Bad Time For America

A lot of things have gone wrong in recent times.  In terms of our Congress, Republicans and Democrats even during these difficult times would rather play political power games than be patriots and govern.  The world came to Wall Street for highly-rated investments paying somewhat better returns than the moribund T-bill.  Wall Street sold them bologna and told them it was steak.  There is some $60 trillion or so (yes, that's with a 't') around the globe in derivative securities.  If their real value is pennies on the dollar, then where does the world go to repair and replace that loss - Jupiter?

We have trusts once again, after Theodore Roosevelt explained to us the danger of trusts, and dissolved scores of them.  Think of a trust as a monopoly or near-monopoly.  If it's a critical industry - i.e. not the  movie industry, but, say, banking - then you can also think of it as an entity "too big to fail."  Why we would ever want one of those I cannot imagine.  Neither could Teddy Roosevelt.   So he set about dissolving them, while we watched dispassionately or even offered our endorsement as bank consolidations pressed on through the '90s and into this decade (the same has happened with another critical industry - the media - but that's fodder for some future post).

So we've known since Teddy that "too big to fail" is not good, is not what we want.  We want smaller than that.  Greater numbers than that.  We want the exposure, the risk associated with critical industries either spread among many players or regulated to death the way property-casualty insurance is, or utilities.  Not the way derivatives specifically and statutorily are not.  That practice leads to $60 trillion in junk bonds, and people losing everything, their savings, their retirement, their job, their livelihood, and the roof over their head, and their children's head.

What would Teddy be doing if he were with us today?  What would he be saying?  What would he be advocating?  You can bet it would shock the world, and represent far more structural change than we have seen so far from President Obama.  Oh, and Teddy Roosevelt was a conservative.  He knew trusts were a roulette wheel, and roulette isn't very conservative, so he was against them.  He was a conservationist, because that and "conservative" share the same root.  Here's a great Teddy paragraph I stole from Wiki:

"I stand for the square deal. But when I say that I am for the square deal, I mean not merely that I stand for fair play under the present rules of the game, but that I stand for having those rules changed so as to work for a more substantial equality of opportunity and of reward for equally good service... When I say I want a square deal for the poor man, I do not mean that I want a square deal for the man who remains poor because he has not got the energy to work for himself. If a man who has had a chance will not make good, then he has got to quit... Now, this means that our government, National and State, must be freed from the sinister influence or control of special interests. Exactly as the special interests of cotton and slavery threatened our political integrity before the Civil War, so now the great special business interests too often control and corrupt the men and methods of government for their own profit. We must drive the special interests out of politics... For every special interest is entitled to justice, but not one is entitled to a vote in Congress, to a voice on the bench, or to representation in any public office. The Constitution guarantees protection to property, and we must make that promise good. But it does not give the right of suffrage to any corporation. The true friend of property, the true conservative, is he who insists that property shall be the servant and not the master of the commonwealth; who insists that the creature of man's making shall be the servant and not the master of the man who made it. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being."

He's got my vote.

We need structural, fundamental change of the things which have not worked.  What are they?  What are these things which haven't worked for a long time, and for which voters this past November practically screamed for "CHANGE!".  What are they, in no particular order?

1. A fundamental objection to partisan, special-interest driven lawmaking by the Congress (see Teddy, above).
2. A fundamental objection to borrowing on the part of our government.
3. Fundamental objections to the redistribution of income upwards since the '80s - reduced taxes for high-income earners; corporate tax loopholes, including offshore tax havens in the Caribbean, Switzerland, LIchtenstein; a reallocation of company profits from workers to CEOs and executives, as evidenced by a change in CEO compensation from 30-1 of the average employee ('80s and earlier) to 400-1 (now).
4. Fundamental objections to the brokenness of Wall Street, following Enron, WorldCom, Tyco, Long-Term Capital Management, and the current crisis in mortgage-backed securities and credit default swaps, which at its core is the structural problem that boards of directors - the intended watchdog for the investor - do not work, and often are enablers of those they are supposed to be watching.
5. A fundamental objection to the "Preemption Doctrine" in foreign policy.
6. A fundamental objection to the ceding of privacy rights from the individual to the central government (honestly, what would Franklin have said, or Patrick Henry?).
7. A fundamental desire for a refocusing toward longer-term goals of energy independence, carbon-emissions reduction, improved infrastructure, and making American school children among the best-educated in the world.

Those seven things?  They were 99% of the election.

Barack Obama and Timothy Geitner have been completely preoccupied till now with putting their collective thumb in the dike.  Maybe that was, is, unavoidable.  Maybe it is necessary.  But that is not change.  That is damage control.  If this president is to hold our attention, and our hopes, and our support, he will need to very soon move to how, exactly how to be the next Theodore Roosevelt, and implement structural changes in how Wall Street works, and indeed how the Congress works.  In taking that on, he is only taking on the most rich and powerful of the private sector, and an entirely independent branch of government which only also has check-and-balance powers over his.  But if Teddy were here, I think he would do it.  Teddy would say it's the conservative thing to do.  Probably the wrong words for Obama to adopt, but, then again, maybe not.  In any case, if he is to hold our attention and our support, he will have to soon show that he can multi-task, that he can jam his thumb in the dike while pointing out the new direction with his index finger.  Crisis management is not change I can believe in.  I know he's only been in office for two months.  But I want page two.  I heard page one - the high-level summary - all campaign long.  I want page two.  I want him to give me his seven.  I want him to pick one or two, and give an address that begins, "Today my administration has set about the task of reforming the SEC and corporate governance laws in this country to bring about the shareholder accountability and transparency which the current system too often fails to bring.  We are going to work with whomever in the Congress will work with us, and I and others in my administration are going to travel the country and explain it to the American people, and, frankly, from them learn even more than we currently know about the problems inherent in the current system."  Note that FDR did exactly this following the stock market crash when he put none other than Joseph P. Kennedy, father of John F. Kennedy, in charge of the SEC, since no one had worked the capital markets to greater advantage than he during a time when everyone else was losing their shirts.

Obama has been accused of attempting to resurrect FDR.  While he's at it, he should resurrect his cousin, Teddy.  Armed with measured amounts of both, he might just set America on a better course, a course she needs.

Comments

[Jim Gordon]

100% dead on IMO.

Of course I agree with all of what you just said, but to add another nail to the paper on the wall, I have just one question. Where does it say that any corporate contract is unable to be violated? No, they are violated all of the time. When the Auto Industry was bailed out in December, the Bush Regime told the heads of the big three that the first thing that they need to do is break the union contracts with UAW and lower those costs.
So why can't Timothy Geithner show some backbone and make AIG, and the like return these bonuses? The money was not given to them to buy a fourth house in the bahamas, or was it? Are corporate contracts only sacred when they involve the Executive team of an organization? OBama has already stated that it's not a good idea to punish these people? Why not? Haven't they punished us? Where are the remnants of our 401Ks? Invested in the CIO of AIG's yacht? The head of AIG says that we will "lose good people" if we don't pay out those bonuses. Really, if they were so "good," - then where's all of our 401Ks? No, AIG is just one of those selfish organizations with BAD people who were able to set themselves to win and win. They gamble with our money and when they win, they win big. When they lose, then they're too big to fail, and they get bailed out and get their bonus money and win again.

Tim Geithner is doing a great job working for AIG, Citibank, Bear-Sterns, et al: keep up the good work Tim!!