It now appears that a major contributing factor to the abrupt shutdown of the Russia-Trump probe by the House Intelligence Committee was a fear that the Committee was getting too close to Trump’s dealings with Deutsche Bank and Deutsche Bank’s dealings with Russia.
The draft report released by the Democrats after belatedly learning that their Republican colleagues had abruptly ended the probe, included this paragraph:
“Donald Trump’s finances historically have been opaque, but there have long been credible allegations as to the use of Trump properties to launder money by Russian oligarchs, criminals, and regime cronies. There also remain critical unanswered questions about the source of President Trump’s personal and corporate financing. For example, Deutsche Bank, which was fined $630 million in 2017 over its involvement in a $10 billion Russian money-laundering scheme, consistently has been the source of financing for President Trump, his businesses, and his family. We have only begun to explore the relationship between President Trump and Deutsche Bank, and between the bank and Russia.”
Deutsche Bank’s “$10 billion Russian money-laundering scheme” which became known by the shorthand term “mirror trades,” was the subject of a May 23, 2017 letter sent by Maxine Waters, the ranking member of the House Financial Services Committee and other House Democrats to John Cryan, CEO of Deutsche Bank. The letter began:
“We write seeking information relating to two internal reviews reportedly conducted by Deutsche Bank (“Bank”): one regarding its 2011 Russian mirror trading scandal and the other regarding its review of the personal accounts of President Donald Trump and his family members held at the Bank. What is troubling is that the Bank to our knowledge has thus far refused to disclose or publicly comment on the results of either of its internal reviews. As a result, there is no transparency regarding who participated in, or benefited from, the Russian mirror trading scheme that allowed $10 billion to flow out of Russia. Likewise, Congress remains in the dark on whether loans Deutsche Bank made to President Trump were guaranteed by the Russian Government, or were in any way connected to Russia. It is critical that you provide this Committee with the information necessary to assess the scope, findings and conclusions of your internal reviews.
“Deutsche Bank’s failure to put adequate anti-money laundering controls in place to prevent a group of traders from improperly and secretly transferring more than $10 billion out of Russia is concerning. According to press reports, this scheme was carried out by traders in Russia who converted rubles into dollars through security trades that lacked any legitimate economic rationale. The settlement agreements reached between the Bank and the New York Department of Financial Services as well as the U.K. Financial Conduct Authority raise questions about the particular Russian individuals involved in the scheme, where their money went, and who may have benefited from the vast sums transferred out of Russia. Moreover, around the same time, Deutsche Bank was involved in an elaborate scheme known as ‘The Russian Laundromat,’ ‘The Global Laundromat,’ or ‘The Moldovan Scheme,’ in which $20 billion in funds of criminal origin from Russia were processed through dozens of financial institutions.”
Waters has now come into Trump’s crosshairs. In a speech in Pennsylvania on Saturday evening, he referred to her as “a low IQ individual.” (The problem for Trump seems to be something very different: Waters’ ability to connect the dots and see a theory of the case that involves money laundering and quid pro quo.)
Also in May of last year, Reuters reported that “FBI investigators are examining whether Russians suggested to Kushner or other Trump aides that relaxing economic sanctions would allow Russian banks to offer financing to people with ties to Trump, said the current U.S. law enforcement official.”
Waters’ letter to the CEO of a major global bank which has complex major dealings all over Wall Street might take one’s breath away unless you have been closely following the serial crime spree that Deutsche Bank has been conducting in other corners of the financial markets in the U.S. and abroad.
In January of last year the U.S. Justice Department announced a $7.2 billion settlement with Deutsche over its improper issuance of mortgaged backed securities and dubious lending practices. The Statement of Facts released by the Justice Department at the time of the settlement included the text of what those inside the bank knew about the fraud as it was occurring. DOJ officials wrote:
“Deutsche Bank also knowingly misrepresented that loans had been reviewed to ensure the ability of borrowers to repay their loans. As Deutsche Bank acknowledges, the bank’s own employees recognized that Deutsche Bank would ‘tolerate misrepresentation’ with ‘misdirected lending practices’ as to borrower ability to pay, accepting even blocked-out borrower pay stubs that concealed borrowers’ actual incomes. As a Deutsche Bank employee stated, ‘What goes around will eventually come around; when performance (default) begins affecting profits and/or the investors who purchase the securities, only then will Wall St. take notice. For now, the buying continues.’ ”
Deutsche Bank was criminally charged by the U.S. Justice Department in April 2015 and allowed to enter into a deferred prosecution agreement. The charges were related to its role in manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR. (LIBOR is an interest rate benchmark used to set consumer loan rates.) At the same time, a bank subsidiary pleaded guilty to wire fraud for manipulating LIBOR. The settlement cost Deutsche Bank $775 million in criminal penalties.
In November 2015, Deutsche Bank was fined $258 million by the New York Department of Financial Services and the Federal Reserve for using “non-transparent methods and practices” from 1999 to 2006 to move money in and out of countries on the U.S. sanctions list. Emails showed that employees had discussed tricks for conducting financial transactions with Iran, Libya, Syria, Burma and Sudan.
In 2013, FHFA, the conservator of Freddie Mac and Fannie Mae, announced a $1.925 billion settlement with Deutsche Bank to resolve claims that the bank had misled the mortgage giants in the sale of mortgage-related investments. Deutsche Bank did not admit wrongdoing in that settlement.
In 2010, Deutsche Bank agreed to pay $553.6 million to the U.S. and admitted criminal wrongdoing in a fraudulent tax shelter scheme that facilitated billions of dollars in U.S. tax losses.
The draft report from the Democrats on the House Intelligence Committee also contains this bombshell:
“Moreover, as the Committee has learned, candidate Trump’s private business was actively negotiating a business deal in Moscow with a sanctioned Russian bank during the election period.”
If Wall Street can glam up a story around a stock or a man or both, it can sell the hell out of the shares to the dumb money. If enough dumb money invests, the Dark Pools spring into action and drive the price even higher. That brings in hedge funds. Pretty soon you’re talking about real money. This is how we got the 1929 stock market crash, the Great Depression, the dot.com bust in 2000, the Enron, Worldcom and Tyco flameouts, and whatever we end up calling the bust that lies ahead of the current brainless bubble market.
Take yesterday’s market, for example. Boeing lost 2.91 percent of its value, driving the Dow lower, while Tesla gained 5.61 percent driving the Nasdaq higher.
Boeing turned 100 years old on July 15, 2016. It has a half trillion dollars in back orders. It manufactures the 737, 747, 767, 777 and 787 families of commercial airplanes which represent almost half the world fleet. The company is also a major manufacturer of freighters, reporting that “about 90 percent of the world’s cargo is carried onboard Boeing planes.”
Tesla, the electric car maker, has been around since 2003. It lost almost $2 billion last year and has never delivered an annual profit to shareholders. Somehow, it has managed to achieve a market capitalization of $58.36 billion as of yesterday’s close. (This is not to say that electric cars are not the wave of the future but only to suggest that the survival of a particular technology does not guarantee the survival of a particular company.)
Tesla’s CEO is Elon Musk. He Tweets and says crazy things in a fashion that is undignified for the head of a publicly-traded company. In that respect, he is another symptom of these aberrational times where the man holding the highest office in the land, President Donald Trump, also Tweets and says crazy things that are undignified for the head of a major nation.
Musk, in fact, has been compared to Trump. Marcie Bianco wrote last month for NBC regarding Musk’s rocket venture known as SpaceX. Biano concludes regarding Musk’s desire to colonize Mars:
“The desire to colonize — to have unquestioned, unchallenged and automatic access to something, to any type of body, and to use it at will — is a patriarchal one… It is the same instinctual and cultural force that teaches men that everything — and everyone — in their line of vision is theirs for the taking. You know, just like walking up to a woman and grabbing her by the pu**y. It’s there, so just grab it because you can.”
Bertel Schmitt wrote for Forbes last year about Musk’s stated intention to build a brand new factory and start producing a Model Y small SUV by 2019. Schmitt sums up that fantasy as follows:
“Permit to completion, a single family house can take a year. A new car plant takes anywhere from three to five years from ground breaking to car making. Depending on the location, permitting could add another year. Musk doesn’t even know where that new Gigafactory will be, and he wants it to make cars in two years? It takes a lot of drugs and alcohol to come up with such a plan, preferably with ‘Lucy in the sky with diamonds’ on the turntable, or elsewhere…Anywhere else in the auto industry, if you would announce plans like that, you would be submitted to a drug test, and fired…”
Schmitt’s multiple references to drugs came about as a result of Musk’s Tweet on June 7, 2017 when he wrote: “A little red wine, vintage record, some Ambien…and magic!” (Ambien is considered a sedative-hypnotic.)
Today, Matthew Walther at The Weekhas crystallized American society’s Pied Piper-like trance under the “messianic huckster.” Walther writes:
“I realize that the founder of Tesla and SpaceX really does make things, like electric cars and spaceships. But Musk’s numerous attempts to realize his gleaming visions of a Jetsons-like future have never come close to living up to the (largely self-manufactured) hype. Lately he has started claiming that he is going to send cargo-laden rocket ships to Mars by the middle of President Trump’s second term, in advance of the establishment of a permanent human colony. I’m not holding my breath.
“Why have we allowed this lunatic a prominent place in our public and commercial life?”
That last question could equally be asked about the sitting President of the United States. The Washington Post has chronicled 2,000 lies the President has told since taking office. On Saturday evening, Trump delivered a rambling speech in Pennsylvania to ostensibly help a fellow Republican win a special election being held today. Trump’s speech was punctuated with remarks that are a humiliation to the office of the President of the United States.
Trump called the host of NBC’s “Meet the Press,” Chuck Todd, “a sleeping son of a bitch.” He said of Congresswoman Maxine Waters of California, an African American: “She’s a low IQ individual. She can’t help it.” Waters is serving her fourteenth term in the U.S. House of Representatives. Before she entered Congress, she served 14 years in the California State Assembly. Trump had never held public office before somehow managing to gain entry to the highest office in the land. His businesses had filed bankruptcy six times.
On Saturday night, Trump also sized up where he thinks he ranks on the presidential dignity scale. He said: “I’m very presidential.”
These are not normal times for America or for the markets. The more we attempt to normalize them to save face, or to relieve our anxiety, the more dangerous the situation becomes. Coming together as a nation to fight back is the only way we can save ourselves from the messianic hucksters.
Jamie Dimon Testifying at Senate Banking Hearing June 13, 2012 on the London Whale Scandal
The illusions of the Trump era – spun as making America great again, while sluicing more and more wealth to the one percent – has revived citizen interest in what it would actually take to restore fairness and integrity to the nation.
The first place to look is how to restructure the American corporation so that it is no longer poisoning our campaign finance system, our election outcomes, and perverting the legislative process in Washington. The majority of Congress now works for its corporate paymasters. That has resulted in perverse economic outcomes across the national landscape that have, in turn, created the greatest wealth inequality in America since the late 1920s.
While reforming the way political campaigns are financed in America has received a great deal of attention, far too little attention has been given to the grotesque disfiguration of far too many corporate Boards in America.
Take JPMorgan Chase for example. According to its 2017 proxy statement, one of its Board members, Laban P. Jackson, Jr., received a total of $532,500 in compensation in 2016 for serving as a Director of the bank. Of that amount, $115,000 was paid in cash for service on the Board of JPMorgan Chase; $225,000 was in an annual stock award that must be retained until he retires from the Board; $110,000 was paid for serving as a Director of J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase in the United Kingdom; along with other fees including a payment of $2500 (paid to all Board members) when they attend a “Specific Purpose Committee” meeting.
According to the 2017 proxy statement, JPMorgan’s lavishly paid Board, which currently receives $75,000 annually in cash and $225,000 in stock will get a 25 percent increase in cash compensation, moving to $100,000 while the stock award moves from an annual $225,000 to $250,000.
This lavish pay package for the Board of a Wall Street bank compares to a projected miserly increase of 3.2 percent for the average American worker in 2018.
JPMorgan Chase is, by any key measure, one of the most financially complex corporations in America. And yet, it notes in its 2017 proxy that one Board member on its Audit Committee, James A. Bell, serves on the audit committees of three other public companies. (According to Bell’s bio on JPMorgan’s website, those other three companies are Dow Chemical, CDW Corporation, and Apple.)
JPMorgan’s sprawling and complex footprint in 60 countries around the globe came into focus at a Senate Banking hearing on July 15, 2014. The witness that day was Fed Chair Janet Yellen. Senator Elizabeth Warren reminded Yellen that at the time of its collapse in 2008, Lehman Brothers had $639 billion in assets and 209 subsidiaries and it took three years to unwind the bank in bankruptcy. Warren singled out JPMorgan Chase for comparison, saying that it has $2.5 trillion in assets and 3,391 subsidiaries. According to the latest data from the regulator of national banks, the Office of the Comptroller of the Currency (OCC), JPMorgan Chase also had $52 trillion in notional derivatives at its bank holding company as of September 30, 2017.
Improper activities in derivatives brought an historic scandal to the bank in 2012 and 2013. Known as the “London Whale” saga for risky gambles in derivatives in London, the bank was the subject of an intense investigation by the U.S. Senate’s Permanent Subcommittee on Investigations. The Subcommittee’s 306-page report, dated March 15, 2013, decimated management of the bank. The report noted the following:
“JPMorgan Chase has consistently portrayed itself as an expert in risk management with a ‘fortress balance sheet’ that ensures taxpayers have nothing to fear from its banking activities, including its extensive dealing in derivatives. But in early 2012, the bank’s Chief Investment Office (CIO), which is charged with managing $350 billion in excess deposits, placed a massive bet on a complex set of synthetic credit derivatives that, in 2012, lost at least $6.2 billion.”
Let that sink in for a moment. The bank was gambling not with its own money but with its depositors’ money and it lost $6.2 billion.
The OCC also conducted its own investigation in the matter and found that “Board and senior management did not ensure effective oversight of CIO activities… Our examinations of Model Approvals and Risk Weighted Assets, Audit Coverage, CIO Risk Management, VAR Model Risk Management, and CIO Valuation Governance disclosed specific weakness that created an unsafe and unsound environment.”
Let that also sink in for a moment. JPMorgan Chase is the largest FDIC-insured bank in the United States with over $1.5 trillion in deposits and its Federal regulator found that it had created “an unsafe and unsound environment.”
Jamie Dimon was Chairman and CEO of JPMorgan Chase at the time this occurred and he kept both of those jobs courtesy of his highly compensated Board of Directors.
New York Stock Exchange rules require that listed companies have a majority of independent directors on the Board. Thus it would seem to follow that the person chairing this independent Board should also be independent. And yet, across corporate America, we find today that the top executive of the company is typically also the Chair of the so-called “independent” Board.
Jamie Dimon became the CEO of JPMorgan Chase on January 1, 2006. The bank was more than a century old and had never been charged with a criminal felony up to that point. In 2014, the Justice Department charged JPMorgan Chase with two felony counts in connection with their role in facilitating the Madoff Ponzi scheme. The bank was given a two-year deferred prosecution agreement.
The very next year, in May 2015, JPMorgan Chase was hit with a new felony count for its role in rigging foreign currency markets as part of a banking cartel. That’s three felony counts in two years and yet the highly compensated Board of JPMorgan Chase allowed Dimon to keep his job as Chairman of the Board and CEO of the company. Prior to the felony counts there was a $13 billion settlement with the Justice Department and Federal and State regulators in 2013 for JPMorgan Chase’s role in selling toxic mortgage investments to investors as worthwhile products when the bank had good reason to believe they would blow up.
There seems to be no shame today in the Oval Office or in the corporate Board room. Only citizens, not billionaires, can turn this country around.
After seven decades, Toys ‘R’ Us may have run out of options and be forced to liquidate all of its U.S. stores according to media reports. (The company called the reports “speculation.”) Toys ‘R’ Us had filed for bankruptcy protection on September 19 of last year, listing assets of $6.57 billion and debts amounting to an astounding $7.89 billion.
If the news reports are accurate, more than 36,000 U.S. jobs could be at stake. According to the company’s 10K filing with the Securities and Exchange Commission on April 12, 2017, as of the beginning of last year, the company employed “64,000 full-time and part-time individuals worldwide, with 36,000 domestically and 28,000 internationally.” Those figures, the filing said, do not include the tens of thousands of part-time employees the company hires for the holiday season.
The liquidation would also put a vast quantity of empty commercial buildings on the market. According to the company’s website, it has 564 Toys ‘R’ Us store locations in the United States plus another 230 Babies ‘R’ Us stores.
Its international footprint is also sprawling. The Toys ‘R’ Us website reports that its has “765 international stores and more than 245 licensed stores in 37 countries and jurisdictions.” It is not known what the company plans to do with the bulk of those operations. In addition to troubles in the U.S., in an SEC filing on February 23 of this year, the company wrote that it would be shuttering operations in the U.K. The filing said:
“On February 27, 2018, as part of the overall restructuring plan of the Company, Toys ‘R’ Us Limited and certain of its U.K. affiliates constituting the U.K. business (the ‘U.K. Subsidiaries’), commenced an administration under the U.K. Insolvency Act 1986 (the ‘Administration’). Pursuant to the Administration, the U.K. Subsidiaries will begin winding down business operations in the United Kingdom.”
The problems besetting Toys ‘R’ Us are a combination of its private equity/leveraged buyout in 2005 and the fact that big box retailers like Walmart and Target are able to undercut its pricing in its most important holiday selling season, where it achieves approximately 40 percent of its total annual sales.
In the Toys ‘R’ Us annual report for its fiscal year ending January 28, 2017, the company had this to say about competitive forces putting the future of the company at risk:
“The retail industry is highly and increasingly competitive and our results of operations are sensitive to, and may be materially adversely affected by competitive pricing, promotional pressures, competitor credit programs, additional competitor store openings, growth of e-commerce competitors and other factors. As a specialty retailer that primarily focuses on toys and baby products, we compete with discount and mass merchandisers, such as Walmart and Target, as well as Internet and catalog businesses, such as Amazon.com, national and regional chains and department stores and local retailers in the markets we serve. We also compete with national and local discount stores, consumer electronics retailers, supermarkets and warehouse clubs.”
According to the website bizfluent.com, Walmart has been eating Toys ‘R’ Us’ lunch since 1999 and now commands 30 percent of the retail toy market, estimated to be a total market of $22 billion. The number of Walmart stores, at 9,000, dwarfs every other brick and mortar retailer. Toys ‘R’ Us ranks a distant second behind Walmart in toy sales, according to bizfluent, with just an 18 percent market share. Target ranks a close third with a 17 percent share of the market.
Unlike its top competitor, Toys ‘R’ Us is buried under crushing debt thanks to its leveraged buyout in 2005. That year, private equity firms KKR and Bain Capital and the real estate investment firm, Vornado, took the company private. The trio injected $1.4 billion in cash and borrowed a whopping $5 billion to complete the deal. Bain Capital is the firm that was founded by former Presidential candidate Mitt Romney and it’s the business that made his quarter of a billion dollars in wealth possible by taking firms private and burying them under junk bond debt financing.
According to a 2012 Vanity Fair article by Scott Helman and Michael Kranish, over Mitt Romney’s 15 years at Bain Capital (which he founded in 1984) “the firm invested about $260 million in its 10 top deals and reaped a nearly $3 billion return” for its investors. The dark side of these riches, note the authors, is this: “Maximizing financial return to investors could mean slashing jobs, closing plants, and moving production overseas. It could also mean clashing with union workers, serving on the board of a company that ran afoul of federal laws, and loading up already struggling companies with debt.”
As Romney now makes a run for Senator from Utah, Toys ‘R’ Us workers are learning firsthand about the dark side of private equity deals and at just what price to the country the 1 percenters have amassed their wealth.
The U.S. Senate is about to set in motion the next financial crash on Wall Street but you would never know it from watching cable news channels CNN or MSNBC last evening. Both news channels obsessed for endless hours over the Trump-Russia scandal and a hush money payoff to porn star Stormy Daniels, neglecting one of the most critical topics of the day: what was happening on the Senate floor this week.
Some of the most informed Democratic voices in the U.S. Senate are making impassioned and heartbreaking appeals to their colleagues this week on the floor of the U.S. Senate to vote down Senate bill S.2155, which carries the Orwellian title: “The Economic Growth, Regulatory Relief and Consumer Protection Act.” The bill is a Republican/Wall Street lobbyist masquerade to ostensibly help small community banks but will effectively gut enhanced oversight of banks with up to $250 billion in assets – mega banks by any measure – that want to dodge oversight of their derivative counterparty exposure to the largest Wall Street banks like JPMorgan Chase and Citigroup.
On Monday, the non-partisan Congressional Budget Office released an analysis showing that the legislation “would increase federal deficits by $671 million over the 2018-2027 period” while increasing the probability of a big bank failure.
Some of the most gut-wrenching and poignant testimony came from Senator Sherrod Brown of Ohio. (Read his full prepared remarks below.) Brown emotionally went off script from his written remarks to explain how families in his zip code in Ohio, 44105, had to deliver the news to their children that they had to put the family dog in a shelter and that the kids would have to leave their school friends because their home was being foreclosed on. Brown added:
“City officials in Cleveland began to hear reports that predatory home refinances were being pushed on borrowers, regardless of whether they could afford to repay the loans.
“Foreclosures began to shoot up in Cuyahoga County – starting with 5,900 filings a year in 2000 and jumping to nearly 15,000 by 2007. My wife and I live in zip code 44105, near Slavic Village in Cleveland, and in the first half of 2007, that zip code – 44105 – had more foreclosures than any other zip code in the country.
“The City of Cleveland went to the Fed and asked it to use its authority to restrain subprime lending.
“The Fed did nothing.”
The Fed actually was doing something. Unknown to the public and Congress, the Federal Reserve was secretly using its so-called emergency lending authority from 2007 to at least the middle of 2010 to provide a cumulative $16 trillion in almost zero interest rate loans to some of the most corrupt banks in the United States and Europe to bail them out of a financial crisis of their own making. It did this while the Federal government provided crumbs to desperate families struggling to keep a roof over their children’s heads.
Brown was not alone in expressing his outrage on the Senate floor over this Wall Street giveaway legislation which has more than a dozen Senate Democrats slated to join with Republicans to support it. Senator Bernie Sanders (see video clip below) went through a litany of concerns that Americans from across the country have told him they are worried about: from gun safety, to DACA, to how to pay for college education, to the high cost of prescription drugs. But, Sanders, says, “I can honestly say that I have not heard one person come up to me and say, Bernie, we have got to deregulate 25 of the largest banks in this country with cumulative assets of $3.5 trillion.”
Sanders added: “If you want to know why the American people, in very, very strong numbers, hold the United States Congress in contempt, it is precisely because we have a Republican leadership that does exactly the opposite of what the American people want.”
Sanders also reminded his colleagues of the devastation Wall Street had unleashed on the country just a decade ago. He said:
“Thousands of Americans set up tent cities in Sacramento, Fresno, Tampa Bay and Reno because they had no place left to live. As a result of the illegal behavior of Wall Street, American households lost over $13 trillion in savings which shattered retirement dreams, wiped out life savings, and made it impossible to send kids to college. That is what Wall Street did 10 years ago. And against my strong opposition then, Congress and the Federal Reserve provided the largest taxpayer bailout in the history of the world to these huge banks because they were too-big-to-fail.”
Senator Elizabeth Warren has also released a video warning about the dangers of this legislation. Warren says that the proposed legislation “takes about 25 of the 40 largest banks in this country and just moves them off the special watch list and treats them like they were tiny little community banks that just couldn’t do any harm to the economy.” Warren adds: “Those exact same 25 banks that are being taken off the watch list got about $50 billion in taxpayer bailout money during the last crash.”
Cable news has failed all Americans when it ignores momentous legislation like this and gives the Wall Street lobbyists a free ride.
Senator Sherrod Brown Opening Floor Speech Opposing S.2155, the Dodd-Frank Roll Back Bill
U.S. Sen. Sherrod Brown, the ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, delivered the following speech on the Senate floor on March 6, 2018 in opposition to S.2155, “The Economic Growth, Regulatory Relief and Consumer Protection Act.”
Brown’s remarks, as prepared for delivery, follow.
Ten years ago – almost to the day – this country was on the verge of a financial crisis that would end up wrecking the lives of millions of families.
The experts – the so-called experts – had their heads in the sand. They shrugged off the warnings. They told the public everything was fine.
Jim Cramer was telling hardworking Americans to invest their money in Bear Stearns, saying “I’m not giving up on the thing.” Bank of America was putting the finishing touches on its plan to buy the subprime lender Countrywide, which they called “the best domestic mortgage platform.”
Hank Paulson – the last Treasury Secretary who got plucked from Goldman Sachs until Secretary Mnuchin came along – downplayed homeowners’ pain. He said “You know, the stock market goes up and down every day more than the entire value of the subprime mortgages in the country.”
Meanwhile, advocates in communities – the people who were actually dealing with the consequences of the building crisis – were sounding the alarm.
The fair lending group Greenlining began meeting with Alan Greenspan at least once a year, starting in 1999 – Nine-teen-ninety-nine – to warn about predatory mortgage lending. And attorneys general from across the country started to caution about troubling trends.
In Cleveland, we saw home prices climb 66 percent in just ten years with the housing market juiced by “flipping on mega-steroids,” according to a government panel that investigated the crisis.
City officials in Cleveland began to hear reports that predatory home refinances were being pushed on borrowers, regardless of whether they could afford to repay the loans.
Foreclosures began to shoot up in Cuyahoga County – starting with 5,900 filings a year in 2000 and jumping to nearly 15,000 by 2007. My wife and I live in zip code 44105, near Slavic Village in Cleveland, and in the first half of 2007, that zip code – 44105 – had more foreclosures than any other zip code in the country.
The City of Cleveland went to the Fed and asked it to use its authority to restrain subprime lending.
The Fed did nothing.
The people in charge in Washington were too certain, too detached, perhaps too comfortable to listen to the warnings from Ohioans, and people across this country.
We all saw what happened. All those people who had the hubris to say that the economy could keep growing while the middle-class was being looted – those people weathered the crisis just fine.
No one with a cable show had his house foreclosed on.
Nobody who tanked the economy went to jail.
In fact, many of these same people now have fancy jobs in fancy buildings on Wall Street and in the White House.
But in zip codes like 44105 and places like it across the country, parents were sitting down at kitchen tables to have painful conversations with their kids.
The CEOs and boards at the banks, and the people in Washington who were supposed to be watching them, failed these Americans. That’s why Congress – including some Republicans – did something about it, to stop this from ever happening again.
We passed a law that created important protections for the financial system, for taxpayers, and homeowners, to hold banks and watchdogs accountable to prevent another crisis.
But Wall Street never gives up that easy. Big bank lobbyists – the same ones who were so sure the 2008 crisis wasn’t going to happen – went to work.
On the day President Obama signed Wall Street Reform into law, a top Wall Street lobbyist said it was “halftime.”
The economy is a game to these people. They can’t tell the difference between putting millions of Americans’ lives and homes and savings at risk and a game of basketball.
Piece by piece, Wall Street has gone to the agencies, gone to the courts, and gone to Congress to dismantle the consumer protections we put in place. The drumbeat is constant. They always want a new exemption, or a new, weaker standard, or a new tax break.
The last year or so has been a good time to be a bank lobbyist.
After the crisis, we created the Consumer Financial Protection Bureau to represent the interests of regular Americans who have to fight with their bank or their credit card company. Now, in this Administration, the Consumer Bureau is being run by a guy who believes it shouldn’t even exist.
The Consumer Bureau’s new protections are under attack too.
All Democrats, and even some Republicans, agreed that we should protect customers’ right to take their bank to court. But bank lobbyists convinced the Vice President to come to this very Senate chamber – late at night, when only the special interests are awake – to vote against hardworking families.
Instead of protecting those families, he voted for Wells Fargo, and Equifax, and Citigroup. That rule is gone. Piece by piece.
The watchdogs who are supposed to be protecting Main Street all come to their jobs fresh from Wall Street and K Street. The President’s cabinet looks like an executive retreat for America’s biggest banks. They’ve released blueprint after blueprint for how they want to dismantle all the rules put in place after the crisis. And they are putting their people in place to do it.
They just rammed through Congress a bill to give Wall Street an enormous tax break that will cost American families 1.5 trillion dollars to give big bank CEOs a raise. That’s 10,000 times more than what we spend at HUD every year to protect kids from toxic lead.
Not long ago, another bank lobbyist told us their plan. “We don’t want a seat at the table,” he said. “We want the whole table.”
And they are about to get it under the bill the Senate will consider this week.
Piece by piece, they have been tearing these protections apart. This bill gives them the whole table. It leaves nothing for working families.
And if you thought 31,000 dollars for a dining set at HUD was a bad deal for taxpayers, wait until I tell you about the billions of dollars in risk that are packed into this effort.
This bill puts Americans at risk of another bank bailout. The Congressional Budget Office – the independent, non-partisan scorekeeper – confirmed yesterday that this bill would increase the probability of a big bank failure and a financial crisis, and add $671 million to the deficit.
So we’re going to weaken the rules, and pay Wall Street for the privilege of doing it.
This bill weakens stress tests for all large banks, even Wall Street megabanks that are designated as “global systemically important banks” like JPMorgan Chase ($2.5 Trillion in assets), Bank of America ($2.3 Trillion), Wells Fargo ($1.9 Trillion), and Citigroup ($1.9 Trillion). Together these banks hold 51 percent ($8.6 Trillion) – more than half – of all industry assets. These are banks whose collapse could cause harm that ripples across the world.
Together all of the country’s biggest banks took about $239 billion dollars in taxpayer bailouts. Without rigorous, annual stress tests, taxpayers could once again be on the hook if “too big to fail” banks collapse and we don’t have the right tools in place to see it coming.
And it opens the door to a weakening of oversight of foreign megabanks operating in the U.S. – the same banks that have repeatedly violated U.S. laws. Let’s run through a few of their rap sheets:
Santander: illegally repossessed cars from members of the military that were serving our country overseas.
Deutsche Bank: manipulated the benchmark interest rates used to set borrowers’ mortgages.
Barclays: manipulated electric energy prices in Western U.S. markets.
Credit Suisse: illegally did business with Iran.
UBS: sold toxic mortgage backed securities.
It didn’t have to be this way.
I tried for months to work on a commonsense package of reforms aimed at lifting up our community banks and credit unions. These are the local financial institutions that fuel homeownership and small business in our communities. The ones that didn’t cause the last meltdown. The ones that get dragged down when big banks crash the economy.
I support targeted relief for these banks and regional banks that do things right and play by the rules. And I wanted to give more help to average Americans who have to cope with unfair tricks and traps.
But that’s not what this bill is.
Why should we have to roll back rules for the largest banks in Switzerland in order to help out community banks or credit unions in Ohio?
That’s a false choice. We could pass a bill today that helps these local banks invest in their communities, while keeping in place strict rules for Wall Street megabanks.
But Wall Street and Republicans don’t want to do that. They want to use the little guys – the community banks we all want to help – to extract something for the big guys.
Washington is suffering from collective amnesia. Thankfully, the IMF – an agency of international financial experts – has done us a favor to help jog memories.
They’ve catalogued 300 years of history of bank deregulation efforts all across the globe. You know what they found? We deregulate, the economy explodes, we put in protections, the economy gets better, and we deregulate again. Wash, rinse, repeat.
We can do better. We owe it to the people we serve to do better.
The Senate owes it to the 176,000 kids in Ohio, and other kids across the country, whose lives and educations were disrupted by the foreclosure crisis.
We owe it to the millions of people whose retirements were wiped out while big banks were bailed out.
We owe it to the students who graduated into the Great Recession, and may have lower earnings for the rest of their lifetime.
The watchdogs who understand these markets are trying to warn us.
Paul Volcker has cautioned us about this bill. He was a Fed Chair for Presidents Carter and Reagan. So has Sheila Bair, who helped us put protections in place after the crisis. Sheila Bair is a Republican warning us about this bill.
Tom Hoenig, the current Vice Chair at the FDIC – selected for that position by Republicans – has told us this bill is harmful. Barney Frank has said he’d vote “no” if he were in the Senate. Former Fed Governor Dan Tarullo has outlined a long series of concerns.
Sarah Bloom Raskin, Antonio Weiss, Gary Gensler, law professors, fair housing advocates, big bank experts, people who provide legal services across this country and civil rights groups are all telling us we cannot go down this path again.
We know what happens next. It is hubris to think we can gut the rules on these banks again, but avoid the next crisis.
There are so many important things that this body could be spending its time on.
We could be addressing the fact that workers and retirees in Ohio, and across this country, could have the pensions they spent a lifetime earning slashed in half if Congress doesn’t act.
We could be addressing the fact that 400,000 Ohioans have to pay more than half their income each month just to keep a roof over their head.
We could be creating jobs, tackling the opioid epidemic, lowering drug prices, or investing in our crumbling roads and bridges. But instead, we’re here doing more favors for the largest banks.
Whose side are we on? Megabank lobbyists, or American taxpayers and homeowners and students and workers?