«Ominously, we\u2019re now in the deregulation stage following the bull run. We know what comes next, just not when. Count on one thing: it won\u2019t be pretty. «<\/b>
\nAuthored by Nomi Prins via TomDispatch.com,
There\u2019s been lots of fire and fury around Washington lately, including a brief government shutdown. In Donald Trump\u2019s White House, you can hardly keep up with the ongoing brouhahas from North Korea to Robert Mueller\u2019s Russian investigation, while it already feels like ages since the celebratory mood over the vast corporate tax cuts Congress passed last year. But don\u2019t be fooled: none of that is as important as what\u2019s missing from the picture. Like a disease, in the nation\u2019s capital it\u2019s often what you can\u2019t see that will, in the end, hurt you most.
Amid a roaring stock market and a planet of upbeat CEOs, few are even thinking about the havoc that a multi-trillion-dollar financial system gone rogue could inflict upon global stability. But watch out. Even in the seemingly best of times, neglecting Wall Street is a dangerous idea. With a rag-tag Trumpian crew of ex-bankers and Goldman Sachs alumni as the only watchdogs in town, it\u2019s time to focus, because one thing is clear: Donald Trump\u2019s economic team is in the process of making the financial system combustible again.
Collectively, the biggest U. S. banks already have their get-out-out-of-jail-free cards and are now sitting on record profits after, not so long ago, triggering sweeping unemployment, wrecking countless lives, and elevating global instability. \u00a0 (Not a single major bank CEO was given jail time for such acts.) \u00a0Still, let’s not blame the dangers lurking at the heart of the financial system solely on the Trump doctrine of leaving banks alone. They should be shared by the Democrats who, under President Barack Obama, believed, and still believe, in the perfection of the Dodd-Frank Act of 2010.
While Dodd-Frank created important financial safeguards like the Consumer Financial Protection Bureau, even stronger long-term banking reforms were left on the sidelines. Crucially, that law didn\u2019t force banks to separate the deposits of everyday Americans from Wall Street\u2019s complex derivatives transactions. In other words, it didn\u2019t resurrect the Glass-Steagall Act of 1933 (axed in the Clinton era).
Wall Street is now thoroughly emboldened as the financial elite follows the mantra of Kelly Clarkston\u2019s hit song: \u201cWhat doesn\u2019t kill you makes you stronger.\u201d Since the crisis of 2007-2008, the Big Six U. S. banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley — have seen the share price of their stocks significantly outpace those of the S&P 500 index as a whole.
Jamie Dimon, chairman and CEO of JPMorgan Chase, the nation\u2019s largest bank (that\u2019s paid $13 billion in settlements for various fraudulent acts), recently even pooh-poohed the chances of the Democratic Party in 2020, suggesting that it was about time its leaders let banks do whatever they wanted. As he told Maria Bartiromo, host of Fox Business\u2019s Wall Street Week, \u201cThe thing about the Democrats is they will not have a chance, in my opinion. They don\u2019t have a strong centrist, pro-business, pro-free enterprise person.\u201d
This is a man who was basically gifted two banks, Bear Stearns and Washington Mutual, by the U. S. government during the financial crisis. That present came as his own company got cheap loans from the Federal Reserve, while clamoring for billions in bailout money that he swore it\u00a0 didn\u2019t need.
Dimon can afford to be brazen. JPMorgan Chase is now the second most profitable company in the country. Why should he be worried about what might happen in another crisis, given that the Trump administration is in charge? With pro-business and pro-bailout thinking reigning supreme, what could go wrong? Protect or Destroy?
There are, of course, supposed to be safeguards against freewheeling types like Dimon. In Washington, key regulatory bodies are tasked with keeping too-big-to-fail banks from wrecking the economy and committing financial crimes against the public. They include the Federal Reserve, the Securities and Exchange Commission, the Treasury Department, the Office of the Comptroller of the Currency (an independent bureau of the Treasury), and most recently, under the Dodd-Frank Act of 2010, the Consumer Financial Protection Bureau (an independent agency funded by the Federal Reserve).
These entities are now run by men whose only desire is to give Wall Street more latitude. Former Goldman Sachs partner, now treasury secretary, Steven Mnuchin caught the spirit of the moment with a selfie of his wife and him holding reams of newly printed money \u201clike a couple of James Bond villains.\u201d (After all, he was a Hollywood producer and even appeared in the Warren Beatty flick Rules Don\u2019t Apply .) He\u2019s making his mark on us, however, not by producing economic security, but by cheerleading for financial deregulation.
Despite the fact that the Republican platform in election 2016 endorsed reinstating the Glass-Steagall Act, Mnuchin made it clear that he has no intention of letting that happen. In a signal to every too-big-not-to-fail financial outfit around, he also released AIG from its regulatory chains. That\u2019s the insurance company that was at the epicenter of the last financial crisis. By freeing AIG from being monitored by the Financial Services Oversight Board that he chairs, he\u2019s left it and others like it free to repeat the same mistakes.
Elsewhere, having successfully spun through the revolving door from banking to Washington, Joseph Otting, a\u00a0 former colleague \u00a0of Mnuchin\u2019s, is now running the Office of the Comptroller of the Currency (OCC). While he\u2019s no household name, he was the CEO of OneWest (formerly, the failed California-based bank IndyMac). That\u2019s the bank Mnuchin and his billionaire posse picked up on the cheap in 2009 before carrying out a vast set of\u00a0foreclosures on the homes of ordinary Americans (including active-duty servicemen and -women) and reselling it for hundreds of millions of dollars in personal profits.
At the Federal Reserve, Trump\u2019s selection for chairman, Jerome Powell (another Mnuchin pick), has repeatedly expressed his disinterest in bank regulations. To him, too-big-to-fail banks are a thing of the past. And to round out this heady crew, there\u2019s Office of Management and Budget (OMB) head Mick Mulvaney now also at the helm of the Consumer Financial Protection Bureau (CFPB), whose very existence he\u2019s mocked.
In time, we\u2019ll come to a reckoning with this era of Trumpian finance. Meanwhile, however, the agenda of these men (and they are all men) could lead to a financial crisis of the first order. So here\u2019s a little rundown on them: what drives them and how they are blindly taking the economy onto distinctly treacherous ground.
Joseph Otting, Office of the Comptroller of the Currency
The Office of the Comptroller is responsible for ensuring that banks operate in a secure and reasonable manner, provide equal access to their services, treat customers properly, and adhere to the laws of the land as well as federal regulations.
As for Joseph Otting, though the Senate confirmed him as the new head of the OCC in November, four key senators called him \u201chighly unqualified for [the] job.\u201d\u00a0 He will run an agency whose history snakes back to the Civil War. Established by President Abraham Lincoln in 1863, it was meant to safeguard the solidity and viability of the banking system. Its leader remains charged with preventing bank-caused financial crashes, not enabling them.
Fast forward to the 1990s when Otting held a ranking position at Union Bank NA, overseeing its lending practices to medium-sized companies. From there he transitioned to U. S. Bancorp, where he was tasked with building its middle-market business (covering companies with $50 million to\u00a0$1 billion in annual revenues) as part of that lender\u2019s expansion in California.
In 2010, Otting was hired as CEO of OneWest (now owned by CIT Group). During his time there with Mnuchin, OneWest foreclosed on about 36,000 people and was faced with sweeping allegations of abusive foreclosure practices for which it was fined $89 million. Otting received $10.5 million in an employment contract payout when terminated by CIT in 2015. As Senator Sherrod Brown tweeted all too accurately during his confirmation hearings in the Senate, «Joseph Otting is yet another bank exec who profited off the financial crisis who is being rewarded by the Trump Administration with a powerful job overseeing our nation\u2019s banking system.»
Like Trump and Mnuchin, Otting has never held public office. He is, however, an enthusiastic proponent of loosening lending regulations. Not only is he against reinstating Glass-Steagall, but he also wants to weaken the \u201cVolcker Rule,\u201d a part of the Dodd-Frank Act that was meant to place restrictions on various kinds of speculative transactions by banks that might not benefit their customers.
Jay Clayton, the Securities and Exchange Commission
The Securities and Exchange Commission (SEC) was established by President Franklin Delano Roosevelt in 1934, in the wake of the crash of 1929 and in the midst of the Great Depression. Its intention was to protect investors by certifying that the securities business operated in a fair, transparent, and legal manner. Admittedly, its first head, Joseph Kennedy (President John F. Kennedy\u2019s father), wasn\u2019t exactly a beacon of virtue. He had helped raise contributions for Roosevelt\u2019s election campaign even while under suspicion for alleged bootlegging and other illicit activities.
Since May 2017, the SEC has been run by Jay Clayton, a top Wall Street lawyer. Following law school, he eventually made partner at the elite legal firm Sullivan & Cromwell. After the 2008 financial crisis, Clayton was deeply involved in dealing with the companies that tanked as that crisis began. He advised Barclays during its acquisition of Lehman Brothers\u2019 assets and then represented Bear Stearns when JPMorgan Chase acquired it.
In the three years before he became head of the SEC, Clayton represented eight of the 10 largest Wall Street banks, institutions that were then regularly being investigated and charged with securities violations by the very agency Clayton now heads. He and his wife happen to hold assets valued at between $12 million and $47 million in some of those very institutions.
Not surprisingly in this administration (or any other recent one), Clayton also has solid Goldman Sachs ties. On at least seven occasions between 2007 and 2014, he advised Goldman directly or represented its corporate clients in their initial public offerings. Recently, Goldman Sachs\u00a0 requested \u00a0that the SEC release it from having to report its lobbying activities or payments because, it claimed, they didn\u2019t make up a large enough percentage of its assets to be worth the bother. (Don\u2019t be surprised when the agency agrees.)
Clayton\u2019s main accomplishment so far has been to significantly reduce oversight activities. SEC penalties, for instance, fell by 15.5% to $3.5 billion during the first year of the Trump administration. The SEC also issued enforcement actions against only 62 public companies in 2017, a 33% decline from the previous year. Perhaps you won\u2019t then be surprised to learn that its enforcement division has an estimated 100 unfilled investigative and supervisory positions, while it has also trimmed its wish list for new regulatory provisions. As for Dodd-Frank, Clayton insists he won\u2019t \u201c attack \u201d it, but thinks it should be \u201clooked\u201d at.
Mick Mulvaney, the Consumer Financial Protection Bureau and the Office of Management and Budget
As a congressman from South Carolina, ultra-conservative Republican Mick Mulvaney, dubbed \u201c Mick the Knife,\u201d once even labeled himself a \u201c right-wing nut job .\u201d Chosen by President Trump in November 2016 to run the Office of Management and Budget, he was confirmed by Congress last February .
As he said during his confirmation hearings, \u201cEach day, families across our nation make disciplined choices about how to spend their hard-earned money, and the federal government should exercise the same discretion that hard-working Americans do every day.\u201d As soon as he was at the OMB, he took an axe to social programs that help everyday Americans. He was instrumental in creating the GOP tax plan that will add up to $1.5 trillion to the country\u2019s debt in order to provide major tax breaks to corporations and wealthy individuals. He was also a key figure in selling the plan to the media.
When Richard Cordray resigned as head of the Consumer Financial Protection Bureau in November, Trump promptly selected Mick the Knife for that role, undercutting the deputy director Cordray had appointed to the post. After much debate and a court order in his favor, Mulvaney grabbed a box of Dunkin’ Donuts and headed over from his OMB office adjacent to the White House. So even though he\u2019s got a new job, Mulvaney is never far from Trump\u2019s reach.
The problem for the rest of us: Mulvaney loathes the CFPB, an agency he once called \u201ca joke.\u201d While he can\u2019t unilaterally demolish it, he\u2019s already obstructed its ability to enforce its government mandates. Soon after Trump appointed him, he imposed a 30-day freeze on hiring and similarly froze all further rule-making and regulatory actions.
In his latest effort to undermine American consumers, he\u2019s working to defund the CFPB. He just sent the Federal Reserve a letter stating that, \u201cfor the second quarter of fiscal year 2018, the Bureau is requesting $0.\u201d That doesn\u2019t bode well for American consumers.
Jerome \u201cJay\u201d Powell, Federal Reserve
Thanks to the Senate confirmation of his selection for chairman of the board, Donald Trump now owns the Fed, too. The former number two man under Janet Yellen, Jerome Powell will be running the Fed, come Monday morning, February 5th.
Established in 1913 during President Woodrow Wilson\u2019s administration, the Fed\u2019s official mission is to \u201cpromote a safe, sound, competitive, and accessible banking system.\u201d In reality, it\u2019s acted more like that system\u2019s main drug dealer in recent years. In the wake of the 2007-2008 financial crisis, in addition to buying trillions of dollars in bonds (a strategy called \u201cquantitative easing,\u201d or QE), the Fed supplied four of the biggest Wall Street banks with an injection of $7.8 trillion in secret loans. The move was meant to stimulate the economy, but really, it coddled the banks.
Powell\u2019s monetary policy undoubtedly won\u2019t represent a startling change from that of previous head Janet Yellen, or her predecessor, Ben Bernanke. History shows that Powell has repeatedly voted for pumping financial markets with Federal Reserve funds and, despite displaying reservations about the practice of quantitative easing, he always voted in favor of it, too. What makes his nomination out of the ordinary, though, is that he\u2019s a trained lawyer, not an economist.
Powell is assuming the helm at a time when deregulation is central to the White House\u2019s economic and financial strategy. Keep in mind that he will also have a role in choosing and guiding future Fed appointments. (At present, the Fed has the smallest number of sitting governors in its history .) The first such appointee, private equity investor Randal Quarles, already approved as the Fed\u2019s vice chairman for supervision, is another major deregulator .
Powell will be able to steer banking system decisions in other ways. In recent Senate testimony, he confirmed his deregulatory predisposition. In that vein, the Fed has already announced that it seeks to loosen the capital requirements big banks need to put behind their riskier assets and activities. This will, it claims, allow them to more freely make loans to Main Street, in case a decade of cheap money wasn\u2019t enough of an incentive. The Emperor Has No Rules
Nearly every regulatory institution in Trumpville tasked with monitoring the financial system is now run by someone who once profited from bending or breaking its rules. Historically, severe financial crises tend to erupt after periods of lax oversight and loose banking regulations. By filling America\u2019s key institutions with representatives of just such negligence, Trump has effectively hired a team of financial arsonists.
Naturally, Wall Street views Trump\u2019s chosen ones with glee. Amid the present financial euphoria of the stock market, big bank stock prices have soared. But one thing is certain: when the next crisis comes, it will leave the last meltdown in the shade because our financial system is, at its core, unreformed and without adult supervision. Banks not only remain too big to fail but are still growing, while this government pushes policies guaranteed to put us all at risk again.
There\u2019s a pattern to this: first, there\u2019s a crash; then comes a period of remorse and talk of reform; and eventually comes the great forgetting. As time passes, markets rise, greed becomes good, and Wall Street begins to champion more deregulation. The government attracts deregulatory enthusiasts and then, of course, there\u2019s another crash, millions suffer, and remorse returns.
Ominously, we\u2019re now in the deregulation stage following the bull run. We know what comes next, just not when. Count on one thing: it won\u2019t be pretty.
Goldman Sachs has got your backs!
Dont know that bond market was a bit shaky today
Agree, no If but When. Why Trump was SELECTED as Potus, so the «crazy guy» can take the fall.
And the bankers cheer
Desperation\u00a0 much?
Elsewhere, having successfully spun through the revolving door from banking to Washington, Joseph Otting, a\u00a0 former colleague \u00a0of Mnuchin\u2019s, is now running the Office of the Comptroller of the Currency (OCC). While he\u2019s no household name, he was the CEO of OneWest (formerly, the failed California-based bank IndyMac). That\u2019s the bank Mnuchin and his billionaire posse picked up on the cheap in 2009 before carrying out a vast set of\u00a0foreclosures on the homes of ordinary Americans (including active-duty servicemen and -women) and reselling it for hundreds of millions of dollars in personal profits.
Now\u00a0 the Libtards are directly attacking the financial system?
Government created this problem…
More government will NOT solve it — but it might take a terrible situation and make it permanent.
More arrests recently, farcical fines.
No Investors compensated for banker indiscretions!!
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Investors from 18 countries around the world have signed up so far…will you?
Together we can end this.
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«Nearly every regulatory institution in Trumpville tasked with monitoring the financial system is now run by someone who once profited from bending or breaking its rules.»
But, but, Trump was better than Hillary so we should all take solace in that.
More than I feel like reading. Let it burn…<\/p>\n