Austerity, Rigour... And Why Do Rich People Always Just Get Greedier When They Get Richer?

Market jitters? The American financial industry is pointing to Europe and warning that a collapse of the banking system there could be nigh-- and could be catastrophic for everyone.

Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group's implosion nearly three years ago.



Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender's bonds against default is now £343,540.



The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.



"The problem is a shortage of liquidity-- that is what is causing the problems with the banks. It feels exactly as it felt in 2008," said one senior London-based bank executive.



"I think we are heading for a market shock in September or October that will match anything we have ever seen before," said a senior credit banker at a major European bank.

France isn't calling it Austerity, but the proud nation is being dragged into the clutches of the banksters and calling it a "rigour package." Compared to the Austerity measures being proposed in the U.S.-- Obama even floated a trial balloon yesterday that sounded like bringing back indentured servitude-- the French version sounds down right benign.

The measures in the rigour package, dubbed by some the "financial turn of the screw," include:



• An "exceptional contribution" of 3% on taxable earnings for those earning above €500,000 to remain in place until France's deficit had been reduced to 3% of GDP.



• Higher taxes on tobacco and alcohol.



• A modification of capital gains tax on property.



...Among other measures, Nicolas Sarkozy, the French president, is reported to be considering the abandonment of tax-free overtime for workers. This was one of the measures that, under the slogan "work harder to earn more," was a pillar of his election campaign in 2005, but it has cost an estimated €4.5bn in lost revenues. The government is also looking at ending tax breaks for companies.



Having recently abolished the "financial shield," which set a limit on the total amount of tax that the rich were expected to pay, a new tax on the wealthy would avoid accusations that his austerity measures would hit those lower down the income scale in the run-up to next year's elections.



France and Germany are also discussing proposals for a tax on financial transactions-- a measure that is vehemently opposed by Britain.

Not just Britain... Wall Street is going insane at the idea and is spending millions of dollars in lobbying and in direct bribes campaign contributions to it's most dedicated mouthpieces in government. The 25 worst Wall Street shills in the House (this year only):

John Boehner (R-OH)- $986,787

Eric Cantor (R-VA)- $610,250

Chris Murphy (D-CT)- $380,500

Jeb Hensarling (R-TX)- $350,350

Dave Camp (R-MI)- $343,800

Scott Garrett (R-NJ)- $320,185

Ed Royce (R-CA)- $318,004

Kevin McCarthy (R-CA)- $315,200

Spencer Bachus (R-AL)- $309,115

Pat Tiberi (R-OH)- $300,549

Steve Stivers (R-OH)- $282,485

Robert Dold (R-IL)- $272,006

Nan Hayworth (R-NY)- $240,006

Jim Himes (D-CT)- $233,500

Steny Hoyer (D-MD)- $226,670

Randy Neugebauer (R-TX)- $224,133

Steve Israel (D-NY)- $204,000

Carolyn Maloney (D-NY)- $199,750

Debbie Wasserman Schultz (D-FL)- $197,900

Joseph Crowley (D-NY)- $193,750

Shelley Berkley (D-NV)- $189,660

Peter Roskam (R-IL)- $188,700

Denny Rehberg (R-MT)- $187,330

Francisco Canseco (R-TX)- $183,852

Paul Ryan (R-WI)- $181,400

Bolded names are members of the Financial Services Committee, charged with "regulating" the banksters to keep them from ripping off consumers and society at large. Alan Grayson was on that committee when he was in Congress. Wall Street wasn't giving him money then and, now that he's campaigning to get back into Congress they're not donating to him either. I called Alan-- who's just back from a trip to Ghana-- this morning to get his take on all this. He told me he "always found it puzzling that business interests gave lockstep support to Republicans, despite their fondness for auctioning off the law to the highest bidder." He was just warming up:

The Republican Party may be the party of Big Business, but it is also the party of Economic Failure.

 

Let’s take the stock market, that very apt measure of how rich the rich are.  In Tommy McCall’s classic 2008 article Bulls, Bears, Donkeys and Elephants, he pointed out that $10,000 invested in the stock market under Democratic presidents would have grown to $300,671, while $10,000 invested under Republican presidents would have “grown” to $11,733. That’s a 2907% Democratic profit versus a 17% Republican profit. Is that still true? Sure enough, the stock market started to recover less than one month after Barack Obama was sworn in.

 

Since federal spending alone now equals almost a quarter of GNP, is it really good for business to make government small enough to “drown in the bathtub,” as Grover Norquist always demands?

 

And how, exactly, is the banking system supposed to function without regulations? Reserve requirements are regulations. They are the only limits on the banks’ unbridled speculation and gambling with other people’s money. Remove the regulations and a crash will quickly follow. That wouldn’t be good for business.

 

Republican economic mismanagement takes down both the rich and the poor. In other countries, the rich seem to understand that, but not here. Here, the blanket support for Republicans by Big Business and the filthy rich amounts to an economic death wish.

 

There is an old saying: “if you’re so smart, how come you ain’t rich?” I have a different question: when it comes to political self-interest, how can rich people be so dumb?

If we can't count on Congress to protect us-- and we can't-- who can we turn to? That was the whole idea of why Elizabeth Warren came up with the Consumer Financial Protection Bureau-- and why Wall Street fought so hard to cut it off at the knees. Obama has been nearly as friendly to Wall Street as any Republican president and it would be foolish to expect him to change his stripes. Matt Taibbi has done some great reporting in Rolling Stone about one of the few places where consumers can look for redress: New York's crusading Attorney General, Eric Schneiderman. Basically, Wall Street and their political puppets-- from Obama and the GOP to the rest of the states' attorney generals-- have "cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes." Schneiderman is the odd man out.

The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.



This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline.  



...But Schneiderman, who earlier this year launched an investigation into the securitization practices of Goldman, Morgan Stanley, Bank of America and other companies, is screwing up this whole arrangement. Until he lies down, the banks don’t have a deal. They need the certainty of having all 50 states and the federal government on board, or else it’s not worth paying anybody off. To quote the immortal Tony Montana, “How do I know you’re the last cop I’m gonna have to grease?” They need all the dirty cops on board, or else the whole enterprise is FUBAR. 



In addition to the global settlement, Schneiderman is also blocking an individual $8.5 billion settlement for Countrywide investors. He has sued to stop that deal, claiming it could “compromise investors’ claims in exchange for a payment representing a fraction of the losses.”



If Schneiderman thinks $8.5 billion is an insufficient, fractional payoff just for defrauded Countrywide investors, then you can imagine how bad a $20 billion settlement for the entire industry would be for the victims.



In that particular Countrywide settlement deal, it looks like Bank of New York Mellon, the New York Fed, Pimco and other players negotiated on behalf of defrauded investors. They told the Times they were happy with the deal, but investors outside the talks told Gretchen they weren’t happy with the settlement.  



Schneiderman apparently listened to those voices instead of the Mellon-Fed-BofA crowd, which infuriated the insiders who struck the actual deal. In a remarkable quote given to the Times, Kathryn Wylde, the Fed board member who ostensibly represents the public, said the following about Schneiderman:



It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street-- love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.



This, again, is coming not from a Bank of America attorney, but from the person on the Fed board who is supposedly representing the public!



This quote leads one to wonder just what Wylde would consider “indefensible,” given that stealing is pretty much the worst thing that a bank can do-- and these banks just finished the longest and most orgiastic campaign of stealing in the history of money. Is Wylde waiting for Goldman and Citi to blow up a skyscraper? Dump dioxin into an orphanage? It’s really an incredible quote.

Remember this?







She's running for the Senate now, in Massachusetts, against Wall Street's "favorite" senator, Scott Brown. Wall Street and the financial services industry are financing his campaign. Can you help Elizabeth's? Our House candidates worthy of help, like Grayson, are on another page-- this one.

Will Wall Street Try To Sabotage Elizabeth Warren's Senate Campaign? They Already Are!

This goes beyond class warriors Darrell Issa and Patrick McHenry using a Wall Street lobbyist disguised as a "staffer" to sabotage Elizabeth Warren's testimony in Congress. Keep in mind that Wall Street has showered Scott Brown with cash. His biggest single source of campaign "contributions" comes from the financial predators Elizabeth Warren has been urging government to protect consumers from. So far the financial sector has donated over $1.8 million to Brown's short career in federal politics. This year alone, he's taken in more money than any other Republican senator other than Bob Corker (TN) of the Banking Committee and, more to the point, the Subcommittee of Securities, Insurance and Investment. The crooks who run the big players in this sector will pay anything to keep Corker and Brown in office and in Brown's case-- to keep Elizabeth Warren out of office. The idea of her in the Senate drives the banksters insane.

Elizabeth Warren’s combative history with Wall Street could create a fundraising dilemma for her burgeoning Senate campaign. 



Her ardent grassroots following on the left-- forged during stints as TARP watchdog and as mastermind of the Consumer Financial Protection Bureau-- would likely make her a formidable Senate candidate in Massachusetts.



But her reputation as sheriff to Wall Street could also be a liability against Sen. Scott Brown (R-Mass.), a popular Republican who has been stockpiling campaign cash in anticipation of a tight 2012 race.



..."I think it's pretty clear she's going to run the classic, grassroots campaign here in Massachusetts," said Mary Anne Marsh, a longtime Democratic operative in the state. "That means she's going to rely on folks here to give low-dollar donations here a number of times."



But without the support of heavy-hitting donors in Massachusetts, many of whom work at hedge funds and other financial firms, Warren might find it difficult to keep up with Brown’s fundraising juggernaut.



Dubbed “Wall Street’s Favorite Congressman” in a Forbes article last year, Brown reported having more than $9.6 million in the bank at the end of June. A good portion of that money came from the financial-services sector, according to data compiled by the Center for Responsive Politics.



Employees of the Boston-based Fidelity Investments are the single biggest group of donors to Brown’s campaign committee, contributing more than $85,000 since 2007, according to the watchdog’s data. Employees at Goldman Sachs, Bank of New York Mellon, Morgan Stanley and Bank of America are also top donors.

Warren, on the other hand, is going to have to depend on... Americans who want to take back their government from the avaricious banksters. Last week, Paul Krugman made it clear just what that means: Finally, Someone to Run Against Wall Street

One of the truly amazing things about American politics in the Lesser Depression is that nobody in political life has been willing to run as the champion of ordinary Americans against the financial wheeler-dealers who brought this disaster on us. Republicans won’t, of course, because their worldview says that greed is good and government the only source of evil. But Obama has also been almost weirdly unwilling to express even the slightest populism.



So I’m glad to hear that Elizabeth Warren will apparently run for Senate. She’s no Huey Long-- her manner is more schoolteacher than rabble-rouser-- but that makes her more credible. And she’s got the best credentials on the financial crisis of any prominent figure in American life.



This should be edifying.

Yes, edifying... and expensive. Can you chip in? Blue America has only endorsed two candidates for the Senate this year, Warren and Bernie Sanders. We want to see both of them working together for regular American families... somewhat of a rarity in the good ole boys club that is the U.S. Senate. Hard to say exactly what will happen this early in the cycle but my guess is that Blue America may endorse one or possible two more Senate candidates this year. That's it. We want THE BEST, not "better than the horrible alternative."

Obama's Payroll Tax Break-- Right In The Crappy Middle

Wall Street, cognizant of the damage George W. Bush and the Republicans had done to the economy, gave obscene amounts to help elect Barack Obama in 2008. Despite giving Wall Street pretty much everything they could have wanted-- starting with one of their own, Timothy Geithner, as Secretary of the Treasury-- Wall Street has abandoned Obama for the even more compliant Willard "Mitt" Romney. "It's not healthy for rich people to feel maligned," said one ex-Obama supporter who is now donating to Romney. They may not have anything to cry about in regard to Obama's policies, which certainly favor the rich, but they don't like how he "maligns" them rhetorically.



That's the thanks Obama gets for extending the Bush taxcuts for the rich cocksuckers! But now Obama wants to extend a payroll tax cut for wage-earners, a tax break for the middle class. Republicans only favor tax cuts from their rich supporters, not for ordinary Americans. They want to raise taxes on working people.

“We should extend the payroll tax cut as soon as possible, so that workers have more money in their paychecks next year and businesses have more customers next year,” Obama said at the White House on Monday.



The president wants the tax cut extended along with unemployment insurance benefits, and has warned that if Congress fails to do so, “it could mean 1 million fewer jobs and half a percent less growth.”



The administration says the two-percentage-point reduction in the payroll tax put in place for 2011 has cut tax bills by about $1,000.

Right-wing corporate shills Dave Camp (R-MI) and Paul Ryan (R-WI), respectively chairmen of the House Ways and Means Committee and the House Budget Committee have come out against it. "I'm not in favor of that. I don't think that's a good idea,” said Camp. "We need a more overarching approach to our tax policy. Ryan was even more of a hypocrite, dismissing the proposed payroll tax cut as “sugar-high economics.” And Jeb Hensarling, a senior far right shill on the House Financial Services Committee (and on the new SuperCommittee) also came out against it: "It's always a net positive to let taxpayers keep more of what they earn but not all tax relief is created equal for the purposes of helping to get the economy moving again." Hensarling, like Ryan and Camp, only agrees to tax relief for the wealthiest Americans, not for working stiffs.



Obsessed with preventing Obama from putting through any of his even mild remedies to fight unemployment, the Republican Party is apparently in full bore class warfare against American workers. What I don't ever "get" about Obama-- although it was well explained last week by Michael Tomasky in The Untransformational President-- is how his brand of civic republicanism always means giving away the store and avoiding a fight with his sworn enemies and, much worse, the sworn enemies of the American people, the domestic fascists and terrorists who run the Republican Party.



Everything always starts with a compromise with Obama. By scuttling single-payer or even a public option, he didn't win over any Republicans-- he just made the bill so bad that it will probably be overturned by the fascist-dominated Supreme Court. And this is the hallmark of everything he does! Now he hopes to rally progressives to help him fight for a flawed payroll tax cut. Andrew Fieldhouse explains what progressives should be fighting for instead:

A targeted, partially refundable tax rebate would be more effective than the current payroll tax cut that President Obama endorsed extending in his speech Monday night, a new Economic Policy Institute/The Century Foundation Issue Brief finds. In A bigger and better economic boost, Federal Budget Policy Analyst Andrew Fieldhouse explains that a modified version of the lump-sum tax rebates that were part of the 2008 Economic Stimulus Act (ESA) would cost the government roughly the same amount as the payroll tax cut but would generate more economic activity while doing more to alleviate poverty and help working families.



Enacted in December, the payroll tax cut reduced employees’ share of Social Security payroll taxes from 6.2% to 4.2%. The payroll tax cut replaced the Making Work Pay tax credit that had been implemented as part of the 2009 Recovery Act.



Because the payroll tax cut was not targeted to low- and middle-income workers-- the workers most likely to spend it-- it was not as effective in generating economic activity as a lump-sum tax rebate would have been. Multipliers developed by Moody’s Analytics chief economist Mark Zandi suggest a refundable lump-sum tax rebate would result in roughly 12% more jobs created per dollar than the payroll tax cut.



Furthermore, the payroll tax cut actually increased taxes for all individuals making less than $20,000 annually. Tens of millions of the lowest-income workers had more disposable income under Making Work Pay than they did under the payroll tax cut.



Finally, the payroll tax cut exposed Social Security to greater political risk by reducing payroll tax receipts and making the program partially dependent on general revenue. Social Security is designed to have a dedicated funding source; a lump-sum tax rebate would leave this funding source intact.

In case you didn't know it, the revolution has already happened, and we lost

House Speaker John Boehner said the White House "moved the goal posts" by demanding an additional $400 billion in revenue during talks over a deal to avoid default. He said he was confident the U.S. will not default but said the White House has "refused to get serious" about spending cuts.

"Dealing with the White House is like dealing with a bowl of Jell-O," Boehner said.

-- a 7:30pm ET Washington Post "Politics News Alert"

by Ken

Compared with thinking about the horror in Norway (about which there doesn't seem to be any news coming in), it's almost a relief to turn to the Theater of the Weird that is our Debt-Ceiling Crisis & Negotiations Inc.

I don't doubt that Sunny John has a point about negotiating with the Obamablob, but when did any right-wing bully ever have trouble getting him to meet them 80 or 90 percent of the way? Besides, when it comes to blobulousness, how can you not return the charge playground-style: "Takes one to know one."

I don't know how this Theater of the Weird tragicomedy is going to work out except that it's going to be really, really bad. In important ways the outcome is predetermined, except for filling in some of the blanks and some of the numbers. As a colleague has been pointing out, the war is over, and we've lost. The oligarchs are in charge, and not many decisions of federal consequence are going to be made which don't meet with their approval.

Call it a civil war, or a New American Revolution, or a putsch, it took place without most of us realizing it was happening, and the New Order was established by the time it was determined that the federal government's basic principle in addressing the economic meltdown was going to be the ensure that the financial elites were made whole.

So I had to chuckle when I saw a piece pumped out by the NYT's DealBook financial-news service, chronicling the woes of the interns to the oligarchs, which starts like so:

"Fewer Perks and More Work for Wall St.’s Summer Interns"
BY KEVIN ROOSE

Wall Street interns have gone from pampered to pummeled.

In better days, college-age interns at the nation’s largest investment banks, known as summer analysts, were treated like young royalty. But shrinking profits and a spate of recent bank layoffs have forced this year’s interns to shoulder full-time workloads.

“I worked 85 hours last week!” said one Goldman Sachs summer analyst, a college senior who spoke on the condition of anonymity because she was not allowed to speak to the media.

“The last two days, I’ve been here until 3 a.m.,” said a Deutsche Bank analyst, who also spoke on the condition of anonymity to protect his job. “My weekends are fun, but that’s about it.”

While hard work has been customary among young finance workers for years, after-hours benefits once made the long days more palatable. . . .

And at this point we're launched on tongue-hanging-out tales of erstwhile intern splendor. The point of the piece, I'm sure, is to spread the word that the banksters are tightening their belts in these troubled times.

Unexpected turbulence in the industry has hit this year’s interns, who say that fewer full-time employees has meant more work for them. UBS and Credit Suisse have both conducted layoffs this year, and Goldman Sachs and Morgan Stanley are cutting back as well.

“Managing directors are telling interns, ‘We’re going to need you to step up,’ ” said one bank recruiter, who spoke only anonymously because she was not authorized to speak to the media.

By all means read the piece. It's entertaining. But I don't believe for a moment it tells us that the banksters are wobbling. What it tells me is that, now that they're consolidating their hegemony, one of the spoils of victory is being able to remake decisions about who has to be paid what. As we've been noting, there appears to be no limit to the greed of our financial lords, and I'm assuming they're simply making new calculations about what they have to pay those summer interns.

Maybe in the past they had to share some of their loot with the fiscal farmhands. For sure now they don't have to. As so many other bulwarks of the old-fashioned middle class have discovered to their chagrin, they're part of the team, they're just hired hands and hangers-on. As regards those poor downtrodden interns, reporter Roose seems to have found no shortage of whiners, but no deniers or decliners.

[D]emand at top-flight colleges for the internships, which had tailed off slightly during the financial crisis, has come roaring back.

“It’s the best way to land a permanent position, it’s prestigious, and there’s a steep learning curve, so you come away having been quickly trained and assigned meaningful work,” said Patricia Rose, director of career services at the University of Pennsylvania.

For their long hours, Wall Street interns are rewarded handsomely. Summer analysts are generally paid based on the prorated salary of a first-year analyst. At Goldman Sachs, for example, a first-year analyst’s salary of $70,000 translates to a summer intern’s pay of about $15,000 for 10 weeks of work, which includes a $2,000 housing stipend, according to one current intern. Interns at the Manhattan offices of BlackRock, the asset management firm, are paid a prorated salary that comes out to around $33 an hour, with time and a half for overtime exceeding 40 hours a week, according to a company spokeswoman.

But for most interns, the real prize is an end-of-summer job offer. Investment banks stock their full-time ranks with former interns, and the pressure to create loyalty during a 10-week summer is palpable. . . .

or interns who survive the summer, the payoff can be big. Top performers are often given offers in the fall for full-time positions that begin the following summer, freeing them from the stress of a senior-year job search.

And even for interns who don’t plan on returning full time next summer, like the overworked Deutsche Bank summer analyst, a Wall Street internship may be good preparation for the trials of working life.

“If I can get through this, I can get through anything,” the intern said.

On the chance that those internships may prove bonanzas, the would be financial wolves and sharks seem happy to take whatever terms are offered, so the oligarchs are adjusting the terms they're offering. "More for themselves" would be the operative economic principle.

#

Some Sunday Morning Inspiration: A Great Democratic President Tells Wall Street To Go Fuck Itself

The video above is an excerpt from a speech Franklin Roosevelt gave at Madison Square garden in 1936, just up the road from Wall Street. And it was to Wall Street-- and their Republican handmaidens-- he addressed these remarks:

Nine crazy years at the ticker and three long years in the breadlines! Nine mad years of mirage and three long years of despair! Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent.

For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up.

We had to struggle with the old enemies of peace‹business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

Progressives who depend on the Democratic Party had a very rough week-- a very rough year, truth be told. Obama's response to Wall Street is nothing like FDR's. It's more like Herbert Hoover's. Yesterday we looked at how American fascism-- led by the DuPont family-- attempted to destroy democracy in our country and use Big Business as an engine of fascism, the way they did in Germany. FDR defeated Germany and it's allies abroad but died before he could defeat fascism at home. Obama, on the other hand, wants to be liked by everyone-- especially his campaign donors. He isn't secure enough to welcome anyone's hatred, even though that's exactly what his timidity inspires... and without the fear or respect.

Obama's approach to Wall Street-- while admittedly not as toxic as the GOP's-- is not the medicine the economy or the country needs. I write this with great sadness... and look forward to a day when Democratic Party voters and supporters will break free from the chains of banksters, lobbyists and Inside-the-Beltway careerists.

Frank Rich Is Back! And I Bet Obama Wishes He Never Existed

Rich is now in New York and even if the Times can ignore the treasure they lost, Obama isn't likely to. Obama's Original Sin isn't part of the program to make progressives resigned to choosing the lesser of two evils. As Frank's editor points out, "the president’s failure to demand a reckoning from the moneyed interests who brought the economy down has cursed his first term, and could prevent a second." And as Frank reminds us, "Obama arrives at his reelection campaign not merely with a weak performance on Wall Street crime enforcement and reform but also with a scattershot record (at best) of focusing on the main concern of Main Street: joblessness. One is a consequence of the other. His failure to push back against the financial sector, sparing it any responsibility for the economy it tanked, empowered it to roll over his agenda with its own. He has come across as favoring the financial elite over the stranded middle class even if, in his heart of hearts, he does not."

What haunts the Obama administration is what still haunts the country: the stunning lack of accountability for the greed and misdeeds that brought America to its gravest financial crisis since the Great Depression. There has been no legal, moral, or financial reckoning for the most powerful wrongdoers. Nor have there been meaningful reforms that might prevent a repeat catastrophe. Time may heal most wounds, but not these. Chronic unemployment remains a constant, painful reminder of the havoc inflicted on the bust’s innocent victims.

...After the 1929 crash, and thanks in part to the legendary Ferdinand Pecora’s fierce thirties Senate hearings, America gained a Securities and Exchange Commission, the Public Utility Holding Company Act, and the Glass-Steagall Act to forestall a rerun. After the savings-and-loan debacle of the eighties, some 800 miscreants went to jail. But those who ran the central financial institutions of our fiasco escaped culpability (as did most of the institutions). As the indefatigable Matt Taibbi has tabulated, law enforcement on Obama’s watch rounded up 393,000 illegal immigrants last year and zero bankers. The Justice Department’s bally­hooed Operation Broken Trust has broken still more trust by chasing mainly low-echelon, one-off Madoff wannabes. You almost have to feel sorry for the era’s designated Goldman scapegoat, 32-year-old flunky “Fabulous Fab” Fabrice Tourre, who may yet take the fall for everyone else. It’s as if the Watergate investigation were halted after the cops nabbed the nudniks who did the break-in.

Even now, on the heels of Bank of America’s reluctant $8.5 billion settlement with investors who held its mortgage-backed securities, the Obama administration may be handing it and its peers new get-out-of-jail-free cards. With the Department of Justice’s blessing, the Iowa attorney general, Tom Miller, is pushing the 49 other states to sign on to a national financial settlement ending their investigations of the biggest mortgage lenders. What some call a settlement others may find a cover-up. Time reported in April that the lawyer negotiating with Miller for Moynihan’s Bank of America just happened to be a contributor to his 2010 Iowa reelection campaign. If the deal is struck, any truly aggressive state attorneys general, like Eric Schneiderman of New York, will be shut down before they can dig into the full and still mostly uninvestigated daisy chain of get-rich-quick rackets practiced by banks as they repackaged junk mortgages into junk securities.

Those in executive suites at the top of that chain have long since fled the scene with the proceeds, while bleeding shareholders, investors, homeowners, and ­cashiered employees were left with the bills. The weak Dodd-Frank financial-reform law that rose from the ruins remains largely inoperative, since the actual rule-writing was delegated to understaffed agencies now under siege by banking lobbyists and their well-greased congressional overlords. The administration’s much-hyped Consumer Financial Protection Bureau is being sabotaged by Washington Republicans intent on blocking any White House nominee, whether Elizabeth Warren or some malleable hack, to lead it. “We can’t let special interests win this fight,” said Obama when he proposed the agency in October 2009. Well, he missed his moment to fight for both it and Warren, and the special interests won without breaking a sweat.

Rather than purge the crash’s crimes, Wall Street’s leaders are sticking to their alibi: Everyone was guilty of fomenting this “perfect storm,” and so no one is. Too-big-to-fail banks are bigger than ever, and ­Masters of the Universe swagger is back. Even Jamie Dimon of JPMorgan Chase, about the only bank chief not to be caught with a suspect balance sheet or a $1,400 office trash can, has taken to channeling Schwarzman. In June, he publicly challenged Ben Bernanke about the intolerable burdens of potential regulation—this despite a 67 percent surge in JPMorgan’s first-quarter profits and a 1,500 percent raise in his own compensation from 2009 to 2010. As good times roar back for corporate America, it’s bad enough that CEOs are collectively sitting on some $1.9 trillion in cash-- much of it parked out of the IRS’s reach overseas-- instead of hiring. (How many jobs can you buy for $1.9 trillion? America’s total expenditure on the Iraq and Afghanistan wars over a decade has been $1.3 trillion.) But what’s most galling is how many of these executives are sore winners, crying all the way to Palm Beach while raking in record profits and paying some of the lowest tax rates over the past 50 years.

The fallout has left Obama in the worst imaginable political bind. No good deed he’s done for Wall Street has gone unpunished. He is vilified as an anti-capitalist zealot not just by Republican foes but even by some former backers. What has he done to deserve it? All anyone can point to is his December 2009 60 Minutes swipe at “fat-cat bankers on Wall Street”-- an inept and anomalous Ed Schultz seizure that he retracted just weeks later by praising Dimon and Lloyd Blankfein as “very savvy businessmen.”

Obama can win reelection without carrying 10021 or Greenwich in any case. The bigger political problem is that a far larger share of the American electorate views him as a tool of the very fat-cat elite that despises him. Given Obama’s humble background, his history as a mostly liberal Democrat, and his famous résumé as a community organizer, this would also seem a reach. But the president has no one to blame but himself for the caricature. While he has never lusted after money-- he’d rather get his hands on the latest novel by Morrison or Franzen-- he is an elitist of a certain sort. For all the lurid fantasies of the birthers, the dirty secret of Obama’s background is that the values of Harvard, not of Kenya or Indonesia or Bill Ayers, have most colored his governing style. He falls hard for the best and the brightest white guys.

Frank's villain in this tragic story: Wall Street huckster and former Clinton Treasury Secretary Robert Rubin, who seems to have sold Obama not just a bill of goods, but an entire Wall Street-oriented economic team to kill any hopes for embracing a populist solution to the Wall Street caused cataclysm of the final Bush years.

By failing to address that populist anger, Obama gave his enemies the opening to co-opt it and turn it against him. Which the tea party did, dishonestly but brilliantly, misrepresenting Obama’s health-care-reform crusade as yet another attempt by the elites to screw the taxpayer. (The Democrats haplessly reinforced the charge with marathon behind-the-scenes negotiations with insurance and pharmaceutical-­industry operatives.) Once the health-care law was signed, the president still slighted the unemployment crisis. A once-hoped-for WPA-style public-works program, unloved by Geithner, had been downsized in the original stimulus, and now a tardy, halfhearted stab at a $50 billion transportation-infrastructure jobs bill produced a dandy Obama speech but nothing else.

Obama soon retreated into the tea-party mantra of fiscal austerity. Short-term spending cuts when spending is needed to create jobs make no sense economically. But they also make no sense politically. The deficit has never been a top voter priority, no matter how loudly the right claims it is. At Obama’s inaugural, Gallup found that 11 percent of voters ranked unemployment as their top priority while only 2 percent did the deficit. Unemployment has remained a stable public priority over the deficit ever since, usually by at least a 2-to-1 ratio. In a CBS poll immediately after the Democrats’ “shellacking” of last November-- a debacle supposedly precipitated by the tea party’s debt jihad-- the question “What should Congress concentrate on in January?” yielded 56 percent for “economy/jobs” and 4 percent for “deficit reduction.”

Geithner has pushed deficit reduction as a priority since before the inauguration, the Washington Post recently reported in an article greeted as a smoking gun by liberal bloggers. But Obama is the chief executive. It’s his fault, no one else’s, that he seems diffident about the unemployed. Each time there’s a jolt in the jobless numbers, he and his surrogates compound that profile by farcically reshuffling the same clichés, from “stuck in a ditch” to “headwinds” (first used by Geithner in March 2009-- retire it already!) to “bumps in the road.” It’s true the administration has caught few breaks and the headwinds have been strong, but voters have long since tuned out this monotonous apologia. The White House’s repeated argument that the stimulus saved as many as 3 million jobs, accurate though it may be, is another nonstarter when 14 million Americans are looking for work.

...There’s not much Obama can do to alter the economy by 2012, given the debt-ceiling fight, the long campaign, and nihilistic Capitol Hill antagonists opposed to any government spending that might create jobs and, by extension, help Obama keep his own. But the central question before the nation couldn’t be clearer: Who pays? The taxpayers bailed out the elite; now it’s the elite’s turn to return the favor. Massive cuts to the safety net combined with scant sacrifice from those at the top is wrong ethically and politically. It is, in the truest sense, un-American. Obama knows this, and he hit a welcome note last week when he urged some higher corporate taxes for hedge funds and the like. But his forays in this direction are tentative and sporadic. You have to wonder why he isn’t seizing the moment to articulate and fight for the big picture instead of playing a lose-lose game of rope-a-dope with the Republicans on their budgetary turf.

Some Obama fans think it’s tactical genius that’s holding him back-- his fabled long ball. Americans are no longer as angry as they were in January 2009 so much as they are defeated, depressed, and jaded by the slow recovery and by four decades of raging inequality that tells them the deck is stacked no matter who’s in Washington. Better, then, not to ruffle these still waters-- or those easily rattled independents fetishized by political consultants-- and instead scare seniors about imminent Medicare cutbacks and plot deep-think policy initiatives that (like health-care reform) might fix America over time. But the voters’ placidity hardly augurs well for Democratic turnout in 2012. And it may not last. All that’s required is one more economic panic to shatter the phony peace and whip the rage back to center stage, once again to the right’s advantage.

“A nation cannot prosper long when it favors only the prosperous,” Obama declared at his inauguration. What he said on that bright January morning is no less true or stirring now. For all his failings since, he is the only one who can make this case. There’s nothing but his own passivity to stop him from doing so-- and from shaking up the administration team that, well beyond the halfway-out-the-door Geithner and his Treasury Department, has showered too many favors on the prosperous. This will mean turning on his own cadre of the liberal elite. But it’s essential if he is to call the bluff of a fake man-of-the-people like Romney. To differentiate himself from the discredited Establishment, he will have to mount the fight he has ducked for the past three years.

The alternative is a failure of historic proportions. Those who gamed the economy to near devastation-- so much so that the nation turned to an untried young leader in desperation and in hope-- would once again inherit the Earth. Unless and until there’s a purging of the crimes that brought our president to his unlikely Inauguration Day, much more in America than the second term of his administration will be at stake.

Blue America never endorsed Obama in 2008, when there was a slim chance he might turn out to be a progressive. I'd say there's far less of a chance we'll be working towards his reelection next year. Instead, as you probably know, we'll be working to raise campaign funds for proven progressive leaders running for Congress. We've endorsed 5 who are running for the House so far and starting later this month we'll be adding to that list with candidates from Arizona and Wisconsin. Meantime, can you give us a hand? No matter who wins the presidency, we're going to need smart, aggressive progressives in Congress.