Republican Slight of Hand

Hello Papamoka Readers! The news lately has been filled with both Republicans and Democrats screaming bloody murder over the completely unjust bonuses being paid by AIG. I agree there have been lots of mistakes made and that everything should be done to stop those payments, however, I also believe the right wing is driving the scandal to distract from the more important reforms.

Republicans haven't had a lot to crow about lately, so they're thrilled the Democrats dropped the ball involving something as controversial as bonus payouts to failing Wall Street bankers. Sure, AIG under the Obama Administration should have seen this coming, but it's still a GOP distraction.

The GOP operatives pushing this scandal are only interested in political gain. It's a scandal within a scandal. They are conveniently ignoring the fact that Bush and Paulson paid the first installment without any congressional involvement and without excluding bonuses the same way, because they too were afraid of employee lawsuits. Subsequent Capitol Hill and Treasury negotiators were also concerned about employee lawsuits. They were worried about increasing liabilities, something lawmakers care a lot about these days. They all had bigger fish to fry.

That's at the heart of the matter, yet nobody seems to have the balls to talk about it. It's all about politics now, and the Republican spin machine is doing its best to strum the last Democratic nerve. The only thing the Republicans are concerned about is a "gotcha" moment, and the Democrats on Capitol Hill are falling for it all hook, line and sinker. Only President Obama has had the nerve to take responsibility while asking us to focus on the big picture. I agree with him. Let's do it!

The AIG Financial Products Corporation, which is now being dismantled by government appointed executives, is the real scandal. The bonuses are horrible, but the real story is why the financial products division of AIG ever came into existence. Let's not forget the regulatory changes led by Senator Phil Gramm of Texas, Newt Gingrich, and the rest of the Republican Congress during the waning days of the Clinton Administration started this national nightmare. They know it, but for some reason rank and file Republicans ignore it, and average Americans never talk about it.

Sure, Clinton signed it under extreme pressure, and he was wrong to do it, but the real culprits were the Republicans who destroyed the walls that stood between banks, speculative investment brokerage firms, insurance companies, and the rest. Those protections were put in place after things went horribly wrong during the last Republican depression. They were designed to manage greed, PROTECT the free market from its darker side, and in the end keep the wolves out of the hen house. It was the REPUBLICANS WHO DESTROYED IT!

Of course, their deregulation was made worse by the fact that regulators were undermined by the Bush Administration. Oversight was weak at best. The Bush Administration was without a doubt a REACTIVE regulator. They didn't believe in the protections. They didn't do their job. I don't care what my right wing readers say, the Bush Administration could have done more to prevent the crisis. They had the data, they knew about AIG and the $50 TRILLION plus DERIVATIVES market, and they knew about the risk to the whole economy. They did NOTHING! They were at least negligent, and at worst conspiratorial.

My dinner party debates always feature a Republican blaming Congressman Barney Frank, Senator Christopher Dodd, and the usual Democrats for not reigning in Freddie Mac and Fannie Mae. What they never admit is how the Bush Administration had the authority, through dozens of regulatory agencies, to reign in the risk across the board. Many economists feel that most administrations would have done so. It was the Bush Administration, along with the Republican belief in small and unobtrusive government, that failed the American people.

Therefore, let's be angry about the greed on Wall Street, but I think it's more important to keep our eyes on the prize. Let's make sure the Democrats and the Obama Administration do everything necessary to reverse the regulatory changes that allowed the Bush Administration to look the other way. Let's FORCE future Republicans to regulate the risk by creating strong and principled new laws.

Let's reform until we can't reform any more. AIG is the critical patient that needs to be isolated and treated, but it's the Republicans and their broken philosophies about government and the market that represent the deadly contagion. Let's find a vaccine and a cure! Let's make sure we never become victims of their greed and stupidity again.

Michael Boh
Papamoka's Left Coast Contributor
from Our Rants & Raves Blog