Democracy or “Lobbyocracy”

In July, the SEC fined Goldman-Sachs $550 million for failing to disclose vital information in selling an investment.  But if there were fraud, as alleged, then why not a criminal case?  John Paulson at Goldman-Sachs selected packages of mortgage loans that were most likely to fail and bet against them.  At the same time, Goldman sold these to clients deceptively as ‘least likely to fail’, and, as endorsed independently by ACA Capital Management.  Goldman is not alone.  In all six major lending institutions investigated, there has been evidence of fraud as well as efforts to conceal it, and, so far, not a single criminal case.

Contrast this with the S&L scandal of the eighties when criminal prosecutions were prompt.  That debacle was the natural result of deregulating the Savings and Loans.  This time it was the banks that were deregulated and Glass-Steagall repealed.  Like clockwork these followed the same cycle of greed, fraud, bust, but with a major difference as noted earlier: no criminal prosecutions.  So what has changed?

Here is one answer.  There are now over 11,000 lobbyists.  Hundreds of ex-legislators and their staffers have joined their ranks.  Billions are being spent – more than a half-billion already for the impending November election.  The University of Kansas recently conducted research on the benefits of lobbying.  Here is just one example they unearthed:  A group of major corporations spent less than $300 million in lobbying for a particular tax break.  They were successful, saving over $60 billion in taxes.  That is twenty times their investment, and a rate of return almost impossible to achieve in a legitimate business venture by established corporations. 

Among the largest contributors, the finance industry stands out, and with it Goldman-Sachs in particular as an active source of cash and personnel.  It alone has around fifty lobbyists, both employed directly and also hired through lobbying firms.  This forceful and highly effective team includes many prominent former elected US Representatives.  It supports Congressmen, Senators, and, especially, members of key committees overseeing the industry.  It is also Obama’s second highest contributor, $994,795 according to OpenSecrets.org.  Here is a list of personnel it has serving in the higher echelons of the Obama administration.

• Gary Gensler, Commissioner of Commodity Futures Trading Commission (former GS Partner);

• Larry Summers is a protege of Bob Rubin a former Chairman of GS and Clinton’s Treasury Secretary;

• Mark Patterson, Geithner’s Chief of Staff and the TARP overseer (former GS lobbyist and Vice President for Governmental Relations);

• Dianna Farrell, Deputy Director, National Economic Council (former GS Financial Analyst);

• Stephen Friedman, Chairman, President’s Foreign Intelligence Advisory Board — Board Member (former GS Chairman 1990-94; Director, 2005);

• Robert Hormats, Undersecretary for Economic, Energy and Agricultural Affairs, State Department (former Vice-Chairman, GS Group);

• Philip Murphy, Ambassador to Germany (former Head of GS, Frankfurt); and,

• John Thain, Advisor to Geithner (former GS President and Chief Operating Officer).

If all of this signifies an exclusive affinity with Democrats, nothing could be further from the truth.  Their support and influence is quite secular.  Thus Henry Paulson, the Treasury Secretary under George W. Bush, was a former Chairman of — you guessed it — Goldman Sachs.   The revolving door syndrome and the spectacular amounts of money involved become evident if we trace the career of just one staffer:  Rahm Emanuel, the current White House Chief of Staff left Clinton’s White House near the end of their term to work for Wasserstein Parella.  He has a B.A. in Liberal Arts and a M.A. in Speech and Communication — no law or business education or experience to contribute.  Yet in two and a half years, he was included in eight deals that ‘earned’ him $16.2 million.  No surprise then that while the President talks about strict controls on the financial giants, behind the scenes lobbying takes on a different tack. 

And any wonder that the toothless nematode of a Financial Reform Bill has been the result.  Limits on proprietary trading by the big banks recommended even by that old friend of banks, Paul Volcker, have been excluded.  Such trading by commercial banks on their own account has been permitted ever since Glass-Steagall was repealed through the energetic exertions of Bob Rubin and Larry Summers.  It was without doubt a major cause of our financial disaster and should have been a central feature of the bill.  It is not.  Even if all of Glass-Steagall is re-introduced, it would affect and proscribe the activities of only about ten major banks.  Yet, despite the havoc they, and other involved companies like AIG, have caused no real restraints are proposed.  A cursory look at the daisy chain of personalities lifts the veil high enough to note that nothing can change because the incestuous relationships do not permit different ideas.  Stellar economists and Nobel Laureates like Stiglitz and Krugman, can shout their heads off — nobody is listening because profits bolstered by the ‘free market’ (read unregulated) win hands down.

To return to the daisy chain, here is an example.  Jamie Dimon, often rumored to be the next Treasury Secretary, is a close friend of Secretary Geithner who is then expected to rotate to a bank.  Mr. Dimon is the current head of J.P. Morgan-Chase.  Prior to that he was at Citigroup as the favored protege of Sanford Weill and rumored to be the next CEO until trouble brewed.  Mr. Rubin, a former chairman of Goldman-Sachs and a mentor to Tim Geithner, found a home at Citi after finishing his tenure at Treasury.  And so it goes on. 

The sad fact remains.  We were presented the best opportunity for change (in a couple of decades) by the financial collapse but failed to seize it.  Nothing can change, it seems, because a dependent President with no base, and no existing structure as, for example, a powerful former governor might have, is forced to use the scaffolding, already in place, constructed by the power bases in the Democratic Party.

Much worse have been the accusations against the Clintons.  The Keiser Report accuses Hillary of “look-back” trading.  It can be used as a scheme to transfer money secretly from one person to another and works like this:  Two commodity trading accounts are opened.  Each day simultaneous buy and sell orders are executed.  When the trades are closed, the winning trade is assigned to the account to which money is being transferred.  Hillary Clinton made $100,000, starting with $1000, in a commodity trading account over a 10-month period, at a time when her husband’s salary was in the low thirties and they were desperate for money.  There has never been an adequate explanation why with such extraordinary commodity trading skills, she stopped trading shortly thereafter.  Most amateur commodity traders — almost 80% by some estimates — lose their stake within a few months.

Bill Clinton signed in the Commodity Futures Modernization Act in December 2000 just before leaving office.  Steered through by Rubin, Summers, Geithner et al, it, among other relaxations, excluded Credit Default Swaps from regulation.  The secret unregulated (a far cry from a regulated open market) trading in these yielded enormous profits until greed overtook common sense.  Then the government bailout.  Since Bill Clinton left office, he has accumulated over a $100 million, half in speaking fees — paid to a man noted for disputing the meaning of  ’is’ in a deposition.  Perhaps it is appropriate to quote the well-known journalist, Christopher Hitchens (no darling of the left himself, yet not a conservative, and one who, like the Clintons, supported the Iraq war) who states in a recent interview in the New Statesman, “Clinton could change his mind on any issue, but couldn’t change the fact that he was a scumbag.”

Then there is the special relationship Hillary and Bill maintain with Haim Saban, the billionaire entertainment mogul who is obsessed with a biblical prospect for Israel.  If you have been wondering whatever happened to the relatively neutral Middle East analysis from Brookings.  Well, in 2002, the $13 million dollar — largest gift in Brookings history — Saban Center for Middle East Policy happened;  in addition, Saban has doled out $5 million to Bill Clinton’s library, untold millions through his group of deep pockets for Hillary’s presidential campaign, $7 million for the Democrats’ National Committee, etc.  Like the bankers, his is the voice that does not cry in the wilderness.

So, who cares if a family’s home is foreclosed, or one in five are unemployed, or one in four children live in poverty, or the Gulf has vast dead zones, or that now, after the Israeli blockade, the World Health Organization reports almost half of the children in Gaza are anemic and stunted.  Sadly, not our government.  We have entered a new phase in our democracy, an era where elected officials no longer need to respond to the needs of the general public … just the minority who pay to play.

Arshad M. Khan is a retired professor. He can be reached at: backfire@ofthisandthat.org. Read other articles by Arshad M..

19 comments on this article so far ...

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  1. Don Hawkins said on August 21st, 2010 at 12:55pm #

    We have entered a new phase in our democracy

    Democracy is when the indigent, and not the men of property, are the rulers.
    Aristotle

    The purpose of a banana republic is commercial profit by collusion between the State and favoured monopolies, whereby the profits derived from private exploitation of public lands is private property, and the debts incurred are public responsibility. Such an imbalanced economy reduces the national currency to devalued paper-money, hence the country is ineligible for international development credit and remains limited by the uneven economic development of town and country.

    Kleptocracy, government by thieves, features influential government employees exploiting their posts for personal gain (embezzlement, fraud, bribery, etc.), with the resultant deficit repaid by the native working people who “earn money”, rather than “make money”. Because of foreign (corporate) manipulation, the government is unaccountable to its nation, the country’s private sector–public sector corruption operates the banana republic, thus, the national legislature usually are for sale, and function mostly as ceremonial government.

    . . . a money class fleeces the banking system, while the very trunk of the national tree is permitted to rot and crash. . . .
    —Christopher Hitchens[8] Wiki

    Stardust we are golden. Calm at peace mates the winds are changing. Good article Arshad and I see the oil in the Gulf didn’t vanish and yes in old twenty ten a few things have vanished alright.

  2. teafoe2 said on August 21st, 2010 at 2:39pm #

    yes good article, and also good comment by Don. However I would never quote scumbag Hitchens even if he was right. And yes, he is now an open member of the reactionary snowjob machine. I myself detest “Liberals” but Hitchkens no longer measures up to even that standard. He’s nothing more than a pro-zionism flak.

  3. Deadbeat said on August 22nd, 2010 at 5:14pm #

    Christopher Hitchens (no darling of the left himself, yet not a conservative, and one who, like the Clintons, supported the Iraq war) who states in a recent interview in the New Statesman, “Clinton could change his mind on any issue, but couldn’t change the fact that he was a scumbag.”

    I agree with T42. Hitchens when from being a Marxist to a neo-con which BTW is Leo Strauss’ definition of a neo-con. He went for the money. Therefore his characterization of Clinton falls flat as the same can be said of Hitchens himself.

    Stellar economists and Nobel Laureates like Stiglitz and Krugman, can shout their heads off — nobody is listening because profits bolstered by the ‘free market’ (read unregulated) win hands down.

    Here’s the problem, Stiglitz and Krugman are not engaging in building movements. They are both Liberal elitist capitalist economists who have no desire to mingle with the indigent masses in a way that will organize them in struggle. Thus to keep referring to these powerless Liberals is a distraction. They offer nothing to the body politics. Their analysis also is limited to their ideology of Keynesian bromides that is primarily designed to maintain the system. The powers that be “tolerate” them but in actuality really don’t care what they have to say. They’ll get their space in the MSM or on Fora TV but they are really speaking to the “high class” crowd; not to the masses.

    Whenever these Liberals use the words “mistake”, “error”, “incredulous”, “ignorance” to describe policy you know they have a new book for sale. They new job sector for this recession is called “bullshit”. It’s great work if you can get signed.

  4. hayate said on August 22nd, 2010 at 6:33pm #

    The zionist is the worst thing to happen to this planet since nazism. In fact, it’s going to be much worse. The nazis never managed to get control of the majority of the major players on the world scene. The zionist have. These people have to be taken out of the picture. Completely. We are existing in a situation now where the nazis call the shot and they have nukes to back up their innate cowardice.

    This is the worst state of affairs for the well being of this planet imaginable.

  5. Robertov said on August 22nd, 2010 at 6:49pm #

    Historically capitalism is a collusion between State and finance class. Free market is a lie to destroy opposition in least developped countries. Capitalist always uses state power to defeat competence. Some times people in dominant country (USA now and England in XIX century) make that free market and free competence are realities in his frontier dominium but capitalist in this period loot and squeeze over all the world. Finance class uses his world power to revert this spring in USA and take newly complete control in US to loot and squeeze also in USA. Big profit is not possible for normal competence rules. The major profit now is obtained from association between world finance class and communist china and vietnam class when slaves gulash are the most source of cheap labor. Fianance class speciality are electoral contributions now in old times finance class speciality was in king’s succesions wars. Marxism is a lie.

  6. Max Shields said on August 23rd, 2010 at 7:00am #

    It was good to see in this article no mention of capitalism (the faux argument) but of the financialization of the Western/USA economy. But even then, it is only a portion of the problem, though significant.

    Beware false dichotomies. Either you believe in Adam Smith’s Invisible Hand or you don’t. Either you believe n the power of free enterprise or you don’t. Either you are a real investor, an investor shooting at the target of maxiumum profits and maximum growth, or you are not. Either you are a true fiduciary or you are a false Malthusian. Either you are with us or you are against us.

  7. Deadbeat said on August 23rd, 2010 at 1:19pm #

    Max Shield writes …

    It was good to see in this article no mention of capitalism (the faux argument) but of the financialization of the Western/USA economy. But even then, it is only a portion of the problem, though significant.

    Yeah Max like Capitalism has nothing to with “financalization”.

    The problem is not the “financalization of the Western/USA economy”. When the U.S. had a “productive” economy there was squalor in the cities that lead to a tuberculosis crisis. It was from that crisis that we got the Public health department because rich people succumb to the disease as well as the poor. The same is true with the development of Public education as the rich needed trained worker drones.

    So Max it is you who are setting up the false dichotomy. Either it is “financalization” or it is not (i.e. productive economy). This crisis is not a crisis of the “financalization” of Western economies. It is a problem due to the lack of POWER. Power screwed workers in a “productive” economy and in a “financed” economy.

    You sound like right-wing hacks like Gerald Celente, Ron Paul, and Peter Schiff all rolled into one…

    It’s not Capitalism; It’s CORPORATISM.

    We need to get back to being a PRODUCTIVE economy

    This is a Capitalist crisis with a great deal of structural problem that has no immediate short-term solutions other than austerity and greater exploitation. The sooner this is recognized the sooner people can mobilize against it.

  8. teafoe2 said on August 23rd, 2010 at 1:26pm #

    wHAT?

    talk about “false dichotomies”:

    “Either you are a true fiduciary or you are a false Malthusian”

    ” Either you believe n the power of free enterprise or you don’t”

    How do these propositions differ from those peddled on rightwing talkshows every day?

    To me this stuff is not even mainstream Republicanism, it’s Crackpot Conservatism.

    “The power of free enterprise”. “a real Investor”. To me this is nothing but pro-Rich People mythology.

  9. Max Shields said on August 23rd, 2010 at 1:50pm #

    Nothing you said Deadbeat has anything to do with my last comment.

  10. teafoe2 said on August 23rd, 2010 at 2:23pm #

    Richboy says 2&2 = 5. No matter how many times you repeat it, it’s still nothing but lying, trying to con people that you’re anything but a rich boy trying your best to keep poor people down.

    The fact is, Deadbeat quoted you verbatim, then took your proposition apart & exposed it as false. False, ahistorical, and illogical.

    “Financialization”, like “Globalization” is not something different and distinct from Capitalism; it is a FEATURE of present-day capitalism.

    “Investors”: well I had to delete what came to my mind.

  11. Max Shields said on August 23rd, 2010 at 3:00pm #

    A quote and a distortion makes for “Nothing you said Deadbeat has anything to do with my last comment.”

  12. Deadbeat said on August 23rd, 2010 at 5:08pm #

    Max Shields writes

    A quote and a distortion makes for “Nothing you said Deadbeat has anything to do with my last comment.”

    CLARIFY then. If my response has nothing to do with what your comment then you’d be more specific than just repeating an ambiguity.

  13. teafoe2 said on August 23rd, 2010 at 5:19pm #

    OK, Xam: please point out the “distortion”?

    Maybe if you could be more specific in your comments, instead of all these vague generalities which sound more like warmed over Sarah Palin than any kind of intelligent “dissidence”, Deadbeat and others including myself could be more specific in our reactions to your pro-capitalist apologetics.

    You claim that “mention of capitalism” is a “faux argument”, That statement is nothing but an assertion lacking a shred of supportive argument.

    Even totally pro-”Free Enterprise” academic economics teachers normally describe the US economic system as “capitalism”. So what is the source of this notion of yours that “mention of capitalism” is a “faux argument”?

  14. Max Shields said on August 23rd, 2010 at 6:27pm #

    The issue Dear Deadbeat is that you mis-understood my point. I was agreeing with the writer regarding how this economy has become swallowed by a cancerous financial sector – Wall Street.

    However, unlike you, I do not see capitalism as an evil. Therefore my list of either/or statements was offered (not complete mind you) to elaborate on the nuance that is life. I would also add that I do not see socialism as an evil.

  15. Don Hawkins said on August 23rd, 2010 at 6:47pm #

    The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil. We see before us a huge community of producers the members of which are unceasingly striving to deprive each other of the fruits of their collective labor — not by force, but on the whole in faithful compliance with legally established rules. Einstein

  16. teafoe2 said on August 23rd, 2010 at 7:07pm #

    If that was your point, Xam, why didn’t you state it clearly the first time?

    If “this economy ” is not capitalism, what is it then that has been swallowed by “a cancerous financial sector”? Sector of what?

    You’re a genius, Xam: you can pile more non-sequiturs into fewer sentences than anybody I’ve ever run across. “Life is a nuance” may seem poetic to some but in the context of the above article is nonsense.

    So are we to understand that to you it makes no difference if the economy and/or political system is capitalist or socialist?

    But let me correct myself: Earlier I said “this is a good article”. I now retract that statement. Read again how the author concludes: ” We have entered a new phase in our democracy, an era where elected officials no longer need to respond to the needs of the general public … just the minority who pay to play.”

    This may be a “new phase” in the US electoral charade, now that the Zionist Mafia has taken over the whole Kombine*, but calling it “our democracy” perpetuates illusions. Elected officials in the US have always been primarily responsive to the interests and desires of rich people, since before the US was the US.

    cf. “Naked Lunch”, by Wm Burroughs

  17. Deadbeat said on August 23rd, 2010 at 7:28pm #

    Max Shields writes …

    The issue Dear Deadbeat is that you mis-understood my point. I was agreeing with the writer regarding how this economy has become swallowed by a cancerous financial sector – Wall Street.

    Here’s the problem Max, the financial sector did not “swallow” this economy. The “economy” has long since been swallowed. The only problem is that today people who thought they were immune from Capitalism are no longer immune from it. That is what scares the ruling class.

    Where were the “professional” class when their working class brethren were being let go. Well namely, for one such professional, Robert Reich, he was telling us that we had to become a nation of “symbolic analysis”. That the U.S. was economy was “transforming” and we had to prepare for it. You can refer to his PBS special from the early 1990′s. Today he is singing a different tune.

    Wall Street is not a separate creature apart from Capitalism as you seem to think. “Financialization” has long been a feature of Capitalism (Marx’s “fictitious capital”) and is not some kind of recent development. I refer you to Marxist economists Richard Wolff and to David Harvey both of whom makes it clear that this is not new. Especially Harvey, he mentions that during the 1930′s it was discuss on the floor of the Congress how they could saddle workers with debt via home “ownership”. The plan was to put workers in debt in order to prevent them from going on strikes. Debt is used to ATOMIZED the work force and to discipline them via the courts. This is the main reason Max, as you well know since you tried to use it as an ad hominem against me, why I am against “child support”. Because PARENTAL PECUNIARY provides a PRETEXT for the CAPITALIST state to ATOMIZE workers.

    However, unlike you, I do not see capitalism as an evil. Therefore my list of either/or statements was offered (not complete mind you) to elaborate on the nuance that is life. I would also add that I do not see socialism as an evil.

    As T42 makes clear, perhaps because you are selfishly benefiting from the Capitalism system it’s obvious that you don’t’ see it as evil. I’d suggest you take a drive through some of the more depressed areas of the country and you’ll see and hear a different tune. Or chat with some former “middle class” adherents. Apparently they are now experiencing what the poor has for years. The profits system has no use for any of them.

    I’m glad you don’t see Socialism as evil Max, but what you are doing is really trying to equate Socialism to Capitalism using a “middle ground” fallacy. That’s what Liberalism is Max and we are now seeing is the failure of Liberalism. That’s what’s going on today and why the author weakens his article by referencing today’s most Liberal economist, Paul Krugman (who was actually a neoliberal) and Joesph Stiglitz (a former Clintonite). These two have no power and are too elitist to organize the masses. Therefore they only offer the same stale Liberal (Capitalist) bromides.

    For someone who claimed here on DV to have helped out with the Black Panther’s breakfast program you certainly didn’t learn anything from them. You must of did that just for either “street cred” or to quell some guilt.

    Sorry Max but you really should re-examine your views.

  18. Don Hawkins said on August 24th, 2010 at 2:49am #

    Got up this morning took a look around and world markets seem to be having a few minor problems hate is on the rise the Democrats are probably on there way out and the Republicans will come riding in to save the day our forests are still burning so called leaders are on vacation in the age of nut’s where the mad are sane.

    A human being is a part of the whole, called by us “Universe,” a part limited in time and space. He experiences himself, his thoughts and feelings as something separate from the rest—a kind of optical delusion of his consciousness. The striving to free oneself from this delusion is the one issue of true religion. Not to nourish it but to try to overcome it is the way to reach the attainable measure of piece of mind. Einstein

    Aha he experiences himself, his thoughts and feelings as something separate from the rest and in the age of nut’s where the mad are sane 8/24/2010 new levels of separate from the rest have been reached. How’s Rod Blagojevich these day’s a new reality show on the way. Hay Glenn Beck will be in DC 829 this weekend but no signs darn no signs he’s banned signs. Here’s a sign from not far far away just far away.

    Those who are skeptical about carbon dioxide greenhouse warning might profitably note the massive greenhouse effect on Venus. No one proposes that Venus’s greenhouse effect derives from imprudent Venusians who burned too much coal, drove fuel-inefficient autos, and cut down their forests. My point is different. The climatological history of our planetary neighbor, an otherwise Earthlike planet on which the surface became hot enough to melt tin or lead, is worth considering — especially by those who say that the increasing greenhouse effect on Earth will be self-correcting, that we don’t really have to worry about it, or (you can see this in the publications of some groups that call themselves conservative) that the greenhouse effect is a “hoax”. Sagan

    Some groups that call themselves conservative will save the day the week the year life on Earth and so it goes in the age of nut’s where the mad are sane was it always’ this way well no wonder in the past was here with us what did happen to wonder did it go somewhere? Sometimes I wonder about Rod Blagojevich and a few more but the few more seem to always’ be on vacation as we all go down the drain in not such slow motion. I wonder……………………………….

  19. Don Hawkins said on August 24th, 2010 at 3:01am #

    Oh Carl Sagan passed away in December of 1996 and I did the math about 14 years ago. I wonder today maybe the back nine orange chicken for lunch buy just one share of stock and have fun doing it as the Earth burns slowly ever so slowly inch by inch step by step.