This is a letter in response to a friends email to TB on Paul Volcker’s attempt to tighten regulation of banks:
Thanks, I hadn’t seen that. It is tragic that Obama said that Volcker was his idol, yet acted on advice of his ‘trusted’ allies (Emanuel and Bill Daley – who came from Citi and got a $900k kiss from them). Volcker said he was too old to lead a committee but would have been glad (eager?) to have been kept in the loop.
The most disgusting and degrading act Congress did with Dodd-Frank was the ‘Volcker Rule’ which he should have threatened to sue them for defamation over!
Jamie Dimon, the ‘much-loved’ CEO of JPM led the charge, not only against the legislation but against Elizabeth Warren who has come back to be his worst nightmare. She is who should be the Dem nominee for President. I am disgusted with the media for all but handing the nomination to Hillary Clinton, a horrible choice as he proved in the Senate changing her stance on equal pay for women (as Warren made clear), to do the bidding of her Wall Street donors.
Sadly, I believe were are where the Venetian and Roman Senate were just before the downfall. We don’t even have an oligarchy, we have a handful of people owning the Congress and the President (the two biggest donors to Obama’s campaign were Goldman, and JPMorgan).
Next, we come to Jon Corzine who was effectively kicked out of Goldman, then spent millions to become governor and then a senator. He then had the backing of two exclusive clubs. He was asked to be CEO of MF-Global to find a buyer. Instead, he practiced the same risk-taking he did at Goldman, only they didn’t have the capital to do it, so, at his direction, they ‘borrowed’ money from customer accounts, yet he tried to blame it on an underling. It was investigated but before charges were filed it was dropped. Why? Answer is above.
More on MF-Global: I was at L.F. Rothschild when they were becoming a primary government dealer. We had to jump through hoops for this privilege. Only when MF went down did I learn that they were a primary dealer! How could this happen? The NY Fed said they are not responsible for the financial condition of its dealers! Really!!! Since when? This leads back to Volcker’s recommendations. One of the ‘evil’ things the banks did by diversifying was to come under the control of several regulators. They then chose the weakest one to supervise them. That should have been the Federal regulators for any financial organization operating in multiple states. This is also why the GOP is dead wrong on ‘states rights’ and why insurance companies should be able to be national. Had this happened AIG would not have gotten into the mess they were in (oddly it was the Texas regulators who blew the whistle, but AIG solved that by cleaning up their act in the Texas subsidiary, and putting it in other states who did not do their due diligence.
I got to know Bill Dudley when he was government economist at Goldman. Met and had lunch with him on two occasions at their SF institutional bond buyers conference (about 20 people at each!). So I wrote him as President of the NY Fed. I told him how saddened I was to see what had happened to the Fed and this only added fuel to the fire that Goldman controls the Fed (he was NOT a GS insider and did not fit the mold). The letter went unanswered, as I expected.
It is the banking lobby that is pushing to have the Fed brought under control of Congress – they have already proven in their grilling of Fed Chairman that that would be the worst thing they can do.
How did we get here? In the Reid interview by Bill Moyers (which thankfully you brought to my attention), he laid out exactly how Glass-Steagall was brought down: thanks to Rubin (who was later well-rewarded for his blessing), Summers (the academic dictator and fool), and Greenspan (the true believer in Ayn Rand – how in hell did we get a Fed Chairman that was anti-regulation?).
William Donaldson, SEC Chairman in 2000, at the time of the demise of Glass-Stegall, came up with a plan to monitor the big five banks, which were to be exempted from regulation, by performing ‘random audits’ on the banks to keep them in line. He was, however, replaced shortly thereafter by former GOP Congressman Christopher Cox, who abandoned the idea, which had to contribute to the problem, as well as naked shorts of financial institutions, which he saw as no problem.
Now back to the beloved Gipper, who did four things:
1. destroyed labor unions and federal unions while municipal unions became virtual dictators);
2. by bailing out Continental over the objection of my former boss, Don Regan, created TBTF;
3. deregulated the S&L industry causing two crises and allowing Keating to cause the biggest S&L debacle – with the help of FOUR congressional members – no one had ever controlled more than one before;
4. appointed Greenspan as Fed Chairman in 1987, by Reagan, then re-appointed by three successive presidents
This is the idol of the GOP, who, by the way is not conservative enough to get elected – or even nominated today.
Now that I have vented – have a nice day!