The bipartisan deregulators

Original article, by Lance Selfa and subtitled Both parties have honored Corporate America’s wish for eliminating government regulation, via

LIKE EVERYTHING else in Washington–from the Iraq war to the USA PATRIOT Act–the financial crisis that has already brought down a host of blue-chip Wall Street firms is a bipartisan disaster.

It can’t be said enough: Both major national parties are in thrall to the bosses! This is the great truth we need to wrap our minds around. Once we do that, real change becomes possible.

You’re not likely to hear much about that, though, because those on the Republican side who are associated with the catastrophe are cardboard cut-out villains–like former Sen. Phil Gramm, one of John McCain’s top advisers, who was banished from public view when he was caught on tape denying the reality of the U.S. recession and saying that America has become a “nation of whiners.”

Why has the thralldom of the national Democratic party not been ‘obvious’ to the general voter? Simple! The Republicans are much more up front about being one with the bosses. They make an easy target, and since Americans tend to like black and white thinking, they’re the party of the bosses. The bosses know this, and so they’ve infiltrated the Dems so the can get their aims passed through the back door.

The Democrats would like to keep the focus on characters like Gramm and the lobbyists running McCain’s campaign. And no wonder–because the Democrats were the Republicans’ chief accomplices.

“It’s what we could do.” That’s the matra of the national Democratic party. Single payer is off the board because “we can’t do that.” So, at best, we’ll still have a health care industry dominated by the insurance companies. What’s more, there’ll probably be a mandate that you have to buy health insurance. How cool!

Because the U.S. has two major capitalist parties, each does what Corporate America wants. And high on the capitalist wish list for the past three decades has been the abandonment of government regulation across broad swaths of the economy.

Deregulation was supposed to open up competition. Well, it worked! Some companies were so successful that they bought up so much of their competition. In doing so, they became ‘to big to fail,’ which under a capitalist system shouldn’t be able to happen. In a capitalist system, failure is endemic to the system. It’s a fascinating position we’ve found ourselves in!

In fact, the Democratic administration of Jimmy Carter kicked off the deregulation revolution with the lifting of government restrictions on airlines, trucking and railroads.

On a side note, remember that it was Carter’s arming of the Afghans during the Soviet occupation that helped to lead to the blowback we’ve suffered from that country. We honor Carter for what he’s done, in pennance, since then, but he really did suck (for the most part) as President.

Airline deregulation–sold as a pro-consumer measure (ask someone who’s flown recently how much they liked the experience or the ticket price!)–was the congressional cause célèbre of arch-liberal Sen. Ted Kennedy. Kennedy’s then-aide, now pro-business Supreme Court Justice Stephen Breyer, who helped design the law that tore up federal rules governing airline pricing and routes.

No wonder the Republicans speak well of Ted now (although Chappaquiddick is always right under their breaths). Between airline deregulation and No Child Left Behind, Ted’s done some heavy water carrying for the bosses. The sad thing is that Ted is, probably, one of the good ones.

During the presidencies of Ronald Reagan and George H.W. Bush, the energy sector (including oil and gas) was deregulated, with Democrats in Congress providing the legislation that accomplished these goals.

Yeah…that one’s worked, too! That’s why all of our houses and public buildings have solar panels on them. Wait…they don’t. Hmmmm.

But the Democratic Clinton administration almost outdid its two Republican predecessors.

The Clinton White House’s pro-business policies went further than simple “deficit reduction.” Clinton and his treasury secretaries Lloyd Bentsen, Robert Rubin and Larry Summers allowed conservative Federal Reserve Chair Alan Greenspan a free hand to jack up short-term interest rates at any hint of inflation, real or imagined.

Alan Greenspan is going to be looked at for economic policy in much the manner we look at Henry Kissenger vis-a-vis foreign policy.

Although the Clinton Justice Department pursued a much-publicized antitrust action against Microsoft, the administration meanwhile actively encouraged deregulation and monopolization in the military (through successive Pentagon budgets), telecommunications (the Telecommunications Act of 1996) and finance (the Financial Services Modernization Act of 1999) industries.

Grrrrr. Ridding the country of ‘welfare as we know it’ was a victory of Billy boy also. So was the continuance of the deindustrialization of America. Bubba was a militarist as well.

THIS LAST bill is the one that’s most directly responsible for the current disaster facing the financial industry. Though spearheaded by Gramm and Republican Rep. Jim Leach–the same Leach who recently made news by endorsing and speaking for Barack Obama at the Democratic Convention in Denver (bipartisanship abides!)–banking “modernization” was a longtime goal of the Clinton administration.

This is why the Repugs are able to make the claim that the Dems are ‘responsible’ for the market meltdown. The fact that one of the Repug deregulators supports Obama should come as no surprise. After all, Barack (fired up and ready to sign off on the bailout’ Obama’s one with the bosses.

In fact, Clinton and his economics brain trust signaled their support for banking deregulation as early as December 1992 at the “economic summit” Clinton held in Little Rock, Ark., in the month before he took office. As James Ridgeway points out in a very useful (and prescient) article in Mother Jones, the conservative National Review noted that Clinton embraced “at least one Reaganesque idea” at the Little Rock summit: “banking deregulation.”

Billly boy was the gift that kept giving to the Repugs.  Deregulation and sex scandals.  What more could they have asked for.

The finance industry’s goal was to repeal the Glass-Steagall Act, the New Deal-era law that erected barriers between commercial and investment banking, and prohibited banks from hawking investment and insurance products. The Financial Services Modernization Act accomplished this, retroactively legalizing 1990s mergers in financial services that had pushed the envelope of what was legal under Glass-Steagall.

So the financial mess is, in part, a legacy of the Clinton years.  We sholdn’t be surprised.  The national Democratic party is in the pocket of the bosses.  Period.

Although initial support for the bill fell along traditional party lines (Republicans for, Democrats mostly against), Republican leaders in Congress, working with Clinton’s Treasury Secretary Robert Rubin, made a few concessions to Democratic concerns and won final passage of the bill with bipartisan veto-proof majorities.

The ‘concessions’ were given to give cover to the Dems.  And we’ve (the society as a whole) allowed them to use that cover to keep our blinders on.  What a great system!

For Wall Street, agreeing to continue making loans in low-income neighborhoods was chump change for getting what it really wanted–the abolition of Glass-Steagall and an open door to mergers and business expansion to create firms that do everything from take deposits to make mortgages to sell insurance and to pitch investments.

Just as the bailout will work for the bosses.  We may not know how, but we can be sure it will work to the best for the bosses.  And the national Democratic party will be on board cheerleading our financial demise.

The best example of the kind of mega-firm that the 1999 law made possible is Citigroup. Not coincidentally, Citigroup hired Rubin for the multimillion-dollar position as director and chair of the executive committee. More importantly, the 1999 law led to the creation of “too big to fail” entities whose losses or bad decisions in one area (say, mortgage-backed securities) could contaminate other areas.

Citigroup will be considered ‘too big to fail.’  Mark that one off.  And it will get bigger before it fails.  Imagine the FDIC covering Citigroup.  It would make WaMu look like a piker.

Where is Rubin now? While lobbying his friends in the federal government to help the finance industry with a huge bailout, Rubin is serving as a high-level economic adviser to Barack Obama. Many of Rubin’s acolytes also serve as top Obama advisers.

‘Nuff said.

Obama has been the favorite of the “finance, insurance and real estate” industry, according to the Center for Responsive Politics. Because the industry is expecting something in return for its investment, it will be telling to see how Obama positions himself in the congressional debate (if there is one) on the $700 billion bailout that Treasury Secretary Henry Paulson proposed.

He was at the conference at the White House, ‘fired up and ready’ to sign off on the bailout.  That’s what we need to know.

With so many Americans losing their houses and jobs, it’s politically untenable for the Congress to simply hand over a blank check to Wall Street. So Democrats might be able to demand “concessions.”

If so, we should recall what happened in 1999. Democrats may win some token changes that allow them to claim that they stood up for ordinary Americans. But the Wall Street wizards who will reap the bailout benefits will know better–and they’ll be laughing all the way to the bank.

Keep all of this in mind as you head to the voting booth in November.  There are alternatives available.

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  1. Ponies of the world, unite!  Fight the bosses!

    • Edger on September 27, 2008 at 4:19 pm

    The original bill was 3 pages long. Paulson wanted $700 Billion for it, or only about $233 Billion per page.

    By Monday the Democrats had added 39 pages to bring it to 42 pages or only about $16.6 Billion per page.

    Now, after almost a week, they’ve managed to get it up to 102 pages or only the rock bottom price of $6.8 Billion per page.

    Now I know that all looks like we’re getting somewhere fast here, but they could have reduced it on the first day to just one word, and it wouldn’t have cost anyone a cent.

    I though they were supposed to be financial wizards. Gnomes of Zurich types.

    Don’t these people have calculators?

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