Salon.com > Paul Volcker

America’s drug war of attrition

Thu, 14 Mar 2013 23:05:00 +0000

BOSTON — The global drug war is arguably America’s longest armed conflict, declared 42 years ago and still raging at a pace that would startle many citizens.

It is waged daily, on farmland and streets from Colombia to Mexico to Detroit. It has put millions of people behind bars, and has dramatically influenced our culture and worldview.

By some estimates, it has cost the nation more than $2 trillion dollars.

Ironically, the drug war was nearly stillborn.

Less than a year after he fired the first salvos, Nixon's Republican-led Shafer commission sought to calm Americans and temper the president’s claims.

The Simpson-Bowles consensus makes no sense

Wed, 28 Nov 2012 23:51:00 +0000

The Simpson-Bowles budget balancing plan seems to have become the common-sense standard for dealing with America’s future budget deficits. I’d say this move toward the right is dangerous to the future of the nation and essentially cruel—far more dangerous than the level of the deficit over the next 15 years. The commission, formally known as the Commission on Fiscal Responsibility and Reform, appointed by President Obama, achieves its deficit reduction by reducing government spending to do two-thirds of the job and raising taxes to do only one-third of the job. Even 50-50 would not be fair in such a low-tax nation. The commission proposed cuts in Social Security benefits of 15 percent for medium earners, for example.

But easily the most short-sighted objective is to hold federal spending to 21 percent of Gross Domestic Product into the future. How did they get this number? It is roughly the average level of federal spending since 1970. This is not a reasonable standard—it is not even a way to think about the issue. So where did the idea originally come from? The answer: the right-wing Heritage Foundation.

Welcoming Wall Street’s anger

Wed, 23 May 2012 00:00:00 +0000

Jamie Dimon's Wall Street peers have good reason to be annoyed with him. Over the past several years, the financial sector spent hundreds of millions of dollars lobbying to weaken bank reform. Then came JPMorgan's multiple-billion-dollar-losing credit default swap blunder. And suddenly, Washington hit the pause button on regulatory rollback. All it took was one reminder of how stupid even the best-run banks can be for everyone to recall that trusting these jokers to act responsibly is a losing game, and, wham, bank regulation was back in the news. Efforts to repeal various parts of the Dodd-Frank bank reform act halted, but more important, pundits and politicians are focusing a brand-new round of attention on the ongoing process of writing the "Volcker rule" into law.

Romney’s Jamie Dimon problem

Fri, 11 May 2012 18:00:00 +0000

Here is the most important sentence in Jamie Dimon's Thursday afternoon conference call discussing JPMorgan's colossal trading screw-up: "Just because we’re stupid doesn’t mean everybody else was.”

If you're looking for the most easy-to-understand breakdown of how JPMorgan managed to lose $2 billion, read Marketplace reporter Heidi Moore's fabulous explainer. Readers who fancy themselves financially sophisticated can ponder DealBreaker's Matt Levine's analysis. If all you want is a guide to the critics "flaying" Dimon's hide, check out the New York Times' DealBook.

But for our purposes right now, all you need to concern yourselves with is Dimon's monumentally disingenuous self-castigation. Because Dimon is not stupid. Under his tenure, JPMorgan has been the best-run of the big banks. So Dimon's self-criticism gets it all backward. The fact that JPMorgan was so very stupid is so very scary because we can rest assured that just about everybody else is doing things even more idiotic.

Occupy defends the Volcker Rule

Wed, 15 Feb 2012 17:31:00 +0000

As the Occupy the SEC march made its way past the Goldman Sachs building in New York City on Monday night I looked up from the near-constant tweeting I do at these events just in time to see a man in a top-shelf suit rush past us holding a bottle of champagne. I imagined him looking at the 100-plus crowd of activists disrupting the walk to his luxury mid-size, pouting indignantly, “You’re gonna do this to a guy in a $4,000 suit? Come on!”

Occupy the SEC held the march to celebrate the release of its 325-page comment letter to the SEC calling for it to strengthen – and then, more important, enforce – the Volcker Rule, which will go into effect on July 21, 2012. According to Aaron Bornstein, who helped organize the march, Occupy the SEC’s comment is about twice the size of the next longest letter, drafted by the Securities Industry and Financial Markets Association, a financial interest lobbying group.

The working group's detailed policy position gives lie to the common claim that the Occupy Wall Street movement is "well intentioned but misinformed." It shows there's room in the movement both for policy wonks and those chanting "anti-capitalista."

Chris Dodd to GOP: I surrender

Tue, 02 Feb 2010 17:48:00 +0000

Paul Volcker is scheduled to appear before the Senate Banking Committee on Tuesday afternoon to explain his proposal to limit risk-taking by commercial banks -- the so-called Volcker Rule that would ban banks from engaging in proprietary trading with federally insured depositor money.

But if the Financial Times is to be trusted, the Volcker Rule is already dead on arrival, because Richard Shelby, the ranking Republican senator on the Banking Committee, doesn't like it, the Democrats no longer have 60 votes, and Chris Dodd, the chairman of the committee, wants to play nice.

Don't read any further if you have blood pressure issues.

From the FT:

A Dodd staffer said the senator is likely to quietly drop or modify many of the recommendations in the Volcker rule to ensure Republican support for regulatory reform.

"Chris is retiring so he wants to end his career with an important regulatory reform bill and he wants to make the bill bipartisan," the staffer said. "He is not going to risk bipartisan support to make the White House happy."

Tim Geithner is a sore loser

Thu, 21 Jan 2010 22:17:00 +0000

The question of who is running the White House economic policy shop has been answered: It sure isn't Tim Geithner, the Treasury secretary.

Citing anonymous sources, Reuters is reporting that Geithner has "reservations" about President Obama's "Wall Street crackdown."

Geithner is concerned that the proposed limits on big banks' trading and size could impact U.S. firms' global competitiveness, the sources said, speaking anonymously because Geithner has not spoken publicly about his reservations.

He also has concerns that the limits do not necessarily get at the heart of the problems and excesses that fueled the recent financial meltdown, the sources said.

What can we tell from this pusillanimous attempt to undermine Obama's biggest regulatory initiative within hours of its unveiling? Simple: There was a big fight over the direction of regulatory reform policy at the White House, and Geithner lost. A good soldier would shut up and do his best to get in line -- certainly, as Geithner's superior, Obama has been unstinting in his defense of the Treasury secretary, and at no small cost to his own standing with progressives. But instead, we get sour grapes comments about "global competitiveness" -- standard conservative boilerplate when free-market ideologues argue against any kind of regulation that might put a crimp on private enterprise.

Meet the new big bank, same as the old big bank

Thu, 21 Jan 2010 20:52:00 +0000

Earlier today I flagged President Obama's peculiar recommendation that "we prevent the further consolidation of our financial system." Since one of the biggest problems with the financial sector is that the biggest banks are already far too large, preventing additional consolidation is beside the point -- we need reform that dramatically reduces consolidation.

Simon Johnson provides additional evidence that Obama's phrasing was no accident. He reports that during a background briefing Thursday morning, senior administration officials said "their proposals would freeze biggest bank size 'as is.'"

Johnson is right: "this makes no sense at all."

James Kwak, Johnson's collaborator at The Baseline Scenario, adds more:

Tall Paul Volcker’s happy day

Thu, 21 Jan 2010 19:29:00 +0000

Felix Salmon passes on a couple of amusing links riffing off of Obama's new banking proposals.

A tweet from the Epicurean Dealmaker:

"Wall Streeters must feel like the Sky People in Avatar: They just got their asses kicked by a 10-foot-tall throwback to an earlier time."

(Paul "Tall Paul" Volcker) really only stands six feet seven inches. But he projects taller.)

Meanwhile BusinessInsider also jumps on the Volcker bandwagon, comparing snapshots of Volcker -- gleeful -- and Larry Summers -- glum -- to make a point on shifting influence over White House economic policy. However, the compare-and-contrast approach would be more compelling if Larry Summers ever looked anything but miserable.

Obama on the banks: “I’m ready to fight”

Thu, 21 Jan 2010 17:30:00 +0000

Obama just can't get a break. Moments before the president was scheduled to announce a major policy shift on banking regulation, the Supreme Court handed down its ruling weakening campaign finance laws. The upshot: Corporations and unions and other entities will now, once again, be allowed to spend freely on political advertising. Can you hear the sound of media coverage shifting its attention, en masse?

But the two news events are intimately connected. If the president follows through on his promises to limit the size of financial institutions and to prevent banks from using federally insured deposits to make bets on securities, the banks will fight him with everything they've got. That much we already knew. But now the Supreme Court has handed Wall Street a huge club with which to thwack Obama or any other politician who dares to try to restrain the likes of JPMorgan and Goldman-Sachs. And you can bet they won't be shy to use it.

The break up the banks delusion

Wed, 21 Oct 2009 16:29:00 +0000

Simon Johnson considers a superb speech last night by Mervyn King, Governor of the Bank of England, and a New York Times article today on former Federal Reserve chairman Paul Volcker, and tells us, in a post titled The Consensus on Big Banks Begins to Move, that their "words mark the beginning of a new stage of real reform."

By which he means: The chances are growing that governments will accept that "too big to fail" is a bankrupt strategy, and therefore the time to break up the big banks has arrived.

When flappers roamed the earth

Fri, 06 Feb 2009 20:24:00 +0000

Now that Paul Volcker's Economic Advisory Board is up and running, I thought it might be worth digging into "Financial Reform: A Framework for Financial Stability," a report put together by the Consultative Group on Economic and Monetary Affairs (a.k.a. "The Group of 30") under the direction of Volcker.

Early on, the report pinpoints two "unique factors" that "worked together to help account for the extent of the current market breakdown."

Highly aggressive and unbalanced compensation practices have strongly encouraged risk taking over prudence. At the same time, highly engineered financial instruments, in their complexity, obscured the risk and uncertainties inherent in those instruments, giving rise to false confidence and heavy use of leverage to enhance profits, as asset prices rose.

Hmm. Now where was it that I was just reading something about compensation in the financial sector? Oh yes --only this morning FreeExchange pointed to a new paper by Tomas Phillipon, of New York University's Stern Business School, and Ariel Resheff, of the University of Virginia, "Wages and Human Capital in the U.S. Financial Industry: 1909-2006."

Paul Volcker’s cavalry to the rescue

Fri, 06 Feb 2009 17:27:00 +0000

A case of the squeaky economic advisor getting the grease? On Wednesday, Bloomberg News reported that former Federal Reserve Chairman Paul Volcker was blaming Lawrence Summers, Obama's National Economic Council director, for "delays" in the setting up of an economic recovery advisory panel. Cue a slew of stories about nascent infighting and turf wars among the Obama economic team.

On Friday, the panel's members were announced. And at first glance, it certainly doesn't lack for diversity. In addition to Volcker as chairman and Austan Goolsbee as chief economist, the Economic Advisory Board includes the corporate elite: Jeffry Immelt, CEO of G.E.; and labor: SEIU's Anna Burger and AFL-CIO's Richard Trumka. There's new economy: venture capitalist John Doerr; and old: Jim Owens, CEO of Caterpillar. There's a veteran from the Reagan administration: Martin Feldstein; and a veteran from the Clinton years: Laura D'Andrea Tyson.

The full list can be found here.

As Greenspan plummets, Volcker surges

Tue, 21 Oct 2008 17:26:00 +0000

One of the lessons of this year's economic crisis is that the reputations of Federal Reserve chairmen are not written in stone the day they step down from their office. Alan Greenspan, lauded hither and yon as the Maestro, looks worse and worse each day, as we watch his Ayn Rand-influenced philosophy of deregulation unmasked by Wall Street's folly. In contrast, his predecessor, Paul Volcker, looks better and better. As a Wall Street Journal article reporting on how Volcker has become one of Barack Obama's top economic advisors notes, "his gruff warnings about the risks of deregulating the financial sector have come to look prescient."

So it's safe to say that we've got a very long way to go before we can close the book on Ben Bernanke's legacy. But when that book does get written, I can guess at least one sentence that will be included in the text: Ben Bernanke did not stand around doing nothing while the global financial system crumbled. He was a busy, busy bee.