But while the economy now may bear a strong resemblance to that of the 1930s, the political scene does not, because neither the Democrats nor the Republicans are what once they were. Coming into the Obama presidency, much of the Democratic Party was close to, one might almost say captured by, the very financial interests that brought on the crisis; and as the Booker and Clinton incidents showed, some of the party still is. Meanwhile, Republicans have become extremists in a way they weren’t three generations ago; contrast the total opposition Obama has faced on economic issues with the fact that most Republicans in Congress voted for, not against, FDR’s crowning achievement, the Social Security Act of 1935.
Here is how Wall Street captured the Obama administration:
Soon, the latecomers had completely superseded the early team. For example, the person charged with vetting potential economic hires was Jason Furman, a seasoned Washington economist who ran the Hamilton Project, a neoliberal think tank founded by Rubin and funded by Democratic-friendly financiers. Mike Froman, an aide to Rubin during his tenure as treasury secretary who then followed Rubin to Citigroup, was the personnel chief of Obama’s transition team. It was he who put forward Larry Summers and Tim Geithner as the leading candidates for treasury secretary.
Summers, the Harvard economist and former undersecretary of the treasury under Robert Rubin, who then succeeded him as treasury secretary, as well as being an adviser to a Wall Street hedge fund, would become Obama’s top economics aide as director of the National Economic Council. Geithner, who had been Summers’s lieutenant while at the Clinton Treasury and was later chairman of the Federal Reserve Bank of New York, had been one of three people who had acted to save the country’s biggest banks—on terms congenial to the banks—during the fall of 2008. As Scheiber writes, “By putting Mike Froman in charge of hiring, Obama was, in effect, choosing to staff his administration with insiders and establishmentarians.”
The dominance of Rubinites in the new administration shocked many progressives, since for many the Clinton-supported repeal of the Glass-Steagall Act, advocated by Robert Rubin but opposed by Paul Volcker, symbolized the extent to which the financial crisis of 2008 was hatched in the overly friendly relationship between the Clinton administration and Wall Street. It’s true that Glass-Steagall, a Great Depression–era law that forbade the mixing of securities trading and accepting FDIC-insured deposits under the same corporate roof, wouldn’t have prevented the 2008 implosion of Wall Street. Instead, it was extraordinarily high levels of leverage at investment banks like Lehman and Merrill Lynch, as well as the holding of huge portfolios of toxic subprime mortgages by deposit-taking banks like Bank of America, that were the fuel for the conflagration. But progressives were right to feel that Wall Street had been dangerously underregulated for too long and that the entire country was now paying the price.
Read the whole thing. I trust that the utterly supine nature of the Republican Party when it comes to standing up to financial interests on behalf of ordinary Americans needs no elaboration. Romney said yesterday that there’s nothing wrong with the US economy that lower taxes and less regulation can’t fix. Really? Really? For Jesse Jackson, it’s always Selma, 1965; for Republicans, it’s forever the 1980 Reagan campaign.
I concede that the Democrats are marginally better than the GOP on this stuff. But are they so much better that they’re worth taking a chance on, given how much worse they are than the GOP on social policies?
I miss Mike Huckabee. Whatever happened to him, anyway?