Wednesday, April 28, 2010

13 Bankers

I just finished reading Simon Johnson and James Kwak's 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. It provides the most cogent narrative of events that led to the crisis in finance, the crisis itself, and the responses of those in power. There is plenty of blame to go around: Ronald Reagan, Phil Gramm, Bill Clinton, Robert Rubin, Alan Greenspan, both Bushes, and an host of other government figures who bought into the myth of the "efficient market hypothesis," as well as those ruthless sons of Moloch who created the complex financial instruments that maximized the profits of megabanks while destabilizing the world's economies.

Johnson and Kwak are much nicer to Barack Obama than I think warranted, perhaps because they want to persuade him that the regulatory reform bills currently struggling through Congress are inadequate, and that he should really be thinking ahead to breaking up the banks that are "too big to fail." They attribute his timidity to being part of (and entirely surrounded by) the New York—Washington mindset that maintains that bigger is better, not to having been co-opted by the big bucks banks have thrown his way.

Maybe they're right, or maybe they just have some compunction against saying that the President of the United States is a pawn of the oligarchs. Me, I have no such compunction: the President of the United States is a pawn of the oligarchs. There. I said it.

Obama is not a stupid man, and even with Geithner and Summers talking into both his ears at once, he should be able to figure out that "too big to fail" is "too big to exist." Hell, even Alan Greenspan, despite what had to be major cognitive dissonance, came around to that point of view. As anybody who's been paying attention understands — including, of course, the bankers — the megabanks have an implicit government guarantee, just by virtue of their size and systemic importance. That is the only reason they can borrow at significantly lower interest than smaller banks — a fact that should be obvious to all.

Wall Street, naturally, has its knickers in a twist over the very limited reforms the Democrats are trying to enact, and is very likely to shift major chunks of its political contributions over to the Republicans — who remain stubbornly opposed to government doing anything at all. Will that be enough to persuade Obama to stop licking their $2000 shoes, and get serious?

Certainly not until his second term — if he gets one.

.....(later the same day).....

Okay, maybe he's not a total pawn — maybe he's just doing his usual "splitting the difference" routine. Halfway between doing nothing (as the bankers would prefer) and the right thing (breaking up the megabanks into smaller units that could be allowed to fail) is the usual, half-assed, universally unsatisfying compromise. That's what we got for health care, and that's what we'll get for financial reform.

So maybe he's not that much a pawn of the banks. Maybe he's just a pussy with no strong beliefs at all — a pussy who wants to be loved and/or re-elected.

Whatever. If it happens to be respect he wants, he's not getting any from me.