Outrage is back -- and long overdue. Now, what to do with it?
First, tune out the self-interested lectures from all those guilty elites who tell taxpayers to "stay calm" while the greedy gorge on our money. Thieves don't usually make good therapists.
Then, let's channel this backlash into more than crisis-driven policymaking. The American International Group bonus uproar can drive structural change -- from strengthening genuine shareholder authority to forcing transparency on the legislative process -- to stop politicians from voting in public and reversing themselves in secret.
Even as Congress finds its taste for accountability and reform, however, there is another key task for policymakers -- and the media. Let's recognize some of the people who got these issues right from the beginning. Many were ignored -- or worse, vilified. They deserve our attention and respect. We might even learn something from them.
The truth tellers
One group of public servants spotted the derivatives problem way back in 1994. The staff of the Government Accountability Office spent two years on a meticulous report concluding that without better regulation, derivative trading could trigger "liquidity problems" for the "financial system as a whole."
The systemic risk was too large for markets to mitigate, the report explained, so "in cases of severe financial stress," the nation would be stuck with a "financial bailout paid for by taxpayers." Got that?
Before the report was even released, however, a corporate attack campaign blasted the GAO and its recommendations. Then leading reporters "largely parroted industry" complaints when covering the issue, as Columbia Journalism Review's Elinore Longobardi details in a new 12-page analysis.
The old quotes might turn your stomach. Derivative losses would not require a bailout, declared then-Fed Chairman Alan Greenspan. A Washington Post editorial falsely claimed that the GAO report was not only "reassuring," but it also supported the existing derivative system. "If this were the obvious reading of the report," Longobardi dryly notes, "the derivatives industry would hardly have been so up in arms about it."
The media and political establishment should have given more weight to the disinterested conclusions from the GAO's exhaustive, nonpartisan study -- not the reflexive, self-interested attacks from its regulatory targets.
The good cop
Eliot Spitzer drew the wrath of Wall Street for his crusade against financial fraud, cronyism and greed.
As New York's attorney general, he was the first to take on AIG, using the state's Martin Act to step up where President George W. Bush's Securities and Exchange Commission had buckled. Spitzer forced out AIG's CEO and drew attention to the company's fraudulent accounting.
"AIG is at the center of the web," Spitzer told CNN this past weekend, advocating a tougher stance on the company's sweetheart deals for Goldman Sachs.
Spitzer resigned from the New York governorship a year ago after a prostitution scandal. Yet in a galling demonstration of Washington's tangled priorities, leaders in both parties still refuse to tap Spitzer's expertise for policymaking and enforcement in the current crisis, while the administration has tapped plenty of people tied to AIG, Citigroup, Lehman and Goldman.
The reformer
Finally, in a lopsided battle that Washington would rather forget -- "looking backward" can be dicey -- consider the massive bank deregulation bill that passed in 1999.
Sen. Byron Dorgan led the lonely opposition of eight senators. He argued that deregulation would spur bank consolidation, increase moral hazard and facilitate risky derivatives trading.
"What does it mean if we have all this concentration?" Dorgan asked in his 1999 floor speech opposing bank deregulation. "The bigger they are, the less likely this government can allow them to fail," he said, cautioning that the list of banks considered "too big to fail" had already jumped from 11 to 21.
His other big concern was derivatives: "Federally insured banks in this country are trading in derivatives out of their own proprietary accounts. You could just as well put a roulette wheel in the bank lobby." Dorgan not only fought deregulation, he also tried to protect regular investors. He introduced an amendment to ban banks from using proprietary accounts for derivative speculation and a plan to regulate hedge funds under the Investment Company Act of 1940.
The Senate crushed both amendments with a voice vote, exempting senators from taking public stances on those sensible precautions.
Noting that those who "cannot remember the past are condemned to repeat it," Dorgan closed his speech with a warning eerie in its prescience. For once, the reformer gets the last word:
With respect to the regulation of risky hedge funds and derivatives in this country -- $33 trillion, a substantial amount of it held by the 25 largest banks in this country ... -- we must do something to address those issues. That kind of risk overhanging the financial institutions of this country one day, with a thud, will wake everyone up and lead them to ask the question: Why didn't we understand that we had to do something about that? How on earth could we have thought that would continue to exist without a massive problem for the American people and for its financial system?
Ari Melber writes a column for Politico, where this first appeared. He Twitters politics at www.twitter.com/arimelber
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Maybe going after a small fry and letting the big fish swim was a sign of something undesirable.
http://www.gregpalast.com/elliot-spitzer-gets-nailed/
Who cares about Spitzer's love for prossies. He's still brilliant!
The Cassandras warned loudly and clearly that ruin was at hand but a large serpent was sent to silence them.
As Homer's story unfolded again in Wall Street, the same hubris was repeated. Greed and dishonesty brought down the entire house of cards and every man, woman and child were killed.
Tell this tale of woe to your children so that they understand the tragic flaw of greed and hubris that brought down a once great civilization. "I fear the derivatives even though they bear gifts."
No, bring them into the City walls. Moral of the story: Never look a gift horse in the mouth.
This is the oldest story.
Dateline this Friday has Part II of the expose' on the subprime scam. Part I was well done. Nothing that I didn't know two years ago but showed real people doing the scam and knowin' it was a total fraud - bipartisan to a large degree.
Control of the MSM was all Bush needed, and he had it.
Welcome to a christian country where redemption has now become a commodity to be bought, sold and given at human whim.
Eliot Spitzer is welcome at my company any day.
The Protestants or Calvinists manages to turn this around that greed was good, contrary to Christian teachings by claiming that hard work was rewarded by God by riches. Charity was replaced by materialism.
Aside from the separation of church and state and the fact that many Founding Fathers were Free Masons and Jewish and atheists, I rarely see a person in this country whose actions that even vaguely resembles what Christ taught. MLK, Jr. taught of the triple evils and he was martyred.
Christianity has been hijacked as grossly as have other religions to promote greed and political agendas. Slavery was justified by using the Bible. The KKK burned crosses.
America is not and has never been a Christian nation though loudly proclaiming tho be one, especially under Bush 43, the least spiritual person one could imagine. When the "King" is sick, the whole land suffers.
Is it a coincidence that the FBI was investigating the biggest threat to Bush's Wall Street masters over something as petty as a prostitution scandal?
Had he not squandered his resources going after Martha Stewart with such a vengence for lying about insider trading, for which she was not even charged, because there was no evidence -- evidence to the contrary in fact, he might have seen through the fog to go after AIG with the same ferocity.
Martha Stewart was convicted by a biased jury that did not understand the issues. That was crystal clear when jury members were interviewed. More people should have been outgraged at the injustice.
Had Spitzer not been so wrapped in his tangled web of illicit sex, he might have had a clear conscience to focus on AIG and catch the real financial culprits. After all he was good at hounding people, but his judgement was extremely poor. He was (don't know if he still is) a self-absorbed hypocrite who had people -- guilty and innocent -- coiling in disgust.
Eliot Spitzer, Mr. Hypocrite, himself, I've got news for you. Stop your holier-than-thou crusade now. No matter what you say, you had your sites on AIG, but you fell short, too sanctimoniously wrapped up in your own nasty activities.
And that is a lesson about how poor character can utterly derail good intentions.
This was a RNC Hitman who targeted Spitzer for his September 2007 Washington Post letter that told of the Bush Administration taking states to court to stop them from using Consumer Protection Laws to put Predatory Lenders out of business.
I think AG Holder NEEDS to tap Spitzer and, frankly, I would pull Fitzgerald off his duty in Chicago and pair him up with Spitzer to get the job done. The Wall Streeters would start squealing like stuck pigs ... and that is exactly what we need to happen.
Wow your name suits you. Fog!
You miss the point. People are disgusted by Eliot Spitzer, not because they are puritanical and begrudge him all the sex he wants with whomever he wants.
No. Spitzer disgusts people because he betrayed his wife. Spitzer disgusts people because he hypocritically went after others when he was breaking the law himself. Spitzer disgusts people because he went after Martha Stewart for lying about something she didn't even do.
He's a snake in the grass that we don't need: a pot calling the kettle black. Furthermore, the derivatives trading and credit default swaps were LEGAL. How absurd to invite a sleezy lawyer (who I am sure doesn't understand derivatives) to fix risky, but legal, derivatives trading.
A leader with the expertise and personality to work with all sides will be required for this task. Spitzer's name doesn't even appear on the list.
By the way, if your definition of puritanical includes those who do not admire Spitzer's record in anyway, then thank goodness we have a puritanical society.
From a far-from puritanical atheist.
I am glad that I do not condemn people for making mistakes in their personal lives - because we all make mistakes or make poor decisions on occasion.
Eliot Spitzer was elected to do a job - and he was doing that job very well. He was pointing out that Wall Street was extremely corrupt in their greed. And he went after those who were committing crimes so serious - that they collapsed the US Economy.
Now just imagine if people like Mr. Spitzer had been allowed to continue their criminal prosecutions and the Bush DOJ had done their jobs - to protect Americans from criminal behavior - I bet the Wall Street corruption - could've been stopped sooner - and would not be as severe as it currently is.
Quit judging people so narrowly - and really imagine if they had been allowed to do their jobs to protect us.
I'm not as disgusted by Spitzer as I am by Wall Street ... and, just for fun, lets investigate a little before we sanctify the goings on in derivatives trading as legal. Maybe Spitzer, (should he get tapped) and foreign counterparts could build solid cases of wire fraud against some traders.
Sounds like a fun game ... lets play.
If we want to change for the better -- fix our problems -- it is of the utmost importance to insist on the highest of ethical behaviour from those in public positions.
If you don't think this important, then don't cry wolfe when it all goes wrong. Seems to me that you are doing exactly that.
I won't be holding my breath, tho.