Happy Meltdown Day
OK, not so "happy."
But this is the anniversary of the collapse of the house of cards that was Lehman Brothers.
One year ago today, the economic time bomb that George Bush and Dick Cheney had spent two terms constructing - on a platform of deregulations furnished by Bill Clinton and Newt Gingrich - blew up. The explosion created the deepest economic downturn since the Great Depression. And it sent unemployment rates soaring to the highest levels in a quarter century.
It also created an opening that the worst players on Wall Street and on Capitol Hill have used to allocate trillions of dollars in US assets to multinational corporations and banks.
According to the New York Times, "government spending [now] accounts for a bigger share of the nation’s economy - 26 percent - than at any time since World War II." Deficits are right, debt is up. Teabaggers are screaming. But it is not programs that care for the children of immigrants or aid to poor countries that emptied the Treasury, and it is not the "threat" of healthcare reform that worries serious economists.
It is the fact that the federal government has become "the guarantor against risk for investors large and small" while doing little to restrain CEO greed or to protect the citizens, consumers and communities that have been battered by banksters.
Things have not gone well over this past year, despite what "reluctant shareholder" Barack Obama suggested in an anniversary-marking presidential visit to Wall Street.
Obama described the Bush-Cheney administration’s bailout of the banks as a "necessary response" and hailed the "outstanding" leadership of bailout-friendly aides such as Treasury Secretary Tim Geithner and White House economic advisor Larry Summers. That was the disappointing part of the speech. The better part came when the president explicitly recognized the dangers inherent in allowing banks to be "too big to fail" and talked tough about the need for CEOs to recognize that they have social responsibilities. The president went out of his way to suggest that federal interventions on behalf of behemoth banks and colossal corporations are temporary and highlight the need for more oversight of banks and financial institutions — as part of the "most ambitious overhaul (of regulations) since the Great Depression." Those were both good messages, and the president delivered them well and wisely. But his fine rhetoric was a tad unsettling, as it followed upon a year of missed opportunities, mistakes and marauding by CEOs and their lobbyists.
It is fair to blame Bush (and Bill Clinton) for pushing economic and trade policies that did severe damage to the real economy while letting the barbarians jump the gate and run rampant. But Obama and his aides need to recognize that, after eight months in the White House, they now own that broken gate. And they have not exactly rushed to repair it.
"In the U.S. and many other countries, the too-big-to-fail banks have become even bigger," notes Nobel Prize-winning economist Joseph Stiglitz. "The problems are worse than they were in 2007 before the crisis." And, economic analyst Edmund Andrews pointed out on the eve of Obama’s address, "while Mr. Obama has offered two basic ideas to address it, his economic team has yet to offer anything close to a concrete plan (for doing anything about the fact that the nation’s four biggest banks now control 60 percent of all bank deposits)."
That, in a nutshell, is the problem.
The reckoning that was supposed to come for big banks and insurance companues has instead made them bigger. CEO salaries and bonuses are going up. The bailout of the auto industry is shuttering factories, closing dealerships and laying off workers as US tax dollars fund the export of production to foreign countries. And prospects for a real reform of the U.S. economy — while better than in the dark days when Dick Cheney and Tom DeLay were bartering the country away to the highest bidder — remain uncertain at best.
What to do?
There is nothing much to celebrate this day.
So let’s get down to the "business" of recognizing mistakes, setting agendas and listening to the truth tellers:
FIRST, remember those members of Congress who rejected the bailout. Dozens of Democrats and Republicans in the House and Senate voted "no" last fall, despite enormous pressure from the economic, media and political elites to approve the blank checks that got the US government into the business of buying "toxic assets."
Here are the voting records:
For the House.
For the Senate.
Don’t let any member of Congress who voted "yes" for the bailout try to tell you that they are "fiscally responsible" or "on your side." They did Wall Street’s bidding at a time when responsible members on the right and left refused to go along.
SECOND, listen to a senator who got things right.
Vermont Independent Bernie Sanders voted against the bailout and says that, instead of blank checks, banksters should be getting subpoenas and jail time.
Here is Sanders outlining his proposals to restructure companies that are supposedly "too big to fail," reform the Federal Reserve, and cap credit card interest rates.
THIRD, read Nomi Prins.
A former Goldman Sachs insider, Prins quit Wall Street the better part of a decade ago to started telling the secrets of the temple.
Her books warned about the speculation, the dirty deals and the dangers inherent in the decline of regulation.
A fellow with Demos think tank, Prins keeps tabs on the cost of the bailout to taxpayers and society at her website.
She writes wisely about why it is "Time to Do Something About ‘Too Big to Fail’ Banks."
And her new book, just out, has the best title and the best analysis of the meltdown and the raid on the Treasury that followed: It Takes a Pillage: Behind the Bailouts, Bonuses and Backroom Deals from Washington to Wall Street.
Pubished by The Nation
For more from Nomi Prins, attend the Demos/Nation sponsored panel on economic issues that will be held at 7 PM October 1 at the Ethical Culture Society, 2 W64th Street, in New York. Moderated by PBS Now’s David Brancaccio, the panel will also feature Newsweek’s Dan Gross, Newsweek and Rolling Stone’s Matt Taibbi.