Okay. So I’ve taken a break from literary stuff recently to focus on literacy. My own literacy. About finance. The 2008 financial crisis and OWS and everything has gotten me into the general ugliness of bureaucratic things and I want to fucking write about it. I’ve been studying history and economics with a small group of OWSers and at our last meeting we decided to each bring something to the group that relates to the question “how did this happen?” I’m going to bring this blog post. Consider it a term paper. Or something.The first thing we read in our group was part of
the 2010 Senate subcommittee report on the financial crisis that came out of Carl Levin’s office. It’s awesome. Particularly the introduction. It says there (among other things) that banks and other financial companies treated their own clients as fucking counter-parties. They took people’s money, said “oh yeah, we’ll help you” and then used it to bet against them to make more money for themselves.
Counterparties.
Turns out we encourage this: experiencing other people’s pain as pleasure. Some sadistic shit. Like, your mom gets cancer, can’t work, can’t pay her mortgage, and some meathead in a skyscraper is betting other meatheads (actually, the meathead is watching a machine bet other meatheads’ machines) that your mom won’t make her mortgage payment. The meathead is also buying insurance from other meatheads for himself just in case she does so that even if he loses his bet that your mom’s life will be fucked he’ll be in the black.
Always be in the fucking black. Always.
Our group discussed that for awhile. But then we got interested in how this happened historically. How did this moral horseshit become legal?
A friend mentioned a bill called the Glass-Steagall Act and sent us an article on it. Basically, our economy already went through this whole financial wasteland about 100 years ago (oh yeah, 1929, right…) when banks got into insurance and securities trading and became so big and interconnected with everyone’s money that it was dangerous for everyone. Glass-Steagall, passed in 1933, made it illegal for banks to get into that stuff. Put banking, securities, and insurance in “separate rooms.” But we couldn’t handle that. No. Over the next 60 years we picked at the scab, trying to let banks get big again and make more fucking money. There were commies! Chinese! We had to compete! Buy! Sell! Go! Now! Ahhhhh!
More fucking money. We need that shit. Seriously. Can’t breathe without it.
We finally ripped the rest of the scab off in 1999 when
Phil Gramm, voted one of the 25 people to blame for the crisis, got a 90-8 vote in the Senate and a 362-57 vote in the House to full undo Glass-Steagall. He wanted to “modernize” our financial institutions. He wanted to deregulate. So banks could compete.
A few senators had their shit together at the time and basically prophesized what would happen. Byran Dorgan was the most badass, saying that the government would need to bail the bankers out and the public would lose all kinds of money just because some people wanted to make money. He gave this fucking incredible example from the 1987 Savings and Loans crisis:
Let me describe the ultimate perversion, the hood ornament of stupidity. The U.S. government owned nonperforming junk bonds in the Taj Mahal Casino. Let me say that again. The U.S. Government ended up owning nonperforming junk bonds in the Taj Mahal casino in Atlantic City. How did that happen? The savings and loans were able to buy junk bonds. The savings and loans went belly up. The junk bonds were not performing. And the U.S. Government ended up [having to buy] those junk bonds.
Fucking casinos. We have government casinos.
Dorgan went on to say that, around ten years from that moment (1999) we’d probably have to do the same damn thing and it would be the public paying for it…
Now imagine this: as tax dollars are spent buying casinos, hundreds of bank lobbyists pull up to Capitol Hill, the security guards checking their credentials. Citbank lobbyists and Bank of America lobbyists. Merrill Lynch and Morgan Stanley. All in all, $187.2 million from 1989-1999 went to legislators from people who wanted Gramm’s bill to pass. Russell Feingold said, “Lobbyists lined the halls outside the room where the conference met to reconcile the House and Senate versions of bill…that is standard procedure on Capitol Hill.”
Lo and behold, the bill passed 90-8 in the Senate, 362-57 in the house. That’s not just the number of people who took lobbying money and/or cowed to political threats from their PACs and parties and/or thought it was a nice idea to deregulate. That’s all the people in this country who elected these people to do all these things. Those numbers are everyone deciding all together to screw ourselves and everyone else to make some cash. And, let me say, it was the liberals that wanted to keep the old policies in place. Be conservative, said the progressives.
What the fuck does anything mean anymore.
So yeah, the conservative-progressives were right. Ten years went by and we had huge banks getting huger, taking on more risk, and fucking growing until no one knew what the fuck anyone was thinking anymore and the housing crisis happened. The government–which, by the way, is just you and me and everyone we know–bailed them out. And we basically handed Europe a hot steaming bowl of shit and said “Enjoy!” Now the commies really will bring us down. They own so much of our debt–the socialist-commie bastards–that if they fail then so do we.
It’s like we want to fucking die. Reading about this shit makes me think of people who want to kill themselves.
We’re getting to the end of this, I promise. Our OWS group discussed the history behind this ‘counterparty’ stuff with Glass-Steagall, but we still wanted to know: what’s the big idea here? What’s the ideology that makes this policy real? It’s not just legal. It’s not just lawmakers and lobbyists getting together and perpetually thinking to themselves “let’s just try to make a shit ton of money and fuck ourselves and our friends in the process.” There’s a fucking zeitgeist at work here.
The book that I think speaks the truth about the history of capitalism is Karl Polanyi’s The Great Transformation. It fucking rocks. There’s a part in there called “The Birth of the Liberal Creed” where he talks about a debate in the 1830s in England. (England invented all this shit, bee tee dubs.)
After they pretty much fabricated the three basic commodities–land, labor, capital–by looking at the world and saying “Oh yeah, I’m gonna use you real good,” they had things like unemployment and poverty to deal with. They also had these factories that they called the Satanic Mills. Yeah. Satanic Mills.
Anyway, the question in 1830 was: do we keep legislation to help protect people from the market? Is it better to threaten people with starvation and poverty or should we provide some kind of safety net? Should government be a mommy or a daddy?
Thing is, they’d tried that one time. Back in 1782 they tried giving out bread and subsidizing farmlands that got hit hard by price fluctuations. It was called the Speenhamland system. It didn’t work so well. So Edmund Burke and David Ricardo and a bunch of utilitarians cited that failure in the 1830 debate and they decided to be daddies. No protection. No safety net. They conjured images of Robinson Crusoe. Rugged individualism and all that. They amended the Poor Laws to help the “victims of improvement” (poor people) get back on their feet. How?
By not having any Poors Laws and telling them: if you don’t find a job and work and make money for yourself, no one will be here to help you. Sorry.
Polanyi says this was the birth of the ‘bootstraps’ mentality. It’s still around, you know. When people like Phil Gramm try to “modernize” our institutions by deregulating them and unleashing market forces on us while we’re just trying to get through our fucking lives every day–that’s the utilitarians speaking from 1830, being our Cultural Daddy, saying “No one is going to help you. You have to do it yourself. Being human means surviving and taking what you can when you can to provide for yourself and who you care about and fuck everyone else…” Of course this idea goes back to Adam Smith, who said that the division of labor and the social product are what’s most important when running a society; that regulation causes real disorder; that markets and exchanging are “natural” for humans…blah blah blah. The big idea is: it’s better in the long run for everyone if no one helps or cares about anyone unless they make you money.
Anyway. This has gone on too long already–both what you’re reading (if you’re still reading) and what it’s about. I’m still trying to fucking figure it out. If you have any ideas, let me know.
