Chuck Schumer (D-Wall Street) was on This Week with George Stephanopoulos, saying that bank nationalization is a bad idea and that once people learn what the Geithner plan is, they’re going to love it.
This despite the fact that people like Jamie Galbraith, Dean Baker, Nouriel Roubini, Paul Krugman and others are arguing that nationalization is the only answer, and it’s just a matter of how much money we’re going to light on fire before we do it.
Dean Baker sent me a Bill Moyers interview with Simon Johnson, former chief economist of the IMF and now a Professor of global economics and management at MIT’s Sloan School of Management. It is one of the most pessimistic views of those empowered to lead us out of our economic crisis that I’ve seen. You can watch the video here, which I highly recommend, but this is from the transcript.
On who’s in charge:
BILL MOYERS: Are you saying that the banking industry trumps the president, the Congress and the American government when it comes to this issue so crucial to the survival of American democracy?
SIMON JOHNSON: I don’t know. I hope they don’t trump it. But the signs that I see this week, the body language, the words, the op-eds, the testimony, the way they’re treated by certain Congressional committees, it makes me feel very worried.
I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there’s a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can’t. You’re stuck.
On the "be nice to the banks" policy:
SIMON JOHNSON: The correct people you should be asking this question to are people at the IMF. And I can tell you what they’re saying is the policy that we seem to be perusing, of being nice to the banks, is a mistake. The powerful people are the insiders. They’re the CEOs of these banks. They’re the people who run these banks. They’re the people who pay themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them.
On the "web of interest" determining current policy:
BILL MOYERS: Geithner has hired as his chief-of-staff, the lobbyist from Goldman Sachs. The new deputy secretary of state was, until last year, a CEO of Citigroup. Another CFO from Citigroup is now assistant to the president, and deputy national security advisor for International Economic Affairs. And one of his deputies also came from Citigroup. One new member of the president’s Economic Recovery Advisory Board comes from UBS, which is being investigated for helping rich clients evade taxes.
You’re probably too young to remember that old song, "Sounds like the Mack the Knife is back in town." I mean, is that what you’re talking about with this web of relationships?
SIMON JOHNSON: Absolutely. I don’t think you have enough time on your show to go through the full list of people and all the positions they’ve taken. I’m sure these are good people. Don’t get me wrong. These are find[sic] upstanding citizens who have a certain perspective, and a certain kind of interest, and they see the world a certain way.
And it’s exactly a web of interest, I think, is what you said. And that’s exactly the right way to think about it. That web of interest is not my interest, or your interest, or the interest of the taxpayer. It’s the interest, first and foremost, of the financial industry in this country.
On the ability of Congress to rein them in:
SIMON JOHNSON: I called up one of my friends on Capitol Hill after that testimony, and that session. I said, "What happened? This was your moment. Why did they pull their punches like that?" And my friend said, "They, the Committee members, know the bankers too well."
BILL MOYERS: Last year, the securities and investment industry made $146 million in campaign contributions. Commercial banks, another $34 million. I mean, American taxpayers don’t have a flea’s chance on a dog like that, do they?
SIMON JOHNSON: It a massive problem, obviously. And I do think, though, the good news there are people in the White House – I think the president himself, is aware of this broader issue. And, obviously, the campaign, the Obama campaign was very good at getting small contributions, and trying to minimize the impact of major donors like that.
But, at the same time, these people are throughout the system of government. They are very much at the forefront of the Treasury. The Treasury is apparently calling the shots on their economic policies. This is a decisive moment. Either you break the power or we’re stuck for a long time with this arrangement.
On the need to stand up to the banks:
BILL MOYERS: So here’s the trillion dollar question that I take from your blog, that I read at the beginning, quote, "Can this person," your new economic strategist, in this case Geithner, "really break with the vested elite that got you into this much trouble?" Have you seen any evidence this week that he’s going to be tough with these guys?
SIMON JOHNSON: I’m trying to be positive. I’m trying to be supportive. I like the administration. I voted for the president. The answer to your question is, no, I haven’t seen anything. But you know, perhaps next week I will. But right now, as we speak, I have a bad feeling in my stomach.
My intuition, from crises, from situations that have improved, the situations that got worse, my intuition is that this is going to get a lot worse. It’s going to cost us a lot more money. And we are going down a long, dark, blind alley.
Johnson isn’t for "nationalization" per se, he’s for "scaled up FDIC intervention," breaking down the "oligarchy" by pitting one faction against the other. He’s also a fellow at the Peterson Institute, which pretty much exists to gut the social safety net and has a permanent flashing "wanker" sign. But based on his analysis of who is holding the financial keys at the moment, he fundamentally believes that the people in charge of determining the outcome of the situation have a vested interest in not standing up to the banking interests and doing the things that need to be done. And that is not a comforting thought.