The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street Review

"Steal a little and they throw you in jail - Steal a lot and they make you king" - Bob Dylan

Imagine, for a moment, that a burly stranger takes your wallet, removes , and walks away. It stands to reason that, at the very least, you would want the culprit caught. You might even take the time to file a police report and describe the thief to a sketch artist. Now imagine instead, a very well dressed thief, with a dozen or so well dressed associates, who manage to take your house, your job, and even to diminish the value of your 401K, would you want this group caught just as badly? And if it turns out that this second heist was the work of identifiable thieves, would you spend the time necessary to learn who they were and how the deed was done? Or would you rather squeal and scream at whoever and whatever is directly in front of you?

That is the choice you face when deciding whether or not to read "The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street". In it, veteran journalist and Truthdig editor, Robert Scheer does exactly what the subtitle implies. He describes in detail how we got into the economic mess we are in.

Of course, everyone knows some of what happened. Most, probably suspect that both bankers and brokers had a hand in creating the real estate mess. Most have heard something about derivatives, CDOs, Alt-A loans, and subprime loans. And those government sponsored bank bailouts are, by now, infamous - even if there seems to be widespread confusion about which administration (Bush or Obama) did what. But when did this all start and what are the political, economic, and ideological connections? More simply, what is the answer to a question posed by a bewildered George W. Bush: "How did this happen?"

As Mr. Scheer tells it, the crime unfolded over almost 3 decades. Ronald Reagan laid the groundwork with the indispensible help of antiregulatory true believers Dr. Wendy Gramm and her husband, Senator Phil Gramm. Scheer carefully describes their efforts to overturn the financial regulatory system introduced by Franklin Roosevelt's New Deal. The top target, dubbed the "holy grail of Wall Street," was the 1933 Glass-Steagall Act, which regulated the financial services industry by erecting a wall between the commercial banks (entrusted with depositors' FDIC insured funds), investment banks, and insurance companies. Although by the end of Reagan's presidency Glass-Steagall remained in place, Scheer explains how President Reagan had been wildly successful on the ideological front in selling the view that big government was the cause economic stagnation.

Then, with Big Government as the newly accepted enemy of unrestricted wealth, the Republicans (in the Reagan and in both Bush administrations) found a way to achieve at least a part of what they wanted by appointing regulators who hated regulations. Thus, in 1988, Wendy Gramm became chair of the Commodity Futures Trading Commission. The foxes were now charged with guarding the henhouse.

While Scheer credits the Republicans with laying the necessary foundation, he is consistently nonpartisan and the real deregulatory victories are shown to come during the Clinton administration. Working in the ideologically anti-government atmosphere that he inherited, it is Bill Clinton, Treasury Secretary Robert Rubin, Larry Summers, Fed chair Alan Greenspan, along with the Republican Congress, that successfully ended Glass-Steagall.

The story is complex, but, as written here, understandable. The end of effective financial regulation, the end of Glass-Steagall, comes in 1999 with the Financial Services Modernization Act. A year later that is followed by the Commodity Futures Modernization Act, which insured the legality of unregulated over-the-counter derivatives and paved the way for the rise and fall of Enron and Arthur Anderson.

If this seems too much like a story composed of dry and difficult economic statistics it is not. Scheer laces the tale with fascinating details, like the inclusion in the Commodity Futures Modernization Act, of the "Enron loophole" which specifically exempted energy trading from regulatory scrutiny. And there is the story of the largely unsung heroine, Brooksley Born, who as the successor to Wendy Gramm at the Commodity Futures Trading Commission struggled valiantly to save us from the coming unregulated nightmare of unlimited over-the-counter derivatives including those labeled "Collateralized Debt Obligations" (CDOs) which allowed loan originators to retain no residual risk for loans they made to those obviously unable to pay.

The tale of Born's meeting with Alan Greenspan, attributed to an article published in Stanford Magazine, is almost surreal. Greenspan begins by saying to Born, "Well, Brooksley, I guess you and I will never agree about fraud." So Born asks, "What is there not to agree on?" "Well," Greenspan replies, "you probably will always believe that there should be laws against fraud, and I don't think there is any need for a law against fraud." Given what we now know about former NASDAQ chair, Bernie Madoff, Enron, Worldcom, and Global Crossing, it is not hard to imagine this Alan Greenspan as a character in Alice in Wonderland with Alice remarking, off to the side, "curiouser and curiouser!"

In "The Great American Stickup" Robert Scheer has clearly laid out the connections that run from Ronald Reagan through the Gramms and on to Enron; from Robert Rubin at Treasury to Citigroup; from Citigroup back to Enron and on to the subprime loan craze. He traces the evolution of Fannie Mae and Freddie Mac from government-sponsored creations to privately owned, and publicly traded, financial monsters. Scheer writes incisively about the incestuous world of finance and government where Goldman Sachs is nicknamed Government Sachs. He connects Hank Paulson and Goldman to AIG and Timothy Geithner to President Obama and back to AIG.

The saddest connection of all may turn out to be the one that runs from candidate Obama to President Obama. Early in the book Scheer quotes Obama's important speech at Cooper Union where the candidate astutely observed, "The American experiment has worked in large part because we have guided the market's invisible hand with a higher principle. Our free market was never meant to be a free license to take whatever you can get, however you can get it."

But that speech, with its clear recognition of the wisdom of Franklin Roosevelt's New Deal, stands in stark contrast to the policies of President Obama and leads me to one last quote from Alice (or, as I would like to imagine, from President Obama himself): "I wonder if I've been changed in the night? Let me think. Was I the same when I got up this morning? I almost think I can remember feeling a little different. But if I'm not the same, the next question is 'Who in the world am I?' Ah, that's the great puzzle!"

Buy this book, read it, and discuss it with friends and neighbors over a pot of tea, or if you prefer, a pot of coffee.

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street Overview

In The Great American Stickup, celebrated journalist Robert Scheer uncovers the hidden story behind one of the greatest financial crimes of our time: the Wall Street financial crash of 2008 and the consequent global recession. Instead of going where other journalists have gone in search of this story—the board rooms and trading floors of the big Wall Street firms—Scheer goes back to Washington, D.C., a veritable crime scene, beginning in the 1980s, where the captains of the finance industry, their lobbyists and allies among leading politicians destroyed an American regulatory system that had been functioning effectively since the era of the New Deal.

This is a story largely forgotten or overlooked by the mainstream media, who wasted more than two decades with their boosterish coverage of Wall Street. Scheer argues that the roots of the disaster go back to the free-market propaganda of the Reagan years and, most damagingly, to the bipartisan deregulation of the banking industry undertaken with the full support of “progressive” Bill Clinton.

In fact, if this debacle has a name, Scheer suggests, it is the “Clinton Bubble,” that era when the administration let its friends on Wall Street write legislation that razed decades of robust financial regulation. It was Wall Street and Democratic Party darling Robert Rubin along with his clique of economist super-friends—Alan Greenspan, Lawrence Summers, and a few others—who inflated a giant real estate bubble by purposely not regulating the derivatives market, resulting in the pain and hardship millions are experiencing now.

The Great American Stickup is both a brilliant telling of the story of the Clinton financial clique and the havoc it wrought—informed by whistleblowers such as Brooksley Born, who goes on the record for Scheer—and an unsparing anatomy of the American business and political class. It is also a cautionary tale: those who form the nucleus of the Clinton clique are now advising the Obama administration.

 

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