[Posted by Karl]
Glenn Greenwald (sock-puppeteer turned populist) got in touch with his inner Howard Beale after watching PBS:
Last night, former Reagan-era S&L regulator and current University of Missouri Professor Bill Black was on Bill Moyers’ Journal and detailed the magnitude of what he called the on-going massive fraud, the role Tim Geithner played in it before being promoted to Treasury Secretary (where he continues to abet it), and — most amazingly of all — the crusade led by Alan Greenspan, former Goldman CEO Robert Rubin (Geithner’s mentor) and Larry Summers in the late 1990s to block the efforts of top regulators (especially Brooksley Born, head of the Commodities Futures Trading Commission) to regulate the exact financial derivatives market that became the principal cause of the global financial crisis. To get a sense for how deep and massive is the on-going fraud and the key role played in it by key Obama officials, I highly recommend watching that Black interview (it can be seen here and the transcript is here).
Greenwald, as a lawyer, could pretty easily discover that there was a very real question about whether the CFTC had jurisdiction over certain types of derivatives — if he bothered to take notice that the term “derivatives” encompasses a wide range of products. Had he done so, it might have occurred to him that casting doubt over the legality of trillions of dollars in existing contracts might have had an economic impact more immediately recognizable than what we see now with hindsight, which involved not only the burgeoning derivatives market (as Greenwald seems to believe), but easy money from both here and abroad, decades of policies pushing homeownership and lowering lending standards, etc.
However, Greenwald’s problem is really larger than his ignorance about financial regulations. Greenwald’s larger assumption is that a lack of regulation was the problem. In Liberal Fascism, Jonah Goldberg chronicles how Big Business has always owned the regulatory process:
Since the dawn of the Progressive Era, reformers have constructed an army of straw men, conjured a maelstrom of myths, to justify blurring the lines between business and government. According to civics textbooks, Upton Sinclair and his fellow muckrakers unleashed populist rage against the cruel excesses of the meatpacking industry, and as a result Teddy Roosevelt and his fellow Progressives boldly reined in an industry run amok. The same story repeats itself for the accomplishments of other muckrakers, including the pro-Mussolini icons Ida Tarbell and Lincoln Steffens. This narrative lives on as generations of journalism students dream of exposing corporate malfeasance and prompting government-imposed “reform.”
The problem is that it’s totally untrue, a fact Sinclair freely acknowledged.“The Federal inspection of meat was, historically, established at the packers’ request,” Sinclair wrote in 1906. “It is maintained and paid for by the people of the United States for the benefit of the packers.” The historian Gabriel Kolko concurs: “The reality of the matter, of course, is that the big packers were warm friends of regulation, especially when it primarily affected their innumerable small competitors.” A spokesman for “Big Meat” (as we might call it today) told Congress, “We are now and have always been in favor of the extension of the inspection, also to the adoption of the sanitary regulations that will insure the very best possible conditions.” The meatpacking conglomerates knew that federal inspection would become a marketing tool for their products and, eventually, a minimum standard. Small firms and butchers who’d earned the trust of consumers would be forced to endure onerous compliance costs, while large firms not only could absorb the costs more easily but would be able to claim their products were superior to uncertified meats.
This story plays itself out again and again during the Progressive Era. The infamous steel industry—heirs to the nineteenth-century robber barons—embraced government intervention on a massive scale. The familiar fairy tale is that the government stepped in to control predatory monopolies. The truth is almost exactly the opposite. The big steel firms were terrified that free competition would undermine their predatory monopolies, so they asked the government to intervene and the government happily obliged. U.S. Steel, which was the product of 138 merged steel firms, was stunned to seeits profits decline in the face of stiff competition. In response, the chairman of U.S. Steel, Judge Elbert Gary, convened a meeting of leading steel companies at the Waldorf-Astoria in 1907 with the aim of forming a “gentlemen’s agreement” to fix prices. Representatives of Teddy Roosevelt’s Justice Department attended the meetings. Nonetheless, the agreements didn’t work, as some firms couldn’t be trusted not to undersell others. “Having failed in the realm of economics,” Kolko observes, “the efforts of the United States Steel group were to be shifted to politics.” By 1909 the steel tycoon Andrew Carnegie was writing in the New York Times in favor of “Government control” of the steel industry. In June 1911 Judge Gary told Congress, “I believe we must come to enforced publicity [socialization] and government control . . . even as to prices.” The Democrats — still clinging to classical liberal notions—rejected the proposal as “semi-socialistic.”
Moreover, had regulations Greenwald imagines worthy been promulgated, there was no guarantee that Wall Street would not have innovated its way around them — which is part of how derivatives came into being in the first instance.
That Greenwald does not know or care about any of the above signals to the reader that it is really little more than window-dressing to his larger complaint about the “sleazy oligarchical control of both the Executive and legislative branches” that he managed to miss for the years in which the problem supposedly was an overweening Pres. Bush running roughshod over Congress and everyone else. At least he got to appear on that same PBS program to denounce the establishment media for missing it, too.
Update: I really should have underscored that Greenwald’s PBS appearance was for Bill Moyers, who was a homo-hunter and planter of questions for White House press conferences before zipping through the revolving door back to journalism. Because for Greenwald, self-promotion trumps such considerations. Truth to powah, Gleen(s)!