Obama’s Number One Economic Priority Has Been Backing Big Banks

Barack Obama

Photo: AP

On Thanksgiving Day, 22 November 2012, Zachary A. Goldfarb headlined in the Washington Post“Economists, Obama Administration at Odds Over Role of Mortgage Debt in Slow Recovery,” and he reported that President Barack Obama and Treasury Secretary Timothy Geithner have been consistently opposed to providing any significant assistance to struggling mortgagees, and that the effort by economists to convince Obama otherwise is still ongoing.

“Former budget director Peter Orszag has said ‘a major policy error was made.’ And Christina Romer, formerly Obama’s top economist, … has said … that there needs to be a bigger focus on reducing debts – a process known as ‘principle reduction.’

But although the new Obama administration had hundreds of billions of dollars in unspent financial bailout funds available to use, it decided against any significant program to reduce the debts of underwater homeowners [despite their being underwater because of having been victimized by a housing bubble that the bailed-out banksters had actually created and profited enormously from]…

The administration did not see a plan that did not have the potential” of “cratering the financial system by forcing banks to absorb huge losses.” In other words: Obama’s actual top concern was to protect those mega-banks, and their executives, and the holders of their bonds, and these mega-banks’ counter-parties. They – and not the public – were “the financial system,” and thus must be prevented from any further “huge losses.”

In other words: despite his rhetoric against “trickle-down economics,” Obama was a top-down type of guy: he believed, above all, in the aristocracy, and didn’t much care about these underwater homeowners, or any other victims of banksters (such as the purchasers of mega-banks’ trashy AAA mortgage backed securities).

To him, causing losses to the people who had tanked the economy would have been “cratering the financial system.” So, he chose, instead, to crater the bottom 99.9% of the economy, not this fraction of the top 0.1%. And this also explains why he refuses to prosecute any banksters – it would harm “the financial system,” in his view.

“‘I think the missed opportunity to forgive principal at the end of 2008 and beginning of … 2009 was the biggest mistake the administration made in trying to deal with the crisis,’ said John Geanakoplos, a Yale economist who proposed a plan to reduce principal. … Other economists – from both parties – were making the same point around the time Obama came to office.

[Alan] Blinder, a former Clinton administration official, and Martin Feldstein, a former Reagan administration official, developed plans calling on the government to commit hundreds of billions of dollars to restructure millions of mortgages with lower interest rates and principal balances.” All to no substantial effect, even today


Investigative historian Eric Zuesse is the author, most recently, of DEMOCRATIC vs. REPUBLICAN ECONOMICS: NO CONTEST – Democrats Always Better, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

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