Washington Babylon — October 29, 2009, 10:54 am

An Object Lesson in Governmental Failure: Derivatives reform

If you want to understand why Congress seems completely incapable of checking the power of Wall Street, look back to a hearing on the Hill last October 7, and the subsequent events surrounding it. On that day, the House Financial Services Committee hosted a panel on reform of the market for derivatives, the financial instrument which played such a notable role in the country’s economic meltdown.

Everyone rational knows that there is an enormous need to seriously reform the derivatives market, but the committee, headed by Congressman Barney Frank (D-Wall Street), invited a panel of eight guests who were distinguished by their uniformly pro-industry positions. They included Jon Hixson of Cargill, James Hill of Morgan Stanley (on behalf of the Securities Industry and Financial Markets Association), Stuart Kaswell of the Managed Funds Association (which, through one of its lobbyists, has delivered significant “bundled” donations to Frank) and Christopher Ferreri of the Wholesale Markets Brokers Association.

In response to complaints from Americans for Financial Reform, which represents hundreds of consumer groups and labor unions, the committee issued an invitation – the night before the hearing was held — to Rob Johnson of the Roosevelt Institute. For the committee, the last minute inclusion of Johnson — a former managing director at Bankers Trust Company and former economist at the Senate Banking Committee and Senate Budget Committee — apparently constituted sufficient balance.

Predictably, witnesses at the hearing trotted out positions urging caution in regard to the matter of reform. Derivatives and other exotic financial devices have reaped the finance industry vast profits, but for Hixson of Cargill the common man and woman would be the real losers if Congress were to act too severely. “We offer customized hedges to help bakeries manage price volatility of their flour so that their retail prices for baked goods can be as stable as possible for consumers and grocery stores,” he told the committee’s wagging heads. “We offer customized hedges to help a restaurant chain maintain stable prices on their chicken so that the company can offer consistent prices and value for their retail customers when selling chicken sandwiches.”

Johnson, who came last, offered the only serious critical viewpoint, saying that the American public had been “quite demoralized by…the bailouts that we experienced last fall.” After about five minutes of his testimony, Congresswoman Melissa Bean – another industry-funded committee member who chaired the hearing because Frank was absent – had heard enough. “I’m just going to ask you to wrap up because we’re running out of time,” she told Johnson.

Johnson gamely continued. “When I hear the testimony today that are largely financial institutions and end users, I believe that I represent a third group that comes to the table, which is the taxpayers, the working people of the United States,” he said.

“I do need a final comment,” Bean interjected seconds later.

That put an end to Johnson’s testimony. “I was just called to this hearing last night, so I will provide detailed comments on your bill and a statement for the record that will finish my comments,” he concluded.

About five days later Johnson submitted his full testimony to the committee, to be included on its website along with the statements of the other eight panelists. When it wasn’t posted, Johnson asked Lynn Parramore, editor of the Roosevelt Institute’s blog, to see what was up. Parramore emailed and spoke to staffers at the Financial Services Committee, and received a number of explanations for why Johnson’s testimony had not been posted: first she was told it hadn’t been received, then that it had to be submitted as a PDF, then that the committee was having IT problems. “I couldn’t decide whether it was incompetence or mischief, but I began to suspect the latter,” Parramore told me.

Finally, she was informed that the committee’s general counsel would not allow posting of the testimony because Johnson had not submitted it during the hearing. (Of course, since Johnson had been invited at the last minute it was impossible for him to fulfill this pointless requirement.) So you still can’t read Johnson’s prepared testimony at the committee website, but you can check it out on the Roosevelt Institute’s blog.

Meanwhile, Frank’s committee has put forth its “reform” bill. “Too tepid, too weak, too late,” Johnson says of the legislation. “Very industry influenced. We had a crisis and they are pandering to the perpetrators.”

Share
Single Page

More from Ken Silverstein:

Commentary November 17, 2015, 6:41 pm

Shaky Foundations

The Clintons’ so-called charitable enterprise has served as a vehicle to launder money and to enrich family friends.

From the November 2013 issue

Dirty South

The foul legacy of Louisiana oil

Perspective October 23, 2013, 8:00 am

On Brining and Dining

How pro-oil Louisiana politicians have shaped American environmental policy

Get access to 167 years of
Harper’s for only $45.99

United States Canada

CATEGORIES

THE CURRENT ISSUE

February 2018

The Bodies in The Forest

= Subscribers only.
Sign in here.
Subscribe here.

The Minds of Others

= Subscribers only.
Sign in here.
Subscribe here.

Modern Despots

= Subscribers only.
Sign in here.
Subscribe here.

Before the Deluge

= Subscribers only.
Sign in here.
Subscribe here.

Notes to Self

= Subscribers only.
Sign in here.
Subscribe here.

Within Reach

= Subscribers only.
Sign in here.
Subscribe here.

view Table Content

FEATURED ON HARPERS.ORG

Article
Pushing the Limit·

= Subscribers only.
Sign in here.
Subscribe here.

In the early Eighties, Andy King, the coach of the Seawolves, a swim club in Danville, California, instructed Debra Denithorne, aged twelve, to do doubles — to practice in the morning and the afternoon. King told Denithorne’s parents that he saw in her the potential to receive a college scholarship, and even to compete in the Olympics. Tall swimmers have an advantage in the water, and by the time Denithorne turned thirteen, she was five foot eight. She dropped soccer and a religious group to spend more time at the pool.

Illustration by Shonagh Rae
Article
The Minds of Others·

= Subscribers only.
Sign in here.
Subscribe here.

Progress is impossible without change,” George Bernard Shaw wrote in 1944, “and those who cannot change their minds cannot change anything.” But progress through persuasion has never seemed harder to achieve. Political segregation has made many Americans inaccessible, even unimaginable, to those on the other side of the partisan divide. On the rare occasions when we do come face-to-face, it is not clear what we could say to change each other’s minds or reach a worthwhile compromise. Psychological research has shown that humans often fail to process facts that conflict with our preexisting worldviews. The stakes are simply too high: our self-worth and identity are entangled with our beliefs — and with those who share them. The weakness of logic as a tool of persuasion, combined with the urgency of the political moment, can be paralyzing.

Yet we know that people do change their minds. We are constantly molded by our environment and our culture, by the events of the world, by the gossip we hear and the books we read. In the essays that follow, seven writers explore the ways that persuasion operates in our lives, from the intimate to the far-reaching. Some consider the ethics and mechanics of persuasion itself — in religion, politics, and foreign policy — and others turn their attention to the channels through which it acts, such as music, protest, and technology. How, they ask, can we persuade others to join our cause or see things the way we do? And when it comes to our own openness to change, how do we decide when to compromise and when to resist?

Illustration (detail) by Lincoln Agnew
Article
Within Reach·

= Subscribers only.
Sign in here.
Subscribe here.

On a balmy day last spring, Connor Chase sat on a red couch in the waiting room of a medical clinic in Columbus, Ohio, and watched the traffic on the street. His bleached-blond hair fell into his eyes as he scrolled through his phone to distract himself. Waiting to see Mimi Rivard, a nurse practitioner, was making Chase nervous: it would be the first time he would tell a medical professional that he was transgender.

By the time he arrived at the Equitas Health clinic, Chase was eighteen, and had long since come to dread doctors and hospitals. As a child, he’d had asthma, migraines, two surgeries for a tumor that had caused deafness in one ear, and gangrene from an infected bug bite. Doctors had always assumed he was a girl. After puberty, Chase said, he avoided looking in the mirror because his chest and hips “didn’t feel like my body.” He liked it when strangers saw him as male, but his voice was high-pitched, so he rarely spoke in public. Then, when Chase was fourteen, he watched a video on YouTube in which a twentysomething trans man described taking testosterone to lower his voice and appear more masculine. Suddenly, Chase had an explanation for how he felt — and what he wanted.

Illustration by Taylor Callery
Article
Before the Deluge·

= Subscribers only.
Sign in here.
Subscribe here.

In the summer of 2016, when Congress installed a financial control board to address Puerto Rico’s crippling debt, I traveled to San Juan, the capital. The island owed some $120 billion, and Wall Street was demanding action. On the news, President Obama announced his appointments to the Junta de Supervisión y Administración Financiera. “The task ahead for Puerto Rico is not an easy one,” he said. “But I am confident Puerto Rico is up to the challenge of stabilizing the fiscal situation, restoring growth, and building a better future for all Puerto Ricans.” Among locals, however, the control board was widely viewed as a transparent effort to satisfy mainland creditors — just the latest tool of colonialist plundering that went back generations.

Photograph from Puerto Rico by Christopher Gregory
Article
Monumental Error·

= Subscribers only.
Sign in here.
Subscribe here.

In 1899, the art critic Layton Crippen complained in the New York Times that private donors and committees had been permitted to run amok, erecting all across the city a large number of “painfully ugly monuments.” The very worst statues had been dumped in Central Park. “The sculptures go as far toward spoiling the Park as it is possible to spoil it,” he wrote. Even worse, he lamented, no organization had “power of removal” to correct the damage that was being done.

Illustration by Steve Brodner

Cost of a baby-stroller cleaning, with wheel detailing, at Tot Squad in New York City:

$119.99

Australian biologists trained monitor lizards not to eat cane toads.

Trump tweeted that he had created “jobs, jobs, jobs” since becoming president, and it was reported that Trump plans to bolster job creation by loosening regulations on the global sale of US-made artillery, warships, fighter jets, and drones.

Subscribe to the Weekly Review newsletter. Don’t worry, we won’t sell your email address!

HARPER’S FINEST

Report — From the June 2013 issue

How to Make Your Own AR-15

= Subscribers only.
Sign in here.
Subscribe here.

By

"Gun owners have long been the hypochondriacs of American politics. Over the past twenty years, the gun-rights movement has won just about every battle it has fought; states have passed at least a hundred laws loosening gun restrictions since President Obama took office. Yet the National Rifle Association has continued to insist that government confiscation of privately owned firearms is nigh. The NRA’s alarmism helped maintain an active membership, but the strategy was risky: sooner or later, gun guys might have realized that they’d been had. Then came the shootings at a movie theater in Aurora, Colorado, and at Sandy Hook Elementary School in Newtown, Connecticut, followed swiftly by the nightmare the NRA had been promising for decades: a dedicated push at every level of government for new gun laws. The gun-rights movement was now that most insufferable of species: a hypochondriac taken suddenly, seriously ill."

Subscribe Today