Obama ’s phony banking “reform”

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Obama’s phony banking “reform”
27 April 2010

Debate on the Senate version of the Obama administration’s bank regulatory
overhaul is expected to begin shortly. The House of Representatives passed its
banking bill last December.

Neither bill does anything to curb the power of the banks or limit their
parasitic and socially destructive activities. What the media is calling the
“most sweeping overhaul” of the banking system since the Great Depression in
reality sanctions the ever greater monopolization of the financial system by a
handful of Wall Street giants, imposes no limits on executive pay, and allows
the banks and hedge funds to continue gambling on exotic and largely unregulated
securities such as collateralized debt obligations and credit default swaps.

The so-called bank “reform” is an exercise in mass deception—an attempt to
placate popular hostility to the banks and provide the government with political
cover while it continues to do the bidding of Wall Street.

The bills have been drawn up in the closest consultation with bankers and bank
lobbyists. This collusion has been widely reported in the press and presented as
a perfectly normal and acceptable fact of political life. The front-page lead
article in Monday’s Wall Street Journal describes the intensive lobbying being
carried out by billionaire investor Warren Buffet to alter the Senate bill’s
provisions on derivatives.

Buffet, an Obama supporter, wants to exempt existing derivatives deals from
collateral requirements in the current language of the bill—a change that would
save him billions on his $63 billion derivatives portfolio. Both senators from
his home state of Nebraska, one Democrat and one Republican, are championing his
cause.

This is just one example of the web of corruption and bribery that extends from
Wall Street to the White House and Capitol Hill. The banks have thus far spent
$455 million lobbying Congress on the overhaul and handed out $34 million in
2010 election campaign donations, most of it to Democrats.

The circle of corruption includes the ratings companies such as Moody’s and
Standard & Poor’s, which blessed toxic subprime mortgage-backed securities with
triple-A ratings in return for fees from the banks they were rating, and
government regulators who move seamlessly from regulatory offices to lucrative
posts at the banks they were supposedly overseeing.

The colossuses of Wall Street amass their huge profits by means of fraud and
swindling. Over the past few weeks systematic accounting fraud at Lehman
Brothers has been exposed and the Securities and Exchange Commission has
indicted Goldman Sachs for defrauding its clients in the run-up to the subprime
mortgage crash. This is only the tip of the iceberg.

Obama’s so-called reform will do nothing to hold accountable the criminals at
the head of the banks and hedge funds or break up the financial behemoths that
exert a stranglehold on the economy. Instead, it will set up a mechanism to
institutionalize government rescue operations of big financial firms to protect
the interests of bank executives, shareholders and creditors, ultimately at
public expense.

The lawless and reckless actions of Wall Street CEOs have had devastating
consequences for tens of millions of people in the US and around the world. The
wreckage left in the wake of the financial tsunami of 2008 is registered in
millions of lost jobs, home foreclosures, utility shutoffs, and rising hunger,
disease and poverty.

With the help of trillions of dollars in taxpayer bailouts, the bankers are
making more money today than ever, even as schools are closed, libraries
disappear and museums and opera houses are shuttered. There is, the people are
told, “no money” for jobs or basic social services.

There is plenty of money. The problem is that it is concentrated in the hands of
a financial aristocracy. The immense concentration of wealth among these
individuals is not only morally repugnant, it is a menace to society. It is the
result of the plundering of the social wealth to feed criminal appetites, at the
direct cost of the productive forces.

During the rise of American capitalism as an industrial power, the vast fortunes
of the corporate elite, while achieved through ruthless exploitation of the
working class, were associated with the expansion of industry and the production
of useful products. That is not the case with today’s financial elite. Its
wealth is amassed on the basis of financial manipulation and outright fraud,
linked to the destruction of the social infrastructure and industry.

The Socialist Equality Party advocates a policy that proceeds from the needs of
the people and society as a whole, not the personal fortunes of the bankers and
big investors. We call for:

• The criminal prosecution of bankers and speculators whose illegal actions
contributed to the deepest economic crisis since the Great Depression. They must
be held legally accountable and given appropriate sentences to prevent a
recurrence of such practices.

• The expropriation of the wealth of the top bankers, hedge fund managers,
traders and speculators. This would immediately free up several trillion
dollars, money that could go to a public works program to provide jobs and
rebuild the social infrastructure—schools, housing, clinics, libraries, cultural
facilities, the energy system. This money could also be used to help provide
relief to the victims of the economic crisis—to maintain full wages for those
laid off, put a stop to foreclosures and utility shutoffs, provide full medical
coverage.

• The nationalization of the banks and major financial institutions and their
transformation into public utilities under the democratic control of the working
population. This is a prerequisite for the rational and planned development of
the economy and the allocation of resources to rebuild the social
infrastructure, end poverty, raise living standards and overcome social inequality.

Only such a socialist program can break the grip of the financial aristocracy
and liberate the productive forces for the benefit of society as a whole. It can
be achieved only through the independent political mobilization of the working
class against Obama, the two parties and big business, and the capitalist system
that they defend.

Barry Grey

http://wsws.org/articles/2010/apr2010/pers-a27.shtml

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