An Open Letter To President Barack Obama.
Dear Mr. President:
I first became aware of you while listening to that incredible speech you delivered at the 2004 Democratic National Convention. I was so impressed I imagined that someday you would be President; I just didn’t think it would be so soon. Too soon, maybe, for you and your party if things continue to go as they have recently.
Like most others, I would imagine, I think your election was due to 3 factors: disgust with Bush, the weak Republican ticket and voter belief that your message of “change” indicated a proper punishment for Wall Street and aid to Main Street. While it is pretty obvious that not a lot, short of a long period of suffering, can be done for the latter, the former is a different matter.
Now, we all know that there can be big differences in what actually goes on in government and the public’s perception of it. And right now the public is really pissed – pissed at the banks and investment houses who are perceived as instrumental in derailing the economy and who, many think, should have been allowed to go out of business but were instead bailed out at taxpayer expense as being “too big to fail” and are now back in fine fettle for another round of economic rape. I mean, look at what these guys have done: they get saved from liquidation, then refuse to lend to their saviors and instead greatly increase carrying costs for those very same people through big increases in interest rates and fees on their credit cards, etc. Of course, much of what has occurred is obviously not your fault since you inherited the disaster, but the perception is growing that you are becoming part of the problem rather than the solution. Think of how your public would cheer if you were to propose a huge “too big to fail” tax on the monsters making it more profitable for them to break themselves up rather than pay it. Solves both problems simultaneously.
In addition, you appear to be courting the afflicted, case in point Tim Geithner. Now I know he’s been getting brickbats from all sides lately but just look at the perception: After all, he was President of the New York Fed and arranged for that outrageous payment of $13 billion to Goldman Sachs from AIG using taxpayer money to pay off losing Credit Default Swaps when similar non-AIG contracts were being settled for as little as 13 cents on the dollar. Then, too, USA Today has reported that he “picked a former Goldman lobbyist as a top aide on the same day he announced rules aimed at reducing the role of lobbyists in agency decisions”. Doesn’t look too good, does it? Now, I have read that in the 1930’s, FDR, facing similar problems as yourself, continually attacked the banker crowd, daring them to challenge his regulatory programs which had great public support, “threw the bums out” and brought in fresh talent to take a new look at things. You might do well to take a page from his book in these matters.
Now, returning for a moment to Goldman, the most egregious of the big boys: first it got bailed out with $85 billion of taxpayer money letting it avoid bankruptcy, then got the $13 billion mentioned above enabling it this year, through fancy trading games such as “flash trading” (essentially a new form of “frontrunning”) and “dark pools” (secreted trades), to pay around $20 billion in bonuses to its 27,000 or so employees (over $700,000 per on average) who, if Capitalism had not been stood on its head, would now be flipping burgers at Mickey D’s instead. And if that doesn’t look bad enough, how about Goldman getting as many early H1N1 vaccine doses as Lenox Hill Hospital in Manhattan? Or that Lloyd Blankfein, CEO, said that his firm is “doing God’s work” (referring to Mammon, no doubt)? If you were to introduce legislation for a one-time–only special windfall tax on Goldman to recover, let’s say, 75% of the $13 billion it should never have received, Goldman would still have gotten more than it would have on the open market and people would be cheering you in the streets.
And in the same vein, how about proposing outsize tax increases on the super- rich, maybe everybody making more that $10 million a year? After all, in 2007 the top 15,000 or so taxpayers (0.01% of the population making more than $11.5 million a year) accounted for more than 6% of all U.S. income. You’d get plenty of public support for that one.
And then there’s the issue of “transparency”, a keynote of your promise to the voters. How is it then that you have reappointed Ben Bernanke as Fed Chairman, a man who has steadfastly refused to release information concerning the recipients of, and quality of assets offered for, the $8.7 trillion lent or guaranteed by the Fed under various bailout programs? Not only is it quite reasonable to suspect that there is fishy business here, but if only 10% of that money became
unrecoverable it could destroy the budget and further cripple the economy disastrously. And even though Bloomberg News filed a Freedom of Information suit to pry the facts out, and won in Federal Court, it’s still not available because the Fed appealed. Hardly the stuff of transparency, don’t you think?
Now, I know Mr. Bernanke thinks that he can orchestrate the avoidance of a serious secular depression by flooding the economy with money and keeping Fed Funds rates in the cellar. The problem is that Alan Greenspan did that also, leading to the last bubble, and alas, the cupboard is now as bare as Bernanke’s academician approach. The Law of Unintended Consequences is alive and well, however, since the dollar is looking more and more like the yen a while back, the “carry trade” choice du jour (maybe it should be renamed the “carrion
trade”) because dollars can now be borrowed at almost zero interest by banks and reinvested at no risk in Treasuries or other higher-yielding assets for a nice spread. And eventually that bubble, now being created, will end like all the others, and it could get really ugly this time around since this is not Japan and the dollar is still the center of the monetary world. Common sense might suggest “driving the money changers from the Temple”, sticking to your knitting and blaming the results on Congress when it fails to sufficiently heed the warnings for more serious financial regulation.
And then there are endless other “moral hazard” matters to consider. For instance, how about lobbyists having been paid $224 million in the first 6 months of 2009 by banks and other financial entities to derail or water-down needed financial reforms after having been bailed out by taxpayers who had no say in the matter? Is this the Twilight Zone? I certainly don’t mean to rag on you, but there’s a whole lot of shit in the yard and somebody’s going to have to shovel it out before the flies take over completely. I suppose I could go on endlessly with my frustration driven diatribe but I don’t doubt that you’ve wearied of it by now. Hoping that maybe a thought or two has captured your attention, I wish you the best of luck in your thoroughly impossible mission.
Yours very truly