The Ultimate Chutzpah (effrontery to the nth degree) Prize goes to Treasury Secretary Henry Paulson. Without even cracking a smile, this flip-flopper demanded Congress trust him with unimaginable sums of money to save the very system he helped steer into collapse. If that’s not chutzpah then the Pope is Jewish.
Paulson ‘s Free Market Uber Alles era crashed in mid September. His dramatic failure as official national financial manager gave Paulson the cojones to demand Congress trust him with $1 trillion of taxpayers’ money. Now he can transfer the bad loans and junky assets of his Wall Street buddies’ to the riff raff (taxpayers). Indeed, he will hire firms receiving bailout fund to manage the bailout! Imagine giggles among CEOs of Bear Stearns, Lehman Brothers, ,AIG and other failed high fliers when they get more taxpayers’ money to pay their inflated salaries provide their luxurious perks and then become brokers for the very government they said shouldn’t regulate them!
Congress should not punish the failed financial companies or their executives, insists Paulson. In July, this three decade Wall St. veteran — Goldman Sachs –assured the world of the soundness of the US financial system’s underpinnings. In September, it collapsed. He vowed to stick with the free market as regulator and not bail out AIG. Within five days, Paulson was equally committed to bailing out the insurance giant. He remains a missionary, but his cause his changed from neo liberalism to socialism for the ultra rich.
Most socialists think that working people sharing wealth is good. My father taught me to worry about a system that produces widespread poverty and esteems Wall Street. “Never trust anyone who makes his fortune gambling with the money of working people,” he instructed me. Boy, was he right!
75 years after the country had suffered a decade of economic hardship, the virtual grandsons of the scoundrels who played fast and loose with the economy in the 1920s performed the same hanky panky on the modern economy.
Beginning in the summer and moving into September, giant brokerages, mortgage companies and banks began dropping like proverbial flies. Then, one of the largest insurance entities failed. AIG had assets larger than many countries, but even larger liabilities.
The failures had accumulated bad loans and junk assets. Banks, brokerages and insurance companies had bought, sold and borrowed on them. By September 20, according to The Wall St. Journal’s headline, Paulson had been “shocked” into reality.
Reality meant that the traders – polite word for thieves, speculators and scammers — shrieked with delight. The government would bail out AIG. Optimism flowed anew among the club of cynics.
The joyful cynics on “The Street” cared little about a California Employment Development Department report of a rise in unemployment to 7.7%. In August, 60,000 fewer Californians had jobs. Officially, almost 1.5 million Californians are unemployed. Unofficially, that figure is considerably higher. Workers in construction and farm work often get paid under the table and thus don’t get listed in official data.
Two years ago, unemployment was 5.5%. And, said Palo Alto based economist Stephen Levy (Center for the Continuing State of the California Economy), the job situation will likely worsen.
Those with jobs also feel the effects of the Wall Street turmoil. “I’m confused and worried,” my neighbor told me. “So I closed my checking and savings accounts at Washington Mutual,” because she had read that the bank teetered on bankruptcy and even though she had far less than the $100,000 ceiling that is insured by the government, she didn’t trust either the bank or the federal officials
“Your checking and savings accounts will be OK,” I tried to reassure her.
“Easy for you to say,” she retorted.
I didn’t tell her that I, too, had my checking account in Washington Mutual and that I’d also felt anxious when I read about their impending collapse.
Who will buy the bank? Will WAMU also get bailed out? And where does the process stop? Details of the AIG bailout remain sketchy. Goldman Sachs restructured because of its fragility. And Paulson never explained where the government will get $1 trillion to rescue the irresponsible companies run by his friends, the MBA multimillionaires who invested people’s pension money in the home mortgage equivalent of a Ponzi scheme.
“How could Bush have allowed the situation to deteriorate to this point?” asked the neighbor, a long time social worker.
Bush wasn’t paying attention. Aside from his inclination to play video golf and take vacations, Bush has repeatedly declared his faith in the magical market as the mechanism to regulate the economy. So he was wrong – once again – although he didn’t admit it, once again. He wore that “Gosh, what’s happening?” look, similar to the expression that appeared on his face after he heard the reports of the 9/11 attacks. Then, he replaced the dufus look with the “I’m in charge” expression and offered one-line socialist solutions –meaning having his affluent friends and colleagues share the wealth of those worth less.
John McCain, another faith-based economics Republican who reassured us that the free market cures all economic ills, also ate his words. Indeed, if words contained calories, McCain would be obese by now, considering how many times he’s had to disclaim his own remarks!
This truth-telling maverick, or lying conformist, blamed greed and then said he would fire Christopher Cox, the Securities and Exchange Commission chief, a Republican appointee who until recently shared McCain’s market faith.
In 1931, the banking system failed, two years after the stock market crashed (1929) and the world experienced a terrible depression. After FDR won the 1932 election, he introduced measures designed to avoid a repetition of the financial shenanigans that led to the global economic collapse.
By the 1980s, the born-again free market missionaries had risen to prominence again, having learned nothing from past events. Men like Greenspan, and the golden twins of Goldman Sachs, Paulson and Robert Rubin, dismissed even a possibility that analogies to prior history might have relevance. The market, they chanted, as if in religious stupor, will self-regulate.
Indeed, the market will regulate itself when alligators grow wings. But even after Bush on September 25 demanded a government bailout, the Republican National Committee platform still claims: “We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself. We believe in the free market as the best tool to sustained prosperity and opportunity for all. We encourage potential buyers to work in concert with the lending community to educate themselves about the responsibilities of purchasing a home, condo, or land.” (Republican Platform, “Rebuilding homeownership,” pg. 28) Who said consistency mattered?
Stick to the neo liberal religion, which demands citizens adopt shopping as the spiritual core of democracy. During the 1930s depression weak willed Americans abandoned shopping as a common spiritual value – just because they couldn’t afford such an expensive religion? They even voted Democrat.
75 years ago, 13 million Americans out of 130 million (total population) were unemployed. Millions were homeless. President Herbert Hoover worried that too much government intervention would lead to socialism or fascism. So, he limited his initiatives to a few meaningless programs. Roosevelt reversed Hoover’s inaction, but even after eight years of government efforts only war production brought economic recovery – post December 1941.
Those memories did not enlighten today’s politicians as they finalized bailout details — rather than ways to house the homeless. They want to save existing homeowners, but not as much as saving the credit system, whatever that is. Congress did nothing to alleviate the conditions in the new Hoovervilles — tent colonies. Millions of Americans understand that one or two paychecks away lies the street, their possible future residence; many of the new victims are children.
No bail out or sympathy for them from the President. Indeed, many of the new poor won’t vote and many Members of Congress will also ignore them. Few of the affluent would echo my parents: “There but for the grace of God go I.” Think of the $700 billion spent on wars, weapons and maintaining 761 bases; also, the six figure salaries of the higher officers and the maintenance of their Swiss ski lodges!
Wall Street tycoons and munitions manufacturers share the taxpayers’ wealth. The CEOs can claim exemptions worth millions of dollars for all kinds of luxuries, but are not exempt from the nasty connotations of their shared deadly sin. “When is enough enough?
“Never!” John D. Rockefeller sneered, referring to accumulating wealth.
The contemporary greedy set accumulated supposed assets inside their banks, brokerages and insurance companies. Then, inflated to the max with junky loans, these weasels went “pop.”
In 1929, the market crashed. Some high flying investors jumped off buildings. The malefactors of the current “investment” fraud no longer consider such solutions. They know Congress will save them – well, not as much as their greedy souls desired, but a bailout is a bailout!
SAUL LANDAU is an IPS Fellow, author of A BUSH AND BOTOX WORLD (Counterpunch) and director of forty films, available on dvd from roundworldproductions.com