Economist Larry Summers withdrew his name from consideration for chairman of the Federal Reserve last night, even though he had been increasingly considered the favorite for the job in the White House (not so much in the Senate).
It is a great mystery why Barack Obama even considered rewarding Summers for his role in increasing income inequality in the US and around the world and in allowing the non-banks to play banks and both to operate as casinos. Obama praised Summers for his alleged role in helping dig back out of the 2008 hole. In fact, Summers made the recovery far less robust than it should have been, by arguing against a bigger stimulus. Moreover, Obama did not note Summers’ role in helping cause it in the first place. Plus, since the recovery has been a recovery for rich people, Summers isn’t owed much thanks from the 99%. In fact, it is in part owing to his policies that Americans at the bottom of the economic ladder have begun calling themselves ‘lower class.’
10% of Americans at the top, i.e., the ‘friends of Larry,’ took home half the income in the country last year, something that hasn’t happened since F. Scott Fitzgerald wrote in “The Rich Boy” (1926): “Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft, where we are hard, cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand.”
On this happy occasion it is worthwhile reprinting my column from a few weeks ago reacting to a Vice report that Summers and Tim Geithner used thuggish tactics via the Treasury Department to impose their casino banking on the whole world, having engineered the destruction of the American middle class:
Reprint edition
Greg Palast at Vice exposes the way that Larry Summers, Tim Geithner and others in the Treasury Department conspired with JP Morgan and other pirate investment banks not only to destroy Glass-Steagall in the US but throughout the world, removing the difference between commercial banks. and investment banks. Basically, they used US financial muscle to leverage the world into letting banks play poker with your money and forcing regulators to treat toxic bad loans as ‘assets’.
It is not normal for moving money around, often in very shady and unsafe ways, to account for a fifth of the profits of the S&P companies,more than high tech, which actually makes something. Only a few decades ago, that sector was 10% of profits. In essence a small number of corrupt investment bankers (not all are) gained control of the Dept of the Treasury and then used it to ‘deregulate’ the whole world. In layman’s language, deregulating banks means firing the guards and unlocking the vaults.
Palast notes that Argentina, Greece and Spain are among the victims of this ploy, not to mention The millions of Americans who lost their mortgages in 2008 and after (if you see someone blame homeowners or consumers for 2008, know of a certainty that person is on the take.)
Deregulation fundamentalism in banking had already contributed to the 1997 meltdown in East Asia, where unregulated currency transfers were allowed and speculators just bounced billions around the world, leading to Thailand’s and then others’ vast currency depreciation. Malaysia refused the arbitrageurs and so weathered the storm well.
Palast explains why Obama never moved against Wall Street (we’re just about as vulnerable now as in 2008) and is even considering the sleazy Larry Summers to head the Federal Reserve.
One of the questions that Palast’s expose raises is the old one of how much autonomy the state really has in a society dominated by the business classes. The de Tocqueville tradition, revived in the 1980s by Theda Skocpol, emphasizes the government as an independent actor. The Marxist tradition famously sees the state as “the managing committee” of the rich.
Geithner’s memo favors Marx, not de Tocqueville. This is government as humble man-servant of the least savory sections of big business. Many of the ways that Obama has disappointed his base have to do with his being chairman of the managing committee rather than president, and so being captive to powerful interests whatever his own instincts. The billions it costs to become and stay president allows Wall Street to buy the presidency, regardless of which party wins.
You also have to wonder about hidden partnerships between US corporations and the NSA, which appears to do a fair amount of industrial espionage.
What Marx got wrong is that apparently people will put up with this sort of thing if you just provide them with some cheap consumer electronics and televised gossip about celebrity scandals.
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