Dan Maffei’s first TV campaign ad in 2012 proclaimed, “Dan Maffei opposed the Wall Street bailout.” But it wasn’t true. I knew that well as Maffei’s Green Party opponent in the 2008 election. On the eve of the first House vote on the $700 billion Troubled Asset Relief Program (TARP), the Post-Standard published statements by all three of us running for Congress in that race: “Maffei, Sweetland back bailout; Hawkins says investors, not the taxpayers, should eat the losses” (Sept. 26, 2008).
That $700 billion appetizer was just the beginning of an ongoing bailout banquet for the big banks that now totals many trillions of dollars in loans, discounts and “cash for trash”—when the Fed purchases toxic mortgage-backed securities, known as Quantitative Easing or QE. Totaling over $4 trillion since 2009 and continuing to this day with an $85 billion a month bond-buying program, QE was recently called “the greatest backdoor Wall Street bailout of all time” by the Fed official who ran the program from 2009-2010.
Almost all of this bailout is flowing to the top 10 US banks that own 84% of all US bank assets. Small, locally-owned community banks, like Solvay Bank in our area, have only seen their Federal Deposit Insurance Corporation (FDIC) insurance premiums go up to cover for the big banks that got bailed out after their risky investments in the housing market failed in the collapse of 2008.
Maffei Continues to Support Bailouts
When banks act as mortgage servicers, they make more money by foreclosing than by modifying mortgages to reflect post-housing-market-crash values. So, policies that encourage foreclosure are another form of bank bailout. That is just what the Obama administration policies did by withholding 90% of the $50 billion Home Affordable Modification Program (HAMP) allocated under TARP to subsidize home mortgage modifications.
The Treasury Department’s General Inspector overseeing TARP has explained that Treasury Secretary Tim Geithner refused to spend that money because he was didn’t want to reduce the profitability of the big banks. The US has had 14 million home foreclosures since 2008, with 11 million out of 49 million US homeowners currently with mortgages underwater (i.e., owing more on their mortgage than the house can be sold for at today’s values).
Although Maffei had cited money in TARP for mortgage modifications in his statement in support of the TARP bailout in 2008, Maffei has said nothing against the impoundment of HAMP funds, nor about bank bailouts in the form of QE.
The latest bailout Rep. Maffei supported was the so-called Swaps Regulatory Improvemnt Act, which he voted for on Oct. 30, 2013. The Act repealed Section 716 of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010. Section 716 required banks to put certain kinds of derivatives trading into separate units that are not covered by the FDIC. So, now your insured deposits can be used by your bank to make speculative bets on derivatives, and if the deals blow up, as they did with housing-related derivatives in 2008, the bank will be bailed out by the FDIC.
Who Is Influencing Maffei?
Maffei’s October 2013 vote reflects an earlier flip-flop on financial regulation in 2009. In October 2009, Maffei voted for and issued a statement in support of an overhaul of derivatives regulation to be included as part of what became Dodd-Frank that required over the counter derivatives swaps to be traded on exchanges.
But by December 2009, as a member of the “moderate” corporate-sponsored New Democrat Coalition (NDC), Maffei joined with his fellow NDC members and Republicans on the House Financial Services Commission to vote for many Wall Street-sponsored amendments to weaken regulations in what became Dodd-Frank, a sad story chronicled at the time by David Dayen on FireDogLake.com and by Public Citizen.
Maffei’s votes in favor of the bailouts are not surprising considering that the FIRE (Finance, Insurance, and Real Estate) sector has consistently been his biggest single source of campaign funding, according to the OpenSecrets.org campaign donations database.
Citigroup was deeply involved in the writing the Swaps Regulatory Improvement Act, according to the New York Times (May 23, 2013): “Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word.” Maffei received Citigroup PAC contributions in the current and two recent election cycles: $2,000 for 2014, $2,500 for 2010, and $2,000 for 2008.
Visit www.peacecouncil.net/pnl for information about progressive financial and banking policies designed to bailout Main Street instead of Wall Street.
