The deluge of money pouring from all orifices of Washington into the banks gives tacit approval to the backward culture of banking—a world based on crazy compensation, counterproductive competition, and loosely regulated practices and laws. Yet it was all pushed by a select group of Wall Street power players, who move back and forth with all too much ease between our nation’s capital and the gilded realm of finance.
If it seems as if the culture of Goldman Sachs pervades the halls of Washington, that’s because the people of Goldman Sachs pervade the halls of Washington. That’s why, despite all the talk in Washington about reforming the system, the same execs who orchestrated its failures were the ones hobnobbing with the political leaders of both the Bush and the Obama administrations. In fact, Obama is even closer to the financial execs than Bush was. In early spring of 2009, Obama called a meeting with Wall Street’s heads to ask them to accept responsibility for causing the crisis and to commit to helping mitigate it. As if that admission would change the rules of their game.
That’s why we still have a bizarre and misplaced faith that huge corporations—which are designed for the sole purpose of making profits—are somehow able to act ethically and restrain themselves. That’s why the Federal Reserve continues to operate in cloak-and-dagger mode, after it covertly and easily orchestrated the largest transfer of wealth from the American people to the banking system in the nation’s history. That’s why, as Henry M. Paulson left his treasury secretary post on January 20, 2009, he concluded that most of his “major decisions were right”—despite all of the losses that the banks had racked up and all of the lives that were hurt as a result.
Unfortunately, no one prevented our collective disaster, even though many people, from economist Dean Baker to Senator Byron Dorgan to yours truly, called it correctly. Worse, despite a spew of indignation for the media’s cameras, Washington has collectively and in a bipartisan manner demonstrated the most knee-jerk and expensive approach to groping toward financial stability in human history.
President Obama’s treasury secretary, Timothy F. Geithner, built on Paulson’s bailout notions when he had every opportunity to behave differently. The plan that Geithner first announced in a February 10, 2009, speech and unveiled in more detail six weeks later, on March 23, 2009, underscored the mentality of Washington’s disconnect from the public and attachment to Big Finance. The strategy he came up with to “fix” the financial system was to ask its most reckless and opaque companies—the ones that shirked the most taxes and took the most selfish and irresponsible risks—to buy up Wall Street’s junkiest assets in order to rid the system of its own clutter.
The worst part? The government would front them most of the money to do it.
Reprinted by permission of the publisher, John Wiley & Sons, from It Takes a Village, by Nomi Prins. Copyright © 2009 by Nomi Prins.