BANKING BANDITS: BUSINESS AS USUAL?
A LAWMAKER DEMANDS AN AUDIT OF THE FEDERAL RESERVE BANK, BUT OBAMA AND HIS BRAIN TRUST REFUSE TO MAKE THE FINANCIAL INDUSTRY “NERVOUS.”
by Robert Scheer
From HUSTLER MAGAZINE March 2010
You don’t have to salute every time Ron Paul raises the libertarian flag, and personally I don’t like leaving education, health and Social Security to the tender mercies of the inevitably rapacious capitalist markets. But the Republican congressman from Texas is on target with his bill demanding a full public audit of the Federal Reserve, the government monster that has a power over the economy that many dictators would envy and operates under a cloak of secrecy that even the CIA rarely attains.
It was the Federal Reserve, under the leadership of the once exuberantly honored but now disgraced Alan Greenspan, that got us into this banking mess. The Fed looked the other way while the finaglers of Wall Street packaged and sold those mysterious Collateralized Debt Obligations and Credit Default Swaps that brought the economy to near death when they exploded with a destructive force and then were covered by trillions of taxpayer dollars.
The Federal Reserve—more than any other institution, public or private— deserves blame for shoving the world economy into the huge financial hole it now inhabits. The Fed, most definitely including the New York Federal Reserve Bank—headed for the five years prior to the Wall Street meltdown by Timothy Geithner until Obama named him Treasury secretary—miserably failed in its regulatory obligations while the bankers looted the banks. But where the libertarians and Ron Paul are wrong is to resist any meaningful regulation, and where Obama is equally wrong is his belief that we can get it from the Fed.
Despite Obama’s sorry record of enabling Wall Street greed, choosing Geithner to run the Treasury Department may be his biggest mistake. And it is not only Geithner but also every other major appointment of those who formulate economic policy—notably deferring to the Fed—that demonstrates the President’s fawning response to the financial hustlers.
Take key White House economic adviser Lawrence Summers, who during his tenure as Clinton’s Treasury secretary pushed through the deregulation of mortgages and other derivatives that made the housing collapse inevitable. After the collapse it was the Federal Reserve that orchestrated a bailout package under George W. Bush and continued under Obama to save—indeed reward— the “too big to fail bankers” whose destructive greed the Fed had promoted.
Paul is right with his legislation, which as of this writing had the support of hundreds of lawmakers but had already been gutted by Democrats on the key House Banking Committee in response to signals from the White House. Not only was the administration opposed to transparency for the Federal Reserve to check its unbridled power, but Obama also compounded the error by advocating an even larger role for the Fed in new legislation designed ostensibly to prevent another banking meltdown.
When Chris Dodd (D-Connecticut), chairman of the Senate Banking Committee, proposed to take major banking oversight power away from the Fed and put it in the hands of a new agency to regulate all federally chartered financial institutions, the Obama Administration treated it as a dangerously subversive proposal. In the words of White House economic adviser Austan Goolsbee, it would cause financial industry “nervousness.”
Isn’t that what we ordinary folk want? Shouldn’t the banking bandits with their proven record of chicanery be made just the least bit nervous when they cook up their next series of scams? Not so, in the view of Neal Wolin, Obama’s choice as deputy Treasury secretary. Despite massive evidence to the contrary,Wolin insisted that the Federal Reserve “is the agency best equipped for the task of supervising the largest, most complex firms.”
Consider the source: Wolin, as the Treasury’s top lawyer during the Clinton years, drafted the language of the infamous Gramm-Leach-Bliley Act, which allowed the merger of investment and commercial banks with insurance companies to create the toolarge- to-fail monstrosities like Citigroup, with which the taxpayers are now saddled.
Between his government stints under Clinton and now Obama, Wolin benefited from those breakthrough mergers. He served as general counsel at The Hartford insurance company, which—thanks to the deregulatory legislation Wolin had helped draft—was allowed to buy up troubled banks and qualify for federal TARP funds.
Even the conservative Washington Times voiced skepticism in an editorial on Wolin: “Revolving doors between industry and the administration and fat-cat political contributors getting bailed out at taxpayer expense sound like business as usual. This certainly isn’t change we can believe in.” Painful as it is to admit, the Right got that right.
Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.
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