THE BLOG

An Electorate Angry -- At Whom?

08/02/2010 08:32 am ET | Updated May 25, 2011

Voters are angry, pollsters tell us.

Indeed, voters are beyond angry, and they should be: they are sputtering, once again, with the inarticulate rage of people who have been bested by swindlers. Democrats and incumbents beware. But are they the real culprits? Or is it deficits, socialism, Obama, Bush?

In fact, the real Mr. Big responsible for the economic and ecological catastrophes that currently beset us is, as usual, in hiding. But a peek at previous man-made disasters will begin to reveal his rap sheet.

1980s: The S&L's Roll the Dice -- Congressman Fernand St. Germain, a man small enough, ethically speaking, to fit comfortably inside the pocket of the banking industry, inserts provisions into bank law allowing Savings and Loans to roll the dice with taxpayer money: more than doubling federal deposit insurance and removing many of the regulators who might have monitored the resulting Casino Night. A revolving door between the regulators (Federal Savings and Loan Insurance Corporation, more than half of whose officers came from the banking industry and went right back to it) and the regulated (S&L's) gave further protection to the Riverboat Gamblers. When the few honest regulators left saw early on that the new law would be disastrous, the $2 million in hush money paid by big banks to House Banking Committee members stopped re-regulation in its tracks. Total cost to taxpayers: $500 billion.

1990s: Enron & Co. Run Amok -- In 1993, the accounting industry's watchdog, the Financial Accounting Standards Board (FASB) proposes investor protections that would limit the use of off-ledger stock options as a form of executive compensation -- options that so tempt CEOs to jack up stock prices through creative accounting. Congress, high on the $43 million in contributions from the accounting industry, proves to be a mean drunk, threatening FASB's existence. FASB rescinds its proposal. Corporations smell weakness. By the late 90s, over 700 US corporations have defrauded their investors. The collapse of Enron's house of accounting cards alone costs investors $200 billion.

2000s: Wall Street Wrecks Our Economy -- In the quaint old days, a bank gave a loan to a home buyer with good credit, who paid the loan back to the bank. This worked fine, but there was one problem: no one got ridiculously rich from this process. Then Wall Street saw a way to change that. So the Street bought Congress, Presidents and federal regulators off with $5 billion worth of lobbying and campaign contributions. In turn, the feds gave the Street carte blanche to make a killing, and kill they did: Mortgage lenders (Countrywide, Indy Mac, etc.) made loans to people who could not fully repay them. But the lenders didn't care, because they didn't hold these mortgages; instead, they sold them to Wall Street investment banks (e.g. Bear Stearns, Goldman Sachs, Lehman Bros.) who resold them to investors. They were aided by corrupt bond rating agencies (Standard & Poor's, Moody's) who were, again, indentured to investment banks, who persuaded the raters to say that these were sound investments. And for a while, they were: if a particular mortgagee defaulted, that was okay, because the house became the property of the mortgage owner, and housing prices were going up, up, up. For the lenders and investment banks, it was like printing money.

But inevitably, this "housing bubble" had to burst. When all these fraudulent loans began to default at once, the market was flooded with repossessed houses, and prices collapsed. Oops. Suddenly, the geniuses on Wall Street were left holding a bag of now-worthless mortgages: mortgagees who couldn't pay back their loans, and houses that were worth a lot less than the lenders had paid for them. Suddenly, the insurance companies (AIG) that had insured these investments were broke. So, this worthless bag of cupidity was handed to us, the taxpayers, who bought it with a bailout of the banks and insurance companies that made the mess. Cost to Americans: Literally incalculable, but let's start with the 14.6 million Americans currently unemployed.

2010: A Gusher Is Loosed on the Gulf -- Surely the 2008 report of the Interior Department's Inspector General ranks as one of the more colorful accounts of Cowboy Capitalism ever to emerge from the federal bureaucracy. Here we find the (recently re-branded) Minerals Management Service somehow forgetting to collect billions of dollars in royalties owed to the US taxpayer by corporations drilling oil on federal property. In exchange, the oil companies gave regulators the usual emoluments -- lavish gifts, free lunches, and great jobs. And then, just to show that Big Oil knows how to bribe a bureaucrat with panache, the drillers frosted MMS' cake with sex and drugs.

For its part, the MMS skipped not only royalty collections, but also safety checks on the drilling operations. So, while Gulf oil platforms killed workers and spilled oil, the MMS looked the other way, and occasionally slapped a wrist.

BP's Deepwater Horizon platform, which exploded on April 20, killing 11 workers and releasing the contents of the earth's sub-crust into the Gulf of Mexico, had been allowed to operate "without safety documentation required by MMS regulations for the exact disaster scenario that occurred." The cutoff valve which failed "has repeatedly broken down at other wells in the years since regulators weakened testing requirements." The MMS also decided that Gulf-platforms did not need an acoustically controlled shut-off valve (BOP) as a safeguard of last resort against underwater spills. Dick Cheney's notoriously industry-friendly energy task force had decided that the BOP, at a one-time cost of $500,000, was "too expensive." And finally, BP claimed to MMS that it had the "equipment and technology" to prevent a serious oil spill if the well did blow. But in fact, that technology was only devised after the blowout, as the world waited for months and watched as over 90 million gallons of oil gushed into the Gulf of Mexico.

Which brings us to the reveal. As you've no doubt detected by now, Mr. Big is the "big" in "too big to fail" -- American corporate capitalism, with the government on his payroll, taking care of business by dishing out a beatdown of the public interest. The resulting bailouts, deficits, eco-crises and mass unemployment might reasonably engender some anger. Let's hope that it is well directed.