Wall Street on the Offensive

Published on Global Research.ca, by Barry Grey, June 8, 2000.

Bolstered by the policies of the Obama administration, Wall Street is waging a political offensive to shed the minimal limits on executive pay that were tied to government bailout funds and to further weaken regulations on the banks’ speculative practices.

This week, the Federal Reserve Board and the Treasury Department are expected to give the OK for many of the biggest banks to pay back the billions of dollars in cash infusions they received last October under the $700 billion Troubled Asset Relief Program (TARP).

The banks’ rush to repay the taxpayer handouts has nothing to do with altruism or a desire to make restitution for the disaster they have inflicted on society by gambling on subprime mortgages and other semi-criminal activities. They are eager to repay the money in order to escape restrictions on executive pay as well as other requirements, such as limits on dividends and stock repurchases … 

… On a separate front, the World Socialist Web Site reported in a June 4 article on the campaign by the banks, organized in another lobbying group called the CDS Dealers Consortium, to block any serious regulation of derivatives, such as credit default swaps, which played a major role in the collapse of the financial system last year. The Obama administration has essentially adopted the proposals for regulation of derivatives drawn up by the banking group and secretly distributed to the Treasury Department and congressional leaders. (See: “Wall Street, Obama administration conspire to block financial regulation”)

Then there is the report in the June 4 New York Times that the Federal Deposit Insurance Corporation (FDIC) has scrapped a central plank in the Obama’s administration bank rescue plan because it could not get the banks to participate. The scheme, dubbed the Legacy Loan Program, was part of the administration’s Public-Private Investment Program, designed to enable the banks to offload their bad loans and asset-backed securities.

Under the “legacy loan” plan, the FDIC was to finance private investment firms, virtually guaranteeing them double-digit profits, if they agreed to buy failed mortgages and other toxic loans from the banks at inflated prices. However, the banks have refused to participate, because even at the rigged prices under the scheme they would still have to accept some losses on their bad debts.

Finally, the Wall Street Journal reported June 4 that the banks have launched a lobbying drive to block an accounting rule, slated to take effect next year, that would force them to bring some of their off-balance-sheet investments back onto their books. The rule would apply to hundreds of billions of dollars in financial vehicles through which the banks packaged and sold off loans to other investors.

The vehicles are Enron-style gimmicks by which the banks evade accounting rules requiring them to maintain sufficient capital to back their speculative bets. “Here we go again,” the former SEC chief accountant Lynn Turner told the Journal. “They will get out their checkbooks and go to [Capitol] Hill.”

Despite having plunged the US and world economy into the deepest recession since the 1930s, the banks are demonstrating their controlling influence over Congress and the federal government more openly than ever. As a result, their stock is soaring, their profits are mounting, and top executives are relishing the prospect of salaries and bonuses that will exceed the huge compensation packages that preceded the financial crash.

The diametrically opposed trajectory of Wall Street’s fortunes and those of the broad mass of the people, who are reeling from depression levels of unemployment, home foreclosures and wage cuts, exposes the class divide that dominates all aspects of American social and political life. (full text).

(More Global Research Articles by Barry Grey).

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