By Chris Hedges, from truthdig.com
The lobbyists and corporate lawyers, the heads of financial firms and the crooks who control Wall Street, all those who spent the last three decades assuring us that government was part of the problem and should get out of the way, are now busy looting the U.S. treasury. They are also working feverishly inside the Democratic and Republican parties to blunt any effective regulatory reform as they pass on their distressed assets to us. The process is stunning in its hubris and mendacity, and two of the most potent enablers of this unprecedented act of corporate welfare are John McCain and Barack Obama.
The federal government, reeling backward from the meltdown of financial markets, is now considering taking responsibility for the bad assets of numerous financial companies. But if that intervention does not include robust new mechanisms of regulation, accountability and control we will see nothing more than a massive taxpayer-funded bailout of stockholders and the financial industry.
The rhetoric of the two presidential candidates about the crisis
has been filled with pious outrage about the abuses of Wall Street and
short on actual solutions. John McCain and Barack Obama know, after
all, who funds their campaigns. The financial industry has given $22.5
million in the current election cycle to Obama and $19.6 million to
McCain, according to the Center for Responsive Politics.
And the financial industry has come around to collect. Two of the
biggest financial groups in Washington, the Financial Services
Roundtable and the Mortgage Bankers Association, have been holding
meetings with McCain and Obama’s economic advisers. They are working
with the campaigns to protect the unregulated power of financial
industries and at the same time to shift bad debt to taxpayers. The
Wall Street Journal reported that the Financial Services Roundtable,
made up of the very banks and firms that got us into this mess, has
developed draft legislation. The Roundtable has called a meeting this
week with the chief executives of more than 50 banks, brokerages and
insurers. The three-day meeting includes private, closed-door sessions
on Thursday with Obama economic adviser Ian Soloman and McCain adviser
Ike Brannon. Those hovering around Obama-economists like Paul Volcker,
Robert Rubin, Lawrence Summers and Laura Tyson-bear as much
responsibility for the dismantling of government regulation as those
advising McCain.
If the financial-services industry is able to suck us dry, our
assets, from our homes to our retirement investments, will continue to
tumble. Taxes will go up. Jobs will be lost. The grim economic
indicators will get worse. The dollar, which has already lost about a
third of its value against the euro, will continue to plummet. The rate
of foreclosures, one in every 416 U.S. households in August, will
skyrocket. Consumer spending, the engine of the U.S. economy, will
continue to decline. Industrial production, which has fallen for three
consecutive quarters, will fall further. Unemployment, which shot up to
6.1 percent in August from 5.7 percent in July, will get worse. These
tremors presage an earthquake.
Ralph Nader, who has spent his adult life battling corporations,
understands more about the rise of the corporate state and the steady
fleecing of American citizens by corporations than anyone else in the
country. The core of his message is that Republicans and Democrats are
hostage to corporate power.
Nader warned
in a letter to Congress on July 23 that the federal government’s bank
insurance fund may be insufficient to handle the developing crisis in
the banking industry. The letter was, at the time, greeted with
indifference and ridicule. Rep. Spencer Bachus, R-Ala., at a
congressional hearing, mentioned the letter and assured those present
that “Our banks are well capitalized, our deposit insurance fund is
sound. There’s absolutely no factual basis for saying that there’s not
money there to pay.”
Two months later our federal bank insurance fund, which insures our
bank deposits, is being swiftly emptied. The collapse of a huge
commercial bank, such as Bank of America, which has assumed control of Merrill Lynch’s losses with no real idea of how extensive these losses are, could see ordinary depositors wiped out.
Nader warned eight years ago that the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) were about to tank like the savings and loan industry of
the 1980s and “90s. Because his warnings were ignored, taxpayers today
face losing billions of dollars to cover these bad debts.
Nader, in a letter to Securities and Exchange Commission Chairman Christopher Cox in 2006, criticized the exorbitant salaries of government-sponsored enterprise
executives Jamie Gorelick, Daniel Mudd, Robert J. Levin and Timothy
Howard. He noted in his letter that their financial incentives were in
direct conflict with consumer financial security. A grave moral hazard
was created by the accounting manipulations they sanctioned, Nader
said. These manipulations benefited their personal wealth, yet there
was no penalty for being caught.
Nader has called for an immediate halt to the increase in the
national debt. He demands an end to corporate subsidies and
unconditional taxpayer bailouts of corporations. And he has called for
aggressive prosecution of corporate criminals.
“Given the contrast between the “free market” ideology of the
Republicans and the corporate or state socialism that is their
increasing practice, the time is ripe for full congressional hearings
next year on the organized power, greed and lack of regulation that is
shaking the foundations of Wall Street,” Nader said in prepared remarks
delivered to editors at The New York Times” Washington bureau.
Nader has come up with 10 market reforms that he says
need to be implemented immediately along with any bailout. These
reforms are:
- No bailouts without conditions and reciprocity in the form of stock warrants.
- No more lobbying for any company that is bailed out.
- No golden parachutes or get-out-of-jail-free cards for guilty executives.
- No bailouts without public hearings.
- Reduce the moral hazard in U.S. mortgage markets by introducing
covered bonds for the majority of mortgage products, as is done in
Western Europe. That gives institutions that finance mortgages an
incentive to be prudent, because they cannot just unload them and wipe
their hands clean of the liability, but are instead on the hook if the
homeowner defaults. - Maintain neighborhood stability and housing security by passing a
law with a sunset clause allowing below-median-value homeowners facing
foreclosure the right to “rent to own” their homes at fair market value
rates. - Avoid future housing bubbles by removing implicit government
guarantees for new mortgages that exceed thresholds of greater than 15
to 20 times the annual fair market rent value of the home. - Make the Federal Reserve a Cabinet position, so it is accountable
to Congress, as well as make sure all Federal Reserve Bank presidents
are appointed by the president and answerable to Congress. - Reduce conflicts of interest by taking away power for auditor and
rating agency selection from companies and placing it in the hands of
the SEC to be administered on random assignment. - Implement a securities speculation tax, starting with derivatives, to deter casino-style capitalism.
You can vote for Obama or, if you are really into self-delusion, you
can support McCain. But you owe it to yourself, even if you erroneously
blame Nader for the election of George W. Bush, to remember these Nader
reforms. Hold them up against the proposed reforms that will soon be
issued by the McCain and Obama camps. If the Nader reforms are not
adopted, if we bail out our corporate masters with hundreds of billions
of tax dollars without instituting draconian market reform and
launching criminal prosecution, we will be left to bear the cross of
corporate malfeasance. We will pay for corporate crime. We will leave
those who robbed us free to plunder.
Chris Hedges is a leading writer on the subjects of religion, war
and empire. His critically acclaimed books, such as “American
Fascists,” can be found here. Hedges” Truthdig column appears every Monday.
Treasury Secretary Henry Paulson