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Chronique de la chute de l'Empire
This new report from the Service Employees International Union, Campaign for America’s Future and the Public Accountability Initiative is profoundly disturbing, especially in the midst of the Wall Street reform debate.
Throughout the financial reform debate, the finance industry has waged an unprecedented assault on the democratic process, spending an estimated $1.4 million per day to influence Congress and hiring 70 members of Congress and 940 former federal employees to lobby on their behalf.
The six biggest banks—Goldman Sachs, Bank of America, JPMorgan Chase, Citigroup, Morgan Stanley, and Wells Fargo—account for a disproportionate share of this activity. In the two years since the first federal bailout of a big bank (Bear Stearns), these banks and their principal trade associations have hired over 240 former government insiders as lobbyists and spent hundreds of millions of dollars on an influence game designed to thwart reform, shape bailout programs and maintain their status as “too-big-to-fail” institutions....
The lobbying spree is taxpayer-funded—it follows $160 billion in bailouts from Congress and trillions in cheap loans from the Federal Reserve. And as their influence has come to be viewed as increasingly toxic in Washington, the banks have shifted segments of their political activity to a “shadow lobby” that includes such front groups as the U.S. Chamber of Commerce....
Findings from the report
- 243 lobbyists for six big banks and their trade associations used to work in the federal government – 202 in Congress, the rest in the White House, Treasury, or at a relevant federal government agency. That’s equivalent to 40 revolving-door lobbyists per bank.iv
- This includes 33 chiefs of staff, 54 staffers to the House Financial Services Committee and Senate Banking Committee (or a current member of that committee) and 28 legislative directors. Many of the revolving-door lobbyists were key architects of financial deregulatory legislation during their time as congressional staffers, including the Financial Services Modernization (Gramm-Leach-Bliley) Act of 1999 and the Commodity Futures Modernization Act.
- The six big banks and their trade associations have spent close to $600 million since the first major federal bailout of Bear Stearns in March 2008 on lobbying, trade association activity and political contributions.
- Citigroup employs 55 revolving-door lobbyists, more than any other big bank or financial industry trade association. The federal government was until recently Citigroup’s largest shareholder. Other banks are also employing huge lobbying armies: Goldman Sachs with 45, JPMorgan Chase with 32, Morgan Stanley with 19, Wells Fargo with 14, and Bank of America with 12. The top big-bank lobbies, the Securities Industry & Financial Markets Association and the American Bankers Association, have hired 84 revolving-door lobbyists.
- The top big-bank lobbying firm in Washington is Elmendorf Strategies, founded by Steve Elmendorf, former chief of staff to Rep. Dick Gephardt. Elmendorf’s financial team includes former top staffers to Senate Majority Leader Harry Reid, Maryland Sen. Paul Sarbanes, and Gephardt. The firm represents the most powerful Wall Street banks and associations, including Citigroup, Goldman Sachs, the Financial Services Forum, and the Securities Industry and Financial Markets Association. Other top lobbying firms include the Podesta Group and Porterfield, Lowenthal, & Fettig.
- Senate Banking Committee chair Christopher Dodd (D-CT) leads all current members of Congress, with five former staffers now working as big bank lobbyists. Banking Committee ranking member Richard Shelby (R-AL) and members Chuck Schumer (D-NY) and Tim Johnson (D-SD) each have four.
- Big banks are hiding lobbying activities in a burgeoning shadow industry of generic business associations, ad hoc coalitions and front companies. Government bailouts and partial federal ownership have made it difficult for big banks to ramp up direct lobbying; instead, they are routing their dollars through this shadow lobby.
- Sullivan & Cromwell, the firm defending Goldman Sachs in its Securities and Exchange Commission fraud suit, secured the most lucrative big bank lobbying contract in 2009, a $520,000 deal with Clearing House Payments Co. – a company owned by JPMorgan Chase, Wells Fargo, Citigroup, Bank of America, and several other banks. The firm also lobbied on behalf of Goldman Sachs during the same period. In a past financial reform fight, lawyers at Sullivan & Cromwell lobbied on behalf of Enron, and appear to have helped craft the “Enron loophole.”
The money--$1.4 million a day is absolutely obscene, but in many ways, Ezra is right on this one, worrying "much more about the people than the money." That money is funding the more than 200 former members and more than a hundred former staffers to the key committees who are all working in concert with current members and staff. It's all about the connections--who has access and whose phone calls and e-mails will be answered. Those social networks can be far more effective at furthering the big banks' interests than the money would be otherwise.
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After trading as high as mid 1.30s, the EURUSD is rolling over, and its slide is now picking up steam, barely holding on to 1.2858 at last check. The 1.2800 stops are looming, whose break would take the EURUSD back to a 1.27 handle. This may very well still turn out to be the shortest and must futile trillion dollar bailout in history yet. Don't forget it was the EURJPY correlation desks that freaked out on Thursday and drained all NYSE liquidity in stocks. It will be truly amazing if we get another 1000 point move in the Dow... But not up.
At In These Times, Roger Bybee writes:
As Les Leopold notes in The Looting of America, the richest 1% of earners collected 8% of national income in 1973. "By 2006, the top 1% got nearly 23% of the pie, the highest proportion since 1929, " he writes. Moreover, the richest 1% now earns more than the bottom 50% of Americans. During almost exactly the same period, the pay gap between the top 100 CEOs and workers rose from 45 to 1 in 1970 to Himalayan proportions in 2006, reaching 1,723 to 1, Leopold says, citing data from Forbes.
But one of the most significant and least-discussed elements in the stunning polarization of America is the extent to which rising productivity has become unhitched from the way that its rewards are distributed.
Leopold lays out the astonishing data on this disparity:
By 2007, real wages in today's dollars had slid from their peak of $746 per week in 1973 to $612 per week--an 18% drop. Had wages increased along with productivity, the current average wage for nonsupervisory workers would be $1,171 per week--$60,892 instead of today's average of $31,824.
Our real average compensation is now about $25 per hour, including all benefits, representing a small increase from the early 1970s [in part created simply because of the sharp rise in health costs.] If it had risen along with productivity, it would be more like $41 an hour. The productivity bonus--about $16 an hour--is still AWOL.
Over roughly the same period, the ratio of household debt to income went from 55% to 127%, as Americans tried to make up for the loss of real wages with increased use of their credit cards.
American families have found themselves with vastly reduced time off the job, losing vacation days, sick time, and other leave. Until the recession hit, we were working the longest hours in the world.
While the numbers for income are highly skewed, those for wealth are even worse, as shown by these graphs.
Yesterday, CDS spreads gapped out on all sovereign risk trades, with dealers reporting that there was big protection buying any time spreads eased
All risk aversion trades are back. The euro continues to fall versus the dollar, dropping from 130 to 125 in a mere 24 hours. The yen has shot to 88. the new risk aversion darling, gold, rallied $15 dollars. Dealers report the credit markets are in disarray.
US stocks did a cliff dive, with the Dow dropping a just shy of 1000 points, and market participants believe it was a single monster seller. The Dow and S&P have rallied hard from there, but are still in seriously negative territory, with the S&P having breeched the technically significant level of 1145 decisively.
Here is the time frame, courtesy Scott (from MarketWatch):
2:38 PM: Dow down 360
2:48 PM: Dow down 600
2:51 PM: Dow down 900
Dow is now down around 500
Another indicator: I am have been unable to access Bloomberg for the last twenty minutes, which NEVER happened during the crisis. Key headlines:
Corporate Credit Risk in U.S. Rises to 2010 High on European Debt Crisis
Dow Plunges 998 Before Recovering
Topics: Banking industry, Credit markets, Doomsday scenarios, Investment outlook
Email This Post Posted by Yves Smith at 3:38 pm
28 Comments » Links to this post
As usual, my views do not necessary reflect those of Yves Smith or her website. The views herein are solely my own …
The tide is now turning towards real financial reform:
I asked a friend on the hill – a top aide for a very important Congress member – whether people would be wasting their time by calling their Senator. I explained that many people called and demanded that the U.S. not invade Iraq, but that Congress just ignored us. I said that many people feel that traditional political activism, like phonecalls, can’t work, as the level of political corruption is too high.
He responded that given the bipartisan support of many congress people and the American people for financial reform, this is very different from Iraq.
He urged everyone to call their Senators and demand the giant banks be broken up and the Fed be audited.
Senator Sanders’ bill to audit the Fed will probably be voted on today. Please call your Senator now.
Topics: Guest Post
Email This Post Posted by George Washington at 2:03 pm
on Mon, 05/10/2010 - 09:49
#341219
Amazing. Who'd have thought that a bunch of insolvent countries offering to guarantee each other's debt would not be a winning strategy?