How "Brilliant" Men Crashed the Economy

How "Brilliant" Men Crashed the Economy What to Do About Wall Street

 

By RALPH NADER

February 2, 2009

 

http://www.counterpunch.org/nader02022009.html

 

Soon after the passage in 1999 of the

Clinton-Rubin-Summers-P. Graham deregulation of the

financial industry, I boarded a US Air flight to Boston

and discovered none other than then-Secretary of the

Treasury Lawrence Summers a few seats away. He was

speaking loudly and constantly on his cell phone. When

the plane took off he invited me to sit by him and talk.

 

After reviewing the contents of this Citibank-friendly

new law called the Financial Modernization Act, I asked

him: "Do you think the big banks have too much power"?

 

He paused for a few seconds and replied: "Not Yet."

Intrigued by his two word answer, I noted the rejection

of modest pro-consumer provisions, adding that now that

the banks had had their round, wasn't it time for the

consumers to have their own round soon?

 

He allowed that such an expectation was not

unreasonable and that he was willing to meet with some

seasoned consumer advocates and go over such an agenda.

We sent him an agenda, and met with Mr. Summers and his

staff. Unfortunately, neither his boss, Bill Clinton,

nor the Congress were in any mood to revisit this

heavily lobbied federal deregulation law and reconsider

the blocked consumer rights.

 

The rest is unfolding, tragic history. The law

abolished the Glass-Steagall Act which separated

commercial banking from investment banking. This opened

the floodgates for unwise mergers, acquisitions and

other unregulated risky financial instruments. Laced

with limitless greed, casino capitalism ran wild,

tanking economies here and abroad.

 

One champion of this market fundamentalism was Alan

Greenspan, then chairman of the Federal Reserve. Last

October before a House Committee, Greenspan admitted he

was mistaken and expressed astonishment at how

corporations could not even safeguard their own

self-interest from going over steep speculative cliffs.

 

Greenspan and Summers were deemed "brilliant" by the

press and most of Congress. Summers' predecessor at

Treasury, Robert Rubin, was also a charter member of

the Oracles--those larger-than-life men who just knew

that the unfettered market and giant financial

conglomerates would be the one-stop shopping mart

consumers were assumed to be craving.

 

Now the world knows that these men belong to the "oops

oligarchy" that bails itself out while it lets the

companies collapse into the handcuffed arms of Uncle

Sam and bridled taxpayers who have to pay for

unconditional megabailouts. Instead of the Wall Street

crooks being convicted and imprisoned, they have fled

the jurisdiction with their self-determined

compensation. Corporate crime pays, while pensions and

mutual fund savings evaporate.

 

Now comes the next stage of the Washington rescue

effort in a variety of stimulus packages which every

vendor group imaginable wants a piece of these days.

When trillions are offered, many come running.

 

As the public focus is on how much, when and where all

this money should be spent, there are very serious

consequences to be foreseen and forestalled. First,

consider how much more concentrated corporate power is

occurring. Forced or willing mergers, acquisitions and

panic takeovers of big banks by bigger banks along with

bankruptcies of companies further reduce what is left

of quality competition for consumer benefit.

 

Remember the anti-trust laws. Obama needs to be their

champion. The fallout from the Wall Street binge is

likely to lead to a country run by an even smaller

handful of monopolistic global goliaths.

 

In the stampede for stimulus legislation, there is a

foreboding feeling on Capitol Hill that there is no

proposal on the table to pay for it other than by the

children and grandchildren. Just the opposite is

raining down on them. Everybody including the private

equity gamblers, Las Vegas casinos and Hollywood

studios along with the banks and auto companies are

looking for tax breaks.

 

So with the economy deteriorating and taxes being cut,

where is the enormous money coming from? From borrowing

and from printing money. So look out for big time

inflation and decline in the dollar?s value vis-a-vis

other currencies.

 

In all the hundreds of pages of stimulus bills, there

is nothing that would facilitate the banding together

of consumers and investors into strong advocacy groups.

We have long proposed Financial Consumer Associations,

privately and voluntarily funded through inserts in the

monthly statements of financial firms.

 

If this bailout-stimulus-Wall Street funny money waste,

fraud and abuse sounds confusing, that is because it

is. A brand new paperback "Why Wall Street Can't Be

Fixed and How to Replace It: Agenda For a New Economy"

by long-time corporate critic, David C. Korten will

explain some of the wheeling and dealing.

 

You don't have to agree with all or many of Korten?s

nostrums. Just read Part II: the Case For Eliminating

Wall Street. He considers three central questions:

 

First, do Wall Street Institutions do anything so vital

for the national interest that they justify trillions

of dollars to save them from the consequences of their own excess?

 

Second, is it possible that the whole Wall Street

edifice is built on an illusion of phantom wealth that

carries deadly economic, social, and environmental

consequences for the larger society?

 

Third, are there other ways to provide needed financial

services with greater results and at lesser cost?

 

Ralph Nader is the author of The Seventeen Traditions.

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