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To say that Dugan is the lackey of the largest banks is really an understatement.

Chris Whalen


Old News

[Jun 18, 2013] Albany May Tighten Rein on Banking Consultants By JESSICA SILVER-GREENBERG and BEN PROTESS

June 17, 2013 |

New York State's top financial regulator is preparing to crack down on the consulting firms that banks hire to navigate legal problems like money laundering and wrongful foreclosures, according to people briefed on the plans.

In an attempt to force change upon a sector that operates with scant supervision and produces mixed results, Benjamin M. Lawsky, New York's superintendent of financial services, plans to use an obscure state banking law to rein in banks' use of consultants, these people said.

Among the aggressive moves under consideration, Mr. Lawsky is said to be weighing whether to ban temporarily at least one firm with a poor track record from advising banks chartered in New York. His office is also considering a new code of conduct for consultants, the people briefed on the plan said.

The state regulator's plan is the latest threat to the multibillion-dollar consulting industry, which has already come under fire in Washington as it has evolved into something of a shadow regulator of Wall Street. In recent months, consulting firms have been faulted with inadequately handling several prominent bank regulatory problems. In a review of millions of home foreclosures nationwide, for example, consultants racked up more than $2 billion in fees while struggling to complete the assignment. In other cases, consulting firms have been accused of either underestimating the amount of tainted money routed through a bank or even enabling banks to escape regulatory scrutiny for wrongdoing.

The consulting industry, which includes some of the world's largest accounting firms, has long defended the quality and independence of its work.

Yet the momentum for change stems from a fundamental concern about its business model: that it is fraught with conflicts of interest. While consultants are expected to take a critical look at banks, critics note, they are handpicked and paid by those same banks.

"It is worth considering the monitors' lack of independence," Mr. Lawsky said at a speech in Washington this year. "The monitors are hired by the banks, paid by the banks, and depend on the banks for future engagements."

The move by Mr. Lawsky - who has a history of irking his federal counterparts by running ahead of them - could spur regulators in Washington to act against the consulting firms. After halting the foreclosure review amid the lingering problems, officials at the Federal Reserve and the Office of the Comptroller of the Currency, federal agencies that oversee many large banks, are already questioning the prudence of heavily relying on consultants, said people close to the agencies. In testimony before Congress in April, a senior official at the comptroller's office said the agency was exploring new ways to curb the use of consultants and correct problems when they occur.

For now, according to the people, the agencies can instruct a bank to replace a consultant that has erred. And if the banks continue to run afoul of the law, the regulators have authority to punish them.

Still, the relationship with consultants is difficult to unwind. Regulators, grappling with scarce resources, rely on consultants to address weaknesses at banks that are hit with federal enforcement actions. Since the financial crisis, the comptroller's office has forced banks to hire consultants after more than 130 enforcement actions, or roughly 15 percent of the cases, an analysis of government records shows.

Reinforcing their clout, consultants like Promontory Financial Group and Deloitte & Touche have established cozy ties to the regulators, routinely hiring from government agencies. Promontory was founded by Eugene A. Ludwig, a former comptroller of the currency, and nearly two-thirds of its roughly 170 senior executives once worked at agencies that regulate the financial industry.

In a previous statement about the review of foreclosed homes, Promontory said that "From Day 1, Promontory strove to conduct its review work as thoroughly and independently as possible."

A spokesman for Deloitte said on Monday: "We share an important common goal with regulators - to safeguard the integrity of the capital markets. We welcome their insights into ways that we and others can improve our processes and procedures."

Even if federal regulators were to take a tougher stance with consultants, they would likely face legal limitations. When the comptroller's office fined a consulting firm in 2006, a federal appeals court later ruled that the regulator had "exceeded his statutory authority."

At the Congressional hearing in April, the comptroller's office petitioned Congress for greater authority. But lawmakers have yet to respond.

In the absence of federal action, Mr. Lawsky has been pursuing new avenues for regulating the consultants in New York, according to the people briefed on his plans. After searching local regulations, his office seized upon a little-known provision buried in New York state banking law dating back to the turn of the 20th century.

Under the law, the earliest version of which was created in 1892, Mr. Lawsky's office controls access to certain regulatory documents that consultants need to review when advising a bank. The documents, including examination reports, are considered "confidential communications," unless Mr. Lawsky's office determines that their release will serve "the ends of justice."

In the case of consultants, Mr. Lawsky is planning to choke off access to firms that fail to meet a set of standards, according to the people briefed on the plans. The standards Mr. Lawsky is likely to introduce would require, for example, that consultants disclose financial ties that could compromise their independence.

For consultants with a history of problems, he is weighing whether to revoke their access to the confidential information for as much as a year or more. Mr. Lawsky is considering such a move in the near future, the people said, though there are no indications of which firm he may target.

His use of the banking law mirrors how New York attorneys general have used a 1921 law, the Martin Act, as a cudgel against fraud. While Mr. Lawsky is not accusing the consultants of fraud, the banking law could enable him to take aim at their performance.

Mr. Lawsky has already criticized one prominent consultant. Last year, he accused Deloitte of helping the British bank Standard Chartered flout American sanctions on Iran. Although the bank hired Deloitte to spot suspicious money transfers from Iran routed through its New York branches, Mr. Lawsky said, the consultant instead instructed bankers on how to escape regulatory scrutiny.

Mr. Lawsky never took legal action against Deloitte, and federal officials have since placed full blame upon Standard Chartered.

Zack Carter on OCC Chief John Dugan in The Nation: "A Master of Disaster " By Chris Whalen

December 27, 2009

What a lovely Christmas present from Zach Carter (discussed here Saturday).

Writing in The Nation, the banking reporter for SNL Financial News describes the wreckage left behind by John Dugan, the Comptroller of the Currency and the primary regulator for most of the US banking industry. To say that Dugan is the lackey of the largest banks is really an understatement. The former lobbyist and Treasury official has been the defacto advocate for the largest dealer banks through the crisis, opposing regulatory reform initiatives on Capitol Hill and even from the FDIC, every step of the way.

Writes Carter:

Over the course of nearly a quarter-century, Dugan has proved himself a staunch ally of the American financial elite as a Senate staffer (1985-89), a Treasury official (1989-93) and a lobbyist (1993-2005), building a career that culminated in 2005 when George W. Bush appointed him comptroller of the currency. When the financial system finally succumbed to its own excesses in September 2008, Dugan's fingerprints were all over the economic wreckage, but almost nobody noticed.

Most recently, Dugan opposed the FDIC's issuance of a preliminary rule regarding securitizations, adding to his list of accomplishments. Dugan has consistently sided with the narrow interests of the largest banks and against the broader public interest during his tenure in Washington. If you were to pick one Washington official who was most responsible for the problems in the US banking system over the past cycle, it is most definitely John Dugan.

The issue for Democrats and members of the American Left raised by this article in The Nation is why does Barack Obama allow this situation to continue one day longer? The continuance of Dugan at OCC and Treasury Secretary Tim Geithner at Treasury illustrates how feeble the White House remains when it comes to financial services policy.

Or maybe the problem is one of conflict. Like Larry Summer's derivatives toxic waste dump inside Harvard's endowment fund?

And let's not forget Rahm Emmanuel's proud legacy as a director of Freddie Mac. Maybe the Obama White House just can't go there when it comes to financial anything.

Click here to read the rest of the article in The Nation.

John Dugan: Architect of "Too Big to Fail" Banks By Barry Ritholtz

December 26 2009

"There were two pieces of legislation that facilitated our migration toward too big to failInterstate Banking and Branching Efficiency Act of 1994, which permitted banks to grow across state lines, and the Gramm-Leach-Bliley Act, which eliminated the separation of commercial and investment banking. Since 1990, the largest twenty institutions grew from controlling about 35% of industry assets to controlling 70% of assets today."

-Kansas City Federal Reserve president Thomas Hoenig. in an August 6 speech before the Kansas Bankers Association.

There is a fascinating discussion of John Dugan, one of the earliest architects of the "too big to fail" concept, in the January 2010 issue of The Nation. Nothing in the article will surprise regular readers of this blog; however, the extent of the wrongheaded belief system and policy initiatives still has the power to shock.

Dugan's main work came about in 1989, when Congress ordered the Treasury to conduct a study on FDIC deposit insurance. Dugan ballooned the project into a 750-page manifesto, titled Modernizing the Financial System: Recommendations for Safer, More Competitive Banks (1991).

The title is misleading: There were many policy ideas pushed in the tome, but in terms of the current economic collapse, there were three of significance:

There is no small irony in that a hard core GOP ideologue wrote the blueprint for Democrat Bill Clinton's deregulation. "It was the first real recipe for too big to fail" said banking scholar Arthur Wilmarth Jr., professor at George Washington University Law School.

Dugan next became head of the Office of the Comptroller of the Currency (OCC), Dugan played a leading role in dismantling the existing system of consumer protection.

Elizabeth Warren, chair of the Congressional Oversight Panel for the Troubled Asset Relief Program, and Harvard University Law School professor, lambasted the OCC: "For years, the OCC has had the power and the responsibility to protect both banks and consumers, and it has consistently thrown the consumer under the bus."

The rest of the article details the usual revolving door story: Dugan leaves government, goes to work as an industry lawyer, helping banks circumvent the very regs he helped to create. In 2005, he is appointed as head of the OCC (it expires in August 2010).

For those people who believe that more deregulation is the way to regulate financial institutions, I advise you to closely study Mr. Dugans life work . . .

Sheila Bair vs. John Dugan (June 14th, 2009)

A Master of Disaster
The Nation, January 4, 2010

Selected Comments

  1. Mark E Hoffer:


    you know, "for the Holidays~"

    This post is, actually, pretty funny(timely).. I was just having a convo, recently, "People have no idea why there, even, were restrictions on "Interstate Banking", and in some States, restrictions on "Branch Banking"…let alone the perniciousness of the phrase: "the Democratization of Credit"..

    LSS: "Back in the Day, when JohnQ wanted to 'lever-up' to get Long a new Washer/Dryer set, He, oftentimes, had to go for a 'sit-down' with the local Bank Mgr.–who lived in the Community, and was unlikely to be 'transferred to Albequerque'..

    but, the video of Hank Aaron's 715th says it All..the Left-Center Field billboard of BankAmericard's w/the tag line "Think of it as Money!~" from '74 , ~35 years ago..
    see it @ ~1:08

    and, for all the "(D) makes all the difference in the World"-believers out there, remember, ol' 42 (WJC), and his DLC-crew, are the best "Republicans" 'Money' can Buy.

  2. David Merkel Says:
    December 26th, 2009 at 2:29 pm

    One quibble - insurance companies are safer than banks. They fail less frequently, and are not a source of systemic risk. (AIG's insurance ops were fine, aside from securities lending, cross guarantees, and capital stacking, all of which are non-insurance issues.)

    As it is, insurance companies and commercial enterprises have not done well owning banks… they are different skill sets. Same for banks and commercial enterprises owning insurance companies. They are different skill sets. Even in Europe, Bancassurance has had a poor record.

    I'm wondering if state regulation isn't better than federal regulation for banks. Why? State regulators are scaredy cats - when they don't get something, they just say no. Regulatory capture is less frequent, aside from single state entities. It's a non-starter, I know, but I think state regulation of all depositary institutions would actually be better policy for the US. From the experience of the insurance industry, it is hard to gain favor with a regulator if you are not domiciled in the state.

    Federal politicians will not give up such a precious piggy bank, though.

  3. Kurt Brouwer Says:
    December 26th, 2009 at 2:48 pm

    Barry– my only quibble is with your use of the term deregulation. The fact that Dugan and others stacked the deck in favor of big institutions does not constitute deregulation in my book. It is a perversion of regulation.

    I don't think we should just point to the repeal of Glass-Steagall as an example of 'deregulation' as the root cause of the problem. Instead, we should ask why was it repealed? Who benefited from repeal? And, who had the power to get 67 years of regulation overturned?

    In my view, there is only one answer: The repeal of Glass-Steagall illustrates the power of the Treasury-Banking Complex to get favorable legislation passed. The Treasury-Banking Complex is fine with added regulations as long as they serve to foster more consolidation and benefits for the very large banks

  4. Mark E Hoffer Says:
    December 26th, 2009 at 2:55 pm


    to your point, these-

    Amendment IX
    The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

    Amendment X
    The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.
    weren't stumbled upon, by accident..

    btw, wonder how many of those are still left, standing, in effect..

    also, remember, these guys -the so-called 'Anti-Federalists' were responsible for the inclusion of the "Bill of Rights" and, sadly enough, their arguments are as applicable now, as they were then.

  5. hgordon:

    To0l or not, this guy Dugan probably believed he was doing the right thing by removing restrictions on growth limitations for banking. Going back multiple decades, a large part of the motivation must have been to help US banks compete more effectively against foreign banks in the international domain, and that could only be accomplished with a larger asset base and more leverage. Between various unintended consequences and a lot of crony capitalism, we are where we find ourselves today, but it's simplistic to believe we are victims of some criminal mastermind.


    BR: Throughout history, most of the worst human acts are committed by true believers.

    That he drank the Kool Aid does not forgive his stupidity - or culpability . . .

  6. hgordon:

    BR – no argument. It seems that the current administration is content to whitewash over the past and promise that new legislation will prevent a repeat, but just about everyone gets to keep their jobs. And that's the real disconnect.

  7. bbishop Says:
    December 26th, 2009 at 10:22 pm

    Love your blog, read it religiously. Curious why you deleted these passages from the original version of this post. They seem quite accurate:
    "The issue for Democrats and members of the American Left raised by this article in The Nation is why does Barack Obama allow this situation to continue one day longer? The continuance of Dugan at OCC and Treasury Secretary Tim Geithner at Treasury illustrates how feeble the White House remains when it comes to financial services policy.

    Or maybe the problem is one of conflict. Like Larry Summer's derivatives toxic waste dump inside Harvard's endowment fund?

    And let's not forget Rahm Emmanuel's proud legacy as a director of Freddie Mac. Maybe the Obama White House just can't go there when it comes to financial anything."

Sheila Bair vs. John Dugan By Barry Ritholtz

June 14, 2009 | The Big Picture

"The overwhelming share of increased actual and projected costs for the fund have been caused by actual and projected failures of smaller banks, not larger ones."

-John Dugan, the comptroller of the currency

I don't usually insert myself into personal disputes amongst regulators, but when one of them appears to be a bit of an asshat, I feel compelled to comment.

The spat in question is between Sheila Bair, the exemplary FDIC chairwoman, and the asshat being the speaker of the above WTF quote, John C. Dugan, the comptroller of the currency. I don't know much about Dugan, other than some of the odd and indefendable statements he keeps making. He often misstates facts about the credit collapse, blames the wrong organizations for the subprime debacle, and otherwise seems to be a mouthpiece for the largest, most inept banking istitutions.

Some Dugan comments:

• "The overwhelming share of increased actual and projected costs for the fund have been caused by actual and projected failures of smaller banks, not larger ones."

• The financial crisis stemmed in part from problems at small banks;

• Stiff new insurance fees on banks as unfair to the largest banks

• The responsibility for validating risk management models lies first and foremost with the institution itself. (OCC)


Part of the problem lies with the OCC itself. Its an agency that has been committed to radical deregulation. When the NY Attorney General was looking into "discriminatory mortgage lending practices," OCC filed suit to stop the NYAG from inspecting the lending records of national banks using state laws.

The OCC decision to allow banks to become commercial real estate developers failed to recognize the inherent risk involved. Even the NAR complained. A 2002 ruling by the regulatory agency prevented Credit Card insurance from being regulated by the appropriate state agencies. And why anyone at the OCC thought allowing national banks to underwrite insurance was a good idea is hard to fathom.

At just about every turn, the OCC has ruled in favor of radical deregulation, and against consumers. Why the Obama administration has retained Dugan (he's been at the OCC since 2005) is beyond my comprehension. He is a classic Bush appointee - a regulator who is against regulating - who should have been dismissed at the earliest opportunity.

Banks are in the business of taking in deposits and then lending that money out again. If they cannot do that responsibly and profitably, then they should get out of the banking business and into real estate development or insurance underwriting. But so long as the FDIC is on the hook as the insurer of these deposit accounts, banks should not be allowed to stray from their core competency into other businesses.

Stick with banking.>

My Experience at Indy Mac: Fraud, Corruption, Criminality (July 2008)

Office of Thrift Supervision: Asshat Central (December 24th, 2008)

Video: IndyMac CEO Interview on CNBC (September 2006)

Idiots Fiddle While Rome Burns (July 2008)

Regulators Feud as Banking System Overhauled
NYT, June 13, 2009

OCC and Model Validation Part 2
Angry Bear, March 28, 2008

The Big Banks' Best Friend in Washington
Steven Pearlstein
Washington Post, May 27, 2009

Selected Comments

  1. Yogizuna Says:
    June 14th, 2009 at 8:23 am

    Regarding why Obama has kept Dugan on, we must always remember that he (Obama) is a member in good standing of our now very corrupt and entrenched establishment, so why anyone would expect real reform and positive change from him is beyond me.
    And yes, we did vote for him over McCain, but only as the "lesser of two evils". Yo

  2. Greg0658 Says:
    June 14th, 2009 at 8:23 am

    just back from walkin the dog .. got a minute before heading off to a project as a hired gun (with camera)

    I am worried that the cascading problems and technicalities of everything has just about all of us wondering the correct action to repair situations without lost steps or backpeddling .. both costly .. and there is little room for error these days.

    Or course a hired gun in the right postition helps make those decisions easier for some when the game is in hyperdrive.

    One more reminder .. the consumer is the boss / not your boss … without a consumer who has the ability to consume it all stops .. ask the boss if thats right.

  3. call me ahab Says:
    June 14th, 2009 at 9:20 am

    Joseph Stiglitz writes-

    "In the developing world, people look at Washington and see a system of government that allowed Wall Street to write self serving rules which put at risk the entire global economy-and then, when the day of reckoning came, turned to Wall Street to manage the recovery. They see continued redistributions of wealth to the top of the pyramid, transparently at the expense of ordinary citizens. They see, in short, a fundamental problem of political accountability in the American system of democracy. After they have seen all this, it is but a short step to conclude that something is fatally wrong, and inevitably so, with democracy itself."

    pretty powerful stuff

  4. CNBC Sucks:

    Ritholtz, Akismet ate my first comment attempt because I tried using those bad words again.

    Not only are you correct in calling Dugan an "asshat" for his comments, but the government is actually hurting the small banks by bending over backwards with taxpayer dollars to keep big, bloated zombie banks alive. How can small banks become big banks if the government protects those who should become extinct by their own actions?

    By the way, I have been reading about Chinese cannibalism during the Great Leap Forward and the Cultural Revolution and I am not liking it too much. I pray America always has good potato pancakes, pork rinds, beef ribs, jalapeno peppers, and other wondrous foods in its big, beautiful, glorious grocery stores. May overweight Americans stay that way forever with plenty of food options besides their fellow Americans.

  5. call me ahab Says:
    June 14th, 2009 at 9:51 am

    emigration anyone?-

    honolulu is suspect- probably made it for climate alone- Singapore- ok to visit but wouldn't want to live there-

    amsterdam, berlin and vancouver are great cities- can't speak for the rest- haven't made it there yet

  6. Dogfish Says:
    June 14th, 2009 at 10:13 am

    @ call me ahab/ishmael/tibbs, 9:20

    Thanks for the link to the article by Stiglitz… it reads a LOT like Naomi Klein's "Shock Doctrine". Have you read that, perchance?

    I would recommend it and "Confessions of an Economic Hitman" by John Perkins to anyone interested in reading more along those lines.

  7. Dogfish :

    @ gloppie, 10:03

    If McCain would've been elected, I think Phil Gramm was in line to be his Treasury Secretary. THAT would've been interesting… I wish people like him were held more to account, that they aren't speaks to the level of complicity and/or incompetence amongst the major media outlets.

  8. Stillaway:

    Not until public attention and outrage can be redirected from Brittney Spears' lack of underwear to the hypocrisy and self-dealing in DC will there be effective change. Perhaps the solution is for the MSM to cover DC in an Entertainment Tonight or Reality TV format?

    Imagine a camera crew following a Senator around 16 hours a day:
    There's Senator Asshat trashing the TARP Bill on national TV. There he is voting for it three hours later.
    Here's the Senator's earmark book. What's this? Five million dollars to dredge out the Stinkwater Canal. Here's a shot of the Senator's vacation home on the Stinkwater Canal.
    There's the Senator meeting with a lobbyist. What's that document sliding across the table? A bill written by the lobbyist's client that the Senator will introduce as legislation.

    Of course, the problem would be getting advertiser money. What corporation would want to pull the rug out from underneath their own feet?

    And I'll bet the Great CNBC Sucks is not outraged by Brittney's lack of underwear?

  9. Yogizuna:

    "In the developing world, people look at Washington and see a system of government that allowed Wall Street to write self serving rules which put at risk the entire global economy-and then, when the day of
    reckoning came, turned to Wall Street to manage the recovery. They see continued redistributions
    of wealth to the top of the pyramid, transparently at the expense of ordinary citizens. They see, in short, a fundamental problem of political accountability in the American system of democracy. After they have seen all this, it is but a short step to conclude that something is fatally wrong, and inevitably so, with democracy itself."

    There is nothing "fatally wrong" with democracy itself, but when democracy is saddled with a population that does not care enough to "right the wrongs" happening all around them left, right and center, and chooses instead to play their video games, go on Facebook, and watch a never ending stream of sports and movies, etc, etc, then of course democracy will fail when the people have become in fact "sheeple".
    With the same old democrats, the same old republicans, the same old stale establishment and or "powers that be", how can anything seriously change for the better in the long term scheme of things? Yo

  10. Dogfish:

    @Stillaway, 10:17

    Corporate influence over everything is, to me, the hulking gorilla in the room. There are three entities sitting at the table vying for power: government, business, and the people… and business has produced all kinds of shiny objects that either obstruct or distract the people (their own fault), and thus all the decisions are being made by business and government, without the people serving as an effective check against government overreach. People check Government who checks Business who checks People. It's like the three branches of government on a societal scale, but right now it's broken, because too many believe that the government and business are there to truly help them instead of pulling the wool over their eyes and exploiting them.

    "Fascism is capitalism plus murder." -Upton Sinclair

  11. CNBC Sucks Says:
    June 14th, 2009 at 10:54 am

    Fellas, and I do mean fellas because this blog is 99.9% male, after having read about cannibalism in modern China, I am inclined to think:
    1. I am definitely not outraged by Britney's lack of underwear, nor photos of Britney's lack of underwear, but I would definitely object to John Dugan's lack of underwear (have to keep this on topic)
    2. I couldn't care less what developing countries think of us - I want us to stop putting so much pressure on ourselves and focus on our own problems
    3. I can leave the US, but I don't want to, not even for Amsterdam – this is a wonderful, great, blessed country, even if we have to share it with Republicans like me
    4. America has always had 90% sheeple, 10% movers and shakers. The top 10% carry the bottom 90% and make this country great. You people on this blog are smart enough to be in the 10%, so go out there and make a difference.
    5. I need to work on my upper body, and focus on my new finance project, so I am going to be a member of Ritholtz's massive silent audience for a while. Enjoy your country!

  12. call me ahab Says:
    June 14th, 2009 at 10:57 am


    one of my favorite ales by the way- Dogfish- 60 minute pale ale- East Coast- made in Delaware I think-

    have not read "Shock Doctrine" but have read articles by her in the "Nation" – I know she is anticorporate-akin to Kalle Lasn of "Adbusters"- and believes that corporations try to control people through advertising and brand identity-

  13. Stillaway Says:
    June 14th, 2009 at 11:15 am


    On the topic of consumerism – I too thought of the ale when I saw the moniker Dogfish. Ever sample any of Flying Dog's products? Being more of malt man than a hop head, I think their Gonzo Imperial Porter is simply divine. It's viscous and has head like the crème on top of an espresso. I've had to lay off of it though. I drank it exclusively for one winter and gained 8 pounds.

  14. Marcus Aurelius:

    As we are learning, incompetence and cronyism do have costs. John C. Dugan should be sent packing. Asshat is much too kind and benign a word. Asshats are laughable - this dude has a major case of da' crazy (as is evident by his disconnection from reality), yet he still holds a position of power. That's dangerous.

    gloppie: I'd vote that ticket over any other (although there should be no Fed, so Mish would be out of a job, and I don't think BR, love and respect him as I do, would be suitable for, or happy in, a public service role).

  15. Mannwich:

    Just read that article a half-hour ago. Pretty timely post. It's pretty absurd that Dugan thinks the bigger banks should be protected even more, likely at the smaller banks' expense. Not even worthy of a response, really.

    On another note, I've come to the conclusion that 90%+ of the public doesn't really give a rip about any of this. Was out yesterday at lakeside bar on Lake Minnetonka, and I can tell you, nobody gives a rat's ass. It's summer in Minny and the weather is gorgeous. The outdoor bars are packed and most everyone seems to not have a care in the world. We're in the eye of the storm now. Everyone wants to be in a good mood, so everyone is in a good mood, despite "For Sale-Bank Owned" signs all over the lake at prime properties (reality hasn't set in there yet that these homes aren't worth a fraction of what they want for them in this market), and "For Lease" signs at virtually every commercial real estate building I've seen recently. Those sign-makers must be happy. Maybe those are the people out at the lakeside bar enjoying some revelry and extra exposed flesh.

    Having said that, I'm out of here. Off to a enjoy the afternoon on a friend's boat on Lake Minnetonka. Good to have friends with boats.

  16. Dogfish:

    @ CNBC Sucks

    I agree this is still a great country, but it will only remain as such if we can get the focus back on helping people and having a strong middle class… which is essential in any democracy.

    I will feel better about our chances if we lose the huge negative stigma attached to unions. As long as we have corporations, we need to have unions to maintain a balance of power between capital and labor. Otherwise things go out of whack and you have what we are experiencing now.

    I do disagree on your percentages, however:

    (I link to that as a young middle-class suburban white guy)


    @ call me ahab

    Despite my name, I find myself preferring Hennepin and Chimay Blue over Dogfish the Beer. It's still tasty, but for some reason I can't get down on it regularly.

    Thanks, again, for the link, I think I had heard of AdBusters, but never have gone to the site. I will check it out further.

    "Shock Doctrine" is less about the branding and corporate influence that her usual fare offers, and follows the same line as Stiglitz's article, but goes into more detail. She follows the history of the Chicago School's influence from the 60s to the modern day, and how many countries were used as test beds of it's theories… From South American countries early on, to Poland and Russia in the 90s.

    "Confessions of an Economic Hitman" follows along the same lines, but more on the IMF/World Bank side of things. Perkins was supposedly an IMF analyst, and his basic premise was that he'd write up overinflated analyses of large-scale projects for developing countries (power plants, factories, ect). These countries would take out loans from the IMF, and then they would default on those loans (as planned). Then the IMF would take their "pound of flesh" in the form of privatization of natural resources, forcing of further laissez-faire policies, etc.

    May we live in interesting times.

  17. Economic Darwinism :

    Sheila Bair an examplary FDIC chairwoman? I'm afraid I'm with John Hempton on this one:

    Other than that, I agree that Dugan seems to be an "asshat".

    PS: I love your blog and you've been a huge influence on the way I think about things, so I'm pretty shocked to see your comments about Bair. She is an idiot and maybe even an "asshat" as well.

  18. Economic Darwinism :

    Sheila Bair an examplary FDIC chairwoman? I'm afraid I'm with John Hempton on this one:

    Other than that, I agree that Dugan seems to be an "asshat".

    PS: I love your blog and you've been a huge influence on the way I think about things, so I'm pretty shocked to see your comments about Bair. She is an idiot and maybe even an "asshat" as well.

  19. DeDude Says:
    June 14th, 2009 at 11:58 am

    Completely out of touch with realities – and outright lying also. Must have been an oversight to allow this old republican to remain in the new administration. Hopefully they fix than sooner rather than later.

    The FDIC fees as well as capital requirements should be made progressive. The bigger the bank the higher the fees and the less leverage should be allowed. That would help keep banks from growing "to big to fall" and eventually allow us to be able to handle the fall of one of those top 20 banks.

  20. franklin411 Says:
    June 14th, 2009 at 11:59 am

    I'm going for a run and then shopping, but I will point out that Dugan was America's first major cartoon character:

    "The Yellow Kid," from R. F. Outcault's Hogan's Alley (created for the newspaper the New York World in 1895), was the first very popular, heavily-merchandized comic strip character in America.

    The Kid was an Irish tenement brat named Mickey Dugan who always dressed in the same dirty smock.

  21. johnbougearel Says:
    June 14th, 2009 at 12:08 pm

    Thanks Barry for sticking your two cents in,

    I had no idea we had such reckless advocate of the big bad banks at the OCC.

    I suspect John Doofus Dugan is sucking up and ass-kissing these big bad banks in hopes the revolving door will sweep him into some irresponsibly high paid banking job someday.

    I hope Obama's shoe leather kicks Doofus Dugan's ass so hard that he can't sit for a month. It is high time Doofus Dugan be given a permanent time out

  22. call me ahab:


    have tried some "flying dog"- not the porter though- will try sometime based exclusively on your recommendation- porter tends to be a bit on the sweet side though-

    in the summer I buy the cheapest mass produced beer I can get my hands on- miller & PBR come to mind- just needs to be "ice cold"


    I must have read a review or something on the "Shock Doctrine"- because it sounds very familiar- will have to give it a read- I know she has a few other books as well- so maybe I'll start from the oldest and work forward- "hitman" sounds like its worth a look as well

  23. Thor Says:
    June 14th, 2009 at 1:35 pm

    Manwich – On another note, I've come to the conclusion that 90%+ of the public doesn't really give a rip about any of this. Was out yesterday at lakeside bar on Lake Minnetonka, and I can tell you, nobody gives a rat's ass.

    I would have to agree with you on this one. I don't take quite the pessimistic view on this as do many of the other posters here. My belief is that rather than an example of America's decline, it is simply human nature that most people, wherever they are in the world, just go about living their lives, knowing full well that in the end, there is not a lot they can do about it. I used to talk to my grandparents a lot about The Depression and I was always fascinated that, at the time, most people just went about and lived their lived. They didn't concern themselves with policy decisions or international banking rules.

    Again, I think this is human nature, I have traveled quite a bit in the last several years and have kept in contact with many of the people I met around the world. From what I can gleam from my friends, they're mostly about like us. The average Joe in Sweden, or Morocco, or Argentina, is not spending great amounts of time thinking about these things.

    We, on the other hand, find these topics of great interest. What frustrates me is when I hear people lambaste the average Joe because they do not share our concerns. Reminds me too much of growing up in San Francisco where the typical attitude would be something like this: "What do you mean you're not recycling? Don't you care about the environment, don't you see how important this issue is? What's the MATTER with you?"
    Last quick example. I do not have, nor do I ever want, children. I cannot understand what would compel a person to want to bring a child into the world as it is, knowing what we do about global warming, the future of the economy, indebtedness, etc. I do, however, respect those of you who wish to bring children into this imperfect world because I know that your priorities are not the same as mine . . . .

    Just a thought

  24. patfla Says:
    June 14th, 2009 at 4:32 pm


    The photo at the top of this is great. So much for the neutral and objective eye of the lens.

    Of course whatever one thinks of Dugan vs. Bair, it's still probably not inaccurate to say that Ms. Bair may have larger political ambitions.

  25. MikeG Says:
    June 14th, 2009 at 6:00 pm

    I wonder why nobody has taken on Phil (you're a bunch of whiners) Gram and his wife Wendy of Energy deregulation and Enron fame. Those two have hurt this country a pretty good deal too, as far as I can tell.

    Both of the Gramms deserve to rot in the nastiest jail on earth for the trillions in damage they have done to the US economy with their self-dealing ideological corruption. Leading exhibits for the sleazy Texas-bred corporatist cronyism the Bush wrecking crew brought to Washington.

  26. Greg0658 Says:
    June 14th, 2009 at 6:12 pm

    on the 90% out to lunch in our democracy .. really now – what else is there but make the best of day to day life … we get to vote once every 4 years for someone who can do as pledged .. or decide to go for the money (4 years isn't a lifetime)

    ok you can (without breaking the law) .. vote / buy (or not) / procreate (or not)

    I always thought we needed referendum style democracy with elected people enacting the dotted Is and crossed T guidelines. These days in capitalism we would need quick recall or clawback facilities to keep business from going to far. Keep 'em wondering if they are overstepping the line and it'll cost 'em.

    but (always a but) I too, am worried at the 90% out to lunch …
    Squeeky Wheels and Old can't afford to replace broken Cars

  27. alfred e Says:
    June 14th, 2009 at 6:14 pm

    @MikeG: Agree more than totally. And yet Phil claims no wrong. Blames it on subprime to this day. Boil him in oil and save the world. Ooops. Too late.

    Just a sign of how corrupt and incompetent we have become.

    Jefferson (help me out here MEH): "Democracy requires an educated populace".

  28. Onlooker from Troy Says:
    June 15th, 2009 at 12:27 am


    AMEN! re: the Gramms. He should spend a good long time with a cell mate named Tiny who has been well versed in the litany of greedy actions that Phil and Wendy have spent their lives perpetrating. And she with a cell mate named Hilga.

  29. Yogizuna Says:
    June 15th, 2009 at 8:45 am

    "Democracy requires an educated populace".

    Then heaven help us, we are doomed!

As U.S. Overhauls the Banking System, 2 Top Regulators Feud

June 13, 2009 |

At a public meeting three weeks ago, John C. Dugan, the comptroller of the currency, blasted a proposal to impose stiff new insurance fees on banks as unfair to the largest banks, which he regulates. The financial crisis stemmed in part from problems at small banks, he insisted.

Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation and the regulator for many smaller, community banks, could barely hide her contempt. The large banks, she said, had wreaked havoc on the system, only to be bailed out by "hundreds of billions, if not trillions, in government assistance." She added, "Fairness is always an issue."

Behind the scenes, the two regulators have been clashing over a host of issues, officials said, be it the administration's coming regulatory overhaul or Ms. Bair's campaign to shake up the top management at Citigroup.

The long-running and deeply personal feud between Mr. Dugan and Ms. Bair, two Republican holdovers with similar career paths in Washington, is now helping to shape President Obama's attempt to revamp financial regulation aimed at preventing the regulatory lapses that contributed to the economic crisis.

Some of Mr. Obama's advisers and some senior Democratic lawmakers have suggested creating a single bank regulator. But the administration's current version, which could be announced as early as this week, would not combine the regulatory agencies. Instead, it would give Mr. Dugan and Ms. Bair significant new powers - and could intensify their turf battles.

Ms. Bair and Mr. Dugan declined to comment for this article.

The Treasury secretary, Timothy F. Geithner, the main author of the administration's plan, in recent weeks has refereed among the competing views of Ms. Bair, Mr. Dugan and Ben S. Bernanke, the Federal Reserve chairman. The four generally agree that, if starting from scratch, they would not create the cumbersome system that has evolved piecemeal over the last 150 years.

But with the administration and crucial lawmakers rejecting a single agency, the four officials have often disagreed on just how to streamline and strengthen regulation. Some points of contention include views on which agencies should play central roles in overseeing financial companies whose troubles could pose problems for the overall system, and whether to create a new agency to protect consumers from abusive mortgages or credit cards.

Officials say the latest version of the plan, in large part, is a compromise of various viewpoints.

"On an issue like regulatory reform, with so many differing opinions, the expectation is not that all sides will agree on the final product," said Andrew Williams, a Treasury spokesman. "But the administration worked hard to gather information from all parties to prevent a crisis like this from ever happening again."

Mr. Obama's economic team has often had internecine battles over policy, but the president's advisers generally fall in line once he makes the final decision. But Mr. Dugan and Ms. Bair are semi-independent regulators whose feuds have multiplied - and at times erupted in public.

Most of the banking industry couldn't be happier with the current system. Bank executives and lobbyists say that the system, while flawed, enables regulators to tailor rules for a variety of financial institutions. They maintain that the policy issues for small banks differ markedly from, and often conflict with, those involving the large banks.

"It's healthy that the regulators disagree," said Camden R. Fine, head of the Independent Community Bankers of America. "Out of their tension comes good, balanced policy."

But the fractured nature of regulation also makes it easier for financial institutions to shop for the friendliest regulator or pit agencies against one another, lawmakers say. To reduce that risk, the administration is expected to propose eliminating one of the weakest agencies, the Office of Thrift Supervision. The agency was faulted for missing problems at some of the largest savings associations, like Washington Mutual and IndyMac, as well as at the American International Group, which it regulated because the company owns a thrift.

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