You hear the charge on Fox News, talk radio, and from your Uncle Bill. “Obama’s a socialist.” And off they go, describing the president as the amalgamated reincarnation of Lenin, Che Guevara, and Saul Alinsky. Obama wants to seize the money of hardworking Americans and redistribute it to single mothers and jobless crackheads, they say, until we resemble the Soviet Union.
It’s a simple talking point, and one that will be used against Democratic politicians until the end of time. Frequently it’s effective because most people can relate to it. Virtually everyone can think of some detestable parasite who receives a government benefit they either don’t need or horrendously misuse. So it’s easy to become outraged when the Obama’s-a-socialist crowd starts conjuring the specter of poor people buying dime-bags with your dimes. In truth, the majority of recipients actually use the benefits for more productive endeavors, such as buying food and paying their mortgages or rent. Even still, Ronald Reagan’s fable about a Cadillac-driving “welfare-queen” from (the largely African-American) South Side of Chicago illustrates a powerful fear among many Americans; namely that somewhere, some black woman has their money.
Which brings me to Wall Street. Whereas most of us can think of someone who, say, makes a decent living working under the table and collects unemployment, few understand the mechanisms by which the biggest firms on Wall Street have siphoned trillions of dollars from the government.
As a senator, Barack Obama cast a “Yea” vote for the $700 billion Troubled Asset Relief Program signed into law by his predecessor George W. Bush. While TARP has become synonymous with “the bailouts,” the truth is that it was merely the warm-up act in a long line of programs and policies designed save banks from succumbing to the very disaster they helped create. There was the Term Asset-Backed Securities Loan Facility, the Primary Credit Dealer Facility, mountains of liquidity swaps, and other schemes involving rock-bottom interest rates and little to no risk. There are a few estimates on the total amount of credit extended to Wall Street and subsequent losses absorbed by the federal government, but the safe figure seems to be $7.7 trillion in credit given to some of the nation’s largest financial institutions since the crisis began. Welfare queens of America, eat your hearts out.
For all the supposed differences between Bush and Obama, Republicans and Democrats, the majority of them agreed that Federal Reserve Chairman Ben Bernanke deserved another term. Apparently he had done such a superb job in missing the housing bubble entirely, that Bernanke was reappointed to that position by Obama with the blessing of a 70-30 landslide in the Senate. From there, Bernanke became free to enact a second round of quantitative easing, which is a euphemism for money printing, whereby the Fed buys Treasury bonds from Wall Street with money created from thin air. The objective is to drive down interest rates in an attempt to spur lending and thus consumption. Under this scheme, savers are punished, as anyone with a savings account can attest to.
So while your savings accrue nothing thanks to quantitative easing and negative real interest rates, banks are more than happy to utilize all the tools available to assist them in their time of need. Whether it’s dropping by the Fed's discount window for some fast cheap cash, or putting taxpayers on the hook for trillions in toxic derivatives, Wall Street can thank Obama for continuing this unique brand of socialism where profits are privatized and the risk is socialized.
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