Many are all aflutter about “Where to go from Zuccotti Park?” and “Jolted, Wall St. Protesters Face Challenge for Future." No one so far is asking the question, where does Wall Street reform stand after eight weeks of massive occupations and coverage? When will our politicians act? Or do they see their job as cleansing protesters from public spaces?
Now we learn that at least 18 big-city mayors conspired in confidential phone conversations to coordinate crackdowns of Occupy Wall Street protesters. Gas would be used, young people would be strong-armed, and lives perhaps put at risk, to satisfy the apparent demand of downtown developers to restore their version of normalcy.
Mayor Antonio Villaraigosa said on Wednesday, October 26, that the LA occupation “could not continue indefinitely.” Someone in the media should formally request the mayor’s calendar of phone calls and appointments – along with the 17 other chief executives – to determine when the conversations about simultaneous crackdowns occurred.
In light of the crackdowns in New York, Berkeley, Oakland, Denver, Portland and beyond, and as massive national demonstrations are about to take place, it’s not too late for the mayors’ to use their political stature to speak out about the crises befalling their cities.
Villaraigosa is the leader of the US national association of mayors. In that capacity, he has engineered resolutions calling for an end to the war in Afghanistan and reinvesting billions in meeting our urban needs. He has spoken out courageously against the brutal inequities of Proposition 13, which by a loophole starves the education budget while protecting absentee owners of huge commercial properties downtown. In contributing to the current Great Recession, Wall Street is to blame for the deepening budget crisis in city after city.
He and other mayors, as well as other elected officials, should get on their phones and launch a campaign to re-regulate and reform Wall Street now that there is rising public support. In the meanwhile, they can erect safer platforms for dissenters to continue their permanent protest of financial institutions in every city. They could even lead rallies in their own financial districts. If they want to end fixed encampments in their cities, they should suggest and lead towards a better path.
Michael Bloomberg has been the mayor of Wall Street, not the mayor of all New Yorkers, through this crisis. It is time for the Un-Bloomberg.
The mayors should assert, first, that their mounting local Occupation problems are not their fault, but derive from a national Wall Street scandal which affects their cities through foreclosures, bankruptcies, unemployment and rising citizen frustration. The crisis requires more than urban crisis management, it will take national debate and reform. Second, they can call on their US senators, congressional delegations and President Obama to seize the opportunity for change, which has grown with the protests. President Obama has described the Wall Street scandal as “a crisis borne of a failure of responsibility from the corridors of Wall Street to the halls of power in Washington.” (Ron Suskind, Confidence Men, p. 437)
Specifically, the local officials can demand that Congress immediately revisit the compromises which resulted in loopholes protecting derivatives and hedge funds in the 2010 federal Dodd-Frank Wall Street Reform Act. During the 2009-2010 debate, progressive amendments by Senators Blanche Lincoln, Carl Levin, Jeff Merkeley, Sherrod Brown, and Ted Kaufman were killed. At the time, Sen. Kaufman wrote:
“The legislation does not go far enough in addressing the fundamental problem of "too big to fail." Instead of erecting enduring statutory walls as we did in the 1930s, the bill invests the same regulators who failed to prevent the financial crisis with additional discretion and relies upon a resolution regime to successfully unwind complex and interconnected mega-banks engaged across the globe. I am also disappointed that key reform provisions like the Volcker Rule and the Lincoln swaps dealers spin-off provision were scaled back in conference.”
The core issue was the Lincoln proposal to regulate trillions of dollars in Wall Street derivatives, which would have forced banks to spin off their most profitable business, banned any conflicts-of-interest and required them to become fiduciaries. Most of the derivatives market is inscrutable to the democratic public, existing in shadows known as “dark pools” without collateral, causing systemic risk. Warren Buffet calls derivatives “financial weapons of mass destruction.” (Suskind, p. 174)
The legislation was “gutted” by loopholes then accepted as necessary by Rep. Frank and Sen. Dodd with White House support. (Suskind, p. 439) Frank said at the time that Sen. Lincoln’s proposal on derivatives “went too far.” (Suskind, p. 431) Lincoln had wanted all derivative operations spun off from the four major banks which control 97 percent of the derivatives market. (Suskind, p. 398) This history of compromise might explain Frank’s exasperation towards critics during his interview with Rachel Maddow on October 18. Frank asked the Occupy Wall Street movement “where were you?” during the mid-term elections, as if they were to blame for not being in existence when he permitted his legislation to be watered down. He complained,“I don’t know what the voting behavior is of all these people, but I’m a little bit unhappy when people who didn’t vote last time blame me for the consequences of their not voting.”
Well, Occupy Wall Street is here, right now. Frank and his allies in the Democratic-controlled Senate, could immediately introduce legislation closing those 2010 loopholes and take their case to the American people – with the leadership of support of mayors now carrying the brunt of the crisis.
It was Larry Summers, one of the twenty-first century’s “best and the brightest”, who wrote the 2002 law de-regulating derivatives. Summers was Treasury Secretary under Bill Clinton, headed the Obama council of economic advisers until 2010, and a hedge fund architect himself.
Summers is gone, however, and the mood of the country is ripe for further reform. The tide is running against Wall Street-oriented politicians (who might be called “Wall Street Derivatives”). Even Iowa Republican Sen. Charles Grassley voted for the Lincoln amendment when it passed the Senate Finance Committee, so a Main Street Republican defense of Wall Street cannot be guaranteed. And if the amendments fail again, the issue should be front and center in next year’s election. Simply put, the question should be why derivatives – and finance capital in general – should be deregulated for the few so that the American future can be put at risk.
Occupy Wall Street is creating a rare climate making it possible to pass legislation over the intense opposition of those special interests who have prevailed until only recently. It’s time to regulate and police Wall Street. A government which crushes unarmed protesters to protect private power and property is approaching political and moral, not simply economic bankruptcy.