The Obama challenge to the banks

Lonesome Hobo Economics

… Kind ladies and kind gentlemen …
Once I was very prosperous
There was nothing I did lack
I had fourteen carat gold, in my mouth,
and silver on my back

But I did not trust my brother
I carried him to blame
Which led me to my fatal doom
To wander off in shame.

– Bob Dylan, “Lonesome Hobo,” 1967

The banks: First he proposes to tax them – they are going to the Supreme Court to stop him if they can. Then he demands they pay back all that they owe – after the public watched the bailed-out banks handing out big bonuses as they, the people, are standing in unemployment lines. The president has taken a decidedly more combative, populist tone, moving to re-mobilize and rekindle commitment from the broad-based forces that elected him.

It’s time. As the election in Massachusetts, I think, shows: those forces are hunkered down, frustrated, and increasingly angry at immense inequities alongside a persistent official 10 percent unemployment figure. They are facing down loss of retirement for themselves, or their parents or grandparents, foreclosed or underwater homes, inability to use credit (which many are compelled to start using for food and rent!), and increasing violence (there are upticks since the recession has deepened).

The Obama health care legislative battle has been much harder, more complex, longer and more exhausting than expected. After the election of Massachusetts Republican Scott Brown to succeed Ted Kennedy, dark clouds are forming over the prospects of any heath care bill passing soon. Voters’ frustration appears driven mostly by the bad economy – but they are clearly, in larger numbers than previously thought, confused by the health care debate.

Decisive moves on expanding the stimulus also appear blocked as fear of deficits expands – also largely the result of Republican propaganda, but also fueled by the bank bailouts that may have forestalled collapse, but have not really restarted credit visible to the consumer. The re-commitment to two of Bush’s wars, neither of which seem headed toward sustainable conclusions, has also sounded warnings for many Americans stunned by the costs, and by the damage to their fellow citizen-veterans and the shape they are in coming back from the Mid-east, Afghani and Pakistani war zones.

While the Republicans have also made noises over “bailouts for bankers,” it’s clear they are just cats’ paws for the banking industry themselves. They completely stonewalled – would not even meet to discuss – Sen. Dick Durbin’s attempt to pass a mortgage reform that would have actually protected many homeowners from losing their homes. His measure would have safeguarded homeowners unless they were unable to make payments on the REAL secured value of their house, rather than inflated rates of the bubble. That was the only real financial reform that could have put some significant money and help in working people’s pockets. Republican concern for the victims of the financial crisis is clearly bogus – but that has to be demonstrated and exposed.

So it’s a good, in fact necessary, step that Obama is calling the right-wing’ bluff on financial reform, and that he is planning on taking needed funds for a second stimulus directly from the banks. I hope that he is serious. It addresses the deficit issue, unemployment and the populist anger at the bailouts – all at once. The populist outpouring against Wall Street must not end up serving Republican ends, or it can wreck his presidency, and all of us at the same time.

The bottom-line consequence of the financial crisis is that finance capital, and national investment policy in general, needs a substantial restructuring that the banks are going to have to accept, but that no amount of talk will ever persuade them to accept. They must be forced. There is no other alternative. To start – they must pay a fair piece of the price of getting people back to work. Tying financial reform to jobs is the only way to pull the center back into the “forward progress” coalition. And more than ever, it’s clear that time is of the essence and that this must mean government directly hiring the unemployed. Stimulus contracts will not get the job done in time to prevent a Democratic setback. Direct employment will make an immediate, and visible difference.

Finally, on the policy of bipartisanship that Obama has tried to encourage, but which has yielded such meager results:

It’s been clear to many for a long time that the Reaganite tendency in the Republican Party, a tendency made even more reactionary by Bush and the right-wing media and religious movements, has long prepared to block the progress of social democracy in the United States by any means necessary, on every front, and no matter the consequence for the country’s ultimate progress or prosperity.

Bipartisanship makes sense if there is universal good will about the national interest at some level. But it makes sense to expose those who claim the national interest but cannot put it in front of even the most extreme anti-democratic sentiments. This faction has seized de facto control over the Republican Party apparatus, and through the filibuster has veto power over the entire agenda voted in last year. One way or another, these forces, and their real financial backers, must be brought completely into the light and marginalized! If not, the pundits criticizing Haiti for its so-called “failed state” mentality, will be having their lines read back to them.