Friday, 27 March 2009

Excellent article about how Wall Street hijacked Washington and Main Street USA

There is an excellent article that appears in an upcoming issue of The Atlantic by Simon Johnson entitled The Quiet Coup. In it he discusses the ways over the last 25 years whereby the interests of Wall Street have increasingly taken the uppermost position in Washington's priorities.

A couple of the more striking quotes from the article are as follows:
A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true.

Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system....Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.

Johnson also comes right to the point in terms of specifically why the power enjoyed by the financial oligarchy is fundamentally hostile to the public interest when he discusses the so called PPIP program
This latest plan—which is likely to provide cheap loans to hedge funds and others so that they can buy distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and Treasury has made no secret of that. As Neel Kashkari, a senior Treasury official under both Henry Paulson and Tim Geithner (and a Goldman alum) told Congress in March, “We had received inbound unsolicited proposals from people in the private sector saying, ‘We have capital on the sidelines; we want to go after [distressed bank] assets.’” And the plan lets them do just that: “By marrying government capital—taxpayer capital—with private-sector capital and providing financing, you can enable those investors to then go after those assets at a price that makes sense for the investors and at a price that makes sense for the banks.” Kashkari didn’t mention anything about what makes sense for the third group involved: the taxpayers. [my italics]
One can only hope that as more and more people are becoming informed about the cultural power possessed by many of those on Wall Street it may be more likely that a new ethos towards finance will begin to emerge. One thing is for sure which is that self regulation or even a facade of tighter regulation will not work as many of the leading names on Wall Street have repeatedly demonstrated a total incapacity to see the damage that they have done and will continue to do until, and unless, their influence on the economic/political agenda is curtailed.

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