UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

April 1, 2009

CRASH TALK

John Nichols, Nation - How come, if the auto industry must feel the pain, the speculators on Wall Street and the CEOs of the big banks and insurance companies only feel the love of the TARP program?

Why is it, as the Politico headline suggested, "Carrots for banks, sticks for autos"?. . .

Despite the fact that the United Auto Workers union called more than 30 years ago for a retooling the industry to produce smaller, more fuel-efficient vehicles, despite the fact that union members have accepted deeper cuts in pay and benefits than their foreign counterparts, [GM CEO] Wagoner kept trying to balance his books by discharging his most skilled employees and devastating communities in Wisconsin, Ohio, Michigan and other states.

But when will this administration get as tough with Wall Street as it has with Main Street? Didn't they screw up in far more dramatic, and damaging, ways than did Rick Wagoner?

Robert L. Borosage, Campaign for America's Future - We need a grand inquest -- either a special congressional committee or an independent commission like the 9/11 Commission armed with subpoena power -- to expose misbegotten policies, malpractices, and mistaken ideas that allowed the wizards of Wall Street to transport us over the cliff.

In the 1930s, the dramatic hearings by the Senate Banking and Currency Committee became known as the Pecora Commission, after Ferdinand Pecora, the fierce former assistant prosecutor from New York who served as general counsel. Born in Sicily, the son of an immigrant cobbler, Pecora was a crusader. As counsel, he hauled the barons of Wall Street before the committee, and took them apart with often withering cross examination. By the time Pecora was done, the hearings had captivated the country's attention and, as Ron Chernow reports, Senator Burton Wheeler of Montana was comparing the bankers to Al Capone and the public began calling them "banksters," rhyming with gangsters.

The Senate committee unearthed the assorted frauds, the abuses, the ponzi schemes that led to the 1929 crash. And in doing so it provided both the case for reform and built a public demand in support of it.

The hearings came under fierce criticism. Wall Street bankers charged that they were "undermining confidence." Some Senators scorned them as running a "circus," and in fact, some of the excesses deserved the tag.

Yet, Pecora was deadly serious. By the time the hearings ended in May 1934, they had generated 12,000 printed pages of testimony -- providing the source that historians have mined ever since to fuel their descriptions of the era. And they paved the way for reform: the Securities Act of 1933, the Glass-Steagall Act of 1933, and the Securities Exchange Act of 1934. In recognition, Roosevelt named Pecora to be a commissioner of the new SEC.

We need the same fearless investigation now.

Phil Mattera, Dirt Diggers Digest - It may be a coincidence, but some banks are repaying the aid they received from the federal government just as some real accountability is finally being injected into the massive financial bailout that has been going on since last fall. The repayment moves so far involve relatively small regional banks, but there have been reports that Goldman Sachs, the recipient of a $10 billion federal capital infusion, is eager to buy out Uncle Sam’s holding.


The stricter accountability that the banks may be responding to is coming not from the Treasury Department but rather from the watchdog bodies that were created in the bailout legislation enacted last year—especially the Office of the Special Inspector General for the Troubled Asset Relief Program. The SIGTARP himself, Neil Barofsky, just offered some remarkable testimony to the Senate Finance Committee.

First of all, he provided a clear estimate of how much the federal government is potentially on the hook for in the dozen different bailout-related programs: up to $2.976 trillion, not counting the yet-to-be-determined cost of the capital that will be offered to banks after they are subjected to a stress test.

Second, Barofsky reported that he demanded and received reports (still being analyzed) from every one of the 364 TARP recipients about how they are using federal funds and whether they are complying with restrictions on executive compensation. . .

Barofsky emphasizes that his office is the only TARP watchdog that has criminal law enforcement powers, and he clearly intends to use them. He's launched "more than a dozen criminal investigations"� of possible bailout fraud and is working with the New York division of the High Intensity Finance Crime Area program, an initiative launched in the Treasury Department in 1999 to coordinate the prosecution of money laundering. Barofksy has even set up a whistleblower hotline (877-SIG-2009). .

David Sirota, Open Left - In Mike Allen and Jim Vandehei's nauseating tribute to D.C. conventional wisdom that claims it's fine to shove automakers into union-busting bankruptcy court while coddling banking industry executives, we get this truly unfathomable quote from "a Democratic official close to the White House":

"[White House officials] have more confidence in the leadership on the banking side - that there are people in place who understand what went wrong and the steps necessary to deal with this disaster."

If this is to be believed - and the double-standard treatment of Detroit and Wall Street makes it believable - then there really are no words to describe how unfathomable that kind of thinking is. How could anyone - even people in the Washington bubble - honestly "have confidence" that the leadership of the banking industry "understand what went wrong and the steps necessary to deal with this disaster?"

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