On April 10th, President Obama will tell the American people that he wants a deal with congressional Republicans in which they will get something that they have always wanted - cuts to Social Security, Medicare and Medicaid (though the very poor will supposedly be protected) - and he will get from them something that he has always wanted: modest tax-hikes on the very rich. This is how Obama proposes that the nation pay for and start to fill the enormous hole in the federal budget that was opened up when an explosion of massive fraud against both mortgage-borrowers and mortgage investors, by Wall Street mega-banks and their mortgage-selling agents such as Countrywide Financial, during the George W. Bush years, caused Americans' incomes and wealth to plunge, and thus stifled the flow of taxes into federal coffers, thereby producing a soaring federal debt. Obama wants to pay for this debt now by cutting 'entitlements,' and by increasing top-bracket tax-rates.
The question might be asked here: Why are Social Security, Medicare, and Medicaid, placed on the chopping block in order to deal with an orgy of bankster crime that had destroyed the U.S. and much of the world's economies? The reason why is that this way of paying for the ongoing bailouts of Wall Street was Obama's plan even before he had entered the White House.
On 16 January 2009, four days before Obama was inaugurated, Michael D. Shear headlined in the Washington Post, "Obama Pledges Entitlement Reform," and he reported about "a wide-ranging 70 minute interview with Washington Post reporters and editors," in which Obama endorsed efforts by Republicans and conservative "Blue Dog" Democrats in the Senate to cut Social Security and Medicare. Progressives were already disturbed at what their friends in Congress were leaking to them about Obama's strong commitment to doing this, and so a few blog posts were issued to ring alarm bells publicly about it. Paul Rosenberg at openleft.com headlined on January 17th (three days before Obama's Inauguration), regarding "Obama's 'Mandate' To Slash Medicare, Medicaid & Social Security," and he presented polls showing that the public not only didn't want to cut any of these programs, but that 74% wanted Medicare and Medicare spending increased, and 62% wanted SS spending increased. Even 65% of self-declared "conservative" Americans wanted the medical programs increased, and 62% of them wanted SS spending increased. To Obama, his plan to cut Social Security, Medicare, and Medicaid, was an act of political courage. It was his long-term plan, even though the polls showed widespread opposition to it by the public.
Obama has long socialized with top Wall Street and hedge fund executives. He likes their company, and personally identifies with them. He truly respects them. He cannot stand the idea that they would be sent to prison for any crimes. To him, they are good people.
On 3 April 2009, Politico bannered innocuously (and deceptively, given the shocking core that was buried here - Obama's statement), "Inside Obama's Bank CEOs Meeting." Eamon Javers reported Obama telling Wall Street's CEOs, inside the White House, "My administration ... is the only thing between you and the pitchforks." (This essentially secret meeting, and the comment itself, had occurred on 27 March 2009, but Javers failed to cite the date, which was indicated only under the accompanying AP wire photo of the CEOs coming out of this publicly unannounced event.) Obama's remark was implicitly analogizing here: he implied that he was protecting these people not from prosecutions for crimes (which he actually was), but instead from angry irrational mobs outside, who were driven by blind hatred (like the lynch mobs were in the Old South). Obama was metaphorically siding here with the plantation owners, not with the slaves; with the KKK, not with their victims. This elite Black was telling them that he would protect them from prosecution. He wasn't going to protect the public - which he here analogized to simply a hate-obsessed mob of bigots.
The crimes that these elite men had committed had, indeed, crashed the U.S. economy. Shahien Nasiripour, at huffingtonpost, bannered, on 16 May 2011, "Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers," and he reported that the Inspector General of the U.S. Department of Housing and Urban Development had carried out audits of Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial, and found, in each case, that they had swindled the Federal Government. "The internal watchdog office at HUD referred its findings to the Department of Justice, which must now decide whether to file charges" under "the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government." All of "the audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes ... using defective and faulty documents." Yet again - as with Goldman's Lloyd Blankfein, and with Countrywide Financial's Angelo Mozilo, and with the Republican former Senator John Ensign - the Obama "Justice" Department was being challenged to prosecute banksters and conservative politicians. Nearly three years into his Presidency, Obama hadn't pursued even a single one of them.
The men who were in the White House at that secret meeting had made billions by deceiving mortgage-borrowers at one end, and by defrauding investors in mortgage backed securities (MBS) at the other end, taking enormous sales commissions and bonuses for themselves along the way, while they bankrupted their banks, which U.S. taxpayers then bailed out. Obama was telling these people that he would let them get away with it, and that they would keep their loot.
The 3 March 2011 issue of Rolling Stone headlined, "Why Isn't Wall Street In Jail? ... The Feds Are Doing More to Protect Them than to Prosecute Them." Matt Taibbi presented there a succession of stories about obstruction of justice by the Obama Administration, at least as bad as during the Bush Administration. "In the past few years, the administration has allocated massive amounts of federal resources to catching wrongdoers - of a certain type. Last year, the government deported 393,000 people, at a cost of $5 billion. ... Illegal immigrants: 393,000. ... Bankers: zero. ... You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars. For fraud that puts a million people into foreclosure? Pass." Taibbi told stories of federal prosecutors who had been fired for wanting to investigate top executives of Morgan Stanley, etc., and of other federal prosecutors who had quit the federal service to work for Morgan Stanley, etc. (at far higher pay, and, now, higher prestige as well). However, Obama could accept federal investigation of Angelo Mozilo of Countrywide Financial, who sold to Wall Street instead of having been part of Wall Street. But even that investigation was aborted. On February 18th of 2011, the Los Angeles Times had bannered "U.S. Drops Criminal Probe of Former Countrywide Chief Angelo Mozilo," and reported that, "Federal prosecutors have shelved a criminal investigation of Angelo R. Mozilo after determining that his actions in the mortgage meltdown ... did not amount to criminal wrongdoing." The Obama Administration refused to continue its investigation of Mozilo's case, because, supposedly, everyone was guilty, and so no one was - Mozilo had committed no crime, even though the SEC found that Mozilo had admitted in a private communication during the lead-up to the mortgage-meltdown, in 2006, "In all my years in the business, I have never seen a more toxic" investment product than what his firm was at that time passing off to Wall Street for securitization and sale to outside investors. The idea that guilt was collective, not individual, hadn't been accepted at the Nuremberg International War Crimes Tribunal, but it was being accepted now by Barack Obama and his stooge Eric Holder, though only for white-collar crimes like this, not for crimes committed by lower-class crooks (whose guilt Obama readily accepted as being individual). The real reason the Mozilo investigation was dropped is that Obama didn't want his Wall Street friends to be prosecuted, and there would be no way of preventing their prosecutions if Mozilo's case went to court. Obama didn't necessarily care about Mozilo. On 4 March 2011, Matt Stoller had headlined "Angelo Mozilo, Tea Partier?" and revealed a 1 September 2004 e-mail from Mozilo to other executives at Countrywide, in which Mozilo had said, "The upcoming election has exacerbated my concerns in that a Kerry win could cause a serious disruption in the economy if he is successful in rolling back a substantial portion of the tax breaks initiated by Bush. It is the wage earners $200,000 and over that are the drivers of the economy and that is the group that Kerry has stated he will attack." Obama was thus not doing a favor for a friend here, but rather a favor for a very conservative Republican, whose business-model was to exploit the non-rich, and whose basic economic belief was that the richest 1.8% of Americans "are the drivers of the economy." Obama was a closeted conservative.
Obama has refused to prosecute even a single one of these "control fraudsters," as criminologist William K. Black calls them. In fact, the prosecutions of all white-collar crimes under the Obama Administration are at a record low, lower even than they were under George W. Bush, who was the previous record-holder for this coddling of the corrupt.
Huffingtonpost.com headlined on 25 February 2011, "Homeowners Demand Criminal Prosecutions," and Zach Carter reported that 50 state attorneys general were "currently hashing out plans for a multibillion-dollar settlement with some of the nation's largest banks over alleged mortgage abuses," but, "There is no indication that [criminal] charges will be filed under the deal currently being negotiated. By contrast, more than 1,100 bankers went to jail after the savings-and-loan crisis of the late 1980s and early 1990s. Because regulatory fines [such as Obama was pushing for, to substitute for criminal prosecutions of individuals] are typically levied against institutions rather than key decision-makers accused of wrongdoing, consumer advocates view them as a relatively weak deterrent against future abuses." Obama, and also the conservative Democrat Tom Miller, who was the chief state Attorney General on this matter, were looking to protect the aristocracy. This deal would cheat outside investors, who had been defrauded by those aristocrats' rotten mortgage-backed securities (MBS), and it would also cheat people whose homes had been foreclosed despite their having been current on their mortgage payments, and (in some cases) despite their home not even having any mortgage on it at all - just fraudulent foreclosures, which have been rampant under Obama. No matter how brazen the aristocrats' crimes had been, Obama and Tom Miller were evidently determined to protect them, not to prosecute them. Obama had thought that a mere $8.5 billion settlement with Bank of America (which had absorbed Angelo Mozilo's corrupt Countrywide Mortgage) would satisfy the outside investors who had been robbed of hundreds of billions. The Obama-Miller deal included immunity from other claims and prosecutions. It was a sweetheart deal for the elite crooks.
This is the only way that Obama can accept in order to fund the ongoing Wall Street bailouts, already into the trillions of dollars, and he doesn't want to leave these ongoing bailouts totally unfunded, which would mean his departing office in 2017 with crushing federal debt.
Those bailouts are in addition to the routine annual takings from the public by these mega-bank institutions. The historic, first-ever, analysis of the taxpayer-subsidy to the mega-banks was done recently by Bloomberg News, and it finds that this subsidy accounts for virtually all the mega-banks' profits. Applying figures from a path-breaking study by two IMF economists, Bloomberg News calculated that the annual subsidy received by America's mega-banks, from our Government's special treatment of them as "Systemically Important Financial Institutions" (i.e., fully guaranteed by U.S. taxpayers, irrespective of the normal $250,000-per-account limit in savings and checking accounts, which limit doesn't apply to them), is $83 billion, of which $64 billion goes to just the five largest banks.
Bloomberg News posted this news in a stunningly uncharacteristic editorial on 20 February 2013, "Why Should Taxpayers Give Big Banks $83 Billion a Year?" which was based upon their analysis of the figures in a widely ignored but rigorous study by IMF economists, a study that had been issued months back, in May 2012, and which was titled "Quantifying Structural Subsidy Values for Systemically Important Financial Institutions." As Bloomberg's editors summarized it: "The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail," due to the Government backing. The taxpayer-funded annual subsidy to these TBTF banks had never before been calculated as to its actual dollar-value, but this rigorous IMF study provided the means for doing that. Bloomberg's said, "What if we told you that, by our calculations, the largest U.S. banks aren't really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?"
"The top five banks - JP Morgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. - account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits."
Obama could be pursuing the crooked executives of those institutions, and the crooked leaders of the SEC and of the other phony "regulators" of Wall Street, and be setting an example that would deter a repeat and another massive financial collapse, bailed out again by the U.S. public, but instead he wants to protect those people from the "pitchforks," and to take this money out of Social Security, Medicare, and Medicaid instead, along with a modest tax-hike on the very rich.
The question for congressional Republicans will be whether they will consider this deal to be worth an increase in the tax-rates of top-end taxpayers (including, of course, the very same banksters whom both Obama and congressional Republicans are determined to protect).
Obama will have dinner on Wednesday night with top congressional Republicans, aiming to get them finally to say yes to his deal. However, even if they say yes, there is no assurance that congressional Democrats will then join in.
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.
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