The following is an excellent excerpt from the book “WITH LIBERTY AND JUSTICE FOR SOME: How the Law Is Used to Destroy Equality and Protect the Powerful” by Glenn Greenwald from Chapter 3 on page 109 and I quote: “This unwillingness is easily explained. Our government institutions are so dominated by financial elites that the very idea that the former would hold the latter accountable under the law is ludicrous. Indeed, it is impossible—as impossible, as say, an employee firing his boss, a tenant evicting a building owner, or inmates punishing the warden. America’s financial elites have not only stockpiled vast amounts of material wealth but also acquired control over all the government and legal institutions that might stand in the way of their corruption and stealing.
To say such things about America, particularly in such stark terms, was once deemed radical and unserious; it was self-marginalizing. But no longer. The ability of financial elites to avoid any legal consequences even for the most egregious acts of wrongdoing is now so self-evident that it has been acknowledged even in the most establishment-sympathetic venues.
In April 2009, the second-highest-ranking Democrat in the United States Senate, Dick Durbin of Illinois, blurted out on a local Chicago radio station: “The banks—hard to believe in a time when we’re facing a banking crisis that many of the banks created—are still the most powerful lobby on Capitol Hill. And they frankly own the place.” Paul Blumenthal of the transparency group Sunlight Foundation emphasized the eye-popping dollar amounts behind Durbin’s comment. “You would think that this might be an exaggeration, or just a rhetorical bit of anti-bank populism, but if you look at the numbers, Durbin isn’t wrong. . . . Since 1997, the financial sector has spent a combined total of $3.6 billion on lobbying the federal government. The total lobbying expenses have increased by 260% since 1997. Over that same time financial sector corporate profits have gone through the roof, with the financial sector reporting up to 40% of corporate profits in recent years.”
Blumenthal offered just a “sampling” of what that money has bought; “the deregulation of financial derivatives and credit default swaps, the elimination of the line between investment banks and commercial banks, the increased hardship for those filing for bankruptcy, and the total free hand for Fannie Mae and Freddie Mac to muddle their books and evade responsibility. And all of this has been fueled by the 3,000 or so finance sector lobbyists meeting with, calling up, and emailing congressional offices and executive branch agencies.”
It should have come as no surprise, then, that in April 2009—a mere six months after Wall Street was in such desperate straits that it needed almost $1 trillion in bailout money—Goldman Sachs reported a $1.8 billion profit for its first quarter. That summer, with serious understatement, the New York Times noted, “Goldman has turned the crisis to its advantage.” And in early 2010, as the unemployment rate hovered close to 10 percent, Goldman Sachs revealed that its earnings for 2009 had topped $13 billion.
Owners of Government – Of course, ownership of the government is not confined to Goldman or even to bankers generally; as we saw in the prior chapter, legislation in virtually every area is written by the lobbyists dispatched by the corporations that demand it, and its passage is then ensured by politicians whose pockets are stuffed with money from those same corporations. But Goldman’s dominance of political and legal institutions is particularly deep-rooted and thus offers a superb demonstration of how elites shield themselves from repercussions of their lawbreaking. Indeed, a straight line can be drawn between the government’s response to the financial crisis and the record profits Goldman enjoyed literally months later. Just consider the following sequence of events.
On September 25, 2008, ABC News reported that Goldman and its executives and employees had spent “more than 43 million dollars on lobbying and campaign contributions to cultivate friends and buy influence in Washington, D.C. since 1989.” Moreover, ABC News noted, “as a group, Goldman Sachs bankers have been the country’s top political campaign contributors this year and have given $29.5 million in contributions since 1989.” “They are almost in a class by themselves,” declared Sheila Krumholz, the executive director for the Center for Responsible Politics, which compiled the data.
The same week, the New York Times described one of the crucial secret meetings that shaped the federal government’s response to the financial crisis. Presiding over that gathering at the Federal Reserve Bank of New York was Bush treasury secretary—and former Goldman CEO—Hank Paulson. The primary topic of discussion was the imminent collapse of American International Group, the giant insurance corporation. AIG’s principal government regulator was absent from the meeting, but in attendance were a small number of Wall Street executives, including Lloyd Blankfein, Paulson’s successor as the CEO of Goldman Sachs. The AIG matter was of urgent concern to Blankfein because, as the Times put it, “a collapse of [AIG] threatened to leave a hole of as much as $20 billion in Goldman’s side.” The outcome of the meeting, of course, could not have been better for Goldman; “Days later, federal officials, who. . . initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.”
Ordinarily, when a severely distressed company such as AIG is being saved by an infusion of capital, the party providing that money has significant leverage to negotiate with the failing company’s creditors. The rescuing entity can easily force those creditors to accept deep discounts on the failing company’s debt as a condition of the rescue. The reason for this is obvious. The party saving the distressed company simply tells the creditors: if you refuse to settle for a partial repayment of the money you loaned, then we will not rescue the company, it will collapse, and you might collect nothing at all. The U.S. government, when bailing out AIG, was thus in the perfect position to force those companies to which AIG owed the most money—including Goldman—to agree to substantial discounts and thereby make the bailout significantly cheaper. That was particularly true since many of those same creditors (again including Goldman) were themselves vying to receive multibillion-dollar bailouts, providing added leverage for government negotiators.
But in the case of AIG and Goldman, none of that happened. Not only was the insurance firm bailed out by the federal government, but—with the U.S. Government essentially in control—it ended up paying off its debts at a rate of 100 percent; not a single penny of discount was negotiated. That meant that Goldman received the full amount due from AIG, in addition to the sums received directly from the government as part of its own bailout. That decision stood in rather stark contrast to the U.S. Government’s dealings with the United Auto Workers in February 2009. There, the government insisted that it would only bail out the auto industry if the union agreed to massive reductions in contractually stipulated benefits.
A month after the UAW negotiations, a major controversy erupted when it was revealed that AIG executives—including many who had presided over the very transactions that had led to that firm’s near demise, a demise averted only with a major infusion of taxpayer money—were to receive millions of dollars in bonuses. The Obama administration insisted that it was powerless to stop those bonuses. When asked by George Stephanopoulos of ABC News to defend that claim, Larry Summers, one of Obama’s top economic advisers, righteously invoked noble legal principles: “We are a country of law. There are contracts. The government cannot just abrogate contracts.”
Stephanopoulos notably failed to ask why that same government could force the working-class, nonculpable, politically powerless autoworkers to accept major reductions in their contractual benefits as a condition for a bailout but could not do the same for the highly culpable, extremely wealthy AIG executives. Apparently, the sanctity of contract rights shields the entitlements of financial elites but is no barrier to forcing ordinary Americans to give up their vested rights upon pain of losing their jobs.”
(IF YOU THINK THIS AUTHOR IS OFF BASE, BELIEVE ME HE DEFINITELY ISN’T CONSIDERING THE TERRIFIC GROWTH OF THE TOXIC DERIVATIVE MARKET AROUND THE WORLD QUOTED AS OVER $600 TRILLION AND GROWING. NOW, THE PEOPLE THAT ARE PUSHING THESE ARE PRIVATE EQUITY, ALONG WITH HEDGE FUNDS AND VENTURE CAPITALISTS, WHO NEED A SO-CALLED MONEY SUPPLY TO FINANCE THEIR SPECULATIVE RISKY VENTURES. PRIVATE EQUITY IS CONSTANTLY CRITICIZING GOVERNMENT BUT WHEN THEY GET IN TROUBLE, ALONG WITH THE HEDGE FUND DEALERS AND INVESTMENT BANKERS, THEY ARE DEFINITELY GOING TO MAKE SURE THEY GET TAXPAYER-FUNDED BAILOUT MONEY SO THEY CAN KEEP THEIR JOB AND NOT GO BANKRUPT LIKE LEHMAN BROTHERS. NOW THE AMOUNT OF MONEY THESE INVESTMENT BANKERS HAVE, ALONG WITH THEIR 3,000 LOBBYISTS, IF YOU THINK THEY ARE GOING TO GIVE THAT BONANZA UP WITHOUT A FIGHT, YOU’D HAVE TO BE JUST KIDDING YOURSELF. YOU CAN EASY UNDERSTAND WHEN PRESIDENT FRANKLIN ROOSEVELT PASSED THE GLASS-STEAGALL ACT ON THE INVESTMENT BANKERS, KNOWING THERE WAS GOING TO BE A TOUGH FIGHT AHEAD, HE KNEW WHAT HAD TO BE DONE AND HE DIDN’T COMPROMISE IN DOING SO. HE TOLD THE INVESTMENT BANKERS, “I WELCOME YOUR HATE AND THAT COMMERCIAL BANKS WILL BE SEPARATE FROM THE STOCK MARKET WHICH WILL NOT BE INSURED BY THE GOVERNMENT.” NOW I KNOW THESE 3,000 HARD-WORKING LOBBYISTS KILLED THAT SIMPLE RESTRICTION BUT THAT THEY DID. AND THAT’S WHEN THE BANKS GOT INTO TROUBLE AND HAD TO BE BAILED OUT BY PRESIDENT GEORGE W BUSH’S $700 BILLION TARP PROGRAM.
LaVern Isely, Overtaxed Independent Middle Class Taxpayer & Public Citizen & AARP Members