Tuesday, November 09, 2010


From AlterNet, esteemed economist
James K. Galbraith on our President's biggest screw up:

Up to a point, one can defend the decisions taken in September-October 2008 under the stress of a rapidly collapsing financial system. The Bush administration was, by that time, nearly defunct. Panic was in the air, as was political blackmail -- with the threat that the October through January months might be irreparably brutal. Stopgaps were needed, they were concocted, and they held the line.

But one cannot defend the actions of Team Obama on taking office. Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to Sheila Bair and the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.

Team Obama did none of these things. Instead they announced “stress tests,” plainly designed so as to obscure the banks’ true condition. They pressured the Federal Accounting Standards Board to permit the banks to ignore the market value of their toxic assets. Management stayed in place. They prosecuted no one. The Fed cut the cost of funds to zero. The President justified all this by repeating, many times, that the goal of policy was “to get credit flowing again.”


But new loans? The big banks had given up on that. They no longer did real underwriting. And anyway, who could qualify? Businesses mostly had no investment plans. And homeowners were, to an increasing degree, upside-down on their mortgages and therefore unqualified to refinance.

These facts were obvious to everybody, fueling rage at “bailouts.” They also underlie the economy’s failure to create jobs. What usually happens (and did, for example, in 1994 - 2000) is that credit growth takes over from Keynesian fiscal expansion. Armed with credit, businesses expand, and with higher incomes, public deficits decline. This cannot happen if the financial sector isn’t working.

Geithner, Summers and Bernanke should have known this. One can be fairly sure that they did know it.


You can dress this up in all the academic language you want, but to most Americans all that matters is this: Obama and the Democrats gave the opulent, fat, and wildly irresponsible banking sector hundreds of billions of our tax dollars, and we received nothing in return. Nothing. Conservatives think this is terrible because it's wrong to take our money and "redistribute" it. Liberals think it's terrible because because it's wrong to take our money and redistribute it to not only people who don't need it but who also don't deserve it, especially when their actions have created countless individuals and families who desperately do need it, who definitely do deserve it. Conservatives also hate it because it rewards so-called "bad actors," and liberals, well, liberals think the same thing, too.

No matter how you slice it, Obama decided early on to let the banking and finance sector run wild over pretty much the entire nation, and that has clearly pissed off everybody. Conservatives showed up in droves to punish the Democrats at the polls last week, and liberals stayed at home for essentially the same reason. I mean, of course, there's more to it than that, all kinds of false arguments, all manner of devil in the details, some other issues like health care and BP, but the President's bizarre favoritism of the banksters encapsulates it all. Whether you're liberal or conservative, hell, even if you're a moderate, whether you agree or disagree with his overall general political philosophy, it is achingly clear to most Americans right now that President Obama just doesn't give a shit about you.

Instead, he's all about his wealthy friends, the ethically challenged elites who have been so instrumental in filling both his and his party's campaign coffers. What's worse - yeah, I know, hard to imagine it being worse - is that this is the status quo. Every single president and Congress for the last two decades would have done exactly the same thing. Neither party has the ability or even the wherewithal to actually do anything about this because they don't serve the people. Democrats and Republicans alike serve the fabulously wealthy and no one else.

To me, this renders our democracy meaningless in all but name. That is, our government has been taken over by hostile and parasitic forces and we are living in an occupied nation. Perhaps that kind of rhetoric is too strong for you to embrace. So I ask, when we vote but the winners always ignore the will of the people in favor of the great moneyed interests, is it really reasonable to call our government "democratic"? Do you really think your vote matters? Do you really think we still live in the land of democracy?

If so, please explain. 'Cause I sure as hell don't get it.