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Obama Fails to Reappoint Serious Regulator to CFTC

Wednesday, 19 June 2013 11:43 By Robert Pollin and Jessica Desvarieux, The Real News Network | Video Report

Jessica Desvarieux, TRNN Producer: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore. And welcome to this week's edition of The Pollin Report.

Now joining us is Bob Pollin. Bob is the founder and codirector of the PERI institute at UMass Amherst, and he joins us now from Amherst, Massachusetts.

Thanks for being with us.

Robert Pollin, Co-Director, Political Economy Research Institute: Thank you very much for having me on, Jessica.

Desvarieux: So, Bob, a lot of news coming out about financial markets and regulation. What is the latest?

Pollin: Well, yes, in the last week there were three major stories that came out in the press and in the financial sector. And they don't necessarily seem that they're that tightly connected, but in fact they are.

The first one is with respect to the regulations and who the regulators are at this place, the Commodity Futures Trading Commission. Now, that may sound like this obscure Washington bureaucracy that nobody can care about, but the Commodity Futures Trading Commission is really the central location for regulating the financial derivatives market, derivatives such as swap, futures, options. The derivatives were actually the centerpiece of the financial speculation that drove the global economy into the crisis in 2007 and 2009.

So regulating the financial derivatives market and the derivatives market for energy and food as well, extremely important. And it was a major feature of the regulatory law that passed in 2010, the Dodd-Frank law to regulate these markets, the derivatives markets. And we've talked at other times on The Real News Network about some of the detail.

But the news this past week is that the two--there's a five-person set of commissioners that actually implements the regulation. And the two that have been strongest in behalf of supporting the law that actually passed, the Dodd-Frank law that regulates derivatives markets, those two people, both of their terms have run out as commissioners. The Obama administration has chosen not to give them another term.

The key person is Gary Gensler, who is the chairman of the Commodity Futures Trading Commission, who actually was a former high official at Goldman Sachs. And when he came in under Obama, people thought, oh, he's just going to be a stooge for Wall Street. But he turned out to be anything but. He turned out to be a very strong, principled commissioner, exactly the kind of person that you'd want to have stay and make sure that the regulations that were passed in 2010 are actually implemented. Well, unfortunately, it appears that the Obama administration has decided to replace Gary Gensler with somebody named Amanda Renteria, who has no experience in this kind of work and, according to all the evidence, is not going to be strong in the same way that Gary Gensler was. So that's one piece of evidence.

A second was I want to refer to an article that was in the global--the leading global financial newspaper The Financial Times last week by one of their columnists, Gavyn Davies. And Davies tried to explain why the U.S. stock market seems to be going up so quickly even though the economy is basically still limping along. Very, very small improvements in unemployment and GDP growth, but the stock market keeps going up. And Davies says, well, actually, there's a fairly clear explanation for that, and that is that the share of the total output in the economy, the share of the total GDP or the pie, even if the pie isn't growing that fast, the share going to the rich in terms of profits is growing very rapidly because the share going to everybody else in terms of wages is going down.

Now, I'm saying that this is coming not out of a leftist kind of publication; this what's in The Financial Times. And Davies's own column referred at length to a blog by a well-known financial market blogger, and the title of the blog itself was "Where Karl Marx is right"--not the kind of thing you usually read from financial market type analysts.

So we have--number one, we have this story about regulations of the financial markets not getting implemented, that the tough regulators are getting replaced. On the other hand, we have this notion of the recovery, such as it is, is taking place mainly in the financial markets. That's what recovering quickly. And that's due to a redistribution of income where profits are getting a bigger share, everybody else is getting a smaller share.
And then the third piece, very unlikely source, the past few days, the International Monetary Fund, which for basically a generation had been the center of advocacy of austerity-type policies, it has now published an article saying that the U.S. should ease off on austerity. The U.S. should ease off on austerity. The IMF is saying it.

Desvarieux: Bob, it sounds like to me, just hearing all these headlines that we're going through, that this is really an example of how wealth and power is concentrated in the hands of few people, small group of people. Can you talk a little bit about what--the real root of this increasing income gap that we're seeing happening right now? Is that the root?

Pollin: Right. Well, we've had a rise in inequality, basically, for a generation, and it became crystallized due to the financial crisis. People recognize that, you know, when so much is flowing to the top, that gives more money for people to speculate on crazy kinds of things like the derivatives that brought the economy down. Now, so you have this period in which even the mainstream politicians decided that, okay, it's time to re-regulate finance, Wall Street, get tough, and have the financial markets work on behalf of everybody else, not have everybody else just work on behalf of Wall Street.

Well, that was the idea that was embedded in this so-called Dodd-Frank law, the financial regulatory law. But that law has never been implemented, because of the power of Wall Street to enforce its will. Even after a law is passed, they bring armies of regulators in to change the nature of the law, to push the regulators, and there's not enough pushing coming from the other side to counteract that. So Wall Street gets away.

In fact, I want to cite another good recent study. The Nation magazine had a study on how Dodd-Frank is getting defanged, the regulatory law, the Dodd-Frank law. So why is this happening? Obviously because people on Wall Street that represent the richest people in the country have tremendous political power, are utilizing it. And I'm not just talking about the power to influence the Tea Party; I'm talking about the power to influence the Obama administration. If the Obama administration was serious about financial regulation, they would let Gary Gensler stay as the head of the Commodity Futures Trading Commission. Again, it sounds--I know it sounds like this obscure thing that's all complicated. In fact, it's not complicated and it's not obscure. Gary Gensler has been a very tough, effective regulator trying to put in place the kinds of measures that were actually passed into law with Dodd-Frank to fight for a more stable financial system, and according to the news, Gary Gensler is getting replaced by someone who will be more friendly to Wall Street.

Desvarieux: Okay. Thanks so much for joining us, Bob.

Pollin: Thank you very much for having me.

Desvarieux: And thank you for joining us on The Real News Network.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

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Obama Fails to Reappoint Serious Regulator to CFTC

Wednesday, 19 June 2013 11:43 By Robert Pollin and Jessica Desvarieux, The Real News Network | Video Report

Jessica Desvarieux, TRNN Producer: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore. And welcome to this week's edition of The Pollin Report.

Now joining us is Bob Pollin. Bob is the founder and codirector of the PERI institute at UMass Amherst, and he joins us now from Amherst, Massachusetts.

Thanks for being with us.

Robert Pollin, Co-Director, Political Economy Research Institute: Thank you very much for having me on, Jessica.

Desvarieux: So, Bob, a lot of news coming out about financial markets and regulation. What is the latest?

Pollin: Well, yes, in the last week there were three major stories that came out in the press and in the financial sector. And they don't necessarily seem that they're that tightly connected, but in fact they are.

The first one is with respect to the regulations and who the regulators are at this place, the Commodity Futures Trading Commission. Now, that may sound like this obscure Washington bureaucracy that nobody can care about, but the Commodity Futures Trading Commission is really the central location for regulating the financial derivatives market, derivatives such as swap, futures, options. The derivatives were actually the centerpiece of the financial speculation that drove the global economy into the crisis in 2007 and 2009.

So regulating the financial derivatives market and the derivatives market for energy and food as well, extremely important. And it was a major feature of the regulatory law that passed in 2010, the Dodd-Frank law to regulate these markets, the derivatives markets. And we've talked at other times on The Real News Network about some of the detail.

But the news this past week is that the two--there's a five-person set of commissioners that actually implements the regulation. And the two that have been strongest in behalf of supporting the law that actually passed, the Dodd-Frank law that regulates derivatives markets, those two people, both of their terms have run out as commissioners. The Obama administration has chosen not to give them another term.

The key person is Gary Gensler, who is the chairman of the Commodity Futures Trading Commission, who actually was a former high official at Goldman Sachs. And when he came in under Obama, people thought, oh, he's just going to be a stooge for Wall Street. But he turned out to be anything but. He turned out to be a very strong, principled commissioner, exactly the kind of person that you'd want to have stay and make sure that the regulations that were passed in 2010 are actually implemented. Well, unfortunately, it appears that the Obama administration has decided to replace Gary Gensler with somebody named Amanda Renteria, who has no experience in this kind of work and, according to all the evidence, is not going to be strong in the same way that Gary Gensler was. So that's one piece of evidence.

A second was I want to refer to an article that was in the global--the leading global financial newspaper The Financial Times last week by one of their columnists, Gavyn Davies. And Davies tried to explain why the U.S. stock market seems to be going up so quickly even though the economy is basically still limping along. Very, very small improvements in unemployment and GDP growth, but the stock market keeps going up. And Davies says, well, actually, there's a fairly clear explanation for that, and that is that the share of the total output in the economy, the share of the total GDP or the pie, even if the pie isn't growing that fast, the share going to the rich in terms of profits is growing very rapidly because the share going to everybody else in terms of wages is going down.

Now, I'm saying that this is coming not out of a leftist kind of publication; this what's in The Financial Times. And Davies's own column referred at length to a blog by a well-known financial market blogger, and the title of the blog itself was "Where Karl Marx is right"--not the kind of thing you usually read from financial market type analysts.

So we have--number one, we have this story about regulations of the financial markets not getting implemented, that the tough regulators are getting replaced. On the other hand, we have this notion of the recovery, such as it is, is taking place mainly in the financial markets. That's what recovering quickly. And that's due to a redistribution of income where profits are getting a bigger share, everybody else is getting a smaller share.
And then the third piece, very unlikely source, the past few days, the International Monetary Fund, which for basically a generation had been the center of advocacy of austerity-type policies, it has now published an article saying that the U.S. should ease off on austerity. The U.S. should ease off on austerity. The IMF is saying it.

Desvarieux: Bob, it sounds like to me, just hearing all these headlines that we're going through, that this is really an example of how wealth and power is concentrated in the hands of few people, small group of people. Can you talk a little bit about what--the real root of this increasing income gap that we're seeing happening right now? Is that the root?

Pollin: Right. Well, we've had a rise in inequality, basically, for a generation, and it became crystallized due to the financial crisis. People recognize that, you know, when so much is flowing to the top, that gives more money for people to speculate on crazy kinds of things like the derivatives that brought the economy down. Now, so you have this period in which even the mainstream politicians decided that, okay, it's time to re-regulate finance, Wall Street, get tough, and have the financial markets work on behalf of everybody else, not have everybody else just work on behalf of Wall Street.

Well, that was the idea that was embedded in this so-called Dodd-Frank law, the financial regulatory law. But that law has never been implemented, because of the power of Wall Street to enforce its will. Even after a law is passed, they bring armies of regulators in to change the nature of the law, to push the regulators, and there's not enough pushing coming from the other side to counteract that. So Wall Street gets away.

In fact, I want to cite another good recent study. The Nation magazine had a study on how Dodd-Frank is getting defanged, the regulatory law, the Dodd-Frank law. So why is this happening? Obviously because people on Wall Street that represent the richest people in the country have tremendous political power, are utilizing it. And I'm not just talking about the power to influence the Tea Party; I'm talking about the power to influence the Obama administration. If the Obama administration was serious about financial regulation, they would let Gary Gensler stay as the head of the Commodity Futures Trading Commission. Again, it sounds--I know it sounds like this obscure thing that's all complicated. In fact, it's not complicated and it's not obscure. Gary Gensler has been a very tough, effective regulator trying to put in place the kinds of measures that were actually passed into law with Dodd-Frank to fight for a more stable financial system, and according to the news, Gary Gensler is getting replaced by someone who will be more friendly to Wall Street.

Desvarieux: Okay. Thanks so much for joining us, Bob.

Pollin: Thank you very much for having me.

Desvarieux: And thank you for joining us on The Real News Network.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Hide Comments

blog comments powered by Disqus