“Never again will the American taxpayer be held hostage by a bank that is too big to fail. If these folks want a fight, it’s a fight I’m ready to have.”
Barack Obama last week announced his plan to curb the excesses of the big banks with fighting talk that millions have been waiting a year to hear.
Obama is proposing the so-called “Volcker rule” – named after Treasury adviser and previous Federal Reserve boss Paul Volcker.
It stipulates that banks holding deposits that are underwritten by the government cannot run hedge funds or private equity arms to gamble on the markets.
Obama also says he wants to limit the overall size of banks.
The proposed reforms have shaken the markets and provoked fury among bankers. Meanwhile governments in France, Germany and Britain have praised them.
The Tories have backed Obama. Gordon Brown has been provoked into calling for a Tobin tax on financial speculation.
Obama’s strong words chime with the huge anger that exists in the US at the continued wealth of bankers while ordinary people face acute economic pain.
Goldman Sachs is one of the banks that made money from the subprime mortgage market that precipitated the financial crisis in 2008.
It handed out $16 billion in bonuses this month after raking in record profits.
This is a slap in the face to millions who are struggling to make ends meet.
Over 15 million US workers are officially unemployed, but the real figure is nearly double that.
Government figures don’t include those who work part-time because there are no fulltime jobs, or those who have given up looking for jobs.
Three million Americans lost their homes last year and over 14 million children live below the poverty line.
For these people, and the millions more teetering on the brink of disaster, Obama isn’t delivering on his promises. The only changes have been for the worse.
It is this anger that explains the catastrophic loss of the Massachusetts Senate seat earlier this month. Teddy Kennedy held the seat for the Democrats for 46 years.
His defeat at the hands of Republican Scott Brown was a huge blow for the Democratic Party and Obama – and pushed him in a more radical direction.
The Republicans won Massachusetts on the back of a wave of populist protest. The “Tea Party” activists take their name from the Boston Tea Party of 1773 that heralded the start of the American Revolution against the British. They are right wing conservatives opposed to “big government”.
Their movement emerged last year with a series of protests against government spending. Sarah Palin backs it, along with arch-reactionary “shock jock” Rush Limbaugh.
The right in the US has gained confidence and is getting organised. This is not because Americans are right-wing. It is because disillusionment with Obama has created a space for them to grow.
The Massachusetts vote showed this very clearly. In a post-election poll last Tuesday, 95 percent of voters said the economy was important or very important in choosing who to vote for.
It showed that 18 percent of those who voted Obama last year now supported Brown. They changed sides because Obama had not gone far enough.
A majority agreed that “Democratic policies were doing more to help Wall Street than Main Street”. 82 percent said they would prefer the government, not private companies, to provide health insurance.
Of those who voted for Obama in the presidential election but stayed at home for the Senate vote, 86 percent supported government-funded health care.
Many voted Republican because they wanted a more radical government. In the absence of a strong left, the right benefited.
Obama’s statement on the banks is an attempt to respond to this. It is also a political manoeuvre.
Obama knows that now the Democrats have lost their super-majority in the Senate, his banking bill will never be passed. If it fails, he can blame the Republicans.
The banks will fight to protect themselves. The “revolving door” policy between the US treasury and the banking sector will ensure the interests of the richest are protected.
Even if Obama could get reform through, it won’t prevent further instability. The banking crisis was one aspect of a wider crisis that exposed the lack of profitability in other areas.
Financial regulation will not resurrect the US car firms or win back a single manufacturing job. Meanwhile, the Obama administration will continue to push the costs of the bailout onto US workers and their families.
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