Sage Advice for the President from Spitzer, Koch and The New York Times
Above the Fold
More than a year after the rescue began, crucial questions remain unanswered. Who knew what, and when? Who benefitted, and by exactly how much? Would A.I.G.’s counterparties have failed without taxpayer support?…We know where the answers are. They are in the trove of e-mail messages still backed up on A.I.G. servers…The government should insist that the company immediately make these materials public. By putting the evidence online, the government could establish a new form of “open source” investigation.
–Eliot Spitzer, Frank Partnoy and William Black
The President should do more. He should instruct his Attorney General, Eric Holder, that one of his highest priorities should be holding criminally liable those who engaged in illegal activities on Wall Street that nearly caused our banking system and, indeed, our entire economy to collapse.
–Edward I. Koch
What profits the banks have made over the last year were funded by oodles of cheap financing provided by the Federal Reserve. This is a windfall that they should not be allowed to keep…Bankers are likely to scream…No one should be intimidated…A windfall tax on bankers’ bonuses would not be enough, but it would be a start.
–from an editorial in The New York Times
This week the Obama administration will quite rightly celebrate a huge achievement, one which eluded six previous Democratic presidents–a giant step towards universal health care for every American citizen. Yes, the Senate bill is vastly inferior to the House version, and not just because of the absence of a public option, but it is also a very important beginning, and it represents a triumph over a fiercely-united, know-nothing Republican minority, which was paid tens of millions of dollars by the medical-industrial complex to prevent anything from passing.
When David Gregory pointed out yesterday that the president’s approval ratings are still sliding downward, White House counselor David Axelrod was perfectly correct to point out that no poll numbers will really matter until October of next year, on the eve of the next Congressional election. And if health care reform is accompanied by a genuinely rebounding economy, all of the predictions of massive Democratic losses in that election may prove to be unfounded.
But despite these “green shoots” of optimism, the Obama administration still faces a gigantic political problem because of the way it has treated Wall Street. Even if the financial reform bill Barney Frank is shepherding through the House survives a much more conservative Senate, this administration must finally put some real muscle behind its anti-Wall Street rhetoric.
Of course it was welcome to hear the president tell Steve Croft, “I did not run for office to be helping out a bunch of…fat cat bankers on Wall Street. Nothing has been more frustrating to me this year than having to salvage a financial system at great expense to taxpayers that was precipitated, that was caused in part by completely irresponsible actions on Wall Street.” But now he must do something decisive to dispel the idea that the administration’s first priority is to keep Goldman Sachs happy. And the best way to do that would be to embrace the powerful advice of two middle-of-the-road Democrats and one very-slightly-left-of-center newspaper.
Eliot Spitzer is the undisputed master of how to investigate Wall Street fraud to propel a political career, and the Obama administration could learn volumes from studying Spitzer’s tenure as New York’s attorney general. Spitzer’s proposal to force a government-owned A.I.G. to make public all of its emails is good policy and good politcs. So is Ed Koch’s admonition to focus the Justice Department’s attention on the bankers who knowingly participated in the massive fraud which came so close to destroying the economy. And the windfall tax advocated by The New York Times could be the single most popular policy change the president could champion.
Earlier this month the Senate Judiciary Committee summoned Robert Khuzami, the enforcement director of the Securities and Exchange Commission; Lanny Breuer, the assistant attorney general of the criminal division at the Justice Department; and Kevin Perkins, the F.B.I.’s assistant director in charge of its criminal investigative division, to find out why it is taking so long to hold anyone accountable for Wall Street’s criminal shenanigans.
“Why aren’t we seeing more board room prosecutions?” Ted Kaufman, Democratic senator of Delaware, demanded. Assistant attorney general Breuer replied that the cases were “complicated,” and would take a long time to investigate, “but they will be brought.”
Khuzami said the S.E.C. had already gone after top officials in the mortgage industry–like Angelo R. Mozilo, the head of Countrywide Financial–but he too said that other areas of the financial industry were a bit more complicated to investigate. And the FBI’s man said that a new interagency financial fraud enforcement task force created only last month would speed up the process, and could lead to more prosecutions down the road.
This is much too little, too late. What we need now is a president who will match not only the rhetoric but also the bravery of Franklin Delano Roosevelt, the greatest American president of the 20th Century.
These were Roosevelt’s words during his first re-election campaign in 1936. Obama must now find the courage to adopt Roosevelt’s tone, and his policies:
We had to struggle with the old enemies of peace–business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me–and I welcome their hatred. I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.
From FDR’s lips to Obama’s ears.
Special thanks to FCP contributors DEK and JWS.