Now Age Minute - 1.19.10
The Fog of War
President Obama got populist last week, at least in speech. In announcing a plan to recoup the costs of bailing out Wall Street, Barack displayed a passion unseen from him since, perhaps, his presidential campaign. According to a story from the NY Times:
President Obama on Thursday called for collecting a new tax for at least a decade on about 50 of the largest financial institutions, saying he wanted “to recover every single dime the American people are owed” for the bailout of Wall Street.
Flanked by his economic advisers at the White House, Mr. Obama used some of his harshest language to date against the resurgent financial industry.
“We’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.”
The phrase, "fog of war", is a military reference which describes the lack of clarity in the midst of battle. "The Fog of War" was the title of a 2003 documentary film about former U.S. Defense Secretary, Robert McNamara, in office during the height of the Vietnam War. Beyond a life story, the film was a platform for McNamara to offer a mea culpa for his part in escalating the U.S. military campaign, expressed in his "eleven lessons of war", the last lesson being, "you can't change human nature".
While it's a more direct case to make contrasting the Vietnam War with the current war in Afghanistan in this context, that would be low hanging fruit. I'm looking at the civil war here at home: Wall Street vs. Main Street.
This promises to be an interesting period in our modern civil war. The Financial Crisis Inquiry Commission began it's work last week to disassemble the causes of the financial crisis that spurred the Great Recession, and the "too big to fail" banks are announcing record profits for 2009, and yes, record bonuses. Hence, Obama's attempt to get in front of the story, with his announcement of new fees against the biggest banks. Yet, while the proposed fees are estimated to bring the treasury $100 billion over ten years, it's a pittance in contrast to what Wall Street sucked out of the economy, and to what they will likely earn over the next decade.
It's important to understand how much taxpayer money may actually head towards the warriors of Wall Street. I know you've heard that TARP totaled $600 billion. And that most banks repaid their TARP loans. That's what they say in the press. But that's just the fog of war. Check out what TARP's Special Inspector General reported to congress in July, according to Bloomberg.com,
U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.
The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.
As Barofsky's team works to lift the fog, they uncovered evidence that the New York Fed, when Geithner was at the helm, ordered AIG to withhold evidence about pay-outs to creditors, like Goldman Sachs, setting up a scenario where the big banks in question got 100% return of their investments, paid for by the American taxpayer in the bailout of AIG. Read this from the Huffington Post:
An arm of the Federal Reserve, then led by now-Treasury Secretary Timothy Geithner, told bailed-out insurance giant AIG to withhold key details from the public about overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs.
The sordid tale unfolds in a series of e-mails between the company and the New York Fed obtained by Rep. Darrell Issa (R-CA), the ranking member of the House Committee on Oversight and Government Reform, and first publicly disclosed by Bloomberg News.
The matter is the subject of an "ongoing review" by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), communications director Kristine Belisle said in an e-mail to the Huffington Post. SIGTARP is headed by Neil M. Barofsky, a former federal prosecutor.
But the fog only thickens when we learn that, like our treasury secretary, the Securities and Exchange Commission has gone to bat for Wall Street. Have a look at an article from Reuters titled, "SEC Order Helps Maintain AIG Bailout Mystery". From that article,
It could take until November 2018 to get the full story behind the U.S. bailout of insurance giant American International Group because of an action taken last year by the Securities and Exchange Commission.
In May, the SEC approved a request by AIG to keep secret an exhibit to a year-old regulatory filing that includes some of the details on the most controversial aspect of the AIG bailout: the funneling of tens of billions of dollars to big banks like Societe Generale, Goldman Sachs, Deutsche Bank and Merrill Lynch.
We've been reminded for the past eight years that the "war on terror" is unlike any war we've fought in the past. Perhaps. But it's nothing as compared to the war being waged against us by Wall Street. It's one that's been prosecuted for the past three decades, starting with the Street's takeover of the White House and Congress with the election of Ronald Reagan, when deregulation of the financial services industry took flight. And we know all to well where it lead. By and large, however, the American public was unaware a war was being waged against us. In fact, we were complicit. We took the bait; we became consumers. But in our transformation from citizens to consumers, we traded our civic responsibilities for, well, stuff. We made a Faustian deal with desire (remember "greed is good"). And we know all to well where it lead.
In case you think my case for war against us by Wall Street is heretical; that the big banks are not fully in charge here, consider what happened when Obama asked heads of the largest banks to come to the White House last month to discuss the reason they were bailed out by taxpayers. And what was that reason? It was to lend money to individuals and small businesses, in order to jump-start the middle class economy. Instead, however, they found more fortune in gambling in the same risky schemes that caused the recession in the first place. That's because TARP was delivered with no strings attached. And Washington has done nothing to change the way Wall Street operates. Why? Maybe Illinois Senator Dick DurbIn was right, back in April, when he expressed in frustration over the banks fighting bankruptcy reform, "...they frankly own the place".
So what happened when Obama asked the banking kings to the White House for a chat? Three of the biggest (Lloyd C. Blankfein, the chief executive of Goldman Sachs; John J. Mack, chairman of Morgan Stanley; and Richard D. Parsons, chairman of Citigroup) decided to phone it in, rather than show up at the president's request. Their excuse, bad weather. Too much fog over Reagan National Airport. Talk about the fog of war!
Forget this phony baloney health care bill, which is really a tremendous win for insurance and drug companies. What's needed is major re-regulation of Wall Street, and a break-up of the "too big to fail banks". Obama's plan for a fee on the banks in merely a smokescreen to avoid what's really necessary here. You can't play nice when this much money and power is in the hands of a few, hyper-greedy, morally unbound men. What was that lesson from McNamara? Right, "you can't change human nature".
- Craig Gordon
Help, I need somebody,
Help, not just anybody,
Help, you know I need someone, help.
J. Lennon, P. McCartney (mostly John)
