Free Markets, Free People
As Dale has mentioned before, ginning up support for massive federal expenditures and deepening deficits was much easier for FDR because he had Nazis. Obama does not have any such luxury, so he has to invent an equivalent enemy. Luckily for him, decades of propaganda have cemented the idea into many heads that capitalism=rightwing=nazi, leading to the inexorable conclusion that anyone or thing whose primary purpose is to make profit is dangerous and must be controlled.
Dovetailing nicely with that need is the meme that deregulation is to blame for the current financial mess. Although it’s a fairly ridiculous claim (as I’ve pointed out before), that won’t stop “studies” like this from being published and reported on:
$5 BILLION IN POLITICAL CONTRIBUTIONS BOUGHT WALL STREET FREEDOM FROM REGULATION, RESTRAINT, REPORT FINDS
Steps to Financial Cataclysm Paved with Industry Dollars
March 4 – The financial sector invested more than $5 billion in political influence purchasing in Washington over the past decade, with as many as 3,000 lobbyists winning deregulation and other policy decisions that led directly to the current financial collapse, according to a 231-page report issued today by Essential Information and the Consumer Education Foundation.
The report, “Sold Out: How Wall Street and Washington Betrayed America,” shows that, from 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made $1.725 billion in political contributions and spent another $3.4 billion on lobbyists, a financial juggernaut aimed at undercutting federal regulation. Nearly 3,000 officially registered federal lobbyists worked for the industry in 2007 alone. The report documents a dozen distinct deregulatory moves that, together, led to the financial meltdown. These include prohibitions on regulating financial derivatives; the repeal of regulatory barriers between commercial banks and investment banks; a voluntary regulation scheme for big investment banks; and federal refusal to act to stop predatory subprime lending.
The quote above comes directly from the report’s financial backers, Essential Information and the Consumer Education Foundation. The former is a non-profit that was created by Harvey Rosenfield, a lawyer who also controls the advocacy group Consumer Watchdog, formerly known as the Foundation for Taxpayer and Consumer Rights. The latter is an entity created by Ralph Nader. None of that information is found either in the press release, or in the news stories reporting on (i.e. quoting) the release.
The organizations are a nonpartisan, nonprofit advocacy groups which push for stronger consumer protection laws and to curb “excessive corporate power.”
The report alleges that excessive deregulation of the financial sector combined with undue influence from the billions spent in lobbying and political contributions resulted in the current financial crisis.
The two men behind the report are California lawyer Harvey Rosenfield of the nonprofit Consumer Education Foundation and Robert Weissman of Essential Information, a Washington nonprofit “that seeks to curb excessive corporate power.”
The report argues that the lobbying and contributions kept financial derivatives from being regulated, led to the repeal of regulatory barriers between commercial banks and investment banks and kept the government from stepping into halt predatory subprime lending.
The remainder of the reporting is merely quoting and paraphrasing the press release. Absolutely zero analysis of the actual report is offered. Why would they report anything else? Well, just looking at the press release provides one clue:
Financial deregulation led directly to the current economic meltdown. For the last three decades, government regulators, Congress and the executive branch, on a bipartisan basis, steadily eroded the regulatory system that restrained the financial sector from acting on its own worst tendencies. “Sold Out” details a dozen key steps to financial meltdown, revealing how industry pressure led to these deregulatory moves and their consequences:
1. 1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
2. Regulatory rules permitted off-balance sheet accounting — tricks that enabled banks to hide their liabilities.
3. The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives — which became the basis for massive speculation.
4. Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
5. The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher levels of debt.
6. Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve requirements, based on their internal “risk-assessment models.”
7. Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or even enforce existing ones.
8. Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
9. Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
10. Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
11. The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
12. Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms.
The damning list offers only one instance of actual deregulation (the Glass-Steagall Act), at least seven instances of regulation that the authors simply disagree with (nos. 2-5, and 8-10), one claim each of “global regulators” and ratings agencies failing to do their respective duties (nos. 6 and 12), and two allegations that federal regulators didn’t pursue their jobs aggressively enough (7 and 11). So, despite the bold claim that “Financial deregulation led directly to the current economic meltdown,” the authors produce almost no evidence to support their conclusion.
It seems like that may have been a little more newsworthy than simply regurgitating the press release.
Then there is the fact that a Ralph Nader organization is partly responsible for the funding. Not only has the man run for president four times, one of those times perhaps leading to the election of George W. Bush, he’s notorious for his left-wing politics, including having a serious distaste for corporate America and capitalism.
Could be relevant, no?
But the real failure of journalism here was to take anything that Harvey Rosenfield has to say at face value.
The Foundation for Taxpayer and Consumer Rights (FTCR) [owned by Essential Information creator, Harvey Rosenfield] has decided to re-brand itself as “Consumer Watchdog.” Will a simple name change help shore-up the eroding reputation of this “consumer group?”
Few days pass without someone from FTCR pontificating in a newspaper story or TV report. Agents of this organization often are quoted — without explanation of their credentials — about auto, fire or health insurance, gasoline pricing, stem-cell research, or just about any public policy debate on the FTCR’s mind.
Behind the pithy quotes from FTCR’s leaders lies an organization with too much to hide and too many faults to be taken seriously anymore. It has survived by quietly pocketing millions of dollars in fees stemming from an initiative it wrote and sponsored nearly two decades ago. Along the way, it has engaged in hypocritical and speculative stock trading, enjoyed the secret patronage of wealthy trial donors, and either cozied up to or bullied politicians. All of this came despite operating under IRS rules as a “public-benefit” charity.
Of course, the public has no idea what is really motivating FTCR because its agents refuse to disclose their financial backers. Their reasons for hiding the facts are insulting to the average Californian’s intelligence.
FTCR declined to release a list of donors on its website by ludicrously equating their work to the civil rights movement in the South. It’s refusal to list details about its financial backers is particularly galling since FTCR spends a lot of time lambasting politicians for alleged corruption surrounding their own political donations.
One source of income is clear, thanks to some available public disclosure forms. Following the disastrous 1994 Northridge earthquake, founder Rosenfield extracted $5 million in a consumer-protection settlement with Allstate Insurance. The money was placed in a new group he controls, the Consumer Education Foundation, which was supposed to prevent the kinds of insurance disasters that followed the Northridge quake.
But nearly a decade after the group was formed, its biggest accomplishment appears to be paying Rosenfield a $100,000 salary and writing a few grant checks … including to Rosenfield’s own FTCR, to fund its operations. One wonders what the judge in the Allstate settlement would think about this cozy relationship, let alone why Northridge consumers have yet to see much benefit from the $5 million that was paid out supposedly for the public good.
It gets even more absurd.
Rosenfield’s Consumer Education Foundation invested some of its Northridge windfall in Enron stock — the Texas company that bilked California consumers out of billions of dollars. This laughable investment, which the CEF was forced to reveal in disclosure statements, is almost too incredible to believe. The “consumer” foundation put its money in one of the biggest consumer ripoff companies in U.S. history.
Enron wasn’t the only hypocritical stock purchase made by the Rosenfield’s Consumer Education Foundation. The group purchased stock in Abbott Labs, Amgen, Merck, Pfizer, Idec Pharmaceuticals, Johnson and Johnson, and Proctor and Gamble. Meanwhile, FTCR would soon get busy lambasting politicians for accepting campaign donations from these same companies. And while FTCR has lashed out at automobile and chemical companies, the “consumer” foundation has invested in Clorox, DuPont, General Motors, Ford Motors, and Toyota Motor Credit.
There’s more on Rosenfield’s endeavors here (scroll through the comments to the ftcrfollies.org stuff), but the original site is now defunct, so caution is warranted.
In any case, it seems that Rosenfield’s alleged background as an agent provocateur should raise enough red flags to warrant at least a mention that perhaps the report he’s funded (written?) should be taken with a grain of salt. Instead, we get news stories that basically repeat exactly little more than the juiciest allegations from the press release, absolutely zero analysis of the actual report (or the press release for that matter), and nothing more than the bare bones information regarding the provenance of the report.
With apologies to Mike Judge, “What would you say ya do here, MSM?”