[R-G] [BillTottenWeblog] The Battle for Obama's Economic Soul

[Bill Totten]

by Robert Scheer

Truthdig (October 21 2008)


The battle for Barack Obama's economic soul is on in earnest, and it has
nothing to do with the "European socialism" that John McCain attempted
to use as an epithet against him. The Republican quickly dropped that
line of attack, perhaps because the European Union's brand of democratic
socialism has proved more effective in regulating the rapacious
financial markets at the heart of the economic meltdown. Besides, the
socialist British Labor Party has been President Bush's most loyal
supporter of the Iraq occupation that McCain has made the test of true
patriotism.

It would be encouraging if the Democratic presidential candidate did
indeed attempt to learn something from Europe's democratic, and barely
socialist, governing left concerning the welfare of those who are not
super-rich, that is, how to provide quality health care and education
for all - but that is not what is happening. Instead, Obama has turned
to the same American "free market" elite that views government as merely
a corporate subsidiary. Even within that crowd, however, there are
serious splits, and the more enlightened side seems to be winning.

Key among the good guys is former Federal Reserve Chairman Paul Volcker,
who consistently challenged the radical anti-regulatory crusade of Alan
Greenspan, his immediate successor at the Fed. Greenspan's
all-too-successful effort to give the banking lobby everything it had
ever dreamed of was abetted by two Clinton-era secretaries of the
treasury, Robert Rubin and Lawrence Summers. Unfortunately, the two, who
should have mustered the grace to depart public life in deep contrition
over their failed policies, are prominent in the Obama campaign.

Rubin, who pocketed tens of millions running Goldman Sachs before
becoming treasury secretary, is the man who got President Clinton to
back legislation by then-Senator Phil Gramm, Republican of Texas, to
unleash banking greed on an unprecedented scale. What followed, thanks
to a rare display of bipartisan teamwork, was a total dismantling of the
regulatory regime that President Franklin D Roosevelt had put in place
during the New Deal, thus undermining the finest legacy of the
Democratic Party. Under the guidance of Rubin and Summers, Clinton
signed off on the Gramm-Leach-Bliley Act and the Commodity Futures
Modernization Act, Gramm's two key pieces of legislation, during his
final two years in the White House.

The first beneficiary of that legislation was Citigroup, which was
allowed to merge with Travelers Insurance, where Rubin became a director
after leaving the government. In his position on the executive committee
of a floundering Citigroup, Rubin insisted as late as January of this
year that a serious crisis was not forming. In a January 31 article in
Fortune headlined "Robert Rubin: What meltdown?" the subheading states:
"In a talk on Wednesday [January 30], the Citigroup director said the
current financial upheaval is just cyclical. And none of the blame that
there was to assign went to Wall Street." The writer of the article,
Katie Benner, quoted Rubin as saying that the problems were "all part of
a cycle of periodic excess leading to periodic disruption", neatly
exonerating his own bank of any responsibility, even though Citigroup
had already written down over $24 billion in bad mortgage losses.

At that time, Rubin was advising Hillary Rodham Clinton, while Obama,
listening to Volcker, took the opposite tack, issuing a warning in a
major address two months after Rubin's talk that the United States was
experiencing the most profound economic crisis since the Great
Depression. Obama specifically cited the legislation that Rubin had
supported and cautioned, "Our free market was never meant to be a free
license to take whatever you can get, however you can get it".

Although Rubin came over to the Obama campaign after Hillary Clinton's
defeat in the primaries, it does seem that Volcker and legendary
investor Warren Buffett, another fierce critic of Clinton-era
deregulation, are holding the floor for the time being. Buffett has been
increasingly visible in the Obama campaign. More than five years ago,
Buffett charged that the new investment devices, the "hybrid
instruments" and "credit swaps" with which taxpayers are now stuck, were
"financial weapons of mass destruction".

Let's hope that a President Obama will keep Buffett and Volcker close.
They are certainly not the European socialists conjured up in yet
another mean-spirited and irrational outburst of the McCain campaign,
and their vision for the country seems to extend beyond their own bank
accounts.

_____

Robert Scheer is the editor in chief of Truthdig and author of a new
book, The Pornography of Power: How Defense Hawks Hijacked 9/11 and
Weakened America.

A Progressive Journal of News and Opinion. Editor, Robert Scheer.
Publisher, Zuade Kaufman.

Copyright (c) 2008 Truthdig, L.L.C. All rights reserved.

http://www.truthdig.com/report/item/20081021_the_battle_for_obamas_economic_soul/


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