Part II:
BILL MOYERS: Well, 96 percent of the incumbents usually do.
DAVID CORN: And they usually do. So, they would care to a certain degree about popular anger if it was pointed enough and directed at them sharply enough. But, you know, people don't raise a fuss about this, if there's an angry editorial in the "New York Times" or we rail about it at "Mother Jones" or you do a commentary. You know, they can survive that.
Believe you me, they may not like it. Maybe next time, you know, you run into Chuck Schumer somewhere. He'll point his finger at you. But they can survive that. What they can't survive is people realizing, "Hey, you're not looking out for me. You're looking out for those rich other guys. Because they're giving you money."
And until people get, you know, demonstrate in big enough numbers, that this is a direct concern to them. And every once in awhile, you know, there's an eruption. There's a bubble of activity along those lines. They don't have to worry about it. They live in their own Washington bubble. And they see, you know, they have decades of empirical evidence to base their actions on. They can say, "Yeah, I can get away with this. I can get away with that. I can get away with this. Guess what? I can get away with most anything I try."
BILL MOYERS: Your article confirms for me, reinforces for me what David is talking about. That there are two parallel universes in America today. And that Washington is, as you said a moment ago, a bubble in which they know, the people who write the rules, the beltway press, the people in power, know that they can get away with this, because there's no significant way that the popular angst can penetrate that bubble.
DAVID CORN: Well, I wouldn't say--
BILL MOYERS: We live in two different worlds.
KEVIN DRUM: One thing we haven't talked about yet. And one place where I think you lay some of the-- we should lay some of the blame is the media. And the financial media. I mean, you talk about the carried interest rule that we were just talking about. That's complex. It's sort of down in the weeds. And it gets no attention. People don't see it enough to get angry about it. You can't get angry about something unless you're told about it.
And if you go out and talk to people, there isn't one person in 100, who even knows the carried interest rule was ever up before Congress. Let alone what it means, why it's outrageous, and why they should care about it. And they can't care about it until they know about it.
BILL MOYERS: Where is the countervailing power in Washington? If the press is falling down. If the executive branch is compromised, as you said earlier, by Obama's approach to conventional wisdom. If the bankers are in charge of Congress, and you described there. You also make the very strong case in your article that the Fed is involved in this, as well. The bankers really know how to work the Fed. Where is the countervailing power?
DAVID CORN: There isn't any countervailing power.
BILL MOYERS: You mean I have cancer and there's nothing I can do about it? I'm serious.
DAVID CORN: Well, there could be.
BILL MOYERS: This discourages a lot of people when you give this depressing analysis.
DAVID CORN: I understand that. And I wish I could be more hopeful. And we had a President who ran on a hope platform. You have just described all the major actors in Washington. And, you know, they are, to some degree, responsive to what happens outside of Washington. But if there's no pressure coming into Washington on this stuff, particularly given, as we've talked about, its tremendously profound complication. Then things just sort of, the status quo wins out.
BILL MOYERS: I mean, in Washington, if you are a critic, if you're a journalist in Washington, who reports the kind of-- on Washington the way you do, you get marginalized right?
KEVIN DRUM: Yes. Yes. I think you do. You're not part of Wall Street. You don't really understand what's going on. That's how they feel about it. I think that the Obama Administration — all the people in there — I think they have become convinced, like a lot of people, that if they don't do what Wall Street says, terrible things are going to happen. I mean, if they try to reign in Wall Street, all of our financial business will move to the Bahamas. And we'll lose trillions of dollars. And they believe that. And that's what the banks are--
BILL MOYERS: But as you say so astutely in this article, that happened for 20 years. Washington-- 30 years. Washington did what Wall Street wanted. And we had a debacle anyway.
KEVIN DRUM: Right.
BILL MOYERS: Have we learned nothing?
KEVIN DRUM: The Stockholm Syndrome, as David puts it, is so strong that they still believe it. And, you know, one of the things that happened here is that the bailout last year succeeded in a way, too well. I mean, it worked. TARP worked. All the actions that Ben Bernanke--
BILL MOYERS: Kept us from going over.
KEVIN DRUM: Took us-- yeah, kept us from getting into a second Great Depression. And so, now, what we've got is to a lot of people, just a big recession. There's a lot of unemployment. But it seems familiar. It's a recession. The crisis is over. And now we can go back to business as usual. Because maybe it wasn't as bad as we thought. Memories, memories fade. But, you know, the same thing is going to happen again if we don't reign in the banks.
BILL MOYERS: Yeah, you make that point is that they've actually set up a situation in which we can repeat what happened 18 months ago, right?
KEVIN DRUM: You know, the key thing, I mean, the key thing that drove the housing bubble of the last decade was debt. Was leverage. Banks weren't just making investments, they were borrowing huge sums of money to make investments. That's what makes a bubble bad. Is huge amounts of leverage. Huge amounts of debt.
DAVID CORN: And betting on those--
KEVIN DRUM: Right. Betting with borrowed money. That's the key. You know, the dotcom bubble, when it burst, it was not that bad. There was a recession that followed, but no banks failed. The financial system didn't meltdown. The reason is because it was a bubble, but it wasn't debt-fueled. The housing bubble was debt-fueled. The--
DAVID CORN: 'Cause when we've had housing bubbles in the past that have failed, without, you know, the daisy chain effect.
KEVIN DRUM: We had one in Southern California, where I live. Back in the late '80s and early '90s. And it was bad for Southern California, because again, it was debt-fueled. Now, the regulations that are being pushed through Congress right now, they do almost nothing about that. I mean, they talk about derivatives. They have a consumer finance protection agency. Those are good things.
But the key thing they ought to be getting at is debt. They need to restrict the amount of debt, the amount of leverage that the financial system can use. You don't get rid of it. Credit is the oxygen of the financial system. But you've got to limit it. And they've done almost nothing about that.
BILL MOYERS: And this is-- why?
KEVIN DRUM: Because debt and leverage are the keys to making money. The one thing that Wall Street needs to make money is lots of leverage. They have to have that to make money. So, that's the one thing they will fight for harder than almost anything. And they fought for it so hard that, in fact, the regulations hardly do anything at all.
BILL MOYERS: Well, as you say in the piece, the overdraft fees that they can now charge can equal something like 10,000 percent? I mean, the mafia would like that, right?
KEVIN DRUM: That's right. It's, you know, it's a small part of the picture, but it shows how much power they've got. What happened was overdraft fees on your debit card. The average overdraft is $17. And it's not hundreds or thousands of dollars. The average overdraft is $17. And it gets paid off in five days. And the average overdraft charge is $39. Now, do the math on that, and that's a 10,000 percent rate of interest.
And the only reason banks can do that is because in 2004, the Fed, after being lobbied by the credit card industry, being lobbied by the banks, ruled that even though overdraft protection was marketed as a loan, was marketed as a line of credit, consumers all thought of it that way. It wasn't, in fact, a loan. And so, since it's not a loan, they can charge any interest rate they want.
DAVID CORN: Well, you know, one of the small debates in Washington has been what type of consumer financial protection agency there should be that would look at things like this.
Elizabeth Warren, it was her idea, initially, to even have such an agency, which she proposed a couple years ago. And she wants it, you know, have the power to regulate, you know, banks and credit card companies and others that provide financial services and financial products. And she wants there to be some very simple rules.
For instance, like you have to-- every credit card company would have to provide what they call vanilla products. Whereby, "Here's your credit card. You have, I don't know, 12 percent interest. It doesn't change. No other fees. Until we let you know in a letter with bold print that it's going to change. And we give you the right to keep the card or not keep the card." Something very simple.
And the agency would also have the right to, you know, write these rules and then regulate the companies. So, it goes into, you know, the Washington hopper. And now, you know, it starts getting watered down. They take out the vanilla product stuff. So, the things that would make things easy for consumers to avoid getting caught in scams like the one that Kevin just described, you know, is removed from the bill.
And they say, "Well, you know, maybe we'll have this little agency write its little rules. But we'll let the banking regulators enforce them." The groups that, to date, have really been held hostage by the people they're supposed to regulate. We have a lot of debate in Washington over this. You know, compared to the big picture that Kevin and others have described, this is really a minor reform. But even this minor reform gets sliced and diced until yeah, something might pass.
KEVIN DRUM: People are more afraid of big government than they are of big banks, despite what happened over the last couple of years. And they shouldn't be. They should be-- what they should be is demanding a better government. A government that regulates without being captured by all the special interests. A government that puts in place regulations that are simple and clear. So, David, what you're saying. The vanilla products option, for example, in the CFPA was a nice-- the reason the banks hated it was because it was so simple.
A nice simple regulation. There's no way to get around it. If the rule says you have to offer as an option, this is not the only thing. You have to offer if you're going to do a home loan one option has to be a standard, 30-year, fixed rate mortgage. And you can have all your other options, but you've got to at least tell people they can have that. That's a very simple regulation. There's no way to get around it. And that's why banks hate it.
DAVID CORN: Bill, you keep coming back to the same question. How can they get away with it? I mean, that's really what it all boils down to.
BILL MOYERS: And it's a serious question for this reason. You know, we don't always have popular representation in the government. But from time to time, Civil Rights movement, Suffragette movement, the Gilded Age, the first time-- people do get heard. And men and women in power begin to speak for them. The worry is have we become so big and things become so complex. Have people been so politically abused as a psychologist recently said, that the will to fight for democracy, the political will has been dissipated?
DAVID CORN: Well, I think there may be something to that. It's also-- you know, it takes time and energy to do that. You know, people who are stressed out over, you know, losing jobs or maintaining their jobs, you know, may not, you know, sometimes that leads people to fight. Sometimes it leads people to resignation. Sometimes it leads people just to focus on getting by.
Think about what's happened to our economy. For the aughts, the last decade, there was no net job growth, at all, from 2000 to 2009. For every other decade prior to that, whether it was Republican or Democratic President in charge, the growth was between 20 percent and 38 percent in jobs. So, we've gone from-- that's pretty healthy. Even though at times there have been recessions and wages may not have gone up as much as the number of jobs created. But in the aughts, nothing. This represents, I think, a fundamental turning point for our economy. And that has people--
BILL MOYERS: For our country.
DAVID CORN: Our country. Wigged out. They don't know the future. They don't know who to turn to. They saw what happened with the economic collapse last year. And, you know, it's hard to know, you know, if you can be angry, who to march on. Or whether you're going to hunker down, and try to just get by on your own. They look at rising powers, economic powers overseas. And how we're going to compete with them. It may be a form of abuse, but they certainly look to the Washington system. And this gets to the point that, you know, that Kevin raised. You know, in poll after poll for decades now, if you asked people who are you more scared of in terms of America's future, is it big government or big corporations? Big government always wins by a landslide.
KEVIN DRUM: And remember one thing is that over the last 20-30 years, people have been told over and over and over again that the economy is doing well. The economy's doing great. The Dow is up. And yet, they themselves, most of them, aren't actually making more money. Median wages have hardly gone up at all in the last 30 years. So, you've got all these people who aren't really making any more money. They're treading water. And yet, everywhere they turn, they're being told the economy's doing well. And they start, I think, a lot of people start to blame themselves. They wonder, "If the economy's doing so well, how come I'm not doing better? It must be me." And what they don't see is, no, it's not them. It's the way the system works.
BILL MOYERS: The Republican Congressman from Wisconsin, Paul Ryan, wrote an essay in the December issue of "Forbes" magazine, the title of which was "Down with Big Business." What do you make of that?
DAVID CORN: Well, the Democrats have to worry. Because there is an opening here for the Republicans. If the Republicans looked at what the, you know, see any anger out there about the economy. And they, you know, start attacking the Democrats and say one reason that this is going on is because of Democrat ties to business and show that chart. And yes, we've had our own problems as well. You know, it could be sort of you know a major shift. I don't think they're going to do that. I don't think they're smart enough to do that, quite frankly. Or have the courage to do that. But that is one opening to have a major strategic change in the face of American politics.
KEVIN DRUM: You know, one thing that certainly the Democrats need, I think the country needs is, you know, President Obama really needs to take the lead on this. And he hasn't. He has been in favor of financial reform, but he hasn't really spoken out about it. He hasn't really pushed the banks. He has made a strategic decision that he needs to cooperate with the banks. Cooperate with Wall Street so as not to cause more panic.
And, you know, it this is not this is not something like health care or climate change, where you can see a lot of moving parts that go together. And you can sort of understand why there's a lot of compromise in those things. With financial reform, he could go out there and start pushing on bits and pieces of it. And even if he loses, even if he loses, it doesn't wreck all the rest of it. He doesn't wreck the chances of financial reform in general if he pushes on one pieces and loses.
DAVID CORN: But better yet, that would mobilize people. I mean, sometimes in politics-- I mean, you know this. Sometimes a clear loss is actually a win politically. Because you draw the lines. You show people who's on what side. And you show them what you're fighting for.
BILL MOYERS: Someone said to me the other day, "Obama has not had his Reagan moment. His defining moment." Remember in the early '80s, when Reagan came to the White House. The one of the first things he did was to fire the air control workers. And it was the moment that for conservatives and a lot of independents, who wanted a tough President to stand up to something, I'm not saying Obama should fire anybody. But he hasn't defined himself by his stand.
KEVIN DRUM: Obama wasn't even willing to fire Ben Bernanke. The head of the--
DAVID CORN: Who's now "Time" man of the year.
KEVIN DRUM: The head of the Federal Reserve. And, you know, Ben Bernanke did, I think, a good job after the crisis hit. He didn't recognize the crisis before it hit. After the crisis hit, he did a good job. But that doesn't mean-- you don't deserve to get reappointed to the Federal Reserve. He did a good job managing the crisis. What we need now, though, is somebody who is going to manage the aftermath of the crisis. Somebody who is genuinely dedicated to re-regulating the financial sector.
BILL MOYERS: Let me show you something that Ben Bernanke said to the annual meeting of economists earlier this week, last Sunday, I think it was.
BEN BERNANKE: The best response to the housing bubble would have been regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective and surgical approach for constraining the housing bubble than a general increase in interest rates.
DAVID CORN: Whoops.
BILL MOYERS: Whoops what?
DAVID CORN: Well, now he's saying what a lot of us said earlier? That we should have had better regulation, you know, rather than just fiddling with interest rates? Kevin mentioned well, he should you know, maybe Obama should not have retained Ben Bernanke. But, you know, we are so far away from that discussion when you look at everything else that's happened. You know, who are some of the top people at Treasury now? A lot of them came from Goldman Sachs.
BILL MOYERS: You have a great chart in your story in "Mother Jones" on that.
DAVID CORN: I mean, my favorite one that I wrote about, and I don't know him personally. He could be a great guy. Never even met him. I tried to interview him, but he wouldn't consent. Mark Patterson. He's the chief of staff for Timothy Geithner, the Treasury Department Secretary. He was a lobbyist for Goldman Sachs. What did he do as a lobbyist for Goldman Sachs? He lobbied against a bill in the Senate to restrain it was a very modest bill, to restrain CEO compensation.
Basically, gave shareholders the right to say, "We think you're paying them too much." It wasn't even mandatory. It wouldn't even cut back pay. He you know, Goldman Sachs would have none of that. He lobbied against that bill. Who authored that bill? Barack Obama, when he was a Senator. So, the guy who fought Barack Obama on CEO pay, an issue that Barack Obama says he cares about. And I believe he does. Is now running the Treasury Department for Tim Geithner. I mean, this really doesn't make a lot of sense to me.
BILL MOYERS: So, what would happen you both talk about mobilization. Let's say that President Obama in his upcoming State of the Union speech called for mobilization. Asked people to do something about this. What would that mean? What would what shape would mobilization take?
KEVIN DRUM: He could do it in a State of the Union address and that might be a place to start. But you know, Barack Obama famously won election through a huge grassroots movement. He's got an enormous, I think 13 million names on his email list. And so forth. But he's refused to use that. He
BILL MOYERS: Write the first email he would send, if you were Obama. What would you send those millions of young people and others who are looking for real change in the elections of 2008. What would you say?
KEVIN DRUM: If it were my email, I would say, "Look, we need to break up the big banks." Look, Alan Greenspan of all people, has said if a bank is too big to fail, it's too big. Allen Greenspan said that. If Alan Greenspan thinks that we ought to break up big banks, if Paul Volcker thinks we ought to break up big banks, this is not a fringe, left view. This is this ought to be a mainstream view. And yet, it's nowhere. That kind of thing should--
DAVID CORN: I'll give you the, I'll give you the first line. The first line should be, "We've been taken for a ride. You know what happened in 2008. I came into office promising change. I've sent some bills up there. They were strong. Maybe they could have been stronger. And I see that they're being weakened. This only makes me believe that we have to bear down harder. And I can only do this with your help."
BILL MOYERS: Okay, I've read that. I'm really excited about that, President Corn. What do you mean? What can I help you do?
DAVID CORN: Send me that $50 as well, Bill.
BILL MOYERS: Well, that's what can I do to help?
DAVID CORN: Okay, well, then been then he would have to he would say, "I have you know, I have I have reset my legislative agenda on this front. Here are the five, you know, provisions I want to see passed this year on regarding financial reform. I want the Consumer Finance Protection Agency to have teeth and be able to offer this. I want, you know, derivatives full, you know, fully transparent. Okay? I want to put back the wall between in banking. Let me tell you why." Now, a lot of this you know, some of this goes to fundamental issues, some of it doesn't. But at least move the, you know, move the ball in that direction.
KEVIN DRUM: If you want to have real change, there's only one place that can come from. That's out of Congress. Congress is the only body which is big enough to actually restrain Wall Street. One way or another, you have to take your 13 million or your 15 million or whatever number of people you've got. You've got to mobilize them to tell their Congressmen that they're mad as hell. And they're not going to vote for them if they don't pass this legislation.
BILL MOYERS: But no one can.
DAVID CORN: It's the only way.
BILL MOYERS: No one can read your piece in "Mother Jones" without thinking, "So, these guys must be laughing all the way to the bank." I mean, the same people who, bought the government off, brought the economy down, caused suffering to millions of people from Orange County to Portland, Maine, are winning all over again, you say. Because, you say, in the same issue, no one's fighting back.
DAVID CORN: My guess is that they feel they dodged the biggest bullet of their lives. I mean who would have thought a year ago that we'd be back we'd be at this point? I mean, I think they probably, you know, worried that, you know that that there'd be communist laws passed. You know, that people would be so angry.
DAVID CORN: Tremendous money and power and influence to wield to get their way. Versus the rest of us, who get nickeled and dimed and we have other things to worry about. You know? People are you know, have you know are worrying about their maybe what their kids going to school safely and getting good educations.
I mean, we have everything to worry about. The bankers and the investment bankers and the financiers, they can grease the way with millions of dollars that gets them billions of dollars in the in return. And it it's not a fair fight.
KEVIN DRUM: People need to have someone to rally around. If they're going to make this happen. And I think that needs to be Barack Obama. He needs to be willing to really take on the bankers. You know, Franklin Roosevelt in his first term. I remember he has a famous quote where he talked about there are you know, there are people out there who hate me. I have earned their hate. And I embrace their hate. And I think Barack Obama needs to be willing to earn the hate of some bankers.
BILL MOYERS: But I don't believe that is his nature, do you? It seems to me after all this time his nature is of a conciliator.
KEVIN DRUM: Conciliation is a good trait. In most cases, I actually think it I think it works well for Obama. But sometimes there are times for a conciliatory attitude. There are times to take somebody on.
Now, one thing one place where I think he's missing a bet is Barack Obama came into office feeling like he did want to bring the country together. He wanted to try to end the partisan wars. But, you know, this issue of Wall Street is one where if he took on Wall Street, the bankers might hate him, but I think that would bring the country together more than you'd think.
'Cause I think there is a lot of anger toward Wall Street. It's latent, but it's there. Among liberals, among conservatives, among libertarians, among independents. I think if there's any one issue where a real show of emotion on his part and a real show that he was going to take these guys on, could bring the country together. It very well might be taking on Wall Street.
BILL MOYERS: So, how you know, how long do we wait for Godot?
KEVIN DRUM: Well, that's up to Godot. That's up to Obama. Nobody knows.
BILL MOYERS: David Corn and Kevin Drum, thank you for being with us on the Journal. |
