The Oligarchy Doesn't Care About Democracy, Just Rigged Markets
Monday, 07 April 2014 10:40By Mark Karlin, Truthout | Author Interview
(Image: Nation Books)In All the Presidents' Bankers: The Hidden Alliances That Drive American Power, Wall Street journalist (and former Goldman Sachs executive) Nomi Prins writes a painstakingly researched history of the financial industry's collusion with the White House to create a self-serving United States financial policy. Get the book directly from Truthout by clicking here.
Through thorough research and incisive writing, Nomi Prins has revealed how tightly Wall Street and White House policy have been aligned for more than a century. This is a difficult relationship to nail down, but Prins - as one reviewer noted - "followed the money." As a result, All the Presidents' Bankers is a must-read blockbuster of a book that names names and nails down the reality that US domestic and foreign policy is largely driven by the interests of economic hegemony and consolidated wealth.
Prins, a former executive on Wall Street and now an author and journalist, knew where to find the evidence - and it is startling to read the details.
In an extensive interview with Truthout, Prins discusses "the hidden alliances that drive Amercan power."
Mark Karlin: Could your book have been called Wall Street Financiers Are America's Co-Presidents?
Nomi Prins: Yes, that's a great way to describe the symbiotic relationship between the men that run the White House and those that run Wall Street. But equally, the title could have been American Presidents are Wall Street's Co-Bankers. When I set out to research this book, I specifically did not want to write another book about how bankers rule the world. Many people, myself included, have written books along that "dog wags the tail" theme. But I wanted to explore the relationships between the men that reside at the two poles of power over America, those who are elected to the White House and those that govern over its finances, and about how long, and to what extent, they operate on the same page.
What I found, is that that for the past century, mutually reinforcing relationships amongst the most powerful men in the past century were drivers of American domestic, national and foreign policy than just the government was, no matter who the president, or what the party in the Oval. I found that every president had connections of various degrees of closeness with the most influential bankers during his term. I knew these associations existed throughout the decades, but I was surprised to discover just how prevalent they were.
In addition, beyond the prevalent collaborations through the years, many of the key players, or 'operators,' as John Galbraith referred to them in his book about the 1929 crash, are related in some way. As I examined this genealogy of power in America, I found an elite "family tree," with branches of blood, intermarriage and protégé-mentorship connections that has shaped America on behalf or from the perspective of its members, and not necessarily the population as a whole.
Reading your new book, I get the feeling that the privileged few in the private sector who control most of America's money, de facto, don't really give a whit about democracy. What they are focused on is free markets for the plutocracy like a laser. Is that your perspective?
The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system.
The connection between democracy and free markets is interesting though. Democracy is predicated on the idea that every vote counts equally, and in the utopian perspective, the government adopts policies that benefit or adhere to the majority of those votes. In fact, it's the minority of elite families and private individuals that exercise the most control over America's policies and actions.
The myth of a free market is that every trader or participant is equal, when in fact the biggest players with access to the most information and technology are the ones that have a disproportionate advantage over the smaller players. What we have is a plutocracy of government and markets. The privileged few don't care, or need to care, about democracy any more than they would ever want to have truly "free" markets, though what they do want are markets liberated from as many regulations as possible. In practice, that leads to huge inherent risk.
All the President's Bankers begins in early 1900s. You detail the attempts to rein in Wall Street, which the financial industry inevitably reverse. Change only appears to occur temporarily after a huge economic setback. But in 2008, Wall Street nearly destroyed the economy and got a taxpayer bailout. Is the hidden alliance that drives American power, as you call it, becoming even more solidified?
The alliance between leaders in Washington and on Wall Street has undergone a series of character changes over the past century. In the early 1900s, when President Teddy Roosevelt - widely perceived as a "trustbuster" - was breaking up the monopolies in certain industries, he didn't 'bust' the banking industry because he was facing a great financial panic in 1907 and decided he needed J.P. Morgan's help to thwart it. In the 1910s, Taft and Wilson aligned with the bankers in establishing the Federal Reserve, and then Wilson and the bankers aligned in war-financing efforts during WWI. In the 1920s, Hoover, Coolidge and Harding and the bankers aligned to endorse a spirit of political isolationism at home, laissez-faire banking policy, and financial internationalism as US bankers pushed into Europe again to take advantage of their ailing former competitors' post-war weakness, with transactions that ultimately combusted during the 1929 crash and Great Depression. In the 1930s to the 1970s though, something changed. Between the Great Depression, World War II, the Cold War and into the early 1970s, bankers were more content to be careful, to support general American expansion abroad and national interest at home, and their practices were more subdued and less speculative.
By the 1970s, things changed again; bankers found that Middle-East oil was a good source of financial independence from the US government's domestic initiatives. With Chase and Citibank leading the charge, US bankers recycled "petrodollars" into Latin American loans, got into trouble and needed the Reagan-Bush government to bail them out. It did, and from that moment on and through the major 1994 and 1999 deregulation under the Clinton administration, they increased their risk-taking and divergent path from the public interest, and though associations between bankers and presidents continued, and general national and financial policy goals were the same, bankers became more globally predatorial and had less interest in helping to sustain the general good at home. The recent 2008 crisis and time since then is the culmination of that attitude, coupled with the enabling and support by presidents of both parties, of their practices and power concentration, without requiring anything from them in return to benefit the population.
You point out that most of our presidents and bankers are pretty interchangeable in terms of pedigree. How is that?
Going back a hundred years, the Roosevelt family was very wealthy. President Taft was a blue-blood New Englander whose ancestors came to America in its infancy. James Roosevelt, FDR's father, was one of the founders of the elite Metropolitan Club in Manhattan. One of its cofounders was the most powerful banker - from a combined financial, political and legacy impact - America has ever known: J.P. Morgan. FDR attended Harvard, as did Jack Morgan, J.P. Morgan's son, as well as Thomas Lamont, senior partner at Morgan, who became chairman after Jack's death. Lamont lived in FDR's home during WWI, paying an obscene amount of rent for those days, that mere mortals could not.
Take that a step further. One of FDR's 1932 election supporters was Joseph P. Kennedy, who was responsible for garnering critical votes in California by rallying the support of media mogul, William Hearst. For his help, FDR appointed Kennedy the first head of the SEC and then gave him a UK Ambassadorship post. Kennedy's son, John F., attended Harvard as did David Rockefeller, himself the product of the marriage of Winthrop Aldrich's (the Chairman of Chase from 1933-1953 and son of Nelson Aldrich, father of the Federal Reserve) daughter with John D. Rockefeller's son. JFK and David Rockefeller first met while both were studying in London in 1938, at a society coming-out party thrown for JFK's sister, Kathleen, by Joseph Kennedy. By the 1960s, JFK was president of the country and David Rockefeller, president of Chase, its most politically connected bank.
All the Presidents' Bankers is full of examples of such pedigreed-infusion through families; by blood, via intermarriages, as well as mentorships extended to a chosen few outsiders. Here, I've recounted a few of them. The point is that the fabric that has been woven from the turn of the 20th century through today, is one wound very tightly through men who comprise this "upper caste" of American society and political-financial power.
Of course, an inevitable question is this: As much as progressives admire FDR as a shining light of liberalism - while publicly chastising Wall Street - didn't he actually work with them to prevent the United States from becoming communist, which is what they feared could happen in the depression?
FDR was no exception in the field of presidential-banking relationships; indeed he was born into them. During his terms in office, he had frequent correspondence and personal contact with Jack Morgan, Thomas Lamont and Russell Leffingwell, all of whom were senior partners at, and ran, the Morgan Bank (now part of JPM Chase) at various times, Winthrop Aldrich who ran Chase, and W. Randolph Burgess who was a former NY Fed official and vice chairman of National City Bank (now Citigroup). FDR was very strong-willed and politically savvy enough to use these friends to help promote his agenda, and unafraid to piss them off and even played them against each other when it suited his purpose.
When it came to fighting communism, or promoting and pushing American-style capitalism through the globe, FDR's goals aligned with those of these elite bankers. Bankers wanted capitalism because it made them rich. FDR and the government wanted capitalism because it was intrinsic to America's political and financial identity, as both the bankers and FDR were pushing America toward greater heights as a global superpower. All these players were on the same page and supported each other during FDR's presidency.
I was reading a book by Stephen Kinzer recently in which he argued that the Dulles brothers (during the Eisenhower era) believed that the consolidation of capital in the hands of a few individuals was ideal for free-market expansion, led of course globally by the US. Hasn't their goal (as secretary of state and head of the CIA at the time) been achieved?
Kinzer's book, The Brothers, is excellent. I highly recommend it. And absolutely, their goal, and the general goal of the men that preside over politics and finance remains the same - to retain and extend power. American presidents and their cabinet members do that on a personal, national and international basis, and so do bankers. During the time that the Dulles brothers were so influential, bankers were also close with Eisenhower, personally and functionally. Eisenhower's files in this regard are fascinating and discussed in more detail in my book.
The Eisenhower Doctrine that protected US allies (read: noncommunist countries that adopted, or were pushed into, US policies) was about the notion that the government and US military would stand ready to protect capitalism, (it was called "trade") in countries that adopted capitalism and liberalized their economies, against communism. At the time, this suited the bankers, because they utilized the power of the US military to open up branches all over the world in countries that fit this criteria. Equally, bank branches, like military bases, gave the US government a financial dimension that fortified their plans for global hegemony. Bankers and presidents needed each other and had the personal and professional connections to support that need. Confining these connections to a few players made it easier to get things done. It's not different from any major corporation; the real decision-making authority is concentrated within the heads of a few head honchos at the top of the firm, and everyone else sort of does their job with mild hopes and little chance of ascending to those top spots.
What role do the IMF and the Word Bank have in holding a stranglehold over democracy in the US and around the world?
The World Bank, in particular, was run as a joint operation between bankers and the US government since shortly after its inception. Following on from the previous question, the World Bank was not an equal opportunity lender by any means, especially during its formative years. Instead, it gave preference to noncommunist countries and better loan terms to nations that enjoyed more substantive trade relationships with the US. In 1947, President Truman chose John J. McCloy to run the World Bank. McCloy was working at a law firm connected to the Rockefeller family at the time, having just finished serving as assistant secretary of war under FDR's appointed war secretary, Henry Stimson. McCloy was the quintessential public-private office "establishment" man and later immortalized in Kai Bird's classic work, The Chairman.
McCloy had two conditions for taking the job. First, that all World Bank bonds be sold through Wall Street Banks and second, that two of his friends from Wall Street who had experience in selling bonds, be appointed his lieutenants. He got his wish. And with that, the World Bank became a pawn of the private banks, funded by the US government (and its friends).
What that means in practice, is that Wall Street can dictate where funds are raised in the private markets for World Bank initiatives, in addition to aligning with the US government regarding what countries should get aid and what is required from them in terms of privatization, austerity and other measures in return. This suited the major bankers that wanted to expand into "aid-worthy" countries - with open markets and raw natural resources. If the World Bank wants to raise funds for a country and needs private money from the capital markets as well, Wall Street has to be on board with the choice, otherwise bonds wouldn't be sold, and money wouldn't be raised. That's why, for example, during the 1980s Third World Debt Crisis, bankers pressed Reagan to provide greater federal assistance to the World Bank - they were losing money in Latin America, and if the US government and its friends could fund the World Bank to fund those countries from the public till, these nations would have more money with which to repay their private loans from the big banks. The IMF works in the same vein. There are more examples of this in the book.
How did Bill Clinton, who campaigned on a platform of lifting up the middle class, become an acolyte of Robert Rubin?
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