Wednesday, April 14, 2010


Ezra Klein: Contracts are sacred only when rich people are getting paid

Shahien Nasiripour reports that J.P. Morgan plans to go hard against policies to modify underwater mortgages because contracts are sacred documents premised on the borrowers' "promise to repay."

This struck one union employee as a bit odd: After all, the business community is constantly demanding that autoworkers and steelworkers and other well-compensated laborers change their contracts to remain more in sync with the times. In those cases, contracts don't appear to be all that sacred, and employers' aren't seen as having some cosmic "promise to repay."

"Next time big business or Republican Governors or Mayors are talking about how working families need to 'sacrifice' or 'give back' for the good of the community by altering their contracts," e-mailed the AFL-CIO's Eddie Vale, "let's remember what happens when the shoe is on the other foot."

John Cole: The “Sanctity of Contracts”

This is rich:

With millions of homeowners losing their homes to foreclosure during this recession, megabank JPMorgan Chase plans to argue against the Obama administration’s latest weapon in its fight to stem the problem—principal cuts for struggling borrowers—by citing the sanctity of contracts and the borrower’s “promise to repay.”

In testimony to be delivered Tuesday afternoon, David Lowman, chief executive officer for home lending at the “Too Big To Fail” behemoth, will fight back against the program which calls for lenders and investors to decrease the outstanding debt owed on a home mortgage. While his competitors at Bank of America, Wells Fargo and Citigroup plan to dance around the issue—judging from their prepared remarks—Lowman cut right to it: borrowers don’t deserve it.

Ok. Let’s go back two years and not do ANYTHING to help out the banks during the crisis and see if JPMorgan Chase sinks or swims under the load of their “sanctified contracts” without taxpayer largesse and huge government intervention at taxpayer expense. And let’s see how many homes JPMorgan Chase has foreclosed on the owners and then abandoned in areas like Cleveland, leaving the wrecked and unclaimed homes to be looted, vandalized, and serve as crack and crime dens up and until the taxpayers are forced to deal with it. Let’s make them live up to their sanctified god damned contracts and take responsibility for their mess. Let’s see how profitable they are without no-interest and extremely low interest loans from the Fed which they turn around and lend to consumers for a hefty profit.

I hate these assholes. And yet I can guarantee there will be someone in the comments defending these guys. You hippies are just being irrational and lashing out!


In politics, memories can be short, but Americans have not yet forgotten the fact that the financial industry's recklessness nearly collapsed the global economy. And yet, congressional Republicans can't stop trying to curry favor with the industry.

Last month, it was House Minority Leader John Boehner (R-Ohio) embarrassing himself. This month, it's his Senate counterparts.

As a financial reform bill starts to take shape in Washington, two key lawmakers came to New York City last week to explain what it means for Wall Street, and how financial executives might help prevent some of its least market-friendly aspects from becoming law by electing more Republicans, FOX Business Network has learned.

About 25 Wall Street executives, many of them hedge fund managers, sat down for a private meeting Thursday afternoon with two of the most powerful Republican lawmakers in Congress: Senate minority leader Mitch McConnell of Kentucky, and John Cornyn, the senior senator from Texas who runs the National Republican Senatorial Committee, one of the primary fundraising arms of the Republican Party.

It appears to have been rather shameless -- Democrats, the GOP leaders said, are going to try to punish the irresponsible industry that caused the crash, and prevent similar crises from happening again. McConnell and Cornyn want to stop these efforts, and need the industry's help -- if Wall Street will work with Republicans, and elect a whole bunch of GOP candidates, the industry will be better off without all of those pesky regulations imposing oversight and accountability.

McConnell and Cornyn, in other words, are going out of their way to characterize Republicans as the Party of Wall Street. It's an exceedingly odd strategy, given the larger landscape.

John Cole: And Yet, No One is In Jail

Best and the brightest:

It was like a hidden passage on Wall Street, a secret channel that enabled billions of dollars to flow through Lehman Brothers.

In the years before its collapse, Lehman used a small company — its “alter ego,” in the words of a former Lehman trader — to shift investments off its books.

The firm, called Hudson Castle, played a crucial, behind-the-scenes role at Lehman, according to an internal Lehman document and interviews with former employees. The relationship raises new questions about the extent to which Lehman obscured its financial condition before it plunged into bankruptcy.

While Hudson Castle appeared to be an independent business, it was deeply entwined with Lehman. For years, its board was controlled by Lehman, which owned a quarter of the firm. It was also stocked with former Lehman employees.

None of this was disclosed by Lehman, however.

Look- I know I’m just a layman, but this sounds like EXACTLY what Andrew Fastow, the Chief Financial Officer at Enron, did for years before Enron finally crashed and burned. He’s in jail.

But these guys raped everyone, walked away with millions, and are probably thick as thieves with a new crowd in some other organization where we are told it would be Stalinesque to tax their bonuses.

Greg Sargent:

* The White House’s hard pivot to the economy (with a brief interruption for a nukes summit) continues today as Obama meets with Congressional leaders to turn up the pressure on financial reg reform. The White House framing:

The President will discuss the choice he sees in the debate — whether to stand with the American people or stand on the side of the status quo. The President believes momentum is on the side of greater accountability for Wall Street and strong protections for consumers, and the bipartisan meeting is an opportunity to discuss the urgent need to enact strong financial reform.

* Bipartisan? Okay, but this one is shaping up like a rerun of a bad movie: Richard Shelby, a lead GOP negotiator on financial reform, says that not a single Republican Senator is prepared to support the measure, at least in its current form.

* Signaling a more aggressive posture, the White House accuses Republicans of reading from Frank Luntz’s false talking points urging GOPers to link the legislation to big bailouts.

Ezra Klein: Sen. Mark Warner: Mitch McConnell 'either doesn't understand or chooses not to understand'

When Sen. Mitch McConnell said that the Senate financial-regulation bill meant "endless taxpayer-funded bailouts for big Wall Street banks," he was, knowingly or not, taking aim at a policy that had been jointly developed by Sens. Mark Warner (D-Va.) (pictured above) and Bob Corker (R-Tenn.). The two lawmakers began collaborating last spring, when they started holding joint briefings on the financial crisis. Eventually, Sen. Chris Dodd tasked them with handling the problem of what happens when too-big-to-fail firms, well, fail. He tasked them, in other words, with handling the problem of endless bailouts.

After months of meetings, the two finalized an agreement in February. That's the "resolution authority" part of the bill, which begins in section 201. And in an interview in his office this morning, Warner was not too happy with McConnell's characterization of their work. "It appears that the Republican leader either doesn't understand or chooses not to understand the basic underlying premise of what this bill puts in place."

"Resolution," Warner continued, "will be so painful for any company. No rational management team would ever choose resolution. It means shareholders wiped out. Management wiped out. Your firm is going away. At least in bankruptcy, there was some chance that some of your equity would've been retained and you could come out in some form on the other side of the process. The resolution that Corker and I have tried to create means the death of the company. The institution is gone."

Another element of the Republican critique concerns the $50 billion "orderly liquidation fund" that the FDIC will raise by taxing the banks. The idea of this fund is to create holdover money so the bank doesn't collapse while regulators are trying to unwind it. Sen. Richard Shelby, the ranking Republican on the Banking Committee, called it a "slush fund" and said that “the mere existence of this fund will make it all too easy to choose a bailout over bankruptcy.”

"Again," says Warner, "it's either that they don't understand or they choose not to understand. There's nobody in the financial sector who believes this. They'd laugh at the proposition that $50 billion is enough to get you through the resolution process if a couple of firms go down. What we've heard time and again is that the challenge in a crisis is to buy enough time to keep the lights on for a few days till you get the FDIC in here. You could make it smaller. Corker and I spoke about $25 billion. But this is funded by the industry."

"And here's the hypocrisy of the Republican leader's comments," continues Warner. "I can guarantee you that if there had not been some pre-funding, the critique would've been: 'Look at these guys! They've left the taxpayers exposed! What's going to keep the lights on for these few days? It's going to be Treasury funds or Federal Reserve funds. The taxpayer will be exposed!' ”

"If you haven't spent time with these issues," Warner sighed, "it's easy to pop off with sound-bite solutions that don't work."

John Cole: The Dodd Is Fired Up

I’d like to see what the Dodd looks like all pissed off:

Senate Banking Committee Chairman Christopher Dodd, D-Ct., delivered a blistering 20-minute speech that included the revelation of a political talking points memo from a Republican strategist that was virtually verbatim to the criticism voiced Tuesday by Senate Minority Leader Mitch McConnell, R-Ky.

McConnell had accused Dodd of drafting partisan legislation, even though the Banking Committee chairman has worked for roughly half a year with key Senate Republicans and incorporated many of their ideas into his bill. McConnell also said the bill continues controversial bank bailouts, which it does not.

“It’s a naked political strategy,” thundered a visibly upset Dodd. He held up a leaked memo attributed to GOP strategist Frank Luntz that advises Republican lawmakers to accuse Dodd and other Democrats of perpetuating bailouts for giant banks.

“Nothing could be further from the truth. The bill as drafted ends bailouts,” Dodd said, describing how regulators would get new powers to dissolve large financial institutions, even healthy ones if their size is deemed to threaten the broader financial system.

I’m sure McConnell sat their with pursed lips looking a little perplexed, because Senators usually don’t call each other liars. Normally, they are all on the same payroll, so decorum is never breached.

Beutler (TPM): Game Of Chicken: Democrats And Republicans Square Off Over Regulating Wall Street (VIDEO)

Senate Democrats, guided by the White House, wasted little time responding to Republican opposition to their financial regulatory reform proposal. A day after GOP came out swinging against a bill authored by Senate Banking Committee Chairman Chris Dodd, Democrats had a simple message for the minority: your time is running out. This touches off a game of chicken over the first big issue Congress will address after health care reform. And the question of whether the two parties can reach agreement over a growing number of disagreements remains in serious doubt.

This morning, Dodd took the the Senate floor to sound the warning to the GOP. "My patience is running out," he bellowed after issuing a withering critique of Republican leaders for grounding their opposition to his reform bill in a political strategy memo authored by conservative strategist Frank Luntz. Dodd has been negotiating with his counterpart, Sen. Richard Shelby (R-AL), but those talks may not last much longer.

If they're to be successful, somebody's going to have to give. The Obama administration is driving a very hard line on financial reform. They have made it clear to leading Democrats in Congress time and again that they will not tolerate making major concessions to the GOP, particularly if those concessions aren't guaranteed to win any votes. Most recently, according to Republican and Democratic sources, the Obama administration put the kibosh on negotiations between Senate Agriculture Committee Chair Blanche Lincoln and her counterpart Saxby Chambliss, who were negotiating a compromise on derivative regulation that the White House and Dodd found unacceptable. With Lincoln facing a stiff primary challenge, the administration made it very clear they wouldn't abide by her expected proposal.

"As the bill moves to the floor, we will fight any attempt to weaken it," warned Treasury Secretary Timothy Geithner, in a Washington Post op-ed yesterday. "The American people have suffered through too much to enact reform that does too little."

And sure enough, yesterday, Lincoln--typically one of the most conservative Democrats in the Senate--announced that she was putting forth derivatives regulation language that exceeded the White House's expectations.

But that also served to widen the divide between Republicans, who oppose requiring all derivatives to be traded and cleared on an open exchange, and Democrats, who will likely need 60 votes to break a filibuster if they want their bill to actually pass.

It's not just derivatives either. Republicans hold that Dodd's bill does nothing to address the problem of institutions that are too big to fail, and will perpetuate future bailouts. Among other things, they oppose the creation of a $50 billion fund, raised by imposing a fee on large financial institutions, that would cover the cost of winding down failed firms. Better, they say, to avoid the perception that any funds can be used to wind down institutions, and to let them fail.

"In ordinary bankruptcy, you can get debtor-in-possession money," Shelby told reporters yesterday.
"Companies have assets and through a bankruptcy court or a resolution court they can do this."

As for institutions that are already too big to fail, Republicans are mostly mum, though Shelby hinted that he (though not necessarily other Republicans) would support breaking them up pre-emptively.

The White House has left congressional Democrats little wiggle room on these issues. Republicans say they want to turn this into a political issue. There's no doubt some truth to that, but the White House also wants a bill, and they're banking on the idea that Republicans won't unilaterally kill a bill that restricts the excesses of Wall Street: perhaps the only institution in America more hated than Congress.

Video of Dodd's speech below:

John Cole: Prepare For a Lengthy Double-Dip Recession

Because Larry Kudlow is predicting a recovery:

Conservatives shouldn’t fight the tale of the tape.

Sometimes you have to take out your political lenses and look at the actual statistics to get a true picture of the health of the American economy. Right now, those statistics are saying a modest cyclical rebound following a very deep downturn could actually be turning into a full-fledged, V-shaped, recovery boom between now and year-end.

I’m aiming this thought especially at many of my conservative friends who seem to be trashing the improving economic outlook — largely, it would appear, to discredit the Obama administration.

Don’t do it folks. It’s a mistake. The numbers are the numbers. And prosperity is a welcome development for a nation that has suffered mightily.

Credibility is at issue here.

Conservative credibility.

Capitalist credibility.

We’re screwed. And since when does conservative credibility matter a whit- you just lie, get the bobbleheads to repeat it, and when it turns out you were lying all along, you’ll have already moved on to the next lie. Credibility is for chumps and Democrats.

Think Progress: Bachmann: ‘We’re hoping that President Obama’s policies don’t succeed.’

Before President Obama took office in January 2009 in the midst of an economic crisis, Rush Limbaugh was rooting for his failure, declaring “I hope Obama fails.” Though some GOP leaders claimed that “no one wants” Obama “to fail,” Limbaugh’s comments were endorsed by many leading conservatives. In an interview with radio host Scott Hennen yesterday, Rep. Michele Bachmann (R-MN) said that conservatives were hoping “that President Obama’s policies don’t succeed”:

HENNEN: I’m proudly accepting that label of rooting for failure for his policies, not for any one personal individual or anything else, but, I mean, should we, is that what Republicans are doing? Are we rooting for failure? Is David Axelrod right?

BACHMANN: We’re, we’re, we’re hoping that President Obama’s policies don’t succeed, exactly as you said. And of course, David Axelrod unfortunately seems to be wanting to smear people who disagree with the president. We’ve seen that over and over at Tea Party events, at gatherings where people say, “look, I don’t like this idea of out of control spending and accumulating deficits that our kids have no possibility of paying back.” And to think that those of us, we who disagree with that very ill-thought out idea are being smeared, I think that’s really wrong.

Listen here:

Bachmann is free to disagree with Obama’s policies, and it’s not surprising that she thinks they are the wrong policies to pursue. But considering that the goal of something like the stimulus is to create jobs and help the economy recover, it’s odd that Bachmann would actively want Obama’s policies to fail. She might think it will fail, but why would she want it to fail in creating jobs? Media Matters’ Eric Boehlert has argued that because of “the right-wing’s obsessive campaign against Obama,” they “latch onto this idea that the economy is being driven off a cliff, which means that basically” they are “now rooting for bad news.”

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