We're Screwed on Everything From
Health Care to the Economy If the Dems Don't Shape Up
by William Greider, The Nation
www.alternet.org/, June 9, 2009
The governing party faced an awkward dilemma.
People were hurting and furious at the government's generous bailouts
for banks. But how could the Democrats do something for the folks
without upsetting their friends and patrons in the banking industry?
Democrats think they found a way. They are enacting a series of
measures described as "breakthrough" reform and "unprecedented"
defeat for the bankers. Only these achievements are more accurately
understood as "reform lite." The house is on fire and
Democrats brought a garden hose.
The Democratic Party is changing in some
promising ways, but what's impressive is how much it has not changed.
Does that sound harsh? I am relying on private judgments from
Washington players regarded as the "white hats" on this
subject -- consumer lobbyists and other public-interest reformers,
who for years have labored in frustration to enact laws that would
restore equity and honest relationships to the out-of-control
financial system. These organizations mostly endorse the Democrats'
efforts and celebrate their "victories." But a few minutes
of private conversation reveals their doubt and disappointment.
"It's a good bill," they will say, then after enumerating
the shortcomings add, "It's better than nothing."
"This has to be on background, OK?"
one of the reformers said. "This crisis brought down the
world economy and yet Congress still hasn't passed a bill making
sure it doesn't happen again."
Julia Gordon, a lawyer with the Center
for Responsible Lending, did not seek anonymity. "We have
reached the moment to ask ourselves Rabbi Hillel's question: if
not now, when?" Gordon said. "I fear we are letting
this crucial moment pass without putting forward-looking rules
in place to fundamentally change how mortgages are made and prevent
predatory lending. Plus, when we look back at the foreclosure
tsunami that devastated so many families, we're going to be ashamed
that we did not fix the bankruptcy code to permit mortgage modification.
That move alone could have prevented more than a million foreclosures,
and while I predict we will revisit the issue in the future, it
will be like closing the barn door after the horse has died."
If not now, when? That question ought
to haunt the Democratic Party and President Obama, who has been
missing in action himself on key issues. Congressional Democrats
are responding to this epic conflagration with the same risk-avoidance
tactics they learned during many years in minority status. In
those days, they could always blame right-wing Republicans for
blocking their good intentions. But whom do the Dems blame now
that they have the White House and fifty-nine votes in the Senate
and a seventy-eight-seat majority in the House? Their standard
explanation for not doing more is, "We didn't have the votes."
So when might we expect Democrats to achieve more? When they have
eighty votes in the Senate?
The party's ideological intentions are
being defined with greater clarity in these new circumstances,
and so are the President's. It's still early, but the implications
are ominous for other issues. If Democrats are reluctant to disturb
the power of other major interests, it seems improbable that fundamental
change will occur on healthcare, energy conversion or the restoration
of work and wages. The problem now is the Democrats, not the Republicans.
The party aids and protects its free-roaming entrepreneurial politicians
and does not punish those who undermine the party's larger promises.
When Republicans were in charge, they enforced party loyalty with
Stalinist discipline. Democrats are the party of safe incumbents,
The much-celebrated "Credit Cardholders'
Bill of Rights" is a fresh example of how the Democratic
Party tries to have it both ways -- avoiding the tough votes while
mollifying the folks. The credit card reform measure imposes new
rules on the industry and does away with many of the most outrageous
gimmicks bankers use to extract more money from debtors. Banks
cannot raise interest rates retroactively on old credit card balances
or pile on hidden fees or fail to give advance notice for rate
increases. These and other changes are worthy.
The achievement seems less courageous
if you know that Congress was largely ratifying the regulatory
rules already adopted by the Federal Reserve last year. Or that
the legislation gives the industry another nine months to gouge
their customers before the new rules go into effect. Or that Visa
and MasterCard, Citigroup and JPMorgan Chase are free to raise
future interest rates to the sky -- without limit. That is the
industry's intention, as bank lobbyists reported after the bill
One of the fundamental issues that party
managers wished to avoid was the scandal of American usury. Usury
is the ancient sin of charging inflated interest rates sure to
ruin the borrowers. It is considered immoral by Judaism, Christianity
and Islam because usury involves the powerful using their wealth
to ensnare weak and defenseless borrowers. The classic usurer
offers an impossible choice that debtors cannot easily refuse.
If they reject the terms of the loan, they will not be able to
pay the rent or buy necessities. If they accept the usurious interest
rates, their debts will accumulate until they are bankrupted (at
which point the creditors claim their property). No civilized
society can endure in such conditions.
Usury used to be illegal in the United
States but it was "decriminalized" in 1980 -- the dawn
of financial deregulation. A Democratic president and Congress
repealed all interest-rate controls and the federal law prohibiting
usury. Thirty years later, American society is permeated with
usurious practices -- credit cards charging 30 percent and higher,
subprime mortgages and other forms of predatory lending, the notorious
"payday" loans that charge desperate working people
an effective interest rate of 500 percent or more. Businesses,
especially smaller firms, are also prey to usury in less direct
Needing credit to survive, they submit
to the creditor's demands and are often weakened as a result,
shedding workers and services that shrink customers and income.
The straightforward way to stop usury
is to enact a hard legal limit on the interest rates creditors
can charge borrowers. In the House, several legislators introduced
interest-rate caps, but party leaders would not let the issue
get a roll call vote. Rep. Maurice Hinchey of New York and co-sponsors
proposed an interest-rate cap of 18 percent, the same ceiling
enacted years ago for credit unions. "Offering the amendment
raised a lot of anxiety on the part of a lot of people,"
"It was withdrawn because it had
no possibility of success and it would have put a number of people
in a tough situation. We had to back off."
A roll call on usury would have compelled
legislators to choose between their constituents and their bankers.
Rep. Donna Edwards of Maryland proposed a tougher ceiling on interest
rates, but the House rules committee rejected her amendment. "Our
constituents are so angry with the banks," she observed,
"siding with credit-card companies would not be helpful to
me, and I expect that's true in other districts." Bankers
are contributors, so this is what members call "a money vote."
A consumer lobbyist explained. "Let's face it," he said.
"The main reason lots of members get on the House Financial
Services Committee is because they want to raise money from the
In the Senate, Dick Durbin of Illinois,
the majority whip who rounds up votes for the party, introduced
his own usury bill -- a cap of 36 percent including the non-interest
fees and charges. Durbin's bill also empowered state governments
to set lower limits. The Consumer Federation of America endorsed
it, but the consumer lobbyists asked Durbin not to have a roll
call on his measure because it might reveal their weakness.
Nevertheless, the redoubtable Bernie Sanders
of Vermont demanded a vote on his bill -- an interest-rate cap
of 15 percent.
"When banks are charging 30 percent
interest rates, they are not making credit available," Sanders
said. "They are engaged in loan sharking." Sanders lost,
33 to 60. Twenty-one Democrats voted with the sharks. Senators
Carper, Cantwell, Byrd, Bingaman, Bayh, Baucus, Akaka, Warner,
Tester, Stabenow, Specter, Shaheen, Pryor, Ben Nelson, Bill Nelson,
Murray, Lincoln, Landrieu, Kaufman, Johnson, Hagan.
The scandal of "payday" lending
is being confronted by numerous state legislatures, but the issue
stalled out in Congress. The industry pursued a race-based lobbying
strategy that targeted black and Hispanic representatives with
this pitch -- poor people need these loans; don't mess with them.
Rep. Luis Gutierrez of Illinois proposed a bill that usurers found
acceptable -- an interest rate cap of 390 percent.
Standing With the Sharks
Perhaps the most revealing moment for
Democratic timidity was the Senate roll call to authorize bankruptcy
judges to intervene on home foreclosures and reduce the burden
for failing homeowners. If the bankers refused to make a deal,
the debtors could take them into bankruptcy court and hope for
better terms. This single reform would shift the balance of power
modestly from creditors to debtors and save at least 1.5 million
families from foreclosure, reformers estimated. The measure passed
easily in the House, but was defeated by the Senate.
Bankruptcy reform lost because twelve
Democrats joined the Republicans to vote for bankers and against
embattled families. Senators Baucus, Bennet, Byrd, Carper, Dorgan,
Johnson, Landrieu, Lincoln, Ben Nelson, Pryor, Specter, Tester.
Dick Durbin could not conceal the bitter
aftertaste. He told a hometown radio interviewer: "Hard to
believe in a time when we're facing a banking crisis that many
of the banks created -- they are still the most powerful lobby
on Capitol Hill. And frankly, they own the place."
Durbin's disappointment may have included
the former Illinois senator whom he had championed for president.
Barack Obama took a walk on reform. Last year as a candidate,
Obama declined to support the bankruptcy provision for the financial-bailout
legislation, but he promised reform groups he would support it
if elected. The White House wouldn't let reformers include it
in the stimulus package or in Obama's first budget. The White
House suggested the issue could proceed as a stand-alone measure
(guaranteed to fail). On this important reform, the president
stands with the sharks.
The Democratic Party ignores its left-liberal-progressive
base with some regularity because it knows it can. Politicians
understand they will suffer no consequences afterward. The galaxy
of mediating organizations, including organized labor, that surrounds
and supports the party may stomp and holler, but they do not attempt
any retribution that might alter their relationship with power.
Reform organizations will not withdraw their support, either money
or rank-and-file voters. Nor will they seek to punish any of the
wayward Democrats who regularly vote against them with opposition
at the next election. The "white hat" reformers are
Washington insiders themselves, with a seat at the table and influence
on the substance of the party's agenda. They do not want to put
their status at risk. Politicians know this from long experience.
So do the reformers.
The warped dynamics of the Democratic
Party may have sufficed when the GOP was ascendant and the goal
was restoring a Democratic majority. But now the majority party
resembles a dysfunctional family, badly in need of outside intervention.
I say this with sympathy, having known and admired many of the
reform activists for many years. Some of them are suffering from
a political version of the Stockholm syndrome. Their good intentions
are brutally compromised by identifying with the limited imagination
and nerve of the Democratic Party.
In some ways, the politicians are prisoners
too -- captives of the money politics and the expensive mass-marketing
that requires them to raise so much money and thus rely on the
moneyed interests. Representatives and senators know how the system
works and what they need to do to survive. Now and then, they
may try to win one for the folks, but mostly they are resigned
to the confinements of the status quo. So long as activist groups
will make no attempt to break out of this pattern or penalize
incumbents for disloyalty, the party will continue to stiff the
Given all the adversities facing the country,
I conclude that meaningful "intervention" is plausible
only if it originates with people at large who are more distant
from power. I envision the intrusion coming from many "independent
formations" free to ignore Washington's insider routines
and mobilized by citizens on behalf of their own convictions,
their common-sense ideas of what needs to be accomplished. This
alternative path is a central theme of my new book, Come Home,
America. I describe (somewhat wishfully) how self-directed organizations
might develop the power to break through regular politics and
overcome the usual barriers.
These groups could function, not as a
third party nor as standard "issue" advocates, but as
a mixture of these capabilities. They could act like free-roaming
guerillas who educate and agitate; like a political party that
selectively destabilizes safe-seat incumbents by entering party
primaries or running independent challengers; like a representative
organization that can demand political relations through direct
confrontations or even civil disobedience. This development sounds
implausible, I know, especially in Washington. But our crisis
demands a more aggressive response from citizens -- something
that threatens the power of both parties and makes them insecure.
As it happens, a rough facsimile of what
I envisioned is arising now in the politics of financial reform.
A network of fourteen community organizations, based in cities
from Boston to Washington, DC, and across North America, has come
together in alliance and intends to force a moral awakening on
the narrow thinking of the status quo. These citizens are developing
a political-action agenda around one theme -- usury -- as the
efficient expression of the abuses and injustices associated with
banking and finance. These are interfaith organizations affiliated
with the Industrial Areas Foundation and composed of citizens
who are white and black, affluent and working poor, whose local
organizations are based in churches and synagogues, Catholic,
Protestant, Jewish, Muslim and others.
Usually, their political action is local
and succeeds regularly in building relations with public officials
that produce real change in communities. This time, given the
crisis, these IAF groups are attempting something they have not
done before -- building the voice and influence to join the national
debate and change its terms. I sat in on one of their organizing
meetings near Baltimore and was asked to contribute my views on
the shape of the problem.
"Are you ready to be born again?
And again? And again? Do you have the imagination? Do you believe
it?" The call was from the Rev. Hurmon Hamilton of the Roxbury
Presbyterian Church in Boston, and he inspired the 100 or so community
leaders. "Faith is the substance of things hoped for,"
Hamilton declared, "the evidence of things unseen."
The Rev. David Brawley of East Brooklyn
Baptist described a preliminary statement of basic principles.
"Reasonable interest rates," he said. "In this
financial culture, the nation will return to a time-honored, indeed
ancient, practice: the law against usury. Financial institutions
and mechanisms that participate in this culture will agree to
a maximum of 9 percent interest or so. This was the usual state-mandated
rate before the repeal."
Brawley described other principles with
radical implications. "The lender holds the loan," he
explained. "The financial institution that makes a loan holds
the loan for its duration. The borrower and lender enter into
a long-term relationship that ends when the loan is fully repaid.
This is the fundamental starting point for any return to accountability."
That statement of principle challenges the market securitization
of mortgages that falsely claimed to reduce risk by dispersing
it among many investors. The process instead left no one responsible
for sound lending and thus multiplied the costs of failure.
Brawley's final principle was perhaps
most threatening to the existing order. "The federal government
insists on these core characteristics as the criteria for all
further bailout funding. Banks that wish to borrow from the government
must accept these simple standards [and] provide consumers with
an alternative to the current monopoly of financial transactions
dominated and still dictated by the same fifty financial institutions
that caused the crisis."
In other words, the social standard of
usurious practices should define which banks and financial firms
are eligible to participate in all forms of government aid and
protection. Why should taxpayers finance the usurers who are injuring
the society? The government's undiscriminating approach to aiding
banks implicates everyone in supporting the usury. So do the banks
and brokerages that collect people's savings and channel the money
into usurious practices that produce greater returns by ruining
more borrowers. The moral standard poses difficult questions for
everyone, not just bankers and politicians.
Arnold Graf, national organizer for the
IAF, argues that the moral question can lead people to confront
a deeper debate about the future. "What is the kind of society
we want to have?" Graf asked. "That's really what we
want to talk about -- transforming the society. We're not going
to get transformation form the president and Congress. It can
only come from the people themselves."
These IAF organizations expect to try
different tactics to spread the message and engage the people
with power who make decisions. That means directly confronting
elected representatives but also the banking institutions with
famous names. The alliance hopes the moral principles will mobilize
people of faith but also students and workers and investors. Following
the example of the civil rights movement, people of conscience
have to find ways to turn up the heat on the established order
and discomfort the silent citizens who are passive and indifferent.
This effort, Graf assumes, will probably take years, not months.
Leaders of the community organizations are aware of the risks.
They are attempting a leap into the unknown and they might fail.
No one listens, nothing changes. They accept the risk because
they too have asked Hillel's question. If not now, when?
William Greider is the author of, most
recently, "The Soul of Capitalism" (Simon & Schuster).
William Greider page