The looting continues, Part 2

Wall Street sign

Back in March I wrote about how the Bush/Obama bank bailouts are essentially cementing the power of big banks like Citi and Bank of America rather than reforming a system that’s failed so spectacularly. Instead, we’re rewarding big banks for their failure, and turning the other way while they misuse tax payer money in a sickening attempt to get even more bailout money.

I thought it was clear then that our government’s bailout policy was heavily influenced by big banks, because our economic policy makers like Paulson and Geithner were part of the Wall Street clique rather than independent thinkers. Now the evidence that our government is colluding with big banks first, and looking after the people’s interest second is piling higher:

Lawrence H. Summers, one of President Obama’s top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. . . .

Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form.

As Greenwald notes, we could be looking at an advanced bribe because those payments were made last year when it was clear that Summers would play an important role in either a Clinton or Obama administration. And this isn’t the first time Summers used a government position help his buddies on the Street. Along with Clinton Treasury Secretary Robert Rubin, Summers and Greenspan succeeded in blocking regulation of the derivatives markets that brought down the big banks and our economy.

Greenwald explains how this works:

People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting.  When in government, they ensure that the laws and regulations are written to redound directly to the benefit of a handful of Wall St. firms, literally abolishing all safeguards and allowing them to pillage and steal.  Then, when out of government, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented when in government.  Then, when their party returns to power, they return back to government, where they continue to use their influence to ensure that the oligarchical circle that rewards them so massively is protected and advanced.

An appalling situation which leads to news like this:

The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials.

Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the $700 billion financial rescue package.

Seriously.

Sorta flies in the face of all the hand wrining Obama did over the executive pay at AIG. I guess that was all a show to keep us distracted while tax payer money was being loaded onto trucks and delivered directly to banksters homes.

So what’s the solution? I’m not exactly sure, but we can start by replacing Obama’s economic team with one a bit more independent. Then we should investigate the who, what and why of our current economic predicament. Punish people if necessary. I know I won’t trust the banks until there is some accounting for what went wrong, and I don’t think that’s an uncommon sentiment.

Flickr photo by f-l-e-x

5 Comments

  1. Ian

    Let the banks fail.

  2. Sheepywoman

    I think it’s notworthy to mention that financial products and instruments have become so complex that you need people in regualatory positions who have had direct experience with those products. Otherwise your regulatory boddies don’t know what the hell is going on. Oh wait, that’s already happening…

  3. Ian

    Hence my saying let them fail. Its so complex that people are profiting off of the general population’s ignorance of the banks inner workings. The system needs to be restructured and properly regulated, and the banks should not be allowed to hold us all hostage with fear while they rake it in.

  4. Andrew

    This might just be my Star-Trek-induced love of big government talking here, but isn’t comment 2 a good argument for banning a lot of the more complex derivatives outright? I mean to lay eye it certainly looks like the bankers don’t understand the damn things, either.

  5. Sheepywoman

    We don’t. You should be scared, very scared…