October 11, 2009
Has There Been a Virtual Coup D'Etat by Wall Street? Who Own Our Government?
By Glenn Greenwald
Reprinted from Salon
The most revealing political quote of the last year came, in my view, from the second-highest ranking Democratic Senator, Dick Durbin, who told a local radio station in April: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." The best Congressional floor speech of the last year on the financial crisis was this extraordinarily piercing five-minute revelation from Rep. MarcyKaptur of Ohio on the Wall Street bailout and how the Congress is subservient to their dictates. And the single most insightful article on the financial crisis was written by former IMF Chief Economist and current MIT Professor Simon Johnson in the May, 2009 issue of The Atlantic, when he argued that "the finance industry has effectively captured our government" and detailed how theU.S. has become very similar to failed emerging-market nations in both its political and economic culture.
All of that came together last night on BillMoyers' Journal program, as Johnson and Kaptur together discussed the stranglehold which the financial industry exerts over the federal government and how that has produced a jobless recovery in which the only apparent beneficiaries are the bankers and other financial elites who caused the financial crisis in the first place. The discussion began with reference to this AssociatedPress article from last week, which examined Timothy Geithner's calenders, obtained through a FOIA request. Those documents show that Geithner spends an amazing amount of time on the telephone with the CEOs of Goldman Sachs, Citibank and JPMorgan: "Goldman, Citi and JPMorgan can get Geithner on the phone several times a day if necessary, giving them an unmatched opportunity to influence policy." Other than the President, virtually everyone else -- including leading members of Congress -- are forced to leave messages. Kaptur and Johnson begin by discussing what that signifies in terms of the ongoing financial crisis and how government works.
I'll excerpt a few representative passages, but the entire segment is very worth watching:
[excerpt from Capitalism: A Love Story]: "MICHAEL MOORE: Do you think it's too harsh to call what has happened here a coup d'état? A financial coup d'état?
REP. MARCY KAPTUR: That's, no. Because I think that's what's happened. Um, a financial coup d'état?
MICHAEL MOORE: Yeah.
MARCY KAPTUR: I could agree with that. I could agree with that. Because the people here [pointing to the Capitol] really aren't in charge. Wall Street is in charge" . . . .
SIMON JOHNSON: Well, I think it really tells you how the system works. The system is based on access and is based on what on Wall Street shaping Washington's view of what's important.
It's the people who are very close to Mr. Geithner before when he was the head of the New York Fed. Before he became Treasury Secretary. These people have unparalleled access. And in a crisis, when everything is up for grabs, you don't know what's going on, the people who will take your phone calls, right, in government and people who are going to be standing in the oval office, making the key decisions. That's the heart of the system. That's the heart of how you get your agenda through, by changing their worldview. . . .
And Rahm Emanuel, the President's Chief of Staff has a saying. He's widely known for saying, 'Never let a good crisis go to waste'. Well, the crisis is over, Bill. The crisis in the financial sector, not for people who own homes, but the crisis for the big banks is substantially over. And it was completely wasted. The Administration refused to break the power of the big banks, when they had the opportunity, earlier this year. And the regulatory reforms they are now pursuing will turn out to be, in my opinion, and I do follow this day to day, you know. These reforms will turn out to be essentially meaningless. . . .
BILL MOYERS: Let me show you an excerpt from the speech President Obama made on Wall Street last month, September. Here is the challenge he laid down to the bankers.
PRESIDENT OBAMA: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.
BILL MOYERS: A reality check. Not one CEO of a Wall Street bank was there to hear the President. What do you make of that?
SIMON JOHNSON: Arrogance. Because they have no fear for the government anymore. They have no respect for the President, which I find absolutely extraordinary and shocking. All right? And I think they have no not an ounce of gratitude to the American people, who saved them, their jobs, and the way they run the world.
BILL MOYERS: In the scheme of things, it is the Congress, and the government that's supposed to stand up to the powerful, organized interests, for the people in Toledo, who can't come to Washington. Who are working or trying to keep their homes or trying to pay their health bills. What's happened to our government?
MARCY KAPTUR: Congress has really shut down. I'm disappointed in both chambers, because wouldn't you think, with the largest financial crisis in American history, in the largest transfer of wealth from the American people to the biggest banks in this country, that every committee of Congress would be involved in hearings, that this would be on the news, that people would be engaged in this. . . .
I've been one of the Members of Congress trying to increase by ten times the agents to get at the justice issues for the American people. For companies that have been hurt. For shareholders that have been hurt. Our government isn't doing it. That it's very easy to look at the budget of the F.B.I. in mortgage fraud and securities fraud and say, 'How serious is the government?' And until those numbers increase, we will not begin to get justice. . . .
BILL MOYERS: Well, and this is what we were talking about earlier, the system. I mean, President Clinton's Secretary of Treasury, Robert Rubin helps eliminate Glass-Steagall. And then leaves the government and goes to work for? Citicorp?
SIMON JOHNSON: Well Rubin's a fascinating character. He ran Goldman Sachs, he went into the Clinton White House, then he became Secretary of the Treasury, and it was on his watch that, first of all, Glass-Steagall began to really seriously crumble, and then it was completely swept away- replaced, abolished, really. And then, of course, Rubin goes on after he leaves Treasury, to be the senior guru type figure at Citigroup. And Citigroup is absolutely epicenter of everything that's gone wrong with our financial system.
BILL MOYERS: And wasn't it Robert Rubin the mentor, the guru to both Tim Geithner and Larry Summers?
SIMON JOHNSON: Absolutely. Both Geithner and Summers advanced to senior positions in the Treasury under Rubin was instrumental in bringing Larry Summers to be President of Harvard, after the Clinton Administration. And according to published new report, he was absolutely key person in making sure that Tim Geithner first went to a senior job at the IMF, and then became President of the New York Fed. And there are unconfirmed reports that Robert Rubin was an essential adviser to then candidate Obama in fall of last year, with regard to who he should bring on board as the leadership team on the economic side.
MARCY KAPTUR: And you know, looking at it from the heartland, when I look at Wall Street and all their connections into Washington, and I've been at it a while now, it's very disheartening to me, because I know they don't care about us out there. We're flyover country for them. And they're just out to make money. . . .
BILL MOYERS: So, Simon, what happens now? If we're going to avert a depression and the next calamity, what needs to be done?
SIMON JOHNSON: Well, I think you have to keep at it, Bill. I mean, that's the lesson from previous generations of Americans, who have really confronted entrenched power like this. You have to keep at it. And you mustn't be satisfied. When the Administration says, 'Okay, we fixed it. Don't worry. We did some technical tweaking on capital requirements, for example, in the banks.' You have to say, 'No, that's not true. Let's look at what's happening, let's follow it through.' . . . .
BILL MOYERS: Does President Obama get it?
MARCY KAPTUR: I don't think President Obama has the right people around him. The poor man inherited a total mess, globally and domestically. I think some of the people that he trusted haven't delivered. I urge him to get new generals. It's time.
SIMON JOHNSON: Louis the Fourteenth of France, a very powerful monarch, was famous for having many bad things, you know, happen under his rule. And people would always say, 'If only Louis the Fourteenth knew. I'm sure he doesn't know. If we could just tell him, he'd sort it out.' You know. I'm skeptical.
Neil Barofsky, the independent watchdog of the TARP program, recently said that while the WallStreet bailout did avert full-scale financial collapse, it plainly failed in its principal stated goal of increasing lending(because banks used the money to buy other institutions, create capital cushions, pay out bonsues, etc.). He detailed how theTreasury Department actually tried (mostly unsuccessfully)to coach the banks into refusing to provide Barofsky with information about how they used the TARP money they received. Worse, he said that theU.S. economy is more dependent than ever on these same "too-big-to-fail" financial institutions, which have grown in size, and the U.S. economy is thus more vulnerable than it was even a year ago to an actual collapse. Meanwhile, even the extremely modest Wall Street reforms Obama is advocating are meeting heavy resistance from those who Dick Durbin called the Owners of Congress.
As Kaptur said, given the size and scopeof "the largest transfer of wealth from the American people to the biggest banks in this country,"one would expect there to be massive public interest in what happened and why, and, more so, whether any of this is being fixed(it plainly isn't). One would particularly expect the Democratic Party -- which has long branded itself as being the populist party against Wall Street -- would be leading that charge, for political benefit if not for substantive reasons. But that's clearly not happening, and the primary reason why is because both political parties, as institutions, are dependent on and thus controlled by the very industry that is at the heart of it.
Among the two parties, there's no outlet for the populist anger that Kaptur understands and is voicing because each party is eager to serve the interests of those who fund them. And that's why Democrats have largely ceded the populist anger over Wall Street to GOPoperatives who are exploiting the "tea party" movement as the only real organized citizen activism over these issues. See this article from last week:"Wall Street money rains on Chuck Schumer":
While the industry has scaled back its political spending in the wake of last year's economic collapse, data from the Center for Responsive Politics show that it's still investing heavily in the Senate, where it's likely to have its best shot at stopping — or at least shaping — the crackdown on Wall Street that President Barack Obama has proposed.
And it's clearly looking to Democrats to do it.
Of the $10.6 million the industry has given to sitting senators this year, more than $7.7 million has gone to Democrats.
This is hardly unique to the banking industry. This is how the political system works generally. Earnest, substantive debates over this or that policy are so often purely illusory, as the only factor that really drives that outcomes is the question of who owns and thus controls the political system. That central fact subsumes just about everything else.