Economist: Anti-bank reform effort 'kind of thing you saw in Soviet Russia'

Obama pushes for bank reform as Goldman CEO watches from the stands

As President Barack Obama lays out his case for financial reform this week, a former chief economist of the IMF is comparing the work of an anti-financial reform pressure group to the political tactics of Soviet Russia.

"This is the kind of thing which you saw in Russia, in the Soviet Union. Very, very clever," Simon Johnson told MSNBC's Rachel Maddow Wednesday night.

Johnson was explaining how he was fooled into supporting a "grassroots" group calling itself Stop Too Big To Fail -- an organization he now says is an anti-reform front masquerading as a progressive pro-bank reform group.

A report by Justin Elliott at TalkingPointsMemo asserts that Stop Too Big To Fail is a corporate-funded effort to block the financial reform bill that would limit Wall Street banks' ability to trade in derivatives, and would set up a consumer protection agency to oversee banks' interactions with customers. Elliott reports:

[E]very indication is that Stop Too Big To Fail is an astroturf operation funded by corporate interests to give the appearance of grassroots opposition to reform.

The group's leader has a long history running a rent-a-front operation: offering up his services to large corporations who are willing to pay top dollar for a "consumers group" that will engage in stealth advocacy on behalf of industry. The group refuses to divulge its funding sources.

"These guys made the KGB look like amateurs, and I used to work in Russia quite a lot," Johnson told Elliott.

The TPM article links Stop Too Big To Fail to the DCI Group, a "public affairs firm that specializes in astroturf efforts and has worked for everyone from the Burmese junta to the tobacco industry."

"This group calling itself Stop Too Big to Fail is wrapping itself in some of the same appearances" as pro-reform groups, Johnson said. "Of course, when you actually see [their] TV ad, there's no mistaking. This is an anti-reform ad. It is a 'kill the bill' ad. And we now understand this very clearly and we will go after them most strenuously, I can assure you."

OBAMA PUSHES FOR BANK REFORM AS GOLDMAN CEO WATCHES FROM STANDS

With the battle to pass comprehensive bank reform well underway, President Barack Obama said Thursday that his financial reforms would bring an end to taxpayer bailouts as he made a defining pitch for America to overhaul Wall Street regulations.

"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in a New York speech with tough messages for financial barons, American voters and Republicans who oppose his plans.

The president said the bill currently under consideration in the Senate would protect the US financial system, the broader economy and American taxpayers should a large financial firm fail in the future.

"I am here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector," Obama said.

"I've insisted that the financial industry -- and not taxpayers -- shoulder the costs in the event that a large financial company should falter," he said.

"The goal is to make certain that taxpayers are never again on the hook because a firm is deemed 'too big to fail.'"

The Congressional Budget Office released a report Thursday estimating that the current financial reform proposal being debated in Congress would cut the budget deficit by $21 billion over 10 years.

Politico reports that Goldman Sachs CEO Lloyd Blankfein was in the audience at Obama's speech in New York. The company whose name has become synonymous with excessive risk-taking on Wall Street was recently accused of fraud by the SEC. Some observers say the charges will help the financial reform effort, though some opponents have questioned the timing of the SEC's announcement.

Blankfein reportedly even hobnobbed with Jann Wenner, the publisher of Rolling Stone, the magazine where reporter Matt Taibbi created an instant meme last year when he described Goldman Sachs as a "great vampire squid wrapped around the face of humanity."

Politico reports:

Wenner and Blankfein had never met before. But Wenner told POLITICO that the encounter, which occurred as both men were waiting for President Barack Obama to begin his remarks on Wall Street reform at New York's Cooper Union Thursday, was cordial.

The publisher said Blankfein approached him before the speech began and said, "I feel like I know you," mentioning the vampire squid article.

-- With AFP

This video is from MSNBC's The Rachel Maddow Show, broadcast April 21, 2010.