Moody’s downgraded three large American banks on Wednesday, citing fears that the United States government would refuse to bail them out if they begin to topple. This fear is completely unfounded. Moody’s fails to recognize the ingrained hypocrisy which governs our nation’s capital.
We already know of the sell-out nature of the Democrats, so it is easy to conclude without any effort that they will surrender to fear—and the greed required to keep their campaign war chests topped off—and have the taxpayers write another $700 billion check (or whatever it is) at the point of a three-page gun.
But what about the Republicans? Will they champion capitalism and let the banks fail, or will the rush to the rescue of their Wall Street benefactors? That’s a tough one for them. And they have backed themselves into a pretty tight corner on it. The most they can hope for is that the next crisis happens after the 2012 election, otherwise their teabagging extremist supporters will lose enthusiasm.
This is where the rubber meets the road for them. To let the banks fail means wiping out the investments of the stockholders completely, and also could mean that holders of the debt in these banks could take a serious haircut (almost to zero). But more importantly, this outcome causes a serious problem with rhetorical framing, because to let the banks fail will result in a de facto nationalization. Can you say “socialism!”?
But to bail the banks out again would be an explicit admission that they are owned by the banks, and their populist you’re-on-your-own façade will fall away. Which way will they go? That’s not such a tough question to answer: They will risk the backlash from voters because they know that the media, which unlimited corporate cash can buy, will purposefully misinform the public.
The real question is: How long can crony capitalism endure? The answer is simple: As long as we let it.
What will it take for people to realize that the corporate barons of Wall Street don’t actually produce (or even own) anything other than ever-larger numbers on a computer screen, and that real people, living real lives on Main Street, are the true producers of wealth in this country? When will we insist that our government start looking out for the best interests of the whole country?
Doing what is best only for narrow private interests has driven us over the brink. What we have now is an unsustainable system which has devolved into the final smash-and-grab phase. We are seeing a riot in slow motion, with the wealthiest looting all that they can before the entire system collapses. Another Wall Street bail out will be the final admission—and realization—that the goals of “free market” fundamentalism were always economic despotism.