Financial Thieves and Robbers

Frank Rich, while acknowledging some of the good things that Obama has done, also states the obvious as to his continuing travails:

But the most relentless drag on a chief executive who promised change we can believe in is even more ominous. It’s the country’s fatalistic sense that the stacked economic order that gave us the Great Recession remains not just in place but more entrenched and powerful than ever.

No matter how much Obama talks about his “tough” new financial regulatory reforms or offers rote condemnations of Wall Street greed, few believe there’s been real change. That’s not just because so many have lost their jobs, their savings and their homes. It’s also because so many know that the loftiest perpetrators of this national devastation got get-out-of-jail-free cards, that too-big-to-fail banks have grown bigger and that the rich are still the only Americans getting richer.

This intractable status quo is being rubbed in our faces daily during the pre-election sprint by revelations of the latest banking industry outrage, its disregard for the rule of law as it cut every corner to process an avalanche of foreclosures. Clearly, these financial institutions have learned nothing in the few years since their contempt for fiscal and legal niceties led them to peddle these predatory mortgages (and the reckless financial “products” concocted from them) in the first place. And why should they have learned anything? They’ve often been rewarded, not punished, for bad behavior.

The much acclaimed new documentary about the global economic meltdown, “Inside Job,” has it right. As its narrator, Matt Damon, intones, our country has been robbed by insiders who “destroyed their own companies and plunged the world into crisis” — and then “walked away from the wreckage with their fortunes intact.” These insiders include Dick Fuld and four other executives at Lehman Brothers who “got to keep all the money” (more than $1 billion) after Lehman went bankrupt. And of course Robert Rubin, who encouraged Citigroup to step up its investment in high-risk bets like Countrywide’s mortgage-backed securities. Rubin, now back as a rainmaker on Wall Street, collected more than $115million in compensation during roughly the same period Mozilo “earned” his half a billion. Citi, which required a $45 billion taxpayers’ bailout, recently secured its own slap-on-the-wrist S.E.C. settlement — at $75 million, less than Rubin’s earnings and less than its 2003 penalty ($101 million) for its role in hiding Enron profits.

It should pain the White House that its departing economic guru, the Rubin protégé Lawrence Summers, is an even bigger heavy in “Inside Job” than in the hit movie of election season, “The Social Network.” Summers — like the former Goldman Sachs chief executive and Bush Treasury secretary Hank Paulson — is portrayed as just the latest in a procession of policy makers who keep rotating in and out of government and the financial industry, almost always to that industry’s advantage. As the star economist Nouriel Roubini tells the filmmaker, Charles Ferguson, the financial sector on Wall Street has “step by step captured the political system” on “the Democratic and the Republican side” alike.

Since Obama has neither aggressively pursued the crash’s con men nor compellingly explained how they gamed the system, he sometimes looks as if he’s fronting for the industry even if he’s not. Voters are not only failing to give the White House credit for its economic successes but finding it guilty of transgressions it didn’t commit. The opposition is more than happy to pump up that confusion.

The real tragedy here, though, is not whatever happens in midterm elections. It’s the long-term prognosis for America. The obscene income inequality bequeathed by the three-decade rise of the financial industry has societal consequences graver than even the fundamental economic unfairness. When we reward financial engineers infinitely more than actual engineers, we “lure our most talented graduates to the largely unproductive chase” for Wall Street riches, as the economist Robert H. Frank wrote in The Times last weekend. Worse, Frank added, the continued squeeze on the middle class leads to a wholesale decline in the quality of American life — from more bankruptcy filings and divorces to a collapse in public services, whether road repair or education, that taxpayers will no longer support.

...the Obama White House is hardly innocent. Its failure to hold the bust’s malefactors accountable has helped turn what should have been a clear-cut choice on Nov. 2 into a blurry contest between the party of big corporations and the party of business as usual.

I have been saying this since Obama appointed Summers and Geithner, friends and boosters of Wall Street, as his chief economic advisors almost two years ago. And very little has changed in the meantime.