The Reference Desk: Amy Goodman

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Wednesday, March 4, 2009

Transcript of "Democracy Now!" interview with Robert Weissman on March 4, 2009

“Sold Out”: New Report Follows Lobbying Money Trail Behind Deregulation that Helped Cause Financial Crisis

In a new report, Robert Weissman, Director of Essential Action and editor of the Multinational Monitor points to twelve deregulatory steps that led to the financial meltdown. It also does an analysis of the amount of money Wall Street poured into Washington in campaign contributions and lobbying over the last ten years. Their answer? A staggering $5.1 billion over the past decade.

Transcript:

AMY GOODMAN: The Obama administration is making a concerted effort to boost confidence in the US economy amidst waves of continued layoff announcements, negative economic data, downward-spiraling markets. On Monday, the Dow Jones Industrial Average dropped below 7,000 for the first time in eleven years. The market has now lost almost a quarter of its value this year and more than half since its high in October 2007.
Speaking to reporters yesterday after meeting with the British Prime Minister Gordon Brown, President Obama said he was sure the US economy would rally back.
PRESIDENT BARACK OBAMA: I’m absolutely confident that credit is going to be flowing again, that businesses are going to start seeing opportunities for investment. They’re going to start hiring again. People are going to be put back to work. What I’m looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing.

AMY GOODMAN: The Obama administration officials appeared before Congress Tuesday seeking to reassure lawmakers about the economy. Treasury Secretary Timothy Geithner and Peter Orszag, the director of the Office of Management and Budget, testified before separate House committees that the President’s massive spending bill would benefit working Americans. Meanwhile, Federal Reserve Chair Ben Bernanke testified before the Senate Budget Committee about the potential impacts of stimulus.

While the Obama administration is looking to turn around the economy with its stimulus plan and budget proposal, what about the issue of financial regulation, what some people point to as the fundamental cause of the crisis? A new report points to twelve deregulatory steps that led to the financial meltdown. It also does an analysis of the amount of money Wall Street poured into Washington in campaign contributions and lobbying over the last decade. Their answer? A staggering $5.1 billion over the past decade.

Rob Weissman is the author of the report. It’s called “Sold Out: How Wall Street and Washington Betrayed America.” He is director of Essential Action, editor of the Multinational Monitor, joining us from Washington, D.C.
Good morning, Rob Weissman. Talk about what you think were the steps that brought us here.
ROBERT WEISSMAN: Well, we saw over the last decade and really the last three decades, with both parties in power in Congress and the executive branch, this long series of deregulatory moves. And as you go step-by-step through them, you see that those are the things that really paved the way for the current financial collapse.
Perhaps the signature move was the 1999 repeal of the Glass-Steagall Act, which had prevented co-ownership of commercial banks and securities firms, investment banks. That was precipitated by and directly authorized the creation of Citigroup, which is now sucking so much public taxpayer money and has really been at the cutting edge of driving the financial crisis we’re now in.
You can go forward another year and see that Congress, with the Clinton administration authorization, prohibited the executive branch agencies from regulating financial derivatives, the instruments that no one can really understand or get a handle on but which have multiplied the problem from the housing crash many-fold over. So we now have $600 trillion in financial derivatives being traded around the world, with no one having a handle on what they are, who owes whom, and all of this requiring us to pour tens of billions of more dollars more every day, it seems, into AIG.
You can step forward and look at the failure to enforce rules against predatory lending, beginning with the Clinton administration, but really accelerating in a really terrifying way with the Bush administration, so that there were about three actions taken by federal regulators in the peak period of predatory lending—three—against some of the commercial lenders and mortgage brokers who were undertaking some of the most abusive predatory lending activities. And on and on it goes.
And there was, of course, over the last three decades a real surge in deregulatory ideology. And perhaps the people who were putting this stuff forward believed in it. But it also makes sense to think that, maybe a little bit, they were influenced by the staggering amounts of money that the financial sector was pouring into Washington, as you said, more than $5 billion in campaign contributions and lobbying money. And, you know, they got a good return on investment, and it was good for them while it lasted. It’s turned out to be quite a disaster for them but, more importantly, for the rest of the country and the world.
AMY GOODMAN: Rob Weissman, I want to keep going through these steps and then talk about the money that Wall Street’s poured into Washington. The SEC’s voluntary regulation regime for investment banks?
ROBERT WEISSMAN: Yeah, there have been, for a couple of decades, a rule in place that required the big investment banks to hold onto a certain level of capital, so they couldn’t be—they couldn’t rely on too much borrowed money if they engaged in their speculative activity. In 2004, the SEC repealed that rule at the request of a consortium of the leading investment banks, led at the time by Goldman Sachs and Henry Paulson, soon-to-then-be the Treasury Secretary. And what that rule—what the new rule said was, well, let’s let the investment banks set the standards on their own for how much borrowed money they can use, based on their own internal risk assessment models, which no one could understand and turned out not to do a very good job. As a result, they were much more leveraged, that is to say, they used much more borrowed money, so they could gamble at much higher levels, and they created a much bigger house of cards, which we saw topple starting in 2007.
AMY GOODMAN: Glass-Steagall?
ROBERT WEISSMAN: Sorry?
AMY GOODMAN: Glass-Steagall?
ROBERT WEISSMAN: Glass-Steagall was this Depression-era law from 1933, adopted because of the crisis—in response to the Great Depression and the previous bubble through the 1920s. And it said commercial banks and investment banks, and then later commercial banks and other financial service entities, ought to just be separate entities. Commercial banks have too important a role. They are husbanding depositor money, and they ought not to be engaged in speculative activity. They shouldn’t be using the depositor money for high-risk gambles that could endanger the depositors and the well-being of the financial system.
Under the guise of financial modernization, there was a decade-long effort by the investment banks and the big commercial banks to repeal that law. In 1998, Citibank and Travelers Group, the insurance company, announced that they were going to merge. That was a merger that was illegal under existing law, but they got a two-year exemption under a regulatory loophole. They then proceeded to force the repeal of the law that had prohibited their merger, and then the merger was subsequently consummated. Robert Rubin, who had been the Treasury Secretary, at the time was negotiating a new deal with Citigroup and then went on to be an executive with the now-merged Citigroup, was the central player making sure the Glass-Steagall repeal took place, that Citigroup moved forward, and with all the disastrous effects we are now familiar with.
AMY GOODMAN: Close adviser, of course, to President Obama. And what about Larry Summers and Timothy Geithner in that?
ROBERT WEISSMAN: Well, Geithner didn’t have such a central role, but Summers was really involved in the Clinton administration in a lot of these key decisions. Geithner was in the Clinton administration, more focused on international issues. But Summers, for example, was a very vociferous opponent of regulating financial derivatives. There was an effort within the Clinton administration’s executive branch to impose some really modest standards on financial derivative regulations—on financial derivatives, which at the time were beginning to explode but still weren’t at the level that we’re now familiar with.
Summers, Rubin and Greenspan banded together with Republicans in Congress, led by Phil Gramm, to prevent the efforts within the executive branch to regulate derivatives, and then in 2000, they passed a law—Congress passed a law, which Clinton signed into law, prohibiting the federal government from regulating financial derivatives at all, with the result that not only are they not regulated, not only are they not required to register to show that they serve some social purpose before they’re allowed onto the market, but no one has a sense of who owes what to whom.
In the course of—we’re bailing out AIG, because they have engaged in so many of these—hundreds of billions of dollars worth of these financial derivative arrangements. It’s clear now that AIG itself did not know who they owed—who they were going to owe, who they had entered into all these contracts for. They were engaged in such a wild speculative frenzy that they’d cut a deal with anybody. It turns out that the executives at AIG literally thought they would never have to pay out any money on these whatsoever. So they thought they were being paid to do nothing. Money for nothing, we’ve called it. And that turned out to be wrong. Unfortunately, the money that’s coming is not just coming from the AIG shareholders, but now, to the tune of almost $200 billion, from the US taxpayer.
AMY GOODMAN: I brought up Glass-Steagall again, because, well, I think it was seventy years ago—it was on this date that—or seventy-five years ago—that FDR was inaugurated and gave his “nothing to fear but fear itself " address. Rob Weissman, your current piece that talks about the amount of money that Wall Street poured into Washington—who did it? Over how many years? This number, $5.1 billion.
ROBERT WEISSMAN: Well, what we did is look at the entire financial sector—so it’s the commercial banks, the investment banks, the insurance companies, the real-estate companies, the accounting firms, all of whom are heavily intermingled now, by the way—looked at their campaign contributions over the last decade. That total is more than $1.7 billion. They spent about twice that much, $3.4 billion, on lobbying, with the results that we’re talking about. So, more than $5 billion, and that is a way understatement on what they spent. It doesn’t include the money they’ve poured into state-level activities. It’s a narrowly defined definition of lobbying, only people who are officially registered lobbyists.
We saw that they had 3,000 separate people working as lobbyists for them in 2007. We looked at twenty different top firms in the financial sector. We found 144 who formerly had high-level positions in the US government. I mean, it’s epitomized by people like Rubin and Paulson, who came from Goldman Sachs, went into government—in Rubin’s case, he went back into the private sector—and who were driving policy on behalf of Wall Street and the big financial sector to the massive detriment of the American public and, as we now know, really the entire world.
AMY GOODMAN: What are the recommendations that you make, Rob Weissman?
ROBERT WEISSMAN: Well, the first thing is that all these deregulatory moves ought to be repealed. But beyond that, we think it’s time for a big picture look at this stuff, and we’re worried that, although Wall Street is obviously on its heels right now, they are not—they are not absent from Washington. This lobbying activity is ongoing, including on a variety of small things being debated in Congress today. But in the big picture, we think there has to—we can’t just get mired down in some of these details.
The financial sector itself ought to be much smaller. In the preceding three or four years, the financial sector was taking about a third of all corporate profits in the United States. It was way too big relative to the rest of the economy. It shouldn’t be more than ten percent. So it should be shrunk down.
There is a range of activities that ought to be prohibited altogether. A lot of these exotic financial derivatives, which serve no social purpose, should be just banned. Any new instruments that are put on the market ought to be required to get pre-approval from government regulators, just the way a new pharmaceutical product has to get pre-approval, be shown to be safe and serve some social benefit before it’s allowed on the market.
We ought to erect again regulatory walls and barriers that prohibit institutions from doing different kinds of things. Banks ought not to be engaged in these exotic derivatives. They should not be putting taxpayer-insured money at risk in this kind of stuff. Consumers need to be directly empowered to organize themselves, so that they are a counterbalance to the influence of the commercial financial sector.
And I think we ought to have a financial transactions tax, a speculation tax, so we slow down the level of speculative activity. That kind of tax would be highly progressive, because it’s only rich people who are engaged in mass transactions on Wall Street. It would bring in a lot of money, have major social benefits.
And finally, I think if you look back over what happened in the last four or five years or the last decade, it’s clear that a huge amount of money was made on Wall Street, but the firms themselves are now in complete crisis. They’re needing the taxpayer money. Some of them are going bankrupt. They’re being merged out of existence. So the companies themselves destroyed themselves.
Why did they do that? What were the incentives that led them to take such crazy risks that they actually destroyed themselves? And it’s very hard to avoid looking at the way individual people were compensated. They got massive bonuses, sometimes five, ten, twenty times their regular compensation level, based on what they did in the previous year. So I think we have to have compensation caps, for sure, on executives and others. But even more importantly, the incentive mechanisms can’t be that they get paid on how they did that year, when they can manipulate it or they can benefit from a bubble. It has to be, any compensation incentives that are going to be in the form of bonuses have to be tracked to a very long-term performance by these companies.
AMY GOODMAN: Rob Weissman, President Obama got millions from the finance industry, one of his largest contributors. Do you see this regulation happening? We only have about thirty seconds. Where do you see the pressure come from?
ROBERT WEISSMAN: Well, it’s up for grabs. His advisers, actually, of course, are very terrible on this. But we’ll see. They’re going to have to do something that’s very serious and to restrain the financial sector if they hope to bring the economy out of the problems it’s in. There were some good pieces in the budget. The financial sector is fighting them like crazy right now. For example, they want to eliminate the ability of companies to manipulate their taxes by relying on offshore subsidiaries. The insurance companies are going berserk and lobbying on Capitol Hill to try to stop that. The Obama administration, in this case, is trying to do the right thing.

AMY GOODMAN: Are the companies that are getting bailed out using some of that money to lobby in Washington right now or make campaign contributions?

ROBERT WEISSMAN: Well, they’re not using that money, but what’s the difference? They’re using some other money. So they’re still very engaged. There is an effort, for example, right now to—

AMY GOODMAN: Five seconds.

ROBERT WEISSMAN: —crack down on predatory lending. They are trying very hard to get that language eliminated from the appropriations bill that just passed.

AMY GOODMAN: Rob Weissman, thanks very much for being with us. His report is called “Sold Out: How Wall Street and Washington Betrayed America.”

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Transcript of Democracy Now! Interview with Jeremy Scahill, March 4, 2009

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Transcript of Democracy Now! For March 4, 2009

Friday, February 27, 2009

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Senate Backs D.C. Voting Rights, But Some Local Activists Call For Statehood

The District of Columbia has moved a step closer to getting a vote in the House of Representatives. On Thursday, the Senate voted 61-to-37 to expand the size of the House by two seats, giving Washington, D.C. a single seat and giving Utah a fourth seat. Democracy Now! hosts a debate between D.C. Vote’s Eugene Dewitt Kinlow, Public Affairs Director for DC Vote Coalition, who calls the Senate’s vote as a historic victory, and Anise Jenkins, president of Stand Up! for Democracy in DC, who opposes the bill because it falls short of making Washington, D.C. the nation’s fifty-first state.

Transcript:

AMY GOODMAN: We move now to another debate, a debate that’s taking place right there in Washington, D.C. Juan?

JUAN GONZALEZ: Well, the District of Columbia has moved a step closer to getting a vote in the House of Representatives. On Thursday, the Senate voted 61-to-37 to pass the D.C. House Voting Rights Act. The bill will expand the size of the House by two seats, giving Washington, D.C. a single seat and giving Utah a fourth seat. The House is expected to soon pass the measure, and President Obama has said he will sign it into law.

The Senate approved the bill only after Republicans added an amendment to throw out Washington’s gun control laws, including its ban on semi-automatic weapons.

AMY GOODMAN: We’re joined now by two guests from Washington, D.C. Eugene Dewitt Kinlow is the public affairs director for DC Vote. On Thursday, the group hailed the Senate’s vote as a historic victory. We’re also joined by Anise Jenkins, president of Stand Up! for Democracy in DC. She opposes the bill before Congress. She says it falls far short of making Washington, D.C. the nation’s fifty-first state.

Let’s begin with Eugene Dewitt Kinlow. You are celebrating now with the Senate vote. Explain exactly what you get.

EUGENE DEWITT KINLOW: Well, you know, we’re celebrating with some mixed emotions. One, we are happy that there is a bill that has moved forward in the Senate and that actually passed a committee in the judiciary, the House, just two days in support of D.C. voting rights. We think that the residents of the District of Columbia, a city of nearly 600,000 residents, a city where people fight and die in wars, will finally have a vote and a voice in the people’s House. We are happy that a vote moves us in that direction. We are not as happy about the attachments of the amendments that was sponsored by the gun lobby to diminish our own laws in Washington.

JUAN GONZALEZ: How does removing the ban on guns have anything to do with the bill that was being voted on?

EUGENE DEWITT KINLOW: Well, you know, in the House, there’s probably a germaneness. You know, when you attach amendments, they must be germane to the major bill. That rule does not apply in the Senate. But this was directly an effort by the gun lobby and probably the NRA to relax our gun laws in Washington, D.C. You know, people want to use us as a test case, so to be able—for the gun lobby to say that, “Hey, there’s a city, Washington, D.C, people can walk around with guns, semi-automatic weapons.”

I don’t think it’s a good idea. I think that we have our own elected officials. We have a mayor and a city council that has written and has actually crafted very progressive legislation based on the will of the people. You know, for years in Washington, D.C., we’ve had a progressive gun law that says you could not have a gun. And that’s because that’s what the citizens of the District wanted. Now, for Congress to come in and say, “We will tell you what’s best for you,” when we have our own elected officials, is ludicrous.

AMY GOODMAN: Eleanor Holmes Norton, the delegate from D.C., is supportive of this legislation. Anise Jenkins, you’re not, with Stand Up! for Democracy. Why not?

ANISE JENKINS: The fact that the Senate attached the challenge to our handgun law is a perfect example. This bill for one vote, in exchange for an extra district for Utah, demonstrates what will happen if D.C. does not become a state. We will still be subject to congressional rule. Congress will still be able to overturn our laws. Our budget, our local budget, made of our local money, tax money, will have to go to Congress every year for review. If we don’t have the protection of statehood, full statehood, we will never have the equal rights that other American citizens have. That’s why we oppose the bill.

It hurts to oppose this bill. There’s been a lot of enthusiasm drummed up for this bill. There’s been a lot of money backing this bill to go through. But the bill is weak. The bill is a compromise. Statehood is the answer. Statehood is what will protect us and give us our rights.

JUAN GONZALEZ: And the reasoning for why Utah was included with an extra congressional district in addition to D.C.?

ANISE JENKINS: It was presented to the D.C. residents, who, by the way, voted for statehood in 1982, which has been the only referendum about what form of government we should have—1982 we voted for statehood. It was explained to us that Utah was being included, because Utah was the complete cultural, political opposite of D.C., and it would be easier for D.C. to get a vote if Utah got an extra congressional district, which also, by the way, gives it another electoral vote. In Stand Up! for Democracy’s opinion, this is too much of a compromise.

This was done when the Republicans controlled the Congress. This was done when Bush was president, and he said he would not even sign this bill. We need to switch tracks on this train. This train is out of control. We need to switch tracks and go to statehood. We don’t need Utah to balance us out. We don’t need Utah to cancel out our vote.

EUGENE DEWITT KINLOW: Let me just say that—and this is—

AMY GOODMAN: Eugene Dewitt Kinlow?

EUGENE DEWITT KINLOW: Let me just provide a little background. And Anise did indicate that this is a compromise. Yes, I agree. This is a compromise bill, and that’s what happens on Capitol Hill. Generally, for bills to pass, you need people who are Democratic and Republican to support the legislation. Let me be clear, this legislation that’s proposed is a bipartisan piece of legislation, which is great. We need more bipartisanship on Capitol Hill.

The bill provides for a vote in Washington, D.C., a city that is a majority Democratic city, and also provides for a vote—it doesn’t specifically say Utah, but the assumption is that it will be Utah. Utah, at the last census in 2000, narrowly missed getting another congressional seat. Now, why is this? It’s because in Utah, they have a tradition of, those who are of the Mormon faith go out into the states and do their missionary work. They were not in the states when the census was taken, and thus they were not counted. They went to court, and they lost. The compromise was to provide for a one-way, in one fell swoop—it’s not a perfect match, but it is one way of, one, enfranchising the citizens of the District of Columbia, who need this opportunity to participate in the political process fully, and one, for Utah to be made whole for their—for not having that seat at the last census.

AMY GOODMAN: You also don’t get senators here without statehood.

ANISE JENKINS: That’s absolutely true.

EUGENE DEWITT KINLOW: No, right. And the bill, clearly, in front of us is not about statehood. I think that if we talk about the statehood debate, that—there was an effort about in 1983 that failed. And it failed when there was a—you know, despite having a city that is majority Democratic and that supported President Barack Obama by about 93 percent, it failed in the House and the Senate, by two-to-one.

ANISE JENKINS: I would—

EUGENE DEWITT KINLOW: And a lot of those conditions still exist. Back in ’93, when you had a Democratic House, Senate and White House, those same conditions exist right now. And I would say if we had to put it up for statehood, that the votes do not exist for statehood.

ANISE JENKINS: I would add to the—

JUAN GONZALEZ: Anise Jenkins, I’d like to let you respond, but just to throw in a question, as well, to respond to, as well—the argument can be made that at least Congress, by voting now to grant a member of Congress, has recognized the right of political representation for D.C. and that presumably a greater Democratic majority in the future might be able then to pass, as well, the—adding two senators, as well, to the District.

ANISE JENKINS: If they vote for this bill and the bill says, specifically—there’s efforts to make amendments to this bill to say specifically, and it already implies, that this bill will not let us have senators. The Congress could see this as voting for “Case closed. You have your representative. You have your delegate. Your delegate is now a representative in the House. You will not have any senators.”

The bill even says that if we have a larger population—against the Constitution, which says if your population increases proportionately, your representatives will increase—this bill even cuts that out for D.C. So, if we go from 600,000 to a million, we still do not get two representatives. We’re still limited to two representatives and perhaps no senators. So what would the Congress be saying? We have to be very careful about what we’re putting before Congress. Is it constitutional? Is it what the residents of D.C. want? Is it what the residents of D.C. deserve?

EUGENE DEWITT KINLOW: Yes, yes, yes.

ANISE JENKINS: This bill—let me say one more thing. There has been no effort by DC Vote to go out, after they’ve raised over several million dollars, to go out into the community, hold town hall meetings, to go out and talk to the D.C. residents. This is coming from the top. We want what D.C. residents voted for.

EUGENE DEWITT KINLOW: OK, OK, let me be clear—

AMY GOODMAN: We’re going to have to leave it there—I hate to say it—but we will continue this debate. Anise Jenkins, president of Stand Up! for Democracy in DC, and Eugene Dewitt Kinlow, public affairs director for DC Vote Coalition. Just in terms of populations, to let you know the states all have under 700,000, equivalent populations to D.C., Wyoming, Vermont, North Dakota, Alaska; under a million, South Dakota, Delaware, Montana.