The headline of this post is a reference to the final sentence in an editorial in Tuesday’s NY Times, entitled: “Nearly a Year After Dodd-Frank.”
Here’s the first paragraph…
Without strong leaders at the top of the nation’s financial regulatory agencies, the Dodd-Frank financial reform doesn’t have a chance. Whether it is protecting consumers against abusive lending, reforming the mortgage market or reining in too-big-to-fail banks, all require tough and experienced regulators.
However, the truth of the matter is that Dodd-Frank may be all but D.O.A. out of the gate, as the Pulitzer Prize-winning folks over ProPublica.org noted, just 10 days ago, in: “From Dodd-Frank to Dud: How Financial Reform May Be Going Wrong,” how imposed budgetary restrictions combined with officially-sanctioned loopholes and exemptions are now being written into the bill’s implementation guidelines by regulators, as we blog. So, the appearance of any “strong leaders at the top of the nation’s regulatory agencies” at the proverbial table will occur after the Dodd-Frank “meal’s” already been served up by its regulatory overseers, so to speak.
The ProPublica folks spell out major “concerns” regarding significantly watered-down implementation guidelines on: the Volcker Rule, derivatives regulations, oversight of the credit ratings agencies (i.e.: Standard & Poor’s, Moody’s, Fitch, et al), and establishment of the Resolution Authority, the entity supposedly responsible for seizing and winding down “too-big-to-fail” financial institutions on the brink of…failure.
Apart from this, and discussed further down, below, is the eleventh-hour effort by the White House to float a trial balloon which puts forth the notion of supplanting the nomination (and/or now-blocked, July 4th recess appointment) of Elizabeth Warren as Chair of the Consumer Financial Protection Bureau with that of one of her assistants, Raj Date.
First, more from ProPublica…
The law laid out principles but often left it to regulators to write the actual rules. Those would be the same regulatory agencies that failed to prevent the financial crisis and that, in some cases, view the banks they oversee, not taxpayers, as their primary constituents.
…
"The decisions that are coming down are not promising," said Ted Kaufman, the former Democratic senator from Delaware who worked on the legislation. "The regulators are not making the hard decisions. If the Congress would not make the hard decisions, how can you expect the regulators to make them?"
…
[It is] an outcome that could increase the chances of another financial crisis in the near future.
"I am concerned that we are not putting in place the things that we need to do to prevent this from happening again," says Kaufman.
Copyright 2011. ProPublica.org
Regarding
the Volcker Rule, which bars banks from investing on their own behalf (i.e.: this is widely known as
“proprietary trading,” or
“prop trading”), as opposed to investing for their clients, we learn that
“…adding the provisions sought by the OCC” [Diarist’s Note: The Office of the Comptroller of the Currency, widely considered by many to be just about the most bank-friendly regulatory arm in our entire federal government]
“would mean banks could make almost any trade and claim an exemption, rendering the rule meaningless.”
As far as imposing stricter regulatory controls on derivatives trading is concerned, the effort(s) to put a saddle on this aspect of the financial services industry has devolved into nothing short of a travesty during this soon-to-be-concluded “review period.”
From ProPublica...
"It seems like some of the regulators accepted the argument from many market participants that they should be able to continue business as usual," said Heather Slavkin, the senior legal and policy adviser for the AFL-CIO's Office of Investment. Some regulators have said that they "don't want to disrupt current market practice -- but hold on a second. The purpose of Dodd-Frank was to change market practices."
On the credit ratings agencies, we learn that the bottom line is the Securities and Exchange Commission has determined it doesn’t have sufficient funding to “fully staff a new office to oversee credit rating agencies.”
So, since they did such a bang-up job preventing the “Great Recession” from occurring in the first place, the SEC’s decided to simply augment staff in other departments to fulfill these new oversight tasks, instead.
The SEC has created a special part of its website just to list elements of Dodd-Frank that "were deferred due to budget uncertainty, and are currently being reassessed in light of the [Fiscal Year] 2011 budget."
We also learn that they’ve “…indefinitely tabled a provision that holds credit rating agencies legally liable for their ratings if they are included in securities offering documents.”
And, when it comes to winding down the “too-big-to-fail” firms via the Resolution Authority, the fact of the matter is Dodd-Frank has made a promise that our country’s legal system cannot keep; at least when it comes to imposing U.S. law on multinational conglomerates.
As Kaufman succinctly nails it: "How do you put together resolution authority for these banks that have $2 trillion in assets? How do you do it across country lines?"
My response to Kaufman is this: Handle the matter much as we handle offshore/Internet gambling in the U.S., today: Our government could simply strip away the failed, too-big-to-fail’a licenses to conduct business in the U.S., going forward.
Checkout M.I.T. economist Simon Johnson’s ideas as far as winding down too-big-to-fail firms are concerned, right HERE. (Hint: The title of Johnson’s commentary is: “The Banking Emperor Has No Clothes.”)
(I’ve saved the most egregious realities for last in this diary.)
You see, one need look no further than my last couple of diaries and today’s New York Times’ editorial for validation of the sentence which comprises the headline of my post, tonight, “It’s Past Time For President Obama To Take Off The Gloves.”
It is “past time.” In fact, it’s too damn late to do much of anything about legislation that was supposed to protect us from further financial crises. What we’ve come to know as “the sweeping regulatory reform of Dodd-Frank” is now morphing into little more than another brutal reminder of the extent of our corporate kleptocracy.
Speaking of brutal reminders of the extent of our corporate kleptocracy, as we all know, Treasury Secretary Tim Geithner reports to the President; and the head of our nation’s Treasury has been given a tremendously wide berth to manage virtually all things controlled by this administration (as opposed to Ben Bernanke over at the Federal Reserve, who—theoretically, at least--acts with at least some degree of autonomy) as it relates to our economy. This is a basic reality in the Obama administration, today.
GEITHNER ON JOB CREATION AND MORE STIMULUS ON MAIN ST.
As I noted in my post this past Thursday, here are Geithner’s sentiments on funding additional stimulus for job creation on Main Street, in terms of where he views that priority versus the current rage in D.C. which features wrongheaded, rightwing catcalls for austerity and cuts in basic social programs in the name of reining in our country’s debt…
Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.
GEITHNER ON KEEPING U.S. HOMEOWNERS IN THEIR HOMES
Then, on Saturday, I posted THIS DIARY on another ProPublica investigative report which highlights the Treasury Department’s abysmal failures as they relate(d) to keeping Americans in their homes during our nation’s ongoing mortgage meltdown and foreclosure fraud fiasco(s).
In that post, I also referenced a whopping sleeper of a story, IMHO, concerning the acknowledged fact that it is very much on the agenda of the Treasury Secretary to turn the mortgage arms of our nation’s too-big-to-fail banks into formal, privately-owned, government-sponsored enterprises (i.e.: “GSE’s”), thus supplanting Fannie Mae and Freddie Mac, and providing the greatest opportunity (ever) for Wall Street to comprehensively and permanently institutionalize the concept of our financial services sector’s never-ending quest to privatize profits and socialize losses ‘til hell freezes over.
GEITHNER ON PROSECUTING TOO-BIG-TO-FAIL BANKS FOR THEIR MOST EGREGIOUS CRIMES
Minutes after posting my diary on Saturday, I then read: THIS retelling, currently running over at Alternet.org, of a (still-fascinating, but somewhat dated) story concerning a “…high-profile investigation [which] ultimately revealed that from 2004-2007, a staggering amount of illegal drug [cartel] proceeds totaling $378.4 billion dollars were transferred into Wachovia by the Mexico-based Casa Cambios that violated U.S. government anti-money laundering compliance.”
What was different, this time around, as far as this story was concerned, is that we were provided with none other than then-Federal Reserve Bank of New York President Tim Geithner’s explanation as to why nobody from Wachovia went to jail.
(Note: If you read this story in its entirety you’ll learn that Wachovia executives did, eventually, acknowledge that they committed criminal acts.)
American Banks 'High' On Drug Money: How a Whistleblower Blew the Lid Off Wachovia-Drug Cartel Money Laundering Scheme
Clarence Walker
Alternet.org
June 10, 2011
… we must question why bank executives and corporate CEOs' rarely face criminal indictments. And if by chance a series of criminal indictments are handed down the ripple effect of the massive injuries and loss of investor's funds outweigh the civil penalties and fines levied against the 'big wigs.'
…
Bypassing criminal charges the prosecutors usually hit a bank with a civil indictment known in the legal circle as 'deferred prosecution agreement', the same deal Wachovia accepted despite overwhelming evidence of intentional criminal conduct.
Adam Kaufman, chief of the investigative division of the Manhattan D.A. office defended the approach…by saying, "prosecutors could have indicted low-level bank employees who handled the transactions on a daily basis. But that wouldn't get the executives making the decisions and figuring out exactly who that is can be daunting."
Kaufman continued, "An indictment can be a death sentence for a financial institution and ruining large banks can trigger unforseen economic ripple effects."
The DA summed up what many believe is true, that banks and corporations are "too-big-to fail and too-big-to jail…"
…
… Geithner once described the financial system as a "target rich environment" for financial fraud. Geithner further explained how massive a problem it can be: "if banks and corporations were criminally indicted the results would inflict disaster for investors and stockholders."
To prevent financial institutions from facing criminal indictments for intentional violation of federal bank laws, the Feds often press the executives, in exchange for a civil fine, and be put on probation, to confess illegal activity that is particularly described in the media as an oversight to uphold federal policy rules.
Or the government can recommend a "deferred prosecution" or drop the matter altogether.
A deferred prosecution gurantee zero jail time. In 2003, U.S. Justice Department issued a memo commending deferred prosecution as a legal approach. "With cooperation by the corporation, the government may be able to reduce tangible losses, limit damage to their reputation and preserve assets for restitution…"
AND, WE COME FULL CIRCLE IN TONIGHT’S DIARY WITH THIS…
GEITHNER ON ELIZABETH WARREN BEING NAMED CHAIR OF THE CONSUMER FINANCE PROTECTION BUREAU
As I indicated at the very beginning of this post, this (see paragraph immediately below) is what it’s all about if we’re to prevent the recurrence (or worse) of the worst economic downturn in our nation’s history since the Depression; and the subsequent evisceration of the middle and lower classes in our society that has ensued—and is still ensuing as you read this--today.
Here’s the first paragraph, again…
Without strong leaders at the top of the nation’s financial regulatory agencies, the Dodd-Frank financial reform doesn’t have a chance. Whether it is protecting consumers against abusive lending, reforming the mortgage market or reining in too-big-to-fail banks, all require tough and experienced regulators.
Bold type is diarist's emphasis.
So, on top of reading about the ongoing evisceration of most of the substance contained in the “sweeping” Dodd-Frank financial regulatory reform legislation, we now have rather clear indications that, at this late hour, with the President required under that legislation to appoint a Chair of the Consumer Financial Protection Bureau by July 21st, and with the option of a recess appointment all but off the table, too, we’re left with the following, from Yves Smith over at Naked Capitalism, at 6:55AM this morning…
(Diarist’s Note: Naked Capitalism Publisher Yves Smith has provided written authorization to the diarist to reprint her blog’s posts in their entirety for the benefit of the DKos community.)
It is obvious that Elizabeth Warren should head the Consumer Financial Protection Bureau. No less than our favorite NC nemesis, the staunch Administration defender Economics of Contempt, has said she is “[https:/twitter.com#!/EconOfContempt/status/76373935465312256 tailor made]” for the job. In the face of increasingly vocal bank opposition to the notion of an effective bank watchdog for consumers, she’s done better than anyone anticipated. And despite the Republican bluster about using a pro forma session to keep the Senate in business to block a recess appointment, the Democrats could break that maneuver if they wanted to.
So why does Team Obama try to hide its choice not to appoint her behind silly “compromises” like its trial balloon of serving up the CFPB’s number two, Raj Date, as a candidate to lead the agency? The Republicans have already said they will approve no one unless they can cut off CFPB’s air supply by controlling its budget. You can’t negotiate with someone who won’t negotiate. Your options are to defy them or capitulate.
So this “compromise” is an inept sleigh of hand to shift responsibility for the Adminsitration’s refusal to appoint Warren on the Republicans.
The failure of the Team Obama to move beyond this impasse is revealing. It isn’t merely, as we have repeatedly mentioned, a sign that the Administration is in bed with the banksters. That’s a given. We predicted that Warren would not get the job…
…
…The Warren fiasco reveals deeper layers of the Administration’s character defects: its indifference to the plight of the middle class and its tactical incompetence.
# # #
There is much to be said for the benefits of strong leadership, across the board. Taking today's NY Times editorial one step further, the reality is that "without strong leadership," Main Street doesn't have a chance either.