Wall Street Executives Don't Get How Angry Main Street Is

[roxybeast]

Obama Blasts Banks For Opposing Financial Reform (VIDEO)
By DARLENE SUPERVILLE, Associated Press
Huffington Post, December 12, 2009

WASHINGTON - President Barack Obama singled out financial institutions for causing much of the economic tailspin and criticized their opposition to tighter federal oversight of their industry.

While applauding House passage Friday of overhaul legislation and urging quick Senate action, Obama expressed frustration with banks that were helped by a taxpayer bailout and now are "fighting tooth and nail with their lobbyists" against new government controls.

In his weekly radio and Internet address Saturday, Obama said the economy is only now beginning to recover from the "irresponsibility" of Wall Street institutions that "gambled on risky loans and complex financial products" in pursuit of short-term profits and big bonuses with little regard for long-term consequences.

"It was, as some have put it, risk management without the management," he said.

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The president also told CBS' "60 Minutes" that "the people on Wall Street still don't get it. ... They're still puzzled why it is that people are mad at the banks. Well, let's see. You guys are drawing down $10, $20 million bonuses after America went through the worst economic year ... in decades and you guys caused the problem," Obama said in an excerpt released in advance of Sunday night's broadcast of his interview.

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The House bill, which passed 223-202, would grant the government new powers to split up companies that threaten the economy, create an agency to oversee consumer banking transactions and shine a light into shadow financial markets that have escaped federal oversight.

Obama is seeking swift approval in the Senate "because we should never again find ourselves in the position in which our only choices are bailing out banks or letting our economy collapse."

No House Republicans voted for the bill, and 27 Democrats voted against it. Opponents argue that the broad legislation overreaches and would institutionalize bailouts for the financial industry.

The Senate Banking, Housing and Urban Affairs Committee is working on its own version of the package.

In his address, Obama contended that the worst economic downturn since the Depression wouldn't have happened if the rules governing Wall Street been clearer and enforcement tougher.

Obama singled out Republicans and industry lobbyists for trying to block the changes.

Last week, top House Republicans urged more than 100 financial industry lobbyists to work harder to defeat the bill. Lobbyists have spent more than $300 million this year trying to scuttle the bill.

Opponents say that the changes would limit consumer choice and that added federal oversight would stunt financial market innovation.

Obama suggested that was one risk worth taking.

"Americans don't choose to be victimized by mysterious fees, changing terms and pages and pages of fine print. And while innovation should be encouraged, risky schemes that threaten our entire economy should not," he said. "We can't afford to let the same phony arguments and bad habits of Washington kill financial reform and leave American consumers and our economy vulnerable to another meltdown."

Obama has scheduled a meeting Monday at the White House with financial services industry leaders to seek support for his effort to tighten federal oversight of the industry and to limit pay for top executives at institutions that accepted billions in bailout money from the government.

Source: http://www.huffingtonpost.com/2009/12/1 ... 89838.html

[roxybeast]

Disaster and Denial
By PAUL KRUGMAN
New York Times, December 14, 2009

When I first began writing for The Times, I was naïve about many things. But my biggest misconception was this: I actually believed that influential people could be moved by evidence, that they would change their views if events completely refuted their beliefs.

And to be fair, it does happen now and then. I’ve been highly critical of Alan Greenspan over the years (since long before it was fashionable), but give the former Fed chairman credit: he has admitted that he was wrong about the ability of financial markets to police themselves.

But he’s a rare case. Just how rare was demonstrated by what happened last Friday in the House of Representatives, when — with the meltdown caused by a runaway financial system still fresh in our minds, and the mass unemployment that meltdown caused still very much in evidence — every single Republican and 27 Democrats voted against a quite modest effort to rein in Wall Street excesses.

Let’s recall how we got into our current mess.

America emerged from the Great Depression with a tightly regulated banking system. The regulations worked: the nation was spared major financial crises for almost four decades after World War II. But as the memory of the Depression faded, bankers began to chafe at the restrictions they faced. And politicians, increasingly under the influence of free-market ideology, showed a growing willingness to give bankers what they wanted.

The first big wave of deregulation took place under Ronald Reagan — and quickly led to disaster, in the form of the savings-and-loan crisis of the 1980s. Taxpayers ended up paying more than 2 percent of G.D.P., the equivalent of around $300 billion today, to clean up the mess.

But the proponents of deregulation were undaunted, and in the decade leading up to the current crisis politicians in both parties bought into the notion that New Deal-era restrictions on bankers were nothing but pointless red tape. In a memorable 2003 incident, top bank regulators staged a photo-op in which they used garden shears and a chainsaw to cut up stacks of paper representing regulations.

And the bankers — liberated both by legislation that removed traditional restrictions and by the hands-off attitude of regulators who didn’t believe in regulation — responded by dramatically loosening lending standards. The result was a credit boom and a monstrous real estate bubble, followed by the worst economic slump since the Great Depression. Ironically, the effort to contain the crisis required government intervention on a much larger scale than would have been needed to prevent the crisis in the first place: government rescues of troubled institutions, large-scale lending by the Federal Reserve to the private sector, and so on.

Given this history, you might have expected the emergence of a national consensus in favor of restoring more-effective financial regulation, so as to avoid a repeat performance. But you would have been wrong.

Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.

Oh, and conservatives simply ignore the catastrophe in commercial real estate: in their universe the only bad loans were those made to poor people and members of minority groups, because bad loans to developers of shopping malls and office towers don’t fit the narrative.

In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: “It is difficult to get a man to understand something when his salary depends on his not understanding it.” As Democrats have pointed out, three days before the House vote on banking reform Republican leaders met with more than 100 financial-industry lobbyists to coordinate strategies. But it also reflects the extent to which the modern Republican Party is committed to a bankrupt ideology, one that won’t let it face up to the reality of what happened to the U.S. economy.

So it’s up to the Democrats — and more specifically, since the House has passed its bill, it’s up to “centrist” Democrats in the Senate. Are they willing to learn something from the disaster that has overtaken the U.S. economy, and get behind financial reform?

Let’s hope so. For one thing is clear: if politicians refuse to learn from the history of the recent financial crisis, they will condemn all of us to repeat it.

[roxybeast]

<center>THE REINCARNATION OF THE DARK AGES
None Dare Call It RELIGIOUS FEUDALISM
By L. Adams, December 27, 2009</center>

The king taxed the peasants to poverty while the royals were exempt from paying any. Reason? Unjust tax codes were a design of the rich, by the rich, and for the rich. That was the “targeted tax-cut” which invariably became law. “He who hath the gold maketh the rules.”

The Dark Ages was the birthplace of “Trickle-Down Economics.” The caste system was embraced, the church was simply a ruling arm of the monarch, and slavery was legitimatized by the religious righteous.

Republicans constantly decry labor’s “class warfare,” but this is the real war being waged across America. The cultural war is basically a derivative of class warfare – where the ruling class has employed white evangelicals to do their bidding: divide and conquer.

During the Dark Ages, wealth was exclusively inherited, not earned. The legal system was purchased like a commodity resulting in juryless trials, military tribunals, pronouncements by a king acknowledged as sovereign and commissioned by God to rule as if the voice of Providence Himself, executive orders usurping representation, taxation without representation, etc. Anyone disputing the monarch’s sovereignty was designated a traitor and summarily executed, tortured or banished to dungeon. These were the markings of the Dark Ages. Are they not similar to contemporary Republicanism so glaringly demonstrated during the Bush years?

America’s founders rejected the monarchial system where its legitimacy hinged on approval by the religious supremes. The “separation of church and state” concept of the new republic was established for that reason. Now we are sliding back into the realm where the head of state rides to power on a religious beast, where any successful candidate must be approved by the predominant religious system to win. Even our beloved Barack Obama during the 2008 campaign felt he must do pilgrimage to Saddleback Church and later pay homage to Pastor Rick Warren at Inaugural.

The Dark Ages were not only dark from plagues, they were darkened from ignorance, superstition and greed. The religious right denied the world was round; anyone disputing this “God-derived” doctrine was executed or imprisoned. Science was equated with Satanism. Thus, discovery, invention, innovation, and commercialism could not flourish, and the West plunged into poverty. Does America not see the similarity? A religious system that wages war on science, denies climate change, rejects evolution, and edits Texas texts for school children to include praise for Limbaugh, Beck and Palin is a system geared toward destroying not only scientific and environmental thought, but the foundation of economy.

The religious system was USED to gain power for monarchs similar to the way current political operatives USE the religious to further their own aims. In the Middle Ages, the doctrine of the “divine right of kings” precluded civil liberties; the king/queen equaled “divinity.” Potentates (royals) were considered surrogates of God. Power was passed down from father to son — Dynasties divinely ordained by entitlement. So, when we hear of world leaders or presidents bequeathed the title “Man of God,” watch out. It may not be long before civil liberties and human rights become casualties in the name of national unity and security — and with popular support — the masses duped by superstition. Remember the Bush theocratic dynasty.

History has witnessed its booms and busts (some massage as “cyclical market adjustments”). History repeats itself. We were at the core of an unparalleled economic boom at the close of the Clinton years — measured by purchases, low unemployment and budget surpluses. There were more jobs than people to fill them; illegals streamed across the border. Now we’re in a deep recession as a consequence of buying into Republican Dark-Age mentality.

What caused history’s busts? When capital is concentrated among the wealthiest, history warns of ominous collapse. The bubble bursts. It happened in 1837, 1857, 1884, 1893, 1907 and 1929. In all depressions there was glaring disparity of income: The poor — poorer, the rich — richer.

Prosperity is the result of healthy circulation of currency where the vast majority have robust purchasing power. When wealth fails to circulate but is dammed up by a concentration at the top, the economy falls and results in depression or severe recession. When the rich accumulate an overwhelming portion of the wealth, their house of cards comes tumbling down because there remains few to buy the goods sold by the wealthy to sustain the lifestyle.

Sure, other factors – such as over-speculation, Wall Street insider trading, anti-labor trade agreements, deregulation, and tax policies determined by greedy special interests – drive the economy into the ditch. But are not these all related? The world is loaded down with the cancers of Bernie Madoffs and Kenny Lays before downturn metastasizes itself into poverty, crime and collapse.

Consider this ominous fact: The average American’s income has remained flat since 1977 — 33 years ago, while the income of the richest 1% has more than tripled — 228% (Center on Budget and Policy Priorities). CEOs (corporate executive officers) incomes rose 400% in the 1990s to $10.6 million annual income per capita, while take-home pay for the average American, the 80%, rose zero percent.

Real life experience bears it out. Most Americans don’t enjoy the purchasing power they once did when a one-income family could raise children, purchase a home, car and college education for their kids. Now both parents work (if lucky enough to have a job) and still can’t keep up, resulting in less quality education, poor family relations, rising crime, and an eroding moral foundation.

Some in this country never learn from history. The greedy are blinded to the fact that refusing to care for others less fortunate ultimately leads to their own demise. The underlying truth may be that these tightfisted characters are not so much concerned about accumulating wealth as widening the gap. Yes, they delight in seeing the difference. Class consciousness means more to them than money in the bank. Thus, the motive defines the power struggle.

Thom Hartmann’s depiction of America’s economic and educational decline is accurate.


The political will of the radical right is more stubborn than ever. Not only do they want to defeat Health-Care Reform, they want to rid the country of any safety-net, Social Security, Medicare, Medicaid, and any other “socialist” program. It’s all “socialism” or “communism” to them. . . “un-American.”

They hide their greed behind such noble causes as “individualism,” “patriotism,” “character & family values” and “national security,” but all the while their ultimate aim is the same. Proudly they wave the flag and claim to be the lead standard bearers for patriotism; all the while we recall they’re missing in action when it really counts; wealthy family ties shield them from risk. Only the rich initiate wars, mostly the poor fight them. The double standard of justice comes from obscene wealth. Principles can be compromised at a price. And so can religion, their primary weapon of choice.

In similar manner, they buy off religious organizations and congressmen, hire the best lobbyists, and manipulate enough voters through the religious system to change laws for their benefit. Their aim? To further concentrate the wealth and leave the rest of the country destitute if need be. Their “compassionate conservatism” is hypocrisy cloaked in a sound-bite.

In future years it will be written that the real enemy of our times was not communism or socialism (as many Tea-Baggers scream), but rather the re-emergence of a form of feudalism in alliance with theocracy or what The Family (“C-Street”) calls “Dominionism.” The Handmaid’s Tale was not too far off.

In place of mote-defended castles surrounded by thatched-roof shanties will be “gated communities” [sporting high-tech surveillance to keep the homeless and servant-class out] surrounded by metal trailer shanties housing 21st Century serfs. Recall “Hoovervilles”? The new shanty-towns should be aptly named “Bushvilles.” We’ve come a long way in 1,200 years or so.

Source: http://tpjmagazine.us/adams36

[roxybeast]

Here's an interesting idea I agree with, the US should make colleges / public universities free or at least very low cost, to help the poor and middle class improve their lot in life - like lots of lots of developed, and apparently more advanced, nations around the world have already done!

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[roxybeast]

<center>2009: The Year Wall Street Bounced Back
and Main Street Got Shafted
by Robert Reich, Former U.S. Secretary of Labor
& Current Economics Professor at University of California at Berkeley
Huffington Post, December 28, 2009</center>

In September 2008, as the worst of the financial crisis engulfed Wall Street, George W. Bush issued a warning: "This sucker could go down." Around the same time, as Congress hashed out a bailout bill, New Hampshire Sen. Judd Gregg, the leading Republican negotiator of the bill, warned that "if we do not do this, the trauma, the chaos and the disruption to everyday Americans' lives will be overwhelming, and that's a price we can't afford to risk paying."

In less than a year, Wall Street was back. The five largest remaining banks are today larger, their executives and traders richer, their strategies of placing large bets with other people's money no less bold than before the meltdown. The possibility of new regulations emanating from Congress has barely inhibited the Street's exuberance.

But if Wall Street is back on top, the everyday lives of large numbers of Americans continue to be subject to overwhelming trauma, chaos and disruption.

It is commonplace among policymakers to fervently and sincerely believe that Wall Street's financial health is not only a precondition for a prosperous real economy but that when the former thrives, the latter will necessarily follow. Few fictions of modern economic life are more assiduously defended than the central importance of the Street to the well-being of the rest of us, as has been proved in 2009.

Inhabitants of the real economy are dependent on the financial economy to borrow money. But their overwhelming reliance on Wall Street is a relatively recent phenomenon. Back when middle-class Americans earned enough to be able to save more of their incomes, they borrowed from one another, largely through local and regional banks. Small businesses also did.

It's easy to understand economic policymakers being seduced by the great flows of wealth created among Wall Streeters, from whom they invariably seek advice. One of the basic assumptions of capitalism is that anyone paid huge sums of money must be very smart.

But if 2009 has proved anything, it's that the bailout of Wall Street didn't trickle down to Main Street. Mortgage delinquencies continue to rise. Small businesses can't get credit. And people everywhere, it seems, are worried about losing their jobs. Wall Street is the only place where money is flowing and pay is escalating. Top executives and traders on the Street will soon be splitting about $25 billion in bonuses (despite Goldman Sachs' decision, made with an eye toward public relations, to defer bonuses for its 30 top players).

The real locus of the problem was never the financial economy to begin with, and the bailout of Wall Street was a sideshow. The real problem was on Main Street, in the real economy. Before the crash, much of America had fallen deeply into unsustainable debt because it had no other way to maintain its standard of living. That's because for so many years almost all the gains of economic growth had been going to a relatively small number of people at the top.

President Obama and his economic team have been telling Americans we'll have to save more in future years, spend less and borrow less from the rest of the world, especially from China. This is necessary and inevitable, they say, in order to "rebalance" global financial flows. China has saved too much and consumed too little, while we have done the reverse.

In truth, most Americans did not spend too much in recent years, relative to the increasing size of the overall American economy. They spent too much only in relation to their declining portion of its gains. Had their portion kept up -- had the people at the top of corporate America, Wall Street banks and hedge funds not taken a disproportionate share -- most Americans would not have felt the necessity to borrow so much.

The year 2009 will be remembered as the year when Main Street got hit hard. Don't expect 2010 to be much better -- that is, if you live in the real economy. The administration is telling Americans that jobs will return next year, and we'll be in a recovery. I hope they're right. But I doubt it. Too many Americans have lost their jobs, incomes, homes and savings. That means most of us won't have the purchasing power to buy nearly all the goods and services the economy is capable of producing. And without enough demand, the economy can't get out of the doldrums.

As long as income and wealth keep concentrating at the top, and the great divide between America's have-mores and have-lesses continues to widen, the Great Recession won't end -- at least not in the real economy.

Source: http://www.huffingtonpost.com/robert-re ... 04889.html

[roxybeast]

<center>The Cash Committee: How Wall Street Wins On The Hill
by Ryan Grim and Arthur Delaney
Huffington Post, December 29, 2009</center>

The question was simple: Should the lending practices of auto dealers be regulated?

It was already October and the 42 Democrats and 29 Republicans on the House Committee on Financial Services had spent the better part of the year hashing out the details of a new federal agency dedicated to protecting consumers from dangerous and deceptive financial products.

Auto dealers seemed like an obvious target for the new agency; nearly every time someone buys a car, the dealer also sells them an auto loan, complete with promises like zero per cent interest and a pile of cash back. Americans hold some $850 billion in car debt and dealers are responsible for marketing roughly four-fifths of that amount. They pocket lucrative commissions with little oversight, and the committee seemed poised to change that.

Enter Rep. John Campbell (R-Calif.), a former Saab dealer from Orange County, who according to his latest financial disclosure statement still collects rent from some of his former auto dealer colleagues. Campbell downplayed the importance of his industry partners and proposed an amendment to the bill exempting dealers from the new agency's purview. On October 22, it came up for a vote.

As usual, the members filed into the high-ceilinged first-floor hearing room in the Rayburn House Office Building. Committee Chairman Barney Frank oversaw the vote atop four tiered rows of seats, a full story above the witnesses and the audience. The longest-serving Democratic members of the panel -- informally known as the banking committee -- sat to the right or just below the chairman; it can take years, if not decades, for a freshman representative to ascend up the risers.

The clerk called the roll, starting from the top. Senior Democrats roundly rejected Campbell's amendment. It appeared as if the Democrats would beat back the effort and apply the same standard to car dealers that was applied to everyone else.

Then came the bottom two rows, the place where reform goes to die. Despite the disapproval of the powerful chairman and nearly every consumer group in the country, the Campbell amendment passed by a 47-21 margin.

THE FRONTLINES

In the fall of 2008, Democrats took the White House and expanded their Congressional majorities as America struggled through a financial collapse wrought by years of deregulation. The public was furious. It seemed as if the banks and institutions that dragged the economy to the brink of disaster -- and were subsequently rescued by taxpayer funds -- would finally be forced to change their ways.

But it's not happening. Financial regulation's long slog through Congress has left it riddled with loopholes, carved out at the request of the same industries that caused the mess in the first place. An outraged American public is proving no match for the mix of corporate money and influence that has been marshaled on behalf of the financial sector.

The banking committee is the second-largest in Congress -- the Transportation and Infrastructure Committee has three more members -- and is known as a "money committee" because joining it makes fundraising, especially from donors with financial interests litigated by the panel, significantly easier.

The Democratic leadership chose to embrace this concept, setting up the committee as an ATM for vulnerable rookies. Eleven freshman representatives from conservative-leaning districts, designated as "frontline" members, have been given precious spots on the committee. They have individually raised an average of $1.09 million for their 2010 campaigns, according to the Center for Responsive Politics; by contrast, the average House member has raised less than half of that amount.

Raising that much money, even with a golden seat on the committee, takes an awful lot of time. The Democratic Congressional Campaign Committee (DCCC) pushes members to do as much "call time" with potential donors as is physically possible from the moment they win election -- which doesn't leave much time for legislating.

"It creates a culture where people don't have to show up," says freshman Rep. Jackie Speier (D-Calif.) about the combination of the committee's size and the ever-pressing fundraising concerns. Speier, a freshman on the committee, says she began to think she was stupid for showing up to every single hearing when she first arrived on the Hill. "I don't know if it's just an unspoken rule around here -- because I'm still very new -- but it appears you don't have to show up for the hearing. You just show up to vote... I think for really thoughtful discussion and review to take place, you have to be an active participant. You can't just be the vehicle to whom one of the special interests throws an amendment with a statement attached and feel that you're doing the people's work."

Because the frontline members face the possible end of their careers in November and may be beholden to the whims of powerful donors, the Democrats' 13-seat advantage on the committee is weaker than it appears. If seven members break with the party on a vote, the GOP wins. Rep. Luis Gutierrez (D-Ill.) refers to them as "the unreliable bottom row." (The second row is little better, populated by the Democrats from red-leaning areas who first took office after the 2006 election.)

In short, by setting up the committee as a place for shaky Democrats from red districts to pad their campaign coffers, leadership made a choice to prioritize fundraising over the passage of strong legislation. "It makes it difficult to corral consensus," says Rep. Stephen Lynch (D-Mass.), a subcommittee chairman, of the unwieldy panel.

And just as the lure of money leads inexperienced new members to join the committee, it prompts experienced staffers to bolt for larger paydays in the private sector. "You have this phenomenon where if you have a staffer who's very experienced on a certain issue and is dealing with the financial sector for any number of months or years, all of a sudden they become a real acquisition target for Wall Street," says Lynch.

According to a HuffPost analysis of the 243 people who've worked on the committee -- including clerical and technology staff -- since 2000, almost half of the 126 people who have left registered as lobbyists, mostly for the financial services industry.

And recruiting experienced Capitol Hill hands to work on K Street pays off in material ways. For example, it didn't hurt the auto dealers' chances of winning an exemption that a third of the industry trade group's two dozen lobbyists are former Hill staffers.

Commercial banks, according to the Center for Responsive Politics, spent nearly $50 million lobbying in 2008 and dropped another $37 million in the first three quarters of 2009. They employed 417 federally-registered lobbyists.

And the revolving door turns in both directions. Sixteen of the committee's 86 current staffers -- including a good chunk of the senior staff -- worked as lobbyists before coming to the committee. (And it's not just Republicans; 12 of the 16 are Democrats.)

"The door doesn't just revolve once," says Rep. Brad Miller (D-N.C.). "They tend to go out and come back and go out again. It really does create a set of financial incentives, whether conscious or not."

Though Lynch laments the phenomenon of staffers fleeing to K Street, he's got nothing against the individuals who leave: "I don't begrudge any of these young people with huge student loans and some Wall Street firm wants to compensate them."

Frank laments staff compensation: "We underpay public officials. Particularly the staff. [Lawmakers] get a certain degree of non-monetary compensation -- psychic. You know, I get mentioned on 'Gossip Girl.'"

Staffers get a good look at how the other half lives; they rub elbows with lobbyists both at work (in meetings or even on extravagant field trips) and off the clock, during ritualistic happy hours. Those who attend know the unspoken rule: don't talk too much shop but bring plenty of business cards. The friendly social scene helps explain why there's not much condemnation from staffers for colleagues who leave for higher pay.

"Everyone comes here to stand up for something they believe in, and at some point they go downtown to make money, and at some point someone they worked for draws them back [to the Hill]," said a former staffer who works as a lobbyist. "It's the running joke: a staffer gets married, you better go downtown! Spots open and one of the committee staffers has a kid. They'll be moving downtown. Money is number one."

"OUT-GRASSROOTSED"

As the House leadership set up committees for the 111th Congress in early 2009, Frank pushed to shrink the size of his own panel in order to better meet the historic challenges presented by the financial collapse and bailout, say several members of the committee including Reps. Watt, Miller and Lynch. Instead, it got bigger. "He was obviously outvoted," quips Lynch. "Either that or he missed the meeting."

Frank doesn't conceal his distress at the size of his panel. "I had no part in setting up the committee. That was all the Speaker," Frank says when asked about the front-row frontliners. Then, without prompting, he adds: "It's also very large, which is a problem. We're the second-largest committee, but the transportation committee does not have ideological issues."

The size and makeup of the committee have been a challenge even for Frank, a chairman not lacking in confidence or energy. "It's been very hard work. The committee used to be a very good little committee, because it had the urban constituency. But it's become a somewhat more desirable committee for people," he says. "There are a large number of people who have marginal seats, and it obviously makes me have to work harder and is a constraint on what we can do. We start out with what I want to do, but what's relevant is what I can get a majority for."

The sheer size of the committee can sentence reform to death by a thousand cuts. Each member of the majority, no matter where he or she falls on the political spectrum, has political interests back home. If those interests are affected by the bill, they've got someone on the panel to carry their concerns about "unintended consequences" to the chairman.

Frank denies that the big banks control his committee members; he actually claims that the big banks' backing of legislation these days is so toxic that he doesn't want their public support. "Goldman [Sachs] has no influence down here. Bank of America doesn't. Bank of America was ready to support the consumer policeman," Frank says in an interview in his office, referring to the CFPA. That support, he says, was politely declined.

There is some truth to Frank's point; groups like the auto dealers don't bring with them to Capitol Hill the public-relations baggage of Wall Street or Goldman Sachs. "The local auto dealers are very popular in their districts," Frank says. The more an interest group can make an issue district-specific and the more it can relate on an everyday level, Frank argues, the better it will do. "That's why the realtors always beat the bankers. The bankers sit and they go [Frank makes a dour face, leans back in his chair and tightly folds his arms, miming an aloof posture]. The realtors are out there joining the Kiwanis and sponsoring little league."

The same is true with John Deere, dairy farmers and other back-slapping boys from back home. But the big banks have figured this out, too -- and now they use precisely such groups to poke holes in the reform effort. Over the last year, they've drafted an army of credible little guys to walk the halls of Congress and push the interests of brokers, swaps traders and Wall Street bankers. And they've shown that they don't need big loopholes to slip trillions of dollars through.

"What's happening now is the pro-regulation forces are being out-grassroots-ed by the antis," Frank says. One member, he says, represented tons of title insurance companies. Another came from the headquarters of credit unions. A third's district is home to LexisNexis; another to Equifax. Each of those entities received special treatment because their representative sits on the committee -- and the more members on the committee, the more special treatment is needed. "I have not had a problem because of campaign contributions. The problem is democracy: it's people responding to people in their districts: community bankers, realtors, auto dealers, as I said, end users, insurance agents," says Frank.

A video of the vote on Campbell's amendment shows how the auto dealers won their victory. It's both serious and comical. After the senior committee members enter their no votes, the bottom two rows begin weighing in with yes after yes after yes -- followed by unanimous ayes from the GOP side.

Then, once it becomes clear that auto dealers are getting their way, those senior Democrats -- not wanting to get on the bad side of a powerful industry for a losing cause -- actually start switching their votes from no to yes.

As confusion spreads and more votes are changed, Frank tweaks his colleagues with a subtle dig. "Can I ask this? Would members please vote loudly, especially if you plan to vote differently than the clerk anticipates?" The chamber echoes with laughter.

Pretending that there is some mistake, several members ask the clerk how they were recorded before asking to switch their votes. After Rep. Dennis Moore (D-Kan.), a senior New Dem and a subcommittee chairman, employs this technique, Frank puts a stop to it. "I would also say, at the same time, if you know how you're recorded, don't ask the clerk. Just change your vote," he says. This time, there is no laughter.

Later on, when the bill was on the House floor, Frank and Rep. Mel Watt (D-Va.), a subcommittee chairman, tried to narrow the exemption but failed. The lopsided committee vote had sapped the strength of the opposition.

The scene of the unfolding vote demonstrates a few things at once: First, notice the size of the committee and the time it takes for everyone to vote. Then, watch the bottom two rows up-end the legislation. And see how difficult the committee is to control, even for as forceful a personality as chairman Frank:

It's in this environment that Frank is tasked with passing what he considers financial reform as historic as "what Theodore Roosevelt and Woodrow Wilson did to control trusts, and what FDR did to control the stock market" -- a regulatory bulwark that stood firmly until it was disassembled in the '80s and '90s.

The question was simple: Should the lending practices of auto dealers be regulated?

It was already October and the 42 Democrats and 29 Republicans on the House Committee on Financial Services had spent the better part of the year hashing out the details of a new federal agency dedicated to protecting consumers from dangerous and deceptive financial products.

Auto dealers seemed like an obvious target for the new agency; nearly every time someone buys a car, the dealer also sells them an auto loan, complete with promises like zero per cent interest and a pile of cash back. Americans hold some $850 billion in car debt and dealers are responsible for marketing roughly four-fifths of that amount. They pocket lucrative commissions with little oversight, and the committee seemed poised to change that.

Enter Rep. John Campbell (R-Calif.), a former Saab dealer from Orange County, who according to his latest financial disclosure statement still collects rent from some of his former auto dealer colleagues. Campbell downplayed the importance of his industry partners and proposed an amendment to the bill exempting dealers from the new agency's purview. On October 22, it came up for a vote.

As usual, the members filed into the high-ceilinged first-floor hearing room in the Rayburn House Office Building. Committee Chairman Barney Frank oversaw the vote atop four tiered rows of seats, a full story above the witnesses and the audience. The longest-serving Democratic members of the panel -- informally known as the banking committee -- sat to the right or just below the chairman; it can take years, if not decades, for a freshman representative to ascend up the risers.

The clerk called the roll, starting from the top. Senior Democrats roundly rejected Campbell's amendment. It appeared as if the Democrats would beat back the effort and apply the same standard to car dealers that was applied to everyone else.

Then came the bottom two rows, the place where reform goes to die. Despite the disapproval of the powerful chairman and nearly every consumer group in the country, the Campbell amendment passed by a 47-21 margin.


THE FRONTLINES

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In the fall of 2008, Democrats took the White House and expanded their Congressional majorities as America struggled through a financial collapse wrought by years of deregulation. The public was furious. It seemed as if the banks and institutions that dragged the economy to the brink of disaster -- and were subsequently rescued by taxpayer funds -- would finally be forced to change their ways.

But it's not happening. Financial regulation's long slog through Congress has left it riddled with loopholes, carved out at the request of the same industries that caused the mess in the first place. An outraged American public is proving no match for the mix of corporate money and influence that has been marshaled on behalf of the financial sector.

The banking committee is the second-largest in Congress -- the Transportation and Infrastructure Committee has three more members -- and is known as a "money committee" because joining it makes fundraising, especially from donors with financial interests litigated by the panel, significantly easier.

The Democratic leadership chose to embrace this concept, setting up the committee as an ATM for vulnerable rookies. Eleven freshman representatives from conservative-leaning districts, designated as "frontline" members, have been given precious spots on the committee. They have individually raised an average of $1.09 million for their 2010 campaigns, according to the Center for Responsive Politics; by contrast, the average House member has raised less than half of that amount.

Raising that much money, even with a golden seat on the committee, takes an awful lot of time. The Democratic Congressional Campaign Committee (DCCC) pushes members to do as much "call time" with potential donors as is physically possible from the moment they win election -- which doesn't leave much time for legislating.

"It creates a culture where people don't have to show up," says freshman Rep. Jackie Speier (D-Calif.) about the combination of the committee's size and the ever-pressing fundraising concerns. Speier, a freshman on the committee, says she began to think she was stupid for showing up to every single hearing when she first arrived on the Hill. "I don't know if it's just an unspoken rule around here -- because I'm still very new -- but it appears you don't have to show up for the hearing. You just show up to vote... I think for really thoughtful discussion and review to take place, you have to be an active participant. You can't just be the vehicle to whom one of the special interests throws an amendment with a statement attached and feel that you're doing the people's work."

Because the frontline members face the possible end of their careers in November and may be beholden to the whims of powerful donors, the Democrats' 13-seat advantage on the committee is weaker than it appears. If seven members break with the party on a vote, the GOP wins. Rep. Luis Gutierrez (D-Ill.) refers to them as "the unreliable bottom row." (The second row is little better, populated by the Democrats from red-leaning areas who first took office after the 2006 election.)

In short, by setting up the committee as a place for shaky Democrats from red districts to pad their campaign coffers, leadership made a choice to prioritize fundraising over the passage of strong legislation. "It makes it difficult to corral consensus," says Rep. Stephen Lynch (D-Mass.), a subcommittee chairman, of the unwieldy panel.

And just as the lure of money leads inexperienced new members to join the committee, it prompts experienced staffers to bolt for larger paydays in the private sector. "You have this phenomenon where if you have a staffer who's very experienced on a certain issue and is dealing with the financial sector for any number of months or years, all of a sudden they become a real acquisition target for Wall Street," says Lynch.

According to a HuffPost analysis of the 243 people who've worked on the committee -- including clerical and technology staff -- since 2000, almost half of the 126 people who have left registered as lobbyists, mostly for the financial services industry.

And recruiting experienced Capitol Hill hands to work on K Street pays off in material ways. For example, it didn't hurt the auto dealers' chances of winning an exemption that a third of the industry trade group's two dozen lobbyists are former Hill staffers.

Commercial banks, according to the Center for Responsive Politics, spent nearly $50 million lobbying in 2008 and dropped another $37 million in the first three quarters of 2009. They employed 417 federally-registered lobbyists.

And the revolving door turns in both directions. Sixteen of the committee's 86 current staffers -- including a good chunk of the senior staff -- worked as lobbyists before coming to the committee. (And it's not just Republicans; 12 of the 16 are Democrats.)

"The door doesn't just revolve once," says Rep. Brad Miller (D-N.C.). "They tend to go out and come back and go out again. It really does create a set of financial incentives, whether conscious or not."

Though Lynch laments the phenomenon of staffers fleeing to K Street, he's got nothing against the individuals who leave: "I don't begrudge any of these young people with huge student loans and some Wall Street firm wants to compensate them."

Frank laments staff compensation: "We underpay public officials. Particularly the staff. [Lawmakers] get a certain degree of non-monetary compensation -- psychic. You know, I get mentioned on 'Gossip Girl.'"

Staffers get a good look at how the other half lives; they rub elbows with lobbyists both at work (in meetings or even on extravagant field trips) and off the clock, during ritualistic happy hours. Those who attend know the unspoken rule: don't talk too much shop but bring plenty of business cards. The friendly social scene helps explain why there's not much condemnation from staffers for colleagues who leave for higher pay.

"Everyone comes here to stand up for something they believe in, and at some point they go downtown to make money, and at some point someone they worked for draws them back [to the Hill]," said a former staffer who works as a lobbyist. "It's the running joke: a staffer gets married, you better go downtown! Spots open and one of the committee staffers has a kid. They'll be moving downtown. Money is number one."


"OUT-GRASSROOTSED"

As the House leadership set up committees for the 111th Congress in early 2009, Frank pushed to shrink the size of his own panel in order to better meet the historic challenges presented by the financial collapse and bailout, say several members of the committee including Reps. Watt, Miller and Lynch. Instead, it got bigger. "He was obviously outvoted," quips Lynch. "Either that or he missed the meeting."

Frank doesn't conceal his distress at the size of his panel. "I had no part in setting up the committee. That was all the Speaker," Frank says when asked about the front-row frontliners. Then, without prompting, he adds: "It's also very large, which is a problem. We're the second-largest committee, but the transportation committee does not have ideological issues."

The size and makeup of the committee have been a challenge even for Frank, a chairman not lacking in confidence or energy. "It's been very hard work. The committee used to be a very good little committee, because it had the urban constituency. But it's become a somewhat more desirable committee for people," he says. "There are a large number of people who have marginal seats, and it obviously makes me have to work harder and is a constraint on what we can do. We start out with what I want to do, but what's relevant is what I can get a majority for."

The sheer size of the committee can sentence reform to death by a thousand cuts. Each member of the majority, no matter where he or she falls on the political spectrum, has political interests back home. If those interests are affected by the bill, they've got someone on the panel to carry their concerns about "unintended consequences" to the chairman.

Frank denies that the big banks control his committee members; he actually claims that the big banks' backing of legislation these days is so toxic that he doesn't want their public support. "Goldman [Sachs] has no influence down here. Bank of America doesn't. Bank of America was ready to support the consumer policeman," Frank says in an interview in his office, referring to the CFPA. That support, he says, was politely declined.

There is some truth to Frank's point; groups like the auto dealers don't bring with them to Capitol Hill the public-relations baggage of Wall Street or Goldman Sachs. "The local auto dealers are very popular in their districts," Frank says. The more an interest group can make an issue district-specific and the more it can relate on an everyday level, Frank argues, the better it will do. "That's why the realtors always beat the bankers. The bankers sit and they go [Frank makes a dour face, leans back in his chair and tightly folds his arms, miming an aloof posture]. The realtors are out there joining the Kiwanis and sponsoring little league."

The same is true with John Deere, dairy farmers and other back-slapping boys from back home. But the big banks have figured this out, too -- and now they use precisely such groups to poke holes in the reform effort. Over the last year, they've drafted an army of credible little guys to walk the halls of Congress and push the interests of brokers, swaps traders and Wall Street bankers. And they've shown that they don't need big loopholes to slip trillions of dollars through.

"What's happening now is the pro-regulation forces are being out-grassroots-ed by the antis," Frank says. One member, he says, represented tons of title insurance companies. Another came from the headquarters of credit unions. A third's district is home to LexisNexis; another to Equifax. Each of those entities received special treatment because their representative sits on the committee -- and the more members on the committee, the more special treatment is needed. "I have not had a problem because of campaign contributions. The problem is democracy: it's people responding to people in their districts: community bankers, realtors, auto dealers, as I said, end users, insurance agents," says Frank.

A video of the vote on Campbell's amendment shows how the auto dealers won their victory. It's both serious and comical. After the senior committee members enter their no votes, the bottom two rows begin weighing in with yes after yes after yes -- followed by unanimous ayes from the GOP side.

Then, once it becomes clear that auto dealers are getting their way, those senior Democrats -- not wanting to get on the bad side of a powerful industry for a losing cause -- actually start switching their votes from no to yes.

As confusion spreads and more votes are changed, Frank tweaks his colleagues with a subtle dig. "Can I ask this? Would members please vote loudly, especially if you plan to vote differently than the clerk anticipates?" The chamber echoes with laughter.

Pretending that there is some mistake, several members ask the clerk how they were recorded before asking to switch their votes. After Rep. Dennis Moore (D-Kan.), a senior New Dem and a subcommittee chairman, employs this technique, Frank puts a stop to it. "I would also say, at the same time, if you know how you're recorded, don't ask the clerk. Just change your vote," he says. This time, there is no laughter.

Later on, when the bill was on the House floor, Frank and Rep. Mel Watt (D-Va.), a subcommittee chairman, tried to narrow the exemption but failed. The lopsided committee vote had sapped the strength of the opposition.

The scene of the unfolding vote demonstrates a few things at once: First, notice the size of the committee and the time it takes for everyone to vote. Then, watch the bottom two rows up-end the legislation. And see how difficult the committee is to control, even for as forceful a personality as chairman Frank:


It's in this environment that Frank is tasked with passing what he considers financial reform as historic as "what Theodore Roosevelt and Woodrow Wilson did to control trusts, and what FDR did to control the stock market" -- a regulatory bulwark that stood firmly until it was disassembled in the '80s and '90s.

The panel still muscled through some pretty tough legislation, argues Cleaver. "We've been able to get all the priorities of the administration through the committee in spite of some glaring handicaps, such as a large number of freshmen whose seats may not be safe. " he says. "And if you look at the votes plural, you will see that on some rather key votes they actually vote against the administration's position."

The legislation's failure to tightly regulate the derivatives market, however, is a crippling weakness. And the frontliners take credit for that.

Democratic Rep. Jim Himes, a frontliner and a New Dem, knocked out moderate Republican Chris Shays in Connecticut in 2008. A former banker, Himes is already an influential member on the committee. "The list of [New Dem] principles for financial regulatory reform, I was intimately involved in that, because I co-chair the New Dem Financial Services task force with Melissa Bean," Himes says. Bean (D-Ill.), along with retiring Rep. Dennis Moore (D-Kan.), is a New Dem ringleader on the committee.

Bank lobbyists looking for the seven votes needed to up-end legislation know where to start. Bean and 15 other New Dems have effective veto power on the committee and are sympathetic to their interests. According to its mission statement, the coalition, which was founded in the boom year 1997, is "committed to enacting policies that encourage economic growth, maintain U.S. competitiveness, meet the new challenges posed by globalization in the 21st century, and strengthen our standing in the world." Wall Street lobbyists usually warn that banking regulations will harm U.S. competitiveness and slow economic growth.

Six of the committee's New Dems are frontline freshmen. The panel is also home to seven Blue Dogs, another faction of business-friendly Democrats, three of whom are also New Dems. Two of the Blue Dogs are frontliners, including Rep. Walt Minnick, a freshman Democrat from Idaho who worked to beat back the pro-consumer finance authority in committee and pushed an amendment on the House floor that would have gutted it. Both efforts failed, but Minnick was nonetheless singled out for praise by the American Bankers Association in a post-vote memo.

Some of the Blue Dogs and New Dems describe their experience working as bankers as an advantage. "I worked in the industry for many years, and so it's been very exciting for me to probably play a more engaged role than a new member ordinarily would," says Hines. "Scott Murphy and I and two or three others really drove the creation of the derivatives bill. Nobody understands it, but it's one of the more important aspects of the regulatory reform. And looking at it as a former businessperson, I think we've really struck a good compromise. I don't think the bill is in any way heavy-handed."

Murphy (D-N.Y.) is a former venture capitalist who won a special election to replace Kirsten Gillibrand when she went to the Senate. A Blue Dog, Murphy isn't on the committee, but on the House floor he punched a gaping hole in the derivatives portion of the bill -- which was already riddled with gaps -- exempting all sorts of swaps-trading from regulation and effectively undermining the legislation. Trillions of dollars of derivatives, which Warren Buffet has called "financial weapons of mass destruction," are traded in "dark pools" that nearly brought down the global financial system in 2008. Thanks to the frontliners, many of these pools remain unregulated in the House reform bill.

Brad Miller has had his share of battles with the bottom two rows. Many of "the Blues and News," as he calls them, are hamstrung by a "dependence on contributions from the industry. That traditionally has been one of the reasons to get on the committee. It was seen as a money committee."


BIPARTISANSHIP

Staffers and members of Congress who deal with lobbyists know that, if they play nicely, there will be career opportunities to come.

"Traditionally, the money committees as a whole have always been the most valuable places to jump from the Hill to K Street," says Ivan Adler, a headhunter at the McCormick Group. "Money committees" also include the tax-policy-writing Ways and Means Committee and the Energy and Commerce Committee. "Folks that are working on financial services and taxes are more valuable, no doubt."

K Street's paychecks flow to both parties. HuffPost compiled a list of committee staffers throughout the decade from Legistorm.com and cross-referenced their names with lobbying disclosure reports filed with Congress. Of the 126 people who have left the financial services committee since the end of 2000, lobbying disclosure forms show that 62 have registered as lobbyists at some point. That doesn't even include people who did not register as lobbyists but who nevertheless worked for law firms with lobbying departments.

Committee spokesman Steve Adamske, relying on information provided by personnel staff, identified the Democrats on the list that HuffPost showed to him. Of the 104 Democratic staffers, both current and former, 31 have been registered to lobby. Of a total 149 GOP staffers, 53 have registered to lobby, roughly the same percentage of total staff as the opposition. (The GOP has more total staffers over the time period in question because it controlled the committee until the 2006 elections. Frank became the highest-ranking Democrat on the committee in 2003; he became chairman in 2007.)

Staffers who go on to lobby are forbidden for one year from directly lobbying the committee they left. Adamske says that when staffers return from downtown to the committee, they are barred from working on the issue they lobbied on for one to two years, depending on the circumstances.

HuffPost was able to speak with a dozen of the 62 staffers who left the committee to become lobbyists; only a handful were willing to speak on the record while others spoke on background or off the record. Several said they left their jobs after being recruited by downtown firms. It's a process that Joe Ventrone, a former Republican deputy staff director for the committee, calls "cashing out."

"Cashing out is using your position to get a significantly greater salary in the private sector," says Ventrone, who now works for the National Association of Realtors. He says there's nothing wrong with leaving the Hill for K Street but he argues that, on the Hill, perception is reality; that if it looks like staffers sell their souls when they take jobs lobbying their former colleagues on behalf of industry, it's because they do.

Ventrone lobbies for realtors, but he says that he never contacts former colleagues in Congress. ("I didn't cash out like a lot of the other people on the Hill," he says.) He left the committee in 2001 to work for the Department of Housing and Urban Development during the Bush transition, then for the Federal Housing Finance Board. The realtors hired him in 2003 and he registered as a lobbyist in 2008.

For staffers leaving a committee job, a higher-paying position downtown is "a very logical progression," says former committee lawyer Howard Menell, who is currently retired. "They knew the people, they knew the laws, and that's what they did." Menell's only lobbying client after he left the committee was the National Multi Housing Council. He says he never contacted former colleagues and only did work that would help low-income housing. "I think I'm different because I particularly did not want to lobby on the issues that I worked on for so many years."

The lobbyists insist they don't fit the Jack Abramoff caricature of the profession painted by the media; they don't capitalize on their connections to pervert the legislative process on behalf of big-money clients.

In reality, lobbying is more boring: lobbyists visit the Hill for meetings with members and staffers to explain how proposed legislation might have "unintended consequences" that could hurt an industry. Or, lobbyists might be invited to make a large campaign contribution and share concerns with members over a meal. Opportunities to attend such events abound -- almost any member of Congress is available for breakfast, lunch, or dinner at some point during the week. And anyone is welcome so long as she or he brings a big fat check.

On Sept. 10, for instance, you could catch all 11 banking committee frontliners for breakfast at the D.C. headquarters of the Credit Union National Association, which over the years has employed at least two committee staffers as lobbyists. The price of admission was a donation to the DCCC ranging from $1,000 to $20,000, according to an invitation obtained by the nonpartisan Sunlight Foundation. The event was well timed -- the committee was just preparing to mark up its regulatory reform bill. Frank himself was billed as a special guest.

From the point of view of lobbyists, their work is just a matter of providing information and then telling clients where they stand in the legislative process. There is no incentive to provide bogus information to sway legislation. "If you lead them down a path that gets them burned, you're gone," says a former Republican staffer. "It's not in my best interest to tell a member if something's true that isn't."

But there's little doubt that former committee staffers use their familiarity to smooth the process. "All of them will come in and say they used to be you. 'I know what you're going through,'" recalls a staffer who left the committee for non-lobbying work. "They try to be real friendly."

When talking to reporters, lobbyists generally laugh at the idea that they have to power to shape legislation, despite such feats as the exemption of auto dealers from the purview of the Consumer Financial Protection Agency. And it's true that they're mere middlemen. But then again, banks and other financial interests can afford an army of aggressive and well-connected middlemen, while consumers groups are left with one or two sentries to cover two chambers. It can mean the difference between winning and losing.

Sometimes, the notion that one lobbyist can be a negative influence is taken seriously. Michael Paese served as a lawyer and deputy staffer director for the committee until 2008, when he jumped ship and wound up lobbying for the Securities Industry and Financial Markets Association. Goldman Sachs scooped him up over this past summer. In an unusual move in September, Frank forbade his staff from talking to Paese for an additional year after his official 12-month "cooling off" period expired. Frank calls the suggestion that Paese might have been carrying water for potential future employers while still on Hill "paranoia."

Hill staffers who work on financial issues are particularly susceptible to lobbyists because, while they may be among the brightest to come through their college class, they often don't know all that much about finance. "They're stretched too thin, covering three or four issue areas," says a former staffer. And on the Hill, "issue area" doesn't mean bond markets or derivatives. "Financial services" is an issue; "health care" is another; "trade" and "education" could be two more, all covered by the same staffer.

"What they know is people," says a former staffer, "and the way you get to know these people is through happy hours or the [free] receptions" on the Hill, often sponsored by trade associations. Because staffers aren't always deeply versed in the particular issue they've been lobbied on, their advice to their bosses often reflects what they're hearing from K Street.

Frank is sometimes able to overcome that influence by going around the staffer. "The staffer is usually pushing something he heard from a lobbyist. If you can get the staffer and the member split up, you can usually get the member to agree to something," says a former staffer. He recalls a time when staff persuaded Rep. Al Green (D-Texas) to demand certain concessions from Frank; during the meeting, Green went out in the hallway to take a phone call; Frank met him out there and got him to change his vote.

OUND AND ROUND THEY GO

Menell and others claim that nobody used to bat an eye when staffers went to K Street and back. It was all part of the pro-Wall Street consensus that developed during the boom years. By contrast, the new climate is creating tensions on the committee. When the financial system collapsed last fall, the bipartisan consensus on Wall Street came down with it. Amid populist fury, banking regulation has become more partisan. Some current staffers now say the hopping back and forth between competing sides should be seen for what it is: betrayal.

"You couldn't pay me enough to go be the spokesman for things like exploding mortgages, 39 dollar overdraft fees and double-cycle billing. These things might not have been 'party issues' a few years ago, but they very much are today," says a staffer.

Of the 16 people on the committee payroll who previously worked as lobbyists, former clients include H&R Block, the New York Stock Exchange, the Bond Market Association, Wachovia, MetLife and Experian. One staffer lobbied on behalf of the National Employment Lawyers Association, yet no staffers have done lobbying gigs with consumer advocacy groups like the Consumer Federation of America, Public Citizen or U.S. PIRG.

At least five are serving the committee for their second time. Committee lawyer Clinton Columbus Jones, for instance, worked for the committee for years before leaving to lobby for Fannie Mae in 2007. He returned to the committee in 2008, just before the Federal Housing Finance Board took the home-loan giant into receivership. Lawyer Jason Todd Spence served as a legislative aide to Rep. Bob Ney (R-Ohio) before a brief lobbying stint with the Independent Insurance Agents & Brokers of America; he returned to the committee in 2008.

"Sometimes you're puzzled at what causes that," says Rep. Lynch. "Is that the downsizing on Wall Street or is that a directional intent there, that staffers are coming back to carry water for a certain perspective? You have to be careful with that."

Mel Watt says he's seen how staffers with K Street backgrounds can be a boon to the committee. He also says he's seen it cut both ways. "If you get too connected to somebody and you start carrying their water, it can be a problem whether you're a member or a staffer," he says. "On the one or two occasions where I've experienced it, I called it to Barney's attention." A third member, who asked not to be named, said he had also seen particular staffers undermining reform legislation before heading off to K Street.

The chairman, however, says he is not concerned about staffers carrying water for past or future clients and employers. "What we have sought to achieve in our staff is a good diverse group of people who have different backgrounds and can bring different things to the table," says committee spokesman Steve Adamske. "At the end of the day, it is Barney's decision what the committee will be doing and it's the members who will vote on it."

SMART POLITICS

"Don't make yourself crazy with conspiracy theories," Rep. Rosa DeLauro tells HuffPost. A senior Democrat from Connecticut, DeLauro is co-chair of the Steering and Policy Committee; in that capacity, she decides which members get placed on which committees, with the approval the House Speaker. (The Speaker's office declined to comment.) DeLauro says that when she makes placement decisions, she isn't thinking of fundraising but rather is simply responding to requests made by members.

"I've been through this where everybody coming in wanted [the Transportation and Infrastructure Committee]. People coming in want Financial Services. There's a host of people who want Foreign Relations. It depends on themselves, their district, their own situation. If you go down that road, you're going to make yourself crazy," she says of the fundraising theory.

Ultimately, though, Democrats are essentially relying on a "great man" strategy, figuring they can dump as many bank-friendly Democrats on the committee as they want and Frank will generally keep them in line. "We have a lot of faith in Barney. He can handle it," says a senior Democratic aide when asked about the phenomenon. Frank's senior staffers, say several current and former committee aides, similarly outmatch their counterparts. The chairman, they say, is able to use the knowledge gap at both the member and the staff level to his advantage.

"The good news is that we have, in my opinion, the most extraordinarily competent chair of that committee in place. He knows his subject, he's one terrifically smart pol, and he has a lot of self-confidence, to say the least," says Majority Leader Steny Hoyer (D-Md.).

"It is an enormous committee, and that makes it difficult for anyone to do major legislating. And I would say that Frank has done a pretty significant task of legislating with such a challenging and diverse committee that's so large," says Rep. Patrick McHenry (R-N.C.), a committee member.

Hoyer says it's natural that business-friendly Democrats would seek out the committee. "The business community is very focused on the Financial Service Committee -- the banking community, brokers. So it's not surprising that more moderate Democrats, more business-focused Democrats, would want to go on the committee which deals with issues they legitimately believe have to do with the growth of the economy, creation of jobs and the growth of business. I think that the Financial Services Committee is a pretty representative committee."

Sure, he says, you could pack the committee with unreconstructed New Dealers, but you've still got to get the bill off the House floor. And then, of course, there's the Senate. "Now, you could create a committee of all right or all left, and they could report out all right or all left stuff, and you get to the floor, and you have chaos," he says. "When you get to the floor, what you get is this conflict and confrontation of the people who were shut out, who represent a broader spectrum. The glory of the Democratic Party in my opinion in the House of Representatives today is it, in fact, is a representative party of the country at large. The Republican Party's not. And I think that's good news."

The House floor is indeed a treacherous place for reform legislation, with 67 New Dems looking to take a shot at it. But making it through committee gives legislation a head start. The auto dealers, for instance, would have had a very hard time winning their concession on the House floor, because the Speaker could have simply prevented Campbell from offering his amendment.


ANOTHER WAY

But the difficulty of corralling the conservative Democrats, the valuable spots they take up on the committee that could otherwise go to a moderate or progressive and the expensive campaigns they require to stay in office call into question the strategy that got them elected. The party's argument is that it is these marginal Democrats who give it the majority it needs to govern. But in seeking to craft its majority, the DCCC pays no attention to how those candidates will behave once in office.

One freshman, Alabama's Parker Griffith, after getting roughly $1.5 million from the DCCC in 2008 and 2009, returned the favor by voting against every Democratic priority and then bolting for the Republican Party. The bottom two rows of the banking committee have been filled at a price of tens of millions of dollars. That money could have instead boosted the campaigns of progressives such as Bill Hedrick, Dan Seals or Bill Durston -- all of whom lost tight races; none of whom would have voted with Wall Street.

Progressive Congressional candidate Darcy Burner who, despite heavy backing from the DCCC lost a squeaker in Washington State in 2008, says the campaign strategy has a more insidious influence.

"The D-triple-C as an institution is much more inclined toward Blue Dog candidates than progressives and that's a self-fulfilling prophecy. They pick candidates who might be perfectly progressive and teach people to be less progressive. You really have to buck them to stay progressive," she says, citing her own experience and several candidates who gradually became more conservative under DCCC guidance. "Once you say that stuff to voters, you're expected to follow through."

("Members are encouraged to represent their districts," says DCCC spokeswoman Jen Crider.)

But is it all that pragmatic? Waffling centrists can have a hard time holding on to their seats -- especially when a populist wave comes washing over, wiping out pandering politicians. And by pushing for Washington to go soft on Wall Street, the frontline Democrats -- and the leadership that put them there -- have helped create the very storm that could carry them away.

Regardless of the loopholes they may have punched through the financial regulations, the vulnerable Democrats on the committee who routinely voted with the banks are sure to be labeled as proto-socialists by the GOP in 2010.

Committee Republican Patrick McHenry says that the Democrats will be hit for fostering a bailout culture and for over-regulating small businesses. And many of the Democrats will be ill-equipped to defend themselves because they don't show up for hearings and don't understand the financial system. "A number of these things very much run counter to what the American people want, and it's very difficult for them to explain the legislation because they don't understand it themselves," he says.

The only frontline Democrat on the committee to consistently oppose the banks has been Rep. Alan Grayson (D-Fla.). The Washington consensus is that his strong stance represents a huge risk in his swing district of Orlando. Yet Grayson does not yet have a credible opponent. Many of the centrist and conservative frontliners wish they could say the same.

Stronger progressives, says Burner, might have been in a better position to hold the seats. "They tend to hold on pretty well," Burner says. "One could argue that it's smart politics to actually have values."

Source: http://www.huffingtonpost.com/2009/12/2 ... 02373.html

[roxybeast]

<center>Happy Holidays from America's Banks
by Michael Winship, Senior Writer for Bill Moyers' Journal on PBS
Huffington Post, December 18, 2009</center>

Never mind Barack Obama's Audacity of Hope. It's the audacity of the banks that takes your breath away. Mean old Mr. Potter in "It's a Wonderful Life" seems like Father Christmas by comparison.

A recent report that Citigroup and Goldman Sachs may have received preferential treatment getting doses of the swine flu vaccine was enough to give Ebenezer Scrooge the yips. Then came news that in order for us to get back the taxpayer bailout money we loaned them, Citigroup is receiving billions of dollars in tax breaks from the IRS.

And there's a new study this week, "Rewarding Failure," from the public interest group Public Citizen, revealing that in the years leading up to the financial meltdown, the CEO's of the 10 Wall Street giants that either collapsed or got huge amounts of TARP money were paid an average of $28.9 million dollars a year.

In 2007, that amounted to 575 times the median income of an American family. Now, thanks in part to the banks' monumental malfeasance that led to our economic swan dive, food stamps are now being used to feed one in eight Americans, and a quarter of all the kids in this country. A new poll from the New York Times and CBS News reports that more than half of our unemployed have borrowed money from friends and relatives and have cut back on medical treatment.

The Times wrote that, "Joblessness has wreaked financial and emotional havoc on the lives of many of those out of work... causing major life changes, mental health issues and trouble maintaining even basic necessities."

Yet according to the non-profit Americans for Financial Reform the reported $150 billion that Wall Street is paying itself in compensation and bonuses this year would be enough to solve the budget crisis of every one of the fifty states or create millions of jobs or prevent all foreclosures for four years.

All of this wretched excess is occurring as more and more people can't afford a roof over their heads. Foreclosures were up another five percent in the third quarter -- 23 percent more than a year ago. Fewer Americans are willing to buy foreclosed properties, and the Obama administration's foreclosure prevention plan has been a bust so far - way too timid, critics say, and many of the banks won't play ball, refusing to negotiate in good faith with homeowners desperate to hold on.

We got a first hand look at the crisis this week, when thousands lined up at the Jacob Javits Convention Center just a few blocks from our Manhattan offices to attend a mortgage assistance event sponsored by the non-profit Neighborhood Assistance Corporation of America (NACA). So many showed up for this leg of the "Save the Dream Tour" that on many days, staff and volunteers stayed to help until one in the morning.

NACA has had success getting homeowners and banks together to work out a deal to prevent foreclosure. But the big banks' return to the government of the TARP bailout money with which we underwrote them over the last 14 months is a mixed blessing -- great to have the cash returned so quickly, terrible because any leverage Washington held over the banks because of the loans virtually vanishes with the payback. They're back in the saddle and not inclined to be of much assistance helping anyone else out, especially those in mortgage trouble.

As Andrew Ross Sorkin of the New York Times wrote in the wake of President Obama's Monday meeting with Wall Street's top guns (three of whom failed to show up because of airport delays), "Executive compensation, leverage limits and lending standards were all issues that Washington said it planned to change -- and when the taxpayers were the shareholders of these firms, it probably could have done so. But now the White House has been left in the position of extending invitations, rather than exercising its clout. And in the figurative and literal sense, it is getting stood up."

Afterwards, Obama said, "The problem is there's a big gap between what I'm hearing here in the White House and the activities of lobbyists on behalf of these institutions or associations of which they're a member up on Capitol Hill."

That's putting it mildly. This week, the American Bankers Association sent out an update and "call to action" memorandum crowing over its success watering down the bank reform bill that was approved by the House and urging its members to beat back similar legislation in the Senate. Self-righteously, it concludes, "As one of your New Year's resolutions, please vow to do everything in your power to show, and to have your colleagues in your bank show, your Senators the right path to true reform."

It helps when the right path is paved with silver and gold. As "Crossing Wall Street," a November report from the Center for Responsive Politics notes, "The finance, insurance and real estate sector has given $2.3 billion to candidates, leadership PACs and party committees since 1989, which eclipses every other sector...

"The financial sector has also been a voracious lobbying force, spending an unprecedented $3.8 billion since 1998, while sending an army of lobbyists to Capitol Hill to make its case. That's more money than any other sector has spent on influence peddling. Not even the health care sector, which spun up a lobbying frenzy this year over health reform, has spent more."

The banks are making a list and checking it twice. And lest we forget, during his run for the White House, the finance sector filled Barack Obama's stocking with $39.5 million dollars worth of campaign contributions, more than any other presidential candidate.

God bless us, every one!

Source: http://www.huffingtonpost.com/michael-w ... 97486.html

<center>Wall Street Tells the President of the United States to Bugger Off
by Raymond J. Learsey
Huffington Post, December 17, 2009</center>

Acela Express Departs NYC Arrives DC
" 6 00 AM 8 52 AM
" 7 00 AM 9 44 AM
" 8 00 AM 10 49 AM
" 9 00 AM 11 25 AM
etc.

These were the Amtrak trains available to the three grandees of Wall Street; Lloyd Blankfein, CEO of Goldman Sachs; John Mack, Chairman of Morgan Stanley; and Richard Parsons, Chairman of Citigroup, leaders of perhaps the most important Wall Street firms. Yet not one of them was willing to change their flight schedules in spite of approaching weather, causing them to miss being in attendance with twelve other senior bank executives at at an urgent conclave summoned to the White House by the President of the United States. The meeting was called in order to discuss pressing issues; bank lending, executive compensation and legislation seeking reform of the financial services industry. According to White House sources they ascribed their absence from the meeting as due to "inclement weather."

The three must have felt sufficiently entitled that they could travel to Washington at the last minute and if the weather didn't oblige, so be it. With the nation up in arms about the perversity of pouring billions into the coffers of the banks (not only TARP, but counter party billions, federal guarantees of toxic holdings, green lighting conversion to becoming bank holding companies, access to myriad Fed programs etc., etc.) the symbolism of their tone deaf failure to be present at the President's meeting is beyond understanding. As one White House staff member was quoted, "It was pretty nervy."

And these grandees are the heads of organizations whose trading desks cash in on every nuance of change in the weather. They are ever alert to the gathering of a hurricane in every corner of the globe, knowing it may significantly impact the trading price of crude oil, and even more significantly paying for the services of professional weather prognosticators giving their grain trading desks early alerts on weather impacting growing conditions for wheat, soybean and corn crops so that their futures contracts can be traded with greater profitability. And with all this firepower at hand these three poobahs didn't have the interest nor considered it their obligation, given the billions of help their organizations received, to get a heads up on the weather front moving in. They stubbornly kept to their last minute flight schedules even with the approaching weather that would play havoc with their flight plans. Had their trading desks been equally oblivious and not had a fall back plan on major positions they had undertaken, it would have cost the career of the lead desk trader. Even then they had the option of a last minute reprieve, as an early train would have delivered them to Washington on time, but that would have meant traveling with the hoi polloi, the great unwashed, you know those little people whose tax dollars spared them the need from having to take the subway, ever. Hardly worth keeping an appointment with the President of the United States.

Their clumsy absence bespeaks of an arrogance that is frightening. Perhaps not the three individuals per se, but certainly the hubris of the Wall Street crowd. Here is a services industry vital to the well-being of the nation that appears to have its head in the sand, playing ostrich to the burning anger vested against them throughout the land. They are powerful, rich, with a Congress largely under their thumb. In turn we have a President who speaks for so many of his fellow citizens, and the leaders of the Wall Street crowd feel he can be figuratively and symbolically dismissed together with the anger of so many of their fellow citizens. It is a bonfire waiting to be lit. Beware!

Source: http://www.huffingtonpost.com/raymond-j ... 95481.html

[roxybeast]

<center>Move Your Money!</center>

<center>THIS VIDEO IS RIGHT ON THE MONEY & AN ABSOLUTE MUST WATCH!

Support your local George Bailey & not mean old Mr. Potter!</center>

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[roxybeast]

<center>Move Your Money: A New Year's Resolution
by Arianna Huffington & Rob Johnson
Huffington Post, December 29, 2009</center>

Last week, over a pre-Christmas dinner, the two of us, along with political strategist Alexis McGill, filmmaker/author Eugene Jarecki, and Nick Penniman of the HuffPost Investigative Fund, began talking about the huge, growing chasm between the fortunes of Wall Street banks and Main Street banks, and started discussing what concrete steps individuals could take to help create a better financial system. Before long, the conversation turned practical, and with some help from friends in the world of bank analysis, a video and website were produced devoted to a simple idea: Move Your Money.

The big banks on Wall Street, propped up by taxpayer money and government guarantees, have had a record year, making record profits while returning to the highly leveraged activities that brought our economy to the brink of disaster. In a slap in the face to taxpayers, they have also cut back on the money they are lending, even though the need to get credit flowing again was one of the main points used in selling the public the bank bailout. But since April, the Big Four banks -- JP Morgan/Chase, Citibank, Bank of America, and Wells Fargo -- all of which took billions in taxpayer money, have cut lending to businesses by $100 billion.

Meanwhile, America's Main Street community banks -- the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of -- are struggling. Many of them have closed down (or been taken over by the FDIC) over the last 12 months. The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace. As a result, a system which was already dangerously concentrated at the top has only become more so.

We talked about the outrage of big, bailed-out banks turning around and spending millions of dollars on lobbying to gut or kill financial reform -- including "too big to fail" legislation and regulation of the derivatives that played such a huge part in the meltdown. And as we contrasted that with the efforts of local banks to show that you can both be profitable and have a positive impact on the community, an idea took hold: why don't we take our money out of these big banks and put them into community banks? And what, we asked ourselves, would happen if lots of people around America decided to do the same thing? Our money has been used to make the system worse -- what if we used it to make the system better?

Everyone around the table quickly got excited (granted we are an excitable group), and began tossing out suggestions for how to get this idea circulating.

Eugene, the filmmaker among us, remarked that the contrast between the big banks and the community banks we were talking about was very much like the story in the classic Frank Capra film It's a Wonderful Life, where community banker George Bailey helps the people of Bedford Falls escape the grip of the rapacious and predatory banker Mr. Potter.

It was a lightbulb moment. And, unlike the vast majority of dinner conversations, the excitement over this idea didn't end with dessert. It actually led to something -- thanks in great part to Eugene and his remarkable team, who got to work and, in record time, created a brilliant, powerful, and inspiring video playing off the It's a Wonderful Life concept. Watch it below.

Within a few days, the rest of the pieces fell into place, including an agreement with top financial analysts Chris Whalen and Dennis Santiago, who gave us access to their IRA (Institutional Risk Analytics) database. Using this tool, everyone will be able to plug in their zip code and quickly get a list of the small, solvent Main Street banks operating in their community.

The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it's meant to be. It's neither Left nor Right -- it's populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest. It's time for Americans to move their money out of these reckless behemoths. And you don't have to worry, there is zero risk: deposit insurance is just as good at small banks -- and unlike the big banks they don't provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion.

Think of the message it will send to Wall Street -- and to the White House. That we have had enough of the high-flying, no-limits-casino banking culture that continues to dominate Wall Street and Capitol Hill. That we won't wait on Washington to act, because we know that Washington has, in fact, been a part of the problem from the start. We simply can't count on Congress to fix things. We have to do it ourselves -- and the big banks are the core of the problem. We need to return to the stable, reliable, people-oriented approach of America's community banks.

So watch Eugene's amazing video, then go to www.moveyourmoney.info to learn more about how easy it is to move your money. And pass the idea on to your friends (help make this video -- and this idea -- go viral!).

JP Morgan/Chase, Citi, Wells Fargo, and Bank of America may be "too big to fail" -- but they are not too big to feel the impact of hundreds of thousands of people taking action to change a broken financial and political system. Let them gamble with their own money, not yours. Let's turn big banks into smaller banks. We'll all be better off -- and safer -- as a result.

Make it your New Year's resolution to move your money. We can't think of a better way to start 2010.

Source: http://www.huffingtonpost.com/arianna-h ... 06022.html#

[roxybeast]

<center>Stop the Abuse: It's Time to Break Up With Your Big Bank
by Bill Maher
Huffington Post, January 13, 2010</center>

Hello, I'd like to take a moment to address the millions and millions of you all across America who are currently stuck in an abusive relationship.

Now I know what some of you are thinking: Who is Bill Maher to give me relationship advice?

But that doesn't mean I don't know a dysfunctional relationship when I see one. Especially when it's staring me right in the face.

You know who you are. Those of you staying in a relationship long after it's turned bad. Sticking around despite the abuse -- even as it's gotten worse and worse over the years. Sticking around only because it seems easier than breaking up -- and besides, where else are you going to go?

That's right, I'm talking to all of you that keep doing your banking at the giant, too big to fail, Wall Street banks that brought our economy to the brink of disaster, were rescued by trillions of dollars of our taxpayer money, then paid us back by using that money to hire lobbyists to convince our lawmakers in Washington to kill financial reform.

They took our money... but cut back on lending.

They took our money... and made record profits -- and paid themselves record bonuses.

They took our money... then returned to the risky behavior that led to the worst financial crisis since the Great Depression, with record unemployment, bankruptcies, and foreclosures.

They took our money... but kept on with all the greedy, abusive, ruthless, and cold-blooded practices that have earned them untold billions of dollars a year -- year after year after year. Things like charging you outrageous fees for anything and everything, jacking up your credit card interest rate to 30 percent for being late on one payment (it's a good thing sodomy is legal!), and refusing to renegotiate your mortgage after the housing bubble they helped create burst.

These big banks, deemed "Too Big To Fail" by our Wall Street-friendly leaders in Washington, are convinced that they can get away with anything -- because they always have.

But here's the thing. You don't have to put up with this nonsense. You don't have to stay in a loveless, abusive relationship with your Big Bank.

In fact, it's easy to get out -- and into something much, much better.

My friend Arianna Huffington has started a campaign designed to convince people to move their money out of these big banks and put them into smaller, local, community banks and credit unions that are more likely to see you as a person, not as an account number... and also to reinvest in the community where they are.

It's a pretty simple idea: If enough people who have money in one of the Big Six banks -- that is, JP Morgan/Chase, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs -- move it into a local community bank or credit union, then collectively we, the people, will have taken a big step toward fixing our broken financial system.

It's easy, and painless, and will send a powerful message to Wall Street and to our leaders in Washington.

Face it: Real change is not going to come from Congress. It's not going to come from the White House. And it's certainly not going to come from the lobbyists Wall Street hires to make sure their special interests keep beating out the public interest.

We've got to do it ourselves. And moving your money is a great way to start.

This is not a conservative idea or a liberal idea. It's not left or right. It's populism at it's best -- and it's already attracted people from all walks of life who are sick and tired of the Big Banks and are ready to do something about it.

So it's time to go break up with your banker and get the hell out. Go to MoveYourMoney.info and see just how easy it is to end your abusive relationship and find true banking love. Or, at least hot, sweaty, monkey, banking sex.

MoveYourMoney.info. Tell 'em Dr. Bill sent you...

Source: http://www.huffingtonpost.com/bill-mahe ... 22068.html

[roxybeast]

<center>Why Congress Can't Tame Wall Street</center>

Bill Moyers Journal had an excellent, must watch, show this past weekend on why Congress can't tame Wall Street. Truly excellent discussion. Moyers interviews Kevin Drum and David Corn who recently authored a series of in-depth articles on this subject for Mother Jones magazine collectively called the "Accountability Deficit."

** Here's a link to watch VIDEO of the show:
http://www.pbs.org/moyers/journal/01082010/watch.html

Here is a link to the "must read" special report collectively titled the "Accountability Deficit" in Mother Jones:
http://motherjones.com/special-reports/ ... ty-deficit

And here's the transcript of the PBS/Bill Moyers Journal broadcast:

PBS - BILL MOYERS JOURNAL
January 8, 2010

BILL MOYERS: Welcome to the Journal.

The ancient Romans had a proverb: "Money is like sea water. The more you drink, the thirstier you become." That adage finds particular meaning today on Wall Street, which began this New Year riding a tidal wave of bonuses in a surging ocean of greed.

Thanks to taxpayers like you who generously bailed banking from the financial shipwreck it created for itself and for us, by the end of 2009 the industry's compensation pool reached nearly $200 billion. And despite windfall profits, the banks will claim almost $80 billion in tax deductions. And nearly $20 billion of those deductions will go to just three institutions — Morgan Stanley, JP Morgan Chase, and Goldman Sachs.

Ah, yes — Goldman Sachs, that paragon of profit and probity — which bet big on the housing bubble and when it popped — presto! — converted itself from an investment firm into a bank so it could get your bailout money. Now consider this: in 2008, Goldman Sachs paid an effective tax rate of just one percent. I'm not making that up — one percent! — while their CEO Lloyd Blankfein pulled down over $40 million. That's God's work, if you can get it. And, believe me, Wall Street bankers know how to get it.

What's their secret? How do the bankers pick our pockets so thoroughly with barely a pang of guilt or punishment? You will find some answers in this current edition of "Mother Jones" magazine, one of the best sources of investigative journalism around today. Most of this issue is devoted to what the editors call "Wall Street's accountability deficit."

In it, the Nobel Prize economist Joseph Stiglitz writes of the "moral bankruptcy" by which bankers knowingly trashed our economy and tore up the social contract.

The magazine's David Corn examines why there's no mass movement demanding fundamental change.

And blogger Kevin Drum tours Washington's heart of darkness from down Pennsylvania Avenue, over to K Street where the lobbyists cluster like vultures, then past the local branch of Goldman Sachs — also known as the U.S. Treasury — and up to Capitol Hill, where key members kneel in supplication to receive their morning tithes from the holy church of the almighty dollar. As Kevin Drum writes, a year after the biggest bailouts in U.S. History, Wall Street owns Washington lock, stock and debit card.

Kevin Drum, formerly with "Washington Monthly," is now the political blogger at "Mother Jones." He's here to talk about his report, along with David Corn, who's been covering Washington for 23 years and is now "Mother Jones'" Washington Bureau Chief. Welcome to you both.

BILL MOYERS: Welcome to both of you.

DAVID CORN: Good to be with you, Bill.

KEVIN DRUM: Good to be with you, Bill.

BILL MOYERS: Let me read you a letter that was posted on our website a few days ago from a faithful viewer. His name is Mike Demmer. I don't know him personally, but I like to hear from him. He says, dear Bill, I watch your program all the time. What I don't understand is how a bunch of greedy bankers could bring the world to the edge of catastrophe and then in less than a year, already move back to their old ways. How do they do it?

KEVIN DRUM: Well, that's the $64 million question. Or maybe it's the $64 billion question these days. Yeah, how they do it? They've got all the money. And they use all the money. And they use it in Congress to get rules passed and get laws passed that they want. They use it to lobby the Fed, they use it to lobby the S.E.C. They use it to lobby the executive branch. And they get rules passed that allow them to make a lot of money. Just like any of us would. It's not that American bankers are greedier than anybody else's bankers. It's that our rules, our laws, allow them to do things that they can't do everywhere else. We let them take advantage of the system.

BILL MOYERS: But how do you measure their power? Lobbying doesn't happen in the public, in the open. We can't sit in the bleachers and watch the game being played. How do you know they have this power?

DAVID CORN: You can read the lobbying reports. You know that there are scores if not hundreds of lobbyists. And where do they come from? They come from the committees that they're lobbying. People used to work on the committee, whether they were members, Congressmen or Senators, or staffers. And they spent a lot of time — because, ultimately, Bill, this is about knowledge. This is about information. This stuff is really complicated and convoluted. And, you know, you try reading any of one of these bills and figuring out what's actually being said. It's mystifying. And so, these guys who know the rules, they know the language, and they have the access, and they're giving contributions to the people writing the rules, have all the advantages.

BILL MOYERS: But Barney Frank would disagree with both of you. I don't know that he's read your piece yet, but I'm sure he will.

DAVID CORN: Yeah, I'm sure he would.

BILL MOYERS: Barney Frank, Chairman of the House Committee on Financial Services, and a liberal Democrat, said the other day, look, it's not — I'm not affected by campaign contributions. The members of my committee are not affected by campaign contributions. The problem is democracy. He says everybody sitting on this committee represents somebody back home, a local bank, a car dealer, an insurance company. And they come to the committee and they press, as you do in a democracy, for their interests as you just said.

DAVID CORN: But wait a second. I mean when you look at something like derivatives — derivatives, which were used to enable the subprime lending mess that led to the near collapse of the U.S. and global economy- I'm not sure there are bankers back home who are lobbying, you know, the committee. There aren't local derivative dealers that you meat in Main Street, when you go back to town hall meetings. It's a very small group of people who understand this. And we have seen-- the "Wall Street Journal" is reporting this week that there's no real action on regulating derivatives.

BILL MOYERS: I brought that story, because I wanted to read it. Quote, "Lobbying by Wall Street has blunted efforts to step up regulation on derivatives trading by carving out exceptions or leaving the status quo in place. Derivatives take blame for some of the worst debacles of the financial crisis. But a year after regulators and critics began calling for an overhaul in the way they're traded, some efforts have been shelved, and others have been watered down." What does it say when "Mother Jones" and the "Wall Street Journal" reach the same conclusion? That our government cannot stand up to the lobby even on an issue like derivatives, which were at the root of much of our problem over the last few years?

KEVIN DRUM: Well, it doesn't say anything good. And derivatives are a good example of how this stuff works. I mean, take a look at what happened. Derivatives were at the center of the financial meltdown in 2008. And at first everybody was all ready to regulate derivatives. And the big idea was to put them on an exchange, like a stock exchange, where they're all traded publicly and transparently. What happened was there were corporations — you know, if you're an airline, and you're worried about the price of jet fuel, you might want to buy a hedge. Hedge the price of jet fuel. And so, the airlines and some other companies went to Congress and said, look, those are derivatives, but they shouldn't be traded on the exchange, because that's not the financial stuff that blew up the world. No problem. Everybody pretty much agreed they ought to be exempted from that. But then it's all in how you write the rules. So, the rules got written. And as they slowly got changed, it turns out you've got to define who is an end user. Who is a corporation, as opposed to a bank? And the rules got written and they got written a little more broadly and a little more broadly until eventually if you read the rules right, it looked as though pretty much anybody was an end user. Goldman Sachs would end up being an end user. And 80 percent of the derivatives would have been exempt.

BILL MOYERS: And what does that say to us?

KEVIN DRUM: It says that the banks are in charge. And they're in charge, they get people, you know, right now, banks are in, you know, nobody wants to be around Goldman Sachs, right? So, what they do is what you were talking about. They get the car dealers and they get the local banks and the credit unions and so forth to basically front for them. And these corporations go in and they say, "We want an end user exception." And they get it. And then all it takes is a few congressional aides here and there to change the wording a little bit--

DAVID CORN: Now, the interesting thing is at this point having a conversation like this, we've already lost. Because now we're arguing about how the technical side of things are handled. And we- what the Wall Street collapse didn't really lead in Washington or anyplace else was sort of a reevaluation of what finance is supposed to be about. And what government's role might be in advancing a financial system that benefits citizens at large. Wall Street has become a place- and the banking industry, where you don't lend money to improve local businesses and industry. You basically, you know, create new- they call them instruments, devices- to make money yourself. It's really turned into nothing except a casino, in which they lend money and then they make bets and side bets and bets on the side bets about what's going to go up and down. So, a lot of the action is really, at the end of the day, not about providing credit and keeping capital flowing. It's about what- how they think they can make more money through more trades.

BILL MOYERS: Yeah, I was struck by the — by that paragraph in your story, where it said the financial industry has persuaded us, convinced us over the last 30 years that the purpose of the financial industry is not to serve companies needing capital or consumers needing credit, but to make money for themselves. And you go on to say that in a very fundamental way, this financial lobby has changed America. What do you mean by that? That goes deeper than campaign contributions and money and even influence in Washington. You say they've changed our framework.

KEVIN DRUM: Yeah, yeah. It goes a lot deeper. It's what Simon Johnson the chief- former chief economist for the I.M.F., it's what he calls Intellectual Capture. And-

BILL MOYERS: Intellectual Capture.

KEVIN DRUM: Right. It goes beyond regulatory capture, where, say the banks control the S.E.C. That's one thing. Intellectual Capture means that essentially the financial industry has convinced us, you know, in the '50s what was good for General Motors was good for America. Now it's what's good for Wall Street is good for America. And they've somehow convinced us that we shouldn't ask about what's right or what works or what's good for America. We should ask what's productive, what's efficient, what helps grow the economy.

DAVID CORN: This is the Stockholm Syndrome. Where you're hostage starts identifying with the people holding them captive. Americans have been, you know, have been talk- said- told over and over again that if the Dow's going up, if Wall Street's making money, it's good for you.

BILL MOYERS: Often when workers are being laid off. That's-

DAVID CORN: Yeah, but other measurements of the economy aren't taken to- aren't held in such high esteem. And so, when I was talking to members of Congress and pollsters about why there was not more popular, you know, revulsion against Wall Street that was leading to action in Washington, Congressman Brad Sherman — he's a Democrat from California. He led during the whole TARP argument- what he called the skeptics caucus. They were kind of opposed, but they were just raising questions. And he says the problem is that people are told that if you don't serve Wall Street, Americans will be out on the streets fighting for rat meat. That basically the whole-

BILL MOYERS: Rat meat?

DAVID CORN: Rat meat. Those- that's his- those are his words, not mine. I never- think I never would come up with that. With that image. But that- basically, we'd all be out fighting for grub on our own. And that so- what happens is people are — while they're angry at Wall Street, particularly on the, you know, on the corporate compensation front, which is very easy to get angry about. They also are fearful of taking Wall Street on, because they've been taught that if, you know, if the DOW falls, if you take on the big banks, it's going to be bad for all of us. So, it really is this Stockholm Syndrome, where we're forced to identify with people who are holding us hostage without our interest in mind.

BILL MOYERS: So, your conclusion from all of this is, and I'm quoting you, "…the simplest, most striking proposals for reigning in bank behavior aren't even getting a serious hearing."

KEVIN DRUM: Back in March of last year Congress was considering a bill to deal with bankruptcy and home foreclosures. And the Obama Administration thought this goal was a shoe in. They really didn't think they were going to have any problem passing it. And it failed. And--

BILL MOYERS: Fail? You mean it was beaten?

KEVIN DRUM: It was beaten by the banks. They got the bill rewritten. And in fact, not only did they get the bill rewritten the way they liked it. They actually got several billion dollars of extra bailout money put in at the same time.

BILL MOYERS: This was the cram- so called cram down proposal that was designed to help homeowners who were in trouble get through the hard times?

KEVIN DRUM: That's right. And I think what happened was the Obama Administration saw what happened with a bill that they thought would pass easily, and they realized what they were up against. And so, even their original proposals, I think they were watered down even before they went to Congress. And then once they're in Congress, they get watered down some more. And once it gets to the Senate, it's going to get watered down even more.

BILL MOYERS: So, if we get financial reform at all, it will be financial reform riddled with loopholes to benefit the very people who got us in this mess in the first place?

KEVIN DRUM: It's going to be financial reform on the margins. You know, complexity is the friend of the financial industry. If you really want to control them, you need simple rules. So, for example, Paul Volcker, former Fed Chairman. He thinks that we ought to simply prevent banks from being in the securities business. They should make loans. They should underwrite bonds. They should give advice on mergers and acquisitions. The sort of things they've done for years. But they shouldn't be trading securities. We should leave that to hedge funds. We should leave that to other people for--

BILL MOYERS: Take the- let them take the big risks. Don't take the big risks with the money you and I deposit.

KEVIN DRUM: Don't take risks inside the banking system, where you can blow up the world.

DAVID CORN: Where you're also federally insured.

KEVIN DRUM: Right.

DAVID CORN: Right? With our money.

BILL MOYERS: It's government-backed money that they're taking the risk with, right? And so, they tried to eliminate that.

KEVIN DRUM: And that- but that was never on the table. That sort of simple regulation was never on the table.

BILL MOYERS: Why?

DAVID CORN: That's what I mean. They're — for all the talk of what goes on in Washington. And, you know, there's reams of newspaper stories. There are hearings every other week. I mean, there's a lot of activity on this front. But it's on the edges, and it's not about any paradigm shifts. It's about just trying to keep things going as they are. You know, so the airplane, you know, has a few holes in the wings. Let's patch it up and keep flying the same way. And this is where, you know, I think Kevin's right. You need someone to step in whether it's the President or some other voice and say, "Wait a second. There's something cockamamie about the entire system. There's something rotten at its core. We want to look at it deep down."

BILL MOYERS: But don't you think people sense that? That there's something rotten at the core?

DAVID CORN: Yes! But I think they don't know where to turn to. I think a lot of people would follow the President if he did this. He made an early decision in his presidency. And it happened even before he was elected. It was, you know, September 2008, when the market tanked that day and John McCain was flailing and not knowing whether he was going to listen to Newt Gingrich or somebody else. And Obama came out with press conferences, surrounded by Robert Rubin, Larry Summers, and all the guys who had a hand in what went wrong. And saying, hey, I'm with the adults. What he was saying, really, was, I'm with the conventional thinkers.

KEVIN DRUM: There's also tremendous pressure on presidents. I mean, when Bill Clinton came into office, there were things he wanted to do. And he learned very quickly that he had to do what the bond market wanted him to do. And he famously said what? "I have to do what the bond market says?"

BILL MOYERS: What does that mean? To do what the bond market wants?

KEVIN DRUM: It basically means doing what Wall Street wants. It means that if you run a big deficit, if you raise taxes, the interest rates will go up. The economy will tank. And that's what he was told. And eventually he caved in.

BILL MOYERS: In the magazine you have a story about how there was a hearing before Barney Frank's House Financial Services Committee. This was on the derivatives reform. Called seven witnesses for the banking industry and only one critic of the banking industry. And he'd only gone six and a half minutes before the Chairman cut him off. Now, what does that tell you?

KEVIN DRUM: It tells you that the banking industry has convinced us that only the banking industry has the expertise to deal with these very, very complex issues. And we bought it. We all believe that. These guys are the experts. And it is very complicated. This stuff is very, very complex. And that is exactly the reason why you need simple rules to rein it in. Because the more complexity you have, the more loopholes there are. The more you can take advantage. The banks-

BILL MOYERS: But you said a moment ago that you have to save the bad guy to serve the good guy. The airline industry needed the quote derivatives in order to get that, they had to go and give the banking the very- almost the same power they had prior to the meltdown.

DAVID CORN: Well, they don't have to

KEVIN DRUM: They didn't have to, but they did.

DAVID CORN: Yes.

KEVIN DRUM: It probably was-

BILL MOYERS: And they did because?

KEVIN DRUM: It probably was a good idea to try to exempt ordinary corporations who were just trying to hedge uncertainty. But then they took that and expanded it. They didn't have to do that. They did that because the banks were in there lobbying. And it looked like they could get away with it. I mean, the wording was very, very tricky. I mean, you would never notice it unless you were a real expert and looked at the legislative language and realized that a word here and a word there and a word here changed the whole thing.

DAVID CORN: It's like money in politics, which we're talking about a little bit, too. You try to set up these convoluted rules to deal with campaign cash and deal with constitutional issues and it's almost, you know, it's- I won't say it's impossible — but it's tremendously difficult to do it in a way so that you don't leave openings for others to take advantage of, particularly when they have access to the people writing the laws. I mean- Mark Mellman, a Democratic pollster told me, listen, if 99 percent of Americans can't understand derivatives, you can't regulate derivatives in our Democratic process. And I think there's a lot of truth to that. I mean, people have to understand it. If only the people who benefit from them understand what's going on, they have the leg up. And there's no way for average citizens to even enter the process.

BILL MOYERS: Well, yeah, the one guy who goes into the House Financial Services Committee and raises questions about derivatives, he's given six minutes and shown the door, right?

DAVID CORN: Right.

BILL MOYERS: What does this say to you from your many years in watching Washington? Barney Frank's committee, The House Committee on Financial Services received more than $8 million from the industry last year, 2009. Might that explain why seven witnesses for the industry got a hearing?

DAVID CORN: Well, the House Banking Committee is called a money committee. And Congress on the House and Senate side, there are couple committees that they refer to as money committees. Not because they necessarily deal with money. It's because if you serve on that committee, you have access to a lot of money. Campaign cash. Because you deal with industries that are wealthy. As Kevin said, the banks have all the money, literally. And they will give money to people on the committee, if not to vote their way, at least to hear them out. So, their witnesses get perhaps more attention at some of these hearings. And also what the Democrats do, and it's common practice, is you take vulnerable freshman and you put them on the House Banking Committee so they can raise a ton of cash and maybe scare away Republican opponents.

KEVIN DRUM: This is why Barney Frank can tell you he's not affected by campaign contributions. Well, maybe he's not. His seat is safe. But, you know, there's a lot of people on his committee, the freshmen, the second term congressman, who are affected by money, because they do need to get reelected.

BILL MOYERS: Did you see the posting on TalkingPointsMemo.com this week? While Congress was trying to write these new rules to clamp down on the risky derivative trading that we were talking about, several of these New Democrats were in New York meeting privately with executives from Goldman Sachs and J.P. Morgan. And they also managed, while they were here, to sandwich in a fundraiser. I mean, does this raise your eyebrow just a tiny bit?

DAVID CORN: Well it does, and I mean, this stuff happens all the time. It's not new. And, of course, you know, we're talking about the Democrats, because they control Congress. Now, look, Republicans do it when they don't control it. And when they had control, they had lobbyists actually in writing legislation, as well, on financial and other industry matters.

Why do these people feel they can do this without any risk to them? Well, that's because I don't think their voters or voters in general are saying, "Wait a second. This really ticks me off. Why are you meeting with Goldman Sachs and J.P. Morgan? These guys who nearly, you know, brought down our economy. Why talk to them at all outside of a hearing room? You know, outside of grilling? You know, let alone, why take cash?" I mean, our whole system where the guys in charge of regulating or writing the laws would take cash from the people who want favors, you know, it's kind of, you know, bizarre to begin with.

BILL MOYERS: It's a little bit like going to the umpire behind the plate before a game, isn't it? And saying, you know, "Here's $1,000 bucks for whatever purpose. I'll lend it to you."

DAVID CORN: Exactly. So, but there's not the popular revulsion against this S.O.P., the standard operating procedure that happens all the time. And even after what we've seen with Wall Street and even after people who are indeed mad at least in a general way with big banks, these guys still feel they can, you know, fly up or train up to New York City and hang out with them. Take their money. And then go back to Washington and do the people's work?

BILL MOYERS: Look at this. This is a list of all the contributions over the last 20 years to Members of finance-related Congressional Committees. Let's just take the first eight. Out of the first eight, six of them are Democrats. And those six Democrats have received from the financial industry some $68 million. What does it mean to take that much money? And it's Democrats at the top of this.

KEVIN DRUM: It's Democrats and Republicans. But, yes. Look, there's no way you can take that money. I mean, if you talk to Chuck Schumer, you talk to Barney Frank, you talk to these guys. They'll tell you that they take the money, but then they're going to do the right thing anyway. Well, that's just not possible. You know, Chuck Schumer to take an example, he raised so much money up through I think 2004-2005. He actually stopped taking personal contributions.

He had so much money, he stopped taking contributions and headed up the Democratic fundraising Senate Committee. The overall Senate Fundraising Committee. Raised a couple hundred million dollars, a lot of it from the financial industry. And that went to all Democrats. Not just Schumer. It went to all Democrats who were running for the Senate. Well, there's no way you can take that money and not at least be leaning in their direction, one way or another.

BILL MOYERS: Well, let's one example that you report in your story in "Mother Jones." This is the carried interest rule. The one that declares that compensation from capital gains will be treated as ordinary income. So that the tax rate for hedge fund managers will be 15 percent instead of 35 percent.

They're paying a lower tax rate than secretaries, janitors, nurses, school teachers, members of our team here. What happened when reformers tried to eliminate that loophole?

KEVIN DRUM: If you're running a hedge fund, you are using other people's money and investing it. Now, by any ordinary definition, that's just ordinary income. If I make ten percent or 20 percent, I'm paid basically a commission, that's ordinary income. But the law right now says it's capital gains.

There no excuse for that. There's no excuse for it to be taxed at the lower capital gains rate. It should be taxed at the higher rate. In 2007, after Democrats took over Congress, there was a movement to change that. To tax it as ordinary income, which is how it should be taxed.

And what happened was that the hedge funds who had not really had a big lobbying presence on the Hill before. Because they weren't regulated, so they didn't really need to. They suddenly got religion. And the private equity contributions to Members of Congress suddenly skyrocketed. And eventually Chuck Schumer decided that he would only support a change to the law if it also affected some other industries. And that was just enough to get opposition from other quarters and the bill failed.

DAVID CORN: He basically found a poison pill way to kill it. And Chuck Schumer could say, "Hey, you know, this is a New York issue. Hedge funds are based in New York."

BILL MOYERS: My constituents.

DAVID CORN: "For my constituents." But you know, but really. I mean, you look at all his constituents out in Staten Island and Brooklyn and upstate New York. And you say, "Does this really serve them? So that the guys who play with money, the hedge fund managers, you know, personally, are taxed at 15 percent rather than 35 percent. Is that really a good deal for everybody writ large? The answer, of course, is no.

BILL MOYERS: You know, I've been around a lot longer than the two of you. And I'm still amazed, though, at how brazen this is. I mean, capital gains are, as you said, the profits you make on investing your own money. But these guys, as you also said, were investing other people's money and getting a piece of the action. Under what Webster definition can you call that ordinary income?

KEVIN DRUM: You can't. That is what makes this so brazen. They're not just lobbying for things, "Well, you could argue one way or the other. Maybe one side is right." This is something where there's simply no excuse. And yet, they get away with it anyway.

BILL MOYERS: How do they get away with it? Because, the tea party was about taxes, right? The — one of the causes of the American Revolution was unfair taxation. And yet--

DAVID CORN: We've been talking a lot about politicians and money. There's something they care about more than money, ultimately. And that is votes. That is their job, you know, protection. People in Congress generally want to win their next reelection.

BILL MOYERS: Well, 96 percent of the incumbents usually do.

DAVID CORN: And they usually do. So, they would care to a certain degree about popular anger if it was pointed enough and directed at them sharply enough. But, you know, people don't raise a fuss about this, if there's an angry editorial in the "New York Times" or we rail about it at "Mother Jones" or you do a commentary. You know, they can survive that.

Believe you me, they may not like it. Maybe next time, you know, you run into Chuck Schumer somewhere. He'll point his finger at you. But they can survive that. What they can't survive is people realizing, "Hey, you're not looking out for me. You're looking out for those rich other guys. Because they're giving you money."

And until people get, you know, demonstrate in big enough numbers, that this is a direct concern to them. And every once in awhile, you know, there's an eruption. There's a bubble of activity along those lines. They don't have to worry about it. They live in their own Washington bubble. And they see, you know, they have decades of empirical evidence to base their actions on. They can say, "Yeah, I can get away with this. I can get away with that. I can get away with this. Guess what? I can get away with most anything I try."

BILL MOYERS: Your article confirms for me, reinforces for me what David is talking about. That there are two parallel universes in America today. And that Washington is, as you said a moment ago, a bubble in which they know, the people who write the rules, the beltway press, the people in power, know that they can get away with this, because there's no significant way that the popular angst can penetrate that bubble.

DAVID CORN: Well, I wouldn't say--

BILL MOYERS: We live in two different worlds.

KEVIN DRUM: One thing we haven't talked about yet. And one place where I think you lay some of the-- we should lay some of the blame is the media. And the financial media. I mean, you talk about the carried interest rule that we were just talking about. That's complex. It's sort of down in the weeds. And it gets no attention. People don't see it enough to get angry about it. You can't get angry about something unless you're told about it.

And if you go out and talk to people, there isn't one person in 100, who even knows the carried interest rule was ever up before Congress. Let alone what it means, why it's outrageous, and why they should care about it. And they can't care about it until they know about it.

BILL MOYERS: Where is the countervailing power in Washington? If the press is falling down. If the executive branch is compromised, as you said earlier, by Obama's approach to conventional wisdom. If the bankers are in charge of Congress, and you described there. You also make the very strong case in your article that the Fed is involved in this, as well. The bankers really know how to work the Fed. Where is the countervailing power?

DAVID CORN: There isn't any countervailing power.

BILL MOYERS: You mean I have cancer and there's nothing I can do about it? I'm serious.

DAVID CORN: Well, there could be.

BILL MOYERS: This discourages a lot of people when you give this depressing analysis.

DAVID CORN: I understand that. And I wish I could be more hopeful. And we had a President who ran on a hope platform. You have just described all the major actors in Washington. And, you know, they are, to some degree, responsive to what happens outside of Washington. But if there's no pressure coming into Washington on this stuff, particularly given, as we've talked about, its tremendously profound complication. Then things just sort of, the status quo wins out.

BILL MOYERS: I mean, in Washington, if you are a critic, if you're a journalist in Washington, who reports the kind of-- on Washington the way you do, you get marginalized right?

KEVIN DRUM: Yes. Yes. I think you do. You're not part of Wall Street. You don't really understand what's going on. That's how they feel about it. I think that the Obama Administration — all the people in there — I think they have become convinced, like a lot of people, that if they don't do what Wall Street says, terrible things are going to happen. I mean, if they try to reign in Wall Street, all of our financial business will move to the Bahamas. And we'll lose trillions of dollars. And they believe that. And that's what the banks are--

BILL MOYERS: But as you say so astutely in this article, that happened for 20 years. Washington-- 30 years. Washington did what Wall Street wanted. And we had a debacle anyway.

KEVIN DRUM: Right.

BILL MOYERS: Have we learned nothing?

KEVIN DRUM: The Stockholm Syndrome, as David puts it, is so strong that they still believe it. And, you know, one of the things that happened here is that the bailout last year succeeded in a way, too well. I mean, it worked. TARP worked. All the actions that Ben Bernanke--

BILL MOYERS: Kept us from going over.

KEVIN DRUM: Took us-- yeah, kept us from getting into a second Great Depression. And so, now, what we've got is to a lot of people, just a big recession. There's a lot of unemployment. But it seems familiar. It's a recession. The crisis is over. And now we can go back to business as usual. Because maybe it wasn't as bad as we thought. Memories, memories fade. But, you know, the same thing is going to happen again if we don't reign in the banks.

BILL MOYERS: Yeah, you make that point is that they've actually set up a situation in which we can repeat what happened 18 months ago, right?

KEVIN DRUM: You know, the key thing, I mean, the key thing that drove the housing bubble of the last decade was debt. Was leverage. Banks weren't just making investments, they were borrowing huge sums of money to make investments. That's what makes a bubble bad. Is huge amounts of leverage. Huge amounts of debt.

DAVID CORN: And betting on those--

KEVIN DRUM: Right. Betting with borrowed money. That's the key. You know, the dotcom bubble, when it burst, it was not that bad. There was a recession that followed, but no banks failed. The financial system didn't meltdown. The reason is because it was a bubble, but it wasn't debt-fueled. The housing bubble was debt-fueled. The--

DAVID CORN: 'Cause when we've had housing bubbles in the past that have failed, without, you know, the daisy chain effect.

KEVIN DRUM: We had one in Southern California, where I live. Back in the late '80s and early '90s. And it was bad for Southern California, because again, it was debt-fueled. Now, the regulations that are being pushed through Congress right now, they do almost nothing about that. I mean, they talk about derivatives. They have a consumer finance protection agency. Those are good things.

But the key thing they ought to be getting at is debt. They need to restrict the amount of debt, the amount of leverage that the financial system can use. You don't get rid of it. Credit is the oxygen of the financial system. But you've got to limit it. And they've done almost nothing about that.

BILL MOYERS: And this is-- why?

KEVIN DRUM: Because debt and leverage are the keys to making money. The one thing that Wall Street needs to make money is lots of leverage. They have to have that to make money. So, that's the one thing they will fight for harder than almost anything. And they fought for it so hard that, in fact, the regulations hardly do anything at all.

BILL MOYERS: Well, as you say in the piece, the overdraft fees that they can now charge can equal something like 10,000 percent? I mean, the mafia would like that, right?

KEVIN DRUM: That's right. It's, you know, it's a small part of the picture, but it shows how much power they've got. What happened was overdraft fees on your debit card. The average overdraft is $17. And it's not hundreds or thousands of dollars. The average overdraft is $17. And it gets paid off in five days. And the average overdraft charge is $39. Now, do the math on that, and that's a 10,000 percent rate of interest.

And the only reason banks can do that is because in 2004, the Fed, after being lobbied by the credit card industry, being lobbied by the banks, ruled that even though overdraft protection was marketed as a loan, was marketed as a line of credit, consumers all thought of it that way. It wasn't, in fact, a loan. And so, since it's not a loan, they can charge any interest rate they want.

DAVID CORN: Well, you know, one of the small debates in Washington has been what type of consumer financial protection agency there should be that would look at things like this.

Elizabeth Warren, it was her idea, initially, to even have such an agency, which she proposed a couple years ago. And she wants it, you know, have the power to regulate, you know, banks and credit card companies and others that provide financial services and financial products. And she wants there to be some very simple rules.

For instance, like you have to-- every credit card company would have to provide what they call vanilla products. Whereby, "Here's your credit card. You have, I don't know, 12 percent interest. It doesn't change. No other fees. Until we let you know in a letter with bold print that it's going to change. And we give you the right to keep the card or not keep the card." Something very simple.

And the agency would also have the right to, you know, write these rules and then regulate the companies. So, it goes into, you know, the Washington hopper. And now, you know, it starts getting watered down. They take out the vanilla product stuff. So, the things that would make things easy for consumers to avoid getting caught in scams like the one that Kevin just described, you know, is removed from the bill.

And they say, "Well, you know, maybe we'll have this little agency write its little rules. But we'll let the banking regulators enforce them." The groups that, to date, have really been held hostage by the people they're supposed to regulate. We have a lot of debate in Washington over this. You know, compared to the big picture that Kevin and others have described, this is really a minor reform. But even this minor reform gets sliced and diced until yeah, something might pass.

KEVIN DRUM: People are more afraid of big government than they are of big banks, despite what happened over the last couple of years. And they shouldn't be. They should be-- what they should be is demanding a better government. A government that regulates without being captured by all the special interests. A government that puts in place regulations that are simple and clear. So, David, what you're saying. The vanilla products option, for example, in the CFPA was a nice-- the reason the banks hated it was because it was so simple.

A nice simple regulation. There's no way to get around it. If the rule says you have to offer as an option, this is not the only thing. You have to offer if you're going to do a home loan one option has to be a standard, 30-year, fixed rate mortgage. And you can have all your other options, but you've got to at least tell people they can have that. That's a very simple regulation. There's no way to get around it. And that's why banks hate it.

DAVID CORN: Bill, you keep coming back to the same question. How can they get away with it? I mean, that's really what it all boils down to.

BILL MOYERS: And it's a serious question for this reason. You know, we don't always have popular representation in the government. But from time to time, Civil Rights movement, Suffragette movement, the Gilded Age, the first time-- people do get heard. And men and women in power begin to speak for them. The worry is have we become so big and things become so complex. Have people been so politically abused as a psychologist recently said, that the will to fight for democracy, the political will has been dissipated?

DAVID CORN: Well, I think there may be something to that. It's also-- you know, it takes time and energy to do that. You know, people who are stressed out over, you know, losing jobs or maintaining their jobs, you know, may not, you know, sometimes that leads people to fight. Sometimes it leads people to resignation. Sometimes it leads people just to focus on getting by.

Think about what's happened to our economy. For the aughts, the last decade, there was no net job growth, at all, from 2000 to 2009. For every other decade prior to that, whether it was Republican or Democratic President in charge, the growth was between 20 percent and 38 percent in jobs. So, we've gone from-- that's pretty healthy. Even though at times there have been recessions and wages may not have gone up as much as the number of jobs created. But in the aughts, nothing. This represents, I think, a fundamental turning point for our economy. And that has people--

BILL MOYERS: For our country.

DAVID CORN: Our country. Wigged out. They don't know the future. They don't know who to turn to. They saw what happened with the economic collapse last year. And, you know, it's hard to know, you know, if you can be angry, who to march on. Or whether you're going to hunker down, and try to just get by on your own. They look at rising powers, economic powers overseas. And how we're going to compete with them. It may be a form of abuse, but they certainly look to the Washington system. And this gets to the point that, you know, that Kevin raised. You know, in poll after poll for decades now, if you asked people who are you more scared of in terms of America's future, is it big government or big corporations? Big government always wins by a landslide.

KEVIN DRUM: And remember one thing is that over the last 20-30 years, people have been told over and over and over again that the economy is doing well. The economy's doing great. The Dow is up. And yet, they themselves, most of them, aren't actually making more money. Median wages have hardly gone up at all in the last 30 years. So, you've got all these people who aren't really making any more money. They're treading water. And yet, everywhere they turn, they're being told the economy's doing well. And they start, I think, a lot of people start to blame themselves. They wonder, "If the economy's doing so well, how come I'm not doing better? It must be me." And what they don't see is, no, it's not them. It's the way the system works.

BILL MOYERS: The Republican Congressman from Wisconsin, Paul Ryan, wrote an essay in the December issue of "Forbes" magazine, the title of which was "Down with Big Business." What do you make of that?

DAVID CORN: Well, the Democrats have to worry. Because there is an opening here for the Republicans. If the Republicans looked at what the, you know, see any anger out there about the economy. And they, you know, start attacking the Democrats and say one reason that this is going on is because of Democrat ties to business and show that chart. And yes, we've had our own problems as well. You know, it could be sort of you know a major shift. I don't think they're going to do that. I don't think they're smart enough to do that, quite frankly. Or have the courage to do that. But that is one opening to have a major strategic change in the face of American politics.

KEVIN DRUM: You know, one thing that certainly the Democrats need, I think the country needs is, you know, President Obama really needs to take the lead on this. And he hasn't. He has been in favor of financial reform, but he hasn't really spoken out about it. He hasn't really pushed the banks. He has made a strategic decision that he needs to cooperate with the banks. Cooperate with Wall Street so as not to cause more panic.

And, you know, it this is not this is not something like health care or climate change, where you can see a lot of moving parts that go together. And you can sort of understand why there's a lot of compromise in those things. With financial reform, he could go out there and start pushing on bits and pieces of it. And even if he loses, even if he loses, it doesn't wreck all the rest of it. He doesn't wreck the chances of financial reform in general if he pushes on one pieces and loses.

DAVID CORN: But better yet, that would mobilize people. I mean, sometimes in politics-- I mean, you know this. Sometimes a clear loss is actually a win politically. Because you draw the lines. You show people who's on what side. And you show them what you're fighting for.

BILL MOYERS: Someone said to me the other day, "Obama has not had his Reagan moment. His defining moment." Remember in the early '80s, when Reagan came to the White House. The one of the first things he did was to fire the air control workers. And it was the moment that for conservatives and a lot of independents, who wanted a tough President to stand up to something, I'm not saying Obama should fire anybody. But he hasn't defined himself by his stand.

KEVIN DRUM: Obama wasn't even willing to fire Ben Bernanke. The head of the--

DAVID CORN: Who's now "Time" man of the year.

KEVIN DRUM: The head of the Federal Reserve. And, you know, Ben Bernanke did, I think, a good job after the crisis hit. He didn't recognize the crisis before it hit. After the crisis hit, he did a good job. But that doesn't mean-- you don't deserve to get reappointed to the Federal Reserve. He did a good job managing the crisis. What we need now, though, is somebody who is going to manage the aftermath of the crisis. Somebody who is genuinely dedicated to re-regulating the financial sector.

BILL MOYERS: Let me show you something that Ben Bernanke said to the annual meeting of economists earlier this week, last Sunday, I think it was.

BEN BERNANKE: The best response to the housing bubble would have been regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective and surgical approach for constraining the housing bubble than a general increase in interest rates.

DAVID CORN: Whoops.

BILL MOYERS: Whoops what?

DAVID CORN: Well, now he's saying what a lot of us said earlier? That we should have had better regulation, you know, rather than just fiddling with interest rates? Kevin mentioned well, he should you know, maybe Obama should not have retained Ben Bernanke. But, you know, we are so far away from that discussion when you look at everything else that's happened. You know, who are some of the top people at Treasury now? A lot of them came from Goldman Sachs.

BILL MOYERS: You have a great chart in your story in "Mother Jones" on that.

DAVID CORN: I mean, my favorite one that I wrote about, and I don't know him personally. He could be a great guy. Never even met him. I tried to interview him, but he wouldn't consent. Mark Patterson. He's the chief of staff for Timothy Geithner, the Treasury Department Secretary. He was a lobbyist for Goldman Sachs. What did he do as a lobbyist for Goldman Sachs? He lobbied against a bill in the Senate to restrain it was a very modest bill, to restrain CEO compensation.

Basically, gave shareholders the right to say, "We think you're paying them too much." It wasn't even mandatory. It wouldn't even cut back pay. He you know, Goldman Sachs would have none of that. He lobbied against that bill. Who authored that bill? Barack Obama, when he was a Senator. So, the guy who fought Barack Obama on CEO pay, an issue that Barack Obama says he cares about. And I believe he does. Is now running the Treasury Department for Tim Geithner. I mean, this really doesn't make a lot of sense to me.

BILL MOYERS: So, what would happen you both talk about mobilization. Let's say that President Obama in his upcoming State of the Union speech called for mobilization. Asked people to do something about this. What would that mean? What would what shape would mobilization take?

KEVIN DRUM: He could do it in a State of the Union address and that might be a place to start. But you know, Barack Obama famously won election through a huge grassroots movement. He's got an enormous, I think 13 million names on his email list. And so forth. But he's refused to use that. He

BILL MOYERS: Write the first email he would send, if you were Obama. What would you send those millions of young people and others who are looking for real change in the elections of 2008. What would you say?

KEVIN DRUM: If it were my email, I would say, "Look, we need to break up the big banks." Look, Alan Greenspan of all people, has said if a bank is too big to fail, it's too big. Allen Greenspan said that. If Alan Greenspan thinks that we ought to break up big banks, if Paul Volcker thinks we ought to break up big banks, this is not a fringe, left view. This is this ought to be a mainstream view. And yet, it's nowhere. That kind of thing should--

DAVID CORN: I'll give you the, I'll give you the first line. The first line should be, "We've been taken for a ride. You know what happened in 2008. I came into office promising change. I've sent some bills up there. They were strong. Maybe they could have been stronger. And I see that they're being weakened. This only makes me believe that we have to bear down harder. And I can only do this with your help."

BILL MOYERS: Okay, I've read that. I'm really excited about that, President Corn. What do you mean? What can I help you do?

DAVID CORN: Send me that $50 as well, Bill.

BILL MOYERS: Well, that's what can I do to help?

DAVID CORN: Okay, well, then been then he would have to he would say, "I have you know, I have I have reset my legislative agenda on this front. Here are the five, you know, provisions I want to see passed this year on regarding financial reform. I want the Consumer Finance Protection Agency to have teeth and be able to offer this. I want, you know, derivatives full, you know, fully transparent. Okay? I want to put back the wall between in banking. Let me tell you why." Now, a lot of this you know, some of this goes to fundamental issues, some of it doesn't. But at least move the, you know, move the ball in that direction.

KEVIN DRUM: If you want to have real change, there's only one place that can come from. That's out of Congress. Congress is the only body which is big enough to actually restrain Wall Street. One way or another, you have to take your 13 million or your 15 million or whatever number of people you've got. You've got to mobilize them to tell their Congressmen that they're mad as hell. And they're not going to vote for them if they don't pass this legislation.

BILL MOYERS: But no one can.

DAVID CORN: It's the only way.

BILL MOYERS: No one can read your piece in "Mother Jones" without thinking, "So, these guys must be laughing all the way to the bank." I mean, the same people who, bought the government off, brought the economy down, caused suffering to millions of people from Orange County to Portland, Maine, are winning all over again, you say. Because, you say, in the same issue, no one's fighting back.

DAVID CORN: My guess is that they feel they dodged the biggest bullet of their lives. I mean who would have thought a year ago that we'd be back we'd be at this point? I mean, I think they probably, you know, worried that, you know that that there'd be communist laws passed. You know, that people would be so angry.

DAVID CORN: Tremendous money and power and influence to wield to get their way. Versus the rest of us, who get nickeled and dimed and we have other things to worry about. You know? People are you know, have you know are worrying about their maybe what their kids going to school safely and getting good educations.

I mean, we have everything to worry about. The bankers and the investment bankers and the financiers, they can grease the way with millions of dollars that gets them billions of dollars in the in return. And it it's not a fair fight.

KEVIN DRUM: People need to have someone to rally around. If they're going to make this happen. And I think that needs to be Barack Obama. He needs to be willing to really take on the bankers. You know, Franklin Roosevelt in his first term. I remember he has a famous quote where he talked about there are you know, there are people out there who hate me. I have earned their hate. And I embrace their hate. And I think Barack Obama needs to be willing to earn the hate of some bankers.

BILL MOYERS: But I don't believe that is his nature, do you? It seems to me after all this time his nature is of a conciliator.

KEVIN DRUM: Conciliation is a good trait. In most cases, I actually think it I think it works well for Obama. But sometimes there are times for a conciliatory attitude. There are times to take somebody on.

Now, one thing one place where I think he's missing a bet is Barack Obama came into office feeling like he did want to bring the country together. He wanted to try to end the partisan wars. But, you know, this issue of Wall Street is one where if he took on Wall Street, the bankers might hate him, but I think that would bring the country together more than you'd think.

'Cause I think there is a lot of anger toward Wall Street. It's latent, but it's there. Among liberals, among conservatives, among libertarians, among independents. I think if there's any one issue where a real show of emotion on his part and a real show that he was going to take these guys on, could bring the country together. It very well might be taking on Wall Street.

BILL MOYERS: So, how you know, how long do we wait for Godot?

KEVIN DRUM: Well, that's up to Godot. That's up to Obama. Nobody knows.

BILL MOYERS: David Corn and Kevin Drum, thank you for being with us on the Journal.

Source: http://www.pbs.org/moyers/journal/01082010/watch.html