The bankers will soon begin collecting their $700 billion ransom from taxpayers. And they can thank Barack Obama for helping them get away with it.
“Democratic presidential nominee Barack Obama spoke to many in the Congressional Black Caucus and helped persuade 13 to switch their votes,” the Associated Press reported, describing Obama’s efforts to salvage the Bush administration plan to use government funds to bail out Wall Street by buying up bad debts from banks and other firms. “Nine freshmen Democrats also switched to yes votes after a conference call with Obama in which he promised an economic stimulus bill would be a top priority if he is elected.”
In other words, Obama was personally responsible for swinging the votes needed to reverse the House of Representatives’ initial rejection of the bailout at the end of September.
Ultimately, dozens more House Democrats and Republicans also switched their votes after coming under enormous pressure from virtually every business lobbying group. But it was Obama who provided the political cover for Democrats to brave the backlash of voters who are furious about this gigantic transfer of wealth from the working class to the rich.
The passage of the bailout bill has once again laid bare the pathetic realities in the “world’s greatest democracy.” There was no question what the fate of the legislation would have been if there had been a referendum of the U.S. population. But the politicians in Washington were responding to the sentiment among those they really represent–in the boardrooms of Wall Street and Corporate America–not the ordinary people who put them in office.
On the campaign trail, Obama played to the anger over the bailout, even as he justified it as necessary.
“We are now in a very dangerous situation where financial institutions across this country are afraid to lend money,” he said at a campaign stop in Nevada. “If all that meant was the failure of a few big banks on Wall Street, that’d be one thing, but that’s not what it means. What it means is that if we do not act, it will be harder for you to get a mortgage for your home, or the loans you need to go to college, or a loan you need to buy a car to get to work.”
“There will be time to punish those who set this fire,” he added, “but now is the moment for us to come together and put the fire out.”
Certainly the 777-point drop in the stock market after the first House vote on September 29 also created political pressure for a “yes” on the bailout. It seemed to give credence to dire warnings by Treasury Secretary Henry Paulson, Federal Reserve Chair Ben Bernanke and George W. Bush (remember him?). The message: Give Paulson dictatorial authority to spend $700 billion virtually any way he wants, or, as Bush put it, “this sucker could go down.”
The problem with that argument is that the bailout may do little to stop “this sucker” from going down anyway. In fact, as this editorial was being written, world stock markets suffered through another day of huge losses on October 6, as a result of a banking crisis in Europe and skepticism among U.S. business that even a $700 bailout can solve the credit crunch that is slowing the economy to a crawl.
A more direct government intervention in the crisis–including nationalizing the banks–would have a much greater chance of alleviating the credit squeeze. And any bailout plan aimed at helping working people would have included a moratorium on home foreclosures and a program to allow homeowners to renegotiate their adjustable-rate mortgages based on today’s lower home values.
If Obama was sincerely campaigning on a promise of “change,” he would have used his clout to push for measures like these. Instead, he promoted the Senate version of the bailout bill, which, though packed with tax cuts for business to win Republican support, will do nothing to help homeowners and the great majority of workers. (The only progressive part of the bill was unrelated to housing–a measure to require health insurance companies to cover mental and physical health care equally.)
Politically, though, Obama knows he’ll come out a winner, no matter what. That’s because Republican presidential candidate John McCain’s inept attempts to intervene in the crisis only reminded people that corrupt and incompetent Republicans presided over this descent into the worst financial crisis since the Great Depression. However much McCain and running mate Sarah Palin try to posture as being independent of Bush, they’re inevitably catching blame for this debacle.
As a result, Obama can have his cake and eat it, too. He can slam McCain for declaring that the “fundamentals” of the economy are strong, even as he positions himself as the “responsible” candidate who will tend to the interests of capital.
However populist Obama may sound in the closing weeks of the campaign, Corporate America will be reassured by the economic advisers on his flank: billionaire investor Warren Buffet, the richest man in the U.S.; former Fed Chair Paul Volker, whose high-interest rate policies drove up unemployment in the early 1980s; and Robert Rubin, the Wall Street executive who, as Treasury Secretary under Bill Clinton, imposed the bankers’ priority of slashing government spending.
With advisers like these, you can be sure that when Obama’s promises to voters conflict with the business agenda, voters will get the shaft.
If you listen closely, you can hear Obama signal as much. “People have asked whether the size of this rescue plan, together with the weakening economy, means that the next president will have to scale back his agenda,” Obama said. “The answer is yes and no. With less money flowing into the treasury, some useful programs, and programs that I have proposed on the campaign trail, will have to be delayed. But there are some certain investments in our future that we cannot delay precisely because our economy is in turmoil.”
One “investment” that won’t be delayed is the further growth of the Pentagon budget, already bloated by wars in Iraq and Afghanistan and spending on outlandish new weapons systems. Richard Danzig, who was Navy secretary under Clinton and a possible defense secretary in an Obama administration, told the Wall Street Journal that he doesn’t “see defense spending declining in the first years of an Obama administration. There are a set of demands there that are very severe, very important to our national well-being.”
While the Pentagon can expect the money to keep flowing, Obama is promising hard-pressed workers a modest tax cut that won’t undo the impact of high food and fuel prices and declining real (after inflation) wages.
And Obama’s proposed $50 billion economic stimulus package is two-thirds smaller than the Bush stimulus program implemented earlier this year. Compared to the bailout of the bankers, that’s chump change.
The economy issue is almost certainly burying whatever hope McCain-Palin had of eking out a victory–always a long shot for them anyway on the heels of the most discredited Republican administration since Herbert Hoover in the 1930s.
But anyone who expects an Obama administration will seriously challenge Corporate America and its priorities ought to take a closer look.