Opinion

The Great Debate

Transforming Post Offices into banks

The U.S. postal service inspector general put out a report last week suggesting an intriguing way to shore up the ailing institution’s finances: Let the mailman double as a bank teller.

The plan? The post office would offer services designed to appeal to America’s unbanked and under-banked — the more than 50 million adults who either have no checking or savings account, or use high-cost, predatory services like payday loans to supplement traditional banking needs.

This sounds like a win-win. Americans — particularly low-income Americans — clearly need greater access to low-cost financial services. At the same time, many financial institutions have been complaining for years that providing banking services to low-income Americans is costing them money. So much so that they can barely bring themselves to open bank branches in anything less than well-heeled neighborhoods.

Surely, they would embrace any plan that could help rid them of these undesirable customers, while offering a new-found opportunity to make money.

Not so fast.

The banking sector immediately threw a hissy fit. “This would be like the banking industry moving into running the airlines,” Richard Hunt, the president and chief executive of the Consumers Bankers Association told American Banker last week. Another executive compared the plan to the Ford Edsel.

Populism: The Democrats’ great divide

One day after President Barack Obama called for moving forward on trade authority in his State of the Union address, Senate Majority Leader Harry Reid (D-Nev.) declared, “I am against fast track,” and said he had no intention of bringing it to a vote in the Senate.

Reid’s announcement came after 550 organizations, representing virtually the entire organized base of the Democratic Party outside of Wall Street, called on Congress to oppose fast track. Though obscured by the Democrats’ remarkable unity in drawing contrasts with the Tea Party-dominated Republicans in Congress, the debate between an emerging populist wing of the Democratic Party and its still-dominant Wall Street wing is boiling.

For a constantly disputatious “big tent” party, Democrats are remarkably unified behind the jobs and inequality agenda the president ticked off in his State of the Union address — raising the minimum wage, immigration reform, paycheck fairness for women, paid family leave, investment in infrastructure, education and research and development, and an “all of the above” energy strategy. Republicans block action on all these relatively modest reforms, providing ammunition for Democrats in the November midterm elections.

Searching for a real populist

In the American political lexicon, few words are as prevalent — or as confusing — as “populism.”

Senator Elizabeth Warren (D-Mass.) gets described as a populist because she wants to curb the power of corporations and increase Social Security benefits. So does Senator Ted Cruz (R-Tex.), who thinks small businesses are crippled by “an explosion of regulation” and has called Social Security a “Ponzi scheme” that should be replaced by individual savings accounts.

Journalists, meanwhile, routinely affix the P word to liberals who want to raise taxes on the rich and to conservatives who claim higher taxes just benefit liberal special interests.

‘Democratic wing’ of Democratic Party takes on Wall Street

The chattering classes are fascinated by the Republicans’ internecine battle to redefine the party in the wake of the George W. Bush calamity and the Mitt Romney defeat — from Senator Rand Paul’s revolt against the neoconservative foreign policy, to intellectuals flirting with “libertarian populism.” Less attention has been paid, however, to the stirrings of what Senator Paul Wellstone dubbed “the Democratic wing of the Democratic Party” — now beginning to challenge the Wall Street wing of the party.

Perhaps the strongest demonstration of this was the barrage of “friendly fire” that greeted the White House’s trial balloon on nominating Lawrence Summers to head the Federal Reserve Bank. More than one-third of Democrats in the Senate signed a letter supporting Janet Yellen, now vice chairwoman of the Fed. More than half of the elected Democratic women in the House of Representatives signed a similar letter. Many were appalled at the notion of passing over the superbly qualified Yellen for Summers, with his notorious record of denigrating and dismissing women.

But, as Katrina vanden Heuvel, editor of the Nation wrote in the Washington Post, Summers also drew opposition because he was the “poster boy for the Wall Street wing of the party — literally.” (Summers joined then-Treasury Secretary Robert Rubin and then-Federal Reserve Chairman Alan Greenspan on the now risible 1999 Time magazine cover celebrating the “Committee to Save the World” — before the global financial collapse exposed the folly of their policies).

Class war in the new Gilded Age

2012 was the first class-warfare election of our new Gilded Age. The first since the middle class has come to understand, in the words of new Senator-elect Elizabeth Warren (D-Mass.), that the “rules are rigged against it.” Business-as-usual may no longer be acceptable.

But Washington didn’t get the memo. Even as ballots were still being counted in Palm Beach, Florida, the two parties lurched into the fierce debate over the fiscal cliff, the noxious brew of automatic spending cuts and expiring tax cuts that would poison the recovery. The debate, a dismal sequel to the 2011 debt ceiling melodrama, focuses on deficits not jobs. Once more, Republicans are threatening to blow up the recovery unless Democrats make otherwise unacceptable concessions. Once more, President Barack Obama looks for a “grand bargain,” seeking bipartisan support for terms divorced from opinion outside the beltway. Once more, what Scott Galupo at The American Conservative called the “clown show” of the House Republican caucus blows itself up.

Republicans are the most clueless about this new reality. The election’s one clear mandate, confirmed in polls ever since, was for Obama’s oft-repeated pledge to let the Bush tax cuts expire on those earning more than $250,000. Yet, House Republicans stood staunch in defense of the very rich – refusing to pass their own speaker’s bill to extend the tax breaks on everyone except millionaires.

Monetizing the marginalized

Five years ago, Ron Paul’s popularity was still surprising. Sometime in 2007, the former physician, longtime crank in Congress, and thoroughly fringe Republican had somehow turned his shtick into success — at least monetarily. Paul raised more than $31 million in the 2008 Republican primary even though he never actually won a contest where actual delegates were at stake. For a longshot like Paul, it wasn’t the chance of his success that drove people to donate; on the contrary, all but the deluded knew he would fail.

Now, in 2012, the idea of his success among the fringe is mainstream. And Paul’s alchemy — turning derision into dollars — isn’t exclusive to his corner of the fringe. The powers that be — politics, media, Corporate America — have refused to embrace causes from Occupy Wall Street to Elizabeth Warren. And yet these underdogs still find a way to succeed because marginalization has become incredibly lucrative. How else to explain the $150 million that the DIY funding site Kickstarter is expected to help raise this year, even though many of the projects it funds will do no better than Ron Paul?

As always, credit the Internet. Since the earliest days of altnet message boards, we’ve known the Web can build just as well as it can destroy. Its vastness allows for connections both obscure and passionate, while its anonymity creates hate both entropic and cowardly. This new economy of the marginalized is the child of the first dynamic — the one that can rally thousands to a cause with the smallest of sparks.

from Reuters Money:

5 reasons why banks hate Elizabeth Warren

Elizabeth Warren, it's not you they hate. It's what you represent. You want to be an honest cop when so many before you in Washington have looked the other way and pretended that the banking industry could police itself.

I can't think of a better reason why this presidential adviser shouldn't be the new chief of an unfettered Consumer Financial Protection Bureau.

She knows where the bodies are buried -- in countless toxic forms and statements that only bank lawyers fully understand. She'll make every attempt to end the silent rip-offs and myriad shenanigans that cost consumers billions.

from Reuters Money:

Consumer cops: Why we need Mary Schapiro and Elizabeth Warren now

U.S. Securities and Exchange Commission (SEC) Chairman Mary Schapiro answers a question at the Reuters Future Face of Finance Summit in Washington March 1, 2011. REUTERS/Kevin Lamarque Two women are fending off a vicious man-handling of investor protection.

As Congress pettily wrangles over the debt limit and the next budget, Mary Schapiro and Elizabeth Warren are fighting to protect you against the ravages of Wall Street.

Wall Street and its Republican allies would like to make the Dodd-Frank financial reforms disappear. The money trust has been pouring millions into lobbying to eviscerate the budget of the Securities and Exchange Commission and blocking the formation of the Consumer Financial Protection Bureau.

Mary Schapiro, who chairs the SEC, said she can't kick start the myriad pro-investor rules of Dodd-Frank without adequate funding. Republicans, lead by Budget Committee Chairman Paul Ryan, want to "starve the beast" in their fiscal year 2012 proposal.

The next hot ticket in financial reform

By John Morrall, Richard Williams and Todd Zywicki
The opinions expressed are their own.

With Larry Summers leaving his post at the White House and Elizabeth Warren recently appointed as the special adviser to the new Consumer Financial Protection Bureau, the hot ticket is still to be the head of the bureau. All eyes should not just be on the appointment of the bureau’s first head, though, but on the bureau itself, for it is the centerpiece of financial regulatory reform.

More important than the innocent wagering among K streeters and Hill staffers, the horse-race to head this powerful new regulatory entity is emblematic of the incredible uncertainty surrounding new financial regulation. This makes it even more important to be clear about the effects, and not just the intentions, of this new regime.

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