Are We Going the Way of the Roman Republic?

May 27, 2010Joe Costello

roman-coin-150With rampant corruption and elitism, America could be following the path of the Roman Republic.

roman-coin-150With rampant corruption and elitism, America could be following the path of the Roman Republic.

"But, as statesmen, even these better aristocrats were not much less remiss and shortsighted than the average senators of the time. In presence of an outward foe the more eminent among them, doubtless, proved themselves useful and brave; but no one of them evinced the desire or the skill to solve the problems of politics proper, and to guide the vessel of the state through the stormy sea of intrigues and factions as a true pilot. Their political wisdom was limited to a sincere belief in the oligarchy as the sole means of salvation, and to a cordial hatred and courageous execration of demagogism as well as of every individual authority which sought to emancipate itself. Their petty ambition was contented with little."

-- Theodor Mommsen, History of Rome -- the quote describes the political class of the Roman Republic's last decades.

A century ago, Theodor Mommsen was globally renown for his history of the Roman Republic. For some reason, the book went out of print around WWII and never came back. Which is unfortunate, for Mommsen's chronicles of the last decades of the republic are extremely relevant history for contemporary Americans. Remember, the Roman republic flourished from 500 BC to 50 BC, when it fell at the hands of Caesar. Of course today, if ever an American thinks of Rome, they undoubtedly think of Imperial Rome, the age of the emperors and its inglorious fall chronicled by Gibbon. Yet, Gibbon's history begins where Mommsen's ends. The fall of the Roman Republic was well known to America's founders and its lessons well contemplated, for unlike Imperial Rome, the Republic fell at the height of its economic and military power. By the end, Rome's politics were eminently corrupt and the weight of the empire that was conquered collapsed the unique system of self-government that had been created.

With most recent examples of the health care bill, the financial industry bill, the continued electoral buying and selling of our elected officials, and the growing ineptitude and corruption of our government agencies (the most recently reported in the MMS) who are responsible for regulation of the oil industry, it is obvious for all who care to look, we are on the same path of the Roman republic. And just as Rome, our political class' petty ambition is content with little. Mommsen wrote history's cold verdict on the republic's fall:

"But, when a government cannot govern, it ceases to be legitimate, and whoever has the power has also the right to overthrow it. It is, no doubt, unhappily true that an incapable and flagitious government may for a long period trample under foot the welfare and honor of the land, before the men are found who are able and willing to wield against that government the formidable weapons of its own forging, and to evoke out of the moral revolt of the good and the distress of the many the revolution which is in such a case legitimate. But if the game attempted with the fortunes of nations may be a merry one and may be played perhaps for a long time without molestation, it is a treacherous game, which in its own time entraps the players; and no one then blames the axe, if it is laid to the root of the tree that bears such fruits. For the Roman oligarchy the time had now come."

In his last years, Mommsen gave a series of lectures on Rome's early emperors. When asked why he didn't put them together in a book, he declared, "It's too depressing." The Roman republic's decline took course over seven decades, from the Gracchi, maybe the republic's last true reformers, to Caesar. The real question for us is, unlike the Romans, will we stand up and reform our unique system of self-government that has provided so much to us all? Or as Rome, will we simply succumb to a neo-Caesar? I've come to empathize a great deal more with the Republic's last great defender, Cicero. I used to consider him completely politically inept, but over the years, through experience, I have developed a much greater sympathy for the environment in which he toiled. Cicero wrote,

"Long before our time the customs of our ancestors molded admirable men, in turn these men upheld the ways and institutions of their forebears. Our age, however, inherited the Republic as if it were some beautiful painting of bygone ages, its colors already fading through great antiquity; and not only has our time neglected to freshen the colors of the picture, but we have failed to preserve its forms and outlines."

Joe Costello was communications director for Jerry Brown’s 1992 presidential campaign and was a senior adviser for Howard Dean’s effort in 2004.

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Mike Konczal Gives FinReg Postmortem; Notes Media Schizophrenia

May 27, 2010

Mike Konczal joined Annie Lowrey yesterday on Bloggingheads to discuss financial reform now that the Senate has passed its bill.

Mike Konczal joined Annie Lowrey yesterday on Bloggingheads to discuss financial reform in the wake of the Senate's passage of the bill...

Mike outlines two key dichotomies that emerged from the bill passage, pointing out that before a bill even came to be, there was a split between "the Summerites and the Volckerites": those who sided with Larry Summers and wanted to consolidate legal authority for regulators, and those who sided with Paul Volcker and wanted to see more structural changes. Now that the House and Senate have both passed their versions of the bill, there is a new split -- what Mike calls the "schizophrenic response" in the media. "You had half the media talking about how... it was a brand new New Deal. And then you had the other half of the people saying ... it's just rearranging the chairs on the Titanic."

Mike and Annie agree that the bill is very helpful in the midst of another crisis, but whether or not it prevents future crisis is less clear. So perhaps the Summerites won out over Volckerites. They go on to discuss how the bill came to be, the weird process the Senate took to pass it, Fannie and Freddie, and even the BP oil spill and Facebook privacy.

Check out the full discussion:


Read more on the topic:

"Make Markets Be Markets"

"How the Senate Financial Reform Bill Gained Strength"

"A Financial Reform Interview Recap"

"Progressive Values and Financial Reform"

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Progressives and FinReg: Where Do We Go From Here?

May 25, 2010Bryce Covert

glass-steagall-150A roundtable of thinkers, journalists, and veterans from the financial industry gathered at the Century Foundation, a nonprofit public policy research institution, after the Senate passed its version of a financial reform bill on Friday.

glass-steagall-150A roundtable of thinkers, journalists, and veterans from the financial industry gathered at the Century Foundation, a nonprofit public policy research institution, after the Senate passed its version of a financial reform bill on Friday. New Deal 2.0 was on hand for a deep dive into the day's topic: what does FinReg mean and where do we go from here?

New Deal 2.0's Mike Konczal led the talk with an overview of the history, values, and challenges in the fight for financial reform. He highlighted four main areas of focus for the progressive community:

1. Correcting concentrations of corporate power, where steps such as a modern-day Glass-Steagall law and leverage caps can come into play;

2. Promoting shared prosperity, with fixes such as the CFPA and mortgage relief;

3. Government's role in enforcing transparency, by reforming things such as derivatives trading and ratings agencies;

4. Finance as a means to build the real economy, and not as an end in itself, which should eliminate conflicts of interest and bring back a fiduciary duty to the public.

Afterward, the discussion ranged from a very micro view -- what does the current bill do to regulate derivatives trading? -- to a zoomed-out view of where progressives and the financial industry stand. What values are we fighting for? How do we fight for them? What are the hurdles?

Participants, including Raj Date, Alan Brinkley,  ND20 contributor Jeff Madrick, Joyce Purnick, and Lance Lindblom, recounted the history of the financial sector. From the 1930's, when FDR enacted serious reforms, to the 1980's, when those reforms were relaxed, bankers looked like the characters from Mad Men -- taking care of client relationships first and foremost, without a lot of flash. There was a healthy relationship between business, the public and its banks.

Then the regulations were slowly eroded, the crisis began to take effect, and the trust was broken. But the progressive movement, it was pointed out, wasn't organized on the issue ahead of time. Since the crisis, it's been about "filling a pothole" by putting money in the sector to stave off disaster. Progressives hadn't mapped out a clear position, and neither had the Democratic Party, so much of the work since then has been a patchwork game of catch up. Where FDR had a 20-year backbench of thought on the issue, we're just beginning to map it out.

And now we're in what one participant characterized as a war -- a cultural and intellectual battle against free market assumptions and the entrenched power of the financial industry. All present voiced concern about the throttlehold the financial industry has on politics, and the Democratic Party in particular. Through amassing wealth, the sector has amassed power, which has watered down financial reform and will continue to block necessary steps.

Meanwhile, without a modern-day Pecora Commission to uncover fraud, the anger and the politics to fuel reform have lagged. Both are fueled by scandalous information -- take a look at the cases against Goldman Sachs -- and we need to uncover more of those stories. But that process is also in nascent form and is moving slowly ahead.

The group also peered into the future. Some coming fights that were highlighted:

Housing policy: foreclosures and underwater mortgages are nowhere near over, and the anger those events cause is going to help fuel continued discussion of the banking sector. Finding solutions for the disappearing middle class will be key.

A VAT tax: as the deficit hawkery takes hold and fiscal austerity measures are pushed, expect a rallying call for a Value Added Tax. This will hurt middle- and lower-income families. Instead, progressives can push for a banking sector tax and get our money's worth.

The general consensus: the movement needs to get organized, because the fight isn't over yet.

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How the Senate Financial Reform Bill Gained Strength

May 24, 2010Mike Konczal

There's a general consensus that the Senate Bill is strong, even surprisingly strong, with everyone being blindsided as to how that happened. Here's Edmund L. Andrews and Katherine Reynolds Lewis:

Bulked Up, Not Watered Down

There's a general consensus that the Senate Bill is strong, even surprisingly strong, with everyone being blindsided as to how that happened. Here's Edmund L. Andrews and Katherine Reynolds Lewis:

Bulked Up, Not Watered Down

Industry lobbyists are stunned that the bill became tougher rather than weaker as it progressed through the Senate...Scott E. Talbott, a top lobbyist for the Financial Services Roundtable, which has adamantly fought against many provisions in the Senate bill, sounded almost shell-shocked by the bill’s breadth...

The bill is a major victory for President Obama and a valedictory for retiring Senate Banking Committee Chairman Christopher J. Dodd, D-Conn. Dodd was the guiding force who overcame strong opposition from many Republicans and some Democrats and skillfully navigated past numerous procedural barriers.

A lot of people, notably Americans for Financial Reform, have been fighting day in and day out for financial reform. But even with all their efforts, 3 months ago people were very greatly discouraged about what could have been accomplished in the Senate.

This also took place with health care passing in the background, so that gave the Democrats an energy that they didn't have in the Senate previously. Having watched the battle unfold both in the House and the Senate in real time, there are three key decisions that were made by individuals that turned out to be game-changers.

The first was Chris Dodd's decision to go it alone and release his own bill rather than water it down to get Republican support in committee. This watering down process between Dodd and the Republicans on his committee sent me in a serious depression over the prospects of financial reform. Shelby had walked away from the debate, Corker was trying to play the role to get a bill out, and then Dodd decided to go on his own. He also called for a vote immediately to get it out of conference without calling any amendments. And it turned out to be the right decision.

The second is the decision to have amendments go for votes. Many, including myself, are disappointed that not enough important amendments got a vote in the Senate. But it is important to remember that there was a moment where there weren't going to be any votes on any amendments. And it's only through progressive senators demanding votes on amendments that they went to the floor. And only by demanding votes, and forcing Republicans and Democrats to vote for or against Wall Street, was progress able to be made.

But the most important part of this was the third reason, and that is the primary challenge of Senator Lincoln. I think a lot of people are going to read this backwards as the Senate momentum getting strong because of the SEC's April 16th charges against Goldman, further investigations and coverage and Goldman's tone-deaf response. I'm not sure how much of an effect that had. Americans didn't go to bed April 15th thinking Goldman and the rest of the Wall Street firms were businesses that hadn't been bailed out without any major repercussions and still retained their power, while the rest of the economy suffered under massive unemployment.

I will say one thing that was a game-changer: Blanche Lincoln had written a derivatives bill that sent everyone scrambling. Everyone. On April 16th everything changed, but because of the derivatives language that was introduced into this bill.

Especially the Section 106/716 language, which would spin out the dealers from commercial banks. Noam Scheiber got this dynamic perfect, noting that all the lobbyist energy had suddenly turned to scrapping this very specific derivatives language, and even with huge opinions against it, it got out of the Senate. This left little time to attack other things.

What's important here is that Senator Lincoln didn't decide to do it randomly, as if because a butterfly flapped its wings in Brazil. She did it because she had a primary challenger in Arkansas -- Lt. Governor Bill Halter, who deserves a lot of credit for stepping up and risking his political career to challenge an entrenched incumbent. Arkansas Democratic primary voters were open to hearing different ideas about what kind of representation they wanted, but they couldn't demand better from Lincoln without an alternative in the race.

And politics is a team sport. Halter was recruited and supported by many local Arkansas Democrats, Glenn Greenwald and Jane Hamsher of Accountability Now, the hundreds of thousands of members of the Progressive Change Campaign Committee, Markos Moulitsas-Zuniga and the Dailykos community, the millions of members of Moveon, and the millions of members of the SEIU and the AFL-CIO.

The other team was mobilized as well. The bank-dominated US Chamber of Commerce, which is fighting against Lincoln's derivatives language, was advertising on her behalf in the race.

But it was the people-powered groups that had more power in the primary. Lincoln knew that if she watered down her derivatives language, it would be known and that information would be given to voters. Special thanks are owed to these groups, who deserve a central place at the story for why this Senate bill is so strong, but so far I've seen very little attention given to them.

Which is to say that when democratic officials are held accountable for their votes they do the right thing. And ordinary people can make a difference, if they pool their efforts and engage in smart and aggressive strategies at the ballot box. It's a simple set of lessons, but it's always good to relearn them.

Mike Konczal is a fellow with the Roosevelt Institute and a blogger at rortybomb.wordpress.com.

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Ben Nelson's Holograms: Aging Senate is Out of Touch

May 24, 2010Tim Price

hologram-150During a recent interview with the Omaha World-Herald, Nebraska Senator Ben Nelson was asked if he supported an amendment to the Senate's financial reform bill that would have capped ATM fees at 50 cents per transaction.

hologram-150During a recent interview with the Omaha World-Herald, Nebraska Senator Ben Nelson was asked if he supported an amendment to the Senate's financial reform bill that would have capped ATM fees at 50 cents per transaction. As the senator tried to explain his position, things took a turn for the bizarre:

"I've never used an ATM, so I don't know what the fees are," Nelson said, adding that he gets his cash from bank tellers, just not automatic ones. "It's true, I don't know how to use one.

"But I could learn how to do it just like I've . . . I swipe to get my own gas, buy groceries. I know about the holograms."

By "holograms," Nelson clarified that he meant the bar codes on products read by automatic scanners in the checkout lanes at stores such as Lowe's and Menard's.

"I go and get my own seating assignment on an airplane," Nelson said. "I mean, I'm not without some skills. I just haven't had the need to use an ATM."

The amendment in question was the brainchild of Iowa Senator Tom Harkin, who argued that it was needed to "ensure that fees charged to consumers at ATMs bear a reasonable relation to the cost of processing the transaction." However, he was not able to bring the amendment to a vote and it was not included in the bill that passed on Thursday.

Senator Nelson's response has drawn comparisons to former Senator Ted Stevens of Alaska, who famously described the Internet as "a series of tubes" that could be clogged by sending too many e-mails and videos through them. The Daily Show leaped on Stevens' mangled metaphor and turned him into the poster boy for politicians who are out of touch with the modern world.

Comparing Nelson to Stevens doesn't seem quite right, though. It was at least possible to see what Stevens was getting at, if you cocked your head to the side and squinted. Nelson sounds like he just beamed down from the mothership and didn't have time to finish reading his briefing on Earthling technology. Like poor Miss South Carolina, it's obvious that he was caught completely off-guard by the interviewer's question and just started saying the first thing that came to mind. "I personally believe that U.S. Americans are unable to pay their ATM fees because some people out there in our nation don't have holograms..."

It's easy to poke fun at politicians like Ben Nelson, but his clueless response to this issue highlights a serious concern. Many of our leaders have been so comfortably ensconced in the halls of power for so long that they have little to no memory of life on the outside. As Ezra Klein notes, this is especially problematic in the current Senate, which is the oldest on record. That's why it's so important for average Americans to engage in the political process and demand results from their representatives in Washington. When the members of Congress are crafting policies that will have a profound impact on the lives of working families, it's not enough for them to know about the holograms.

We need to speak up and remind them of what the real world is like.

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Mike Konczal on Rachel Maddow: Goldman Calls the Shots

May 24, 2010

Our very own Mike Konczal visited the Rachel Maddow show, guest hosted by Chris Hayes, the day the Senate passed its version of FinReg. He explains the Volcker Rule, which says that you can't both run a hedge fund and a commercial bank, and how it never got a vote. Even though Senators Merkley and Levin tried to "sneak" this language in as an attachment to the amendment to exempt auto dealers from regulation, both were withdrawn when it came time. "Which goes to show you who really calls the shots, auto lenders versus Goldman Sachs," Mike notes.

After giving a quick overview himself, Chris turned to Mike for his insights:

Visit msnbc.com for breaking news, world news, and news about the economy

Our very own Mike Konczal visited the Rachel Maddow show, guest hosted by Chris Hayes, the day the Senate passed its version of FinReg. He explains how the Volcker Rule, which says that you can't both run a hedge fund and a commercial bank, never got a vote. Even though Senators Merkley and Levin tried to "sneak" this language in as an attachment to the amendment to exempt auto dealers from regulation, both were withdrawn when it came time. "Which goes to show you who really calls the shots, auto lenders versus Goldman Sachs," Mike notes.

After giving a quick overview, Chris turned to Mike for his insights:


Visit msnbc.com for breaking news, world news, and news about the economy

Read some of Mike's pieces on the topic:

"Why Merkley-Levin Is Necessary"

"Merkley-Levin Amendment Can’t Get a Vote"

"A Roadmap of the Shadow Banks, plus targeting the Volcker Rule"

"Towards a 21st Century Glass-Steagall"

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More ND20 FinReg Reactions: Bill Black and Henry Liu

May 21, 2010

question-mark-150 Two more New Deal 2.0 contributors have weighed in to help you navigate the debate on the Senate bill...

Bill Black:

question-mark-150 Two more New Deal 2.0 contributors have weighed in to help you navigate the debate on the Senate bill...

Bill Black:

The key things to look for in judging the seriousness and effectiveness of any reform effort are whether it addresses the primary drivers of our recurrent, intensifying crises. Those are:

1. Compensation: Executive and professional -- control frauds use these to (a) create the "Gresham's dynamic" that allows them to suborn "controls", officers and employees and turn them into fraud allies, and (b) to convert firm assets to their personal benefit while minimizing the risk of prosecution.

2. Accounting: Capital and liquidity ratios are meaningless without good accounting. We have weakened the real capital requirements because the industry used its contributions and its economist allies to convince Congress to extort FASB to gimmick the accounting rules so that banks need not recognize losses on bad assets prior to their sale. Until this action is reversed everything done on capital/liquidity is a sham.

3. Ending the regulatory black holes that were deliberately created: You can't leave any holes. Control frauds are dynamic. If you fix five of seven holes they will exploit the other two and your five successes will be hollow.

4. Regulators: By far the largest problem was with the anti-regulators that Bush appointed for the explicit reason that they opposed regulation. Desupervision was a far greater problem than deregulation. As long as the anti-regulatory Rubin wing of the Democratic Party governs economic and regulatory policy we will fail. So watch for whether Rubin, Summers, Geithner, and the anti-regulatory Bush leftovers running the Fed, OCC, and OTS remain in power. When they hire Mike Patriarca to be their top regulator you'll know that they actually want to succeed. Track how many criminal referrals of CEOs the regulatory agencies make.

5. Control fraud: While the Supreme Court decision on corporations being persons for First Amendment purposes is obscene, it has at all times been within Congress' power to restrict conflicts of interest. When the financial services committees bar their members from receiving any political contributions from the financial services industry and its shills (and bar anyone that took money from the industry from joining the committee) we'll know that serious reform has arrived.

So, proverbial bottom line: the Senate bill did, in fact, get stronger. And that tells us something very positive about what the Members' constituents are supporting, because the organized "special interest" effort to weaken the bill was intense. The fact that the strengthened bill is zero for six on dealing with the problems driving these crises shows that the original bill was so weak in all of its fundamentals that even with the marginal improvements it will not address successfully the reasons why we are suffering recurrent, intensifying crises.

Henry Liu:

Generally speaking, while regulatory reform is obviously needed in financial markets, one should recognize the limits of reform as always being a rearview mirror endeavor. That is the difference between reform and revolution. The former is an attempt to restore a broken past while the latter is an attempt to construct a utopian future.

Based on information available so far, regulatory reform seems to have been ensnared by obscure technical details -- the systemic consequence of which have not been fully established -- and headline-grabbing red herrings that divert attention from fundamental issues. Financial innovations are adopted in the market generally because they serve a particular positive function. Yet a sharp knife can cut many ways; in the hands of a surgeon it will be a useful instrument, while in the hands of criminals or even innocent children it can be a dangerous weapon. Therein lies the dilemma of financial regulation, a problem faced also by regulation on scientific research.

There is logic in not placing unrealistic hope in regulation as a regime of forbiddance. Rather, the application of the concept of fail-safe may be more useful than the nebulous quest to eliminate the too-big-to-fail syndrome. Fail-safe incorporates systemic features which in the event of failure respond in ways that will cause no harm or at least a minimum of harm or danger to other elements in the system. Fail-safe components in a system allow, but do not cause or invite, improper systemic behavior without a system-wide contagion of penalties. It seems that the current regulatory reform effort has been focused more on the concept of fail secure -- by seeking to prevent improper systemic behavior through the impediment of proper systemic behavior.

In a market system, incentive-driven good behavior is preferable to criminalization of bad behavior. Given the ingenuity of market participant creativity, one can expect that an incentive-driven fail-safe regime can be developed for financial markets. History has shown that fail-safe regimes have been devised to successfully manage nuclear arms control during the Cold War to prevent a nuclear war.

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ND20 FinReg Reactions: Elizabeth Warren, Mike Konczal, Marshall Auerback

May 21, 2010

question-mark-150Last night the Senate signed off on the financial regulation bill by a 59-39 vote. Next step: the bill will move to a conference committee where it will have to be reconciled with the House bill. The Senate bill is big (1,500 pages). It's unwieldy. It's full of compromises. Is it enough? What works?

question-mark-150Last night the Senate signed off on the financial regulation bill by a 59-39 vote. Next step: the bill will move to a conference committee where it will have to be reconciled with the House bill. The Senate bill is big (1,500 pages). It's unwieldy. It's full of compromises. Is it enough? What works? What doesn't? To help you navigate the murky waters of financial reform, we asked ND20 contributors to give us their take. ** Stay tuned for more reactions...

Elizabeth Warren:

"No bill that deals with big issues is ever perfect, but the Senate's Wall Street reform package will go a long way toward preventing the kinds of abusive practices that brought our economy to its knees. Getting to this point was a tough slog, and President Obama and Chairman Dodd deserve a lot of credit for producing a strong bill."

Mike Konczal:

The best point of comparison for the Senate Bill is the House Bill, HR 4173, that passed last December. Resolution authority is a little bit weaker than what reformers were able to achieve in the House. There is no equivalent of Miller-Moore's amendment for unsecured creditors in a resolution. A lack of a leverage cap also means that there is no fencing on what the

regulators can do with their discretion. Collin's amendment on capital ratios is better than what the House got, since it really focuses on high quality capital.

The Senate's consumer protection bureau versus the House's CFPA is a trade off; the House has a new agency, but there are a lot of carve outs for auto dealers. The Senate version is housed at the Fed and the risk council has a veto over its actions, but is a pretty pure version of what reformers wanted given that.

Derivatives in the Senate is still up in the air. Section 716 would be major change, akin to a 21st Century Glass-Steagall, however it will come under massive lobbying attacks in conference.

Given what they wanted this bill to do in regards to Too Big To Fail -- give regulators more legal powers in a crisis, and expand prudential regulatory powers -- it's fairly good. But will that be enough?

Marshall Auerback:

On the Volcker Rule (which restricts banks from making certain kinds of speculations) there are so many allowed exceptions that the rule is meaningless. There are two things that could be done right away which would be far more effective than anything passed by Congress. On the issue of securitization, the standard securitization structure takes the form of a trust or what is called a "special purpose entity". For all intents and purposes these are the equivalent of an investment company. Investment companies are normally subject to registration under the 1940 Investment Companies Act. However, the SEC has ruled (3a-7) that a special purpose entity that issues fixed-income securities or other securities which entitle their holders to receive payments that depend primarily on the cash flow from eligible assets will not be deemed to be an investment company and is thus exempt from registration. The 3a-7 exemption also provides that the securities sold by the securitized structure be rated, at the time of initial sale, in one of the four highest categories assigned long-term debt by at least one nationally recognized statistical rating organization. But such fixed-income securities may be sold to qualified institutional buyers as defined in rule 144A. This means that the securities issued by an unregistered entity do not have to be registered or performance reported, with all due diligence undertaken by a nationally recognized rating organization.

Also, since we're not yet ready to get rid of credit default swaps, let's take Wall Street at its collective word. It claims that the CDSs are in effect a kind of insurance to hedge against the underlying reference securities. So let's get rid of the rule which exempts them from state insurance regulation. Regulate them like insurance entities and force the dealers to come up with a full method of provisioning in the event that someone has to collect on the 'insurance'. Of course, this is likely to make the credit default swaps uneconomic and unprofitable, but it's better than the alternative of using trillions of dollars of government funds to underwrite these horrible financial Frankenstein type products.

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Merkley for Main Street

May 20, 2010

Senator Jeff Merkley took to the Senate floor on Tuesday, complete with fist pounding, to air his frustration over the blockage of the Merkley-Levin amendment that would fortify the Volcker Rule. What he wanted to know: "Why is Wall Street winning and Main Street losing tonight in the US senate?" Watch his passionate speech:

Senator Jeff Merkley took to the Senate floor on Tuesday, complete with fist pounding, to air his frustration over the blockage of the Merkley-Levin amendment that would fortify the Volcker Rule. The rule restricts banks that have access to FDIC insurance from speculative trading. What he wanted to know: "Why is Wall Street winning and Main Street losing tonight in the US senate?" Watch his passionate speech:


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On Unemployment, Wall Street, and a 'Nuevo Deal'

May 20, 2010Bryce Covert

lealan-jones-150LeAlan Jones is running for US Senate in Illinois on the Green Party ticket to take the seat vacated by President Obama.

lealan-jones-150LeAlan Jones is running for US Senate in Illinois on the Green Party ticket to take the seat vacated by President Obama. Jones grew up in public housing projects in the South Side of Chicago, and at the age of 13 made an award-winning radio documentary called "Ghetto Life 101" about life in his neighborhood. He later trained to be an investment banker at JP Morgan, but decided instead to devote himself to fatherhood and now works as a football coach at Chicago's Simeon High School. I sat down with Jones to discuss unemployment, the culture of Wall Street, and reviving the New Deal.

BC: Why did you choose the Green Party? What does it offer that the Democrats or Republicans can't?

LJ: It's a question of common sense. If we were in the streets and somebody had their hand in your pocket and somebody else had their hand in your pocket, how could you accept either? Traditionally African Americans have voted Democratically, and I think blindly, because aside from all the politics that have come out of the Democratic party about helping people, I have to ask myself on a daily basis what has been the productivity from all these politics, from all the speeches and all the supported interests. What has actually been the productivity and the sustainability of people that have supported the Democratic party? And on the other side, we look at the Republican party, they have been a party that has existed on fringe issues like abortion, militarism, and at the very same time they've delivered very little to their base in terms of real jobs, real wages and real opportunities. So being a conscious person and being a fair and balanced person, there is no way I could see myself, as my grandmother would say, fattening flies for frogs. That's what I tend to believe, that supporting Democrats or Republicans, it's an act of futility, not an act of faith or real substance. I'd rather be ahead of the curve than behind the curve and I think that green politics is the way of now, not the way of tomorrow.

We're really just trying to start off where the New Deal left. And we believe that being a third party candidate tends to allow us to do that to a greater extent than the party that Mr. Roosevelt started this discussion in. And that's all we seek to do, is to bring forth the "Nuevo Deal." They say all tides rise ships, and I think that's what this movement is going to be about, is that we're trying to bring forth a discussion that America needs, the world needs, and we believe that we're the party that's going to do that. And I think that going forward the two major parties can't deliver on their solutions because they're too mired in the problems.

BC: You and Obama both come from Chicago but have very different backgrounds. What are the similarities and differences between the two of you? What's your view of what he's doing?

LJ: Barack Obama is a tremendous man. And I will not say anything to disparage him on a personal level. But take into consideration that 80% of political contributions come from corporations or individuals that have specific interests that they want to see out of government and those individuals who have contributed, whether it was Bush or Obama, have undue influence on legislation. It wouldn't be a criticism of Barack Obama, it would be a criticism the system and of a game he's had to play to get to where he's gotten. And the most fundamental difference between me and President Obama would be the fact that I am taking a belief that my political course is about the genuine interest of allowing people to be able to optimize their evolution within a society. Without having infringement from entities or institutions that would like to otherwise control them.

And it's not just to speak to Obama. It's to speak to the new realities in American politics where the corporations are in competition against the citizen. You'll see that with any reform that has tangible and material influence on middle income America being volleyed by special interests and politics and media. So there's this cycle between the corporate interest, the media, and the citizen, and out of that ball being juggled the citizen usually falls first.

BC: What solutions do you think will be most effective in solving the jobs crisis?

LJ: I think for one that the American economy has always been driven by the American people. When we look at the great inventors, when we look at the great products that have come, they've primarily come from people who have had ideas but may not have had the equity. And those two things came together and created the American economy. What seems to be happening now is people still have ideas but they're limited in terms of the resources to drive this American economy forward. So that's why we have a complete program -- we want to work on cooperatives, co-ops, credit unions and use those as mediums to be able to get the capital resources to people in order to drive job growth from the bottom up as opposed to the top down.

BC: Do you see this capital coming mostly from the private sector in community banks or venture capital, or do you think the government has a role to play in helping fund ideas?

LJ: I think that there has to be a multi-dimensional approach to it because you don't want to subsidize, you can't subsidize prosperity. It goes back to the old Bible proverb, "If you give a man a fish he eats for a day, if you teach a man how to fish he'll eat for the rest of his life." I think that the African American community, and not just the African American community, middle-income communities, have been impacted by having been given too many fish. And now in these economic times, if you did give people a fishing rod they wouldn't know what to do with it.

BC: Do we need different or extra steps to bridge the race gap and fix the high levels of unemployment and poverty for African American people?

LJ: I think that the African American community has a unique set of circumstances which has exacerbated economic figures for unemployment. Do special concessions need to be made? Maybe in certain cases, but I think if the right social investments in terms of education, housing and sustainable things like that were done effectively, the African American community would be no different than any other community in terms of being able to get a return on those types of investments. A large part of the African American economy is not an economy that's registered. You have a lot of people that are service-oriented, that are barbershop owners, that are mechanics, that have skills and trades that are in the labor market but are not filing 1099s for it because a lot of their skills are cash and carry. The other thing that affects us is that many of these people that are entrepreneurs don't get a chance to expand their businesses because they're cash and carry operations and because they have an aversion to dealing within commerce. So the thing is to get those individuals that have these great ideas, that have these great small business models, to think outside of just where they're at. And getting them integrated into a system which allows their ideas to be expanded through reasonable financial investment and reasonable talent investment. Once of the most remarkable things about the African American community is that it's a very talented community. We wouldn't have gotten to this point if we were not. The thing is that we tend to isolate ourselves when we come into business as opposed to integrating what our business concepts could be and how those things can be expanded. Once of the things that does not happen in the African American business is you rarely have mergers and acquisitions. Usually their businesses have been around for one generation and don't get to transcend out of that generation because we look at our entities as being very personal things as opposed to things that can be enhanced and optimized by doing very basic things and creating synergies that can create efficiencies that can create jobs that can create sustainability.

BC: What is your view of financial reform? Will it help unemployed and/or middle class people?

LJ: Financial reform is huge. The financial institutions have as a result of deregulation and free market principles really deteriorated the quality of life for people in Middle America. And the profits are earned by individuals but the losses are shared. So financial reform is one aspect of it. And that is going to regulate, but I think there still has to be an expansion of growth. That's the defining line: how do we regulate with the understanding that we have to generate growth. And that's why our cooperatives and working with the community banks and credit unions are going to be able to expand that capital into Middle America, as well as, as we said, financial regulation has to happen. And we think that's where we're going to create the jobs and the opportunities that are going to get people back to viability economically.

BC: How do you view the financial industry, having trained to work at JP Morgan?

LJ: As much as I'm a Green, I do understand there are aspects of the financial industry that have expanded the American middle class. But it expands the American middle class at the very same time that it undermines it. It's an oxymoron. And that's why I think that as much as we want to regulate the industry we also have to create viable alternatives where we can have capital appreciation and capital allocation in industries and institutions that are going to produce and service the American people. It does leave a bad taste in my mouth, but I do understand that some of the functions of Wall Street are actually beneficial to middle America. And that to demagogue the entire industry won't help America gain fiscal responsibility. But there have to be regulations, because we do recognize that deregulation has a tremendous impact on Middle America.

BC: What is the culture like in these firms?

LJ: You are at the top of the food chain. So it's basically being a lion or being a sheep. And these are definitely men that think of themselves as lions in this economy. But at the very same time, even lions have to live in equilibrium within the environment they're in. And these lions on Wall Street have been overfeeding. And now they're fat, and now it's time for those sheep to live.

I've compared them to drug dealers. I don't think there's any difference between Wall Street investors and young men in urban communities that have participated in drug distribution. The only difference between the two of them is their commodities. And that's why I think that in terms of regulation some of these men need to go to jail if it is found that they have willfully and consciously conspired to undermine investors. It's the criminalization of it. Young men in the cities selling drugs won't tell you they're about capital allocation but they will tell you they're trying to feed their families. And yet they're doing it at the expense of undermining their community and they understand that risk and some of them are willing to take it. Because some of them actually do good with it. And they accept that society has a taboo against what they do. I would just hope that society begins to have the same taboo against the men who wear suits and ties instead of baggy jeans and gym shoes.

BC: Part of your platform is a green economy and clean energy. What do you envision as viable solutions?

LJ: I saw the solution this week in the middle of the state of Illinois where I had the opportunity to visit an organic farmer who has a ten acre field, who produces great vegetables, and also driving back on that expressway and seeing a wind farm. And knowing that we're not talking about anything revolutionary here. More than talking about politics, it's about a philosophy. It's a smarter way for man to live, being in a green world as opposed to a world where you profit at the expense of the environment. We only have one world and we can't get it back when this one is done. So I think that it's important that we take into consideration that it's not about us, it's about what we leave behind. And right now, if we look at American politics we're going to leave behind more debt, we're going to leave behind more pollution when we look at places like the Gulf of Mexico where we've had one of the most prolific ecological disasters in American history at the expense of propping up and old economy that we don't' have to deal with. We're dealing with an economy that's a lot smarter, we're dealing with a people that's a lot smarter, and the only thing that's holding them back are the politics and interests that profit off of this old model.

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