Get Out of Bed with the Bankers, Mr. President
My second letter to the President, published at HuffingtonPost.com
The signal from Massachusetts’ special election is clear: a major course correction is required to move forward your agenda over the next three years.
The first order of business is to pour your heart and soul into being a clear, public champion of Main Street against the interests of Wall Street. I do not doubt that Main Street has always been your prime concern but Wall Street has an insidious way of maintaining its grip on power and money.
When you took office in the midst of a global financial meltdown, it was understandable and perhaps even necessary that you hired a coterie of the old economic guard to help you chart the course of action. However, the Summers and Geithners of the world may be very smart and likely quite convincing, but they are fundamentally a product of Wall Street, Goldman Sachs and the like. Their fundamental DNA is that of big-time bankers.
You may be the man who makes the final decisions. But the people who determine what information you pay attention to and therefore what course of action is even thinkable are your advisors. You cannot create meaningful, true economic reform while surrounded with the likes of your current economic team. They may be wonderful people on a personal level, hard-working and well-intentioned. But they are products of an old, broken, and fundamentally parasitic financial system. They will not be able to see the pathway forward and they will ensure your ongoing blindness. For true reform, you need economic innovators, people who have been studying what is fundamentally flawed about the U.S. economic system and what reforms can begin to put America back on track and to get the engine of real businesses to roar back to life.
I thus believe that the first and most important act of course correction is to thank your current economic team for their service during a year of financial emergency, release them all, and bring in a new team bristling with innovation, reform, and pioneering ideas. The less time spent on Wall Street, the better.
The brilliant economist Hazel Henderson pointed out in a radio interview I did with her that the financial sector is 20% of our current GDP and that a truly healthy economy should not have more than 10%. That is because the financial sector is largely a game of intermediaries who don’t by themselves create products of value. A healthy financial sector greases the wheels of the real economy but an unhealthy one creates methods to siphon off a larger and larger share of the profits. An unhealthy financial sector is basically a parasite, taking nutrients in the form of money and undermining the health of the host. And that is what we have: a parasitic financial system that has come perilously close to killing the host.
Americans know that a $30,000/year teacher in Kansas is more valuable to our society than a middle-manager at Goldman Sachs who takes home $300,000 in bonuses. They also feel outraged that they are still unemployed while the bailed out banks are now paying outsize bonuses again. They sense that our system is rigged to allow Wall Street to profit off the backs of Main Street, all with the blessing of Washington, and that something very deep has to change.
It has to be clear that you are the champion of that deep, systemic change in the economic system or your presidency will fail.
I am no expert on the economy, but I have studied enough to know that there are plenty of forward thinking economists outside of the Wall Street club who can help you to rebuild the engine of innovation that is America. For your own understanding, try starting out with Ellen Brown’s Web of Debt, a brilliant survey of American economic history and what is fundamentally flawed. It’s an eye-opener. Or listen to Catherine Austin Fitts, a former assistant secretary for HUD who has detailed the “tape-worm” economy after her years on Wall Street and DC.
I’ll give you examples of the kinds of reforms I think should to be on the table for your economic reform work to be real:
- Federal Reserve reform – America needs to take back its constitutional right to create money rather than borrow it from bankers at interest (who simply create it out of thin air anyways). You are a fan of Lincoln and I think his Greenbacks were one of his most important stances our country has ever taken against the banking cartels. The Greenbacks were what allowed us to rebuild after the devastation of the Civil War and we need to do something similar now. One of the few financially healthy states is North Dakota, which has its own bank, a model the U.S. should emulate
- Transaction tax in the stock market – Even a quarter of a cent tax on trades could generate billions for the American people and slow some of the arbitrage and day-trading that poisons the financial system. This tax would not be felt by Main Street Americans but only by the elite who squeeze money out of the system through extremely rapid trading that games the system and does not create enduring value.
- Microlending fund for small businesses – The Grameen Bank of Nobel Laureate Mohammed Yunus has demonstrated success in empowering millions of entrepreneurs in Bangladesh with microlending and is now showing 99% repayment in pilot U.S. programs. What if we created a massive micro-lending fund for U.S. entrepreneurs with the same principles? It could even be profitable. That would spur enormous innovation without adding to the debt burden. You might use some of the repaid TARP money for this purpose.
- Full transparency of the derivatives market – What happens in secret almost always leads to no good in the long run. The trillions of dollars of potentially destabilizing derivatives simply must be brought out into the light of day. Before another financial bomb goes off, we need to know what is happening and to defuse as many bombs as possible.
- Too big to fail insurance – For any business that is deemed too big to fail, the American taxpayers should be paid for our insurance of that business. After all, we are shouldering the risk of their bad decision-making, just like an insurance company. A substantial and pricey insurance policy would motivate them to either move off the public too big to fail list (and it should be a clear, public list) or for the taxpayers to earn a decent profit in the good times. If a company is not on this list, then public investors need to know that it is free to fail and that the government will not intervene in its mistakes.
- Remove all corporate money from elections – this can be a bipartisan initiative, ensuring that the big banks and other corporations cannot buy votes.
These are audacious reforms to be sure, but they are only a handful of what is necessary to liberate our creative power from the predatory pirates that have taken over Wall Street and who are continuing to manipulate Washington.
The logic here is simple: if the American people see you as in bed with the bankers, the 2010 elections will be a bloodbath and most of the other reforms you want to see will fail.
You have to decisively, publicly break your linkage with Wall Street – which first means eliminating the Wall Streeters from the White House – and then take up the mantle of true, deep reform.
When you have shown that you can stare down Wall Street and clean up the corruption and piracy, the American people will again rally by your side. And then you will have the political and social capital to stare down the health insurance giants to create real health care reform.