"The financial system is playing us for chumps"
And the interview became even scarier. What Johnson and Moyers made clear, without saying it in so many words, is that American democracy is on the line.
Not Chile. Not Argentina. Not Bolivia or anywhere else. America.
What is at stake is the continued existence of the United States as a democratic republic.
Moyers started by reading a quote from a blog Johnson wrote earlier this week, High Noon: Geithner v. The American Oligarchs.
BILL MOYERS: Oligarchy is an un-American term, as you know. It means a government by a small number of people. We don't like to think of ourselves that way.
SIMON JOHNSON: It's a way of governing. As you said. It comes from, you know, a system they tried out in Greece and Athens from time to time. And it was actually an antithesis to democracy in that context.
But, exactly what you said, it's a small group with a lot of power. A lot of wealth. They don't necessarily - they're not necessarily always the names, the household names that spring to mind, in this kind of context. But they are the people who could pull the strings. Who have the influence. Who call the shots.
BILL MOYERS: Are you saying that the banking industry trumps the president, the Congress and the American government when it comes to this issue so crucial to the survival of American democracy?
SIMON JOHNSON: I don't know. I hope they don't trump it. But the signs that I see this week, the body language, the words, the op-eds, the testimony, the way they're treated by certain Congressional committees, it makes me feel very worried.
I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there's a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful.
Now, you can read the text, but you really need to watch the video, to get the full impact of Johnson’s and Moyers’ discussion: the body language, the voice inflections, what was emphasized. Keep in mind that Johnson, being at the IMF, has actually dealt with countries that have been destroyed by incompetent and / or corrupt elites.
Moyers asked Johnson whether or not it was a problem having Geithner, who is so familiar with and to the Wall Street crowd, acting as the nation’s enforcer in the financial markets.
SIMON JOHNSON: I have no problem with poachers turning gamekeeper, right? So if you know where the bodies are buried maybe you can help us sort out the problem. And I did think the first three or four minutes of what Mr. Geithner said were very good.
As a definition of a problem, and pointing the finger clearly at the bankers, and saying that the government had been slow to react, and, of course, that included himself. I liked that. And then he started to talk about the specifics. And he said, "The compensation caps we've put in place, for the executives of these banks, are strong." And at that point I just fell out of my chair. That is not true. That is factually inaccurate, in my opinion.
Johnson explained the loopholes that will allow the banksters to take tens of millions of dollars out in bonuses, or retention awards, or whatever they end up calling it. But, it is not a comforting thing to have the Secretary of the Treasury shown to be a blatant liar in the midst of these crises.
BILL MOYERS: Are we chumps?
SIMON JOHNSON: We'll find out. Yes, we may be. Okay. It depends on how we play this politically. It depends on what our political system does. It depends, I think, on the level of reaction. The financial system is playing us for chumps, okay? The bankers think we're chumps.
BILL MOYERS: So here's the trillion dollar question that I take from your blog, that I read at the beginning, quote, "Can this person," your new economic strategist, in this case Geithner, "really break with the vested elite that got you into this much trouble?" Have you seen any evidence this week that he's going to be tough with these guys?
SIMON JOHNSON: I'm trying to be positive. I'm trying to be supportive. I like the administration. I voted for the president. The answer to your question is, no, I haven't seen anything. But you know, perhaps next week I will. But right now, as we speak, I have a bad feeling in my stomach.
My intuition, from crises, from situations that have improved, the situations that got worse, my intuition is that this is going to get a lot worse. It's going to cost us a lot more money. And we are going down a long, dark, blind alley.
There’s a lot more detail provided in the discussion, but I’ll leave you with a snippet of Johnson explaining how to actually solve part of the problem. And this is not even the best part: Johnson explains how to set up market forces to destroy the political power of the financial oligarchy. Again, let me reiterate: you really should take the time to watch the video.
the FDIC is world class at shutting down and managing the handover of deposits, for example, from small banks. They managed IndyMac, the closure of IndyMac, beautifully. People didn't lose touch with their money for even a moment. But they can't do it to big banks, because they don't have the political power. Nobody has the political will to do it.
So you need to take an FDIC-type process. You scale it up. You say, "You haven't raised the capital privately. The government is taking over your bank. You guys are out of business. Your bonuses are wiped out. Your golden parachutes are gone." Okay? Because the bank has failed.
This is a government-supervised bankruptcy process. It's called, in the terminology of the business, it's called an intervention.