[Marxism] Matt Taibbi: "this officially ends the Obama honeymoon"

[Louis Proyect <lnp3@xxxxxxxxx>]

Obama's Top Economic Adviser Is Greedy and Highly Compromised
By Matt Taibbi, True/Slant
Posted on April 10, 2009, Printed on April 10, 2009
http://www.alternet.org/story/136008/

     "But Summers, a leading architect of the administration's economic 
policies and response to the global recession, appears to have collected 
the most income. Financial institutions including JP Morgan, Citigroup, 
Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for 
speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 
Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman 
Sachs, according to his disclosure form." -- Washingtonpost.com

So I guess that $45,000 speaking fee from Merrill Lynch wasn't 
technically a bribe because Summers wasn't named to Obama's economic 
transition team until Nov. 24 — a full 12 days later. I'm sure Larry 
Summers had absolutely no inkling whatsoever that he was going to be one 
of the key advisers to the new administration on Nov. 12.

It likewise makes perfect sense that Merrill Lynch, a company just 
months removed from having to be rescued from bankruptcy by an 
11th-hour, pseudo-state-subsidized buyout by Bank of America, would 
decide to spend $45,000 on a speaking appearance by Summers because, 
well, they really valued his economic expertise and his proven ability 
to rally the troops with his stirring rhetoric.

It certainly had nothing to do with the fact that a) it was eight days 
after a Democrat was elected to the presidency; b) Summers had a long 
history of being one of the key policymakers in Democratic Party 
politics; and c) Merrill was absolutely not going to survive more than a 
few more months unless taxpayers forked over another 20 billion or so to 
cover the giant hole in Merrill's balance sheet that was, at that time, 
still being hidden from Bank of America and its shareholders.

And how about that $135,000 appearance for Goldman Sachs in April, when 
Summers was already involved with Democratic Party politics again? That 
wasn't a surreptitious campaign contribution at all!

But you have to give Goldman credit: it sure is thorough. It literally 
leaves no stone unturned.

One has to love the sequence of events here. Back in 2004, Goldman chief 
Hank Paulson goes to SEC chief William Donaldson and petitions to have 
lending restrictions relaxed for the top five investment banks. 
Donaldson rolls over, the restrictions are relaxed, and it's a disaster, 
as the top five banks immediately overleverage themselves — two of the 
five, Bear Stearns and Lehman, would actually collapse, at least 
partially as a result of being insanely overleveraged.

In the midst of this disaster, Paulson is named Treasury secretary. He 
does nothing about the worsening financial crisis until it is far too 
late, then allows one of Goldman's biggest competitors, Lehman, to fail 
while at the same time intervening on a huge scale to save AIG, which 
just happens to owe Goldman a ton of money.

When AIG is bailed out, its government regulator is not in the room, but 
the new chief of Goldman, Lloyd Blankfein, is. In fact, Goldman Sachs 
ultimately receives about $13 billion of the money paid to AIG by the 
government in the bailout, reportedly getting paid 100 cents on the 
dollar for its AIG exposure, despite the fact that the bank claimed it 
wasn't going to suffer severe losses if AIG collapsed.

Later, another former Goldman executive, Ed Liddy, is installed as head 
of AIG -- which just happens to get bailed out twice more, the last time 
to the tune of $30 billion.

The last two bailouts of AIG take place after a former Goldman chief, 
Robert Rubin (who, incidentally, helped start this mess by ramming 
through a series of i-banker wet-dream deregulatory moves as Treasury 
secretary for Clinton in the 1990s), is named to the Obama transition 
team, joining Summers (who had already taken $135,000 from Goldman that 
year) and Timothy Geithner (a protege of another Goldman alum, John 
Thain, former president and chief operating officer and notorious scumbag).

When it comes time for new Treasury Secretary Geithner to name a chief 
of staff, he chooses Mark Patterson, who is less than a year removed 
from working as a lobbyist for … Goldman Sachs. Patterson's great 
contribution to society as a Goldman lobbyist was opposing a 2007 
measure introduced in the Senate by presidential candidate Barack Obama 
to rein in executive compensation.

I remember watching Obama the presidential candidate give a speech in 
Mason City, Iowa, in 2007. Obama had made a big show of not having 
registered lobbyists working for his campaign, and he promised that 
lobbyists "won't work in my White House." The line was a hit and became 
part of Obama's stump speech. I must have heard it two dozen times.

A little over a year later, he put a registered lobbyist of a bailed-out 
investment bank into a job whose primary responsibility is administering 
bailout money.

It gets worse. According to a Glenn Greenwald piece I just read, even 
Gary Gensler is a former Goldman employee. That absolutely blows my 
mind. Genlser is Obama's choice to head the Commodities Futures Trading 
Commission, whose purview is the derivatives market. The CFTC was the 
battleground where ages ago Rubin, Summers, and then-Rubin aide Gensler 
teamed up to whack CFTC chief Brooksley Born, who had serious concerns 
about the burgeoning derivatives market, in particular the 
credit-default swap market. Rubin overturned Born's recommendations, and 
derivatives were freed from most regulation. That economic Alamo led 
almost directly to the AIG disaster.

Think about this for a moment. A former Goldman chief, Rubin, presses 
the CFTC to deregulate a type of derivative contract whose chief benefit 
to an investment bank like Goldman is that it allows it to lend more -- 
the CDS being most useful as a tool to move investment risk off a bank's 
balance sheet.

Then another Goldman chief, Paulson, pushes for further relaxation of 
lending limits. Then Goldman jumps head first into the housing bubble, 
buying tens of billions in CDS protection to hedge its crazy 
investments. This massive explosion in lending by banks like Goldman, 
fueled in part by the use of derivatives like CDS and fueled still more 
by the 2004 change in rules, puts an enormous strain on the economy, 
leading to giant holes blown in its hull by the end of 2007 and on 
through 2008.

It follows that when Goldman's chief partner in those CDS deals, AIG, 
collapses as part of this wave of crashes, Paulson — now Treasury 
secretary — rushes to the rescue, pumping billions in taxpayer money 
into AIG that is quickly funneled to Goldman. Then a Goldman alum is put 
in charge of AIG, while another bunch of Goldman alums funnels still 
more bailout money to AIG, and yet another Goldman alum is put in charge 
of regulating the derivatives market that is the focus of most of the 
bailout efforts.

In the midst of all of this, something amazing happens. Goldman Sachs, 
along with Bank of America, Morgan Stanley and a host of other 
"troubled" banks, reports a profit for its first quarter in 2009! How 
and why that happened is another fascinating story, for another time. 
For now, the only thing to remember is that all the ones who got us into 
this mess — Rubin, Summers, Goldman in general — are now being put in 
charge of the cleanup by a president who spent most of 18 months on the 
campaign trail pledging to end the influence of money in politics.

Add this to the obscene giveaway that is the toxic assets program 
Geithner has just devised (Goldman Sachs "expressed interest in 
participating in the plan as an investor," according to the Wall Street 
Journal), and you have an amazing situation. Between the Bush and Obama 
administrations, you have a bailout program that has now figured three 
ways to funnel money to Goldman Sachs: via AIG, via TARP and now via 
this trillion-dollar "public-private investment program," which 
basically lends huge amounts of money to investors and provides 
guarantees against heavy losses. It's free money, state-subsidized 
profiteering at its most naked.

I hear all the time from people who complain that it's naive to wonder 
why we put Wall Street executives in charge of policing Wall Street -- 
that this is actually quite a sensible policy, because we need people 
with experience in that world making these decisions.

The reason people say this has nothing to do with reality and everything 
to do with the fact that the financial markets are intimidatingly 
complex. When Enron buys a seat at the table to conduct energy policy 
under the Bush administration, everyone knows what that is. When Reagan 
hires notorious union busters to run the National Labor Relations Board, 
everyone knows what that is. And when we hire investment bankers to run 
banking policy, and put investment bankers in charge of handing out 
bailout money to investment banks, we ought to know what that is. But 
for some reason we don't seem to see it the same way, not as clearly.

In my mind this officially ends the Obama honeymoon. I can maybe see one 
or two of these creeps in key positions. But this many -- it's an 
undeniable pattern. He put William Lynn, a former Raytheon lobbyist, in 
the Pentagon as deputy defense secretary. A lot of people squawked about 
Obama's early lean toward John Brennan as CIA director because of his 
role in establishing the "enhanced interrogation" policies, but to me 
more significant was the fact that Brennan was the former chairman of 
the Intelligence and National Security Alliance, which is sort of like 
the chamber of commerce of intelligence contractors.

Most importantly, I'm sensing in these economic appointments a kind of 
drearily cynical parsing of the approval-ratings situation -- Obama 
knows he's still flying high with the "Yes We Can!" T-shirt crowd and 
knows that most people simply are not going to give a shit if he packs 
his Treasury Department with Goldman alums and lobbyists, despite the 
fact that he explicitly promised to do otherwise.

Matt Taibbi is a writer for Rolling Stone.
© 2009 True/Slant All rights reserved.

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