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Zach Carter

Zach Carter
Economics Editor, AlterNet

Financial giants have figured out yet another way to profit from fraud. After devastating communities across the country with shady subprime loans, the mortgage industry has launched a new assault on America’s neighborhoods. Big banks are now outsourcing their foreclosure processing to shady law firms with a history of breaking the law for a quick buck. These foreclosure scammers forge documents, backdate signatures, slap families with thousands of dollars in illegal fees and even foreclosure on borrowers who haven’t missed a payment.

Andy Kroll lays out the insanity in a terrific piece for Mother Jones. “Foreclosure mills,” as they are known, have been around for years, but they’ve become a much bigger problem as the mortgage crisis has deepened. Fannie Mae and Freddie Mac spurred the creation of these social beasts decades ago to help them process large volumes of foreclosures quickly and cheaply. Pretty soon big banks wanted in on the action, and bailout barons at Wells Fargo, Citigroup and Bank of America starting sending foreclosures to these scummy law firms by the thousands.

Banks opt to outsource dirty work like this for a reason. It takes weeks to process the legal work necessary to kick somebody out of their home, since cops and judges don’t want to give borrowers the boot without proof. If you can cut down that processing time, you can save a lot of money on legal bills. Foreclosure mills cut costs for banks by cutting corners — when they can’t compile the documentation needed to push families out of their homes right now, they simply fabricate the documents. Still worse, these guys illegally withhold documentation from borrowers seeking to negotiate loan modifications with their banks — effectively forcing borrowers out of their homes instead of allowing them to cut a deal with the bank. When borrowers actually do straighten things out with foreclosure mills, the scumbags slap them with huge illegal fees. Kroll details a foreclosure mill that erroneously tried to evict a Florida couple who had been paying their mortgage on time. When it became clear that the couple could not be kicked out of their home, the foreclosure mill tried to charge them $18,500 in fees for mistakes committed by the foreclosure mill and the bank. The foreclosure mill even invented two new people who it said lived in the home in order to demand four sets of legal processing fees instead of two. (more…)

Mike Hall

By Mike Hall
AFL-CIO Senior Writer

A coalition of New York City unions and community groups, joined by city Comptroller John Liu, told some of the biggest banks that received hundreds of billions in taxpayer bailouts that it’s time to help out  New York homeowners facing foreclosure.

In letters to JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, PNC, Wachovia and U.S. Bank, the group says the banks are not doing enough to modify mortgages to help homeowners stay in their homes.

Nationwide, just 168,700 permanent modifications have been made under a voluntary federal program, with fewer than 12,000 in New York. But there are 265,000 homeowners deeply behind in payments or already in the foreclosure process. In 2009, foreclosures were up by 30 percent in the state over 2007 and in New York City just in the first quarter of this year, up 16 percent over the same time last year.

Michael Mulgrew, president of the United Federation of Teachers (UFT), an AFT affiliate, says:

We are trying to help [homeowners] who are doing the right thing. It seems the banks are not really doing a lot on this. They are not trying to negotiate in many instances. (more…)

Don McNay

By Don McNay
Award winning financial columnist and structured settlement guru 

“I don’t give a damn about my bad reputation.”
-Joan Jett 

In my childhood, Northern Kentucky was a hot spot for organized crime. In a town full of hustlers, prostitutes and gamblers, the profession they looked down on was loan sharking.

Loan sharks preyed on the poor and most desperate. The sharks charged high rates of interest for short term loans. The practice was illegal and, often, dangerous.

It wasn’t unusual for a loan shark to wind up floating in the Ohio River. One of the biggest names in the business, Frank “Screw” Andrews, (who is a central character in Hank Messick’s book, Syndicate Wife) “accidentally fell” out of a 4th floor window.

If Screw was in business today, he would be a captain of industry. Loan sharking is now legalized. Today, we call the loan sharks “payday lenders.”

The stock of payday lenders is traded on the New York Stock Exchange and NASDAQ. Many payday lending companies do business with Wall Street’s biggest banks.

As Gary Rivlan notes in his book, Broke USA, “the working poor have become big business.”

Rivlan’s book is a must read. It’s a riveting piece of work by a first-rate writer.

As far as flow and writing style, it reminds of Joe Nocera’s 1994 classic history of personal finance in America, A Piece of the Action.

A good idea would be to read Rivlan’s book immediately after reading Nocera’s book.

A Piece of the Action shows how we went from a nation without credit cards to where they are so important in many people’s lives. Broke USA shows how the decades of easy credit and loose regulation has created a new business category called the “Poverty Industry.”

You wouldn’t think that poor people would be a growth market, but businesses make big money off people who live paycheck to paycheck.

Rivlan’s book had a personal connection for me. Much of his narrative takes place in Dayton, Ohio, a city I know well. Don Donoher, the longtime basketball coach at the University of Dayton, was best man in my parents’ wedding and I am named for him.

Frank “Screw” Andrews “fell” out of the window in 1973. He never dreamed that nearly 40 years later, his business would be operating legally in almost every city in the country.

Screw knew how to bribe local officials with cash payments. He didn’t live to the see such bribery legalized in the form of lobbying and political fundraising.

Broke USA makes it clear that the public and those in the media don’t care for payday lenders much.

It also makes it clear how many friends the Poverty Industry has made by paying big dollars to lobbyists and giving huge contributions to lawmakers.

They are also funded by Wall Street.            

Until I read Broke USA, I didn’t realize what a big hand the “too big to fail” banks have in creating the Poverty Industry.

Citigroup, JP Morgan Chase and Bank of America are just some of the big banks that make huge profits, directly or indirectly, from the Poverty Industry.

They have another common bond. They received bailout money from the American taxpayers in 2008.

They are directly or indirectly in the Poverty Industry. Since we bailed them out, that makes us directly or indirectly in the Poverty Industry, too.

Rivlan’s book paints a depressing picture of America.

Entrepreneurs who want to be rich and don’t care how they do it are matched with people who don’t handle money well.

The people peddling poverty products have figured out the there is a strain of Americans who are the financial equivalent of drug addicts. They will pay any price, fee, or interest rate as long as they can get an immediate fix. They don’t care about tomorrow. They just want money today.

Just like a heroin addict, a financial junkie will usually die before the addiction runs out.

The uplifting side of Rivlan’s book is that a great deal of it is devoted to reformers.

He writes extensively about people like Martin Eakes of North Carolina, who has developed a poverty financing model at reasonable interest rates, and to Bill Faith, an Ohio activist who got that state to pass a restrictive cap on payday lenders’ interest rates.

Those who want to fight the Poverty Industry can look at what Eakes and Faith have done and follow their road map.

It’s not an easy battle. The Poverty Industry has tons of lobbyists, lawyers, legislatures and “too big to fail” financial institutions backing them up.

Poor people don’t have well-paid lobbyists. But as Rivlan’s book makes clear, focused and committed lobbyists can make up the difference.

Congress is putting the finishing touches on financial reform legislation and the “too big to fail” banks are fighting tool and nail to prevent a separate consumer protection agency, like the one Elizabeth Warren has been pushing, from seeing the light of day.

If Broke USA did anything, it convinced me why a separate agency is needed.

Without regulation, there are people and businesses who will find new ways to make money off poor people and don’t give a damn about their bad reputations.

***

Don McNay is the author of two books, the most recent being “Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery.” McNay also is an award-winning financial columnist and contributor to The Huffington Post, where this piece was first published. His web site is www.donmcnay.com . McNay earned master’s degrees from Vanderbilt and American College and was inducted into the Eastern Kentucky University Hall of Distinguished Alumni. He is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field, CLU, ChFC, MSFS, and CSSC.

Dean Baker

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

I worked at the Economic Policy Institute (EPI) for 6 ½ years. During this time, the credibility of my work and that of my colleagues was often impugned by describing EPI as “labor backed.” This was partially true, we got 20-25 percent of our funding from unions. However, the clear implication of this identification was that our ties to labor called our integrity into question in a way that large amounts of corporate tied money did not affect the integrity of other think tanks.

I am reminded of this because I was at the Peter G. Peterson’s Foundation deficit fest this morning. I left as Peter Peterson took the stage with Robert Rubin. The hypocrisy around this sight was more than I could bear. Actually, I left because I had work to do, but this sight was still pretty painful.

Peter Peterson and Robert Rubin are both enormously wealthy men. (They joked about dividing their lunch tab based on their net worth.) They are lecturing the country on the need to cut Social Security and Medicare benefits for retirees who have a tiny fraction of their wealth. Many of the victims of the cuts that they would push are people who are already struggling.

This would be difficult to accept in any case, especially since there are ways to get the long-term deficit down to size that don’t involve nailing middle income and/or poor people. However, it would be hard to find two people who have benefited more from taxpayer handouts than these two individuals.

Peter Peterson has been the recipient of tens of millions of taxpayer dollars through the fund manager’s tax break. This tax break, which is also known as the “carried interest tax deduction” allows managers of hedge and equity funds to pay tax on their earnings at the 15 percent capital gains tax rate, instead of having it taxed as normal income. As a result, Peterson paid a lower tax rate on much of his earnings than tens of millions of people working as school teachers, fire fighters, and other middle income jobs.

Peterson not only collected the money himself, he came to Washington in 2007 to lobby Congress when it debated ending the tax break. He apparently wanted to make sure that his friends would still be able to benefit from this tax break even after he had retired.

After setting the country on a course for the current crisis with the policies he pushed as Treasury Secretary, Robert Rubin went to work as a top executive at Citigroup. In this capacity, he earned $110 million before leaving the company in the middle of its 2008 meltdown. As we know, Citigroup was one of the major actors in the housing boom. It produced hundreds of billions of dollars worth of mortgage backed securities.

It would have gone belly up in the crisis were it not for tens of billions of dollars in taxpayer loans and hundreds of billions in guarantees. (That the government’s guarantees restored Citi to life, which allowed us to get our money back is beside the point.)

Rubin’s public line is that he should not be blamed for Citi’s collapse or the role it played in bringing down the economy; he really didn’t know what they were doing. This is an interesting claim for someone who got paid $110 million by the bank. Presumably Citi could have employed someone who didn’t have a clue about what was going on for something considerably closer to the minimum wage. In any case, being at the center of a collapsed megabank that helped bring down the economy would not ordinarily be a credential that would give a person standing to lecture the country about fiscal policy and the need for sacrifice.

Yet, in Washington in 2010, Peterson and Rubin hold the high ground, lecturing the rest of us on the need to tighten our belt. As I said, I have work to do.

***

This post is part of the Virtual Summit on Fiscal and Economic Responsibility For People Who Did Not Wreck The Economy. 

***

Dean Baker is author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy,” PoliPoint Press, LLC. This piece was first published on TPMCafe.

Richard Trumka

By Richard Trumka
President, AFL-CIO

So now we learn that as millions of America’s families were losing their homes, Goldman Sachs cheered because it stood to make huge money betting on a housing market gone bad. Is that Wall Street’s vision of American values? It’s not mine. And it’s not the values of the thousands of working Americans who are marching on Wall Street today in person with me and online.

Our message is simple: Big Banks tanked our economy and took our money when they needed a bailout. Now they’re thumbing their noses at our communities but making billions in profits. It’s time they pay up.

Pay up by investing in communities to create jobs for the millions of unemployed workers–like Terry in Florida, who was laid off a week before Christmas. Being forced to return his family’s Christmas gifts to the store was just the beginning of his pain. While the corporation he worked for is turning a profit, he fears his family will be homeless by summer.

Meanwhile, in 2009, 25 hedge fund managers were paid the equivalent of the salaries of 680,000 school teachers. That’s in 2009, when we taxpayers spent billions of dollars bailing out the financial sector. If Goldman Sachs is cheering at the collapse of the housing market, what’s the rest of Wall Street saying? Thanks, suckers?

Those may be Wall Street’s values. They’re not America’s.

In a stunning new Pew poll, more than half of those surveyed say within the past year a member of their household has been out of work–up 15 percentage points since last year. Fully 70 percent of Americans say they have faced one or more job- or financial-related problems in the past year, up from 59 percent in February 2009.

And homelessness no longer is a scourge of the most troubled of our society. Maria Foscarinis, executive director of the National Law Center on Homelessness and Poverty, describes the nation’s epidemic of homelessness as reaching crisis proportions not seen since the Great Depression–and it stems directly from the Big Bank-fueled recession in which millions of workers lost jobs and savings and can no longer afford their mortgage or rent.

Meanwhile, the Big Banks announced massive first quarter earnings–Citigroup, $4.4 billion; Bank of America, $4.2 billion; Goldman Sachs, $3.46 billion; JPMorgan Chase, $3.3 billion; and Morgan Stanley, $1.8 billion. It turns out that much of that money was made by the same risky trading practices that cost taxpayers a $700 billion bank bailout.

The damage inflicted has deepened economic inequality, which has gotten worse since 2007. The richest 10 percent now control nearly 70 percent of the wealth. Those with incomes in the bottom 50 percent have a little more than 2 percent of the wealth.

The bottom line is Wall Street should pay to clean up the mess they made and Congress must enact strong Wall Street reform. We are supporting four ways for the Big Banks to pay–President Obama’s bank tax, a special tax on bank bonuses, closing the carried interest tax loophole for hedge funds and private equity and, most important, a financial speculation tax levied on all financial transactions–including derivatives–that would raise more than $150 billion a year, according to the Congressional Budget Office. The financial speculation tax would have a negligible impact on long-term investors but would discourage the short-termism in the capital markets that led to so much destruction over the past decade.

Congress also must aggressively address the jobs crisis now–if not because it’s the right thing to do, then because of November 2010. That Pew poll I cited above? It found Americans united in the belief that the economy is in bad shape: 92 percent give it a negative rating.

Wall Street’s values are based on greed. The American people’s values are rooted in working hard, playing fairly and doing right by our family, neighbors and friends.

If you can’t march and rally with us on The Street, join us live online today at 4 p.m. EDT. We’ll be 10,000 strong on the ground and marching for tens of thousands more who have signed up to take part in our virtual march.

Working people are angry–and we are right to be angry at the betrayal of our economic future. Help us turn that anger into the energy to create jobs, fix our economy and build a stronger nation.

Leo W. Gerard

By Leo W. Gerard
USW International President

Recent stories about Wall Street contain a recurring theme: deceit.

For example, this week the CEO of the late Lehman Brothers, Richard S. Fuld Jr., with a completely straight face swore to Congress that he’d been utterly out to lunch on the issue of “Repo 105,” a sleight-of-hand accounting procedure auditors found Lehman used to conceal its debts.

Last week, the Securities and Exchange Commission filed a civil lawsuit charging  Goldman Sachs with securities fraud and describing a scheme in which Goldman defrauded clients by selling them a mortgage investment to bet on after secretly permitting selection of its component securities by a hedge fund manager who Goldman knew planned to bet against it.

Also last week, the Senate conducted hearings on failed Washington Mutual following a report by a Senate subcommittee that found the bank’s lending operations rife with fraud, including fabricated loan documents.

This deceit illustrates that America’s largest financial institutions can’t be trusted to refrain from crashing the world economy again. In fact, when the big banks announced their first quarter earnings recently — Citigroup $4.4 billion; Bank of America, $4.2 billion; Goldman Sachs $3.46 billion, and JPMorgan $3.3 billion; Morgan Stanley $1.8 billion – it turned out that much of that money was made by their trading divisions – the very ones that dragged them – and the U.S. economy – down during the crisis in 2008. These are the same risky trading practices that cost taxpayers a $700 billion bank bailout, their savings, their jobs, their businesses.

Clearly, these bankers can’t control themselves. And the “free market” has failed to moderate their behavior. Strict regulation is essential, including re-instituting the Glass-Steagall Act and other rules that will prevent financial firms from growing too big to fail; forcing the banks themselves to pay for liquidation of big financial institutions; placing on open markets trades of those secretive derivatives that brought down AIG and that the SEC says Goldman used fraudulently; and creating an independent consumer financial protection agency to stop practices like predatory lending, usurious interest rates and hidden fees.

Congress lifted bank regulations over the past three decades, including the Glass-Steagall Act passed after the 1929 stock market crash to reduce speculation and conflicts of interest and to prevent “too-big-to-fail” financial institutions by forbidding the combination of investment and commercial banks. Like gullible investors in subprime mortgage bonds, the politicians who reversed those rules bought the argument that the free market would regulate itself. This is the same argument 1,500 Wall Street lobbyists are using, along with millions of dollars, right now in attempts to persuade lawmakers to stop worrying their little heads about seriously regulating Wall Street.

Main Street, where foreclosures continue at a record pace and unemployment remains painfully near 10 percent, desperately needs its own 1,500 lobbyists and millions in influence dollars. It will have the power of thousands of voices at a “Make Wall Street Pay” rally April 29 in the heart of New York City’s financial district, one of several protests across the country organized by the AFL-CIO.

On Main Street the need to forcefully re-regulate to prevent another Great Recession is clear; it’s not in Washington, D.C. In fact, weakening the already-too-soft financial regulation bill proposed by Sen. Chris Dodd is a crusade for Senate Minority leader Mitch McConnell, whose campaign coffers have received more money from security and investment firms than from any other category — $1.3 million. Like a Wall Street banker, McConnell is using deception. For example, he harped all last week that an “orderly liquidation fund” in the Dodd bill was a “bailout fund.”

It’s not. It would be created with fees on banks – not taxpayers. And it’s not for bailouts that preserve banks. It is for bank liquidation. It would pay for the orderly closing of too-big-to-fail banks. Ezra Klein of the Washington Post ridiculed McConnell’s claims, and Katrina vanden Heuvel, editor of the Nation, described McConnell’s attacks on the bill as fraudulent.

All of the sudden on Monday, McConnell changed his mind about Dodd’s bill. Coincidentally, that was three days after the SEC filed the fraud suit against Goldman Sachs, making railing against financial reform appear not quite so politically wise to Republicans anymore. It’s all about the politics in Washington, D.C.

McConnell said he had new optimism that Wall Street reform would pass because Democrats had resumed bipartisan talks and, he said:

“I’m convinced now there is a new element of seriousness attached to this, rather than just trying to score political points.”

Listening to McConnell is like hearing Lehman’s Fuld, who got a $22 million bonus six months before his financial firm filed for bankruptcy, swear to Congress he knew nothing about the “Repo” accounting procedure Lehman used to conceal $50 billion in debts. Following his testimony, Anton R. Valukas, the examiner in the Lehman bankruptcy, told Congress that his investigators found a person who had discussed Repo with then-CEO Fuld and e-mails to Fuld describing it.

The problem with McConnell and his new-found eagerness to pass “bipartisan” legislation is that the Dodd bill needs to be strengthened, not weakened with compromises thrown to Senate Republicans, all 41 of whom signed a letter last week saying they’d vote against it.

Before compromises remove from this bill the power to effectively regulate, Congress needs to review what Goldman is accused of doing. Ezra Klein of the Post described it best:

“Goldman Sachs let hedge-fund manager John Paulson select the subprime-mortgage bonds that he thought likeliest to explode and put them into a package called Abacus 2007-AC1. Paulson, who guessed early that the market was heading for a crash, wanted to bet against these bonds. But he needed someone on the other side of the bet. So Goldman went out and found him some suckers, or, as Goldman called them, “counterparties.” .  .  .But here’s the rub: Goldman didn’t tell the counterparties that Paulson had picked the bonds. ‘Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,’  said Robert Khuzami, the director of the  SEC’s division of enforcement.”

Khuzami’s description makes Goldman’s behavior sound a lot like lying.

The real economy in this country – the one that manufactures, builds and produces tangible products – can’t afford a Wild West financial economy. The real economy depends on banks to finance business expansion and everyday transactions. All of that froze in the Fall of 2008 because of Wall Street’s reckless, inadequately-regulated gambling.

In a speech in New York City on Thursday, President Obama reinforced that some bankers “forgot that behind every dollar traded or leveraged, there is family looking to buy a house, and pay for an education, open a business, save for retirement.”

Obama also referenced the issue of dishonesty when he said this in New York:

“A free market was never meant to be a free license to take whatever you can get, however you can get it.”

If McConnell-style deceit about the financial reform bill continues in the Senate, serious regulatory reform won’t happen. Half measures won’t work. Only robust financial reform will end Wall Street’s freedom to deceive.

Richard Trumka

 By Richard Trumka
President, AFL-CIO

So, $9 million in stock options as a 2009 bonus for Goldman Sachs CEO Lloyd Blankfein is now considered a big concession from Wall Street–a way of recognizing that the rest of the nation isn’t sharing in the Big Bankers’ party. Before we all start applauding, let’s take another look at what’s really happening on Wall Street. Over at Bank of America, a top CEO is raking in $29.9 million. Chairman and CEO Jamie Dimon is getting $17.6 million at JP Morgan Chase. And at Goldman? Bonuses total $16.2 billion.

Concessions? From financial institutions saved by taxpayers in a year when more than 4 million Americans lost their jobs, largely because of the actions of these very institutions? But wait. We’re actually supposed to feel sorry for the pampered financial set–because this year they’re not getting as much in up-front bonus cash as fast as they’d like since the corporate payouts are more often in stock (another concession). So taxpayer-bailed-out corporations like Bank of America and Citigroup are doling out stock shares that employees can sell within months–much sooner than normally allowed–because as the Wall Street Journal tells us:

The new pay culture is squeezing bankers with hefty mortgage payments and private-school tuition bills–and has prompted some companies to find ways to assist cash-squeezed employees.

“I know it sounds ridiculous to Main Street, but it’s a hardship,” says Gary Goldstein, who runs Whitney Group, a financial-services job-search firm in New York.

Meanwhile, these same corporations are spending multi-millions to kill reform of the financial industry. In 2009, JP Morgan Chase spent $6.2 million in lobbying. Bank of America: $3.7 million. Citigroup: $5.6 million Wells Fargo: $2.9 million. Goldman Sachs: $2.8 million.

We’ve got an idea for these Wall Street wreckers: Instead of tucking billions of dollars away in the pockets of a handful of individuals, how about putting that money toward creating jobs–a few billion dollars can go a long way. Just $8.4 billion spent on transit would create 253,539 jobs–and generate untold positive economic reverberations throughout communities starved for dollars to keep them viable. Just $1 billion would fund the Clean Water State Revolving Fund (H.R. 2847) and result in 27,823 jobs. Another $10 billion would rebuild the infrastructure of our nation’s deteriorating schools and create the jobs to do it.

Main Street has helped Wall Street–and it’s time for Wall Street to pay the bill to create jobs and fix the economy it wrecked. From March 15-26, the AFL-CIO and our allies are holding rallies and demonstrations at branches of the Big Six Wall Street banks–Bank of America, Chase, Citigroup, Wachovia-Wells Fargo, Goldman Sachs and Morgan Stanley–across the country. We are telling the banks: Make Wall Street Pay for Creating New Jobs.

So-called ‘green shoots’ and rises in stock prices aren’t going to fix our economy. We will not be out of the recession until we are creating good jobs on a large level. We need 11 million jobs to get out of the hole dug by the recession. And we need to make sure this kind of financial crisis never happens again.

One way Big Bankers can help honestly rather than playing at responsibility is to back a financial speculation tax on securities transactions to curb financial guessing games. A modest financial speculation tax will help curb harmful Wall Street practices–and raise
$100 billion to $300 billion annually to pay for job creation. This would go a long way toward creating the jobs we need, and also would help curb churning, high frequency trading and other speculative activity that harms capital markets. I joined Warren Buffett and other business leaders who came together under the auspices of the Aspen Institute to call on Congress to consider a financial speculation tax because financial companies must not be allowed to go back to business as usual–or worse.

Another way Wall Street could act honorably is to support a strong, independent consumer protection agency that would root out the kinds of abuses that helped lead to the financial crisis and destroy jobs. Harvard Law Professor Elizabeth Warren, who heads up the congressional committee to oversee the Troubled Asset Relief Program (TARP), writes that the financial industry can regain the public trust by supporting such a program.

For years, Wall Street CEOs have thrown away customer trust like so much worthless trash.

Banks and brokers have sold deceptive mortgages for more than a decade. Financial wizards made billions by packaging and repackaging those loans into securities. And federal regulators played the role of lookout at a bank robbery, holding back anyone who tried to stop the massive looting from middle-class families. When they weren’t selling deceptive mortgages, Wall Street invented new credit card tricks and clever overdraft fees.

But as Warren points out and as the big bonus payouts show, there hasn’t been a whole lot of real soul searching among the banking class.

So far, Wall Street CEOs seem determined to stop any kind of watchdog. They seem to think that they can run their businesses forever without our trust. This is a bad calculation.

Hard-working Americans will not be ATMs for Wall Street. That’s why we in the labor movement are working to hold Wall Street, and Congress, accountable for protecting Americans who play by the rules, preventing future bailouts and job losses and laying the foundation for a financial system that promotes stability and long-term economic growth for our nation and for all.

We support President Obama’s proposed tax on the largest financial institutions to recoup the cost of their bailout program. We urge the president and Congress to make financial re-regulation a top priority by:

• Creating an independent new consumer financial protection agency.
• Regulating the shadow capital markets, including hedge funds, private equity and over-the-counter derivatives.
• Reforming corporate governance and executive pay.
• Creating a systemic risk regulator that is fully public and accountable.

But remember when President Obama announced his intention to propose a Financial Crisis Responsibility Fee? That fee would require the largest and most highly leveraged Wall Street firms to pay back taxpayers for the extraordinary assistance provided so the TARP program does not add to the deficit.

Even before the announcement, Big Bankers were squealing like stuck pigs. From Think Progress:

Edward Yingling, president and chief executive, American Bankers Association: “To impose yet another burden on the industry would obviously decrease their ability to lend.”

So it’s not looking real good that Wall Street’s change of heart is more than a wink and a multi-billion-dollar nod. That means it’s up to the president, Congress and the rest of us.

Stacy Mitchell

 By Stacy Mitchell
Senior researcher, New Rules Project’s Community Banking Initiative 

The New Rules Project, in partnership with HuffPost’s Move Your Money campaign, is using its Community Banking Initiative to get out the word that banking locally can put the power back in the hands of individuals and communities, rather than Wall Street’s CEOs.

Those who wonder whether public anger at big banks and the Move Your Money sentiment sweeping the country is substantial enough to impact these giants need only look at the banks’ own marketing over the last few weeks to see the proof.

In a spate of new advertisements and PR maneuvers, the nation’s largest banks are working hard to win us back. They are, in effect, standing on our doorstep, flowers in hand, trying to convince us they’ve changed.

They’re using words like “local” and “community,” because they know quite well that there’s a rival for our affections. A recent Zogby poll found that nearly one in ten Americans had moved at least some of their business to small banks or credit unions.

One jilted lover, Citibank, has launched a blog devoted to showcasing the “new Citi.” The site, which Citibank is promoting through newspaper and magazine ads, features a video statement by CEO Vikram Pandit, who offers a few vaguely apologetic statements before detailing how Citi is a changed bank.

We’ve given up boozing and gambling, Citibank seems to be saying as Pandit assures us that the new Citi has embraced “a culture of responsible finance.”

In his opening post, Pandit describes this as a “new chapter” and invites us to participate in a conversation. “We promise we’re listening,” he writes.

So far, many of the user comments, which are moderated, appear to come from Citibank investors, but a few disgruntled customers have managed to get through. “What Cit has done to ‘help’ me in the last year: interest rate increase to 29 percent!” writes Peter. “I have never been late with a payment… [You have] a total lack of caring toward your customer base.”

“No amount of empty words can help you guys,” comments another, now ex-, customer of Citibank.

The site makes rather conspicuous use of the words “local” and “community,” suggesting that Citigroup, which has assets of $1.3 trillion, knows exactly where its customers are moving their bank accounts. When you load the site, a pop-up window that fills the center of the screen describes the company as a team of “local community bankers.”

Citi is not the only giant financial conglomerate wrapping itself in the mantle of a local community bank. During the Olympics, Wells Fargo, which has $1.2 trillion in assets and some 10,000 locations, ran television commercials in which it described itself as “the nation’s leading community bank.”

Although there’s no set definition of a community bank, it’s commonly defined as a bank that is rooted in one place and has no more than $1 billion in assets. Wells Fargo is about 1200 times that size.

In a biting response to the commercials, Camden Fine, head of the Independent Community Bankers of America, warned, “Wall Street mega-firms better be careful what they call themselves lest they be confused with actual community banks that regulators allow to fail.”

It’s no surprise that big banks are grabbing onto words like “local” and “community,” says Tim Pannell, president of Financial Marketing Solutions, which develops branding and advertising for banks. “Big banks understand that those are the key words that are creating success for a lot of community banks,” said Pannell. “That’s what they’ve been hammered with in all these local markets, where the community banks have said, you don’t need a big bank, what you need is a local bank.”

Rather than pretending to be small itself, JPMorgan Chase has taken a slightly different tack. New print ads running in the New York Times and elsewhere present the bank as a generous financial backer of small businesses: “At JPMorgan Chase, we recognize that small businesses are critical to economic recovery and to building America’s future…. When creditworthy businesses come to us for help, we look to find every opportunity to provide the funding they need to grow.”

According to FDIC data, however, JPMorgan Chase is very much a laggard when it comes to small business lending. With just 16 percent of its commercial lending going to small business loans in 2009, Chase is not even remotely in the same league as community banks, which devoted more than half of their commercial loan portfolios to small business. But even more stunning is the fact that Chase even lags other giant banks (those with $100 billion or more in assets), which allocated an average of 19 percent of their 2009 lending to small business loans.

(Take a look at these graphs to see just how little support for small businesses big banks provide.)
All of this is just an early taste of what the rest of year is likely to bring. Nervous about customer defections and holding a lot more cash than they had last year, big banks are planning to spend big bucks on marketing this year. We should expect more speeches about how they’ve changed and more false claims about community and small business. But let’s not be seduced into taking these jerks back.

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Stacy Mitchell, who has tracked corporate “local washing” across a variety of industries, is a senior researcher with the New Rules Project and its Community Banking Initiative.

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Dean Baker

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

The Supreme Court ruled last week that corporations could spend as much money as they want in elections, thereby making most existing restrictions on corporate election spending unconstitutional. This raises the prospect of US politics becoming even more corrupt than it already is. It will now be totally legal for Goldman Sachs, Citigroup, or any other major corporation to spend endless amounts of money to elect politicians who will drain taxpayers’ pockets to enhance their profits. This is not good for democracy.

However, if the court has ruled that Congress can’t limit political spending by corporations, then it can always go the other direction and redefine corporations. The court effectively said that corporations have the same rights as individuals in the political sphere.

But corporations are creations of the government. The economic privileges granted to corporations are set by governments, not by the Constitution and certainly not by nature. Specifically, the limited liability of the shareholders in a corporation is a special privilege that governments grant to corporations.

Because of limited liability, the individuals that own a corporation can poison our water, sell dangerous products to our kids or cripple their workers and not pay for the damage they have caused because the government limits their liability to the value of the stock they own. While there may be good economic arguments for giving corporations the privilege of limited liability, there certainly is no moral or legal argument that corporations, or more properly their shareholders, must be granted this privilege.

This allows for a simple route around the Supreme Court’s ruling. Consistent with the Supreme Court’s ruling, corporations can be given the right to engage in whatever political activity they wish. However, to get the benefit of limited liability, a corporation would have to sign away its right to take part in election campaigns. It could not contribute to political campaigns, engage in any lobbying efforts on legislation or appointees or take out issue ads.

In effect, to get the privilege of limited liability, corporations would have to give up their political rights in the same way that insurance companies often require people to give up their right to sue and instead submit to binding arbitration. Everyone still has the right to sue, but not in the cases where they have explicitly surrendered this right to the insurance company. Similarly, corporations still have the full right to take part in political activity, but not if they have surrendered this right in order to gain the privilege of limited liability.

There is actually precedent for exactly this sort of restriction in the law. Tax-exempt organizations are severely restricted in their ability to support candidates, lobby legislatures, or in other ways take part in the political process. This is not viewed as a restriction on freedom of speech; it is simply a condition of getting tax-exempt status. These organizations are free to engage in as much political activity as they like, but not when they are benefiting from tax-exempt status.

There is no reason that the government can’t apply the same rules to the political conduct of corporations as it does to tax-exempt organizations. They can do whatever they like, but not when they benefit from the privilege of limited liability.

Unfortunately, Congress is not likely to rein in corporate behavior in this way. The problem is not a legal one; the problem is that US politics are already so corrupt that any measure restricting the ability of corporations to interfere in the political process is almost a joke in political circles. Members of Congress who pushed such measures would have been targeted with a flood of money coming indirectly from corporate coffers even before the Supreme Court ruling. Now that the court has outlawed most of the restrictions that did exist, this flood will be almost unstoppable.

Unless we can do something to reverse the direction of politics in the United States, the burden that the wealthy and corporate America impose on the rest of society will grow ever larger. And we should be very clear: this has absolutely zero to do with free markets and free speech. This is entirely about writing the rules so that the rich can rip off the rest of us.

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Dean Baker is author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy,” PoliPoint Press, LLC. This piece was first published on Huffington Post.

Leo W. Gerard

By Leo W. Gerard
USW International President

In New York, the oldest and snobbiest financial and advising ventures are called “white shoe” firms.

This, they say, arose from the days when their hoity-toity employees wore white bucks to work. 

These days, white shoe firms bear names notorious outside New York, like Goldman Sachs and Morgan Stanley. That’s because their arrogance, risky investments and confounding dealing in derivatives caused last fall’s Wall Street meltdown, slaughtered white shoe firms like Lehman Brothers, froze credit nationwide, and threw the rest of us into the Great Recession. 

Now unemployment is up to 9.8 percent, a 26-year high. Banks repossessed 88,000 homes in September and filed foreclosure notices on another 344,000, according to RealtyTrac. Suicide hotlines report increases in calls, and a study released in July by researchers at several universities including the University of California documented the connection between unemployment, suicide and murder. Each percent increase in unemployment raised suicide rates by .8 percent and homicide rates by .8 percent, the research team found.

There’s blood on those white bucks. But the guys wearing them don’t seem to notice.

When bankers’ backs were up against the wall, the taxpayers of the United States bailed them out to the tune of $700 billion. Some, like Bank of America, took the welfare then repaid that generosity by doling out billions in bonuses. BofA got $45 billion from taxpayers, then gave $3.6 billion in bonuses to Merrill Lynch workers, just as BofA bought Merrill — which lost $25 billion in 2008. 

Banksters always argue that they must pay massive bonuses to reward and retain their best and brightest. Yet the best and brightest had managed to undermine Wall Street and lose $100 billion at the nine firms that received government welfare in 2008.  Realistically, finding lower-cost replacements for them shouldn’t be a problem since lots of unemployed bankers are pounding New York streets. The New York City Office of Management and Budget determined that Wall Street banks cut 30,000 jobs in 2008.

Still, Wall Street continues to reward incompetence. Morgan Stanley, for example, increased the proportion of its revenues to be paid as compensation and benefits – to total a whopping $6 billion by September — despite three straight losing quarters this year. This is how the London Telegraph characterized the decision in an Oct. 21 story:

“Investment bank Morgan Stanley has more than doubled the share of revenues it will hand out in pay and bonuses to its 62,000-strong army of bankers and brokers despite a 91 pc drop in profits last quarter.”

Right now, they’d each get $96,774, but Morgan Stanley has another quarter to add to that pool of pay.

Investment house Goldman Sachs has set aside $11.4 billion so far for compensation, setting a pace for an average Goldman worker to get $773,000. That would more than double last year’s earnings for the average Goldie.

Contrast that with the U.S. Census report that the typical worker nationwide lost $1,860 for a reduced wage of $50,303. Or compare it to the experience of the woman in the Oct. 21 New York Times story who competed with 500 other applicants for one $13-an-hour clerk job opening at an Indiana trucking company.

When America’s median income workers paid to bail out those white shoe swells, they thought something would change. “There is some failure in the finance industry to appreciate the level of public antagonism toward whatever Wall Street symbolizes,” Orin Kramer, a Democratic fund-raiser who is a partner in an investment firm, told the New York Times’ David D. Kirkpatrick earlier this month.

Dr. Daniel E. Fass, who was chairing a Democratic fundraising event with Kramer, told the Times’ Kirpatrick, “The investment community feels very put-upon. They feel there is no reason why they shouldn’t earn $1 million to $200 million a year, and they don’t want to be held responsible for the global financial meltdown.”

And, indeed, they’re acting like it never happened. JPMorgan Chase & Co. went out this year and made billions doing exactly what caused the crash last year – trading like crazy in derivatives. 

So a parent figure had to step in. The Obama Administration acted this week. The Federal Reserve announced it would crack down on pay packages at the nation’s 28 largest banking companies in ways intended to discourage risky practices. And the Treasury Department announced that it will order pay cuts and perk limitations for top officials at the firms still on welfare. They are Citigroup, Bank of America, American International Group, General Motors, Chrysler and the automakers’ financing agencies.

This new lifestyle will be devastating for some of those on welfare. Their perks could be limited to $25,000 – only half of a typical American worker’s annual salary. And the cash portion of their salaries could be slashed by 90 percent and replaced by stock that cannot be sold for years. The point is to align their personal interests to the firm’s long-term financial health.  It is an attempt to discourage risky investments that seemed profitable for the purpose of immediate bonus payments but later exploded like the AIG derivatives scandal. 

The white shoe crowd, failing to understand that the president was trying to help them clean up the mess at their feet, immediately started whining and complaining. It just wouldn’t work, they said, because pay-pinched executives would run to firms unrestricted by the government. That’s all for the good because, again, there are 30,000 Wall Streeters searching for jobs.

The pay restrictions will set a proper tone. Perhaps Wall Street will hear it before, as the New York Times described it, “populist animosity toward Wall Street and corporate America” grows too great.

If that happened, the blood on their white bucks might be their own.