News

Commentary by Professor C. Fred Exoo - An Electorate Angry -- At Whom?

From The Huffington Post, 8/2/10:

Voters are angry, pollsters tell us.

Indeed, voters are beyond angry, and they should be: they are
sputtering, once again, with the inarticulate rage of people who have
been bested by swindlers. Democrats and incumbents beware. But are they
the real culprits? Or is it deficits, socialism, Obama, Bush?

In fact, the real Mr. Big responsible for the economic and ecological
catastrophes that currently beset us is, as usual, in hiding. But a
peek at previous man-made disasters will begin to reveal his rap sheet.

1980s: The S&L's Roll the Dice -- Congressman
Fernand St. Germain, a man small enough, ethically speaking, to fit
comfortably inside the pocket of the banking industry, inserts
provisions into bank law allowing Savings and Loans to roll the dice
with taxpayer money: more than doubling federal deposit insurance and
removing many of the regulators who might have monitored the resulting
Casino Night. A revolving door between the regulators (Federal Savings
and Loan Insurance Corporation, more than half of whose officers came
from the banking industry and went right back to it) and the regulated
(S&L's) gave further protection to the Riverboat Gamblers. When the
few honest regulators left saw early on that the new law would be
disastrous, the $2 million in hush money paid by big banks to House
Banking Committee members stopped re-regulation in its tracks. Total
cost to taxpayers: $500 billion.

1990s: Enron & Co. Run Amok -- In 1993, the
accounting industry's watchdog, the Financial Accounting Standards Board
(FASB) proposes investor protections that would limit the use of
off-ledger stock options as a form of executive compensation -- options
that so tempt CEOs to jack up stock prices through creative accounting.
Congress, high on the $43 million in contributions from the accounting
industry, proves to be a mean drunk, threatening FASB's existence. FASB
rescinds its proposal. Corporations smell weakness. By the late 90s,
over 700 US corporations have defrauded their investors. The collapse of
Enron's house of accounting cards alone costs investors $200 billion.

2000s: Wall Street Wrecks Our Economy -- In the
quaint old days, a bank gave a loan to a home buyer with good credit,
who paid the loan back to the bank. This worked fine, but there was one
problem: no one got ridiculously rich from this process. Then Wall
Street saw a way to change that. So the Street bought Congress,
Presidents and federal regulators off with $5 billion worth of lobbying
and campaign contributions. In turn, the feds gave the Street carte
blanche to make a killing, and kill they did: Mortgage lenders
(Countrywide, Indy Mac, etc.) made loans to people who could not fully
repay them. But the lenders didn't care, because they didn't hold these
mortgages; instead, they sold them to Wall Street investment banks (e.g.
Bear Stearns, Goldman Sachs, Lehman Bros.) who resold them to
investors. They were aided by corrupt bond rating agencies (Standard
& Poor's, Moody's) who were, again, indentured to investment banks,
who persuaded the raters to say that these were sound investments. And
for a while, they were: if a particular mortgagee defaulted, that was
okay, because the house became the property of the mortgage owner, and
housing prices were going up, up, up. For the lenders and investment
banks, it was like printing money.

But inevitably, this "housing bubble" had to burst. When all these
fraudulent loans began to default at once, the market was flooded with
repossessed houses, and prices collapsed. Oops. Suddenly, the geniuses
on Wall Street were left holding a bag of now-worthless mortgages:
mortgagees who couldn't pay back their loans, and houses that were worth
a lot less than the lenders had paid for them. Suddenly, the insurance
companies (AIG) that had insured these investments were broke. So, this
worthless bag of cupidity was handed to us, the taxpayers, who bought it
with a bailout of the banks and insurance companies that made the mess.
Cost to Americans: Literally incalculable, but let's start with the
14.6 million Americans currently unemployed.

2010: A Gusher Is Loosed on the Gulf -- Surely the
2008 report of the Interior Department's Inspector General ranks as one
of the more colorful accounts of Cowboy Capitalism ever to emerge from
the federal bureaucracy. Here we find the (recently re-branded) Minerals
Management Service somehow forgetting to collect billions of dollars in
royalties owed to the US taxpayer by corporations drilling oil on
federal property. In exchange, the oil companies gave regulators the
usual emoluments -- lavish gifts, free lunches, and great jobs. And
then, just to show that Big Oil knows how to bribe a bureaucrat with
panache, the drillers frosted MMS' cake with sex and drugs.

For its part, the MMS skipped not only royalty collections, but also
safety checks on the drilling operations. So, while Gulf oil platforms
killed workers and spilled oil, the MMS looked the other way, and
occasionally slapped a wrist.

BP's Deepwater Horizon platform, which exploded on April 20, killing
11 workers and releasing the contents of the earth's sub-crust into the
Gulf of Mexico, had been allowed to operate "without safety
documentation required by MMS regulations for the exact disaster
scenario that occurred." The cutoff valve which failed "has repeatedly
broken down at other wells in the years since regulators weakened
testing requirements." The MMS also decided that Gulf-platforms did not
need an acoustically controlled shut-off valve (BOP) as a safeguard of
last resort against underwater spills. Dick Cheney's notoriously
industry-friendly energy task force had decided that the BOP, at a
one-time cost of $500,000, was "too expensive." And finally, BP claimed
to MMS that it had the "equipment and technology" to prevent a serious
oil spill if the well did blow. But in fact, that technology was only
devised after the blowout, as the world waited for months and watched as
over 90 million gallons of oil gushed into the Gulf of Mexico. 

Which brings us to the reveal. As you've no doubt detected by now,
Mr. Big is the "big" in "too big to fail" -- American corporate
capitalism, with the government on his payroll, taking care of business
by dishing out a beatdown of the public interest. The resulting
bailouts, deficits, eco-crises and mass unemployment might reasonably
engender some anger. Let's hope that it is well directed.