The next big battle in Washington in heating up.
And, as they have since January, Republicans are ready to "just say no." They should probably re-think that plan.
Because this fight won't be over providing access to health insurance, which could be characterized as "helping poor people," although it actually benefits everyone. You can always drum up some opposition to helping the poor in America.
The coming battle will be over punishing the bankers, traders and Wall Street fat cats whose greed and dishonesty almost threw us into a second Great Depression. And, so far, the GOP has come down firmly on the side of the bad guys. In a letter to President Barack Obama, every Republican member of the House and Senate declined to support financial reform legislation backed by the president.
You'd think Republicans would have learned something from the first Great Depression, when Herbert Hoover sided with the folks who'd caused the crash and handed Washington over to the Democrats for a generation.
The Great Depression also created a long-standing distrust of Wall Street and the financial system among working class and middle class Americans.
My Dad, a Depression baby, used to tell me that the stock market was just a scam to fleece the little guy for the profit of the big guys.
Turns out he was right.
The SEC has filed a civil suit against Goldman Sachs, one of Wall Street's most prominent firms. In part, it alleges that Goldman Sachs created a securitized debt instrument, a derivative, that was designed to have the most risk possible. In short, it was set up to fail. The firm happily sold this toxic time bomb to one set of clients, who got slaughtered when the inevitable happened. But it told a second, more favored set of clients, to sell the product short. To bet that it would fail. Of course, the second group of clients made out like what they were -- bandits. Goldman Sachs, of course, profited because they made commissions on both ends.
That's pretty much exactly how my Dad told me Wall Street worked. But I didn't believe him.
What I can't believe now is that if Goldmans Sachs really did what the government alleges, why is this only a civil suit? What Goldman Sach had going on was a racket every bit as crooked -- and probably much more lucrative -- than anything the Gambino family ever thought about. If the company really did this, the Justice Department needs to bust out the RICO statutes and cause Goldman Sachs to cease to exist.
Have we gone from "too big to fail," to too big to jail?
I don't think executives and brokers at Goldman Sachs are the only people on the street who probably deserve a visit to one of our fine, taxpayer-supported federal prisons.
The financial meltdown didn't just happen, it was caused by these peoples' greed, incompetence and in some cases, outright criminality.
The Obama administration is preparing legislation to try to make sure that it doesn't happen again. That legislation is far from perfect. It doesn't go far enough in putting the the financial markets back into the cage of regulations that kept the system safe for 70 years.
And let's point out, because the industry is sure to claim it will be crippled by watered-down regulations that will eventually be passed, that during that 70 years Wall Street and the country saw an unprecedented economic boom, the greatest sustained creation of wealth in the history of mankind. And financial professionals were handsomely compensated for their role in the boom.
I don't recall any stories about brokers having to take second jobs or go on food stamps. They were among the highest-paid 5% of all Americans. But that wasn't good enough, so they lobbied to have stripped away regulations that protected the the public and, in retrospect, protected Wall Street from itself. Because campaign contributions speak loudly, a bi-partisan consensus soon developed to allow the financial system to become more integrated, to allow trading in what essentially is Monopoly money (derivatives), and to allow Wall Street to gamble with other peoples' money, including the average American's retirment account.
Thank God the Democrats foiled George W. Bush's scheme to let these crooks get their hands on our Social Security contributions.
As a result of operating in a loosely regulated environment, Wall Street made record profits. And almost ran the country into the ground.
Because some of the firms were "too big to fail" without bringing down our entire financial system with them, they had to be bailed out by the government. That wasn't popular, but it probably was necessary. But now they've bounced back strong. They are again posting big profits and paying big executive bonuses, while the rest of the country tries to get out from under 10% unemployement and a crushed real estate market.
The country has recovered enough now that it's time to hold these people accountable.
Because money still buys political influence, the reforms won't go far enough. They might modestly regulate, but they won't ban, derivatives trading. Those complex financial insturments, the more complex the better from the broker's point of view, don't represent actual investments in the economy as stocks and bonds do. They represent bets. They are for people who view the stock market as a sophisticated casino. As with any game of chance, it was just a matter of time before somebody figured out how to rig the table in favor of the house, as Goldman Sachs allegedly did.
The new regulations also, sadly, won't remove the phrase "too big to fail" from our lexicon. Too big to fail should mean "too big to exist." That's what we have an anti-trust division in the Departement of Justice for. But Democrats all want to seem "business-friendly" these days and Republicans long ago shed Teddy Rossevelt's "trust busting" legacy.
So reforms are incremental. They bring a little bit more tranparency to the derivatives market. They require banks and investment houses, deregulation has insured that there's little difference, to have more assets on hand to cover their liabilities.
They are meant to minimize the next crash rather than to prevent it.
But every Republican is apparently opposed to even that modest reform.
They'll need to get over that.
Republicans are hoping for big pickups in this year's Congressional elections. They have reason to be optimistic. The president's party almost always loses seats in the off-year elections. The Tea Party movement has energized a group of older, white voters who traditionally vote Republican. Things are looking good for the GOP.
But not if they go into the fall elections as the champions of the Wall Street crooks who caused so much economic pain for the rest of us. The Tea Party folks are anti-bailout. Part of their litany of complaints is that Washington and the financial system are corrupt. To seem to stand in the way of cleaning up that corruption is not gong to be a winning position for Republicans.
And it's not a winning position for the country either.
0 comments:
Post a Comment