A.J. DiCintio
Elitists, football, and the financial industry
By A.J. DiCintio
June 11, 2011

Recently, I came upon John J. Miller on C-SPAN, author of "The Big Scrum: How Teddy Roosevelt Saved Football," discussing the attempt by arrogant, dictatorial "proto-Progressive" elitists to abolish football, admittedly, in the late nineteenth and first years of the twentieth century, a brutally dangerous game lacking a universal set of rules.

Fortunately, the progressives did not prevail; for, as Miller's publisher summarizes, President Theodore Roosevelt, "a proponent of risk" secured the help of several risk-embracing meritocrats who to this day proudly respond to the title "Coach" to save the game through innovative, common sense reforms.

But what does Miller's story have to do with today's financial industry?

Well, it caused me to think about the rotten, thoroughly anti-Jeffersonian nature of all elitist socio-political systems, including the fact that the value of the labors performed by elitist Wizards of Oz is overrated at least by a factor of a trillion squared.

However, when it occurred to me that substantiating that general assertion requires a work of encyclopedia-length proportions, I decided to limit myself to commenting about the elites who have shaped America's financial industry since the late nineties.

Before beginning the task, I ask readers to keep in mind that the people who will be mentioned have not just had all the advantages but have amassed experiences they and their admirers regard as so ostensibly valuable both deem it perfectly reasonable to silence critics with the shard of hard ice that asks, "And what entitles you to expound about financial issues?"

That crucial observation made, I begin in 1998, when Travelers' Sandy Weill (Cornell) and Citibank's John Reed (MIT) proposed merging their companies, a grand scheme that would create a huge entity by combining the businesses of commercial banking, insurance, and securities and therefore blow the biggest hole ever in the Glass-Steagall Act, which financial elites regarded as a restrictive antique certain to allow foreign banks to far outdistance their encumbered American counterparts.

Of course, getting such an historic merger approved requires help at the highest levels of government. But no problem, for Weill and Reed could count on the enthusiastic support of President Bill Clinton (Georgetown, Oxford, Yale), Secretary of the Treasury Robert Rubin (Harvard), and Fed Chairman Alan Greenspan (NYU Ph.D.).

The fix in, the deal was done; but the suffocating incubus that elites argued was keeping U.S. banks from nurturing American prosperity to its full potential was still on the books.

Again no problem; for Weill and Reed were supported by the herculean labors of flush, generous lobbyists employed by the FIRE industry (Financial, Insurance, Real Estate) and therefore succeeded in adding to the aforementioned list of VIP's a number of very highly educated and experienced Members of Congress, especially Senate Banking Committee Chairman Phil Gramm (U. of Georgia Ph.D.).

After some pretend negotiations, Clinton agreed to sign the Financial Services Modernization Act in late '99, and Glass-Steagall became history — as did former Goldman Sachs bigwig Rubin, who, having completed his work in Washington, immediately resigned his post to return to Wall Street, this time to take another very lucrative position at (you guessed correctly) Citibank, where he would work hand in hand with (you're right again) Mr. Sanford "Sandy" Weill.

With banks now free to become as big as they wish (indeed, the bigger the better under the perfectly stupid socialism of the "too big to fail" doctrine), to trade (i.e. speculate) in currencies, commodities, and inscrutable bundles of mortgages euphemistically called "Collateralized Debt Obligations," as well as to write and buy insurance against possible losses by their casino departments, George W. Bush (Yale, Harvard M.B.A.) assumed the presidency.

As the nation learned all too well, "W" is a New World Order neo-con who, among other mad fantasies, believes so much in the goodness of the Debt Fairy that during his eight year tenure he force fed the wondrous being so effectively that he nearly doubled its weight.

But he is also an elitist who just can't contain the pride that impels the brain to arrogant, foolish dreams of social engineering.

So it was that Bush joined Greenspan, banking CEO's, and politicians such as Harvard grad Barney Frank (upon mention of whose name liberal mouths reflexively gush "brilliant!") in hatching a plan to relax mortgage requirements in the name of creating an "ownership society."

As expected, the elites became dogmatically devoted to a program destined to degenerate so profoundly it gave birth to an illegal alien mortgage racket in which, according to the San Francisco Chronicle, mortgage companies waived the requirement to show a social security account to obtain a mortgage and allowed borrowers "to use unconventional ways to demonstrate their creditworthiness."

The whole truth is, however, that whether the "mark" was an irresponsible citizen, a citizen genuinely in need of honest advice, or an illegal alien, elites in government and the private sector facilitated and carried out the issuing, packaging, and selling of mortgages that were astonishingly mind-boggling in their stupidity as well as their dangerousness to the borrower, the lender, and, most important, the nation.

That reality notwithstanding, the elites were so contemptibly smug and closed-minded that Alan Greenspan implicitly trusted banking CEO's to honestly and faithfully protect the financial integrity of their companies, believing, apparently, it was unnecessary to regulate their behavior because they were exempt from the stunning frailties faith attributes to the Fall and science to the myriad irrational wirings of the human brain.

Not to be outdone, the "brilliant" Barney Frank lectured the nation that "These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis" and scolded Americans that "The more people exaggerate these problems [re Fannie and Freddie]. . . the less we will see in terms of affordable housing."

And in May of '07, when honest, smart people of the financial world could smell the toxic stench of a pile of mortgage CDO's from a thousand miles away, new Fed Chairman Ben Bernanke (Harvard, MIT Ph.D.) spoke at a Federal Reserve Bank conference, extolling the "ownership society" program for having increased home ownership by 4%.

To that display of mindless incompetence, he added a prediction whose every word explodes with the pernicious stink Irony reserves exclusively for emanations that ooze from the minds and mouths of pompous aristocrats:

. . . we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.

This, of course, is the same Ben Bernanke whom Barack Obama (Columbia, Harvard J.D.) nominated for a second term as Fed chairman.

And Barack Obama is the same man whose deep devotion to liberal dogmas impels him to labor mightily to make a debt piker of his predecessor.

Moreover, since liberalism's fundamental tenet perverts Thoreau and Jefferson to say, "That government is best which governs most from seats of authority farthest removed from the people," Obama worships power to the extent that he appointed Wall Street connected Timothy Geithner (Dartmouth, Johns Hopkins M.A.) to serve in the expanded role of Treasury Secretary/ Bank-Bailout-Meister.

In fact, Obama's principal worry has been that making banks and bankers pay a price for their corrupt behavior (that included betting against the very mortgage products they sold) might temporarily slow the economy and thus harm his chances for reelection.

That's why he has winked to Justice, sending the message that it take its good old forgetful time in bringing civil and criminal charges against corrupt banking elites.

Happily, a good number of state attorney generals are filling the insulting void.

But the truth is that with a whole lot of help from its friends in Washington, including Country Club Republicans who betray ordinary citizens of the kind who comprise the Tea Party movement, the status quo loving financial industry is doing quite well.

As honest banker Robert G. Wilmers told Joe Nocera (NYT), ". . . . banks exist for people to keep their liquid income, and also to finance trade and commerce. Yet the six largest holding companies . . . made a combined $75 billion last year . . . $56 billion [of it] in trading revenues . . . [meaning that] trading, not lending, is how they make most of their money."

Of course, that data begs these questions:

Does this business model serve the national good, especially in light of the fact that it is the nation through the FDIC that provides stability to the banking system?

If banks are to play casino, should the gambling be done in separate divisions where money lost is money lost and bailouts are never a possibility?

There is also the information contained in a chart Barry Ritholtz (ritholtz.com) reproduced from John Roque of WJB Capital, showing that during the housing boom and continuing today, the value of financial stocks relative to the value of the S&P 500 has been well above the 34 year average, a fact Ritholtz suggests ought to make us think about "what happens when Finance is dominant versus other sectors."

Keeping in mind the economic, psychological, and social pain our nation is experiencing as a result of decisions made by elites of the financial and political industries, I'll pick up on the always insightful Ritholtz to conclude with the following observation:

Today's economic mess is only one of the tragedies that happen when, to relieve themselves of the responsibilities inherent in the Jeffersonian vision, a free people, blind to the disastrous betrayal that inevitably lies ahead, agree to government of, by, and for the elite.

© A.J. DiCintio


The views expressed by RenewAmerica columnists are their own and do not necessarily reflect the position of RenewAmerica or its affiliates.
(See RenewAmerica's publishing standards.)

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A.J. DiCintio

A.J. DiCintio posts regularly at RenewAmerica and YourNews.com. He first exercised his polemical skills arguing with friends on the street corners of the working class neighborhood where he grew up. Retired from teaching, he now applies those skills, somewhat honed and polished by experience, to social/political affairs.


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