A Trifecta of Failure

The near calamity on Christmas Day capped a year - a decade - when the ability of our government to protect its people was tested and, when it counted most, failed.

As Maureen Dowd at the New York Times put it: “If we can’t catch a Nigerian with a powerful explosive powder in his oddly feminine-looking underpants and a syringe full of acid, a man whose own father had alerted the U.S. Embassy in Nigeria, a traveler whose ticket was paid for in cash and who didn’t check bags, whose visa renewal had been denied by the British, who had studied Arabic in Al Qaeda sanctuary Yemen, whose name was on a counterterrorism watch list, who can we catch?”

To that, I add: “If our elected representatives can’t overcome the Money Industry’s lobbyists and legislate a ban on speculation in derivatives, enact a cap on credit card interest rates and regulate the rating agencies after these evil-doers trashed our economy and after Congress saved them from bankruptcy by giving them trillions of taxpayer dollars, what can they do?”

Then there is health care reform, a seven decades-long fight for fairness and financial security that has ended up in an unprecedented gift to the very companies that are responsible for our ridiculously expensive and cruel system. “Congress is effectively making private insurers unnecessary, yet continuing to insist that we can’t do without them,” the New Yorker points out.

From any viewpoint, liberal or conservative, our government’s record over the last ten years is dismaying and alarming. First came 9/11, when the religious ideologues attacked our nation and we turned out to be defenseless against a bunch of amateurs even though the Pentagon, the intelligence agencies and the White House knew a catastrophic assault was in the works. It is an outrage that despite hundreds of trillions of taxpayer dollars spent on defense and weaponry, there were only a handful of fighter jets available to protect our homeland that day, and they were too late. Next came the free market ideologues who brought us the Mini-Depression of 2009 (We’re supposed to pretend it was a recession and that it's over but it wasn’t and it ain’t). There were plenty of warnings about the inevitable collapse of the Speculation Economy, but Congress, the White House and federal regulators all looked the other way.

What has been accomplished by the government’s efforts to protect us against foes foreign and domestic? After an almost unfathomably large expenditure of public resources by the government, not to mention considerable pain and suffering for the public, we seem to be right back to square one.

Which is of course why so many Americans have given up on health care reform.

The stakes are great for the Republic: once Americans lose confidence in government, Democracy itself is in danger. Restoring their trust will be the preeminent challenge of the next decade, which starts today.

Stuck in the Fog

One thing is clear: Citigroup executives thought they had a deal with the government to pay back their bailout money so they could pay themselves as much as they wanted.

Then it all started to unravel. The Washington Post disclosed that the IRS granted Citigroup huge tax breaks (meaning billions) as part of the exit strategy the "too big too fail" bank worked out with Treasury officials.

After that the stock market rejected the government and Citigroup’s assessment of the bank’s health and the deal fell through.

Loopholes and Lumps of Coal

While the financial industry got a stocking stuffer, we got stiffed.

House Democrats passed something they called reform and handed  it over to the Senate.

But the bill is laden with loopholes, put there by Blue Dogs and New Democrats doing the bidding of the financial institutions.

Democratic leaders, from President Obama to Rep. Barney Frank have demonstrated that they are at best ineffectual in spearheading efforts to win real reform that puts consumers and taxpayers’ interests first. At worst, they're undermining those efforts.

The resilience shown by the financial industry in blunting efforts at sensible regulation has been nothing short of breathtaking.

Despite these setbacks, the battle may not be lost.

Getting a Haircut and a Hotdog

Lawmakers are always looking for a fig leaf when it comes to presiding over a massive public bailout of their friends on Wall Street. So, for example, when Treasury Secretary Geithner appeared on Capitol Hill last March to explain why AIG got one hundred cents on the dollar, which it promptly turned around and handed over to Goldman Sachs and its other Wall Street partners, Republican Congressman Spencer Bachus wanted to know, “Was there any discussion over a haircut – [the Wall Street Banks] taking 95% or 90% as full payment?”

Five or ten cents on the dollar – that’s what Congressman Bachus and his colleagues on Capitol Hill think is a sufficient penalty for having hopped into bed with AIG? 

Attention Unhappy AIG Employees: Good Riddance

Looks like the top lawyer and other fat cats at AIG, whose salaries are now paid by American taxpayers, are maneuvering to be able to escape limits on their pay. Today’s Wall Street Journal reports that a Ms. Anastasia Kelly, the General Counsel of AIG, and four other insurance executives gave notice last week that they were “prepared” to leave by the end of the year if their pay is cut by Kenneth Feinberg, the government “pay czar” who sets compensation levels for companies that got bailout money. AIG got $182 billion in taxpayer dollars. AIG’s top employees want to bust the $500,000 pay cap set by Feinberg.

Wall Street's Back – And Has Detroit by The Throat

While financial institutions drastically reduce lending again to private lenders and businesses, they’re also tightening the vice on cash-strapped public agencies from California to New Jersey.

This aspect of the financial meltdown has gotten less attention than the bonuses and the bailouts: how AIG and other Wall Street giants sold cities, towns, school boards and other public agencies high-risk investments and complex financing schemes during the boom. Now that the economy, the government agencies’ credit ratings and all those risky investments have gone bust, Wall Street is hounding cash-strapped governments from California to New Jersey for its money.