Needed: A Good Dose Of Grassroots Populism For The Beltway Party Establishments

Joel Kotkin ends his essay for The Guardian on the rise of Wall Street under Obama with a plaintive call that many grassroots types on both sides of the partisan divide would recognize: "In caving in to Wall Street and its economic priorities, members of both parties have demonstrated where their primary loyalties lie. Amid the obscene levels of compensation going to the financial grandees, it seems the ideal time for politicians, right or left, to challenge Wall Street’s control of Washington. High finance has so devastatingly rocked the world of the middle and working classes. Voters, it might be thought, now need leaders who will take these grandees down a notch or two."

But until the two parties' grassroots get serious about making that a goal, their respective party establishments in Washington will, at best, do no more than pay the whole idea lip service-- the way Chuck Schumer and other Wall Street-devoted Democrats did by making sure "A Say On Pay" would be non-binding and unenforceable... just like Wall Street wanted. It lets Schumer prance around pretending to be a reformer by day while prancing into Wall Street firms after dark to pick up his checks-- $20,721,989 at last count, more than any other Member of Congress in history other than 3 who ran for president (Obama, McCain and Hillary).

Meanwhile, both parties' 2016 front runners are Wall Street candidates-- Hillary Clinton to Wall Street's Team Blue and Jeb Bush on Wall Street's Team Red. I'd rather watch America's Worst Cooks reruns. Kotkin made the point that in the "battle" over Wall Street's most recent demands to further eviscerate Dodd-Frank rules, the "move was supported largely by the establishment in each party. Opposition came from two very different groups: the Tea Party Republicans, who largely represent the views of Main Street businesses, and a residue of old-line progressive social democrats, led by Massachusetts Senator Elizabeth Warren." He expects more from Democrats, even, oddly, from Obama.

Support for big finance is no surprise from Republicans, who are used to worshipping at the altar of Wall Street. But the suborning of “progressivism” to Wall Street has been a permanent feature of this administration. From the onset of his presidential run, Barack Obama had strong ties to Wall Street grandees. New York Times Wall Street maven Andrew Ross Sorkin noted in 2008 how Obama had "nailed down the hedge fund vote."

The ultra-rich so backed the president that, at his first inaugural, noted one sympathetic chronicler, the biggest problem for donors was finding parking space for their private jets. Since then, despite occasional flights of populist rhetoric, the president has kept close ties with top financial firms, including the well-connected Jamie Dimon, chairman of JP Morgan, often called Obama’s “favourite banker.” He appears to have been instrumental in getting Democrats to support the recent loosening of financial controls on big banks.

These Wall Street connections have continued to play dividends for the president, in terms of contributions. The financiers benefited from Obama’s choice of financial managers, such as former treasury secretary Tim Geithner, widely known as a reliable ally of the financial sector. (He liked to explain his support by equating its importance to that of the technology and manufacturing industries.) To no sensible person’s surprise, Geithner, when he left the Treasury last winter, found his reward by joining a large private equity firm. (By way of completing the circle, Geithner’s successor, Jacob Lew, used to work for Citibank.)

The Justice Department has also been cosy with the plutocracy. Attorney general Eric Holder allowed Wall Street a kind of “get out of jail free card” by failing to launch tough prosecutions of the grandees. In contrast to the situation under previous administrations, both Republican and Democratic, the financial plutocrats have not been forced to pay for their numerous depredations. Instead, most prosecutions have been aimed at low-level traders, Ponzi schemers or inside traders.

So if you still think 2008 and the financial crisis changed everything, still think of it as a progressive triumph, think again. Instead of the brave new world of reformed finance, what’s been created in the US is something close to a perfect world, policy-wise, for the plutocrats. The biggest rewards have come from an economic policy, backed by the Federal Reserve and the administration, that has maintained ultra-low interest rates. This has forced investors into the market, at the expense of middle-class savers, particularly the elderly. The steady supply of bond purchases has essentially given free money to those least in need and most likely to do damage to everyone else.

The results make a mockery of the Democrats’ attempts to stoke populist sentiments. In this recovery, the top 1% gained 11% in their incomes while the other 99% experienced, at best, stagnant incomes. As one writer at the Huffington Post put it: “The rising tide has lifted fewer boats during the Obama years – and the ones it’s lifted have been mostly yachts.” If this had occurred during a Republican administration, many progressives would have been horrified. But Democrats, led by New York senator Charles Schumer, Wall Street’s consigliere on the Hill, have been as complicit as Republicans in coddling Wall Street. Democrats, for example, despite their rhetoric about inequality and fairness, have refused to challenge the outrageous discount on taxes for capital gains as opposed to income. A successful professional making $300,000 a year is often taxed at rates twice as high as the rate paid by hedge fund investors, venture capitalists, tech entrepreneurs and Wall Street stock jobbers.

At the same time, the Obama years have been something of a disaster for Main Street, where most Americans work. A 2014 Brookings report revealed that small business “dynamism,” measured by the growth of new firms compared with the closing of older ones, has declined significantly over the past decade, with more firms closing than starting for the first time in a quarter of a century.

Small banks, long a critical source of funding for small businesses, have also been pummelled by the very regulatory regime that also allows mega-banks to enjoy both “too big to fail” protections as well as their sacred right to indulge their most cherished risk-oriented strategies. In 1995, the assets of the six largest bank holding companies accounted for 15% of gross domestic product; by 2011, aided by the massive bailout of “ big banks,” this percentage had soared to 64%.

These trends do much to explain what happened in the recent midterm elections, which saw a massive shift of middle- and working-class voters, especially whites, to the Republicans. Increasingly, Americans suspect that the economic system is rigged against them. By a margin of two to one, according to a 2013 Bloomberg poll, adults feel the American Dream is increasingly out of reach. This pessimism is particularly intense among white working-class voters and large sections of the middle class.

The other major cause for the Democratic demise in November was the low turnout among minority voters. They certainly have ample reason to be indifferent. Both African American and Latino incomes have declined during the current administration, in large part because neither group tends to benefit much from the appreciation of stocks and high-end real estate.

Schumer and his ilk may want to protect you-- or at least protect Israel's Likud Party-- from peace with Iran, but don't look to Schumer or anyone like him to protect you or your family from Wall Street predators, their most loyal base of support. Last week Les Leopold, writing for AlterNet, looked into how Congress' good pals in the Finance Industry are serving themselves with Congress' help-- and at the expense of the rest of us. "Private financial corporations, which have the power of debt in our system, have done a masterful job, he wrote, "in pushing us to the brink of debt peonage."

Our homes, schools, roads, bridges, highways, utilities, corporations and virtually every product and good produced and sold depend on debt. By some estimates as much as 30 cents of every dollar we spend goes to cover interest payments on the debt accrued to make all that we buy. (For example of the $6.5 of private enterprise income in 2012, 36.8% went to interest payments.)

With our banking system in private hands, the simple truth is that as the debt levels accelerate, so does runaway inequality. Therefore key to controlling runaway inequality is to dramatically curtail the power of high finance.

But as a society we have done the opposite. For nearly a half century between the New Deal and the 1970s, Wall Street was tightly controlled. Taxes on the wealthy were high, worker wages were rising, and debt levels on consumers, companies and government were low. After finance was deregulated (circa 1980) private and public debt exploded, wages stalled, taxes on the rich fell and inequality soared.

...By 2006, 40% of all US corporate profits went to Wall Street-- up from 7% in 1980. And over $21 trillion is now hidden in offshore tax havens-- and moves there via Wall Street. Furthermore, the top three banks dominate the entire financial system. These oligopolists have made it clear to all, they are far, far too big to fail, jail or curtail.

What will happen when this debt pyramid comes tumbling down again? As financial expert Ellen Brown points out, after the next crash we should expect a new kind of bailout. It's called a bail-in, and it already has become part of European planning. Instead of giving billions to the banks, the government will ask the banks to take it from their depositors-- namely us.

...We are learning painfully each and every day that reregulating Wall Street does not work. Reforms have been tepid at best. Banks get fined, and then fined again, for every financial sin imaginable-- money laundering for gangsters and rogue states, ripping off servicemen and women by financing payday loan sharks, colluding to fix interest rates, insider trading, controlling commodity markets, and illegal financial gambling. Yet the same executives and the same institutions prevail as if these crimes are just the normal cost of doing business.

Change becomes much more possible if and when we are able to transform every discussion about debt into a debate about creating public banks to replace Wall Street's financial stranglehold.

Something tells me, though, that there is no member of the media who will get anywhere near the presidential debates who will ask any of the candidates anything about that. Could you imagine the look on Jeb's face? Or Hillary's? Or the bullshit that would spew forth? Imagine a real journalist instead of a TV talking head, like, say, Henry Giroux asking one of the candidates to comment on something along the lines of "Capitalism has learned to create host organisms and in the current historical conjuncture one of those organisms is young people, who are forced to live under the burden of crushing debt. Moreover in the midst of a widening inequality in wealth, income and power, workers, single mothers, youth, immigrants and poor people of color are being plunged into either low-paying jobs or a future without decent employment. For the sick and elderly, it means choosing between food and medicine. Austerity now drives an exchange relationship in which the only value that matters is exchange value and for students that means paying increased tuition that generates profits for credit companies while allowing the state to lower taxes on the rich and mega corporations."

Sadly, the audience might start booing.