THERE may not be a person in America without a strong opinion about what coulda, shoulda been done to prevent the underwear bomber from boarding that Christmas flight to Detroit. In the years since 9/11, we’ve all become counterterrorists. But in the 16 months since that other calamity in downtown New York — the crash precipitated by the 9/15 failure of Lehman Brothers — most of us are still ignorant about what Warren Buffett called the “financial weapons of mass destruction” that wrecked our economy. Fluent as we are in Al Qaeda and body scanners, when it comes to synthetic C.D.O.’s and credit-default swaps, not so much.
What we don’t know will hurt us, and quite possibly on a more devastating scale than any Qaeda attack. Americans must be told the full story of how Wall Street gamed and inflated the housing bubble, made out like bandits, and then left millions of households in ruin. Without that reckoning, there will be no public clamor for serious reform of a financial system that was as cunningly breached as airline security at the Amsterdam airport. And without reform, another massive attack on our economic security is guaranteed. Now that it can count on government bailouts, Wall Street has more incentive than ever to pump up its risks — secure that it can keep the bonanzas while we get stuck with the losses.
The window for change is rapidly closing. Health care, Afghanistan and the terrorism panic may have exhausted Washington’s already limited capacity for heavy lifting, especially in an election year. The White House’s chief economic hand, Lawrence Summers, has repeatedly announced that “everybody agrees that the recession is over” — which is technically true from an economist’s perspective and certainly true on Wall Street, where bailed-out banks are reporting record profits and bonuses. The contrary voices of Americans who have lost pay, jobs, homes and savings are either patronized or drowned out entirely by a political system where the banking lobby rules in both parties and the revolving door between finance and government never stops spinning.
It’s against this backdrop that this week’s long-awaited initial public hearings of the Financial Crisis Inquiry Commission are so critical. This is the bipartisan panel that Congress mandated last spring to investigate the still murky story of what happened in the meltdown. Phil Angelides, the former California treasurer who is the inquiry’s chairman, told me in interviews late last year that he has been busy deploying a tough investigative staff and will not allow the proceedings to devolve into a typical blue-ribbon Beltway exercise in toothless bloviation.
He wants to examine the financial sector’s “greed, stupidity, hubris and outright corruption” — from traders on the ground to the board room. “It’s important that we deliver new information,” he said. “We can’t just rehash what we’ve known to date.” He understands that if he fails to make news or to tell the story in a way that is comprehensible and compelling enough to arouse Americans to demand action, Wall Street and Washington will both keep moving on, unchallenged and unchastened.
Angelides gets it. But he has a tough act to follow: Ferdinand Pecora, the legendary prosecutor who served as chief counsel to the Senate committee that investigated the 1929 crash as F.D.R. took office. Pecora was a master of detail and drama. He riveted America even without the aid of television. His investigation led to indictments, jail sentences and, ultimately, key New Deal reforms — the creation of the Securities and Exchange Commission and the Glass-Steagall Act, designed to prevent the formation of banks too big to fail.
As it happened, a major Pecora target was the chief executive of National City Bank, the institution that would grow up to be Citigroup. Among other transgressions, National City had repackaged bad Latin American debt as new securities that it then sold to easily suckered investors during the frenzied 1920s boom. Once disaster struck, the bank’s executives helped themselves to millions of dollars in interest-free loans. Yet their own employees had to keep ponying up salary deductions for decimated National City stock purchased at a heady precrash price.
Trade bad Latin American debt for bad mortgage debt, and you have a partial portrait of Citigroup at the height of the housing bubble. The reckless Citi executives of our day may not have given themselves interest-free loans, but they often walked away with the short-term, illusionary profits while their employees were left with shredded jobs and 401(k)’s. Among those Citi executives was Robert Rubin, who, as the Clinton Treasury secretary, helped repeal the last vestiges of Glass-Steagall after years of Wall Street assault. Somewhere Pecora is turning in his grave
Rubin has never apologized, let alone been held accountable. But he’s hardly alone. Even after all the country has gone through, the titans who fueled the bubble are heedless. In last Sunday’s Times, Sandy Weill, the former chief executive who built Citigroup (and recruited Rubin to its ranks), gave a remarkable interview to Katrina Brooker blaming his own hand-picked successor, Charles Prince, for his bank’s implosion. Weill said he preferred to be remembered for his philanthropy. Good luck with that.
Among his causes is Carnegie Hall, where he is chairman of the board. To see how far American capitalism has fallen, contrast Weill with the giant who built Carnegie Hall. Not only is Andrew Carnegie remembered for far more epic and generous philanthropy than Weill’s — some 1,600 public libraries, just for starters — but also for creating a steel empire that actually helped build America’s industrial infrastructure in the late 19th century. At Citi, Weill built little more than a bloated gambling casino. As Paul Volcker, the regrettably powerless chairman of Obama’s Economic Recovery Advisory Board, said recently, there is not “one shred of neutral evidence” that any financial innovation of the past 20 years has led to economic growth. Citi, that “innovative” banking supermarket, destroyed far more wealth than Weill can or will ever give away.
Even now — despite its near-death experience, despite the departures of Weill, Prince and Rubin — Citi remains as imperious as it was before 9/15. Its current chairman, Richard Parsons, was one of three executives (along with Lloyd Blankfein of Goldman Sachs and John Mack of Morgan Stanley) who failed to show up at the mid-December White House meeting where President Obama implored bankers to increase lending. (The trio blamed fog for forcing them to participate by speakerphone, but the weather hadn’t grounded their peers or Amtrak.) Last week, ABC World News was also stiffed by Citi, which refused to answer questions about its latest round of outrageous credit card rate increases and instead e-mailed a statement blaming its customers for “not paying back their loans.” This from a bank that still owes taxpayers $25 billion of its $45 billion handout!
If Citi, among the most egregious of Wall Street reprobates, feels it can get away with business as usual, it’s because it fears no retribution. And it got more good news last week. Now that Chris Dodd is vacating the Senate, his chairmanship of the Banking Committee may fall next year to Tim Johnson of South Dakota, home to Citi’s credit card operation. Johnson was the only Senate Democrat to vote against Congress’s recent bill policing credit card abuses.
Though bad history shows every sign of repeating itself on Wall Street, it will take a near-miracle for Angelides to repeat Pecora’s triumph. Our zoo of financial skullduggery is far more complex, with many more moving pieces, than that of the 1920s. The new inquiry does have subpoena power, but its entire budget, a mere $8 million, doesn’t even match the lobbying expenditures for just three banks (Citi, Morgan Stanley, Bank of America) in the first nine months of 2009. The firms under scrutiny can pay for as many lawyers as they need to stall between now and Dec. 15, deadline day for the commission’s report.
More daunting still is the inquiry’s duty to reach into high places in the public sector as well as the private. The mystery of exactly what happened as TARP fell into place in the fateful fall of 2008 thickens by the day — especially the behind-closed-door machinations surrounding the government rescue of A.I.G. and its counterparties. Last week, a Republican congressman, Darrell Issa of California, released e-mail showing that officials at the New York Fed, then led by Timothy Geithner, pressured A.I.G. to delay disclosing to the S.E.C. and the public the details on the billions of bailout dollars it was funneling to its trading partners. In this backdoor rescue, taxpayers unknowingly awarded banks like Goldman 100 cents on the dollar for their bets on mortgage-backed securities.
Why was our money used to make these high-flying gamblers whole while ordinary Americans received no such beneficence? Nothing less than complete transparency will connect the dots. Among the big-name witnesses that the Angelides commission has called for next week is Goldman’s Blankfein. Geithner, Henry Paulson and Ben Bernanke should be next.
If they all skate away yet again by deflecting blame or mouthing pro forma mea culpas, it will be a sign that this inquiry, like so many other promises of reform since 9/15, is likely to leave Wall Street’s status quo largely intact. That’s the ticking-bomb scenario that truly imperils us all.
Judge Kollar-Kotelly added, pointedly, "These abusive techniques did not result in any additional confessions from al-Rabiah, although he continued to parrot his previous confessions with varying degrees of consistency," and then reached her devastating conclusion:
F6: Accusing an American president of "appeasing" Russia and of "betraying" the Poles and the Czechs, the way critics have been reacting to the Obama Administration's announcement that it was scrapping a planned missile defense shield in Eastern Europe, had the effect of enveloping Washington in a Cold War time-warp.
Remember the good-old days when the perceived Soviet threat had served as an opportunity for politicians, bureaucrats and interest groups, encompassing what President Dwight Eisenhower called the Military-Industrial Complex, to stimulate new arms races in the name of protecting U.S. interests and defending its allies? [...]
Expect the sounding of the alarm by the same critics in the coming days: Beware. The Spirit of Yalta is haunting Eastern Europe and could bring about the "Finlandization" of Poland, the Czech Republic, Ukraine, the Baltic states. [...]
It was not surprising, therefore, that the Russians -- who lest we forget had already dissolved the Warsaw Pact and the entire Soviet Union and withdrawn their military forces from Eastern Europe -- have regarded the planned defense system in Eastern Europe, coming after the continuing extension of NATO to their borders, as part of an aggressive American posture. After all, Russia has no plans to deploy a similar system in Cuba http://investorshub.advfn.com/boards/read_msg.aspx?Message_id=41973902&txt2find=military-industrial
Steph: What Obama Is Up Against
The first anniversary of Barack Obama's historic election finds many of his supporters already grousing. Fair enough: Obama has been more vigorous in some areas than others. But one essential question goes unasked: How much can any president accomplish against the wishes of recalcitrant power centers within his own government?
We Americans harbor a quaint belief that a new president takes charge of a government that eagerly awaits his next command. [...]
Compound that with the Bush-Cheney administration's aggressive seeding of its staunch loyalists throughout the bureaucracy, and you have a pretty tough situation. Obama, then, has to contend not only with the big donors and corporate lobbies. His biggest problem resides right inside his "team."
***
The internal battles between American presidents and their national security establishments are not much reported. But if it is an invisible game; it is also a devious and even deadly one. Our civilian leaders end up mirroring the chronically nervous chiefs of state of the fragile democracies to our south.
Those who do not kowtow to the spies and generals have had a bumpy ride. FDR and Truman both faced insubordination. Dwight Eisenhower, who had served as chief of staff of the US Army, left the White House warning darkly about the "military industrial complex." (He of all presidents had reasons to know.) John Kennedy was repeatedly countermanded and double-crossed by his own supposed subordinates. The Joint Chiefs baited him; Allen Dulles despised him (more so after JFK fired him over the Bay of Pigs fiasco), and Henry Cabot Lodge, his ambassador to South Vietnam, deliberately undermined Kennedy's agenda. Kennedy called the trigger-happy generals "mad" and spoke angrily to aides of "scattering the CIA to the wind." The evidence is growing that he suffered the consequences.
In the 1950s, the late Col. L. Fletcher Prouty, a high-ranking Pentagon official, was assigned by CIA Director Allen Dulles to help place Dulles's officers under military cover throughout the federal government. [...]
In December 1971, Nixon learned of a military spy ring, the so-called Moorer-Radford operation, that was piping White House documents back to the Joint Chiefs of Staff. The Chiefs were wary of secret negotiations the president and Henry Kissinger were conducting with America's enemies, including North Vietnam, China and the USSR, and decided to keep tabs on this intrusion upon their domain. Jimmy Carter came into office as revelations of CIA abuses made headlines. He tried to dismantle the agency's dirty tricks office, but wound up instead a victim of it - and a one-term president.
Those who avoided problems - Johnson, Reagan, Bush Sr. and Jr. - were chief executives that made no problems for the Pentagon and intelligence chiefs. [...]
The old boys' network is very much in place, and it is hard at work to force Obama's hand, a la Vietnam. Witness the leaking of Gen. Stanley McChrystal's supposedly "confidential report" calling for escalation in Afghanistan. The leak was, not surprisingly, to the reliable Bob Woodward. [...] The White House was furious at the McChrystal release. But what could it do? Presidents come and go, and the security folks have ways to hasten the latter.
Covert alliances and payments to corrupt foreign allies continue, making creative diplomacy more difficult. [...] Throughout its six-decade history, the CIA has resisted accountability, [...] .. So Barack Obama is boxed in. [...]
For all the reasons laid out here, Obama will need help. He may, in the rote formulation, hold "the most powerful office in the world." However, the extent to which he controls the government he heads, is another matter. http://investorshub.advfn.com/boards/read_msg.aspx?message_id=43188934
fuagf: For the first time that I know of in recent American history, the uniformed military have created what amounts to a pressure group of their own. Generals Petraeus and McChrystal are the leaders but, by influencing or controlling promotions panels, they have fostered the advancement of middle grade and junior officers who agree with them. Some have been brought into a group called “the Colonels’ Council.” They have participated in what Andrew Bacevich has called a “quasi-coup. A small group of individuals, none of them elected or holding appointed office, had joined forces with military dissidents to engineer a change in policy. Those with statutory responsibility for providing military advice to the president were sidelined. It was an impressive achievement, but its implications are troubling. If [retired General Jack] Keane’s manoeuvre proves a precedent, the chain of command will cease to exist.” 18 And numbers of retired senior officers have joined not only in what President Eisenhower called the “military-industrial complex” but have become the opinion-makers on foreign policy in the media. Private soldiers and non-commissioned officers have, at the same time, become a major component of the private armies of such groups as Blackwater and form an active part of the constituency of the right wing of the Republican Party.
In the dangerous months and years ahead, if this road is taken, we are apt to hear echoes – particularly in the next presidential election --of the post Vietnam rhetoric that the civilians sold out the military. In short, while this option sounds moderate and “business-like” I believe that it is the worst option for President Obama and, more importantly, for the nation.
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