23 mrt. 2009

The Target of Congress

The public outrage over the AIG bonuses has undermined support for Treasury Secretary Timothy F. Geithner at a pivotal moment. In an interview broadcast last night on "60 Minutes," Obama expressed strong support for Geithner, who has been criticized in Congress and elsewhere for what some call his halting response to the financial crisis and for not doing more to block the AIG bonuses. AIG paid the bonuses to members in its troubled Financial Services division after receiving more than $170 billion in federal bailout aid.

Still, Geithner is central to the Obama administration's plans for dealing with the global economic crisis, key portions of which are to be rolled out this week.

Geithner did not approve the bonuses of AIG and he did not know about it until, five days before payday, his aids informed him. The contracts were closed in March 2008, while the Board knew that AIG was at the edge of break down. Without the bailout aid AIG should not have reached the payday. Paulson/Bernanke and Congress did not provide a measure to stop paying bonuses in the bailout bill, and while Geithner wasn't in the former Congress nor in the Bush43 administration he is now under fire of the people who are really responsible for the debacle. They want the innocent to burn down for their own sins. But is that all of the motives?
On Thursday, Geithner is scheduled to testify before the House Financial Services Committee about overhauling financial regulation. He is likely to call for giving the Federal Reserve new powers to regulate the financial system as a whole, including power to oversee any institution that is big enough or intertwined enough to pose risks to the financial system.

Conservatives want to block new regulations, Republican and also Democratic conservatives, but they can't block the immense popular Obama doing what almost 85% of the public feels to be right: making an end to the kleptomania in the financial system. If they can get rid of Geithner the Obama administration will be severely beaten in its policies to solve the problems and regenerate the economy at the costs of the conservative bandits and their longtime servants in Congress.

Let's have a look at the real evil genius:

Republican Senator William Philip Gramm
Republican Senator William Philip Gramm was one of five co-sponsors of the Commodity Futures Modernization Act of 2000. One provision of the bill is often referred to as the "Enron loophole" because some critics blame the provision for permitting the Enron scandal to occur. Gramm's wife, Wendy Lee Gramm, was on the board of directors of Enron when it collapsed, and she was named in many of the Enron shareholder lawsuits.

Between 1995 and 2000, Gramm was the chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. During that time he spearheaded efforts to pass banking deregulation laws, including the landmark Gramm-Leach-Bliley Act in 1999, which removed Depression-era laws separating banking, insurance and brokerage activities. As a senator, Gramm often called for reductions in taxes and fraud in government spending.

2007 mortgage and 2008 financial & economic crises
Some economists state that the 1999 legislation spearheaded by Gramm and signed into law by President Clinton "the Gramm-Leach-Bliley Act" was partly to blame for the 2007 subprime mortgage crisis and 2008 global economic crisis. The Act is most widely known for repealing portions of the Glass-Steagall Act, which had regulated the financial services industry. Gramm responded to criticism of the act by stating that he saw "no evidence whatsoever" that the sub-prime mortgage crisis was caused in any way "by allowing banks and securities companies and insurance companies to compete against each other." The Act, it should be noted, passed the House by an overwhelming majority and passed by unanimous consent in the Senate, though it was introduced on the last day before Christmas holiday and never debated by either congressional body.
The Washington Post in 2008 named Gramm one of seven "key players" responsible for winning a 1998-1999 fight against regulation of derivatives trading. Gramm's support was later critical in the passage of the Commodity Futures Modernization Act of 2000, which kept derivatives transactions, including those involving credit default swaps, free of government regulation.
2008 Nobel Laureate in Economics Paul Krugman, a supporter of Barack Obama, described Gramm during the 2008 presidential race as "the high priest of deregulation," and has listed him as the number two person responsible for the economic crisis of 2008 behind only Alan Greenspan. On October 14, 2008, CNN ranked Gramm number seven in its list of the 10 individuals most responsible for the current economic crisis. In January 2009 Guardian City editor Julia Finch identified him as one of twenty-five people who were at the heart of the financial meltdown. An Internet poll currently ranks Gramm #1 among 25 people selected by Time as candidates to blame for the economic crisis.

John McCain 2008 presidential campaign
Gramm was co-chair of John McCain's presidential campaign and his most senior economic adviser from the summer of 2007 until July 18, 2008. In a July 9, 2008 interview on McCain's economic plans, Gramm explained the nation was not in a recession, stating, "You've heard of mental depression; this is a mental recession." He added, "We have sort of become a nation of whiners, you just hear this constant whining, complaining about a loss of competitiveness, America in decline." Gramm's comments immediately became a campaign issue. McCain's opponent, Senator Barack Obama, stated, "America already has one Dr. Phil. We don't need another one when it comes to the economy. ... This economic downturn is not in your head." McCain strongly denounced Gramm's comments. On July 18, 2008 Gramm stepped down from his position with the McCain campaign. Explaining his remarks, Gramm stated that he had used the word "whiners" to describe the nation's politicians rather than the public, stating "the whiners are the leaders." In the same interview, Gramm said, "I'm not going to retract any of it. Every word I said was true."

EU pressure
Obama administration this week is expected to announce new proposals for financial regulation, executive pay, accounting standards, the structure of the International Monetary Fund and other issues ahead of a summit of 20 major nations in London on April 2.

At the summit, leaders will seek to reach a consensus on those and other coordinated steps meant to combat the global economic crisis and prevent a repeat. In particular, France and Germany are seeking to win assurances at the summit that Washington is committed to tighter financial regulations.

Diplomatic sources say the Europeans have largely backed the 24 recommendations contained in a report of an advisory group to the Group of 20 industrialized and developing nations calling for broad reforms, including tighter regulations of hedge funds and rating agencies as well as higher capital requirements for banks.

The details of how to enact such changes are likely to be left to each nation, though the Europeans are pressing for countries including the United States to agree to a rough outline of principles. For instance, they are requesting that the G-20 adopt language that would call for hedge funds to register and report regularly on their size, investment style, borrowing levels and performance. Currently, hedge funds are not subject to rigorous reporting requirements.

The report calls for G-20 nations to take new steps to monitor and prevent excessive levels of executive compensation, although administration officials said that was not a central thrust of the proposals. That would be done partly by having regulators take executive compensation packages into consideration when assessing the overall risk levels at major financial institutions.

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