October 6th, 2012
in Op Ed
by William K. Black, New Economic Perspectives
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. (Click on cartoon for Larger image.)
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.
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.
I argued in my first appearance on Bill Moyer’s Journal 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.)
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.
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.
Holding elite criminals accountable is a minimum condition for a democratic state that aspires to be a great nation.
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.