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President Barack Obama: Stability Or Reconstruction?
America’s current difficulties are shockingly reminiscent of crises in places like Russia and Argentina — including the key role played by crony capitalists. In America as in the third world elite business interests — financiers, in the case of the U.S. — played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive.
Simon Johnson, Economist, M.I.T
quoted by Paul Krugman
Washington
Goldman Sachs CEO Lloyd Blankfein is one of the most powerful men in America today. He is counted among the old order [ America's Power Elite ] that has effectively run the United States for the last generation. He’s a good citizen, successful CEO, and possessed of good intentions. He also enjoys unique access to the people and levers of government.
The Power Elite: Goldman Sachs
In America, the establishment takes care of itself. Goldman Sachs is not alone in defending its own interests, for doing so is the driving force of capitalism. In the spring of 2008 Goldman Sachs was not threatened as seriously as its principal Wall Street competitors. Insiders on the street understood that no firm would go unscathed by the escalating failures in sub-prime mortgage based securities.
By the time Treasury Secretary Henry Paulson realized the problem was getting out of hand, Goldman and Lloyd Blankfein were already in the loop. Given the stakes involved, everyone on the street and in Washington realized that strong measures would be required. At Goldman, Lloyd Blankfein took immediate and aggressive steps to protect his firm from the developing storm. He was not shy, for Blankfein possesses the managerial chutzpa, knowledge and connections to impact events on both the operational and governance sides of the coin.
Don’t Miss . . .
Bulletin: Establishment Caught Stealing America
Reset: Failed Rules Of Engagement
Given the comfy connection that bloomed between Wall Street and Washington in the last three decades, big name players like Blankfein were uniquely positioned to influence government decision makers. The ethically challenged interconnection between the nation’s rich and powerful and the men and women responsible for governance has benefited the establishment at the cost of ordinary Americans.
In the spring of 2008, those chummy relations between Wall Street and government resulted in a blurring of public and private interests. It was in this environment that the power elite whose failures to self-regulate were bringing down banking and finance were also in charge of how the U.S. government would address the problems.
By virtue of his power and influence, Blankfein is a senior member of the reigning American Establishment — the elite few who dominate business, finance, politics and government. Our nation is largely run by an old and established order comprised of experienced people knowledgeable in politics, government, finance, banking, manufacturing, academia, marketing and international relations. The men and women who comprise the American Establishment are good Americans, with honorable intentions, immense skills and knowledge, and powerful self-interests.
With Lloyd Blankfein’s predecessor as CEO at Goldman, Henry Paulson, running the Treasury Department for the Bush administration, ( Goldman’s Robert Rubin was in charge of Treasury during the first and second Clinton administrations ), Goldman Sachs and Blankfein became deeply involved in Treasury and Federal Reserve decision making. While other Wall Street players, including Goldman competitor and sometime adversary Dick Fuld ( Lehman Brothers CEO ) found themselves on the defensive, Goldman and Blankfein were on the inside. It was Treasury Secretary Hank Paulson who, along with Federal Reserve chairman Ben Bernanke who would decide how Wall Street would be impacted by the developing collapse in world financial markets.
When the New York Federal Reserve ( run by new Treasury Secretary Timothy Geithner ) was deciding what to do about failing insurance giant AIG, Lloyd Blankfein was present to represent Goldman Sachs as well as to advise his former associate Henry Paulson. Subsequent to that meeting, and without willing disclosure by either AIG or Goldman Sachs, some $12 bln of AIG’s TARP funds were paid to Goldman Sachs for credit insurance losses.
Author William Greider
William Greider
Should The Old Order Survive?
Bill Moyers Journal March 27, 2009
BILL MOYERS: We saw Secretary Geithner on Monday. We saw President Obama on Tuesday night. We saw Secretary Geithner again on Thursday. And the storyline seems to be, we’re going to get tough on the financial industry. Your old newspaper, “The Washington Post,” says, calls it, “A sweeping expansion of Federal authority of the financial system. A rebuke of raw capitalism, and a reassertion that regulation is critical to the healthy function of financial markets.” That’s the storyline as I read the week, but if you read between the lines, what’s missing?
WILLIAM GREIDER: Well, among other things that are missing from that story is that we had the rules and regulations, the agencies created some 80 years ago and afterwards to prevent this sort of catastrophe. And these same political players, Republicans and Democrats holding hands, stripped them away, eviscerated them. The same agencies these reformers want to put in power to prevent this from happening again. Starting with the Federal Reserve, the Securities Exchange Commission, other regulators, utterly failed in their duty to do that. Now, we’re going to give them new power.
I’m offering a breath of skepticism toward this grand transformation of government. I don’t want to be a cynic, but it feels more to me like trying to restore the old order that failed. And I mean by that these big mega banks that had been liberated by deregulation to do as they pleased and the other rules that were undermined. I think this President, and I’m a big fan of this President, but I think his first priority seems to be to recreate those institutions which, some of which are now insolvent, as healthy again.
And actually it’s quite scary, because unless they set about to make much more fundamental changes, I fear we will, sure enough, get this back again.
Failed Establishment
The problem isn’t that Blankfein or anyone else did something wrong in the decade before the collapse began, although they well may have done so. The problem is that the nation’s banks and credit extenders failed to do what was safe, conservative of others’ interests, and above board. The result has been cataclysmic– leading former Washington Post finance writer and author William Greider to surmise — the old order that’s been running the American establishment for the last generation has demonstrably and miserably failed.
But so did we all — and, it now seems, so is our new president who is knowingly and one might presume intentionally trying to restore the old order establishment. There are many good reasons for doing so. Among them are stability, predictability and risk avoidance to an economy still in peril. Those who favor installing an new order are becoming more vocal in their assertions that perpetuating the systems and institutions that failed only treats the symptoms of what is clearly a potentially fatal disease.
What Matters Most Goes Unknown, Thus Unheeded
In a generation seemingly absent responsible adults, we knowingly and cheerfully chose to have a grand party at the expense of our children and grandchildren. In the doing, we effectively destroyed our great institutions of finance, journalism, education, banking, manufacturing, insurance, transportation and athletics.
As a nation our errors were of commission and omission. Our errors of commission were largely based on tilting the economic playing field to favor the wealthy and powerful among us by lessening governmental regulation and control. Deregulation became a game in which immense wealth was transferred from the nation’s middle class to the mighty, rich and powerful. Absent responsible adults to remind us that American capitalism rests on a foundation of checks and balances, we systematically deregulated ourselves into disaster.
And now reality has set in, what matters most has become clear and painful. Over reliance on laissez-faire thinking, and the invisible hand first postulated by Adam Smith has failed. Neither we, nor the world around us is happy with the result. We know someone did us wrong and we rightly demand retribution. Until we accept the reality that as a nation we got exactly what we asked for, substantive change remains unlikely.
Angry And Confused
Angry Banker Protests In Britain
But we’re mad as hell — and rightfully so. Our sense of betrayal is universal at home and abroad. Bankers we once held in high esteem we now flagellate as thieves and criminals. We overlook, for the moment, our own contributions to the problem. For as we collectively invested billions in market holdings based on short term earnings performance, our personal flight from reality sent our own jobs overseas, destroyed effective corporate governance and freed our bankers to do other, more risky things with our savings.
Our banks turned into failed enterprises by way of corrupt behavior and failed oversight because we, you, me all of us, sought to live better, become wealthier, or profit from failed governance. As long as deregulation favored our interests, our jobs, and our investments, we went along. We did so by permitting ourselves to be made ignorant of what matters most, to be herded to political extremes, and corrupted by single-issue thinking that concealed what was being done in our name. We allowed ourselves to be seduced by those who pandered to our desires and our need to be needlessly entertained. It it we who disdained things that really mattered — things we knew little about and cared less to know.
It was our making that produced a one party system comprised of two warring extremes. It was our demand that someone else do the work, take the risk, give of their lives so that we might prosper that made us a debtor nation. It was we who demanded that our once mighty financial empires be turned into wild-eyed speculators cunningly running criminal enterprises. Our government was permitted to run-amuck by failed political institutions, failed oversight, failed governance and the disembowelment of long respected journalistic institutions by people and organizations that surely knew better.