Cross-posted from the European Tribune.
Some may call it irrational antipathy to rich bankers who gambled huge fortunes of other people’s money and lost – but not before they had paid themselves $Billions in bonuses. But I have a real problem bailing out the bankers. No problem with bailing out homeowners who were conned by predatory lending practices. No problem providing capital for real businesses producing real goods and services. But will the world really end if Wall Street is allowed to implode? Is that model of funding business not irreparably broken?
If the bankers succeed in conning the Government into giving them $700Billion in taxpayers money, what is to prevent them from coming back and looking for more, and more, and more – each time with the same extortionate demand that the alternative is a collapse of the real economy?
The remarkable thing is that it is Obama and the Democrats who look like they are trying to cut a deal with Bush – while it is the GOP conservatives who are bolting from a deal which they consider smacks of socialism. And McCain, the great Maverick, looks like he is trying to ride two horses at once. Claiming the credit if Bush/Paulson/Bernanke do manage to cut a deal, and claiming to have fought for the little man if the whole thing falls down around their ears. You see, he really is independent from Bush after all!
Sometimes there really isn’t any alternative to a revolutionary change in the way the economy is managed, and trying to shore up a broken system is just throwing good money after bad. Do we really think that the Wall Street model of gambling on the way underlying assets might perform – where the ultimate risks are borne by the taxpayer is the way to go into the future?
Obama has the difficult task of trying to appear calm, reasoned. consistent, non-partisan and Presidential in the face of some very suboptimal choices, but it looks as if the Republicans are going to save him from having to endorse a very unpopular deal. Bush has been unable to rally his own party behind the Paulson/Bernanke plan, so why on earth should Democrats bail him out?
The key thing is not to be found to be the one playing silly buggers when the music stops and the markets go into freefall – as they now almost surely will. McCain rode in all guns blazing and saying he was going to sort out the mess. The White house meeting – which excluded Paulson – was organised almost entirely for McCain’s benefit.
But even House Republicans are running from the deal in the face of almost unprecedented voter anger. This deal is everything that small Government, libertarian conservatives hate – even about the Bush White House. Obama risks becoming the focus of that voter anger should he actually endorse a deal voted down by many Republicans. And there is absolutely no telling what McCain might do next – up to and including denouncing a deal negotiated by his own President and leading Democrats.
Obama, by contrast, has seemed more measured and Presidential in his approach – being prepared to work towards a bipartisan agreement. If the deal falls through because of conservative resistance he loses nothing – whereas McCain could be seen as responsible for the stock market bloodbath that seems sure to follow. Indeed the prospect of a deal seemed to recede the moment McCain hit town. Even his own party members are wary of being blindsided by him.
This whole mess blows the Conservative consensus wide open – an uneasy coalition between small town business and international capitalism which never really had all that much in common with each other in the first place. But the biggest scam of all is the logic of the “too big to fail” argument. Ultimately it legitimises the systematic extortion of the poor by the very rich on the grounds that the very rich would take their money elsewhere if their ransom demands are not met.
Of course the consequences of a Wall Street melt-down will be stark and terrible in the short term – with many ordinary people losing their jobs and homes. But the system is so irreparably broken that only a very rapid and dramatic change process – normally seen only in brief revolutionary interludes – has any prospect of allowing the development of a more rational way of organising financial services into the future. I know this sounds very close to the “creative destruction” argument of many conservative free market theorists. On this occasion they may very well be right.
The Presidential Election has to date seemed almost a toss-up between two very unsubstantial and inarticulate visions which said nothing very much very concrete at all. Vacuous rhetoric about change contrasted with false images of a maverick. Even the derisory inclusion of Palin lent much needed excitement and novelty to the debate. It shows you how little is now expected of politicians provided they “share your values”. That may now change. Real leadership is required, and sometimes real leadership also means saying that some things just can’t be fixed and need to be allowed to die their natural death.
It is not Obama’s job to try to fix this mess before the election. The fall-out will be so huge it will probably dominate his entire first term as President in any case. But right now it is a Republican problem, and the Republicans must be left to stew in their own entrails. The notion that it can be fixed by a once of injection of taxpayers cash is the great illusion which must be challenged.
Historic changes in US politics happen when one side wins the argument – as happened in 1972 and 1980. Under those circumstances a Presidential election can result in a 50 state blow-out – not the very marginal race now expected. If McCain fails to show for the debate tomorrow his empty chair may well come to symbolise the day the argument was lost – and McCain will be exposed for the pathetic opportunist he has always been.
Either way, Obama just needs to keep his cool now and let the Republicans destroy themselves in the total contradictions their own policies have created. It won’t be a pretty sight, but it will be a necessary one.
