Volatility

January 22, 2010

Obama’s Ploy

 

On Tuesday the voters of Massachusetts delivered a drubbing to Obama and his entire agenda. The blow was against the system, even if too many people still think the right way to express anger is to vote against the incumbent but for another system criminal.
 
However lousy a candidate Coakley was, nothing changes the fact that her original wide margin (coming at a time when voters were familiar with her stances on the war and the banks) evaporated as she conformed more and more with the administration agenda, in particular its health racket bailout.
 
And when Obama made a big show of campaigning for her, this only hurt her further. So we can add Coakley to Corzine and Copenhagen (the Olympic bid) to the list of Obama’s personal appeals with were met with expectorate to the face. It seems he doesn’t do well with “C”s, and that people don’t like him, they really don’t like him.
 
Another C is CEOs. Obama has been repeatedly publicly snubbed by the bank leaders, most recently when most of them couldn’t be bothered to personally attend his childish lecture at the White House, but instead literally phoned it in.
 
Obama has plenty of his own personal Cs – Corporatism as his ideology, Corruption as the water he swims in as a slippery fish, going back to his Chicago days. He was considered a phony as a Community organizer. He personally embodies Cowardice. But no one but a hack would ever put a big C on his lack of character.
 
Obama’s response to the Massachusetts debacle has been novel in at least being a response, as opposed to his normal “everything’s fine, stay the course” mindset. He’s generally a prisoner of the status quo preference which is his main personality and political trait.
 
It must be difficult for him to now pretend to have found populist religion, and not just in the sense of throwing a hissy fit about “fat cats” as he did some weeks back, but actually having to make nominally anti-bank policy proposals.
 
And so we have the Volcker plan. Obama trotted out the long-neglected Volcker to stand beside him as he announced a plan to both cap bank size and force a split of proprietary trading from commercial banking.
 
The institutional segregation of part of the casino from commercial activity would represent a version of Glass-Steagall restoration. That and the cap on size would be two of the measures real reform activists have been demanding since the crash, and long before. If the administration is really, enduringly sincere, has really seen the error of its ways, and if the government really goes through with this, it would achieve significant, necessary, though not sufficient reform.
 
(Glass-Steagall achieves separation but doesn’t ban radioactive derivatives as such.)
 
Not even 24 hours in, and one of the two centerpieces, the size cap, already looks bogus even in concept, as the administration is being reported to want to simply freeze the monopolies “as is” and just not let them get bigger.
 
This is absurd; the TBTF banks are already way too big and way too concentrated. Leaving them in existence at anywhere near the current size can only ensure that they’ll use their intact lobby power to get this restriction and any other new regulation gutted. Part of the way they got so big in the first place is that three of them have been granted “waivers” allowing them to concentrate more than 10% of the regulatory limit on deposit share. So letting them stay as big as they are only enshrines the enact-regulation-then-gut-it-with-waivers-and-loopholes scam. Far from being real reform, this is standard anti-reform dressed up as reform.
 
It’s very similar to the “resolution authority” scam, which contends that you can leave the big banks as they are but set up an a priori mechanism to dictate how they’ll be wound down without a taxpayer bailout when they crash again in the future. This is obviously a political lie, since we know that in the next crisis the banks will scream that there’s no time for the orderly resolution, and TPTB will cry out “we need to bail them out NOW, and we’ll fix everything according to the plan later”. There already existed perfectly good resolution authority via the Prompt Corrective Action law. They simply didn’t want to use that because it would’ve forestalled the plunder of the people via the Bailout. So they disregarded it and screamed “Stampede!” That’s the way disaster capitalism works. So if the plan really is “As is”, that signifies that the real plan for the next collapse will also be another Bailout as is.
 
The prop trading and bank hedge fund limits sound better in theory. Banks engaged in such activities would be ineligible for FDIC protection. But the details already look sketchy.
 
Given the record of this administration and this Congress, I think the only way to look at this is to be skeptical. We know Obama doesn’t really believe in any of this and is making these proposals only under the duress of Massachusetts, bad approval ratings, and other political setbacks.
 
Given the evidence, we have to assume this is a reprise of the “public option” scam in health “reform”. Big talk at the outset, then by design they let it be first watered down and then, they hope, gutted completely.
 
That was always the purpose of the Swedish-style “nationalization” idea, flogged by Krugman and others. If they had been politically pressed enough, they would have made a big show of enacting that plan, but it really would’ve been just a farce, just a pretense, to buy time, try to put on a good political show, while further enabling the looting.
 
This proposal probably has the same goal. Besides, according to Obama it has to be enacted through Congress, as part of the already-gutted finance “reform” bill currently oozing its way through there. That would be the same finance bill whose already-compromised CFPA is now on the verge of being cast out completely.
 
Does the path of the CFPA repeat the history of the public option? So far it’s tracking it almost perfectly.
 
We can induce an algorithm for every such “great idea”, trotted out with such fanfare, then steadily enervated, and then killed completely.
 
So until we see this proposal be:
 
1. Strong and severe in concept (so far the alleged Glass-Steagall revival is quite hazy, while the size cap already looks like a scam);
 
2. Enacted (By this Congress? That sure sounds intended to fail. Right there we can deduce bad faith on Obama’s part.);
 
3. Aggressively enforced (which can’t be done so long as the rackets exist at anything near their current levels of power; if they’re not going to smash up the banks outright, if they expect to keep them “as is” but somehow regulate them in a different way, it will definitely fail);
 
we mustn’t believe the hype. We’ve had the misfortune of having to live under them for too long to still be willing to believe their lies and scramble for the feel-good political crumbs they toss out to us when the heat is on. Those crumbs are poisonous.
 
That’s the great historical villainy of “liberal reformism”. It’s always a lie, it’s always a sellout. The only way it ever temporarily worked was when there was so much surplus wealth subsidized by plentiful oil that even the feudal criminals were sated enough to consider it in their interest to share.
 
But that was a unique historical circumstance, and now the Oil Age is ending. That’s why corporatism has resumed its former viciousness since the 70s.
 
The real historical dynamic is for liberal reformism to always be a political gambit on the part of moneyed interests, a political scam meant to misdirect the people and split and blunt the resistance. Meanwhile it has never accomplished anything, ever, except where subsidized by oil.
 
That dynamic now resumes in full force. “Reform within the system” is dead, once and for all. Real activists must resolve to resist the corporatist system as such, and not let themselves get suckered by pretty-sounding “reform” proposals coming from charismatic* politicians.
 
[*I’ve never “gotten” Obama’s alleged charisma myself, but evidently all too many people even now still believe in it.]
 
So the right line on things like this is for real reformers: 
 
1. To understand how it’s promulgated only under what they hope will be temporary duress, and is designed to fail. It’ll be weakly conceived and is expected to be worn down and then destroyed through the “process”.
 
2. For public consumption, to take an open-minded “Show Me” stance, even though we don’t really need to be shown anything; but since most people still want to believe in the system and have a ways to go before they finally realize that they have been believing in vain, we need to empathize and concede that “anything’s possible”, while we exhort them to say Show Me and to watch carefully what then happens, to see how every supposedly new thing then falls into the same old pattern.
 
Education takes time and effort and empathy.

2 Comments

  1. And then we have this, which is something of a tell.

    http://www.msnbc.msn.com/id/35011959/ns/business-businessweekcom/

    Comment by Edwardo — January 22, 2010 @ 11:39 am

  2. Yes, pretty bad. I’ll be posting on that tomorrow.

    Comment by Russ — January 22, 2010 @ 3:20 pm


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