Politics, open government, and safe streets. And the constant incursion of cycling.

Tag: financial

The US Financial Industry

Around September, when this mess was getting some play in the public eye, I used to joke that it wouldn’t be such a bad thing if the financial industry just blew up.  That we could rebuild something much better from the pieces than what we had with the present whole.  I still say that.  I’m not so sure I’m joking all that much anymore.  Two graphs, from a story in the Atlantic:

financial industry compprofit graph

The numbers at the bottom are 10 year terms, starting in 1948.  And yes, that uptick starts around 1980.  From the article, titled The Quiet Coup, by former IMF chief economist Simon Johnson, is summarized:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform.

Break it.  Blow it up.  Let’s just have a plan for putting it back together beforehand, yes?  And one more suggestion: don’t leave that plan to the people who put us here in the first place.  (Of course, that’s the even bigger joke, right there – yes, there’s a problem, but who’s going to fix it?  Not the people in power now.  This is the hand that fed (and clothed, and housed, and . . .).)

Must Read: Josh Marshall on Obama, Geithner & the Public Trust

Marshall writes:

What is so damaging about this isn’t the money — which is almost trivially small compared to the many hundreds of billions we’ve already committed. The problem is what appears to be the president’s mortifying impotence in the face of bankers and financiers who created the problem. The president speaks and acts for the federal government, which is to say, the American people, who have mobilized more than a trillion dollars and all powers of the state to repair the damage emerging out of the financial sector. And with all that, he’s jacked up on a employment agreement between a company the government now owns and derivatives traders who sank the world economy and may quite likely be looking at criminal charges for their activities in the not too distant future?

Anyone can look at that and see that the equation of power and accountability is all screwed up.

Quite.   And really, I hope you’ll click over and read the whole thing.  It nails the current state of affairs.  Here’s the end:

Whether Geithner and Summers are too close to the people on Wall Street, either through interest or affinity, is an interesting and possibly important question. But fundamentally Obama needs to start showing that he’s in charge, that he’s operating as the American people’s advocate and that he has the power to do it — which these stories of getting jacked up by some Gordon Gecko wannabes in London just terribly undermines. But to do that, to show that, it has to be true. And that might require some real changes in policy and possibly in personnel too.

Only Little People Pay Taxes

The hits keep on coming:

Just when you thought it was impossible to find more proof of the bungling of the bailout … Rep. John Lewis (D-GA), chairman of the House Ways and Means oversight subcommittee, announced this morning that his panel had found 13 of the top 23 recipients of TARP owing the government $220 million in back taxes.

Making matters worse was the fact that any company getting TARP aid had to certify to the Treasury Department that they didn’t owe back taxes before getting their share of the bailout, as Lewis explained. It appears that Treasury took the bailed-out businesses at their word rather than asking to actually see their tax records.

This was a foul-up under Bush/Paulson, but the Obama Administration needs to turn around and look at those posters that put them there.   They need to take that CHANGE a bit more seriously, or they’re going to take it on the chin.  To be clear, they’re not approaching the financial sector in any fundamentally different way than did the Bush and Clinton Administrations, so it would be unfair to say that they’re any worse than what came before.  But that’s not the measure they’ve set for themselves, nor is it one that anyone should be willing to let them skate on.

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