Saturday, December 13, 2014
The LaRouche Political Action Committee and LaRouche movement warned Congress and the American people: it's Glass-Steagall or destruction. This week, when Obama, Boehner, and Wall Street conspired to put all swap derivatives under protection of the FDIC and ram it through in the spending bill, the Congressional Democrats revolted and began denouncing Obama in unprecedented terms.
Obama's and Wall Street's treason was brought home on Dec. 11, when JP Morgan's Jamie Dimon, Barack Obama, and GOP Speaker of the House John Boehner joined hands to "whip" the omnibus spending bill (which they dubbed "cromnibus") through the Congress with its poison pill that bails out Wall Street's credit swaps derivatives by repealing the only "fig leaf" of Dodd Frank—Section 716 (which had been put in in 2010 by then Sen. Blanche Lincoln [d-ar]). The bill passed at about 9:45 PM on Dec. 11, only after Boehner had shut down the House for a 7-hour recess because he and Obama and Wall Street did not have the votes to pass the $1.1 trillion spending bill.
Earlier, the vote on the rules that allowed the bill to be voted on only squeaked by with a vote of 214-212. And now, Rep. Marlin Stutzman (R-IN), one of the final 2 votes that gave Boehner the rules majority, has charged that the GOP leaders lied to him. They told him that the omnibus bill was "dead" and would be replaced by a "continuing resolution."
In the final vote, the bill was passed, 219 to 206, with 57 Democrats joining the Obama treason, while 67 Republicans voted against the bill with the progressive Democrats.
Sen. Elizabeth Warren (D-MA) kicked off the battle with a floor speech on Dec. 10 that blasted the bill as "the worst of government for the rich and powerful," which she followed up with sending the link to the members of the House, and then actually lobbying the House members to kill the spending bill if the bailout measure were not removed. She took to the floor of the Senate again on the 11 and again yesterday, Friday afternoon and unveiled for the world to see how pervasive the role Citigroup plays in running the U.S. Federal government.VIDEO: Elizabeth Warren warns America Against Wall Street and Citigroup
Senator Warren is the lead sponsor of S. 1282, the "21st Century Glass-Steagall Act."
In this battle, Warren worked closely with Rep. Maxine Waters (D-CA), who broke her recent record of backing Obama and went to war against the White House by—among other means—calling a resistance meeting in her offices that was attended by 20 Members, to vote 'no'.
Some of the highlight statements and actions appear below:
MAXINE WATERS: The Hill reported on Dec. 11 that"With just hours to go before a scheduled government shutdown, the Democrats launched a lobbying blitz to counter calls made by Obama and other White House officials urging passage of the bill."
"We don't like lobbying that is being done by the president or anybody else that would allow us to support a bill that ... would give a big gift to Wall Street and the bankers who caused this country to almost go into a depression," Waters said. "So I'm opposed to it and we're going to fight it."
Waters said she and other representatives who met at her office, including Dem Caucus Chairman Xavier Becerra (D-Calif.), "divvied up a list of members" and called them to oppose the bill and oppose Obama, The Hill said."We're fighting anybody who is lobbying to tell people to vote for this bill, if the president is lobbying, we do not like it, and we're saying to our members, 'Don't be intimidated by anybody."'
After the narrow vote, Waters again attacked Obama and JP Morgan Chase's CEO:"I know that the president was whipping and he was supporting this bill, and I know that Jamie Dimon was whipping," Waters said, reported the Wall Street Journal. "That's an odd combination."
NANCY PELOSI: In a floor speech and a written message to Democrats, Pelosi told them,"It is clear from this recess on the floor that the Republicans don't have enough votes to pass the cromnibus,"
reported Politico on Dec. 11."We're being asked to vote for a moral hazard. Why is this in an appropriations bill? Because it was the price to pay to get an appropriations bill .... This is a ransom, this is blackmail. You don't get a bill unless Wall Street gets its taxpayer coverage."
"We are being blackmailed, being blackmailed, to vote for an appropriations bill. I would not put the name of my constituents, in my district, next to this bill,"
Pelosi said during a speech on the House floor, Politico added.
ALAN GRAYSON (D-FL) told the Huffingon Post's Zach Carter, who broke the story, that it was"a good example of capitalism's death wish."
Dozens of other Democrats were working the phones and mobilizing against the repeal of the ban on derivatives bailouts, including some who made clear to Warren and others: "This is another Glass-Steagall moment."
SEN. CARL LEVIN (D-MI) made a Dec. 10 floor statement that not only opposes the derivatives amendment but pointedly goes after JPMorgan Chase."A couple years ago, JPMorgan Chase lost billions of dollars on a bad bet in the credit derivatives markets. The Permanent Subcommittee on Investigations, which I chair, conducted an extensive investigation and issued a 300- page bipartisan report.... JPMorgan's risky trading by its bank was a disaster—costing the bank over $6 billion. And it was receiving the taxpayer subsidy the whole time."
SEN. DAVE VITTER (R-LA) called the bill"a Christmas presents to the megabanks and Wall Street," reported TruthOut.
MARLIN STUTZMAN (R-IN) put out a statement on Thursday night, reported National Review, Dec. 12, that says,"I was very surprised and even more disappointed to see the cromnibus back on the floor....The American people deserve better."
"Stutzman backed the rule [to allow the vote on the omnibus] at the last minute after leadership told him that they would pull the cromnibus, once the rule was passed, and replace it with a short-term continuing resolution favored by rank-and-file conservatives. With the last-minute help of Stutzman and outgoing Representative Kerry Bentivolio (R., Mich.), leadership won the vote 214-212," wrote National Review."I supported the Rule, because I was informed by leadership that the cromnibus was dead and a short term CR would take its place," Stutzman said.
A well-informed Washington intelligence source said that it may appear that Wall Street won in the short term, but this only opens the door for Glass-Steagall."Dodd Frank is a piece of garbage that should be totally repealed," he said. "This vote adds more urgency and clarity to Glass-Steagall. There's nothing left to hide behind, and you see that in the population."
Saturday, December 13, 2014
The "Cromnibus" or "poison pill" spending bill repealed Section 716 of the Dodd-Frank Act. This section was the whittled-down nub of what originally was the 2010 (Sen. Blanche) Lincoln Amendment, which was a requirement that Wall Street banks do ALL of their derivatives trading in separate subsidiaries, separately capitalized. So it began as something "almost as good as Glass-Steagall."
Glass-Steagall did not, and would not allow commercial banks in the Federal Reserve System to conduct derivatives trading, except for — if they were permitted "wealth management" — futures and options trading for their clients and with their clients' money. It would not allow them any connection — neither by cross-management, capitalization, control, nor even by lending or credit support — to securities or derivatives dealers.
The Lincoln Amendment passed in the Senate bill after a long fight, was opposed by the Obama White House and Barney Frank, and removed in conference. Section 716 was substituted, and then it was claimed that it plus the Volcker Rule were "just as good as Glass-Steagall."
Under Section 716, the banks, which were doing ALL their derivatives trading in FDIC-insured units — including Morgan Stanley and Goldman Sachs, which had been granted holding company status, founded dummy "commercial bank" units, and moved their derivatives books there — would have to "push out" commodity derivatives and uncleared credit default swaps (CDS) to separate units without FDIC insurance. This is a total of about $35-40 trillion of the overall $700-plus trillion in derivatives exposure (using the Bank for International Settlements' version). The commodity derivatives are $25-30 trillion, and Goldman, Morgan Stanley, and Citibank have the lion's share of exposure. Of the uncleared CDS, it's JPMorgan Chase all the way.
MIT economist and banking expert Simon Johnson clarified on Dec. 11: "Under Section 716, interest rate swaps, foreign exchange derivatives, and cleared credit derivatives can remain on the balance sheet of the insured bank. This is almost all derivatives. And hedging of risks by banks using derivatives is most definitely allowed" by Section 716 [emphasis added].
So, under this latest "as good as Glass-Steagall," 90-plus percent of all derivatives exposure has remained with banks insured by FDIC; i.e., in a crisis, insured by taxpayer funds. And so are, still, all the money-market mutual funds run by the banks and the shadow banks.
Now Wall Street has made clear that even this was not enough taxpayer bailout insurance for them. Why? The $35-40 trillion in derivatives which the late Section 716 supposedly excluded from bail-out, were the riskiest derivatives exposure the big banks have. And $5-10 trillion of that exposure is to energy derivatives, which face blowout in the immediate future due to the sudden oil price collapse. These will now be bailed out.
Unless, now, the real Glass-Steagall Act appears.