Thanks to both the focus on health care and the storm over President Obama's comments on Henry Louis Gates, few bothered to note a deeply troubling moment during last month's White House press conference in which the president displayed genuine stupidity, willful ignorance, intelligence-insulting dishonesty - or some combination of all three (I bring this up now, because it's the very same argument we're going to hear from supporters of Ben Bernanke in his renomination process). Referring to the recent news that banks like Goldman Sachs reported big profits, he said:
"What you're seeing is that banks are starting to make profits again. Some of them have paid back the TARP money that they received, the bank bailout money that they received. And we expect more of them to pay this back. That's a good thing...And we also think it's a good thing that they're profitable again, because if they're profitable that means that they have reserves in place and they can lend. And this is America, so if you're profitable in the free market system then you benefit." (emphasis added)
Yeah, sure - economically speaking, it's a great thing when a business makes a product or delivers a service and is able to make a profit from that endeavor in a free, unsubsidized market. However, that's not what's going on in the financial industry...at all.
As Matt Taibbi noted a full week before Obama's press conference, "this is not free-market earnings but an almost pure state subsidy." In a TrueSlant article that followed his original Rolling Stone gem, he breaks down all the subsidies and handouts the financial industry engineered for itself outside of just the TARP bailout. He concludes:
One of the most hilarious lies that has been spread about Goldman of late is that, since it repaid its TARP money, it's now free and clear of any obligation to the government - as if that was the only handout Goldman got in the last year. Goldman last year made your average AFDC mom on food stamps look like an entrepreneur...
Taken altogether, what all of this means is that Goldman's profit announcement is a giant "fuck you" to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it's untouchable and it's not going to change its behavior for anyone. And it doesn't matter who knows it.
So in light of the evidence Taibbi lays out - evidence that has been reported in the business press for the last many months - it's clear President Obama's claim that the big banks are back to being "profitable in the free market system" is stupid, willfully ignorant, or dishonest, because they're quite obviously operating inside the opposite of a "free market system." Their profits are a direct taxpayer subsidy.
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Is that a "good thing?" Well, I guess it's a "good thing" that after all the subsidies, the banks didn't report more losses. However, I'd prefer the phrase "the absolute least that should have happened" to "good thing." Why? Because the idea that they did something right or smart or brilliant or moral or newly responsible by generating their recent profits is absurd.
Had they been given so much taxpayer cash and not reported a profit - that would have been an embarrassment. Put another way, there was almost no possible way for the banks to report anything other than profits when they were the recipients of so much taxpayer cash. The president praising them for being "profitable in a free market system" is like him signing legislation transferring $1 million from the U.S. Treasury into my bank account, and then a month later, sending me a letter of commendation for having mustered the brilliance and hard work to earn $1 million.
OK, fine, you get that this isn't a free market. But you're still wondering about motive. Why would Obama go on national television and tell the American public that big bank profits are a "good thing" like any other endeavor that is "profitable in the free market system?" What motive might he have? I'd guess defending Wall Street and the ongoing subsidies/bailouts.
Remember, Obama is the guy who raised more campaign cash from Wall Street than any other candidate in American history - and he was the guy who played a pivotal role in passing the bailouts in the first place. And while, sure, it's seems like a positive that Obama wants financial "reform," we don't really know what "reform" means. It could mean nothing - or, based on administration proposals to actually put more power into the very secretive agency that allowed the mess to happen, it could mean an even worse regulatory system.
So it's entirely possible - if not probable - that Obama is just doing his part to tamp down popular anger at financial firms and the bailouts so as to help prevent any kind of serious regulatory reform and/or political backlash against Wall Street. I mean, the guy is a smart guy - he of all people knows that the banks are not earnestly generating profit in a "free market." The fact that he can't even bring himself to acknowledge that and provide some straight-talk to the American people about such an obvious reality suggests an ulterior motive.