Monday, June 28, 2010

One Man’s Opinion

“They have labored long and produced a mouse…”

This phrase has been used often in commentary and very often when describing deliberative exercises.

It is most appropriate when describing the financial regulatory reform conference report, which emerged last week from the House/Senate conferees.

That’s unfortunate because a lot of people put in a lot of time and effort trying to improve the financial regulatory terrain and rules in the wake of the 2008 financial institutions implosion. The initial product of various House and Senate congressional committees had Wall Street and the big banks running scared and for good reason.

But when members of the two Banking Committees met “in conference” and produced an amalgam “conference report”-- which still must still pass both the House and Senate—a lot of the toughness came out.

The large financial firms did their job and lobbied, cajoled, and bought their way out of a lot pain which earlier had passed either the House or Senate, but never made it in the final conference report, which represented a House-Senate “compromise.”

Of course President Obama welcomed the result and made clear he will sign it, if enough Senate Democrats don’t toss their cookies when asked to vote for it. Just like the health care bill, the President will declare the product a major victory for the American people and his administration and display that coup.

But, he’ll be wrong about its substance (just like he was with healthcare).

On every major issue—which the new consumer protection agency wasn’t—the giant financial institutions begged and threatened and got a lot of the bite taken out from the proposals before the conferees voted. Whether it was the Volcker rule, the Lincoln language on derivatives divestitures, or the too big to fail capital protections, the big guys squealed and lied about their “international competitiveness” or the hoariest explanation that the new proposals would hinder the banks’ ability to finance necessary domestic lending.

The last argument in particular is enraging.

The banks now are sitting on $1.8 trillion which they have chosen to arbitrage with the Treasury and fed rather than lend to business customers, large and small alike, and individuals. The big financial guys seem only to want to be part of national economic recovery if the federal government gives them total protection.

The major financial service arguments against the congressional proposals always were “all about the money” and nothing more. The Congress talked big and drafted proposals that would have reduced major financial risk, taken some bank revenue and moved it around to other financial institutions, jhedge funds, and maybe even a few foreign banks.

The US companies draped themselves in red, white, and blue and conjured all sorts of negative impacts in the communities where branches have and claim they lend (but certainly do draw deposits).

Phoney Deadline

What people saw unfold was a very old story. Both D’s and R’s huffed and puffed, accused the other of obstructionism, and then someone creates an artificial deadline. In this instance it was, “Let’s pass this before the July 4 congressional recess” or “Let’s give the President a tool for the G-20 meeting” and a majority employs the bogus justification to cut corners, sand away the edges of tough legislation, and then 50% plus one vote for it, end of story.

Why does the President need a bill before July 4 or the G-20 meetings? Is it really better to have a piece of soggy statute, early, rather than solid legislation with teeth, which takes a while?

Might those Senators and Members have gone home for the Fourth and heard how much the voters revile the big banks and Wall Street and how much they want them stuck with the toughest Lincoln and Volcker language along with even more resistance.

Don’t bet your last dollar that it was anything but that.

Remember that some of the biggest opponents to the tough proposals were Obama Administration officials worried about hurting the banks and investment banks.

(This blog was written on Sunday, before the death of Sen. Robert Byrd (D-W. Va.) raised questions about the Senate’s schedule this week, as well as its ability to override a possible GOP filibuster of the reg reform bill.)

In my opinion, the best thing that could happen is for the congressional leadership schedule to fall through and the House and Senate not get bills to the President before they skip town this week. Maybe they’ll come back with some spine on these matters and reject what they did in conference for more effective ideas.

Does anyone listen to car ads on radio or TV (as I did during the week the conferees exempted the automobile sellers from the new consumer agency oversight)?

“Best price in town; only available for a limited time; these prices won’t last; see us for one of a kind pricing, blah, blah.” Hyperbole after hyperbole after hyperbole, which is a nice way of saying, lie after lie after lie. The behavior of new and used car dealers have been the stuff of social commentary and comedic grist for decades, but suddenly Congress sanctifies them absolving them from coverage by the new federal consumer watchdog.

What was most surprising was the car folks get a pass from the new consumer “eyes,” even after the Pentagon criticized the industry for consistently fleecing servicemen and women???

Fannie Mae and Freddie Mac

As I look ahead to what, undoubtedly, will be more hearings on Fannie Mae and Freddie Mac (certainly in the House) and efforts to develop legislation to “abolish them” or do whatever the congressional solons feel needs to be done, this recent legislative reg reform exercise should be most instructive.

Will the Congress really abolish the two GSEs which now finance 75% of all of the nation’s mortgages and almost all of the “conventional mortgages” (non-government)? Or will the chambers talk a big game but when you get to the details--and Congress realizes that it can’t replace something very workable with nothing--F&F themselves may survive—albeit more heavily regulated--or will a federal secondary mortgage market for conventional loans be created but in other institutional identities??

Because the Congress talked big but acted small on regulatory financial reform, Congress may feel a need to come down heavy and make major changes with the housing finance entities. After all who would defend Fannie and Freddie?

But, once you get passed the Wall Street Journal and others on the fanatical Right and listen to folks who understand mortgage markets, you’ll find residual strength for federal support of the mortgage finance system, even Fannie and Freddie themselves, which could twist next year’s Congress just as much as the bank and Wall Street guys did this year.

The debate will not and should not be to extend the life of F&F but it should be about the role of the federal government in mortgage finance,

It’s not just the Homebuilders, Realtors, small bankers, and others—all of whom vote and all of whom have lots of employees who vote, and all of whom willing to put their money where their mouths are—who might challenge the Congress if the politicians get radical when it comes to the nation’s mortgage infrastructure.

In the wake of the 2008 debacle caused by lousy Wall Street underwriting on subprime mortgages, I’ve seen a certain amount of, “Does the US need all of this homeownership?” commentary.

Let me rephrase the question with, “Does our nation need the neighborhoods, stability, citizenship, community and civic activism, and multitude of jobs, which go with all of that homeownership?” Those lost jobs are much more than just builders and laborers. They are appliance sales and repair people, national warehouse stores (Wal-Mart, Home Depot, Lowe’s etc) independent paint and hardware stores, glaziers, rug manufacturers, roofers, carpenters, etc. etc, and the myriad industries which rely on an active housing industry and contribute to it representing about 25% of our gross national product.

You get the picture. Cutting back on support for US homeownership involves a lot more than a few home builders going out of business and Fannie and Freddie finally being sidelined.

What do you think Congress? It will be argued that you just are “getting Fannie and Freddie.” But if you legislate on mortgage finance matters as poorly as you did on financial regulatory reform, turning your legislative shotgun on the “American Dream,” you’ll be punishing a lot more than just that.


On June 25, 2010, a son, Rocco Patrick Maloni, 7 pounds, 5 ounces and 20 inches tall, to Andi Hedberg and Jason Maloni, with an Italian first name, Irish middle name, and a last name that swings both ways!!!

Best wishes for good health and a long life Rocco and thank you from Grandma Heidi and Grandpa Cheerios and God bless Rocco, his sister Daryn, and cousins Rex and Tiegan Maloni.

Maloni, 6-28-2010

Monday, June 14, 2010

Household Pox!

Democrats and Republicans, Sigh

I am sure that some contemporary wag admonished, “Never blog when you are in a foul mood.” But, screw it, I am in a black funk and I still will blog.

I am not happy with the federal government, 17 months into the Obama Administration and Democratic control of both houses of Congress.

The magnitude of national problems, from excessive deficit spending, unemployment, immigration, Afghanistan, Iraq and Iran, taxes, and now “BP and the Gulf” demands real leadership—from Democrats and republcians--and major fixes. But those have been frustrated by highly inflated rhetoric from both sides, the limits of federal amelioration, and the continued unhappiness of the American public with its lot in life.

Nobody seems to be able to kick the spending habit; our national infrastructure is tattered; “full employment,” which once used to be 4% or a bit higher, may now swell to7% or more, because we have become able to do more with less labor. Right now, 7% unemployment would be great, since real jobless numbers are hovering around 9% plus.

The big banks and Wall Street complain that the Congress is being too rough on them or requiring them to post more capital will make them uncompetitive. Bull pucky!
Their 2010 quarterly earnings are astronomical and they aren’t lending now. If banks aren’t making loans, then they should be required to put their capital into a fund to handle future financial failures.

Public officials shouldn’t fear the wrath of big financial institutions. They should fear the American people who will vote in November and who will remember who let the banks gobble taxpayers’ dollars and which refused loans to the same taxpayers.

Congress never should feel sorry for behemoth financial institutions because the big boys always will find ways to make money and my friends who work for these companies know that.

What my dismay has not done is turn me into a “Tea Bagger,” looking for simple answers to complex questions which ignore common sense and willingness to rationally problem solve. The conservative Tea Party—and many on the GOP right--also are an ugly lot and it isn’t too far into their “platforms” until your arrive at racism and religious bigotry, masquerading as “patriotism.”

So, this leopard isn’t ready to change his political spots, but he is ready to scream, a “pox on most of your houses” and keep searching for public officials who “get it,” no matter their political persuasion.

Obama and the GOP, Shortcomings Everywhere

The unacceptable behaviors from politicians in both parties and their inevitable hypocritical responses are boorish and scummy.

Since the real estate bust, everywhere I go I hear manifestations of this broad based political ennui, which seems to have replaced “housing values” as the topic of most cocktail and party conversations.

Many Democrats feel is that President Obama doesn’t seem to get it. Republicans suggest worse.

At times, the President seems politically astute but not political enough; he seems caring, but not caring enough; he seems smart but possibly not smart enough; he acts tough but not in all the right instances. (See Iran!)

Does he need a second term to become a well intentioned bully, a bully with a bully pulpit? How about putting our unemployed to work building drone weapons for the Air Force, Army, and CIA and liberally using them?

Maybe I’m just dismayed by the scope of our nation’s problems and what I consider lame efforts to galvanize and organize the nation and the Congress to take on these dilemmas.

The best thing the Democratic Party has going for it is the GOP, which continues divisive attacks on its party’s own “moderates.” Think the South Carolina GOP, Tennessee GOP, or Colorado GOP writ large!!

The D’s only can pray that the GOP gives Sarah Palin the Republican presidential nomination in 2012, which would produce minority party status for years to come. (Can she and Joe McGinniss, both see Russia from their houses, since they now are Wasilla neighbors?)

The Limits of Regulation

People are naïve if they think that business and industry exist to do anything but make money.

As I watch all of the efforts to control and regulate business, whether it’s polluters or rapacious financial service companies, no regulator, old or new, is going to be able to stay ahead of “business,” because the latter makes decisions in real time, while regulators employ weeks and months to construct regulatory policy, if they haven’t been suborned already by the regulated.

Business is just too quick and too facile. Regulating the big guys’ risky activity—and I don’t care which industry you choose--is like trying to bail water with a sieve. You’ll get some but not all or even enough.

Congress should just make a whole raft of risky activities which require prior regulatory approval and hope they nullify the most egregious practices.

Money in Politics

The amount of money in politics today sickens me. It’s corrosive. Virtually every public official who says, “My vote can’t be “bought or influenced” should have his/her nose immediately measured, because it’s a cinch it got longer after saying that.

True, money seldom directly buys their vote.

But the cash buy lobbyists access and access allows for an opportunity to present your “facts”—often reflective of the official’s state/district priorities--and influence congressional behavior. Most often, that version of the “facts,” plus the campaign cash and other favors (hiring friends, relatives, constituents) add to the lobbyist’s influence and ability to get that Member’s or Senator’s vote.

Our conservative Supreme Court already has blessed massive private campaign contributions, but Congress still could vote to fund congressional campaigns with public money, say giving a million dollars to every incumbent and challenger and triple that amount for Senators because of the greater geography covered.

It would be cheap at the price, even if those amounst were higher, as long as the same legislation called for immediate and super transparency on any private contributions. (See legislation being pushed by Rep. Chris Van Hollen (D-Md.), who coincidentally is my Congressman.)

The Black Caucus and the Congressional Ethics Office

Why is the Congressional Black Caucus (CBC) trying to neuter the new Office of Congressional Ethics (OCE)?

Rep, Marcia Fudge (D-Ohio) seems to be leading this Quixotic windmill charge, pretending it has nothing to do with OCE finding that one of her staffers engaged in questionable—if not illegal--behavior regarding the sponsorship of a Caribbean trip made by several CBC members. Facts surrounding this trip also may have ensnared Rep. Charlie Rangel (D-NY), who has stepped down “temporarily” as Chairman of the powerful House Ways and Means Committee pending resolution of several personal financial matters.

Oh, the OCE has forwarded to the Justice Department information on some of its work (beyond the Carib trip). That scares congressional miscreants—not merely CBC members--who may have bent or broken the law.

Isn’t the message getting through that the public wants its congressional representatives to be above the law? After years of hiding each other’s foibles the OCE could strengthen the heavily sagging public image of Congress and the now the Black Caucus wants to kill it?

Here’s rooting for the CBC to fail and save itself the ignominy of explaining its campaign to destroy something which is meant to expose congressional skullduggery.
If you are a Member with nothing to hide, nothing you couldn’t afford to read about on the front page of your hometown newspaper, then a strong Office Congressional Ethics is in your best interest.

Blanche Lincoln and Derivatives Regulation

In the twisted world of Capitol Hill, some Democrats were hoping Sen., Blanche Lincoln (R-Ark) would lose her Democratic primary runoff election. Instead, Sen. Lincoln won which likely was a huge victory for Wall Street opponents and good government.

Lincoln is the chief Senate sponsor of a bill—which passed the Senate amid great protests from the monied financial services community—to heavily regulate the sale and exchange of derivative securities and requiring banks to divest themselves of the derivative selling subsidiaries, potentially costing the banks millions in revenue.

But, some Wall Street sympathizers in the Obama Administration also don’t care for the Lincoln bill.

If Lincoln had lost her runoff race and returned to Washington a “lame duck,” there is little doubt that those opponents easily would have tanked this tough but necessary provision, when House and Senate conferees thrash out a final regulatory reform bill.

But while won she still faces an uphill fight to secure its final approval in the House-Senate conference, conferees may be loathe to so openly give Wall Street and the big banks what they want--which is Lincoln’s provision squashed--as well as hand a signature defeat to a candidate most Democrats want to triumph in November.

Financial Services Roundtable and Bank Lobbyists

I don’t know Scott Talbott, who lobbies for the Financial Services Roundtable, but I’ve seen him quoted with regularity and I saw him on a TV interview a few weeks ago, talking about the financial reg reform bill now in conference.

He seems to provide easy access to reporters tracking this story not surprisingly defending lobbyists and their bosses as they try and effect changes to the final conference report.

Various reports have 1500 financial service lobbyists working on this bill, meaning talking to staff, conferees, and leadership, going to fundraisers—scheduled coincidentally in the middle of what is expected to be a three week conference—and generally trying to weaken the package making it more palatable to their paymasters. But, that’s their job. That’s what they are paid to do.

Poor Mr. Talbot got the unenviable task of trying to explain away this influence peddling mob, when he was quoted by POLITICO in a new story about the gaggle working the bill.

“Experts also say the numbers do not prove that banking sector will have undue influence as Capitol Hill moves forward on financial reform.

“These are technical people in a technical field. It’s a small universe of people who can actually understand this,” said Scott Talbott, Financial Services Roundtable senior vice president for government affairs. “I think this is much ado about nothing, in the sense that this is something that happens in every industry. It’s not just specific to financial services.”

Unfortunately, nobody present measured Mr. Talbott’s nose after he uttered that statement.

Russian and Poland

Yay Poland, boo Russia.

This just is a test to see if residents of those countries truly are tracking my blog, since the last two times I mentioned either the blog drew “hits” from those nations.

Maloni, 6-14-2010