Obama Invites Wall Street To Join Reform Debate

President Obama Seeks Reform Buy-In From Wall Street


President Barack Obama told an audience stocked with some of Wall Street's brightest luminaries that he wants them to join him in passing new financial regulation legislation, criticizing a “failure of responsibility” that stretched from Wall Street to Washington and “nearly dragged our economy into a second Great Depression."

"I believe in the power of the free market," Obama said in remarks delivered at New York's Cooper Union. "But a free market was never meant to be a free license to take whatever you can get, however you can get it. That is what happened too often in the years leading up to the crisis."

Obama's remarks came at a moment when Senate negotiators said they were getting closer and closer to a deal allowing the regulatory legislation to move to the Senate floor. The political momentum led some observers to predict the bill could pass — and be signed by Obama — by Memorial Day.

Still, Obama urged the Wall street executives packing the hall to stop resisting the measure.

Both bills, he said, represent "significant improvement on the flawed rules" that are in place today, "despite the furious efforts of industry lobbyists to shape them to their special interests."

"I am sure that many of those lobbyists work for some of you," Obama said. " But I am here today because I want to urge you to join us, instead of fighting us in this effort."

Sitting in the third row as Obama addressed the audience were two executives squarely in the sights of Obama's administration: Goldman Sachs CEO Lloyd Blankfein and his number two, Gary Cohn.

The arrival of the Goldman duo, whose powerhouse Wall Street firm faces securities fraud charges from the SEC, heightened the drama of a speech.

Also in the audience as Obama spoke was Rolling Stone publisher Jann Wenner — whose magazine famously called Goldman Sachs a "great vampire squid wrapped around the face of humanity" in an article on the bank's vast influence last summer.

Wenner told POLITICO that Blankfein approached him before the speech began and said "I feel like I know you," mentioning the vampire squid article, which proved hugely damaging to Goldman's public image. Today, though Wenner said he doesn't think the phrase was overstated. "It met the case," he said, describing, as Blankfein schmoozed with audience members a few seats away, Goldman's "blood tentacles sucking money out of everything."

The Rev. Al Sharpton was also in the crowd, and told POLITICO that he and Blankfein chatted about growing up in Brooklyn, where the two men attended rival high schools. "It seems like we've been on rival sides for a long time," Sharpton said of Blankfein.

But Sharpton said he was pleased with Obama's decision to come to New York. "I'm glad he's here," Sharpton said. "He's doing what he said he'd do, despite the fact that so many on Wall Street contributed to his campaign."

In his remarks, the President also pushed back against GOP claims that the bill allows for more bailouts of Wall Street. "But what is not legitimate is to suggest that we’re enabling or encouraging future taxpayer bailouts, as some have claimed" Obama said. "That may make for a good sound bite, but it’s not factually accurate."

Obama made a pitch for several of the key items of the reform legislation.

On the "Volcker Rule," which would prohibit banks from engaging in certain transactions the president calls risky, Obama said, new restrictions would bring confidence back to the financial system -- which would be good for Wall Street. "By enacting these reforms, we’ll help ensure that our financial system – and our economy – continues to be the envy of the world," he said.

On the complex financial products known as derivatives, Obama said, that there are some legitimate uses of the instruments, such as for hedging business risk. Still, he said, the sector needs more transparency. "We want to ensure that financial products like standardized derivatives are traded in the open, in full view of businesses, investors, and those charged with oversight."

On the proposed new consumer financial protection agency, which would be housed inside the Federal Reserve, Obama said that customers too often suffered large losses as a result of abusive business practices. And he laid out a vision of what might happen once the agency was in place:" "Instead of competing to offer confusing products, companies will compete the old-fashioned way: by offering better products," he said. "That will mean more choices for consumers, more opportunities for businesses, and more stability in our financial system."

Obama closed by offering the bankers in the room a history lesson, quoting from a Time Magazine article from June of 1933 -- in which bankers said that the recently created FDIC created a "monstrous system."

But the FDIC, Obama said, became "an institution that has successfully secured the deposits of generations of Americans."


Sources: Politico

Move Your Money To Community Banks & Credit Unions! Consumer Power!

www.moveyourmoney.info







Move Your Money: A New Year's Resolution


Too-big-to-fail banks are profiting from bailout dollars and government guarantees, and growing bigger.

The big banks on Wall Street, propped up by taxpayer money and government guarantees, have had a record year, making record profits while returning to the highly leveraged activities that brought our economy to the brink of disaster.

In a slap in the face to taxpayers, they have also cut back on the money they are lending, even though the need to get credit flowing again was one of the main points used in selling the public the bank bailout. But since April, the Big Four banks -- JP Morgan/Chase, Citibank, Bank of America, and Wells Fargo -- all of which took billions in taxpayer money, have cut lending to businesses by $100 billion.

Meanwhile, America's Main Street community banks -- the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of -- are struggling.

Many of them have closed down (or been taken over by the FDIC) over the last 12 months. The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace. As a result, a system which was already dangerously concentrated at the top has only become more so.

We talked about the outrage of big, bailed-out banks turning around and spending millions of dollars on lobbying to gut or kill financial reform -- including "too big to fail" legislation and regulation of the derivatives that played such a huge part in the meltdown.

As we contrasted that with the efforts of local banks to show that you can both be profitable and have a positive impact on the community, an idea took hold: why don't we take our money out of these big banks and put them into community banks?

And what, we asked ourselves, would happen if lots of people around America decided to do the same thing? Our money has been used to make the system worse -- what if we used it to make the system better?

Everyone around the table quickly got excited (granted we are an excitable group), and began tossing out suggestions for how to get this idea circulating.

Eugene, the filmmaker among us, remarked that the contrast between the big banks and the community banks we were talking about was very much like the story in the classic Frank Capra film It's a Wonderful Life, where community banker George Bailey helps the people of Bedford Falls escape the grip of the rapacious and predatory banker Mr. Potter.

It was a lightbulb moment!

And, unlike the vast majority of dinner conversations, the excitement over this idea didn't end with dessert. It actually led to something -- thanks in great part to Eugene and his remarkable team, who got to work and, in record time, created a brilliant, powerful, and inspiring video playing off the It's a Wonderful Life concept. Watch it below.

Within a few days, the rest of the pieces fell into place, including an agreement with top financial analysts Chris Whalen and Dennis Santiago, who gave us access to their IRA (Institutional Risk Analytics) database. Using this tool, everyone will be able to plug in their zip code and quickly get a list of the small, solvent Main Street banks operating in their community.

The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it's meant to be. It's neither Left nor Right -- it's populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest.

It's time for Americans to move their money out of these reckless behemoths. And you don't have to worry, there is zero risk: deposit insurance is just as good at small banks -- and unlike the big banks they don't provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion.

Think of the message it will send to Wall Street -- and to the White House. That we have had enough of the high-flying, no-limits-casino banking culture that continues to dominate Wall Street and Capitol Hill. That we won't wait on Washington to act, because we know that Washington has, in fact, been a part of the problem from the start. We simply can't count on Congress to fix things. We have to do it ourselves -- and the big banks are the core of the problem. We need to return to the stable, reliable, people-oriented approach of America's community banks.

So watch Eugene's amazing video, then go to www.moveyourmoney.info to learn more about how easy it is to move your money. And pass the idea on to your friends (help make this video -- and this idea -- go viral!).

JP Morgan/Chase, Citi, Wells Fargo, and Bank of America may be "too big to fail" -- but they are not too big to feel the impact of hundreds of thousands of people taking action to change a broken financial and political system. Let them gamble with their own money, not yours. Let's turn big banks into smaller banks. We'll all be better off -- and safer -- as a result.

Make it your New Year's resolution to move your money. We can't think of a better way to start 2010.



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Sources: Huffington Post, www.Moveyourmoney.info, Weblogs, Youtube, Google Maps

US Banks Awarded Bailout / Taxpayer Dollars Are Turning A Profit

MSNBC, NY Times----


(Although the FDIC insurance fund that guarantees bank deposits is running low, there are ways to make sure your money is safe. NBC's Tom Costello reports.)

Visit msnbc.com for Breaking News, World News, and News about the Economy

(Chair of the Congressional Oversight Panel Elizabeth Warren joins a Morning Joe panel to talk about how the TARP funds were spent and why America is not out of the woods yet.)

Visit msnbc.com for Breaking News, World News, and News about the Economy

Nearly a year after the federal rescue of the nation’s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again.

The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times.

These early returns are by no means a full accounting of the huge financial rescue undertaken by the federal government last year to stabilize teetering banks and other companies.

The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages.

Welcome surprise

But the mere hint of bailout profits for the nearly year-old Troubled Asset Relief Program has been received as a welcome surprise. It has also spurred hopes that the government could soon get out of the banking business.

“The taxpayers want their money back and they want the government out of our banking system,” Representative Jeb Hensarling, a Texas Republican and a member of the Congressional Oversight Panel examining the relief program, said in an interview.

Profits were hardly high on the list of government priorities last October, when a financial panic was in full swing and the Treasury Department started spending roughly $240 billion to buy preferred shares from hundreds of banks that were facing huge potential losses from troubled mortgages. Bank stocks began teetering after Lehman Brothers collapsed and the government rescued A.I.G., and fear gripped the financial industry around the world.

American taxpayers were told they would eventually make a modest return from these investments, including a 5 percent quarterly dividend on the banks’ preferred shares and warrants to buy stock in the banks at a set price over 10 years.

But critics at the time warned that taxpayers might not see any profits, and that it could take years for the banks to repay the loans.

As Congress debated the bailout bill last September that would authorize the Treasury Department to spend up to $700 billion to stem the financial crisis, Representative Mac Thornberry, Republican of Texas, said: “Seven hundred billion dollars of taxpayer money should not be used as a hopeful experiment.”

So far, that experiment is more than paying off. The government has taken profits of about $1.4 billion on its investment in Goldman Sachs, $1.3 billion on Morgan Stanley and $414 million on American Express. The five other banks that repaid the government — Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T — each brought in $100 million to $334 million in profit.

The figure does not include the roughly $35 million the government has earned from 14 smaller banks that have paid back their loans. The government bought shares in these and many other financial companies last fall, when sinking confidence among investors pushed down many bank stocks to just a few dollars a share. As the banks strengthened and became profitable, the government authorized them to pay back the preferred stock, which had been paying quarterly dividends since October.

But the real profit came as banks were permitted to buy back the so-called warrants, whose low fixed price provided a windfall for the government as the shares of the companies soared.

Despite the early proceeds from the bailout program, a debate remains over whether the government could have done even better with its bank investments.

If private investors had taken a stake in the banks last October on par with the government’s, they would have had profits three times as large — about $12 billion, or 44 percent if tallied on an annual basis, according to Linus Wilson, a finance professor at the University of Louisiana at Lafayette, who analyzed the data for The Times.

Why the discrepancy? Finance experts say the government overpaid for the bank assets it bought, because its chief priority was to stabilize the teetering financial system, not to maximize profit.

“Had these banks tried to raise money any other way, they probably would have had to pay quite a bit more than the government received,” said Espen Robak, head of Pluris Valuation Advisors, which analyzes the value of large financial institutions.

A Congressional oversight panel concluded in February that the Treasury paid an average of 34 percent more than the estimated fair value of the assets it received.

Of course, many finance experts suggest that the comparison is academic at best, because there is no way to know what might have become of the banks or the financial system as a whole had the government not acted.

“Taxpayers should heave a sigh of relief that the investment in the banks protected them from even more catastrophic losses from more bank failures,” said Aswath Damodaran, a finance professor at the Stern School of Business at New York University.

A more direct comparison of profits can be made with the investment performance of other governments that poured money into ailing banks last fall.

The Swiss government, for example, said last week that it had pulled in a handsome profit for taxpayers on a $5.6 billion bailout it gave to UBS, the troubled Swiss bank, at the height of the financial crisis in October. The government netted $1 billion on its investment, a gain equal to a 32 percent annual return.

“They are substantially in the money,” Guy de Blonay, a fund manager at Henderson New Star in London, said after the announcement.

More profits?

American taxpayers could still collect additional profits on their investments in two other big banks that have repaid their preferred stock but not their warrants: JPMorgan Chase and Capital One. They are expected to yield over $3.1 billion in gains for the Treasury in the next month or so, although the full tally will depend on how much they will pay to buy back their warrants.

And the government is owed about $6.2 billion in interest payments from banks that have not yet repaid their federal money.

But all the profits taxpayers have won could still be wiped out by two deeply troubled institutions. Both Citigroup and Bank of America are still holding mortgages and other loans that were once worth billions of dollars but whose revised values are uncertain. If they prove “toxic” because they cannot attract buyers, they could leave large holes in the banks’ balance sheets.

Neither bank is ready to repay its bailout money anytime soon, even though the banks’ stock prices have surged in the last month, leaving the government sitting on paper profits of about $18 billion between them.



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Sources: NY Times, MSNBC, Huffington Post, Google Maps