Posted December 18, 2010on:
Christmas is here once again. The season for forced jollity at office parties and, of course, the end-of-the-year bank bonuses. Ninety billion dollars has been stashed away by five American banking giants for their prize employees. The big PR problem the bankers face, whether in the US or UK, is how to transfer this wealth to their tax havens without attracting the outrage of millions of people struggling with unemployment, foreclosures and shrinking social benefits.
The media, with few exceptions, looks the other way. The global frenzy over the Wikileaks affair has distracted us from the more important revelations slowly leaking out of the US Federal Reserve. While I find the official hysteria over Julian Assange quite ridiculous, I don’t think American citizens, let alone the rest of the world, have any automatic “right” of access to American diplomatic cables. In any case, unlike earlier leaks about war crimes in Afghanistan, the new “revelations” have been either low-level gossip or common knowledge. But what should be of concern to all of us is the way governments that proclaim “free markets” and call on citizens to accept “austerity for the good of the country” are hand-in-glove with powerful banking and corporate interests.
Three weeks ago, the US Federal Reserve posted on a public website details of 21,000 transactions from December 2007 through July 2010. The Fed provided roughly $3.3 trillion in liquidity and more than $9 trillion in short-term, low-interest loans not only to giant banks such as Bank of America, Citicorp, Wells Fargo and JPMorgan Chase, but also to companies such as General Electric, Caterpillar and Harley-Davidson. In addition, there were numerous transfers to foreign financial institutions such as Deutsche Bank and Credit Suisse which were implicated in the housing mortgage crisis of 2008.
The details show that the $700 billion Treasury Department bank bailout out signed into law under President George W. Bush in 2008 was only an initial down payment on a secretive “backdoor bailout” of big banks and corporations. This is the phrase used by Senator Bernard Sanders who wrote the measure that forced the disclosures under the financial services reform legislation passed this year by the U.S Congress. Sanders and his allies forced the release of secret Fed files and persuaded the Government Accountability Office to conduct a top-to-bottom audit of the Fed. [The Fed information can be found at http://www.federalreserve.gov by clicking on “Usage of Federal Reserve Credit and Liquidity Facilities.”]
The Clinton and Bush administrations were well-stocked with former senior bankers from Goldman Sachs. Hank Paulson, the Treasury Secretary who engineered the 2008 bank bailout was himself a former chairman of the bank; so, unsurprisingly, Goldman Sachs was one of the first banks to benefit from the near-pandemonium and scaremongering that the US Treasury initiated to get the deal passed by both houses of Congress. Remember the talk at the time of “putting the military on the streets” and the imminent “collapse of the global economy”?
At the height of the “financial crisis” Philip Stevens, one of the Financial Times’s leading columnists, advocated shooting the bankers. Alongside the bankers he should have lined up a lot of other people – academic economists, politicians, journalists- who encouraged them and sanctioned their antics over the last two decades. And we must not forget thousands of stockholders who couldn’t care less what the banks were doing with their money, and who was bearing the costs of their reckless speculations, as long as their own dividends kept flowing in regularly. Moreover, many of the risks to which financial institutions became exposed bore little or no connection to their basic economic function of providing capital to either needy individuals or businesses.
I have often pointed out that the rich live on the backs of the poor. The net financial flows, within both local economies and the global system, are from the poor to the rich. In Sri Lanka, where I live, the backbone of the economy comprises small farmers, tea plantation workers, textile factory workers, and migrant workers who remit foreign exchange back to the country. A disproportionate number of these are women. The nouveau riche use this foreign exchange to send their children to international schools and foreign universities. In the recent budget, the ruling regime had nothing for the poor except the usual empty promises of “ development”. Taxes for the rich were cut, foreign capital restrictions eased, and members of parliament were given permits to import luxury vehicles. Education and healthcare are starved of funding, resulting in hundreds of rural schools being forced to shut down and state-run hospitals (the only medical services accessible to the poor) regularly run out of basic drugs.
In The Wealth of Nations, Adam Smith (yes, Adam Smith!) warned that any proposal for new laws or regulations in commerce which came from the business community should always be looked at sceptically: “It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”
Bernard Madoff, 72, is serving 150 years in prison because he defrauded rich people. Multiple murderers get far lighter sentences. Those who plunder the wealth of nations, let alone take the lives of the poor, are rarely brought to justice. The moral outrage of the rich is a wonder to behold.