Monday, March 16, 2009

More on Elite Corruption Fueling the Recession

Robert Reich can really get you thinking:

When it turns out that people like Lloyd Blankfein, the CEO of Goldman Sachs, who took home $68 million in 1997, was the only Wall Streeter in a meeting last September at the New York Federal Reserve to discuss the initial AIG bailout with Tim Geithner, then New York Fed chair, among others, at the very time Goldman was AIG's largest trading partner, a distinct scent of self-dealing begins to emanate. When it turns out that Citigroup got a bailout deal last October far more generous than that given to any other distressed bank, when a top Citi executive was advising the Treasury and Fed, the scent increases. Goldman's past CEO was Treasury Secretary at that time, by the way, and another former Goldman's CEO was a top Citi official and also a former Treasury Secretary. I am not suggesting anything so crude as corruption. But could it be, given these tangled webs, that -- innocently, unintentionally, perhaps even subconsciously -- the entire bailout effort was premised on saving these companies rather than protecting the public? Or that the distinction between the two was lost, and still is?

But he is, in this case, leaning way over backwards to be polite to folks who have spent the last six months making America's financial crisis much worse than it ever needed to be. Everyone in Washington, Robert -- as you know well -- is exceedingly conscious of "conflict of interest." Everyone in the Washington bureaucracy gets trained to recognize it and warned repeatedly to avoid it, or even the appearance thereof. I am certainly not saying that no bureaucrat is ever guilty of it; au contraire. But when they step in it, they can smell it on their shoes. "Gee, I never thought..." is no excuse; all it means is, "Gee, I never thought you'd catch me."

For the CEO of Goldman to discuss bailing out AIG with the Government while Goldman is AIG's largest trading partner is conflict of interest. Reich may not be suggesting anything so crude as the passing of paper bags full of cash, nor am I. Cash bribes are for the small fry. Corruption in elite America is about the illicit sharing of power; the cash, all in good time, takes care of itself. When a politician shares power with a corporate CEO in a context of revolving chairs between Wall Street and Washington to enhance the careers of each at the expense of the national interest, that is corruption.

A simple, standard method for avoiding such conflict of interest exist. It is called "recusal." When you know you are personally involved in an issue so that your participation in the decision-making process would potentially affect your own pocketbook, then you excuse yourself from participation in that process.

If no one can be found in Washington who meets the above criteria, then we need a board of non-Washington people to make these decisions. Select one economist from each university in the U.S., put their names in a hat, and appoint the first seven whose names you pull out. Lock them in a hotel room for a week with the best food in town catered in, and tell them to spend $1 trillion to help their country.

Or perhaps we the people will have to follow the Pakistani approach...

Pakistan, that stellar example of sophisticated citizenry knowledgeably regulating the performance of their elected officials, just demonstrated to the world how to defend democracy. Thousands of individuals put their personal safety on the line marching straight through police lines ordered by a corrupt politician in love with his own power. Even more impressive, these citizens were marching toward military lines set up to defend power against people. The news today suggests that the people won in this case, but Tiananmen and many, many other cases have taught mankind the danger of defending democracy. The courage of the Pakistani people this weekend is a lesson for democracy that Americans watching its own elite misbehavior should take to heart.

The above is just a blog post. If you actually want a plan of action for repairing the structure of the American financial system, it isn't even necessary to put those economists' names in a hat: the plan already exists. And wonder of wonders, the author is a member of the Government! Yes, some good people do work for the U.S. Government.

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