The Mess Obama Created for Himself

I was -- and still am -- a big fan of Barak Obama. But I've been against his handling of the Wall Street banks from the beginning. Initially it just looked like trouble trying to get his footing, but the longer this lingers, the more obvious it is that the same insiders are dictating policy to Obama as they did to Bush. Here's a bit by Frank Pasquale at the Balkinization website:

The outrage over the AIG bonuses is rooted in legitimate worry about a hapless, drifting state. The rage may eventually be quelled by sober economic analysis of the "real value" of executives and traders. But Americans now have a sick feeling that even after the repudiation of the most fatcat-friendly regime in our history, "Change We Can Believe In" has turned into continuity we can't stand. Consider Senator Ron Wyden's comment on the Dodd-Geithner contretemps:

"I pulled out all the stops," Wyden [said], "to convince the president's economic team that [an anti-bonus amendment] was vital to the White House for two reasons: 1) the president had spoken out against bonuses; 2) fury about bonuses would kneecap confidence in the president's entire economic policy."

But no one inside the president's economic team was in favor of it. As Wyden put it: "If the White House economic team had made it clear that this was important, this provision would never have been removed. I don't believe the president has been well-served on the bonus issue by his economic team."

A couple months ago, I thought that President Obama's strategic decision to defer to "safe hands" like Geithner and Summers on macroeconomic matters was wise. I even held out hope that the government would use some of its leverage over the banks to induce them to invest in our future--projects such as green energy, universal broadband, and health information technology that will be perennially neglected by investors obsessed with quarterly earnings.

But these hopes are fading as a neo-feudal reality begins to emerge. Whatever their failures, however reviled they are by the public, the potentates at our leading banks appear to believe themselves entitled by divine right to determine what projects get credit and which are denied. Rather than assert the people's prerogative to demand investment that builds a better future for us all, our putatively progressive Treasury Department contorts itself to resist the "nationalization" label--even as conservatarians like Lindsey Graham and Alan Greenspan consider it. Like the Rubin-ites who rolled over Robert Reich and Brooksley Born in the Clinton administration to prevent derivatives regulation, these "centrist" Democrats are pushing the Obama administration into a hollow establishment "consensus" that commands the respect of few outside the Beltway Bubble, Greenwich, and the Upper East Side. For these worthies, we are impertinent even to ask about the long-secret destinations of the AIG money.

We live in "a world in which, according to 2006 statistics, one percent of the world’s adults own forty percent of all global assets[,] [t]he richest ten percent own eighty-five percent, while the poorest half own less than one percent." We should not be surprised when those in that glittering top percentile pull out all the stops to preserve and intensify those inequalities. But we are still inevitably disappointed by an administration that promised so much, and appears more at drift than mastering the financialization that has brought the nation to the brink of ruin. That's the kernel of truth and sorrow at the core of public outrage over AIG.