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Hillary Clinton, Bernie Sanders, Wall Street, and America 2.0

The stunning ascent of Bernie Sanders portends far more than a hard-fought Democratic primary.  Its greater implication, whether Sanders wins or loses, is that America’s crony capitalism will no longer go unchallenged.  Thus Hillary Clinton and her husband, along with many others, are increasingly trapped by the wealth, credentials, and insider status they have pursued so fervently – because they derive from a corruption whose nature and consequences can no longer be concealed.  America’s financial elites are now so corrupt, arrogant, and predatory that political leaders beholden to them can’t even pretend to deliver economic or political security, much less fairness or progress.

And now, finally, Americans are running out of patience.  In addition to Bernie Sanders, there’s Elizabeth Warren, Zephyr Teachout, and even movies – The Big Short has (deservedly) grossed $100 million.   Everything suggests that American politics is now truly, fundamentally, up for grabs – a hugely exciting but also terrifying prospect.  In America, the Great Depression yielded Franklin D. Roosevelt and the New Deal; but in Europe, it created Hitler and Mussolini.  America’s reaction against its corruption and decline could show us at our best – or our worst.

Indeed, this is the Democratic establishment’s rejoinder to Bernie Sanders:  he’s a wonderful dreamer, but impractical – he can’t get elected, so we’d get Trump or Cruz, and furthermore even if Bernie was elected, he couldn’t get anything done.  Look at Dodd-Frank and Obamacare, they say – those laws barely passed.  No way could Bernie break up the banks.  Only a pragmatic, moderate insider can get anywhere.

Actually the truth is exactly the opposite.  American insider politics is now so corrupt that nobody within it can get anything done.  But by stepping outside of the rules, you could do a great deal.  Let’s take a concrete example – the banks.

Start with Hillary Clinton.  The sound bite is that Goldman Sachs paid her $675K for three speeches.  The full reality is far worse.  She, her husband, and their advisers have history with the banks going back decades.  Bill Clinton made Robert Rubin, former president of Goldman Sachs, his Treasury secretary, then appointed Larry Summers and Laura Tyson to succeed him, and re-appointed Alan Greenspan as chairman of the Fed.  Together, they let the banks run amok; in fact, they helped them.  They repealed Glass-Steagall, banned the regulation of derivatives, refused to use the Fed’s authority to regulate the mortgage industry, and did nothing as massive securities fraud permeated the Internet bubble.  Then Rubin became vice-chairman of Citigroup, while Tyson joined the board of Morgan Stanley.  Bill Clinton, Rubin, Summers, Tyson, and Greenspan all share major responsibility for the 2008 global financial crisis, and none of them have been remotely honest about it.

Since leaving office, both Bill and Hillary have made millions of dollars giving speeches to banks while being remarkably quiet about prosecution of financial crime, not to mention the Obama administration’s appalling record since the crisis – zero prosecutions, bankers in senior regulatory positions, inviting bank CEOs to state dinners dozens of times, et cetera.  Now Hillary says she’ll rely on Bill for economic policy.  Bad idea.  The financial sector became a pervasively criminal and economically destabilizing industry largely through Clinton policies, and now Hillary takes their money.  When pressed, Democratic insiders concede all this, but then say, well, OK, the financial sector is just too powerful to rein in, but think of what Hillary could do in, say, education.

Let us therefore take a brief tour of the Education Management Corporation (EDMC), one of the most repulsively predatory companies in America.  EDMC specialized in exploiting poor people seeking to better themselves educationally.  It used fraudulent marketing, luring students into paying high tuition – by taking out student loans signed over to EDMC.  EDMC kept all the money, but provided abysmal schooling with high dropout rates.  EDMC made huge profits while poor students wasted time, obtained no skills, and dropped out with crushing debts.

EDMC raked in $11 billion this way.  Assuming, say, $11,000 per student, EDMC screwed one million poor Americans.  Eventually the Justice Department sued, but as usual the settlement was a wrist-slap with no criminal prosecutions, no admission of guilt, and no financial relief to victims.

But why am I telling you all this?

Well, now.  Who devised EDMC’s strategy, aided by relaxed Federal regulation?  Who was EDMC’s largest shareholder, buying 41% of the company in 2006?

Goldman Sachs.

Now, Hillary, when you and Bill have your little cocktail parties for the Clinton Foundation in Goldman Sachs offices, when you give your speeches to Goldman Sachs executives, when you chat them up for donations, when you meet them at White House state dinners, just how frequently do you bring this up?

OK, Hillary ain’t so great.  But could Bernie do any better?  Well, he could appoint an Attorney General and a head of the DOJ Criminal Division who hadn’t spent their careers defending corporate criminals, and then invite the Justice Department to put lots of bankers in jail.  (There is overwhelming evidence to justify doing so; for details, read this, or chapter 6 of this.)  Bernie could also appoint an Antitrust Division head who would actually investigate the cozy, cartel-like arrangements that pervade finance, and bring major cases against the banks.  He could appoint a Federal Reserve chair who would require banks to divest assets and operate safely, plus regulating bankers’ compensation so that if you caused a disaster, you couldn’t profit from it.  All this can be done without a single new law, and both Bill Clinton and Obama could have done them too.

Now, can Bernie Sanders get elected?  And are we willing to take the risk that if he loses, we’d get an insane Neanderthal like Trump or Cruz running the country?  Honestly, I’m not sure.  For one thing, Bernie had better stop calling himself a socialist.  But I’m damned sure that if he was elected, he’d do a lot more than Hillary Clinton would.  And I think that the American people have figured this out.

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