U.S. Secretary of State Hillary Rodham Clinton waves as she steps down the ramp of a plane upon her arrival at Haneda international airport in Tokyo, Japan, Thursday, May 20, 2010. Clinton's three-nation Asia tour is likely to be dominated by a new crisis with North Korea, this time accused by sinking a South Korean naval ship with a deadly torpedo attack.
U.S. Secretary of State Hillary Rodham Clinton says North Korea must face international consequences for the sinking of a South Korean warship.
Speaking in the Japanese capital, Clinton said Friday that the U.S., Japan, South Korea and China are consulting on an appropriate reaction to an international investigation that blamed North Korea for the incident. She says the report proves a North Korean sub fired a torpedo that sank the ship and that it could no longer be "business as usual" in dealing with the matter.
North Korea denies it was responsible for the March sinking and has threatened to retaliate against any attempt to punish it with "all-out war."
McClatchy's Greg Gordon tells the Real News Network what questions he would ask Goldman Sachs if he were sitting on the Financial Crisis Inquiry Commission.
WASHINGTON — While Goldman Sachs' lawyers negotiated with the Securities and Exchange Commission over potentially explosive civil fraud charges, Goldman's chief executive visited the White House at least four times.
White House logs show that Chief Executive Lloyd Blankfein traveled to Washington for at least two events with President Barack Obama, whose 2008 presidential campaign received $994,795 in donations from Goldman's employees and their relatives. He also met twice with Obama's top economic adviser, Larry Summers.
No evidence has surfaced to suggest that Blankfein or any other Goldman executive raised the SEC case with the president or his aides. SEC Chairwoman Mary Schapiro said in a statement Wednesday that the SEC doesn't coordinate enforcement actions with the White House or other political bodies.
Meanwhile, however, Goldman is retaining former Obama White House counsel Gregory Craig as a member of its legal team. In addition, when he worked as an investment banker in Chicago a decade ago, White House Chief of Staff Rahm Emanuel advised one client who also retained Goldman as an adviser on the same $8.2 billion deal.
Goldman's connections to the White House and the Obama administration are raising eyebrows at a time when Washington and Wall Street are dueling over how to overhaul regulation of the financial world.
Lawrence Jacobs, a University of Minnesota political scientist, said that "almost everything that the White House has done has been haunted by the personnel and the money of Goldman . . . as well as the suspicion that the White House, particularly early on, was pulling its punches out of deference to Goldman and its war chest.
"There's now kind of a magnifying glass on the administration for any sign of interference or conversations with the regulators and the judiciary," Jacobs said.
The SEC investigation of Goldman's dealings lasted 18 months and culminated with the SEC filing civil fraud charges against the investment bank last week.
According to White House visitor logs, Blankfein was among the business leaders who attended an Obama speech on Feb. 13, 2009, and he also joined more than a dozen bank CEOs in a meeting with Obama on March 27, 2009.
Blankfein also was supposed be among the CEOs who met with Obama in December, but he and two others phoned in from New York, blaming inclement weather.
He and his wife, Laura, were listed on the logs among 438 presidential guests at the Kennedy Center Honors the previous week.
The logs also indicate that Blankfein met twice in 2009, on Feb. 4 and Sept. 30, with Summers, who was undersecretary of the Treasury Department during the Clinton administration when it was headed by Robert Rubin, a former Goldman CEO.
Asked whether Goldman executives had talked to administration officials about the SEC inquiry, Goldman spokesman Michael DuVally said that the firm doesn't discuss "what conversations we may or may not have had with government officials."
Schapiro's statement said that she's "disappointed" by Republican rhetoric suggesting that the SEC case against Goldman might have been timed to boost legislative prospects for a financial regulation overhaul bill, which Obama plans to pitch in a speech in New York Thursday.
"We do not coordinate our enforcement actions with the White House, Congress or political committees," Schapiro said. "We do not time our cases around political events or the legislative calendar . . . We will neither bring cases, nor refrain from bringing them, because of the political consequences."
Obama dismissed any such suggestion as "completely false" Wednesday, saying in a CNBC television interview that the SEC "never discussed with us anything with respect to the charges that would be brought."
While describing Craig, his former counsel, as "one of the top lawyers in the country," Obama also said that he'd imposed "the toughest ethics rules that any president's ever had."
"One thing he (Craig) knows is that he cannot talk to the White House," Obama said. "He cannot lobby the White House. He cannot in any way use his former position to have any influence on us."
Goldman's chief spokesman, Lucas van Praag, said the firm "wanted Craig . . . for his wisdom and insight."
Craig, now an attorney with the Washington law firm of Skadden, Arps, Slate, Meagre & Flom, said: "I am a lawyer, not a lobbyist. Goldman Sachs has hired me to provide legal advice and to assist in its legal representation."
Goldman's nearly $1 million in campaign contributions to Obama's presidential campaign were the most from any single employer except the University of California. Still, they represented only a fraction of the more than $700 million that the campaign raised.
"The vast majority of the money I got was from small donors all across the country," Obama told CNBC. "Moreover, anybody who gave me money during the course of my campaign knew that I was on record in 2007 and 2008 pushing very strongly that we needed to reform how Wall Street did business."
One White House insider who knows something about how Wall Street does business is chief of staff Emanuel, who earned millions of dollars in investment banking after he left the Clinton White House. His work for the Chicago-based financial services firm Wasserstein Perella & Co. intersected with Goldman in at least one deal.
In 1999, Emanuel was a key player representing Unicom Corp., the parent of Commonwealth Edison, in forging its merger with Peco Energy Co. to create utility giant Exelon Corp. Goldman was also advising Unicom.
The White House declined immediate comment on that connection.
Several former Goldman executives hold senior positions in the Obama administration, including Gary Gensler, the chairman of the Commodity Futures Trading Commission; Mark Patterson, a former Goldman lobbyist who is chief of staff to Treasury Secretary Timothy Geithner; and Robert Hormats, the undersecretary of state for economic, energy and agricultural affairs.
Jacobs of the University of Minnesota said that the administration now risks "kind of a feeding frenzy."
"The administration has to be very careful," he said, "because . . . they're seen as the ones who bailed out Wall Street. If there are indications that the administration was talking to regulators or to Justice Department people about when and how Goldman or other firms would be investigated, I think that's going to create almost a mob scene."
(Margaret Talev, Steven Thomma and Tish Wells contributed to this article.)
The Senate passed a financial "reform" bill today by a 59-39 vote which won't fix any of the core problems in the financial system, and won't prevent the next financial crisis.
The bill doesn't include the Volcker Rule (it wasn't even debated), doesn't break up or even substantially rein in the too big to fails, doesn't stop prop trading, and doesn't force transparency in the derivatives market.
The bill does not eliminate the risk to our economy posed by "too big to fail" financial firms, nor does it restore the proven safeguards established after the Great Depression, which separated Main Street banks from big Wall Street firms and are essential to preventing another economic meltdown. The recent financial crisis triggered the nation's worst recession since the Great Depression. The bill should have included reforms to prevent another such crisis. Regrettably, it did not.
Senator Cantwell agreed, saying:
While this bill takes much needed steps to help prevent a crisis of this magnitude from ever happening again, it fails to close the very same loopholes in derivatives trading that led to the biggest economic implosion since the Great Depression.... Throughout this debate I have fought hard against efforts to weaken this legislation as well as to pass language to strengthen it further. But the fact of the matter is, without key reforms in derivatives trading, this bill does not safeguard America's economy from a repeat of this crisis.
It sets up a process for responding the next time we have a financial crisis, but it doesn't prevent this kind of thing from ever happening again. We have to stop these kinds of dangerous activities. We need stronger bans on banks gambling with depositors' money. We need bright lines - like Glass-Steagall - that separate risky activities from the traditional banking system. We need to refocus our financial system away from synthetic bets and get more capital into the hands of job creators and Main Street businesses. There are good, strong provisions in this bill, and I'm proud of the work we did to get them in there, but I fear that without closing the loopholes primarily responsible for this economic meltdown, we are missing the entire heart of the matter.
Nouriel Roubini said the bill is "cosmetic", and won't stop the next crisis.
In a letter to Senate majority leader Harry Reid and minority leader Mitch McConnell, luminaries including former SEC Chief Accountant Lynn Turner, former Labor Secretary Robert Reich, hedge fund owner Jim Chanos, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, former Senate Banking Committee Chief Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and others pointed out that Dodd's proposed financial reform legislation wouldn't have prevented the current crisis ... and won't prevent the next crisis.
Dodd himself has admitted that his bill "will not stop the next crisis from coming".
In fact, the bill is wholly ineffective, failing to address the core things which need to be done to stabilize the economy. See this, this and this.
Senator Dodd is trying to push through a financial "reform" which bill won't do anything to break up the too big to fails, or do much of anything at all ...
Just this week, a Moody’s report stated: “…the proposed regulatory framework doesn't appear to be significantly different from what exists today."
***
In sum, little in these reforms is really new and nothing in these reforms will change the size of these mega-banks.
Moreover - as Simon Johnson notes - the bill intentionally doesn't have much in the way of specifics, but just pushes off on regulators the ability to crack down on Wall Street in the future. As Johnson notes, this is a recipe for continued failure to rein in Wall Street:
If legislation can only empower regulators then, given regulators are only as strong a newly elected president wants them to be, the approach in the Dodd bill simply will not work.
Indeed, Democratic Congressman Brad Sherman - a senior member of the House Financial Services Committee and a certified public accountant - said recently:
The Dodd bill has unlimited executive bailout authority. That’s something Wall Street desperately wants but doesn’t dare ask for. The bill contains permanent, unlimited bailout authority.
And as Arthur Delaney points out, the bill is riddled with carve-outs purchased by lobbyists:
"Obtaining a carve-out isn't rocket science," said a Republican financial services lobbyist. "Just give Chairman Dodd [D-Conn.] and Chuck Schumer [D-N.Y.] a shitload of money."
On MSNBC Tuesday morning, Sen. Bob Corker (R-Tenn.), a Banking Committee member who worked closely with Dodd, said there was "no question" that Dodd's draft contained loopholes. Corker mentioned a few hits from the carve-out list: "Private equity firms are left out," he said. "Hedge funds are left out."
The Senate passes the Wall Street Reform Bill (S. 3217) by a 59-39 vote, if it passes the House it will kill jobs by making it difficult for small businesses to succeed and it will give permanent and unlimited bailout authority for the big banks on Wall Street. It would also do nothing to solve problems in the financial system and won’t prevent the next financial crisis.
Republican Senator David Vitter: “Congressional Democrats and the Obama Administration want to create a permanent bailout mechanism all while spouting their rhetoric of getting tough on Wall Street, but if you look at who is already lining up to support their ‘reform’ measure it’s a who’s who of the big banks that have already received the taxpayer bailout the first time.” Democrat Congressman Brad Sherman: “There are serious problems with the Dodd bill. The Dodd bill has unlimited executive bailout authority. That’s something Wall Street desperately wants but doesn’t dare ask for.”
This bill would also break the back of small business by having them register with the SEC to only wait 120 days for the SEC to review their filing. A second provision in the bill raises the wealth requirements for venture capitalists that want to invest in startups – if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.” There’s no doubt about it that the provisions in the bill would absolutely chill investing and small business which is the backbone of our economy. [Source]
The bill doesn’t include the Volcker Rule (it wasn’t even debated), doesn’t break up or even substantially rein in the too big to fails, and doesn’t force transparency in the derivatives market.
The bill does not eliminate the risk to our economy posed by “too big to fail” financial firms, nor does it restore the proven safeguards established after the Great Depression, which separated Main Street banks from big Wall Street firms and are essential to preventing another economic meltdown. The recent financial crisis triggered the nation’s worst recession since the Great Depression. The bill should have included reforms to prevent another such crisis. Regrettably, it did not.
Senator Cantwell agreed, saying:
While this bill takes much needed steps to help prevent a crisis of this magnitude from ever happening again, it fails to close the very same loopholes in derivatives trading that led to the biggest economic implosion since the Great Depression…. Throughout this debate I have fought hard against efforts to weaken this legislation as well as to pass language to strengthen it further. But the fact of the matter is, without key reforms in derivatives trading, this bill does not safeguard America’s economy from a repeat of this crisis.
It sets up a process for responding the next time we have a financial crisis, but it doesn’t prevent this kind of thing from ever happening again. We have to stop these kinds of dangerous activities. We need stronger bans on banks gambling with depositors’ money. We need bright lines – like Glass-Steagall – that separate risky activities from the traditional banking system. We need to refocus our financial system away from synthetic bets and get more capital into the hands of job creators and Main Street businesses. There are good, strong provisions in this bill, and I’m proud of the work we did to get them in there, but I fear that without closing the loopholes primarily responsible for this economic meltdown, we are missing the entire heart of the matter.
Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn't passed. And Rahm Emanuel famously said:
Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before.
Last year:
Senator Leahy said "If we learned anything from 9/11, the biggest mistake is to pass anything they ask for just because it's an emergency"
"The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress."
***
Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
Not Just Government
But it's not just government . . .
If the too big to fails say that the world economy will crash and there will be martial law unless they are bailed out, politicians - most of whom don't understand finance or economics - will believe them, and sound the alarm themselves.
In the 1974 comedy Blazing Saddles, Cleavon Little plays the new sheriff in an old Western town. The sheriff is African-American, and when he rides into town for the first time, the [racist] townspeople pull out their guns and are about to shoot him.
But he quickly puts a gun to his own head, pretends he's scared of his own gun, and says "BACK OFF OR THE AFRICAN-AMERICAN GUY GETS IT!!!" The townspeople are dumb and fall for it, suddenly terrified that he'll kill himself. Here's the scene.
That's what Wall Street is doing with the bailout.
The fat cats on Wall Street are saying "give us a lot of money, and buy all of our bad debt for a lot more than its worth, or Wall Street will get it and we'll go into a depression!"
Are Americans stupid enough to fall for it?
In a recent interview, William K. Black uses the exact same Blazing Saddles sheriff-bank analogy.
Miles Kendig has a different - but parallel - analogy for the giant banks:
In essence, what we have here folks is a characterization of the banks and the government that has assumed the risk profile of these banks as some sort of 1,000 pound men, unable to move without assistance. They have suckered everyone else into the idea that if anything is done to move these overweight, unhealthy "persons" to health they will have a heart attack and kill us all since they sit upon the crossroads of commerce and have sold most folks the idea that they are the heart of the nation and indeed the world. Given these "objective" circumstance the government is not only beholden to the 1,000 pound persons, but is one of them itself, will do everything to make the rest of us carry them so as to save them the indignity of actually addressing their morbid obesity and the cycle of codependency that enables them all to remain so fat.
Any way you look at it, the too big to fails are not needed and they are dragging our economy into a black hole. Like the sheriff in Blazing Saddles or Kendig's 1,000 pound men, they are playing us for fools.
[Yves Smith] shared another analogy with me: a man with 15lbs. of Semtex strapped to his waist. She says "any surprise people in the vicinity are very attentive to his desires?"
The vote was another victory for the Fed, which months ago faced one of the biggest challenges to its power and independence in its 96- year history as lawmakers responded to public anger over bailouts of Wall Street firms. The amendment Ensign supported was included in the financial regulatory bill the Senate approved yesterday.
“The Fed’s authorities seemed to be under serious threat,” said David Nason, a former assistant U.S. Treasury secretary who’s now a managing director at Promontory Financial Group LLC, a Washington-based consulting firm. Instead, the Fed “appears to have regained its footing and now appears to be emerging with at least as much authority and likely more.”
***
The Senate bill contains most of what Fed officials sought. In addition to preserving their bank-supervisory powers, it maintains a ban on congressional audits of interest-rate decisions that some lawmakers had sought to strip away.
***
The outcome puts Fed Chairman Ben S. Bernanke in a stronger position to withdraw record monetary stimulus as the economy recovers ...
And Tyler Durden provides details of how the Fed blackmailed Congress into expanding the Fed's powers:
A reader provides us with the following letter he received from Senator Mikulski in response to dissatisfaction expressed about Bernanke's reconfirmation. The response from the Senator demonstrates [that the Fed is pressuring] gullible and incompetent senators ... to pass law after law that is only in the Fed's, and thus Wall Street's interests, as the alternative would always be a "market nose dive" ....
Thank you for getting in touch with me about Ben Bernanke's nomination to chair the Federal Reserve. It's great to hear from you.
***
I was advised that rejecting his nomination would cause markets to nose dive, which would hurt retirees and families saving for their future. I am not enthusiastic in my support. But I think Mr. Bernanke understands the job that he still has to do.
***
Sincerely, Barbara A. Mikulski United States Senator
And for the counterpoint, here is an example of a Senator who does not fall for the Fed's racket:
Dear Friend:
Thank you for contacting me. I appreciate hearing your thoughts about President Obama's decision to nominate Ben Bernanke for another four-year term as Chairman of the Federal Reserve (the Fed). I voted against approving Mr. Bernanke, who was nevertheless confirmed by the Senate by a vote of 70-30.
***
While I have heard the concerns of many that the failure to confirm Mr. Bernanke would have damaged the financial markets and jeopardized our economy recovery, I do not believe that anyone, including Mr. Bernanke, is too big to be replaced. We should not hold our economy hostage to the Wall Street threat that total economic collapse is the sure result of not doing everything they want.
Thanks again for contacting me. Please do not hesitate to do so again about this or any other issue that may concern you.
Toxicologist Says Chemicals Harmful, Can Lead To Death
LAFITTE, La. --
More and more stories about sick fishermen are beginning to surface after the oil spill in the Gulf of Mexico.The fishermen are working out in the Gulf -- many of them all day, every day -- to clean up the spill. They said they blame their ailments on the chemicals that BP is using.One fisherman said he felt like he was going to die over the weekend."I've been coughing up stuff," Gary Burris said. "Your lungs fill up."Burris, a longtime fisherman who has worked across the Gulf Coast, said he woke up Sunday night feeling drugged and disoriented."It was like sniffing gasoline or something, and my ears are still popping," Burris said. "I'm coughing up stuff. I feel real weak, tingling feelings."Marine toxicologist Riki Ott said the chemicals used by BP can wreak havoc on a person's body and even lead to death."The volatile, organic carbons, they act like a narcotic on the brain," Ott said. "At high concentrations, what we learned in Exxon Valdez from carcasses of harbor seals and sea otters, it actually fried the brain, (and there were) brain lesions."Rep. Charlie Melancon said he wants something done. He sent a letter to President Barack Obama's administration calling for temporary health care clinics to be set up in the area."There can be immediate attention to any people who feel they have adverse problems caused by the inhalation or exposure to the oil," Melancon said.According to Burris, some equipment was donated to workers in Lafitte, but as far as he can tell BP hasn't added anything to the mix. He said a lot of fishermen are working sick, and they're afraid to speak out because it could cost them."You've got a woman with a baby in the oven, bills due and fishing's closed down," he said. "You're going to do whatever you have to do to look after your family."Burris said that when he went to a doctor after feeling ill on Sunday, the doctor told him his lungs looked like those of a three-pack-a-day smoker, and Burris said he has never smoked.
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