From the Huffington Post:
Hmmm. This isn’t exactly confidence inspiring.
Tim Geithner’s new nominee for number two at the Treasury Department, Neal Wolin, played a key role in drafting legislation in the late 1990s deregulating the banking system, a former Treasury Department official confirms to us.
We aren’t going to fix the mess in banking (and the economy) by turning to the same cast of characters whose lack of vision and deregulatory ideology got us into the mess.
In the past I’ve mentioned Simon Johnson’s article on “The Quiet Coup”. It’s worth another look. The real epidemic that’s going to wipe us out isn’t swine flu or any other virus. Instead it’s a viral idea. An idea that people in positions of power hold in this country. Namely, the idea that they got where they are due solely to merit. And since they believe they got where they are by merit, then they must be good people. And then they conclude that whatever is in their personal best interest must also be good. It’s rationalization of greed, corruption, and avarice. Nothing less.
A few data points to consider:
- Our secretary of treasury, Tim Geithner, was confirmed despite admitting to being a tax cheat. Even when he was caught by the IRS and informed that his “interpretation” of the tax laws was errroneous, he paid only the absolutely legal minimum. He refused to pay back the back taxes that were beyond the statute of limitations. Apparently it’s only wrong if you get caught and publicized in Timmy’s book. That doesn’t bode well for the Timmy designing a derivatives regulatory regime, does it?
- From NewsDaily and other sources:
Stephen Friedman, chairman of the New York Federal Reserve Bank‘s board of directors, resigned on Thursday amid questions about his purchases of stock in his former firm, Goldman Sachs.
What did he do? He “quit” (the revolving door is open) a job at Goldman Sachs to take a position replacing Tim Geithner as President of the New York Federal Reserve Bank. For those not familiar, the NY Fed is supposed to regulate Goldman Sachs. So did Friedman put his Goldman stock in a blind trust? No. Did he sell it and seperate himself from Goldman? No. Instead he not only continued to own stock in the firm he is supposed to regulate (and that has profited by the billions from bail-out programs, including those of the Fed). He not only continued to own stock, he bought more. Later in the same article Friedman is quoted as saying what he did was “in compliance with the rules”. Of course it was. That’s because even later in the same article we discover that he was granted a waiver of the rules. He sounds absolutely indignant that people think he has a conflict of interest and that we question his motivation.
- From Reuters today:
Private equity fund The Carlyle Group will pay a $20 million penalty to settle its role in a probe of investment firms that hired politically connected people to help them get chosen to manage New York state’s pension fund, the state’s attorney general said on Thursday.
Of course it wasn’t just the NY state pension fund, it was pension funds in at least 36 states. Carlyle Group is one of the largest private private equity and investment mgt firms in the world. One of it’s prime methods is to employ former top political people (ex-Presidents of US, ex-Secretaries of State, ex-Prime Ministers of UK, etc). Then magically, the firm’s owned companies get big government contracts. Surprise! In this latest episode, Carlyle bribes “employs” people who make campaign contributions to the politicos who are on the boards of the ublic pension funds. Then, magic, the funds find that Carlyle is an excellent investment manager and should be hired.
Turns out that culture matters, too. From the NYTimes (free registration may be required)
The global financial crisis has brought low the economies of just about every country on earth. But not Norway.
Often natural resource wealth becomes a trap for a country as the nation is tempted to consume the riches that come from exporting the natural resources (such as oil). Other times, the natural blessing ends up only benfitting a narrow, wealthy elite. Norway has avoided both traps and also avoided much of the global crisis affecting everyone else. Culture appears to have much to do with it.
Going Dutch is a good article that explores the complexities of economic systems by using The Netherlands as an example. Simple “capitalism” vs. “socialism” labels oversimplify.
Arianna Huffington has a very good read today about why bankers continue to get preferential treatment at the expense of Main Street. Here’s just an excerpt:
Just this week, the bankers and their lobbyists — who you might have reasonably thought would be the political equivalent of lepers in the halls of power these days — have kneecapped substantive bankruptcy reform in the Senate, helped pull the plug on a government-brokered deal with Chrysler, and tried feverishly to throw up a roadblock in the way of credit card reform in the House.
You heard me right. America’s bankers — those wonderful folks who brought us the economic meltdown — are still being treated as Beltway royalty by those in Congress.
According to Sen. Dick Durbin, the banks “are still the most powerful lobby on Capitol Hill. And they frankly own the place.”
When it comes to reforming our financial system, we are truly through the looking glass. I mean, since when did it become “to the vanquished go the spoils”? How do the same banks that have repeatedly come to Washington over the last eight months with their hats in their hands, asking for billions to rescue them from their catastrophic mistakes, somehow still “own the place”?
But the banks continue to be rewarded for their many failures.