May 26: When I read a certain front-page article in the New York Times on Friday, my mind immediately hurled itself, and much of the rest of me with it, back to Poland in 1772. I can’t help it; my mind does that sometimes, since, I guess, that’s where my forebears were living at the time. But I can explain it, at least to some extent. Please bear with.
The article, by Eric Lipton and Ben Protess, is entitled in full, in that typical cascade of headlines often used these days: “Banks’ Lobbyists Help in Drafting of Bills on Finance: Move to Soften Rules: Wall St. Finding Capital a Friendlier Place—It Donates More.” It shows how Citibank is essentially writing legislation, word for word, that affects its own interests, and it gets to do this by suborning Congress with campaign donations.
There is nothing new here, of course, except the details of yet another outrageous example. My TAI ebook, Broken: American Political Dysfunction and What to Do About It, tells the same general story and gives earlier examples—as have for years now books by Robert Kaiser, Joe Klein, Kevin Philips, Dylan Ratigan and many others. Here, for example, is an excerpt from Broken:
[M]oney doesn’t just buy votes these days; it buys the texts of laws and regs. Corporate lobbyists actually provide congressional staff with specific language and often lots of it, and sometimes these days they do it while literally sitting in House and Senate office buildings, sometimes as lobbyists and some- times as former lobbyists become Capitol Hill staffers. Liz Fowler, a former head lobbyist for WellPoint and a staffer for Senator Max Baucus, wrote the basic draft of the Obamacare bill. Julie Chon, a former J.P. Morgan analyst, wrote large chunks of the Dodd-Frank banking legislation while working for Senator Dodd.
My favorite example, from November 2009, I describe in Broken as follows:
. . . Genentech lobbyists had provided health care policy talking points to the staffs of several House members that made their way verbatim into the congressional record via the identical official statements of a clutch of Representatives. Genentech had earlier poured many dollars into these Representatives’ campaign coffers. But Evan L. Morris, head of Genentech’s Washington office, claimed (without anyone prodding him to do so), “There was no connection between the contributions and the statements.” Heaped on this insult to everyone’s intelligence, another lobbyist commented, “This happens all the time. There’s nothing nefarious about it.”
One is tempted to just chalk up the NYT article as another typical MSP BFO (that’s “mainstream press blinding flash of the obvious”, for those not yet inducted into the wonderful world of Washington acronymphomania—defined as the promiscuous use of acronyms, of course), in the same class as recent headlines warning, months after it had become obvious to anyone paying attention, that the integrity of the Syrian state is at risk because of its civil war, or that the Syrian civil war might have some impact on communal relations in Iraq, and so on and on. One gets used to this, even though, in the best of all possible worlds (one of which existed as recently as two decades ago as far as the press is concerned) one should not have to.
That said, this NYT article is worth the time to read not just for the details it provides, but for two other reasons as well. One is that it forces us to focus on the financialization of the economy over the past quarter century—and I probably spent too little time in Broken talking about this, though many others (Simon Johnson to name but one) with more expertise and experience in this area than me have done so. When all the sports arenas and baseball stadiums started to get named after banks, I knew intuitively that something very bad was happening, but I didn’t understand what exactly it was until recently. The second reason for reading the NYT article concerns one really and truly terrific quotation—of which more below.
Now, I did point out in Broken that we in the United States don’t have a national bank, as such, as most other liberal democracies do; the Fed is composed of bankers (and only from the larger banks) who quite naturally have their own interests at heart. This arrangement is part of the original compromise that created the Federal Reserve System in 1913. So when people blame Ben Bernanke for doing dumb or merely inexplicable things, they often forget that the avaricious cats he’s trying to herd have motives he cannot detach from them. Low interest rates and lots of quantitative easing have created a situation in which the banks can arbitrage interest rates to make a lot of risk-free cash, which is exactly what they’re doing. The point? There are two.
First, big banks no longer have interests that align with the best interests of the economy in general, but they’re so powerful that they can nevertheless get their way on key economic policy issues. And second, to get back to the NYT article, the big banks have now come to dominate the plutocracy in the United States, writing their own laws and regs. That has major implications for corporate investment strategies, thus for the rate of innovation in the economy, for the capacity of the economy to generate jobs, for the trade balance and the strength of the dollar, and more besides.
We definitely have a fox-guarding-hen-house kind of problem here, big time, but Congress will do nothing about it because of all the money Wall Street gives them, and, peeling back the onion a few layers, that’s because they need enormous and growing sums of money for campaigning, and that in turn is because of the role of TV ads in contemporary American electoral politics, recently made worse by the opacity bequeathed by Citizens United—as vividly illustrated in the 2012 elections. And that is why the first of the ten proposals in Broken zeroes in on getting a handle on the role of TV in American campaign financing.
Amazingly, there are still academics out there who insist that TV really isn’t that important in American politics, and that all the money spent on ads isn’t really very important either; but I have noticed that none of these academics seem to live here in Washington. You can bloody well smell what’s going on, just like, when I was a kid, you could smell the Potomac River from ten miles away. Ohio and Kansas (I’ve been to both places recently) smell entirely different. The money and the TVcentric character of the spending are important in electoral outcomes, but they’re even more important to the conversations that take place before anyone even votes—which is why the major corporations and Wall Street give money to both sides. They are equal opportunity suborners.
Now that great quote. Here is how the NYT quotes Jim Hines, a third-term Democratic Congressman from Connecticut:
I won’t dispute for one second the problems of a system that demands immense amounts of fundraisers by its legislators. It’s appalling, it’s disgusting, it’s wasteful, and it opens the possibility of conflicts of interest and corruption. It’s unfortunately the world we live in.
Hines, a member of the House Financial Services Committee and a former Goldman Sachs banker, is one of the top recipients of Wall Street money. He lives in this appalling, disgusting, wasteful, corrupt world because he and his colleagues, Democratic and Republican alike, abet it. If this is such an “unfortunate” world, why does Hines contribute to it? Why doesn’t he instead try to contribute to its reform (there’s zero sign of his interest in so doing)? Does this seemingly masochistic congressman need a psychiatrist, or a jailer?
Now back to 1772 and all that (the historically aware among you will have long since known where I’m going with this). On the occasion of the First Partition of Poland, Frederick II of Prussia remarked famously of Hapsburg archduchess Maria Theresa that, as it has come down to us in the abbreviated form of historical folklore, “She wept, but she took.” As Norman Davies describes the matter (on page 390) in his 2005 bookGod’s Playground, it was even better (if not quite as succinct) than that. Referring to Catherine of Russia and himself, Frederick said (in French, and Davies quotes in French when he simply must):
Maria Theresa . . . was devout and anxious. When the First Partition was eventually completed, Frederick remarked: “The Empress Catherine and I are simple brigands. But I wonder how the Queen-Empress managed to square her confessor. . . . Elle pleurait quand elle prenait; et plus elle pleuraid, plus elle prenait.”
And so, Congressman Hines, let me understand you in historical context: You weep, but you take, and the more you weep, the more you take. Given your lacrymose remark to the New York Times, one shutters to imagine what is now about to get took…. And you do this because your colleagues—the great Catherines and Fredericks among your Capitol Hill company—force you to do it? You are a co-conspirator, one of several hundred at the least, in the accelerating partition of American democracy, then. Do I have that about right?
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