Financial Crisis

Financial Reform Heads for Home

May 7, 2010

In following the tic toc daily developments of the financial reform debate, Brain Beutler makes that following observation over at Talking Points Memo:

Anti-Wall Street sentiment is so strong and Republicans have such a weak hand that Democrats in the Senate are suddenly finding themselves strengthening the financial reform bill with new amendments and beating back GOP attempts to weaken it.

He details the Sanders amendment which would open up the Federal Reserve to greater scrutiny. The Fed has been one of the least transparent institutions and calls for greater oversight have never gotten much traction. Until now. A vote is scheduled for Monday on this amendment and I think it will generate some weekend talk show discussion. It will be interesting to see what the party breakdown is here. Will it cut across party lines, break down the usual partisan divide, or become more of a landslide vote?

For me, one of the most consequential votes was taken yesterday where the Shelby alternative to the consumer financial protection bureau was voted down by a unified Democratic caucus and joined in by Republican Seantors Grassley and Snowe. The Shelby approach proposed a weaker oversight body and was seen as a step backward by most consumer advocates. This was a very telling vote, which indicated for me that the final vote on the whole package is headed for home. It may take a few more swerves along the way, and certainly continues to bear close watching, but there is momentum to get something done which avoid the President's veto pen.  

Goners

  • By
  • Christopher Hayes,
  • New America Foundation
May 17, 2010 |

Until last week, I'd never heard of "IBGYBG." But during the Senate Permanent Subcommittee on Investigations' eye-opening hearings into ratings agency malfeasance, former Moody's senior credit officer Richard Michalek introduced me to it while testifying about the perverse incentives that dominated the industry. On the investment bank side, he said, bankers were looking to score the one-time fee from whatever securitization deal they were asking the agency to rate, and move on to the next deal.

Legalization Must Be Part of Immigration Reform

  • By
  • Tomas Jimenez,
  • New America Foundation
April 29, 2010 |

Opponents of comprehensive immigration reform argue that legalization rewards bad behavior. They contend that illegal immigration is a crime that merits punishment and expulsion, not amnesty. The logic is that if we respond with tough enforcement, illegal immigrants will finally get that they aren't welcome here and go back to their home countries. This kind of reasoning is what's behind laws like the one recently passed in Arizona, which requires law enforcement personnel to determine whenever possible the immigration status of suspected illegal immigrants.

Reforming Wall Street Starts at Main Street

April 30, 2010
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Originally posted at Huffington Post

In Washington these days, not much is assured. Senate Republicans have ended their filibuster of financial reform, but this just allows debate on the bill to go to the Senate floor. There remains plenty of opportunity for opponents to make more mischief. Still, all signs point to a deal.

The conventional political theory behind getting a financial reform bill through Congress runs something like this. Backed by the Administration, Democrats have proposed changing the rules governing the financial sector which are opposed by the big banks and their allies but their influence is being offset given their contributing role in the Great Recession. Republicans in Congress, who have not wanted to see the President succeed in anything, are reticent about blocking legislation that can be billed as taking on Wall Street, especially as a fall election looms where they are anticipating significant gains. That’s a recipe for finding common ground on the political playing field.

But what’s in the bill? After all, the details surely must matter and will determine whether it is a deal worth taking. {I previously outlined five benchmarks for President Obama to consider before he signs on the dotted line}. What we do know is that the current regulatory regime did not include sufficient safeguards to prevent a near total collapse of the national economy nor protect households from being pushed into products they did not need nor understand. Risks of financial instability were exacerbated rather than contained. Priority number one for reform should not focus on finding a political compromise but making sure we don’t repeat the economic experience of the last few years. That is hardly a partisan position. And if we look closer at some of the major provisions of the bill under consideration, they also potentially create common ground on the policy landscape and point toward getting a bill done now that is not just politically wise, but moves the ball down the policy playing field as well.

Preventing a Future Foreclosure Crisis

April 29, 2010

We know that the combination of the popping of the housing bubble and the Great Recession has produced a wave of foreclosures, defaults, and left many homeowners underwater owing more on their homes than they are worth.

Monica Potts of the America Prospect shines some light on a pretty revealing study that examined foreclosure rates among lower-income borrowers.

Why Trade Figures Do Not Prove China Is Rebalancing

  • By
  • Samuel Sherraden,
  • New America Foundation
April 27, 2010

China’s trade surplus declined in the first quarter, and during March the country ran a deficit of $7.2 billion, its first monthly trade deficit since 2004. Contrary to some analyses, this is not proof that the economy has made significant progress toward rebalancing or a reason for the United States to back away from pushing China on yuan appreciation.

Bank Reform Should Only Be the Start

  • By
  • Michael Lind,
  • New America Foundation
April 27, 2010 |

The deregulation of the American financial industry that began in the 1970s is now widely viewed as a disaster. Even Bill Clinton has admitted that the supporters of deregulation in his administration, like Robert Rubin and Larry Summers, gave him bad advice.

Europe's Answer to Wall Street

  • By
  • Steven Hill,
  • New America Foundation
April 21, 2010 |

A year and a half after an economic earthquake shook the world, the so-called experts are still trying to figure out what happened and how to move forward. In the shadows of that confusion, new economic models are beginning to find traction.

The Short Game

  • By
  • Tim Fernholz,
  • New America Foundation
March 16, 2010 |

In the prologue to The Big Short: Inside the Doomsday Machine, Michael Lewis explains that he envisioned his first and perhaps most famous work, Liar's Poker, as a grim obituary for an industry that rewarded inexperience and greed. However, the byzantine banking industry continued to flourish, and young readers wrote Lewis to ask how they, too, could get into the game. His disappointment is palpable.

The Fine Print on Financial Reform

  • By
  • Tim Fernholz,
  • New America Foundation
March 17, 2010 |

On Monday, President Barack Obama released a complimentary statement about Sen. Chris Dodd's latest proposal for financial reform, singling out its creation of "a new consumer financial protection agency to set and enforce clear rules of the road."

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