Word on the Street

Christine Todd Whitman, a former Republican governor of New Jersey and administrator of the Environmental Protection Agency, is president of the Whitman Strategy Group – and pretends to be on the side of the downtrodden. But she isn’t.

“Today’s demonstrators,” she writes, “are understandably angry and frustrated, but they are focusing on the wrong place. Instead of marching on the homes of the wealthy, they would effect real change by going to the polls every time they can.”

Ms. Whitman knows full well that the “polls” and the “two-party system” are what got us into this mess, but as long as she and the rest of the elite remain among the “1%”, it’s in her – and their – best interests to endorse the status quo. The rest of us can go to blazes.

“A quick review of the richest 25 Americans,” she continues, “reveals a quality that many protesters may be forgetting: Only four of those 25 are investors … most of the super-wealthy created a product or service that the world wanted so much that we all bought it.”

Those “richest 25 Americans” are a diversion. Ms. Whitman should take a look at our Vol. XXIX, Art. 11 commentary. She’s laying a smoke screen for the real culprits – the 50 richest members of Congress. That’s where the real Wall Street connection lies, and the “protesters” know it.

Robert B. Reich, former U.S. Secretary of Labor and currently a Professor at the University of California at Berkeley, knows it, too. “Wall Street is back to its old tricks,” is the headline for his latest syndicated column.

“This week, President Obama travels to Wall Street, where he’ll demand – in light of the Street’s continuing antics since the bailout, as well as its role in watering down the Volcker rule – that the Glass-Steagall Act be resurrected and big banks broken up.

“I’m kidding. But it would be a smart move.

“Americans of whatever stripe – from the Partiers on the right to the Occupiers on the left – continue to hold Wall Street at least partly responsible for the nation’s continuing misery. With good reason.

“After the banks made wildly risky bets with our money, we bailed them out. Congress enacted financial reform (the Dodd-Frank Law), but Wall Street lobbyists immediately set about diluting it, along with its regulations. Dodd-Frank is now riddled with so many exemptions and loopholes that the largest banks are back to many of their old tricks. For example, it’s impossible to know the Street’s real exposure to the European debt crisis. To stay afloat, several of Europe’s banks may be forced to sell mountains of assets – among them, derivatives originating on the Street – and may have to renege on or delay some repayments on loans from Wall Street banks.

“Executives on the Street say they’re not worried because their assets are insured. But remember AIG? The fact that Morgan Stanley and other big U.S. banks have taken a beating in the market suggests investors don’t believe the Street. This proves financial reform hasn’t gone nearly far enough.

“For more evidence, consider the fancy footwork by Bank of America in recent weeks. Hit by a credit downgrade in September, BofA moved its riskiest derivatives from its Merrill Lynch unit to a retail subsidiary flush with insured deposits.

“That unit has a higher credit rating because the Federal Deposit Insurance Corporation (that is, you and me and other taxpayers) are backing the deposits. Result: BofA improves its bottom line at the expense of American taxpayers.

“Wasn’t this supposed to be illegal? Keeping risky assets from insured deposits had been a key principle of U.S. regulation for decades before the repeal Glass-Steagall in 1999. (For the record, I was no longer in the Clinton administration.) The so-called ‘Volcker rule’ in the new Dodd-Frank Act was designed to remedy this. But under the pressure of Wall Street’s lobbyists, the rule has morphed into almost 300 pages of regulatory mumbo-jumbo, riddled with loopholes.

“It would have been far simpler to ban proprietary trading altogether. Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks’ own behalf?

“Bring back Glass-Steagall! And break up the big banks. In the wake of the bailout, they’re bigger than ever. Twenty years ago, the 10 largest banks on the Street held 10 percent of America’s total bank assets. Now they hold more than 70 percent. And the biggest four have a larger market share than ever – so large, in fact, they’ve almost surely been colluding. How else to explain their apparent coordination on charging debit-card fees?

“The banks aren’t even fulfilling their fiduciary duties to investors. Last summer, after Groupon selected Goldman Sachs, Morgan Stanley and Credit Suisse to underwrite its initial public offering, the trio valued it at a generous $ 30 billion. Subsequent accounting and disclosure problems showed this estimate to be absurdly high. Did the banks care? Not a wit. The higher the valuation, the higher their fees.

“I doubt the president will be condemning the Street’s post-bailout antics, or calling for a resurrection of Glass-Steagall and a breakup of the biggest banks. Democrats are still too dependent on the Street’s campaign money.

“That’s too bad. You don’t have to be an occupier of Wall Street to conclude the Street is still out of control. And that’s dangerous for all of us.” –

Well, Wall Street is “still out of control” as far as the average American is concerned, but the elite – the elected – the greedy 1% – have a firm grip on the steering wheel, and their grimy fingers will be peeled off that wheel only when the Occupy Wall Street movement gains nationwide support.