Sunday, January 24, 2010
Earl Ofari Hutchinson
President Obama ear can’t be that tin on Fed Chairman Ben Bernanke. His wink and nod at the Big Banks and Wall Street’s roulette play with public monies is a big reason for record breaking home foreclosures, record breaking bank executive compensation payouts, soaring bank profits, unemployment climbing again in December, a decade high number of Americans in poverty, and Scott Brown. Yet Obama’s still busily jawboning senators to ram Bernanke through the Senate.
The checklist of Bernanke flubs is well documented. There’s fraudulent AIG, JPM, and Bear Stearns bailout, the banks and financial houses went on a free wheel orgy in trading risky and ultimately hollow derivatives, the massive bait and switch sub-prime lending scams, the stonewall of details on how and to whom the Fed shelled out trillions through the Fed's special lending programs, the near total absence of tough regulatory oversight over the failed and flawed Wall Street banks and financial houses. All of this happened on Bernanke’s watch.
Wall Street and Obama administration mythmaking about Bernanke aside, he didn't save a system from collapse. He saved a handful of flopped banks and financial houses that engaged in dubious stock spins, swaps and game playing with investor and public monies from a crisis that he and they helped create.
Bernanke, of course, didn’t make the mess alone. The not embattled enough Treasury Secretary Timothy Geithner and Obama top economic advisor Larry Summers with their free market, minimal regulations philosophy, and too cozy ties with Wall Street also fueled the crisis.
Volumes have been written about how Bush and the Republicans eagerly cut sweetheart deals with financial industry lobbyists to gut lending and stock trading regulations, winked and nodded at the banks and brokerage houses as they engaged in an orgy of dubious stock swapping, buys, and trading, conned millions of homeowners into taking out catastrophic sub-prime loans and watered down the oversight powers of government regulatory agencies.
But their financial free boot couldn't have happened without a huge policy change that Summers and another Obama advisor Robert Rubin engineered during the Clinton years to scrap most of the provisions of the decades old Glass-Steagall Act. The Act was the 1930s Great Depression era measure that kept federally insured banks out of the go-go world of stock trading, exotic lending and financial speculation. It also set rigid standards for mortgage lending and strict oversight over banking practices.
The predictable quickly happened with the regulatory gloves off commercial banks, brokerage firms, hedge funds, institutional investors, pension funds and insurance companies could do whatever they wanted when it came to investing in each other’s businesses and marching in lock step with each other's financial operations. Now Obama belatedly wants Glass-Steagall, or some reasonable facsimile of it, back. But can he convince his economic troika of that?
The Wall Street three give no sign of backing away from their belief that failing financial institutions must be propped up with massive amounts of taxpayer dollars, that the industry can police itself, and that Wall Street still holds the key to economic recovery.
The three have a lock on Obama. And since one of them has to face confirmation only once and pass muster and he has done that and the others are advisors, they can’t be dumped by the Senate, but Bernanke can. That is if Obama would cut bait on him. Obama’s made that clear that won’t happen. His ear is too tin.
Earl Ofari Hutchinson is an author and political analyst. His new book is, How Obama Governed: The Year of Crisis and Challenge (Middle Passage Press).