Republicans once again show their true colors: Dollar Green & White Collar

Posted on July 5, 2011

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The U.S. House of Representatives is once again abuzz with clamour. It seems – believe it or not – that there is an argument going on in the House that seems to be falling smack-square along partisan political lines.

Republicans are lining up with relish to repeal, weaken and in some cases outright abolish, the lion’s share of regulations, restrictions and controls against financial firms creating another economic meltdown – as well as the agencies that enforce them. And, as unusual as this may sound, it appears that Republicans are siding with the corporations.

{Sarcasm mode: Off}

Obama signed the banking and consumer protection measure 50 weeks ago, a keystone achievement that responded to the biggest financial crisis and most severe recession since the 1930s. It passed Congress with solid Democratic support and near-uniform party-line GOP opposition.

In its current configuration, the financial oversight law:

  • Created the Consumer Protection Agency to oversee mortgages, credit cards and other financial products (As of today, Republicans are trying to abolish the Consumer Protection Agency, or force all it’s policy decisions to be subject to Congressional approval, effectively stripping the agency of any enforcement authority).
  • Established a body of regulators to scan the economy for threats to the financial system (As of today, Republicans are trying to limit how and when regulators can be involved, and reduce regulatory control to federally subsidized entities only — i.e., all banks, insurance companies and investment firms that have paid back their TARP bailout funds would not be subject to regulation).
  • Required banks to hold back money for protection against losses (Republicans want the amount required to be severed by 66 percent).
  • Curbed the trading of derivatives, speculative investments partly blamed for the 2008 financial crisis (Republicans are arguing in favor of derivatives and speculative investments to be unregulated to “strengthen free-market capitalism.”)
  • Gave the Federal Reserve powers to oversee huge companies whose failures could jeopardize the entire financial system (Republicans argue that oversight of all financial firms should be left to the executives of those firms).

As of July 1st, out of an estimated 400 regulations that were to be written, 38 are complete – 15 of which are being challenged for reversal by Republicans. That leaves 362 enforcement measures still facing a delivery deadline. Ever-so-coincidentally, Republicans in the House are chomping at the bit to move that deadline date *UP* so they can declare the regulation initiatives to be failed, and thus unenforceable.

Republicans say the overhaul went too far and has saddled banks and other companies with “excessive requirements that unfairly harm their competitiveness.” The House Financial Services panel alone has held more than a dozen hearings on the law, in part to underscore the objections of House Financial Affairs Committee Chairman Spencer Bachus, who cries that “forcing banks to hold back capital as a hedge against losses — will hurt business.”

Bachus would like you to forget – or never learn if you already haven’t – that out of the $837 Billion in taxpayer bailouts give to the six largest banks in the country – money that was INTENDED to allow those banks to lend it out and stimulate the economy – only ELEVEN PERCENT was actually lent, and the majority of that was given to subsidiary companies that already had pre-existing funding.

But don’t take my word for it. Look at the new report on “Troubled Asset Relief Program: Status of Programs and Implementation of GAO Recommendations” from the General Accounting Office which shows that from October 2008 and December 2010, out of $837 Billion:

  • A total of $439 Million has been lent by banks to ordinary citizens with less than $100,000 in annual income;
  • A total of $337 Million has been used to modify existing mortgages on homes costing less than $500,000;
  • and a total of $254 Million has been used to issue new loans from the Small Business Association.

That’s $1.03 Bllion … out of $837 Billion.  That’s 1.2 percent. So where did the other $836 Billion go?

  • $681 Million was given out in 2009 as bonuses to the executives of the companies that were bailed out;
  • Another $514 Million was given to those same executives in bonuses in 2010;
  • $900 Million was spent on “structured account maintenance” (I can’t seem to find a definition for that on Google);
  • $109 Million was spent on “public information initiatives” (i.e., “advertising”);
  • $330 Million was spent on “legal and administrative costs” (i.e., lawyer fees);
  • And … I hope you’re sitting down … a grand total of $538 Billion … BILLION … is sitting in the cash reserve accounts of the top 11 corporations that received TARP money.  It hasn’t been distributed anywhere. It’s just sitting there, collecting interest, which doesn’t have to be paid back to the government.

And yet, somehow, Bank of America and Wells Fargo and JP Morgan Chase are scratching their heads and wondering why they’re being fined between $6.2 and $8.75 Billion for “not distributing TARP funds in the manner proscribed.”

A very high-level breakdown of the highest profile funding initiatives in the TARP program are:

  • Bank Bailouts: $250 billion committed. Expected repayments: almost everything. Expected profits: $16 billion so far.
  • Auto Bailouts: $82 billion committed. Expected repayments: $55 billion. Expected losses: $27 billion.
  • AIG Bailout: $70 billion committed. Expected repayments: $25 billion. Expected losses: $45 billion (Remember, last week AIG CEO Robert Benmosche said the company should be allowed to self-regulate).
  • Housing: $30 billion committed. Expected repayments: None. Expected Losses: $30 billion.
  • Public-Private Investment Program (purchases of toxic assets from banks, TARP’s original purpose): $22 billion committed. Expected repayments: $21.5 billion. Expected losses: $500 million.

The financial industry leans Republican in its campaign contributions but not overwhelmingly. Sixty-one percent of the $9 million that commercial banks gave federal candidates for the 2010 elections went to Republicans, while 54 percent of the securities and investment industry’s $9 million went to Democrats, according to the nonpartisan Center for Responsive Politics.

Democrats charge – apparently quite accurately so – that Republicans want to “bring back the days of unrestrained excess, deception and de-regulation of Wall Street.” The mailing called it “payback to their big contributors in the financial services industry.”

Imagine the surprise that Republicans want to drastically cut the budgets of agencies that are supposed to enforce the overhaul. The highest-profile fight has been over Elizabeth Warren, Obama’s eminently qualified and experienced nominee to be the first full-fledged and empowered Director of the new Consumer Protection Bureau.

Following a May clash between Warren and a House subcommittee chairman, House Oversight Committee Chairman Darrell Issa, R-Calif., announced his intentions to question the “Harvard law professor and long-time consumer activist” at a July 14 hearing about her role shaping the new agency. I expect the car-salesman-smiled Issa will be part of the discussion panel on “Real Time with Bill Maher” once again this week (his umpteenth appearance on the show) to “explain where you misunderstand.”

Meanwhile, 44 GOP senators have promised to block a vote on any nominee unless the bureau is made “accountable to the American people” by replacing the director with a board of directors and giving Congress control over its budget. Forty-one senators can prevent a nomination from coming to a vote.

In short, Republicans do not want the Director of the primary consumer protection enforcement agency to have any consumer protection enforcement authority.

Besides trying to emasculate the Consumer Protection Bureau and wanting to limit the bureau’s budget to $200 million, well below the $329 million that’s been called for, Republicans want to deny the Securities & Exchange Commission more than 30 percent of the budget it requested. The House has voted to reduce the budget of the Commodity Futures Trading Commission, which oversees derivatives, to $171 million, less than two-thirds of the $560 Million called for.

Republicans cast the cuts as part of their deficit-cutting drive, but Democrats say the reductions are designed to obstruct the new law. Given that all the most egregious and drastic cuts seem to be against the areas of government designed to prevent another TARP bailout from being necessary, and to restrict corporations’ ability to swindle, lie and cheat and then reward themselves for doing so … which do you think is the more likely scenario?

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