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The Financial Gangs of New York

Why are President Obama and Treasury Secretary Tim Geithner so bloody deferential to the financial gangs of New York, the same Wall Street thugs whose reckless greed drove the invention and build up of the toxic bank assets in the first place? That is the question faith leaders should be asking. After all, the religious community has a whole lot of skin in this game.

Across the country, in churches and synagogues and mosques and temples, people are praying for the newly laid-off and about-to-be-laid off. Church basements are filling up with gatherings of anxious middle-class people running do-it-yourself support sessions. Whether the bankers drive Obama or Obama drives the bankers is a real existential issue for millions of anxious folks. It’s not an issue faith leaders can take lightly.

New York Times columnist Frank Rich wrote Sunday that the inability of the White House to anticipate or deal with the public outcry over the AIG bonuses could be this new administration’s “Katrina moment.” As Rich correctly notes, the White House seems to think the public is simply misinformed about technical issues of contract law, etc., whereas in fact the public is way ahead of the White House in grasping the core moral issue: these Wall Street guys mugged all of society with Washington’s help, and now Washington is still protecting them, still enabling them.

In simple moral terms, Wall Street self-dealing stole America’s future. The hot shot bankers’ criminality — for that’s what it was and is — unleashed a tidal wave of economic violence that is still cresting, as jobless numbers and home foreclosures continue to mount week by week and month by month. And now what Main Street wants to know, in relation to the President and his team, is whether they still intend to leave the bankers in the driver’s seat. Or, to put the public’s question still more starkly, will the violent bear it away?

That’s an allusion to Flannery O’Connor’s famous 1960 novel, “The Violent Bear it Away”. O’Connor was alluding to Matthew 11:12, which she would have known in the Catholic Douay version: “And from the days of John the Baptist until now, the kingdom of heaven suffereth violence, and the violent bear it away.” Here Jesus distinguishes his own revolutionary nonviolence from the violent and therefore self-contradictory and imperfect message of the Baptizer. He is saying that something is plainly wrong if it will take yet more violence to bring about the reign of God.

Flannery O’Connor, Jesus and Jeremiah are very much on my mind today as the Obamans now attempt Phase II of how to disappear $11 trillion in toxic bank assets. Earlier today, Geithner rolled out a complex and highly questionable public-private partnership concept, but it won’t take long for Main Streeters to figure out that they will be bearing all of the downside risk as taxpayers, whereas the hedge fund managers being offered sweet inducements to purchase the assets will enjoy all of the upside gains. This is yet another awkward moment for Geithner and his boss, however, as the hedge fund boys may still be reluctant to play unless they can be reassured that their upside windfalls won’t be taxed too severely.

The President keeps saying that he wasn’t sent to Washington to pass along the big problems to someone else, that he was elected to put things right. Yes indeed. But he is putting his entire credibility at risk by continuing to let the bankers drive policy. As many economists and pundits point out, Obama doesn’t have to do it this way. He could take a Reconstruction Finance approach rather than continue to prop up the zombie banks. He could consistently highlight the profound inherent tensions between rebuilding the real economy and simply throwing more public money at the financial sector. Or, as John Harwood notes in today’s New York Times, he could use the public’s anger to “reverse Republican policies on taxes, domestic spending and regulation.” But as Harwood also observes, Obama is temperamentally more interested in “cooling that anger rather than stoking it.”

I think that precisely because of his cool temperament, the President is very well positioned to change the game in Washington and to drive the money changers from the temple of public policy. But he needs to make up his mind, and soon, that he actually wants a fundamental power shift that significantly reduces the power and influence of the financial sector in government. Taking on the “achievatrons,” as Lewis Lapham calls the ruling elite, is the only chance Obama has of reversing the sharp rise in economic inequality that has marked the past 30 years.

Obama should be seeking a power shift of the same magnitude as the realignment pushed through by Franklin Roosevelt. If he were to lead in this direction, the people would surely follow and our politics would be changed mightily. But to lead us decisively he will need far more of FDR’s courage and clarity and willingness to be blunt, as in his ringing 1936 declaration that “government by organized money is just as dangerous as government by organized mob.”

Right now it just isn’t clear that Obama sees the Wall Street elite as a mob of violent predators, even though the public increasingly sees Wall Street exactly that way.

If he is to be a great and successful president, Obama must not, in Jeremiah’s words, treat the people’s wounds lightly:

For all, high and low, are out for ill-gotten gain; prophets and priests are frauds, every one of them; they dress my people’s wound, but on the surface only, with their saying ‘All is well.’ All well? Nothng is well! They ought to be ashamed because they practised abominations; yet they have no sense of shame, they could never be put out of countenance. Therefore they will fall with a great crash, and be brought to the ground on the day of my reckoning. The LORD has said it. — Jeremiah 6:13-15 (Revised English Bible)

Rev. Peter Laarman is Executive Director of Progressive Christians Uniting in Los Angeles. This essay originally appeared in the Washington Post and was republished here with permission.

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