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D.C.’s New Bosses Start to Pay Back Wall Street

21 | By Shah Gilani

Rattlesnakes rattle their tails as a warning. It’s their way of saying, “I’m ready to attack you to defend my ground,” which really means defend myself.

All politicians are snakes. And some of them are rattlesnakes – but only if they have to be.

Most of them would prefer to silently slither in and out of their offices defending their self-interests. But sometimes a politician has to rattle his tail because his constituents’ interests are threatened – meaning his campaign contributions (money) and votes are threatened.

Republicans have been doing a lot of rattling lately, since they are now the majority species in the deep, dark den known as Congress.

Me, I used to be a staunch Republican. I still adhere to the basic Republican principles of smaller government, lower taxes and a “constructionist” view of the U.S. Constitution, not an interpretive one.

But I’m disgusted with the Rattlesnake Republicans who are pandering to crony capitalists. Their greedy, pro-super-wealthy and big-business agenda isn’t about the good of the country, but about lining their own pockets and becoming super-wealthy themselves.

And here’s how they’ve been lining their pockets most recently…

Rattlesnake Shake

Yesterday, the House of Republicans (oops, I meant House of Representatives) and greedy like-minded Democrats passed the Promoting Job Creation and Reducing Small Business Burden Act, by a vote of 271 to 154. According to Open Congress, 242 Republicans and 29 Democrats voted aye, while 1 Republican and 153 Dems voted nay.

There’s a lot of rubbish in the act. But the thing that riles me most is a provision that gives big banks an additional two years to comply with a slice of the Volcker Rule, an integral part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That slice says banks have to shed their collateralized loan obligation assets by July 2017.

That’s plenty of time. So why an extension to July 2019?

That’s the sound of a rattle. It’s the Rattlesnake Republicans and their Democratic buddies warning they’re going to defang not only the Volcker Rule, but as much of Dodd-Frank as they can.

What are collateralized loan obligations (CLOs)?

Banks and other lending outfits, like private equity shops, make loans – a lot of them leveraged loans and high-yield loans – to medium and large companies for all kinds of reasons.

Lately, these outfits have been making a lot of these loans to highly indebted companies that may have been taken over or spun back out as public companies. These companies then borrow huge amounts to pay fees to their private equity masters or to pay dividends to their shareholders.

Those loans are “securitized,” or packaged, like mortgage-backed securities, and “collateralized,” or “tranched,” meaning cut up into different layers with different collateral attached and different risks associated and different yields. That’s similar to the collateralized mortgage obligations (CMO) that blew up so spectacularly in 2008.

The tranches get sold to institutional investors, mutual funds, ETFs and banks. Banks buy CLO slices because they are loan assets, and, after all, banks are in the loan business.

CLOs are assets because they are securities that represent loans, and loans are assets on banks’ balance sheets. Forget that they can be toxic. Did I say that they are assets?

There is no reason to extend by two years the time banks need to shed these potentially toxic assets.

Just like there is no reason the same House of Reprehensibles passed a rule change as its first order of business in the 114th Congress.

That rule change requires all big budget legislative initiatives – think huge tax cuts for the 1% and big businesses – to be “dynamically scored.”

Dynamically scored? That’s a smoke-and-mirrors trick that says a budget cut (tax cut) isn’t necessarily going to be a revenue cut.

If you score the victories that the rich and big businesses get (they don’t say that – they say, if you score what the middle class gets) when tax savings from the rich and big businesses trickle down to the rest of Americans, they’re actually going to be better off, get better jobs and pay more taxes

And so, a tax cut applied just so can be a revenue generator.

Who knew?

They’re all snakes.

What we need is a milking station where the vipers in Congress can be brought out in public and milked of their venom.

What’s a milking station? It’s a voting booth.

21 Responses to D.C.’s New Bosses Start to Pay Back Wall Street

  1. Paul says:

    I believe the milking station is better served through the almighty dollar and how & where we spend it.
    I believe Big Business is spending theirs on both Parties and dilutes the power of our Vote.

    We need to be selective how we spend/Vote with our money, and knowing how they will use it.

    • Rchard L. Watson says:

      I agree wholeheartedly with this author.
      How easily they forget that we are the ones who put them in power and we can just as easily take them out.

      • John Heeckt says:

        The idea that the voters can and will kick the scoundrels out of Congress is nothing more than wistful thinking. Our population is less knowledgeable now than in the past. The worst of Congress still gets routinely reelected. The Republican congressional victory was nothing more than a vote against the nameless dread.
        It is virtually impossible to bring to the presidency a man or woman of strength, fortitude, knowledge and positive ruthlessness.

  2. wilson t crandall says:

    Sir,
    You are the Lion of Wall St, by this, I mean that you have the courage to speak out about abusive behavior of the author, regardless of the person, institution, practice, etc. There is no bank/investment firm that is too big to fail and the current use of derivatives after the previous disaster(s) is truly alarming. Those don’t understand/address History……………….

    I very much admire your accomplishments and you addressing matters of imperative concern.

    Sincerely,
    wtc

  3. Rod Schoenmaker says:

    I really appreciate your remarks but the draw back with the milking station, we the people are just as dumb as the politicians. The politician will say anything and we the people will believe anything without our own knowledge. In other words we never find our own answers we just go with what sounds good to someone else.

  4. H. Scott Watson says:

    Well said Shah. Like you I used to be a staunch Republican. But I became independent several years ago for the very same reasons that you recited!

  5. Carl Gethmann says:

    Nice article, but the final line is useless. Both Democrats and Republicans are snakes, you have no real choice. Both parties have supported the banks, big business, and Wall Street. The voter is consistently presented with a truly no-win situation and system is rigged to consistently present that.

  6. Kevin Beck says:

    My main question about all this is: When will we ever learn?

    When will we learn that we are now getting the government that we deserve, not the one that we want? When will we learn that the main objective of anyone that gets elected is to get re-elected? Or promoted?

    I want to get back to the political idea of Mark Twain, when he said, “Every politician deserves two terms: The first in office, and the second in prison.”

  7. Rick says:

    Two years for TBTF banks to comply?
    Then let us level the field and give ALL Americans
    an additional two years to comply with Obamacare.
    I will visit the milking station for that.

  8. Kennie says:

    When I first glanced at the heading/title of this article, I thought, “Oh yes, another piece about our (UK) Prime Minister” He (Dave Cameron) had just gone to Washington to get his new orders from Obama.

  9. Craig Stelck says:

    CDO’s, arbitrage,CDS (credit default swap) derivatives, prime, sub prime, Alt-A loans, quants, short selling, synthetic collateralized debt obligation, tranche, senior tranche, mezzanine tranche, equity tranche. So many financial tricks that are used to keep the financial fiction of amerikah going.

  10. Ed Schaffer says:

    Right on the mark Shah! You have once again opened my eyes to the reality of our political system.
    I value your opinion and am interested in your ideas. If you had your “druthers” ( if you could choose an alternative way to run and finance the political system ) how would you do it? Would you finance political parties through the public purse or by some other method? What would be the best way to reorganize our political system which currently is in a state of disrepute and appears to be getting worse as time goes by.

    • William Fenton says:

      The solution is Public Financing, it will level the playing fields in local as well as Federal Elections; then we can truly sing, “Free at last, free at last, thank God Almighty we are free at last. Free to compete in a “Free Democracy”.
      This current system is bought and sold to the highest bidder, just as the natural resources are bought and sold to the highest bidders.
      It is Capitalized and Corporatized. The poor man penny-less, the home-less, the less-gifted….. has “A dog’s chance”; little or no chance.

  11. 3 says:

    The big problem is the OATH that Republicans took never to raise taxes on their masters.
    Alas, this the one thing that might stave off the utter destruction of this once great country.
    The trillionaire corporations, and the billionaire owners of same were to pony up a responsible, and
    hefty share of what they gleaned from uncalled for deregulation to the dwindling coffers of the US Treasury, as they did in the 1950’s (when America was truly a great power), this nation would be in better shape. Instead, they are using their newly-bought congressmen and offshore schemes to dodge paying what they rightly should.

  12. Gary Semlak says:

    Shah:
    How about writing a “tell all” book that outlines many of the financial atrocities perpetrated by the financial wizards of Wall St. and their counterparts in Congress. You could probably retire on the book sales before they started rattling their threats.

  13. Harold says:

    It seems I stand alone. I haven’t voted for an incumbent for any office for 36 years.
    Some times I don’t have many to vote for,but, if enough of us did that the numbers would show who didn’t get votes in an election and someone would run against that incumbent.

  14. Ken says:

    The banksters are afflicted with an addiction as surely as any alcoholic or drug abuser, and they should be forced into rehab. They are destroying our civilization by reducing the working class into serfdom. They have no understanding of basic economics, fairness or history. The working class produces all of the products, the new ideas and everything else. The rich and the poor all live on their labors. Think about this. When they reduce everyone to penury, who is going to buy their junk or borrow their money. When the civilization goes, they go with it, no matter which country they flee to. When the U.S. finally defaults, there will be catastrophe. Think about this. All debts must be paid by someone, but if you owe more money than there is wealth in the world, the inevitable end is a middle age, a collapse of civilization, so that a new more viable civilization can be built from the ruins of the old. Don’t believe me? Go back and study history. We are at the end of the third cycle. The fist two ended around 1200B,C., and the second ended with the collapse of Rome and everybody else. Both times witnessed a complete collapse of civilization, followed by several centuries spent rebuilding a new civilization built on the remains of the previous civilization. There is a loss of existing technology, and the standard of living is reduced to a deplorable level. Do we want that? Or are we willing to take control of our government, which is supposed to be representing us, and replace them with people who truly represent us. Right now, the one with the most money wins. We must change that rule, because it is working against all of us out here who are just trying to live a decent, productive life.

  15. Frank says:

    You can never vote for an incumbent and still get the same results. We need to set term limits on the the senators and reps and also just as importantly, their staffers. If the people behind the politician are the same ones (they do the reading, writing, deal making with the K street gang, etc), nothing will ever change. Until that happens we will not see change.

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