The Big-Banks Story Behind Both Obama and Romney

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by Les Kates

7-31-2012 10:00am

 President Barack Obama and Governor Mitt Romney, to me, appear to be two sides of the same coin.  In this regard, a choice between them is like choosing again between President Bush and Barack Obama – who also had a great deal in common. The electorate will be told that there are differences, but the differences, I argue, will not mean actual change once either candidate is in office. That is the true meaning of the Feds Continuity of Government Program, which could be renamed to Continuity of Big Government Big Corporate Financial Plan. History does not lie.

Both the United States government and Central Banking system have at their disposal the best business and accounting minds; these officials and executives are educated at Wharton, Harvard, Stanford, Yale , and Chicago. I believe that there is, now, a set of common themes that both Big Government and Big Banking are joined in pursuing, that transcend political party. The elites in both ‘industries’ are now part of a revolving door with common interests.

The movement to create this meta-structure with its goals transcending party, started with President Clinton; his administration repealed the Glass–Steagall Act, which in turn deregulated the banking industry. The deregulated banks began trading in derivative programs; these were predominately created and managed by Goldman Sachs.

President Clinton’s Secretary of Treasury was Robert Rubin; Rubin served in this role during both the first and second Clinton administrations. Before his government service, he has spent 26 years at Goldman Sachs. Eventually Rubin served as a member of its Board; he was Co-Chairman from 1990-1992.

Next let’s look at who surrounded President G W Bush; Henry "Hank" Paulson Jr., a banker, served as Secretary of the Treasury under this President Bush. But previously, Paulson had served as the Chairman and Chief Executive Officer of  -- Goldman Sachs. As Treasury Secretary, Paulson was responsible for TARP 1 – the vast government bailout of banks deemed ‘too big to fail.’ This added massive amounts to the US deficit , a debt level that was, of course, escalated by  with the Bush Administration’s war in Iraq – a war waged over non-existent “weapons of mass destruction.” During Mr Paulson's previous tenure at Goldman Sachs, before his becoming G W Bush's Treasury Secretary, he oversaw Goldman Sachs program of collateralized debt obligations (CDO's). These products formed the basis of the 2008 banking derivative crisis that eventually spread to Europe. This toxic product with its vast profits was an active part of Goldman Sachs’ business model during Paulson's tenure

Our tax dollar bailouts went to the large institutional banks, as noted.  But these banks did not pay us back in real terms; rather, the unaudited and privately held Federal Reserve Bank simply printed money for the ‘repayment’ of TARP funds.

 Is this the end of the manipulation of the system by these officials, former bankers, in this particular revolving door? I am afraid not. Now we are learning that top level bank executives manipulated the LIBOR rate in London, so as to benefit the profits and cook the books of the world’s largest European and American banks.

  Now let us look at President Obama; his Treasury Secretary is Timothy Geithner, an economist, and former Federal Reserve central banker. Geithner was president of the Federal Reserve Bank of New York during the last Bush administration. Geithner's position with Obama's administration included a major role in directing the Federal Government's spending as the '08 financial crisis was extending into '09; this spending included the allocation of $350 billion in funds from the Troubled Asset Relief Program that had been released during the previous Bush administration. I think the continuities in commitment here have become apparent.

Now let’s go to: what if Romney becomes President? His economic advisor is Glenn Hubbard. Hubbard was Deputy Assistant Secretary at the U.S. Department of the Treasury from 1991 to 1993 under the first President Bush. From February 2001 until March 2003, under the second President Bush, Hubbard served again – this time as chairman of the Council of Economic Advisors. A supply-side economist, Hubbard was instrumental in designing the 2003 Bush tax cuts. In January 2006, he was tapped to serve on the advisory board of a think tank formed by the Federal Reserve Bank of Dallas -- to study the impact of globalization on the international economy. The door revolved again.

So you see, Presidents and political parties now may come and go; that is not the real story. More important, it appears,  is the fact that this revolving door of senior executives – many from Goldman Sachs and the Federal Reserve -- form a kind of Continuity of Big Government/ Big Business financial model that has outsize and mutually reinforcing influence in domestic policy regardless of the Party or President that is nominally directing events.

  Following the money is always wise: unethical, corrupt monetary policy has taken the financial reins of the US Federal Government. Partisan punditry and partisan diatribes are a form of theatre now, that corporate-owned media continually directs at the US electorate – helping to keep us divided, and distracted from the real story -- the goals of a handful of banks, executed by a handful of former-banker officials -- that is far more critical.