Leave it to Miss Ann to get the right of it:
In the wake of the Massachusetts Miracle last week ("The other Boston Massacre"), President Obama adopted a populist mantle, claiming he was going to "fight" Wall Street. It was either that or win another Nobel Peace Prize.
Now the only question is which Goldman Sachs crony he'll put in charge of this task.
If Obama plans to hold Wall Street accountable for its own bad decisions, it will be a first for the Democrats.
For the past two decades, Democrats have specialized in insulating financial giants from the consequences of their own high-risk bets. Citigroup and Goldman Sachs alone have been rescued from their risky bets by unwitting taxpayers four times in the last 15 years.
Bankers get all the profits, glory and bonuses when their flimflam bets pay off, but the taxpayers foot the bill when Wall Street firms' bets go bad on -- to name just three examples -- Mexican bonds (1995), Thai, Indonesian and South Korean bonds (1997), and Russian bonds (1998).
As Peter Schweizer writes in his magnificent book Architects of Ruin: "Wall Street is a very far cry from the arena of freewheeling capitalism most people recall from their history books." With their reverse-Midas touch, the execrable baby boom generation turned Wall Street into what Schweizer dubs "risk-free Clintonian state capitalism."
Apropos of the Clintonian No-Responsibility Era, Goldman Sachs and Citibank became heavily invested in Mexican bonds after a two-day bender in Tijuana in the early '90s. Any half-wit could see that "investing" in the dog track would be safer than investing in a corrupt Third World government controlled by drug lords.
But precisely because the bonds were so risky, bankers made money hand-over-fist on the scheme -- at least until Mexico defaulted.
With Mexico unable to pay the $25 billion it owed the big financial houses, Clinton's White House decided the banks shouldn't be on the hook for their own bad bets.
Clinton's Treasury Secretary, Robert Rubin, former chairman of Goldman, demanded that the U.S. bail out Mexico to save his friends at Goldman. He said a failure to bail out Mexico would affect "everyone," by which I take it he meant "everyone in my building."
Larry Summers, currently Obama's National Economic Council director, warned that a failure to rescue Mexico would lead to another Great Depression. (Ironically, Summers' current position in the Obama administration is "Great Depression czar.")
Republicans in Congress said "no" to Clinton's Welfare-for-Wall-Street plan.
It's not as if this hadn't happened before: In 1981, Reagan allowed Mexico to default on tens of billions of dollars in debt -- Mexico claimed the money was "in my other pair of pants" -- leaving Wall Street to deal with its own bad bets.
As Larry Summers expected, this led like night into day to the Great Depression we experienced during the Reagan years ... Wait, that never happened.
Bulls eye as usual. Read the rest here.
I disagree with her concluding sentence. The Carter Depression, as I style it, was a deep, cruel, cold, & very real Depression. Perhaps she was a sheltered middle-class child then, perhaps she was a government bureaucrat then, perhaps she was a Wall-Street denizen then. If so, lucky her ; however, for most of us, it was a brutal Depression. I can assure you that losing a business & becoming self-employed in that epoch was a nightmare. I will not listen to or read any denigration of the suffering, which included hunger, which attended those of us which abode in the ' real world ' of the 1980s with impunity. It was a Depression. Fortunately, I stoically re-grouped, entered an eclectic career, married, & moved on. (The political correctness & hiring practices of the ' groves of Academe ' thwarted any chance of a career in my specialty. Hint to the young : don't expect your European doctorates to be recognised on this side of the Pond. I learnt that lesson the hard way. The universities are completely incestuous in their hiring practices & thinking & philosophy.)
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