Obama and Jamie Dimon Team Up, Democrats in Revolt
December 13, 2014
The LaRouche Political Action Committee and LaRouche movement warned Congress and the American people: it's Glass-Steagall or destruction. This week, when Obama, Boehner, and Wall Street conspired to put all swap derivatives under protection of the FDIC and ram it through in the spending bill, the Congressional Democrats revolted and began denouncing Obama in unprecedented terms.
Obama's and Wall Street's treason was brought home on Dec. 11, when JP Morgan's Jamie Dimon, Barack Obama, and GOP Speaker of the House John Boehner joined hands to "whip" the omnibus spending bill (which they dubbed "cromnibus") through the Congress with its poison pill that bails out Wall Street's credit swaps derivatives by repealing the only "fig leaf" of Dodd Frank—Section 716 (which had been put in in 2010 by then Sen. Blanche Lincoln [d-ar]). The bill passed at about 9:45 PM on Dec. 11, only after Boehner had shut down the House for a 7-hour recess because he and Obama and Wall Street did not have the votes to pass the $1.1 trillion spending bill.
Earlier, the vote on the rules that allowed the bill to be voted on only squeaked by with a vote of 214-212. And now, Rep. Marlin Stutzman (R-IN), one of the final 2 votes that gave Boehner the rules majority, has charged that the GOP leaders lied to him. They told him that the omnibus bill was "dead" and would be replaced by a "continuing resolution."
In the final vote, the bill was passed, 219 to 206, with 57 Democrats joining the Obama treason, while 67 Republicans voted against the bill with the progressive Democrats.
Sen. Elizabeth Warren (D-MA) kicked off the battle with a floor speech on Dec. 10 that blasted the bill as "the worst of government for the rich and powerful," which she followed up with sending the link to the members of the House, and then actually lobbying the House members to kill the spending bill if the bailout measure were not removed. She took to the floor of the Senate again on the 11 and again yesterday, Friday afternoon and unveiled for the world to see how pervasive the role Citigroup plays in running the U.S. Federal government.
Senator Warren is the lead sponsor of S. 1282, the "21st Century Glass-Steagall Act."
In this battle, Warren worked closely with Rep. Maxine Waters (D-CA), who broke her recent record of backing Obama and went to war against the White House by—among other means—calling a resistance meeting in her offices that was attended by 20 Members, to vote 'no'.
Some of the highlight statements and actions appear below:
MAXINE WATERS: The Hill reported on Dec. 11 that
"With just hours to go before a scheduled government shutdown, the Democrats launched a lobbying blitz to counter calls made by Obama and other White House officials urging passage of the bill."
"We don't like lobbying that is being done by the president or anybody else that would allow us to support a bill that ... would give a big gift to Wall Street and the bankers who caused this country to almost go into a depression," Waters said. "So I'm opposed to it and we're going to fight it."
Waters said she and other representatives who met at her office, including Dem Caucus Chairman Xavier Becerra (D-Calif.), "divvied up a list of members" and called them to oppose the bill and oppose Obama, The Hill said.
"We're fighting anybody who is lobbying to tell people to vote for this bill, if the president is lobbying, we do not like it, and we're saying to our members, 'Don't be intimidated by anybody."'
After the narrow vote, Waters against attacked Obama and JP Morgan Chase's CEO:
"I know that the president was whipping and he was supporting this bill, and I know that Jamie Dimon was whipping," Waters said, reported the Wall Street Journal. "That's an odd combination."
NANCY PELOSI: In a floor speech and a written message to Democrats, Pelosi told them,
"It is clear from this recess on the floor that the Republicans don't have enough votes to pass the cromnibus,"
reported Politico on Dec. 11.
"We're being asked to vote for a moral hazard. Why is this in an appropriations bill? Because it was the price to pay to get an appropriations bill .... This is a ransom, this is blackmail. You don't get a bill unless Wall Street gets its taxpayer coverage."
"We are being blackmailed, being blackmailed, to vote for an appropriations bill. I would not put the name of my constituents, in my district, next to this bill,"
Pelosi said during a speech on the House floor, Politico added.
ALAN GRAYSON (D-FL) told the Huffingon Post's Zach Carter, who broke the story, that it was
"a good example of capitalism's death wish."
Dozens of other Democrats were working the phones and mobilizing against the repeal of the ban on derivatives bailouts, including some who made clear to Warren and others: "This is another Glass-Steagall moment."
SEN. CARL LEVIN (D-MI) made a Dec. 10 floor statement that not only opposes the derivatives amendment but pointedly goes after JPMorgan Chase.
"A couple years ago, JPMorgan Chase lost billions of dollars on a bad bet in the credit derivatives markets. The Permanent Subcommittee on Investigations, which I chair, conducted an extensive investigation and issued a 300- page bipartisan report.... JPMorgan's risky trading by its bank was a disaster—costing the bank over $6 billion. And it was receiving the taxpayer subsidy the whole time."
Among Republicans:
SEN. DAVE VITTER (R-LA) called the bill
"a Christmas presents to the megabanks and Wall Street," reported TruthOut.
MARLIN STUTZMAN (R-IN) put out a statement on Thursday night, reported National Review, Dec. 12, that says,
"I was very surprised and even more disappointed to see the cromnibus back on the floor....The American people deserve better."
"Stutzman backed the rule [to allow the vote on the omnibus] at the last minute after leadership told him that they would pull the cromnibus, once the rule was passed, and replace it with a short-term continuing resolution favored by rank-and-file conservatives. With the last-minute help of Stutzman and outgoing Representative Kerry Bentivolio (R., Mich.), leadership won the vote 214-212," wrote National Review.
"I supported the Rule, because I was informed by leadership that the cromnibus was dead and a short term CR would take its place," Stutzman said.
A well-informed Washington intelligence source said that it may appear that Wall Street won in the short term, but this only opens the door for Glass-Steagall. "Dodd Frank is a piece of garbage that should be totally repealed," he said. "This vote adds more urgency and clarity to Glass-Steagall. There's nothing left to hide behind, and you see that in the population."
SUPPORTING MATERIAL
Nothing 'Almost as Good as Glass-Steagall' Is Left
The "Cromnibus" or "poison pill" spending bill repealed Section 716 of the Dodd-Frank Act. This section was the whittled-down nub of what originally was the 2010 (Sen. Blanche) Lincoln Amendment, which was a requirement that Wall Street banks do ALL of their derivatives trading in separate subsidiaries, separately capitalized. So it began as something "almost as good as Glass-Steagall."
Glass-Steagall did not, and would not allow commercial banks in the Federal Reserve System to conduct derivatives trading, except for — if they were permitted "wealth management" — futures and options trading for their clients and with their clients' money. It would not allow them any connection — neither by cross-management, capitalization, control, nor even by lending or credit support — to securities or derivatives dealers.
The Lincoln Amendment passed in the Senate bill after a long fight, was opposed by the Obama White House and Barney Frank, and removed in conference. Section 716 was substituted, and then it was claimed that it plus the Volcker Rule were "just as good as Glass-Steagall."
Under Section 716, the banks, which were doing ALL their derivatives trading in FDIC-insured units — including Morgan Stanley and Goldman Sachs, which had been granted holding company status, founded dummy "commercial bank" units, and moved their derivatives books there — would have to "push out" commodity derivatives and uncleared credit default swaps (CDS) to separate units without FDIC insurance. This is a total of about $35-40 trillion of the overall $700-plus trillion in derivatives exposure (using the Bank for International Settlements' version). The commodity derivatives are $25-30 trillion, and Goldman, Morgan Stanley, and Citibank have the lion's share of exposure. Of the uncleared CDS, it's JPMorgan Chase all the way.
MIT economist and banking expert Simon Johnson clarified on Dec. 11: "Under Section 716, interest rate swaps, foreign exchange derivatives, and cleared credit derivatives can remain on the balance sheet of the insured bank. This is almost all derivatives. And hedging of risks by banks using derivatives is most definitely allowed" by Section 716 [emphasis added].
So, under this latest "as good as Glass-Steagall," 90-plus percent of all derivatives exposure has remained with banks insured by FDIC; i.e., in a crisis, insured by taxpayer funds. And so are, still, all the money-market mutual funds run by the banks and the shadow banks.
Now Wall Street has made clear that even this was not enough taxpayer bailout insurance for them. Why? The $35-40 trillion in derivatives which the late Section 716 supposedly excluded from bail-out, were the riskiest derivatives exposure the big banks have. And $5-10 trillion of that exposure is to energy derivatives, which face blowout in the immediate future due to the sudden oil price collapse. These will now be bailed out.
Unless, now, the real Glass-Steagall Act appears.
Elizabeth Warren: “The American People Did Not Elect Us To Stand Up for Citigroup.”
Sen. Elizabeth Warren delivered an eight-minute speech on the floor of the Senate on Dec. 10, urging the House, and especially its Democratic members, to refuse to vote for the budget deal until its provision guaranteeing government support for financial derivatives were repealed. She posted the video of her remarks to her Senate webpage, and urged people to share it with their friends "right now." The transcript of those remarks, slightly shortened, follows:
Mr. President, I come to the floor today to ask a fundamental question: Who does Congress work for? Does it work for the millionaires, the billionaires, the giant companies with their armies of lobbyists and lawyers? Or does it work for all of us?
...And now the House of Representatives is about to show us the worst of government for the rich and powerful. The House is about to vote on a budget deal — a deal negotiated behind closed doors that slips in a provision that would let derivatives traders on Wall Street gamble with taxpayer money and get bailed out by the government when their risky bets threaten to blow up our financial system.
These are the same banks that nearly broke this economy in 2008 and destroyed millions of jobs. The same banks that got bailed out by taxpayers and are now raking in record profits. The same banks that are spending a whole lot of time and money trying to influence Congress to bend the rules in their favor.
You will hear a lot of folks say that the rule that will be repealed in the Omnibus is technical and complicated, and that you shouldn't worry about it because smart people who know more than you about financial issues say that it's no big deal. Don't believe them.
Actually, the rule is pretty simple. Here's what it's called — the rule that the House is about to repeal — and I'm quoting from the text of Dodd-Frank: "PROHIBITION AGAINST FEDERAL GOVERNMENT BAILOUTS OF SWAPS ENTITIES." What does it do? The provision that's about to be repealed requires banks to keep separate a key part of their risky Wall Street speculation so that there's no government insurance for that part of their business....
We put this rule in place after the collapse of the financial system because we wanted to reduce the risk that reckless gambling on Wall Street could ever again threaten jobs and livelihoods on Main Street. We put this rule in place because people of all political persuasions were disgusted at the prospects of future bailouts. And now, no debate, no discussion, Republicans in the House of Representatives are threatening to shut down the government if they don't get a chance to repeal it.
...Wall Street spends a lot of time and money on Congress. Public Citizen and the Center for Responsive Politics found that in the run-up to Dodd-Frank, the financial services sector employed 1,447 former federal employees to carry out their lobbying efforts — including 73 former Members of Congress. And according to a report by the Institute for America's Future, by 2010, the six biggest banks and their trade associations employed 243 lobbyists who once worked in the federal government, including 33 who had worked as chiefs of staff for members of Congress and 54 who had worked as staffers for the banking oversight committees in the Senate and the House. That's a lot of former government employees — and senators and Congressmen — pounding on Congress to make sure the big banks get heard. No surprise that the financial industry spent more than $1 million a day lobbying Congress on financial reform....
And now we see the fruits of those investments.... According to documents reviewed by the New York Times, the original bill that is being incorporated into the House's spending legislation today was literally written by Citigroup lobbyists, who "redrafted" the legislation, "striking out certain phrases and inserting others."
It's been opposed by current and former leaders of the FDIC, including Sheila Bair — a Republican who formerly chaired the agency, and Thomas Hoenig, the current vice-chairman of the agency. For those who are keeping score, this is the agency that will be responsible for bailing out Wall Street when their risky bets go sour....
But this provision goes too far. Citigroup is large, and it is powerful. But it is a single, private company. It shouldn't get to hold the entire government hostage — to threaten a government shutdown — in order to roll back important protections that keep our economy safe. This is a democracy, and the American people didn't elect us to stand up for Citigroup. They elected us to stand up for all of the people.
I urge my colleagues in the House — particularly my Democratic colleagues, whose votes are essential to moving this package forward — to withhold support from it until this risky giveaway is removed from the legislation. We all need to stand and fight this giveaway to the most powerful banks in the country.
Time To Implement Glass-Steagall and Stop Wall Street's Blackmail of Congress
Huffington Post writer Robert Creamer launched a mobilization of progressives for Glass-Steagall and against Wall Street early on Dec. 11 with an article entitled, "Stop Congress from Eliminating Dodd-Frank Provision That Prevents Bail Outs of TBTF Banks." Creamer wrote:
"The Financial Modernization Act [that repealed Glass-Steagall] unleashed the explosion of speculation that — in just over a decade — led to the Great Recession.
"My wife, Congresswoman Jan Schakowsky, considers her vote against the repeal of Glass-Steagall one of the proudest votes of her Congressional career. She ranks it right up there with her vote against the Iraq War.
"This is another Glass-Steagall moment."
After writing that Wall Street can be beaten on this, and informing readers that Pelosi is opposing the measure, he said,
"If Democrats stand tall and support Leader Pelosi, they can stop this provision dead in its tracks. But you can't wait to act. The decision will be made today. Call your Members of Congress the moment you finish reading this article. Tell them to vote against the so-called 'Cromnibus' funding bill until the provision that allows for the bail out of big Wall Street banks is excised and sent to the shredder where it belongs."
David Stockman, the former Director of the Office of Management and Budget under President Ronald Reagan, wrote on his SeekingAlpha website on Dec. 11 also blasting the omnibus spending amendment, noting that Dodd-Frank
"and its incomprehensible 1,700 pages of legislative pettifoggery and 10,000 pages of implementing regulations that metastasize by the day" was useless.
"Instead, [congress] should have gone to the root of the problem and passed a Super Glass-Steagall that would have dismembered the giant banks by statutory edict, and kicked the Wall Street-based gambling houses like Citigroup out of the FDIC entirely. The fact is, deposit insurance has been coopted and abused by the Wall Street mega-banks for decades, and now stands as a vast perversion of what had actually been intended — misguided or not — way back in the dark hours of 1934."
In a rare intervention by an FDIC vice-chairman into a legislative vote, Thomas Hoenig put out a statement against the repeal of Section 716 put into the omnibus bill.
"In 2008 we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks. Section 716 of Dodd-Frank is an important step in pushing the trading activity out to where it should be conducted: in the open market, outside of taxpayer-backed commercial banks. It is illogical to repeal the 716 push out requirement."
He adds that these derivatives can go into the banks' affiliated "broker-dealer" entities "which are not as richly subsidized ... which explains these firms' resistance" to the "push out" from FDIC protection.
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