Guest: Break alliances between Wall Street and the White House
The Big Six banks are now more powerful than ever before in our history, writes guest columnist Nomi Prins. Without a broader dispersion of power, influence and money, we cannot have a true democracy.
Special to The Times
Nomi Prins will talk about “Wall Street in the White House” at 7:30 p.m. Wednesday at a Town Hall Seattle event. Tickets are $5.
MONEY in politics is nothing new; in fact, money and politics are siblings in the family known as Power.
But the U.S. Supreme Court’s recent McCutcheon decision to enable further consolidation of campaign dollars to influence politicians, coupled with levels of inequality that rival those preceding the stock market crash of 1929, reveals a clear message:
Without a broader dispersion of power, influence and money, we cannot have a true democracy — one in which the majority of the population dictates the nation’s direction.
More than a hundred years ago, Supreme Court Justice Louis Brandeis penned a book called “Other People’s Money.” He argued that too much concentrated wealth and power in the hands of a few elite players, known as the “money trusts,” were dangerous to the economic safety of American citizens.
At the time, a handful of families — the Morgans, Stillmans, Rockefellers, Bakers and Aldrichs — dominated finance and exerted that influence on political decisions, and did so for decades afterward.
In my new book, “All the Presidents’ Bankers,” I trace the longstanding blood, intermarriage and protégé-mentor ties between presidents and bankers, relationships fostered at adjoining estates, Ivy League university attendance, yachting expeditions and exclusive club gatherings.
Throughout much of the 20th century, presidents were not the puppets of bankers but their friends, and in turn, bankers were confidantes of presidents (sometimes in an official capacity, sometimes unofficial, but always unelected).
Presidents sought bankers’ counsel on major issues: financing world wars, Glass-Steagall regulations to separate banks’ risky speculations from depositors’ money, expansionist policies during the Cold War and the Great Society ideals of President Johnson. But bankers and presidents also balanced their mutually reinforcing desires for power with the needs of the country as a whole — with positive economic results for the population.
Yet, something changed in the early 1970s. Bankers discovered that recycling the new profits they were making from Middle East oil funds, in the form of loans to other countries, enhanced their global power and profit without accountability to U.S. domestic or public interests. They took bigger risks as presidents adopted open trade policies, which allowed bankers’ international expansion.
What followed was a series of financial crises and subsequent federal bailouts: the Third World debt crisis of the 1980s, the Mexican peso and Asian crises of the 1990s, the Enron debacle and recession of the early 2000s, and most recently the crisis of 2008.
During those decades, bankers pressed presidents and U.S. Treasury secretaries to deregulate their activities and subsidize their losses, citing America’s need to remain competitive in the global marketplace. Throughout the Reagan, Bush and Clinton administrations, bankers pushed regulatory boundaries. Those presidents, whose cabinets were largely composed of Wall Street friends, fervently argued on their behalf in D.C.
Today, the alliance between President Obama and the nation’s most powerful banker, JPMorgan Chase head Jamie Dimon, might not be as closely personal as alliances were in the days when Teddy Roosevelt entrusted John Pierpont Morgan to save the American economy in the wake of the Bank Panic of 1907.
But they are just as functional. The Big Six banks are now more powerful than ever before. They hold more of our deposits and control more derivatives than ever.
Our nation stands at a crossroads. We, the American people, are at grave risk of another economic crisis because nothing substantive has been done to prevent it.
Our leaders in D.C. must resurrect a Glass-Steagall division of big U.S. banks so that our deposits are not used as fodder for reckless practices. The Department of Justice should take punitive actions against those who pillage the nation’s bank accounts for personal and institutional gain while relying on government backing to keep them from failing.
We, the citizens, should build our own local alliances, supporting public initiatives, regional commerce, credit unions and other community banks to help alter the shape of power and fortify our country from the ground up.
We need White House leadership to place the country’s economic well-being before that of bankers. We need to rein in recklessness, not subsidize it with our taxes.
Lastly, we need to learn from our past mistakes, not accentuate them, and decentralize power in order to achieve a true democracy.
Nomi Prins is a Los Angeles-based journalist, a senior fellow at Demos and a former Wall Street executive. Her new book is “All the Presidents’ Bankers: The Hidden Alliances that Drive American Power” (Nation Books).