By William K. Black
April 30, 2016 Bloomington, MN
To no one’s surprise, President Obama lobs periodic attacks on Bernie Sanders’ plans to restore the rule of law to Wall Street elites. Obama launched his latest attack, fittingly, through Wall Street’s sycophant-in-chief, Andrew Ross Sorkin. Sorkin’s column expresses his shock at how Obama repeatedly extended their interview for hours beyond its scheduled length. No one else is shocked that Obama, trying to make the case that bailing out the Wall Street felons was an act of supreme genius, would find Sorkin’s relentless sycophancy towards those felons and their political cronies so endearing. This is the first segment of my response. It focuses on the Obama administration’s great lie – the only policy “tools that work” in response to a financial crisis are getting “in bed with the banks” and making even wealthier through federal bailouts the bankers who grew wealthy by leading the fraud epidemics that caused the crisis.
The context of Sorkin’s column was Obama making the pitch for his “economic legacy.” Obama is distressed that we do not understand how great he was because he was too busy saving us to have the time to “explain” to us how great he was.
“We were moving so fast early on that we couldn’t take victory laps. We couldn’t explain everything we were doing. I mean, one day we’re saving the banks; the next day we’re saving the auto industry; the next day we’re trying to see whether we can have some impact on the housing market.”
The result, he said, was that he lacked the political capital to do more.
Actually, one can explain everything one is doing in this sphere. There are no reasons to keep secrets on economic and financial strategy. A president who has a good case to make on the merits of his economic policies can make that case to the public with all the advantages of his office. Obama would have gained immense “political capital” if he had led a vigorous claim to hold the Wall Street frauds personally accountable for their crimes and he would have discredited the source of much of his future opposition. A president who allows elite CEOs to grow wealthy through fraud and even wealthier through a public bailout will – and should – squander his political capital.
Obama admitted to Sorkin, that he chose the strategy of allying himself with Wall Street and disparaging its critics.
Obama, convinced that anything short of a major bailout could lead to economic catastrophe, said Democrats should back Paulson’s plan. They did.
It was a rare moment of bipartisanship, with long-term political consequences. To Obama, this was a necessary alliance with Wall Street and a Republican president. To many others, it looked like a sweetheart deal for the same people who created the mess; some critics wondered why he was not equally quick to help aggrieved homeowners through an aggressive mortgage-relief or forgiveness program. “The whole thing about financial crises is the tools that work are the ones that will make you look like you’re in bed with the banks,” said Timothy Geithner, an architect of TARP whom Obama made his Treasury secretary.
Obama’s problem was not the one he claims – Americans didn’t understand why he was allying himself with the Wall Street felons because “we couldn’t explain everything we were doing….” Obama’s problem is that many Americans realized that he was, to quote Sorkin, giving “a sweetheart deal [to] the same people who created” the crisis through their frauds. Obama used our Nation’s wealth to make those felons even wealthier while giving them immunity from prosecution. That is a dreadful “legacy” and it is destined to get far worse when it encourages the epidemics of control fraud that cause the next crisis.
Similarly, Americans increasingly realized that the record political contributions from the Wall Street felons to Obama’s 2008 campaign produced the self-serving rationalization that led him to claim to Sorkin that he made “a necessary alliance with Wall Street.” “Necessary” to who? Not to the American people or our economy. It was “necessary” solely to his receiving the contributions.
Worse was soon to come, for as Sorkin notes Obama chose Geithner as his principal domestic policy official. Geithner was already infamous as an abject failure as a financial regulator who failed utterly in his job, which was regulating Wall Street. Geithner actually testified to Congress that he had never been a regulator. That was true, but you are not supposed to admit it.
Geithner always claimed that he never worked for Wall Street, ignoring the fact that as the President of the New York Fed he was literally picked by Wall Street, paid for by Wall Street, and worked assiduously to advance the interests of the Wall Street CEOs who were leading the three control fraud epidemics. After praising himself for not using the revolving door to make himself wealthy, Geithner promptly dropped that pretense and went to work officially for Wall Street. He was made a top executive and instantly made wealthy not despite a record of failure as a self-professed non-regulator and Treasury secretary, but as a reward as a serial failure. The thing that has repeatedly led to Geithner’s promotions is his consistent record of failing to serve the interests of the public because of his dedication to serving Wall Street’s interests.
The Obama Administration’s “Great Lie”
As “architect” of the bailout, Geithner famously explained that the plan was to bail out the banks and their senior officers and that any parts of the plan that were sold as helping the public were actually subterfuges designed to “foam the runways” for the elite banks and bankers. Sorkin quotes Geithner announcing the Obama administration’s great lie:
“The whole thing about financial crises is the tools that work are the ones that will make you look like you’re in bed with the banks,”
No, the tools that work to speed recovery from a crisis and to prevent future crises demonstrate that you are not in bed with the felons – the elite bankers – because they are in prison. When you give economic aid properly from the Treasury in response to a financial crisis, you ensure that the funds go to pay off the depositors at failed banks – not to bank felons in the form of sumptuous salaries and bonuses. When the Fed acts properly as the “lender of last resort” it does not do so on the basis of collateral composed of toxic loans. Providing mortgage relief to borrowers in the form of troubled debt restructuring (TDRs) aids honest bankers and does far more to spur recovery from a Great Recession by increasing effective demand. Suspending the collection of the Social Security withholding tax is the quickest way to stimulate the economy and puts relatively more of the money in the pockets of those most likely to spend it, which provides a particularly strong “multiplier” that speeds recovery. Only bankers and their political cronies purport to believe that bailing out the worst banks led by felons represent the “tools that work” to spur a recovery.
Equally important, however, is the question of what are the “tools that work” to prevent or reduce future crises. Obama and Geithner’s policy of using public funds to further enrich the Wall Street felons and grant them immunity from prosecution for leading the three fraud epidemics that drove the crisis – and to continue to use public funds to enrich them even as those felons repeatedly launched new fraud epidemics – made the next crisis far more likely and likely to be more severe. The policy of immunity for Wall Street felons also maximized injustice and inequality and replaced democracy with crony capitalism. Taken together, all of these results are the results that the bank felons intend and expect from the policy “tools” they push. This is why elite bank felons have always spread the propaganda that these are the only “tools that work.” They are, in fact, the only “tools that work” – for the Wall Street felons.
Geithner was Wall Street’s “tool” in the Obama administration. It was inevitable that Wall Street would find a way to reward him with further riches. As Hillary Clinton says, “everybody” at her cabinet level is promptly made wealthy by the plutocrats after they end their government “service” – as long as that “service” serves the interests of the plutocrats. She asserts that the system is not corrupt because “everyone does it,” which demonstrates a talent for willful blindness and self-serving rationalization that rivals Bill’s.
It is breathtaking to hear a confession of ubiquitous corruption (“everyone does it”) offered as if it were “proof” of non-corruption. Paul Krugman, who desperately wants to see Hillary elected President, is enabling and apologizing for this corruption (and moral reasoning any parent would find distressing coming from his or her five-year-old daughter) rather than calling on her to stop taking money from Wall Street felons. If she were to take the Bank Whistleblower United’s campaign funding pledge it would increase her chance of being elected and make her a vastly better President.