Against the People’s Outrage

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“Beware the Result of Outrage” is the title of the NYT’s Andrew Ross Sorkin’s new column, and this could easily be his ideological slogan. Sorkin is an “errand boy, sent by grocers to collect the bill”. He is consistently anti-populist, pro-elite, pro-technocracy, above all pro-trickle down. In this crisis and gathering Depression the people have no right or prerogative to do anything other than meekly await dispensations and crumbs from on high. Anything else would be inelegant, and troublesome for the rich’s peace of mind.

 

 Last spring we saw him delivering AIG’s extortion threat: “we know how to blow up the economy once and for all, so pay us our bonuses or else.” He sees his main job as to try to shout down any sort of anti-elitist, pro-populist developments.

 

Today his targets are a few potentially troublesome amendments spoiling the otherwise clear sailing for the anti-reform project sleazing through Congress under the Orwellian title “Financial Stability Improvement Act”.

 

“Improvement”? You better duck.

 

The “Bair-Miller-Moore” haircut amendment would require all the bigshots, including hitherto sacrosanct secured bondholders, to take a hit if the government has to bail out a bank.

 

In his standard supercilious tone, Sorkin assures us that he appreciates the appeal to childish notions of justice, but that this will actually upset the adults who, darn it, are trying to keep things “stable”!

 

That is a hot-button idea because, for the last year, many critics have asked why bondholders were protected by the government. Again, at a gut level, it seems fair for secured creditors to take a haircut if the taxpayer if going to bail them out.

Again, not so simple in practice. Because of the new risk, banks would find it more expensive to raise money — especially so when they run into problems.

Who wants to lend money to a bank when there is a chance the government is going to come in and take it over, so that even a secured creditor at the top of the food chain is going to lose something?

 

I don’t know about you, but this looks to me like it would reduce the heads-I-win, tails-you-lose status quo. As things are “lenders” (using free Fed money) have all upside and little downside, since they can be confident that if their investments in TBTF entities go bad, the taxpayer will bail them out. Why shouldn’t this moral hazard be eradicated? Even if we agreed with Sorkin’s contempt for the morality and justice aspects of it all, the TBTF put is still just not good capitalist business practice, is it? The amendment as written may have flaws, but in principle it wants to head in the right direction.

 

If a bank, thanks to its reckless practices, is doomed to fail, why should any investor, public or private, be zombifying it? But certainly, if a private investor wants to do that, he should be doing it ONLY because he’s willing to run a big risk looking toward some big reward, NOT because there is no risk because he’s assured the public will make good his losses.

 

So in conjuring bogeymen here Sorkin is really fighting to uphold the lemon socialist paradigm of privatized profits, socialized risk. (You’ll look in vain through these columns to find out how we’re supposed to get rid of these systemic extortionists completely. Sorkin is not saying “Yes, let’s break them up so we won’t have to deal with these threats at all anymore.” He’s saying stay the course, business as usual, and no populist rocking the boat, dammit. Don’t you nasty cavemen go scaring my well-dressed bondholders. Just give us the money.)

 

(He also mentions in passing the Kanjorski amendment, but doesn’t seem to have as much of a problem with that. That’s because it’s a reactionary Trojan horse meant not to extend public power, but gut what little exists. It would allow insolvent banks to sue to prevent FDIC action. As bad as things are today, they can’t do that. Yet.)

 

The worst specter haunting this corporatist Xanadu is the Audit the Fed amendment.

 

Again, when Sorkin gets patronizing:

 

So on its face, the Paul amendment seems well intended. After all, who can argue with a little more sunlight?

 

you know he’s getting ready to whip a peasant.

 

You could have bet that Sorkin’s line here would be the sacred non-political “independence” of the majestic Fed, and he doesn’t disappoint. He does rather oddly cite economic vandal Judd Gregg to propagate this lie:

 

But consider these words of caution from Senator Judd Gregg, Republican of New Hampshire: “Congress has demonstrated time and again its inability to manage the nation’s fiscal policy, illustrated by our staggering national debt in excess of $12 trillion. So how can anyone think that its involvement in monetary policy would be good for the country?”

So any unintended consequences of the amendment — what Senator Gregg calls “a dangerous move by this Congress to pander to the populist anger” — could indeed lead to less independence for the Federal Reserve, and the result ultimately may not be good for the economy.

 

That “so” in there cracks me up. It’s not too much of a non sequitur, is it? The tone is, “such-and-such is true, for as it is written in scripture…….”, and your citation is Judd Gregg??? Talk about a fallacious appeal to authority. You would think a combination of Keynes, Lincoln, and Superman had said so.

 

When we look at how they have to scrape the bottom of the barrel like this since Greenspan’s fall from grace, we can infer the moral bankruptcy of their position, even if we didn’t know that on more substantive grounds. “As Judd Gregg has written…”  (Maybe Sorkin wants to set him up as a magisterial authority looking ahead to the upcoming attempts to completely gut all social spending. We already knew Obama is sweet on the guy.)

 

That has been Fed Chairman Ben Bernanke’s line all along. He does not want the Fed to be a puppet of Congress.

Representative Paul, of course, doesn’t just want oversight of the Federal Reserve, he wants to dismantle it entirely. He has a dog in this fight and it is snarling….

 

Getting serious, Bernanke, Gregg, and their little flunkies like Sorkin want to propagate the ideological fraud that the status quo, in this case the position and policy of the Fed, is normal, rational, moderate, non-politicized, serenely contemplative, and doesn’t fall under democracy’s purview yet somehow is not therefore an affront to democracy.

 

By contrast, Paul and audit supporters are represented as “snarling”, abnormal, irrational, extremist, having a political agenda. Our concerns about transparency and “democracy” are impertinent.

 

But the truth is that the Fed’s easy money policies in general are highly ideological, beholden to Friedman monetarism, and their manifestation over the past year and a half are extreme and radical. The Fed has been simply hemorrhaging money out of a vast fleet of helicopters, steadily expanding the range of recipients even as it ratchets down eligibility and collateral requirements. Even if we ever accepted the notion that the Fed had certain technical duties which should be insulated from politics, by now its activities are not contained within the bounds of any such framework. It has struck vast swathes of new ground. There’s simply no way society can or should accept this as technical administration. If the plumber I tasked to fix my sink starts bulldozing part of my house, I’m damn well going to call him to account.

 

The Fed, as its “baseline”, is a radical, extremist actor. The call to impose full oversight, transparency, and accountability upon it is not a radical departure, but a call to restore reason and moderation.

 

As for the vaunted Fed “independence”, what they mean by this is independence only of democracy. The fact that the Fed is not independent of its member banks; that it listens very carefully to their desires and advocacy; that it sees its great mandate as to maximize profit for these bankers; that it is nothing more or less than the synthetic manifestation of corporatism; this extreme dependence, this extreme politicization, this radical ideological position, constitute what Sorkin and the MSM at large defend as the status quo norm, from which point of view any other idea is to be judged as deviant and smeared with all the traits I described.

 

It’s not Paul’s amendment which “panders” to the people, as Gregg put it. As much as Gregg clearly hates the people and hates democracy, the fact is that in what’s supposed to be a democracy policy is indeed supposed to listen to the people, which is what Paul said his bill wants to do.

 

On the other hand the Fed sees its reason for being as not only to “listen to” the big banks, but indeed to pander to them. Pander like there’s no tomorrow, which given how the clock is running out on debt corporatism, there really isn’t. That’s why they want to steal all they can today.

 

We must be clear in seeing the status quo itself as the radical state of affairs, and its ideology as the radical ideology. The MSM’s sphere of consensus is extremist and predatory, while little of what the people want, what would benefit them instead of a handful of rich criminals, what democracy cries out for, would even appear on the media’s radar as a legitimate subject for debate.

 

We have a rogue mainstream media, serving as stenographer for a rogue government. Together they are functionaries of kleptocracy, and their whole project is simply to keep the loot machine flowing as smoothly as possible. Rumbles of democracy threaten to upset this functioning, so a tool like Sorkin goes out to spread the anti-democratic message.