The biggest political problem Obama has with both the Progressives and the Libertarians is that he pussied out on the Wall Street Bailout. No one went to jail, unlike the Savings and Loan Crisis of the 1980’s. We paid out the banks 100 cents on the dollar for billions of essentially worthless Credit Default Swaps and other forms of insurance written with no collateral behind it.
This week, Jamie Dimon gave Obama a do over. Obama needs to spend the next six months in a populist crusade to enact the Volker Rule is it’s strictest form. A form that would have banned the obviously phony “hedge” that JP Morgan is now going to loose $3 Billion on.
“The timing, prices and particular choice of index that people are saying that J. P. Morgan used seems to support the view that there was more to the trade than just a hedge,” said James Parascandola, a veteran credit-default-swaps trader formerly with MF Global Holdings Ltd. and Barclays PLC.
Already, Republicans like accused inside trader, Representative Spencer Bachus, the most powerful Republican on finance, are coming to Jamie Dimon’s defense.
“Even with this loss, I believe they’re one of the most profitable financial institutions in the country,” Mr. Bachus said at a House hearing on Wednesday morning. “There is no risk from this loss to depositors or to taxpayers.…They remain a very profitable, viable institution.”
For Obama, this is a Teddy Roosevelt moment. Roosevelt gave a speech in Provincetown, Massachusetts right after the Panic of 1907, which eerily mimicks the crash of 2008. He called out “the malefactors of great wealth” and went on to say,
“. . . [these men] combine to bring about as much financial stress as possible, in order to discredit the policy of the government and thereby secure a reversal of that policy, so that they may enjoy unmolested the fruits of their own evil-doing. . . I regard this contest as one to determine who shall rule this free country—the people through their governmental agents, or a few ruthless and domineering men whose wealth makes them peculiarly formidable because they hide behind the breastworks of corporate organization.”
For Barack’s whole administration he has followed his Harvard instincts and stuck with The Establishment. Thats why Geithner and Summers were his economic team and Gates was his defense team. Now, like Teddy he has to risk being called a class traitor and cast off his establishment team in the hopes that he could fulfill Tom Paine’s promise of our Revolution, “We have it in our power to begin the world over again.”
What is remarkable is that Obama essentially can fulfill this promise by doing nothing.
If he is able to defend the laws he already passed—the Affordable Care Act, the Women’s Equal Pay laws and the Sequester passed in the summer of 2011—we will have “begun anew”. Why?
Let’s start with the sequester.
Since 1955, Progressives have tried to cut the Military Budget, without success.But if nothing changes, starting in January the Defense Budget will take huge cuts.
For the Pentagon, that would mean about $50 billion a year in less defense spending from fiscal year 2013 to FY2021, according to the Congressional Budget Office. The CBO baseline already assumes roughly $450 billion in reduced defense outlays, coming from provisions of the Budget Control Act.
Lindsay Graham, Mr. Defense Pork is outraged at the very thought of the cuts.
“I have heard from people after every engagement: ‘why do you need this military?’ only to have to ramp up, go to war without the equipment, send the (National) Guard off with a shell of a force. What happens if China gets bolder, Iran gets a nuclear weapon, (or) we have to go into Yemen?”
I’m sure if Mitt Romney becomes President, Lindsay won’t have to worry.
So what about Bernanke’s notion that the Sequester will drive us off a “Fiscal Cliff” ? Well due to the brilliant negotiating by Barney Frank in the conference committee, there are no cuts to Medicare or Social Security in the Sequester. So does the “fiscal cliff” arrive because we are cutting the military industrial complex? Highly doubtful. The weapons systems now being built are on very long cycles and it is doubtful this employment would slow down. So what happens when the Bush Tax Cuts expire (the other part of Bernanke’s fiscal cliff)? Quite frankly, very little. The rich are not going to stop buying $100 million paintings, just because their income tax rate went up 4%.
So this is all Barack has to do. Push through the Volker Rule and threaten to veto any change to the Budget Control Act of 2011 or the Affordable Care Act. An America with a radically reduced military budget, a decent and fair universal health care system and a financial sector under control would be able to face the future unburdened with Neoconservative fantasies of being the world’s cop and with an economy not built around speculation but around production and services sold world wide.
Now all Barack has to do is get reelected.