Lawrence Goodwyn: The Great Predicament Facing Obama
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Classic Republican cliches simply cannot support the weight of such large-scale human agony. It will force thoughtful Americans to discover what the original Populist advocates of the 19th century discovered and which I wrote about so long ago -- namely, the profoundly exploitative impact unregulated banking has upon all the sundry millions who are not bankers. The descriptive word that came to be affixed to these upheavals was "panic." They made their destructive appearance in every generation. The first to raise the alarm was Thomas Jefferson whose warning I used as the frontispiece of my book Democratic Promise in 1976, to wit:
"I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."
Easier said than done. Jefferson's warnings began appearing in his letters in, I think, 1816, the last decade of his life, and "Panics" thereupon became a fixture of American economic life: 1837, 1857, 1873, 1893, 1907, 1921, 1929-'38, 1973, 1993, 2008-'10. America's favorable balance of trade ended in the early 1970s and it has been more or less downhill ever since. Over the past 30 years, the percentage of the national wealth held by the top 1 percent of the population has gone from 9 percent in 1976 to 28.9 percent in 2007. Quite soon this pampered one percent, heavily concentrated in the financial sector, will own one-third of all the wealth in the country. They do especially well in times of severe popular stress, whether these depleting moments are called depressions, recessions or downturns. "Bubbles" can also be counted on to afford opportunities for rapacious plunder, though in advanced capitalist countries, housing bubbles have provided especially lucrative terrain. Democracy as we know it cannot survive this maldistribution of the fruits of the labor of the toiling millions whose belief in the country make America what it is.
Frel: Time to talk about Obama?
Goodwyn: Not quite. I want to set up a bit more context first. We need to understand, at least in broad outline, the leaky vessel that is "financial regulation." Do we need it? Yes. Do we need to restore some or all of the protections we used to have with Glass-Stegall? Yes, some, all, and then some.
We need to understand that the creation of the Federal Reserve System at the beginning of the 20th century was a product of legislation written by bankers. Its purpose was to not to "regulate" banks but to help banks get the wherewithal to restore order to the market after "panics." Because of population growth and radically increased production, the America economy had simply gotten too big for somebody like J. P. Morgan and friends to "properly" bail out the system after every stock market crash. As a conceptual starting point for grasping what a robust industrial society needed as a prerequisite to a democratic economic system, the Fed constituted precisely the opposite of what the Populists of the 1889 and 1890 had advocated with their Sub-Treasury System. Instead, the creation of the Fed constituted the harnessing of the power of the government for service to bankers, not for service to the producing economy. The objective of the architects of the Fed system was to "settle" what was called "the financial question" by removing the issue from public discussion forever.
Turning that on its head is simply beyond the reach of any American president. It is not just that the political support is not there, the intellectual understanding is not there either. Essentially, the matter is unstudied. I could explain why, but that is a dull and depressing subject that we'll have to visit some other day. Suffice it to say that we know more about rockets to outer space, and more about dinosaurs, than we do about the prerequisites for a stable monetary system, much less a stable and democratic monetary system. As a political and intellectual subject, we leave financial matters to bankers who take steps to ensure that representatives of the political parties who man the appropriate committees in Congress are both well-heeled and properly compliant. This is not uniquely an American achievement. There is no society in the world that is remotely liberated from those of its citizens who control the levers of finance. The only advice I would have to offer Obama would be to suggest he take elaborate steps to find financial advisers who care more about his physical and political well-being than they care about improving their own connection to great wealth. And when I use the word "care" here, I mean "care passionately."
So I can move on to Obama by first telling a quick story about how marginal non-bankers like you, me, and U.S. presidents are. Okay?
Frel: Go on.
Goodwyn: Back in the late 1950s when I was writing with the kind of moral rectitude we usually associate with provincial muckrakers (which was what Texas Observer contributors had a tendency toward, and still do a half century later), I received a phone call from a man named Walter Hall, a leading citizen from a little town on the upper gulf coast called League City. He said he was sending me a little book on money and banking and he would be coming to Austin in a week to talk to me about it. I soon got the book, recognized it was written with admirable insider confidence, and tried to learn enough to be prepared for the tutoring I was sure was coming. Walter Hall was well known among politically active types in Texas because he was a banker who was especially friendly to oil and refinery workers, steel workers and others of similar ilk. A very broad man.
It turned out to be a meeting unlike any I had ever had -- either before or since. He wanted to know what I thought of the book. I said it found it hard because the subject matter was foreign to me and because I had no clear idea what bankers did. He wanted to know what I thought of the Federal Reserve System. Except for some things I had learned from Wright Patman, head of the House Banking Committee, I was more or less blank on this matter also. I told him I majored in English and history but not in higher math.