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Les Leopold

Les Leopold

Posted: January 19, 2010 04:21 PM

Mass Hysteria: Another Victory for the Billionaire Bailout Society

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Pollster Celinda Lake said Coakley was hampered by the failure of the White House and Congress to confront Wall Street. That failure, she said, means that Democrats are being blamed by angry independent voters worried about the state of the economy. -- Huffington Post

The Obama administration bears much of the responsibility for the debacle in Massachusetts. It didn't go hard enough against Wall Street, and it didn't recognize the depth and breadth of the jobs crisis -- and the connection between the two.

But don't stop there. Much of the failure also rests with the progressive community which is clueless about how to respond to our new billionaire bailout society.

Over the past thirty years we've gone from a quasi-social democratic/capitalist economy to a full-fledged billionaire bailout society whose primary purpose is to maintain the wealth and prominence of a tiny handful of elites, even if it means raiding the national treasury to protect, restore and enhance its riches.

If you muttered such thoughts before the crash you were viewed as a crackpot who didn't understand the power and glory of deregulated markets. After all, the accumulation of wealth in the hands of the few supposedly produced a vibrant near-full-employment economy from Reagan to Bush, didn't it? And didn't our deregulated financial sector and tax cuts for the super-rich create a prosperous trickle-down economy that really worked? Wasn't home ownership rising and along with jobs? (Although less and less so for industrial workers, but that was said to be the old economy, not the new).

Of course, it was better yet if you were in the top 5 percent of the wealth distribution or in the top fraction of the top one percent. Life for the top 400 billionaires really was good...and still is.

We didn't realize that so much of our newfound wealth was based on rot, as the financial sector grew from 15 percent of corporate profits in the 1960s to 35 percent just before the crash. Most of this financial wealth turned out to be phony: layer upon leveraged layer of structured financial instruments based on toxic assets. We're talking trillions in unmarketable trash.

When it all came crashing down, we still didn't realize, until too late, that that we had entered a new billionaire bailout society. The crash should have produced immediate investigations and drastic reforms. The big bankers were on their knees groveling for funds. That was the time to address "too big to fail" by breaking them up so they never again could crash the entire system.

It didn't happen. It's still not happening.

Instead, we bailed them out without asking for anything significant in return. The most recent tally of US public support for financial institutions totals somewhere between $6.4 trillion to $13 trillion. (See the OECD paper, "The Elephant in the Room: The Need to Deal with What Banks Do," , and Nomi Prins's excellent accounting.)

Worse still, these giant wealth transfers are taking place during the worst employment crisis since the Great Depression.

To drive home the reality of what a billionaire bailout society really means, the biggest banks, (which are still major beneficiaries of billions of dollars of public largess even after they payback TARP) are declaring near record profits and bonuses again while nearly 30 million people are without jobs or forced into part-time work. And to rub it in, the banks are using their new found wealth to lobby against any and all reforms that might stand in their way. (Isn't it nice to see the stock market rally as Obama's reform agenda is further wounded?)

What did progressives do? What are they doing now?

Not nearly enough. We put our faith in Obama and now are moaning about how he failed to take on Wall Street and the insurance giants. We concentrated on shaping the health care bill, but did little to shape the outrage against Wall Street and the anxiety about job loss.

The moment was missed. The American public truly became outraged at the Wall Street rip offs, but progressives failed to mobilize on Main Street. Instead the terrain was abdicated to the Tea Party, a loose collection of right wing populists who stirred up a potent brew of anti-Obama, anti-government resentments and anti-Wall Street anger.

In a matter of months the Tea Party has gained more popular appeal than either of the two parties. Unbelievably, it is becoming the party of Main Street.

It didn't have to be this way. Every significant crash creates openings for left and right populist reactions. This time however, the left version is dormant. Progressives have not generated a financial reform agenda or a vision for a revitalized economy that speaks to Main Street's anger. Nor has it produced the kind of mass pubic educational program that would be necessary to build a popular response. It certainly has not mobilized a new political party or movement to capture the millions of Americans who are fed up with what clearly appears to be the two parties of Wall Street.

Where is all that new progressive Internet organizing that was supposed reshape American politics? Where is that virtual mass movement that supposedly got Obama elected? Did we expect to tweet our way into reforming Wall Street?

It pains me to say this but progressives are about as far away from mobilizing a genuine movement of Main Street against Wall Street as Ms. Coakley is to understanding that Curt Shilling is not a Yankee.

Progressives are at a crossroads. We can either fight for the interests of Main Street against the billionaire bailout society, or we spend our dwindling energies on defending Obama and the Democrats against the populist revolt.

The Tea Party, however muddled and contradictory its proposals, have proved that Americans want to take on the billionaire bailout society. And it has showed us how quickly a new party formation can emerge. Unfortunately, the crisis also is revealing how tied progressive are to the Democratic establishment, and how meek our protests seem, just when our nation most needs our loudest voices and most spirited reforms.

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.

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