A sleeper cell of four Republicans struck the Financial Crisis Inquiry Commission this week, escalating what had previously been a campaign of covert obstruction into an overt act of sabotage. That act should be seen for what it is: A "denial of service attack" on bipartisan cooperation and public deliberation, designed to destroy the Commission's work and discredit its findings.
The subversives also released a document which they characterized without any apparent embarrassment as a "primer." You may remember that "primers" are the simple books used to teach small children, like the Dick and Jane reading series, My Little Book of Dinosaurs, or So You Want to be a Lobbyist.
But the most important book the saboteurs used was the Republican playbook -- for disrupting, subverting, and destroying government institutions. Pay attention to that playbook. It's been used before, and it will be used again.
"Fifth column" -- noun: A group of people working secretly to help the enemy of the country or organization they are in.
-- Oxford Advanced Learners' Dictionary
In a now-famous quote, President Obama said this to the 13 Bankers who provided the title for Simon Johnson's book: "I'm the only thing standing between you and the pitchforks." We now know that the Republican appointees to Financial Crisis Inquiry Commission had pitchforks, too, which they planned to plant in their fellow Commissioners' backs when the right time came.
These Republicans know that their party has enjoyed a terrific year for Wall Street contributions, which were funneled through the U. S. Chamber of Commerce and other front organizations. Now they've paid its benefactors back with in-kind services by acting as Wall Street's Fifth Column on the Commission. Like all such subversives, theirs was a silent and deadly game. It finally culminated when they made demands they knew could not be granted, precipitating a "crisis' in order to discredit the Commission's work. They triggered their phony crisis by insisting that phrases like "deregulation," "shadow banking," "interconnectedness," and even "Wall Street" be excluded from the final report. That's like demanding that a report on crime in America exclude the phrases "robbery" and "murder."
One of the Republicans who voted to ban the word "deregulation" is Peter J. Wallison. Here's a sentence from Wallison's official biography, as it appears on the Commission's website: " (H)e was General Counsel of the (Reagan) Treasury Department, where he had a significant role in the development of the Reagan Administration's proposals for deregulation in the financial services industry."
These people are shameless.
The Minority Report
The Minority Report film, and the Philip K. Dick story that inspired it, based their storylines on the ability to predict crimes before they've been committed. That makes the phrase an ideal name for the Republican "alternative" to the Commission's report. In retrospect, one of the strangest aspects of the Commission's hearings was the way one high-powered Wall Street figure after another would behave exactly the same way during their testimony. They would answer direct questions with vague circumlocutions, repeating the same talking points that the others had used. Why, you'd almost think they'd been coached ...
Their testimony certainly became predictable. So did their explanations for the crash: Freddie and Fannie caused it. Lower-income people received too many loans. Bubbles happen. Good-hearted banks tried to help too many people. We need better risk management.
If you were wondering what the FCIC's Minority Report says, let me spare you the trouble of reading it. It says: Freddie and Fannie caused it. Lower-income people received too many loans. Bubbles happen. Good-hearted banks tried to help too many people. We need better risk management.
Why, you'd almost think ... never mind.
Remember how the mutant psychics in The Minority Report would all open their eyes simultaneously and then speak in unison? This report is a lot like that. And remember when the "nice" mutant told Tom Cruise they were coming for him? All of a sudden she opened her eyes wide and screamed "Run!"
We haven't gotten to that scene yet, but it's coming.
Even the authors of the minority group's missive couldn't bring themselves to describe it as a "report," however. Famed deregulator Peter J. Wallison wrote: " It is very important not to see this statement as in any sense a dissent or as the Republicans' 'report.' It is neither. It's not a dissent... because there is as yet no report to dissent from, and it is not the Republicans' report because it is a very limited statement of the key issues we think should be addressed in the final document."
It's not a "report." It's not a "dissent." What is it? Says Wallison, "It's a primer on the issues we think will be important to cover in the final report of the commission." It certainly reads like a primer, with headings like "Why was there a housing bubble?" and "Why was the panic so painful for the economy?"
See Rubin. See Rubin fail. See Rubin say he couldn't have known.
Every fallacious idea in this report has been addressed at great length, but here's the primer version:
It wasn't Fannie, Freddie, or all those poor, black, and brown people. Losses weren't confined to Fannie and Freddie loans. They cascaded across every kind of banking institution. Heavy losses were seen in commercial real estate and luxury housing, neither of which received Fannie or Freddie backing. Other countries had real estate bubbles, too.Were there problems at Fannie and Freddie? Sure. Did they cause the crisis? Of course not.
You know what all these bad loans had in common? Bankers. They made tons of money writing them. You know what else they had in common? They were all written after the financial industry was deregulated. (Oops. I said a bad word.)
Bubbles happen. "We couldn't have known," said Robert Rubin. "I'm right 70% of the time and wrong 30% of the time,' said "Maestro" Alan Greenspan (thereby giving himself a lifetime grade of C- or D+). But lots of people knew there was a housing bubble. Why didn't they? Because it was in their own best interests not to know. That left them free to make their fortunes. Here's what they did know: No matter what happened to housing prices, they knew the government would have to rescue them if (when) things collapsed.
Bankers were betting on housing prices, ignoring property law so they could swap mortgages (and people's homes) like bubble gum cards, and making a fortune by gambling with the entire economy. The Fifth Columnists want to make sure they can do it all again.
If we need better risk management ... ?. One banker after another, from Robert Rubin on down, came before the Commission to explain that despite their billion-dollar salaries they really didn't know very much. And all this time we've been told how smart they are. Why, they didn't even know what their own banks were doing! But don't bother regulating us, they all said. We've learned our lesson.
But, gosh! (Remember, this is a primer.) If we need better risk management, why should we trust these guys to do it? And why would they "manage risk" at all, when they can make billions ignoring it instead?
They played a rigged game in a crooked casino, using your house as one of the chips. Here's how the Four Horsemen of the Financial Apocalypse describe the Wall Street casino: "The primary role that financial firms played in mortgage lending was that of financial intermediary, providing a link between those who wished to invest in mortgages and those who wanted to take out a mortgage to buy a home. This is the value of a robust financial system--it allows investors to make investments wherever they choose and borrowers to borrow at the lowest cost."
Here's what they're really saying: Financial firms were like Hell's Kitchen bookies, but without their charm, class, or principles. They peddled loans to everybody with a pulse, hired crooked auditors to overstate the value of their homes, then bundled the mortgages and used them as chips in a crooked game where they took both sides of the bet and then rigged the outcome. The value of the system comes when it's time to ask them for campaign contributions - or to fund the think tanks that employ us.
The Final Scene
As they were releasing this "primer," the economy continued to reel and stagger as the result of Wall Street's criminality, greed, irresponsibility, and stupidity. Millions of lives remained in ruins, while millions more continued to suffer. Some initial steps have been taken to reign in the bankers, but much more needs to be done. In the meantime, we desperately need government investment to get people back to work and get the economy moving again.
In light of this ongoing misery, and with most economists agreeing that we need short-term government spending to turn things around, this is the primer's concluding sentence: "We caution our nation's leaders to learn the appropriate lessons from history and take seriously the need to reduce our federal deficit."
Yes, they really said that. Remember that scene from the movie, the one we said we hadn't gotten to yet? This is it.
Run!
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(Part Two of this report is here. It's called "Destruction for the Cash of It: The Republican Saboteurs' Playbook.")
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates