News & Views from 465 California Street

BREAK THE BANKS

Clint Reilly
Feb
16
2010

American banks love to affect a false pose of solidity and enduring strength. That’s why so much bank architecture mimics the classical columns of ancient Greece.

But the American financial system today is in ruins – much like the Parthenon.

So, how can it be that more than a year after the ignominious collapse of our financial system, banking reform still languishes in Congress?

A just-published book by former Treasury Secretary Henry Paulson – who wrote the trillion dollar checks – contends that taxpayers stand to make a profit on the bank bailouts.

Paulson’s conjecture is laughable in light of the more than $11 trillion of taxpayer infusions and guarantees committed to staunching our hemorrhaging financial system and stabilizing our economy. Even if it had a grain of truth, it still wouldn’t change history: the unprecedented intervention, the ruined personal wealth, the mass unemployment and our shattered economy.

President Obama has proposed a Consumer Financial Protection Agency to oversee credit cards and mortgages. Mega-money hedge funds would be required to register with the SEC. A Financial Services Oversight Council would target and regulate banks and financial firms too big to fail. A National Bank Supervisor would scrutinize problem banks. He even proposes a tax on banks to repay the government and the end of proprietary securities trading with depositors’ money.

Of course, the banking lobby is shamelessly resisting regulation the way car companies once smeared seat belts.

Elizabeth Warren, Chair of the TARP Oversight Protection Panel, recently wrote, “Now, a year later, President Obama’s proposals for reform are bottled up in the Senate. The same Wall Street CEOs who brought the economy to its knees have now spent more than a year and hundreds of millions of dollars furiously lobbying Washington to kill the President’s proposal.”

A high-paid Madison Avenue campaign, complete with focus groups and research conducted by Republican pollster cum television media guru Dr. Frank Luntz has been launched to fight off banking reform and demonize regulation. Incredibly, it could actually succeed in bamboozling the nation.

At the center of the Luntz disinformation strategy is the patented Republican attack on “Big Government.”

Luntz advises the bank lobby to use their own huge bailouts, which have infuriated taxpayers, to confuse and obfuscate by implying that added oversight might also bring unwanted bailouts for the next banking crisis.

In essence, Luntz jujitsus taxpayer anger by attacking the federal government for spending to bail out private enterprise and then proposing new bureaucracies to more tightly regulate these very same institutions.

Luntz writes, “Ordinarily, calling for a new government agency to protect consumers would be extraordinarily popular. But these are not ordinary times. The American people are not just saying no. They are saying ‘hell no’ to more government agencies, more bureaucrats and more legislation crafted by special interests.”

Franklin Roosevelt launched an aggressive campaign to regulate large banks and financial institutions after the collapse of Wall Street in the 1930s. His tough policies kept banks out of the securities business and successfully regulated lending for more than 50 years.

But these rules were gradually loosened for banks beginning with Ronald Reagan’s anti-regulatory policies in the 1980s and continued during the Republican administrations of both Presidents Bush.

Even President Bill Clinton – seduced by huge contributions from Wall Street firms and led by his Treasury Secretary Robert Rubin (a former Goldman Sachs chief) – eliminated many crucial New Deal regulations.

President Obama’s crusade to bring back oversight to banks, hedge funds and Wall Street is crucial to protecting consumers and taxpayers! By attacking the very federal government that rescued them from almost certain extinction, a shameless and greedy bank lobby now bites the hand that fed it.

How twisted and cowardly is that?

That’s proof enough that they need to be restrained.

Comments (7)

  • I have to say thank you for your column in the Mercury News. I have been struggling with the information I read in the paper, online, television and hear from intelligent as well as ignorant friends. I have a gut feeling about Mr. Obama that he is a good man trying to fix a really messed up nation. You have helped me understand what he is trying to do and that he is not the elitist or liar that people are trying to make him out to be.
    I support health care reform because I experienced first hand how the insurance companies have ruined people’s lives with their greed.
    I had a back injury and my doctors and myself called and got the go ahead to have surgery. I was even told by the insurance company to spend the night because my outpatient insurance was almost used up. I had the surgery, spent the night and received bills from doctors, the hospital, MRIs, physical therapy and the insurance company paid $1,200 of $64,000 worth of bills. We have been paying the bills but it has set us back years, no savings, can’t get a loan to refinance our home etc.
    I just wanted to let you know I appreciate you informing the public with your knowledge, it makes sense to me and helps me stand up to those that continue to bash Obama and want him out.
    Take care
    Kris M

    Posted by: Kris M. | February 16th, 2010 at 10:12 am

  • In response to your article in today’s paper it never ceases to amaze me that the
    people who quote history actually possess so little knowledge on the topic. Yes
    those big bad banks are the culprit and never mind the politicians who were already
    in charge of regulating them. FDR also demonized the banks after his hapless
    policies did nothing to lower unemployment or help the economy recover. True
    historians know that FDR’s over-regulatory big government solutions were anything
    but that and only exacerbated & prolonged the depression to horrific proportions.

    Any cursory study of our current economic collapse will enlighten even the most
    ignorant of our society to the fact that loans made to people who need not prove
    their income as mandated by the likes of Barney Frank & Chris Dodd in order to give
    everyone & anyone who wanted a home a home, was a policy sure to end in demise.
    This is the central cause of our collapse with its root embedded in government
    oversight and regulation by inept politicians.

    A sage word of advise from the dawn of time is prudent in this case and not a
    capricious act of overreaction rooted in demonizing the banks. When in a hole stop
    digging and that would mean don’t punish the very banks we are all going to need to
    help us get out of this mess. In today’s world we are far from the days in which
    unions and politically biased bank regulators are necessary as competition always
    roots out & separates the good banks from the bad ones. The bad ones will simply
    not survive and shouldn’t.

    We need real solutions to real problems and what we don’t need is self promoting
    quasi political hacks who possess no knowledge of history and who lack the common
    sense God gave him who write paid for articles in the FREE press promulgating big
    government solutions that have never worked. Free societies work and the private
    sector always provides the answers to the mistakes men make through free trade and
    honest competiton.

    Bed well and the next time you have something to say please do your homework before
    you turn in the paper.

    Gordon S

    Posted by: Gordon S. | February 16th, 2010 at 10:13 am

  • Dear Mr. Reilly: I read your columns in the Tri-Valley Herald ( Pleasanton ) on
    Tuesdays. You are one of my favorite columnists. Can I say “I know your thinking is
    good because it pretty much parallels mine.” I keep saying to myself, ” I wish I had
    said that.” Anyway, keep up the good work and consider the possibility of going into
    politics. We need good, honest, incisive people in every level of government; of
    course, we need good, incisive political analysts, also. I value your work, Paul L.

    Posted by: Paul L. | February 16th, 2010 at 10:13 am

  • Good column. Unfortunately, the TBTF (too big to fail) corporations—banks
    especially—own the President because if he does not bail them out they fail and
    unemployment goes through the roof and he gets booted out of office. Therefore,
    banks have no incentive to change their old habits.
    Get rid of the CRA (Community Reinvestment Act), Fannie and Freddie, and
    re-instate Glass-Steagle to limit banks to spread lending; this worked since FDR’s
    time.
    Hank R

    Posted by: Hank R. | February 16th, 2010 at 10:14 am

  • The big banks have acted shamelessly–you are right on the mark. Franklin Roosevelt (as well as his cousin Teddy) is considered one of the greatest American Presidents. I like the reference to the Parthenon. Hang in there, Clint.

    Posted by: Tony Gantner | February 16th, 2010 at 3:03 pm

  • OBAMA and Bernanke are featured in a movie– about greedy hedge funds called “Stock Shock.” Even though the movie mostly focuses on Sirius XM stock being naked short sold nearly into bankruptcy (5 cents/share), I liked it because it exposes the dark side of Wall Street and revealed some of their secrets. DVD is everywhere but cheaper at http://www.stockshockmovie.com

    Posted by: Clintreilly Fan | February 17th, 2010 at 2:21 pm

  • Thank you for articulating something very crucial for people to begin to understand at this time in the course of history. How the major network and cable news channels have not been able or willing to criticize the banks (there ads run relentlessly on all the channels) is frightening. Why are they so intimidated by these lobbyist in Washington? Why aren’t they reporting what the lobbyist are doing in Washington? The banks and their Armies of Lobbyist have a stranglehold on Washington and the Media.
    Hopefully post like this are simple enough for Tea Baggers to grasp how they’re being manipulated.

    Posted by: Mark Lomas | February 21st, 2010 at 5:12 pm

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