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Synopsis of Moyers Journal Regarding Current Bailout and State of the Country and Obama's Election

Follow Me on Twitter     Message John Lorenz

President Obama confronts one of his first big challenges — the bankers and the bailout.  Usually it's the bandits robbing the banks. But now it's getting hard to tell the bankers from the bandits. Where have they stashed the loot — that 350 billion dollars of our money that the Bush Administration lavished on them to jump-start our failing economy?

 There was a story in last Sunday's "New York Times", largely overlooked in all the pre-inaugural hoopla, in which reporter Mike Mcintire reviewed investor presentations and conference calls to see how bankers talk when they think the rest of us aren't listening.  To show what they are thinking, here is what Boston Private Wealth Management, a healthy bank said, when it was handed $154 million:  "With that capital in hand [...] we'll be in a position to take advantage of opportunities that present themselves once this recession is sorted out."  Once this recession is sorted out? Those funds are supposed to generate loans for people and small businesses in trouble — not to help banks ride out the recession on a cushion of cash.  Then there's the statement of  the chairman of Whitney National Bank in New Orleans. They've received 300 million dollars in bailout money:  "Make more loans? .....We're not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans."  

None of this is being made up: Flushing Financial crowed that it was going to use the bailout bucks to raise the ante and buy new companies: 

"We can get $70 million in capital," is what  their CEO said. "So, I would say the price of poker, so to speak, has gone up." And, so to speak, he's playing with our taxpayer financed chips!  

Twice this week, the House cast symbolic votes urging the new administration to clamp down on how financial institutions spend their bailout money.

Obama's choice for treasury secretary, Timothy Geithner, faced some tough questioning on Capitol Hill. TIMOTHY GEITHNER: [...] our system created a very complicated set of accountability and responsibility among the myriad of supervisors and regulators responsible for overseeing bank holding companies. And part of the failure in the checks and balances was-  

SEN. RON WYDEN cut him short and asked,
"Should YOUR supervision have been more effective? "
 

TIMOTHY GEITHNER admits it: "Absolutely."  

So as our new president faces off against the Wall Street mindset, we may soon find out if his velvet gloves cover hands of steel, or not.

We'll talk about Obama's agenda and the strength of his resolve with my next two guests.  Historian Thomas Frank wrote the best-seller "What's the Matter with Kansas?" and more recently, "The Wrecking Crew." He is the "Wall Street Journal's" newest weekly columnist.  David Sirota spent years in electoral politics before turning to political journalism. His weekly syndicated column appears in newspapers across the country and he's written two best selling books, "Hostile Takeover" and "The Uprising".  B

ILL MOYERS: Welcome to both of you.  DAVID SIROTA: Thanks.  

What's at stake for the president in this bailout and banks issue?

This is the biggest issue of them all. He's got to do this right, this is the heart of the recession. The banks are what caused it all. It's a huge opportunity if Obama chooses to essentially remake the economy or adjust the economy and make sure this sort of thing doesn't happen again. 

The entire way that wealth has been distributed, prosperity has been experienced in this country for the last 20 years, needs to be done differently, done right this time.  For the last almost thirty years, since the 1980s, the financial sector has called the shots. It not only is larger than manufacturing, it tells manufacturing what to do and every other sector of the economy.  

 

 

Now look what has happened. Wall Street has driven us off a cliff,  It's time they had a day of reckoning. And to think that they're just going to get bailed out with no strings attached, and that they don't have to change the way they behave after doing this to us as a country, that's inconceivable.

The American government is now probably close to being the majority shareholder — you and me, the public-are close to being majority shareholders of a lot of banks in this country. And yet we will not have the power to vote. We can't vote the shares. We can't appoint directors. These are the conditions of the TARP, of the Troubled Assets Relief Program, right? That's a terrible blunder.  If we're going to throw all that money to these people, we need to be able to tell them, look, you  have to let us have directives. We have to be able to have a voice in the operation of this business. 

At this very moment,  the Irish government is nationalizing the third largest bank in that country. And governments all over the world, including Britain have nationalization on the table.

Obama could at least put nationalization on the table. The question is, are we going to simply throw money at the current banks the way they exist now, in their failed form? We need to do  nationalization, like the Europeans so this bad business model doesn't just continue with taxpayer money thrown in.   

We've already partly nationalized them with taxpayer money. But they're only partly nationalized.We've gotten all of the bad stuff and none of the good stuff of nationalization. Nationalization in other countries means that the government has control over the banks — nominates directors, has oversight--with that money that they put into the bank.  

 

 

 

 Their governments regulate them. But what we have done is simply handed the money over with no mandate to actually change the behavior, change the structure of the banks, change the management of the banks.   

 

 

 

If we're going to throw this much money — remember, $350 billion is half the bailout. That's $1,100 for every man, woman, and child in the country. If we're going to put that kind of money into the banking system, we should get much more leverage. And one other thing is really important,

Notice that in the entire debate over the bailout, nobody has really tried to make the point or ask the question: is spending $700 billion, a trillion dollars, given to the banks--is that the best way to improve our economy?  

No one has decided if this is a better way to lift the economy than, perhaps, passing a universal healthcare program, doing a jobs program, a New Deal-style jobs program. That part of the debate is simply off the table. We're expected to simply assume that the ways to lift the economy is to give this money to the banks.  

Some people are talking about treating the banks — not nationalizing them but treating them as utilities, like we do the electric company- In a lot of ways we think about banks mentally in that way.  That's certainly how we thought about,  the savings and loans and it's how we think about a lot of these enterprises. And yet they're not utilities  at all. And that's not what their function has actually been in reality. Instead the situation has come about that the banks'  function has been to DRIVE  the economy, you know, call the shots all across the whole system.  

You're talking about the segment of the economy that's already  been so fantastically prosperous:  by that I mean investment banks were drawing all the best and the brightest into that field. So then, to change banks into a sort of utility instead of societal drivers--- you're talking about an earthquake-like change in policy if banks are to have their inordinate influence curtailed.

 The question is, is there any toughness in Obama as he approaches this issue?  Unfortunately, the actions that he has taken have been ones that are much more towards the status quo. I mean, he was the guy whose first exercise of presidential power was---right before he came into office--he threatened to veto any bill that Congress passed rejecting or limiting more bailout funds from going to Wall Street.  

 

 

He has put in place into his administration people who have been either involved in the current bailout — Tim Geithner — or people who have really advocated for lots of the same free market fundamentalism that this bailout really epitomizes.

So one would like to hope. That's Obama's big word, "hope."

The question is: Are we going to get change? We don't know. Obama should act like he won. Is he doing that? 

It's a funny thing because he — and I really like Obama when I say this--- I don't understand why a man that just won a sweeping victory over the other party — Obama won a landslide in the electoral college over the other party,which is crawling off with its tail between its legs, horribly discredited, everything Republicans believe in ruins.  

And Obama goes to that party and says, you know — I want a majority of the Republican votes in the Senate for my stimulus package as well as, of course, the Democrats.

I ask the question WHY? You just gave them a whipping that they're not going to forget in a long time, you know? Hey Barack YOU are in charge.

Why go to them and cow down to them? Let them come to you.

I think is going to happen  because Obama will  discover very quickly what Bill Clinton discovered --that the conservatives are implacable. They are not going to come around, that they won't have his best interests at heart. And they don't even have the nation's best interests at heart. I'm sorry but I've seen their behavior and it is very partisan. 

 The issue is how much is Obama willing to sacrifice for political aesthetics? How much is he willing to water down an economic stimulus package with discredited Bush-style tax cuts in order to get 30 or 40 Republican votes?  

 

 

I'm very convinced, if you look at polls on the issues   that a lot of the public believes the government should spend to create jobs. So if

Obama pushes a robust, progressive, Democratic package, he, with his bully pulpit, could peel off the necessary five, six, seven Republican votes in the Senate.

 But, again, the question is how much is he willing to water that down to get the 20 or 30 die hard right wing votes?  So far, he seems to want an 80-vote margin, including majority Republican support, rather than to go for a 60-vote victory with only a few Republicans.

The question is, is that part of a long-term strategy? Or does it reflect a man who really is geared to the consensus?  Obama is coming into office at a moment of crisis. What presidents traditionally do at moments like this is they reach for the bipartisanship. We're all in this together, government of national unity.

 Lyndon Johnson;s mantra was right out of the Book of Isaiah, "Come now and let us reason together." But he had to pass the Great Society Legislation by playing hardball in the end. So, every time I hear Obama call McCain or go to see the Republicans or meet with them, I think of Lyndon Johnson reaching across the aisle trying to create this consensus.  And that's okay IF the policy sacrifice isn't too  great.  

So what is Barack Obama giving up at this moment? It's too early to really know, but  we know for instance, his first draft of the economic stimulus package included $400 billion or 40 percent worth of tax cuts, including a couple of corporate tax cuts that would have rewarded the banks — retroactively allowing them to write down some of their losses. That was rejected. He brought it up to Capitol Hill and the Democrats in the Senate said, no, this is not acceptable.  

The point is, is that he brought that up in order to try to get that 80 votes. And so I'm all for reaching out to the other side, but do we have to water down the policy just for the greater number of Republican votes? That's what we don't know about Obama yet.  

 

 

Democrats have massive majorities these days not because they waffle hither and yon but because their historic principles have been vindicated by events. This is their moment.

So what does the Democratic Party have to do to seize the moment? Or has the moment seized them? In some ways, events are in the saddle right now. And everything that we've seen has been the neocon way of looking at economics, which has produced a society crumbling before our eyes just in the last few months. And I suspect it will continue to crumble.  

One thing that might happen ---- I think what's going to happen with Obama is that events are going to continue to push him. He's going to continue to go in the progressive direction because people want changes made and I'm optimistic. In spite of the right wing noise machine, 

it's all about hope and change.  One of the things that Congress could do to sort of help this process along is do what in the campaign, McCain said: i.e.,  we need to have hearings on what's gone wrong on Wall Street.  Of course with McCain that was obviously an effort to say, "Oh, let's not talk about this now." Well, we do need hearings to find out what went wrong on Wall Street, just like in the 1930s where they had hearings that went on for years. 

 Ferdinand Pecora was not exactly the prosecutor. But he was the attorney that they brought in the Senate to conduct the hearings. And it was — they were very high profile and they brought in all the  great captains of Wall Street, put them on the stand, and revealed to the world the sort of incredible and really evil things that these people had been up to.  It was the first time that the public at large learned what the CEOs and the tycoons on Wall Street had been doing. And it actually led to significant reform, SEC and other things like that, because this fella was a determined. Roosevelt wasn't sure he wanted the Pecora Commission. The president didn't want to cause trouble,but Pecora and the Senate persisted. And they came up with this extraordinary revelation about what had happened on Wall Street. And just like then, today we should have a high profile Senate investigation of these Wall Street guys.   

That's the value of having a vibrant legislative branch. We have now gone through eight years of a legislative branch that has been a rubber stamp to the president. And it was particulary disturbing was that even in the last two  years when the Democrats nominally controlled the Congress the Republicans got their way by a combination of Senate roadblocking and Bush vetoes.  

But just because we have a Democratic progressive president doesn't mean that we don't need a legislative branch. A vibrant legislative branch is important because it can hold the kinds of hearings that need to be held. It can push Obama into a more robust agenda that perhaps as president, as a new president, he may not yet want to go.  In a broad kind of way, people want him to be more embracing, which he is, of the role of government in addressing issues like economic inequality as well as income stagnation.

  An important question is, is Barack Obama a fighter?  This is a guy who's obviously very intelligent but is a guy who very much understands the rules of the establishment, the rules of the status quo and is always looking to maximize, to make change within those rules.  

What I worry about with Obama is that here is a guy that has the power, really, to change those rules not just because he's president but because he's an inspiring figure. And we need a president to change those rules, to change those paradigms.  

Maybe he does, maybe he doesn't understand that he has the power, Harvard, Chicago is where they teach you the orthodoxy. Harvard Law School. I'm afraid these upholders of orthodoxy, have the idea that, no, we can't have an industrial policy in America. The market has to decide. We can't pick winners. Blah, blah, blah, blah, blah. 

 Obama now has the power to throw all that overboard. History is demanding that he throw it overboard. The orthodoxy is discredited like at no time since, you know, the 1930s. It is in his power to do that. I hope he'll rise to the challenge.  But some say that by nature, isn't he a centrist?

  The issue is, what is a centrist? The definition of a centrist in D.C. is different than the definition of a centrist in the country. Centrism in D.C. means anything that passes the Senate by 99 to nothing, right? And as we know, usually things that pass the Senate 99 to nothing are to rename a post office or pass a corporate tax cut.  Out in the country, the center, the polls will show the center is get out of Iraq, pass a universal healthcare system, have the government invest a lot more in job creation and infrastructure rebuilding.

What we don't know yet is whether Obama is going to represent that center, outside the Beltway, or if he is insistent on playing by the rules of Washington, the Washington center that says what we should do with the economy is simply give money to the banks.  

So, what's the first thing he should do? I'd like to see him pass a much bigger, much more robust economic stimulus package that was focused almost exclusively on spending, on the kinds of public spending, expanding healthcare, infrastructure spending, and back off the idea of corporate tax cuts. 

 It has to be judgment day for Wall Street. We need really strong oversight. Regulation is back. And we don't need to be bringing in these people that have been part of the problem. Bring in tough regulators. And they're out there. We have lots of them. They know what they're doing. Bring them in. Turn them loose on Wall Street.  

"The Economist" magazine has said that  "economic crisis" may increase the appeal of the Chinese model of authoritarian capitalism — right here — and the "Economist" is no socialist rag. Is the rise of of American czarism a real threat?  

Yes, in a democracy, it is. It's the rise of our desire to have dictators with extralegal power that the Congress or the president appoints to force things through. It really — it's a way to subvert democracy in the name of progress.  But won't people say "this is the way to get the trains working on time?" Isn't that what people mean by it?  Well, yes, that is what they mean. But what it does is it puts democracy in competition with progress:  You're basically saying we don't think the regular democratic process of hearings and oversight is enough to make progress, to pass legislation. So we're going to empower essentially a dictator.  As a prime example of this, is Hank Paulson. He's a disasterHe was making the policy just as he saw fit. But people will say "he was secretary of the treasury. He was invested with that authority, right?"

The answer it NO, not ordinarily. But when he was appointed as the czar. Congress delegated its power of the purse to Paulson. And now what do we have? We have a bailout that we know hasn't lifted the economy. We've got an oversight panel, an independent oversight panel saying we don't even know where the money is going. And that's because there has been no public input. The democracy, the oversight, the input was completely offloaded for the czar.  Not only that but he seemed to make policy just by whim. Like, one day it's, you know, we're going to go and buy the troubled assets. The next day, no, no, no, we're going to bail out the auto companies.   We're going to have a stimulus package. We're not going to have a stimulus package. And it was all up to him. 

And by the way in empowering Paulson, let's not forget Paulson, before becoming treasury secretary, was a top executive at Goldman Sachs, which has received or is part of the industry that has received so much money.

So we've not only empowered a czar and subverted democracy, we've given that power to somebody who has direct connections to the very industry he's supposed to be regulating. 

Remember the bill that he — the original demand to Congress for the TARP funding? It was what? Three pages?  The whole thing was,like, there'll be no accountability, no oversight, no hearings, no looking into this ever? Unbelievable. And thank God, Congress did rebel. They threw that out.

Congress said, no, we want more oversight. The problem was, of course, is that the oversight measures that were written into the bill included all sorts of loopholes to the point where, I kid you not, the Treasury Department was caught on tape in a conference call with Wall Street analysts saying that the executive compensation limits that Congress was bragging about were written to be essentially unenforceable.

 So the czar gets his way but, Congress? Bush and Paulson wanted no discussion.  Blow off any inquiry. It's amazing.And supposedly that's what the czars are for, to make it work better, right?

No, not really. I don't buy into the idea that in order to make government work you've got to essentially create a dictator or a czar or an authoritarian. I think "The Economist" is right. The impetus at this moment is to move towards authoritarian capitalism. But in order for us to be a strong country, we have to resist that. We are a strong country because we're a democracy.

One of the reasons that I was so pleased to vote for Obama in the primaries was that I thought that it would bring a new crowd to Washington, that it would be the end of this sort of centrist nonsense.   

We don't need a return of the Clinton Administration. That's what people want now. And for now, his cabinet picks seem to indicate that he's offering offering that because he has  brought in a lot of the old Clinton hands — I'm not sure I agree, but at the same time, I still have a great deal of faith in the man.

I've never seen a politician any more intelligent, any more rhetorically gifted. He's brilliant.  The other positive about Obama has not much to do with Obama. The upsurge in people's engagement in politics, the hope that he's given people, the desire for change that he has harnessed offers a potential to actually make change, whether he wants it or not. In other words, he may have created something that he, in many ways, wasn't prepared for.  

I think Obama has unleashed, through his oratory, through his candidacy, this force that could be used for very good and could push him in a more bold direction than even he may want to go. It's like in the Roosevelt Administration. Roosevelt didn't come out for Social Security and, you know, give us all the great things that he did out of the goodness of his heart.  He did it because there was a movement behind him that was constantly pushing him for these things.

 And that's what has to go on with Obama. The movement has to continue. It can't just be one guy. The movement didn't just exist to elevate this one man to the Oval Office. It has to keep pushing him.  I would use the term "tough love" to describe it, that's the stance that we have to take. But we have to keep pushing. Events are in the saddle. It's going to have to happen. It has to happen. If it doesn't, we are going to just go back and repeat the mistakes of the last 20 years all over again. And that would be  catastrophic. Can't happen that way. 

 BILL MOYERS: Tom Frank and David Sirota, thank you for being with me on the Journal.

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I live in the Pacific Northwest and I am interested in current affairs.
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