Is there a Global War between Financial Theocracy and Democracy?
Congress is about to reconcile a financial reform bill that is virtually designed to institutionalize "too big to fail."

By Les Leopold, The Huffington Post, 6/11/2010
http://www.huffingtonpost.com/les-leopold/is-there-a-global-war-bet_b_608703.html

Senate and House conferees are about to reconcile a financial reform bill that is virtually designed to institutionalize "too big to fail." And when they do we'll lose another battle in the ongoing war between global financial markets and democratic nation-states.

This war has been going on for decades -- but democracy hasn't always been in full retreat.

The New Deal Conquest: During the Great Depression democratic forces gained the upper hand in the war. We realized that financial markets, which are driven by the largest banks and financiers, had to be tightly controlled. We knew that global speculation on currencies only deepened the Depression and had to be strictly limited. We knew that an iron curtain was needed between commercial and investment banking to protect Main Street depositors from market madness (that was the Glass-Steagall Act). And most importantly we knew that the key to preventing economic upheaval was to limit the wealth of the super-rich and to increase the wealth of working people through progressive taxes, Social Security, wage and hour laws, and the promotion of unionization. The Bretton Woods agreements forged by the Allies during WWII set up strict rules for global finance, rules that kept financiers in check for more than a quarter century.

And it worked pretty damn well. As economist Joseph Stiglitz points out, this era saw only one financial crisis (Brazil, 1964), and working people in western democracies made huge gains. Since the era of deregulation took hold in the late 1970s, the world has suffered over a hundred financial crises and middle-class incomes have stagnated.

The Deregulatory Counter-Offensive: By the late 1970s, bankers regained the advantage through the spread of a new faith in self-regulated markets. The economic apostles of unfettered markets lobbied against progressive taxes, unions, and social welfare programs. The new orthodoxy was: "Let the elites collect the money--they'll invest wisely (instead of consuming), and all boats will rise." This near-religious revolution rapidly spread through the economic and policy establishment. Regulations were dismantled right and left, and the revolving door between government and Wall Street started spinning. The American financial catechism ruled the world. And on Wall Street, the money tap was open. It did not trickle down.

Then, suddenly, in 2008, the market gods destroyed themselves as the unregulated financial casinos crashed and burned, just like they did in 1929. For a few months, it seemed like the deregulatory theology become a global heresy. It was obvious that Wall Street's reckless speculation and its bold new wave of financial engineering had caused the Great Recession. (See The Looting of America for an accessible account.). It was also clear that if government didn't come to the rescue, Wall Street would lay in ruins, along with the rest of the economy. This was the perfect moment for democracy reassert democratic control on financial markets, just as we did during the New Deal. We blew it.

The Victory at Too Big to Fail: At the moment when Wall Street was on its knees, we decided to bypass serious reform. Instead, we rebuilt Wall Street, using taxpayer money and guarantees - more than $10 trillion worth. We let bankers use our bailout money to pay themselves $150 billion in bonuses -- at a moment when over 29 million Americans were jobless or forced into part-time jobs. We allowed the top hedge fund managers to walk off with over $900,000 an hour (not a typo) in 2009. Windfall profits taxes? No. In fact we let hedge fund honchos pay an extra-low tax rate by calling their income "capital gains." We didn't restore Glass-Steagall, we didn't break up "too big to fail" financial institutions. In fact the biggest banks became even bigger, courtesy of the U.S. government.

The Invasion against Democracy: The war is escalating. Right now, financial elites aren't just fighting a defensive battle against new regulations. They're playing offense: They're whipping up deficit hysteria around the globe and calling for drastic cuts in middle class programs. Why? They want to ensure that their loans to governments aren't threatened by rising public debt. Ironically, the public debt they're so worried about was created in large part by them -- the result of huge bailouts and other expenses stemming from the crash they caused. Although the bankers want us to dismantle what remains of our worker-oriented policies, welfare for the financial elites is still fine and dandy.

This is the most dangerous counter attack in the history of finance. We had better know a great deal more about the attackers. Who makes up this shadowy force called "global markets"? Who fights their battles? Do they have a high command?

Not really. There is no executive committee of financial elites. There's no international conspiracy, no Elders of Zion. Instead these markets are pulled and pushed by about 50 very large banks and financial institutions. This is where much of the nation's $2 trillion in hedge fund money roams. This is where the top six US banks frolic. They don't have to sit around a table strategizing. They instantly sense threats to their power. They instantly smell profitable openings and they're poised to grab what they can, whenever they can. They thrive on turmoil, which gives them new "proprietary" trading opportunities to exploit. Volatility means big bucks, especially now that the largest players know that the government will back up even their wildest gambles. History has just proven that they are way too big to fail.

Of course they still have to lobby government officials--many of whom either were bankers, or will be once they leave office. But their most powerful lever on government is through the market itself: Here, by moving vast quantities of money around, they can instantly veto policies they don't like. If the EU talks seriously about financial transaction taxes, the markets go down the Euro grows weaker, and interest rates rise--making it more expensive for governments to borrow the money they need to operate. Politicians have learned to "listen" to the markets and are conditioned to placate them.

Should a nation state get out of line (Greece, Italy, Spain, Portugal, etc), the markets slap them silly. Politicians rush to the scene and start slicing social spending. If instead they demand new taxes on financial elites to reduce public debt, the markets respond with even more fury. Money flees.

All the external machinery of democracy still clanks along. We still pull the levers in the voting booth. But the decisions that affect us the most are made in a profoundly undemocratic way. Faceless financial markets exercise far more control over politicians than the voters who elected them.

So the problem isn't just the corporate campaign contributions, or corporate media control or the academic consensus supporting our financial theocracy. It's the raw power of the markets. They've been roaming free and virtually unregulated for more than a generation, and now their power is unparalleled. Just months after they brought our economy crashing down, they're right back to their old tricks, setting the stage for the next crash and the next bailout while getting filthy rich along the way.

Bill Clinton nailed it on the head when he reportedly said:

"You mean to tell me that the success of the economic program and my reelection hinges on the Federal Reserve and a bunch of fxxxing bond traders?" (See Agenda by Bob Woodward)

No Retreat, No Surrender? There's no room for pacifists in this war. Clearly, Wall Street and its global minions are not seeking a truce. Instead, they're coming after our Social Security, Medicare and Medicaid programs. They want us to work longer before we retire and get less when we do. They want us to pay more for health care and get less of it. They want less public money to go to schools, teachers and public infrastructures. And they want us to get used to a jobless recovery with double digit unemployment rates. (And when millions and millions of people are unemployed, we can't maintain high labor standards, and our wages and benefits erode.) In short, they want to undermine all the policies and programs that have built and sustained middle class life.

Already government officials in the UK, Germany and here are telling us we must endure austerity for "decades to come." As Fed Chair Ben Bernanke candidly put it:

"We can see what problems can arise in a country if investors lose confidence in the fiscal position of that country, so it is very important that we address this problem."

Of course, he's not going to point out that this austerity is only for the masses, definitely not for the financial elites. Or that the underlying cause of the debt investors are so worried about is the giant economic crater caused by the very same financial elites who now might "lose confidence" in financing a middle class society.

We shouldn't kid ourselves about the pitched battles ahead. Fighting back won't be easy, and winning will be even harder. People in country after country will have to mobilize themselves in defense of real democracy, in defense of each nation's right to provide its people with a decent quality of life. In my opinion, that includes sustainable jobs with decent benefits and a solid public infrastructure that promotes equity, protects the vulnerable and enriches the environment.

Unfortunately, no one can guarantee that democracy will prevail in the war against financial theocracy -- just recall the totalitarian chaos in Europe during the Great Depression. But don't count it out, either. It's true that many of us regular folks have been diverted by the media, distracted by the Internet or lulled into a stupor by pharmaceuticals. But when we realize that we've been shoved into a corner with no way out, we'll act. A popular struggle will begin. And when it does, we'll at least have a fighting chance to recapture our democratic souls.

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It - Chelsea Green Publishing, June 2009.

READER COMMENTS:

HOT wrote:

Everyone keeps talking about how the big banks and Wall Street caused the collapse, but it was the big, vertically-integrated home builders (the ones with their own finance companies) who taught the banks the art of predatory lending. Builders had less regulatory oversight and an incentive to sell homes rather than make sound loans. After the repeal of Glass-Steagall, they could sell the loans to 3rd party investors, so the objective of builder-owned mortgage company was to push home sales. These builders also had an incentive to use shoddy materials, hire undocumented workers, inflate appraisals, promote liar loans, and more, and they used their political clout to pass laws that shielded them from accountability, especially in Texas.
 
To learn more, read "Texas Homebuilding and the Global Collapse" at www.homeownersoftexas.org/collapse.pdf.

mondaymornQB wrote:

Anyone that has remotely been paying attention could see this war for power w/ their eyes closed. If there is one thing our 2 crime syndicates [Democrats & Republicans] that run this country do, it is protecting their corporate masters from the public. When corporatist run regulation they appoint industry insiders to regulate. Those regulators are there to secure jobs in the industry and turn a blind eye regulation violations. The FDA and MMS are perfect examples of this. When the corporatist that fly false flags for free markets they initiate limited liability laws. These are in place to protect the largest companies from the family owned business. One thing the 2 corrupted parties did on a bi-partisan level was repeal the Glass-Steagall Act and put in place the Gramm-Leach-Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999. And what do yo know 10 yrs later the economy goes down the toilet.

Then we have the two parties working together to pass laws making virtually impossible for 3rd parties and independent candidates to get on ballots.

We are loosing this war.

renes wrote:

Brooksley Born, the head of the Commodity Futures Trading Commission at the time, warned of the potential for economic meltdown and derivatives in the late 1990s, and Greenspan, Summers, etc. had her agency gutted (see a Frontline program called "The Warning").

Unlike this time, when the financial crisis happened in the 1990s, Greenspan and company convinced Wall Street to pay for their mistakes themselves and then did nothing to make sure that it did not happen again. Greenspan did not consider the possibility that his view of markets was wrong.

http://www.gold-eagle.com/gold_digest_01/hamilton091001.html

rhymney wrote:

The bill will not end "too big to fail" but that hardly is our biggest problem. Congress demonizes the financial industry on a regular basis until they collect enough political donations from said industry, then they back off. It is just like in the movies where the small shop owner doesn't want to buy protection from the hoods until they smash up his shop. People complain that businesses own the government due to their donations, hey that is just the way the politicans want it. They theaten industries and companies with onerous regulation until they cough up more dough.

Kevin Atlanta wrote:

Our first step in regaining our nation is to remove the Corporate Veil and begin holding the Boards of Directors, Executives and Stockholders civilly and criminally accountable.

The next is to Audit and End the FED. The FED is the root of the Boom and Bust cycles, the wars and the current rape of America.

The FED is a private Banking Cartel and is not a part of government except by it's agreement. The FED completely abrogated any responsible regulation under Bush's direction and is the root of the Fraud of the Heist of History that Bush and Bernanke accoplished with Geithner insuring his cronies got paid at par.

The FED has only one interest and that's using what was the strength of the dollar to subjugate all the people of the world to the FED imperial aspirations. Audit and End the FED to restore democracy now.

EdCorner wrote:

Personally I kind of like China's way of dealing with corporate looters and financial criminals - they execute them - hence very little to no financial crimes there. That is why our banksters won't pull this crap in China through their subs and why America is the chief benefactor of TBTF's - because, insanely and self-destructively, we leave those that created the problem to fix it. Just like leaving the fox to guard the henhouse.

From a speech by Ghandi:

"Politics without principles; wealth without work; pleasure without conscience; knowledge without character; commerce without morality; science without humanity; worship without sacrifice."

HOT responded:

Do we need the death penalty to deter white collar crime? We might. That's because business executives understand cost/benefit analysis, and they know white collar crime pays: i.e. the benefits FAR EXCEED the cost*risk. Large fines can be paid from Petty Cash, and even the threat of jail time is not a deterrent when the rewards are high enough. Consider the example of life in prison (assume 20 years depending on your age). Would you take that risk if the reward was $10 million total? That $500,000/year compensation for jail time is acceptable to many people when prosecution is certain, but what if the odds were 50%, or 5%, or 1%? What if the reward was even greater: i.e $100 million or $1 billion? At some point, the threat of execution is the only deterrent, but for some even that's not enough.

slogward wrote:

There's nothing at all wrong with capitalism so long as its being run by folks you'd lend a dollar to. And everything wrong with governments you wouldn't give a dollar to, if you could avoid it.

EdCorner wrote:

For those that blame people that mortgaged more than they could afford. These people bought into the scam propaganda from the banksters that home values would always go up! The ratings agencies said what they were paid to say, Junk=AAA! The banksters saw defaults happening & knew they had to unload their toxic holdings quickly! Without AAA ratings they couldn't unload them to Fannie & Freddie and leave the taxpayer on the hook for their bets that went bad. Most people set aside their own logic because the banks were supposed to know better! Little did we realize it was a scam the banksters were running, knowing that the taxpayer would have to bail them out. So they went as far as offering "liar loans" to the unemployed with the goal of getting EVERYONE in debt. With "proprietary trading", in otherwords, criminal/immoral activity, they were able to lose more money than there is in the whole world! Did they lose? Not the way it's been laid out & looks to me. GS was shorting the exotic instruments they were creating so they HAD to have made money on the bust. If GS was shorting then they all were. Financial terrorists exploded a financial bomb that has bankrupted the world. It's not our fault that we fell for their scam - banks were smarter than us mere mortals & were supposed to know best. So we believed them & took out mortgages or used our homes as ATM's.

Kevin Atlanta responded:

Here is the reality of the Small Business man. Beginning in 2007 the Banksters refused to loan money to my business that supported 4 families plus my own, I used the equity in my home to provide me the line of credit that the seasonal nature of my business demands. The market tanked, wiped out my Roth, my investment portfolio disappeared and the value of my home decreased by 30% and that effectively dried up my ability to maintain a business after selling off what was left of the portfolio to get through keeping my laborers paid and meeting the day-to-day expenses that continued to spiral upward.

After a lifetime of work I no longer own a business, have a retirement or any investments at 55 because of the Greed of Back-Room Gamblers encouraged by the FED and thier Dereliction of Duty in Regulation and that is an Intentional Act of war against the USA.
End the FED, restore democracy.

HOT responded:

Government promoted the American Dream of home ownership with artificial stimulus for decades. These incentives inflated home prices and caused people to buy more than they should have. See how this caused market failures in our free-market society: www.homeownersoftexas.org/Artificial-Stimulus-Causes-Market-Failures.html.

David Durbin wrote:

The problem isn't just that the elites gambled with other people's money - private profit at public risk - but that such incredible concentration of wealth corresponds to virtually unlimited political leverage. And yes, that is completely irreconcilable with a functioning democratic republic. Most of the world's countries are being usurped by an international oligarchy with no loyalty to nation nor people.

iconoclast1 wrote:

We haven't been able to export much in recent decades, but we did export reckless capitalism, the "gift" that keeps on giving. The Citizens United decision merely accelerates the process.

Democracy has been falling to plutocracy for quite some time. It's the ultimate misdirection ploy. People rail against government while enormous corporations and moneyed interests gain control, courtesy of the weakening of government by the aforementioned railing against it. The hijacking of corporate cash flow funds the corporate takeover of government. As anyone that holds shares in a publicly traded corporation knows, there is no accountability to ordinary shareholders. Substituting corporate plutocrats for government bureaucrats may seem appealing on the surface, but the former promote the destruction of democracy while the latter can at least, in a healthy democracy not poisoned by moneyed interests, be thrown out of office if they are not working on behalf of their constituents.

veracity wrote:

Dear Mr. Leopold: I'm a big fan of your book, "The Looting of America," and I believe it should be REQUIRED READING for everyone, and especially for those who have jobs as talking heads discussing the American economy & financial markets. ("Looting" of course focuses on how Wall St. swindlers intentionally sold Michigan school district pension funds fraudulent "securities," packaged and rated (by "independent" ratings agencies like Standard & Poors & Moody's) that were not only full of JUNK bonds (such as those that GoldmanSachs sold investors, while simultaneously betting against them), but were full of "Credit Derivative Swaps" & other "derivative instruments" that weren't even bonds, but were in effect insurance contracts that put the School Boards on the hook as the INSURER should the underlying stocks in the WallSt. engineered "security" go bust - this was potentially UNLIMITED liability in a "security" that the School Boards thought were "safe & secure"!!

To answer the question of this article, "YES, it is 'Finanical THEOLOGY'" - and I do so hate to be the one to point this out, but it is the "divine right of God in our pocket" MoneyChangers, just as the bible illustrates in the story of Jesus overturning the moneychangers tables in the temple!

schatsie wrote:

Fabulous article and this totally explains the lack of transparency in everything from oil to wall street and healthcare.... without information, we are in the dark.... It is time to demand SIMPLIFICATION because this so called social engineering is doing NOTHING at all for the middle class or the schlepps....