Obama & Wall Street: 'Moderation in the Pursuit of Justice'

The Limits of Triangulating

Now that Congress has passed financial reform legislation, aren't people upset about past Wall Street abuses just being scolds and cranks?

Shouldn't they -- we -- just get over ourselves?

My answer is "no," because the abuses aren't past.

On the contrary, shockingly little has changed (never mind accountability for misdeeds).

Financial Reform Scorecard

To review, here is a litany of all the things that went wrong leading up to the crash:

Wall Street actively encouraged subprime lenders to lower their already low standards — and then bought those loans knowing they were likely to default, but not caring. Traders up and down Wall Street made millions in bonuses selling products that were “ticking time bombs.” Moody’s, one of the three big credit ratings agency, quadrupled its profits in seven years by handing out triple-A ratings like candy. Regulators ignored impassioned entreaties to investigate fraudulent lending practices and excessive leverage. These were not anomalies. This was standard operating procedure in the years before the crisis.

--Joe Nocera, "Still Stuck in Denial on Wall Street"; The New York Times (10/2/2010)

So all that's different now, right?

Not exactly.

The big banks aren’t being broken up, the way they were in the 1930s. Bankers aren’t being hauled off to jail. No serious effort has been made to rein in executive compensation — or even to claw back millions of dollars in bonuses that were based on what turned out to be illusory profits. Most of the financial practices and products that brought us to the brink remain legal under the new Dodd-Frank legislation — though they will, finally, be regulated.

--Joe Nocera, "Still Stuck in Denial on Wall Street"

Splitting the Difference

When confronted with knotty social issues -- gays in the military, abortion, immigration policy, etc. -- splitting the difference (dubbed "triangulating" in the Clinton years) is smart politics.

When confronted with overwhelming evidence of egregious lawbreaking and greed, the consequences of which have cost millions of people their jobs, homes, and savings -- triangulating is a terrible political strategy.

FDR understood that when he said, "“Wall Street is unanimous in its hate for me — and I welcome their hatred."

So did Barry Goldwater, that bleeding heart Socialist, who famously said: 'extremism in the defense of liberty is no vice. And moderation in the pursuit of justice is no virtue.'

Matt Taibbi on "Wall Street's Big Win"

The New Financial Crisis, Same as the Old One?

Don't have time to read thousands of pages of (purposefully) arcane legislation, to figure out whether the financial reform bill Congress passed this Summer really reforms how Wall Street does business? (I guarantee you that few if any members of Congress read the bill in its entirety, either).

Here are the Cliff's notes, courtesy of Matt Taibbi (now infamous for calling Goldman Sachs “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money") :

What happened to our economy over the past three years, and is still happening to it now, was not an accident or an oversight, but a sweeping crime wave unleashed by a financial industry gone completely over to the dark side. The bill Congress just passed doesn't go after the criminals where they live, or even make what they're doing a crime; all it does is put a baseball bat under the door and add an extra lock or two on the doors. It's a hack job, a C-minus effort. See you at the next financial crisis.

--Matt Taibbi, "Wall Street's Big Win"; The Rolling Stone (8/19/2010)

In damning (and depressing) detail, Taibbi lays bare how senior members of both parties gutted the so-called "Volcker Rule" and the "Lincoln Rule" -- the bill's two provisions aimed at shutting down proprietary trading and derivatives trading, respectively.

As Taibbi, Michael Lewis, Barry Ritholtz and numerous others have now chronicled in great detail, it was precisely those two activities that lay at the foundation of the financial melt-down that started in 2008 and is still plaguing our economy.

Here is Taibbi's sum-up:

Over a long year of feverish lobbying and brutally intense backroom negotiations, a group of D.C. insiders fought over a single question: Just how much of the truth about the financial crisis should we share with the public? . . . Do people need to know the real version, in all its majestic whorebotchery, or can we get away with some bullshit cover story? In passing Dodd-Frank, they went with the cover story.

--Matt Taibbi

Besides the sheer skulduggery of what transpired on Wall Street, what I find most dismaying is that the most vocal and impassioned critics -- still -- are people like Jon Stewart, Matt Taibbi, and Ritholtz.

In other words, entertainers, journalists, and bloggers far removed from the actual levers of power.

It's as though we're living through a financial Watergate, but this time the Woodward's and Bernstein's are being muscled aside.