Absolutely must-read article from the new Vanity Fair. It nails everyone - from congressional Republicans to Democrats to President Obama, and mainly is an indictment of the current system. Many things in it are unsurprising and nevertheless appalling. And in the aggregate have set the stage for protests like OWS, which is probably only going to be the first of many.
You can write off the people in the streets as bums without jobs or privileged white kids protesting. But ignore the state of the system at your own peril. It is pretty clear that we, the people have lost in almost every imaginable way.
The Woman Who Knew Too Much | Politics | Vanity Fair
Some choice passages:
You can write off the people in the streets as bums without jobs or privileged white kids protesting. But ignore the state of the system at your own peril. It is pretty clear that we, the people have lost in almost every imaginable way.
The Woman Who Knew Too Much | Politics | Vanity Fair
Some choice passages:
A Harvard law professor, one of the nation’s leading bankruptcy experts and consumer advocates, the 62-year-old Warren had come up with the idea for the agency in 2007. She had advised the Obama administration on its creation in the aftermath of the 2008 financial collapse and helped to push it through Congress. Warren had also spent the last 10 months working tirelessly to build the agency from scratch—hiring its staff of 500, including Richard Cordray, organizing its management structure, and getting the C.F.P.B. up and running for its opening on July 21.
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At a time of record corporate profits, a time when 14 million Americans are out of work, when millions have lost their homes and, according to the Census Bureau, the ranks of those living in poverty has grown to one in six—that Elizabeth Warren could be publicly kneecapped and an agency devoted to protecting American consumers could come under such intense attack is, ultimately, the story about who holds power in America today.
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When the C.F.P.B. was first proposed to Congress, in early 2009, the Chamber of Commerce, the leading business lobbying group in the country, announced that it would “spend whatever it takes” to defeat the agency.
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According to the Center for Responsive Politics, in 2010 the financial industry flooded Congress with 2,565 lobbyists. They were financed by the likes of the Financial Services Roundtable, which, according to the Center, paid lobbyists $7.5 million, and is on its way to spending as much or more this year. The Chamber of Commerce spent $132 million on lobbying Washington in 2010. The American Bankers Association spent $7.8 million. As for individual banks: JPMorgan Chase, which received $25 billion in TARP funds from taxpayers, spent nearly $14 million on lobbying during the 2009–10 election cycle; Goldman Sachs, which received more than $10 billion from taxpayers, spent $7.4 million; Citigroup, which was teetering on the brink of insolvency and received a $45 billion infusion, has paid more than $14 million to lobbyists since 2009. And none of this money includes the direct campaign donations these organizations, and their surrogates, made to members of Congress.
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While Wall Street and the banks oppose virtually every aspect of Dodd-Frank—from the new rules on derivatives to higher capital requirements—the C.F.P.B. would become among the most controversial aspects of the reforms, the banking industry’s particular bête noire.
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This Wall Street psychosis—“We did nothing wrong, but everyone is trying to hurt us”—was given a dramatic airing in June by Jamie Dimon, the chairman of JPMorgan Chase, at a conference in Atlanta. Clearly agitated during a Q&A with Federal Reserve chairman Ben Bernanke, Dimon launched into the reasons why the regulators were being too tough on banks. The causes of the financial crisis had been dealt with. “Most of the bad actors are gone,” he said, rattling off a long list of the perpetrators, which included C.D.O.’s, Fannie Mae, Freddie Mac, “thrifts, all the mortgage brokers, and, uh, obviously some banks.” He said that he worried that Dodd-Frank was “holding us back at this point”—suggesting that the regulation of banks was the reason why the economy was not recovering. In other words, what was bad for Wall Street was very bad for the country.
What Dimon did not say is that having been supported through the crisis by billions of dollars in TARP aid from American taxpayers, and another $1.2 trillion in emergency loans from the Fed, the largest banks are bigger today than they were before the crisis—way too big to fail—and that many of them are generating even fatter profits. At Dimon’s $2 trillion JPMorgan Chase—which rewarded Dimon’s performance last year with pay estimated at $20.8 million and $17 million in restricted stock and options—revenues hit $27.4 billion, with a profit of $5.4 billion, in the second quarter of 2011 alone.
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Today, Warren says, one “vision of how America works is that it’s an even game, that anybody can get started—just roll those dice; that booms and busts will come and millions of people will lose their homes, millions more will lose their jobs, and trillions of dollars in savings retirement accounts will be wiped out. The question is, Do we have a different vision of what we can do? This agency is out here in a sense to try to hold accountable a financial-services industry that ran wild, that brought our economy to the edge of collapse,” she said. “There’s been such a sense that there’s one set of rules for trillion-dollar financial institutions and a different set for all the rest of us. It’s so pervasive that it’s not even hidden.”
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Warren was not always a critic. Born and raised in Oklahoma, Elizabeth Herring spent most of her early life performing all the good-girl Stations of the Cross. She won the Betty Crocker competitions, married for the first time at 19, had two children before she was 30, and was once a registered Republican.
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It was in 1979 that Warren had her Damascene conversion—the experience that would lead her to become the nation’s top authority on the economic pressures facing the American middle class, and trigger her passionate advocacy. In 1978, Congress had passed a law that made it easier for companies and individuals to declare bankruptcy. Warren decided to investigate the reasons why Americans were ending up in bankruptcy court. “I set out to prove they were all a bunch of cheaters,” she said in a 2007 interview. “I was going to expose these people who were taking advantage of the rest of us.” What she found, after conducting with two colleagues one of the most rigorous bankruptcy studies ever, shook her deeply. The vast majority of those in bankruptcy courts, she discovered, were from hardworking middle-class families, people who lost jobs or had “family breakups” or illnesses that wiped out their savings. “It changed my vision,” she said.
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In November 2008, Warren received a call from Senator Harry Reid. Lehman Brothers had collapsed two months before; A.I.G.’s bailout had just been upped to $150 billion, and Congress had passed TARP. Reid asked Warren to head the congressional panel overseeing the $700 billion bailout.
Perhaps the most widely watched hearing is the one that took place in September 2009. A video of part of that hearing can still be found on YouTube, under the title “Elizabeth Warren Makes Timmy Geithner Squirm.” It opens with Warren asking the question that was on the minds of many taxpayers: “A.I.G. has received about $70 billion in TARP money, about $100 billion in loans from the Fed. Do you know where the money went?” What followed during the rest of the hearing was the spectacle of the Treasury secretary tripping over his words, his eyes darting around the room as Warren, calm and prosecutorial, kept hammering him with questions. At another hearing, in December 2009, Geithner appeared to be barely able to contain his annoyance, at one point almost shouting at her. Warren’s questioning “was masterful,” says Neil Barofsky, who ran the TARP oversight for Treasury. “She eviscerated him.” But Warren would pay a price for those hearings.
“Geithner hated her,” says a former administration official. Part of it was seen as personal because she had scorched him in public. But the whole thrust of her work on the oversight panel—getting the facts out to the public—was at odds with Geithner’s perceived conviction, shared by the Wall Street establishment, that the details of the banks’ TARP rescue should be hidden from public scrutiny whenever possible in order to give the banks time to recover, an assessment that a Treasury spokesperson disputes, insisting that “Secretary Geithner initiated unprecedented disclosure requirements for financial institutions.”
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By April, however, Warren’s standing in the White House was shaky. Three months earlier, in what was seen as an attempt to “repair” his relationship with his Wall Street donors, Obama had brought in William Daley as his new chief of staff. A former banker at JPMorgan Chase, Daley came into the administration just as senior Obama adviser David Axelrod left. But while Axelrod and another top adviser, Valerie Jarrett, were perceived as strong Warren supporters, Daley had reportedly opposed the creation of the C.F.P.B. A spokesperson for the White House said that, although Daley was “not recused from” discussions about the C.F.P.B., he chose “not to participate in the process of selecting a nominee for C.F.P.B. director.” Which is possible. But with Daley and Geithner—one of Obama’s closest advisers—sharing center stage, the balance of power in the debate over Warren shifted.
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By this spring, Spencer Bachus, along with his fellow Alabaman, Senator Richard Shelby, was one of the C.F.P.B.’s leading opponents. But they would be joined by the vast majority of Republicans. Some of them had previously admitted to having no particular interest in or understanding of banking, but had developed strong feelings about the C.F.P.B. after receiving campaign donations from banking groups.
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The anti-government, free-market, unregulated-business-as-the-savior-of-America sentiment of the Republican Party today, assisted by Wall Street’s campaign donations, dovetailed perfectly with the interests of the country’s banking Goliaths. To a degree, the attitude regarding Warren, Frank says, was “How dare this woman criticize the free-enterprise system?”
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But it wasn’t just Republicans. In May, Christopher Dodd, the former Democratic senator from Connecticut, who had chaired the powerful Senate Banking Committee, denied to Politico the rumors that he was trying to kill Warren’s nomination. But his cryptic statement about people with “ego” problems standing in the way of the bureau was widely seen as a poison dart aimed at Warren.
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In a letter dated May 2, 2011, 44 Republican senators issued an ultimatum to Obama. Citing “the lack of accountability in the structure” of the C.F.P.B., and “the unprecedented authority” of its director “over financial institutions and main street businesses,” they announced that they would block the confirmation of anyone he chose to nominate as C.F.P.B. director unless the bureau’s structure was overhauled. There were many in Washington who viewed this as the perfect opportunity for Obama to appoint Warren during a congressional recess.
But for weeks Obama did nothing. As the attacks on Warren and the C.F.P.B. heated up during May and June, the silence from the White House was deafening. Even leading Democrats, like Barney Frank, were confused about the president’s intentions—would he name Warren in a recess appointment or not? And they were stunned when Obama jettisoned her.
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Today, Warren is considered the Democratic front-runner in what is likely to be one of the most closely watched congressional elections next year. In early September, one poll put her within nine points of Scott Brown—even before she had announced her candidacy. A few weeks later, after her official entry into the field, another poll had her ahead of Brown by two points.
Speaking from a car on her way from one campaign event to another, Warren told me that the stakes are too high for her not to run, too high not to try to continue the fight “for the middle class.” Too high not to try to bring it into the belly of the beast, to the floor of the U.S. Congress. Middle-class families “are getting hammered and you know Washington doesn’t get it,” she said. “G.E. doesn’t pay any taxes and we are asking college kids to take on even more debt to get an education, and asking seniors to get by on less. These aren’t just economic questions. These are moral questions.”