By Ann Pettifor. Huffington Post. 20 April, 2009.
The Obama administration said no to downsizing and re-structuring the banks. They balked at firing incompetent CEOs. Under attack from Republicans and Wall Street they held back on controlling financial institutions that, post bail-out, are in reality ‘State-Owned Banks’.
As a result, the US administration has itself been hijacked, and America is now, effectively, a Bank-Owned State. Democracy has been usurped by what Abraham Lincoln called ‘the Money Power’.
Why would bankers stage a hold-up of the administration you ask? Because, to echo the words of an old bank robber: “That’s where the money is”.
As millions in the real economy suffer bankruptcy or unemployment, bank profits and bank share prices have soared.
Bankers are barely able to conceal their glee. Their triumphalism is justified. Thanks to the 2008 heist, $700 billion of ‘Troubled Asset Relief Funds’ (TARP) was siphoned out of taxpayers’ pockets and into bank coffers. The heist was pulled off in classic ‘Shock and Awe’ style, with virtually no questions asked.
The Fed bowed to the threat the bankers posed to us all. Chairman Ben lowered borrowing costs to zero, and meekly took the banks’ toxic assets onto the Fed’s books. The bullies behind the heist weeded out the competition, and the government allowed big banks to become more dominant in lucrative markets.
Goldman Sachs took Secretary Geithner hostage, and drained down $12.9 billion of AIG bailout funds; Merrill Lynch tapped $6.8 billion, the Bank of America $5.2 billion, Citigroup $2.3 billion and Wachovia $1.5 billion. Regulators (The Financial Accounting Standards Board) surrendered, ignored the lack of provision for loan defaults, and then weakly agreed that banks could inflate the value of their assets.
In the meantime, blindfolded Treasury Secretary Tim Geithner promised to hand over $500 bn — $1 trillion in the form of a ‘Public-Private Investment Program.’ This would create a new gambling casino for hedge-fund outlaws — one in which the hedge funds win, and the FDIC loses. To pay for this effective give-away Geithner had to raid (tax) small and medium healthy banks to subsidize the gambling of their larger, more reckless — and too-big-to-fail — competition.
While the banking outlaws were roaming around administration buildings, the US Treasury Secretary timidly suggested they test for fitness by jumping hurdles. They weren’t putting up with that, and so, it is rumored, Geithner has backed down, and set the bar very low. We are still waiting to know more about the stress tests, but it seems the Treasury Secretary has been silenced. (See Elizabeth Warren here)
Citizens went along with the bankers as they plotted their raid. There was little outcry when the Depository Institutions Deregulation and Monetary Control Act of 1980 was repealed, or when the Glass-Steagall Act — which prohibited a bank holding company from owning other financial companies — was repealed in 1999 by the Gramm-Leach-Bliley Act. Voters were asleep at the wheel.
So, it’s no wonder that bankers are triumphant. No wonder the San Francisco Chronicle has crowned John Stumf — CEO of Wells Fargo — CEO of the year. Thanks to the success of the heist, bankers were able to announce remarkable profits for what was — in the real economy in which you and I live — a terrible quarter.
So what lies ahead for the bank-owned state?
Well, my view is that the triumphalism of the bankers is a little overdone, and may not last. Why? Because they can’t get away with cooking the books forever. As with Enron, some day the sheriff will walk through the door.
Second, bankers do not deal in the real economy. You and I do that, by working, caring for others and producing goods and services. They need us to keep that up, if they are to keep their grip on government, and siphon off our hard-earned surplus. But by raiding government coffers and squeezing the economy dry, the bankers may be cutting the ground that is the real economy from underneath them.
Third, the bank outlaws have failed to spot a big cloud on the horizon — Climate Change — and are not prepared for the shocks that extreme weather events will cause to their business and the economy as a whole.
So we, the people, should face reality, end our collusion with the finance sector, recognize our power, and begin to organize — politically.
To succeed there must be an alliance between Labor, Industry (i.e. all those engaged in productive activity by hand or brain) and the Greens — to challenge the bankers.
For too long Labor and Industry have bickered, over wages and conditions — allowing the bankers to win on the big issues — control over tax revenue, regulation and government. In other words, while Labor and Industry were bickering — Finance usurped American democracy.
For too long, Labor, Industry and the Greens have been talking over each other’s heads — or at each other — from their deeply entrenched positions. Now they must settle differences, unite and organise — to tackle the really big issues.
It means uniting — as communities — to defend families and businesses from foreclosures. It means standing together and challenging the bankers — holding demonstrations outside banks, educating ourselves and our communities about what has happened.
It means holding elected representatives to account for their record on this issue; and throwing them out if they collude with the outlaws.
And it also means changes to our lifestyles — less borrowing, less dependence on the banks, and less consumption, to make the world more sustainable — and to remove the power of money over the way we live.
If Americans don’t organise politically to transform the bank-owned state to make it accountable to the people — then God help American democracy. But if Americans do once again organize to defend hard-won democratic gains, then in the words of Abraham Lincoln “Money will cease to be master and become servant of humanity. Democracy will rise superior to the money power.”