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Profiles in Cowardice and Corruption: Why McCain and Obama are United in Weakness on the Financial Crisis


GOLDMAN SACHS SOCIALISM

 

The nation’s financial system is in the middle of a colossal crisis caused by massive fraud, idiocy, and greed at the upper reaches of the banking, insurance, and real estate industries.  The arch-plutocratic Bush administration and Federal Reserve propose to “solve” the crisis by orchestrating a massive taxpayer bailout granting stupendous rewards to the leading perpetrators.  The Paulson-Bernanke plan to buy up $700 billion worth of bad, overpriced mortgage assets takes the venerable corporate principle of “socialism for the rich and capitalism for the poor” (privatization of reward and socialization of risk) to grotesque new levels. 

 

Compensating gross business misconduct on a spectacular scale, it would be what former Wall Street economist Michael Hudson called “the largest and worst giveaway since a corrupt Congress gave land grants to the railroad barons a century and a half ago.  If it goes through, it will shape the coming century by giving finance unprecedented power over debtors – homebuyers, industry, state and local government, and the federal governmentas  well” [1]

 

As former presidential candidate and progressive Democrat Dennis Kucinich notes, “The double standard is stunning; their profits are their profits, but their losses are our losses.”  Further: “the same corporate interests that profited from the closing of U.S. factories, the movement of millions of jobs out of America, the off-shoring of profits, the out-sourcing of workers, the crushing of pension funds, the knocking down of wages, the cancellation of health care benefits, the sub-prime lending are now rushing to Washington to get money to protect themselves” [2].

 

On the front page of the New York Times today (I am writing on Thursday, September 25th), a reporter notes a grave concern among “many ordinary Americans” – that the profound difficulty involved in determining the real value of “troubled investments” could “result in the government’s buying them for more than they will ever be worth, a step that would benefit financial institutions at taxpayers’ expense.”  Times reporter Vikas Bajaj notes that “each one of these investments is tied to thousands of individual mortgages, and many of those loans are going bad as the housing market has worsened.”  Bajaj quotes a leading bond portfolio manager who reports that “we are not going to know what the right price is for years.”  [3]

 

But while precise valuation waits, it is a sure bet that the government’s purchasing price will be well above fair market value.  Asset inflation (along with asset-stripping) is what this latest late-capitalist boom and bust drama – the “mother of all bubbles” (Glen Ford) – is all about [4].

 

SUBSIDIZING “THE VERY PEOPLE WHO SOLD OUT MY COUNTRY”

 

Is it any wonder that the Bush administration’s scheme to rescue predatory high finance at a price that could fund Society Security for four decades evokes widespread fear and loathing across the United States? Lawmakers of both parties have been releasing e-mail messages from their constituents decrying the proposed bailout. A typical message to Representative Jim McDermott (D-Washington) reads as follows: “I am hoping Congress can find the backbone to stand on their feet and not their knees before BIG BUSINESS.”  A representative e-mail to conservative Republican congressperson Candice Miller (R-Michigan) said this: “NO BAILOUT, I am a registered republican.  I will vote and campaign hard against you if we have to subsidize the very people who have sold out MY COUNTRY.” U.S. Senator Sherrod Brown (D-Ohio) reports 2,000 e-mails and calls that are “95 percent opposed” to the bailout. The reactionary Illinois congressman Ray LaHood (R-Illinois) says he has not seen such an outpouring of citizen rage since the Bill Clinton impeachment trial [5].

 

 

“NATIONAL LEADERS IN A TIME OF CRISIS”

 

How interesting that the supposed “populist” “maverick” John McCain and the alleged left “progressive” Barack Obama have taken a painfully cautious, wary, and vague approach to the epic financial meltdown and the Paulson-Bernake giveaway.  These two would-be leaders of “We the People” have watched the historic financial debate with super-careful reserve. They have  responded with few if any meaningful differences between them, consistent with the “post-ideological” Obama’s request for the open economic ignoramus McCain to join him in issuing a joint statement and with McCain’s call to suspend the first presidential debate so that “our national leaders” might “come together at a time of crisis.”

 

Both candidates have called for “greater oversight,” for “limits” on executive pay at bailed out firms, and for “ensuring that taxpayers benefit” from whatever emerges. Both have agreed to meet with Bush to forge a Wall Street “rescue bill” because, as both Obama and Bush declare – in Obama’s word’s yesterday, anticipating Bush’s televised statement on the financial crisis last night – the “the risk of doing nothing is economic catastrophe” [6].

 

Neither of the two business party contenders has called for a moratorium on foreclosures or for writing down the mortgage debt of millions of families facing expropriation.  Neither has demanded a public ownership stake in recused firms or the tough re-regulation, disciplining, and political (and campaign finance) neutralization of the finance, insurance, and real estate (FIRE) sector’s owners and managers.  Neither has called for transferring funds from the giant, bloated (but sacrosanct_ “defense” (Empire) budget to support current and would-be homeowners, renters, workers and to stabilize markets poisoned by junk mortgages and other related toxic financial instruments.

 

“National eeaders?” The only presidential candidates speaking forthrightly and urgently against the proposed Wall Street giveaway have been Ralph Nader, Cynthia McKinney, and Bob Barr.  They are banned from the presidential debates, even as McCain threatens not to show up for the first one.  They have been preemptively exiled from serious consideration in the corporate-crafted narrow-spectrum electoral extravaganza.

 

 

“GIVE US THE MONEY – RIGHT NOW – OR TAKE THE BLAME FOR WHAT FOLLOWS”

 

The two “mainstream” candidates’ cowardly response to the latest spectacular state-capitalist financial fiasco is a result of six basic factors. 

 

First, neither of them wants to be seen as sticking their foot in their mouth on a major but complex issue that changes from one day to the next in accord with shifting markets, polls, and political winds. This is a close race (absurdly enough given the transparent danger and idiocy of the McCain-Palin ticket and the Republican Party’s recent record) and one mistaken comment could cost the election.

 

Second, while both candidates (even the painfully isolated McCain) are sharply aware (that many voters hate Bush’s bailout, they also know that officeholders and candidates who oppose the plan risk blame if deepening economic calamity is seen to have resulted from “congressional inaction.” As William Greider notes, “Wall Street has put a gun to the head of the politicians and said, ‘Give us the money – right now – or take the blame for what follows’”[7].

 

 

DEFECIT v. HOPE”

 

Third, the major hike in federal debt that is certain to result from a “rescue” plan does not fit well with either of the candidates’ campaign promises.  The giant public expenditures certain to occur in a likely Wall Street bailout works against McCain’s call to extend Bush’s tax cuts for the rich.  They also challenge Obama’s call for “middle class tax cuts” and his promise to increase public subsidies for health care, education, renewable energy, retirement savings, and other priorities. Obama is already talking scaling down some of his already tame “hope” agenda in response to the crisis.

 

 

BIPARITSAN COMPLICITY

 

Fourth, both candidates know that their own parties and key players in their campaigns were centrally involved in key policy moves that created the context for the current financial debacle. During the late 1990s, McCain’s longtime ally, associate, and (until recently) economic adviser Phil Gramm was the leading Congressional force behind legislation that exempted numerous toxic financial instruments (“credit swaps,” “over the counter derivatives,” “credit defaults” and the like) from regulatory scrutiny.  Gramm also led the way for the fateful undoing of basic federal (from the New Deal) firewalls between commercial banking, investment banking and the insurance industry [8].

 

The top Obama advisor and funder Robert Rubin was an even bigger agent of the fateful deregulation of the financial industry and the related drastic over-escalation of financial asset prices during the 1990s “Clinton boom.”  Under the guidance of the its Treasury Secretary Rubin – a former Goldman Sacs CEO and future Citigroup Chair – the neoliberal Clinton administration (described as “recognizably progressive” in Obama’s 2006 campaign book The Audacity of Hope) refused to halt the path to ultimate disaster by taxing speculative financial transactions or by reducing reserve requirements for loans funding productive rather than speculative investments. As Lila Rajiva recently noted, Rubin  “was responsible as much as anyone else for blocking regulation of the over-the-counter derivative trade and for consolidating the banks – misdeeds for which the rest of the financial industry is now paying.” Rubin influenced Clinton to sign Gramm’s deregulatory legislation, favored by Wall Street Republicans and Democrats alike[9].  

 

Perversely enough, Rubin was one of the first to personally profit from the abolition of the separation between commercial and investment banking.  Getting out of Dodge before the dot.com asset inflation bubble burst in 2002-2001, Rubin moved from Treasury to become co-director of Citigroup, a newly merged investment-commercial banking conglomerate [10].

 

WALL STREET SPONSORSHIP

 

Fifth, both McCain and Obama are deeply beholden to the very financial elites and Wall Street firms who created the current mess and who stand to gain from the Bush-Paulson-Bernanke proposal. Through August of 2008, McCain’s  top 20 contributors include: Merrill Lynch (#1 at $298,000); Citigroup  (#2 at $209,000); Morgan Stanley (3 at $233,000);  Goldman Sacs (4 at $208,000); Credit Suisse Group (8 at $150,000); UBSAG (10 at $140,000); PriceWaterhouseCooper (11 at $140,000); Bank of America (13 at $129,000); Wachovia (14 at $122,000); Lehman Bros (15 at $116,000), Bear Stearns (19 at $99,000), and Pinnacle West (20 at $98,000)

 

Of all the leading U.S. economic sectors, FIRE (finance, real estate, and insurance) is the top giver to McCain at $22,108,921 [11].

 

Obama’s top 20 contributors include Goldman Sachs (#1 at $692,000), Citigroup (#3 at $449,000), JP Morgan Chase (#4 at $405,000), Lehman Bros. (#10 at $371,000), and Morgan Stanley (#16 at $319,000).  Note that Goldman Sachs has given three times the amount to Obama it has contributed to McCain and that Citigroup’s Obama giving more than doubles its investment in McCain.  Obama’s #16 contributor – the investment bank Morgan Stanley – gave Obama $20,000 more than McCain got from his top contributor (the investment banker and brokerage house Merrill Lynch). 

 

FIRE is also Obama’s top contributor, granting him $24,860,257, more than $2 million more that sector gave to McCain [12]. 

 

It is darkly interesting to note that the Obama campaign’s finance chair, the Hyatt heress Penny Pritzker, was one of the leading originators of the toxic sub-prime mortgage instrument during the late 1990s, when she served on the board of the Superior Bank in Hinsdale, Illinois [13]. 

 

Also worth noting, Obama initially tried to hand his vice presidential nominee vetting process to Jim Johnson, a former CEO of mortgage lender Fannie Mae (recently re-nationalized in the wake of its financial collapse).  Johnson was a top player in the meltdown of the financial system [14].

 

As the prolific author and Wall Street critic Kevin Phillips noted on the Public Broadcasting System’s Bill Moyers Show last week, “But then, you’ve got Obama with Bob Rubin and he doesn’t seem to have any problem with the hedge fund types. I mean, one of the Chicago people was a major financer of his. He gets a guy to pick his vice-president. Turns out to be somebody who was part of the Fannie and Freddie mess.”

 

“So I don’t exactly see Obama as this fellow riding in on a horse who represents all kinds of reformism. It’s an important thing probably to have to change from the Republicans but I don’t see that he is free of the ties to finance and Democratic Party financial types…..”

 

When Moyers noted many Democrats’ hopes that a new New Deal – involving tightened financial regulation among other progressive reforms – is in the offing under an Obama administration [15], Phillips responded with understandable skepticism, explaining that:

 

“there’s several difficulties here. First of all, at this point, what you’ve got are the Democrats are the party right at this point that’s getting most of the financial money. When Franklin D. Roosevelt won in 1932, we know he wasn’t getting most of the financial money.”

 

“The second thing is I don’t think we’re more than partway through. The Democrats think it’s going to be another 1933, they get in there, they can do all the New Deal stuff. My feeling is that they’re coming in halfway and they’re going to have to make hard decisions that are going to eat the Democratic coalition like a bologna sandwich. They’re going to start civil wars….”

 

Phillips added that McCain probably “osmossed …much less sycophancy toward Wall Street and the money crowd” growing up in “a naval family” than what Obama would have “osmossed at Harvard Law School.”  (But Phillips also noted that McCain who is an economic idiot, as evidence by his willingness to be advised by the ridiculous Gramm)[16].

 

LOVING “THE MARKET”

 

The sixth and final factor is that both Obama and McCain are open enthusiasts of American so-called “free market capitalism.” This shared ideological commitment to the profits systems is of course mandatory for “viable” presidential candidates under the rules of American “dollar democracy,” the “best democracy that money can [and did] buy.”  It does not leave a lot of room for serious public confrontation with the privileges and dictates of capital, no matter how dysfunctional and dangerous masters of finance have become for the common good. 

 

The supposed “radical leftist Obama” [17]identifies himself as a "pro-market" and "free trade" "guy," saying things like, "Look, I am a pro-growth, free-market guy.  I love the market" [18]. But as Laurence Shoup recently noted in Z Magazine, Obama "fail[s] to note that the market loves and rewards those who already have money and power, not those lacking these advantages.  To say that you ‘love the market’ is akin to saying that you love the ruling class (the top 1 percent of the population that controls 20 percent of the country’s wealth and nearly 40 percent of the country’s wealth) and do not care about the great majority (the 60 percent of the population that controls only 25 percent of the income and 5 percent of the wealth).  To say ‘I love the market’ – at a time when the financial system is deflating because of decades of lies about how great unregulated markets are which fueled rampant speculation, phony valuations, and deceitful assurances – is to be deaf to the reality of powerful interests are protected by the government while everyone gets a lecture on personal responsibility. ‘Change we could believe in,’ would involve confronting the perversity of market-driven capitalism….” [19]

 

Cowards, fools, whores, and defenders of unjust privilege and concentrated wealth do not make great popular leaders in times of crisis or stability.  The cautious and conservative approach of the two dominant party presidential candidates to the current state-capitalist financial fiasco reminds us of the need, in John Pilger’s words (on the back cover of my recent study of the Obama phenomenon) to “reveal power as it is, not as many of us wish it to be.”  It is also, to quote Adolph Reed, Jr. (also writing on the back of my new Obama book) a “bracing reminder that progressive agendas will not be advanced through vesting hopes and aspirations in candidate-centered politics, that there is no quick and easy substitute for the task of building a serious, institutionally grounded, working-class based political movement – from the bottom up and top down” [20].

 

 

Veteran radical ex-historian and activist Paul Street ([email protected]) is the author of Empire and Inequality (2004), Segregated Schools (2005),  and Racial Oppression in the Global Metropolis (2007). His latest book (just released) is "Barack Obama and the Future of American Politics" (Boulder, CO: Paradigm Publishers, August 2008),order at

www.paradigmpublishers.com/Books/BookDetail.aspx?productID=186987

 

 

NOTES

 

 

1. Michael Hudson, “The Paulson-Bernanke Bank Bailout Plan,” CounterPunch (September 22, 2008), read at http://www.counterpunch.org/hudson09222008.html

 

2. Dennis Kucinich, “Protecting the Public Interest in Any Economic Bailout” (September 23, 2008), read at www.Kucinich.us

 

3. Vikas Baja, “Rescue Plan’s Basic Mystery: What’s All This Stuff Worth?,” New York Times, 25 September, 2008, p. A1.

 

4. Michael Hudson, “America’s One Kleptpcracy,” CounterPunch (September 20/21, 2008); Glen Ford, “Death Rattles of a Criminal Class,” Black Agenda Report (September 24, 2008), read at www.blackagendarpeort.com

 

5. Sheryl Gay Stolberg, “Lawmakers’ Constituents Make Their Bailout Views Loud and Clear,” New York Times, 25 September 2008, p. A25.

 

6. Charles Babington, “Obama, McCain Cautiously Watch financial Debate,” Associated Press (September 23, 2008); Gail Collins, “Bring On the Rubber Chickens,” New York Times, 25 September 2008, A29; Elizabeth Bumiller and Jeff Zeleny, “McCain for Delay,” New York Times, 25 September 2008, A1, A23.

 

7. William Grieder, “Goldman Sachs Socialism,” The Nation (September 23, 2008), read at http://www.thenation.com/doc/20081006/greider2

 

8. Alexander Cockburn, “Is This the Stake Through Neoliberalism’s Heart? It Should Be, But…”, CounterPunch (September 20/21, 2008), read at http://www.counterpunch.org/cockburn09202008.html; Lila Rajiva, “Putting Lipstick on an AIG,” CounterPunch (September 20,21, 2008), read at http://www.counterpunch.org/rajiva09202008.html.

 

9. Rajva, “Putting Lipstick on an AIG;” Cockburn, “Is This the Stake?;” Robert Pollin, Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity (New York: Verso, 2003)

 

10. Pollin, Contours of Descent, p. 32.

 

11. Center for Responsive Politics, “John McCain (R): “Top Contributors” and “Sectors” (2008 election cycle through August 2008), view at http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00006424. Here are the standard economic sectors used in the reporting of campaign finance data: Agribusiness; Finance, Insurance, and Real Estate (FIRE); Lawyers and Lobbyists; Health; Labor; Communications/Electronics; Transportation; “Defense;”  Construction; Energy and Natural Resources; Misc. Business; Ideological/Single Issue.

 

12. Center for Responsive Politics, “Barack Obama (D): “Top Contributors” and “Sectors” (2008 election cycle through August 2008), view at http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638.

 

13. “Truthteller,” “REVEALED: Obama Finance Chairwoman Pritzker the Toxic Catalyst of the current Financial Crisis,” No Quarter (September 22, 2008), read at http://noquarterusa.net/blog/2008/09/22/revealed-obama-finance-chairwoman-pritzker-the-toxic-catalyst-of-the-current-financial-crisis/

 

14. Johanna Neuman, “Barack Obama Advisor Jim Johnson Quits under Fire,” Los Angeles Times, 12 June, 2008, read at http://articles.latimes.com/2008/jun/12/nation/na-johnson12

 

15. This is the fantasy behind a smart but silly book by the liberal economist and American Prospect editor Robert Kuttner: Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency (White river Junction, VT: Chelsea Green, September 2008)

 

16.Kevin Phillips Interview by Bill Moyers, Bill Moyers Journal(September 19, 2008), read transcript at http://www.pbs.org/moyers/journal/09192008/transcript2.html

 

17. The ridiculous description of Obama advanced by the right-wing hit-man Jerome Corsi in his best-selling book “Obama Nation.” For a (I hope) useful review of Corsi’s preposterous neo-McCarthyite (and yet best-selling) account of Obama, see Paul Street, “The Madness of Jerome Corsi,” ZNet (August 25, 2008), read at http://www.zcomm.org/znet/viewArticle/18540.

 

18. Naomi Klein, “Obama’s Chicgao Boys,” The Nation (June 12, 2008), read at http://www.thenation.com/doc/20080630/klein.

See also Barack Obama, Barack Obama, The Audacity of Hope: Thoughts on Reclaiming the American Dream (New York: Crown, 2006),pp. 149-150; Paul Street, “Obama’s Audacious Deference to Power,” ZNet Magazine (January 24, 2007), read at http://www.zmag.org/content/showarticle.cfm?ItemID=11936.

 

19. See Laurence H. Shoup, "Obama and McCain March Rightward," Z Magazine (September 2008), p. 27.

 

20. Paul Street, Barack Obama and the Future of American Politics (Boulder, CO: Paradigm Publishers, 2008), back cover. I hope this book will be understood as useful left alternative to both the vicious right-wing neo-McCarthyiite-white-Christian-nationalist madness of Corsi’s attack book (“Obama Nation”) and the childish progressive hopefulness of Robert Kuttner’s monograph and an earlier similarly immature (but much less serious and substantive) book by Obama’s liberal former law student John Wilson: Barack Obama: This Improbable Quest (Boulder,CO: Paradigm Publishers, 2007). 

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