A Sign That Obama Will Repeat Economic Mistakes
Please don’t tell me that these reports in the business press touting Sallie Krawcheck as a front-runner for chairman of the SEC or even a possible candidate to be the next Treasury secretary are true. Who is she? Oh, just another former Citigroup CFO, and therefore a prime participant in the great banking hustle that has savaged the world’s economy. Krawcheck was paid $11 million in 2005 while her bank contributed to the toxic mortgage crisis that would cost millions their jobs and homes.
Not that you would know that sordid history from reading the recent glowing references to Krawcheck in the New York Times, the Wall Street Journal and Bloomberg News that stress her pioneering role as a leading female banker — a working mother no less — but manage to avoid her role in a bank that led the way in destroying the lives of so many women, men and their children. Nor did her financial finagling end with Citigroup, as Krawcheck added a troubling stint in the leadership at Merrill Lynch and Bank of America to her résumé.
A woman who would be an excellent choice as the most experienced as well as principled candidate to head the SEC or Treasury is Sheila Bair, former head of the FDIC, who labored to protect consumers rather than undermine them. Indeed, her outstanding book “Bull by the Horns,” chronicling her fight in the last two administrations to hold the banksters accountable, should be required reading for the president and those who are advising him on selecting his new economic team.
The SEC is supposed to supervise the banks rather than abet them in their chicanery. And although the Treasury Department has been a captive of Wall Street lobbyists for most of the modern era, one would expect something better from the second coming of Barack Obama. Those are key appointments in determining whether the president can turn around the still-moribund economy by channeling the spirit of Franklin D. Roosevelt. Or will he continue to plod along on the course set by George W. Bush, bailing out the banks while ignoring beleaguered homeowners and the many other victims of this banking-engineered crisis?
Obama was given a pass on the economy by voters only because Mitt Romney was an even more craven enabler of Wall Street greed. But the outlines of the Bush Wall Street payoff remain in place, with the Federal Reserve continuing to bail out the banks with virtually free money and the purchase of $40 billion in toxic mortgage-based bonds every month to add to the more than trillion dollars in that junk that the Fed previously had taken off the banks’ books.
The money printing by the Fed is at the heart of the massive debt crisis. But it has been great for the bankers, with compensation at the 32 largest banks slated to hit an all-time high of $207 billion this year, according to a Wall Street Journal estimate. This reward for ripping off the public is almost three times the amount the federal government spends on education. Once again the bankers are blessed for their failures, receiving such wildly excessive compensation despite the fact that banking revenue is down 7.2 percent over the last two years.
A prime example is Krawcheck’s old bank, Citigroup, whose new CEO this week announced that the company has been forced to engage in a major retrenchment, eliminating 11,000 jobs and closing 84 branches. The bank has been deeply troubled ever since the housing meltdown it helped trigger first began, and it was saved from bankruptcy only by a direct infusion of $45 billion in taxpayer money and a commitment of an additional $300 billion in underwriting of Citigroup’s bad paper.
The ugly tale of America’s Great Recession is inextricably entwined with the deplorable practices of Citigroup, the too-big-to-fail bank made legal by Bill Clinton’s signing off on reversing the Glass-Steagall law that prevented the merger of investment and commercial banks. The first beneficiary of the revised law was the newly created Citigroup, saved from bankruptcy a decade later by the taxpayers.
I shouldn’t be surprised that Krawcheck would be considered a viable nominee for a central position in managing our economy. After all, her colleague in the top ranks at Citigroup during the years of financial depravity, Robert Rubin, is considered a significant adviser to the Obama administration, and his protégés, led by Treasury Secretary Timothy Geithner, are still directing policy. It was Rubin who pushed through the reversal of Glass-Steagall, an act of betrayal of the public interest that was rewarded with obscene amounts of money when he ultimately took the job of leading the bank he made legal.
The very fact that these folks remain influential, as witnessed by Krawcheck being considered to head the SEC rather than being the subject of one of its much-needed investigations, gives further evidence of the enduring but ultimately terminal illness of crony capitalism.