Unsurprising Poll Results from Massachusetts: Voters Think Obama Sides With the Banks

An interesting observation was made today by the pollster for Martha Coakley, the hapless Democratic candidate for the Massachusetts senate seat held almost forever by Ted Kennedy. It appears polls are showing that the voters, especially independents who would normally vote Democratic in a liberal blue state like Massachusetts, have instead run to support the Republican candidate as the agent of change. Wasn’t that supposed to be Barack Obama’s signature tune?

Massachusetts voters have given up on President Obama as an agent for anything but the status quo, and this is most evident in his willingness to dole out trillions of dollars in direct and indirect support to the banks. The Massachusetts polls show this issue to be foremost on the minds of the voters.

The White House was getting this message way too late to do any good. President Obama was in Massachusetts only in the last few days, trying to work his magic with crowds to revitalize a dying effort. He also announced last week a proposal to tax the banks on their profits, hoping to generate $90 billion dollars this decade in partial payment to the taxpayers for their bailout of the banking system. He promised that one way or another, the banks would pay back every dime of the money lent to them.

It is not clear that his oratory is working or that the public is listening to him; his actions this past year have been completely at variance with his rhetoric. He is, in fact, almost as completely addled as the bank executive cronies he appears to court and coddle. This past week also saw testimony from some of the top executives in the banking industry, including Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JP Morgan Chase, and John Mack of Morgan Stanley. They were all very skilled at accepting regret for what happened without accepting responsibility.

It was clear, though, that not one of them expected to change their way of business to any great degree. They acted almost as if it were their God-given right to be Too Big To Fail, and to have unlimited access to the taxpayers’ wallets when they wanted and needed it. The most astounding revelation came from Jamie Dimon of JP Morgan Chase, who said no one in his bank even contemplated the possibility that housing values might go down.

Were he to say otherwise might expose the bank to all sorts of lawsuits. Still, taking him at his word, we have to accept that none of the top executives at Jamie Dimon’s bank foresaw a housing crash or even a bubble in the making. These are men making millions of dollars a year, and they couldn’t see the housing bubble of the century in front of their eyes? If Jamie Dimon had a soupçon of personal honor he would have already resigned over this failure, and fired all his top management to boot. We are left to conclude that bankers are as much bereft of personal honor as they are lacking in a sense of personal responsibility for their failures.

These are the people Barack Obama has chosen to cozen up to in a vainglorious attempt to revive the economy. We have come to the point of no return for this administration ”“ either it charts a drastically different course when it comes to dealing with the financial industry, or it carries on siding with clueless, inept, and in many cases immoral bankers. Maybe the electoral situation will force President Obama to see the light, but if so, he is going to have to take dramatically different action to do anything serious about reforming the banking industry. Many of the ideas afoot, like a tax on banking profits or a consumer regulatory watchdog, are helpful but don’t constitute real reform. Here, then, is an insider’s view of what really is necessary.

Step One
Fire Timothy Geithner and Larry Summers, and replace them with people who are not integrally connected to the industry, particularly to Goldman Sachs. Withdraw the nomination of Ben Bernanke as Chairman of the Federal Reserve before it is too late. If possible, replace him with Paul Volcker or someone equally disgusted with the performance and attitudes of banking executives. Fire John Dugan as Comptroller of the Currency. He has been captured by the big banks from the get-go and needs to be replaced by someone who is not afraid to stand up to the industry.

Step Two
Submit to Congress a bill to repeal last year’s instructions to the FASB to modify mark to market practices. The light of day needs to be shed on what the banks own in the way of mortgage backed securities and related derivatives, and public prices need to be applied to these assets. Instruct the GAO to conduct a complete audit of the Fed, not just the limited audit of the AIG transaction that Bernanke has approved.

Step Three
A tax on bank profits is well and good, but does not get to the source of the problem behind aggressive risk taking and obscene bonuses. The real problem is with bank expectations on their return on equity. Banks, especially the top 10 largest in the US, have ratcheted up their ROE targets year by year, so that now they are at least expected to be 15% p.a. or higher. These high targets lead to abuse of leverage, lax accounting, misleading products, and ultimately Ponzi finance, in which higher volumes and greater risk are needed every year to keep the ROE scheme going. To control this, bank regulators need to go straight to the heart of the system within banks that mandates these excessive ROE targets ”“ the hurdle rate of return for transactions. This should be mandated to be no larger than 10% return on assigned capital. Deals which generate a return greater than 20% on assigned capital should no longer be welcomed with glee, but looked at suspiciously for the undue risks involved.

Step Four
Bankers love to say that if they don’t reward their best talent with fantastic bonuses, these people will leave for greener pastures. What this really means is that these people will leave for the hedge fund or leveraged buyout industries, and to a lesser extent the mutual fund industry, all of which pay extremely well. The reason these industries have thrived has been their access to cheap and unlimited credit that allows them to leverage anywhere from 2:1 up to 30:1 for some hedge funds. Without this leverage high ROEs are not possible, and therefore neither are high bonuses. There is no demonstrable economic benefit from hedge fund or leveraged buyout practices, therefore the access to capital for these industries needs to be significantly constrained. Regulators need to go to the source of this capital ”“ the banking industry ”“ and an ideal starting point would be to cap loans to these industries going forward at the levels set in 2009.

Step Five
Financial activities which constitute extraction of equity need to be outlawed. There are a number of examples of this, but two obvious examples include any home equity loan where the borrower is taking cash out from their property not directly related to the purpose of the borrowing or to be used to pay points or fees to the lender; and second leveraged buyout activity where the target is used as collateral for the buyout loan or where the buyer takes dividends out of the target’s retained earnings or pension plan.

Step Six
Get Eric Holder and the Justice Department to work on the many cases of fraud and securities or tax law violations that have piled up in recent years and are now getting stale. The mortgage industry is an obvious source of indictments, but don’t be afraid to look at all the top banking industry executives who ignored warnings from the federal government as early as 2004 that no-documentation loans were rife with fraud (as was the appraisal process). These executives, including CEOs, should have seen these warnings, yet they continued to issue securities to investors without alerting them to the potential problems with the underlying mortgages behind the securities. This is securities fraud, or at the very least negligence of the highest order.

Step Seven
Work closely with all the major international banking regulators and their governments to insure consistent standards on financial reform and tax policies. Regulators should not be allowed to game the system and deliberately put in place lax standards to attract banking business from other countries. This means you, Switzerland!

Step Eight
Prepare the federal government internally, and especially the FDIC, for the possible bankruptcy and collapse of any or all of the big banks, including Citigroup, Bank of America, JP Morgan Chase, and Wells Fargo. Have a well-thought-out emergency plan in place for such a contingency, especially for the FDIC to act as receiver-in-possession and guarantor of all qualifying deposits. Then, announce as clearly and forcibly as you can that Too Big To Fail is officially dead, and then henceforth any financial institution which gets into trouble will receive no bailout from the government but will instead be thrown into bankruptcy.

The important aspect of this eight point program is that all of these actions can be taken here and now. The Obama administration doesn’t need to wait for regulatory reform to work its way through years of legislation and court tests. All it needs is the right leadership in the regulatory bodies, and the right prodding from the administration.

Which means all it needs is for Barack Obama to decide that the financial industry is not his friend, is not doing anything to help revive the economy, and is in desperate need of reform that gets to the very root of its practices.

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Numerian is a devoted author and poster on The Agonist, specializing in business, finance, the global economy, and politics. In real life he goes by the non-nom de plume of Garrett Glass and hides out in Oak Park, IL, where he spends time writing novels on early Christianity (and an occasional tract on God and religion). You can follow his writing career on his website, jehoshuathebook.com.

54 CommentsLeave a comment

  • The political analysis, that is. I couldn’t have written the recommendations. Great stuff. We’ll see how tonight pans out but this is a statement about the banks by a politically sophisticated electorate that knows how to send a message.

    How quickly the Democratic majority for rule has failed and how closely that has tracked the inside nepotistic cronyism for the banks displayed right from Geithner’s appointment through today.

    Great stuff! This deserves to be everywhere.

  • might be able to be condensed into what Paul Volker proposed (and it’s much simpler:)

    3. Separate banking from investment houses. Banking is simple loans, very boring. FDIC only covers banking, not investing.

    Then if investment houses want to take crazy risks or offer equity pull outs, more power to them. Good luck with that, not our problem.

    The simpler we can keep the new rules, the better. When the bankers can control the hand that is writing the bill (with an army of legal lawyers in tow), they can change just enough to get anything they want. Simple laws = no wiggle room.

    The biggest problem facing us (the citizens) now is how to get Congress to do it (and Obama to sign it.) Honestly, I’m wide open to suggestions – this is an iron-clad nut buried in a 20 ft concrete-rebar bunker.

  • The big banks were well on their way to Ponzi finance in the 1990s. ROEs of 15% were already required and fitted into the control systems like the hurdle rates of return for transactions. Had Glass-Steagall not been abolished in 1999, the banks would still have had the leeway to explode their credit default swap portfolios, which were integral to the housing bubble.

    You have to go way back to the 1980s to see where the ROE craze began, so fixing that problem is essential even without a Glass-Steagall restoration.

    Still, there is plenty of room for abuse now from banks that act both as lender and underwriter, so restoration of Glass-Steagall is still important. The reason I didn’t put it in my list is because it is going to take time to enact and break up the banks.

    What I wanted on the list were things the administration can do now without waiting too long for Congress. Most of the list is up to the executive branch. For example, people don’t realize that Too Big To Fail is something the Treasury, White House and Fed agree to without having to go to Congress. It is not mandated legislatively, so therefore it can be withdrawn by the administration here and now.

  • That’s when my jaw fell. I couldn’t believe Obama would appoint someone already badly tainted. It was just one of the early signs of disappointment that we weren’t going to get true reform.

  • Such reforms. He is even opposed to recovery of tarp funds.

    He also wants to restore the torture regime to the us. He wants to keep gitmo open.

  • Mass voters chose a conservative Republican over a liberal Democrat because Obama is too cosy with big business.

    “I despise ideologues masquerading as objective journalists.” – Bill O’Reilly, March 30, 2007

  • No shit, baby.

    Hopey-Changey turned into Nopey-Status-quo on 20 Jan 2009. Voters aren’t all stupid lumpenprole. I voted for Empress Martha not because I thought she was a good candidate (she was a TERRIBLE candidate) but as a repudiation of the knuckle-dragger teabagger idiots. The MA Dem party bigshots decided months ago that Coakley would win the primary. Mike Capuano, an actual progressive and tough bastard, couldn’t fight the machine. I voted for him in the primary. He woulda wiped the floor with Brown.

    Anyway, whatever, it’s done. People are fed up with dissembling, ineffective, smarmy Dem blatherers who do fuck-all for the common person despite their faux empathy. At least I know where I stand with Republicans: they hate me, but I know that. Dems, fuck em, they give me a fabulous rimjob then act like they don’t know me once in office, kinda like some of the guys I’ve dated in the past.

    Fuck this. I’m done with politics. All it does is make me angry no matter who’s in the White House. I got better things to get angry about.

  • I also voted for Coakley holding my nose. And I voted for Capuano in the primary. I also agree that Capuano would have trashed Brown. People voted D in 2008 because they wanted changes, or at least see that real effort was put into generating such change. It has not happened. I anticipate disaster for the Dems in November, unless they act really fast.

  • have different versions of what was “said” by the election tonight.

    What people may want to say with a protest vote and what happens are not at all the same.

    The stock market big pharm stocks are apparently set to go up big time.

    I don’t see the Dems being more courageous or coordinated after this disaster, for the reasons Mark gave earlier– quite the opposite.

    I wish I knew how to change that, but I don’t.

    That Ted Kennedy’s old seat should be flushed down the toilet so easily is a disgrace.

    The origin of the universe has not as yet been shown to be a conspiracy theory

  • …but he became the “agent of change.”

    You are 100% correct — the guy is a total mess (and we’ll find out much more soon) but the Democrats simply blew it. You’d have thought they’d choose a great campaigner, someone who loves to mix it up and shake some hands, rattle some cages. But no, they chose that woman, Martha Coakley and the Republican stole the populist advantage.

    The same thing happened with the Virginia governors race. The Dems picked a guy who actually announced he’d reject the Obama health plan if he got elected! 1.1 million 2008 Obama voters stayed away!

  • Who the Hell runs these Democratic parties. The put up “the hallow men” with empty shirts and expect people to snap to attention and vote the line. I hope you don’t dump politics. Your response is dead on, damn!

  • the Republicans picked a guy who actually announced he’d reject the Obama health plan if he got elected! And he won.

    So is it that the two Democratic candidates(and one a woman ) should have been centerfolds 🙂 ?

    It does seem to come down to figuring out what people think they want and telling them that’s what you’ll give them.

    The origin of the universe has not as yet been shown to be a conspiracy theory

  • Huge majorities in both houses of Congress voted for legislation to allow the biggest bank heist of all time. But this time, it was the banks pulling the heist. And that’s the story of the Obama bailouts. Thanks for nothing, Mr. President.

    But we’ll see a “this means it’s time to move to the center” theme emerging. All aboard the Ship of Fools!

  • I can’t believe this but I think the Mass voters on this thread sum it up correctly. The Dems picked a stiff and rejected a liberal. The voters know that the Dems not only take us for granted, they think that we’re stupid! There are no losers in the Money Party, however. They all make out in the end.

  • So far we have heard from Birch Bayh, Joe Lieberman, and Jim Webb all instructing the Democrats to change their ways before it is too late. In other words, move to the center.

    What they seem to see is an electorate siding with the Republicans, which means the Tea Bag Party, Rush Limbaugh and Glenn Beck, and of course Sarah Palin.

    I wonder if the message from these elections isn’t very different. First, voters are fed up with the way things are going and they are blaming the party in power. Second, the Democrats and independents who voted for Obama were expecting real change, not obsequious deference to corporate interests, which has resulted in deeply flawed health legislation and the useless bank bailouts.

    Now we have the two main political parties split into their own competing camps. The Republican Party establishment, such as it is, is being challenged by the teabaggers. The Democratic establishment is itself splitting into liberals and “moderates” or Blue Dog Democrats. This is partly the consequence of the Democratic Party being a bigger tent and having to naturally reconcile conservative and liberal tendencies present in society as a whole. But this fight is also made possible by dysfunction in the Senate, which refuses to let the majority rule and therefore gives power to a handful of moderates or conservatives who obsess over deficit spending and see nothing wrong with catering to corporate interests and their lobbyists.

    Obama seems to side with the moderates, perhaps on the grounds this is necessary to get anything done. Unfortunately, as he will now discover, he can get nothing done as long as the Senate remains dysfunctional. We now have gridlock government, which has generally served corporate interests rather than the interests of the people.

  • except try to pass a bonus plan for health insurance executives. The one chance to face up to America’s very serious problems with a super majority in the Senate and a strong majority in the house and they could not do a thing. This is a crime, an abdication of governance. Now we have, not just a lame-duck president, but an entire lame-duck party; two lame-duck parties with severe problems to solve and not much time to do it. I don’t blame the Mass. voters, hell, I will never vote for a Democrat but what is happening is putting our country at risk.

  • Bayh, Lieberman, and Webb are not much brighter than their ossified analogs from past fallen empires of the imagination. Put out the party line, no matter what. Their party is the party of greed and rapacious crony capitalism, but I digress.

    The ‘move to the center’ argument will be used by Obama and his handlers to justify more of the same policies that got them into trouble in the first place. It’s their nature. They can’t help themselves. It seems elections and everything else comes in second to doing their jobs … preserving the status quo until the next big round of wealth transfer.

    The good news is that people are not reacting to themes. They’re reacting to the real world around them. You’re right on target with the Mass vote and bankers; people wanted change, they want someone on their side, and they got Bush-lite.

    The Republicans can crow, the Democrats can use their cowering to cover the tracks of more capitulation, but the people will continue to experience and react to the real world. It may take a time or two but the appropriate reactions to this lawless theft will emerge.

    Thanks for this outstanding and very timely analysis.

  • They were barely tolerable when things went fairly smoothly (because it was always at someone’s very real expense, here or outside the borders). Now that we’re headed for a long slide down, it’s time to stop the nonsense. The emergence of opportunistic populists like Brown will be a recurring theme but they’ll face the same problems from voters – produce the conditions for real benefits and opportunities or you are out on your backside.

  • Your analysis is spot-on. But the Dems won’t do any of the things you recommend. Not even one of them.

    Obama will not fire Geithner. Goldman Sachs is Obama’s middle leg. And that’s where his brain is located.

    I give up. No more hope for change here.

    The Dems just proved that it doesn’t matter who has the majority or the White House.

    A lot of people voted for Obama because although they weren’t fooled by the hope for change meme, we at least thought the government with a Dem majority would be less outright destructive, embarrassing, and painful than under the GOP.

    Well, the Dems proved us wrong. They showed that they are going to trash the country, screw the middle class, abandon the poor, and keep sending ‘surges’ to the middle east, just like the GOP would.

    So it’s a lost cause. I am just going to focus on my music, and try to keep my job. That’s it.

    There’s nothing I can do to help the country. It’s over. And it’s over because the Democrats proved, finally and forever, that they are abunch of bastshit incompetent losers not worthy of the respect of the American citizen.

    Prostitutes have amore honorable profession than politicians. Herion addicts are more trustworthy. There’s no “there” there – in either party.


    I expect we’ll all be getting a lot closer because huddling together is probably the only way we’ll get through the coming political, economic, and climate upheavals, not to mention the outright hot wars that our out-of-control trainwreck of a country is barreling towards at 200 mph.

    We’ll have to share because all of us will be broke and in need. Maybe that’s a good thing? We’ll find out the hard way. That’s the only thing for sure.

  • has the better ability to rally the dems, Hillary is being hampered by pushing Obama’s bad foreign policy.(at the moment) Dean at least has no problem speaking with passion and fire, he does pissed off very well.

  • Change I can believe in. Please bring Howard back if he would come back to run demos. I bet the wh learns 0 from this and I see already the left is being blamed. I will take all the blame they hand out.

  • …one artist/writer I *DO* miss….

    “God gives men a brain and a penis, and only enough blood to run one at a time.” — Robin Williams

  • while we and ours might be the ‘brains’ of the Dems, unfortunately, we’re not the foot-soldiers/rank-and-file, and those will remember the trashing Dean took in 2004 with “the Scream”.

    While I’d hoped Obama would have shown a more Progressive bent than he has, I’ve been more disappointed with Congressional Dems (Senators lumped in here, too), and their benind over backwards to kiss the @$$es of the Republicans.

    This creates the clear perception that Congressional Dems are out of touch with their electorate, and the worst case scenario was borne out in VA and MA, with Dems running lackadaisical campaigns, expecting the Prize to just fall into their laps, while the Republican challengers ran hard and ran tough–they put in the miles, shook the hands, got out to the rallies, and in the end, that’s what people remembered when they voted. That, and Conservatives are *still* better at mobilizing their ‘troops’ than Dems…

    not even 9am, and already I’m ready for happy hour……

    “God gives men a brain and a penis, and only enough blood to run one at a time.” — Robin Williams

  • She lost to this guy

    with a surprising large margin and she lost the ball in a couple of weeks.

    Where were her nude pictures?

    — Do you feel bad for Obama? He’s the president — he kind of asked for it.

  • Could even the playing field next go around.

    “”If stupidity got us into this mess, then why can’t it get us out?” – Will Rogers (1879-1935)

  • One Brown voter, female I might add, I heard say about the nudie pics: “Oh, that was a long time ago.” Brown got a pass because he’s male and a Republican.

    If Coakley had posed for Playboy in college the faux-rage would have been deafening and she probably would have dropped out of the race once it was discovered.

  • Thanks for that clip. Stewart’s expressed precisely how I view the democrats; hopeless, gutless, impotent buffoons. Everything is broken! And there’s not a repairman in the house.

    “We’re all of us children in a vast kindergarten trying to spell God’s name with the wrong alphabet blocks.” ~ Edwin Arlington Robinson

  • So where does that leave Senator Centerfold with his “surprisingly large margin” as Singular puts it. **Nudge, nudge, wink, wink, say no more**

    “”If stupidity got us into this mess, then why can’t it get us out?” – Will Rogers (1879-1935)

  • OMG.

    I can’t WAIT for Saturday Night Live.

    “”If stupidity got us into this mess, then why can’t it get us out?” – Will Rogers (1879-1935)

  • Next round, 2010, I predict there will be an openly avowed DBSM candidate elected, although I’d qualify that if there is heavy pictorial content. Black and white, lots of shadows, good taste will be OK. Then all the others can out themselves;)

  • Amazing what retouching can do.

    “”If stupidity got us into this mess, then why can’t it get us out?” – Will Rogers (1879-1935)

  • WAPO

    By Karl Vick
    Washington Post Staff Writer
    Wednesday, January 20, 2010; 2:23 PM


    “And if I can just be the 41st senator and bring it back to the drawing board, there are some very good things in the national plan that’s being proposed, but if you look at — and really almost in a parochial manner — we need to look out for Massachusetts first,” he said. “I felt as a legislator and as a citizen, that we haven’t done that very well — that we’ve always kind of thought about maybe Washington first or the party first. But the thing I’m hearing all throughout the state is, ‘What about us?’ ”

    Can he see Russia from his house by any chance? Also?

    “”If stupidity got us into this mess, then why can’t it get us out?” – Will Rogers (1879-1935)

  • because he’s getting well paid to f*kc people every day. As a former porn star, he believes in free-enterprise. He’s from Alabama, and a college dropout. He is also a former marine, which adds to his Defense and FP cred among hawks.

    One small point against the “R” vote is that he likens himself to Rosa Parks.

    Meet Markus the ‘prostidude’: Brothel hires America’s first legal gigolo

    The Daily Mail, January 23

    Ladies, meet Markus – a burly former US marine who is ready to assume the unique position [har, har] as America’s first legal male prostitute.

    The muscular college drop-out who abandoned a brief stint as a porn actor in Los Angeles has become the only legal gigolo in the country.

    The Shady Lady Ranch brothel in Nevada successfully won state and county approval to clear the way for the ‘prostidude’ (female clients only).

    After a slow first week on the job, his first appointments are scheduled for this weekend – charging an estimated $300 (£187) per hour.

    The 25-year-old male prostitute – known as ‘Markus’ – has quickly become the centre of attention in Nevada’s brothel industry.

    But he has been criticised by female counterparts for not being willing to have sex with men.

    He sees himself as sexual pioneer and likens his role to that of civil rights icon Rosa Parks.

    They sicken of the calm, who knew the storm.

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