Elizabeth Warren

Elizabeth Warren Is Right: The Cromnibus Aids Crony Capitalism

Give her credit where credit is due.

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Elizabeth Warren is right.

That doesn't happen very often, so it's worth taking note of before discussion of the Cromnibus—the $1 trillion spending bill Congress passed this past weekend — fades in the rearview mirror.

During last week's showdown over the bill, Warren objected to a provision eliminating a certain rule in the 2010 Dodd-Frank law. (Hang on, don't fall asleep just yet.) That rule prevented traditional banks from betting on financial derivatives with federally insured deposits. The banks could still trade in such exotic securities, but they had to do so with their own capital stock, through non-bank affiliates unsecured by FDIC backing. (In short, they had to "push out" such business.) The idea was to prevent future bailouts like the ones that took place six years ago.

The Cromnibus removes that barrier to bailouts. As Warren has noted several times, the relevant provision repeals a part of the law titled, "Prohibition Against Federal Government Bailouts of Swaps Entities." Most people understand why it's not a good idea to bail out financial institutions for making risky bets: It only encourages them to assume more risk than they otherwise would. If they bet right, then they get to keep the profits; if they bet wrong, then the taxpayer gets stuck with the bill. Warren is right to oppose such moral hazard.

She's right on a couple of other points, too: The language in the Cromnibus was written by Citigroup. And it had no business being included in a federal appropriations measure to fund federal agencies. Its inclusion in the spending bill avoided (most) public debate, and all but guaranteed the provision would pass, since even those who strenuously objected to it were not willing to shut down the government over it.

Now, the other side of the issue is not utterly devoid of merit. As a whole, Dodd-Frank imposes huge costs on the economy. The banks would not have to move all of their derivatives business to non-FDIC-backed affiliates, only some of it. The banks could still get emergency funds from the Federal Reserve, which reopens the door to moral hazard. And so on.

Nevertheless, the rule rollback is precisely the sort of crony capitalism that tea party types have railed against for years. It's big business as marionette—with Congress playing the part of the puppet, and the little guy stuck holding the tab when the big boys act irresponsibly.

The conservative protests against bringing back bailouts, however, were muted.

A few market-oriented publications did concede, almost as an aside, that moral hazard is generally a bad thing. "We're all for shrinking the taxpayer safety net," The Wall Street Journal admitted in an editorial otherwise devoted to excoriating Warren for not wanting to overhaul the entire Dodd-Frank apparatus in one swell foop. National Review conceded that the rule Warren defended "sounds intuitively appealing." But it then went on to note that the recent lowering of down payment requirements for federally backed mortgages creates much more risk than repealing the push-out rule would. OK—but does that make repealing the push-out rule a good idea?

It was up to movement conservatives to speak the unspeakable: Warren was right, and the establishment GOP was wrong. "So help me God, I have no way to refute the basic point that the Democrats are making," said a writer on RedState. "For many conservatives," wrote Noah Rothman on HotAir, "Warren … far better represented their position on the bill than did House Republican leadership."

Not just the leadership, either. Virginia's 7th District Rep. Dave Brat—he who knocked off Eric Cantor in a boggling upset in June—voted against the spending measure. But Brat (the only economist in Congress, as you might have heard) did so because it would fund President Obama's directive granting amnesty to illegal immigrants, not because of the sop to Citigroup and the other big banks. Indeed, his official statement explaining his vote against the bill made no mention of the banking measure or crony capitalism at all. It was left to the 3rd District's Bobby Scott to explain that he voted against the measure in part because of "a provision that will allow banks to speculate with taxpayer-insured funds."

In remarks before the spending bill passed, Warren quoted the RedState piece and said, "These conservative activists are right. If you believe in smaller government, how can you support a provision that would expand a government insurance program and put taxpayers on the hook for the riskiest private activities?"

Precisely.

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  1. A Barton Hinkleheimer Schmidt,
    His name is my name too.
    Whenever we go out,
    The people always shout,
    “there goes A Barton Hinkleheimer Schmidt!”
    Na na na na na na na na

    1. HEY! That’s my line(s)!

  2. The change to Dodd Frank is the worst. It allows the banks to invest federally insured deposits in derivatives. Since you can split your deposits into an infinite number of $100,000 bundles, we essentially have infinite deposit insurance in this country. Back in the 1980s, the S&L bailout cost so much money because the banks had deposited money in the S&Ls; in nice little $100,000 bundles and thus had their shitty investments secured by the feds. The same thing is going to happen here. That change in the law is putting the taxpayers on the hook to bail the fucking banks out to infinity.

  3. Unfortunately, Warren’s solution is a mixture of crony capitalism on steroids and suppression of free speech.

    1. Her solution would be to nationalize the banks and let the government decide who gets a loan.

      1. Kill ’em all – let God sort ’em out.

    2. Crony socialism.

  4. Elizabeth Warren is right? What’s her date of birth? I need to play the lottery today.

  5. Even a broken clock is right twice a day.

    White Squaw is not right about anything for the right reason. I’m sure she’d like the Cronybus if there were a lot more big government cronyism in it. It’s just not Cronybus enough for her.

    1. “Right” is a relative term. Lenin was “right” in saying that the Tsarist government was corrupt and oppressive. While true as far as it goes, I don’t see how you can say he was “right” about anything when you consider his desired solutions. Same with Warren here.

      1. When you consider what Lenin considers ‘righteous’, it invalidates every argument he makes about ‘right’ and ‘wrong’. Charles Manson may consider ‘murder’ to be wrong and it may seem correct when he utters that platitude, but when you look at how Manson defines ‘murder’ you see that he is actually not right at all in his condemnation.

    2. The weird thing is she’s against this but not against the Export-Import Bank, which is exactly the same thing, except with foreign business loans instead of derivatives. I guess she’s one of those who think “derivatives caused the GFC” rather than idiot Fed meddling.

  6. Boehner works with Obumbles and Reid and shuns his base passing the Crapulous, taking a giant shit on Republican credibility after a sweeping election before they are even able to seat their newly elected members.

    Why, its almost as if the two parties have the same agenda and are tag teaming us.

    1. I’m really hoping the new congress will vote his orange ass out of the speaker’s chair.

  7. I have no doubt she thinks of ‘cronyism’ as a synonym for ‘capitalism’ in general, so her criticisms however right they may seem, remain completely false when we take into account her working definitions of these terms.

    1. That would be my take on it.

  8. Saw my first Lizzy Borden Warren bumper sticker on a Prius yesterday!

    1. I have the strongest urge to punt Priuses off the road when I come upon them.

      A Lizzy Fauxcahontas sticker just increases that desire. A 2008 Obo sticker quintuples the urge…

      1. Almanian!|12.17.14 @ 11:09AM|#
        “I have the strongest urge to punt Priuses off the road when I come upon them.”

        Or at least ask the owner for MY money back.

    2. Here in Balmer, a bumper sticker comes standard with the Prius. You get your choice of:

      Obama/Biden 2008

      Save the planet, hug a tree today!

      I’m ready for Hillary

      Run, Lizzie, run!

      1. Don’t forget the “Coexist” bumber sticker written in clever religious symbols

  9. Sorry but I have difficulty supporting a law named for the two members of Congress most responsible for the entire financial meltdown in the first place. Warren is nothing more than a millionaire who wants to centralize power in another location (Government instead of business. We need to stop pretending that other than a select few, Congress is actually there to do what is right for country. The majority of members in both Houses went to DC to get rich, powerful and work like hell to keep what they have. Until we (voters) demand term limits and take away the financial incentive for being elected, the government will remain a broken, corrupt cesspool…

  10. Pretty hard to support welfare for Wall Street when your entire political ideology is based on opposing welfare for poor people. I’m sure some of you will try, complete with baby-talk references to Warren’s alleged heritage claims and baby talk about communism.

    1. Who supports welfare for Wall Street? Opposing welfare for poor people? What does that mean? What the fuck are you babbling about? Did the libertarians in your head keep you up again last night telling you about their orphan slaves and Scrooge McDuck style swimming pools full of money?

      More baby talk from the vile commie troll.

      1. So you are giving credit where it’s due?

        1. Yes you deserve credit for promoting your murderous ideology.

          1. In Tony’s make believe commie utopia, only the bad people get sent to the gulags. You know, right wing extremists, teabaggers, the bad people. When the boot comes down on Tony’s neck, he’ll be the only one who is surprised by it.

            1. I think Yuri Bezmenov nailed this about 40 years ago

            2. One of many many logical and moral errors, he isn’t consistent in his application of either, amazingly more so than your average statist.

    2. Pretty hard to support welfare for Wall Street when your entire political ideology is based on opposing welfare for poor people.

      Why do you keep claiming that libertarians support cronyism and hate poor people? You’re you know quite well that you’re lying. Go subsidize a solar panel factory and leave the criticisms of cronyism to those who actually oppose it.

      1. I think libertarians are neoconfederates who’ve read a couple grown-up books (but only a couple). I think your ideology evolved from a root of racist anti-welfare sentiment, and though you tack on anti-corporatist rhetoric so as not to be complete hypocrites, you are actually the biggest enablers of crony capitalism (regulation is usually bad for some reason!). It’s not hard to find a shoe that fits on occasion–taxpayer bailouts are pretty easy. But then you ignore completely the flaws and abuses of wealthy private interests that don’t have an immediately recognizable tie to government enabling. Government per se is still the root problem to you, dogmatically, and that ignores a huge part of the problem.

        1. I think libertarians are neoconfederates

          Well, that’s because you’re retarded. Thinking and reality are not related in any meaningful way in Tony world.

        2. “Regulation is usually bad for some reason!”

          Do you just not understand the concept of lobbyists and regulatory capture? Could you REALLY be that stupid?

          Man, that is some weak-ass trolling, dipshit…you are horrible at your job!!

          1. Look, if we just stamp out all vestiges of capitalism and freedom, then nobody will have any concept of capturing the regulatory apparatus for personal gain. We can breed out human nature, if we really try hard enough!

            Apparently the problem with the Soviet Union was that somewhere in the world–no matter how distant in geography or culture–the taint of capitalism remained and poisoned the well.

            Is it any surprise that Tony is a Trotskyite?

        3. Everyone who disagrees with me is, somewhere, somehow, deep-down, a racist. I know it. I can feel it. They don’t need to say or do anything. These racists might even say and do things that are, ostensibly, anti-racist. It’s all code speak. They oppose racism in public so they can promote it in private. Or, they oppose it to can political support so they can revert to their true designs later, possessing more power. Even the black and brown ones are secret racists. Even the ones about whom I have no idea, & have never met. Yet these imbeciles have the nerve to call me, their obvious intellectual and evolutionary superior, a Marxist Leninist even though I have *never* admitted to being one.

        4. I think libertarians are neoconfederates

          Sigh. Libertarianism is a political philosophy and more broadly a moral philosophy. “Confederates” are people who favor a certain arrangement of power between particular political units. “Neoconfederates” are a certain species of confederates solely within the context of the history of the United States. Libertarianism has precisely nothing to say about “neoconfederates”, you can be one without the other. If you were a rational person that would tell you something.

          I think your ideology evolved from a root of racist anti-welfare sentiment

          Okay so you don’t read outside of your bubble. We knew this already. But hey maybe you can cite this claim?

        5. and though you tack on anti-corporatist rhetoric so as not to be complete hypocrites, you are actually the biggest enablers of crony capitalism (regulation is usually bad for some reason!).

          You can’t think of reasons why regulation is bad? Aren’t you always claiming that the government is owned by rich people? Google; ‘regulatory capture’.

          But then you ignore completely the flaws and abuses of wealthy private interests that don’t have an immediately recognizable tie to government enabling.

          Well that’s completely false. Abusers are the rent-seekers of government power. Though if your definition of ‘abuse’ includes voluntary interaction, justly owned and created wealth, I can see why you conflate everything.

          Government per se is still the root problem to you, dogmatically, and that ignores a huge part of the problem.

          Okay so you would solve the problem of co-opted state power by creating more state power to rent out.

          1. You are trying to equate regulation and regulatory capture in a disingenuous attempt to avoid admitting that you want the entities to be able to get away with what they want without having to buy off the middleman. Regulatory capture is a form of corruption of the regulatory scheme, not an argument for why having a regulatory scheme is always bad. Fighting taxes and regulations is what corporations do. It’s not evil, it’s just looking after their bottom line. But whether something should be regulated or not is a question of public interest. I don’t think we should put corporations above the public interest, but I don’t worship the market.

            Again, you’re only aligned with Warren here because the corruption happens to be easily defined as corporate welfare. In other respects you guys support corporate abuse more than anyone on the political spectrum. It’s your reason for being.

            1. We support corporate abuse. Why then do we not support regulatory schemes and regulatory capture as it enables corporations to engage in abuse with abandon and with government sanction?

              If we support corporate abuse shouldn’t we be applauding cronyism?

              Do you really think no one can see through your bullshit?

              1. Some advice: If you want to convince people that someone is unprincipled you have to argue to people other than the principled people you are trying to malign. You won’t have much luck otherwise. Trying to convince us that we are secretly crony capitalists is less than convincing.

                1. I don’t think you’re secretly anything, you’re just too dumb to realize how you’re being played by the crony capitalists. Your philosophy is mostly propaganda–but you wouldn’t know that.

                  1. I don’t think you’re secretly anything, you’re just too dumb to realize how you’re being played by the crony capitalists. Your philosophy is mostly propaganda–but you wouldn’t know that.

                    Says the guy who at every turn is proposing that a superpowerful state to solve every problem, real or imagined. There’s nothing predicated on false philosophy and propaganda there…

            2. You are trying to equate regulation and regulatory capture in a disingenuous attempt to avoid admitting that you want the entities to be able to get away with what they want without having to buy off the middleman.

              No I’m claiming that the regulatory agencies are wolves disguised as sheep. Political institutions financed by involuntary forfeitures of wealth are not incentivized to actually play referee, they’re incentivized to monopolize the role of referee and then rent out that profound power.

              Regulatory capture is a form of corruption of the regulatory scheme, not an argument for why having a regulatory scheme is always bad.

              It’s an argument for increasing regulatory power is both arbitrary and counter productive to the stated goals.

              is a question of public interest.

              That’s a great term, it’s sufficiently vague to justify any political action you fancy.

              but I don’t worship the market.

              You can’t even define the market. You worship the state and political force.

              In other respects you guys support corporate abuse more than anyone on the political spectrum. It’s your reason for being.

              Citation required.

            3. Let me just end this debate. You are a fucking idiot.

        6. It is clear from your comment here Tony that you are completely misrepresenting what the majority of us hold as positions. I would say you are not bright enough to understand the many explanations you have been given, but since you have proven yourself so many, many times to be a completely unprincipled liar, I don’t think that is it.

        7. It took only the first two words in your post illuminate the problem. You DON’T think.

        8. Speaking of dogma, I can’t wait until SJWs go full-on multi-personality disorder and put their feminist crosshairs on rap music. It’ll be fun watching them go to their own logical conclusion that everyone is either racist or sexist, but never neither.

          For example, if you hear someone say, “How you gonna get a bitch on your dick like that, nigga?”, are you being racist if you voice criticism? Or, if you remain silent, are you implicitly enabling the rape culture patriarchy?

        9. John Locke, John Stuart Mill, Freidrich Hayek, Herbert Spencer: racist neoconfederates in your world?

          I think the guy who hasn’t read enough grown up books here is you.

          1. Well, John Stuart Mill and Herbert Spencer had the chance to advocate British intervention in the U.S. Civil War on the side of the Union and failed to do so, so: Yep, racist!

        10. ” I think your ideology evolved from a root of racist anti-welfare sentiment, ”
          That’s because you’re either too stupid or too arrogant to read anything about the history of any ideas.

          “and though you tack on anti-corporatist rhetoric ”
          Yes, we “tacked on” the whole regulatory capture thing, and opposition to the Ex-Im Bank, the Military Industrial Complex, Yes, we did all that. The whole gay rights thing? That was a cover too, even though it was DECADES before you vile progressives decided that the government abuse had gone too far.

          “you are actually the biggest enablers of crony capitalism ”
          That’s right Tony, we’re the biggest enablers, not the people who ACTUALLY VOTE FOR THE CRONYISM. God what’s it like to be you? What’s it like to hate facts?

          “But then you ignore completely the flaws and abuses of wealthy private interests that don’t have an immediately recognizable tie to government enabling. ”
          Such as what? What abuses of “wealthy private interests” were anything like as bad as the fucking Iraq war? As bad as the mal-investment of billions maybe trillions of dollars? As bad as the prison industrial complext? What abuses are these Tony?

      2. Why do you keep claiming that libertarians support cronyism and hate poor people?

        One of two possibilities.

        1. Tony is a sock puppet.

        2. Tony is a really brain washed and delusional proglodyte.

        1. Tony is always disingenuous but also from time to time leaves hints that he is insincere as well. I lean strongly toward him being a sockpuppet, but I suppose it’s possible that he could just have an overriding contempt for humanity such that even when he “takes the mask off” it’s really just to reveal another mask.

          1. ” but also from time to time leaves hints that he is insincere as well. ”
            Just thought you’d like some help:
            noun
            1.
            an indirect, covert, or helpful suggestion; clue:
            Give me a hint as to his identity.
            2.
            a very slight or hardly noticeable amount; soup?on:
            a hint of garlic in the salad dressing.
            3.
            perceived indication or suggestion; note; intimation:
            a hint of spring in the air.
            4.
            Obsolete. an occasion or opportunity.

        2. 3. Tony is a mendacious little shit.

    3. Tony’s starting to sound ( a little bit) like Ron Paul. We should encourage him instead of excoriating him. Just ignore his second sentence.

      1. That’s in regard to his post at 11:17. After that he just goes off the rails, as usual.

  11. “for not wanting to overhaul the entire Dodd-Frank apparatus in one swell foop. ”

    Was that an unintentional spoonerization?

    Oh, yeah, Poca-hotmess is right for ALL the wrong reasons. Doesn’t mean the repubs aren’t hypocritical shitbags, though…

    1. Looks like a deliberate spoonerism to me.

  12. Sitting Bullshit… Crazy Horse’s Ass…Hopi Changer

  13. Ted cruz was dead against this bill and publically and loudly denounced it for the repeal of the Dodd-Frank provision and the crony pork.

    He actually spkoe of the Washington corpution involved in passing this bill.

    But not a mention about Cruz from A Barton Hinckle. Only a little pro Warren puff piece.

    Imagine that.

    1. I guess every author who mentions Dodd-Frank needs to include full list of every humanoid lifeform that opposed Dodd-Frank in everything they write.

      1. Whether they do or not is their business.

        I felt it was my perogative to point out to readers that Cruz was in fact the most vocal anti against this bill.

        And you have a problem with that why ?

        1. You point it out as though the author is leaving out vital information about this story. A story about a braindead leftist being accidentally right about something need not include a disclaimer about Ted Cruise or whichever other politician you prefer he’d mention.

  14. Bald-faced Eagle…Little Big Scorn… Totem Pol…

  15. Whereas Warren is right in the complaint, her solutions are extremely wrong. The “Tea Party” had the same complaint, and their solutions might actually work. I put quotes around Tea Party as there is no Tea Party, just a bunch of groups with similar aims, decentralized with slightly different emphasis on many thing. A very good example of Libertarian like cooperation really.

  16. Sham Pow Wow…. Sacaja-whiner… Running Joke…

  17. Does keeping these derivatives in separate units really withdraw taxpayer risk?

    IIRC, Bear Stearns was undone by MBS being traded by a nominally separate unit.

    I’d actually support Warren’s proposal to break up Citi as a better idea. Just have a cap on bank size that is lower than the TBTF size where banks can borrow at lower rates because the lenders know they are TBTF.

    I’d also have personal performance bonds for managers above a certain level. Let bankers invest their bonuses into these bonds if they want to get promoted. (The bonds would be forfeit to government if their bank gets in trouble.)

    1. I would propose that since large banks have a larger risk profile, they should pay higher rates for FDIC and higher interest rates at the FED.

      This is what rational (not government backed) private insurance and short terms loans would do.

      The big banks would soon be spun into several smaller banks in the attempt to “rightsize” between enough size to benefit from economy of scales and small enough to avoid the high risk profile of excessive systemic risk.

      Of course, this would actually work, and would disturb the status quo powers-that-be, so don’t expect it to happen any time soon.

      1. Maybe you forgot the history of banking in this country. After the Depression banks couldn’t cross state lines. Because of that there were all sorts of crazy schemes.

        First Interstate bank was big in the west and had a scheme where they would take your money and put it in 100,000 dollar packets and put it in different banks to have everything protected by the FDIC. This was probably costing them money compared to having just one bank.

        The biggest complaints, however, were coming from money center banks involved in big financing like major corporate loans and international finance. They were crying that they were too small to compete with the big Japanese and European banks. Even with a few of them merging like Chemical Bank and Manufacturer’s Hanover they were still many times smaller than Japanese banks like Daichi Kangyo.

        Eventually, like always happens Congress “solved” the problem in the way the bankers wanted, just like they solved the latest crisis in the way the bankers wanted.

  18. Loathsome Dove…Dishonest Injun…Red Clod…

    1. Wounded Kneejerk…Geronimoan…

  19. Of course, this is the kind of person who on the one hand criticizes the banks for not lending to minorities enough, and then when banks finally comply, she says they exploited the minorities.

    Her brainchild CFPB also bumped up the cost of wire transfers from $35 to $60 for some nebulous benefits.

  20. As Warren has noted several times, the relevant provision repeals a part of the law titled, “Prohibition Against Federal Government Bailouts of Swaps Entities.”

    As most people now, the title of a federal law is exactly the opposite of what that law actually is designed to do.

    1. “As most people now, the title of a federal law is exactly the opposite of what that law actually does.”
      FTFY

  21. Slam dunk the ball dude, like seriously.

    http://www.AnonBay.tk

    1. Having travelled to Cuba a couple of times over the past year I would have to say this change will have an overall positive effect on Cuba. And if you are looking for a place to invest some $$, the opportunities will abound. Unfortunately we will now lose the one Caribbean country with citizens not jaded by being overrun by obnoxious American tourists…..

      1. Isn’t it amazing a vehement anti-capitalist like Comrade Fidel has no problem letting American dollars into his country?

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  24. Warren is just pissed that she didn’t get to hand out more billions to her own favorite corporations and special interests.

  25. I completely disagree. People are focusing on the wrong thing, yes this allows banks to use the insured funds, however at the same time these banks are already more heavily regulated on the amount of leverage they can have on these securities, but at the same time the FED is pushing for even more limitations. So yes, they can use the money, but they can’t be so highly leveraged that they need the bailouts in the first place.

  26. That rule prevented traditional banks from betting on financial derivatives with federally insured deposits.

    Solution: eliminate federal insurance for bank deposits. Let people buy private deposit insurance, or do their own goddamned due diligence.

    -jcr

  27. it’s too bad she makes no distinction between CRAPitalism and CAPitalism, but what else can one expect from a collectivist?

  28. Valerie `s posting is shocking… on saturday I bought a great new Jaguar XJ after I been earnin $6211 this last four weeks an would you believe 10k this past month . it’s by-far my favourite-work I’ve ever done . I started this eight months/ago and immediately startad bringin home over $71… per hour .
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  29. Valerie `s posting is shocking… on saturday I bought a great new Jaguar XJ after I been earnin $6211 this last four weeks an would you believe 10k this past month . it’s by-far my favourite-work I’ve ever done . I started this eight months/ago and immediately startad bringin home over $71… per hour .
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  30. Warren is the pro Wounded Knee candidate.

  31. This is the same woman who voted against defunding the Export-Import Bank, and SHE is taken as an anti-crony politician? Fiction is Dead.

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