Wall Street’s anti-Obama strategy: Absurd analogies

Obama is to Wall Street as ... Hitler was to Poland?

By Michael Lind

Wall Street's anti-Obama strategy: Absurd analogies

Has the war of metaphors gone too far? Historians, constitutional lawyers and even zoologists have jumped into the fray provoked by Wall Street critics of the Obama administration and Congress.

It all began when Stephen A. Schwarzman, a co-founder (with right-wing Republican deficit hawk Pete Peterson) of the Blackstone Group, a major private equity firm, said that the Obama administration’s proposals for taxing partners in firms like his brought to mind “when Hitler invaded Poland in 1939.”

Schwarzman’s critics have included fellow members of the financial industry like Robin Plunder of Dewey, Schwindel and Howe, a major U.S. pump-and-dump firm. “That comparison was way too kind to President Obama,” Plunder wrote in his monthly letter to his co-conspirators. “Let’s remember that Poland provoked Hitler, after all. But Wall Street had nothing to do with the financial crisis.”

Unlike Plunder, however, many financial historians think that Schwartzman’s comparison of President Obama to Chancellor Hitler was too harsh. “It’s way over the top,” says Shirley U. Geste, the Ken Lay Memorial Professor of Financial Ethics at William Duer University. “Hitler’s invasion of Poland? No way. I think it would be much more accurate to compare the administration’s proposals for higher taxes on partners in private equity firms to the Hyksos invasion of Egypt in the seventeenth and eighteenth centuries B.C., which destroyed the 13th Dynasty and ended Egyptian unity until the Hyksos were finally driven out during the 17th Dynasty by Seqenenre Tao II and his son Kamose.”

Other financial experts, like Engelbert Homunculus, the Samuel Insull Professor of Predatory Finance at the Gotham City Correspondence School, see other analogies: “I would compare the administration’s tax proposals to the sacking of Baghdad by the Mongol leader Hulaga Khan in 1258. That’s a much closer fit, I think, than the Hitler and Poland thing.”

Schwarzmann is not the only Wall Street figure whose bloviations have stimulated debate in the halls of academe as well as the corridors of power. Daniel S. Loeb, a major Democratic fundraiser with the hedge fund Third Point, created a similar stir when he wrote: “As every student of American history knows, this country’s core founding principles included nonpunitive taxation, constitutionally guaranteed protections against persecution of the minority and an inexorable right of self-determination. Washington has taken actions over the past months, like the Goldman suit that seem designed to fracture the populace by pulling capital and power from the hands of some and putting it in the hands of others.”

Is Loeb’s interpretation of American constitutional history accurate? Several leading American historians take issue with it.

“It is, of course, true that the Founders intended the Constitution to enshrine the principle that hedge fund managers and other people in the financial industry should pay much less as a proportion of their income than their secretaries and similar commoners,” observes Dudley Gray Prose, author of the best-selling study Diet of Controversy: How to Lose Weight on What the Founders Ate. “Even so, I wouldn’t put nonpunitive taxation at the head of a list of the country’s core principles. I think that in any list of core American governmental principles, subsidies for politically well-connected businesses should go first.”

K. Templar Mason, who teaches the Founding Era at Leo Strauss College, was more critical. “Loeb’s list of America’s core founding principles is completely inaccurate. I would tell you what the true core founding principles are, but they are secret and known only to Straussian initiates.”

The controversy over the attacks on the Obama administration by members of the Wall Street elite has been accompanied by a continuing furor over the comparison by former Republican Senator and deficit commission member Alan Simpson of Social Security to “a milk cow with 310 million tits.” Zoologists around the country were uniformly critical of Simpson’s metaphor, pointing out that it was anatomically unlikely, if not impossible.

Nigel Doolittle, head of the Zoology Department at the Museum of Natural History in Puddleby-on-the-Marsh, muses: “We scientists recognize that Sen. Simpson makes an important point about the worthlessness of American retirees who expect to be repaid after paying Social Security taxes all their lives. After all, they had a chance to get rich and they failed. But I think he would have been better advised to compare elderly Americans to something other than 310 million calves — say, a swarm of insatiable piranhas in a frenzy, devouring a gaucho’s pony that has tragically strayed from the pampas and stumbled into the turgid currents of the Rio Parana.”

“A plague of flesh-eating bacteria devouring Uncle Sam” is how another eminent biologist, Noah Arkwright, professor of parasitology at Wossamata University, thinks Simpson should have described American retirees who depend on Social Security because their low wages prevented them from accumulating high levels of personal savings. Professor Arkwright points out that it is not too late to get the metaphors right. “From the point of view of natural science as well as budgetary analysis, it is crucial that any parasitological metaphors included in the deficit commission report, in addition to vilifying hard-working, ordinary Americans who depend for their retirement income on Social Security, should be zoologically plausible. You wouldn’t want it to seem like mere political rhetoric.”

: Michael Lind’s new book, "Land of Promise: An Economic History of the United States", will be published in April and can be pre-ordered at Amazon.com. More Michael Lind

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An offensive advocate for LGBT rights

By choosing Goldman CEO Blankfein as a spokesman, HRC signals that corporate malfeasance is perfectly acceptable

By David Sirota

Lloyd Blankfein (Credit: AP/Alessandro della Valle)

Topics:Wall Street, LGBT

Last week, the Human Rights Campaign, the organization that advocates for equal rights for gay, lesbian, bisexual and transgender people, announced that Goldman Sachs CEO Lloyd Blankfein will be its first “national corporate spokesman for same-sex marriage.” HRC’s move was almost universally portrayed in the media as a laudable one for the cause of equality: a supposed Nixon-goes-to-China-esque coup that aligned a politically conservative icon with a liberal cause. As one HRC executive told the New York Times: “Lloyd Blankfein is not someone average Americans would think is going to support marriage equality.”

In all the ovation and self-congratulation, however, two big problems were left unmentioned.

First and foremost is the simple fact that this is not some brilliant P.R. move in the Nixon-to-China vein. On the contrary, many (though certainly not all) Wall Street financiers have long professed their support for gay rights, culminating in their pivotal role helping legalize gay marriage in New York state. That’s, in part, because it’s an effective strategy to divert attention from their economic agenda.

Taking a page out of corporate greenwashing strategies, many of the most offensively greedy, right-wing thieves in the business world have long touted their personally progressive position on select social issues like gay rights as a means of publicly presenting themselves as Good and Decent People. Not surprisingly, the particular progressive causes they choose tend to be those that do not impact their businesses or personal economic situations. In some cases, in fact, these thugs seem as if they are leveraging their stands on such progressive issues as a quid pro quo bargaining chip for their personal financial interests. As just one example of where that kind of dynamic may have played out, recall that almost immediately after Wall Streeters underwrote Democratic Gov. Andrew Cuomo’s campaign to legalize gay marriage, Cuomo launched a public (though ultimately unsuccessful) campaign to halt the extension of a so-called millionaires tax on those same Wall Streeters.

This isn’t to say that Wall Streeters’ support for marriage equality isn’t a good thing; it most certainly is. (As a strong supporter of marriage equality, for instance, I’m glad those Wall Streeters helped New York State legalize gay marriage.) It’s only to say that Blankfein’s support of gay marriage isn’t some hard-to-believe coup; it’s probably exactly what many “average Americans” would expect from a Manhattan investment banker.

That gets to the second, even bigger problem: What, then, is the movement for equal rights really saying to “average Americans” when that movement promotes someone like Blankfein as its chief public spokesman? And what is the muted reaction to the HRC announcement saying about what is acceptable in America?

To answer that question, consider who Blankfein is — and recall specifically that he is not some quiet, buttoned-up executive in a staid manufacturing industry, nor is he known as a new Lee Iacoca or Steve Jobs — aka a person widely revered (rightly or wrongly) for how his innovation and business savvy (supposedly) helped the world. On the contrary, Blankfein is the singular — and rightly detested — poster boy for the lies, crimes and avaricious schemes that destroyed the economy, impoverished millions of Americans and ripped off taxpayers.

This is a man who refused to tell Congress the truth about the basic facts of how the firm he led bet against — and profited off — the destruction of the American economy. As Rolling Stone’s Matt Taibbi documented, in 2010 Blankfein “went to Washington and testified under oath that Goldman Sachs didn’t make a massive short bet and didn’t bet against its clients” — even though the Senate’s “Levin report proves that Goldman spent the whole summer of 2007 riding a ‘big short’ and took a multibillion-dollar bet against its clients, a bet that incidentally made them enormous profits.” Blankfein’s lying was so egregious, the Senate Subcommittee on Investigations has recommended that the Justice Department consider perjury charges against him.

Blankfein is also the CEO who oversaw Goldman at the very moment that the firm engineered the infamous Abacus deal, a deal that was so insidious, that it ultimately drew a record $550 million fine from the Securities and Exchange Commission. Lately, he’s made headlines personally lawyering himself up in preparation for possible criminal prosecution, which is probably a smart move because he’s already being formally deposed in a civil lawsuit related to the SEC settlement. And, of course, this says nothing about Blankfein and Goldman’s central role in the deceptive mortgage securitization schemes that, ya know, cratered the entire global economy.

Considering all of this through the prism of HRC’s decision to promote him and the political/media world’s supportive reaction to that decision, we see a disturbing message: namely, that in America, if you commit the most odious economic crimes against humanity, you can not only get taxpayers to bail you out, you can not only keep your job atop the most powerful corporations, but you get to keep your social status as well. In this case, you get to be promoted as the cheery spokesman of a progressive social cause.

This elucidates a troubling double standard between how we see civil rights/equality and how we see economic justice. Most mainstream organizations (and certainly all progressive organizations) would never willfully brand themselves to opponents of the former — that is, they would never make their spokespeople open proponents of bigotry, prejudice and homophobia, and they would never do so in the name of reaching “average Americans” (yes, there are of course still groups like Focus on the Family and the Family Research Council that align themselves with that kind of hate, but at least as they do so it’s considered controversial and cause for widespread criticism). Yet, when a group pushing the progressive cause of civil rights and social equality promotes one of the avatars of economic injustice as a spokesman, there’s either no criticism at all — or widespread applause.

To be sure, when it comes to divisive political issues, there are no perfect high-profile spokespeople for public awareness campaigns. Everyone has a flaw, nobody is pure, and almost nobody is universally liked. But there’s a clear and obvious difference between imperfect and villainous. When a progressive group refuses to find the former and instead willfully aligns itself with the latter, it may help the specific and worthy cause at hand in the short term (in this case, marriage equality). But over the long haul, it sanitizes that villain and, worse, helps legitimize all he represents — including all the terrible things he represents.

That’s why Blankfein probably jumped at the chance to be HRC’s spokesperson — it’s a great deal for him, even as it gives the big middle finger to the millions of Americans he harmed in this recession.

: David Sirota is a best-selling author of the new book "Back to Our Future: How the 1980s Explain the World We Live In Now." He hosts the morning show on AM760 in Colorado. E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com. More David Sirota

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Preet Bharara’s toothless bite of Wall Street

Time magazine's favorite federal prosecutor chases the bottom feeders and avoids the sharks

By Gary Weiss

Wall Street isn't worried (Credit: Salon)

Topics:Wall Street, Preet Bahara

Two intriguing magazine cover stories are on the stands this week, on more or less the same topic. New York magazine shows a man clutching between his knees, with the headline: “The Emasculation of Wall Street.” Time’s cover has the impassive puss of Preet Bharara, the U.S. attorney in Manhattan, and “This Man Is Busting Wall St.”

Seeing these two covers side by side, you’d think that Bharara was Wall Street’s Great Emasculator. The Time article is subtitled “Prosecutor Preet Bharara collars the masters of the meltdown,” while the New York piece describes how the Street is reeling from “a crisis that would not be flip to call existential.” Yet nowhere in Gabriel Sherman’s well-researched piece in New York is there even one mention of Preet Bharara.

There’s a simple reason for that: Preet Bharara is not busting Wall Street. He’s not collaring the masters of the meltdown. He’s done nothing to even slightly discomfit Wall Street’s still-ferocious money machine, or has yet to bring to justice the architects, enablers and continuers of the 2008 financial crisis — the bankers who got us into that mess, and the ones who are continuing to extract pain from foreclosed homeowners, in the New York area and beyond.

As a matter of fact, his over-hyped insider-trading prosecutions, the main focus of the Time piece, are doing the Street a favor, by targeting people who actually ripped off Wall Street — individuals like hedge fund managers Raj Rajaratnam and Danielle Chiesi, who functioned a bit like the goons who used to dope race horses in the old days.

Bharara’s insider trading targets rigged the game for their own profit by illegally misappropriating information, in effect stealing from their employers and other investors, just as the horse-dopers cheated racetracks and other betters. Another analogy, also from the racetracks of old, would be to the scam artists who used to “past-post”: bet on races after they knew the outcome.

That’s how insider trading works. It’s a form of theft and cheating. It’s bad. Bharara was right to prosecute them, just as he has aggressively pursued drug gangs in the outer boroughs. But let’s be clear on something: The big players, the Goldman Sachses, Merrill Lynches, Banks of America and so on, don’t like insider trading any more than Preet Bharara does. And none of his criminal prosecutions to date — including his recent bust of three high-ranking former Credit Suisse execs, accused of rigging the value of mortgage bonds they held in 2008 — had any connection to the pain being felt by Americans today, which can be directly traced to the misconduct of mortgage bankers and derivatives traders in the run-up to the financial crisis.

The real perps of the financial crisis haven’t been in Bharara’s — or the Justice Department’s — cross hairs for a single moment since Barack Obama took office three years ago. It’s one of the most troublesome failings of his administration.

What almost upended the economy was not insider trading, but dreck. (Look it up.) Misleadingly marketed, overcomplicated subprime and Alt-A mortgages were sold to homeowners, often using fraudulent methods. Those dreck mortgages were then packaged by Wall Street as complex derivatives and sold to banks, large investors and insurance companies like American International Group. Along the way, the likes of Lehman Brothers utilized gimmickry to shunt their mortgage-dreck liabilities off their balance sheets.

It was a story of screw-ups and villains, whose screwing up and villainy have been described in a number of best-selling histories of the financial crisis, as well as the final report of the Financial Crisis Inquiry Commission. Insider traders just weren’t part of the picture. And if you don’t believe me, see if you can find one reference to Time’s so-called masters of the meltdown in the FCIC report, or even one mention of insider trading in that voluminous tome.

The financial crisis was the culmination of a fundamental conflict between the so-called financial services industry and the interests of society as a whole. To maximize their returns, and thus their bonuses, Wall Street firms ratcheted up their use of leverage and engaged in proprietary trading strategies that ultimately proved to be harmful to society, when those strategies failed. Government regulation failed to prevent them from hurting us. The result was a series of immensely unpopular bailouts conducted by the Federal Reserve and Treasury Department, which were forced to clean up the mess that they created.

Today, of course, the right has turned the facts of the crisis upside-down, turning it into a failure of government and not out-of-control capitalism. Dodd-Frank, now under attack from the Republicans —and dead meat if Obama is defeated — cut into leveraged-fueled trading strategies and, hence, bonuses. That law hit Wall Street where it hurts: in the wallet. While Dodd-Frank, the actual bane of Wall Street, has preventing the Street from hurting the rest of us by cutting into its earnings, Bharara was engaged in his insider-trading prosecutions, which were worthy and nice as far as they went, but never came close to throwing sand in the gears of the money machine.

So it’s a stretch, to say the least, for Time to compare Bharara with Eliot Spitzer, the New York attorney general of a decade ago. Spitzer actually impeded the way Wall Street did business, by assaulting the conflicts of interest that then abounded in the research departments of large Wall Street brokerage firms.

The same can be said for comparing him to his predecessor from the 1980s, Rudolph K. Giuliani. Though Giuliani in later years became a kind of megalomaniac self-parody, in his prosecutor days he went after genuine big wheels, Michael Milken and Ivan Boesky. None of the six Bharara targets arrayed across the top of pages 24 and 25 in the U.S. edition, their profiles tinged blood red, came anywhere close to rising to that kind of Gordon Gekko-like status.

Now, this is not to say that there aren’t some wide-awake prosecutors out there, ready to tackle real issues of concern to real people, and not headline-grabbing insider trading cases. There is at least one — in Boone County, Mo., where a grand jury just handed up a 136-count indictment against a home foreclosure service, DocX, for using forged documents against homeowners whose houses are being seized by banks.

Is Missouri a hotbed of foreclosure crime, and not the Big Apple? Don’t make me laugh. In Brooklyn, the banks’ tactics are so sleazy that a New York State Supreme Court judge, Arthur M. Schack, has single-handedly fought against the banks’ sleazy tactics in foreclosures. It’s a job that really should be tackled by Bharara. This is a state, mind you, where the debt collection industry is so out of control that the New York state attorney general, the now-Gov. Andrew Cuomo, asked a judge in 2009 to throw out 100,000 faulty judgments against consumers who were victims of unscrupulous collectors.

The closest Bharara has come to tackling foreclosure fraud — the most serious, ongoing source of consumer pain to arise from the financial crisis — was his November 2011 suit against a mortgage broker for fraudulent lending practices. A civil suit, not a criminal case. As for the day-in, day-out practices that Judge Schack has been wrestling with in his courtroom for years: nothing so far.

I happen to think that Bharara is a decent guy, albeit with his priorities poorly chosen. If he starts going after the real bad guys he will finally deserve to get all the puff pieces he’s now inspiring. But for now, definitely not.

: Gary Weiss is a journalist and the author of "Ayn Rand Nation: The Hidden Struggle for America's Soul," to be published by St. Martin's Press on February 28, 2012. Follow him on Twitter @gary_weiss. More Gary Weiss

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Wall Street’s song of Obama woe

Self-pitying bankers lament a bygone era of fat bonuses and easy money

By Andrew Leonard

(Credit: iStockphoto/JerryPDX)

Topics:Wall Street

There are at least three different ways to read Gabriel Sherman’s fascinating and provocative report on Wall Street’s incredible shrinking profits in New York magazine, “Is This the End of Wall Street as They Knew It.”

1) As a vehicle for excessive schadenfreude indulgement.

Sherman’s piece is loaded with quotes from bankers bemoaning their changed circumstances. A prime example comes from a banker mulling the news that Morgan Stanley is capping annual bonus payments at $125,000.

For New York’s bankers and traders, the new math suddenly reordered their assumptions about their place in a post-crash city. “After tax, that’s like, what, $75,000?” an investment banker at a rival firm said as he contemplated Morgan Stanley’s decision. He ran the numbers, modeling the implications. “I’m not married and I take the subway and I watch what I spend very carefully. But my girlfriend likes to eat good food. It all adds up really quick. A taxi here, another taxi there. I just bought an apartment, so now I have a big old mortgage bill.”

And there’s more where that came from! Banking analyst Dick Bove complains that the government has “basically castrated these companies.” Sorry, Dick, but it couldn’t have happened to a more deserving bunch of testosterone-crazed bulls in the entire global economy pasture. Hard times for investment bankers? It’s hard to imagine anything in the world that the average American could care less about, at this particular juncture in time.

2) As proof, amazing as it may seem, that the Dodd-Frank bank reform law is achieving exactly what the U.S. economy needs most: a reversal of the long-term trend in which the financial sector steadily gobbled up more and more of the U.S. economy.

Sherman makes a persuasive case that, even before the full implementation of Dodd-Frank, in anticipation of the new rules the big banks have been forced to make major changes to their businesses that have had a serious negative impact on their bottom line.

What is even more startling about this reversal is that few thought the much-vilified Dodd-Frank act would have much effect at all … And yet, from the moment Dodd-Frank passed, the banks’ financial results have tended to slide downward, in significant part because of measures taken in anticipation of its future effect. Since July 2010, Bank of America nosed down 42 percent, Morgan Stanley fell 25 percent, Goldman fell 21 percent, and Citigroup fell 16 — in a period when the Dow rose 25 percent. Partly, this is a function of the economic headwinds. But the bill’s major provisions — forcing banks to reduce leverage, imposing a ban on proprietary trading, making derivatives markets more transparent, and ending abusive debit-card practices — have taken a pickax to the Wall Street business model

If true, this is great news. In 1986, Wall Street accounted for 19 percent of all U.S. corporate profits. Just before the financial crash that figure had grown to 41 percent. That’s not a healthy economy. That’s an economy of speculators trading with each other and blowing up financial bubbles. Obama has gotten no end of grief from the left for not breaking up the big banks immediately after becoming president, even though one could make a good argument that to do so in the middle of the crisis would have damaged the U.S. economy even further. If, in fact, the long-run resolution of this drama is a Wall Street that is withering on the vine, while the “real” “Main Street” economy gradually strengthens, then we are looking at something remarkable: a profound transformation of the U.S. economy, the likes of which we haven’t seen since the Reagan administration.

3) As unwarranted hype.

Of course, Dodd-Frank has not been fully implemented, and financial sector lobbyists are busily exerting tremendous pressure to make sure every new rule gets written so as to have the weakest effect possible. At the same time, Wall Street will pour hundreds of millions of dollars into the campaign of Mitt Romney, who has promised to make rolling back Dodd-Frank one of the primary goals of his presidency. Profits may be bad this year, and bankers might be whining about their bonuses, but Wall Street will regroup, Dodd-Frank will be neutered, and it will be business as usual in just a few years.

Readings 2 and 3 are not necessarily in contradiction with each other. It’s possible for Dodd-Frank to already be having a salutary effect and for that effect to be short-lived. In some ways, Dodd-Frank’s legacy may be what November’s election ends up deciding — although whichever party wins the White House in 2012, the power of the financial sector over the political process is unlikely to diminish significantly.

But regardless of which reading you choose, the piece itself is amazing if only for the plethora of quotes from bankers lamenting how the times have changed. There’s a self-awareness of the fact that the country headed down the wrong road, that maybe, just maybe, there was something wrong with all the easy money. Wall Street sounds chastened. Whether or not the Occupy movement, or Dodd-Frank, or the bad economy is most responsible for this reality is impossible to say, but for now, let’s call it progress.

: Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More Andrew Leonard

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Lieberman, Cantor defend Capitol Hill’s inside traders

Wall Street's favorites resist the effort to ban profiteering on non-public information

By Sam Knight

Inside traders (Credit: AP/Reuters)

Topics:U.S. Congress, Wall Street, Joe Lieberman, Eric Cantor

“Send me a bill that bans insider trading by members of Congress,” President Obama told the assembled members of the House and Senate in his State of the Union address last week, “and I will sign it tomorrow.”

If only it were that simple.

The Stop Trading on Congressional Knowledge (STOCK) Act, a bill that prohibits legislators and federal officials from knowingly profiting off of nonpublic information related to impending legislation and regulatory decisions, looks certain to pass the Senate this week. On Monday, senators overwhelmingly approved a motion to cloture on S.2038 preventing the bill from being filibustered. But on Wednesday in the House of Representatives Reps. Tim Walz, D-Minn., and Louise Slaughter, D-N.Y., demanded a straight up or down vote on a different bill, HR 1148, also known as the STOCK Act. The House bill already has 271 sponsors.

And therein lies a tale of Washington. No one in Washington favors allowing Capitol Hill insiders using non-public information to reap profits — at least not publicly. But privately, well, that’s a different story.

The Senate version of the STOCK Act differs from the House version in crucial ways. The House bill regulates the so-called political intelligence industry, which consists of lobbyists and private businesses who milk information from members of Congress and their staff and sell it to hedge funds and other investors. The House bill requires people in the political intelligence industry to register as lobbyists. The Senate bill merely calls for study of this obscure sector of the Washington economy, which is worth an estimated $100 million, according to the Wall Street Journal.

As the Journal explained last year:

Information about what’s happening in Washington is at a premium on Wall Street these days. Government regulatory changes and economic initiatives following the 2008 financial crisis have affected numerous industries, and even minor shifts in policy can be of interest to hedge-fund managers. When the health-care bill was snaking its way through Congress in 2009, for example, hedge funds wanted to know about every twist and turn. They followed the debt-ceiling showdown over the summer just as closely.

Keen for information about what’s happening behind the scenes, hedge funds have been drilling ever deeper into the government. Thousands of political insiders are being paid by hedge funds, private-equity firms and other big investors. Former Federal Reserve Chairman Alan Greenspan, for example, is an adviser to Paulson & Co., and former Treasury Secretary John Snow works for Cerberus Capital Management. SAC Capital Advisors and Eton Park Capital Management have hired former congressional staffers.

The move to limit the scope of the STOCK Act seems to have been led by the U.S. Chamber of Commerce and the less prominent but no less well connected Managed Funds Association. According to 2011 lobbying disclosure forms, lobbyists for both groups reached out to Congress with their clients’ concerns about the legislation.

According to Craig Holman, government affairs lobbyist for Public Citizen, a transparency advocacy group that lobbied for the House version of the STOCK Act, the two groups were especially concerned about the regulation of the political intelligence industry.

The U.S. Chamber of Commerce represents some of the most powerful corporations in America and spent almost $350 million lobbying Congress over the past three years, according to OpenSecrets.org. A spokesperson for the Chamber said that the group has not taken a position on the STOCK Act.

The Managed Funds Association lists influential investment firms and banks, such as Goldman Sachs, Bank of America, Citigroup, JP Morgan Chase, UBS and Barclay’s Capital as “strategic partners.” The group’s senior advisors include representatives from Eton Park Capital Management, which received an insider tip about Fannie Mae and Freddie Mac from former Treasury Secretary Hank Paulson in July 2008, as well as representatives from Paulson & Co., SAC Capital Advisors, and Soros Fund Management. A spokesperson for the Managed Funds Association declined to comment on the STOCK Act.

Whether or not these lobbying groups had a hand in the writing of the Senate bill, its provisions provide protections to the political intelligence industry that the House bill does not.

Walz’s version of the STOCK Act prohibits “any person from buying or selling any commodity for future delivery or swap while the person is in possession of material nonpublic information relating to any pending or prospective legislative action” or “material nonpublic information derived from Federal employment relating to the commodity.” It also requires political intelligence firms to register as lobbyists under the Lobbying Disclosure Act of 1995.

The Senate version of the STOCK Act, sponsored by Sen. Joe Lieberman, I-Conn., is less comprehensive. It merely prohibits any “Member of Congress and … employee of Congress” from using “any nonpublic information derived from the individual’s position as a Member of Congress or employee of Congress, or gained from performance of the individual’s duties, for personal benefit” (emphasis added). The actions of people in the political intelligence industry who use their congressional connections to sell information to the hedge funds would not be covered.

The Lieberman bill does not require political intelligence firms to register as lobbyists. It only mandates that the comptroller general and the Congressional Research Service submit studies on “the role of political intelligence in the financial markets” a year after the legislation is signed into law.

Rep. Slaughter, who has been championing the STOCK Act for five years, believes that curbing the power of the political intelligence industry is a crucial part of restoring the public’s trust in Congress.

“Our constituents didn’t send us here to line the pockets of hedge fund managers,” she has said. “If there was ever a case to show that Wall Street and Capitol Hill have become too cozy this is it, and the political intelligence industry is in desperate need of transparency, meaning they should register as lobbyists do.”

The House version of the STOCK Act got a boost from a “60 Minutes” feature on congressional insider trading last November that reported how members of Congress had used their insider’s knowledge to make profitable stock transactions. But when Republicans and Democrats rallied to support the House bill, House Majority Leader Eric Cantor, R-Va., suddenly balked. He canceled the mark-up by House Financial Services Chairman Spencer Bachus, R-Ala. – a major player in the “60 Minutes” feature and one of those eager to row back from the scandal. Cantor, who came under fire himself for having made a $15,000 bet on the dollar’s decline before last year’s summer debt ceiling fight, later told CBS News that he wanted to ensure that the legislation accounted for more than just deals based on the trading of financial instruments.

After Obama’s speech, Lieberman and Cantor scrambled to protect the Senate bill.

In a colorful floor speech on Monday, Lieberman resisted amendments to his bill by invoking Thidwick the Moose, the kindhearted creature in a Dr. Seuss book who allowed so many of his fellow animals to climb on his antlers that they eventually fell off. (“Dr. Seuss,” it should be noted, was the pen name of the late Theodor Seuss Geisel, a liberal Democrat, who would probably not be amused to learn that one of his fictional creations had been conscripted in the effort to protect the paid informants of Wall Street tycoons.)

For his part, Cantor told Politico yesterday that he wanted to “strengthen” the Senate bill without changing the language that calls for the study — not regulation — of the political intelligence industry.

It’s not hard to guess why Cantor and Lieberman want to leave the political intelligence industry unregulated. According to the Sunlight Foundation’s influenceexplorer.com, they are both major beneficiaries of securities and investment firms. The House majority leader and the senator have received just under $1.4 million and $3.8 million, respectively, in campaign contributions from securities and investment firms over the course of their political careers.

In a statement released after Monday’s cloture vote, Cantor said that he is “pleased” with the Senate bill, but reiterated that he wants to have the final legislation account for more than just financial transactions based on securities exchanges. He also wants the bill to more thoroughly cover the personal finances of members of the executive branch. He said the bill did not “go far enough.”

As for regulation of the political intelligence industry, he suggested that would be going too far.

“I think that the Senate bill … speaks to the potential misuse of that kind of information and untoward activity on the part of, not Members of Congress, but others that are in the business of monitoring Washington,” he said on Tuesday at a press conference. “I think that in advocating — in putting forth a directive to get underneath that kind of activity — to really begin to determine what it is — is something that is helpful.”

If you parse Cantor’s nervous language, he is saying more time is needed to assess whether or not Congress should prohibit private interests from cashing in on insider knowledge harvested on Capitol Hill. If Cantor and Lieberman have their way, the Stop Trading on Congressional Knowledge Act will ensure that some people can continue secretly trading on congressional knowledge.

Walz and Slaughter say they will file what is known as discharge petition to advance their bill this week. If a majority of the House signs the petition, the bill can immediately advance to the House floor for consideration. Whether their bill will reach President Obama’s desk is still in doubt. The hidden power of Wall Street and the hedge funds — “the political intelligence industry” — is not.

: Sam Knight is a freelance journalist and writer living in Washington, D.C.. Follow him on Twitter @samknight1 More Sam Knight

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Wall Street’s gilded frat party

At an opulent annual blowout, bailed-out bankers haze newbies, mock OWS and show just how out of touch they are

By Bill Moyers and Michael Winship

(Credit: Library of Congress)

Topics:Wall Street, Great Recession

A week or so ago, we read in The New York Times about what in the Gilded Age of the Roman Empire was known as a bacchanal – a big blowout at which the imperial swells got together and whooped it up.

This one occurred here in Manhattan at the annual black-tie dinner and induction ceremony for Kappa Beta Phi. That’s the very exclusive Wall Street fraternity of billionaire bankers, and private equity and hedge fund predators. People like Wilbur Ross, the vulture capitalist; Robert Benmosche, the CEO of AIG, the insurance giant that received tens of billions in bailout money; and Alan “Ace” Greenberg, former chairman of Bear Stearns, the failed investment bank bought by JPMorgan Chase.

They got together at the St. Regis Hotel off Fifth Avenue to eat rack of lamb, drink and haze their newest members, who are made to dress in drag, sing and perform skits while braving the insults, wine-soaked napkins and petit fours – those fancy little frosted cakes — hurled at them by the old guard. In other words, a gilt-edged Animal House, food fight and all.

This year, the butt of many a joke were the protesters of Occupy Wall Street. In one of the sketches, the bond specialist James Lebenthal scolded a demonstrator with a face tattoo, “Go home, wash that off your face and get back to work.” And in another, a member — dressed like a protester – was told, “You’re pathetic, you liberal. You need a bath!”

Pretty hilarious stuff. The whole affair’s reminiscent of the wingdings the robber barons used to throw during America’s own Gilded Age a century and a half ago, when great wealth amassed at the top, far from the squalor and misery of working stiffs. Guests would arrive in the glittering mansions for costume balls that rivaled Versailles, reinforcing the sense of superiority and the virtue of a ruling class that depended on the toil and sweat of working people.

That’s consistent with the attitude expressed by several of these types after Occupy Wall Street sprung up; bankers told the Times on the record that they could understand the anger of the protesters camped on their doorstep; but privately, a hedge manager said, “Most… view [it] as ragtag group looking for sex, drugs, and rock ’n’ roll.”

So sayeth the winners in our winner-take all economy. The very guys who were celebrating at the St. Regis because they were too big to fail. Even when they fell flat on their faces, the government was there to dust them off, bail them out and send them back to fight the class war with nary a harsh word or punishment. Talk about a nanny welfare state.

None of this was by accident. The last three decades have witnessed a carefully calculated heist worthy of Robert Redford and Paul Newman in “The Sting” — but on a massive scale. It was an inside job, politically engineered by Wall Street and Washington working hand-in-hand, sticky fingers with sticky fingers, to turn the legend of Robin Hood on its head – giving to the rich and taking from everybody else. Don’t take our word for it – it’s all on the record.

The biggest of the big boys was Citigroup, at one time the world’s largest financial institution. When the meltdown hit in 2008, the bank cut more than 50,000 jobs and you and other taxpayers shelled out more than $45 billion to save it. And how are Citigroup executives doing? Nicely, thank you. Last year, its CEO, Vikram Pandit, took home $1.75 million in base salary, and was awarded $3.7 million in deferred stock.

According to the Times, “Citigroup is expected to disclose the rest of his pay, cash, be it upfront or deferred, in March. In addition, while not necessarily for work performed in 2011, Mr. Pandit last year was awarded a $16.7 million retention bonus, plus stock options that could add $6.5 million to the package’s overall value.” Makes you want to cry out, “Retain me! Retain me!”

To be fair, Vikram Pandit was at the World Economic Summit in Davos, Switzerland last week, where he told Bloomberg News, “It’s important for the financial system to acknowledge that there’s a great deal of anger directed at it… Trust has been broken. Banks have to serve clients, not serve themselves.” What’s more, he has said that the “sentiments” expressed by Occupy Wall Street demonstrators were “completely understandable.”

This, in contrast to the financial industry official who told a reporter that the protesters’ issues were “a lot of sound and fury, signifying nothing.” Or, as they used to say while partying down at the court of Louis XVI and Marie Antoinette, let them eat petits fours.

: Bill Moyers is managing editor of the new weekly public affairs program, "Moyers & Company," airing on public television. Check local airtimes or comment at www.BillMoyers.com. More Bill Moyers
: Michael Winship is senior writing fellow at Demos and a senior writer of the new series, Moyers & Company, airing on public television. More Michael Winship