by Robert Scheer
from HUSTLER Magazine September 2010

THE INVESTMENT FIRM’S DOMINATION OF GOVERNMENT BANKING POLICY GREEN-LIGHTED DISASTER.

Goldman Sachs is right to claim innocence of any charges, criminal or civil, that the government brings against the financial conglomerate for banking fraud. Of course the firm is innocent, no matter the ugly facts of its hustling the unsuspecting, from New York to Athens and many other points worldwide. Sure, its CEO, Lloyd Blankfein, was paid $68 million in 2007, the year Goldman bet against its own customers with those phony “synthetic” derivatives. But you’d better believe it was all legal.

How could it be otherwise when Goldman got to help write the laws governing the selling of derivatives and other key aspects of financial deregulation that allowed it to grow too big to fail and thus be eligible for generous government bailouts? Its lobbyists, one of whom got to be chief of staff in the Obama Treasury Department, were the leaders in getting the government to make the regulations Goldman-friendly. If convicted of anything, Goldman’s wiseguys have a right to the outrage of handcuffed Mafia bosses in the bad old days when they felt betrayed by judges and legislators they assumed had been properly bought.

That’s more than a wild rhetorical point. The massive bank-lobbying effort that Goldman’s big bucks helped pay for forced through the radical deregulation that ended effective government supervision of the big investment banks and resulted in the banking debacle that wiped out the home ownership and jobs of tens of millions of people worldwide. Under the presidencies of Bill Clinton and George W. Bush, when laws enacted during the Great Depression were made moot, the Treasury Department was practically a subsidiary of Goldman Sachs. It was the most blatant takeover of the government by one firm in American history. Clinton named former Goldman Sachs Vice- Chairman Robert Rubin to be his Treasury secretary, and Bush did the same giveaway of power when he named Goldman Chairman Henry Paulson to fill that post in his administration. Goldman’s total domination of the Bush Administration’s banking policy was so widespread that the New York Times ran an article headlined “The Guys From Government Sachs.”

As the Times story pointed out, “Goldman’s presence in the [Treasury] department and around the federal response to the financial bailout is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.”

Ex-Goldman CEO-turned-Treasury Secretary Paulson had an eager accomplice in Timothy Geithner, who was serving as head of the New York Fed before he replaced Paulson at Treasury in the Obama Administration. While at the New York Fed, it was Geithner who presided over the shameful payouts of taxpayer dollars to Goldman, as well as facilitating its overnight transformation into a bank holding company eligible for access to low-interest borrowing from the Fed and other profitable favors. If that privilege had been granted to Lehman Brothers, the company would still be with us instead of having disappeared through bankruptcy.

The closeness of the Geithner-Goldman connection was underscored by a Wall Street Journal report that concluded: “The Federal Reserve Bank of New York shaped Washington’s response to the financial crisis last year [2008], which buoyed Goldman Sachs Group Inc. and other Wall Street firms. Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after.”

With friends like that running Washington’s oversight of Wall Street, it’s no wonder that Goldman traders got a bit wild in their greed and that the firm’s top leaders gave them the green light to milk the system and, ultimately, we taxpayers for all it was worth. CEO Blankfein would later claim in testimony before a Senate committee that he “did not know” the details of those trades, but if that is true, it is obviously because he didn’t want to know as long as the money was pouring in.

The synthetic deals now at the heart of various lawsuits against Goldman would have smelled rotten to an experienced trader like Blankfein if he had paid scant attention to the derivatives packages that his company’s own internal e-mails described as “a shitty deal” and “a piece of crap” for the suckers buying them from Goldman. He didn’t have to care, because those deals were expected to go sour. Goldman bet on that outcome even as it failed to inform its customers of that likely result.

When the Mafia played those kinds of games, it was called “loan-sharking,” and the Mafiosi were put away behind bars for long stretches. But they didn’t have the right lobbyists and their own shills on the inside of the federal government. Not so the guys from Government Sachs, who are never going to require the services of the Witness Protection Program.

Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

by Robert Scheer
from HUSTLER Magazine August 2010

CONGRESS MAY TRY TO REIN IN WALL STREET, BUT THE BANKERS WILL CONTINUE TO THREATEN OUR WAY OF LIFE.

If the healthcare-reform battle has been an unsatisfying test of the government’s ability to deal with our pressing problems, brace yourself for bigger disappointment in its attempt to bridle Wall Street. This is where the true heavies go to work, and—as opposed to the medical-industry lobby— the moneychangers fear not the wrath of their clients or, as Scripture tells, any higher power.

Certainly not that of Congress or the President, whose powers it has so confidently purchased. That is how we got into this mess. The bankers wrote the rules of the road that allowed them to exceed all reasonable limits when Democrat Bill Clinton was in the White House. And when the crash came, it was the Republican George W. Bush who made their problems go away.

Having survived that disaster of their own creation, they are not about to let anyone make them change their ways. It will definitely take more than the likes of Connecticut’s lame-duck Senator Christopher Dodd, a likely candidate for more lucrative employment in the financial sector that the Democrat has served so faithfully.

Dodd, who chairs the Senate Banking Committee, made a big show of introducing legislation to rein in Wall Street, having failed to elicit a single Republican vote after months of caving in. He has abandoned his earlier proposal for a truly independent regulatory agency that would challenge the Fed, which got us into this jam. His bill rejects a public audit of the Fed, where he would house what remains of the President’s proposed consumer- protection agency.

There is only a nod in the direction of a return to the Glass-Steagall Act’s separation of investment and banking firms, a regulation that Dodd, along with New York Democrat Charles Schumer, helped kill a decade ago. As the New York Times reported on October 23, 1999: “Dodd, whose state is home to the nation’s largest insurance companies, and Schumer, with strong ties to Wall Street, have long sought legislation to repeal the Glass-Steagall Act.”

That’s what legally made possible the toobig- to-fail mergers of insurance giants like Travelers and AIG with banking companies. As Peter Eavis pointed out in the Wall Street Journal in March 2010, Dodd’s proposed bill “still flunks the AIG test,” in that “if the Senate bill became law, it looks like the government could still find itself making the sort of payments it made to AIG counterparties.”

And that’s before the lobbyists go to work. The most glaring failure of Senator Dodd’s proposal is to fully come to grips with the enduring threat of unregulated derivatives. In this area the bill’s text is an unparalleled exemplar of the use of the runon sentence in the pursuit of obfuscation. But what is clear is that the out-of-control derivatives market, which Dodd helped engineer ten years ago when he supported the Commodity Futures Modernization Act, will be at best tempered somewhat.

Obviously aware that his current bill provides no serious answer to this most pressing of our financial-industry problems, Dodd holds up the wan hope that “Senator Jack Reed [D-Rhode Island] and Judd Gregg [RNew Hampshire] are working on a substitute amendment to this title that may be offered in full committee.”

Yes, we know what such bipartisan efforts bring, and it does not bode well for getting a grip on a derivatives market that threatens to do us all in.

Warren Buffett wasn’t kidding when he called them “financial weapons of mass destruction,” and by now most Americans are aware that the innocuous-sounding derivatives that he was referring to have done great damage to our way of life. It extends from foreclosed homes in Florida that are collected in collateralized debt obligations to credit default swaps on Greek airport revenue and, as the New York Times reported, massive corporate collateralized loan obligations that are “a potential financial doomsday.”

The dubious security bundles are as vast as they are obscure, and their notational value is staggering. As Dodd’s committee’s fact sheet stated, “The over-thecounter derivatives market has exploded— from $91 trillion in 1998 to $592 trillion in 2008.” The current figure is $605 trillion and still growing.

As Dodd’s press release put it, “Because the derivatives market was considered too big and too interconnected to fail, taxpayers had to foot the bill for Wall Street’s bad bets.”

Now he tells us. But let’s hope there’s more to this bill than meets my eye and that the lobbyists don’t get to gut it further. As this issue goes to press, it is still a work in progress with some good points, the House bill is better, and it is time that Congress hears much more from the suffering public.

Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

LURKING IN THE SHADOWS OF OBAMA’S GRASSROOTS CAMPAIGN, AND LENDING A BIG HAND, WERE WALL STREET BANKS.

by Robert Scheer
for HUSTLER Magazine – July 2010

As you read these words in the future, some weeks after they were written, you may be hearing on your nightly news cast about a new law the President has just signed that promises to fundamentally reform the way banks operate and are regulated in order to protect individual consumers as well as the national and global economies. But it won’t change anything important. The banks will still have a license to steal.

That’s because, some two years after the free-falling investment house Bear Stearns tore a black hole in the thin-skinned super bubble pumped up by Wall Street speculators, Washington, D.C., has been completely unable to establish any authority over the banking industry it bailed out.

Trillions of taxpayer dollars were put at risk to buy the toxic assets that the banks bought and marketed with such abandon. The federal bailout saved most of the big banks from bankruptcy, they used the money to buy the assets of those that did fail, and at the end of the day the financial industry was more concentrated in a few hands than ever. By allowing it to get even bigger, we are being set up for the next crisis.

Not that politicians haven’t flapped their gums plenty, when convenient, about helping to protect Main Street from Wall Street predators. Even our normally reserved President has allowed himself to indulge a few hearty denunciations of “fat cats” now and again. Republicans meanwhile have opposed any effort to rein in Wall Street. The Democrats have not done much better.

That’s because the banking lobby owns both political parties—particularly now, after the Supreme Court committed the supreme absurdity of ruling that the big corporations are just like any ordinary citizen and that to control their buying of politicians would interfere with their free speech rights. Who are we kidding when it comes to the pretense of living in a democracy when even the puny limits on campaign financing have been eliminated, and more than ever it is money that talks?

When it comes to doing the bidding of Wall Street, it doesn’t matter much whether the Republicans or Democrats are in charge. After the banking meltdown there was no difference in the policy pursued by Barack Obama over that of George W. Bush. Both had nothing else to offer except throwing money at Wall Street while ignoring the pain of ordinary folks who were losing their jobs and homes. Both political parties kept the bailout gravy train rolling for Goldman Sachs, Citibank, JPMorgan Chase and all the other good ol’ boy banks, while handing the keys to economic policy to the same array of slicksters that created this mess.

Whenever Obama started to get the least bit tough with the financial hustlers that got us into all of this, the big boys on Wall Street let the kids in Washington know who was boss. After Obama dared voice a desire for some return for ordinary taxpayers who footed the bailout bill, several of his Wall Street backers promptly—and publicly—shifted some political donations from Democrats to Republicans.

“Buyer’s remorse,” joked Texas Republican Senator John Cornyn, apparently glad to sell his party to any bidder shifting its enthusiasm from the President they thought they had bought. For example, as the New York Times put it, JPMorgan CEO Jamie Dimon “is a friend of President Obama’s from Chicago, a frequent White House guest and a big Democratic donor.” But even he was complaining to Obama about the President’s loose talk of reinstalling some post-Depression regulations stripped out of the law books during the Bush I and Clinton administrations. As if to punctuate the point, the Times said Dimon’s traditionally Democratic Party-leaning megabank was shifting its electoral cash sluices toward the GOP.

Joining Dimon in pressuring the President was Robert Wolf, chief of the U.S. division of the Swiss-owned bank UBS. Wolf, who plays golf and watches fireworks with the President, was appointed by Obama to the Presidential Economic Recovery Advisory Board, headed by former Fed chief Paul Volcker. Wolf was upset when Obama recently endorsed Volcker’s proposal for restoring the spirit of the Glass-Steagall Act by separating investment from commercial banking, as it was for six decades of financial stability before the big money people decided that stuff was old hat and for sissies.

Dimon and Wolf were just being cautious; they can’t be too worried. After all, take the mask off the Obama candidacy and there was always a deeply disturbing reality that his massive Internet-driven grassroots contributor base concealed: Obama was the first major party Presidential candidate since Richard Nixon to base his campaign fundraising exclusively on private rather than public funds.

The appearance of all those coins flowing in from the common folk denied the harsh reality that Obama’s campaign contributions established him as the darling of Wall Street financiers every bit as much as George W.Bush. Pity that We the People, that majority of Americans forced to pay dearly for Wall Street’s scamming, never got the populist in the White House we thought we had elected.

Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

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THE PRESIDENT AND POLITICIANS WHO SUPPOSEDLY SPEAK FOR THE “LITTLE GUY” HAVE FAILED TO DELIVER WHERE IT MATTERS MOST.

by Robert Scheer
for HUSTLER Magazine – June 2010

So the Democrats lost their much-vaunted“filibuster-proof” majority in the Senate?Well, they’re probably relieved: ScottBrown’s arrival gives them another excuse notto deliver on campaign promises that upsettheir financiers from Wall Street and theFortune 500.

Seriously, the Democrats are not so muchinept or unorganized—as the frequent accusationsfrom frustrated supporters would haveit—as they are simply locked in an impossiblecontradiction: The companies that fund theirpricey TV-ad-driven political campaigns have acompletely different agenda than the actualAmericans who vote for them.

Case in point: The healthcare reform debaclethis past fall highlighted that, when it comesto any progressive legislation that would favorAmericans over corporations, the Democratsare simply unable and unwilling to deliver. Theyfear the bite of Big Business more than thebark of the vox populi. Forget filibusters; this isabout who is paying whom in a form of legitimizedbribery.

Of course, the voters get their punches in.Witness the recent creaming of the President inMassachusetts, where dispirited liberalsallowed Republican Brown to clock the Demswith a stiff right, and the tea bagger triumphantlyentered the Senate. Yet even thoughObama’s opportunistic search for win-win solutionsto our healthcare concerns and our largereconomic problems is leading to a lose-loseoutcome for the President and the country, he isonly digging himself deeper into the “triangulation”hole that Bill Clinton so doggedly pursued.

The two issues that mattered in 2010’s specialelections thus far were the latest “joblessrecovery” and Obama’s plea to save healthcarereform, even though the latter didn’t includeanything really meaningful, such as a publicoption or a major expansion of Medicare.

It is significant that it was the voters ofMassachusetts who have now derailed the Democrats’efforts to revamp the country’s healthcaresystem, for these voters know the subjectwell. The federal proposal is based on theirown state’s model requiring people to obtainhealth insurance without the state doing anythingto effectively control costs through an alternativeto the private insurance corporations.

Lacking a public option, the cost of healthcarein Massachusetts, already the highest inthe nation at the time of the plan’s implementation,has spiraled upward. Services have beencurtailed, and many, particularly younger people,feel they are being forced to sacrifice to payfor a system that doesn’t work.

That the Democrats now blame Massachusettsvoters for spoiling their lock on Congress—even though they hadn’t been able todo much with it—is thus ironic. They sold outthe voters to the healthcare profiteers, whichmakes our healthcare three times as expensiveas any other country with a developed economy.

Too strong a statement? Consider: Last yeara New York Times/CBS poll found 72% ofAmericans “supported a government-administeredinsurance plan—something like Medicarefor those under 65—that would competefor customers with private insurers.” Yet theparty that supposedly speaks for the “little guy”couldn’t even pass such a plan despite wieldingmajorities larger than the Republicans held foreight years of Bush misrule. Hell, even half ofthose identified as Republican said they wouldback such a public plan, as would three out offour independents!

This is similar to how, despite a massiveoutcry, the Democrats have stalled on deliveringany meaningful financial reform more thana year since the megabanks’ gambling drove usinto a severe recession. One out of six Americansis now unemployed or underemployed, yetthe President is only now calling for Congressionalaction to pump up the job market, as henoted in his 2010 State of the Union Address.

Unfortunately, in this speech, Obama alsodoubled down on his pandering, this time to illinformed“deficit hawks” by proposing a federalspending freeze. Never mind that such afreeze would exempt the national security budgets,which have by far the most fat to trim andsuck up the majority of our tax revenue. Thereal problem with this cynical move is that it isterrible economic policy at a time when somany Americans are hurting.

In fact, the President should be pushing inthe opposite direction: a second major stimuluspackage. The first one helped, especially bypreventing a total meltdown for the middleclass, but as economics brainiacs like PaulKrugman and Robert Reich noted at the time, itwas not large enough.

“The best and fastest way for government toprime the [economy’s] pump is to help statesand locales, which are now doing the opposite,”wrote former Labor Secretary Reich afterObama’s disappointing State of the UnionAddress. “They’re laying off teachers, policeofficers, social workers, healthcare workers andmany more who provide vital public services.”

Funny thing, though: Obama is not thatbeholden to all those middle-class workers andthe small-shop owners they support, despitethe storyline that places them at the heart of themodern Democratic Party. He faces biggerbosses on Wall Street and K Street, and untiltheir stranglehold on D.C. is weakened, it ishard to see when the Democrats can functionas a true party of “hope” and “change.”

Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

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Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

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WHERE WAS THE BLUE-COLLAR COMMUNITY ORGANIZER WHEN TIMOTHY GEITHNER TOLD HIM TO TRUST THE BANKS?

by Robert Scheer
for HUSTLER Magazines – May 2010

What’s up with Barack Obama? I thought this guy had some tough, everyday smarts and, having witnessed life a bit on the mean streets of Chicago, would stand up to the Wall Street big shots who’ve made life so miserable for the little people back in the blue collar communities he once tried to organize. Instead, he got bamboozled by the banking bandits big time and may have fatally sunk his own legacy in the process.

Sure, the President inherited the banking mess rather than helping to create it. That distinction goes to his Republican predecessor George the Second, who fiddled while the financial markets burned. And while the fires raged through the mortgage market, destroying the savings of 15 million families whose homes were suddenly “under water” and in danger of foreclosure, it was Bush who decided to save the bankers and not those they had swindled.

Yet it was Obama who decided to blindly follow Bush’s example and turned to the Democrat toadies of Wall Street who had cooperated in that scam to be his point men on the economy.

One was Timothy Geithner, who was picked by Obama to replace Henry Paulson as Treasury secretary in the obvious but erroneous belief that more of the same— mindlessly throwing money at Wall Street—was the way to go.

Indeed, Geithner was, from jump street, even more enthusiastic than his Republican predecessor in doing just that: In June 2008, while president of the New York Federal Reserve branch, he shocked even Paulson and other GOP bankers in a crisis meeting by proposing they ask “Congress to give the President broad power to guarantee all the debt in the banking system,” according to two participants cited by a New York Times report. Incurring what could be many trillions of dollars in bad debt was too rich for even that crowd. Later, though, in the White House, Geithner was able to maneuver Obama aggressively down that road. The fantasy was that if the banks, who had sunk themselves with high-risk behavior, were made more liquid with government welfare, they, in turn, would bail out beleaguered homeowners.

Of course they did nothing of the sort, as the 15 million families whose homes are under water—real value now falling below the mortgage value—and subject to foreclosure could tell you.

The smoking gun here, the incident that tells you all you need to know about what went wrong with the Geithner plan to help homeowners by bribing the banks, was reported by Joe Nocera in the New York Times back on October 25, 2008, a few weeks before Obama’s victory. An intrepid reporter covering Wall Street, Nocera managed to get in on a conference call of heavyweights at JPMorgan Chase, a bank that was given $25 billion by Bush that it apparently didn’t even need.

“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” one of the top bankers on the call said, according to the Times, gloating over the fact that his bank was not in as much trouble as some of the others. But JPMorgan Chase was going to take the money and run—not in the direction of helping families stay in their homes but in locking up profits in other distressed banking properties. “What we do think it will help us do is perhaps be a little more active on the acquisition side or opportunistic side for some banks who are still struggling,” the aforementioned banker added.

That strategy, the same as the one employed by Goldman Sachs and the others who got more money from the Feds than they needed, paid off super-big. By the end of Obama’s first year in office the banks reported an all-time record of $145 billion in payouts to their top executives. JPMorgan Chase garnered $11.7 billion but didn’t put it into lowering the terms for distressed homeowners.

As the guy on the call had correctly predicted in what was supposed to be a secret conference call 14 months earlier, “We would think that loan volume will continue to go down as we continue to tighten credit.”

The dismal results of the misplaced trust the United States put in these banks have been reflected in Obama’s falling poll numbers as homeowners, the unemployed and stressed small businesses feel the pain of that tight credit market. Folks have turned against the President who had promised so earnestly to represent the little guy but who sold out so totally to Wall Street.

Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

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MAY 2010 – HUSTLER Magazine


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A LAWMAKER DEMANDS AN AUDIT OF THE FEDERAL RESERVE BANK, BUT OBAMA AND HIS BRAIN TRUST REFUSE TO MAKE THE FINANCIAL INDUSTRY “NERVOUS.”

by Robert Scheer
From HUSTLER MAGAZINE March 2010

You don’t have to salute every time Ron Paul raises the libertarian flag, and personally I don’t like leaving education, health and Social Security to the tender mercies of the inevitably rapacious capitalist markets. But the Republican congressman from Texas is on target with his bill demanding a full public audit of the Federal Reserve, the government monster that has a power over the economy that many dictators would envy and operates under a cloak of secrecy that even the CIA rarely attains.

It was the Federal Reserve, under the leadership of the once exuberantly honored but now disgraced Alan Greenspan, that got us into this banking mess. The Fed looked the other way while the finaglers of Wall Street packaged and sold those mysterious Collateralized Debt Obligations and Credit Default Swaps that brought the economy to near death when they exploded with a destructive force and then were covered by trillions of taxpayer dollars.

The Federal Reserve—more than any other institution, public or private— deserves blame for shoving the world economy into the huge financial hole it now inhabits. The Fed, most definitely including the New York Federal Reserve Bank—headed for the five years prior to the Wall Street meltdown by Timothy Geithner until Obama named him Treasury secretary—miserably failed in its regulatory obligations while the bankers looted the banks. But where the libertarians and Ron Paul are wrong is to resist any meaningful regulation, and where Obama is equally wrong is his belief that we can get it from the Fed.

Despite Obama’s sorry record of enabling Wall Street greed, choosing Geithner to run the Treasury Department may be his biggest mistake. And it is not only Geithner but also every other major appointment of those who formulate economic policy—notably deferring to the Fed—that demonstrates the President’s fawning response to the financial hustlers.

Take key White House economic adviser Lawrence Summers, who during his tenure as Clinton’s Treasury secretary pushed through the deregulation of mortgages and other derivatives that made the housing collapse inevitable. After the collapse it was the Federal Reserve that orchestrated a bailout package under George W. Bush and continued under Obama to save—indeed reward— the “too big to fail bankers” whose destructive greed the Fed had promoted.

Paul is right with his legislation, which as of this writing had the support of hundreds of lawmakers but had already been gutted by Democrats on the key House Banking Committee in response to signals from the White House. Not only was the administration opposed to transparency for the Federal Reserve to check its unbridled power, but Obama also compounded the error by advocating an even larger role for the Fed in new legislation designed ostensibly to prevent another banking meltdown.

When Chris Dodd (D-Connecticut), chairman of the Senate Banking Committee, proposed to take major banking oversight power away from the Fed and put it in the hands of a new agency to regulate all federally chartered financial institutions, the Obama Administration treated it as a dangerously subversive proposal. In the words of White House economic adviser Austan Goolsbee, it would cause financial industry “nervousness.”

Isn’t that what we ordinary folk want? Shouldn’t the banking bandits with their proven record of chicanery be made just the least bit nervous when they cook up their next series of scams? Not so, in the view of Neal Wolin, Obama’s choice as deputy Treasury secretary. Despite massive evidence to the contrary,Wolin insisted that the Federal Reserve “is the agency best equipped for the task of supervising the largest, most complex firms.”

Consider the source: Wolin, as the Treasury’s top lawyer during the Clinton years, drafted the language of the infamous Gramm-Leach-Bliley Act, which allowed the merger of investment and commercial banks with insurance companies to create the toolarge- to-fail monstrosities like Citigroup, with which the taxpayers are now saddled.

Between his government stints under Clinton and now Obama, Wolin benefited from those breakthrough mergers. He served as general counsel at The Hartford insurance company, which—thanks to the deregulatory legislation Wolin had helped draft—was allowed to buy up troubled banks and qualify for federal TARP funds.

Even the conservative Washington Times voiced skepticism in an editorial on Wolin: “Revolving doors between industry and the administration and fat-cat political contributors getting bailed out at taxpayer expense sound like business as usual. This certainly isn’t change we can believe in.” Painful as it is to admit, the Right got that right.

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Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

You may purchase the hard copy of the March 2010 Issue of HUSTLER Magazine (with free shipping) at HustlerMagazine.com. Comes with full length DVD and free shipping!

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WALL STREET’S MOST INFLUENTIAL CEOs HAVE OBAMA’S TREASURY SECRETARY ON SPEED DIAL, AND IT PAYS.

by Robert Scheer
from HUSTLER Magazine – January 2010

When Timothy Geithner headed the Federal Reserve Bank of New York, he was very good at mealtime, particularly with the Wall Street fat cats he was supposed to be governing. The details of his endless private dining with the likes of Sanford Weill, Robert Rubin and other big bankers responsible for the economic meltdown only came out after President Obama named him Treasury Secretary—and in response to a Freedom of Information lawsuit.

“An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions,” the New York Times reported. “His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.”

You would have thought that the embarrassing disclosures of how tight this guy was with the banking bandits would have led him to change his social habits—and it has: Instead of private dining encounters, he now schmoozes the bankers during incessant phone calls. Of course, we only learned this when the Wall Street Journal and other news organizations forced the information public through another FOIA lawsuit.

Under the headline “Wall Street on Geithner’s Speed Dial,” the WSJ reported that “Geithner has kept frequent contact with an exclusive group of Wall Street executives since taking the helm at Treasury, speaking most often with top officials from Goldman Sachs Group Inc., J.P. Morgan Chase Co., CitiGroup Inc. and BlackRock Inc.” And, in fact, he logged far more time talking with Lloyd Blankfein, the CEO of Sachs, than he did with Barney Frank and Chris Dodd, the two leaders of Congress to whom he was supposed to be reporting.

The bigger concern is not the frequency of Geithner’s calls, however, but which end of the call is setting the tone. Representative Brad Sherman (D-California), who has been pushing for tougher regulation of financial institutions, complained: “I don’t mind that he’s talking to Wall Street. The problem is that he appears to be listening.”

Blankfein’s Goldman Sachs bears as much responsibility for the banking meltdown as any other firm and was one of the main beneficiaries of the government’s subsequent heaving of trillions into the gullets of culpable financial institutions that had gambled themselves to the brink of bankruptcy. Remember, it was former Goldman head Robert Rubin who, as treasury secretary in the Clinton Administration, had pushed through the radical deregulation that allowed Wall Street to spin out of control. And it was another Goldman honcho, Henry Paulson, who served as treasury secretary to George W. Bush and ignored the ballooning problem, then led the government bailout that saved the very companies, like Goldman, that deserved to fail.

Thanks to Paulson, Goldman was allowed to reconstitute itself as a commercial bank and therefore became eligible for $10 billion in TARP bailout funds, as well as massive additional support from the Treasury Department and the Federal Reserve. But the daisy chain doesn’t end there.

After leaving the government, Rubin became a top leader of Citigroup, a company allowed to grow too big to fail by the deregulation he had pushed through. He made over $100 million looking the other way while Citigroup sank close to the point of oblivion. It was prevented from total collapse when Geithner, a Rubin protégé in the Treasury Department who had become New York Fed chairman thanks to Rubin’s influence—joined Paulson in bailing out Citigroup. The bank was given $45 billion outright and a federal guarantee for $300 billion of its toxic assets.

Treasury Secretary Geithner, who took office in January 2009, had frequent phone conversations with the leaders of Citigroup, which might be acceptable if he had gained some concessions on its part. Instead, Citigroup was actively lobbying against any serious efforts to rein in this and other highflying banks. Even though we taxpayers are supposed to own 34% of Citigroup, there is no evidence that this has translated into making the bank’s policies more transparent or accountable.

In contrast, Geithner did not care to hear from the executives of the auto companies that were being saved, at far lower cost, from disaster. As the Wall Street Journal reported, “Mr. Geithner appears to have had no contact with officials at General Motors Co. and just one call with a Chrysler Group LLC official.” Apparently the grittier types in Detroit don’t rate solicitous calls from Wall Street CEOs’ obedient lackey, Obama appointee Timothy Geithner.

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Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

You may purchase the hard copy of the February 2010 Issue of HUSTLER Magazine (with free shipping) at HustlerMagazine.com. Comes with full length DVD and free shipping!

You may purchase a digital copy of the February 2010 Issue of HUSTLER Magazine at UnderCoverMags.com.

THE PRESIDENT IS TALKING THE TALK, BUT CAN HE REALLY KEEP WALL STREET IN CHECK?

by Robert Sheer
for HUSTLER MAGAZINE – JANUARY 2010

Are you kidding? Barack Obama wants Wall Street to make nice to Main Street because it’s the right thing to do? Yeah, that’ll work. “The fact is, many of the firms that are now returning to prosperity owe a debt to the American people,” President Obama told banking heavyweights in a September 2009 address on their turf. “It is neither right nor responsible after you’ve recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system and a more broadly shared prosperity.”

Oh, but they will; they will. Who doubts it? The laws haven’t changed, the same passive or overmatched regulators are still on patrol, and short-term profit is still the overriding goal of every trader, stockholder and executive on watch at the even bigger and more dominant financial firms that survived the crash. Now, to be fair, Obama wants to pass some new laws and change the regulatory structure. The questions that remain, of course, are how sincere is he, and what can he get passed through Congress in the face of a blizzard of cash flying down from Wall Street to K Street?

“The reforms I’ve laid out will pass, and these changes will become law,” said Obama, talking tough to the polite-yet-unenthusiastic zillionaires assembled at the historic Federal Hall— the same crew that recklessly destroyed the world economy and then cheerfully let the U.S. government rescue them. “I want everybody here to hear my words: We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses.”

“I can’t tell you how many young people have come up to me in these years and said, ‘I went to Wall Street because of that movie,’” echoed Stone, now making a sequel. Obama, however, is consistent in forever trying to seize the high ground. Thus, he entered the den of wolves to try out moral suasion in a place that has no use for anything but the pursuit of profit. Giving him the benefit of the doubt, he must be agenda-setting rather than hoping the assembled CEOs would rise out of their seats, shaking, to have evangelical conversions—since any American with a bank account, mortgage or credit card already knows from bitter experience how these corporations will screw them at every turn if they are not constantly vigilant.

In fact, the myth of corporate self-regulation is the key to understanding how we got here. Since President Clinton, Congress has been systematically erasing the post-Great Depression financial services laws, like the Glass-Steagall Act, that for seven decades successfully protected American capitalism from its worst excesses. However, after the stunning collapse of several of the world’s biggest banks, and the subsequent unprecedented bailout of these greed centers by the American taxpayer, Obama and Congress have no choice but to save face by passing some kind of financial reforms.

The day of his speech, an Associated Press poll showed that “seven out of ten Americans lack confidence the federal government has taken safeguards to prevent another financial industry meltdown.” Public opinion demands something be done; the devil, of course, will be in the details.

One devilish detail is enforcement. Passing regulatory laws only works if somebody makes sure they are followed. Before the collapse, the few regulators actually sounding alarm bells—such as Brooksley Born—were crushed by more politically powerful players like Democratic Party darling Robert Rubin. Others, from the Federal Reserve to the Securities and Exchange Commission, simply did not do their job, whether out of fear, incompetence, ideological blinkers or corruption.

“Senior regulators who stood idly by for years as financial firms built their houses of cards have been rewarded with even bigger jobs or are jockeying for increased responsibilities,” wrote veteran New York Times finance reporter and former stockbroker Gretchen Morgenson in a September 13, 2009, column. “Those in the public sector ask us to believe that regulators who snoozed during the credit bubble will be alert to emerging problems on their beats when the next mania begins. That’s asking a lot, isn’t it?”

Indeed, it is. Yet denial of the depth of the problems this crushing economic debacle has exposed is fueled by gushing pipelines of cash that run straight from New York City to Washington, D.C. Until we can reclaim our democracy from the legal corruption of corporate campaign donations, it is unlikely that any systematic reforms can succeed.

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The HUSTLER January 2010 Issue  can be purchased with free shipping at HustlerMagazine.com. 

Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.

by Robert Sheer

It is the great and terrible irony of capitalism that if left unfettered, it inexorably engineers its own demise, either through revolution or economic collapse. The guardians of capitalism’s survival are thus not the smug free-marketers and brainy libertarians who, in defiance of the pragmatic Adam Smith himself, want to chop away at all government restraints on corporate actions, but rather liberals who seek to harness its awesome power while keeping its workings palatable to a civilized and progressive society.

Unfortunately, we seem to have misplaced all our liberals. See, whether it was child labor in dark coal mines, the buying and selling of human beings to pick cotton, or the unfathomable devastation of the Great Depression, the brutal creativity of the pure profit motive has always posed a stark challenge to our belief that we are moral creatures. The modern bureaucratic governments of the developed world were built, unconsciously, as a bulwark, something big and oafish enough to, occasionally, stand up to capital, much as a referee must show the yellow card to stronger, younger athletes. Our referees right now are as honest as that NBA guy with the gambling debts.

Sure, when times are relatively good, it is predictable that the managers of our government will be seduced by the mythology of capitalism. This seduction is fueled by bribes, legal or not, as well as by an echo chamber of excitement in the larger media and society. It helps too if the worst consequences of greed can be portrayed as dusty textbook memories no longer possible in our modern whiz-bang America.

Remember the “Dow 50,000″ guy? By the 1990s, having been beat up by Ronald Reagan, the Democratic Party decided to cut its ties with its Great Regulator and party builder, Franklin Roosevelt, having soured of playing the “good cop” exemplified by that moralizing bust, Jimmy Carter. With the steep decline in the clout of manufacturing unions, it seemed natural to follow the big money dripping out of Gordon Gekko’s Italian suit pockets.

It was Bill Clinton, a good but overly ambitious man, who tapped into this new paradigm so aptly, accepting both Wall Street money and vision, compliantly teaming with a Republican Congress to knock down the fences set up by FDR to protect the banking industry from its own greed. Clinton’s reward was to receive credit—and a second term—for creating a boom economy much like that of the “Roaring ’20s,” a series of bubbles creating paper wealth for the lucky folks already blessed with real estate, inheritances and high salaries.

When the Republicans took over for eight truly horrible years of non-governance, they were only too happy to look the other way as it became increasingly clear to all with a strong stomach and a keen eye that there was deep, deep, dangerous rot in the pillars of the globalization boom so celebrated by cheerleaders like the New York Times ‘ Thomas Friedman.

To make sure nobody with real clout authorized careful scrutiny of the pyramid schemes and predatory lending and all the rest of it, the sluices were fully opened. According to the watchdog group Public Citizen, Wall Street spent $5 billion in campaign contributions and lobbying over the past decade alone.

As we now know, of course, that five bill was chump change as an investment, seeing how the federal government has put up trillions in loans and toxic asset guarantees for these wheeler-dealers. Meanwhile, back in Real America, according to the Federal Reserve’s June 2009 report, seven straight quarters of declining household wealth left us $14 trillion poorer.

But the true horror for liberals who believe the power of capitalism must be harnessed for the good of society, rather than vice versa, is that their own party has been completely co-opted by the money guys. All the Goldman Sachs and Citigroup suits who talked Clinton and Congress into deregulating derivatives are now advising Obama, leading his Treasury department and so on. It’s as if Obama had hired Dick Cheney and Don Rumsfeld to run his Iraq policy.

Voters had thought Obama got it. To be sure, he can talk a great game. “Millions of Americans who have worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and by the failure of their government to provide adequate oversight,” he said. “Our entire economy has been undermined by that failure.”

Yet as the ever-prescient Ralph Nader put it in a recent column, “One would think that his 88-page reform proposal to Congress would be up to his words. Instead he provides Washington aspirins for Wall Street brain cancer.”

As former Labor Secretary Robert Reich writes, “The [Obama reform] plan doesn’t stop bankers from making huge, risky bets with other people’s money. … Nor does the plan do anything to prevent banks from becoming too big to fail. It doesn’t hint at a return to the days before the late 1990s when commercial banks were separate entities from investment banks— before mammoth bank supermarkets like Citigroup came to be so tied up with so many other commercial and investment vehicles that they couldn’t be allowed to go under. And there’s not the slightest mention of antitrust law.”
The reality is our government will protect us from the extremes of capitalism only if we demand it does. Those watching the store don’t have our interests in mind, no matter how charming or well-spoken they may be.

by Robert Sheer

AMERICA’S UNREGULATED BANKING SYSTEM ROBS THE POOR TO GIVE TO THE RICH.

Some will rob you with a six-gun, and some with a fountain pen.” That image from “The Ballad of Pretty Boy Floyd” is out of date these days, since bankers and other thieves who foreclosed on the bereaved widow’s home in Woody Guthrie’s old folk song don’t use fountain pens anymore. Instead, they rely on computerized transactions, online solicitations, international money swaps and all sorts of other secret shenanigans that leave the robbed consumers blindly unaware of who actually assaulted them.

First, a bank hustles them into deceptively low-cost introductory loans, which are then sold in a Ponzi scheme of speculation. When the homeowner’s interest rate inevitably balloons, it’s some other bank the consumer never heard of that lowers the foreclosure ax.

The other thing Guthrie’s tune missed is that only a fool of a stickup man would use a gun, because the criminal penalties are super-high and the loot paltry by comparison. Not so the money to be ripped off from home mortgage foreclosures and credit card hustles— and those robberies are not even classified as punishable crimes.

Sure, loansharking is a crime—a hoodlum loans you money at an exorbitant interest and then busts your kneecaps when you can’t pay up—but that’s because ordinary thugs don’t have a license to steal; banks do. And any time the government makes the slightest move in the direction of cracking down on the banks or stockbrokers who operate these officially sanctioned swindles, their lobbyists go to town and win. Individual states once had reasonable caps on interest rates and sound lending practice standards, but all of that got swept away by a federal government that the financial giants own.

Don’t believe for a minute that the long election campaign we just suffered through is going to change any of this. Lending-industry bandits lavishly bankroll both major political parties, and neither is about to punish them for their excesses. Quite the opposite: The only serious regulation of the financial world was wisely enacted in the 1930s during the Great Depression to prevent another meltdown and was repealed with solid bipartisan support during the Clinton Presidency. The banks bought that legislation with more than $300 million in lobbying costs, thus reversing the 60-year-old ban on mergers between banks, insurance companies and stockbrokers.

The first major beneficiary of the new deregulation legislation was Citigroup, which had been attempting an illegal merger with the Travelers Group insurance company. Once the banking giant got the law changed, the merger went through, and Robert Rubin, Clinton’s Secretary of the Treasury, then resigned to head up—yes, you guessed right—Citigroup.

These guys have no shame. Before he went into the government, Rubin made hundreds of millions running Goldman Sachs, which played the mortgage market for all it was worth before sticking others with the cost. Henry Paulson, Rubin’s predecessor at Goldman Sachs, also occupied that position of Secretary of the Treasury, in George W. Bush’s administration. See how nonpartisan these con artists are?

You might be thinking, What, me worry? —that is, if you don’t happen to be one of the tens of millions stuck in foreclosure on their interest-only adjustable mortgage loan or bearing the burden of credit card debt, suckered in by low introductory rates that later expand astronomically. But it will also cost you big-time even if you never took out a lousy loan. That’s because the taxpayers— yeah, you—are left holding the bag, buying out the banks and bailing out their top executives so that they can continue the hustle.

These are the thieves that Scripture warned us against. One of the clearest moral injunctions of the Bible is that usury—which is what these guys routinely practice—is a sin. As is stated in Ezekiel 22:12: “…thou hast taken usury and increase, and thou hast greedily gained of thy neighbors by extortion, and hast forgotten me, saith the Lord God.”

Funny how Christian moralizers pilfer from the Bible to find quotes that confirm their repressive views, but manage to miss anything in that same hallowed tome which smacks of social justice. But according to Ezekiel 22:12, the Lord God will not be as forgiving of our bankers as the politicians who constantly invoke His name.

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Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as Thinking Tuna Fish, Playing President: My Close Encounters With Nixon, Carter, Bush I, Reagan and Clinton—And How They Did Not Prepare Me for George W. Bush and his latest, The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America.