13 Bankers

Ok, now I just started 13 Bankers co-written by Simon Johnson and James Kwak. Partly I wanted to read it because I knew it was going to invoke a lot of history to back up its central point. The central point I'm well versed on because I follow their blog, The Baseline Scenario. They believe that the United States has a sophisticated oligarchy, a small collection of elite that have enormous economic and political power - and this oligarchy operate our financial system. They are basically unaccountable (typically a business owner is accountable to their customers and their competition).

"The Wall Street banks are the new American oligarchy - a group that gains political power because of its economic power, and then uses that political power for its own benefit. Runaway profits and bonuses in the financial sector were transmuted into political power through campaign contributions and the attraction of the revolving door."

The revolving door implies that political appointees and elected officials eventually make bank when they leave the public sector to work for Goldman Sachs as a "consultant", then of course, they come back in to work for a new administration.

"But those profits and bonuses also bolstered the credibility and influence of Wall Street; in an era of free market capitalism triumphant, an industry that was making so much money had to be good, and people who were making so much money had to know what they were talking about. Money and ideology were mutually reinforcing."

"In the United States we like to think that oligarchies are a problem that other countries have. The term came into prominence with the consolidation of wealth and power by a handful of Russian businessmen in the mid-1990s; it applies equally well to other emerging market countries where well-connected business leaders trade cash and political support for favors from the government. But the fact that our American oligarchy operates not by bribery or blackmail, but by the soft power of access and ideology, makes it no less powerful. We may have the most advanced political system in the world, but we also have its most advanced oligarchy."

The problem here is the Republicans like to blame Barack Obama completely for the Great Recession. But that's political gamenship, obviously, because the crash occurred during Bush's administration. He does get some blame for how the crisis was handled. The massive and deep and long lasting recession was inevitable - but failure to reform our banking industry so the next crisis is avoided is on Obama. But not just on Obama, on our entire political system. No way, Bush would have done things much different, or any other president.

What should be done? Simon Johnson proposes:

"The alternative is to reform the financial system now, to put in place a modern analog to the banking regulations of the 1930s that protected the financial system well for over fifty years. A central pillar of this reform must be breaking up the megabanks that dominate our financial system and have the ability to hold our entire economy hostage. This is the challenge that faces the Obama administration today. It is not a question of finance or economics. It is ultimately a question of politics - whether the long march of Wall Street on Washington can be halted or reversed. Given the close financial, personal, and ideological ties between these two centers of power, that will not happen overnight."

Again, the Republican party is pretty much useless right now as a check on Obama. Ideologically, the want to roll back presidential power further. They want to block any and all reform of Wall Street. Over the last 30 years, ideology has, ironically, decreases governmental power. Our government, in my view, is probably is at its weakest its been in the last 100 years. This has given other powerful entities relatively more power, especially Wall Street.

Ironically, what the Republican party is attempting to do, by their baseless accusations that Obama is trying to take us down the road toward socialism is to create the conditions that will grow oligarchies. Where private corporations have growing economic and political power, which in a much different way, destroy individual liberty.

Obama is not guiltless in this, he ran on and is governing with a similar Republican (although more moderated) ideology.