amandajade

Robert Scheer has published a brilliant piece of forensic reporting in "The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street by Mugging Main Street". By peeling back the layers of obfuscation which surround the financial crisis of 2008, he has laid bare the causes of the crisis in a manner which is accessible to the layman. Scheer describes the origins of the crisis as beginning in the Clinton administration. In order to strike a new accord with Wall Street, Democrats destroyed the regulatory framework which had protected consumers for 70 years. The Financial Services Modernization Act (FSMA) rolled back Glass-Steagall, which had drawn a sharp line between depository banks and investment banks. Once this division had been gutted, all banks were free to take high-risk gambles with taxpayer money in the certainty that, should worse come to worse, the government would bail them out. This was followed a year later by laws which exempted derivatives, like collateralized debt obligations from any degree of regulatory scrutiny whatsoever. The main architects of these laws were none other than Robert Rubin, Treasury Secretary under Bill Clinton, his successor, Larry Summers, Fed Chair Alan Greenspan, and a coterie of behind-the-scenes lobbyists from Citibank, Goldman Sachs, and other titans of the banking industry. The revolving door between high government office and high-power banks is particularly disturbing: Rubin, a former Goldman exec, pushed through FSMA as a means of allowing Citibank to merge with Traveler's Group (a disastrous deal that destroyed value). He later left government for a multi-million dollar job with the newly-christened Citigroup whose existence he helped bring about. Rubin didn't stop there. When Citi later realized the extent of the losses it would suffer when its major client, Enron, was found to be conducting fraud on a massive scale, Rubin called his pals in Treasury and asked them to apply pressure to Moody's not to downgrade Enron until Citi had pawned it off on an unsuspecting buyer. When-- a rare moment of civil prudence-- Treasury opted not to get involved, Rubin promptly contacted the credit rating agencies himself to influence their downgrading schedule. Rubin was succeeded by Larry Summers, whose disdain for any ounce of regulation over the new derivatives market led him to destroy the career of civil servants who warned that such unregulated markets could someday threaten the entire economy. This unholy trinity was completed by Fed Chairman Alan Greenspan, whose free market fanaticism had its origins in his work with pseudophilosopher Ayn Rand. Together, this trio of government officials destroyed anyone who objected to their blind faith in the ability of banks to regulate themselves. Scheer tells the story of Brooksley Born, former head of the Commodity Futures Trading Board, and of how her single-handed attempts to inject common-sense into the discussion made her the target of the aforementioned trinity, as well as dozens of their Wall Street lobbyist friends. Disturbingly, it is these very architects of the financial crisis who Barack Obama turned to upon stepping into his presidency. To Scheer, a lifelong liberal, this represented the ultimate betrayal. Candidate Obama talked a good talk about financial reform. Unlike George W. Bush, Obama seemed to grasp the complex details surrounding the causes of the crisis. When push came to shove, however, Obama sought to reassure the Democratic party's friends in Wall Street that business would continue as usual. Only when public opinion polls show a level of dissatisfaction with his performance will Obama show the rare flash of anger toward the banks, but they have long since learned that he is merely providing red meat to the masses and does not actually intend to back up his words with substantive action. Scheer has produced what may ultimately prove to be the best summary of the financial crisis in a single, highly-readable volume. Disturbingly, one is left with the irrefutable conclusion that Obama will continue the same love affair between Washington and Wall Street that has spanned several past administration-- be they Democrat or Republican.

2022-12-15 13:15