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Understanding Obama�s Response to Financial Meltdown
Bill Van Auken, Socialist Equality Party Vice Presidential candidate
19 September 2008
"...Behind all of the Democratic candidate�s
rhetoric about Wall Street not �minding the store� and how �CEOs got
greedy,� his campaign enjoys ample support from finance capital, and his
administration would, no less than the Republicans, represent its
fundamental interests. The Obama campaign has raised close to $10 million
from the Wall Street investment houses, nearly 50 percent more than the
amount they have given to Republican McCain. Three senior executives at the
now bankrupt Lehman Brothers raised more than $1.5 million for the Democrat.
The Center for Responsive Politics, which tracks campaign contributions,
listed Goldman Sachs as the top source of campaign funds for the Obama
campaign. The watchdog group added that Wall Street�s stake in the
Democratic candidate is probably even larger. �Since his campaign has
ignored repeated requests... to disclose his bundlers� employers and
occupations,� it pointed out, �these figures are probably undercounts.� "
As hundreds of millions of people in the US and around the world confront the
onset of the worst financial crisis since the Great Depression of the 1930s,
with all of its implications for their jobs, livelihoods and the future of their
children, the Democratic Party and its presidential candidate Barack Obama have
seized upon Wall Street�s implosion as a means of reinvigorating their faltering
campaign.
Obama has delivered a series of speeches and aired a new campaign ad blaming the
economic meltdown on �bad decisions made in favor of big corporate special
interests instead of America�s working families.�
The Democratic candidate has made the most of his Republican rival John McCain�s
bald statement Monday�in the wake of the bankruptcy of Lehman Brothers, the
forced sale of Merrill Lynch and the free-fall of stock prices on Wall
Street�that the �fundamentals of our economy are strong.�
As the absurdity of these remarks became clear, the McCain campaign shifted
gears, adopting an equally absurd pretense of anti-Wall Street populism. By
Wednesday, speaking to employees at the General Motors plant in Lake Orion,
Michigan, McCain was denouncing Wall Street�s �casino culture� and declaring:
�We are going to fight the special interests and corruption in Washington. We
are going to fight the greed and irresponsibility on Wall Street.� By Thursday,
he was calling for the firing of the chairman of the Securities and Exchange
Commission for having �betrayed the public trust.�
Obama mocked McCain�s phony populist rhetoric, while calling attention to the
dominance of corporate lobbyists over his campaign and his close ties to the
right-wing former Republican senator and architect of key financial deregulation
legislation, Phil Gramm.
�At this rate, by the end of the week John McCain will be telling us how he and
Phil Gramm and the seven lobbyists are planning to storm the Treasury Department
with torches and pitchforks,� said the Democratic candidate.
The sarcasm was apt, but the reality is that it cuts both ways.
If the cataclysmic events in the financial markets over the past week have
revealed anything, it is the complete subservience of every branch of the US
government and both major political parties to the banks and the biggest
capitalist interests. Behind the fa�ade of American democracy lies a
dictatorship of finance capital that, under conditions of crisis, exerts its
power directly and nakedly.
Thus, in the course of two weeks, the Federal government has doled out hundreds
of billions of dollars in taxpayer money in bailouts and loans for failing
financial institutions. It has carried out the unprecedented nationalization of
the insurance giant American International Group (AIG) with what is widely seen
as a down payment of $85 billion. The firm holds nearly half a trillion dollars
worth of questionable credit derivatives on its books.
Not a single vote was taken in either house of the US Congress on these
measures, much less by the American people. Rather, the bailouts of Bear Stearns
and Fannie Mae and Freddie Mac, like the takeover of AIG, have all been
negotiated behind closed doors between Treasury Secretary Henry Paulson, Federal
Reserve Board Chairman Ben Bernanke and Wall Street executives.
The Washington Post reported Thursday that congressional leaders were hastily
informed of the deal to bail out AIG only after it had been struck.
�Lawmakers on both sides of the aisle expressed concern yesterday that they have
had no control over when and how federal money has been used to curb the panic
on Wall Street,� the Post reported. �While many have been convinced that the
moves so far have been necessary to prevent a wider financial meltdown, they
said they felt confined to the sidelines as power to make momentous decisions
has been concentrated in very few hands.�
The impotence of Congress and the Democratic Party was expressed most nakedly by
Senate Majority Leader Harry Reid (Democrat of Nevada), who declared Wednesday
that in the face of the unfolding financial catastrophe, the Senate would go
ahead with its planned pre-election recess. There was no point in staying in
Washington as �No one knows what to do at the moment,� he said. The Democratic
leadership indicated that it would probably not reconvene until January, unless
summoned by Paulson, Bernanke and Wall Street.
At the same time, leading Democrats�including Congressman Barney Frank, chairman
of the House Financial Services Committee, Senator Christopher Dodd, head of the
Senate Finance Committee, and Senator Charles Schumer, chair of the Joint
Economic Committee�have signaled their support for a massive, wholesale bailout
of Wall Street through the creation of a new federal agency to buy up all of the
banks� worthless mortgage-backed assets.
The plan has been widely compared to the creation of the Resolution Trust
Corporation (RTC) nearly 20 years ago to deal with losses from the savings and
loans crisis of the 1980s. However, there are critical differences. The sums
involved in absorbing the mortgage-backed securities are astronomically higher.
Moreover, while the RTC was established to deal with the fallout from savings
banks that had already failed, the new agency is designed to bail out ongoing
financial institutions that have profited off of these �toxic� speculative
investments.
Reports that the enactment of such a plan is imminent sent stocks soaring by 410
points Thursday, the market�s biggest rally in six years. The exuberance on the
floor of the stock exchange amounted to the celebration of a system in which
massive profits accumulated by Wall Street�s wealthiest by means of reckless
speculation and outright criminality remain privatized, while their losses are
socialized, with American working people forced to foot the bill.
Obama and the Democrats are full partners in this system. Behind all of the
Democratic candidate�s rhetoric about Wall Street not �minding the store� and
how �CEOs got greedy,� his campaign enjoys ample support from finance capital,
and his administration would, no less than the Republicans, represent its
fundamental interests.
The Obama campaign has raised close to $10 million from the Wall Street
investment houses, nearly 50 percent more than the amount they have given to
Republican McCain. Three senior executives at the now bankrupt Lehman Brothers
raised more than $1.5 million for the Democrat.
The Center for Responsive Politics, which tracks campaign contributions, listed
Goldman Sachs as the top source of campaign funds for the Obama campaign. The
watchdog group added that Wall Street�s stake in the Democratic candidate is
probably even larger. �Since his campaign has ignored repeated requests... to
disclose his bundlers� employers and occupations,� it pointed out, �these
figures are probably undercounts.�
In addition to Wall Street, the Obama campaign has raised some $13.4 million
from the finance, insurance and real estate sector and $2 million from the
commercial banks, again outstripping McCain.
Given this financial banking, Obama�s posturing as a champion �Main Street� and
the scourge of �special interests� is just as absurd as McCain�s vow to fight
�greed� on Wall Street.
Equally dishonest is the Democratic candidate�s repeated assertion that the
present crisis is the outcome of policies pursued simply over the past eight
years. Conveniently ignored is the fact that the frontal assault on the working
class that lay the foundations for the present economic setup in America was
initiated under the Democratic Carter administration 30 years ago and that the
most sweeping deregulation of the financial markets was carried out under the
Democrat Clinton.
The results of this process, which has seen the increasing deindustrialization
of the US economy, the ever growing weight of financial parasitism and the
unprecedented widening of social inequality, will not be cured by the modest
increase in regulation being proposed by some Democrats.
Obama has given his backing to the bailouts carried out to date, while remaining
silent on plans for a government takeover of mortgage-related investments. The
Democratic candidate has said nothing about holding accountable those who
profited off of this unfolding calamity, much less proposing that their profits
be seized.
In his speech Wednesday in Nevada, Obama declared that the tumultuous events on
Wall Street represented a �final verdict� on the �economic philosophy� of McCain
and the Republicans, while proclaiming his conviction that �our free market has
been the engine of America�s great progress. It�s a market that has created a
prosperity that is the envy of the world.�
What �free market� is he talking about? It is �free� only in the sense that
society exercises no control over its predatory and socially destructive
misallocation and misappropriation of the wealth created by the working class.
In a serious crisis, all talk about the evils of �big government� and the
virtues of �self-reliance� and �private initiative� is dropped and a vast
expansion of government power is carried out to intervene in the �free market�
in order to rescue the financial aristocracy, with the American people footing
the bill.
As for American prosperity being the �envy of the world,� people around the
globe are watching with horror and disbelief as millions of Americans are kicked
out of their homes, poverty and unemployment worsen, and the country�s
infrastructure collapses�while corporate CEOs rake in eight-figure salaries.
The devastating crisis that is gripping Wall Street and the world�s financial
markets is a verdict on this �free market.� The capitalist system, based on
private ownership of the productive forces, production for profit and the
subordination of all social needs to the accumulation of private wealth, is
threatening to unleash a catastrophe upon the working class in the US and around
the world.
One thing is certain, the plans to rescue Wall Street that are now being
prepared with Democratic support will be paid for by working people, through the
destruction of their jobs and living standards and the gutting of Social
Security, Medicare, Medicaid, and what little else remains of social benefits in
America.
A new social catastrophe even greater than the Great Depression can be averted
only through a break with the Democratic Party and the fight for a socialist
program that ends the subordination of the economy to the dictates of private
profit. Only in this way can the vast wealth created by working people be
utilized for the benefit of all. This is the program fought for only by the
Socialist Equality Party.
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