[lbo-talk] Fwd: [Pen-l] Yves Smith on the latest Obama fraud

[Shane Mage]

> So let’s return to the rebranding of Obama. From the Financial Times:
> Barack Obama outlined a plan to toughen penalties against banks that  
> commit fraud in a speech on Tuesday that hardened his attacks on  
> Republicans for “collective amnesia” in backing policies that caused  
> the financial crisis and economic downturn.
> Speaking in Osawatomie, Kansas, Mr Obama summoned the spirit of  
> another president, Teddy Roosevelt, who spoke in the same city a  
> century ago about his “new nationalism” and the need for a fairer  
> system that supported the middle class..
> Mr Obama was scathing about the banks’ opposition to new financial  
> regulations, saying they were only feared by “financial institutions  
> whose business model is built on breaking the law, cheating  
> consumers or making risky bets that could damage the entire economy”.
> “I’ll be calling for legislation that makes [anti-fraud] penalties  
> count – so that firms don’t see punishment for breaking the law as  
> just the price of doing business.”
> The misdirection is blindingly obvious. The claim is that the  
> Administration needs new tools to get tough on banks. No, it has  
> plenty of tools, starting with Sarbanes Oxley. As we’ve discussed at  
> length in earlier posts, Sarbox was designed to eliminate the CEO  
> and top brass “know nothing” excuse. And the language for civil and  
> criminal charges is parallel, so a prosecutor could file civil  
> charges, and if successful, could then open up a related criminal  
> case. Sarbox required that top executives (which means at least the  
> CEO and CFO) certify the adequacy of internal controls, and for a  
> big financial firm, that has to include risk controls and position  
> valuation. The fact that the Administration didn’t attempt to go  
> after, for instance, AIG on Sarbox is inexcusable. The  
> “investigation” done by Andrew Ross Sorkin in his Too Big To Fail  
> (Willumstad not having a good handle on the cash bleed, the sudden  
> discovery of a $20 billion hole in the securities lending portfolio,  
> the mysterious “unofficial vault” with billions of dollars of  
> securities in file cabinets) all are proof of an organization with  
> seriously deficient controls.
> But more broadly, it’s blindingly obvious this Administration has  
> never had the slightest interest in doing anything more serious than  
> posture. As we wrote in early 2010:
> Recall how we got here. Early in 2009, the banking industry was on  
> the ropes. Both the stock and the credit default swaps markets said  
> that many of the big players were at serious risk of failure.  
> Commentators debated whether to nationalize Citibank, Bank of  
> America, and other large, floundering institutions..
> This juncture was a crucial window of opportunity. The financial  
> services industry had become systematically predatory. Its victims  
> now extended well beyond precarious, clueless, and sometimes  
> undisciplined consumers who took on too much debt via credit cards  
> with gotcha features that successfully enticed into a treadmill of  
> chronic debt, or now infamous subprime and option-ARM mortgages..
> The widespread, vocal opposition to the TARP was evidence that a  
> once complacent populace had been roused. Reform, if proposed with  
> energy and confidence, wasn’t a risk; not only was it badly needed,  
> it was just what voters wanted.
> But incoming president Obama failed to act. Whether he failed to see  
> the opportunity, didn’t understand it, or was simply not interested  
> is moot. Rather than bring vested banking interests to heel, the  
> Obama administration instead chose to reconstitute, as much as  
> possible, the very same industry whose reckless pursuit of profit  
> had thrown the world economy off the cliff. There would be no Nixon  
> goes to China moment from the architects of the policies that  
> created the crisis, namely Treasury Secretary Timothy Geithner,  
> Federal Reserve Chairman Ben Bernanke, and Director of the National  
> Economic Council Larry Summers..
> Obama’s repudiation of his campaign promise of change, by turning  
> his back on meaningful reform of the financial services industry, in  
> turn locked his Administration into a course of action. The new  
> administration would have no choice other that working fist in glove  
> with the banksters, supporting and amplifying their own, well  
> established, propaganda efforts.
> Thus Obama’s incentives are to come up with “solutions” that paper  
> over problems, avoid meaningful conflict with the industry, minimize  
> complaints, and restore the old practice of using leverage and  
> investment gains to cover up stagnation in worker incomes. Potemkin  
> reforms dovetail with the financial service industry’s goal of  
> forestalling any measures that would interfere with its looting. So  
> the only problem with this picture was how to fool the now- 
> impoverished public into thinking a program of Mussolini-style  
> corporatism represented progress.
> The list of evidence supporting this view is so lengthy that I am  
> certain to miss quite a few items: the lack of serious  
> investigation, the phony stress tests, the perpetually missing in  
> action DOJ, allowing the banks to exit the TARP pronto, the mortgage  
> fraud whitewash investigation, the clever sidelining of Elizabeth  
> Warren, the way too weak Dodd Frank legislation, which is being  
> watered down further with the blessing of Timothy Geithner. And  
> speaking of legislation, gee, if it was really that hard to  
> prosecute bank miscreants, why wasn’t that incorporated in Dodd  
> Frank? Awfully convenient to notice that supposed oversight now,  
> with no hope of getting a tough bill passed at this juncture and  
> statutes of limitations running out.
> Frankly, the fact that the Administration has joined Khuzami in the  
> “oh, it’s SO hard to prosecute” messaging leads me to believe the  
> SEC really will throw the case. It’s plenty clear this  
> Administration has let the people who really count know it has no  
> intention of ever carrying a stick.


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