FDR Explains One Dimension of Our Problem: Bankers Own the Government

Summary:  We cannot fix America until we understand what ails it.  Some of our problems are systemic.  Some result from external rivals, even foes.  Some result from our weakness.  Some result from internal enemies of the Republic.  Some result from lust for power and wealth by our fellow Americans.  Our bankers fall into the last group, and have for many generations.

“The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson — and I am not wholly excepting the Administration of W. W. {Wilson}. The country is going though a repetition of Jackson’s fight with the Bank of the United States — only on a far bigger and broader basis.”

— Letter by FDR to Colonel House, dated 21 November 1932

The struggle of bankers for control of America is an enduring theme in American history since the founding.   Defeat of the southern aristocracy during the Civil War unbalanced the political balance, giving Northeastern bankers unprecedented dominance.  They used this to implement a policy of tight money.  The resulting shortage of currency reduced much of rural America to barter (cattle sales to the Indian Agents were one of the few sources of cash in the West; eastern villages were reduced to barter with general stores as clearinghouses).  This resulted in a boom-bust pattern of growth and deflation which almost exterminated the small farmer and merchant classes.

The results were a massive concentration of wealth and power, continuing until they overreached themselves.  The political convulsion of the Great Depression restored a more balanced distribution of political and social power.  Starting in the 1980′s the banks gradually rebuilt their political influence with both parties by means of massive campaign contributions, armies of lobbyists, and well-funded advocates at think-tanks.  This effort produced large gains:

  • Regulation Q was repealed in 1980.
  • FDIC insurance was increased from $40 thousand to $100 thousand in 1980, and to $250 thousand in 2008.
  • Glass-Steagall was repealed in 1999.
  • Scores of other regulations limiting their reach and profits were explicitly repealed, weakened, or no longer enforced.

As a result financial profits (including the financial divisions of non-bank companies) grew to 40% plus of total business profits, and the banking sector (broadly defined) grew to one of the greatest centers of power in the nation.

“And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”
— Senator Dick Durbin (D-IL), interview on WJJG 1530 AM’s “Mornings with Ray Hanania”, 27 April 2009

A broad majority of the public opposes the banks in some sense (see here for links).  All who oppose them are crushed or co-opted.  As we saw with the Tea Party movement. Born as a protest to the bank bailouts (see here), they became shock troops for a GOP devoted  to serving the banks.

“In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”
– Spencer Bachus (R-AL), Chairman of the House Banking Committee, The Birmingham News, 9 December 2010

Now the Occupy Wall Street movement arises to challenge the banks.  Will they be co-opted by the Democratic Party?  Will they develop specific political goals, or merely serve to vent peoples stress?  Might the movement mutate into some monstrous mass movement?  The internet overflows with people making wild guesses about the unknowable.  You can pitch in to help determine the answer — by working local campaigns.

“All peoples have the government that suits them.”  “Every country has the government it deserves”
— Joseph-Marie, comte de Maistre. From Étude sur la souveraineté (1794) and Lettres et Opuscules (1811)

About our corrupt financial system

  1. Slowly a few voices are raised about the pending theft of taxpayer money, 21 September 2008
  2. The Paulson Plan will buy assets cheap, just as all good cons offer easy money to the marks, 30 September 2008
  3. A reminder – the TARP program is just theft, 24 November 2008
  4. A solution to our financial problems: steal wealth from other nations, 2 February 2009
  5. Stand by for action – more theft of our money being planned in Washington, 4 February 2009
  6. Update: yes, the Paulson Plan was just theft, 14 February 2009
  7. Locked into the bailout state, 4 March 2009
  8. Now is the time for America to get angry, 24 March 2009
  9. America on its way from superpower to banana republic, 28 March 2009
  10. Bush’s bailout plan is now Obama’s. His quiet eloquence guides the sheep into the pen, 30 March 2009
  11. The best way to rob us is to own a bank, 10 April 2009
  12. “The Greatest Swindle Ever Sold”, by Andy Kroll in The Nation, 28 May 2009
  13. Please read this. For the sake of yourself, your children, and their children, 2 June 2009 — Taibbi’s first article about Goldman.
  14. About Goldman Sachs, the exemplar of our financial system, 21 July 2009
  15. More about “Government Sachs” (they own America; we just live here), 31 July 2009
  16. It’s official. TARP is just theft., 1 May 2010
  17. Matt Taibbi helps us see ourselves, and the leaders we elect to run America, 29 May 2010

This post originally appeared at Fabius Maximus and is posted with permission.