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Insider Academic Says U.S. Is Disastrously Corrupt at the Top

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A YouTube video posted on April 18th, "SR 76 Wall Street," records extemporaneous comments that were made the day before to a group of academics by the prominent international economist Jeffrey Sachs, a Democrat who has been to the Obama White House nine times, twice to speak with the President. He was here telling these academics the extent of corruption that he has observed on Wall Street and at the top in Washington, and he spared neither Bill Clinton nor Barack Obama in his damning comments. He said that everyone at the top on Wall Street is massively corrupt, and that no Presidential Administration has done anything (if they even care) about it.

Note might be made here, for empirical background on the extent of corruption in the United States, that "The Global Competitiveness Report 2012-2013," from the World Economic Forum, scores the U.S. below all other industrialized countries (of which there are about thirty) on most of the corruption-related factors, and that this rating has declined while Obama has been in office. For example, on the factor "Diversion of Public Funds [due to corruption]," the U.S. now ranks #34 (down from #28 in their 2009-2010 report). On "Irregular Payments and Bribes" (which is perhaps an even better measure of lack of corruption) we are #42 (not rated in 2009). On "Transparency of Governmental Policymaking," we are #56 (down from #31). On "Organized Crime," we are #87 (down from #72). On "Efficiency of Legal Framework in Challenging Regulations," we are #37 (down from #35). On "Efficiency of Legal Framework in Settling Disputes," we are #35 (down from #33). On "Burden of Government Regulation," we are #76 (down from #53). On "Wastefulness of Government Spending," we are also #76 (down from #68).

Furthermore, when the World Bank scored the U.S. on "Control of Corruption" in the 2009, 2010, and 2011 (or Obama-era) editions of their "Worldwide Governance Indicators," the U.S. performance wasn't even as good as it had been in the previous, 1996-2008, rankings. Whereas the U.S. had scored consistently at the bottom of the top 10% (and near the bottom of the developed countries) prior to Obama, the U.S. has scored at the bottom of the top 15% (and the very bottom of the developed countries) since Obama came into office in 2009.

With those figures in mind, Sachs's comments can be seen as being not merely anecdotal, but an authentic part of the larger picture. The end of Sachs's statement is obviously impassioned (printed below in boldface), and even seems to be a cry of hopelessness.

Perhaps after what has happened since Sachs had helped Boris Yeltsin privatize the Soviet Union and it became a kleptocracy (something for which he has since been paying penance), Sachs is finally venting here - maybe even, in part, venting disgust with himself and with the extent to which his personal career-success has been dependent upon this profound institutionalized corruption at the top, which he knows intimately, both in Russia and in the U.S.

Here, then, is my transcript of his comments, with minor excisions in order to enhance continuity, and with highlights boldfaced by me:

VIDEO: At the opening, Sachs is asked how to separate banks from, essentially, what are gambling operations ("investment banks"), so as to protect savers from having their precious limited assets raided (via federal bailouts and FDIC insurance) by Wall Street's big boys, in order for them and their colleagues to be able to pay their gambling ("investment") debts when hard times come. Sachs said:

"Glass-Steagall successfully did that, for quite a long time, and its removal was a very very cynical play, uh, by, uh, Rubin, Summers, Clinton, Gramm, and others, who all had very strong interests, uh, personal interests, in the outcomes of that deregulation, um, and exploited, uh, the gaps that they created, and then, to the chagrin of uh, some of us at least, uh, were invited right back into the White House, uh, in early 2009 after they had made this uh calamitous uh mess, to be the ones supposedly to fix it [such as were Geithner, Summers, etc.], and I know that uh Summers for example continued uh to really institute moral hazard policies [rewarding bad behavior] right and left, by fighting against any limits on compensation of these people who had entered into the breach. ... A lot of what has happened actually, and what has been revealed, is in my view prima facia criminal behavior; it's financial fraud on a very large extent. There's also a tremendous amount of insider trading, and you can even watch it when you're living in New York how that works, so it's not uh, so mysterious. ... I take John Paulson for example. Paulson worked together with Goldman Sachs, to defraud massively many European banks which bought the toxic mortgages that Paulson [working under Goldman's direction] had put together. When this Abacus deal was taken up by the SEC, Goldman ended up paying a small fine. The chair of Goldman of course [Lloyd Blankfein] continued in his position and continued at White House state dinners. And Paulson wasn't even mentioned once in any of the proceedings and he took home a one billion dollar paycheck the next year, even as Goldman was paying a roughly $700 million fine [actually only $550 million], if I remember correctly, for the abuse that Paulson was part of. I can't believe no matter what the financial regulations, we can't do better than that. That's really pathetic. ... [He's then asked about Glass-Steagall, what things must be done now] One is separating liquidity in the banking sector from other kinds of speculative financial activity; this I would do for sure; and I would never have put Goldman Sachs back under the Fed's protection as a banking unit, so that it could receive direct loans from the Fed - that's ridiculous, and sad actually. ... The final point of course is separating the politicians from the crooks, but maybe that's so close together that they can't actually be separated. Maybe it's just the same community. ... [He is then asked about the dependency of small or weak countries on the advanced ones] There is a sense of almost complete dependency ... the need for swap facilities with the Fed or ECB, the pervasiveness of tax havens, the extent of flight capital from their countries. ... Most of the advice that they get is to be part of the system and be quiet, basically, this is how the system is, you join it, you stay in good terms with the Fed, with the IMF with others. ... I can only emphasize the palpable anger and vulnerability that's felt right now is very very high. [He's then asked about economics and values.] ... I believe that we have a crisis of values that is extremely deep. ... I meet a lot of these people on Wall Street on a regular basis right now. I am going to put it very bluntly. I regard the moral environment as pathological, and I am talking about the human interactions that I have. I've not seen anything like this. ... These people are out to make billions of dollars, and nothing should stop them from that. They have no responsibility to pay taxes, they have no responsibility to their clients, they have no responsibility to people counterparties in transactions, they are tough, greedy, aggressive, and feel absolutely out of control in a quite literal sense, and they have gamed the system to a remarkable extent; and they have a docile President, a docile White House, and a docile regulatory system, that absolutely can't find its voice. It's terrified of these companies. ... The financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I am afraid to say, and ... both parties are up to their necks in this; this has nothing to do with Democrats or Republicans; it really doesn't have anything to do with right wing or left wing, by the way. The corruption is as far as I can see everywhere. But what it's led to is this sense of impunity that is really stunning, and you feel it on the individual level right now, and it's very very unhealthy. I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language, and I have not seen it once. And that is shocking to me. And if they won't, I have waited for a judge, for our President, for somebody, and it hasn't happened; and, by the way, it's not going to happen, anytime soon, it seems.

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Investigative historian Eric Zuesse is the author, most recently, of They're Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST'S VENTRILOQUISTS: The Event that Created Christianity.