Who Will Be the Un-Bloomberg? What Mayors Should Say About Wall Street
After the forcible eviction of Occupy Wall Street protesters in several major cities, the media are aflutter, with the Los Angeles Times asking, “Where Does the Occupy Movement Go Now?” The New York Times headline poses the same question: “Jolted, Wall St. Protesters Face Challenge for Future.”
Why aren’t they asking the questions, 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 eighteen big-city mayors may have conspired to coordinate the crackdowns against 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 and bankers to restore their version of normalcy.
Los Angeles Mayor Antonio Villaraigosa said on 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 seventeen other chief executives—to determine when the conversations about the crackdowns occurred.
In light of the police actions 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 National Association of Mayors. In that capacity, he has engineered resolutions calling for an end to the war in Afghanistan and for reinvesting billions in meeting our urban needs. He has spoken out courageously against the brutal inequities of California’s Proposition 13, which through a loophole starves the state’s education budget while protecting absentee owners of huge commercial properties in urban centers.
If Villaraigosa and other mayors can get on the phone to talk about the alleged problems of the Occupy protesters, why can’t they, as well as other elected officials, get on their phones and launch a campaign to re-regulate and reform Wall Street, now that there is rising public support? In the meantime, they should provide safer platforms for dissenters to continue their permanent protest of financial institutions. The mayors could even lead rallies in their own financial districts.
Michael Bloomberg has been the mayor of Wall Street, not the mayor of all New Yorkers. It is time for the Un-Bloomberg.
The nation’s mayors should assert, first, that their mounting local Occupation problems are not their fault but derive from a national Wall Street scandal that affects their cities through foreclosures, bankruptcies, unemployment and rising citizen frustration. The disaster requires more than urban crisis management. It will take national debate and reform. Second, they should call on their senators, Congressional delegations and President Obama to seize the opportunity for change that has grown with the protests. As Ron Suskind reported in his book Confidence Men, 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.”
Specifically, local officials can demand that Congress immediately revisit the compromises in the 2010 Dodd-Frank Wall Street Reform Act that resulted in loopholes protecting derivatives and hedge funds. During the 2009–10 debate, progressive amendments by Senators Blanche Lincoln, Carl Levin, Jeff Merkley, Sherrod Brown and Ted Kaufman were killed. At the time, Senator 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 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 public, existing in shadows known as “dark pools” without collateral, causing systemic risk. Warren Buffet calls derivatives “financial weapons of mass destruction.”
The legislation was “gutted” by loopholes then accepted as necessary by Representative Barney Frank and Senator Chris Dodd, with White House support. Frank said at the time that Senator Lincoln’s proposal on derivatives “went too far.” Lincoln had wanted all derivative operations spun off from the four major banks, which control 97 percent of the derivatives market. This history of compromise might explain Frank’s exasperation toward 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 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 was instrumental in crafting the 2000 law deregulating derivatives when he was Treasury Secretary under Bill Clinton. Summers, who headed Obama’s Council of Economic Advisers until 2010, is himself a hedge-fund architect.
Summers is gone, however, and the mood of the country is ripe for further reform. The tide is running against Wall Street–oriented politicians. Even Iowa Republican Senator Charles Grassley voted for the Lincoln amendment when it passed the Senate Finance Committee, so Main Street Republican defense of Wall Street cannot be guaranteed. But if the amendments fail again, the issue should be front and center in next year’s elections. 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 has changed the political climate, making it possible to pass legislation over the intense opposition of special interests. It’s time to regulate and police Wall Street. A government that crushes unarmed protesters to protect private power and property is approaching political and moral, not simply economic, bankruptcy.