t r u t h o u t | The Importance of Getting Wall Street Out of Washington, and Washington Out of Wall Street

Reich's sentiment is fine, in the excerpt below, but I disagree with his argument. It seems to me that one cannot separate Washington from Wall Street. He mentions some of the obvious reasons--the recent Supreme Court decision in Citizens United, the revolving door between lobbyists and government, the reliance on campaign donations. But the merger is more profound than this. We see it in the bailouts, in FDIC guarantees, in the role of the Fed, in the minting of money, recognition of property, and backing of constructs. We see it in the very structure of government (as the good old instrument of the bourgeoisie).

In the past thirty years, moreover, we see it in private-public partnerships and the diminution of government (Clinton and Gore called it reinventing government). Government became another economic actor, another entrepreneur steered by market logics and incentives (which made it an even more attractive acquisition for financial and corporate interests who could then mold it even more to their liking). But it wasn't just another economic actor. It was an actor with police powers, military powers, judicial powers. It was an actor that sought to legitimize itself as acting in something called a public interest, rather than simply an interest in profit. Current schizoprenia and mistrust is a result of the decay of this legitimation even as the power and rhetoric continue.

Tight connections between Washington and Wall Street are nothing new, of course, especially when it comes to Goldman. Hank Paulson ran the bank before becoming George W. Bush’s Treasury secretary. Robert Rubin followed the same trajectory under Bill Clinton, then returned to Wall Street to head Citigroup’s executive committee. Dick Gephardt, the former Democratic House leader, lobbies for Goldman. Some 250 former members of Congress are now lobbying on behalf of the financial industry. President Barack Obama himself received nearly $15m from Wall Street during his 2008 campaign, of which almost $1m came from Goldman employees and their families.

But politicians cannot continue to have it both ways. Given the Street’s excesses, Washington’s continued financial dependence on it is eroding trust in government. The distrust has already helped spawn the so-called “Tea Party movement” of disaffected Republicans. Many Democrats and Independents are no less cynical.

If Washington knew what was good for it and the nation, it would sever its financial connections with the Street. Better yet, it would enact legislation seeking to limit the impact of private and corporate money in politics. That goal is made more difficult to achieve by the grotesque recent Supreme Court decision (Citizens United vs. Federal Election Commission) holding that corporations, including financial firms, have the right to spend unlimited amounts on political campaigns.

via www.truthout.org

Comments

[Alain]

Hi Jodi

It is great to see you engaged in the current debate on the financial crisis. Unfortunately the insurance company i work for now prohibits me from visiting any blog using typepad - interestingly I can still visit those that use blogger and wordpress. So I will only be able to engage here in the evenings.

Anyway, regarding your reaction to Reich, I think that the neoliberalism you describe so well is qualitatively different from the past, specifically in terms of the relationship between finance and government. It is so clear that at the federal level, the decision makers have largely been captured by wall street. The question that is emerging, however, is whether the naked wantonness of the current disclosures can break, or at least tear a crack, into the current oligarchy.

I suspect you are may be more pessimistic or cynical about the possibility than I am - but having watched some of the hearings today one would be hard pressed not to be disgusted by the brazen callousness and inhumanity of the Goldman people. But it remains to be seen what, if anything will come of this.

One last comment - regarding any reference to government protecting the "public interest." Republicans rarely if ever talk about such a thing because they do not believe it exists. Buyer be ware and good luck. If you are taken advantage of, tough shit. The democrats, on the other hand, still pay lip service to this concept, and can still sound ernest at times. What many of them fail to recognize is that a hypertrophic financial industry is antithetical to any notion of a commons that needs protecting. Again, I see this "legitimation crisis" as an opportunity and the moment has not yet been lost.

Thanks for the discussion. As always, much appreciated.

[Jodi]

Hey Alain--sorry for not responding earlier. It's weird to me that Typepad would be singled out. Ideally, this legitimation crisis would result in eliminating most of the finance sector. I think the odds are against this, unfortunately. And this likely means that we will continue in the slow, miserable decline and corresponding increase in inequality and desperation.

Take care--I hope you and yours are doing well. As you might have guessed if you've come by here, I'm moving away from blogging for a while. I feel like I need to read, think, step back, stop being on line all the time.

[Alain]

No problem. Taking time to read and think is good.

I just read "13 bankers" - which I think was very insightful. Of couse Simon Johnson is a mainstream economist (I think he worked for the IMF). He is clearly not a radical and certainly doesn't wish to do away with the finance sector. But even he sees the need, both economically and politically, to break up the big banks. What I find particularly dispiriting is the Brown Kaufmann bill that tried to do just that lost overwhelmingly in the Senate - something like 27 democrats voted against it. In the past, Keynsian influenced policies allowed the system to a certain extent correct itself (I realize you may not agree with this). Now it seems that this is not possible. Whether Europe is able to deal with the crisis differently remains to be seen - but so far it is not encouraging.

I look forward to your future work - take care.