The Business Of High-End Prostitution Is Enormously Profitable-- Just Ask Your Garden Variety Congressman

Charles Ferguson's latest film, Inside Job, was probably last year's most important movie. I don't think it ever made it on the level of Toy Story 3, which grossed $415,004,880, or Iron Man 2, which grossed $312,433,331. In fact, Inside Job's worldwide gross was $7,883,873. I guess no one wants to see a film about investment banks... even the ones that have systematically impoverished the United States. Whether you saw it or not, watch the Charlie Rose interview with Ferguson. It's powerful.

I suppose the movie could have made more money if they marketed the hookers-and-coke aspect of the film. But it made a compelling case about something a lot more crucial to all of our lives. Didn't matter, of course; people were more interested in Toy Story 3... more than 50 times more interested, as it turns out. It also turns out that last week Reuters reported on a Wall Street prostitution ring. Needless to say, none of the clients were busted.

Seventeen people were indicted on Wednesday on charges of running a high-end prostitution ring that catered to Wall Street clients who often spent more than $10,000 in a night, authorities said.

The ring pulled in more than $7 million over three years, Brooklyn District Attorney Charles Hynes said at a news conference.

"The business of high-end prostitution is enormously profitable," Hynes said.

The prostitution service, named High Class NY, was run 24 hours a day out of an office in Brooklyn and charged from $400 to $3,600 an hour for its services, according to the 144-count indictment. It also provided customers with cocaine and other narcotics, the indictment said.

Hynes said clients often spent in excess of $10,000 in a single night.

They were "all high-end customers coming from the financial markets. People with nothing but money," he said.

Police said the business was extremely sophisticated, running several escort websites and using dummy corporations with misleading names and codes during business-related phone calls.

High Class NY even had a law firm draw up employment contracts for its prostitutes, who described themselves as models and fraudulently agreed to refrain from sexual contact with clients, police said.

"They were on the high-end of sophistication," said Vice Detective Joe Panico.

Among those indicted were High Class NY owner Mikhail Yampolsky and his wife Bronislava, who allegedly used the proceeds from their business to finance expensive trips to Atlantic City and luxury car purchases, Hynes said.

Also indicted were Yampolsky's son Alexander, step-son Jonathan, 11 managers and supervisors and two investors, Efim Gorelik and Yakov Maystrovich, he said.

Each of the investors had put $700,000 into High Class NY and were being paid back with interest, he said.

Each of those indicted faces the possibility of 25 years in prison if convicted. Two prostitutes face separate indictments on prostitution and drug charges.

The prostitutes in this 15-minute segment of the film are far more important and far more interesting than the segment of the film about leggy hookers and cocaine users. It's a horrible indictment of the Obama Administration.

WE HAVE HAD IT! America's Financial Coup d'état

I went for a hike yesterday and fantasized about wrting a post about how the wealthy and their political lackeys have seriously overreached. In my fantasy by the end there were Koch heads on pikes. But when I got home a friend sent me a clip of Michael Moore addressing a crowd of Wisconsin citizens who are willing to stand up tyranny. It's as good as my fantasy. Please watch it:

America is not broke.

Contrary to what those in power would like you to believe so that you'll give up your pension, cut your wages, and settle for the life your great-grandparents had, America is not broke. Not by a long shot. The country is awash in wealth and cash. It's just that it's not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.

Today just 400 Americans have more wealth than half of all Americans combined.

Let me say that again. 400 obscenely rich people, most of whom benefited in some way from the multi-trillion dollar taxpayer "bailout" of 2008, now have more loot, stock and property than the assets of 155 million Americans combined. If you can't bring yourself to call that a financial coup d'état, then you are simply not being honest about what you know in your heart to be true.

And I can see why. For us to admit that we have let a small group of men abscond with and hoard the bulk of the wealth that runs our economy, would mean that we'd have to accept the humiliating acknowledgment that we have indeed surrendered our precious Democracy to the moneyed elite. Wall Street, the banks and the Fortune 500 now run this Republic-- and, until this past month, the rest of us have felt completely helpless, unable to find a way to do anything about it.

Now, just like your soon-to-be EX-governor, I have nothing more than a high school degree. But back when I was in school, every student had to take one semester of economics in order to graduate. And here's what I learned: Money doesn't grow on trees. It grows when we make things. It grows when we have good jobs with good wages that we use to buy the things we need and thus create more jobs. It grows when we provide an outstanding educational system that then grows a new generation of inventers, entrepreneurs, artists, scientists and thinkers who come up with the next great idea for the planet. And that new idea creates new jobs and that creates revenue for the state. But if those who have the most money don't pay their fair share of taxes, the state can't function. The schools can't produce the best and the brightest who will go on to create those jobs. If the wealthy get to keep most of their money, we have seen what they will do with it: recklessly gamble it on crazy Wall Street schemes and crash our economy. The crash they created cost us millions of jobs.  That too caused a reduction in revenue. And the population ended up suffering because they reduced their taxes, reduced our jobs and took wealth out of the system, removing it from circulation.

The nation is not broke, my friends. Wisconsin is not broke. It's part of the Big Lie. It's one of the three biggest lies of the decade: America/Wisconsin is broke, Iraq has WMD, the Packers can't win the Super Bowl without Brett Favre.

The truth is, there's lots of money to go around. LOTS. It's just that those in charge have diverted that wealth into a deep well that sits on their well-guarded estates. They know they have committed crimes to make this happen and they know that someday you may want to see some of that money that used to be yours. So they have bought and paid for hundreds of politicians across the country to do their bidding for them. But just in case that doesn't work, they've got their gated communities, and the luxury jet that's always fully fueled, the engines running, waiting for that day they hope never comes. To help prevent that day when the people demand their country back, the wealthy have done two very smart things:

#1. They control the message. By owning most of the media they have expertly convinced many Americans of few means to buy their version of the American Dream and to vote for their politicians. Their version of the Dream says that you, too, might be rich some day-- this is America, where anything can happen if you just apply yourself! They have conveniently provided you with believable examples to show you how a poor boy can become a rich man, how the child of a single mother in Hawaii can become president, how a guy with a high school education can become a successful filmmaker. Don't fall for it! They will play these stories for you over and over again all day long so that the last thing you will want to do is upset the apple cart-- because you-- yes, you, too!-- might be rich/president/an Oscar-winner some day! The message is clear: keep you head down, your nose to the grindstone; don't rock the boat; be sure to vote for the party that protects the rich man that you might be some day.

And here's the second smart thing the wealthy have done. They have created a poison pill that they know you will never want to take. It is their version of mutually assured destruction. And when they threatened to release this weapon of mass economic annihilation in September of 2008, we blinked. As the economy and the stock market went into a tailspin, and the banks were caught conducting a worldwide Ponzi scheme, Wall Street issued this threat: Either hand over trillions of dollars from the American taxpayers or we will crash this economy straight into the ground. Fork it over or it's Goodbye savings accounts. Goodbye pensions. Goodbye United States Treasury. Goodbye jobs and homes and future. It was friggin' awesome and it scared the shit out of everyone. "Here! Take our money! We don't care. We'll even print more for you! Just take it! But, please, leave our lives alone, PLEASE!"

The executives in the board rooms and hedge funds could not contain their laughter or their glee, and within three months they were writing each other huge bonus checks and marveling at how perfectly they had played a nation full of suckers. Millions lost their jobs anyway, and millions lost their homes. But there was no revolt.

Until now. On Wisconsin! Never has a Michigander been more happy to share a great big lake with you! You have aroused the sleeping giant know as the working people of the United States of America. Right now the earth is shaking and the ground is shifting under the feet of those who are in charge. Your message has inspired people in all 50 states and that message is: WE HAVE HAD IT! We-- and we are all Wisconsites now-- we reject anyone who tells us America is broke and broken. It's just the opposite! We are rich with talent and ideas and hard work and, yes, love. Love and compassion toward those who have, through no fault of their own, ended up as the least among us. But they still crave what we all crave: Our country back! Our democracy back! Our good name back! The United States of America. NOT the Corporate States of America. The United States of America!

So how do we get this? Well, we do it with a little bit of Egypt here, a little bit of Madison there. And let us pause for a moment and remember that it was a poor man with a fruit stand in Tunisia who gave his life so that the world might focus its attention on how a government run by billionaires for billionaires is an affront to freedom and morality and humanity.

Thank you, Wisconsin. You have made people realize this was our last best chance to grab the final thread of what was left of who we are as Americans. For three weeks you have stood in the cold, slept on the floor, skipped out of town to Illinois-- whatever it took, you've done it, and one thing is for certain: Madison is only the beginning. The rich have overplayed their hand. They couldn't have just been content with the money they raided from the treasury. They couldn't be satisfied by simply removing millions of jobs and shipping them overseas to exploit the poor elsewhere. No, they had to have more-- something more than all the riches in the world. They had to have our soul. They had to strip our teachers of their dignity. They had to shut us up and shut us down so that we could not even sit at a table with them and bargain about simple things like classroom size or bulletproof vests for everyone on the police force or letting a pilot just get a few extra hours sleep so he or she can do their job-- their $19,000 a year job. That's how much some rookie pilots on commuter airlines make, maybe even the rookie pilots flying people here to Madison. But he's stopped trying to get better pay. All he asks is that he doesn't have to sleep in his car between shifts at O'Hare airport. That's how despicably low we have sunk. The wealthy couldn't be content with just paying this man $19,000 a year. They wanted to take away his sleep. They wanted to demean and dehumanize him. After all, he's just another slob.

And that, my friends, is Corporate America's fatal mistake. But trying to destroy us they have given birth to a movement-- a movement that is becoming a massive, nonviolent revolt across the country. We all knew there had to be a breaking point some day, and that point is upon us. Many people in the media don't understand this. They say they were caught off guard about Egypt, never saw it coming. Now they act surprised and flummoxed about why so many hundreds of thousands have come to Madison over the last three weeks during brutal winter weather. "Why are they all standing out there in the cold? I mean there was that election in November and that was supposed to be that!

"There's something happening here, and you don't know what it is, do you ...?"

America ain't broke! The only thing that's broke is the moral compass of the rulers. And we aim to fix that compass and steer the ship ourselves from now on. Never forget, as long as that Constitution of ours still stands, it's one person, one vote, and it's the thing the rich hate most about America -- because even though they seem to hold all the money and all the cards, they begrudgingly know this one unshakeable basic fact: There are a hell of a lot more of us than there are of them!

Madison, do not retreat.  We are with you. We will win together.

Yes there was an election in November-- an election with two shitty choices: corrupt Democrats and corrupt Republicans. No heads on pikes-- nonviolence. We have to take our country back.



UPDATE: Step In The Right Direction

And, of course, it isn't coming from a Democrat. Independent Vermont Senator Bernie Sanders is proposing a surtax of millionaires and an end to tax loopholes and subsidies for Big Oil for anyone who is serious about working towards a fairer and more balanced budget. He's been insisting that the Senate not just take an ax to the federal budget, the GOP approach: “It would be morally wrong," he said, "for the United States to balance the budget on the backs of the most vulnerable people in our society while asking nothing from the wealthiest... “Unfortunately, until now, virtually the entire debate in Washington has focused only on cutting federal programs. Many of the cuts being proposed will have a devastating impact on some of the most vulnerable people in our nation-- including seniors, children, the sick and the poor.”

He's proposing a 5.4 emergency surtax on adjusted gross incomes over $1 million, which would raise as much as $50 billion a year, a proposal that is widely popular according to recent polling, although adamantly opposed by the powerful people Moore was talking about in the video up top.

Something Important Happened On That Oscars TV Show-- Inside Job

When I retired from Warner Bros-- I mean on that last day-- I made a speech to the staff and remember telling them the best thing about leaving was that I'd never have to go to the Grammys again, let alone the MTV Awards or the People's Choice Awards or any of that godawful crap where you become a prop in someone's tawdry TV show. So you can imagine that I was not exactly watching the Oscars Sunday night and was only aware of it because all my tweet buddies were making fun of the show. The next morning I was delighted to hear that Inside Job won in the best documentary category, as it had at the Directors Guild of America and Writers Guild. It's the only movie I saw that won and DWT covered it here, here and here, even before it was released. For me to say it was the most important movie of the year, doesn't mean much since it was just about the only movie I saw this year. What director Charles Ferguson said on the stage last night, though, does mean something...

“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that's wrong.”

And my neighbor told me the whole audience applauded. Thank goodness he wasn't pulled off the stage for having the gall to say something... political.

The film had impressed critics and the industry alike with its expansive cinematography, global reach, fast-paced narrative and pointed interviews.

Ferguson, a self-described "policy wonk" with a doctorate in political science, interviewed fund managers, central bankers and political advisers for his film, which uncovered an uncomfortably close professional relationship between academia and hedge funds.

But not everyone was willing to subject themselves to his pointed questions, including key players like Henry Paulson, the former CEO of Goldman Sachs and treasury secretary at the worst moments of the economic implosion.

He also expected more from the new government.

"The biggest surprise to me personally and biggest disappointment was that nobody in the Obama administration would speak with me even off the record-- including people that I've known for many, many years," Ferguson said backstage.

He believes Americans, who lost homes and jobs in the millions because of shady mortgage lending and bank collapses, are disappointed that "nothing has been done."

"Unfortunately, I think that the reason is predominantly that the financial industry has become so politically powerful that it is able to inhibit the normal process of justice and law enforcement," said Ferguson.

Ironically, the only noteworthy coverage of Ferguson's powerful statement yesterday I saw in the mainstream media was from the Wall Street Journal, though not on their fabled editorial page. "Ferguson’s move," they reported, "to slam Wall Street-- just as his film had done on the big screen-- electrified the proceedings."

The acceptance speech was noteworthy. At these kinds of awards ceremonies, it is customary for self-congratulatory recipients to bask in the spotlight and thank everyone but their fifth-grade drama teachers. It was startling to hear Ferguson to attack Wall Street so brazenly.

Of course, you could be cynical and suggest that Ferguson’s tough talk will serve to put a light on Inside Job now and goose sales of DVDs. Ferguson has only managed to reignite the public’s anger for the sins of financial crisis. That may be what Wall Street executives are muttering this morning. But for now, score another big victory for Charles Ferguson.

By all means, get it here.

Maybe Obama Will Actually Bring Some Change... More Than Anyone Bargained For

Nice target... I mean house

From today's Frank Rich column, Still The Best Congress Money Can Buy: Wall Street is already celebrating the approach of bonus season by partying like it’s 2007. In The Times’s account of this return to conspicuous consumption, we learned of a Morgan Stanley trader, since fired for unspecified reasons, who went to costly ends to try to hire a dwarf for a Miami bachelor party prank that would require the dwarf to be handcuffed to the bachelor. If this were a metaphor-- if only!-- Wall Street would be the bachelor, and America the dwarf, involuntarily chained to its master’s hedonistic revels and fiscal recklessness with no prospect for escape.

John Judis, author and senior editor at TNR, argues persuasively that despite the fact that "the percentage of conservatives in the actual electorate this November-- and their proportional support for Republicans-- increased dramatically by ten percentage points from 2006," conservatism among registered voters hasn't gone up much since 2006. There was an increase of 3 percentage points from 2006 to 2010 but-- and this is key-- "the conservative tilt was much stronger in the electorate that actually voted than among registered voters." Just as our own research has shown, "conservatives were more energized than their liberal or moderate counterparts. And intensity has much more to do with political outcomes than the sheer numbers that opinion polling registers... [T]he liberal electorate that took to the streets in 2006 and 2008 was demoralized and demobilized."

And the results showed not just in the election, but in the political questions that are currently being debated in the press and in Congress. It’s not whether to have a single-payer health care system, but whether to have a national system at all. It’s not whether social spending should be increased, but whether it should be frozen or cut.

The "better" news is that "the conservative trend after 2008 was not the result of the gradual erosion of the liberal-moderate majority, but of the failure of the Obama administration to stem the [economic] downturn that began in 2008... [T]he Obama administration’s failure to seize the political opportunity afforded by the Great Recession has not necessarily opened the way to a new Republican majority. More likely, it will lead to a period where the two parties exchange power, and where neither can establish a long-lasting majority."

But Obama could easy make it much worse-- and many observers think he's, in fact, determined to. About a week ago Dave Johnson of Campaign for America's Future applied the theory of "The Shock Doctrine" to the push to gut Social Security. He decries the move towards proposals meant to cut middle class tax breaks and programs so that the richest Americans can continue to concentrate the nation's wealth in the hands of fewer and fewer families. "This is full-on Shock Doctrine, wait for an emergency like the terrible recession so people are in shock and want solutions, and then change everything so fast they can’t respond while telling them how this is good for them." And on Friday Johnson followed up with a proposal of his own that is meant to cut the deficit without hurting the people who Obama and the American government are supposed to represent-- the 99% of us who are not fabulously wealthy and who we don't expect to see ignored, especially not by a Democratic administration. Johnson's 8-point proposal seems like a lot more serious and effective-- not to mention fair-- than the toxic nonsense coming out of the Catfood Commission or the Rivlin Commission.

1) Restore pre-Reagan top tax rates. We didn't have massive deficits until we reduced the top tax rates.

2) Income is income. No more reduced capital gains tax rate. The incentive to invest should be to make a bunch of money from a good investment. The reason there is a low capital gains tax rate is that the wealthy get most of their income from capital gains. And the reason they get most of their income from capital gains is there is a low capital gains rate. The resulting income shifting schemes are a drag on the rest of us. (Also applies to dividends.)

3) Income is income. Inheritance income should be taxed as income, except there should be a "democracy cap" on how much someone can inherit. We decided not to have an aristocracy when we founded this country so we shouldn't have one.

4) Businesses should be taxed or not taxed, but not taxed AND not taxed. They shouldn't be able to use "double Irish" or "Dutch sandwich" or operate out of PO boxes in Bermuda or the Cayman Islands. (Bonus, this also helps reduce incentives to send our jobs and factories out of the country.)

5) If you don't pay your taxes We, the People won't pay to provide you with services. We can start by not allowing you to have a driveway that connects to public streets, or water/sewer hookups or mail. Also we won't enforce any contracts for you, including the one that says you "own" your house(s). And no government-developed Internet for you.

If companies like Google want to "double Irish" and "Dutch Sandwich" us or operate out of PO boxes in tax havens, we shouldn't let them use government services like courts, or the government-developed Internet. See how well they operate without access to roads (that includes for employees to get to go to work.) How about withdrawing the limited liability protection that investors in corporations receive? And of course no protection for "intellectual property" or trademarks. Oh, yeah, no access to anyone who went to a school that used tax dollars. And no government services means no sea-lane protection for your products shipping from Chinese factories, by the way.

6) Speaking of sea-lane protection, why do we have a military budget comparable to when we faced nuclear annihilation by the Soviet empire? Bases in Germany and Japan? And why can I go to this website, pick a DC-area zip code, say 22314, and learn that "Dollar Amount of Defense Contracts Awarded to Contractors in this Zip Code from 2000 to 2009: $7,086,397,848." Seriously, scroll down the page and look at some of the contracts and amounts awarded. I suspect there's some serious deficit reduction to be found in the military budget. A comprehensive and very public audit of where all that money has been going since, say, 1981 might take a chunk out of the debt problem all by itself

7) I could start listing all the corporate subsidies, tax breaks, monopoly grants, schemes, contracts, etc. that we pay for, but I think you get the idea. How about calling bribery by its name: bribery, and doing something about it?

8) To the extent that implementing this plan does not clear up the deficit and start paying off the debt, how about a yearly national property tax on all individual holdings above, say, $5 million, with the tax rate progressively increasing as total wealth increases, and keep doing this each year until the debt is paid off. Perhaps start at 1% on $5 million, 2.5% at $10 million, 5% at $50 million, etc. (Hedge fund managers and investment bankers start at 50% and go up, just for the heck of it. We can call this the "get the money from where the money went tax.")

Or maybe Obama wants to just continue to preside over a situation that's starting to smell a lot more like pre-Revolutionary France. And all it took to trigger the decapitations of the aristocracy was... some climate change. Of course, the ruinous climate change alone wouldn't have done it. Does this wikipedia description of the causes of the French Revolution sound vaguely familiar?

Although France in 1789 faced economic difficulties, mostly concerning the equitability of taxation, it was one of the richest and most powerful nations of Europe. The French people also enjoyed more political freedom and a lower incidence of arbitrary punishment than any of their fellow Europeans. However, Louis XVI, his ministers, and the widespread French nobility had become immensely unpopular. This was a consequence of the fact that peasants and, to a lesser extent, the bourgeoisie, were burdened with ruinously-high taxes levied to support wealthy aristocrats and their sumptuous, often gluttonous, lifestyles.

...These problems were all compounded by a great scarcity of food in the 1780s. A series of crop failures caused a shortage of grain, consequently raising the price of bread. Because bread was the main source of nutrition for poor peasants, this led to starvation. The two years previous to the revolution (1788–89) saw meager harvests and harsh winters, possibly because of a strong El Niño cycle caused by the 1783 Laki eruption in Iceland.

Sure, a little excessive... but a bat mitzvah no one will ever forget, even if daddy's a criminal

Yesterday was the anniversary of a big party in New York. Could it really only have been just 5 years ago when notorious war profiteer David H. Brooks was celebrating his daughter's bat mitzvah at the Rainbow Room. The event cost upwards of $10 million and featured Aerosmith, Nelly, Tom Petty, the Eagles, Kenny G. and 50 Cent. Aerosmith was paid $2 million and there's no way on earth Tom Petty or the Eagles would have played for less; they share the same manager. Brooks was a big macher; he had just donated $25,000 to the National Republican Senatorial Committee a couple of months earlier.

There's a lot in this post that tangentially touches on Iceland. Loki, the volcano that errupted and caused the wealther patterns that triggered the French Revolution, for example, is on Iceland. And these days, whenever I think about Iceland, I think about Charles Ferguson's brilliant documentary about the most recent financial meltdown, Inside Job since it too is tangentially about Iceland. I posted about the film when I first saw it in September. And a month ago Ferguson posted over at Salon about the question that probably anyone who's sitting and watching it for a few minutes will ask himself-- how will he deal wth Obama?

It was before the election and he wasn't as harsh as he could have been. But he did struggle with the question about how to tackle Obama.

When Barack Obama was elected, he had an unprecedented opportunity to shape American history by bringing the country's new financial oligarchy under control. Elected on a platform of change and renewal by a nation in crisis and with strong majorities in both houses of Congress, his election celebrated throughout the world, Obama could have done great things. Instead, he gave us more of the same. America will be paying for his decision for a very long time.

The first troubling sign was his personnel appointments: Larry Summers, the man behind nearly every disastrous policy that created the crisis, fresh from making $20 million from hedge funds and investment banks while at Harvard, to become the director of the National Economic Council; Tim Geithner, plucked from the New York Federal Reserve Bank and put in charge at Treasury; as Geithner's chief of staff, Mark Patterson, a former Goldman Sachs lobbyist; to succeed Geithner at the New York Fed, William C. Dudley, who was chief economist of Goldman Sachs during the housing bubble years; Michael Froman, straight from Citigroup Alternative Investments, which lost billions while its executives became rich, to coordinate economic policy for the National Security Council; Jacob Lew, who was the CFO of Citigroup Alternative Investments, as deputy secretary of state (and now, Obama's nominee to run the Office of Management and Budget); Gary Gensler, a former Goldman executive who helped ban the regulation of over-the-counter derivatives, to lead the Commodity Futures Trading Commission, which regulates derivatives; Mary Shapiro, former head of the Financial Industry Regulatory Agency, the investment banking industry’s self-policing body, to run the Securities and Exchange Commission; reappointing Ben Bernanke. And on and on.

These moves were excused as the understandable actions of a president-elect without a background in finance turning to the most experienced people in a time of crisis. But even then, it was clear that these people had been part of the problem, not the solution, and that other highly competent but untainted candidates were available.

And now, nearly two years later, the Obama administration has established a clear record. Beginning almost immediately, the president consistently opposed any effort to control financial industry compensation-- even for firms receiving federal aid, as most were in 2009. Then came a long period of total inaction, followed by the toothless Wall Street reform bill passed this summer and the appointment of a former Fannie Mae lobbyist, Tom Donilon, as the new national security advisor. There was no action on the foreclosure crisis and no serious attempt to investigate the causes of the crisis. The SEC has brought only a handful of civil cases ending in trivial fines, with neither firms nor individuals required to admit any wrongdoing.

Most tellingly, there has not been a single criminal prosecution of any firm or any individual senior financial executive-- literally zero-- and, of course, no appointment of a special prosecutor. While we can debate the extent to which fraud caused the crisis, and precisely how much fraud was committed, the answer is clearly not zero. We already know that Lehman and other firms used fake accounting to hide liabilities and inflate assets; that lenders and securitizers frequently knew that the loans they sold and packaged were fraudulent or defective; and, of course, we also now know that Goldman Sachs and other investment banks sold securities they knew to be defective (they were often sold to pension funds for low-paid government employees, by the way)-- and that they designed many of these securities so that they could profit by betting against them after they were sold. Stunningly, this last practice was not ipso facto illegal; but as a practical matter, it’s pretty hard to do if you’re telling the truth. Yet nobody has been prosecuted, and only a very few individuals have even been sued in civil cases.

It is, in short, overwhelmingly clear that President Obama and his administration decided to side with the oligarchs-- or at least not to challenge them. This raises the question of why they have made this choice, and whether it is a correct (in the sense of rationally self-interested) calculation on their part.

As to the "why," several explanations have been proposed. One is that the president, as a matter of individual psychology, is extremely conflict-averse, preferring to avoid fights no matter how important. A second hypothesis is that the president is simply doing the most he can, given the political climate and the furious lobbying effort with which he is confronted. This explanation, however, is belied by the personnel appointments, among other evidence.

A more disturbing possibility is that the Obama administration has simply codified a new strategic equilibrium in American politics, one first devised by the Clinton administration, in which both parties are supine with regard to the financial sector and the wealthy.

The objection to this view is that there is some evidence, in conventional political terms, that the Obama strategy of giving in to Wall Street might be a mistake. The economy remains in bad shape, bad enough to be a major political handicap, and will likely stay that way for several years. Democrats are having trouble fundraising (from individuals, at least; interest group donors remain plentiful), union voters may desert them, and it looks like Republicans and the Tea Party will make substantial inroads in the midterm elections. The liberal media, most prominently the Huffington Post but many other outlets as well, have turned sharply critical of administration policy. And my own conversations with friends and colleagues have revealed a deep, angry disillusionment with Obama.

But consider the situation more broadly. If the two parties both lie down for Wall Street in roughly equal measure, but fight viciously over other issues, it is possible to construct a stable strategic equilibrium. At the margin, the Democrats are slightly less favorable to business, at least for unionized industries, but nobody upsets the financial sector apple cart.

This angers much of the Democratic base. But the Democrats avoid the epic confrontation that would surely ensue if they were to take on the financial sector, which would retaliate with a massively funded effort. Instead, the two parties fight furiously, or at least pretend to fight furiously, about a wide range of other social issues that affect many voters deeply-- abortion, gay rights, gun control, stem cell research, creationism, global warming, health insurance and so on. Each side can credibly warn its base that if it deserts the party, apocalypse may follow. So, while some citizens may register as independents, or stop voting, or stop donating to the system, the entrenched establishments of both parties will remain safe.

Of course, the sustainability of this strategic duopoly depends on the absence of truly independent challenges, such as third parties. Third parties can and do arise in America-- George Wallace, Ross Perot, Ralph Nader and, now (sort of), the Tea Party-- but they tend to be short-lived, in part because they face enormous structural obstacles in becoming a sustainable political force. For one, America doesn't have a parliamentary system, and most localities don’t use ranked-choice or "instant-runoff" voting. Plus, given the structure of American elections, the Obama administration can credibly warn, pointing to the example of Ralph Nader, that any splinter effort would hand the White House to the Republicans. And, given the enormous role now played by money in American elections, the logistical and financial efforts required to create a grass-roots third party would be huge. In contrast, the financial sector possesses the twin advantages of concentration and cohesion on the one hand, and of enormous financial resources on the other.

So, then, the Obama administration’s choices may be depressingly rational, given the "quiet coup," to use Simon Johnson’s term, constituted by the spectacular rise of the financial industry and the wealthy over the last quarter-century. This does not mean we should all despair; there have been times before in American history when the American people had to force their leaders to follow them. A century ago, the progressive movement achieved major reforms in the face of an economy even more concentrated than today. But it won’t be easy. To reverse the hegemony of the financial sector, and the danger it poses both to economic stability and to real democracy, will require an enormous outpouring of popular anger and organizational energy, probably a considerable period of time, and perhaps could be generated only by... another, even worse, financial crisis, such as might well occur a decade hence, given the absence of real reform after this one…