Arianna Huffington: Listen to Cassandra

From the Huffington Post:

And, yes, it's not fun feeling like Cassandra. But remember: Cassandra turned out to be right and the cheerleading Trojans very seriously wrong. And very seriously dead.

The other problem with "the pathological weakness of the financial memory" is that it causes us to forget, along with the Trojan War and the last economic crisis, all the things we could have done with the massive amounts of money we spent bailing out the banks -- things like foreclosure relief, job creation, infrastructure repair, health care reform, and improving education.

It's time to stop pretending that the Wall Street economy is the same as the real economy. The Wall Street economy may be showing signs of life -- thanks to the hundreds of billions we have poured into it -- but the real economy isn't.

"Don't tell me about the stock market," wrote Bob Herbert last week. "Don't tell me about the banks and their perpetual flimflammery. Tell me whether poor and middle-income families can find work. If they can't, the country's in trouble."

And that trouble is only growing worse, even if the media are full of Wall Streeters over the moon because the Dow just went up 100 points.

There aren't going to be reasons for optimism -- or cause for celebration -- unless "the new rules of the game" Geithner promised are moved from the realm of rhetoric to the arena of action. The window for reform is closing.

Wall Street Journal: Growing Friedman-Goldman Sachs Scandal Endangers Federal Reserve

Even though Journal editors appear to be pulling their punches somewhat, today's Wall Street Journal editorial calls for the resignation of Federal Reserve Vice Chairman Donald Kohn, who approved NY Fed chair Stephen Friedman's ethics waiver that permitted him to remain on the Goldman Sachs board and trade their stock. The Journal concludes:

The problem is the politics of all this. Half of the financial world already thinks Goldman runs the U.S. Treasury and Fed, however unfairly. The American public is furious about the bailouts of AIG and banks, engineered by the Fed and Treasury, that have helped the likes of Goldman Sachs. And guess who Mr. Friedman's search committee picked as Mr. Geithner's successor when he left to run Treasury? Another Goldman alum, William Dudley. Yet with all of this in the political air, Mr. Friedman tried to stay in the New York Fed post at least through the end of 2009, and Mr. Kohn granted the waiver. It's hard to imagine a more politically obtuse judgment.

Their behavior has handed a sword to those in Congress who have long wanted to exert more political control over the 12 regional Fed bank presidents. Unlike Federal Reserve governors, the regional presidents aren't appointed by the U.S. President and confirmed by the Senate. They are appointed by their regional bank boards. They nonetheless serve, on a rotating basis, on the Fed's Open Market Committee that sets monetary policy, and the New York Fed president is Vice Chairman of the FOMC. This structure was designed under the Federal Reserve Act of 1913 to help insulate the Fed from political pressure, and it has worked well.

This insulation is especially important now, given how Mr. Kohn and Chairman Ben Bernanke have made the Fed an arm of the Treasury over the last 18 months. The Washington Fed has immersed itself deeply into fiscal policy and recently decided, for the first time since the early 1950s, to directly monetize U.S. debt by buying Treasury securities. Barney Frank would love to get more control over the regional banks to make them more amenable to political pressure as well, and the Friedman flap has given the politicians an opening.

At least Mr. Friedman is gone, but for all the harm he has done to the Fed's political independence, Mr. Kohn should resign too.

Unfortunately missing from this editorial: a demand for an SEC investigation into insider trading at Goldman Sachs and the Federal Reserve of New York...IMHO, necessary to begin to restore some confidence in the system.

More on this story from Robert Scheer at the Huffington Post, here...and Michelle Malkin, here,

A Good Sign from the White House...

The director of White House Military Affairs has resigned in the aftermath of the NYC Air Force One flyover fiasco. I can't remember Bushies or Clintonites doing the decent thing like this (remember Janet Reno "taking responsibility" for Waco but keeping her job?). Let's hope we see more such resignations in future...starting with Timothy Geithner.

FOIABlog: Update on Jarvik v. CIA

From FOIABlog:

Last fall, journalist Laurence Jarvik sued the CIA for a second time (his first suit revolved around a fee waiver). The CIA has now denied the request in full and Jarvik has sought an in camera review by the court. His most recent filings can be found here.

Happy V-E Day!

Wikipedia has the story, http://en.wikipedia.org/wiki/Victory_in_Europe_Day.

Ideoblog: Investigate Friedman's Insider Trading

From Ideoblog:

Friedman says he wasn’t involved in the Fed's decision to give AIG an $85 billion bailout, part of which was used to repay debts to Goldman. Well, maybe. But the rule against insider trading is supposed to be a prophylactic and its application doesn't depend on whether the insider participated in a particular corporate decision.

Even if there’s no problem with Friedman’s initial GS share position, the additional purchases are a different matter, particularly since Friedman never told the Fed about those purchases and never asked for a waiver.

Friedman says he bought the shares because they were “cheap.” What does that mean? In an efficient market, shares are “cheap” only if you know something. What did Friedman know? He bought shares in a bank while he was working for a branch of the agency that was running banking (not to mention the rest of the economy). Could he have known something?

As it turned out, Friedman bought the shares at prices ranging from $66 to $80/share which were trading at $127.08 on Friday, for an accrued gain of $2.7 million.

While Congress and the SEC are investigating those hedge funds, do you think maybe they could find some time for Mr. Friedman?

Text & Legislative History of Hawaii's "Islam Day" Law

I couldn't find this in the news articles on the web, so downloaded the text of HCR 100 from the Hawaiian Capitol webpage to read it without journalistic filters:

HOUSE OF REPRESENTATIVES
TWENTY-FIFTH LEGISLATURE, 2009 H.D.1
H.C.R. NO. 100
STATE OF HAWAII

HOUSE CONCURRENT
RESOLUTION

PROCLAIMING SEPTEMBER 24, 2009, AS ISLAM DAY.

1 WHEREAS, Hawaii is known for the wealth of its cultural and
2 religious diversity and the harmony with which people of many
3 cultures and religions live together; and

4

5 WHEREAS, Muslims constitute an ethnically diverse part of
6 Hawaii's cultural fabric, with around 3,000 practicing members;
7 and
8
9 WHEREAS, the Prophet Mohammad left his house to migrate to

10 Madinah and reached Quba in the vicinity of Madinah on the 12th

11 day of Rabi ul-Awwal according to the lunar calendar, or

12 September 24th according to the Gregorian calendar, thereby

13 marking the birth of Islam; and

14

15 WHEREAS, Islam, a religion with a long and noble history,

16 is the second largest religion in the world, with over one

17 billion followers spread across every continent, and including

18 members of many nations and cultures; and

19

20 WHEREAS, the Islamic world preserved and made original

21 contributions to works of science and philosophy during the

22 Middle Ages when these disciplines were threatened by bigotry

23 and prejudice in other parts of the world; and

24

25 WHEREAS, Islamic artists, scientists, and philosophers have

26 a rich history of contribution to world literature and our

27 collective scientific understanding; and

28

29 WHEREAS, the Islamic faith shares common teachings found in

30 the texts of both Christianity and Judaism, whose followers are

31 respected and considered "People of the Book"; and

HCR100 HD1 HMS 2009-3797

Page 2 100

H.D.1

H.C.R. NO.
1 WHEREAS, Islamic doctrine encourages generosity in its
2 adherents, maintaining that those who possess much have a
3 responsibility to care for those in need; and


4

5 WHEREAS, Islam, along with its monotheistic counterparts,
6 holds that peace is a divine quality and necessary for
7 collective human happiness; and
8
9 WHEREAS, Islam strives for a world-wide community which, in

10 the words of one Islamic poet philosopher, "does not recognize
11 the superficial differences of race, or history, or
12 nationality"; and
13
14 WHEREAS, the United States and countries of the Islamic
15 world hold in common many beliefs and values including concepts
16 of world community and'mutual responsibility; and
17
18 WHEREAS, international understanding and peace, as well as
19 understanding and peace in our local communities, are
20 strengthened by free and open communications among everyone
21 representing various cultural and religious traditions; and
22
23 WHEREAS, the 96th United States Congress officially
M recognized the noble qualities of Islam in a concurrent
25 resolution on October 15, 1979 (SCR 43), honoring the religion's
26 14th centennial; now, therefore,
27
28 BEIT RESOLVED by the House of Representatives of the
29 Twenty-fifth Legislature of the State of Hawaii, Regular Session
30 of 2009, the Senate concurring, that September 24, 2009, shall
31 be known as "Islam Day" to recognize the rich religious,
32 scientific, cultural, and artistic contributions Islam and the
33 Islamic world have made since their founding; and
34
35 BEIT FURTHER RESOLVED that certified copies of this
36 Concurrent Resolution be transmitted to Hawaii's congressional
37 delegation, the Governor, and the Board of the Muslim Association of Hawaii.

HCR100 HD1 HMS 2009-3797

Legislative History:

Hawaii State Legislature
2009 Regular Session
HCR100 HD1
Measure Title: PROCLAIMING SEPTEMBER 24, 2009, AS ISLAM DAY.
Report Title: Islam Day
Description:
Companion: HR79
Package: None
Current Referral: EDT
Introducer(s): BERG, HANOHANO, Belatti
Date Status Text
3/4/2009 H To be offered.
3/5/2009 H Offered
3/6/2009 H Referred to TCI, referral sheet 25
4/8/2009 H Resolution scheduled to be heard by TCI on Thursday, 04-09-09 9:30am in conference room 312.
4/9/2009 H The committee(s) recommends that the measure be deferred.
4/14/2009 H Resolution for decision making on Thursday, 04-16-09 10:00AM in conference room 312.
4/14/2009 H This measure has been deleted from the meeting scheduled on Thursday 04-16-09 10:00AM in conference room 312.
4/16/2009 H Scheduled for decision making on Thursday, 04-16-09 2:00 PM in conference room 423.
4/16/2009 H The committees on TCI recommend that the measure be PASSED, WITH AMENDMENTS. The votes were as follows: 7 Ayes: Representative(s) Manahan, Tokioka, Berg, Choy, Evans, Tsuji, Wooley; Ayes with reservations: none; Noes: none; and 3 Excused: Representative(s) McKelvey, Wakai, Marumoto.
4/16/2009 H Reported from TCI (Stand. Com. Rep. No. 1776) as amended in HD 1, recommending adoption.
4/17/2009 H Adopted as amended in HD 1 with none voting no and Keith-Agaran, Takai excused.
4/17/2009 H Transmitted to Senate.
4/20/2009 S Received from House (Hse. Com. No. 615).
4/21/2009 S Referred to EDT.
4/23/2009 S The committee(s) on EDT has scheduled a public hearing on 04-28-09 2:00PM in conference room 423.
4/28/2009 S The committee(s) on EDT recommend(s) that the measure be PASSED, UNAMENDED. The votes in EDT were as follows: 3 Aye(s): Senator(s) Fukunaga, Baker, Ige; Aye(s) with reservations: none ; 1 No(es): Senator(s) Slom; and 1 Excused: Senator(s) Hee.
5/5/2009 S Reported from EDT (Stand. Com. Rep. No. 1557) with recommendation of adoption.
5/5/2009 S One Day Notice 05-06-09.
5/6/2009 S Report and Resolution Adopted. Ayes, 22; Aye(s) with reservations: Bunda. Noes, 3 (Green, Hemmings, Slom). Excused. 0 (none). Transmitted to House.
5/6/2009 H Returned from Senate (Sen. Com. No. 783).
5/6/2009 H Resolution adopted in final form.

Sponsors BERG & HANOHANO bios:

Lyla B. Berg, Ph.D.

Dr. Berg is the owner of Lyla Berg & Associates, a company that provides consulting, training, and facilitation services on leadership development, effective communication skills, interpersonal relationships, and customer service. Her clients include financial and educational institutions, retail businesses, non-profit organizations, state agencies, and companies engaged in the visitor industry. Lyla integrates Hawaiian values and concepts in her custom-designed sessions with the belief that "thinking with a heart of ALOHA is the avenue to a successful organization." She believes that an organization's performance excellence is linked directly to its human assets and that the long-term prosperity of that organization is directly impacted by how the people of that organization interact with one another in their response to change. (source:http://www.lylaberg.com/index.php?page=biography)


Faye P. Hanohano
4th Representative District
Hawaii State Capitol, Room 303
415 South Beretania Street
Honolulu, HI 96813
phone 808-586-6530; fax 808-586-6531
From the Big Island, toll free 974-4000 + 66530
E-mail rephanohano@Capitol.hawaii.gov
Personal
Born and raised in Pahoa, Hawaii on December 21, 1953
Married to Leslie Kalani Jaime Julian
Education
University of Phoenix - MBA
University of Hawaii at Hilo - BA in Sociology
Hawaii Community College - AD in Political Science
Kamehameha Schools - High School Diploma
Political Office
Hawaii State House of Representatives, 2007 - present
District 4 ( Puna, Pahoa, Hawaiian Acres, Kalapana)
- Assistant Majority Floor Leader
Experience
Retired after 25 years from Kulani Correctional Facility
-Adult Corrections Officer - Acting Captain/Administrative Lieutenant
Former State Secretary-Treasurer of United Public Workers
- Also, negotiation chairperson for Unit 10 contract
DOE Substitute Teacher
Hawaiian Studies Lecturer at HCC
Program Coordinator at Kalani Honua and Honua Hawaii
Elected to the House: 2006 - Present (source: http://www.capitol.hawaii.gov/site1/House/members/Rep4.asp)

NY Fed Chairman Stephen Friedman's "Insider-Type" Trading

From reading Simon Johnson's BaselineScenario blog today it looks like Goldman Sachs' man at the NY Federal Reserve may be guilty of an offense that sent Martha Stewart (among others) to jail. Will he get away with it?:

The idea of a stress test, of course, is to see what goes wrong under pressure. We do this for banks with hypothetical scenarios, but when you go to see the cardiologist you need to step on a treadmill and actually get your heart rate up. The stress test for bankers is very relevant for thinking about our future financial system in three ways:

1.We are now seeing how they behaved during a boom, both in terms of compensation system and insider-type transactions.
2.We can see what happened during a crash and attempted recovery; part of which is about massive taxpayer provided subsidies (do the bankers even have the manners to say thank you?) and much of which is about tilting the playing field towards pre-provision earnings (for which Jan Hatzius of Goldman has the most eloquent exposition).
3.Most interesting, of course, is how bankers think. They regard themselves as entitled to outsized compensation that encourages excessive risk taking. They think that insider trading rules apply to other people. And they are convinced that only they – and their friends – are capable of running government in boom or bust (or in ways that boom leads to bust, at which time you buy low and then recover through large implicit support from the government.)

Really what we have seen over the past two years (a great Freudian slip from the Comptroller of the Currency on NPR last night) is a stress test of our bankers. If you think they basically did fine, then we can go about our business with essentially the same financial system that has developed in the last couple of decades.

If you have concerns about how they behaved and the potential consequences of such behavior down the road, then we need to talk further. The banks passed their stress tests, in part because these were designed by bankers and people friendly to bankers (we could also think about how our regulators have done over the past two years). But are the bankers passing their stress tests?

Also this tidbit, from today's Wall Street Journal profile:

Mr. Friedman preferred to keep a lower profile than Mr. Rubin, leading some analysts to refer to him as Goldman's "Mr. Inside."

The Enron Economy

Our hosts in Chicago screened Alex Gibney's Enron: The Smartest Guys in the Room while we were visiting. I had heard about this 2005 film from my business communication students, who apparently had been required to watch it for ethics training. What struck me about the documentary--which did a good job of capturing the psychopathic leadership and corporate culture of Enron--is that far from being a "wake-up call," Enron seems to have served instead as a model for what followed in American capitalism. Indeed, if the scandal happened today, after "stress tests," one might hear Secretary Geithner arguing for a government subsidy for Ken Lay and his cronies because the company were "too big to fail" (it was the largest energy company in the US at one point). Watching Enron's executives, listening to their voices on tape, I could only think of AIG, Halliburton-KBR, Goldman Sachs, Citibank, Moody's, Madoff, General Motors and the long list of corporate scandals involving bribery, fraud, bonuses, skimming, and corruption of various kinds that festoon our newspapers . Indeed, by comparison with today's crisis, Enron looks like nothing much. And at least the Enron story had a happier ending than we see today: Arthur Andersen went out of business, Enron collapsed and disappeared, Fastow and Skilling were convicted, and Ken Lay may have killed himself...

Why America is Angry Hamid Karzai Picked Mohammad Qasim Fahim

Perhaps because it represents an Afghan tilt towards Russia, and away from the United States (which has been "distancing" itself from Karzai)?

Some hints from Wikipedia's profile of the Afghan official:

Two views exist in regards to Fahim's past, first view holds that Fahim is the son of Abdul Matin from the Panjshir Valley. He is reported to have finished his studies in Islamic Sharia at an Arabic institute in Kabul in 1977. He went to Peshawar, Pakistan in 1978 where upon returning to Afghanistan joined Ahmad Shah Massoud in the Panjshir Valley. With the collapse of the pro-Soviet regime in Kabul in 1992, Fahim was appointed head of KHAD under interim president Sibghatullah Mojaddedi and continued to serve under president Burhanuddin Rabbani. (Bhatia, 2007[2];Brown & Oliver, 2001[3]; also [1][2][3][4][5][6]

The second views holds that, Fahim began his career as a Soviet-trained intelligence officer in the KHAD secret police in the 1970s and 80s, [7] [8] becoming deputy to future president Mohammad Najibullah. Adding that Fahim abandoned Najibullah when his government fell in 1992, and joined the forces of Ahmad Shah Massoud, [9]. In addition, he maintained close ties to Moscow (and also reportedly the Communist Party of Tajikistan)[10]

Palette & Chisel

Walking down Dearborn on our way from the Chicago Historical Society to lunch at the Arts Club of Chicago--after a bitter disappointment in front of a padlocked entrance to the now-shuttered Three Arts Club recommended for its courtyard in our 2006 Rough Guide to Chicago--someone I know and I stumbled across The Palette & Chisel Club, located in a beautiful old townhouse, perfectly preserved, as if in amber, with an art gallery instead of living and dining rooms. Definitely worth a visit. Official description on their website:

The founding members were evening students at the Art Institute of Chicago in 1895. They wanted to paint from the model under daylight, which was rather difficult since most of them worked six days a week and the Art Institute did not offer Sunday programs. Charles J. Mulligan, a member of this group, was an assistant to sculptor Lorado Taft. He was able to persuade Taft to rent the fledgling organization part of his seventh floor studio in the old Athenaeum Building on Van Buren Street in Chicago. Taft was in the habit of maintaining large, ostentatious studios - more to impress prospective clients than from need for such space. Within a short time, the Palette & Chisel membership multiplied.

In 1921, to accommodate their burgeoning numbers, members pooled their money and purchased a three story Italianate mansion at 1012 North Dearborn. It was one of the first buildings to be built in the neighborhood after the great fire of 1871. Founding member Fred Larson and several others guaranteed the mortgage using their own homes as collateral.

Early supporters of the organization included: Charlie Russel, Alphonse Mucha (a leader of the art nouveau movement), William Merrit Chase and George Bellows. Though largely a group of amateurs, the Palette & Chisel quickly began to produce artists with their own singular vision. Walter Ufer, Victor Higgins, and Martin Hennings began their art careers at the Palette & Chisel and later became famous in the West as painters in the Taos School. Later, the Palette & Chisel served as the artistic home of J. Jeffrey Grant, James Topping, Rudolph Ingerle, Eugene Savage and muralist Otto Hake. The first woman member, Ruth Van Sickle Ford, was accepted in 1961.

A contemporary survey of members would include: internationally recognized artist Richard Schmid, who served as president of the Palette & Chisel from 1986-1989; marine painter Charles Vickery; super-realist George Fischer; sculptors Margot McMahon and Patrick McKearnon.

A Chicago Sculpture Album

Saint-Gaudens' Abraham Lincoln:

From the entrance arch to the Chicago Stockyards in the Historical Society Cafe:




And a sign of the times:

Carl Holzman at the Triangle Gallery of Old Town

At the opening of his new show in Chicago, last Sunday, in front of his Sunflowers in a Talavera Pot and Fresh Pasta with Parmesan:

Daniel Pipes: Why I Supported Steven J. Rosen

From DanielPipes.org:

On the other hand, he (along with his AIPAC colleague Keith Weissman) stood accused by the Bush administration of breaching the ominously-named Espionage Act of 1917, and faced criminal charges that could have landed him in jail for years. Although he was not accused of spying, his (and our) opponents reveled in calling him an "accused spy"; and, of course, we worried about the ramifications for us if he were found guilty.

During extensive consultations with the MEF's board of governors, I found a consensus on wishing to bring on board so formidable an analyst in his hour of need mixed with apprehension about the criminal case.

Two developments resolved the dilemma for us in September 2008. Our study of the government's case convinced us of its injustice, shoddiness, arbitrariness, hollowness, and futility. Certain of Mr. Rosen's innocence, the lawsuit against him would not stop us from hiring him.

Second, world events kicked in. Seeing the Iranian drive to get the bomb as the single greatest danger both to the Middle East and to the United States (in the later case, via electro-magnetic pulse), we realized that the outgoing Bush administration would not take steps to stop the Iranian pursuit of nuclear weapons; and that Barack Obama, with his soft approach to Iran, would likely win the election.

Accordingly, the Forum in October 2008 began funding Mr. Rosen to work on ways to stop the Iranian march to nuclear weapons. He is ideal for the job, having begun efforts to stymie Iranian nuclear ambitions fifteen years ago – long before these became a general concern. Working behind the scenes, for example, he initiated efforts to develop leverage over Tehran through graduated economic sanctions by securing two presidential orders in 1995, followed by the Iran-Libya Sanctions Act of 1996 which laid the foundation for all subsequent efforts to bring economic pressure to bear against the Iranian government. He has been active in this arena ever since.

Following the inauguration, the Forum brought Mr. Rosen formally on board as a visiting fellow. In his brief time in this capacity, he initiated a Washington Project with his influential weblog, "Obama Mideast Monitor," and a new publication series called The Policy Forum. Notably, Mr. Rosen's blog started the chain of events that caused Charles Freeman to withdraw his name for consideration as chairman of the National Intelligence Council.

Then, on May 1, came the welcome news that the U.S. Department of Justice dropped its case against Messrs. Rosen and Weissman. In the words of the Washington Post, this decision amounted to "a stunning vindication" for them. Beyond that, it confirms the limits on arbitrary and prejudicial government actions.

Arianna Huffington: Geithner's "Stress Tests" Mean More Insider Trading Scandals

From today's Huffington Post:

The reason is, the banks are using this time to negotiate how much information about their portfolios the hoi polloi will be privy to, and are trying to get the government to reconsider its analyses (which are already iffy, since they are based on the banks' own estimates and on assumptions about the economy - including unemployment rates, and cumulative real estate and credit card losses -- that are hardly stress-inducing). This is the equivalent of a teacher giving a student a look at his grades and allowing the student to try to cut a better deal before report cards are sent home to mom and dad.

It shows how out of whack the power dynamic is when it comes to the administration and Wall Street. In the natural pecking order, regulators are above the regulated. They don't ask for permission. And they certainly are not worried about ruffling any feathers.

But for some reason -- the Wall Street-centric bias of Tim Geithner and Larry Summers, perhaps, or, as Joseph Stiglitz puts it, the government's confusion of "the notion of too big to fail with the notion of too big to be financially reorganized" -- the banks continue to hold the upper hand (see the cramdown debacle).

The delay in releasing the test results also opens the door to potential funny business, with some troubling insider-trading scenarios and a huge payoff, as David Min at the Center for American Progress points out.

We've already seen Goldman Sachs raise eyebrows with its sale of $2 billion in non-government-guaranteed bonds last week -- a move that sidestepped its agreement with the government not to disclose the results of its stress test, instead sending a signal to investors that there was no bad news in the stress test for Goldman. Of course, Goldman's receipt of $10 billion in TARP funds and $29 billion in bonds backed by the FDIC might have something to do with how well it is doing.

Goldman is typical of the banks' have-it-both-ways approach. By announcing its intention to repay the TARP money it received (thus freeing itself from government compensation restrictions) while continuing to issue government-backed bonds, the banking giant is acting like a man who wants all the benefits of being married while still being able to slip off his ring and have an affair anytime he feels the urge.

And then there is the trouble with the assumptions at the heart of the stress tests. As Nouriel Roubini put it: "These are not stress tests but rather fudge tests... The results of the stress tests -- even before they are published -- are not worth the paper they are written on."

Arianna Huffington: Stop the Banking Lobby!

From today's Huffington Post:

Just this week, the bankers and their lobbyists -- who you might have reasonably thought would be the political equivalent of lepers in the halls of power these days -- have kneecapped substantive bankruptcy reform in the Senate, helped pull the plug on a government-brokered deal with Chrysler, and tried feverishly to throw up a roadblock in the way of credit card reform in the House.

You heard me right. America's bankers -- those wonderful folks who brought us the economic meltdown -- are still being treated as Beltway royalty by those in Congress.

According to Sen. Dick Durbin, the banks "are still the most powerful lobby on Capitol Hill. And they frankly own the place."

When it comes to reforming our financial system, we are truly through the looking glass. I mean, since when did it become "to the vanquished go the spoils"? How do the same banks that have repeatedly come to Washington over the last eight months with their hats in their hands, asking for billions to rescue them from their catastrophic mistakes, somehow still "own the place"?

But the banks continue to be rewarded for their many failures.

Let's start with bankruptcy reform. The banks scored a lopsided victory on Thursday when the Senate rejected an amendment that would have allowed homeowners facing foreclosure to renegotiate their mortgages under the guidance of a bankruptcy judge. The measure would have helped 1.7 million homeowners keep their houses, and preserved an additional $300 billion in home equity.

Given the tidal wave of foreclosures that have so destabilized our economy, this seems like a no-brainer piece of legislation. There were over 800,000 foreclosures in the first three months of 2009 -- more than 341,000 in March alone.

But the banking lobbyists went after it with guns a-blazing - even after Durbin and the measure's other backers seriously diluted the bill. These concessions did nothing to sway the Mortgage Bankers Association (whose members' subprime schemes have helped bring us to the point of collapse), the Financial Services Roundtable, and the American Bankers Association, among other hired guns (check out this video of the Mortgage Bankers Association's annual meeting, held the night before the cramdown vote, and note the overpowering scent of self-congratulations).

And their aim was true -- and deadly. Heading into the vote, those pushing for reform hoped to gather the 60 supporters needed to bring the cramdown amendment to a final vote. Instead, Durbin struggled to find 45 Senators willing to side with consumers. The final tally: Bankers 51, Consumers 45.

Twelve Democrats sided with the banks -- Max Baucus, Michael Bennet, Robert Byrd, Tom Carper, Byron Dorgan, Tim Johnson, Mary Landrieu, Blanche Lincoln, Ben Nelson, Mark Pryor, Arlen Specter, and Jon Tester -- as did every Republican who voted.

As HuffPost's Ryan Grim reported, some of the key Democrats who voted against the measure have been on the receiving end of major banking industry campaign contributions:

The banking and real estate industry have funneled roughly $2 million into Landrieu's campaign coffers over her 12-year career, according to data from the Center for Responsive Politics. The financial sector is Nelson's biggest backer; he's taken $1.4 million from banks and real estate interests... Tester has fielded roughly half a million in his two years in office. Lincoln has taken $1.3 million from banking and real estate interests.
In the run-up to the vote, Durbin called it a "test": "Who is going to win this debate?" he asked. "The mortgage bankers and the American Bankers Association or the consumers across America?"

We just got our answer.

The shocking swagger of those in the financial sector was also evident in the negotiations that resulted in Thursday's announcement that Chrysler would file for Chapter 11 bankruptcy.

For much of the back-and-forth between Chrysler, its lenders, and the Treasury Department, those lenders (comprised of banks, including Goldman Sachs, Citigroup and JP Morgan -- all recipients of bailout money -- and private equity firms) were playing hardball. They repeatedly rejected attempts by Treasury to get them to lower the amount of Chrysler's debt.

The car company owes its creditors $6.9 billion. Treasury proposed that the banks and private equity firms accept 15 percent of what they are owed. The creditors scoffed at that and suggested they'd settle for getting 65 percent of what they are owed (around $4.5 billion), plus a 40 percent stake in Chrysler and a seat on the company's board.

Picture this for a moment. On one side you have the Treasury, which has helped funnel tens of billions of dollars to these banks, making what it considers an equitable proposal. On the other side, you have the bankers, the recipients of that government largess, showing their gratitude by scoffing at Treasury's proposal and demanding a much, much better deal. Clearly, Goldman has gotten way too used to sweetheart deals like the 100-cents-on-the-dollar payout it received as part of the AIG bailout.

Treasury eventually upped the proposal to $1.5 billion (22 percent of what the creditors were owed) and a 5 percent equity stake in the carmaker. Again the bankers scoffed, before finally, at the 11th hour, agreeing to accept $2 billion (around 29 percent) and a small equity stake.

A Treasury official took a victory lap, calling the deal "an exceptional accomplishment in line with the President's firm commitment that all stakeholders sacrifice to make this deal succeed."

Then the 12th hour arrived and the hedge fund managers, who hold around 30 percent of the Chrysler debt, decided they didn't want to sacrifice that much after all and refused to sign off on the deal -- even after the offer was sweetened with an additional $250 million. At least the hedge funds had not improved their balance sheets with billions in taxpayer dollars and government loan guarantees before scuttling the deal.

As for credit card reform, the House's resounding 357-70 passage of Carolyn Maloney's Credit Card Holders' Bill of Rights would seem like a rare defeat for the banking lobbyists who furiously opposed it. But a number of elements of the legislation demonstrate that even when the bankers lose, they still win. For instance, despite the desperate urgency of the situation, all but one of the consumer-friendly provisions of the bill won't take effect for a year. And the bill doesn't contain any cap on credit card interest rates -- an amendment to cap rates at 18 percent never got any traction. And, of course, the bankers will get another crack at derailing credit card reform when the Senate takes up its version of the bill, sponsored by Chris Dodd, later this month.

So no matter how badly the banking industry fails and how much its failures cost us, it continues to be Washington's 800 lb gorilla -- and the greatest risk to Barack Obama's presidency.

At his press conference, Obama bemoaned the fact that he "can't just press a button and suddenly have the bankers do exactly what I want."

It's too bad the same can't be said for the bankers, who keep pressing Congress's buttons, and getting pretty much what they want.

May Day's Chicago Roots

This entry from the Encyclopedia of Chicago tells the story of the Haymarket riots that led to an international socialist holiday:

On May 1, 1886, Chicago unionists, reformers, socialists, anarchists, and ordinary workers combined to make the city the center of the national movement for an eight-hour day. Between April 25 and May 4, workers attended scores of meetings and paraded through the streets at least 19 times. On Saturday, May 1, 35,000 workers walked off their jobs. Tens of thousands more, both skilled and unskilled, joined them on May 3 and 4. Crowds traveled from workplace to workplace urging fellow workers to strike. Many now adopted the radical demand of eight hours' work for ten hours' pay. Police clashed with strikers at least a dozen times, three with shootings.

At the McCormick reaper plant, a long-simmering strike erupted in violence on May 3, and police fired at strikers, killing at least two. Anarchists called a protest meeting at the West Randolph Street Haymarket, advertising it in inflammatory leaflets, one of which called for “Revenge!”

The crowd gathered on the evening of May 4 on Des Plaines Street, just north of Randolph, was peaceful, and Mayor Carter H. Harrison, who attended, instructed police not to disturb the meeting. But when one speaker urged the dwindling crowd to “throttle” the law, 176 officers under Inspector John Bonfield marched to the meeting and ordered it to disperse.

Then someone hurled a bomb at the police, killing one officer instantly. Police drew guns, firing wildly. Sixty officers were injured, and eight died; an undetermined number of the crowd were killed or wounded...

...Inspired by the American movement for a shorter workday, socialists and unionists around the world began celebrating May 1, or “May Day,” as an international workers' holiday. In the twentieth century, the Soviet Union and other Communist countries officially adopted it. The Haymarket tragedy is remembered throughout the world in speeches, murals, and monuments. American observance was strongest in the decade before World War I. During the Cold War, many Americans saw May Day as a Communist holiday, and President Eisenhower proclaimed May 1 as “Loyalty Day” in 1955. Interest in Haymarket revived somewhat in the 1980s.

A monument commemorating the “Haymarket martyrs” was erected in Waldheim Cemetery in 1893. In 1889 a statue honoring the dead police was erected in the Haymarket. Toppled by student radicals in 1969 and 1970, it was moved to the Chicago Police Academy.

Carl Holzman at Old Town Triangle Gallery, Chicago

Our Chicago painter friend Carl Holzman shows his latest still life paintings at the Old Town Triangle Gallery, opening Sunday, May 3rd in Chicago. You may also look at his work on his website, here: carlholzman.com.

Arlen Specter Jumps Sinking Republican Ship

That's the bottom-line on Specter's move from (R) to (D). The discredited and morally bankrupt (though personally enriched) Republican Party has nothing to offer the Pennsylvania Solon but tsuris anymore. Specter actually voted for much of the Republican agenda over the years, despite reports to the contrary. His defection hurts, in the same way Lieberman's defection hurt the Democrats a few years back. IMHO, it's a matter of "tipping points," for the party and the country. We'll see if the left-wing of the Democratic party is any nicer to Specter (remember Anita Hill?) than it has been to Lieberman (who suffered for his support for the Iraq war). If Specter is challenged in the 2010 Pennsylvania primary, he may be forced to go independent to keep his position, following Lieberman and Vermont's Bernie Sanders (who once called himself a Socialist)...though after listening to Senator Bob Casey's press conference, I think Pennsylvania Democrats might be smarter than the Connecticut hedge fund managers who gave the world Ned Lamont....

President Barack Obama: Happy Birthday, Israel!

This blog joins the President of the United States in congratulating the Jewish State on her 61st birthday. Here's the President's Statement on the 61st Anniversary of Israel’s Independence:

On behalf of the people of the United States, President Obama congratulates the people and government of Israel on the 61st anniversary of Israel’s independence. The United States was the first country to recognize Israel in 1948, minutes after its declaration of independence, and the deep bonds of friendship between the U.S. and Israel remain as strong and unshakeable as ever. The President looks forward to working with Israel to advance our common interests, including the realization of a comprehensive peace in the Middle East, ensuring Israel’s security, and strengthening the bilateral relationship, over the months and years to come.