Northern Country

How globalization changes capitalism, the economy and politics

Posts Tagged ‘Washington

Wall Street – Washington Connection, Part I

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DimonandBlankfeininWashington

When we think about the financial crisis on Wall Street and in the economy we try to figure out why it happened, who was responsible and how can we prevent it from happening again in the future. Today we still have a lot more questions than we have answers, but the sun is beginning to shine, and one issue is starting to emerge which probably for years and years has been tucked away from the public’s view.

This crisis is pulling the blanket of secrecy from a bunch of Wall Street bankers smooching and spooning undercover with Washington’s big guys for the last several decades. Of course we would expect them to be somewhat embarrassed about busting their secret arrangements, maybe even flee the scene to break up their unholy unity for good. Much to our surprise none of this is actually happening.

Mr. Dimon, chairman and head of JPMorgan Chase, has sought to ratchet up his business of influencing Washington in late 2007, when the financial crisis hit and the democrats together with the Obama administration were beginning to settle in. Jamie Dimon together with Goldman’s Loyed Blankfein are among a rare breed of executives who have not jeopardized their companies by taking unwise decisions. Both CEOs in the meantime have returned all funds received from Treasury’s capital assistance programs (CAP).

These days JPMorgan’s chairman comes to town about twice a month and not twice a year as he used to. He met with Treasury secretary Geithner, White House economic advisor Lawrence Summers, and several lawmakers in recent months and gets a list from his staff to call a half-dozen public officials each week. He has made it a regular thing to nurse his precious Washington relations to make sure he is not kept out of the loop.

When JPMorgan wanted to return its TARP funds his influential connections helped him to ease the terms for banks allowing them to repay the money. In the end Washington caved in to Dimon’s complaints about limitations for hiring skilled foreigners and on executive pay. He also helped thwart attempts to lower the principal on mortgage payments which would have benefited homeowners.

Another contentious issue is Mr. Dimon’s objection to regulate the market for credit derivatives by keeping part of it independent from regulated clearing operations. Fees from underwriting over-the-counter credit derivatives are a major source of income for JPMorgan Chase.

Mr. Dimon’s connections to Washington date back to his day at Citigroup when he offered Mr. Rahm Emanuel, then senior advisor to president Bill Clinton, a job at the firm. Today Mr. Emanuel serves in the Obama administration as White House Chief of Staff. William Daley, former commerce secretary and influential Chicago lobbyist, is also currently on JPMorgan’s payroll. Mr. Dimon mindfully replaced some of his staff with wired democrats to better serve his Washington agenda. 

Most surprising is his connection to Treasury secretary Geithner. Mr. Dimon holds a seat on the board of the New York Federal Reserve. Mr. Geithner served as president of the NY Fed till he joined the Obama administration in January of this year. How can a CEO of a public company sit on the board of a federal regulator? That’s like John Gotti being a member of the U.S. Department of Justice.

For the first time this Monday JPMorgan Chase held a meeting of the firm’s board in the nation’s capital. Messrs. Geithner and Emanuel were both invited, but only the chief of staff first agreed to later withdraw not to appear too cozy with Wall Street bankers. This invitation is nonetheless testament to the arrogance of invincibility that has shrouded executives of our most powerful corporations.

In Washington nothing gets done without support from Wall Street and Wall Street knows it. Wallshington is more important and influential than the oil industry, the industrial complex or even the powerful military. This has never been so true like it is today with a handful of firms left unfettered from the crisis and government’s control. Their power is more concentrated in the hands of a few and therefore even more difficult to control.

Executives on Wall Street get whatever they wish from every administration or congress there is. This too big to fail monster is sucking the lifeblood of morality, decency and sustainability out of a societal fabric that once was the envy of the rest of the world.

In the latest report for the period ending July 17, 2009, the Treasury department listed employed funds under the Troubled Asset Relieve Program (TARP). The financial industry received $204.2 billion, $70.2 billion have been returned, leaving the industry with a total of $134 billion outstanding. In the automotive industry $77.8 billion from 79.9 are still owed to the taxpayer. Automotive suppliers received a more humble $3.5 billion. Targeted investments in Citygroup and Bank of America totaled $40 billion and asset guarantee programs for Citigroup another $5 billion. The Troubled Asset Loan facility (TALF) committed $20 billion. Rescuing troubled insurer AIG required another $69.8 billion.

To this day the financial and the automotive industry owe the taxpayer $350 billion, yet government has devoted only $18.7 billion in home affordable modification programs to avoid foreclosures. While taxpayers were required to fund the bailout of Wall Street with 350 billion dollars the financial industry is reluctant to modify loans and scores of families are still forced out of their homes.

This current administration with the most eloquent president since years will have a hard time to sell this to the general public. Wall Street firms reverting to old habits by once again doling out mega bonuses to their club members will not make it any easer.

US to Israel – make peace with Palestine

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Not everything is quiet on Obama’s front. Economic crisis, unemployment, the crisis on Wall Street, executive compensation, General Motors, the environment just to name a few issues he has to tackle and he is only in his mid fifties. Oh, not to speak of a record current account deficit that is now poised to break through the alarming 1 trillion dollar mark.

On foreign policy two wars, in Irak and Afghanistan, are still looming high and no end seems in sight. The solutions promised to the people in the Middle East are a reason for deep frustration. Israel-Palestinian peace negotiations seemed to have stalled in part because of lack of leadership from the US. And above all the nuclear stand-off with Iran.

President Obama has more than once stated during his campaign speeches that he is frustrated with the lack of progress in the Israel-Palestinian conflict. He sees it as a "constant sore" that "infect[s] all of our foreign policy". Vice-president Jo Biden and General James Jones, Obama’s national security adviser, wowed to be ‘more forceful toward Israel than under Bush’.

This has alarmed a powerful pro-Israel lobby group in the US to get Congress to deliver a written letter to president Obama in an attempt to right what seemed wrong for Israeli hardliners. The American Israel Public Affairs Committee (Aipac) calls on the US to remain a devoted friend of Israel. Aipac wants to maintain the current pace of negotiations with the Palestinians and does not see this conflict crucial to peace in the Middle East. By the way Aipac also wants military attacks on Iran’s nuclear facilities something the Obama administration clearly rejected so far.

Aipac is very powerful and has considerable influence over American lawmakers. Their message is clear, that there will only be a two-state solution when Israel is ready for it. Well, they had about 60 years now, that is a lot of prep time. So, hopefully Obama stays the course so as to this region will have peace in our lifetime.

There are considerable forces that work against a two-state solution. Netanyahu’s speech about the conditions for a formation of a Palestinian state was meant to be rejected and certainly will not in anyway open a door for successful peace negotiations.

The Obama administration is under considerable stress concerning the nominations of some of their top administrative positions. In March Chas Freeman, a veteran American diplomat and former ambassador to Saudi Arabia, had to withdraw as chairman of the national intelligence council. Behind this move is arguable Freeman’s criticism of Israel.

The "Israel Lobby", he argued, was stifling any discussion of US policy options in the Middle East except those endorsed by "the ruling faction in Israeli politics" – a situation that could "ultimately threaten the existence of the state of Israel".

This underscores the alarmingly powerful influence Aipac has in Washington and although the last elections brought hope of change, so far its the same ol same ol. Wait, maybe not so fast. Obama has obviously sacked a state department advisor on Iran. Dennis Ross, Hillary Clinton’s special adviser on Iran has been removed from his post because of reports that Tehran was unwilling to engage with him. Ross is believed to be very close with Israel. The real reason for his removal is his rejection of the Obama administration’s approach to the Middle East. Mr. Ross sees himself eye to eye with Aipac and Netanyahu. Well his boss did not like it and fired him.

I hope we will see more of this, because it is absolutely clear by now that peace in the Middle east will only come if Israel will be forced to accept it.

Written by Alfred

16. June 2009 at 6:17 pm