No Accountability... Ever-- Who Will Pay For Bush's Economic Miracle?

When I was in 8th grade I won a UN scholarship, a small one, for an essay I wrote about the death penalty. Thanks to my socialist grandfather, I grew up far to the left of the Brooklyn Democratic Party and the death penalty always made sense to me. It still does-- though only theoretically since the Justice system is so imperfect that racial and other biases can't be overcome and innocent people are regularly put to death-- so now I'm just pro-death penalty in my mind and oppose it in the real word. Nonetheless I'm all for accountability. On one level I even agree with Nancy "Off the Table" Pelosi that there's a more appropriate fate-- and not a theoretical one-- that Bush and Cheney should meet than mere impeachment. If only...

This morning, as I always do on Mondays, I turned immediately to Paul Krugman in the NY Times and a typically lucid column on the temporary fixes around the edges of our collapsing economy and the political ideology that brought it low. There's a lot of work to be done and my heart goes out to Obama at the mere thought of coping with what Bush and the rubber stamp Republicans (and the Republican wing of the Democratic Party) are leaving behind when Bush absconds to his estate in Paraguay.

But that isn't what got me going this morning. Instead, what boiled my blood was something Krugman never mentioned or even implied: accountability. Who's going to pay for Bush's mess?

The back story to the current crisis is the way traditional banks-- banks with federally insured deposits, which are limited in the risks they’re allowed to take and the amount of leverage they can take on-- have been pushed aside by unregulated financial players. We were assured by the likes of Alan Greenspan that this was no problem: the market would enforce disciplined risk-taking, and anyway, taxpayer funds weren’t on the line.

And then reality struck.

Far from being disciplined in their risk-taking, lenders went wild. Concerns about the ability of borrowers to repay were waved aside; so were questions about whether soaring house prices made sense.

Lenders ignored the warning signs because they were part of a system built around the principle of heads I win, tails someone else loses. Mortgage originators didn’t worry about the solvency of borrowers, because they quickly sold off the loans they made, generally to investors who had no idea what they were buying. Throughout the financial industry, executives received huge bonuses when they seemed to be earning big profits, but didn’t have to give the money back when those profits turned into even bigger losses.

And as for that business about taxpayers’ money not being at risk? Never mind. Over the past year the Federal Reserve and the U.S. Treasury have put hundreds of billions of taxpayer dollars on the line, propping up financial institutions deemed too big or too strategic to fail. (I’m not blaming them-- I don’t think they had any alternative.)

While Barney Frank, chair of the House Financial Services Committee, making perfectly good sense in talking about extending financial regulation to cover a wider range of institutions-- and I'm as for it as Grover Norquist is against it-- I had another thought in mind.

When Krugman talks about lenders who "went wild," he's talking about crooked businessmen and the politicians they bribed to make their schemes legalistic. They have wrecked the lives of millions of Americans and left our economy of the brink of collapse. Many live in mansions. Some have Bentleys and Rolls Royces; some of them own airplanes. Is it unreasonable to see them with nothing but the clothes on their backs while their ill-gotten gains go to cleaning up the colossal messes they made? I heard whichever rubber stamp was interrupting the impeachment hearings the other day-- Lamar Smith (R-TX) I think-- whining about the criminalization of politics. He's lucky a moderate to conservative Democrat like Obama is going to be president.

If it were me, I'd appoint a slew of prosecutors and judges who would take one look at the massive bribes congressional rubber stamps like... oh, say Lamar Smith took from financial institutions (commercial banks- $142,068 + miscellaneous finance- $355,900 + insurance- $173,523 + securities and investments- $74,545) and then let them-- how did Krugman put it?-- "run wild," and I would make sure they were help accountable, very accountable.

Krugman and Frank think that "basically, the financial framework created in the 1930s, which brought generations of relative stability, needs to be updated to 21st-century conditions." That's very sweet and I completely agree. But a few confiscated fortunes, like 10-15,000, and some stiff prison terms of them might go a longer way towards keeping certain types of greedy Republicans from ripping off society again.

The desperate rescue efforts of the past year make expanded regulation even more urgent. If the government is going to stand behind financial institutions, those institutions had better be carefully regulated-- because otherwise the game of heads I win, tails you lose will be played more furiously than ever, at taxpayers’ expense.

Of course, proponents of expanded regulation, no matter how compelling their arguments, will have to contend with very well-financed opposition from the financial industry. And as Upton Sinclair pointed out, it’s hard to get a man to understand something when his salary-- or, we might add, his campaign war chest-- depends on his not understanding it.

But let’s hope that the sheer scale of this financial crisis has concentrated enough minds to make reform possible. Otherwise, the next crisis will be even bigger.

This kind of crisis doesn't just happen. The avaricious and criminally minded among us make it happen. They know there is no accountability on any level so why not just "run wild?" As a society we should have the balls and the brains to show them why not.