“powerful interests benefit from a system that is complicated and opaque”
Elizabeth Warren was deemed too controversial to head the new federal U.S. Consumer Financial Protection Bureau she’d called for. This agency would investigate complaints by ripped off consumers, give them a way to get compensated when their powerful fellow-citizens, corporations, take advantage of them in a predatory way. President Obama decided the confirmation debate on the floor of a Congress intent on thwarting his every idea, even ideas they agreed with, would be futile and politically costly. He nominated a less controversial person to head the agency, appointed him during a recess and that was the last anyone heard of this bold new agency. Nobody’s fault, a defender of Mr. Obama could say, just the sad reality of the highly polarized wedge issue politics of the day.
Elizabeth Warren ran a successful campaign for the senate in 2012 and took office in January 2013. I get emails from Senator Warren from time to time. I like what she has to say very much, and what she consistently seems to fight for. Here is a great quote from her I heard last night, apparently made over a year ago:
“I’ve been in the senate for nearly a year and believe as strongly as ever that the system is rigged for powerful interests and against working families. We could talk about a lot of ways the system is rigged: lobbyists, campaign finance, the court system, but I want to raise a specific issue that we need to spotlight: how much powerful interests benefit from a system that is complicated and opaque.”
A system that is complicated and opaque. Well said. Other adjectives come to mind as well, but she cuts through to the essence, resisting the urge to use words like convoluted, deliberately confusing, obfuscatory, immoral. Ask a financial genius to describe the industry-wide scam that torpedoed the economy in 2008, the bundling, tranching and reselling of toxic “derivatives” that were somehow swapped for the tremendous profits of few, and the bankruptcies of many, after being rated triple A investments by rating agencies that were essentially paid to give these false and misleading ratings to poison. The genius would have a hard time describing it in a way anyone not trained in the industry could understand.
Although, the simple fact, after the fact, is that a massive fraud was perpetrated, industry-wide, arguably under cover of complicated and opaque law, and nobody was ever forced to return a dollar of the billions and billions transferred from retirement accounts and life savings to the personal wealth of already very rich executives and investors. The opaque, complicated and loophole strewn laws these wealthy interests agreed to so that a future tsunami of financial highjinx does not roll over us lack the simplicity and effectiveness of the FDR-era law* they had repealed in order to perpetrate this massive transfer of wealth.
Glass-Steagall, the repealed law, prevented a major financial crisis for more than 50 years (they’d previously happened every 15 years, culminating in the stock market crash of 1929), until loopholes began appearing under Reagan in the 1980s. Shortly thereafter we had the Savings and Loan Scandal. Once the law was repealed (under Bill Clinton’s watchful and practical eye) we had the first world-wide financial disaster since 1929. An amazing coincidence, no?
The devil is in the details and if the details are complicated, confusing, opaque, impossible to parse– voila, the devil is free to cavort as much as he likes. Here’s one that struck me from Elizabeth Warren’s recent email about regulation to curb the interest rates of student loans:
“Since last year, nearly a million more borrowers have fallen behind on their payments. Altogether, students are now struggling with $100 billion MORE debt than they were a year ago.
” … I don’t kid myself: Refinancing loans won’t fix everything that’s wrong in our higher education system. We need to cut the price of college, to reinvest in public universities, to shore up federal financial aid, to crack down on for-profit colleges, and to provide better protections on student loans.
The bold proposal that Republicans filibustered last year would limit the interest rate in this trillion dollar government sponsored industry to 3.9%, four times what savings banks pay to depositers, three or four times the interest rates banks are paying for two year CDs. A quick check of mortgage and other loan rates shows rates below 3.9% for people buying houses or cars, or refinancing homes. I don’t know what rate investment banks and corporations are paying to borrow money these days (as close as I can tell this is the federal funds rate, lowered to 0.0-0.25% in December of 2008) but I believe the 3.9% interest rate is more than 10 times higher than that, if not infinitely higher.
Ah, go fight City Hall, it’s complicated and opaque, you know what I’m saying? But let us end with Elizabeth Warren’s succinct 2011 refutation of the Libertarian worldview and her answer to the charge that in advocating for higher tax rates on the wealthy she is engaging in “class warfare”:
There is nobody in this country who got rich on his own. Nobody. … You moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless. Keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.
NOTES
* [in 1987] Thomas Theobald, then vice chairman of Citicorp, argues that three “outside checks” on corporate misbehavior had emerged since 1933: “a very effective” SEC; knowledgeable investors, and “very sophisticated” rating agencies. Volcker is unconvinced, and expresses his fear that lenders will recklessly lower loan standards in pursuit of lucrative securities offerings and market bad loans to the public. For many critics, it boiled down to the issue of two different cultures – a culture of risk which was the securities business, and a culture of protection of deposits which was the culture of banking.
(and from the end of the PBS piece)
Just days after the administration (including the Treasury Department) agrees to support the repeal [October, 1999], Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told [noted corporate cocksucker] Rubin he had some important news, the secretary reportedly quipped, “You’re buying the government?”
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