Annual Fundraising Appeal

The US Geological Survey recorded a minor earthquake this morning with its epicenter near Wasilla, Alaska, the probable result of Sarah Palin opening her mail box to find the latest issue of CounterPunch magazine we sent her. A few moments later she Instagrammed this startling comment…

Ayers

The lunatic Right certainly has plenty of problems. We’ve made it our business to not only expose these absurdities, but to challenge them directly. With another election cycle gaining steam, more rhetoric and vitriol will be directed at progressive issues. More hatred will be spewed at minorities, women, gays and the poor. There will be calls for more fracking and war. We won’t back down like the Democrats. We’ll continue to publish fact-based critiques and investigative reports on the shenanigans and evil of the Radical Right. Our future is in your hands. Please donate.

Day10

Yes, these are dire political times. Many who optimistically hoped for real change have spent nearly five years under the cold downpour of political reality. Here at CounterPunch we’ve always aimed to tell it like it is, without illusions or despair. That’s why so many of you have found a refuge at CounterPunch and made us your homepage. You tell us that you love CounterPunch because the quality of the writing you find here in the original articles we offer every day and because we never flinch under fire. We appreciate the support and are prepared for the fierce battles to come.

Unlike other outfits, we don’t hit you up for money every month … or even every quarter. We ask only once a year. But when we ask, we mean it.

CounterPunch’s website is supported almost entirely by subscribers to the print edition of our magazine. We aren’t on the receiving end of six-figure grants from big foundations. George Soros doesn’t have us on retainer. We don’t sell tickets on cruise liners. We don’t clog our site with deceptive corporate ads.

The continued existence of CounterPunch depends solely on the support and dedication of our readers. We know there are a lot of you. We get thousands of emails from you every day. Our website receives millions of hits and nearly 100,000 readers each day. And we don’t charge you a dime.

Please, use our brand new secure shopping cart to make a tax-deductible donation to CounterPunch today or purchase a subscription our monthly magazine and a gift sub for someone or one of our explosive  books, including the ground-breaking Killing Trayvons. Show a little affection for subversion: consider an automated monthly donation. (We accept checks, credit cards, PayPal and cold-hard cash….)
button-store2_19

or use
pp1

To contribute by phone you can call Becky or Deva toll free at: 1-800-840-3683

Thank you for your support,

Jeffrey, Joshua, Becky, Deva, and Nathaniel

CounterPunch
 PO Box 228, Petrolia, CA 95558

The FCIC Report

Another Whitewash for Wall Street

by MIKE WHITNEY

Maybe “whitewash” is too bland of a term to apply to the Financial Crisis Inquiry Commission’s (FCIC) report, but it certainly doesn’t break any new ground. Nor does it achieve its real purpose, which is to figure out what triggered the financial meltdown and (hopefully) restore confidence in the system. It fails on both counts, and it’s not hard to see why. The investigative panel was clearly instructed to point out the dangers of insufficient regulation rather than focus on the massive incidents of fraud that were perpetrated by the bankers and other financial kingpins. It’s a clever way of blaming the system instead of the people who were responsible.

Here’s an excerpt from the report that’s been widely circulated in the media. It exposes the FCIC’s real agenda and shows that the commission is little more than a cover up.

“We conclude this financial crisis was avoidable. The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble. While the business cycle cannot be repealed, a crisis of this magnitude need not have occurred. To paraphrase Shakespeare, the fault lies not in the stars, but in us.”

While this seems like an admission that crimes were committed, it’s really just the opposite. The authors are saying “We’re all to blame”, which is pure baloney. The “captains of finance” didn’t simply “ignore warnings” or “fail to question, understand, and manage evolving risks”. They deliberately stole a great deal of money from a great many people. Period. That’s a crime and they need to be held accountable. Unfortunately, the Commission uses the report to obfuscate the facts and confuse the public about what really needs to be done.

There’s a very good summary of the Commission’s approach via e mail on the naked capitalism website. It was written by Matt Stoller. Here’s an excerpt:

“I was on a conference call today with Phil Angelides and Brooksley Born, two commissioners of the Financial Crisis Inquiry Commission. During their unveiling of the FCIC report, they used words like deregulation, leverage, imprudent risk-taking, reckless behavior, failures at credit agencies, and failed regulators. Left out were words like crime, fraud, looting, or a specialized form of looting known as control fraud. At every point reporters asked about their referrals of criminal cases, which someone leaked before the report came out, they demurred. “We are not prosecutors”, said Angelides.

I asked about the criminal nature of the crisis. I said I didn’t want to know about any specific case, but whether they thought that fraud or crime was a core cause of the crisis. This is an important distinction, because the real question at hand is whether you trust the system to correct itself, or whether you believe that the people running the system are the problem and must be removed before we can fix the system. It’s obvious, as you’ll see, that Born and Angelides believe the former.

Neither Born nor Angelides would answer whether accounting fraud or crime was a primal cause of the crisis. The gist of the response was “it’s all in the report,” along with an attempt to pretend like they had discovered the systemic mortgage origination fraud that the FBI discussed in 2004. Born also repeated that they wouldn’t disclose specific cases of criminal referrals, even though I had specifically said that I was not interested in such disclosures. It was a filibuster, and an obvious one at that. I kept pressing, and asked them repeatedly to answer my question, and after the third follow-up Angelides finally said they had to go.

With that, the FCIC has completed the final act of oversight for the last Democratic Congress, and it held true to what Democrats in the last Congress believed. Everyone was at fault for the crisis, but no one is to blame. This was Bush’s line in 2008, that “Wall Street got drunk”, and Obama’s line throughout the Dodd-Frank mark-up. The Republicans went after the GSEs and “regulation”, and the Democrats sadly lamented the tragedy of the crisis. Again, everyone’s at fault, and no one is to blame. I saw high-ranking Democrat Carolyn Maloney brag yesterday about her vote for TARP in the hearing on foreclosures, noting that the Dow busted through 12,000 as a sign of prosperity. This is what they believe, in their bones. There was no theft, only tragedy….(“The FCIC, in Lockstep with the Officialdom, Refuses to Use the “C” Word”, Naked Capitalism)

So, the report is actually a cover up, a way of going over the events in excruciating detail without assigning blame. The whole 500-page rehash could be summarized in two words, “shit happens”. Maybe that’s the best the commission could do, but it’s going to take more than that to restore the public’s confidence in the system.

Market analyst, Jonathan Weil, takes a similar view in an article on Bloomberg last week. Here’s what he says:

“The report’s conclusions were obvious: The financial crisis was man-made and avoidable. Regulators and credit-rating companies blew it. Banks and homeowners borrowed too much. Companies such as AIG and Lehman Brothers had horrible governance. Ethics and accountability broke down. The government panicked when the crisis hit in 2008. And so forth.

The lack of new insights dovetailed with the commission’s non-confrontational approach. More than 700 people granted interviews, most behind closed doors. Only seldom did the panel issue subpoenas….” (“Wall Street’s Collapse to Be Mystery Forever”, Bloomberg)

See? It’s just old wine in new bottles. So, what can we extrapolate from this?

Just what its authors intended, of course. Predatory lending is bad, ethics matter, corporate governance needs watching, and regulations need to be tightened. While this is all true, it doesn’t get to the heart of the matter: Who’s responsible? That’s what the public wants to know. They don’t want to know who sold what CDO to whom. They want justice. That’s all.

Besides, the window for passing new regulations has closed. Much of the Dodd-Frank Bill has already been gutted and, with a new GOP majority in congress, there’s no appetite for new rules to reign in Wall Street. Too Big To Fail banks and financial institutions have gotten bigger, securitization and derivatives remain largely unscathed, the banks will be allowed to write their own guidelines on how they intend to follow the Volcker Rule, and–just last week–the banks won a major victory that will allow them to continue to cook their books into perpetuity. Here’s a clip from the Wall Street Journal:

“The banks got what they wanted. Accounting rule makers on Tuesday dropped a plan to require banks to value loans using market prices.

That means investors will remain reliant on banks’ own views of the worth of their assets. Those judgments proved seriously flawed during the financial crisis and left many with insufficient capital. Taxpayers, who as a result were called upon to bail out numerous institutions, also are left more vulnerable….

Banks generally oppose the use of market prices because, they say, it makes their results more volatile. Their intense lobbying efforts against the proposal likely got a leg up after FASB Chairman Robert Herz, who had supported the plan, unexpectedly departed in August. FASB cited strong opposition it received in public comments in changing course.” (“Banks Have Their Way With FASB”, Wall Street Journal)

So, the banks can continue to deceive shareholders and investors just like before, and anyone who opposes them, like ex-FASB Chairman Robert Herz, will get the boot. This is a system that no longer has the capacity for course-correction, which is why another crisis cannot be far off.

Here’s one last blurp from Bloomberg’s Susan Antilla from an article “The Rich Rest Up as Markets Forget Crisis Lessons”:

“Investor protection is out. Remember all the talk about making the markets safe for investors? Well, get over it. Dodd-Frank instructed the Securities and Exchange Commission to set up five new offices, including one to handle whistleblower cases, and a committee to represent the interests of investors on issues like fees and disclosure. But on Dec. 2, the agency put those efforts on hold because of “budget uncertainty.”

A frozen budget has also forced the SEC to scale back its plans to get up to speed with the dynamics that resulted in the so-called flash crash on May 6, 2010, when the Dow Jones Industrial Average fell almost 1,000 points in a matter of minutes. The agency had planned to hire five math whizzes acquainted with the sorts of financial algorithms involved in the instant meltdown. Instead, it’s settled for one…..

Pandering to business is in. Darrell Issa, the car- alarm millionaire twice accused of auto theft (both charges were dropped), and now the California Republican who is chairman of the House Oversight and Government Reform Committee, sent letters to 150 companies and business trade groups in December asking them which regulations and rules might be restraining job growth. He didn’t really have to ask, because we all know that the answer, of course, is: “All of them.” (“The Rich Rest Up as Markets Forget Crisis Lessons”, Bloomberg)

And, Darrell Issa is not the exception either. He’s the rule, and now he can count on the support of the White House, too. Obama’s anti-regulation rant in the Wall Street Journal last week is a sign that the president is snuggling even closer to big finance. In fact, Obama deliberately timed his WSJ screed to torpedo the FCIC’s report and preempt renewed demands for regulation. What are friends for anyway?

So, the FCIC report can be consigned to the dustbin where it belongs and all the blather about subpoenas, indictments, arrests or prison sentences can end once and for all. It doesn’t take 500 pages to remind people that the law does not apply to the rich and powerful. They already know that.

MIKE WHITNEY lives in Washington state. He can be reached at: fergiewhitney@msn.com.