Democracy Sausage

 

“If enacted, Brown-Kaufman would have broken up the six biggest banks in America,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

 

I’d love for this quote to be the epitaph for this administration.

 

This open gloat that “We could have fought for the people and chose to fight against them.” It should be applied not just to the Kaufmann-Brown Break-Up-the-Banks amendment, but to everything (not an exhaustive list, but just some highlights) – single-payer instead of handing over the American people as a cash cow to the insurance gangsters, ending the war instead of escalating it, restoring civil liberties instead of further assaulting them, restoring the rule of law instead of further destroying it, breaking our captivity to oil and the oil rackets instead of tightening the bonds, ending corporate welfare instead of opening the sluice gates even wider, smashing all rackets instead of further entrenching them, eradicating the finance parasite instead of defending and further empowering it, thereby guaranteeing that the final crash and Depression will be as destructive and painful as possible.

 

“If enacted, Brown-Kaufman would have broken up the six biggest banks in America,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

 

That brings us to the sham finance sausage squeezing through the corporate congressional processors. Sinclair’s descriptions in The Jungle are apt but as metaphors still fall short of really capturing the evil and gutter repugnance of this magnitude of crime in action, the utter subhuman smallness of the criminals involved, the blackness of the primate heart.

 

They still keep trying to pretend. Today we learn that the conferencers really want an expanded Fed audit. But we already know that the Senate rejects this. That’s why Sanders had to pre-gut his amendment to even get a vote. (And what a vote! 96-0. It’s not just Soviet elections and Nazi plebiscites which can do that.) So this is just Frank putting on a show for the loser “progressives” in the House, so they can feel validated before they cave in and vote for a gutted audit or none at all.

 

The record is almost a clean sweep – this sausage-maker expelled all actual meat and squeezed together only the most filth-ridden fragments of snout, fatback, entrails, feces……

 

1. The critical thing is of course breaking up the Too Big To Fail banks. This was rejected completely in the form of the Kaufmann-Brown amendment. As we see with his self-written epitaph, the Obama administration is bragging about having killed it. Here Obama is eager to take personal responsibility.

 

Right there, it’s already game over. So long as the rackets exist, they will function as an extortion racket and general arsonist, raised to the level of tyranny. This is Bailout America. The 96-0 vote can stand in as a symbolic 30s style plebiscite, to give us that old European flavor.

 

2. Second most important would be derivatives reform, and here true reform would be nothing less than demolition of the casino. Only legitimate hedging by legitimate businesses should have legal status, while all mere betting should be relegated to the back alleys where it belongs. Outlaw all speculation. Simple bucket laws, and non-enforcement of sham “contracts” which are nothing but infinitely more destructive versions of sports betting, are what we need.

 

The bill does nothing remotely like this. The House version pretended, not to outlaw speculation but merely to place it on public exchanges. But even this meager measure was gutting by exempting, not just legitimate hedging, but “currency hedging”, which can pretty much be defined to include anything and everything. Which was the intent.

 

The Senate version, pushed by Blanche Lincoln under the duress of her primary campaign, is also loaded with loopholes and Trojan horses. But it does contain one strong piece – banks who want to play in the casino would have to give up their Fed window access. In other words, you can be a gambler or a welfare queen, but not both.

 

That this is the only piece in the entire mess with real bite is evidenced by the report that the banks are willing to concede the sham version of the “Volcker Rule” in order to focus their energies on defeating this gambling restriction. How can the congress possibly contemplate not letting the banksters keep playing casino games with free public money? That would strike at the core of their business model. Capitalism, right?

 

Lincoln herself, having won the primary but facing almost-certain defeat in November, looks ready to abandon her own amendment. I’d say there’s about zero chance anything better than the sham House version will be in the final bill, maybe with some of the bad parts of the Senate version added.

 

3. We already discussed the Fed audit. This looks like where they’ll play their political pretense game.

 

4. “Resolution authority” is a fraud in principle, since we already know from the 2008 experience that in the crisis nothing will be “resolved”, everyone will be bailed out, no matter what law is in place. The PCA law already confers resolution authority and requires that it be exercised. Why would anyone think a new law would be any different.

 

(Still believing or not believing in resolution authority is a good metric for one’s ability to learn from experience. As is everything involving racket “reform”.)

 

Both bills pretended to set up this sham authority. The House version pretended it would collect funds from the banks ahead of time to facilitate the resolutions. In this space I called it a sham “Financial Superfund”. Since the tax would be levied on banks far smaller than the TBTFs, it was even in principle another monopoly-entrenching measure, another socializing of risk and cost. And we know that in practice even if they did pre-collect such a fund and even if they did use it to take TBTFs into receivership, it wouldn’t be remotely sufficient, and the taxpayers would end up making up the massive difference. Just like with the original Superfund.

 

Meanwhile the Senate version was more honest and dropped the superfund idea, implicitly acknowledging that the taxpayers would be on the hook for the resolutions.

 

Obama, of course, prefers the Senate version.

 

And we know that in practice no collapsing TBTF will be “resolved”. To the extent it’s within the system’s power, it will always be bailed out as is. (Even the administration admits this.)

 

5. The vaunted CFPA has been a joke from the start. Obama pretended to want strong vanilla requirements, even said so in a white paper.

 

But remember:

 

“If enacted, [a real CFPA] would have [imposed real restrictions on] the six biggest banks in America,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

 

Obama didn’t fight for a strong, independent CFPA; by his own testimony that means he didn’t want a strong, independent CFPA.

 

Now he says that out of competing sham versions, he prefers the Senate version which includes car dealers but would be housed in the Fed, which guarantees it will do nothing at all no matter what its theoretical scope, over the House version which is loaded with more loopholes (the Senate version has many of those too) and is more overtly pre-emptive of stronger state laws, but would stand alone as a regulator, outside the Fed.

 

We already know Dodd would prefer to get rid of it completely, while Frank is presumably content with his kabuki version, playing to that House crowd again. So I expect something like the Senate version to be in the final bill.

 

6. There’s lots of other nonsense. The Franken amendment which would’ve tried to fix the absurd situation of the credit-rated hiring their own credit raters (even Dodd admits it’s ridiculous: “just saying it alone, it screams out for a resolution”) was thrown out. None of the Senate’s aspiring Glass-Steagal type amendments even made it into the Senate version, let alone having a chance in the conference.

 

I already mentioned how Wall Street is said to have decided to let Obama have his little volcker rule, which is also laden with enough loopholes that nobody has to worry about it cramping the banks’ style in any real way. (In the Senate version, it wouldn’t even be enacted until after a period of “study”, i.e. post-legislative lobbying.)

 

 

The NYT has been peddling hype about how hard the poor lobbyists are having it. All that means at most is that having gotten 95% of what they wanted, that last 5% gets more difficult. Diminishing returns, E=mc2 and all. After all, the politicians have to pretend, and then there’s randomness such that something small might squeeze through the nets. On the whole, I’d say the lobbyists can congratulate themselves on a (mostly easy) job well done, and it’s a testament to their professionalism that they’re still fighting hard for that last 5% and whining about it to the MSM. And how compassionate of the papers to report so sensitively on that whining.

 

But nobody has to worry. If it goes through, the volcker rule isn’t going to hurt anybody. After all, it’s Obama’s baby.

 

And what do we know about Obama, where it comes to anything which could possibly constrain the rackets and empower democracy?

 

“If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”