When Obama said he wanted bi-partisanship, this is probably not what he had in mind: Democrats and Republicans in Congress speaking in a united voice against corporate executives that have been equally cosy with Democrats and Republicans.
As in: equally cosy with Senator John Warner, that bad Republican, and Chris Dodd, who presented himself as a mild progressive in the last Democratic presidential primary.
As in: equally cosy with the Fed and Treasury under Clinton and Bush. As in: pretty darn cosy with President Obama himself.
Forget the bonuses at AIG. Chump change. Let's put what Goldman Sachs has been up to in plain English. Goldman Sachs had made a lot of esoteric financial transactions with AIG. Banks were collapsing at the time, leaving their investors with huge losses. When things started looking shaky at AIG, Goldman and other investors started calling in their claims, and pushed AIG off the cliff.
Now ask yourself: with banks collapsing, why would you push the one you had put so much money in to collapse?
Answer: because you had your boys on the inside in Washington, that's why. And your boys got a bail-out package for AIG which actually paid you more than your claims that broke the bank. What investors had demanded from AIG was collateral on debts. But they actually got with the bailout was the whole damn amount, 100 cents on the dollar.
To put it even more bluntly: if AIG had managed to not collapse and not require $180 billion in taxpayer money, Goldman Sachs would be sitting today with some very very shaky investments. But since AIG collapsed, the folks at Goldman cleaned up.
Or even more bluntly: Goldman used AIG as a funnel.
That's a nice trick. It's like two guys rolling someone on the street when the first guy comes up on the right and throws a punch after which the guy on the left quietly lifts the mark's wallet. Of course you run the risk that the cops might see you. Then again, if you have the cops in your pocket...
OK, that is a simplification. It is not the whole story. But it is a big part of the story.
But but... wasn't there an election between the AIG bail-out and today? The world changed, didn't it?
Goldman Sachs employees gave just shy of a million dollars to the Obama campaign, ranking second in contributions. Citigroup and JPMorgan ranked sixth and seventh. Goldman Sachs gave Obama four times more than they gave McCain.
This is one big fat ugly chicken that is coming home to roost.
Our political attention span being what it is, we might need reminding that there was actually a big debate over this very thing last year. From my July 1 blog:
When Barack Obama pulled out of public campaign financing, I wrote a column about his money machine, noting that despite all the small Internet donors, his campaign is still mostly funded in the most traditional of ways. Numerous readers taking offense at my characterization of Obama's fundraising as dominated by "fat cats." In light of new details on Obama's fundraising which have become available, now would be a good time to revisit this issue.
I noted that that, by the end of June, Wall Street had already given Obama $9.5 million, that four out of his top five contributors are employees of financial industry giants, with Goldman Sachs at the top of the list. Even conservative New York Times columnist David Brooks was appalled: "Over the past few years, people from Goldman Sachs have assumed control over large parts of the federal government. Over the next few they might just take over the whole darn thing."
The reader response was overwhelmingly negative. The debate was over which was more significant: the half of Obama's money that came in small Internet contributions, or the half that came from big corporate money. I argued that:
adding a layer of small Internet donations (45% of Obama's money) on top of all the traditional campaign money (55% of Obama's money) does not change the game of politics and money. It just adds another layer to the same old cake. To really change the game, one would need to replace all that traditional money with small Internet donations.
Just think through the basics: if on one side you have over a million people giving you little donations that make up 45% of your budget, and on the other side you have a handful of people giving you big donations that make up 55% of your budget, whose telephone calls are you going to take?
So here we are with the world economy collapsing and the big question is exactly this: whose calls is Obama going to take? Because both sides are calling, big time. I don't have to tell you who is winning so far.
But I am more optimistic than I thought I would be at this point. The looting of the US Treasury has not gone as planned. Everything is spiraling out of control. And Americans are actually mad! Bankers are in tears (at least according to their congressional testimony). When Republican congressmen are calling for corporate execs to commit mass suicide, you know the ground has shifted.
Have things changed so dramatically that Obama will have room to dump his biggest campaign contributers overboard? That question will be answered in the coming weeks.
Now is not the time to be quiet. Now is the time to yell bloody murder. We will soon know whose call comes through the loudest.
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