Banky-Panky

                                                                    Louisiana Governor Huey Long circa 1935

Boo-hoo-hoo! Let me shed a tear for the poor, misunderstood bankers. All those years they were raking it in and people were mesmerized: these guys are geniuses, they figured out the art of alchemy, they are truly great humanitarians for creating so much value!

It turns out they didn’t know shit. All their robbing of Peter to pay Paul came unraveled and, as usual, the emperor had no clothes. As one astute observer put it, when the tide goes out you find out who was swimming without a bathing suit.

So now the cupboard is bare, and everybody is cleaned out. All the money went up in a puff of smoke. Not really. It has to be in somebody’s bank accounts. But we’ll get to that further on down the road.

In the meantime, the bankers are screaming like stuck pigs because public opinion is insisting that banks that are receiving taxpayer bailouts must put a lid on the amount of compensation that can be looted by their corporate officers. They are insisting that if they can’t be allowed to continue steal, they will dig in their heels, refuse to cooperate and impede the flow of credit into the general economy. Presently at stake is whether banks should be forced to write down the hundreds of billions of dollars of worthless derivatives they hold for what they are worth (nothing) or whether the government should be forced to buy the derivatives at their face value and bail out bank equity holders. This is pure power politics, and the bankers are used to winning.

For years they have been fighting against what they term “entitlements” for ordinary people like medical and unemployment insurance as “fiscal irresponsibility”. Translated into plain English that meant they were afraid it would come out of their share of the pie. Or, more plainly, it would mean less for them to steal.

Wall Street has just as much, or more, of a sense of entitlements, only instead of food stamps it entails yachts, private jets and mansions. Try to separate the bankers from their entitlements, and they will literally go insane with rage.

Capitalism, as it’s practiced in the Anglo-Saxon world, implies an unsentimental approach to other people’s interests. It’s pure power politics taken to the Darwinian level of survival of the fittest. This approach, while it may be appropriate for flesh-eating Comoro dragons in the jungles of Borneo, is not suitable for sophisticated human social organisms. Therefore banks, like any other economic structures, must be submitted to the same regulatory constraints as mineral extraction or food production, as a component of social organization.

The banks are chafing against Treasury Secretary Tim Geithner’s proposal that they be compelled to set aside larger reserves against losses, because every dollar which must be added to reserves is a dollar out of their pockets. They are resisting regulation of swap deals which, as AIG demonstrated, swaps are just another term for wholesale stealing. Regulation of swaps, where reserves would have to be set aside against wagers, will effectively kill the whole derivatives industry.

Fine, if their approach is “my way or the highway”, let the banks go under! Let the Treasury Department set up a new public bank, run by ethical civil servants, to serve as a model for a new banking system that operates in the public interest.

Bankers are crying in fear and blaming the whole uproar on populist sentiment. And what is populism? It is public opinion that is not based upon manipulation by society’s elite. Populism is a boat that has been cut loose from its moorings and is now floating out of control. In past generations the system has found a way to safely ground populist opinion and tie it safely back to the dock.

Only now there is no dock. There is no establishment structure in place to contain public opinion. There is only instability.

Barack Obama cannot control it. Two or three more months down the line, his ceaseless interventions in the media will become irrelevant because he cannot count on the Democrats in congress to support him. As for the Republicans, they are meaningless.

Obama is revealing himself to be a continuation of Bush, who assumed power expecting to govern on the basis of continuity, and was swamped by events beyond his comprehension. When Obama promised “change” he was anticipating a period of relative stability where he would be able to tinker around the edges of the system.

Unfortunately, in both cases these politicians were inundated by a series of events that were beyond their comprehension.

A Russian intelligence analyst, Igor Panarin, is predicting the imminent break-up of the United States. He may not be too far off the mark. The country is in a pre-revolutionary situation similar to Weimar Germany or the Kerensky Social Democratic regime that ran Russia until the Russian revolution. Before Americans begin crowing about Mexico being brought to disintegration by a few narco-terrorists, it should look to its own backyard.

We can rule out a military takeover like that of General Franco in Spain, because the bulk of our military is extended halfway around the world in Iraq. But ultimately, new leadership is beginning to arise at the street level, like in France where young radical socialist Olivier Besançonot is gaining prominence that rivals that of president Nicolas Sarkozy.

Populist sentiment is notoriously unstable. It tends to gravitate to authoritarian right-wing solutions. A lot depends on the personal magnetism of the leadership. Americans, not being grounded in ideological theology, could go either way. During the Depression of the 1930’s populist sentiment tended to gravitate to Louisiana Governor Huey Long, who presented a left-wing economic agenda, Every Man a King, with a right-wing personal style. Until he was assassinated.

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Posted on 3/29/2009 ( Permanent Link )
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