Monday, May 11, 2015

The New Deal vs. Wall Street...and President Obama's "massive fight with Wall Street" that we all missed

(WPA poster, courtesy of the Library of Congress Prints and Photographs Division.)

Replying to Senator Elizabeth Warren's persistent claims that his secretive TPP international trade deal will be bad for American workers and bad for regulatory oversight of Wall Street, President Obama recently said, "She's absolutely wrong...Think about the logic of that, right? The notion that I had this massive fight with Wall Street to make sure that we don’t repeat what happened in 2007, 2008. And then I sign a provision that would unravel it? I’d have to be pretty stupid...her arguments don’t stand the test of fact and scrutiny."

President Obama had a massive fight with Wall Street? When did that happen? I'm a news and political junkie, and I totally missed that. Instead, what I've been seeing is the president bringing Wall Street cronies into his administration, the protection of Wall Street from criminal prosecution, and his economic team protecting the financial elite, "Not families who were losing their homes. Not people who lost their jobs. Not young people who were struggling to get an education. And it happened over and over and over” ("Elizabeth Warren: Obama 'protected Wall Street' over middle class families," Washington Post, October 13, 2014). Furthermore, Republicans and Wall Street big wigs are supporting Obama on the TPP. What does that tell you?

Now, to be fair, President Obama and his administration have had a few minor quarrels with Wall Street. But a "massive fight"? No, sorry, never happened. Heck, too-big-to-jail banks are even bigger now. At the end of the day, it's Obama's claim of a "massive fight" that doesn't "stand the test of fact and scrutiny."

If you want to see a massive fight against the misdeeds of Wall Street, you have to go back to President Franklin Roosevelt and his fellow New Deal policymakers.  

(In the audio above, we hear about the massive fight with Wall Street that actually happened. Infuriated with President Roosevelt's efforts to change an economy rigged in their favor, big business tried desperately to get Roosevelt out of the White House. Listen to Roosevelt's response and ask yourself: Would President Obama, or soon-to-be President Hillary Clinton, ever dare challenge Wall Street the same way? The answer, of course, is "no," and that is why the next fraud-fueled recession is only a matter of time.)      

Many policies were implemented during the New Deal that Wall Street abhorred, e.g., the creation of the Federal Deposit Insurance Corporation, the creation of the Securities & Exchange Commission, and rules regulating which monies the banks could gamble with and which monies they could not. And these policies formed the foundation for financial stability for nearly half-a-century; before the political right began disassembling and weakening them, in the name of Laissez-faire capitalism - which is, essentially, letting super-wealthy Americans do whatever they feel like.

Unfortunately, letting people run amok has consequences, consequences that people like Alan Greenspan (the former Republican Federal Reserve chairman and one of the prime architects behind financial deregulation) do not understand. After the 2007-2008 recession pulverized the American economy, Greenspan said, "A critical pillar to market competition and free markets did break down. I still do not fully understand why it happened" ("Greenspan admits 'mistake' that helped crisis," NBC News, Associated Press, October 23, 2008).

The attitude of New Deal policymakers towards the misdeeds of Wall Street was summed up in FDR's first inaugural address:

"They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish…The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit...there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing... there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency."

Unfortunately, America has forgotten the words and policies of the New Deal. Hence, corporate greed, corruption, and crime will continue to flourish (see my blog post "The Reverse New Deal: A 'Golden Era of White Collar Crime'").

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