The Buck Stops With Obama on Tepid Financial Reform

[brentspeak]

http://www.propublica.org/thetrade/item/the-buck-stops-with-obama-on-tepid-financial-reform?google_editors_picks=true

The Buck Stops With Obama on Tepid Financial Reform
by Jesse Eisinger
ProPublica, May 21, 2014, 12 p.m.

What are we talking about when we talk about Timothy F. Geithner's new book? President Obama.

The former Treasury secretary's new book, "Stress Test," has stirred up the old debates and anger: How the bailout was overly generous to the banks and bankers; how the failures on housing were inexcusable; how the financial regulatory reform was inadequate. These were Mr. Geithner's failures, but they were more deeply Mr. Obama's. The flaws we thought we were seeing during Mr. Geithner's tenure turn out to have replicated themselves in other Obama departments. And they have persisted after Mr. Geithner left. Why, it's almost as if the Treasury secretary wasn't the one making decisions and setting the tone after all.

President Obama's appointees, Eric H. Holder Jr. at the Department of Justice and Mary L. Schapiro at the Securities and Exchange Commission, oversaw the inadequate enforcement response to the crisis. Mr. Obama reappointed Ben S. Bernanke, who focused on monetary policy and didn't push for more aggressive regulatory and financial reform. Mr. Geithner didn't run those shops.

And Geithner-like characters keep popping up, while appointees who are unlike the president get ousted. At the Federal Deposit Insurance Corporation, the outspoken Sheila Bair was replaced with the low-profile Martin J. Gruenberg. Gary S. Gensler, the tough chairman of the Commodity Futures Trading Commission, didn't get nominated to a second term. In his place, we got a Treasury official whose cipher of a record was almost treated as a virtue by the Obama administration. The new head of the S.E.C., Mary Jo White, has been disappointing on regulatory questions.

[TheNutcracker]

1. Loss of respect for John Stewart for having him on. Remember when Geithner said in Europe that

HE WAS IN CHARGE...NOT THE PRESIDENT!

Do you remember that? Geithner's interview was not a good one. But these crimes are now being peddled as usual politics. This is NOT what happened!

http://godfatherpolitics.com/1158/geithner-obama-is-not-in-charge/

[Romulox]

2. The bankster bailouts and the resulting depression are Obama's legacy. He picked Geithner. nt

[JayhawkSD]

3. The buck doesn't stop with Obama on anything.

It didn't stop with him when the launch of Obamacare was botched; he was angry and outraged, and didn't even learn of it until the same time we did, when he read about it in the newspapers. The buck didn't even stop with hsi appointed Secretary of HHS, either; she resigned more almost a year later, for reasons which had nothing to do with the mess.

It didn't stop with him with the VA Hospital disaster; he is angry and outraged and has just now learned about it when he read about it in the newspapers. The buck doesn't stop with his appointed Secretary of VA either, in whiom he has "full confidence."

Harry Truman had the sign on his desk that says "The buck stops here," but President Obama does not subscribe to that theory. Some presidents accept responsibility for what their subordinates do or don't do, and others sit in the bubble of the White House and are "outraged" by the failures of their subordinates.

[ProSense]

4. What a

Another Democrat, Senator Russ Feingold of Wisconsin, was holding out on financial reform from the left. Instead of seeking to placate him with progressive proposals, the White House and the congressional leaders scrambled to secure the vote of Scott Brown, the suddenly elected Republican from Massachusetts. Mr. Brown could have scuttled financial reform, but instead he was eager to embrace it, a sign of where the politics of the moment really were.

<...>

Consider the Volcker Rule, which prohibits banks that take taxpayer-insured deposits from speculating for their own account. Mr. Geithner was against it initially. President Obama pushed it. Mr. Geithner writes that he accepted it only in a "purely legislative calculation" that it would help the overall Dodd-Frank reform package pass. (Never mind that this admission comes three pages after Mr. Geithner's self-praise of "the impressive extent to which policy trumped politics in the Obama administration.&quot

Mr. Geithner's stated objection to the Volcker Rule is that proprietary trading didn't cause the crisis. That's a debatable proposition at best, but set that aside. The idea that financial reform shouldn't fix obvious problems in the markets simply because they didn't play a central role in this particular crisis demonstrates almost willful blindness.

So where did Mr. Obama stand on the Volcker Rule? The president revealed his position as he let the rule-making process, post passage and post Geithner, drag on.

...silly commentary. I guess there was a need to comment on Geithner's book, but what the hell does any of that have to do with the fact that Dodd-Frank passed and is being implemented?

The piece is all about personalities and makes absolutely no point about the status of Dodd-Frank. It mentions Russ Feingold as if to say it was OK to vote against Dodd-Frank. That was his choice, but it was not the right choice. Killing the strongest financial reform in decades, including the CFPB would have been the height of stupidity.

The CFPB has been doing a great job, and the policies in place give regulators the tools to do their jobs.

Elizabeth Warren:

There is no question that Dodd-Frank was a strong bill—the strongest in three generations. I didn’t have a chance to vote for it because I wasn’t yet in the Senate, but if I could have, I would have voted for it twice.

http://www.warren.senate.gov/files/documents/AFR%20Roosevelt%20Institute%20Speech%202013-11-12.pdf

CFPB, hard at work
http://www.democraticunderground.com/10024877283

Bank of America to pay nearly $800 million for deceptive credit card practices
http://www.washingtonpost.com/business/economy/bank-of-america-to-pay-nearly-800-million-for-deceptive-credit-card-practices/2014/04/09/982bba7e-c00d-11e3-b195-dd0c1174052c_story.html
http://www.democraticunderground.com/10024802019

Regulators Finalize Stricter Volcker Rule - Reuters/HuffPo
http://www.democraticunderground.com/10024158305

CFPB Sues ITT Tech For Allegedly Exploiting Students, Pushing Predatory Loans
http://www.democraticunderground.com/10024570346

Sen. Warren Praises New CFPB Mortgage Rules that Make Families, Economy Safer
http://www.democraticunderground.com/10024295777

Banks Ordered to Add Capital to Limit Risks
http://www.democraticunderground.com/10024798328

New York Financial Regulator Uses Dodd-Frank to Sue Auto Lender
http://dealbook.nytimes.com/2014/04/23/new-yorks-top-regulator-sues-subprime-auto-lender/

SEC Will Require Companies To Report CEO-To-Worker Pay Ratios
http://www.democraticunderground.com/10023694931

Robert Reich: The Significance of Citigroup’s Shareholder Revolt
http://www.democraticunderground.com/1002579118

Executive order on federal contracting means real action on economic mobility
http://www.democraticunderground.com/10024415803

Why isn't there more focus on shareholders' say on executive pay?
http://www.democraticunderground.com/10024877216

[Leme]

8. you asked...

"what the hell does any of that have to do with the fact that Dodd-Frank passed and is being implemented?"
-
years later it is still being implemented, and not well.

[ProSense]

11. The OP is about Geithner's book, and

"what the hell does any of that have to do with the fact that Dodd-Frank passed and is being implemented?"
-
years later it is still being implemented, and not well.

...the points about the law are not based on facts, but opinions about personalities. In fact, here is the author actually commenting on the law, a piece linked to at the right of the OP piece.

When Regulation Threatens, Bankers Predict Doom For Main Street

by Jesse Eisinger

<...>

No sooner had that issue been resolved when Washington convulsed with a new crisis, now upon us: the C.L.O. panic...The House held a hearing last week to examine the issue. American Banker, a trade publication, ran an article with a headline that succinctly summarized the industry’s view: “How Dodd-Frank Might Kill the C.L.O. Market.”

<...>

Collateralized loan obligations, as the acronym is known, are bundles of loans, usually made to junk-rated companies. They use the same techniques as collateralized debt obligations, which were often made up of subprime mortgage investments and were the rotten core of the financial crisis. C.L.O.’s caused billions in losses for banks during the market panic of 2008, but most recovered strongly and memories faded. Junk-rated companies rallied, and C.L.O.’s roared back.

Under the Volcker Rule, which prevents banks from making speculative investments or owning large pieces of hedge funds or private equity firms, some C.L.O. holdings might be prohibited. Some C.L.O.’s own securities or bonds, and those are considered more speculative. (In a regulatory quirk, bonds and loans get different regulatory treatments.) Some C.L.O.’s give certain investors the ability to remove the manager that makes the C.L.O.’s investment decisions. That could be construed as a form of ownership control, which would bar banks from participating under a strict construction of the Volcker Rule.

The banking industry has been making loud noises about how the uncertainty could have dire consequences. As with the TruPs ruckus, the big banks have defended their interests in the name of smaller and more sympathetic entities. According to the banking lobby and its friends in Congress, any threat to the C.L.O. market is actually a dagger pointed at midsize businesses, which will have trouble finding capital as a result. In written testimony to the House subcommittee, a United States Chamber of Commerce representative expressed “serious concerns that the regulators had failed to take into account the impact of the Volcker Rule upon the capital formation of Main Street businesses,” adding ominously that “it may only be the first wave of capital formation problems that may crop up as a result of the Volcker Rule.”...this skirmish is largely about preserving a market for the largest banks. Just three “too big to fail” banks — JPMorgan Chase, Citigroup and Wells Fargo — account for 71 percent of bank C.L.O. holdings, according to Better Markets, the banking reform group. And the large banks get fees from creating the deals.

- more -

http://www.propublica.org/thetrade/item/when-regulation-threatens-bankers-predict-doom-for-main-street

http://www.democraticunderground.com/10024620516

Finally, Bank Regulators Have Had Enough

by Jesse Eisinger

With their simultaneous display of hubris, remorselessness, incompetence and corruption, the banks have finally ignited a modicum of courage in banking regulators...reckless trading at a JPMorgan Chase unit in London, the rampant mortgage modification and foreclosure abuses, manipulation of the key global interest rate benchmark — went just a tad too far. For the first time since the financial crisis, the banks are losing some battles on tougher regulation.

Last week, banking regulators, led by the Federal Deposit Insurance Corporation, but including the Federal Reserve and the Office of the Comptroller of the Currency, proposed a rule to raise the capital at the largest, most dangerous banks.

<...>

For the bank safety rules, regulators are going to require a higher capital ratio. Basel III, the international agreement on bank rules, put the rate at $3 for every $100 in assets. The new rules would raise it to $5 for the holding company, and $6 at its banking subsidiaries.

The measure is a victory for reality-based thinking in an important respect: how banks measure their assets. Under current accounting rules, assets are disclosed so poorly that banks are allowed to keep mysterious exposures out of view. Banks own pieces of businesses that reside off the balance sheet. They also make commitments using derivatives, creating obligations that are complex and difficult to quantify. The specifics of these vulnerabilities are poorly understood by everyone, including bankers themselves, but we know for sure that they can cause implosions.

- more -

http://www.propublica.org/thetrade/item/finally-bank-regulators-have-had-enough

[Leme]

12. thanks for showing Dodd Frank is not being implented

except here and there.

[ProSense]

14. "except here and there."

LOL!

Welcome to DU.

[brentspeak]

25. The OP is not about Geithner's book

It is about Obama's own failure to hold Wall St. accountable for the bailouts which he strongly helped make possible. You can make up whatever bull$hit you want to and spam as many misleading links as you can -- let your employers know that it won't change anyone's mind.

[VanillaRhapsody]

27. Are you suggesting anyone who supports this President is a paid shill?

is that really what you are saying?

[Leme]

9. you also did a partial quote of elizabeth warren

it continues
-
Even so, the law is not perfect. And so it’s important to ask: Where are we now, five years after
the crisis hit and three years after Dodd-Frank?
There are many issues to discuss—and I’m sure you will get to them in the panel that follows
this speech. But I’d like to focus on one in particular.
Where are we now on the “Too Big to Fail” problem? Where are we on making sure that the
behemoth institutions on Wall Street can’t bring down the economy with a wild gamble? Where
are we in ending a system that lets investors and CEOs scoop up all the profits in good times, but
forces taxpayers to cover the losses in bad times?
After the crisis, there was a lot of discussion about how Too Big to Fail distorted the
marketplace, creating lower borrowing costs for the largest institutions and competitive
disadvantages for smaller ones. There was talk about moral hazard and the dangers of big banks
getting a free, unwritten, government-guaranteed insurance policy.
Sure, there was talk, but look at what happened: Today, the four biggest banks are 30% larger
than they were five years ago. And the five largest banks now hold more than half of the total
banking assets in the country. One study earlier this year showed that the Too Big to Fail status
is giving the 10 biggest US banks an annual taxpayer subsidy of $83 billion.
3
Wow. Who would have thought five years ago, after we witnessed firsthand the dangers of an
overly concentrated financial system that the Too Big to Fail problem would only have gotten
worse?
There are many who say, “Sure, Too Big to Fail isn’t over yet, but Congress should wait to act
further because the agencies still have to issue a bunch of Dodd-Frank’s required rules.” True,
there are rules left to be written, but that’s because the agencies have missed more than 60
percent of Dodd-Frank’s rulemaking deadlines.
I don’t understand the logic. Since when does Congress set deadlines, watch regulators miss
most of them, and then take that failure as a reason not to act? I thought that if the regulators
failed, it was time for Congress to step in. That’s what oversight means. And that’s certainly a
principle that would have served our country well prior to the crisis.
-
http://www.warren.senate.gov/files/documents/Better%20Markets%20Speech.pdf

[ProSense]

10. Does

"you also did a partial quote of elizabeth warren"

...the fact that what I posted is a "partial quote" (like your "partial" quote) change my point? Dodd Frank is the strongest financial reform in decades. Period.

There is no question that Dodd-Frank was a strong bill—the strongest in three generations. I didn’t have a chance to vote for it because I wasn’t yet in the Senate, but if I could have, I would have voted for it twice.

Even so, the law is not perfect. And so it’s important to ask: Where are we now, five years after the crisis hit and three years after Dodd-Frank?

There are many issues to discuss—and I’m sure you will get to them in the panel that follows this speech. But I’d like to focus on one in particular.

Where are we now on the “Too Big to Fail” problem? Where are we on making sure that the behemoth institutions on Wall Street can’t bring down the economy with a wild gamble? Where are we in ending a system that lets investors and CEOs scoop up all the profits in good times, but forces taxpayers to cover the losses in bad times?

After the crisis, there was a lot of discussion about how Too Big to Fail distorted the marketplace, creating lower borrowing costs for the largest institutions and competitive disadvantages for smaller ones. There was talk about moral hazard and the dangers of big banks getting a free, unwritten, government-guaranteed insurance policy.

<…>

Treasury Secretary Jack Lew recently said that if “Too Big to Fail” is still a problem at the end of the year, it might be time to consider other options. I applaud Secretary Lew for laying out a timeline, and I’d like to see other Administration officials and regulators follow suit. If Dodd- Frank gives the regulators the tools to end Too Big to Fail, great—end Too Big to Fail. But if the regulators won’t end Too Big to Fail, then Congress must act to protect our economy and prevent future crises.

<…>

That’s the battlefield. That’s what we’re up against. But David beat Goliath with the establishment of CFPB and, just a couple months ago, with the confirmation of Rich Cordray. David beat Goliath with the passage of Dodd-Frank. And I am confident David can beat Goliath on Too Big to Fail. We just have to pick up the slingshot again.

Thank you.

[Leme]

13. i provided link to entire quote with context

thanks again for showing little has been done ..and Lew wants another year

[ProSense]

16. You "provided link"?

"thanks again for showing little has been done ..and Lew wants another year"

I "provided link." LOL! You've now reached the point of say anything.

[Leme]

18. from the warren link, her words

"the agencies have missed more than 60
percent of Dodd-Frank’s rulemaking deadlines. "
-
More than half of this greatest in 30 years has yet to be done as of that date when she said those things.
-
Great things not accomplished, are just not an accomplishment.

[ProSense]

19. What does

"the agencies have missed more than 60
percent of Dodd-Frank’s rulemaking deadlines. "

...missing a deadline have to do with the strength of the law? That's a failure of regulators or other factors.


"from the warren link, her words":

There is no question that Dodd-Frank was a strong bill—the strongest in three generations. I didn’t have a chance to vote for it because I wasn’t yet in the Senate, but if I could have, I would have voted for it twice.

[Leme]

20. the strongest law has no effect

if not implemented and enforced

[ProSense]

21. Actually,

"the strongest law has no effect if not implemented and enforced"

..."the strongest law has no effect" if one ignores that it's being " implemented and enforced."

CFPB, hard at work
http://www.democraticunderground.com/10024877283

Bank of America to pay nearly $800 million for deceptive credit card practices
http://www.washingtonpost.com/business/economy/bank-of-america-to-pay-nearly-800-million-for-deceptive-credit-card-practices/2014/04/09/982bba7e-c00d-11e3-b195-dd0c1174052c_story.html
http://www.democraticunderground.com/10024802019

Regulators Finalize Stricter Volcker Rule - Reuters/HuffPo
http://www.democraticunderground.com/10024158305

CFPB Sues ITT Tech For Allegedly Exploiting Students, Pushing Predatory Loans
http://www.democraticunderground.com/10024570346

Sen. Warren Praises New CFPB Mortgage Rules that Make Families, Economy Safer
http://www.democraticunderground.com/10024295777

Banks Ordered to Add Capital to Limit Risks
http://www.democraticunderground.com/10024798328

New York Financial Regulator Uses Dodd-Frank to Sue Auto Lender
http://dealbook.nytimes.com/2014/04/23/new-yorks-top-regulator-sues-subprime-auto-lender/

SEC Will Require Companies To Report CEO-To-Worker Pay Ratios
http://www.democraticunderground.com/10023694931

Robert Reich: The Significance of Citigroup’s Shareholder Revolt
http://www.democraticunderground.com/1002579118

Executive order on federal contracting means real action on economic mobility
http://www.democraticunderground.com/10024415803

Why isn't there more focus on shareholders' say on executive pay?
http://www.democraticunderground.com/10024877216

Jesse Eisinger:
http://www.democraticunderground.com/10024989457#post17

[Leme]

22. justice delayed is justice denied

and no guarantee any of the other half of Dodd Frank will be implemented... years after it has been passed.
Dodd Frank may be obsolete by then.. or moot .

[rhett o rick]

23. And yet

Dodd Frank is the strongest financial reform in decades. Period.

it's not nearly enough.

[bvar22]

5. Jon Stewart skewered Geithner Wednesday night.

[rhett o rick]

24. Thanks for posting. Why was it a mirror image? nm

[rhett o rick]

26. I am not good at analogies but the arsonists in the airplane was a terrible analogy.

Let's try another, we will stick with the airplane as the economy and the pilots are partying and gambling online. When they get too far in debt, they threaten to crash the plane unless their debt is covered by the taxpayers. Of course Timmy G. doesnt want the plane to crash on his watch, so he gladly writes the extortionists a check on our account. Once the plane is landed the pilots are given a big bonus and allowed to leave in their limos. And the security guards that were bribed to let these crazy-assed pilots on board, were also given a bonus. When you ask Timmy G. if the pilots and security guards should be punished, he says no they are not important. It's only important to get the plane back in the air.

Timmy G. admits that they let the pilots go too far, but doesnt admit who specifically was to blame. Certainly not him.

As long as we allow the banks to be too big to fail this will continue to happen.

[Leme]

28. and the pilots continue to fly

now assured that no matter how hard they party... they will have a soft landing, even if next time the back half of the plane has to be evacuated mid flight.

[WillyT]

6. K & R !!!

[Demeter]

7. Cruel assessment

Unfortunately, I cannot find any other fault with it.

[1000words]

15. Jesse Eisinger needs to Cut the Crap™

There's a list.

[ProSense]

17. Jesse Eisinger:

When Regulation Threatens, Bankers Predict Doom For Main Street

by Jesse Eisinger

<...>

No sooner had that issue been resolved when Washington convulsed with a new crisis, now upon us: the C.L.O. panic...The House held a hearing last week to examine the issue. American Banker, a trade publication, ran an article with a headline that succinctly summarized the industry’s view: “How Dodd-Frank Might Kill the C.L.O. Market.”

<...>

Collateralized loan obligations, as the acronym is known, are bundles of loans, usually made to junk-rated companies. They use the same techniques as collateralized debt obligations, which were often made up of subprime mortgage investments and were the rotten core of the financial crisis. C.L.O.’s caused billions in losses for banks during the market panic of 2008, but most recovered strongly and memories faded. Junk-rated companies rallied, and C.L.O.’s roared back.

Under the Volcker Rule, which prevents banks from making speculative investments or owning large pieces of hedge funds or private equity firms, some C.L.O. holdings might be prohibited. Some C.L.O.’s own securities or bonds, and those are considered more speculative. (In a regulatory quirk, bonds and loans get different regulatory treatments.) Some C.L.O.’s give certain investors the ability to remove the manager that makes the C.L.O.’s investment decisions. That could be construed as a form of ownership control, which would bar banks from participating under a strict construction of the Volcker Rule.

The banking industry has been making loud noises about how the uncertainty could have dire consequences. As with the TruPs ruckus, the big banks have defended their interests in the name of smaller and more sympathetic entities. According to the banking lobby and its friends in Congress, any threat to the C.L.O. market is actually a dagger pointed at midsize businesses, which will have trouble finding capital as a result. In written testimony to the House subcommittee, a United States Chamber of Commerce representative expressed “serious concerns that the regulators had failed to take into account the impact of the Volcker Rule upon the capital formation of Main Street businesses,” adding ominously that “it may only be the first wave of capital formation problems that may crop up as a result of the Volcker Rule.”...this skirmish is largely about preserving a market for the largest banks. Just three “too big to fail” banks — JPMorgan Chase, Citigroup and Wells Fargo — account for 71 percent of bank C.L.O. holdings, according to Better Markets, the banking reform group. And the large banks get fees from creating the deals.

- more -

http://www.propublica.org/thetrade/item/when-regulation-threatens-bankers-predict-doom-for-main-street

http://www.democraticunderground.com/10024620516

Finally, Bank Regulators Have Had Enough

by Jesse Eisinger

With their simultaneous display of hubris, remorselessness, incompetence and corruption, the banks have finally ignited a modicum of courage in banking regulators...reckless trading at a JPMorgan Chase unit in London, the rampant mortgage modification and foreclosure abuses, manipulation of the key global interest rate benchmark — went just a tad too far. For the first time since the financial crisis, the banks are losing some battles on tougher regulation.

Last week, banking regulators, led by the Federal Deposit Insurance Corporation, but including the Federal Reserve and the Office of the Comptroller of the Currency, proposed a rule to raise the capital at the largest, most dangerous banks.

<...>

For the bank safety rules, regulators are going to require a higher capital ratio. Basel III, the international agreement on bank rules, put the rate at $3 for every $100 in assets. The new rules would raise it to $5 for the holding company, and $6 at its banking subsidiaries.

The measure is a victory for reality-based thinking in an important respect: how banks measure their assets. Under current accounting rules, assets are disclosed so poorly that banks are allowed to keep mysterious exposures out of view. Banks own pieces of businesses that reside off the balance sheet. They also make commitments using derivatives, creating obligations that are complex and difficult to quantify. The specifics of these vulnerabilities are poorly understood by everyone, including bankers themselves, but we know for sure that they can cause implosions.

- more -

http://www.propublica.org/thetrade/item/finally-bank-regulators-have-had-enough

When he isn't making comments about personalities, he's very good.

[Aerows]

29. The buck doesn't stop with Obama

It stops with Congress.

(when something bad happens).

The buck stops with Obama.

(when something good happens).

He is fierce as a lion and weak as a kitten.