lending and providing banking accounts and related services.
e. No contracting in LIBOR, only fed funds.
f.  No subsidiaries of any kind.
g. No offshore lending.
h. No contracting in credit default insurance.

5. Federal Reserve- The liability side of banking is not the place for market discipline. The Fed should lend in the fed funds market to all member banks to ensure permanent liquidity. Demanding collateral from banks is disruptive and redundant, as the FDIC already regulates and supervises all bank assets.

6. The Treasury should issue nothing longer than 3 month bills. Longer term securities serve to keep long term rates higher than otherwise.

7. FDIC

a. Remove the $250,000 cap on deposit insurance. Liquidity is no longer an issue when fed funds are available from the Fed.
b. Don’t tax the good banks for losses by bad banks. All that does is raise interest rates.

8. The Treasury should directly fund the housing agencies to eliminate hedging needs and directly target mortgage rates at desired levels.

9. Homeowners being foreclosed should have the option to stay in their homes at fair market rents with ownership going to the government at the lower of the mortgage balance or fair market value of the home.

10. Remove the ’self imposed constraints’ that are disruptive to operations and serve no public purpose.

a. Treasury debt ceiling- Congress already voted for the spending and taxes
b. Allow Treasury ‘overdrafts’ at the Fed. This is left over from the gold standard days and is currently inapplicable.

11. Federal taxes function to regulate aggregate demand, not to raise revenue per se, and therefore should be increased only to cool down an overheating economy, and not to ‘pay for’ anything.

*First published on Moslereconomics.com

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Posted in Monetary policy, Policy and Reform, Uncategorized

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Some Things to Consider Before Reappointing Bernanke

Posted on December 21, 2009 by | 4 comments

By Eric Tymoigne

Chairman Bernanke has been praised for his handling of the crisis. Nobody disputes the fact that the massive emergency lending programs of the Federal Reserve helped to stabilize the financial system in the short-term; however, judging the first term of the Chairman purely on this ground is rather narrow minded.

It is important to remember that the preamble of the Federal Reserve Act lays out a dual mandate for the Federal Reserve System: (1) provision of “an elastic currency” and (2) “effective supervision.” While the former provides short-term stability in the form of a lender of last resort (during crises) and of a reliable refinancing channel for banks (in normal times), the latter is intended to promote long-term stability.

Unfortunately, supervision has always been seen as a secondary duty of the Federal Reserve System. The Fed, which is now overwhelmingly populated by economists (probably the least qualified to supervise banks), has too often ignored its dual mandate in favor of a single policy objective — managing price stability – which, importantly, was never the intended role of the Fed. Chairman Bernanke continues this tradition.

First, he (along with Governor Mishkin) is the main proponent of inflation targeting. Since 1999, he has been a strong advocate of purely focusing interest-rate settings on meeting an inflation target, while ignoring output growth and asset-price volatility. The models “showed” that price stability is the holy grail of policy goals that guarantees high (and stable) economic growth and financial stability. During his tenures as Governor and Chairman, this view has been at the core of his policy choices, and financial fragility has been largely left aside. Thus, from 2006, he continued Greenspan’s policy of raising policy rates to fight a presupposed looming “high” inflation, without any regard for an economy already extremely fragile. These policy actions contributed tremendously to systemic risk by pushing financial institutions and households into more leveraged positions (the worst mortgage originations occurred in 2005 and 2006, when the fed funds rate target was rising fast) and by creating large payment shocks on exotic mortgages. In addition, Chairman Bernanke did not consider the relevance of systemic risk until mid-2008, while many economists, journalists and bloggers from the financial community had been warning about the huge problems since 2005 at least.

Second, Chairman Bernanke has been a proponent of market-oriented regulation in the spirit of Basel II, and of the financial innovations that have been at the heart of the crisis. Mega financial institutions are supposed to know their business better and so, with some light oversight from the government, are supposed to be able to regulate themselves. Risk management, financial innovations and credit rating agencies are supposed to provide the proper signals and buffers against risks. This regulatory philosophy has failed miserably to prevent not only this crisis but also previous crises, and has contributed to growing financial instability over the past 30 years. In addition, the Federal Reserve has been unwilling to apply existing regulations to handle problematic banks and the Chairman has backed the shameless stress tests implemented under TARP. As Bill Black noted elsewhere, federal regulators are mandated to force recapitalization or to place in receivership insolvent institutions no matter how big they are. Receivership was done during the S&L crisis in a very smooth and competent way and it should be done today.

Third, the way the lender of last resort policy of the Federal Reserve has been implemented during the crisis has been flawed. The emergency lending programs have been highly opaque, creating suspicions of favoritism and unfair competitive practices. SIGTARP, US COP, and Bloomberg have been pushing hard for greater transparency (Bloomberg won a court battle but the Fed is now appealing). All those programs should have been done through the discount window, which should be destigmatized by making it the main way the fed intervenes on a daily basis.

Overall, Chairman Bernanke is not the right person to deal with the main concern that the Federal Reserve should, above all else, strive to maintain financial stability. Before the crisis, Chairman Bernanke ignored (or simply missed) the many warning signs until it was too late, and after the crisis he will likely return to his favored policy of targeting expected inflation.

One may wonder who the President should appoint as Fed Chairman. While I am not in the position to name anybody in particular, I can suggest some criteria. First, the Chairman should be a person who is old enough not to be concerned about finding a job once he or she leaves the Chairmanship. Second, she or he should be someone who is known for his or her independence of mind. Third, she or he should be someone that puts financial stability above all other criteria (because that is what the Fed was originally mandated to do and because it is the best way the Fed can promote price stability and stable economic growth). Finally, he or she should be someone who does not try to please the financial sector, and who involves much more other sectors of the economy in policy decisions.

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Obama Finds His Spine and Attacks Fat Cat Bankers

Posted on December 15, 2009 by | 3 comments

By L. Randall Wray

President Obama has finally castigated the fat cat bankers that caused the crisis that forced millions of Americans from their jobs and their homes. Let us hope this represents a much awaited reversal of his here-to-for prostration before Rubin’s Wall Street buddies. (See Matt Taibbi’s Obama’s Big Sellout)

Trends always begin with a first step. Now he must prove that he really means it by firing Timmy (why haven’t you resigned yet?) Geithner and Larry Summers for crimes against the economy. We might even hope for a more deserved outcome:

The next step will be to send the FDIC into the largest, “systemically dangerous”, financial institutions to shut them down. Fire all the top management plus any traders who have earned six figure bonuses in any of the past three years. Replace them with lowly paid middle management. We will need a new Jessie Jones (President Roosevelt’s selection to head the Reconstruction Finance Corporation that took over half of the nation’s banks in the Great Depression, successfully resolving most of them); my colleague, Bill Black (who helped to resolve the thrift crisis, standing up to Charles Keating, John McCain and the rest of the Keating 5), is the leading candidate. His task will be to downsize the financial sector, starting with the top two dozen or so banks—which will be broken into small pieces. Their former management and traders will be investigated for fraud, which will be found with a probability approaching certainty in all cases.

We will also need to round-up all the Goldman Sachs alum now working in government– shoveling favors to their former employer—for special treatment. Part of the President’s remaining stimulus funds can be devoted to building new prisons for them and the thousands of other financial market predators. The new penitentiaries ought to be sited in places like Modesto, California that are suffering the most from the real estate collapse, making use of foreclosed properties and providing jobs as prison guards to those who have been displaced. At their hands, poetic as well as Biblical justice could be visited on Wall Street’s finest.

The notion that these “highly skilled” whiz kids need huge bonuses to retain them is, as Keynes would remark “crazily improbable–the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years.” Your average Brooklyn plumber has more financial markets sense than all of these clowns combined. Their efforts were directed to another goal—running a kleptocracy that would make a Russian mobster blush. There is no evidence that they have learned anything from this debacle and unless they are removed, they will dig the financial black hole even deeper.

This is the real change we have been waiting for since Obama took office. The Obama elected by the American people has been AWOL since last November, with an evil twin occupying the White House and repaying Wall Street for its campaign contributions. However, America is still a democracy—one citizen, one vote—and Obama has got to realize that while the fat cats might have contributed most of the money, they did not provide many votes. It is time to boot the imposter and downsize Wall Street’s influence on Washington.

The electorate voted for change. I have the audacity of hope to believe that the real Obama is the one we saw this week. Send the fake back to Goldman’s.

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Obama’s New-Found Populism: All Hat, No Cattle

Posted on December 13, 2009 by | 5 comments

By Marshall Auerback

President Obama is taking a sharp, populist tone with Wall Street and scolding the ways of Washington as he once again looks to the Senate to follow the House and pass one of his top legislative priorities: sweeping financial regulatory reform. It might feel satisfying to hear the President criticize “reckless”, “fat cat” bankers, but the financial reform legislation passed by the House last Friday (and lauded by the President) provides little incentive to change their behavior. In reality populism, with nothing of substance behind it, is just cynical posturing designed to mask genuine failure. Like everything else with this President, he is again showing himself to be (to use an expression of his predecessor), all hat, no cattle.

Appealing to the peanut gallery at this stage is an insult to the voters’ intelligence. The current bill is yet another in a series of major disappointments. The most telling comment on the latest reforms came from the stock market: Bank stocks ended the day higher last Friday (when the House bill was passed to great fanfare), with the KBW Banks index slightly outperforming the benchmark Dow Jones industrial average.

At its most basic level, a bank is an entity that has a reserve account at the Fed, which makes loans and takes deposits. That is its primary public purpose, and we should not be allowing activities which undermine this central function, especially seeing as it is the government which guarantees the public’s deposits via the FDIC. (As an aside, even though the government creates all reserves and guarantees deposits, we do not want it to be directing lending activity because, as “Winterspeak” notes, “we do not want the Government to make credit decisions, they are too likely to dole out money to politically connected constituencies, while starving worthwhile, but unconnected borrowers”.

However good the political optics of resorting to name-calling and demonization of Wall Street, the legislation itself does nothing to recognize that the behavior criticized is a direct consequence of incentives built into the current institutional structure. It completely misses the point because it does nothing to ban activities which were at the heart of the crisis and which will likely be perpetuated as a consequence of the new legislation. All the new legislation does is institutionalize tax payer bailouts and, in so doing, continues the process of privatizing profits and socializing losses. There is no attempt to ban activities that were central to this crisis. The problem is that insolvent institutions have a habit of “betting the bank” through control fraud and the new legislation will not prevent this.

Even positive aspects of the bill, such as the establishment of the Consumer Financial Protection Agency, were significantly watered down. New Democrats – the people we used to call “Republicans” – won concessions that give federal regulators more scope to preempt state consumer-protection laws deemed to “significantly interfere with or materially impair a national bank’s ability to do business.” The change was sponsored by Congresswoman Melissa Bean, who is the most bought for and paid member (by bankers) in the House , not an inconsiderable political achievement amongst our current political profiles in courage in Congress. Bean justified the change on the basis of having, “robust national standards and enforcing them uniformly”, which sounds good until one considers the history of federal regulators, none of whom have historically moved when they plainly should have done so. How many federal regulators do you recall actually blocking the most egregious excesses in the mortgage market over the past 15 years? Preventing the states from moving proactively means that we will likely repeat the experience of the 1990s. Historically, the reform impetus has emanated from the states, not the Federal Government, Governor Eliot Spitzer’s administration being a prominent illustration.

More and more voters are beginning to believe this façade of reform is deliberate – a cynical act of kabuki theatre by the President to mask his own reticence to deal with the problem in an honest manner. It was clear to many of us that the President may not have been serious about reform when he picked Tim Geithner and Larry Summers as the leaders of his economic team a year ago, and essentially relegated any genuine progressive to the Cabinet equivalent of Siberia, as Matt Taibbi recently highlighted Yes, Summers and Geithner both have ample experience: but does that mean that they were qualified to take on the positions they were granted in the Administration? I suppose that depends on whether you think a doctor who botched your surgery ought to be given the role for the next one, simply because he has greater familiarity with your body than another surgeon.

Some on the left have attacked Taibbi very hard for the attacks on Obama, and Matt is no conservative. More importantly, he is correct: Taibbi calls the President for what he is, a sweet talking man who cannot fulfill one single promise he made to the public to get elected. So we have this incompetent financial reform bill, which will not place any limits on another systematic collapse. We have a health bill with no means of sensibly restraining cost pressures within the private health insurance industry. We are still fighting two wars, one of which is being escalated. The economy is still struggling and jobs are being lost.

Far easier to resort to cheap populism that actually do something about it. If the President were serious, he would be pointing out that the bankers have been undercutting every effort at reform, and have been paying off Congress to put loopholes into all legislation. If he were genuinely upset, he would be channeling the country’s anger constructively, by calling on the population to take to the streets in mass protests against Wall St with a view to shutting down the biggest banks and breaking their power once and for all. Of course the President would never do anything so “irresponsible”. Far better to throw a few bones to the peasants and hope that the appearance of reform pacifies them.

The economist Hyman Minsky argued that the Great Depression represented a failure of the small-government, laissez-faire economic model, while the New Deal promoted a Big Government/Big Bank highly successful model for capitalism. The current crisis just as convincingly represents a failure of the Big Government/Crony Capitalist model that promotes deregulation, reduced oversight, privatization, and consolidation of market power. Yet the very people, who have shredded the New Deal reforms and replaced them with self-supervision of markets, are the champions of today’s financial “reform”. As appealing as the story of Paul on the road to Damascus might be, there is no certainly no evidence of any Damascene conversion here amongst the policy makers of the Obama Administration. It’s business as usual, along with the championing of monetary and fiscal policy that is biased against maintenance of full employment and adequate growth to generate rising living standards for most Americans.

We must return to a more sensible model, with enhanced supervision of financial institutions and with a financial structure that promotes stability by aligning the banks’ activities with public purpose, rather than abetting speculation and then bailing the financial sector out after the fact. President Roosevelt proved that we could reform the financial system, rescue homeowners, and deal with the unemployed even as we mobilized and then fought World War II. By contrast, this is an Administration that defines reform as muddled compromise within a profoundly broken polity.

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Geithner as Martyr to an Ungrateful Nation: Bo Cutter’s Tragicomic Portrayal of Tim as Our “Man for all Seasons”

Posted on December 2, 2009 by | 4 comments

By William K. Black

This is the second installment in my comments on Bo Cutter’s essay defending Treasury Secretary Geithner.
Bo was a managing partner of Warburg Pincus, a major global private equity firm and led President Obama’s Office of Management and Budget (OMB) transition team. He was Bob Rubin’s deputy at the National Economic Council. The first installment discussed Bo’s extraordinary indictment of the finance industry.

Bo views Geithner as a martyr subjected to unfounded, ungrateful attacks for his actions that prevented the Second Great Depression. Bo doesn’t have much use for Americans that are upset with the senior managers of the finance industry. (This is a bit weird because Bo denounces these senior managers as universally incompetent, cowardly, and unethical.)

[L]iberals hate [Geithner] because he did not take over or dismember the banks, and publicly execute their senior managements.


This passage tells us nothing about liberals, but much about Bo and his peers’ fears of the public. The finance leaders know they are guilty of destroying much of the global economy – while growing extraordinarily wealthy in the process. They know that their primary means of destruction was accounting “control fraud.” They cannot understand why the public has not turned on the finance industry and demanded that the fraudulent financial leaders be prosecuted and their immense gains from fraud recovered. They also cannot understand why we allow the continued existence of systemically dangerous institutions (SDIs). Geithner, Paulson, and Bernanke have warned that the failure of any SDI could cause a global crisis. Under their logic, SDIs are ticking time bombs that will cause recurrent global crises. Geithner, like Paulson, is making the SDIs much larger and much more dangerous by using them to acquire other large, failed financial institutions. This policy is insane. Virtually no one (that isn’t on their payroll) supports the continued existence of SDIs and no one publicly argues they should be made even larger – but that is our policy. Bo is the authentic voice of giant finance: the idea of shrinking the giant banks to this community is so painful, so personal that it is equivalent to “dismemberment.” (It also shows that the giant finance is predisposed to view itself and its allies as tragic martyrs.)

Bo is only getting started with Geithner’s martyrdom and the ingratitude of the murderous mob to this modern martyr.

And no one thinks he is tall enough. If you read the accounts of Secretary Geithner’s hearings last week, you know this is all classic Washington behavior. If there is one thing at which the glibocracy in DC excels, it is coming out of the hills after the battle is over and shooting the wounded. This is Washington today, a system in total gridlock, in which counting coup is the central activity.

So, Geithner is picked on by nearly everyone, not given any respect because he is short, and now that he is wounded the D.C. denizens are out to shoot him. Despite our scorn, Geithner continues to step into the breach on our behalf. Bo was a senior federal official in crises and found his peers to be cowards: “the crowd of people willing to join you in taking responsibility gets smaller by the second.”

This is why he is so impressed by Geithner:

Then, beginning with his assumption of the Treasury job in November — long before he was confirmed, so he was clearly going to be beaten up on every action he took, but he went ahead and took them – he was at the lead of every major decision made in the recovery effort. (During this presidential transition period, it would have been easy to keep away from the decisions by saying that power was still in the hands of President Bush. But the Bush Administration by that point was completely spent. Someone had to step up and Tim Geithner did.)

Unlike Bo’s cowardly heroes, Geithner is a hero – repeatedly taking the lead in responding to the crises even when he knew that if he did so “he was clearly going to be beaten up on every action he took.” Geithner was abused for using stress tests.

His use of stress tests, which was roundly laughed at by everyone, worked,helping enormously to make much more transparent and less scary the situations all of the major banks were in.

The purported stress tests [see here, here, and here] did make banking seem “less scary” because they were not real and were part of the Geithner/Summers/Bernanke coverup strategy. The SDIs demanded that the accounting rules on loss recognition be junked – and the trio acceded to that travesty. Bo tells us why the SDIs demanded that they be able to hide their massive losses when he explains why he supports the Bush/Obama administration bailouts of AIG’s counterparties: “most of the banks had either insufficient or no capital.” To put it more bluntly, most of them were insolvent and the remainder had so little capital that they posed intense, global systemic risk. The Bush and Obama administration have followed a three-part strategy towards these insolvent and crippled SDIs: (1) cover up the losses through (legalized) accounting fraud, (2) launch an “everything is great” propaganda campaign (the faux stress tests were key to this tactic), and (3) provide a host of secret taxpayer subsidies to the SDIs. This strategy is the opposite of making banks “much more transparent.” The strategy is not shaped by finance, but by politics. Both administrations have sought to keep the American people from knowing about these cover-ups and secret subsidies because they know that we would not tolerate either policy. The cover-ups and secret subsidies are not simply awful financial policies; they are also a betrayal of democracy. When Bernanke writes that the sky will fall if the Fed is subject to audit it is precisely because he knows that the Fed’s policies cannot withstand scrutiny by anyone serving the interests of the citizens (as opposed to the interests of the SDIs). (John 3:20 “For every one that doeth evil hateth the light.”)

Bernanke may believe that when he acts in the interests of the SDIs he is acting in our interests. Charlie Wilson (GM President and President Eisenhower’s nominee as Secretary of Defense): “I thought that what was good for our country was good for GM, and vice versa.” But that’s the point; the Fed and so many of its senior officials such as Bernanke and Geithner are dangerous because the institution identifies too completely with the SDIs. Like Bo, they also see us as murderous populists that cannot be trusted to make democratic decisions about SDIs. Calling Geithner’s and Bernanke’s cover-ups and secret subsidies “transparency” is Orwellian. The best one can say is that Paulson, Geithner, and Bernanke decided (undemocratically) that it had become necessary to destroy capitalism and democracy in order to save them.

Bo’s final claim in support of his martyrdom motif is:

Tim Geithner acted. He acted at the moment action was required … with the fullknowledge that he would face exactly what he is now facing.

Get off his back.

Luckily, I like Star Trek so I have experience puzzling through time paradoxes similar to the one Bo presents here. Geithner had “full knowledge … that he would face exactly what he is now facing.” What he’s facing is calls for him to resign his position as Treasury Secretary. He became Treasury Secretary in 2009. Bo, however, emphasizes:

Starting from late 2007, as the crisis began to unfold, Geithner was at the spear point of every issue and, along with Bernanke, was a creative policy maker who clearly saw the immense dangers we faced and stretched all of the powers of the Federal Reserve Board to find solutions no one else could.

So, Geithner acted “from late 2007” with “full knowledge” that his actions would be so unpopular that it would destroy his career and that he “would face exactly what he is now facing” (calls for him to resign as Treasury Secretary). Geithner’s career went ballistic after “late 2007.” In 2009, President Obama appointed him Treasury Secretary and has moved to reappoint Bernanke as Fed Chairman. Those are the two most prestigious financial positions in the world. Exactly which aspect of being promoted to his dream job made Geithner a martyr? Where can we sign up for similar martyrdom? Tevye’s response to Perchik’s claim that “money is the world’s curse” applies to Bo’s claim that Bernanke’s promotion makes him a martyr.

May the Lord smite me with it. And may I never recover. [Fiddler on the Roof.]

All time paradoxes are, of course, paradoxical and Bo’s doesn’t disappoint. How exactly did Geithner know in “late 2007” that (1) Obama would be elected President, (2) would appoint Geithner as his Treasury Secretary, and (3) that he would face calls in 2009 to resign as Treasury Secretary?

Why Praise Faux Martyrs When Ed Gray is Available?

If Bo wants to praise a real regulatory martyr – one who got the finance and regulatory issues correct early enough to prevent an economic crisis, reregulated successfully in the face of virulent, powerful opposition, and who did so despite knowing that it would destroy his career at a point where he was in financial distress the obvious candidate is Ed Gray. As Paul Volcker wrote about Ed Gray in a post-publication blurb for my book, The Best Way to Rob a Bank is to Own One (2005 University of Texas Press):

Bill Black has detailed an alarming story about financial and political corruption….the lessons are as fresh as the morning newspaper. One of those lessons really sticks out: one brave man with a conscience could stand up for us all.

Paul Volcker was Ed Gray’s only pillar of support for his reregulation of the S&L industry. When Gray became Federal Home Loan Bank Board Chairman in 1983 the S&L industry was coming out of the first (interest rate risk) phase of the debacle but descending into an even more severe second phase of accounting control fraud. The National Commission on Financial Institution Reform, Recovery and Enforcement’s 1993 report on the causes of the debacle explained the characteristic failure pattern:

The typical large failure was a stockholder-owned, state-chartered institution in Texas or California where regulation and supervision were most lax…. [It] had grown at an extremely rapid rate, achieving high concentrations of assets in risky ventures…. [E]very accounting trick available was used to make the institution look profitable, safe, and solvent. Evidence of fraud was invariably present as was the ability of the operators to “milk” the organization through high dividends and salaries, bonuses, perks and other means (NCFIRRE 1993: 3-4).

In 1983, the S&L accounting control frauds grew at an average rate of 50%. The Texas state S&L Commissioner was sleeping with prostitutes provided by the second worst control fraud in the nation – Vernon Savings (known as “Vermin” to its federal regulators). The California state commissioner, according to the documents, was secretly in business with the worst control fraud in the nation – Charles Keating’s Lincoln Savings. Texas and California approved over 300 new S&L charters. Most of them were troubled real estate developers with severe conflicts of interest. Many of them were control frauds. The rate of applications for new charters was expanding.

Gray’s predecessor, Richard Pratt (a theoclassical finance professor) led the deregulation of the industry at a time of mass insolvency. He also largely desupervised the industry. He gimmicked the accounting rules to cover up losses and create fictional income. He cut the number of examiners. There were no criminal referrals or prosecutions of senior S&L officials. The industry was completely out of control. A regional bubble in commercial real estate was already growing in 1983.

Gray reregulated and re-supervised the industry. He ended most regulatory accounting abuses. He doubled the number of examiners and supervisors (over the vigorous objection of OPM and OMB). We began targeting the worst control frauds for closure while they were still reporting record profits and minimal losses. We adopted a rule restricting growth aimed at the Achilles’ heel of every Ponzi scheme – the need to grow massively. Gray brought in experienced regulators with a track record of vigor, courage, and professionalism and put them in place in the Dallas (Joe Selby) and San Francisco (Mike Patriarca) because they were the two worst regions. We deliberately burst the Southwest’s commercial real estate bubble.

Gray put in place a system of criminal referrals and made supporting criminal prosecutions a top priority. The agency (and here great credit must also be given to OTS Director Ryan and the Department of Justice and FBI) effort was so successful that over 1000 “priority” felony convictions of senior S&Ls insiders were obtained – the most successful effort in history against elite white-collar criminals.

We almost always resolved serious failures in a manner that wiped out entirely “risk capital” (shareholders and subordinated debt holders). Gray blocked Texas’ and California’s land rush style grants of hundreds of new charters by refusing to approve FSLIC insurance for any new S&Ls in those states. Gray did all this with the certain knowledge (which he often stated to us) that it would end his career. He was in his 50s and he was in financial distress, so he knew the sacrifice he would make would be severe.

Gray took on, simultaneously, the Reagan administration (particularly Don Regan and the OMB), a majority of the members of the House (who co-sponsored a resolution calling on us not to reregulate), House Speaker Jim Wright, five U.S. Senators (the “Keating Five”), the S&L trade association (which some political scientists rated the third most powerful in the U.S., his two fellow Bank Board members, much of the agency (including two of our economists that met secretly with Keating’s lawyers), and most of the media (which sometimes referred to him as “Mr. Ed” – from the TV program about the talking horse). Charles Keating sued him in his personal capacity for $400 million. The administration threatened to prosecute him for closing too many insolvent S&Ls (under the Anti-Deficiency Act). The administration tried to appoint two members chosen by Charles Keating (the most notorious S&L control fraud) to the agency (which would have given them majority control of the three-person Bank Board). (Pause for two minutes and consider how catastrophic it would have been if the administration had succeeded in giving control of the agency to that decade’s most notorious control fraud.) He served as a “mole” for Keating and proposed to amend the direct investment rule (which Lincoln Savings had violated by more than $600 million) that would have had the effect of exempting it from enforcement. Lincoln’s lawyers drafted the amendment (which, of course, never mentioned Lincoln). I blew the whistle on Keating’s mole, which eventually led him to resign. After I blew the whistle (but before he resigned), the administration nominated him for a full term. The day after he resigned four U.S. Senators (the “Keating Five” minus Senator Riegle) met with Gray to pressure him not to take enforcement action against Lincoln’s massive violation of the direct investment rule.

Don Regan tried very hard to force Gray to resign. He refused, so Treasury Secretary Baker met secretly with Speaker Wright (who, at the behest of Texas control frauds, was holding our proposed bill to recapitalize the FSLIC insurance fund hostage in order to prevent us from securing the funds to close more of the control frauds). Baker and Wright reached a cynical deal: the administration would not reappoint Gray to a new term and would not oppose Wright’s demands for “regulatory forbearance” (which included debasing – again – the accounting rules and adopting other measures drafted by attorneys for the control frauds designed to make it far harder to close insolvent S&Ls. Wright agreed that he would support a $15 billion FSLIC recapitalization bill (instead of the $5 billion bill that the industry and control frauds supported. Wright got the better of the deal because his allies spread the word that the Speaker didn’t really support the $15 billion bill and the House voted for the $5 billion bill.

Gray remains unemployed and unemployable today. But he doesn’t have to avoid mirrors.

Unlike Geithner, Paulson, and Bernanke, Gray acted before the epidemic of accounting control fraud produced a bubble so large that it produced a general economic crisis. Consider what would have happened had Gray not reregulated and resupervised the industry beginning in November 1983. The roughly 300 control frauds in 1984 would have grown at 50% annually and scores of new Texas and California frauds would have entered each year. The result would have been a commercial real estate bubble of epic proportions. Such a bubble would have taken down not only the S&L industry, but also the banking industry (which had massive commercial real estate exposure) and would have severely damaged the insurance industry (which provides much of the permanent/takeout financing for commercial real estate). We cannot yet demonstrate when a bubble will collapse, but we know that accounting control fraud epidemics are capable of extending the life of financial bubbles and hyper-inflating them for several years. The direct losses among S&Ls, absent Gray’s reregulation, would have been over a trillion dollars within five years. The losses to banks and insurance companies would have exceeded the S&L losses. Losses of that magnitude would have caused a severe recession.

It also needs to be stressed that subprime and alt-a loans, qualifying loans based on teaser rates, bonuses to loan officers based on volume (not loan quality), inflated appraisals, and accounting control fraud are not new. They always end badly. Mike Patriarca lead the supervisory effort in 1990-92 that prevented a nonprime lending crisis by forbidding lending practices that we have long known end in disaster. He then left federal service and went into business.

You might think that the first two calls Geithner, Paulson, Summers, Rubin, and Bernanke would have made once they finally realized there was a crisis would have been to Ed Gray and Mike Patriarca to see how successful reregulation is accomplished and how one successfully prosecutes the accounting control frauds that drove the current crisis. But, if you think that you probably also think that the one regulator that stood openly in support of Gray’s reregulation of the industry – Paul Volcker – would be President Obama’s primary economic advisor. Instead, Summers, Geithner, and Bernanke have marginalized Volcker. The Bush and Clinton anti-regulatory Wrecking Crews remain in power in the Obama administration despite a dismal record. They are never held accountable. Bo wants them left in power. He wants us to stop criticizing their failures, to apologize to them for our ingratitude, and to honor them for the terrible career sacrifices they have (mythically) made to protect us from harm.

I disagree. I urge us to learn the lessons not simply of regulatory failures but regulatory and prosecutorial successes (the Gray and Ryan years). Mike Patriarca is in his prime. Put him in charge of a major regulatory agency immediately. Paul Volcker is a national treasure that petty, power-hungry failures (yes, I mean Summers) are wasting.

Oh, and Jim Baker, Jim Wright, and John McCain should show some class and apologize for the shoddy treatment they handed out. Let me be clear on this last point – they shouldn’t apologize for the shoddy treatment of Ed Gray the man – they should apologize for the damage they caused our nation when they took their policy advice from major political contributors (that were leading control frauds) and impeded Gray’s substantive reforms that were essential to protecting our citizens.

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When All Else Has Failed, Why Not Try Job Creation?

Posted on November 15, 2009 by | 2 comments

By L. Randall Wray

The US continues to hemorrhage jobs even as some purport to see “green shoots”. All plausible projections show that unemployment will rise even if our economy begins to grow. Personally, I think those green shoots will die this winter because the stimulus package is far too small and because the financial system is going to crash again. The longer we wait to actually address the unemployment problem, the worse are the prospects for a real recovery.

In his recent piece, Paul Krugman writes:

Just to be clear, I believe that a large enough conventional stimulus would do the trick. But since that doesn’t seem to be in the cards, we need to talk about cheaper alternatives that address the job problem directly. Should we introduce an employment tax credit, like the one proposed by the Economic Policy Institute? Should we introduce the German- style job-sharing subsidy proposed by the Center for Economic Policy Research? Both are worthy of consideration.

The point is that we need to start doing something more than, and different from, what we’re already doing. And the experience of other countries suggests that it’s time for a policy that explicitly and directly targets job creation.


As Krugman reports, Germany has avoided massive job losses by subsidizing firms that retain workers but reduce hours worked. The EPI’s proposal follows a similar strategy. This is fine so far as it goes—in a sense it allows workers, firms, and government to share the burden of reduced output and thus reduced work hours required. That is more equitable but in my view it is not a path toward recovery. While I do agree with Krugman that greater aggregate demand stimulus is required, there is no reason to believe that would provide a sufficient supply of jobs for all who want to work.

The final sentence in the Krugman post makes far more sense: let’s create MORE jobs, MORE work hours, and MORE payroll. A new, New Deal program with a permanent and universal job guarantee that will supply as many jobs as there are job seekers. Not only will this provide jobs in the New Deal style program, but it will also save jobs and increase work hours in the rest of the economy. Why go for second or third best when the best option is available?

Winston Churchill remarked “The Americans will always do the right thing………. after they`ve exhausted all the alternatives”. Direct job creation is the right way to put the economy onto a sustainable path to recovery.

For discussion and ideas on direct job creation and full employment, go here; here; here; and here.

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The Time Has Come for Direct Job Creation

Posted on October 23, 2009 by | 9 comments
First Published on the New America Foundation’s blog.
According to an ILO report[15] issued before the global economic crisis hit, even though more people were working than ever before, the number of unemployed was also at an all time high of nearly 200 million. Further, “strong economic growth of the last half decade has only had a slight impact on the reduction of workers who live with their families in poverty…”, in part because the growth was fueling productivity growth (up 26% in the past decade) but was not creating many new jobs (up only 16.6%). The report concluded: “Every region has to face major labour market challenges” and that “young people have more difficulties in labour markets than adults; women do not get the same opportunities as men, the lack of decent work is still high; and the potential a population has to offer is not always used because of a lack of human capital development or a mismatch between the supply and the demand side in labour markets.” All of these statements applied equally well to the United States even at the peak of our business cycle in early 2008.

Now, of course, our labor market is in dire straits–having lost more than 6 million jobs, with official unemployment approaching 10%, and with millions more workers facing reduced hours and even reduced hourly pay. According to a New America Foundation report[16] released late last spring, if we add “marginally attached” workers, those forced to work part-time, and those who would like to work but have given up looking, the effective unemployment total is over 30 million. Add to that another 2 million incarcerated individuals–many of whom might have avoided a life of crime if they had enjoyed better economic opportunities, and it is likely that a more accurate measure of the unemployment rate would be about 20%.

These numbers are similar to those I obtained for the Clinton boom when I estimated how many potential workers remained jobless even when the economy was supposedly at full employment.[17] Labor force participation rates–the percent of working age population that is employed or unemployed–vary considerably by educational level; high school dropouts have very low participation rates, and correspondingly high incarceration rates. I calculated that as many as 26 million more people would be working if we brought labor force participation rates of all adults up to the levels enjoyed by college graduates. That number would be higher now because of lackluster job creation during the Bush years and due to the economic crisis. Thus, we can safely conclude that whether the US economy is booming or busting, it is chronically tens of millions of jobs short.

Comparing such numbers with President Obama’s promise that his policies will create, or at least preserve, three or four million jobs demonstrates that current policy is not up to the task of dealing with our labor market problems. To be sure, there is no single labor market policy that can deal with the scope of our problems. We certainly need to resolve the financial crisis and to restore economic growth. But as experience demonstrates, even relatively robust growth does not automatically create jobs.

We also have severe structural problems: some sectors, such as manufacturing, will create far too few jobs relative to the supply of workers with appropriate skills, while others, such as the FIRE sector–finance, insurance and real estate–likely should be downsized, and still others, such as nursing and trained childcare, face a chronic shortage. Finally, it could be argued that we face another kind of structural problem identified a half century ago by John Kenneth Galbraith: a relatively impoverished public sector and a bloated for-profit sector. Thus, while recognizing the multi-faceted nature of our problem, I believe that direct job creation by government would go a long way toward resolving a large part of–and probably the worst of–our unemployment problem even as it could put people to work to provide needed public sector services.

Direct job creation programs have been common in the US and around the world. Americans immediately think of the various New Deal programs such as the Works Progress Administration (which employed about 8 million), the Civilian Conservation Corps (2.75 million employed), and the National Youth Administration (over 2 million part-time jobs for students). Indeed, there have been calls for revival of jobs programs like VISTA and CETA to help provide employment of new high school and college graduates now facing unemployment due to the crisis.[18]

But what I am advocating is something both broader and permanent: a universal jobs program available through the thick and thin of the business cycle. The federal government would ensure a job offer to anyone ready and willing to work, at the established program compensation level, including wages and benefits package. To make matters simple, the program wage could be set at the current minimum wage level, and then adjusted periodically as the minimum wage is raised. The usual benefits would be provided, including vacation and sick leave, and contributions to Social Security.

Note that the program compensation package would set the minimum standard that other (private and public) employers would have to meet. In this way, public policy would effectively establish the basic wage and benefits permitted in our nation–with benefits enhanced as our capacity to provide them increases. I do not imagine that determining the level of compensation will be easy; however, a public debate that brings into the open matters concerning the minimum living standard our nation should provide to its workers is not only necessary but also would be healthy.

The federal government would not have to micromanage such a program. It would provide the funding for direct job creation, but most of the jobs could be created by state and local government and by not-for-profit organizations. There are several reasons for this, but the most important is that local communities have a better understanding of needs. The New Deal was more centralized, but many of the projects were designed to bring development to rural America: electrification, irrigation, and large construction projects. To be sure, we need infrastructure spending today, but much of that can be undertaken by state and local governments. This program would provide at least some of the labor for these projects, with wages and some materials costs paid by the federal government.

More importantly, today we face a severe shortage of public services that could be substantially relieved through employment at all levels of government plus not-for-profit community service providers. Examples include elder care and childcare, playground supervision, non-hazardous environmental clean-up and caring for public space, and low-tech improvement of energy efficiency of low-income residences. Decentralization promotes targeting of projects to meet community needs–both in terms of the kinds of programs created but also in terms of matching new jobs to the skills of unemployed people in those communities. Also note that by creating millions of decentralized public service jobs, we avoid one of the major criticisms of the stimulus package: because there were not enough “on the shelf” infrastructure-type projects, it is taking a long time to create jobs. Instead, we should allow every community service organization to add paid jobs so that they can quickly expand current operations.

As the economy begins to recover, the private sector (as well as the public sector) will begin to hire again; this will draw workers out of the program. That is a good thing; indeed, one of the major purposes of this program is to keep people working so that a pool of employable labor will be available when a downturn comes to an end. Further, the program should do what it can to upgrade the skills and training of participants, and it will provide a work history for each participant to use to obtain better and higher paying work. Experience and on-the-job training is especially important for those who tend to be left behind no matter how well the economy is doing. The program can provide an alternative path to employment for those who do not go to college and cannot get into private sector apprenticeship programs.

There are some recent real world examples of programs that are similar to the one I am proposing. When Argentina faced a severe financial, economic, and social crisis early this decade, it created the “Jefes” program in which the federal government provided funding for labor and a portion of materials costs for highly decentralized projects, most of which created community service jobs.[19] The program was targeted to poor families with children, allowing each to choose one “head of household” to participate in paid work. The program was up-and-running in a matter of four months, creating jobs for 14% of the labor force–a remarkable achievement. More recently, India has enacted the National Rural Employment Guarantee, which ensures 100 days of paid work to rural adults. While the program is limited, it does make an advance over the Jefes program: access to a job becomes a recognized human right, with the government held responsible for ensuring that right.

Indeed, the United Nations Universal Declaration of Human Rights includes the right to work, not only because it is important in its own right, but also because many of the other economic and social entitlements proclaimed to be human rights cannot be secured without paying jobs. And both history and theory strongly indicate that the only way to secure a right to work is through direct job creation by government. This is not, and should not be, a responsibility of the private sector, which employs workers only on the expectation of selling output at a profit. Even if we could somehow manage economic policy to produce a permanent state of boom, we know that will still leave tens of millions of potential workers unemployed or in part-time and underpaid work. Hence, a direct government job creation program is a necessary component of any strategy of ensuring achievement of many of the internationally recognized human rights.

[15] Global Employment Trends Brief 2007, International Labour Office; results summarized in “Global Unemployment Remains at Historic High Despite Strong Economic Growth”, ILO 25 January 2007, Geneva. See also The Employer of Last Resort Programme: Could it work for developing countries?, L. Randall Wray, Economic and Labour Market Papers, International Labour Office, Geneva, August 2007, No. 2007/5.

[16] Not Out of the Woods: A Report on the Jobless Recovery Underway, New American Contract, New America Foundation, 2009, www.newamericancontract.net.

[17] Can a Rising Tide Raise All Boats? Evidence from the Kennedy-Johnson and Clinton-era expansions, L. Randall Wray, in Jonathan M. Harris and Neva R. Goodwin (editors), New Thinking in Macroeconomics: Social, Institutional and Environmental Perspectives, Northampton, Mass: Edward Elgar, pp. 150-181.

[18] See Not Out of the Woods, referenced above.

[19] See Gender and the job guarantee: The impact of Argentina’s Jefes program on female heads of households, Pavlina Tcherneva and L. Randall Wray, CFEPS Working Paper No. 50, 2005.

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National Media Trifecta

Posted on October 19, 2009 by | Comments Off on National Media Trifecta

We hit the trifecta last week in getting reform ideas reported in the national media:

See here, here, and here

Keeping up the pressure for real reform.

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Showdown in Chicago

Posted on October 19, 2009 by | Comments Off on Showdown in Chicago

Countdown to the Showdown [via New Deal 2.0].

The same financial institutions that caused the economic crisis and took billions in taxpayer bailouts are back to earning incredible profits. Meanwhile, Americans face shrinking pensions, rising foreclosures and unemployment, state budget cuts, predatory lending, outrageous overdraft fees, and sky-high credit card interest rates.

The American people want oversight, accountability and common-sense financial reform NOW. This is the classic David vs. Goliath fight, with Wall Street spending millions and millions on lobbying to defeat reforms that would protect the American people and our economy.

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