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Entries in Banks (1)

Monday
Jan252010

US Politics: Explaining Congress and "Obama's Downfall" to a Martian

Let us imagine that a Martian, “Marty”, dressing like a stand-up American and with the ability to read and speak English, has landed in Washington, D.C. He reads the politics pages in The Washington Post and scratches his head in wonderment. So he accosts a passer-by, “Kane”, who happens to be astute and neutral on choice of political party.

Marty: Excuse me, sir, but would you mind explaining some things in the newspaper?

Kane: I’ll do my best.

Marty: It says that the President has lost his healthcare legislation because the Democrats have lost a Senate seat. Is the President the loser?

Kane: I think the losers are the more than 30 million Americans who will be denied access to medical insurance if the Bill fails. That said, the legislation is not lost yet. Democrats still hold 59 of 100 seats in the Senate.

There is much they can do to save the bill but special interests have made it a mockery. The state of Nebraska got itself all sorts of exemptions for its senate vote. However, I think there is still all to play for.


Marty: Surely, the legislators shouldn’t play politics with people’s health.

Kane: You would think so. But this is D.C. where politics trumps all.

Marty: The newspaper also says that the President is out to get the banks and the bankers. Why?

Kane: In reality he isn’t. What he is seeking to do is to restore the position that lasted for 50 years until the Reagan Administration, separating high risk investment banks from low risk retail banks. He doesn’t want to penalise sensible lending.

Marty: What has happened?

Kane: Bankers are directly responsible for the crash of 2008 and its aftermath. They took huge lending risks not just on “sub-prime” mortgages where banks lent money on poor but over-valued property to borrowers who could not possibly afford to repay loans. They also lost hundreds of millions of shareholders' dollars in bad lending on commercial property, leisure developments, and other projects. And not one banker has yet been brought to book. Governments all over the world bailed out their banks who, instead of repaying debt when they made profits, have given huge bonuses to the people who got us into the mess in the first place.

Marty: So will the President legislate against the banks?

Kane: He doesn’t have to. He could sign an Executive Order to curtail bonuses and separate banks but Congress would probably overrule it.

Marty: So he’ll have to go to Congress?

Kane: Yes, and he has a majority in both houses. However, there is a problem. Banks support senators and Congressmen financially so legislators would bite the hand that feeds them by voting for the legislation.

What’s even worse is the Supreme Court decision, handed down last week, on campaign finance. Corporations are no longer constrained by the amounts they may give to politicians. So banks will support legislators who vote "favourably" and will threaten to withdraw support and give it elsewhere if they are challenged. As the banks are stuffed with cash, they will be able to advertise their chosen candidates into office.

The Court decision was awful; it was political. This is often the way. Ten years ago, the Supreme Court handed a Presidential election to its favoured candidate. It doesn’t end there. For example oil interests could provide huge sums to candidates for Congress and if those candidates become legislators, the environment protection the world needs would be at serious risk.

Marty: So your system has an Executive Branch where the President is in day-to-day charge with huge powers. However, he can be easily stymied and frustrated by the legislators. And even if he is not, the judiciary can put a spoke in the wheels and on political not legal grounds. What bright sparks thought up this Constitution?

Kane: There are all sorts of safety nets. For example, the President could try to find Congressmen to put through a different campaign finance law and, if that law was popular, seek a Constitutional Amendment to block the Supreme Court.

Marty: We don’t have this system where I come from, thank heavens.

Kane: Well, Obama’s not done yet. And he’s no fool. Watch this space.

And the moral? Winston Churchill had a point when he said, “democracy is the worst form of government……except for all the rest.”