As Simon Johnson said on CNN this morning, all that today’s big show in Washington will demonstrate is the Obama Administration’s tender solicitude for the banking sector. It won’t say a thing about the actual condition of the 19 banks whose “results” will be released this afternoon. And that’s because this is a “test” that the bankers themselves helped create, supplying the “data” from which government examiners will give out results. As many observers point out, it’s as though some overweight slobs were put on the treadmill, asked to take a few strides, and then say how they feel—without ever even attaching electrodes to their bloated bodies.
I am certain we will later mark today as the day in which the next bubble was launched, inasmuch as the White House is clearly determined to keep Finance in its dominant role in the economy—the very outcome that sane people, and particularly sane people of faith, should be seeking to avoid. And if you have any doubt that Obama is giving banking special rules, just consider the very different rules being applied, still, to the auto sector: forced bankruptcy in Chrysler’s case, and a very probable breakup (with or without bankruptcy) in the case of General Motors.
“Too big to fail” turns out to mean too politically connected to fail: it has nothing to do with the alleged dire effects on the overall economy were, say, Bank of America or Citi or Wells Fargo to be taken over, cleaned up, and broken up by direct government action. What is most bothersome to me about the Big Con being perpetrated today is the absolutely supine and credulous “reporting” of the whole affair in the corporate media. Only a tiny number of outlier critics—like Simon Johnson—are given any air time at all. Everybody else, from NPR to Fox News, goes right along with the cute “stress test” metaphor, forgetting that the so-called patient being “tested” is actually an 800-pound gorilla that needs to be put into a cage if not shot dead outright.
Johnson pointed out this morning that today’s news non-event even has a kind of Goldilocks character that the big media are bound to lap right up. It will turn out that the $1 trillion in TARP is an amount “just right” to cover the self-declared capital needs of the big banks. Bernanke said this morning that he’s absolutely sure that this afternoon’s announcement will “inspire confidence.” Quel coincidence!
The profound damage done by Team Obama to economic fundamentals today will not be fully felt during his administration, even if he serves two terms, so it was probably politically shrewd to go this way: not fighting Finance’s stranglehold over the economy and over the government itself and saving his political chips for health care and education and energy.
Politically shrewd—but morally bankrupt.
Meanwhile, where are the two great Warrior Women who until recently were out there telling the truth, and telling it loudly, about the actual condition of the banks and the massive unfairness of the massive subsidies we have been handing them?
As far as I can tell, the FDIC’s Sheila Bair is now part of the problem—effectively forced by Geithner and Bernanke to play along with today’s charade. As for Congressional watchdog Elizabeth Warren, has anyone heard from her lately? At the dismal rate things are going, expect to see her face on a milk carton one of these days.
