Skip to content

LET US NOW PRAISE FAMOUS MEN—AGAIN

May 30, 2013

Senator Carl Levin

I. WAY BACK WHICH FEELS LIKE ANCIENT HISTORY—APRIL21, 2010– TWO DEMOCRATIC SENATORS—THEODORE KAUFMAN, WHO WAS APPOINTED TO FILL OUT JOE BIDEN’S DELAWARE SEAT, AND SHERROD BROWN OF OHIO, SPONSORED A SAFE BANKING ACT THAT WOULD PUT TOUGH LIMITS ON THE SIZE OF BANKS.

IT CONTAINED A STRICT LIMIT OF A 10 PERCENT CAP ON ANY BANK HOLDING COMPANY’S SHARE OF U.S. DEPOSITS AND A 6 PERCENT CAP ON LEVERAGE. “WE NEED TO ENSURE THAT IF BANKS GAMBLE,” BROWN SAID, “THEY HAVE THE RESOURCES TO COVER THEIR LOSSES.”

KAUFMAN SAID HE WAS FRUSTRATED BY HIS COLLEAGUES “ TINKERING AROUND THE EDGES OF OUR BROKEN FINANCIAL SYSTEM. “ AS FOR DEALING WITH BANKS TOO BIG TO FAIL, HE CONCLUDED: “ WE NEED TO BREAK UP THESE INSTITUTIONS BEFORE THEY FAIL, NOT STAND BY WITH A PLAN WAITING TO CATCH THEM WHEN THEY DO FAIL.”

THE BILL WAS ESSENTIALLY DEFEATED BECAUSE THE TREASURY UNDER TIM GEITHNER WAS OPPOSED, BLAMING THE CRISIS INSTEAD TO A “ FAILURE OF GOVERNMENT.”

KAUFMAN, HOWEVER, ARGUED THAT “FRAUD AND LAWLESSNESS WERE KEY INGREDIENTS IN THE FINANCIAL COLLAPSE” AND ESPECIALLY FOR “HAVING UNREGULATED DERIVATIVES MARKETS.”

JUMP FORWARD TO EARLY MAY THIS YEAR WHEN SENATOR BROWN AND REPUBLICAN SENATOR DAVID VITTER OF LOUISIANA, –KAUFMAN’S BRIEF TERM EXPIRED AND HE DIDN’T SEEK RE-ELECTION– INTRODUCED ANOTHER BILL TO MAKE BANKS SAFER AND DISALLOW THE USE OF TAXPAYER MONEY TO SAVE FINANCIAL INSTITUTIONS.

THE BILL CALLS FOR THE LARGEST BANKS WITH MORE THAN $500 BILLION IN ASSETS TO HAVE CAPITAL RESERVES OF 15 PERCENT, WHICH IS MUCH HIGHER THAN CURRENT LIMITS. THE BIGGEST BANKS, OF COURSE, ARE JPMORGAN CHASE, CITIGROUP, BANK OF AMERICA, WELLS FARGO, GOLDMAN SACHS AND MORGAN STANLEY.

NEEDLESS TO POINT OUT, THE BANKS ARE ENRAGED ABOUT HAVING TO KEEP MORE OF THEIR FUNDS AS AN INSURANCE POLICY AGAINST ANOTHER FINANCIAL BLOWOUT. AND THEY PROBABLY WILL DILUTE THE LATEST BILL, ASSUMING IT EVER GETS OUT OF CONGRESSIONAL BANKING COMMITTEES, ESPECIALLY THE ONE IN THE GOP HOUSE.

JUST LOOK AT THE DODD –FRANK ACT OF 2010 AND OTHER SO-CALLED STRONGER REGULATORY PROPOSALS WHICH HAVE BEEN LOBBIED TO NEAR DEATH BY THE OVERPOWERING WALL STREET LOBBYISTS. ITS BEEN FOUR YEARS SINCE THE BILLS WERE PASSED BUT THE REGULATIONS HAVE BEEN WATERED DOWN IN A SANDY-HURRICANE STRENGTH-LIKE TSUNAMI OF BANKERS CASH.

2. LET US NOW PRAISE FAMOUS MEN—AGAIN

SENATOR CARL M. LEVIN, D-MICHIGAN, IS LEAVING NEXT YEAR AFTER SERVING SIX TERMS. HE IS 78 AND HAS BEEN IN CONGRESS SINCE 1978.
HE WAS A TAXI DRIVER AND AUTO FACTORY WORKER, GRADUATED FROM SWARTHMORE AND HARVARD AND, AS A DETROIT CITY COUNCIL PRESIDENT, LED SOME OF HIS COLLEAGUES WITH A BULLDOZER TO KNOCK DOWN UNINHABITED HOUSES BECAUSE HE WAS FRUSTRATED WITH HUD’S DELAYS.

AS CHAIRMAN OF THE ARMED SERVICES COMMITTEE, HE HELPED PASS HISTORIC BILLS TO REMOVE NUCLEAR AND CHEMICAL WEAPONS FROM FORMER SOVIET STATES AND LATER EXTENDED TO NON-SOVIET COUNTRIES WHILE ALSO AIMED TO REDUCE THE RUSSIA-US NUCLEAR ARSENALS BY TWO-THIRDS.

HE WAS CRITICAL OF THE AFGHAN WAR ESPECIALLY WHEN “BUSH TOOK HIS EYE OFF THE BALL AND DECIDED TO GO AFTER IRAQ INSTEAD OF AL-QAEDA.” HE AUTHORED THE COMPETITION IN CONTRACTING ACT AND WHISTLE BLOWER PROTECTION ACT AND STOP TAX HAVEN ABUSE ACT.

HIS ACLU RATING WAS 84 PERCENT AND TIME MAGAZINE IN 2006 SAID HE WAS ONE OF THE 10 BEST U.S. SENATORS. AS A STRONG GUN CONTROL ADVOCATE, HE WAS RATED F BY GUN OWNERS OF AMERICA. DESPITE ALL THAT, HE BECAME NATIONALLY RECOGNIZED WHEN HE LEAD THE INITIAL INVESTIGATIONS OF THE WALL STREET FINANCIAL COLLAPSE.

HE BECAME EVEN MORE KNOWN BECAUSE OF HIS TRADEMARK GLASSES HANGING NEAR THE END OF HIS NOSE WHICH PROMPTED JON STEWART TO CALL LEVIN A CROSS BETWEEN A “KINDLY OLD SHOEMAKER” AND “GRANDPA MUNSTER.’

BUT WE WILL MISS SENATOR LEVIN FOR HIS MOST IMPORTANT CONTRIBUTION TO SENATE OVERSIGHT WHEN HE CHAIRED THE SENATE PERMANENT INVESTIGATIONS SUBCOMITTEE FROM 2001 TO 2003 AND 2007 TO THE PRESENT. THE WORK HE DID LEADING THAT COMMITTEE WITH ITS SERIES OF MULTI-HUNDRED PAGE DEVASTING REPORTS ON A HOST OF FINANCIAL OVERSIGHT INVESTIGATIONS LED THE NATIONAL JOURNAL IN FEBRUARY,2012 TO SAY IT WAS “ONE OF THE FEW INSTITUTIONS IN CONGRESS THAT’S STILL WORKING. CARL LEVIN IS A BIG REASON WHY.”

THAT PANEL WAS EMPOWERED TO LOOK AT FEDERAL WASTE, FRAUD AND ABUSE; CORPORATE CRIMES; OFFSHORE BANKING AND TAX PRACTICES; ENERGY MARKETS AND CORRUPTION AND NATIONAL SECURITY.

BUT THE REPORT THAT BROUGHT HIM TO NATIONAL PROMINENCE WAS THE NO-HOLDS-BARRED INVESTIGATION OF WHAT CAUSED THE WORST FINANCIAL DISASTER SINCE THE GREAT DEPRESSION. THE COMMITTEE LAMBASTED BANKS, FEDERAL REGULATORS, CREDIT RATING AGENCIES AND PARTICULARLY GOLDMAN SACHS.

1. THE DETAILS STARTED WITH WASHINGTON MUTUAL AND ASSOCIATED BANKS WHO DECIDED TO RAISE PROFITS BY SELLING HIGH-RISK LOANS WITH FRAUDULENT INFORMATION AND ERRORS TO WALL STREET. THE BANK SOLD 77 BILLION IN TAINTED AND FRAUDULENT SUBPRIME MORTGAGES THAT “POLLUTED THE SYSTEM.” THE BANK’S EVENTUAL COLLAPSE WAS THE LARGEST IN THE HISTORY OF AMERICAN BANKING.

2. THE FEDERAL OFFICE OF THRIFT SUPERVISION, (OTC) ,THE BANKS’ REGULATOR, AND THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SECONDARY REGULATOR, HAD “FEEBLE OVERSIGHT, WEAK REGULATIONS AND AGENCY INFIGHTING.” OTC “FAILED TO TAKE ENFORCEMENT ACTIONS ON UNSAFE AND UNSOUND LOANS” AND “BLOCKED ACCESS “ TO FDIC SEEING THE RAW DATA. AND FDIC WAS CRITICIZED FOR NOT OVER RIDING OTC AND STARTING “ITS OWN ENFORCEMENT ACTION.”

3. MOODY’S AND STANDARD & POOR, FROM 2004-2007 USED OUTDATED CREDIT MODELS THAT COULD NOT PREDICT PERFORMANCE OF HI-RISK RESIDENTIAL MORTGAGES LIKE SUBPRIME, INTEREST ONLY AND OPTIONAL ADJUSTMENT RATES. THEY WERE UNDER COMPETITIVE PRESSURES FOR MARKET SHARE TO HELP INVESTMENT BANKERS AND PROFIT FROM THEIR BUSINESS. IN 2006, THEY REVISED RATINGS BUT DIDN’T USE THEM TO REEVALUATE THE MORTGAGES. DELAYED THOUSANDS OF DOWNGRADES WHICH MISLEAD INVESTORS.

2004-2008: DESPITE RECORD PROFITS FOR THE TWO AGENCIES, THEY ISSUED UNEXPECTED DOWNGRADES OF MORE THAN ONE-THIRD OF 12,000 MORTGAGES AND COLLATERAL DEBT OBLIGATIONS. THESE ACTIONS “DAMAGED FINANCIAL FIRMS WORLD WIDE AND CONTRIBUTED TO THE FINANCIAL CRISIS” AND “TO MAKE MATTERS WORSE, THE US SECURITIES & EXCHANGE COMMISION IS BARRED BY LAW FROM OVERSIGHT OF SUBSTANCE, PROCEDURES AND METHODLOGIES OF CREDIT RATING MODELS.”

4. GOLDMAN SACHS: FROM 2004-2007, IT RECEIVED LUCRATIVE FEES BY HELPING WASHINGTON MUTUAL AND SUBSIDIARIES TO SECURITIZE HIGH-RISK, POOR QUALITY LOANS “BY OBTAINING FAVORABLE CREDIT RATINGS… AND PUSHING BILLIONS OF RISKY MORTGAGES THRU THE FINANCIAL SYSTEM.”

“THE BANK RESECURITIZED TOXIC MORTGAGES INTO COLLATERIZED DEBT OBLIGATIONS AND USED CREDIT DEFAULT SWAPS AND INDEX TRADING TO PROFIT FROM FAILURES…OF THESE SECURITIES.”
AS DELINQUENCIES INCREASED, THE BANK “SHORTED MORTGAGE SECURITIES UNTIL 2007, CASHED IN LARGE POSITIONS AND BILLIONS IN GAINS.”

“CONFLICTS BETWEEN CLIENTS AND PROPRIETARY TRADING. THE BANK USED SWAPS AND CDS IT DIDN’T OWN TO BET AGAINST MORTGAGE MARKET, GENERATING SUBSTANTIAL REVENUES.”

Advertisements
Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: