Blog

Sen. Bernie Sanders

By Sen. Bernie Sanders
Independent U.S. Senator from Vermont

At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from the Federal Reserve, how much they received, and the exact terms of this assistance. He refused. A year and a half later, as a result of an amendment that I was able to include in the Wall Street reform bill, we have begun to lift the veil of secrecy at the Fed and the American people now have this information.

It is unfortunate that it took this long and it is a shame that the biggest banks in America and Mr. Bernanke fought to keep this secret from the American public every step of the way. But, the details on this bailout are now on the Federal Reserve’s website and this is a major victory for the American taxpayer and for transparency in government.

Importantly, my amendment also required the Government Accountability Office to conduct a top-to-bottom audit of all of the emergency lending the Fed provided during the financial crisis to be completed on July 21, 2011, which will take a hard look at all of the potential conflicts of interest that took place with respect to this bailout. So, in many respects, details that the Fed was forced to divulge on Wednesday about the $3.3 trillion in emergency loans that until now were totally kept from public scrutiny, marked the beginning, not the end, of lifting the veil of secrecy at the Fed.

After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed’s multi-trillion-dollar bailout of Wall Street and corporate America. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions and how we can make our financial institutions more responsive to the needs of ordinary Americans and small businesses. (more…)

Zach Carter

Zach Carter
Economics Editor, AlterNet; Fellow, Campaign for America’s Future

Unbelievably, the U.S. Senate has approved legislation making it easier for banks to get away with foreclosure fraud. The bill would make it much harder for consumer advocates to show that banks are engaging in fraud, bailing out megabanks who cut corners in order to boost bonuses and slap borrowers with massive, illegal fees. The political fight between big banks and troubled homeowners is on, and President Barack Obama must take a side.

If President Obama signs this legislation into law, he’s sending a clear signal that his administration stands ready to bailout the banks again, whatever the consequences for American homeowners. The new legislation is a clear attempt to provide legal cover to GMAC’s robo-signing scandal, and should be firmly opposed by Obama.

Banks are running into big trouble in foreclosure courts right now because they have kept shoddy mortgage records for years in order to cut costs and boost bonuses. Those records are so bad that banks routinely cannot prove that they have the legal right to foreclose on the homes they attempt to foreclose on. That’s a major problem, because banks have repeatedly demonstrated that they cannot be trusted to figure out their own foreclosures for themselves. They’ve foreclosed on people who haven’t missed any mortgage payments, and even on borrowers who have fully paid off their loans.

So banks and their lawyers have been fabricating documents, forging signatures, and lying to judges in order to go through with foreclosures. All of this is fraud– especially when committed systematically, en masse by large corporations and their clients. It gets even worse when banks try to use fraudulent documents to slap borrowers with thousands of dollars in illegal fees. (more…)

Zach Carter

Zach Carter
Economics Editor, AlterNet; Fellow, Campaign for America’s Future

I didn’t expect to see serious economic policy discussions in the “Republican Pledge To America,” but even by Washington, D.C. standards, this document is staggeringly disingenuous. Not once in the entire 48-page screed do Republicans mention the words “Wall Street,” “subprime,” or “foreclosure.” It’s a deliberate effort to obscure the fact that today’s economic mess is the direct result of financial malpractice on Wall Street — and that Republican economic policies would encourage more of it.

As my CAF colleague Richad Eskow has noted, this Pact to Rob The Middle Class has plenty of other problems — but fundamentally, it’s supposed to be a discussion about government spending and the federal budget deficit. For anyone to even pretend to discuss those issues without mentioning the past decade’s Wall Street excess is simply laughable. The increases in government spending under President Barack Obama have been an attempt to counter economic damage wreaked by Wall Street under President George W. Bush. They haven’t been enough, but they’ve helped — just ask economist Mark Zandi, former adviser to Sen. John McCain’s presidential campaign (.pdf file).

But after watching a deregulated Wall Street pump out trillions of dollars worth of ridiculous predatory mortgages and then amplify their bets tenfold in the unregulated derivatives market, Republicans now promise to hold up any new government regulation that “costs” the economy more than $100 million.

This is pure insanity. Any serious Wall Street regulation will cost every megabank far more than $100 million over the 10-year span devoted to budget projections — that’s the whole point of serious financial regulation. Republicans are defending the basic housing bubble accounting scam: book huge, illusory short-term profits with reckless lending and gambling– when those bets blow up, stick taxpayers with the bill. You can measure the short-term costs to bank profitability, but you can’t measure the costs of future financial collapse. Plenty of free-market activists thought decades of deregulation had worked until markets cratered in 2008. At that point, we lost eight million jobs, and the amount of government debt held by the private sector increased by 40 percent of GDP. Without Obama’s stimulus package, the cost in jobs would have been far higher. (more…)

Les Leopold

By Les Leopold
Author, “The Looting of America”

As thousands of demonstrators marched in European capitals on Wednesday to protest recent austerity measures, officials in Brussels proposed stiffening sanctions for governments that fail to cut their budget deficits and debt swiftly enough. (“Workers In Europe Protest Austerity Measures”, New York Times, 9/30/2010)

Oh, do the super-rich hate the sound of “class struggle.” Dare to utter the words and they’ll reach for their red-baiting paint guns and spray you silly with invective. It’s un-American. It’s socialistic. It’s an insult to democracy and freedom.

But try as they might, they can’t paint over the reality, which the new Fortune 400 listings make so clear: Wall Street billionaires have more money than they’ll ever be able to use–at a time when more than 29 million of us don’t have that most basic necessity, a full-time job. A hidden class war got us to this point. It’s not hidden anymore.

Once upon a time there was a tangible connection between the plutocrats and the rest of us. Carnegie, Mellon and Rockefeller built sprawling enterprises that employed tens of thousands of workers (even if they did treat them brutally). But today’s billionaire financiers, about 100 of whom are on the Fortune 400 list, have a tough time explaining how their money-making schemes produce any jobs at all. Very few of us have a clue about how they even make their money.

But we are clued in to the way our society is splitting apart. What’s good for the Wall Street tycoons is not good for America. The wealthy may loathe hearing about “class struggle,” but we’re in the middle of one — and it’s a doozy. (more…)

Zach Carter

Zach Carter
Economics Editor, AlterNet; Fellow, Campaign for America’s Future

A full 90 members of Congress who voted to bailout Wall Street in 2008 failed to support financial reform reining in the banks that drove our economy off a cliff. But when you examine campaign contribution data, it’s really no surprise that these particular lawmakers voted to mortgage our economic future to Big Finance: This election cycle, they’ve raked in over $48.8 million from the financial establishment. Over the course of their Congressional careers, the figure swells to a massive $176.9 million.

The complete list of these Crony Capitalists is below, along with the money they pulled in from Big Finance, according to data compiled by the Center for Responsive Politics (opensecrets.org). The career data goes back to 1989. Of the 69 House members who voted with Wall Street on both the bailout and financial reform, 60 are Republicans, while nine are Democrats. All 21 Senators who voted with Wall Street on both issues are Republicans, and Republicans raked in over
90 percent of the total campaign contributions.

Here’s a chart showing Wall Street’s total contributions to this crowd for the 2010 cycle, by political party:

And here’s one showing total Wall Street contributions over the course of their careers:

These aren’t the only politicians carrying water for Wall Street–only the most flagrant. Some of the bank lobby’s savviest servants on Capitol Hill do their dirty work early in the legislative process. They push through technical amendments and deploy complex procedural tricks to defang a bill, but when the final vote comes, they can still create the appearance of taking a stand against Wall Street’s interests. Rep. Melissa Bean, D-Ill., is a master of this technique, and Tea Party favorite Sen. Scott Brown, R-Mass., was able to claim credit for voting in favor of reform after demanding–and receiving–a host of big bank giveaways in return for his vote. (more…)

Dean Baker

By Dean Baker
Co-Director, Center for Economic and Policy Research

Virtually everyone has had the experience of being forced to pay a late fee or a bank penalty because of some fine print provision that we overlooked. Sometimes begging by good customers can win forbearance, but usually we are held to the written terms of the contract no matter how buried or convoluted the clause in question may be.

That is the way it works for the rest of us, but apparently this is not the way the banks do business, at least when those at the other end of the contract are ordinary homeowners. As a number of news reports have shown in recent weeks, banks have been carrying through foreclosures at a breakneck pace and freely ignoring the legal niceties required under the law, such as demonstrating clear ownership to the property being foreclosed.

The problem is that when mortgages got sliced and diced into various mortgage-backed securities it became difficult to follow who actually held the title to the home. Often the bank that was servicing the mortgage did not actually have the title and may not even know where the title is. As a result, if a homeowner stopped paying their mortgage, the servicer may not be able to prove that they actually have a claim to the property.

If the servicer followed the law on carrying through foreclosures then it would have to go through a costly and time-consuming process of getting its paperwork in order and ensuring that it actually did have possession of the title before going to a judge and getting a judgment that would allow them to take possession of the property. Instead banks got in the habit of skirting the proper procedures and filling in forms inaccurately and improperly in order to take possession of properties. (more…)

Zach Carter

Zach Carter
Economics Editor, AlterNet

I’ll have plenty to say about the escalating foreclosure fraud scandal later this week. For now: This is a big, big deal. It isn’t a clerical error, it’s an aggressive attempt to slap borrowers with thousands of dollars in illegal fees for the luxury of being foreclosed on. And what’s more, this absurd, shady business was priced into the entire mortgage securitization scheme from the get-go. Banks have been fudging their documentation for years in order to cut costs and score higher profits from securitization—the business model has relied on this corner-cutting since day one of the housing boom.

The good news is that borrowers can use this epic fraud to defend themselves. If a bank can’t prove that it has the right to foreclose on a borrower by showing the proper documentation to a judge, then it doesn’t have the right to foreclose. This is a tremendous opportunity for neighborhood advocates. Make them pony up the docs, it might just save your home. The problem isn’t restricted to GMAC—foreclosure counselors and attorneys talk about the issue of forged or destroyed documentation all the time, and we already know that JPMorgan Chase and Countrywide (now Bank of America) have major documentation problems. Including GMAC, that’s three of the biggest players in every aspect of the mortgage market.

If courts actually follow the law here, we get the best of both worlds—big losses for Wall Street on their predatory loans, and borrowers who get to stay in their homes (mortgage-free, at that). The only question is whether these mortgage losses prove so severe that Wall Street banks come back begging to the government for another bailout. If so, it’s an opportunity to do what should have been done in 2008—break up these financial monsters into smaller creatures that don’t require bailouts when they fail. (more…)

Zach Carter

Zach Carter
Economics Editor, AlterNet; Fellow, Campaign for America’s Future

I agree with everything Paul Krugman has to say about Max Abelson’s excellent run-down of the Wall Street whinery, but his critique stops a little too short. Abelson’s piece emphasizes that Wall Street isn’t really upset about any policies the Obama administration has adopted, since, as I and many others have noted, the Obama administration has been very friendly on that front. What they’re upset about– at least what they say they’re upset about– is the jargon. Obama called bailed-out bankers “fat cats” after they paid themselves obscene bonuses with taxpayer money. To the bankers Abelson quotes, this amounts to some kind of unfair discrimination. That’s absurd– the bailout barons Obama criticized had wrecked the economy and then paid themselves like princes for profits secured by taxpayer largesse. Those who did not benefit from such largesse have no reason to feel slighted by the critique, and those who did benefit have no reason to be complaining from their second homes in the Hamptons.

But what I find most interesting is that the cry-babies in Ableson’s story actually threaten to wreck the economy over this rhetoric. The key passage is at the end of Ableson’s piece:

Wall Street’s emotions have consequences. “If, as a result of this anger, credit becomes unavailable, particularly for small and mid-size businesses,” Mr. Schwarzman wrote in The Washington Post this year, before his Poland blunder, “then at best the economy will slow and, at worst, we will find ourselves in a dire situation.” He said bankers felt under siege and were responding by “becoming conservative,” a lovely little pun about lending and politics. (more…)

Dean Baker

By Dean Baker
Co-Director, Center for Economic and Policy Research

Two years ago, the top honchos at the Fed, Treasury and the Wall Street banks were running around like Chicken Little warning that the world was about to end. This fear mongering, together with a big assist from the elite media (i.e. NPR, the Washington Post, the Wall Street Journal, etc.), earned the banks their $700 billion TARP blank check bailout. This money, along with even more valuable loans and loan guarantees from the Fed and FDIC, enabled them to survive the crisis they had created. As a result, the big banks are bigger and more profitable than ever.

Now, the same crew that tapped our pockets two years ago is eagerly pitching the line that their bailout was good for us. It may be the case the history books are written by the winners, but that doesn’t prevent the rest of us from telling the truth.

Let’s step back to where we were two years ago. The huge investment bank Bear Stearns had collapsed. So had Fannie Mae and Freddie Mac, the mortgage giants. Lehman Brothers, the fourth largest investment bank, had also gone down. AIG, the country’s largest insurer, had been put on life support by the government.

At this point, Merrill Lynch, Morgan Stanley, and Goldman Sachs, the three remaining independent investment banks, all faced runs that would quickly sink them absent government intervention. Citigroup and Bank of America, two of the three largest commercial banks, were also almost certainly insolvent. Many other banks also faced insolvency, especially if they took big losses on their loans to other institutions that were about to go bankrupt. (more…)

Les Leopold

By Les Leopold
Author, “The Looting of America”

The ranks of the working-age poor in the United States climbed to the highest level since the 1960s as the recession threw millions of people out of work last year, leaving one in seven Americans in poverty. The overall poverty rate climbed to 14.3 per cent, or 43.6 million people, the Census Bureau said last week in its annual report on the economic well-being of US households. Gulfnews.com

While 43.6 million Americans live in poverty, the richest men of finance sure are getting pissy. First Steve Schwartzman, head of the Blackrock private equity company, compares the Obama administration’s effort to close billionaires’ tax loopholes to “the Nazi invasion of Poland.” Then hedge fund mogul David Loeb announces that he’s abandoning the Democrats because they’re violating “this country’s core founding principles” — including “non-punitive taxation, Constitutionally-guaranteed protections against persecution of the minority, and an inexorable right of self-determination.” Instead of showing their outrage about the spread of poverty in the richest nation on Earth, the super-rich want us to pity them?

Why are Wall Street’s billionaires so whiny? Is it really possible to make $900,000 an hour (not a typo — that’s what the top ten hedge fund managers take in), and still feel aggrieved about the way government is treating you? After you’ve been bailed out by the federal government to the tune of $10 trillion (also not a typo) in loans, asset swaps, liquidity and other guarantees, can you really still feel like an oppressed minority?

You’d think the Wall Street moguls would be thankful. Not just thankful — down on their knees kissing the ground taxpayers walk on and hollering hallelujah at the top of their lungs! These guys profited from puffing up the housing bubble, then got bailed out when the going got tough. (Please see The Looting of America for all the gory details.) Without taxpayer largess, these hedge fund honchos would be flat broke. Instead, they’re back to hauling in obscene profits.

These billionaires don’t even have to worry about serious financial reforms. The paltry legislation that squeaked through Congress did nothing to end too big and too interconnected to fail. In fact, the biggest firms got even bigger as they gobbled up troubled banks, with the generous support of the federal government. No bank or hedge fund was broken up. Nobody was forced to pay a financial transaction tax. None of the big boys had a cap placed on their astronomical wealth. No one’s paying reparations for wrecking the US economy. The big bankers are still free to create and trade the very derivatives that catapulted us into this global crisis. You’d think the billionaires would be praying on the altar of government and erecting statues on Capital Hill in honor of St. Bailout.

Instead, standing before us are these troubled souls, haunted by visions of persecution. Why? (more…)