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Summer Rerun – The Empire Continues to Strike Back: Team Obama Propaganda Campaign Reaches Fever Pitch

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Readers new to this site may be unfamiliar with our summer reruns, in which we reprise vintage NC posts that we think have stood the test of time pretty well.

We’ve done these more or less in chronological order (our last one was our post on the unveiling of the TARP), but we decided to skip ahead to one in 2010 because it focuses on a crucial bit of history that is too often overlooked, and were were reminded of it by a very good Frank Rich piece in New York Magazine on Obama’s failure to bring bankers to account.

Even Rich’s solid piece treats Obama more kindly that he should be. He depicts the President as too easily won over by “the best and the brightest) in the guise of folks like Robert Rubin and his protege Timothy Geithner.

We think this characterization is far too charitable. Obama had a window in time in which he could have acted, decisively, to rein the financial services in, and he and his aides chose to let it pass and throw their lot in with the banksters. That fatal decision has severely constrained their freedom of action, as we explain below.

This post first appeared on March 10, 2010

I’ve seldom seen so much rubbish written by people who ought to know better in a single day. Many critical thinkers have heaped the scorn and incredulity on three articles, one a piece on Rahm Emanuel slotted to run in the Sunday New York Times Magazine, another an artfully packed laudatory piece on Timothy Geithner by John Cassidy in the New Yorker and a more even handed looking one (I stress “looking”) in the Atlantic.

Ed Harrison has skillfully shredded parsed the Geithner pieces . Simon Johnson thrashed the New Yorker story. A key paragraph below:

The main feature of the plan, of course, was – following the stress tests – to communicate effectively that there was a government guarantee behind every major bank or quasi-bank in the United States. Of course this works in the short-term – investors like such guarantees. But there’s a good reason we usually don’t guarantee all financial institutions – or act happy when other countries do the same. Unconditional bailouts lead to trouble, encouraging reckless risk-taking and undermining responsible governance. You can’t run any form of reasonable market system when some big players hold “get out of bankruptcy free” cards.

Banking expert Chris Whalen was so disturbed by the numerous distortions in the New Yorker piece that he had already fired off a long letter to the editor by the time I pinged him, with these starting paragraphs:

Jack Cassidy tells us that “Timothy Geithner’s financial plan is working—and making him very unpopular.” Unfortunately this is completely wrong. Cassidy’s comment just illustrates why the New Yorker has fallen into such obscurity, namely because it is more Vanity Fair than its vivacious sibling and unable to perform critical journalism.

In fact, the banking system is continuing to sink under bad loans and even worse securities losses. Telling the public that the banks are “fixed” is irresponsible. Unfortunately this false perception is widespread, including among major media such as CNBC and also with a number of my clients in the hedge fund world.

And from Marshall Auerback, who had a ringside view of the aftermath of the Japanese bubble:

Cassidy’s article brings to mind a retort by Chou En Lai when he was asked about the success of the French Revolution. He said, “It’s too early to tell”. Yet here we have John Cassidy from the New Yorker and Joshua Green from The Atlantic both making the assumption that the Geithner plan “worked”. This whole line about “taxpayers to recover bailout money” is based on an accounting fraud, because accounting abuses are the primary means by which TARP recipients have repaid bailout money — putting us at greater risk. That may seem paradoxical, but the rush to repay is driven by a desire to have unrestrained executive bonuses (a very bad thing associated with far greater accounting fraud and failures — requiring future, larger taxpayer bailouts) and accounting abuses produce the (fictional) ability to repay the United States (primarily by failing to recognize existing losses). The TARP recipients weakened their financial condition, and increased moral hazard, when they rushed to repay the TARP funds. Both factors increase the risk of making more expensive future bailouts more likely.

Yves here. The reason that people who can discern clearly what is afoot are so deeply disturbed is simple, and all the comments touch on it. The campaign to defend Geithner and Emanuel, both architects of the administration’s finance friendly policies has gone beyond what most people would see as spin into such an aggressive effort to manipulate popular perceptions that it is not a stretch to call it propaganda.

This strategy, of relying on propaganda to mask their true intent, has become inevitable, given the strategic corner the Obama Adminstration has painted itself in. And this campaign has become increasingly desperate as the inconsistency between the Adminsitration’s “product positioning” and observable reality becomes increasingly evident.

Recall how we got here. Early in 2009, the banking industry was on the ropes. Both the stock and the credit default swaps markets said that many of the big players were at serious risk of failure. Commentators debated whether to nationalize Citibank, Bank of America, and other large, floundering institutions.

The case for bold action was sound. The history of financial crises showed that the least costly approach is to resolve mortally wounded organizations, install new management, set strict guidelines, and separate out the bad loans and investments in order to restructure and sell them. An IMF study of 124 banking crises concluded that regulatory forbearance, the term of art for letting impaired banks soldier on, found:

The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred…

Shuttering sick banks is hardly a radical idea; the FDIC does it on a routine basis. So the difference here was not in the nature of the exercise, but its operational complexity.

This juncture was a crucial window of opportunity. The financial services industry had become systematically predatory. Its victims now extended well beyond precarious, clueless, and sometimes undisciplined consumers who took on too much debt via credit cards with gotcha features that successfully enticed into a treadmill of chronic debt, or now infamous subprime and option-ARM mortgages.

Over twenty years of malfeasance, from the savings and loan crisis (where fraud was a leading cause of bank failures) to a catastrophic set of blow-ups in over the counter derivatives in 1994, which produced total losses of $1.5 trillion, the biggest wipeout since the 1929 crash, through a 1990s subprime meltdown, dot com chicanery, Enron and other accounting scandals, and now the global financial crisis, the industry each time had been able to beat neuter meaningful reform. But this time, the scale of the damage was so great that it extended beyond investors to hapless bystanders, ordinary citizens who were also paying via their taxes and job losses. And unlike the past, where news of financial blow-ups was largely confined to the business section, the public could not miss the scale of the damage and how it came about, and was outraged.

The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn’t a risk; not only was it badly needed, it was just what voters wanted.

But incoming president Obama failed to act. Whether he failed to see the opportunity, didn’t understand it, or was simply not interested is moot. Rather than bring vested banking interests to heel, the Obama administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff. There would be no Nixon goes to China moment from the architects of the policies that created the crisis, namely Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Director of the National Economic Council Larry Summers.

Defenders of the administration no doubt will content that the public was not ready for measures like the putting large banks like Citigroup into receivership. Even if that were true (and the current widespread outrage against banks says otherwise), that view assumes that the executive branch is a mere spectator, when it has the most powerful bully pulpit in the nation. Other leaders have taken unpopular moves and still maintained public support.

Obama’s repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action. The new administration would have no choice other that working fist in glove with the banksters, supporting and amplifying their own, well established, propaganda efforts.

Thus Obama’s incentives are to come up with “solutions” that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry’s goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.

How did the Administration and financial services message control teams work together?

The first was the refusal to consider investigations of any kind. Obama is widely reported to have studied the early days of Franklin Delano Roosevelt’s administration for inspiration; it would be impossible for him to miss the dramatic steps FDR took, including supporting the continuation of a Senate Banking Committee investigation into the misdeeds of the Roaring Twenties, the Pecora Commission. The Pecora Commission not only kept the bankers on the defensive, but it also did the forensic work into the abuses. It was critical to bring the nefarious practices to light to devise durable and lasting reforms.

Why were there no inquiries into how the firms that needed bailouts got themselves into a mess? This was an obvious and comparatively easy avenue of inquiry which would make a great deal of useful background accessible and identified issues for further examination. For instance, after the rescue of UBS, the Swiss Federal Banking Commission required UBS to provide an extensive report of what went wrong, and also had the bank make considerable portions of that information public, via a special report to its shareholders. Yet no US firm has been asked to make any explanation of how it managed its affairs so badly as to require extensive public support to keep from failing.

The choice here was obvious. A refusal to investigate was tantamount to a refusal to reform. A good understanding of what had happened was essential, not merely to develop sound new rules, but also to keep the industry from muddying the waters, which would be easy to do, given how complex and opaque many of the products are

More compelling evidence of the Administration’s lack of interest in reining in the money-changers came via Treasury Secretary Timothy Geithner’s first presentation on his reform plan, which was more accurately a plan to have a plan. It was widely criticized for its sketchiness, but most observers missed the true significance. Had the Obama transition team done any serious thinking about the financial crisis? Obviously not, because you don’t need to think too hard if the game plan is to go back to business as usual to the extent possible. Geither’s presentation came nearly three weeks after Obama was sworn in, and all its initiatives were Bush/Paulson wine in new bottles: a new go at the failed idea of having the government overpay for bad bank assets; “stress tests” to put more discipline around the process of handing out TARP funds to the needy; and a mortgage modification program which pretended to be able to square the circle of saving borrowers without taking on investors in mortgage securitizations.

Geithner’s not-much-of-a-plan exemplified the second tool in the Obama campaign to sell doing as little as possible to the financiers: the Theory of Positive Thinking.
.
That notion has a proud tradition in America and was much in evidence in the run-up to the crisis. It promises that the economy will be fine as long as everyone thinks happy thoughts about it. For instance, I noted in a March 2007 blog post that while the tone of the Financial Times as of March 2007 had become generally grim, the US had become a Tinkerbell market, where valuations are held aloft by faith, and participants conspire to stoke true belief. And as the crisis wore on, other magical personages intervened. As a hedge fund manager who writes as Augustus Melmotte noted,

The market responded with enthusiasm to reports that the Tooth Fairy has agreed to acquire Lehman. The purchase price has not yet been determined and will be set by Dick Fuld wishing upon a star, clicking his heels three times, and being transported back to that magical place where Lehman still sells for over $70 per share….. Meanwhile, the SEC has announced an investigation of mean, evil, bad short-seller David Einhorn. …. Einhorn reportedly suggested that the Tooth Fairy does not exist and that wishing upon a star is not a wholly reliable price discovery mechanism. Christopher Cox, chairman of the SEC, said, “Vicious rumors attacking the Tooth Fairy will not be tolerated. Our entire financial system and indeed the American way of life depend on the Tooth Fairy and wishing upon a star…” The SEC is reportedly planning to set up re-education camps for short-sellers.

Remember that the US has an entire cable channel devoted to the Theory of Positive Thinking, namely CNBC, and a goodly portion of the financial media falls into CNBC-style cheerleading with more than occasional abandon.

Now it is true that this idea has a kernel of truth. John Maynard Keynes attributed the Depression to a change in investor “liquidity preferences,” which meant they had suddenly become very risk averse and preferred to hold cash until they felt conditions had improved, with devastating consequences for economic activity. Uncertainty can morph into a self-reinforcing downcycle. But it is one thing to use confidence boosting as a tool, quite another to regard it as a magic bullet. Merely clapping our hands all together will not cure the long-standing ailments in the economy.

Moreover, the Theory of Positive Thinking has been used, upon occasion, to suggest that conditions will only deteriorate if the public examines the financial services industry critically. It isn’t hard to see whose interests benefit from that posture.

Now it is hard to prove in a tidy way that the tone of financial press coverage had shifted suddenly, and decisively, to optimism as of early March. But many professional investors in my circle started regularly talking of cheerleading. Two Wall Street veterans, Sandy Lewis and William Cohan, weighed in on this pattern at the New York Times:

Whether at a fund-raising dinner for wealthy supporters in Beverly Hills, or at an Air Force base in Nevada, or at Charlie Rose’s table in New York City, President Obama is conducting an all-out campaign to try to make us feel a whole lot better about the economy as quickly as possible… We’re concerned that nothing has really been fixed. We’re doubly concerned that people appear to feel the worst of the storm is over — and in this, they are aided and abetted by a hugely popular and charismatic president and by the fact that the Dow has increased by 35 percent or so since Mr. Obama started to lay out his economic plans in March.

This result relied on more than mere dint of personality. A Pew Research Center study found that roughly government and businesses originated over half the economics-related news after the crisis. Obama himself “dominated” the key images and ideas. The reporting had a clear arc. The early coverage focused on the struggles over the stimulus plan and the banking industry plans, and as those faded, so did coverage of the crisis in any form. The tacit assumption was that the crisis was over, and the performance of the supposedly forward looking stock market was proof. But as anyone with a modicum of detachment could see, the market was a false positive, treating an aversion of utter disaster as an imminent return to normalcy.

The stock market has rallied over 60% from its early March lows, enabling the wounded banks to sell new equity to the public and avoid further contentious taxpayer-funded rescue measures. But the justification for the soft glove treatment of the banking classes, that what was good for them would prove to be good for everyone else, has proven to be wildly false. When the Dow levitated over 10,000, mainstream news outlets celebrated the event, with nary a mention of the continued train wreck in the real economy. As Matt Taibbi observed, “the dichotomy between the economic health of ordinary people and the traditional ‘market indicators’ is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.”

But banking boosterism has succeeded all too well, allowing Team Obama to fantasize that it can get away with creating Potemkin prosperity in lieu of waging the pitched battles needed to lay the groundwork for the real thing.

Indeed, the adoption of the Theory of Positive Thinking has virtually guaranteed that nothing will change, unless there is sufficient deterioration in the real economy or the financial markets to provide compelling counter-evidence. One example is the “paying back the TARP” charade. As the banks continued to post improved earnings, no matter how phony they were, they argued that they were now healthy and should be allowed to pay back the TARP funding that had been crucial to their survival. The reason they were so keenly motivated to do should have been reason enough to deny their request: namely, that they wanted to escape restraints on executive compensation, virtually the only demand that the government had made. But overpaying staff and keeping too little in the way of risk reserves was precisely the behavior that led to the near collapse of the financial system. Going back to business as usual would virtually guarantee more looting of major financial firms and another series of collapses.

But the Obama administration miscalculated badly. First, it bought the financiers’ false promise that massive subsidies to them would kick start the economy. But economists are now estimating that it is likely to take five years to return to pre-crisis levels of unemployment. Obama took his eye off the ball. A Democratic President’s most important responsibility is job creation. It is simply unacceptable to most Americans for Wall Street to be reaping record profits and bonuses while the rest of the country is suffering. Second, it assumed finance was too complicated to hold the attention of most citizens, and so the (non) initiatives under way now would attract comparatively little scrutiny.

But as public ire remains high, the press coverage has become almost schizophrenic. Obvious public relations plants, like Ben Bernanke designation as Time Magazine’s Man of the Year (precisely when his confirmation is running into unexpected opposition) and stories in the New York Times that incorrectly reported some Goldman executive bonus cosmetics as meaningful concessions have co-existed with reports on the abject failure of Geithner’s mortgage modification program. While mainstream press coverage is still largely flattering, the desperation of the recent PR moves versus the continued public ire and recognition of where the Adminsitrations’s priorities truly lie means the fissures are becoming a gaping chasm.

So with Obama’s popularity falling sharply, it should be no surprise that the Administration is resorting to more concerted propaganda efforts. It may have no choice. Having ceded so much ground to the financiers, it has lost control of the battlefield. The banking lobbyists have perfected their tactics for blocking reform over the last two decades. Team Obama naively cast its lot with an industry that is vastly more skilled in the the dark art of the manufacture of consent than it is.

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40 comments

  1. psychohistorian

    Yves,

    Your last sentence stuck me:
    “Team Obama naively cast its lot with an industry that is vastly more skilled in the the dark art of the manufacture of consent than it is.”

    At this time I would say that those folk behind the scene are manipulating Obama and the financial industry in the dark art of hiding the real head of our rotting fish very effectively.

    It is clear to me who Team Obama and the financiers work for and friction between them is all for show….and manufacturing more ignorance amongst the populace.

      1. WK

        Agree generally with the reply. The premise of the article is that Obama and his minions had direct ability to decide whether to help the banksters. In my view, Obama has a lot less control here than what is commonly known, and agree somewhat with psychohistorian.

        We need to recognize that the Rothschild cartel is at the genesis of much what we see in the financial industry today, including ownership and control of Washington DC, the Federal Reserve, etc. The Rothschild clan control the Fed, and this power influences much if not anything of what we see coming out of DC. We’re not alone, the cartel owns almost all central banks in the world. The cartel has maximum skill in preseving their secrecy, as they know as soon as the cartel’s dealings become commonly known, the people will rise up against them. The left/right dichotomy is a red herring, the real issue is how the wealth disparity continues to deteriorate in the USA (and elsewhere). As long as this deterioration continues, with support of a tax system that collects from the poor and gives to the rich, problems will continue. Along with that is the general perception among many in the American population that justice has never been served with the behavior of the DC power brokers in late 2008 with the primary onset of the global economic crisis, and probably will never be served.

        1. Yves Smith Post author

          You forget how cowed the banks were in late 2008 and 2009. They could have been brought to heel. Go back and read articles at the time. In all honesty, your view is revisionist history.

          1. Tim

            Not all banks were cowed back in late 2008 early 2009. Those in Canada and Australia were sitting quite pretty and had the full public praise of their governments and regulators as did a significant number of Asian and European banks all of which were proclaiming their eagerness to come in and pick off what ever business they could from the carcass of the wounded American banks. In an Canada I think two important events were significant Stephen Harper’s beating back of the NDP/LIB/BQ coalition threat in the fall of 2008 before Obama even came into office and later in 2010 Harper essentially driving a stake in UK PM’s Gordon Brown’s attempt to get a global bank tax in place the last real attempt to a major global leader to get tough with the banks.

          2. required

            @Tim: Economists such as Australia’s Steve Keen and financial bloggers such as Mish repeatedly debunked the myth of healthy Canadian and Australian banks back in 2008-9.

          3. reprobate

            Reading comprehension check. Was the post about Canada or Australia? Are any Australian or Canadian banks among the global TBTF that need to be curbed? No on both counts.

            Caviling for the hell of it is not terribly attractive.

  2. Norman

    As with everything human, one has to wonder if the “powers to be” have figured out what they are going to do if & when they realize total dominance? Perhaps I’m being optimistic here, but it seems that the Earth is on that well known slippery slope, gaining speed, while the “powers” accumulate their riches. Where do they think they can go, “where man has the ability today?” Good luck. That’s the fly in the ointment, as I see it. Talk about burning your bridges!

    1. Susan

      Hi Norman, Glad to read your comment. I have been muttering that sentiment for years. If there is a cabal, they’ve got to be the dumbest cabal in the universe. And I always wondered: if they are so hell-bent on enslaving us all and controlling the planet, haven’t they already ruined the prize. I mean, who would even want it?

  3. Timothy Gawne

    An excellent article.

    One minor but important quibble: the evidence is increasingly that Obama did not “Cast his lot with the financial industry”. Surely the evidence is that Obama was in fact picked by the financial industry, that he has been a corporate shill from day one, and the he and his buddies like the current situation just fine?

    Obama has not painted himself into a corner. Obama is doing great, and even if he retires after one term he will likely make a billion dollars for services rendered and have a very nice life palling around with his rich buddies giving lectures etc. So most of us will get poor. You have any evidence that Obama cares?

    1. required

      as much as i criticize obama, your description sounds more fitting to bill clinton than to obama. at a minimum, that leaves obama as naive, but definitely picked by the fire sector.

  4. annoyed lib.

    ” Team Obama naively cast its lot with an industry that is vastly more skilled in the the dark art of the manufacture of consent than it is. ”

    I’d disagree. Team Obama just pulled a page out of the Clinton (DLC-Carville-Emanuel) triangulation handbook—unless Obama is absolutely clueless when it comes to financial matters.

    The post-Vietnam Democratic Party is a complete mess.

    Take one part naive, liberal guilt (professional liberals), a beholdened, taken-for-granted base (poor minorities and gays) and add in pure opportunistic, Machivellian power seekers (the DLC-types) and you get a completecluster####.

    The professional liberal left should know better, but they don’t like losing—so they’d rather have a “beard” Democrat in office than the real thing.

    1. Yves Smith Post author

      As much as I have considerable antipathy for Geithner, he’s a textbook case of cognitive capture.

  5. Obama Resignation

    “The NY Fed, and thus Timothy Geithner, were at a minimum massively derelict…” Yves Smith

  6. Richard

    Yves,

    I enjoyed the post when it originally came out, but disputed then and still dispute one assumption: the time has past to actually reform the banks.

    Obama practiced the failed strategy of kick the can down the road and pray for a miracle. Clearly the miracle has not occurred.

    Without a miracle, the banks are still facing the problems they had at the beginning of the crisis (recently there toxic securities slipped 20% in valuation when the Fed tried to offload the AIG securities). In addition, they have a few new problems like the justice system beginning to delve into how the bank’s mortgage operations really work.

    This puts Obama in an interesting spot. If he believes his propaganda, then he needn’t give the bankers, no matter how hard Tim Geithner pushes for it, a get out of jail free card or another bailout.

    But if he does not do this, there is a sizable chance that the rot in the banking sector will be exposed. Once this occurs, we are back to the necessary conditions for reforming the sector.

    Richard

    1. readerOfTeaLeaves

      Since this post was originally published, we’ve seen the WaMu revelations that as much as 70% of the mortgages were fraudulent. We’ve seen Abacus and Timberwolf’s ‘shitty deals’. We’ve seen the Galleon insider trading.

      In other words, the context has changed and will almost certainly continue to do so. As it does, the system will probably continue to convulse.

      The conditions in which banks flourished between the early 1980s and even up to 2010 appear to be dissolving. The great credit-based economy seems to be running its course, although no doubt it will continue — like a drowning man who pulls his would-be savior down with him — to gasp for life even as it sinks from its own bloated weight.

      I give it 24 months at the outside before the idea of banks as utilities becomes a generally held, socially acceptable, widely supported notion. Perhaps we might call it ‘the NC iBanking model of banking’.

      It would be more transparent, and that criteria has gained a whole new resonance since Sept 2008.
      It would be cheap and affordable, which is quite attractive post-bailouts and obscene banker bonuses.
      It would be simple, also attractive post ‘shitty deals’ of Timberwolf, Abacus, and Magnetar.
      It would be easy, which most customers prefer.
      It would eliminate the problems of ‘tight coupling’, and in that respect it would provide a far more stable business model than the extremely unstable, highly leveraged structures of the present period.
      It would be more trustworthy, because the simplicity would reduce the chances of control fraud.

      iBanking: transparent, cheap, simple, workable, stable, and trustworthy.

      Personally, whether it is called ‘iBanking’ or ‘Banking Co-op’, I think that the idea of banking **as a utility** has a bright future.

      The existing model of highly leveraged, tightly coupled, control-fraud-riddled, wealth destroying banking can’t even begin to compete on any single one of those criteria that I’ve used to ponder the concept of what I think of as ‘an iBank model’ in which a bank is a public utility. On every criteria, the iBank concept beats the existing banking model.

      The smart politicians will be the ‘early adopters’.
      The legacy politicians are likely to implode with the banks.

      As a pragmatist, it seems to me that whoever manages to set this up as a working utility-banking model is going to have a ton of opportunity.

      People moved from dial-up and the hassle of phones with 20 buttons and umpteen call lines the minute they were offered something cheaper, easier, affordable, and simpler.

      Whoever can figure out what I’m phrasing the ‘iBank model’ is going to hit a market that no one knew existed. Until it happened. But when it happened, it happened very, very fast.

      1. readerOfTeaLeaves

        One more thing…

        apparently, a missing / mark.
        Apologies 8-p

        But the Obama defense of the legacy banking structures in an emerging environment of transparency is politically catastrophic.
        Even saving the existing banking structure is ludicrous; kind of like arguing for the old dial-up phone, or the 20-button conference call contraption. Sheer lunacy.

        1. Cedric Regula

          We need a less confusing name for it than iBank.

          I’ve had an internet bank for a long time, so I used to think that was an iBank. Then when I found out I needed to learn more about investment banks, I found those were abbreviated to iBank or iB. And I suppose Capital One will come out with a scanable, electronic, subprime credit card app for the iPhone one of these days, and call it the iBank.

          So maybe something like MyBank? Or uBank? (some UBS linkage there tho)

          1. readerOfTeaLeaves

            You make a good point. I was trying to think out a concept ;-)

            Maybe offer prizes for the bank? “Must be 10 characters or less, include at least one numeral and one Capital letter. May not include ‘zombie’ or obscene terms.”
            ;-)

      2. Mark P.

        readerOfTeaLeaves wrote: ‘I give it 24 months at the outside before the idea of banks as utilities becomes a generally held, socially acceptable, widely supported notion.’

        This is feasible. In parts of the world, anyway.

        In the UK, the meme in fact seems to be emerging. That’s remarkable, given the City’s large role within both the UK economy and on the world stage, where its influence has helped enable the UK in its view of itself as still an important world power. Yet the cost of bankster malfeasance has just been too ruinous: the alternative of not bringing them into line is not really feasible. That said, the politicians will drag their feet till the end, of course.

        It’s in the US that this meme will be fought and suppressed the longest. The media discourse — as with the Cassidy article on Tim Geithner discussed here, and so forth — bears comparison, in terms of presenting only those tropes that the regime finds ideologically acceptable, with the old PRAVDA.

        Maybe, eventually, with Baghdad Bob.
        http://welovetheiraqiinformationminister.com/index.html
        http://en.wikipedia.org/wiki/Muhammad_Saeed_al-Sahhaf

    2. Mary

      “The banking lobbyists have perfected their tactics for blocking reform over the last two decades. Team Obama naively cast its lot with an industry that is vastly more skilled in the the dark art of the manufacture of consent than it is.”

      1) Banking lobbyists and legislators are succubus to incubus.

      2) Dark art of manufacturing consent – owners of corporate america and the media.. 83% of US Corps are incorporated Offshore (Treasure Islands, Nicholas Shaxson). How do the lobbyist’s get paid? Offshore money? How can the corporation supercede people? Supreme Court – Citizens United.

      3) The only answer is to not cede that we “move forward”. Example – High Frequency Trading = millisecond musical chairs – if you’re without the chair when the music stops – you lose. And they DO know how to get the gains just by pretending to supply the music.

      My family NEVER forgot the depression and the lessons from it. More than appalling that there is no valid reform. Bald corruption and thievery is the order of the day. My theory is Mr. Obama received a warning: explicit or implicit. His meeting with the 12 Bankers was just for show. He really didn’t know the score. It takes years to understand these markets. He had the foxes explaining to him the rules of the henhouse and frankly, this game is far too big even for a president to take on. There would certainly be sacrifices. Have you ever seen any entity give up it’s power and money that easily? Exactly.

  7. Tom Key

    I used to think “economics” was not difficult to understand. Sort of “buy low, sell high” with a side of tax evasion. The banksters pretended to be “creating new products” — but they were not. They were simply engaged in fraud — pretending to offer new investment vehicles, but actually disguising toxic waste with fancy nomenclature and fraudulent ratings.

    The simple-minded thuggery of the financial industry CEO’s who destroyed their institutions and then took bonuses, is neither crafty nor new. They are self-defeating moral morons. The should be civilly and criminally prosecuted by investors and State AGs for fraud.

    However, this article woke me up to the role played by the “dark arts”. Right. The Market is not “Free”, where consent and choice are so intensely manufactured.

  8. Kim Kaufman

    This reminded me why I cancelled my New Yorker subscription. After being disgusted with the puff pieces on Obama administration folks and David Remnick came out with his book about Obama… I realized The New Yorker needed “access” to the administration and what better way to do it than writing favorable articles about the unfavorable losers Obama had surrounded himself with.

  9. arby

    Mr.Dimon says that these massive banking failures should be expected every five years or so. Time is fast approaching for another collapse if he is correct. This time, hopefully, there will be enough people to punish the politicians who will not fix the system, break up the banks and prosecute the wrongdoers.

    1. Jason Rines

      Sure, the banks will be broken up in America and become utilities. After WW3 that is…

      By then hanging a few hundred for two billion lives destroyed along with society itself, will not feel like true justice.

      The cycle of the mugger is now onto the next phase of silencing the rape victim. Wonder how it will happen this time, like in WW2 with lots of Mexican Stand-Offs, double-crosses, etc?

      Either way, when elephants fight ants get trampled. And it always seems like the Fascists have got to kill each other in the end. The compulsive need for competition in these ranks being what it is…

  10. Omitted Kingdom

    What, exactly, would a Republican president and a Republican Congress do that would make any difference?

  11. Teejay

    Wow! “…Obama’s…’solutions’ that paper over
    problems…using leverage and investment gains
    to cover up stagnation in worker incomes.[]
    …the only problem…how to fool the…
    public into thinking a program of Mussolini-
    style corporatism represents progress.”
    Bless you Yves! I came late to the Fin Info
    party but I’m addicted. As painful and at times
    depressing as this info becomes I find myself
    saying: ” Thank you may I have another one
    please.”

  12. So Cal 7

    Yves,
    This a very apt post for this day. Thank you.

    I love comparisons and I appreciate the referece to the FDR commissions/efforts and will read more about them. Thanks there, too.

    To make a starker comparison, look at events such as the Gulf Oil spill. That was truly a disaster and the action (reponse) was swift and the inquiry very pointed and demanding. You could apply that to most every other (Katrina, Three Mile Island, etc.) such cataclysm.

    To me it is very telling that the complete absence of any real and agressive inquiry, reform and prosecution has not (and likely will not) occur and that, in the light of the facts that what happened in 2007/08, may have been the most gigantic catastrophe we’ve ever seen….and possibly may have not seen the worst of yet.

    It’s almost eerie and certainly foreboding.

    1. Dan The Man

      I think corporatism/elitism has reached its zenith with corporate personhood, mandatory arbitration(tort reform)and the successful purchase of both parties ,union emasculation. We just arrived back to the turn of the century.

  13. R Foreman

    Alan Greenspan seems to think the Aug 2 deadline will pass and the debt ceiling won’t be raised. His conclusion is that financial debt service will continue being paid, but other promises such as social security, medicare, medicaid, will be defaulted to the tune of 40% of all government outlays.

    Has Obama accounted for the type of social chaos that would ensue, the drop in GDP (and hence tax revenues), the cost of maintaining order ? It seems like every propaganda effort only considers the most rosey scenario, but as we know real life doesn’t always work out that well.

    http://video.cnbc.com/gallery/?video=3000030846

    1. R Foreman

      Report predicts chaos if U.S. prioritizes payments

      WASHINGTON, June 28 (Reuters) – Any attempt to prioritize federal payments if Congress fails to raise the U.S. debt limit and the country defaults would rapidly descend into chaos, according to an independent study released Tuesday.

      If the U.S. government cannot borrow more money to meet its obligations past Aug. 2 — the Treasury’s deadline for raising the federal borrowing limit — it will be unable to pay between 40 to 45 percent of the 80 million payments it makes every month, the report says.

      http://www.reuters.com/article/2011/06/28/usa-debt-default-idUSN1E75R1WT20110628

    2. Mary

      On Charlie Rose recently, Greenspan opined that Greece withdrawing was “inevitable”, so if he has expressed the opinion stated above, just points to the idea of inevitable lack of containment.

    3. Jason Rines

      No worries. Being totally ass-raped over decades is not humiliating enough!

      The protesters will all be arrested and put to work for the State. All for the good of the country, of course.

      That frail human spirit must be broken completely (sarc off).

  14. Susan

    Wow. That was clear and unequivocal. I’ve only been here a few months. But even by the time I stumbled onto NC, I knew I had found the well. I would like to apologize for all of my ignorance and thank NC for accepting my comments regardless. And I also want to beat my drum. We do need to utilitize the banks. We now live in such a complex and needy world that the old rules will have to be reexamined. I think we need to print up money generously. As needed. And do the right thing with the money: achieve the common good. Money needs to be valued only for what it can achieve. And I fear if we do not get on with this, it will be too late for us and for the environment we must preserve.

  15. rps

    As I read about Obama’s shoulda, coulda, and woulda’s regarding the banks, Wall Street, and corporate malfeasance, I’ve come to one conclusion, the responsibility and error of judgment does not rest at Obama’s feet, it rests upon our shoulders.

    Our expectations exceeded his abilities. Obama never ran the gauntlet. What did we know of his character, integrity, honor, strength, and most of all endurance in the ring. He never was a fighter. Instead he posed as a fighter when in reality he’s a pretender. The moment he chose Biden was when the truth was revealed; the fight was rigged. Biden the VP nanny and protector of banks, Wall Street, and Hedge funds was the smoking gun. Biden’s presence assured the financiers, quelled the voters of Obama’s youthfulness, inexperience, and lessened the bigots pain. Thus, the untested Obama was imbued with a veneer of polish. His resume was given a dash of book celebre cause as to hide the absence of life. Where was the mettle, hard-earned life lessons, and personal depth found in those who walked the difficult road of life such as FDR? Imagine an FDR without polio or Teddy Roosevelt without the sickly childhood and strength to overcome his physical weaknesses. Lincoln’s hardships and loss of children, and John F. Kennedy as a lieutenant of his battalion PT 109 saved his entire crew’s life and his life-long incapacitating back pain as a reminder….all examples of leaders that were life-tested, forged by fire, shaped, and honed into steel blades on hard-won lessons. Obama never had a chance to succeed as a president. He was in over his head, still is. As a nation we were naive in assuming he’d could step in as an accomplished leader and statesman when in fact he’s at apprentice level.

    Obama should not seek re-election and do the right thing, not because it is easy but because it is hard. Allow a person with the strength,integrity, tenacity, stature, judgment, and courage to lead a nation out of the economic chaos and morass of immoral superiority.

  16. LeeAnne

    Obama: ‘There will be no end to the propaganda.’ Shut up and show me your papahzs!

  17. Bonju Patten

    Here’s something happening in nj that no one really knows about except people on Medicare and medicaid. Gov Christie has taken tradition Federally run programs and given them to HMO insurance companies that are running these programs – medicare and medicaid like insurance programs. This is only good if the patient is in palliative care like my partner however any monies she gets from SSI/SSD will be eliminated leaving her penniless. She doesn’t make much a year way under $10K so how is this going to be affected. Millions of people will be disenfranchised under Obama – and he will go down as the worst president ever. I still say that you cannot hire a black person to do a job that affect millions of non black people. Obama is not black or white he’s all about being green.

  18. steelhead23

    This article and the many comments seem to be wondering whether Obama is the flim-flam Music Man we all marched behind, singing his tune, or if he was duped. My view is slightly different. I won’t bore you with my life story, but I have known players, rascals, and millionaires. Players routinely end up lonely, reminiscing about the good old days and reviewing their list once their boyish good-looks fade, rascals are interesting, but hanging with them too long is a bad career choice, but millionaires take the cake. Take a millionaire fishing and he will do his damnedest to hook the best fish, the most fish, etc. even if they have to cheat. They are competitive beyond all manners. Whether the prize is a fortune 500 company, or boasting rights around the campfire, the just want to win, baby. While Clinton was a player, and Bush a rascal, Obama is the millionaire. He simply wants to win. How the country fares is immaterial. As kissing bankster ass increases his chance for winning, you can expect rosy cheeks all round Wall Street. Rahm may be in Chicago, but his ghost still haunts the palace at 1600 Penn. Obama’s chances for taming the banksters ended the day the banksters decided he was to be president and put their money down – and that is not going to change anytime soon.

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