FDR transformed the nation when he was confronted with the Great Depression and World War II. He famously welcomed the hate of the banksters. President Obama wanted the love (and the contributions) of the banksters. He chose Timothy Geithner to be his pipeline to the banksters because Geithner shared Obama’s lack of passion for holding the banksters accountable for their frauds that drove the ongoing crisis. We have known the core of these sad facts for years, for they were revealed (irony of ironies) in a May 22, 2010 article whose theme was that we had all done Geithner and Obama a terrible injustice by criticizing them for their servile approach to the banks. The key facts that the article disclosed can be summarized in a sentence: Obama developed a “man crush” on Geithner and decided to follow Geithner’s policies to bail out the banksters rather than hold them accountable for the frauds that made them wealthy and caused the Great Recession. Obama’s “man crush” is particularly odd given the fact that Geithner is a Republican who, as a fig leaf, became an independent.
I emphasize that Obama is the President and the man who chose Geithner to head Treasury and, eventually, become his principal advisor on finance and economics. While this article focuses on Geithner’s role, the responsibility and culpability lie primarily with Obama.
I find the May 2010 article’s sycophancy towards Geithner so appalling that it is acutely painful to, in the interest of brevity, ignore its defects and simply report its disclosures. Books published recently by Suskind, Barofsky, Bair, and Connaughton have confirmed and expanded these disclosures about Geithner’s all-encompassing dedication to the interests of the banksters.
I argued in my first appearance on Bill Moyer’s in April 2009 that Obama’s acceptance of Geithner’s advice to serve the interests of the banksters rather than America could cost him reelection. Romney and Ryan have been such terrible candidates with awful policies that recent polls have indicated that Obama has a substantial advantage in the electoral vote. Wednesday’s debate, however, has exposed the political insanity of Obama’s embrace of the banksters. (I have often explained why the policy is substantively insane and provide only the briefest summary here.)
The single most important thing that Obama could have done to respond effectively to the crisis and to prevent future crises was to take on the systemically dangerous institutions (SDIs) whose fraudulent CEOs drove the crisis. The SDIs inherently put us constantly at risk of systemic crisis, are so large that they are inefficient, make “free markets” impossible because they receive a huge, implicit federal subsidy, and pervert democracy into crony capitalism. Leaving the banksters in charge of our largest banks also guarantees recurrent, intensifying financial crises. Taking on the SDIs, particularly their CEOs who grew wealthy by looting “their” banks would have also been the single most just and politically popular action Obama could have taken.
I want to emphasize the “just” aspect. Holding the banksters accountable for their crimes has nothing to do with “pitchforks,” vengeance, or scapegoats. Holding elite criminals accountable is a minimum condition for a democratic state that aspires to be a great nation. Americans yearn for a president who demands that we live up to our best natures. The May 2010 article unintentionally demonstrates the author’s, Geithner’s, and Bill Clinton’s inability to even fathom the concept that justice requires holding the banksters accountable for their crimes. Indeed, the article descends into this loathsome slander of the American people.
[Geithner’s] objective was to rescue the economy from ruin, and if the price was that a bunch of bankers benefited, he was happy to pay it. But Geithner was smart enough to realize that the simmering wrath of voters could complicate the politics around his efforts considerably. So the secretary ventured to Harlem to ask Bill Clinton’s advice as to what might be done to cool the cauldron. According to Jonathan Alter’s new book, The Promise, Clinton told him that his options were limited.
“You could pull Lloyd Blankfein into a dark alley and slit his throat,” Clinton said, “and it would satisfy [people] for two days, and then the bloodlust would rise again.”
Note the depth of their contempt for the American people. The American people did not want any executions of banksters, much less their murder in “a dark alley.” Geithner, Clinton, and the author cannot even consider the compelling evidence that accounting control frauds led by the banksters drove the crisis. They have no understanding of accounting fraud, justice, or the damage caused to a nation when elite frauds can grow wealthy (and massively destructive) through fraud. They have no conception of what any competent regulator, economist, criminologist, or attorney would understand about a “Gresham’s” dynamic. If cheaters prosper, then bad ethics drives good ethics out of the marketplace and fraud can become endemic.
The “price” that results from allowing elite frauds to become wealthy with impunity is endemic fraud, recurrent financial crises, grotesque economic inefficiency, and the perversion of markets and democracy through the descent into crony capitalism. Geithner will not bear this “price” – America and Americans will. We were not informed of this price or asked whether we were willing to bear it. There was no legitimate need for us to bear the price because Geithner’s grant of impunity to the elite frauds was unjust and harmed the economy and nation. The banksters are the most undeserving recipients of a U.S. government bailout in history. The odds are strong that the banksters will eventually share a portion of the massive bounty they received from the U.S. due to Geithner’s policy recommendations with Geithner. They may hire him, arrange for him to run an international organization, or give him Larry Summers-level (massive) fees for speeches on the wonders of faux “stress tests.” There are numerous ways for a senior government official to cash in.
No regulator would ever believe that leaving fraudulent CEOs in charge of banks produces economic stability. While Geithner, as President of the FRBNY, was supposed to be one of the nation’s top regulators he, by his own admission, refused to regulate. Like Clinton, Geithner was a strong proponent of the financial regulation that helped to produce (with a huge assist from Bush) the intensely criminogenic environment that caused the crisis. Geithner and Clinton would be two of the last individuals in the world that one would ever select to create an effective program of regulating or prosecuting banksters.
It is amusing that Geithner would choose Clinton as his go-to guy on how to neutralize the public’s outrage at Geithner’s successful effort to convince Obama not to prosecute (or even seriously investigate) the elite criminals who grew wealthy by causing the crisis. First, it’s not exactly a socially desirable expertise for which one wants to be known. Second, Clinton was the subject of the criminal investigations. He was the elite guy that much of the public was demanding be prosecuted. Third, Clinton immediately displayed his contempt for the American people by describing us as eager to murder bank CEOs by slitting their throats in a “dark alley” without any trial.
I am sure that that all Americans will be delighted to learn that Geithner decided that we should bear the price of his recommendation (accepted by Obama) to give the banksters who grew wealthy by causing the crisis de facto immunity from prosecution plus a bailout that would save their jobs and reputations and make them even wealthier. How convenient that the banksters were, as the May 2010 article shows, Obama’s leading contributors (and Geithner’s most likely future employer). Our saying as regulators during the S&L debacle remains true today: “the best return on assets is always a political contribution.” In our day, the political contributions were used to influence politicians who sought to block us from holding the banksters accountable. The author’s effort to render Geithner noble and Clinton sagacious for braving the public’s (fictional) bloodlust in order to protect the noble banksters (aka: contributors) from the murderous public is revealing and comic.
Taking on the banksters would have required the Obama administration to rebuild the vigorous regulatory system essential to prosecute the banksters and prevent future crises. Obama, however, followed the advice of Geithner and Orzag (Obama’s OMB appointee and another leading foe of regulation) and attacked regulation and regulators as the problem. Geithner’s answer to Congressman Ron Paul’s question about his role as the chief regulator of many of the nation’s largest bank holding companies was “I was never a regulator.” So true, but you’re not supposed to admit it. Geithner was a catastrophic failure as a regulator.
Obama followed Geithner’s advice and did not shape Dodd-Frank to target the true causes, particularly accounting control fraud, of the financial crisis. Obama did not appoint vigorous regulatory leaders and he appointed Attorney General Holder, whose failure to prosecute any elite white-collar Wall Street CEO involved in causing the crisis has continued the national disgrace of the Bush administration.
What does the Obama administration stand for with respect to the greatest financial crisis in four generations? Obama stands for bailing out the banksters and not prosecuting them. The administration’s most cynical act was claiming that programs that were actually designed to bail out the banksters were programs to help distressed homeowners. Barofsky’s (SIGTARP) book reveals the sickening details.
[Elizabeth] Warren asked Geithner repeatedly about HAMP. After several evasions, Geithner said about the banks, “We estimate that they can handle ten million foreclosures, over time… this program will help foam the runway for them.”
Romney lied repeatedly when he claimed that the Dodd-Frank Act creates a safe harbor for the SDIs. Obama failed to rebut the lies, but the greater problem is that because he listens to Geithner’s advice Obama has done nothing to end the SDIs, which would have turned Romney’s attack into Obama’s triumph. Dodd-Frank should have ended SDIs and it would have if the President had rejected Geithner’s advice. If Obama had pushed for Dodd-Frank to end the SDIs it would have smoked out the SDIs’ defenders – which would have included Romney and Ryan. The continuing failure to remove the threat posed by the SDIs has nothing to do with (non-existent) Dodd-Frank safe harbors for the SDIs. But that actually demonstrates that the fault lies with Obama listening to Geithner. The administration, prior to and after the passage of Dodd-Frank had and has the statutory authority to shrink the SDIs to the point that they no longer pose a systemic risk to the global financial system. The Obama administration has followed the Bush administration policy of refusing to use that authority and the SDI problem increased greatly under both administrations.
During the debate, Romney changed his positions when he backed away from his plan to repeal Dodd-Frank and its financial regulations. Obama failed to point this out or explain why greater financial regulation was necessary. But we need to step back and consider why Romney would think he could get away with his lies and evasions on these points. If Obama had appointed vigorous regulators and prosecutors and made it a national priority to remove from office the banksters who control our SDIs and prosecute them Romney could not have attempted these lies. Obama would not have been on the defense – he would be presenting himself as the president who led the successful campaign against the banksters. Similarly, if Obama had appointed vigorous regulators who reestablished the criminal referral process that is essential for prosecuting elite banksters and adopting and enforcing the rules that would prevent future crises he would have been on the offensive taking credit for these successes. If Obama had fought to establish real relief designed to aid distressed homeowners rather than “foam the runway” for the banks Obama would be the hero. Instead, Obama followed Geithner’s and Orzag’s advice and derided and reduced regulation and cynically used programs purportedly designed to help homeowners to as yet another means to bail out the banks. Obama is incapable of reversing fields and endorsing vital regulations and real programs for the homeowners because of his “man crush” on Geithner – the banksters’ pipeline to the Obama administration.
The debate revealed that Obama does not stand for anything positive when it comes to the banksters or distressed homeowners. Geithner is not a banker or a technocrat. He is an American apparatchik who rose by attaching himself to powerful political patrons and telling them what they want to hear. That reflects badly on Obama. Geithner gave Obama the answers Obama wanted to hear – we must not act against our largest donors (and Geithner’s most likely future employer), the banksters, by holding them accountable for their frauds because if we were to do so the economy would collapse. Geithner’s answer, which became administration policy, was to lie about the banksters’ role in causing the crisis and the financial condition of the banks. Obama should hold Romney accountable for his endemic lies during the campaign and debate, but he would be in a better position to do so if he fired Geithner and Holder, ended his administration’s lies about the banksters, and reversed the administration’s unjust and destructive financial policies. Obama needs to stand for something – he should stand for the American people against the banksters and the SDIs. The irony is that by following Geithner’s advice Obama acted dishonorably and foamed the runway for Romney’s lies about the financial crisis.
Great piece Bill.
I have to tell you that I have checked out of this election intellectually, and could not even bear to watch the debate. I am astonished that with a social and economic crisis facing much of the world, a massive epidemic of unemployment sweeping across large parts of America, Europe and the Middle East, the topics of daily campaign discussion have dwindled down to inane bean counting.
I’m voting to help defeat the execrable Romney on the 6th, and then leaving the Democratic Party on the 7th to fight against what it has been turned into by the Clintons, Obama, Emanuel, Geithner, Rubin, Bowles and the rest of them.
Great plan. Others will be joining you. Good luck to us.
Excellent reply. I agree. However, unlike you, I left the Democratic Party three months after Obama took office. Having voted for him I was disgusted when I saw the people he chose for his Cabinet I knew then that we were in for the same ol’ same ol’. There is no difference in either party. They are both corrupt, and headed by sock-puppets for the oligarchy.
The Third Party candidates were excellent in the debate on the computer
I consider all lamestream media nothing more thancollaborators to Treason and Tyranny, and yes that includes MSNBC and their talking, chattering heads. They obfuscate truth. They are no better than CNN or FOX Whore News.
William K. Black is an American Patriot and Hero. He is Brilliant.
What are you doing.
Stop voting for Obamney, the banksters lackeys.
Don’t settle for a POS.
There is no way I am voting for either Obama or Romney.
I am not sure if I’ll write in Ron Paul, or Ralph Nader.
Obama may need to do a lot of things, but he will not do them for the simple reason that he is precisely an apparatchik. You don’t get to be President without a lot of money backing you. Hence, as President, you owe them. You are their servant; no longer the servant of the “people.” In effect, government has been hijacked by the moneyed and security state interests. Isn’t it evident? And they control the media, hence the minds of very many, and they have debased the general mentality. I see no way out of this situation. The US has in effect been transmogrified into a corporate state. The Congress is bought; the Supreme Court is bought; the Executive is bought; the military is bought. The government knows very well how to use sovereign currency where is suits it and to protest the end of money when it does not. The great question is, what is the endgame in this endless austerity, which cannot possibly benefit the parasitical interests in the long run? The endgame is total power. Imperial power and strategic control of all resources, and the gradual increasing neglect of superfluous populations; debt peonage and third-world conditions, along with “bread and circuses”; islands of wealth in seas of poverty, protected by police armed to the teeth. Those with this in mind are sunk in their privileges and their wealth and far from any wisdom. They are stricken “with no small madness.” Their day in the sun is characteristic of the end of an era which they bring about. I think war is on the horizon: the modern world cannot exist without non-renewable resources. It will be a fight to the death among the powers; the mentalities in power do not have the concept of equity and justice; they are not noble and magnanimous men of good will.
Your brilliant comment, Jim, is without the shadow of a doubt a luminous piece on Obama, the forthcoming American presidential election, the domination of almost all people by almost nobody, the enveloping despair without exit, the menacing, somber future. A superb analysis, a literary accomplishment per se.
I have employed the adjective “luminous” for a reason: the comment is luminous for me, for it is very rare to find in so few sage words exactly what you feel but could not express adequately in writing. It is an outstanding approximation of the Truth, as I see this fugitive Absolute in relation to the issues addressed.
Of course, reading it may also be good for Obamabots as it could lead them to get rid of infatuation with the President.
An exquisite requiem . . . with the perfect number of notes.
People who seemed surprised by Obama’s debate performance should not have been. It’s a good fit with his whole Presidency. Quoting FDR in 1936 was appropriate. We needed another FDR, to deal with a problem that is eerily similar, but we didn’t get it.
these people can’t imagine a world without a banker’s boot to lick. It doesn’t compute.
these people can’t imagine a world without a banker’s boot to lick. y
Very few can. I imagine banking must be high up on the Devil’s “must keep” list.
Consider this: Obama and Geithner and indeed the vast majority of politicians and the media neither are crazy nor stupid, but instead are accomplishing exactly what their owners want: An increase in the income gap between the very rich and the rest of America.
With every demand that the banks be protected and the federal deficit reduced, the rich open that gap a bit wider. Cut federal spending but don’t increase taxes: A perfect formula to broaden the chasm between the 1% and the 99%.
This neither is insanity nor stupidity. When you pay a servant, you expect him to serve you, and all politicians have been paid by the rich. When you own a company, you expect it to serve you, and virtually all media are owned by rich people.
The only difference between the political parties: The Democrats sometimes pretend to represent the “little man,” The Republicans don’t even bother to pretend.
Rodger Malcolm Mitchell
Yes, it is very discouraging. Citizens United locked in the moneyed interests.
Excellent analysis, except for one glaring omission. The big banks are not only Geithner’s probably future employer, but Barack Obama’s as well. It probably won’t be direct, of course, but will consist of gigantic “speaking fees” for putting in an appearance and providing some soaring rhetoric, over and over again.
In fact, I am really starting to wonder if the President really wants reelection that badly. Certainly a two-term, eight-year ex-President would be a slightly more prestigious draw for conference keynotes, planning retreats, Davos, etc. OTOH, he would be able to get started next spring, after a nice rest-up in Hawaii. And he may be looking down the road at what’s coming economically and environmentally and decide that now is the time to get out, amass his 9-figure pile, and get himself, Michelle, the girls, the MIL and whoever else he wants to take along off to The Island with the other 1 percenters before the zombie apocalypse hits.
Not to overlook that Obama’s family came from a daughter of a Wichita banker, a small but influential segment of that community which provided a Kansas governor in the form of George Docking, a Democrat whose political style was to out Republican the Republicans, generating untold rage from that quarter. The grandson is a Republican that is out Democrat-ing the Democrats, to the same effect. The trajectory of Obama’s career delineates significant fraud, from Harvard, its Law school, to messing briefly in public works in Chicago, on to teaching Law at University of Chicago, his less than stellar, never completed political positions. Absolutely nothing Obama did ever generated a detectable record of accomplishment other than being a politician without a history, and the public fell for the fraud that represents. Simply Obama is not qualified for the position he is in or any position he ever held as far back as that goes. How better to supervise corruption than elect someone whose life is fraud. There is no recourse for the public to address grievances , all avenues for redress are closed and guarded by selected sycophants, nor are there any centers of power outside governance available, labour is eviscerated and drained of power, education is devoted to producing the automatons needed to feed the machine, the military is a co-opted subsidiary of MIC and dependent upon the public trough. Debate exists not in the land of sheeple, discourse uses words without attached meaning, memories have ceased to exist, amnesia reigns in all but the seasons sports stats, it is a circus, and the clowns are supreme. Withdrawing consent is the sole avenue available, use the system as least as is required, become self-sufficient to the greatest extent possible and develop connections in the community. As a goal, put yourselves in a position that your reserves can cover about a quarter year of needs, curtail sharply wants, and eliminate desires until this economic disaster passes as it will, it is a house of cards and cannot last, watch out for falling debris, and keep some popcorn on hand to watch the rich eating the rich because that is the only place there will be any money left and the only show in town. And it would do no harm to learn some history and find out how others have handled their problems, few things are, after all, new under the sun.
My question is this: Isn’t banking unstable regardless of criminality? Example: How many bankers went to jail for causing the Great Depression?
And since banking is essentially the charging of usury for stolen purchasing power, especially from the poor and helpless, just where do you expect to find good people willing to be thieves?
And if banking is inherently unstable and dishonest then why do the bank enjoy enormous government privileges such as deposit insurance and a legal tender lender of last resort?
Great article, clarifies a lot for me. There were many reasons to believe that Obama doomed his chances for a second term when he appointed/reappointed the Bush/Clinton people largely responsible for deepening if not creating this great recession. Hope someone would fill me in on some details as to how this “The administration, prior to and after the passage of Dodd-Frank had and has the statutory authority to shrink the SDIs to the point that they no longer pose a systemic risk to the global financial system.” Just looking to how to rebut the conventional wisdom that claims the opposite. Thanks
The Republicans don’t even bother to pretend. Rodger Malcolm Mitchell
The Republicans pretend the system is fair so why should they be for anyone?
The Achilles Heel of the Republicans is the banking system which is essentially a government backed/enforced counterfeiting cartel for the benefit of the banks and the rich. Yet how many Progressives attack banking itself?
We needed another FDR, to deal with a problem that is eerily similar, but we didn’t get it.
I don’t think an FDR would live too long in today’s climate, assuming he would even be backed by those who could–again in this climate–put him in power. Money trumps all now.
A great underlying issue is energy, non-renewable energy. Along with the financial realities, these will result in convulsive movement in US society. I would not be surprised to see the Union broken within 10 years. The government cannot even control an Iraq (although its people are not the passive sheeple Americans have become), let alone an enormous country like the US. There are limits to everything.
@F.Beard: I get that banks are government backed entities that benefit the rich. But I don’t get the counterfeiting reference. The bank creates the money out of thin air but immediately sends it to a third party. The newly created money has a built in feature that destroys the exact same amount of money that was created over a period of time. The bank is guilty of usury, but I’m not so sure about the counterfeiting.
Commercial banks in the US are almost all part of the Federal Reserve system, and are licensed by the government to do what they do. Therefore, it makes no sense to describe commercial bank broad money creation as “counterfeiting”, since counterfeiting is by definition the fraudulent production of unauthorized imitation money.
This question of whether money should be issued debt-free, or instead issued in the process of making loans is logically independent of the question about whether banks should be private for-profit enterprises or public not-for-profit enterprises. Even a fully public and not-for profit system might issue money only in the process of making loans.
Therefore, it makes no sense to describe commercial bank broad money creation as “counterfeiting”, since counterfeiting is by definition the fraudulent production of unauthorized imitation money. Dan Kervick
Both traditional counterfeiting and bank credit creation steal purchasing power. So what if what the banks do is legal? Should theft be legal?
Even a fully public and not-for profit system might issue money only in the process of making loans. Dan Kervick
It might but it shouldn’t since it would be creating new purchasing power for the benefit of some at the expense of the general population. The monetary sovereign should simply spend its fiat into existence and tax some of it out of existence again. Borrowing and lending by the monetary sovereign is inherently discriminatory and not needed besides.
But I don’t get the counterfeiting reference. The bank creates the money out of thin air but immediately sends it to a third party. Six
The bank creates the money (“loans create deposits”) but the purchasing power for that new money is stolen by dilution from the general population – especially from the less or non-creditworthy.
The newly created money has a built in feature that destroys the exact same amount of money that was created over a period of time. Six
It does more than that since the loan must be repaid with interest – interest that does not even exist sans more borrowing or sufficient deficit spending by the monetary sovereign.
So the economy is punished first with inflation and then by deflation.
The bank is guilty of usury, but I’m not so sure about the counterfeiting. Six
The banks drive us into debt via money creation; those who don’t borrow are priced out of the market by those who do borrow.
As for usury, common stock is a usury-free private money form that “shares” wealth and power rather than concentrates them. It also requires no privileges from the government such as deposit insurance and a legal tender lender of last resort.
“But I don’t get the counterfeiting reference.”
The counterfeiting occurs because QE1 to QE infinity is printing money and buying the security “shit bags” , as the banksters themselves describe it, from the bankers. As a result, digitally printed money, now over a couple of trillion enters the monetary circulation, relieving the banks of their fraud and this causes inflation. Qhantitative Easing (QE) is different fractional reserve lending in that the newly created money does NOT have “a built in feature that destroys the exact same amount of money that was created.” Have you asked yourself, if the economy is so bad why is there such a rise in the price of commodities, silver, oil, fertilizer, etc. The reason is printing money via QE. The bad news is that the Fed has now committed itself to QE to infinity and beyond or until employment improves. This is the same as saying that the punishments will continue until morale improves.
But isn’t Obama acting for the benefit of the American ppl by following these policies? He’s just acting in the interest of an elite group of americans?
“He is an American apparatchik who rose by attaching himself to powerful political patrons and telling them what they want to hear.”
You say this about geithner, but really this is about Obama. He has never done anything for himself. He has just sucked up to people with power and followed their orders and ends up the first black president. He follows the orders of these elites.
How incredibly short-sighted we Democrats are.
This is a terrible plan based upon a terrible fallacy–
“I’m voting to help defeat the execrable Romney on the 6th,
and then leaving the Democratic Party”
This is a good excuse to do nothing.
Republican corporatists are not so short sighted.
They will forever play that fear card because they know they can hoodwink us with it– the next Republican candidate will again and again be ” so bad” that again and again you will settle for the party that is now no better.
Consider that Romney is just too bad to be real?
Romney is a great foil for Obama.
“Corporations are people?” — do we see even the wildest Tea Party member waving that placard?
To read this article is to realize that top pro-corporate promoters don’t care who wins this year, though Obama is definitely the more adept front man for them. Regardless, they win with both candidates. They don’t stupidly throw dice and hope for the best — they run the casino.
If we don’t begin right now asserting our independence we will never do it.
Support Occupy and other independent groups,
support a few good Democrats now,
And most certainly vote — for a third party for president.
Dan’s plan is mine too. Fight to beat Romney now. Begin the day after election to get better candidates in upcoming elections.
The polls indicate that Jill Stein has no realistic chance for a third party victory. I may make sense to vote for her if one lives in New York or California or in any state safe for either Republicans or Democrats; but in swing states, a vote for Stein increases the likelihood that Romney/Ryan will be elected. It’s very hard to believe that a Romney/Ryan victory would do anything but make the situation of Americans. The right is bound to get a good part of its agenda through then; and it’s agenda is to end democracy as quickly as possible.
Obama seems to want to end it too; but he doesn’t seem to have the same zeal to do so as Romney and Ryan. I think it’s pretty clear his judicial appointments will be a lot less damaging than Romney’s and that his cuts in federal spending will be less damaging than the other side’s. So, I think O gives us more time for organizing a new political force around Occupy and other movements; and I also think that time is very important now.
Consider, the push for austerity is very strong among the DC elite right now. But what happens when austerity finally brings the Eurzone down? The chances are that it will happen in the next year. When it does, the Europeans will turn away from the Euro, and those nations in the vanguard of that movement will use the return to their own currencies to fuel recoveries. We will then see clear counter-examples to austerity policies in other nations, and it will become less possible that TINA to austerity is true.
We can use that, and policy positions built around MMT to fight the austerians and the plutocratic elites, and build the counter-movements we need to take back the Democratic Party or, alternatively, build a viable Green Party that can oppose the Republican plutocrats.
So, again, right now, time without complete destruction of the social safety net, and voting rights, and without more complete subversion of the Supreme Court is what we need. We get that with a new Obama and Democratic Party victory; but after the election we have to immediately go on offense against victors and fight them tooth and nail to torpedo “the grand bargain,” and any other measures that make the position of most of the American people more desperate than it already is.
Bill Black, the content of this piece is terrific. But reading it, I had the feeling that better organization of the post was necessary, and that it rambled a bit. I think the argument needs to be tightened up, and I confess that I wasn’t sure about the “man crush” thing. Clearly, Obama crawled in bed with Geithner, and sold out to the banksters using Geithner as his tool, but I guess I don’t see what the notion of “Man crush” adds to our understanding of this.
It’s true that FDR implemented necessary programs and laws to provide safety-nets for the citizenry and deterrents to chasten the worse of avarice. However, it was WWII that had saved the US economy. Europe’s manufacturing industry was destroyed; their access to goods and weaponry was demolished. The USA became the manufacturing mecca of goods and wmds for Europe. Plus, the creditor center of the universe for the most part. One last horrific point; war was a twofer; a job creator (demand) and destroyer of (surplus) breadwinner population.
FDR’s 1932 “The Forgotten Man” speech addresses the capitalism paradigm; employer + worker = production supply/demand (+/-) profit. “Every man and woman who gives any thought to the subject knows that if our factories run even 80 percent of capacity, they will turn out more products than we as a Nation can possibly use ourselves…”
“What we must do is this: revise our tariff on the basis of a reciprocal exchange of goods, allowing other Nations to buy and to pay for our goods by sending us such of their goods as will not seriously throw any of our industries out of balance, and incidentally making impossible in this country the continuance of pure monopolies which cause us to pay excessive prices for many of the necessities of life.” Throw in a world war that doesn’t demolish the creditor nation’s home base and life is good.
Today, we are living the negative effects of foreign countries merchandise produced by working populations who do not have equitable social safety nets and laws safeguarding worker’s rights. Thus, american workers are told we must compete against the lowest common denominator rather than adding tariffs onto goods/services produced by human chattel.
Great article, as usual from Bill Black.
One question: I had not heard that Bill Clinton was a subject of investigations, or that he was “the elite guy that much of the public wanted to be prosecuted.” Do you mean when they blamed Fannie and Freddie instead of Wall Street?
I’d love to hear more about that!
“If cheaters prosper, then bad ethics drives good ethics out of the marketplace and fraud can become endemic.”
From an evolutionary perspective, this is the central concept. We never would have evolved as a cooperative species without a biologically-based ability and inclination to detect and punish cheaters.
A media establishment co-opted by elites tries to convince us that the banksters have not in fact committed fraud. This is not just cognitive dissonance – when cheating is rewarded instead of punished, it’s biological dissonance.
Why are people not out in the streets? Not demanding, as you make clear, that Lloyd Blankfein’s throat be slit, but at the very least that he not be made rich by cheating, and perhaps spend a little quality time in a country club prison.
As I recall, before TARP started, Paulson estimated that $700,000,000 was needed to keep mortgages from failing. Most in and out of Congress thought that this would go to help make mortgage payments, thus continuing the payment streams needed to prevent the triggering of the CDS’s based on the CDO’s based on all these “worthless” mortgages. Of course this would have helped the common man, who was so stupid he let the banks convince him he could make the payments , instead of the Bankers who had created the CDO’s in the first place.
Unfortunately, we know who are friends are…
The money system is doomed if enough engineers start to look at it critically. Good show!
(Yes, it’s enough to make an honest engineer puke. Still, who else can solve this problem except the honest?)
He famously welcomed the hate of the banksters. William K Black
But he saved banking, an inherently dishonest and unstable money creation system, with government deposit insurance.
How many today are trying to save banking from itself? You, Professor Black? Shouldn’t we rather let it die if it can’t survive without government privileges?
“Obama needs to stand for something – he should stand for the American people against the banksters and the SDIs.” – four American presidents did the same thing and all of them were assassinated. Last one killed that way was Kennedy.
I like Professor Black’s thinking a lot when he’s talking about putting people in jail for financial fraud, far less so when he’s ascribing motivations to Obama/Republican behavior.
I am prepared to concede in this instance that notion of an Obama mancrush on Timmy Geithner just strikes me as far too kind in light of my admitted opinion that Obama has been overrated on intellect from the day he first showed up and that he just flat out can’t get his mind around how it works and subsequently where it’s all going wrong.
Then there’s the other far more damning thought I hold for the President, I don’t think he gives a rat’s ass and never did. I believe that this what bit him in the debate.
Taking only two examples from the comments here, “banks counterfeiting” and “corporate personhood”, which when used as they are, display an abject and profound ignorance. The example given of the loan creation process as counterfeiting is pure ignorance. It demonstrates the lack of knowledge of the double entry accounting and the creation of debits and credits or any appreciation of what sophistication lies in those bookkeeping entries. In the very short history of the U.S. most of the development past the eastern seaboard was some version of local banks creating credit. President Jackson obtained the presidency riding that issue and fought mightily against the eastern “sound money” bankers, staying their agenda until nearly a century after his administration – some effectiveness, huh. Do you who blithely write of “banks counterfeiting” have the slightest clue of what you speak?
Total scorn of the ignorance that fuels “corporate personhood” is necessary. This phrase demonstrated absolute ignorance of Law, the history of law, the sources and development of law. In Ireland there exists an early example of corporation, there corporations exist as town and county governments, created by charter for specific purpose. But corporate existence has its roots as far back as Roman Law that acknowledged the family as a legal entity having purpose. Since some purpose could be achieved outside the family, a legal fiction was developed that accommodated other forms. The creation of legal fiction allowed law to remain unchanged but accommodate other forms like the legal fiction of adoption allowed others to be legally part of a family. When the courts in the U.S. found that corporations possessed “personhood” what they were saying the corporation could negotiate and enter into contracts and be held to those contracts or indeed the law LIKE ANY ACTUAL LEGALLY RECOGNIZED PERSON. Any other understanding is mal-informed ignorance.
Can’t see the forest through the trees? Legal fiction is, as the term suggests, extrapolation of precedent based on reasoned arguments. It is interpretation, not Truth, and as such is essentially reasoned vision for society through laws made by the judges who bring the ruling. Your argument suggest there could be no other reasoned ruling based on precedent, which is entirely specious. Through the *fiction* it writes, the Supreme court has the power to expand or curtail the power of corporations. With the Citizen’s United ruling, the vision for an expansion of the corporate dominated society is absolutely clear. Your points, though based in historical fact, miss the point entirely. The *scorn* of people who hold a different vision than a corporate ruled society is completely legitimate and justified.
or any appreciation of what sophistication lies in those bookkeeping entries. T-Bear
Actually, I do appreciate the sophistication of asset-backed private money but it should be implemented ethically. Common stock is an ethical and stable means to implement asset-backed private money and not coincidentally it does not require government privileges as the current system does.
Thanks for volunteering as an example of my points preceding.
Ah, so you reject ethical asset-backed money? Why?
Also, if credit creation is a legitimate activity then it surely needs no government privileges. Yet history proves the banks need substantial government privileges.
Btw, do you think the author of the quote below did not understand double entry bookkeeping?
“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” – Sir Josiah Stamp, Director of the Bank of England (appointed 1928). Reputed to be the 2nd wealthiest man in England at that time.
Had thought to dissect your load of verbal garbage but thought better of that effort, pearls to ignorance and all that. What in your wee mind is “asset-backed private money”? Never heard of any such in the literature, is it something you have created by yourself? Is it an economic entity or a player in some delirium you’ve experienced? You want such tosh “implemented ethically”? You need a church don’t you? What about “implemented morally”or “implemented legally” or what about just plain mores? And since when is “Common stock”, (your definition would be enlightening) a form of monetary exchange? Looks we are back to changing cows for a loaf of bread. Then we’re back to more prescriptive morality that being stable isn’t going anywhere followed by more verbal diarrhea leading to “government privileges” which I can only assume to be governmentally chartered and regulated but you would know nothing of that as it was presented. And finally we arrive at “as the current system does”, which exposes probably most clearly your ignorance of the system which basically stated is an agreement and contract are made which money is lent creating both a transfer of value and a debt that is to be serviced over time. I know for some the concept of “zero” is in the higher reaches of their ability to understand but the sum total of this transaction is “zero” when it is created and it is “zero” when it is concluded by the contract. Anything else you may think of the process is delusional. Get help.
As for your response to my comment, won’t bother discussing other than your association between the statement’s author and double entry bookkeeping is specious shite from someone pretending to scholarship. Your comments seem to fall in the category of demagoguery and if you were not providing the service of negative example, you would have to be invented. The answer to your question “Ah, so you reject ethical asset-backed money? Why?” is: “ethical asset-backed money” does not exist (outside your delusions).
What in your wee mind is “asset-backed private money”? T-Bear
Bank money (so-called “credit”) is backed by the assets of the bank which are typically promises to repay backed by collateral. Common stock is likewise backed by assets but with no problematic liabilities since common stock is normally not redeemable. Instead, it is part ownership of normally indivisible capital.
And since when is “Common stock”, (your definition would be enlightening) a form of monetary exchange? T-Bear
The problem with private money is getting someone to voluntarily accept it sans government privileges. How would YOU get people to accept your private money? You might have to offer them a “share” of the profits, no?
Looks we are back to changing cows for a loaf of bread. T-Bear
Well, people could still choose to use fiat for ALL debts, not just private ones.
I know for some the concept of “zero” is in the higher reaches of their ability to understand but the sum total of this transaction is “zero” when it is created and it is “zero” when it is concluded by the contract T-Bear
Actually it is less than zero unless the bank recycles ALL the interest it receives (by spending or new loans) or the monetary sovereign makes up the difference with deficit spending. But in any event, one can not balance the present with the future unless one wants boom-bust cycles that alternatively steal by inflation and deflation.
Then we’re back to more prescriptive morality that being stable isn’t going anywhere… T-Bear
Since common stock is typically spent, not lent into existence, there is no necessary need for it to be removed from circulation. Also, without interest to be paid on it there is no need for exponential (ultimately impossible) growth.
Immediately after 2008 crisis, we were told that this is because of wrong conception of ‘too big to fail’ and now they say that this is due to mishandling of SDIs – systemically dangerous institutions -. The disease is the same but the name of the patient has been changed. Surprisingly in an open society like America only one person or a group of persons can create that much financial mess which has spilled over to other economies of the word.
Super, Bill. I decry our lack of choice in this election, and have encouraged those who feel similarly to vote for you for president. I will. God bless and keep up the fight.
The very moment when change was most possible, the winter of 09. was also the moment it was least possible. Least possible because of the massive borrowing needs of the US Treasury .Politically change in the form of actual restructuring of the large banks by wiping out their equity holders and pushing out their executives was possible. However that would have destroyed the complex web of relationships which allows the mechanisms that supplied the Treasury with $100 bln a month of credit.
Well perhaps the latter isn’t true but it was a possibility. A possibility delivered to our politicians in the form of a threat. Only an exceedingly strong personalty would not fold under such a threat. To say the least America lacks any such strong politicians. Throw in none, including Obama, know a thing about money, monetary policy or debt. Thus they has no inkling of an alternative if the threat became real. Not only that they had nobody entrenched within the entire political system who knew of any other path.
The Treasury does not truly “borrow” from banks, only in the sense that banks “borrow” from deposit customers and loan out those deposits, which is not true.
The Treasury is mandated by a rule of Congress (archaic, Gold Std.) and the Constitution that it MUST issue Securities when spending exceeds tax revenue. The Treasury can only “coin” money or borrow, and has unlimited power to do either.
Before the Fed, the de facto central bank that bailed out *some* insolvent banks facing bank runs and lent money to the Treasury was John Pierspont Morgan and his company. The Fed is the govt’s own bank, cleverly devised by capitalists and bankers and politicians over a ten year span to (in my opinion) allow the Treasury to get around the Constitution by “borrowing” from itself. But Congress added another glitch, probably in deference to banker-lobbyists. Treasury is not allowed to sell its bonds directly to the Fed, or the Fed is not allowed to buy bonds from the Treasury. Instead, key middlemen “Primary Dealer” banks can and MUST purchase T-bonds at auction, and then the Fed can buy T-bonds from the banks at “Open Market Ops”.
I’m PRETTY SURE that’s the case. Some of my opinion goes back to reading about Greenbacks from the Civil War on Wiki. The Govt argued these were NOT “money”, they were “notes” (loans) issued by Govt to soldiers, but they came to be exchanged AS money by holders and users.
Today, with money clearly as a “unit of account” on the Fed’s spreadsheets, the main purpose of Treasury security accounts (aka “govt debt”) is so the Fed can conduct a balance transfer from the banking system’s Reserve accounts @ Fed to Securities accounts @ Fed, which is to DRAIN RESERVES, and thereby drive up interest rates above zero, when the banking system creates loans that expand reserves “too much”, and then banks are offering Interbank loans to each other but there are no takers, so the interest rate offered drops to zero.
This has NOTHING to do with SPENDING or that the Govt must BORROW its own money to spend some, except the archaic mandate by Congress, that does not reflect current monetary reality, self-imposed rules and contraints which Congress could change any day it chose to do so. Like when Bush paid for Iraq “off-budget”, what does that mean? Treasury + Fed created the money and gave it to the Pentagon and shipped shrink-wrapped $100 bills to Iraq on pallets, but they decided that none of that would be counted as part of the annual “budget”.
That this capability of “off-budget” spending exists, should tell us that they way the Govt’s sovereign monetary systerm works is not quite the way conventional logic tells us it does.
William, first off, I read your book. It was a great work that every American would benefit from. Now, on to the new reality of today. I think you give way too much credit to Geithner, Holder, etc and therefore, have a faulty belief system on who Obama really is. There is this perception amongst so many that Obama is somehow being given bad advice or can’t do the right thing because of Republicans or advisors or countless other rationalizations. Your left brain refuses to accept a greater reality provided by your right brain. These rationalizations occur only through cognitive dissonance. That is, Obama isn’t who your left brain wants him to be based on a faulty belief system your mind has created. Open your mind to the information your right brain is feeding you. The democrats aren’t who you want them to be. Obama never was and never is going to be who your belief system perceives him to be.
Geithner didn’t give Obama the answers he wanted to hear. Obama heard what he wanted to hear. Just like you or I hear what we want to hear.
Black was pretty clear that Obama *chose* Republican faux Dem Timmy Geithner for his top econ advisor and Treas Secy.
On the other hand, I’m sure that political forces with lots of money (Wall St SDI CEOs) were around to TELL their candidate Obama that THEIR choice was Tim Geithner, or that he was one of their top choices. Tim was already close to Bernanke and Greenspan. Surely someone like Obama (or Romney too) must turn to Wall St experts and people like Geithner (and Clinton) for advice on macro-econ and govt ops. No one thinks Obama has a degree in post-Keynesian econ from UMKC, or from anywhere. He is the one who “presides” over his team; figurehead may be a strong term, or maybe not.
That Obama “CHOSE” Geithner and initially Rubin and Summers tells us what his policy bent was from the get-go. For example, he was not pretending to be Dennis Kucinich or Bernie Sanders. He chose a 2009 post-crash version of Reaganomics and Neoliberalism.
If now criminality has been turned into de facto “legality” by the american ruling class, why then wasting time on so-called “wrong-doing” officials?
Isn’t Obama the guy who sits in his office, drawing up lists of whom to murder by drone-attacks, “legally” of-course?
Re last comment on F. Beard responding to 7 Oct 2012, 4:07 pm and 8Oct 2012, 1:44 pm
F. Beard appears in these comments frequently and spews their opinion liberally without challenge although they are freely challenging the veracity of others. That FB is persistent in the position of erroneous assumptions there are times those comments detract from what others have to say, reminiscent of hasbara defending another Zionist atrocity with the intent to disrupt the flow of information. Outside that, FB exquisitely demonstrates the total lack of public education for economic maters and the consequent dearth of meaningful economic discourse and left in its wake something passing as economic theology having the utility of phrenology. This may bend or break the rules for this site, if so please disregard or delete.
Please feel free to correct me. Let’s not forget that we all probably have some learning to do since MMT is relatively bleeding edge stuff. The problem of how the monetary sovereign shall create fiat at an optimum rate is one we should be concerned about,imo. The silly gold-standard folks would limit government money creation to the mining rate of a shiny, scarce metal! We certainly don’t want that, do we?
We should all make ourselves aware of Approval Voting as the simplest way to eliminate the false choice of the “lesser of two evils” with which our two parties present us.
Approval Voting allows the voter to vote Yes or No for EACH Candidate on the ballot. In 2000 this would have meant Vote Yes for Nader, Vote Yes for Gore, Vote No for Bush.
With that awesomely simple improvement we no longer feel compelled to blame Nader for causing Gore to lose. Of course we should blame the Supreme Court not Nader, in any case. But its a lot easier to just blame Nader than to admit that the Supreme Court has done a horrible wrong.
In 92 one could have voted Yes for Perot, Yes for Clinton and No for Bush. Given that Perot got 19% of the vote under our lesser of two evils system, I think he may actually have won under an Approval Voting system. In that case we wouldn’t have NAFTA (both parties supported it – that’s why we have it) and we wouldn’t have repealed Glass Steagall (both parties supported the repeal) and we wouldn’t end up spending trillions bailing out financial criminals (both parties supported the bailout and the lack of prosecutions).
And in the meantime, while we’re working to get Approval Voting at the federal level we coordinate with our fellow Americans to break the grip of the two party false choice.
We tell all of our progressive friends and family who live in strongly Red states to vote for Jill Stein of the Green Party. Don’t waste a good vote on Obama in a state where he can’t possibly win. Instead vote for a candidate and party that would get federal funding if it got to 5% of the vote.
Conversely we tell all of our conservative friends and family who live in strongly Blue states to vote for Gary Johnson of the Libertarian Party. Don’t waste a good vote on Romney in a state where he can’t possibly win. Instead vote for a candidate and party that would get federal funding if it got to 5% of the vote.
Imagine what we could do. Please broadcast these ideas widely if you think they hold merit.
Let’s put the fear of God into to the two corrupt parties that are owned by the banksters and the war profiteers. Let’s restore democracy to our floundering nation.
@ F Beard 9 Oct 2012 6:04 pm
I suspect I’m addressing this to one in an advanced state of cerebral rigor mortis. The question put was What in your wee mind is “asset-backed private money”? looking for definition, the reply a non-answer was ignorant garbage, supposed examples about credit and common stock, amounting to bullshit you can’t grow flowers in. The balance of this person’s response amounts to repetition of his earlier comments, repeating under the apparent assumption that repetition makes for true. For me to continuing engaging with this economically ignorant moron will take 2 or 3, make that three shares of Berkshire-Hathaway A. This discussion is ended.
The world is rapidly approaching the point there is little time to assemble an alternative economic model and the attendant language to counter the dysfunctional theo-economic doctrines promulgated under “neo-” epigraphics. There is an acute danger of some political demagogue taking advantage of public ignorance of economics to gain political power, if in doubt observe the political hue and cry for “balanced budget austerity” and the dismantling of the social security insurance program. It is sites like this that needed information can be disseminated clearly and accurately. Should that function be taken over and overwhelmed by opinionated disinformation such as the above mentioned commentator spewing economic garbage, those without adequate basics cannot easily tell gold from glister. Without uncontaminated information, the public cannot easily judge their options and decide on some available option or protect themselves from the unscrupulous politicians. The decision is between the importance of information versus the right to express opinions having no basis. Gresham’s dynamic operates for information as well. All too often the sites providing the best information are overwhelmed by economic idiots and gold-bugs in their commentary. Please do not let that happen here.
I appreciate your comments.
The larger point on the topic of “corporate personhood” can be gleaned from a reading of “Gangs of America” by Ted Nace, on the rise of corporate power and disabling of democracy.
The point is not that English common law (and others, I guess) created the legal fiction of “business corporation” or “Crown corporation” as a person for certain legal matters.
It’s that federal judges in the USA used that “corporate personhood” legal precedent to argue that not only were corporations equivalent to “legal persons”, they are entitled to ALL the protections of the Bill of Rights and the 14th Amendment which the Enlightenment era founders created for human beings. In essence, the railroad corporations and others of the mid-1800s were granted a kind of legal privilege and protections as if they were like Negro ex-slaves, and these millionaires were facing the equivalent of “Jim Crow Laws” against corporations by the masses of citizens who fought to restrict the economic AND political power and freedoms of these “artificial persons”.
To keep it simple (and antagonistic) for the average Wingnut mentality, I suggest that what was created was “Affirmative Action” for “Artificial Persons” and that this is the most broad and most heavily used and most original form of “Affirmative Action”, invented at a time when the Supreme Court and federal courts were really not too interested in defending the rights of actual Negro ex-slave human beings. Thereafter, and as precedents piled up, every “civil rights” ruling could be examined to see if there was some way to argue for a court to apply that standard to any lawsuit that could be used to place “corporate rights” OVER the initiatives and desires of human beings.
From there we get nonsense like completely rational adult professional jurists affirming that “money is a form of speech”, since corporations have no mouths or tongues, nor souls.
For more nitty-gritty on this, including the point that the initial ruling in the Santa Clara (sic?) Railroad case was actually NOT a ruling but a statement by a judge that he would not rule on the issue because “everyone” already agreed that corporations were persons, and how this obscure side-note was later cited as a comprehensive legal precedent, you can just FEEL the law and logic being stretched to fit the desired outcome, check out Ted Nace’s book (free online or pay him).
If it takes you over a month to reply you should check your own brain for disfunction.