Wall Street WARZONE

10 Reasons President Obama is Failing America: Piling Trillions of Debt on Future Generations, on Top of Bush’s Trillions. Next, Obama’s Final Surrender of His Principles: Capitulation to GOP on Bush Tax-Cuts for Billionaires

by Paul B Farrell, JD, PhD
| | 11/16/2010

Back in January one of my MarketWatch columns was an “open letter” to the president: “10 reasons Obama is failing 95 million investors: Why his ‘Fat Cat Bankers’ are destroying both capitalism and democracy.” The response was strong. Today, given all the financial reforms now being secretly contested in Washington, especially the Consumer Financial Protection Agency that the banks are spending millions to kill, those “10 reasons” seem far more important. Read them closely, not as some short-term critique, but for the long-term historical consequences, not their impact on your retirement but the impact on future generations of Americans …

Mr. President: We know that the future—seen through a broader historical lens—will reveal a natural cycle with you cast in the predictable scene of a Shakespearean-style plot driven by fate, the same dramatic destiny of all great nations and civilizations. We know a “Happy Conspiracy” of Wall Street, Corporate CEOs and the Forbes 400 controls Washington, limiting and manipulating you. Shakespeare says: “All the world’s a stage, and all the men and women merely players. They have their exits and their entrances.” As this past year unfolded it became painfully obvious you are indeed playing a role in a historic drama, along with other leaders in a staged, life-cycle, endgame that includes Presidents Reagan, Clinton and the Bushes, Fed Chairmen Greenspan and Bernanke, and Wall Street’s bosses Paulson and his “Fat Cat” banker buddies. The final scene of this historic Shakespearean drama is playing out this very moment, with 10 improvisational plot points driving your character’s role:

1.  Failing to grasp John Adams’ warning: All democracies “commit suicide”
“Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide:” Yes John Adams, a great American president made that famous prediction at the beginning of our great nation. And yet, paradoxically, when a democracy commits suicide, it also kills off the very capitalism that made it powerful, the economic system Adam Smith identified the same year our Declaration of Independence was signed. Today we are neither independent nor free, King George has been replaced by a far more powerful moneyed conspiracy that you sold out to last year.

2.  Failing to sense the psychological impact of being an aging democracy
Yes, our time is up says Scottish historian Alexander Tytler, recently quoted by economist Marc Faber: “The average life span of the world’s greatest civilizations has been 200 years.” Then “once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent … overspends … costly wars … wealth inequity and social tensions increase; and society enters a secular decline.” We’re on ‘suicide watch,’ acting out the final scenes President Adams predicted for democracy, as Wall Street murders capitalism.

3.  Failing to demand sacrifices, instead adding to Bush’s massive war debt
Back in 2003, coincidental with the “greatest foreign policy blunder in American history,” the Iraqi War, Kevin Phillips, President Nixon strategist and political historian, published Wealth and Democracy. Phillips warned: “Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out.” Three trillions wasted, says Nobelist Economist Joseph Stiglitz. And now, Mr. President, you’re playing your role, along with Bush, Paulson, Bernanke and Congress, piling on an unsustainable $23.7 trillion in what is the greatest domestic blunder in American history.

4.  Failing to lead with “once-in-a-lifetime” systemic financial reforms
Former Fed vice-chair Alan Blinder recently wrote in The Journal: “When economists first heard Gekko’s now-famous dictum, ‘Greed is good,’ they thought it a crude expression of Adam Smith’s ‘Invisible Hand’—which is one of history’s great ideas. But in Smith’s vision, greed is socially beneficial only when properly harnessed and channeled,” with incentives for risk taking, honest competition, regulatory safeguards, and regulators who will actually enforce the rules. But “when these conditions fail to hold, greed is not good.” Blinder fears “that a once-in-a-lifetime opportunity to build a sturdier and safer financial system is slipping away.” No consumer protection, no mortgage clawbacks, no derivatives regs, nothing. You are setting the stage for another, bigger meltdown, the “Great Depression 2,” the last tragic act in this drama, dead ahead.

5.  Failing to pick a “cast-of-characters” that could have changed history
Recently Financial Times John Kay said: “Our banks are beyond the control of mere mortals.” But it’s not just banks: Our American government and economy is “beyond the control of mere mortals.” Each president picks his own actors to play out this grand epic historical drama: 21 cabinet officers and 6,722 other senior bureaucrats. Last year many voted for you fearing McCain might pick Phil Gramm as Treasury secretary. Unfortunately, Mr. President, your picks not only revived Reaganomics under the guise of Keynesianism, you sidelined a real change-agent, Paul Volcker, and picked Paulson-clones like Geithner and Summers. But worse of all, you’re reappointing Bernanke a Greenspan-clone as Fed Chairman, an economist who, as Taleb put it, “doesn’t even know he doesn’t understand how things work.” And with that pick, you proved you also don’t “understand how things work.” And yet forever true to the script, your decision fits perfectly in the final act captured by your predecessor, President Adams.

6.  Failing to stand up to our 100 senatorial assassins and 261,000 lobbyists
Instead of leadership, you let Congress run the show, a strategy that may work in community organizing but in Washington reminds us of the old adage that “the inmates are running the prison.” We now know why Adams used words like “murder” and “suicide” as the endgame in a democracy. Suicide was a theme in a third of Shakespeare’s dramas: Romeo and Juliet, Brutus, Cassius, Othello, Lady MacBeth, Ophelia, Anthony and Cleopatra. But Julius Caesar is the best comparison: Senators were Caesar’s assassins, a loyal friend even drew first blood. Today, any one of 100 self-interested senators can legally threaten to “assassinate” the entire nation. And you seem unwilling to stand up to their totally dysfunctional kamikaze mission.

7.  Failing to act Presidential, while “Fat Cat Bankers” hijack your presidency
Economist Peter Morici writes in the Baltimore Sun: “On banks, Obama talks tough, does little.” Matt Taibbi is far more caustic in “Obama’s Big Sellout,” Mr. President: “A once-in-a-generation political talent” has “allowed his presidency to be hijacked. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it … pulled a bait-and-switch on us.” And yet while it’s so blatant and obvious, Wall Street gets away with it because your presidency has merged into a “Fat Cat Bankers Conspiracy.”

8.  Failing to protect 95 million investors, letting Wall Street loot America
Wall Street bankers are stealing trillions: In “Not So Radical Reform” BusinessWeek says the “top five U.S. commercial banks … were on track” earning at the rate of $70 billion “in 2009 trading unregulated derivative contracts.” The Journal connects the dots: The same banks “allocated about $90 billion for overall compensation,” with average bonuses of $500,000, ten times the income of most Americans. Yes, Wall Street looted that money from taxpayers as you turned a blind eye, Mr President. The Journal commentator from Yale Law says “the government should make it clear that it will allow these institutions to fail.” Except no one believes you have the guts or the will to do that, Mr. President. You are a Wall Street bankers dream. But you have failed America’s 95 million investors and the consequences will be disastrous in the near future.

9.  Failing to avoid the “hubris virus” disease killing America’s leaders
Before you took office Mr. President (and while Paulson was looting the American Treasury to save his old firm), Portfolio warned: For “every highflier who is chastened, another would-be mogul pops up elsewhere, convinced he’s smart enough to game the system … When things are very good, people take ridiculous risks, and then things come crashing down and the risk just moves somewhere else … We don’t know where it’s going next, but someone will be making money somewhere.” Why? Because “like a lethal virus, it seems, hubris never really disappears, it simply finds a new host.” Yes, that deadly virus, that insatiable greed, mutates fast among Wall Street’s “Fat Cat Bankers.”

10.  Failing to see the “ticking time-bomb scenario,” the next big meltdown
“Bring Back Glass-Steagall,” demands Journal columnist Thomas Frank, author of The Wrecking Crew, How Republicans Rule. We hear the same message from Volcker, Stiglitz, McCain and others. But it’ll merely delay the inevitable. The end-game is “never different,” whether penned by Shakespeare, Adams, Tytler or Reinhart and Rogoff. As Frank says of the Financial Crisis Review Commission: Wall Street bankers will “skate away yet again by deflecting blame or mouthing pro forma mea culpas … a sign that this inquiry, like so many other promises of reform since 9/15, is likely to leave Wall Street’s status quo largely intact. That’s the ticking-bomb scenario that truly imperils us all.”

But all this in the unfolding script: All the actors, cabinet officers, Fed chairmen, regulators, lobbyists are playing set roles in a well-known theater, waiting for their “entrance and exit” cues, “merely players” in a larger predestined historical drama re-written so many times, in the same repetitive plot. Like Shakespeare, economists Reinhart and Rogoff made clear in This Time Is Different: Eight Centuries of Financial Folly, we are performing yet another revival of a 800-year-old history of self-destructive bull/bear, boom/bust cycles, with each ending in the same old Shakespearean-style final tragic act. For fact, you could break off Goldman’s derivatives trading division from their commercial banking operations and I guarantee you their mega-bonus traders will find new ways to run Wall Street’s gambling casino as fast as they were able to convert TARP billions into record bonuses in one year.

Epilogue: Midterms? Reelection? New GOP president 2012? All irrelevant!
The endgame script won’t change. GOP-controlled House? 59 Dem senators? Romney? Palin as president? None of this matters, Mr. President. We’re all “merely actors” in an epic drama well-known to Adams as well as Shakespeare. But don’t get us wrong, we still do admire you. We know you’ll honor your Nobel legacy, like Carter and Gore, after you leave office. But meanwhile, you are playing your role well in this tragic final act. Indeed, all of America’s “merely actors” are right on cue with their “entrances and exits.” Yes, even our 95 million investors are playing their designated roles too. In fact, it really doesn’t matter much whether anyone goes to the voting booth, ever again, because the final scene has already been written … by your predecessor, President John Adams.

7 Responses to 10 Reasons President Obama is Failing America: Piling Trillions of Debt on Future Generations, on Top of Bush’s Trillions. Next, Obama’s Final Surrender of His Principles: Capitulation to GOP on Bush Tax-Cuts for Billionaires
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