In fact, when the crash first happened, in September 2008, the head of the Federal Reserve was a man by the name of Frank Paulson, who also used to be the CEO of Goldman Sachs – a firm long known for its revolving door between top firm officials and top government posts. At the same time, Tim Geithner was head of The New York Federal Reserve.
To further add to this mix, Goldman Sachs not only was the largest campaign donor of any Wall Street firm to Obama’s campaign (a fact he never revealed before voting for the fiscal bailout of the banks, which is a blatant conflict of interest), but Goldman Sachs, of all the banks, was the only Wall Street Firm who escaped unscathed from the crisis – receiving 100% recoupment of their losses.
Later details would reveal not only why (fraud on the part of Goldman Sachs in betting the market would fail, leading to current considerations on the part of the American, British and German Government’s to now sue the firm for literally fraud), but also that Mr. Geithner told AIG, the insurer the government also bailed out, to deliberately withhold key details from the public about overpayments the Fed made to all of the Wall Street banks, most notably Goldman Sachs.
The fact that the American government however, is considering a lawsuit of fraud against the firm is a particularly cynical piece of theatre when one examines several key points. The first is that the revolving door hasn’t stopped; it’s just operating under the radar in the administration. Top financial executives, from particularly Goldman Sachs, now occupy top positions at Treasury and throughout the administration. This isn’t a new trend. It’s one that has been going on since the rise of the Wall Street banks.
There’s always been a strong and ongoing revolving door between the top echelons of financial management and government economic advisors and officials. And then of course there’s Congress and top Agency Officials to consider too. As this humorous video segment illustrates extremely well, clearly, albeit humorously, (Stewart, 2010) the incestuous nature of the relationships between Congress and Wall Street too (from receiving campaign donations to the revolving door to the next gig when the stint as an elected official is over) often makes real reform hard.
And is another factor contributing to white collar crime, not to mention a culture within both the industry itself and the government that is supposed to regulate it, that encourages such behavior and abuse. Added to this is the unbelievably slow pace of any kind of financial reform of the banks themselves, including still any debate in Congress on whether or not to regulate derivatives, not to mention the fact that the banks don’t even seem to fear Washington, let alone Mr.
Obama, to the point that the CEO’s of the big TARP recipients on Wall Street, didn’t bother to show up in DC to attend a mandatory speech by the President due to “weather” in late April 2010. The chart below shows not only the key players in the meltdown and where they came from, stretching in Greenspan’s case all the way back to Reagan, but most of the key players were actually in government during the Clinton Administration, took advantage of their connections to do a very profitable stint on Wall Street, and are now back, like the revenge of Frankenstein. Does anyone really believe that reform can happen in this kind of scenario?
To quote the much cliched but certainly applicable saw in this case, it’s like allowing the proverbial fox to guard the henhouse. It was enabled by the revolving door between the political elite and corporate America, in particular Wall Street, that has always existed, was rampant at certain times in our nation’s history (as in the Roaring Twenties for example, but also at other times of massive expansion and growth in the economy) but has grown increasingly fluid, as wealth, power, and corporations themselves, from Wall Street to other kinds of verticals have also increased in size, over the past thirty years.
And a massive transfer of wealth from the middle class to an ever smaller elite, creating today, the largest disparity between rich and poor since the beginning of the last century. Figure 7: Income Disparity in the U. S. That too, however, is not accidental. And part of a deliberate political strategy that is driven today by the same motivations as it was a century ago. Namely Imperialism.
Access to large amounts of capital for America’s largest multinational corporations and allowing the growth of financial powerhouses on Wall Street to create such access, has become a way to cement America’s hold on global dominance. And has been since America first had a Navy. It was certainly the strategy of North America as it ventured into the Southern Hemisphere, with varying degrees of success, particularly during the Cold War.
And certainly since the fall of Communism, this has been a critical part of America’s foreign policy strategy of global domination. A policy that has led to increased “privatizations” in countries and regions that never would have tried it. That said there has been a retrenchment from such a straightforward march since the crash, although the UK is apparently still looking to privatize both water and utility rights (a disaster if there ever was one, and again, a perfect place for corporate white collar criminals to flourish, just as they did in the U. S. A. )
Both Enron (which blackmailed the state of California over outrageously raising utility rates) and now Pom Wonderful (who is going to court to protect it’s backdoor privatization of public water rights in the most important publically held reservoir in water starved Los Angeles) should at least shine a flashing red light to STOP, to the British Government. Particularly with Goldman Sachs announcing that “water is the next oil,” and both utilities and water rights apparently selling at a discount because credit is so hard to come by.