The Clinton Bubble

Has Timothy Geithner ever had lunch with a
non-megamillionaire who has lost his job or home because of the banking
meltdown? I ask that question after reading the list of the treasury
secretary's luncheon dates when he was head of the New York Federal
Reserve, a list that the government was forced to provide in response
to a lawsuit.

During those years when he was supposed to
be supervising Wall Street, he supped most often in the top-echelon
dining room of some bank or at the home of one of the financial moguls
who created the mess that has now bankrupted billions throughout the
world. One of his frequent luncheon buddies was Sanford I. Weill, who
as chairman of Citigroup lobbied successfully for the reversal of key
regulations that dated back to the New Deal era. That change permitted
Weill's oligarchy to become "too big to fail."

Another preferred dining companion was
Robert Rubin, who as Bill Clinton's treasury secretary pushed through
Weill's favored deregulation-a disastrous "reform" that lies at the
heart of the current mess-and who went on to become chairman of
Citigroup, where he presided over a downfall of the company that
required a $45 billion taxpayer bailout. Geithner had worked for Rubin
at the Treasury Department, and it was Rubin who got him his job at the
New York Fed and hooked him up with Barack Obama.

Geithner has since pushed the Obama
administration to approach the banking crisis not in response to the
needs of destitute homeowners but rather from the side of the bankers
who are seizing their homes. Instead of keeping people in their homes
with a freeze on foreclosures, he has rewarded the unscrupulous lenders
who conned ordinary folks.

He still wants to give more money to
Citigroup, which has just been found woefully short of cash by
Treasury's auditors, and has not stopped Fannie Mae, Freddie Mac and
some other big banks ostensibly under government influence, and indeed
sometimes ownership, from recently ending their temporary moratoriums
on housing foreclosures. Geithner has been in the forefront of coddling
the banks in the hopes that welfare for the rich will trickle down to
suffering homeowners, but that has not happened.

As The New York Times revealed this week
in a devastating expose of Geithner's record: "An examination of Mr.
Geithner's five years as president of the New York Fed, an era of
unbridled and ultimately disastrous risk-taking by the financial
industry, shows that he forged unusually close relationships with
executives of Wall Street's giant financial institutions. His actions,
as a regulator and later a bailout king, often aligned with the
industry's interests and desires, according to interviews with
financiers, regulators and analysts and a review of Federal Reserve
records."

Most revealing was the Times' discovery
that Geithner shocked a meeting of top government officials, convened
by then-Treasury Secretary Henry M. Paulson to deal with the financial
crisis, when "[h]e proposed asking Congress to give the president broad
power to guarantee all the debt in the banking system. ... "

Now I know that the conventional wisdom
among Democrats is that the Clintonistas were wildly successful in
running the economy when they had their turn, and that Rubin and his
proteges Lawrence Summers and Geithner deserve a lot of the credit. But
that view is dead wrong. The seeds of the current economic chaos were
planted in those years, in which Wall Street lobbyists were given
everything they wanted in the way of radical deregulation, and hence
was born the madcap world of credit swaps and other unregulated
derivatives.

The result was a Clinton bubble, which saw
the rise of a new superrich class that vastly skewed income
distribution in favor of what was termed the "working rich" by Emmanuel
Saez, who deservedly just won the top prize for young economists, the
American Economic Association's John Bates Clark Medal. Members of the
"working rich" are well represented in the top 1 percent of income
"earners," who, according to a study by Saez, "captured about half of
the overall economic growth over the period 1993-2006." The record is
clear that from the first year of the Clinton reign, the new class of
superrich, including many Wall Streeters, benefited as much as the
other 99 percent of the nation's population did from the policies that
Clinton put in place and George W. Bush accelerated.

To add salt to the wounds of those left
out of the bubble, the Clinton administration summarily ended the
federal poverty program in the name of a so-called welfare reform that
"devolved" programs for the poor to the tender mercy of the states. The
meanness derby between the cash-strapped states is on, and the poor, a
category that includes a growing number of folks who only recently were
judged "middle class," are abandoned.

What is involved here is an extreme case
of government-condoned "moral hazard" offering outrageous compensation
to the superrich for screwing up royally. Where is the socially
conscious Obama we voted for? E-mail him and ask.