The Great American Stickup

I attended a Berkeley Arts & Letters event last week featuring Robert Scheer, whose new book is The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.

This book and Bob's previous one, on military spending, have something very important in common; both show that the two major parties really do cooperate. Unfortunately, it's on all the wrong things.

Bob makes a very strong case that the Republicans (starting with Reagan) and the Democrats (especially under Clinton) enabled an enormous financial disaster that ruined millions of households in the form of foreclosures, unemployment, and diminished home equity and retirement savings. As if that weren't enough, the same people who engineered the disaster vilified public servants who tried to avert it and then, under Obama, mismanaged the effort to limit the damage. Really appalling.

The heroes are few and far between, but one is certainly Brooksley Born, who headed the Commodity Futures Trading Commission under President Clinton. She pushed to regulate derivatives trading and was scorned by the so-called Committee to Save the World--Alan Greenspan, Robert Rubin, and Lawrence Summers--as well as the holy zealots of deregulation, most notably Wendy and Phil Gramm.

Wendy Gramm preceded Born as chair of the CFTC, and both she and her husband profited nicely from efforts to "modernize" (that is, gut) oversight of the financial markets. Having secured a regulatory exemption for Enron, she became a board member there and served on its audit committee. Former Texas senator Phil Gramm took a position at UBS, the bank that was later bailed out by the Swiss and U.S. governments. He later served as economic advisor (!) to John McCain.

Rubin also made out like a bandit, encouraging Clinton to eviscerate oversight and then accepting a position at CitiGroup, where he earned $15 million a year until that company had to be bailed out, big-time, by U.S. taxpayers. Summers also received millions from Wall Street firms for his wisdom before heading up Obama's economic team.

And what to say about people like Alan Greenspan and Henry Paulson? Greenspan was another Born adversary. As Fed chair, he was supposed to regulate the banks, but as an Ayn Rand-style libertarian, he didn't even believe in regulation. The markets would take care of everything. Paulson made sure Goldman Sachs, which he left to become Treasury secretary under President Bush, got everything it needed, most notably full payment of the bad bets AIG had insured but couldn't cover. And then Paulson decided to let Lehman Brothers, a Goldman competitor, go down in flames.

I've worked on two Dean Baker books (Plunder and Blunder and False Profits) that cover some of the same territory, but Bob is more focused on the political side of the story--and especially the people responsible for the fiasco. Highly recommended.