I know there are many on this site who like myself, were disappointed/disgusted at Obama's appointments of Wall St. insiders such as Rubins, Summers, Tim Geithner et al. The reality is that this is just business as usual for the Democratic party leadership. On Friday the excellent financial blog Naked Capitalism published a piece entitled Third Way Document Proves Democratic Party Supports Institutionalized Looting by Banks.
It is one thing to suspect that something is rotten in Denmark, quite another to have proof. Ever since Obama appointed his Rubinite economics team, it was blindingly obvious that he was aligning himself with Wall Street. The strength of the connection became even more evident in March 2009, when Team Obama embarked on its âstress testâ charade and bank stock cheerleading. Rather than bring vested banking interests to heel, the administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff.
But now we see evidence in a new paper by the think tank Third Way of an even deeper commitment to pro-financier policies. The Democratic party has made clear that it supports institutionalized looting by banks, via the innocuous-seemeing device of rejecting the idea of writedowns on bonds they hold.
Please follow below the fold...
The Third Way is a "centrist", "business friendly" think tank connected to the Democratic Leadership Council that has great influence in the white house. See here. (Notice their co-opting of the word "progressive" which is now officially meaningless. If this group is "progressive" I sure would hate to see what they call regressive.)
Third Way runs the policy apparatus of the Democratic Party. In Congress, staffers attend regular Third Way policy briefings, where the group hands out pre-packaged legislative amendments in legal form, generic press releases, polling around those policy ideas, and talking points. It’s a soup-to-nuts policy apparatus. Most of these ideas are harmless – like increased volunteerism – but some are not, like various tax proposals.
Why is the Third Way position tantamount to endorsing institutionalized looting? Consider the definition in the classic George Akerlof and Paul Romer paper (emphasis ours):
. . . an economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm’s debt obligations.
Again, I urge people to read the original article in full, before attacking the points made here. The ongoing looting of the public sector is destroying this country. The looting really got underway in Bush's term (Privitazation, the "Ownership Society" etc) but unfortunately is continuing under Obama - The Audacity of Selling Out.