Some Honesty From Liz Warren

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  • Waddie
    Senior Member
    • Aug 2009
    • 9106

    Some Honesty From Liz Warren

    At least this woman isn't afraid of the big banks. And the letter signed by 12 Senators shows there is some courage in Washington; and they can work together at least on some issues.

    By Pam Martens and Russ Martens: August 19, 2014

    Two weeks ago, Paul Krugman used some expensive media real estate to write a propaganda piece on the unsupportable proposition that the Dodd-Frank financial reform legislation passed in 2010 is “a success story” and that its bank wind-down program known as Ordinary Liquidation Authority has put an end to “bailing out the bankers.”

    Wall Street On Parade took Krugman to task over this fanciful ode to accomplishments by the President the day after his piece ran in the New York Times’ opinion pages and suggested he do proper research on this subject before opining in the future. That was the morning of August 5.

    By late in the afternoon of August 5, Krugman had a reality smack-down on his Dodd-Frank success fairy tale by two Federal regulators. Every major media outlet was running with the news that eleven of the biggest banks in the country, including the mega Wall Street banks, had just had their wind-down plans (known as living wills) rejected by the Federal Reserve and FDIC for not being credible or rational. The eleven banks are: Bank of America, Bank of New York Mellon, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and UBS.
    New York Times Columnist, Paul Krugman

    Yesterday, Krugman’s Dodd-Frank fantasy lost further credibility when Senator Elizabeth Warren released a letter that she and eleven of her Congressional colleagues had sent to the Federal Reserve, warning that one of its Dodd-Frank proposed rules “invites the same sort of backdoor bailout we witnessed five years ago.”

    To refresh any forgetful minds at the Fed over its unprecedented hubris in connecting a giant feeding tube to Wall Street during the last financial crisis, the Senators and Congressional Reps wrote:

    “During the financial crisis, the Board invoked its emergency lending authority for the first time in 75 years. The scope of the Board’s program was staggering. Between 2007 and 2009, the Board’s emergency lending facilities provided over $23 trillion in loans to large domestic and foreign financial institutions.

    “These loans were another bailout in all but name. Of the nearly $9 trillion the Board provided through its largest facility – the Primary Dealer Credit Facility – over two-thirds went to just three institutions: Citigroup, Merrill Lynch, and Morgan Stanley. Those institutions and others had access to the Board’s credit facilities for an average of 22 months. And the interest rates the Board offered were typically very low – in many cases, under 1%.”

    Think about this for a moment. Citigroup was insolvent during the crisis – as Federal insiders have now acknowledged in books and media interviews. In an efficient market system, Citigroup would not have been able to borrow at all, much less at a rate for a AAA-borrower of less than 1 percent. The Federal Reserve is forbidden from making loans to insolvent institutions – but it did it anyway.

    Contrast the Fed’s largess to serial miscreants like Citigroup against homeowners at the time whose credit was flawed but they had a job and were still paying their bills. If these homeowners could have received funds at a borrowing rate of less than 1 percent, they could have paid off all of their high-interest rate debt, saved their homes from foreclosure, and started out on fresh footing.

    Why does the U.S. financial infrastructure only play Fairy Godmother to criminally inclined banks?

    Senator Warren and her colleagues clearly smell the possibility of another Citigroup-type situation occurring again. In the letter, they request that the Fed adopt a broader definition of insolvent “so that the Board could not use its emergency lending program to save an institution that is on the verge of bankruptcy.”

    The twelve members of the Senate and House who sent this sternly worded letter to the Fed have solid cause for worry. On July 31 of this year, Edward J. Kane, Professor of Finance at Boston College, testified before the Senate Banking Subcommittee on Financial Institutions and Consumer Protection that the stock of Bank of America and Citigroup “would have been declared worthless long ago if market participants were not convinced that authorities are afraid to force them to resolve their weaknesses.”

    In his testimony, Kane called it “shameful” for government officials to suggest that bank bailouts were good deals for taxpayers, stating: “On balance, the bailouts transferred wealth and economic opportunity from ordinary taxpayers to much higher-income stakeholders in TBTF [too-big-to-fail] firms. Ordinary citizens understand that this is unfair and officials that deny the unfairness undermine confidence in the integrity of economic policymaking going forward.”

    The letter from Senator Warren and her colleagues together with Professor Kane’s testimony are like a fresh breeze and the first glimpse of sunshine after being trapped in an underground tunnel of darkness for six years.

    In addition to Senator Warren, the letter was signed by the following: Senators Sherrod Brown (D-Ohio), Mark Begich (D-Alaska), Mazie Hirono (D-Hawaii), and Edward Markey (D-Mass.), and Representatives Walter Jones, Jr. (R-Calif.), Stephen Lynch (D-Mass.), Michael McCaul (R-Texas), Gwen Moore (D-Wis.), Keith Ellison (D-Minn.), Leonard Lance (R-N.J.), and Tom Cotton (R-Ark.).

    The letter ends with this: “If the Board’s emergency lending authority is left unchecked, it can once again be used to provide massive bailouts to large financial institutions without any congressional action.”
    By Pam Martens and Russ Martens: August 19, 2014 Two weeks ago, Paul Krugman used some expensive media real estate to write a propaganda piece on the


    regards,
    Waddie
    I started with nothing and I still have most of it....
  • David G
    Senior Member
    • Dec 2003
    • 89765

    #2
    Re: Some Honesty From Liz Warren

    Honesty seems to be her hallmark. So far she seems to be a pretty unrepentant straight-shooter.
    David G
    Harbor Woodworks
    https://www.facebook.com/HarborWoodworks/

    "It was a Sunday morning and Goddard gave thanks that there were still places where one could worship in temples not made by human hands." -- L. F. Herreshoff (The Compleat Cruiser)

    Comment

    • JBreeze
      Senior Member
      • Apr 2007
      • 1874

      #3
      Re: Some Honesty From Liz Warren

      I wonder why Grayson (D-FL) didn't sign it, nor Sanders (I-VT)? I always hoped the three of them would begin some sort of break-away group from the mainstream D's and R's, at least on domestic policy.

      The Krugman Krap was linked in this post, which didn't elicit much of a response in the bilge:

      Comment

      • Waddie
        Senior Member
        • Aug 2009
        • 9106

        #4
        Re: Some Honesty From Liz Warren

        Originally posted by JBreeze
        I wonder why Grayson (D-FL) didn't sign it, nor Sanders (I-VT)? I always hoped the three of them would begin some sort of break-away group from the mainstream D's and R's, at least on domestic policy.

        The Krugman Krap was linked in this post, which didn't elicit much of a response in the bilge:

        http://forum.woodenboat.com/showthre...86#post4248286
        This thread is Elizabeth Warren's response to Krugman's wishful pontificating.



        regards,
        Waddie
        I started with nothing and I still have most of it....

        Comment

        • pcford
          boatwright/film/video
          • Jul 2002
          • 9875

          #5
          Re: Some Honesty From Liz Warren

          Unfortunately, she is weak on foreign affairs, in particular the Middle East. She defends "Israel's right to defend itself."

          Comment

          • ljb5
            Senior Member
            • Jan 2004
            • 18136

            #6
            Re: Some Honesty From Liz Warren

            The Martens-Martens article makes it sound like there is some big fight between Krugman and Warren.

            I'm not sure that's really the case. Warren's letter doesn't even mention Krugman, and they both seem to be concerned about the same question: How to protect the financial system from collapse without rewarding bad behavior or encouraging risk.

            The article mentions that 11 big banks had their "living wills" rejected by Federal regulators for being inadequate. The authors characterize this as a stunning blow to Krugman's argument, but I really think it might be the other way around.

            The fact that the Feds can now order banks to develop more robust wind-down plans would seem to be a benefit to us, the consumer, and speak well of the power of fed authority.

            I'd be much more worried if the feds just accepted any wind-down plans the banks submitted, so I take the fact that they rejected some of them as a good sign, not a bad sign.

            Warren may have a good point that the Feds were too free to lend money to some banks during the crisis, but I don't see that as a rebuke of either Krguman or Dodd-Frank, which was, after all, passed after the worst of the crisis had passed.

            The Martens seem to have invented this narrative of "Warren vs. Krugman" which doesn't seem to exist in his article or her letter.
            ”If you look at it from a contextual standpoint, I think it's accurate. If you contextualize in concrete numbers fashion, it's not accurate."

            Comment

            • RonW
              Banned
              • Aug 2003
              • 10370

              #7
              Re: Some Honesty From Liz Warren

              And the bottom line is - the dodds -franks bill is a piece of garbage that will do grave harm to the U.S. economic system if not collapse it, and was written by the big banks lobbyists for the big banks to eliminate competition and receive bail outs..
              The only solution is to repeal dodd-franks and reinstate the glass stegall act before it is too late ..

              Comment

              • RonW
                Banned
                • Aug 2003
                • 10370

                #8
                Re: Some Honesty From Liz Warren

                Well put norman, check out these articles on economics and bank bailouts..

                Web of Debt Articles written by Ellen Brown


                and yes state run banks is a answer to the problem, and no it isn't socialism. We already have the flow of money controlled by the federal reserve.

                And state run banks could eliminate property taxes....it is a plus, except to the big bankers.......

                Comment

                • RonW
                  Banned
                  • Aug 2003
                  • 10370

                  #9
                  Re: Some Honesty From Liz Warren

                  Originally posted by Norman Bernstein
                  WHAT?

                  Be still, my beating heart!
                  I was taught to give credit where credit is due and it isn't often that you deserve it, but this time maybe a little..............

                  State run banks is being done in south dakota as I remember.....with great results.........

                  Comment

                  • hanleyclifford
                    low information voter
                    • Jun 2010
                    • 9272

                    #10
                    Re: Some Honesty From Liz Warren

                    Originally posted by Norman Bernstein
                    WHAT?

                    Be still, my beating heart!
                    I don't want to contribute to Norm's coronary but I too find myself liking her more and more. Eventually her work will expose and clarify the role of the FED in the plundering of the American people. After some experience in the Senate, could she be that populist candidate on the horizon who could bring down the plutocracy?
                    Conferences at the top level are always courteous. Name calling is left to the foreign ministers. (Averell Harriman)

                    Comment

                    • hanleyclifford
                      low information voter
                      • Jun 2010
                      • 9272

                      #11
                      Re: Some Honesty From Liz Warren

                      Originally posted by Norman Bernstein
                      It would be nice, but it's probably too much to hope for.

                      Besides, she's a progressive populist, not a libertarian or conservative populist, which undoubtedly means that she'll take some positions which will have your head exploding
                      You're right, Norm; she is an enemy of the 2nd amendment (among other things), but it's still a pleasant thought on a bright summer morning (that someone with a little power also cares about people).
                      Conferences at the top level are always courteous. Name calling is left to the foreign ministers. (Averell Harriman)

                      Comment

                      • wizbang 13
                        Senior Member
                        • Oct 2009
                        • 24813

                        #12
                        Re: Some Honesty From Liz Warren

                        I count 5 senators

                        Comment

                        • John Smith
                          Senior Member
                          • Mar 2009
                          • 48714

                          #13
                          Re: Some Honesty From Liz Warren

                          Originally posted by pcford
                          Unfortunately, she is weak on foreign affairs, in particular the Middle East. She defends "Israel's right to defend itself."
                          I think it is a flaw in our system that we expect any one person to have expertise in all areas. My hope is that those in elected office (who are not scientists, for example) will avail themselves of people who are experts in whatever the area expertise is needed in. This is how our elected officials can, and should, operate so they have sufficient actual data on which to make informed decisions.

                          They also need the ability to accept the facts the experts present even when they are inconvenient.

                          CAUTION: I witnessed "experts" testifying some years back about the Postal Service. Three of them were impaneled to provide information. They all testified that postal employees got paid significantly more than people doing similar work in the private sector. The next witness was from UPS. He testified UPS pays better and offers better benefits than the USPS. The committee member called the first three experts back and asked what they considered "similar work in the private sector?" When they listed Burger King, Wendy's, etc. the committee threw out their entire testimony.
                          "Banning books in spite of the 1st amendment, but refusing to regulate guns in spite of "well regulated militia' being in the 2nd amendment makes no sense. Can't think of anyone ever shot by a book

                          Comment

                          • John Smith
                            Senior Member
                            • Mar 2009
                            • 48714

                            #14
                            Re: Some Honesty From Liz Warren

                            Originally posted by RonW
                            And the bottom line is - the dodds -franks bill is a piece of garbage that will do grave harm to the U.S. economic system if not collapse it, and was written by the big banks lobbyists for the big banks to eliminate competition and receive bail outs..
                            The only solution is to repeal dodd-franks and reinstate the glass stegall act before it is too late ..
                            I agree, but you don't first repeal Dodd/Frank. Congress comes up with a single bill that replaced Dodd/Frank with the re-instatement of Glass/Steall. You might get this congress to repeal the one, but if you think they'll then pass a bill re-instating the other you're dreaming.

                            It's just like healthcare. If you want to replace Obamacare, write the bill and pass the legislation so the new law replaces the old.
                            "Banning books in spite of the 1st amendment, but refusing to regulate guns in spite of "well regulated militia' being in the 2nd amendment makes no sense. Can't think of anyone ever shot by a book

                            Comment

                            • John Smith
                              Senior Member
                              • Mar 2009
                              • 48714

                              #15
                              Re: Some Honesty From Liz Warren

                              Originally posted by hanleyclifford
                              You're right, Norm; she is an enemy of the 2nd amendment (among other things), but it's still a pleasant thought on a bright summer morning (that someone with a little power also cares about people).
                              Which would you prefer, if you had to choose: Your pension being safe and secure, or your right to own an assault weapon being safe and secure?
                              "Banning books in spite of the 1st amendment, but refusing to regulate guns in spite of "well regulated militia' being in the 2nd amendment makes no sense. Can't think of anyone ever shot by a book

                              Comment

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