Wednesday, April 21, 2010

Senate Panel Approves Plan to Make Banks Spin Off Swaps Desk

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By Phil Mattingly

April 21 (Bloomberg) -- The Senate Agriculture Committee approved derivatives legislation that would require U.S. lenders such as JPMorgan Chase & Co. and Bank of America Corp. to spin off their swaps trading desks.
The panel voted 13-8 to back a bill drafted by Committee Chairman Blanche Lincoln, an Arkansas Democrat. Senator Charles Grassley, an Iowa Republican, joined Democrats in approving the measure. The provision to make lenders separate swaps trading from commercial bank operations has been among the most contentious issues as lawmakers weigh new rules for Wall Street.
Grassley’s vote provided a rare bipartisan sign in the Senate debate over financial-industry regulations. Grassley said his vote today doesn’t mean he supports the broader legislation sponsored by Senate Banking Committee Chairman Christopher Dodd. Dodd, a Connecticut Democrat, is negotiating a bipartisan deal on the larger bill with Alabama Senator Richard Shelby, the banking panel’s top Republican. Lincoln’s derivatives measure would be merged into the broader bill, she told reporters today.
“The derivatives piece is significant, but that larger bill has a number of flaws that need to be resolved before I’d support it,” Grassley said in a statement after the vote.
Lawmakers are weighing derivatives oversight after bets made by American International Group Inc. brought the New York- based insurer to the brink of failure in 2008, forcing the U.S. government to pledge more than $182 billion in assistance.
Lincoln’s bill would bar companies that deal in swaps, a form of derivative, from bank privileges such as accessing the Federal Reserve’s discount lending window, emergency liquidity functions and the Federal Deposit Insurance Corp.’s deposit guarantee.
‘Small Fixes’
“This is no time for small fixes or tweaking around the edges,” she said in a statement before the vote. “This is the time for bold change and big decisions about the future of our country and the global financial system.”
Lawmakers from both parties have expressed concern about the spinoff proposal and Commodity Futures Trading Commission Chairman Gary Gensler has refused to support it, saying “the Federal Reserve and the Treasury has to think through these issues.”
“The Senate Agriculture Committee voted out a bipartisan bill that will bring derivatives trading out of the dark, provide strong oversight of market participants, and combat fraud, abuse and manipulation,” Treasury Secretary Timothy F. Geithner said in a statement.
The spinoff provision of Lincoln’s bill would cut banks’ ability to lend and could drive derivatives markets overseas, said Kenneth E. Bentsen of the Securities Industry and Financial Markets Association, a Washington trade group.
Antithetical
“At a time when borrowers are already finding it difficult to obtain credit, limiting financial institutions’ ability to lend seems antithetical to the goals of comprehensive reform legislation,” Bentsen, Sifma’s executive vice president for public policy and advocacy, wrote in an April 20 letter to Lincoln and Senator Saxby Chambliss of Georgia, the Agriculture Committee’s ranking Republican.
The bill would require mandatory clearing and exchange trading for standardized derivatives. Parties in over-the- counter trades would be required to put up increased capital.
Chambliss said Lincoln’s bill would put undue burden on institutions such as AgriBank FCB and CoBank ACB.
“All the sudden they are going to be treated like Goldman Sachs or JPMorgan,” Chambliss said.
Gensler, who has advocated requiring all derivative trades be cleared and traded on exchanges, said any additional exemptions would only open doors to more.
“Fundamentally the choice we’re dealing with is, every exemption from clearing makes it a little more likely that a taxpayer will have to stand behind a bailout,” Gensler said.
To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net.
Last Updated: April 21, 2010 14:47 EDT

Obama readies for Wall Street tough talk

By Sam Youngman - 04/21/10 02:01 PM ET

President Barack Obama will likely hit Wall Street with another round of criticism in his speech Thursday.
The president has grown increasingly harsher in tone when he speaks of the financial industry.

White House spokesman Robert Gibbs hinted Wednesday that Wall Street could be subject to more tough talk for its past abuses and excessive bonuses when the president speaks.
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Obama was highly critical of bankers during his last trip to Wall Street. In his September speech Obama told bankers he was prepared to step in to stop their “reckless behavior” from doing more harm to the economy.

Thursday’s speech comes days after the Securities and Exchange Commission sued Goldman Sachs for fraud, claiming the company defrauded investors.

Obama will speak at Cooper Union in New York City, where he will also make the case for financial reform.

Rhetoric on that topic has heated up in the Senate this week as both parties try to negotiate legislation.

Gibbs claimed Wednesday the White House has made progress in winning GOP support for financial regulatory reform.

He said the negotiations in the Senate have reached "a critical period of time," and Republicans have realized that opposing reform is a political loser.

"I think clearly some Republican opposition has become overcome," Gibbs said.

Republicans last week accused the White House of withdrawing its Democratic negotiators from the table, but in the days since, GOP Senate leadership has signaled a willingness to discuss reform.

Gibbs said he believes "that in the Republican caucus in the Senate there is a desire to get this done." But Gibbs said he wasn't sure if that desire "goes to the top" and Senate Minority Leader Mitch McConnell's (R-Ky.) office.

On Tuesday, a Gallup poll found a majority of Americans support tighter government regulations when "Wall Street" firms are specified as the target.

In the poll, 50 percent of Americans backed more government regulations for "Wall Street" firms versus 46 percent who want stricter controls of "large banks and major financial institutions."

-- Vicki Needham contributed to this article.

Obama Unleashed

How a calm, reasonable president gets exercised about … financial regulation.

By John Dickerson
Posted Tuesday, April 20, 2010, at 11:58 PM ET

The weekly presidential radio address is a sleepy tradition. On Saturday, though, the president said something that may have caused people to wake up and take notice. Obama called the Senate Republican Leader Mitch McConnell "cynical and deceptive" for asserting that financial regulatory reform legislation now under consideration in Congress would lead to future bailouts.
President Obama usually keeps it vague. His disagreements are with "some people" or those who want to "defend the status quo." It's usually clear whom he's talking about, but Obama, like all presidents, generally adds a little soft padding to stay presidential and above it all. That aloofness irritated some of his Democratic allies during the health care fight. They were glad he finally took the fight to Republicans in the end and appeared ready to keep the pressure there. They like that he's doing it again now with McConnell. This is an election year, after all. "If he'd done this a little earlier on health care, maybe it would have passed sooner," said one veteran Democrat involved in the fall campaigns.
The president benefits from being specific in this case because he has a story to tell about McConnell. His charge is not merely that the GOP leader is mischaracterizing the financial reform legislation. The president is charging that McConnell is in the pocket of Wall Street bankers. "It turns out Mitch McConnell thinks differently," Obama told Democratic donors after explaining why he supports the legislation. "I don't know exactly what happened, but he and the chairman of the Senate [electoral] committee went up to Wall Street, had a pow-wow with them, and came away—the next thing we knew they were all opposed to financial-regulatory reform. I don't know the nature of the conversation but I'm hoping that they will do the right thing."
Why respond so directly? No one else could do the job. If this were the debate over health care legislation, the president might be letting Democratic leaders fight it out. But in this case the White House does not want to risk losing the fight to define the legislation. The "Wall Street bailout" charge is perhaps the most toxic one in American politics right now. It inspires conservatives, irritates independents, and depresses liberals. In a political campaign where Democrats seek to position themselves as defenders of the common people against insurance companies and Wall Street banks, the characterization could not risk getting muddied.
On a policy level, the White House argues that the president used such strong language because McConnell was suggesting taxpayers would foot the bill for future bailouts when the legislation is designed to do the opposite—it would require banks to pay to liquidate failing institutions. Their case was rather thoroughly supported by Republican Sen. Bob Corker of Tennessee. "This fund that's been set up is anything but a bailout," he said. "It's been set up to provide upfront funding by the industry so that when these companies are seized, there's money available to make payroll and to wind it down while the pieces are being sold off."
The pressure seemed to be working. Sen. McConnell on Tuesday seemed to pull back from his previous opposition to the legislation, acknowledging that "both parties agree on this point: no bailouts." Senior Republican leadership aides said that McConnell spoke out against reform so strongly because he felt Democrats were not negotiating in good faith. Now that negotiations have restarted, they say, his goal has been achieved. Democrats characterize this position as a climb-down and recognition that the politics were against him.
Obama will add more fodder to this debate Thursday in a speech on Wall Street reform at Cooper Union. Will he be as tough on Wall Street as he has been on McConnell, whom he says is doing its bidding? White House aides say the speech will be to the American people, setting the stakes for the legislation they see with a clarity reminiscent of George W. Bush's position on Iraq. You're either with American families or with Wall Street.
If he plays true to type, Obama will take the balanced tone he has tried to apply throughout—decrying the excessive bonuses and risk-taking by banks while championing the need for vibrant financial markets. This has the added advantage of not overly offending the bankers who gave so generously to his campaign and the Democratic Party. But some of his allies say the moment calls for the same sharpness against Wall Street that he used with McConnell. That would help push the legislation and make a statement about what Democrats stand for. As the White House knows, polls show that talking about restraining Wall Street only makes this legislation more popular.
If he needs a model, Obama might refer to Woodrow Wilson, another president known for his cerebral approach. In 1910, just before running for governor of New Jersey, Wilson gave a lecture about self-sacrifice which Obama could actually lift word-for-word today:

Banking is founded on a moral basis and not a financial basis. The trouble today is that you bankers are too narrow-minded. You don't know the country or what is going on in it and the country doesn't trust you. You are not interested in the development of the country. … You take no interest in the small borrower and the small enterprise which affect the future of the country, but you give every attention to the big borrower and the rich enterprise. … You bankers see nothing beyond your own interests. … You should be broader minded and see what is best for the country in the long run.

Though Obama has said Wall Street bankers are trying to kill reforms that will protect the rest of the country, it's hard to imagine him offering this kind of peppery rhetoric. He also won't be able to match the setting. Wilson gave the speech to an audience of Wall Street bankers. J.P. Morgan was sitting right next to him.
Become a fan of Slate and John Dickerson on Facebook. Follow us on Twitter.John Dickerson is Slate's chief political correspondent and author of On Her Trail. He can be reached at slatepolitics@gmail.com. Follow him on Twitter.

All the President's Goldman men

Emanuel: Goldman crowd gave almost $80,000 for his runs for Congress.

By MICHELLE MALKIN

Last Updated: 1:34 AM, April 21, 2010

Posted: 1:16 AM, April 21, 2010

While President Obama assails the culture of greed and recklessness practiced by the men of Goldman Sachs, his administration is infested with them. The White House can no more disown Government Sachs than Obama can disown Chicago politics.
Obama is headed to Wall Street tomorrow to demand "financial regulatory reform" -- just as the US Securities and Exchange Commission has filed civil suit against Goldman Sachs for mortgage-related fraud.
Question the timing? Darn tootin'.
As the New York Post reported Tuesday, the Democratic National Committee immediately bought sponsored Internet ads on Google that direct Web surfers who type in "Goldman Sachs SEC" to Obama's fund-raising site.
"It's time to hold the big banks accountable," the DNC message bellows.
Democrats are silent on the $994,795 in Goldman Sachs campaign cash that Obama bagged in the 2008 presidential race. The class-warfare Dems are also mum on all the president's Goldman men sitting in the catbird's seat:
* Goldman Sachs partner Gary Gensler is Obama's Commodity Futures Trading Commission head. He was confirmed despite heated congressional grilling over his role, as Reuters described it, "as a high-level Treasury official in a 2000 law that exempted the $58 trillion credit default swap market from oversight. The financial instruments have been blamed for amplifying global financial turmoil."
Gensler said he was sorry -- hey, it worked for tax cheat Treasury Secretary Tim Geithner -- and was quickly installed to guard the henhouse.
* Goldman kept White House Chief of Staff Rahm Emanuel on a $3,000 monthly retainer while he worked as presidential candidate Bill Clinton's chief fund-raiser, as first reported by Washington Examiner columnist Tim Carney. The financial titans threw in another $50,000 to become the Clinton primary campaign's top funder.
Emanuel received nearly $80,000 in campaign contributions from Goldman during his four terms in Congress -- investments that have reaped untold rewards, as Emanuel assumed a leading role championing the trillion-dollar TARP banking bailout law.
* Former Goldman lobbyist Mark Patterson serves under Geithner as his top deputy and overseer of TARP bailout -- $10 billion of which went to Goldman Sachs.
Paul Blumenthal of the Sunlight Foundation, a Washington-based think tank devoted to transparency in government, noted that, while Patterson agreed to recuse himself on any Goldman Sachs-related issues or related policy concerns, it "still creates a serious conflict for Geithner, as Treasury is being partly managed by a former Goldman lobbyist. Geithner is also placed in a tough position considering that his chief of staff is limited in the areas in which he can work (supposedly)."
* National Economic Council head Larry Summers reaped nearly $2.8 million in speaking fees from many of the major financial institutions and government bailout recipients he now polices, including JP Morgan Chase, Citigroup, Lehman Bros. and Goldman. A single speech to Goldman in April 2008 brought in $135,000.
Summers has prior experience negotiating government-sponsored bailouts that benefit private concerns. In 1995, he spearheaded a $40 billion Mexican peso bailout that bypassed Congress.
Summers personally leaned on the International Monetary Fund to provide nearly $18 billion for the package. Summers' boss, then Secretary of the Treasury Robert Rubin, was former co-chairman of Goldman -- the Mexican government's investment banking firm of choice.
Rubin continues to mentor another of his former employees with regular visits and chats -- Treasury Secretary Geithner, who was head of the New York Federal Reserve in 2008 when it ordered bailed-out AIG not to disclose its sweetheart payments to big banks including, you guessed it, Goldman Sachs.
As Obama harangues Wall Street to clean up its house, all the president's Goldman Sachs men have their feet on the coffee table at his.
malkinblog@gmail.com

What’s Missing in the Financial Rules Bill

April 20, 2010, 7:06 pm

By THE EDITORS

Win McNamee/Getty Images Soon after he took office, President Obama gave a speech at the White House calling for regulation of the financial industry. With him, in February 2009, are Barney Frank, Christopher Dodd and Timothy Geithner.

President Obama will be in New York on Thursday to lobby for the Democrats’ effort to overhaul financial regulations, as Senator Christopher Dodd, the chairman of the banking committee and sponsor of the legislation, and Treasury Secretary Timothy Geithner try to gain the support of centrist Congressional Republicans for the measure.
So far Republican support is hard to come by, and, on the other side, some Democrats say the bill is not strong enough. What is wrong with the bill, from both perspectives? Are there ways to improve it?

Peter J. Wallison, American Enterprise Institute and ex-Treasury counsel
Simon Johnson, M.I.T. professor and co-author of “13 Bankers”
Tyler Cowen, economist, George Mason University
Mark Thoma, economist, University of Oregon

You Can’t Ignore the Marketplace

Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute. He was general counsel of the Treasury and White House counsel in the Reagan administration.
What’s missing from the Dodd financial regulation bill is any recognition that there is a competitive market out there that can be distorted or destroyed. The bill authorizes the Fed to regulate all “systemically important” nonbank financial institutions, with the power to control the capital, liquidity and permissible activities of the country’s largest securities firms, insurance companies, bank holding companies, hedge funds, finance companies and others.

This bill was designed by people who know or care little about how competitive markets function.

All these firms compete with one another — for customers, investors and credit. The Fed, never having regulated a hedge fund or an insurance company, is now supposed to set the capital levels, liquidity requirements and permissible activities for each type of business and for each individual institution.
If it increases the capital requirements for, say, hedge funds, it will affect their ability to compete with securities firms or bank holding companies. If an insurance company wants to enter the business of insuring municipal securities, it will be fought by bank holding companies, which already do this business. In other words, competitive issues will be fought out at the Fed or in Congress instead of the marketplace.

Finally, and perhaps most important, the bill would regulate the largest financial institutions because, in theory, their failure could trigger a systemic breakdown. This means they are, by definition, too big to fail. All these institutions will thus have significant advantages over their smaller competitors, especially in obtaining credit.
Because they will be seen as less risky, they will have access to more credit at lower cost. They will also have advantages in selling their products. Imagine an insurance company being able to tell its potential customers that, because it is regulated by the Fed and too big to fail, the policies it offers are safer than those of its smaller competitors.
This bill could only have been designed by people who know or care little about how competitive markets function.

A Tougher Cap on Size

Simon Johnson, a professor at the M.I.T. Sloan School of Management and a senior fellow at the Peterson Institute for International Economics, is the co-author of “13 Bankers: The Wall Street Takeover and The Next Financial Meltdown.”
Senator Dodd’s financial reform bill is missing a huge piece of the puzzle. The Obama administration proposed in January to cap the size of our biggest banks going forward, so they cannot pose an even larger threat to the economy than that which we faced in September 2008.
This was a good idea, but it should have gone further. Why would anyone think that today’s size of banks is the right place to stop? After all, it is the banks at their current size who brought us such disaster. And the largest six banks have only become bigger since the crisis — actually, as a direct result of the way the Bush and Obama administrations handled the bailout.

But the most striking fact is that this part of the Volcker Rules has completely failed to make it into the Dodd bill. There is a provision in the bill that regulators can break up large banks but only “as a last resort.” This is very weak and essentially meaningless in today’s context where big banks have great political power.

The amendment proposed by Representative Paul Kanjorski to the House bill was a definite improvement — putting more power in the hands of regulators and also more pressure on them to act preemptively on megabanks that pose risks to the system. But events have moved on considerably since that time — as seen most dramatically by the Securities and Exchange Commission charges against Goldman Sachs last week.
Two months ago, Senator Ted Kaufman was pushing the frontier with tough rhetoric about fraud at the heart of Wall Street. Now his views are completely mainstream. And Senator Kaufman insists, for example, in a speech on Monday that (among many other things) our biggest banks need to be broken up — there is simply no other way to make the financial system significantly safer.
Senator Sherrod Brown will almost certainly have an opportunity to introduce an amendment that would implement a hard size cap on big banks. For all our futures, it is of the highest importance that this amendment succeeds.

Congress Is the Problem

Tyler Cowen is a professor of economics at George Mason University. His blog, Marginal Revolution, covers economic affairs.
The main thing missing from the current bill being proposed by Senator Christopher Dodd — or indeed any of the relevant alternatives — is the idea of a better, more intelligent and more accountable Congress.

Bank regulation depends on the quality of the bureaucracy and the periodic attention of a responsible legislature.

Plenty of blame has been levied at the Fed, the regulatory agencies and, of course, the banks themselves. But political scientists sometimes refer to Congress as “the keystone of the Washington establishment” and for good reason. Congress oversees the budget of just about everyone else and sets the standards for their performance. It can be said that each Congress gets the regulatory regime it deserves.
Let’s consider an example of why there is no “once and for all” regulatory solution and why regulatory discretion cannot be avoided. Many commentators criticize the Dodd bill for failing to sufficiently tighten restrictions on bank leverage. That point is well-taken, but just passing restrictions on leverage — and making no further changes — probably won’t have the intended effect. The more binding the leverage restrictions, the more banks and other intermediaries will, sooner or later, recreate implicit leverage off the balance sheet.

It’s fine to call for maximum transparency, but mostly that’s just wishing for a different world. Activities off the balance sheet are off the balance sheet for a reason and it is hard to squeeze many of them into traditional accounting conventions. Nor should we try to ban off-balance sheet banking, as it would happen somewhere else around the globe or in some other part of the financial sector. Indeed many of these off-balance transactions limit rather than raise risk.
The upshot is that bank regulation is a tough slog: it depends on the quality of the bureaucracy and the periodic attention of a somewhat responsible Legislature. It is like a chess game whereby the private sector eventually finds a way around most of the binding regulations.
In the current debate, there’s far too much attention paid to how we are reshuffling the regulatory boxes and what restrictions we are putting down on paper. It’s the daily reality of regulation that matters and right now the U.S. Congress simply isn’t up to the job.

Controlling Bubble Damage

Mark Thoma is an economics professor at the University of Oregon and blogs at Economist’s View.
While we should certainly do our best to prevent bubbles through legislative and regulatory changes, and to prevent other problems like fraud, legislative and regulatory remedies can never ensure that the financial sector will be free of bubbles in the future. Thus, it’s important for financial reform legislation to limit the damage that bubbles can do.

We need leverage limits that are independent of regulators put in charge under an administration.

An important factor determining the amount of damage a bubble can do is the amount of leverage in the financial system. The more leverage there is, the bigger the crash. For this reason, limits on leverage are essential.
Senator Dodd’s proposal does allow regulators to set limits on leverage, but that is not enough. This crisis demonstrates that trusting the judgment of regulators who are subject to ideological and regulatory capture can lead to insufficient oversight. We need strict upper bounds on leverage — 15 to 1 for example — limits that are independent of the regulators put in charge under any particular administration

The other place that the legislation could do better is in limiting the size of banks. There is no convincing evidence that banks need to be as large as allowed under the Dodd legislation for the financial system to function efficiently. However, limits on bank size may not protect the financial system from a meltdown. If small banks are exposed to common risks or sufficiently interconnected, then many small banks could fail simultaneously and mimic the failure of a large bank, something that has happened in the past.
Reducing size is no guarantee of safety. But limiting bank size does limit the political power of financial institutions. Imposing regulations such as strict limits on leverage is much more difficult when banks are politically powerful, and that alone is sufficient reason to enact strict limits on bank size.

Financial Debate Renews Scrutiny on Banks’ Size

Stephen Crowley/The New York Times

Senators Edward E. Kaufman Jr., left, and Carl Levin during a financial hearing last week.

By SEWELL CHAN

Published: April 20, 2010

WASHINGTON — One question has vexed the Obama administration and Congress since the start of the financial crisis: how to prevent big bank bailouts.
In the last year and a half, the largest financial institutions have only grown bigger, mainly as a result of government-brokered mergers. They now enjoy borrowing at significantly lower rates than their smaller competitors, a result of the bond markets’ implicit assumption that the giant banks are “too big to fail.”
In the sweeping legislation before the Senate, there is no attempt to break up big banks as a means of creating a less risky financial system. Treasury Department and Federal Reserve officials have rejected calls for doing so, saying bank size alone is not the most important threat.
Instead, the bill directs regulators to compel the largest banks to hold more capital as a cushion against losses. It sets up a procedure intended to allow big banks to fail, with the cost borne not by taxpayers but by the biggest financial institutions.
As the debate over the regulatory overhaul heated up this week, a populist minority in both Congress and the Fed requested a revisit to the size issue. They would like to go beyond a provision in the bill, suggested by Paul A. Volcker, the former Fed chairman, and supported by President Obama, that would seek to keep banks from growing any larger but not force any to shrink.
“By splitting up these megabanks, we by definition will make them smaller, safer and more manageable,” Senator Edward E. Kaufman Jr., Democrat of Delaware, said in a speech Tuesday.
The president of the Federal Reserve Bank of Dallas, Richard W. Fisher, broke ranks with most of his colleagues within the central bank last week, declaring, “The disagreeable but sound thing to do regarding institutions that are too big to fail is to dismantle them over time into institutions that can be prudently managed and regulated across borders.”
There also has been concern about the size of banks from Republicans who believe in free-market principles. Several senators from the South and West — Richard C. Shelby of Alabama, Johnny Isakson of Georgia, John Cornyn of Texas and John McCain of Arizona — have expressed a desire to revisit the 1999 repeal of the Glass-Steagall Act, the Depression-era law that separated commercial and investment banking.
Alan Greenspan, the former Fed chairman, has entertained the idea of splitting up the banks but has stopped short of advocating it.
“If they’re too big to fail, they’re too big,” he said in an October speech.
He added: “In 1911, we broke up Standard Oil. So what happened? The individual parts became more valuable than the whole. Maybe that’s what we need.”
In January, the White House embraced a proposal by Mr. Volcker that would ban banks that take customer deposits from running their own proprietary trading operations, or making market bets with their own money. It would also limit the share of all financial liabilities that any one institution can hold — besides deposits — but it would be up to regulators to set the limit.
A federal law enacted in 1994 already addresses size by restricting any bank from holding more than 10 percent of the nation’s deposits, although several of the largest banks have been granted waivers from that requirement or used loopholes to evade its intent.
The Volcker proposal resembled an amendment by Representative Paul E. Kanjorski, Democrat of Pennsylvania, that would let regulators dismantle financial companies so large, interconnected or risky that their failure would jeopardize the entire system. The amendment was part of a regulatory overhaul that the House adopted in December, largely along party lines, and is also in the Senate version in a modified form.
At a hearing on Tuesday about the bankruptcy of Lehman Brothers, which caused credit markets to seize up in September 2008, the Fed chairman, Ben S. Bernanke, reiterated that his preference was to limit the risky behavior of banks rather than break them up.
“Through capital, through restrictions in activities, through liquidity requirements, through executive compensation, through a whole variety of mechanisms, it’s important that we limit excessive risk-taking, particularly when the losses are effectively borne by the taxpayer,” Mr. Bernanke said.
But when Mr. Kanjorski pressed him on whether regulators should be allowed to break up big banks, he replied, “It’s something that would be, on the whole, constructive.”
Representative Brad Sherman, Democrat of California, added: “We should go further and not just allow, but require, regulators to break up firms that have reached a certain size.”
What is not in doubt is that the crisis increased the size and importance of the six largest banks: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley.
During the crisis, Bank of America swallowed Merrill Lynch, JPMorgan Chase bought Bear Stearns and Wells Fargo acquired Wachovia. Goldman and Morgan converted to bank holding companies to gain access to lending from the Fed’s discount window.
In 1995, the assets of the six largest banks totaled 17 percent of the nation’s gross domestic product. Now they have assets amounting to 63 percent of G.D.P. Measured another way, the share of all banking industry assets held by the top 10 banks rose to 58 percent last year, from 44 percent in 2000 and 24 percent in 1990.
Gary H. Stern, the co-author of “Too Big to Fail: The Hazards of Bank Bailouts,” said policy makers largely ignored the warnings contained in the title when the Brookings Institution published the book in 2004.
Mr. Stern, who retired last year as president of the Minneapolis Fed, is lukewarm about the bill. “It tries to address the problem but it’s half a loaf at best,” he said. “It doesn’t address the incentives that gave rise to the problems in the first place.”
In Mr. Stern’s view, ending “Too Big to Fail” should subject uninsured creditors — bondholders — to losses if the bank fails. Without that fear, he said, unsecured creditors will not exert discipline on the banks by monitoring their risk-taking and pricing their loans appropriately. Mr. Stern said the bill in the Senate is vague about how such creditors would be treated if the government were to seize and dismantle a failing bank.
Simon Johnson, an M.I.T. professor, has been leading the intellectual charge to break up banks. In his book “13 Bankers,” he urged that no financial institution be permitted to control more than 4 percent of G.D.P. and no investment bank more than 2 percent. All six of the big financial institutions exceed those limits.
Forbidding taxpayer bailouts, as the Senate bill proposes, is worth little more than the paper it is on, Mr. Johnson argues. “When push comes to shove, will the government save these guys?” he asked. “I don’t know anybody who doesn’t think they’d save Goldman if Goldman were to suddenly run into trouble.”

The Equal Pay Day Reality Check

By Christina Hoff Sommers Tuesday, April 20, 2010

Filed under: Public Square, Culture, Government & Politics

The claim that American women as a group face systemic wage discrimination is groundless.

Today is Equal Pay Day. Feminist groups and political leaders have set aside this day to protest the fact that women’s wages are, on average, 78 percent of men’s wages. “This date symbolizes how far into 2010 women must work to earn what men earned in 2009,”says the National Committee on Pay Equity. The American Association of University Women (AAUW) has enlisted supporters to wear red “to represent the way the pay gap puts women ‘in the red.’” There will be rallies, speak outs, mass mailings of equity e-cards, and even bake sales featuring cookies with a “bite” taken out to represent women’s losses to men. The National Organization for Women (NOW) suggests women gather together at local bars for “Un-happy Hours” where they can share their dissatisfactions. “See if a local bar, club, or restaurant (try the women-owned ones first!) will give you drink specials [where] women pay 78% of their tabs and men pay 100%.”
Excuse me for interrupting, but this holiday has no basis in reality. Even feminist economists acknowledge that today’s pay disparities are almost entirely the result of women's different life choices—what they study in school, where they work, and how they balance home and career. This is not to deny that some employers will try to pay Jill 78 cents and Jack $1.00 for an identical job. But our strict laws give Jill the right to take that employer to court. The claim that American women as a group face systemic wage discrimination is groundless.

Even feminist economists acknowledge that today’s pay disparities are almost entirely the result of women's different life choices.

There are by now many reputable studies that refute the assertion that women are being cheated out of a fair salary by unscrupulous employers. In January 2009, the Labor Department posted a study prepared by the CONSAD Research Corporation, “An Analysis of the Reasons for the Disparity in Wages Between Men and Women." It analyzed more than 50 peer-reviewed papers. Labor Department official Charles E. James Sr. summed up the results in his foreword:

This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.

Psychologist Susan Pinker has aptly noted that men are more likely than women to give priority to salary and promotions over personal fulfillment. Women are not as ready to sacrifice their deep interests in, say, history, psychology, or public policy—“all in order to fix, sell, or distribute widgets” or “to spend the best years of [their lives] planning air conditioning ductwork for luxury condos.” Men also work longer hours and are more willing than women to take dangerous but well-paid jobs as truck drivers, loggers, coal miners, or oil riggers. (My American Enterprise Institute colleague Mark Perry has suggested we designate October 11, 2020, Equal Occupational Fatality Day. That is how far into the future women will have to work to experience the same number of work-related deaths that men experienced in 2008 alone. )

Psychologist Susan Pinker has aptly noted that men are more likely than women to give priority to salary and promotions over personal fulfillment.

And of course women are much more involved with babies than men. According to a 2009 Pew survey, “A strong majority of all working mothers (62%) say they would prefer to work part time . . . An overwhelming majority [of working fathers] (79%) say they prefer full-time work. Only one-in-five say they would choose part-time work.” To close the wage gap, women’s groups are going to have to find a way to change women’s preferences and life choices—or somehow rule them out of order.
In their defense, feminist groups deny that women’s choices explain the wage gap. “In fact,” says the National Women’s Law Center, “authoritative studies show that even when all relevant career and family attributes are taken into account, there is still a significant, unexplained gap in men’s and women’s earnings.” Not quite. Studies summarized in the CONSAD report show that when the proper controls are in place, the unexplained wage gap is somewhere between 4.8 and 7.1 cents—and no one can say how much of it is discrimination and how much is owed to subtle differences between the sexes that are hard to measure. For the time being, Equal Pay Day should be moved back from April to January.

To close the wage gap, women’s groups are going to have to find a way to change women’s preferences and life choices—or somehow rule them out of order.

Women’s groups do sometimes acknowledge that the pay gap is largely explained by women’s choices, as the AAUW does in its 2007 Behind the Pay Gap. But this admission is qualified; they insist that women’s choices are not really free. “Women’s personal choices are similarly fraught with inequities,” says the AAUW. It speaks of women being “pigeonholed” into “pink-collar“ jobs in health and education. According to NOW, powerful sexist stereotypes “steer” women and men “toward different education, training, and career paths” and family roles.
But are stereotyped choices evidence of discrimination? American women are among the freest, best educated, and most self-determining people in the world. It seems unsisterly for NOW or the AAUW to suggest that they are being hoodwinked into college majors, professions, or part-time work so they can spend more time with their children.
Heather Boushey, a senior economist at the Center for American Progress (CAP) and co-author of an “Equal Pay Day Primer,” takes a different approach. She notes that jobs historically held by women—teaching, nursing, childcare—are paid less relative to men’s jobs, even when they require the same skills. She gives the example of zookeepers (traditionally male) and childcare workers (traditionally female) and cites with approval the words of another scholar who asked, “Aren’t our children more valuable to society than zoo animals?” According to Boushey, such pay disparities are the “legacy of past discrimination. “

When the proper controls are in place, the unexplained wage gap is somewhere between 4.8 and 7.1 cents—and no one can say how much of it is discrimination and how much is owed to subtle differences between the sexes that are hard to measure.

Let me say for the record that I also think children are more precious than zoo animals, but I reject Boushey’s point. There are vast numbers of people who know how to take care of children, but very few who are qualified to bathe and feed a giraffe. Why is it wrong for a zookeeper to earn more than a childcare worker when the zookeeper has a more specialized skill set?
There is more at stake here than having to endure another feminist victim-fest on April 20. Groups like NOW, the AAUW, CAP, and the National Women’s Law Center have produced volumes of tendentious research that is taken seriously by journalists and by Congress. The Senate is now holding hearings on the misleadingly named Paycheck Fairness Act. The bill, which has already sailed through the House with bipartisan support, reads as if it were written by AAUW and NOW members during a particularly bitter “Un-happiness Hour.”
Under this convoluted and impenetrably murky law, feminist lawyers will file multi-million dollar class-action lawsuits and innocent employers will settle. Liability will be based on not only intentional discrimination (we already have laws against that) but on the “lingering effects of past discrimination.” What does that mean? Employers have no idea. Universities, for example, typically pay professors in the business school more than those in the school of social work. They cite market forces as the justification. But according to feminist theory, market forces are tainted by past discrimination. Women’s Studies departments will eagerly provide expert witnesses to testify that sexist attitudes led society to place a higher value on male-centered fields like business than female-centered fields like social work. If the Paycheck Fairness Act passes, it will wreak havoc in the American workplace. Employers today are already nervous about making new hires. This legislation will give them added pause.
American women are not being cheated out of a fifth of their salary. They are not being corralled into inferior life choices. But dozens of women’s groups have spent years drawing this misleading picture, and they have won some important converts. Last year, in his “Equal Pay Day Proclamation,” President Obama said that the 22 percent difference in average wages means that “women across America continue to experience discrimination in the form of pay inequity every day.” Memo to the president: Women across America do not believe that, and most will stay far away from the embarrassing grievance festivals planned for today's Equal Pay Day.
Christina Hoff Sommers is a resident scholar at the American Enterprise Institute.

April 20, 2010

Biden to announce change in Title IX women's sports policy

Posted: April 20th, 2010 08:48 AM ET

From CNN Foreign Affairs Correspondent Jill Dougherty

Joe Biden will announce a change in the Title IX women’s sports policy on Tuesday, a senior White House official tells CNN.

Washington (CNN) - The Obama administration plans to change the so-called Title IX policy which governs gender equality in sports, eliminating what some women's rights supporters claim is a Bush-administration loophole in compliance, according to a senior White House official.
Vice President Joe Biden is expected to announce the change Tuesday, said the official, who is not authorized to speak on the record.
The 1972 Title IX education amendment required gender equity in sports programs at educational institutions receiving federal funds.
Universities initially faced three requirements to prove they were complying with the law: that the proportion of male and female students participating in sports at the university was proportional to the number of male and female students enrolled in the university; that the university was expanding opportunities for women students in athletics; and that the university was meeting the athletic abilities and interests of women students.

In 2005, the administration of former President George W. Bush changed the third requirement, allowing the university to prove it was meeting the athletic interests of women by carrying out surveys of students' interest in sports. The NCAA and women's sports advocates said a low response to such surveys could be interpreted as indicating a lack of interest in sports when actually it could indicate a lack of availability of sports activities.
Under the new policy, universities will no longer be able to claim that a low response to surveys means a low interest in sports, the official said. The new rules still will allow the use of surveys, but universities will have to go further to prove they are complying.
The offiicial told CNN the new rules "restore the system to what it was before" the 2005 change. That rule "made it easier for universities to avoid complying with Title IX," the official said.

Presidential Proclamation -- National Equal Pay Day

The White House

Office of the Press Secretary

For Immediate Release

April 20, 2010

A PROCLAMATION

Throughout our Nation's history, extraordinary women have broken barriers to achieve their dreams and blazed trails so their daughters would not face similar obstacles. Despite decades of progress, pay inequity still hinders women and their families across our country. National Equal Pay Day symbolizes the day when an average American woman's earnings finally match what an average American man earned in the past year. Today, we renew our commitment to end wage discrimination and celebrate the strength and vibrancy women add to our economy.
Our Nation's workforce includes more women than ever before. In households across the country, many women are the sole breadwinner, or share this role equally with their partner. However, wage discrimination still exists. Nearly half of all working Americans are women, yet they earn only about 80 cents for every dollar men earn. This gap increases among minority women and those with disabilities.
Pay inequity is not just an issue for women; American families, communities, and our entire economy suffer as a result of this disparity. We are still recovering from our economic crisis, and many hardworking Americans are still feeling its effects. Too many families are struggling to pay their bills or put food on the table, and this challenge should not be exacerbated by discrimination. I was proud that the first bill I signed into law, the Lilly Ledbetter Fair Pay Restoration Act, helps women achieve wage fairness. This law brings us closer to ending pay disparities based on gender, age, race, ethnicity, religion, or disability by allowing more individuals to challenge inequality.
To further highlight the challenges women face and to provide a coordinated Federal response, I established the White House Council on Women and Girls. My Administration also created a National Equal Pay Enforcement Task Force to bolster enforcement of pay discrimination laws, making sure women get equal pay for an equal day's work. And, because the importance of empowering women extends beyond our borders, my Administration created the first Office for Global Women's Issues at the Department of State.
We are all responsible for ensuring every American is treated equally. From reshaping attitudes to developing more comprehensive community-wide efforts, we are taking steps to eliminate the barriers women face in the workforce. Today, let us reaffirm our pledge to erase this injustice, bring our Nation closer to the liberty promised by our founding documents, and give our daughters and granddaughters the gift of true equality.
NOW, THEREFORE, I, BARACK OBAMA, President of the United States of America, by virtue of the authority vested in me by the Constitution and the laws of the United States, do hereby proclaim April 20, 2010, as National Equal Pay Day. I call upon all Americans to acknowledge the injustice of wage discrimination and join my Administration's efforts to achieve equal pay for equal work.
IN WITNESS WHEREOF, I have hereunto set my hand this twentieth day of April, in the year of our Lord two thousand ten, and of the Independence of the United States of America the two hundred and thirty-fourth.
BARACK OBAMA

Friday, April 16, 2010

April 19, 1995 Oklahoma City andTim McVeigh

Knowing that his execution was certain and soon, Oklahoma City bomber Timothy McVeigh spent days giving an interview to Buffalo, New York, reporter Lou Michel. The 45 hours of audio tapes provide an unprecedented look into the mind of an American terrorist.

On Monday, you'll have a chance to hear McVeigh describe his motivations and planning for the crime, his feelings about his victims, and his thoughts about facing his own capital punishment. The makers of the two-hour movie used computer animation to put a virtual McVeigh into the scene. In the clip above, they show you how they did it.

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

Audiotapes: Okla. City bomber Tim McVeigh

I could not embed here so this is a link

Convicted mastermind discusses his motivation and more in 1995 attack

The McVeigh Tapes: Confessions of an American Terrorist, documentary from MSNBC, airs Monday, April 19, at 9 pm Eastern.

These tapes were recorded in prison between 1999 and 2000, while Timothy McVeigh was awaiting his execution. He was interviewed by Lou Michel of the Buffalo News. Those interviews eventually became the foundation for a book Michel wrote with his Buffalo News colleague Dan Herbeck, "American Terrorist." This is the first time that Timothy McVeigh’s chilling confession has ever been publicly heard.

Thursday, April 15, 2010

GOP operatives crash the tea party