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Democracy For The Southern Adirondack/Tricounty Area
Monday, July 19, 2010
Tricounty DFA Update: Emergency Action Call, Our Facebook Page, Letter To Rep.Murphy
Hello Everyone!

In This Update:

1. Facebook Invitation!
2. Emergency Action Call: Who Will Run The Consumer Financial Protection Agency
3. Letter To Rep. Scott Murphy On The Threat To Social Security

1. Facebook Invitation!

Democracy For The Greater Glens Falls Area now has a Facebook page, and since the news announced tonight that there are now 500 million people on Facebook,
it's clearly become a top way for people to connect with one another, organize and get news.

and join our new online group! We'll be doing a lot more with it in the future, and you'll get updates on your
Facebook page when we do, but only if you sign up.

2. Emergency Action Call: Who Will Run The Consumer Financial Protection Agency

Also tonight: There is a major action call to contact the White House and urge President Obama to appoint Elizabeth Warren
as the head of the new Consumer Financial Protection AGency.

At issue is whether there will be any, and I emphasize, any, reform of the US's financial industry.
Do not think that because there was a financial reform bill that there will actually be financial reform.
What basically happened is that Congress punted on the details in order to get Blue Dog votes,
and passed the buck to whoever runs the regulatory agencies.

Elizabeth Warren got the financial reform ball rolling and understands the issues better than anyone else
and will fight for consumers., The banking industry is pressuring the White House not to appoint her,
and so far the White House has pretty much taken their side on just about everything.

For more in depth coverage, read this piece from today's Huffington Post and add your name to the online petition:

John R. Talbott
Bestselling author of The Coming Crash in the Housing Market
Posted: July 18, 2010 11:33 AM
The Real Reason Geithner Is Afraid of Elizabeth Warren

As reported on HuffPost last week, Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner's views.

One can assume that Geithner, being very close to the nation's biggest banks, is concerned that Warren, if chosen, will exercise her new policing and enforcement powers to restrict those abusive practices at our commercial banks that have been harmful to consumers and depositors.

Certainly, Warren is not the commercial banking industry's first pick to serve in this new role. And unlike other legislation in which an industry's lobbying effort would naturally slow or cease once the legislation is passed, the new financial reform bill is continuing to attract enormous lobbying action from the banks. The reason is simple. The bill has been written to put a great deal of power as to how strongly it is implemented in the hands of its regulators, some of which remain to be chosen. The bank lobby will work incredibly hard to see that Warren, the person most responsible for initiating and fighting for the idea of a consumer financial protection group, is denied the opportunity to head it.

But this is not the only reason that Geithner is opposed to Warren's nomination. I believe Geithner sees the appointment of Elizabeth Warren as a threat to the very scheme he has utilized to date to hide bank losses, thus keeping the banks solvent and out of bankruptcy court and their existing management teams employed and well-paid.

To see how this scheme works during the current crisis we must go back and examine previous crises and recessions in order to understand their cause. As Kenneth Rogoff explains in his new book, This Time is Different, most crises are preceded by a boom or bubble period in which asset classes, such as homes in this case, reached unsustainable pricing levels. The main driver of most of these asset bubbles is loose bank lending in which banks offer money to asset buyers on very liberal terms, thus guaranteeing that asset prices will inflate abnormally. Eventually, all bubbles burst, and in the worst cases we are led into financial crises. The banks make things even more difficult because as prices fall the banks end up with substantial increases in problem loans.

To deal with this increase in problem loans, the banks typically pull back on all lending, not just lending in the affected sector. The banks, now primarily concerned with their own survival if they wrote off the problem loans, literally stop almost all new lending, thus driving the economy into a deep recession. It is difficult to sustain economic activity when there is no credit being supplied by the banking system. The banks, instead of lending to businesses and consumers, shift their investments to very safe instruments like US Treasury securities. The result is a risk-free cash flow that over time eventually repairs the banks' balance sheets by increasing their profitability and thus restoring their book equity.

Typically, during crises, the Federal Reserve also lowers interest rates and the cost of bank borrowing so as to make this risk-free profit spread to banks even greater. In the current financial crisis, the Federal Reserve has lowered interest rates to almost zero percent per annum thus assuring that the banks can profit enormously by doing almost nothing, not lending and sitting on risk free Treasury investments. While good for the banks, one can see how damaging this lack of credit extension can be to an economy trying to recover from an economic crisis.

What is most damaging about this approach to an economy attempting to recover from a recession is that it ensures that the policy of tight money from the banks will continue for some time. Time is needed for the banks to earn their way out of their loan losses and insolvency problems if they decide not to quickly write off the bad loans. In Japan, after their banking crisis of 1994, it took more than a decade for the banks to repair their balance sheets and resume normal lending thus retarding economic growth for decades.

This is exactly the plan that Geithner and Larry Summers have proposed for the current crisis. If you remember, Hank Paulson, the Treasury Secretary at the time, had announced that the $700 billion TARP funds would be used to buy toxic assets like bad mortgage loans from the commercial banks. But this never happened and now the amount of bad bank loans has increased in the trillions. Immediately after receiving authorization of the funding for TARP from Congress, Paulson reversed direction and decided to make direct equity investments in the banks rather than using the TARP funds to acquire their bad loans.

So where are the trillions of dollars of bad loans that the banks had on their books? They are still there. The Federal Reserve took possession temporarily of some of them as collateral for lending to the banks in an attempt to clean up the banks for their supposed" stress tests". But as of now, the trillions of dollars of underwater mortgages, CDO's and worthless credit default swaps are still on the banks books. Geithner is going to the familiar "bank in crisis" playbook and hoping that the banks can earn their way out of their solvency problems over time so the banks are continuing to slowly write off their problem loans but at a rate that will take years, if not decades, to clean up the problem.

And this is where defeat of the nomination of Elizabeth Warren becomes critical for Geithner. For Geithner's strategy to work, the banks have to find increasing sources of profitability in their business segments to balance out their annual loan loss recognition from their existing bad loans in an environment in which they continue to recognize new losses in prime residential mortgages, commercial real estate lending, sovereign debt investments, bridge loans to private equity groups, leverage buyout lending and credit card defaults.

The banks have made no secret as to where they will find this increase in cash flow. They intend to soak their small retail customers, their consumer and small business borrowers, their credit card holders and their small depositors with increased costs and fees and are continuing many of the bad mortgage practices that led to the crisis (ARM's, option pay deals, zero down payments, second mortgages, teaser rates, etc). American and Banking Market News reports this week that the rule changes in the financial reform bill may lead banks to start implementing fees that had essentially disappeared from the industry early in the new millennium, such as fees for not meeting minimum balance requirements on a checking account, or reinstituting fees for certain online banking transactions that are currently free or charging to receive a paper statement or to talk to a live teller as Bank of America's CEO has recently proposed.

It is exactly these types of unwarranted fees on small consumers and poorly designed products that Elizabeth Warren will fight against as head of the new consumer finance protection group. And it is why Geithner sees her as so threatening. Unless the banks are allowed to raise fees and charges on their smaller consumer customers, Geithner's and Summers' scheme for dealing with the banking crisis by hiding problem loans permanently on the banks' balance sheets will be exposed for what it is, an attempt at preserving the jobs of current bank executives at the cost of dragging out this recovery needlessly for years in the future. For the investment banks without small consumers and depositors to soak, Geithner and Summers have offered an environment with fewer competitors, more dominant market shares for the surviving firms and near monopoly pricing of their investment banking and derivative products to corporate clients and institutional investors to ensure continued and increasing profitability and growth.

Warren's appointment wouldn't just be a setback, it would devastate Geithner's entire plan on how to deal with trillions of bad assets the banks still won't recognize as losers. That is why I think she is going to face enormous resistance, even inside of the administration. The next one to oppose Warren after Geithner will be Larry Summers for this very reason. Then they will see if they can get Bernanke and finally Obama on board. The pitch to Obama and Bernanke will not be personal, it will be the same phony argument that Paulson and Bernanke used to justify TARP to congress, they will say that if Warren is appointed the entire world of banking and finance as we know it will come to an end.

I am reminded of when Bernie Sanders offered an amendment to audit the Fed to the financial reform bill earlier this year. While it was just one of many amendments being considered, the administration came out and said it was not against any of the amendments being discussed, with one exception, they would fight the "audit the Fed" idea to the death (me thinks the lady doth protest too much). Why? The same reason, a complete audit of the Fed would show that we have still not dealt with the bad loans on the banks' books.

As to the other two potential nominees on Obama's short list for the position, Michael S.Barr is Geithner's boy currently working for him as an Assistant Secretary at Treasury. More importantly, he is Bob Rubin's boy, having served as Rubin's assistant in the Clinton administration. If you are Rubins' boy, you are the bank lobby's boy as this position of Rubin's boy was previously held by Summers and then Geithner. Eugene Kimmelman seems like a nice enough person who has no background in finance. If the banking lobby can't get their guy in, the next best thing is to get a completely clueless person in who is too afraid to act boldly given he couldn't tell a CDO from a CEO. He has been the top lobbyist for the Consumers Union, so he is pro-lobbying and as a positive comment, really understands how toasters and garage door openers work.

Elizabeth Warren won't just protect consumers, her Oklahoma bred sense of honesty, fairness and decency just might reinvigorate and redirect a government and a banking industry that for too long has seen the average American taxpayer and the typical small consumer as the enemy to be taken advantage of at every turn.

If you want to help make sure Elizabeth Warren is appointed to head the new consumer finance protection agency, please take a minute and that will be presented to the President and then use the accompanying email opportunity to invite your friends to do the same.

3. Letter To Rep. Scott Murphy On The Threat To Social Security

The same people who gave us the financial crash are gearing up for another run at wrecking Social Security: over the next few weeks you are going to be hearing a great deal about this, and we will have more.

DGGFA adopted the following letter at our July 7 meeting and sent it to Rep. Scott Murphy.

Dear Representative Murphy;

We would like to express our thanks and appreciation for your recent votes in favor of the emergency extension of unemployment benefits and other benefits, financial regulation, and extending the home purchase credit. These were important steps towards fulfilling the Democratic Party's long-term promises to the American people, for restoring our economy, and the American tradition of equality and fairness. We would urge you to continue to support efforts in the future to strengthen the financial regulation bill, for instance, by the full restoration of the Glass–Steagall Act of 1933, and other measures that will get Wall Street out of the casino racket and back into its proper role of helping finance real economic development, that is, by helping create wealth rather than merely gather it.
However, our principle concern in this message today that conservative elements in our economy and, very unfortunately, within the Democratic Party, are attempting to generate a bogus crisis over the future of Social Security, very much as they attempted to do during the Bush years.
We would make several points:
*The real financial stability of Social Security is not at issue. There is no crisis. Any future short falls can be easily dealt with, for instance, and most specifically, by removing the cap on upper income individuals.
*There is no deficit crisis, relative to the U.S. economy and its strengths. Bringing deficits down is mainly an inside-the-beltway concern. We are sure you are aware of polls that indicate 60% or more of the American people feel that the government is not doing enough to get the country moving economically, and that deficits are not a present concern. Least of all, there is no need or a mandate to reduce deficits by attacking Social Security.
*As medical science and health standards improve, and people live longer, it may be sensible in the future to raise the retirement age, but this must be done carefully, with great attention to the special needs of Americans who work physically, very many of whom are members of or supporters of the Democratic Party. Any change in retirement ages should only be considered independent of any crisis atmosphere, where an effort will be made by vested interests to stampede the nation into a hasty and ill-advised decision.
*Special interests still would seek the privatization of Social Security– indeed, there are still what both President Roosevelts labeled economic malefactors, who are drooling at the prospect of channelling all of the nation's retirement savings through Wall Street, so that they may dip their greedy fingers into every American's retirement income. They are not entitled to a share. And above all, the present ongoing economic crisis, and the wild fluctuations in the stock market, expose as thoroughly as could be imagined the folly of letting Wall Street have anything to do with Social Security, if we had done so during the Bush years, the results would have been catastrophic. In fact, the entire modern trend away from traditional defined benefit pensions to IRAs, 401Ks and the like should now be in question.
Again, we appreciate these votes. Will we have your commitment to preserving the achievements of the New Deal and Great Society, including protecting Social Security from privatization in any form, and that the costs of any reforms will not come at the expense of the poor, the elderly, students and the middle class, but from those people who have benefited the most from the American Dream, often at other’s expense?

Democracy For The Greater Glens Falls Area.

Thanks Everyone! See you on our new Facebook page!


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Monday, July 05, 2010
Tricounty DFA Update: Our New Facebook Page, Meeting Reminder, more
Hello Everyone;

Hope you all had a fun-filled, safe and patriotic holiday weekend!

In this update for July 5th, 2010:

1. Our New Facebook Page
2. Meeting Reminder
3. Washington County Picnic

At our last meeting we decided to create a Facebook page. Unfortunately my computer troubles delayed that, but it is now up and running and available to you all! You can see it at:

I would urge everyone to join this new page. (You will need to join Facebook first.) As a member of the page you will be able to post messages to "the wall," which, if you are not familiar with it, is a community bulletin board where any member can post a message that every other members sees and gets on their own page. This makes it a good way to communicate with and find other members. It's a very flexible thing with a lot of potential for creative uses. If we want to we can– all together– make this into a major center of progressive politics in the entire Southern Adirondack-Tricounty-Greater Glens Falls-Saratoga-Lake George Area.

So go and sign up at:

Be looking forward to hearing from you all.

1. Our New Facebook Page

We will be having our regular monthly meeting this Wednesday, July 7th, at 7pm at the Rockhill Bakehouse Cafe in downtown Glens Falls. Last month we sent a letter to Rep. Murphy about some of his votes. We've received a partial reply back and Dick has also been in contact with Murphy's Chief of Staff Todd Schulte, so we may have more response to this by Wednesday.

Rep. Murphy has made some very good votes lately- for instance, he voted for financial reform and then voted for the unemployment extension, which is excellent and I am sure will please us all. His race against Republican challenger Gibson does not seem to be attracting much attention, but that probably is for the best for Murphy as the incumbent.

The cafe is located on the corners of Elm and Exchange Streets and Hudson Avenue, one block west of the roundabout in downtown Glens Falls.

3. Washington County Picnic

An invitation from Naomi Marsh at the Washington County Democrats:

Washington County Democrats' Annual Picnic

Where: Roger’s Island - Fort Edward off Rt. 197 (end of the Island at the Idle Hour Club Grounds)
When: Sunday July 18, 2010 - 12 noon to 4 pm (food served between 1 and 3 pm)

The Committee will provide barbecue meats and non-alcoholic beverages Everyone is asked to bring a dish to share.

Beer and Wine will be sold by the Idle Hour Club for $2.00 each.
Note: No alcohol can be brought into the park.

Good Food - Music - Political Guests
Cost is $18 per individual; $30 per couple
(children under 12 free)
For tickets contact your local town chair or Judy Doonan: 692-7215

Thanks everyone! See you all Wednesday,


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