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'Wall Street leads in phony reform'
Congress dithers on financial reform while white collar crooks get 'get out of jail' cards.
Last Modified: 01 Jul 2010 10:29

Obama claims his financial reforms will bring an end to taxpayer bailouts [EPA]

Charade
noun
an absurd pretense intended to create a pleasant or respectable appearance: talk of unity was nothing more than a charade.

The plan was to get the financial reform bill "done" by last weekend so that Barack Obama, the US president, could pull it out of the his back pocket at the G20 meeting in Canada to demonstrate American "leadership" on an issue the whole world is legitimately worried about: the real prospect of an even more serious global economic collapse.

Congress has been working on this deal for months. The Senate passed its version after the House adopted a different measure.

It was then up to the Conference process to "reconcile" the two bills, and come up with a law all could live with before taking the summer off to prepare for killer elections in the autumn.

No one reminded these alleged public servants of that axiom about the best laid plans of men and mice as in "the best laid schemes o' mice an' men. Gang aft agley, ... aft agley" (often paraphrased in English as "The best-laid plans of mice and men/Go oft awry").

Reform in name only

It is hard to know how "gang aft agley" they really went since all of the legislators are masters of compromise and beholden to financial interests that have gone through the provisions with a fine tooth comb and a surgical pair of scissors.

Already the proposed independent Consumer Protection Agency has been buried in the Federal Reserve Bank.

The too big to fail provisions are history and the wrangle over tough rules on derivatives have been targeted by liberals from New York who fear that the trading desks will move overseas.

Forget about principles here.

Exemptions are being carved out, as I write, for mutual funds and manufactures. Three "moderate" Republicans, including Scott Brown of Massachusetts have demanded reforms in the reform that will make it a reform in name only.

Doing Wall Street's bidding

Senator Dick Durbin says that banks are still the most powerful lobby on Capitol Hill [AFP]

Behind the scenes, the industry with 25 lobbyists for every member of Congress is intensifying the pressure at the federal and local level, putting the squeeze on.

Every member has a little something they now need to vote yes, explains Senate negotiator Chris Dodd.

"I dredge votes on the floor of the US Senate. I come back and I feel like a bulletin board ... I've got notes stuck in every pocket."

These lobbyists have poured hundreds of millions into the coffers of these politicians.

As Senator Dick Durbin admitted last April: "The banks - hard to believe in a time when we're facing a banking crisis that many of the banks created are still the most powerful lobby on Capitol Hill. And they frankly own the place."

According to MIT's Simon Johnson who writes The Baseline Scenario, it is the White House that is doing Wall Street's bidding while claiming the opposite.

He writes: "The president signed off on the most generous and least conditional bailout in world financial history .... The administration has scrambled to create some political cover in terms of "reform" but the lack of substance here is already clear to people who follow it closely, and public perceptions will shift quickly."

'Get out of jail'

And it is not just the Congress that is backpedaling as I write.

The courts and the prosecutors are doing their share to issue "get out of jail cards" for suspected and convicted white collar criminals.

Dow Jones reports: "The US Supreme Court found fault Thursday with the federal government's high profile convictions of Enron's Jeffrey Skilling and former media mogul Conrad Black, rejecting the government's use of a key white collar crime law on which part of the prosecutions were based.

"The justices sent the cases back to two different lower courts to determine whether portions of Skilling and Black's convictions should be thrown out."

A Congressional provision has insured that convicted white collar criminals cannot be sued by the people they ripped off.

Joseph Collins, a corporate lawyer who worked for Refko, will not have to pay back investors he helped defraud. 

Appeals Court Judge Gerald Lynch wrote: "It is perhaps dismaying that participants in a fraudulent scheme who may even have committed criminal acts are not answerable in damages to the victims of the fraud."

"It is perhaps dismaying." Huh???

Even the people who enabled Bernie Madoff seem to be getting off writes the New York Times white collar crime blogger, Peter J. Henning: "Senior members of Mr Madoff's securities operation, including his brother and two sons, have not been charged with any crime to this point, and one wonders whether anyone will be charged with being an accomplice to the fraud. Mr Madoff received his 150-year sentence nearly a year ago and little has happened on the criminal front since then."

The operative phrase: "One wonders ...."

So, the criminals go free while the Congress and the courts compound the crimes.

If this is not a vivid demonstration of corruption at the highest levels, what is?

'The new poor'

The Uk's government announced a raft of tax increases and spending cuts [Getty] 

Meanwhile, in the UK, under a Conservative government financial crime is being treated differently.

According to news reports, "the UK government announced a complete overhaul of the financial services industry in the UK, increased focus on white collar crime, and a review, with possible reform, of the banking industry".

And while all this is going on, the economy continues to fall apart as Republicans sink a measure to extend unemployment benefits for working people who are already being designated "the new poor".

Mike Whitney writes: "Consumer spending is flat, home prices are set to fall, unemployment will likely edge higher, private sector credit is still contracting, capacity utilisation is far below pre-crisis levels, the CPI is slipping, and yields on US Treasuries are priced for deflation. 

"The government must pick up the slack or there will be a general fall in prices that will trigger more layoffs, larger deficits, and social unrest."

Do not worry; each party will blame the other.

Already Republican candidates are telling the unemployed "to get a job," no matter how low it pays.

When some weakened bill is passed as, no doubt, one will, prepare for the TV spin by the punditocracy shilling for the status quo, and rationalising it as the best law that could emerge under the circumstances in such a dysfunctional institution.

And then, watch as the Obama administration hails it as the second coming.

News Dissector Danny Schechter directed the film Plunder the crime of our time and wrote a companion book viewing the financial crisis as a crime story.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

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