As in the final reel of the old-fashioned Hollywood cliffhangers, it’s a race against time. Will Congress stiffen its spine, face down Paulson’s blackmail and tell him there’ll be no $700 billion on his terms?
Will a decisive chunk of the American electorate decide that between a half-mad former POW tormented with PTSD and dying of melanoma and a stable, centrist, Harvard-educated half-black man, they’d better trust their basic instincts and go with the all-white nut who might well blow up the planet? Rush Limbaugh’s line, also featured on the Wall Street Journal‘s September 22 editorial page, is that the real culprits in this crisis are the blacks. You see, the Community Reinvestment Act, designed in the Carter era to encourage minority homeownership, was pushed by Clinton, who coaxed into being the necessary subprime loans. The blacks took the subprime loans and then couldn’t make the payments and set Wall Street on course for disaster.
People say hopefully that Obama is sharpening up his game. It’s partly true. We’re getting less of the high-flown paeans to hope, a bit more pith amid the wind. But since things are breaking his way, at least in these predebate days, he’s a lot more demure than the edgy popular mood.
Americans have been living in a casino economy for years. It’s a style of life ingrained in the national psyche. But at the prospect of a long-term losing run they are getting frightened and angry, fast. Congress knows it could be facing voters who can see what’s coming over the horizon when the Treasury bails out Wall Street. The shriveled health benefits they now have will shrivel further. Their 401(k)s are shot to hell. Pretty soon they’ll be told that the trillion or so going to Wall Street means that taxes will go up, that the Social Security trust funds are the target of renewed attack.
Prudence aside, how can Obama set his match to the tinder of popular rage and fear when he has Robert Rubin and Lawrence Summers standing beside him, rage-and-blame extinguishers at the ready? True, at his elbow McCain has Phil Gramm, an altogether nastier human package. Gramm–a former Democrat, be it noted–was the prime Republican force pushing through the Gramm-Leach-Bliley Act in 1999. It repealed the old and admittedly leaky Glass-Steagall Act, passed during the Great Depression, which prohibited a commercial bank from being in the investment and insurance business. President Clinton cheerfully signed Gramm’s act into law.
A year later Gramm, chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill right before a recess. The amendment received no scrutiny and duly became the Commodity Futures Modernization Act, which OK’d deregulation of investment banks, exempting most over-the-counter derivatives, credit derivatives and credit default swaps from regulatory scrutiny.
This is all true, but it omits the contribution of the Democrats to deregulation, which–naturally enough, since this was the Clinton era–was decisive. What was the Democratic Leadership Council, of whom Clinton and Gore were prime adornments, about but pushing through deregulation on the agenda of the banking industry? Look at the 2001 Economic Report of the President, the last one written under Clinton. It was unequivocal in dismissing Glass-Steagall and touting the virtues of financial deregulation: "those rules are not needed today…. These steps allow consolidation in the financial sector that will result in efficiency gains and provide new services for consumers."
You want a symbol of Wall Street’s corruption? Who better than Rubin, formerly of Goldman Sachs, a major player behind the Glass-Steagall repeal and a prime beneficiary of its demise, since he skipped from his Treasury position to run the newly merged investment/commercial banking conglomerate Citigroup?
On September 22 Jesse Jackson gave a little press conference in lower Manhattan, at Exchange and Broad Streets in the financial district. JoAnn Wypijewski sent me a description. There were maybe fifty people, which is apparently what Jackson had expected. Six years ago Ralph Nader and the Green Party were down there in the same spot for a campaign event. The place was packed, and there were loudspeakers and Patti Smith was the opening act. Nader was saying then a lot of what Jackson is saying now: about the runaway train of Wall Street, the deregulation that was going to exact payback at some point, the extreme gap in wealth and the redistribution upward.
Six years later the Green Party is a joke. There is less organization than there was when Nader ran in 2000, and Nader is less of a presence than he was then, these days a lone, partyless individual, albeit a famous one. The 2000 campaign built nothing, just as, in the end, Jesse’s campaigns in the ’80s built nothing. What an irony! Now is the moment to kick neoliberalism into the grave. We won’t get another chance like this in our lifetimes to swing the pendulum the other way.
Obama has fired up the young people with appeals to hope. But as he polls over 50 percent for the first time on day three of the bailout hearings, he clearly deems it too rash to try to ignore a populist constituency. His proposed conditions on the bailout have been very tame. He’s frightened of setting a match to the tinder and thinks it’s seemly to have Rubin, Summers and Volcker stand next to him. Those are his natural instincts anyway. The irony is that it’s McCain’s demagoguery about hanging the chairman of the SEC that’s shoved Obama a bit to the left. In extremis McCain will say and do anything. He put Sarah Palin on the ticket. Maybe now he’ll propose an FDR-type New Deal and Obama will have to raise the ante and start sounding like a real leader who can seize the opportunity presented by this crisis, which the gods have offered him with such perfect timing.