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 Guardian, Men's Journal, the American Prospect, and TomDispatch.com, where he's an associate editor. Email him at akroll (at) motherjones (dot) com. He tweets at @AndyKroll.

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Glass-Steagall Resurrected?

| Thu Dec. 17, 2009 1:29 PM EST

Is the Glass-Steagall Act, the Depression-era law that blocked commercial banks from participating in riskier investment banking, set for a revival? That's what a new piece of legislation, introduced yesterday by Senators Maria Cantwell (D-Wash.) and John McCain (R-Ariz.), would do, forcing major changes to financial titans like JPMorgan Chase, Citigroup, and Bank of America. 

But first, here's McCain on the new legislation on CNBC:

Reestablishing the firewall between commercial and investment banking poses a dilemma for banks such as JPMorgan Chase, which snapped up Bear Stearns' trading operations earlier this year, and massive Citigroup, which includes more staid consumer banking branches as well as riskier trading operations. The already controversial, shotgun-wedded Bank of America and Merrill Lynch relationship wouldn't survive if Glass-Steagall was revived, either. And you can throw Goldman Sachs and Wells Fargo into that mix, too. The McCain-Cantwell legislation would give such institutions a year to break up their different banking arms.

The Depression-era law, you'll remember, was abolished in 1999 by the Gramm-Leach-Bliley Act, one of the most significant pieces of deregulatory legislation in the past few decades, paving the way for the emergence of financial behemoths like Wells Fargo, JPMorgan Chase, and Citigroup (though Citi received somewhat of an exemption to grow even before 1999). It's a long shot at this point, but bringing Glass-Steagall back would be a watershed moment for financial regulation and major step toward scaling back the excesses and ridiculous risk-taking of the past decade or so. At the very least it would protect consumers' savings from use in banks' riskier operations.

And talk about a role reversal for John McCain! McCain voted for Gramm-Leach-Bliley back in 1999—a vote to tear down a law he now wants to restore. And as David Corn wrote last year, one of McCain's closest economic advisers during part of the presidential campaign was the godfather of deregulation himself, former Sen. Phil "Nation of Whiners" Gramm

Rep. Maurice Hinchey (D-N.Y.) is going to introduce similar legislation in the House, the Wall Street Journal reported Wednesday. Hinchey tried to get his bill into the House's big financial-reform package earlier this month, but Democratic leadership blocked him.

Since the Senate probably won't take up financial regulation until early 2010, it's unclear how soon the McCain-Cantwell legislation will get its day in the sun. It could be tucked into the Senate's financial regulation plans, or introduced as an amendment later in the sausage-making process. Either way, it's a promising idea and an encouraging start to the Senate's financial overhaul.

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Obama's Wall Street Window Closes

| Tue Dec. 15, 2009 3:50 PM EST

This week the last of the big banks—Citigroup and Wells Fargo—announced they're repaying their TARP funds, ending a major chapter in the Great Bailout Era. (It's not the end of the Era entirely, as many banks still benefit from the Federal Reserve's guarantees and other means of support.) As the banks exit TARP, they proudly shed the bailout's stigma—namely, needing the federal government as a crutch—and are free from the scrutiny of compensation and governance that came with federal assistance. But from a financial-reform standpoint, the bailout represented a huge, once-in-a-lifetime opportunity for the Obama administration: They had leverage, huge amounts of it, Long-Term Capital Management-sized leverage over Wall Street and its "fat cats." Obama, Geithner, Summers, and their allies in Congress (i.e., Rep. Barney Frank (D-MA)) had a window in which they could enact rigorous, meaningful, lasting reforms in the way our financial markets and institutions do business.

Now's as good a time as ever to ask: How'd they do?

Dispatch from Foreclosureland

| Mon Dec. 14, 2009 2:47 PM EST

In August, I wrote about the Obama administration's flawed $75 billion homeowner rescue effort, the Home Affordable Modification Program, and therein introduced readers to Florida homeowner Kristina Page. Page's mortgage company, Saxon Mortgage Services, first told her it hadn't heard of HAMP. Then, when Saxon finally admitted Page into the program, it lost her paperwork and told her multiple times to send more copies of the same information even though she knew the name of the employee who'd signed for the originals.

Page eventually made it into HAMP's trial period, a test run during which she had to make to three lower payments on time to qualify for the permanently lower, more affordable payments. After the test run, Page's mortgage company, per HAMP's guidelines, re-examined her financial information and recalculated what her permanent mortgage payments would be. Here's where, like so many other homeowners, Page ran into trouble. "As I feared," she recently wrote me, "the permanent payment is much higher than the trial period estimate payments." On the face of it, her new monthly payment will be $40 less—hardly much help when you consider the mess Page's been through to participate in HAMP.

It gets worse. Here's why, in Page's own words, Saxon gave her higher—and as it turns out, incorrectly calculated—HAMP payments:

I couldn't figure out how they had our income so high, so as I told you I contested the numbers. Saxon called this morning and I explained my problem. [The Saxon employee] checked into it and called me back with this gem. She said, "The extra income is because there is a letter in your file stating your sister Samantha will be contributing $1300 per month toward your household income"...I am an only child...I don't have a sister Samantha or any other sister. She [the employee] apologized profusely and even said, "This is all our fault"...I almost dropped the phone.

Music Monday: Morrissey Till I Die

| Mon Dec. 14, 2009 8:00 AM EST

The first thing you notice at a Morrissey concert isn't the man himself but his fans. Or at least that's how it felt at a recent show at Oakland, California's Paramount Theater, where Morrissey appeared in support of his latest album, a collection of B-sides titled Swords. Their hair styled circa The Smiths, clad in blue-jean rockabilly chic, Morrissey’s fans still adore him, deify him, cram at the foot of the stage and thrust their hands toward him for just a brush, a touch. Some gave Morrissey hand-painted signs; others clambered up onstage and dashed past security guards to wrap their arms around their beloved Moz.

And for at least one night, as he basked in the art deco majesty of the gorgeous Paramount, Morrissey was nothing if not grateful for the love. Notorious for cancelling shows (for reasons legit and not) and carrying an otherwise indifferent air about him, this was Morrissey at his most self-deprecating. "In view of cancellations, deaths, it's nice of you to hang around," he offered, later adding, "I can't believe you're still here."

A New Lease on Life for Detroit's Auto Dealers?

| Sat Dec. 12, 2009 7:00 AM EST

Update: The Senate passed the omnibus spending bill by a 57-35 vote on Sunday, with the dealer arbitration language intact. The National Automobile Dealers Association said in a statement, "The amendment will provide a fair process to address dealer concerns about the recent closures of General Motors and Chrysler dealerships, and will give affected dealers transparency and the right to arbitrate to regain their dealerships." Mark Reuss, GM's North American president, called the arbitration language "an opportunity for all of us to make the right decisions and move on."

Buried way down in the fine print of the Congress' $1.1 trillion spending bill, passed Thursday by the House, is a lifeline for an endangered species—the American car dealer. A clause inside the the 1,088-page bill would give thousands of General Motors and Chrysler dealerships that have been put on the chopping block the chance to challenge their closure though arbitration. The measure's supporters say it will put the brakes on the Obama administration's controversial attempt to resuscitate Detroit by downsizing its dealerships. "Profitable dealers should have never been terminated in the first place, and I was proud to join the fight to have these short-sighted decisions reversed," said Rep. Chris Van Hollen (D-MD) in a statement last week. "Automobile manufacturers won't be able to get back on their feet without a strong dealer network, and Congress is committed to ensuring that such a network exists."

The dealer-arbitration plan is the latest lurch in the push-and-pull between GM, Chrysler, and their dealers, which began earlier this year when the two automakers emerged from bankruptcy proceedings with plans to shutter more than 2,000 auto showrooms nationwide. Backed by the Obama administration's Auto Task Force, the companies' executives told Congress that cutting unprofitable or underperforming dealers would trim unnecessary dealers, cut costs, and make their firms more competitive with their domestic and foreign counterparts. Fritz Henderson, the then-president and CEO of GM, said dealer closures could save his company more than $2 billion. Michael J. Robinson, a GM vice president and general counsel, told a House subcommittee in July that the move would allow the surviving dealers "to improve the overall customer experience and retain current customers."

However, car salespeople and their allies argue that closing dealerships would have the opposite effect, driving away consumers and possibly even killing the automakers. "When you hear [new GM CEO Ed] Whitacre say, 'Well, we're going to increase market share,' and you don't have as many dealers, you wonder what he's been drinking or smoking," says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan. "It just doesn't compute."

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