‘Bribing’ Middlemen – Obama’s Biggest Mistake

We’ve previously noted, in much greater sorrow than anger, how President Obama has seemingly gone, in less than a year, from “The One” to “Who?” – so much so that some have started calling him “Mr. Irrelevant”.

We’ve previously noted, in much greater sorrow than anger, how President Obama has seemingly gone, in less than a year, from “The One” to “Who?” – so much so that some have started calling him “Mr. Irrelevant”.

We’ve previously noted, in much greater sorrow than anger, how President Obama has seemingly gone, in less than a year, from “The One” to “Who?” – so much so that some have started calling him “Mr. Irrelevant”.

Insofar as this is the case – which we greatly hope isn’t true now, and won’t be in the future – he probably has only himself to blame.

Why?

Because in the four key areas that have defined his Presidency so far and seem likely do so in the future:

[quote]

• “too-big-to-fail” banks
• the health “care” debate fiasco
• the collapse of the housing market
• his mystifying “double down” in Afghanistan

[/quote]

he has consistently made the same mistake:

begging middlemen to accept taxpayer money and other perks to do what he’d like them to – only to see them take what he’s offering, almost always on their terms / laugh discreetly up their sleeves / and then find every way they can to do what they wanted in the first place.[br]

This pattern, of course, was initially set by Cheney / Bush, who spent 8 years pouring no-bid government contracts into the pockets of their past and future employers – Haliburton, Blackwater, their networks of contractors and sub-contractors etc. – culminating in the Paulson “Plan,” allegedly called into being to fight the “credit crunch” in the aftermath of Black September 2008.

The joke there, as we all know now, is that the “credit crunch” was nothing more than a lending freeze by the remaining “too-big-to-fail” banks, led by Goldman Sachs, who wanted to make clear to the government that they weren’t going to lend anyone anything until they were assured that not only would their profits remain private, but their losses would be “socialized” – ie, paid for by the taxpayers.

Why Obama continued this – not just corrupt but – radically ineffective approach to an economy in free fall remains unclear.

That he would do so was evident from his horrific choices for Treasury Secretary and National Economic Council head, Tim Geithner & Larry Summers respectively, whose previous collaborative “highlight” was the December 2000 “under cover of night” de-regulation of derivatives – Warren Buffet’s favorite “economic weapons of mass destruction” – which, lest we forget, have still not unleashed their initial blast effects, let alone the radioactivity that is sure to endure for years.[br]

Given this “dynamic duo”, it’s hardly surprising that – despite being begged to end the “lending freeze” that has crippled the American economy, with the exception of Wall Street and K Street of course – the “too-big-to-fail” banks and insurance companies have simply ignored Obama’s pleas to lend, making sure their exposure is minimized until they have gotten what they want.

So what if the US economy remains in the toilet – blatantly-cooked “encouraging” unemployment figures aside? The TBTF folks just chortle away and order more Veuve Cliquot ©.

This same predictably sad dynamic can also be seen in the laughable-if-it-weren’t-so-serious health “care” “debate”, where the middlemen aren’t TBTF banks, but, rather health insurance companies, supported by their Big Pharma drugcos / hospitals / HMOs / & AMA allies.

Here again, Team Obama shot itself in the foot, repeating this time not the errant knavery of Cheney / Bush, but, rather the well-intentioned [ maybe ] mistake of Billary Clinton in 1993: taking single-payer off the table from the start of negotiations with the dynamic, well-financed and -organized health “care” industrial complex.

With that, Obama once more put himself at the mercy of middlemen – here, health insurance companies – who had no interest in promoting any elements of a “reform” agenda EXCEPT those that would increase their bottom line – in this case, a mandate requiring people to buy health insurance.

The result, of course, was the almost immediate gutting of even the weakest “public option” for the health insurance market – thus “insuring” the insurance companies they wouldn’t suffer / might well gain from any “reform” that DID eventuate –

an outcome they simultaneously felt free to do everything in their power to make sure WOULDN’T happen anyway, mobilizing both a radically distorted public “debate” on the macro level, and, on the micro, making sure Republicans and “centrist” Democrats would obediently follow the “healthco” line.

So too in the housing market are middlemen making Obama look foolish and gullible, as this outstanding article by Gretchen Morgenson in the New York Times makes clear:

[quote]

After months of playing pretend, the Treasury Department conceded last week that … its plan to aid troubled homeowners by changing the terms of their mortgages, was a dud.

The 10-month-old program is going nowhere, the Treasury said, because big institutions charged with implementing it are dragging their feet.

[/quote]

Sound familiar? As Gomer Pyle would say, “surprise, surprise, surprise”. Or Peter, Paul & Mary: “when will they ever learn, oh, when will they ever learn?”

You get the idea.

[quote]

A stalled loan modification plan might not be worrisome if the foreclosure crisis were abating.

Yet at the end of September, a record 14.4 percent of borrowers were either in foreclosure or delinquent on their mortgages, the Mortgage Bankers Association reported.

[/quote]

The ever-sharp Morgenson outlines in detail the ploys being used by banks to keep from doing what – again – Team Obama begged them to do with taxpayer money.

Not surprisingly, a major problem is the fact that so many of the banks – guess what??? – had packaged the loans into “mortgage-backed securities” – the infamous MBS DERIVATIVES, which, of course, completely changed their calculations, since they then had “second liens” on those houses.

[quote]

Unfortunately, there is a $442 billion reason wiping out second liens is not high on the government’s agenda:

that is the amount of second mortgages and home equity lines of credit on the balance sheets of Bank of America, Wells Fargo, JPMorgan Chase and Citigroup.

These banks — the very same companies the Treasury is urging to modify loans that they service — have zero interest in writing down second liens they hold because it would mean further damage to their balance sheets.

[/quote]

The result, as she notes, is “yet another conflict of interest enriching financial companies while impoverishing investors and consumers.”

Thanks, Barry – that’s DEFINITELY “change” from Cheney / Bush.

Which brings us to the final example of middlemen taking advantage of Obama – and, through him, US taxpayers: Afghanistan.

Here the middlemen are the Afghan Karzai government, on the one hand, and, on the other, the government of Pakistan.

Let’s ignore for the moment whether it makes sense for the US to be a) focusing ANY resources on Al Qaeda, when the issue since 9/11 has never been terrorism, but, rather, political Islam; and b) using a fundamentally military, rather than political / ideological strategy, as the usually annoying, but this time spot-on, Tom Friedman has made clear.

Even granting these two points simply for the sake of argument, is there any credibility to the argument that further US dependence on these two regimes can be considered in any way effective MEANS to achieve those dubious-in-the-first-place ends???

Of course not.

But when you’re used to throwing money at middlemen who laugh in your face when you beg them to do something, why should the farce be limited to Americans – after all, there are so many other corrupt elites in the world who, as Don Fanucci said to young Vito Corleone, want a little something to “wet their beaks”.

 

David Caploe PhD

Chief Political Economist

EconomyWatch.com