Senator Elizabeth Warren recently complained about Citigroup’s influence on the congressional budget and legislative process. This chart from the Washington Post shows Citi has a strong voice in the executive branch as well. So do Goldman Sachs and other big Wall Street firms.
Conservatives are opposed to government welfare, and liberals are opposed to big business, so you would think that one thing they would be able to agree on is opposition to government welfare for big business.
But Democrats and Republicans in Congress are just the opposite. They just enacted a budget bill stuffed with benefits for big business, including a provision that allows big banks to gamble on with government-insured deposits.
Senator Elizabeth Warren, in a speech recorded in the video above, told how Citicorp leveraged its influence in Congress and the executive branch to bring this about.
Letting a bank such as Citicorp put insured deposits into inherently risky speculations, such as swaps and derivatives, is the equivalent of me wanting to bet my saving Las Vegas casinos and expecting the government to compensate me for my losses.
This is not was federal deposit insurance was intended to do. Deposit insurance was intended to cover normal banking activity in the real economy, such as home mortgages, auto insurance loans and business loans.
Federal deposit insurance never was intended to cover swaps and derivatives, which are just bets on which way the markets will go. They are not backed by real collateral and they do not contribute to the real economy.
Writers for Politico have noticed that President Obama has filled many key positions in his administration with employees or ex-employees of Citibank and its parent, Citigroup.
Now I don’t think that merely having worked for Citibank is a disqualification for a job in the federal government. And if you have to fill positions with employees of Wall Street financial firms, Citibank has a clean record compared to Goldman Sachs, JP Morgan Chase and some of the others.
Nevertheless Citibank was one of the failed banks that had to be bailed out by the government. If the Obama administration were serious about reforming Wall Street, it would not be filling its ranks with a network of people who are part of the problem.
Even assuming good faith, a person who created a mess is not the best person to clean up the mess, because that person usually will be more concerned about justifying past actions than solving the problem.
The excuse given for hiring so many Wall Street financiers is that no outsider has the necessary expertise. So the obstacles to reform are not only “too big to fail” and “too big to jail”, but “too complicated to understand”.
LINKS
The Citigroup Clique: Why is Obama appointing so many former employees of one Wall St. bank? by Senator Elizabeth Warren for Politico.
Citi on the Potomac by Kate Davidson and M.J. Lee for Politico
Phil Ebersole's Blog 