Financial Rorschach

Well, “Helicopter” Ben Bernanke has been confirmed for a second term by the full US Senate. What a disaster.

Much has been written in the past couple of months, since the Bernanke re-nomination has been slow-boiling in the Senate. Much of what’s been written has focused on the indisputable fact that Bernanke was at the helm when the financial ship almost went down sixteen months ago during the last year of President Bush’s second term (and the hotly-contested Presidential election of ’08). In fact, though it’s never completely clear in matters such as this where so many different variables bear on the outcome, it’s probably valid to say that there’s a good chance Barack Obama owes his Presidency to the financial collapse of fall ’08.

Prior to that time, the accelerating campaign had swung into high gear with the Denver Democratic convention, at which an ebullient candidate Obama had delivered a speech that was perhaps second only to the Democratic convention keynote speech he’d given four years previously – and perhaps this one had been even better, since it marked the emergence of Barack Obama, the genuine contender. The bruising primary fight with Hillary Clinton was over, dramatically symbolized by the extraordinarily gracious speech by Mrs. Clinton (not to mention hubby Bill), and the staged but nonetheless effectively symbolic “passing” of states in the actual nomination process until New York’s turn came up so that Mrs. Clinton could personally suggest that the formal process of delegate counting be suspended and a unanimous vote sought on Obama’s nomination. Obama looked Presidential, and some observers would possibly even described him as unbeatable at that point.

Less than a week later, however, John McCain had stunned the political world – heck, the entire world – by nominating a little-known, thin-résuméd governor from Alaska, Sarah Palin, stealing most of the interest – and the thunder – from Obama’s still-recent speech. And not long after that, Palin was electrifying the predominantly old, white throngs who had gathered at the Republican convention, not to mention millions more “regular hockey moms,” dads and others across the nation, who finally felt like “one of their own” had been nominated to something important. In hindsight, the Palin nomination may look like a poor choice, something of a political albatross that John McCain allowed his advisors to talk him into voluntarily draping around his own neck, but at the time, in the late summer/early fall of 2008, all everyone could talk about was Sarah Palin — mostly in a positive, even giddy way.

Then came the crash. On September 14, less than two months away from the November election, then-New York Fed chairman Tim Geithner, in conjunction with then-Treasury Secretary Hank Paulson, made the decision to bail out AIG, then only days later, allowed Lehman Brothers to fail. This sent shock waves through the worldwide financial markets, but none so large as right here in America, the global home of both AIG and Lehman (not to mention Bear Stearns, which had failed earlier that year). The resultant crisis, which had been building for several years, due to first a liquidity crisis, then a credit crisis, and most recently the subprime mortgage crisis, very nearly crashed the entire world economic system. I suspect no one – not even Paulson or Geithner – knows just how close we might have been to a complete collapse.

In the midst of all this, Republican Presidential candidate John McCain – on the very day Lehman failed – was videotaped at a campaign event saying he believed “the fundamentals of our economy are strong.” Within days, it became clear to everyone who was paying even the slightest bit of attention, that “the fundamentals of our economy” were anything but strong. Although the McCain campaign tried desperately to spin what was looking by then like not so much just a simple gaffe anymore but rather a glaring obliviousness to both economic reality and economic theory, as a nothing more than a poorly-worded attempt to say that McCain believed that hard-working Americans were still going strong, due to the almost jarring disconnect between the tenor of McCain’s actual words and the spectacle of one of the nation’s top three investment banks outright collapsing, almost no one believed the spin.

Up until that time, ever since the stealing of Obama’s post-convention speech thunder with the Palin nomination and convention speech, the polls had shown McCain and Palin keeping pace with Obama – or even narrowing what was a small gap to begin with. By most accounts, by the first week in September of 2008, McCain/Palin was running neck-and-neck with Obama/Biden. There’s no way to tell what would have taken place on election day in November, had the financial collapse been somehow put off until December or later…but it’s not at all out of the realm of possibility to think that we could have just heard President McCain’s first State of the Union speech last night, instead of President Obama’s, under those circumstances.

However, the banks DID fail, the crisis DID happen, and candidate McCain never recovered. McCain had never been a favorite of the hard-right crowd that listens to right-wing talk radio – the nascent teabagger movement – and in a calculated move to woo them, he’d been drifting ever-rightward from his traditional “maverick” stance somewhere on the left side of the Republican aisle, ever since he became a serious contender for the GOP nomination. By the time of the Palin nomination, McCain had already gone back on many of his own previous positions, among them immigration, much of our current military operations — McCain was even wavering somewhat on his personal-experience-driven opposition to the use of torture as a conscious tool of war. And of course, the more McCain tried to refashion himself in the image of George W. Bush – who, despite record-setting low popularity with the general public by that time, was still beloved of the Limbaugh crowd, the worse it became for him when the banks finally did come crashing down in September of 2008. Unfortunately – for McCain – when that happened, his sharply rightward-tack into the arms (or at least the shadow) of George W. Bush began to appear not quite as winning a strategy as it had previously seemed. As VP candidate Palin stammered her way through the disastrous Katie Couric interview, McCain began very quickly to be seen, in the minds of American voters of all political persuasions, as having been a long-term, integral part of the Bush/Cheney/Republican congress team that had created the mess the nation now found itself in.

And in November, America elected a black man named Hussein to the Presidency, instead of the kindly old war hero with the beer-heiress wife, as one joke I heard at the time put it pithily. So it’s no stretch to say that Obama might very well owe his Presidency at least in part – the crucial last part when many “undecideds” make up their minds about whom to cast their votes for – to the financial collapse. Which is why it’s all the more surprising that he re-nominated Ben Bernanke to be chair of the Federal Reserve. Why? Well, although the public focused at the time on Treasury Secretary Hank Paulson (as well as Bush himself, and the ongoing election battles), guess who was Fed Chair during the entire time of the collapse? That’s right, Ben Bernanke. Former Fed Chair – who was also instrumental in bringing us to the point of collapse, but that’s another story – had retired in January of 2006, and Bernanke had helmed the Fed from that point forward, including the worst of the subprime bubble problems, the Fannie/Freddie mess, and all the resultant nonsense. In fact, many argue it was Bernanke’s policies (some of them continuations of Greenspan’s policies, some of them his own) which steered the country – avoidably – towards the cliff. People of good education and good intentions might disagree on this point, but when respected economists like Joseph Stiglitz and Paul Krugman both say – and, crucially, said before the crash (not just afterwards) – that Bernanke’s policies played a large part in the problems America faced and is facing, it’s not a point which can be summarily dismissed.

That’s why I’ve never understood why Barack Obama re-nominated Bernanke to head the Fed. If nothing else, he’s a hugely divisive appointee from the Bush-era, who arguably helped cause the worst American financial crisis in nearly eighty years. And it’s not as if there aren’t other potential replacements who have as good or – in many cases, such as Mr. Stiglitz himself – even more illustrious résumés than Bernanke’s. Then again, I’ve never understood why Obama chose Geithner – also hip-deep in the financial crisis – to be Treasury Secretary, nor Larry Summers (a Bob Rubin acolyte) as his most-trusted economic adviser, either. Perhaps I’m just thick that way.

What’s interesting, though, about this just-today re-confirmation of Bernanke to the Fed is the actual details of the vote itself. Increasingly, these days, you’ll hear political pundits of varying stripes claim that both parties are in thrall to Wall Street, or to the big banks. Some will even go so far as to say that we no longer have even a two-party system; that what we have in reality is two parts of a one-party system, the business party, Democratic and Republican factions. Every four or eight years, they change places – occasionally, one will hang around for longer, but that’s the general pattern – but never do any laws get passed (and very rarely do any politicians of stature get elected) which contravene or even seriously threaten the dominance of American corporations over how our laws get made and administered in Washington.

This may strike you as overly cynical read on American politics and the corrosive influence of corporate money thereupon, but perhaps it strikes some less that way after last week’s SCOTUS decision that completely overturned nearly a century’s worth of settled precedent, in the Citizens United case. And if that still doesn’t sway you away from thinking that such talk is merely overinflated hyperbole spoken by either paid or partisan flacks into an increasingly noisy public space, where only the most extreme voices get noticed, consider the vote today on Bernanke’s nomination. One thing nobody disputes these days is the fact that Washington is more polarized along partisan lines than it’s been in recent memory. The GOP is filibustering virtually every single bill that the Democratic-controlled congress puts forth, making all progress nearly impossible. Sniping on both sides of the aisle’s political commentators has become routine and increasingly bitter, and hope for real progress has begun to fade, even in the wake of this historic election of a new President who was swept into office in part because he ran on a platform of change.

Yet, in spite of all that observable partisan rancor, take a look at today’s vote on Bernanke’s re-nomination:

bernanke nomination vote count graphic
Bernanke Nomination Roll Call Vote

Anything strike you about that vote tally? First of all, the nomination was indeed filibustered. And the filibuster was – gasp – broken. Up until now, the pattern in this Congress has been that the majority Democrats would propose something (at least anything that was the least bit controversial, and in fact even many things that weren’t), and the minority GOP would filibuster it. What followed was an arcane, intricate dance to see whether enough votes could be mustered to allow the Democrats to break the GOP’s filibuster (see: health care debate, the). But not this time. For Bernanke’s nomination, the final vote tally was 70-30. But what’s much more striking than the departure from the usual 60-40 of the last year (at least since Senator Franken was seated) is the genuinely bipartisan nature of the vote. Yes, there have been some bipartisan votes, even in this Congress. But those votes have come on bills which are either so inconsequential or so uncontroversial – or both – that it would be hard to see how anyone could filibuster them – or would want to. And those votes are usually near-unanimous, as well. The Bernanke nomination vote was neither of those things (uncontroversial nor unanimous), yet it had a very thorough mix of both Democrats and Republicans on both sides of the vote. I haven’t the background – nor the time – to dig into the ties of every single Senator to see how indebted (so to speak) each is to the banking industry…but I’d bet that the Republicans AND Democrats in the “aye” column would tend to likely be those with the greatest incentive – whether positive or negative – to support the banking interests of this country. The banks LOVE Bernanke. He’s not a fan of regulation, and if he allowed the last crisis to happen on his watch, even if he didn’t actually help cause it, he certainly didn’t have whatever it took to either foresee or stop it. Banks love that. They see no reason to change out Bernanke for a guy like Stiglitz, who – although he is perhaps the world’s most-respected economist – has already amassed a lengthy record of criticizing the very policies that allowed for the near-collapse to happen. So if we can agree that the country’s banking interests are very much behind Bernanke’s renomination, it would be interesting to see how many Senators are indebted in one way or another to said industry, and how or if it affected their vote on Bernanke’s renomination.

Some truly unusual – at least at first glance – standouts (to me) among the votes: on the “yea” side, I’m somewhat surprised to see Sherrod Brown and Pat Leahy, though the presence of other Democrats, from Feinstein to Lieberman to Baucus and Bayh should surprise no one. On the “nay” side, I’m completely unsurprised to find genuine progressives like Franken, Whitehouse, Feingold, Boxer and Dorgan…but I’m sick to my stomach to see wingnuts like Vitter, Brownback, DeMint, Grassley, Inhofe and Thune. These guys represent the teabagger movement – or at least as close as the institutional Republican party gets to it these days. It wouldn’t surprise me to learn that those guys intended to try to make this a referendum on Obama and the Democrats’ support of the very institutional banking forces that caused this crisis, by opposing their favorite son, Ben Bernanke. Fortunately, I think the presence of the aforementioned progressives on the “no” side of the aisle with the wingnuts will serve to blunt such an attack to the point of uselessness (though who knows?). But that leaves the larger question of all those yes votes. What question? Well, if the Senators opposed to Bernanke’s re-confirmation to the fed represent, in general, the most progressive and most-reactionary ends of the political spectrum in the Senate (and I think it’s arguable that they do), then that leaves the vast bulk of the United States Senate on the other side of the fence, and in the middle of those two poles. Call it the “centrist” majority, if you want, but I think a better term might be the “business as usual” majority. And it’s a real problem for getting things done in Washington, far greater a problem that partisan sniping or disingenuous campaigning or punditry. If we take this vote as a political Rorschach test of sorts, where the “yes” votes represent votes which are for “business as usual” in this case (and, presumably, would be in other cases as well, generally), then that means that no matter WHO the President is, fully seventy percent of the Congress, more or less, a margin plenty large enough to override any filibuster – or even a Presidential veto, should it be necessary – will coalesce across party lines and vote to continue doing things in the same, failed way that we’ve been doing them…because that is the way that deep-pocketed interests, particularly financial ones, want things to continue to be done.

And that’s some scary stuff.