Posted on December 16, 2014
by Jerry Alatalo
(Originally posted on counterpunch.org – An article written by Norman Pollack)
December 15, 2014
Gluttony of American Finance
Query: Can you have a counterrevolution without a revolution? In logic, perhaps not; in America, now illustrated by the pending $1.1tr Appropriations legislation, emphatically yes. The pressure is on, and to focus exclusively on Republican opportunism (lateness, threat of government shutdown, blackmail) is to misread and misjudge the wider forces at work: the financialization of American capitalism, Democratic party’s equal complicity in serving and advancing banking interests, the ever-Rightward progression of the political-ideological spectrum on bipartisan lines, and, in this case, confirmation of the acceleration of ruling groups’ dominance as if a one-way street. Yes, the crippling of Dodd-Frank by again freeing-up derivatives trading, government obligingly backing-up this species of big-time gambling with depositors’ monies through bailout-guarantees should the bets turn south.
But that is not new, the replay of 2008 only a replay given the (again) bipartisan desire to serve as the House—how envious Las Vegas must be—in this gambling enterprise. Not new: Clinton had already set about dismantling Glass-Steagall in the mid-90s by bringing to power at Treasury, Council of Economic Advisers, direct legislation, etc., the Rubin-Sommers crowd of regulatory dismantlers, leaving, under liberal auspices, the banking system easy prey to the megabanks circling the wagons. Republicans today are merely validating and completing the work of Wall Street’s enhanced power in world politics and its role in the domestic economy, i.e., the larger policy-context, which affects the fusion of militarism and capitalism in America. Nothing is left to chance. I say this, not as one enamored with conspiracy theory but only following out the trends, as in the decisions promoting intervention, confrontation, hegemonic claims to unilateral global supremacy.
Not coincidentally, the new Appropriations legislation devotes practically one half ($490B) to defense, no cutting there—in contrast to the skilled paring down of the social safety net. But why should it be any different, when this perhaps-new stage of capitalism is intended to place finance capitalism itself on a permanent war and/or expansionist footing? Go back with me ten decades, to Rudolph Hilferding’s Das Finanzkapital (1910) to see the direction we are heading (or have already arrived), a dangerous or qualitative jump in capitalist development carrying with it militaristic prospects and consequences, and the regimentation—“soft” or “hard,” manipulation and a taste of the goodies as so many crumbs from the table, or, now, into a twilight zone, massive surveillance, the conjuring of a universal/ubiquitous Enemy, The Terrorist, necessitating the National Security State—of the American people. The US has been hatching this structure at least since the time of Hilferding, with Red Scares and Palmer Raids, to McCarthyism, to the NSA assault on civil liberties—curiously, in these cases mostly under Democratic administrations.
So, briefly, here is Hilferding for some guidance (and my guidance to him, largely via Paul Sweezy’s The Theory of Capitalist Development) in understanding today’s events, a good starting point being how the role of imperialism and militarism, in superseding and partially destroying laissez faire, paved the way for finance capitalism, which, more than the industrial phase of capitalism, fosters underconsumption and widening class differentials (where, I think, we’re presently at!). Internal controversies among Marxian economists of World War I vintage, on the importance of underconsumption and falling rate of profit, are too arcane for me to follow, but I see Hilferding recognizing the expansibility of capitalism in its financial form—monopoly and militarism its natural accompaniment. (This conclusion, vouchsafed in practice, doesn’t take a Marxist to figure out; the American leadership and power system have acted on the assumption of militarism and monopoly as the sine qua non of American capitalist development for at least a half-century plus.)
Hence, no automatic breakdown theory of capitalism, which I take to be the motivating factors, with the structure of consolidation in place, for imperialism and militarism—the system will not dissolve of its own (Hilferding, the Social Democrat, giving unintended credence to the necessity of revolution). The US not having the foggiest notion about such fine points of Marxian disputation, we see the system nonetheless at work on the course of permanent counterrevolution (a Reactive societal formation, even from Day One—Louis Hartz, The Liberal Tradition in America, on the taking-over of Lockean philosophy, remarked, America was born mature, it did not have to make itself so), attempting permanent capitalist expansion at whatever cost.
Consolidation, in the rise of the modern corporation as the groundwork for industrial capitalism, had within itself the next phase, finance capitalism, in which all the chicanery comes bursting out as the entrepreneur becomes divorced from production and devotes his being to profits, influence, deals, short-cuts, phony stock issuance—why blame Bernie Madoff as an exemplar of the falsification of a political economy transitioning from industrial to financial concentration, when his type has been around for years? Penetration of markets, of course, but financial jugglery, pyramiding international financial controls and schemes through American-led organizations, not all at once, not in the 1920s, nor Bretton Woods, but now, IMF, World Bank, a match in heaven for US capitalism (even the outsourcing of US manufacturing to remove some clutter), or more specifically, Morgan Chase et. al.
“Promoters profits” is Hilferding’s generic case, to be elaborated, amplified, twisted to bring us to where we presently are. “Market controls” sounds better, but even that may be gradually lost from sight as sheer manipulation of the financial system becomes an end in itself—my reference to gluttony. Profits in the old-fashioned way through production, why bother, especially when the American political system is at the beck and call of the Goldman boys, Jamie, Bank of America, all leading the charge for scrapping the safeguards to derivatives trading, such as they are, in Dodd-Frank. I think we can leave Hilferding here (I have barely gotten started, still less having done him justice), but we have a beautiful illustration before us, this very moment, of finance capitalism run amuck, Obama, for one, greasing the way. Don’t make the mistake of structural determinists (Hilferding didn’t), capitalists and their lackeys—how else characterize Obama and all but a few Democrats, Republicans, it goes without saying, the few opposing the legislation on extraneous rather than principled grounds—have actively to continue the progression of business/banking favoritism, not sit back and let it just happen.
I begin with Ed O’Keefe’s Washington Post article, “House passes $1.1 trillion spending bill,” (Dec. 12), the 219-206 vote coming hours before government shutdown. By now, we’re familiar with the details, my concern, the clash between Pelosi and some House Democrats against Obama, his cowardice and treachery revealed for all to see. When a procedural motion to begin debate was finally passed, it was Obama, Biden, and White House officials, in “a concerted lobbying effort,” who “helped secure enough support” for that to happen, he promising to sign the legislation if passed. A cave-in of the first water, except that Obama was already in Wall Street’s pocket. Pelosi rightly charged blackmail (government shutdown) and in words bespeaking her finest hour (there have been few such indeed), she said: “’I’m enormously disappointed that the White House feels that the only way they can get a bill is to go along with this [the this being rescinding Dodd-Frank safeguards on trading derivatives].”
Democrats were unhappy. Obama & Co. did the arm twisting to support the bill: “In addition to Obama and Biden, Jeffrey Zients, chairman of Obama’s National Economic Council, and Shaun Donovan, the White House budget director, phoned wavering Democrats. So did Democratic members of the Senate Appropriations Committee [Barbara Mikulski, its chair, and Christopher Coons].” Denis McDonough, White House chief of staff, also pushed hard, “an in-person plea for support during a closed-door meeting in the basement of the U.S. Capitol on Thursday night [night of passage].” Throw in the drastic loosening of allowable campaign donations—and the Obama record is dismal, to me, par for the course for him. 139 Democrats voted against the bill, 59 in favor, including minority whip Steny Hoyer. To give House Democrats backbone, Elizabeth Warren made a courageous speech in the Senate the day before, to which James Moran House Democrat (Va.) resorted to old-school red-baiting: “’That’s what you do when you run for president. You get out front knowing that there are a whole lot of people who are not going to let anyone get to the left of them.’” So much for Democratic party progressivism.
But Obama and Co., and fellow Senate Democrats, are not the only callers. Steven Mufson and Tom Hamburger’s Washington Post Workblog article, “Jamie Dimon himself called to urge support for the derivatives rule in the spending bill,” (Dec. 12), in its heading says it all:
Democrats, especially Congress freshmen, are either so weak or so opportunistic, in either case, slobbering over wealth and standing in awe of the major bankers—the revolving door perhaps beckoning—as to go over lock, stock, and the people’s barrel to Big Finance. One suspects that a call from Dimon would be sufficient, Obama hardly mattering where one’s bread is buttered. The reporters write: The acrimony between Obama and his party “largely pivoted on a single item in a 1,600-page piece of legislation to keep the government funded: Should banks be allowed to make risky investments using taxpayer-backed money?” Bad enough, an attack on a key provision of Dodd-Frank, but, they say, “even more outrageous to Democrats was that the language in the bill appeared to come directly from the pens of lobbyists at the nation’s biggest banks, aides said. The provision was so important to the profits [we tend to neglect how much, for the banks, is riding on this–mine] at those companies that J.P. Morgan’s chief executive Jamie Dimon himself telephoned individual lawmakers to urge them to vote for it, according to a person familiar with the effort.”
Josh Earnest, Obama spokesman, stated, “’The president is pleased,’” and that he doesn’t like “’a specific provision in this omnibus that would be related to watering down one provision of the Wall Street reform law,’” still, “’on balance, [he] does believe that this compromise proposal is worthy of his support.’” Anyone attuned to the special language of Washington knows that “compromise,” far from signifying shame is used to proclaim Victory, as though much had been gotten in its place. Fortunately, Mufson-Hamburger see through the phony rationale: “But ‘that provision’ isn’t just any provision. It’s one that goes to the heart of the Dodd Frank reform because it would let big banks undertake risky activities with funds guaranteed by the federal government and, hence taxpayers.” Pelosi, recognizing what was at stake (now, FDIC protection for the riskiest investments, whereas Dodd-Frank ordered them, credit default swaps and all, into separate entities, outside that protection), superbly noted in her speech: “’[The amendment went] back to the same old Republican formula: privatize the gain, nationalize the risk. You succeed, it’s in your pocket. You fail, the taxpayer pays the bill.’” Irrefutable logic, except to the bankers (or perhaps they fully know the score, and therefore go on the offensive).
The American Banking Association (ABA), in the person of James Ballentine, its executive vice president of congressional relations and political affairs, has all the answers. Setting up separate entities “’to engage in derivatives and commodities trading isn’t practical.’” Besides, it limits banks’ ability to extend credit to their clients. Most telling, and heart-rending, “’[Setting up separate affiliates] makes one stop shopping impossible for businesses ranging from family farms to energy companies that want to hedge against commodity price changes.’” Let’s give Simon Johnson of MIT the last word in this account. Why the change? “’It is because there is a lot of money at stake. They want to be able to take big risks where they get the upside and the taxpayer gets the potential downside.’” Johnson is no flaming radical. He is former chief economist of the IMF and professor at the MIT Sloan School of Management.
Not surprisingly, banks were active in pressing for this revision of Dodd-Frank for some time. I haven’t mentioned Citigroup yet. Here it is important to go back to May 2013, Eric Lipton and Ben Protess’s New York Times article, “Banks’ Lobbyists Help in Drafting Financial Bills,” (May 23), as the preparatory ground for what lies ahead in the Appropriations bill now moving to the Senate, and with Obama’s blessing (along with that of Harry Reid, in stark contrast to Pelosi) certain passage. We think of legislation as the creation of legislators—silly us. Lipton-Protess write: “Bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations. Instead, the lobbyists are helping to write it themselves.” Citigroup authored “one bill that sailed through” House Financial Services which “would exempt broad swathes of trades from new regulation.” Its recommendations “were reflected in more than 70 lines of the House Committee’s 85-line bill…. Two crucial paragraphs… were copied nearly word for word.” Not bad for an independent Congress, immune to regulatory crash.
This is on Obama’s watch, and the reporters can state matter-of-factly, “The lobbying campaign shows how, three years after Congress passed the most comprehensive overhaul of regulation since the Depression, Wall Street is finding Washington a friendlier place. The cordial relations now include a growing number of Democrats in both the House and the Senate, whose support the banks need if they want to rollback parts of [Dodd-Frank].” I confess to giving little credence to campaign contributions in explaining legislative behavior—yet here it is, and I’m reminded of V.L. Parrington’s description of the Great Barbeque after the Civil War. Lipton-Protess: “And as its lobbying campaign steps up, the financial industry has doubled its already considerable giving to political causes. The lawmakers who this month supported the bills championed by Wall Street received twice as much in contributions from financial institutions compared with those who opposed them…. In recent weeks, Wall Street groups also held fund-raisers for lawmakers who co-sponsored the bills. At one dinner.., corporate executives and lobbyists paid up to $2,500 to dine in a private room of a Greek restaurant just blocks from the Capitol with Representative Sean Patrick Maloney, Democrat of New York, a co-sponsor of the bill championed by Citigroup.”
Oh, the soul-searching on conflicts of interest. Jim Himes, third-term [at time of writing] Democratic congressman from Connecticut, head of the party’s fund-raising in the House, member of the Financial Services Committee, former Goldman banker, and “one of the top recipients of Wall Street donations,” said, no doubt anguished, “’I won’t dispute for one second the problems of a system that demands immense amount of fund-raisers by its legislators. It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption. IT’S UNFORTUNATELY THE WORLD WE LIVE IN [my caps.].’” In a nutshell, the Democratic slogan for rationalizing everything from gutting Dodd-Frank to armed drone assassination to massive surveillance to confrontation with Russia and China, the present instance of banker favoritism part of the same fabric justifying intervention, militarism, imperialism—again, on Obama’s watch (building on predecessors, but also intensifying policies in critical areas). It is as though Wall Street recognizes that it’s easier to work through Democrats, who afford an appearance of liberalism and reform in pushing the whole Reactionary agenda. (This of course tells us something about liberalism and reform—completely perverted since the New Deal, if not earlier.)
Jonathan Weisman’s NYT article, “Furor Over Move to Aid Big Banks in Funding Bill,” (Dec.12), adds little to the discussion, but he does have a good point made by Simon Johnson on the repeal of the Dodd-Frank derivatives provision: “Mr. Johnson said the evocation of family farms and mom-and-pop banks [referring to the Ballentine quote above] was specious. The four largest banks conduct more than 93 percent of all derivatives trading in the United States. The repeal push is for them, he said.” And finally we have fellow Times reporters Ashley Parker and Robert Pear’s article, “House Narrowly Passes Bill to Avoid Shutdown; $1.1 Trillion in Spending,” (Dec. 12), which makes clear Obama’s support and that of much of the party. Steve Israel, NY Democratic congressman, however, echoed Pelosi’s criticism: “’This bill is a one-two punch at middle-class voters. It weakens financial regulation on big banks and rewards Congress for doing so by increasing campaign donation limits of big donors. This is exactly why middle-class voters have a contempt of Congress.’” I am not comfortable with the middle-class designation to describe opposition, working class, working poor, minorities, all seem more pertinent. But in a storm of counterrevolution one takes what one can get—even an Elizabeth Warren candidacy (riding the wave of that designation), even though her foreign policy still needs to be smoked out.
My New York Times Comment on the Parker-Pear article, same date, follows:
For Democrats, a Night of Infamy. The party deserves to go down the tubes: cowardly, attuned to Wall Street, supportive of war and intervention, difficult to distinguish from Republicans.
Pelosi’s shining hour, her first courageous stand after years of accommodation to the Right. Hopefully, the Pelosi-Obama split will widen, the few progressives left in the country now alerted to the Obama Treachery, from Barack Wall Street Obama to Barrack Drone Assassination Obama is only a baby step.
Let the US One-Party phenomenon continue. With Republicans in control and a miniscule, feckless opposition, we should see Corporatism-Militarism so far in the ascendance as to be described in a single word: to wit, fascism.
Wealth is in the saddle. Derivatives are back. Hatred toward the world (Obama already has increased tensions with China and Russia) now to be expressed without restraint. We’ll see demonstrable social change within a decade, an irreversible trend toward global warming, increased military spending, heightened wealth concentration, all of which have been in progress for decades.
Perhaps the only good thing about the present fiasco is the exposure of Obama as a fake, and the Democratic party as UNWORTHY of its past. FDR is turning in his grave at Hyde Park.
Norman Pollack has written on Populism. His interests are social theory and the structural analysis of capitalism and fascism.