Remember when Bernanke's Fed was giving hundreds of billions of dollars to the banking industry?
Remember when that wasn't enough to bail out the corrupt US banking system, and Hank Paulson asked for $700 billion more to cover executives bonuses?
Remember when President Obama was so angry he was declaring the end of the golden parachute era? It looked like the era of casino capitalism might be coming to a close.
Remember when congressional anger over insane pay packages for corrupt bankers and insurance executives was so high the House actually voted for 90% marginal tax rates? (The legislation died in the Millionaire-controlled Senate, of course.)
If you don't, you are not alone. No one in Washington seems to remember, either. Andrew Clark in today's Guardian examines how the Obama administration is helping Wall Street get its greed back.
The past year's financial apocalypse has provided a golden opportunity to end the greedy, vulgar culture of stratospheric bonuses in the financial industry. But the Obama administration, initially keen to take up the challenge, has blinked.
In an anaemic monologue last week, the Treasury secretary, Timothy Geithner, blandly acknowledged that executive compensation was a "contributing factor" to the financial crisis, as vast rewards for short-term gains encouraged an appetite for irresponsible risk. He waffled on for 19 paragraphs about aligning pay with performance. But what does he propose actually doing about it?
What does Secretary Geithner propose to limit the compensation of his friends and former colleagues on Wall Street? Must the question even be asked?
Geithner offered only two modest measures...a British-style "say on pay" advisory vote on executive pay... and tighten up the rules surrounding the independence of directors on pay-setting committees.
That'll show 'em whose boss, won't it Timmeh? Well, maybe not:
He reassured Wall Street: "I want to be clear on what we are not doing. We are not capping pay. We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive."
Ah, I get it. Wall Street is the boss. Can't cross the boss, can we Mr. Secretary. The financial meltdown will push the real unemployment rate to over 20% when all is said and done, good people are losing their homes, their access to health care, in some cases everything they have, but to your friends and benefactors on Wall Street, the ones ultimately responsible for this mess, "it's all good!"
This will not do, nor will your proposals. Nothing will do but re-instating marginal tax rates where they were when President Eisenhower was in office, before JFK started the Laffer-curve inspired tax-cut mania which continues to this day. (Recall the tax cuts embedded in the Obama Stuimulus plan. No matter the party, tax cuts always have a place in spurring the economy, and no tax rate is too low unless it is on the poor..)
What is the likely outcome of the Obama administration's timid inaction regarding the banking and insurance industry?
An influential banking analyst, Richard Bove, today predicted that banks, recapitalised and refreshed, will shortly enter "a new golden age" of moneymaking. If that proves true, then Goldman's chief executive Lloyd Blankfein, who is the highest paid bank boss on Wall Street, can soon look forward to bettering his record 2007 pay packet of $68.5m. And it is hard to see investors voting him down if profits are on the up.
It is time for a decision. Do we really want Wall Street to go back to playing the same old casino games? Or shall we change the rules to make sure that irresponsible bonus-chasing doesn't cripple the economy again?
The Obama administration has chosen sides. The casino must stay open for business. Let's hope the US voter remembers to do choose sides as well. It's his or her future prosperity which is being gambled with.