The Bush–Obama scheme to restore the status quo ante has been pretty successful on its own terms.

Doug Henwood: Radio commentary, December 5, 2009

Two stoories on the front of Thursday’s Financial Times tell you a lot about life in today’s USA. Above the fold—a phrase that probably doesn’t mean that much to anyone under the age of 35—the lead story tells us that the Bank of America is about to pay back the $45 billion the U.S. government lent to it when it was on the verge of collapse last year. The bank finds those mild pay restrictions and government snooping too onerous and just can’t wait to slip the yoke. About two-thirds of the money will come from the bank’s healthy stream of profits, and the balance will come from the sale of new stock to the public. The price of the stock rose on the news, suggesting healthy appetites for a security that wasn’t desirable even with the intervention of the proverbial 10-foot pole as recently as March, when you could buy a share for $2.50, not much more than you’d pay for a cash withdrawal at an ATM. Now it’s trading at over six times that price. What remarkable powers of resilience.

What this means, among other things, is that the government bailout worked, in some sense. That is, throwing hundreds of billions at the financial system kept things from going totally down the drain. Still, the unemployment rate is over 10%, jobs continue to disappear, and nothing serious has been done to prevent future crises of this magnitude. The Bush–Obama scheme to restore the status quo ante has been pretty successful on its own terms.

Further proof of that can be seen in the failure of the markets to begin a fresh journey towards oblivion with last week’s news of Dubai’s debt default. I noticed that some of the more fevered corners of the Internet commentariat were convinced that this week’s trading would bring a relapse of last year’s crisis, but that hasn’t happened. I’d never say that a relapse is impossible. But it does look like we’ve moved onto a new phase of thie melodrama—financial stabilization followed by some kind of economic recovery. I still expect it to stink. But Armageddon has been postponed.

Plus ça change…. The other telling story on the front of Thursday’s FT reported on a survey by the FDIC—an entity rendered nearly bankrupt by rescuing failed banks over the last year—showing that 17 million adult Americans live without bank accounts, and another 43 million are “underbanked,” as they say, using pawn shops, payday lenders, check cashing joints, and other other shady operators to handle many of their financial transactions. The latter gang charge enormous fees and interest rates, making straight bankers—who aren’t shy about their fees and interest rates—look like pikers in comparison. The FDIC found huge racial disparities in underbankitude, with 3% of white households lacking bank accounts—but 22% of black households, seven times as many, so deprived.

So big finance thrives, while regular folks are squeezed. A serious financial reform would squeeze the financiers and force bankers to provide basic financial services at reasonable prices to everyone. But there’s nothing like serious financial reform on the horizon. In a lot of ways, Barack Obama is the best friend that Wall Street ever had. It’s one thing to coddle bankers in good times. It’s another entirely to give them a blank check to enable them to go back to making the mischief that got us in trouble in the first place.

Posted via web from Jim Nichols