Andy Kroll

Andy Kroll

Senior Reporter

Andy Kroll is Mother Jones' Dark Money reporter. He is based in the DC bureau. His work has also appeared at the Wall Street Journal, the Detroit News, the Guardian, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndrewKroll.

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Dem Defectors on Wall Street Reform?

| Fri Apr. 23, 2010 11:35 AM EDT

Senate Majority Leader Harry Reid (D-Nev.), has set the stage for a full Senate debate on the financial reform bill to begin Monday evening. Reid's decision to charge ahead on overhauling Wall Street—and not let closed-door talks drag on—drew fire from Republicans, like Sen. Susan Collins (R-Me.), who said a Monday cloture vote "would be unfortunate in view of the fact that both sides of the negotiations say that progress is being made." That said, Reid's push looks to be dividing Senate GOPers, who can't seem to agree on a unified strategy on financial reform, the Wall Street Journal reports. A bigger question, though, is whether all of Reid's own Democratic brethren stand behind his latest plan.

While numerous Dems took to the Senate floor yesterday to stump for the finance reform bill, an animated Sen. Chris Dodd (D-Conn.) said that not only were Republicans objecting to Reid's push but admitted that some "on the majority side as well" didn't necessarily want a Senate-wide debate so soon. Sen. Dick Durbin (D-Ill.), the majority whip, told Roll Call last week that he, too, wasn't sure whether all 59 Democrats supported the bill. That could mean Reid, Dodd, and other top Democrats merely need to twist a few more arms to ensure everyone's on board. Or are there some Senate Democrats not ready to take the financial reform battle to the floor?

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Is Grassley the Dems' 60th Vote?

| Wed Apr. 21, 2010 3:58 PM EDT

Could Sen. Chuck Grassley (R-Ia.), a senior figure and power player in the GOP, be the 60th vote Democrats need to pass comprehensive financial reform? That's what today's passage of a sprawling piece of legislation from Senate agriculture committee overhauling derivatives, the complex financial products at the heart of the financial crisis, seems to suggest. A party-line split in the ag committee was expected, but Grassley surprised some by casting the lone GOP vote, bringing the tally to 13 to 8. The vote came as a surprise, and Grassley's support could embolden Democrats as they push for passage of their full finance bill, which could land on the Senate floor as early as Monday.

After the vote, Grassley waved off any suggestion that his derivatives vote will translate into support for the broader bill. "The derivatives piece is significant," Grassley was quoted as saying today, "but that larger bill has a number of flaws that need to be resolved before I'd support it." Of course Grassley would say that. The Iowa senator's vote today was enough of a rebuke to his peers—namely, Sen. Saxby Chambliss (R-Ga.), the agriculture committee's ranking member, whose amendment to roll back crucial parts of the bill was defeated on a party-line vote—that Grassley wasn't going to rub any more salt in the wound afterward.

Still, his defection is a significant crack in the GOP's opposition to financial reform, a subject almost entirely led by Democrats like Sens. Chris Dodd (D-Conn.), Jack Reed (D-RI), and others. It wouldn't be surprising to see Democrats pounce on Grassley's vote as leverage against Senate Republicans and as a way of drumming up a few more Republican votes when the full Senate votes on financial reform in the coming weeks.

Apart from Grassley, today's vote on derivatives marked a major victory for pro-reform lawmakers and advocates. The bill passed by the agriculture committee would force derivatives to be traded on exchanges, like stocks are now on the New York Stock Exchange. Derivatives trades would also be processed through what's called a clearinghouse, where parties involved in that transaction put up collateral for each deal and where the clearinghouse guarantees the trades and lessens the huge amounts of risk in the currently opaque, unregulated over-the-counter market. In a bold statement, the bill also calls for banks to break out their derivatives trading desks into separate operations, eliminating the chance of imploding swaps deals from dragging down an entire firm. And while the bill allows for a few exemptions—a narrow slice of derivatives users like farmers, utility companies, and manufacturers wouldn't have clearing or trading requirements—the bill is seen as a very tough piece of legislation. "Under Chairman Lincoln's strong leadership, the Senate Agriculture Committee voted out a bipartisan bill that will bring derivatives trading out of the dark, provide strong oversight of market participants, and combat fraud, abuse and manipulation," Treasury Secretary Tim Geithner said in a statement after the vote.

GOP: Now Finance Reform Is Good!

| Wed Apr. 21, 2010 9:11 AM EDT

It took them a week or so, but Republicans in the Senate finally realized that locking arms with big banks and their lobbyists does a doozy on your public image. Ever since Senate Minority Leader Mitch McConnell (R-Ky.) made the disingenuous claim early last week that the current finance bill would create "endless taxpayer-funded bailouts," and soon after reports emerged that McConnell and Sen. John Cornyn (R-Tex.) had met with top hedge fund managers in New York to discuss reform with them, the GOP has looked like the party of Goldman Sachs at a time of boiling public anger at bankers and financiers.

Now, predictably, the GOP is backtracking. Yesterday, Sen. Judd Gregg (R-RI) told a Bloomberg radio station he hoped for a bipartisan solution on financial reform, and later on Tuesday, more top GOPers pared back the partisan fighting and extended their olive branches. "I'm convinced now there is a new element of seriousness attached to this, rather than just trying to score political points...I think that's a good sign," McConnell said, according to the Washington Post. Sen. Richard Shelby (R-Ala.), the ranking member on the banking committee and a leading voice on financial reform, said he believed the Senate was "going to get there" on financial reform, adding that "we've got a few days to negotiate, and the spirit is good." Several other Republicans, like the Maine senatorial duo of Olympia Snowe and Susan Collins, could ultimately lend a bipartisan imprimatur to a finance bill, too. (Though no one's forgotten Snowe's health care back-out, so I wouldn't hold my breath.)

All of this is quite a reversal for the Republicans, who only last week drafted a letter outright opposing the finance bill. All 41 Senate Republicans signed the letter addressed to Senate Majority Leader Harry Reid (R-Nev.). But the reasoning behind their reversal is obvious: With the Goldman-SEC suit adding momentum to reform efforts (momentum that, some GOPers believe, might've been deliberately created), the GOP's opposition made them look like Wall Street's cronies. And with midterm elections to worry about, that's an image every politician right now wants to avoid.

Geithner Defends Goldman's Gambling Chips

| Tue Apr. 20, 2010 3:19 PM EDT

At a packed hearing today on the 2,200-page autopsy of Lehman Brothers, a painstakingly detailed report by bankruptcy examiner Anton Valukas, Treasury Secretary Tim Geithner was asked about a obscure yet destructive financial product called a collateralized debt obligation (CDO). In particular, the questioner, Rep. Joe Donnelly (D-Ind.), wanted to know Geithner's take on "synthetic" CDOs, which are complex derivatives whose value rose and fall depending on the swings in the housing market. (That allegedly rigged Goldman Sachs deal at the heart of the SEC's suit? Yep, a synthetic CDO.) Unlike regular CDOs, which are backed by pools of actual mortgage loans, synthetic CDOs take the gambling to a new level: They're not backed by actual loans at all. Instead they were created by Wall Street's rocket scientists when the stream of real loans ran out to fulfill the demand from investors clamoring to bet more on the housing market.

You're probably asking, What do synthetic CDOs mean to me? Well, other than helping to explode the economy, not much. In fact, there's been considerable doubts and hand-wrining on whether these products serve any purpose whatsoever. "With a synthetic CDO, it's a pure bet," Erik F. Gering, a former securities lawyer and now a law professor at the University of New Mexico, told the New York Times. "It is hard to see what the social value is—it's hard to see why you'd want to encourage these bets." 

Back to Geithner. What Rep. Donnelly asked the treasury secretary was this: If they're essentially explosive poker chips that helped topple the economy, do we need synthetic CDOs? Should we get rid of them? To no one's surprise, Geithner wavered. He vacillated. While he admitted that the logic fueling the rise of synthetic CDOs before the housing crisis—that the market would grow and grow and never stop—was horribly wrong, he chose not to disavow these products that have little, if any, purpose apart from speculative investing. "They do provide a useful economic function," Geithner said. Whether that function benefits anyone other than the people in the casino remains to be seen.

Bipartisan Finance Bill Alive?

| Tue Apr. 20, 2010 1:04 PM EDT

Sen. Judd Gregg (R-RI), a top senator with a hand in financial regulatory reform, held out hope today that the Senate's bill to rewrite the rules of our financial markets could still garner bipartisan support. "I hope we’ll do a negotiated compromise because there's not really a big partisan divide here," Gregg told a Bloomberg radio program. "It's just a question of getting it right."

The bill, which is set to hit the Senate floor tomorrow or Thursday, has become the latest lightning rod issue to divide the Senate. Senate Minority Leader Mitch McConnell (R-Ky.) sparked the partisan bickering by disingenuously saying the bill would lead to "endless taxpayer-funded bailouts"; soon after, all 41 Republicans in the Senate signed a letter opposing the current version of reform legislation. That divide between Democrats and Republicans has been exacerbated by an armada of Wall Street and other financial lobbyists seeking to water down the Senate's financial reform bill and play members of both parties off of each other. The challenge facing Democrats is rounding up one or two or three GOP votes to overcome Republicans' potential filibuster and pass the bill, which could be voted on as early as Monday of next week.

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