Economy

The President took on Wall Street Thursday. Stocks plummeted, consumer activists cheered. Now we are talking.

Obama's throwdown comes hard on the heels of the special election in Massachusetts in which public outrage over the bank bailout and the state of the staggering economy played a major role. As we have already reported, Republican Scott Brown seized the Democratic stronghold by billing himself as a man of the people and using public dismay with the Wall Street bailout to his advantage on the campaign trail. On Thursday, Obama showed he got the message.

For the first time, the President's narrative directly blamed Wall Street for the crisis and proposed a major structural reform to business-as-usual. After freeing former Federal Reserve Chairman Paul Volcker from the closet he had been stuffed in at the Treasury Department, Obama brought him out to announce new measures long advocated by Volcker.

On Friday, the Wall Street Journal reported that President Obama's signature financial reform, a Consumer Financial Protection Agency (CFPA), was in trouble in the Senate.

Senate Banking Chairman Chris Dodd (D-Conn.) was considering dropping the idea of creating an independent, stand-alone consumer protection body, empowered to crack down on banking abuses, in order to get a regulatory revamp passed this year with bipartisan support. Dodd is apparently considering shrinking the CFPA into a division of an already-existing federal agency (no doubt one with a proven track-record of failing consumers.)

Dodd is faced with a dilemma. Although he introduced a rather strong financial services reform bill in Congress last year -- one which creates an independent CFPA, curtails the powers of the Federal Reserve and tackles many Wall Street abuses -- it appears that big bank lobbyists who have spent millions fighting reform are now chipping away at his bill.

The top bankers that were called to testify before the independent Financial Inquiry Crisis Commission in Washington today touched on the drama of the September 2008 financial crisis. They complained of nervous anxiety and sleepless nights. They didn't apologize for a thing, but they did -- to a man -- express their deep appreciation to the American taxpayer for saving their hides.

So how are the big banks treating those taxpayers these days? Almost every banker touted his firm's voluntary housing loan modification efforts to help families facing foreclosure. Jamie Dimon of JP Morgan Chase, for instance, cited 570,000 new trial loan modifications and 112,000 permanent modifications.

Today the Washington rumor mill sprang into overdrive as word trickled out that the Obama administration was thinking of applying some sort of fee to banks in order to take back bailout dollars and fund deficit reduction. Here at BanksterUSA we are thrilled that the Obama team has joined our "Repo the Dough" campaign and urge it to apply a financial transaction tax to destructive stock market speculation. A one time tax on bank bonuses simply will not suffice.