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October 30, 2014


There is good reason to fear the global spread of pandemics such as Ebola and other perhaps as-yet unidentified viruses and antibiotic-resistant scourges in the making. There is also good reason to fear the results of global warming, militant thugs operating under the pretense of religion and a host of other problems involving overpopulation, water shortages, overfishing, coastal “dead zones” due to chemical discharges etc. etc. etc. Now that we are warned in advance, rational human beings around the globe will band together to head off the harmful effects of such disasters-in-the-making, right? Wrong. We wait for and act only when a particular problem or set of problems attains emergency status. (Witness the current hysteria over Ebola and ISIS.) Some of our sorry lot even argue that what’s happening is not happening. (See the present inanities in re global warming.)

This essay will deal with an internal problem we have that few will feel as passionate about as a discussion of beheadings, serial killings and/or the universal imposition of sharia law, but a problem which, if not solved, could amount to an economic “beheading” of America if we continue to ignore it. I refer to our failure to regulate the regulators, and my economic “beheading” metaphor captures my number one fear, the total and final takeover of America by the corporate class, a process well under way and, some say, already completed, a fait accompli. I think not so, not yet, and that there is still time for us and our money-tattered democracy to survive if we wake up and do something about the current (judicially and congressionally approved) purchase of our country and democracy by moneyed interests.

So does my concern amount to overstatement and a result of some hackneyed view that there is a conspiracy afoot? I wish it were overstatement, but it isn’t, and Piketty has ended the argument in re conspiracies, i.e., he has proven via his r > g formula that capitalism by its very nature is designed to ultimately self-destruct in its perpetual drive for gain unless “attended to,” and we (via policy!) are encouraging rather than “attending to” this “central contradiction of capitalism,” as Piketty defines it.

One of the ways we are failing to “attend to” the continuing and accelerating loss of our democracy and providing for the ultimate destruction of capitalism itself is by our failure to regulate the nation’s biggest banks. Our regulators seem to care more about protecting big banks from being accountable than protecting us from their crap-shooting behavior. Scandals are beginning to emerge in this connection. For instance, the Federal Reserve Bank of New York is the on-the-scene regulator of the big Wall Street banks. A lady who works for that bank was fired for being too tough on Goldman Sachs. She secretly recorded 46 hours of audio which suggest that Goldman Sachs and not the New York Fed was in charge.

Some senators are calling for Congressional oversight hearings to investigate the disturbing issues raised by the Goldman Sachs tapes, but if such hearings result in tougher rules for Wall Street banks, it won’t matter if such rules are not enforced or if the regulators are otherwise soft on enforcement generally and continue to allow the bankers to run the show, and it is clear to a fault that the bankers are running the show. For instance, and I have long complained about this, these closed door deals where regulators and bankers invariably agree to fines and no jail time is a strong and continuing indication that the relationship between bankers and regulators is far too cozy to be called oversight. Nobody gets indicted, however grievous the offense, a sure signal that the regulators and the supposedly regulated are too chummy. The bankers cough up some chump change fines and it’s back to the trading and investment tasks at hand, banking licenses intact and written agreements they won’t keep in their briefcases.

The New York Fed regulators tell snooping senators that these fines which don’t hold any individuals accountable are sufficient to teach the big banks a lesson. If the banks are so properly chastened by these peanuts fines levied by our regulators, then why are the big banks back time after time for new and different violations? Tell me what lessons they learned. I am especially incensed that no one went to jail for an admitted violation of The Foreign Corrupt Practices Act by JP Morgan Chase in bribing Chinese corporate officials in return for lucrative banking contracts. Instead, after paying a “fine,” the bank’s board gave a raise to Jamie Dimon, the bank’s CEO, who has also managed to secure other massive pay raises for his knack in negotiating sweetheart deals with the regulators behind closed doors.

So what are we going to do when our own agents and employees (the regulators) appear to be complicit in making sweetheart deals with the people they are supposed to be regulating on our behalf? If the Congress makes new and tougher rules and our regulators are soft on their enforcement, then perhaps it’s time to make both the big banks AND our regulators accountable. There may finally be a way to end this nonsense in these closed-door sessions where the tail is wagging the dog, a way to make accountability a certainty for both the regulators and the regulated. The answer? End the closed-door secrecy between regulators and the regulated where these sweetheart deals are negotiated.

How? There is a bipartisan bill now pending before the Senate that would end this secrecy nonsense and give the people a look into what really went on in these meetings. The bill would require detailed public disclosures of all settlements so we can see what is or is not covered up in these agreements negotiated behind closed doors. This is not a political bill; it is a good government/housekeeping bill that deserves an “aye” vote from every legislator whether Democrat or Republican or Independent.

The bill would provide us with a means of holding both our regulators and those they regulate accountable. The appropriate committees in the House and Senate could start with hearings on the bill that would call in the Goldman Sachs whistle blower to testify as well as the president of the New York Federal Reserve Bank, who should be asked under oath why the whistleblower was fired, among other questions having to do with why no bankers are ever indicted or lose their licenses even after having admitted to felonies. The rest of us go to jail when we admit to felonies – why not bankers?

Banks, after all, are just pieces of corporate paper with banking licenses to operate. In isolated context, they are inert; they do nothing. It is humans (boards of directors and banking executives) who commit felonies and break rules, and yet the chump change fines are assessed to “the bank” (as though in the JP Morgan Chase case, the “bank” literally negotiated the bribes with Chinese officials in clear contravention of the Foreign Corrupt Practices Act). The “bank” didn’t because it couldn’t. Its executives and/or board members committed two felonies in such connection: one for breaking the law and the other for conspiring to break the law. They walked, the “bank” paid a pittance for a crime it could not commit, and the bank’s CEO got a raise in pay. Someone tell me how those pieces fit short of fantasy. It is time to end this charade and get serious in protecting the public interest, and if that requires a law which holds our regulators accountable and our bankers susceptible to jail time, let’s do it.   GERALD E


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