June 11, 2014

We Must Make Our Choice

P.S.: Only Animals Pee Wherever They Want!!! 
sign seen in Elmhurst, Queens, NY
Photograph courtesy Pak So and Anna Tan

Excerpts below from Who Stole the American Dream by Hedrick Smith, published by Random House, 2012:

We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both. - Louis D. Brandeis, adviser to President Woodrow Wilson

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The biggest failure that I've had and that Congress has had ... is the failure to slow the transfer of income up the income scale, which has left this a two-tiered society. ... The economic elite of this country has performed the biggest rip-off of the middle class in the history of the universe. - Former Representative David Obey, Wisconsin Democrat

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But in spite of the wide peril it posed, Wall Street has escaped serious oversight. It has gotten its way in Washington to an extraordinary degree. It wields influence not only through lobbying power and lavish campaign donations, but even more through the tight symbiotic relationship it has built with official Washington.

The chieftains of the financial world have acted on the evident conviction that money spent on lobbying and political campaigns pays big policy dividends. In those terms, too, finance has no rival. In the 2009-10 election cycle, the financial sector poured roughly $318 million into congressional campaigns and spent another $946 million on lobbying - $1.25 billion in all. Most other high-profile sectors - oil, defense, pharmaceuticals - did less.

Even more striking than the flow of money is the steady flow of Wall Street luminaries and master financiers into the most important policy posts of government. At times, the line between government and banking has become blurred: Alan Greenspan, head of an elite New York financial consulting firm and board member at J.P. Morgan & Co., served as chairman of the Federal Reserve for twenty years; Robert Rubin and Henry Paulson, former top executives of Goldman Sachs, have run the Treasury for both Democrat Bill Clinton and Republican George W. Bush, respectively; so many Goldman alumni were recruited by Paulson to manage the taxpayer bailout for Wall Street banks that they were called "the Guys from Government Sachs"; former New York Fed president Tim Geithner, who for five years worked under a Fed board dominated by Wall Street bank CEOs, was chosen to head Treasury by President Barack Obama; and former Harvard president and economist Larry Summers, who was paid nearly $8 million in fees in 2008 by Wall Street firms and hedge funds, became the head of Obama's National Economic Council. Under Democrats as well as Republicans, Wall Street cornered the policy market.

What's more, the Washington - Wall Street axis works as a two-way street. Wall Street recruits its lobbying army from the ranks of government. During the battle over the 2010 law to regulate Wall Street, the financial services sector hired 1,447 former government officials as lobbyists - former members of Congress, Capitol Hill staffers, or White House and Treasury Department policy makers as well as former high officials from other key agencies.

Finance had a lobbying team that included 73 former members of Congress, headed by two former House majority leaders, Democrat Dick Gephardt and Republican Dick Armey, and two former Republican Senate majority leaders, Bob Dole and Trent Lott. Less visible but no less influential were 115 former staff aides for the key House and Senate banking committees that were actually writing the financial reform bill. These staffers were inside experts who possessed not only intimate knowledge of the intricacies of the law, but also access to key members of Congress. Their job was to turn every conceivable subparagraph and semicolon to Wall Street's advantage.

Under The Atlantic's headline, "The finance industry has effectively captured our government," economist Simon Johnson observed "A whole generation of policy makers has been mesmerized by Wall Street .... The American financial industry gained political power by amassing a kind of cultural capital - a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country."

What Johnson called "the Quiet Coup" was a matter not just of people, but of ideology. In the 1990s, with Greenspan chairing the Federal Reserve and Robert Rubin leading Treasury, Wall Street's laissez-faire market philosophy became Washington's conventional wisdom. Its "capture" of Washington was evident in practically every major financial policy battle under Clinton in the late 1990s and under Bush in the zero decade, and even into the battles of financial regulation under Obama.