Obama and Goldman Sachs: A Quid Pro Quo?

U.S. President Obama nominated Timothy Geithner to be Secretary of the Treasury. While president of the New York Federal Reserve Bank, he had played a key role in forcing AIG to pay Goldman Sachs’ claims dollar for dollar. Put another way, Geithner, as well as Henry Paulson, Goldman’s ex-CEO serving as Secretary of the Treasury as the financial crisis unfolded, stopped AIG from using the leverage in its bankrupt condition to pay claimants much less than full value. At Treasury, Mark Patterson was Geithner’s chief of staff. Patterson had been a lobbyist for Goldman Sachs.
To head the Commodity Futures Trading Commission—the regulatory agency that Born had headed during the previous administration—Obama picked Gary Gensler, a former Goldman Sachs executive who had helped ban the regulation of derivatives in 1999. Born had pushed for the securities to be regulated, only to be bullied by Alan Greenspan (Chairman of the Federal Revere) and Larry Summers, whom Obama would have as his chief economic advisor. To head the SEC, Obama nominated Mary Shapiro, the former CEO of FINRA, the financial industry’s self-regulatory body.
In short, Obama stacked his financial appointees during his first term with people who had played a role in or at least benefitted financially from financial bubble that came crashing down in September 2008.[1] Put another way, Obama selected people who had taken down the barriers to spreading systemic risk to fix the problem. Why would he have done so? Could it have been part of the quid pro quo the president had agreed to when he accepted the $1 million campaign contribution from Goldman Sachs (the largest contribution to Obama in 2007)? Might Goldman’s executives have wanted to hedge their bets in case the Democrat wins. Getting Goldman alums in high positions of government would essentially make the U.S. Government a Wall Street Government—that is, a plutocracy with the outward look of a democracy. It is no accident, we can conclude, that the spiraling economic inequality increased during the Democrat’s first term of office.

1. Inside Job (2010).

Congress: Hitched to the Status Quo

To lead is to be out in front, pointing the jet’s nose one way rather than another. Leadership is not that which causes drag at the back of the plane. Leadership is not that which holds a society in place or protects the vested interests. Whether envisioning something new or a return to a better time, a leader is not oriented to the status quo. It is significant, therefore, that the Minority Leader of the U.S. House of Representatives, one of the two chambers in the American Congress, has stated publicly that the Congress is rigged to advantage the status quo. The stunning implication is that members of Congress are actually anti-leaders.

In an interview in 2013, Nancy Pelosi admitted, “This is an environment that is almost rigged, intentionally or not, wittingly or not, rigged so that the status quo just goes on.”[1] This amazing line can be read as confirmation that the fears of some of the American Founders has come true—namely, that the U.S. House would itself become an aristocratic body rivaling the U.S. Senate. With just 435 representatives for over 310 million people, George Washington’s plea on the last day of the Constitutional Convention that a minimum of 30,000 rather than 20,000 in a district would not be sufficiently democratic sounds trite, even antiquarian. With so few representatives relative to the total population, the U.S. House could not help but be aristocratic, each member being like a magnet to huge “gifts” from vested interests. “We have to kick open the door and make our own environment” in the Congress, Pelosi urged, “reduce the role of money [in campaigns], insist on the civility of debates, and bring more women here, and that’s a better reflection of our country.” In painting this picture for us, the Minority Leader was indeed leading, for she was intrepidly venturing out beyond the status quo. Nevertheless, the thrust of leadership is not always enough to counter the gravity of the vested interests grounded in the status quo.

For example, as long as so few representatives hold such power, the money of the vested interests will inevitably find its way to the campaigns and the Congressional bills will continue to be written by the vested interests themselves. In approaching this problem systemically, more is needed. One possibility is to sift the E.U.’s lower legislative chamber for possible solutions. 

The U.S. House of Representatives (top) and the European Parliament (bottom). 

At the beginning of 2012, European Parliament had a maximum of 751 representatives to cover a population of about 504 million, which works out to an average of 671,105 people in a district. Meanwhile, the U.S. House had 435 representatives to cover a population of about 313 million, which corresponds to an average of 719,540 people in a district. The difference is 48,435 people per district. To get down to 671,105 people per district, the U.S. House would need to add 31 seats. Were the House to have 751 representatives, the average number of people in a district would be 416,777. While more democratic than districts with an average population of 719,540, neither figure comes close to satisfying George Washington’s objection that 30,000 people in a given district is not sufficiently democratic (i.e., too many constituents for a given representative).

Therefore, in addition to increasing the number of seats—with the knowledge that 751 in a chamber can work—further reduction in the centralized power would be needed to reduce the money magnet’s power. One option would be returning more domestic policy areas to the state legislatures. At the time of Pelosi’s statement, the U.S. states had 7,382 state legislators altogether. [2] Spreading around additional powers, taken from the Congress, to so many more representatives would not only make American federalism more democratic, but also open up possibilities for real change beyond the grasp of the status quo. As a few examples even without the additional power, some states had legalized gay marriage, two had legalized pot, and one had achieved universal health-insurance. Admittedly, the status quo has a greater grip in some states (e.g., Kansas) than others (e.g., California). However, spreading out governmental power could perhaps be sufficient to give leadership a chance to outpace the moneyed interests in the status quo.     

1. Laura Bassett, “Nancy Pelosi: Congress Is ‘Rigged’ to Maintain the Status Quo,” The Huffington Post, June 5, 2013.

2. National Conference of State Legislatures, “Sizes of Legislatures,” 2013.

American religion and politics: Overreaching Realms

Even though they are formally separated in the U.S. under the constitutional rubric that the federal government cannot lawfully establish a religion and infringe on the free exercise of religion, religion has ventured into politics and vice versa. Valued ideals pertain to both even though the highest in religion are transcendent, meaning that they extend beyond the limits of human cognition, perception, and sensibility, according to St. Denis (aka Pseudo-Dionysius) in the sixth century. So far is the political variety from such ideals as being in heaven! Yet the political sort has enjoyed a near monopoly in the world, including its public discourse. At least as 2019 was giving way to a new decade, captivation on President Trump’s tweets (i.e., brief statements made on the internet’s social media) and the process of impeaching him in the U.S. House of Representatives was strangely devoid of any religious discussion in the public square. This is all the more extraordinary because of the significant role that religion had played historically in presidential politics.

During the U.S. presidential campaign of 1928, for example, Al Smith was chastised for being a Catholic, and therefore thought to be under the sway of the Pope in Rome. During the campaign of 1960, John F. Kennedy found himself subject to the same charge. The simple assumption of papal dictate turned out to be naïve. For one thing, the American presidency is firmly within the governmental realm, and the Second Amendment bars the use of the office to establish (or give preference to) a religion or sect/denomination thereof. Kennedy ran against Richard M. Nixon, whose Quaker background, which presumably disdained lying, turned out in his own presidency (1968-1974) to be particularly lacking as revealed in the Watergate hearings. In short, the impact of a president’s inner religious sense and identity on his conduct (and mentality) can be massively overstated.

The role of religion in politics has been present, however, in reactions to the assumed, overstated impact of a candidate’s religion on his role should he get to the office. For example, based on the overblown fears held by protestant Americans, some protestant leaders, including Jerry Falwell and Billy Graham, and their allies in the political realm were able to gain popularity and power. Graham secretly met with other protestant pastors in 1960 to coordinate campaigning against Kennedy, essentially capitalizing on the popular fear among Protestants. This movement in turn prompted Kennedy to give a speech on September 12, 1960 to the Houston Ministerial Association. He insisted that his Catholicism would not direct or obstruct his policy-making judgment. Interestingly, the push of religion into the political sphere was made by religious figures ostensibly in the religious realm—overextending into the other realm.

In 1980, however, a presidential candidate by the name of Ronald Reagan realized that politicians like himself could make use of the political lobbying of religious leaders and groups. Implicitly, he showed Americans just how trivial the political divide had really been between Catholics and Protestants in presidential politics. While Reagan was still the governor of California in the 1970’s, Phyllis Schlafly, a Catholic, was reaching out to evangelical women to lobby against the Equal Rights Amendment (for women). Along with evangelical political action committees, she established the Eagle Forum in the next decade, when Ronald Reagan was president of the United States. By the time he was in office, he had already realized that he could publically galvanize evangelicals and conservative Catholics to support his political ambitions.

With the political realm dipping into the religious realm and vice versa, the societal issue of abortion also played an important role at the time in uniting socially conservative Protestants and Catholics. After the U.S. Supreme Court’s ruling in Roe v. Wade in 1973, Francis Schaeffer brought in prominent evangelicals including Jerry Falwell to oppose abortion politically. Gay marriage in the early 2000’s would play a similar role in uniting the division that had hitherto hampered Al Smith and John Kennedy. James Dobson’s Focus on the Family and the Family Research Council, which had formed in the 1980s during Reagan’s flourishing years in office, pushed what they publicized as family values against both abortion and gay marriage. Both Focus and the Council were both church-related and lobbyists close to the Republican Party. For example, the groups lobbied for conservative fiscal policies—something near and dear to the Party but less obviously based in Christianity, especially as Jesus espouses giving to the poor and giving up one’s wealth to follow him. The rich man getting into the Kingdom of Heaven is like getting a camel through a needle. Even so, the evangelical lobbying groups became wealthy, using the prosperity gospel from the Old Testament—that God would make Israel prosperous if it keeps the covenant—as a rationale. To be sure, the pro-wealth paradigm had long become dominant over the anti-wealth paradigm, which hitherto had been dominant.[1] Perhaps this shift within Christianity made it easier for evangelical/Catholic political groups to not only pursue wealth themselves, but also appeal to the Republican Party that Reagan had made (i.e., fiscal and social conservatism). 

 

In conclusion, Americans could look back by the end of the twentieth century and see the old religious division as politically artificial, and thus not nearly as important as Americans had believed in 1928 and 1960. But could those same Americans see their contemporary divisions as just as artificial or at least over-drawn? In the Middle Ages amid the Commercial Revolution, the sin of usury (i.e., charging interest on loaned funds) was the moral/religious/political controversy in Europe. By Reagan’s time, the charging of interest even on consumption loans was a dead issue, whereas abortion could be viewed as an extremely important matter. Could this presumed overriding importance of the issue of the day be questioned by looking back at how the salience of the usury debate had run its course in its own time? In other words, in matters of religion and politics, and even their intermeshing, can the human mind put even its most cherished ideals in proper perspective? Can we question our own presumed importance, including that of our ideological ideals, whether religious or political (or both!)?

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1. Skip Worden, God’s Gold (1915), available at Amazon.

Bolivia's President Morales: A De-Facto Dictator Undemocratically Removed from Office

Bolivia’s president, Evo Morales, resigned on November 10, 2019 after an audit by the Organization of American States found that the results of the election held the previous month could not be validated because of “serious irregularities,” including “failures in the chain of custody for ballots, alteration and forgery of electoral material, redirection of data to unauthorized servers and data manipulation.”[1] Election officials had stopped the count for about 24 hours without explanation; when the count resumed, Morales’ lead was much greater. Accordingly, along with Morales, the vice president, and the president of the state senate, the president and vice president of the electoral council resigned. Before the end of the day, the two officials of the council had been arrested for “electoral crimes.”[2] Although the state police were justified in arresting the officials, I submit that the police acted beyond their proper sphere when they joined with the military, which also acted beyond its sphere, to force Morales to resign.

To be sure, Morales controlled both chambers of the state legislature, the electoral council, and even the Constitutional Court, rendering the problem of holding the president accountable to the law particularly acute. As for the legislature, the presidents of both chambers resigned along with Morales, making the matter of Morales’ successor quite messy even from a constitutional standpoint. These resignations suggest that the leadership of the legislature would have been unlikely to act as a check on the president.

As for the high court, Morales had argued that it was his human right to run for reelection for a third term even though the constitutional limit was two terms. In 2019, he was running for his fourth term, sailing through the constitutional constraint yet again. Citing the American Convention on Human Rights, the Constitutional Court ruled that the term limits violated Morales’ human right to run for a third term. The Court had a basis to consider the treaty on par with the state’s constitution. In the U.S. Constitution, for example, Article VI, Clause 2 states that a treaty, like the Constitution itself, is the “supreme Law of the Land.” In the Bolivian case, the Constitutional Court put the treaty above the constitution. In general, where two parts of supreme law conflict, one must be put above the other.

Article 23 of the Convention, which covers the right to participate in government, is the relevant part of the treaty. Every citizen has the right and opportunity “to take part in the conduct of public affairs, directly or through freely chosen representative; to vote and to be elected in genuine periodic elections . . .; [and] to have access, under general conditions of equality, to the public service of his country.”[3] Taking part in the conduct of public affairs can be by being elected to a governmental office. Such participation can be regulated “only on the basis of age, nationality, residence, language, education, civil and mental capacity, or sentencing by a competent court in criminal proceedings.”[4] Even though term limits do not fall under any of these legitimate means of constraining the underlying right to the opportunity to run for office, term limits are under general conditions of equality concerning public service, of which serving in elected office pertains. That is to say, being elected to a governmental office falls within public service, and term limits are consistent with general conditions of equality because the limits apply to any citizen. Hence we need not look at the legitimate rationales for constraining the right. I am assuming that the enumerated legitimate means by which to regulate the right to serve in elected office are exceptions to the general conditions of equality. We need not look at the exceptions because term limits satisfies general conditions of equality. The Bolivian Court thus erred in determining whether term limits falls within any of the exceptions.

The Court had no legal justification for putting the treaty above the state’s constitution. The leap in having done so is suspicious because the Court’s primary role is to interpret the constitution. Molares had “packed the court” (i.e., put the sitting justices on the bench),[5] so the errant legal reasoning may have been more the fault of political bias than logic. If so, Molares had control over the judiciary as well as the legislature, electoral council, and executive branch. Without any operative checks on his power, he could turn a democracy into a de facto dictatorship for life. Indeed, up until the end, he controlled the state police and military.

That the police and military are under the executive power of a president does not justify the involvement of the police and the military in taking it upon themselves to remove that president. If the Bolivian military chief made a deal with the opposition party, then he became a partisan politically. In his designated capacity to defend the state from foreign enemies, a military chief does not have the authority to pick partisan sides in a political dispute. Likewise, in unilaterally deciding to stop guarding the presidential palace, the police went beyond their authority and became partisans. That the police kept to their designated duties in arresting the president and vice president of the electoral council suggests that the decision to walk away from the presidential palace was partisan in nature.

Even relative to Morales’s usurpation of constitutional prerogative by running for a fourth term in violation of the term-limit general restriction, the refusal of the police and military to stay within their respective spheres of authority is particularly problematic because they possess weapons. Even in requesting that the president step down, the military chief acted inappropriately because the president is the commander-in-chief. In other words, the military chief evinced an unwillingness to stay within his gift. Such a mentality, plus the legal possession of many accumulated weapons, is why it is important that a military answer to a civilian, such as a president, who is not subject to the military. In a democracy, that civilian is an elected official, and it is not within the purview of a military (or police department) to question the veracity of the election as that would violate the president not being subject to the military (or police). In the U.S., this is why the impeachment and removal from office are conducted by the Congress. This is also university police-departments in the U.S. are inherently problematic from a democratic standpoint, for the chiefs of such departments report to university managers rather than elected officials. 

  

That the Bolivian police and military sided with the president’s political opposition in removing the president from office demonstrates the maxim that the ultimate power in a government lies with whomever can legally hold a (near) monopoly on weapons. Parchment is no match for officials with power and guns if a self-aggrandizing, even aggressive mentality is involved. The matter of holding such officials accountable can be quite difficult, as has been demonstrated by all the failed efforts to hold municipal police accountable in the United States. Unfortunately, a police employee can leverage his or her power to arrest and ultimately to use a gun to be able to act disproportionately (and prejudicially) on even trivial local laws.

On the very evening of Morales’ resignation, I was stopped by a policeman in Tempe, Arizona while I was walking in an alley. He informed me that walking in alleys is illegal in the city, which is home to Arizona State University. Doubtless the local police had looked the other way when students take such shortcuts, but in my case, the policeman assumed that enough residents of the apartment complex where I was living use alleys as shortcuts that he would issue me a formal warning, which means that I would be arrested the next time I was apprehended in an alley. Such a serious matter in Arizona! Being from another state, I felt myself a semi-foreigner there in part because the police tended to over-react, even in demonstrating an excessive police-presence on the supposition that intimidation is the best deterrent. In my case, the policeman was trying to use me as a deterrent for other residents in a low-income apartment complex even though as a research scholar I had very little in common with the other residents (except for the few students who lived there). I had the impression that the policeman was grouping me in with homeless people just because I was carrying my laundry to a nearby laundry-mat. That Arizona was ranked 49^th out of the 50 states of the US on primary education, including High School, suggested to me that I was being confronted by ignorance (and prejudice against the poor) with a gun. So police (and even a military) can go too far even in a state in which democracy is ostensively well-established. Personal discretion can be easily misused by people with the authority to arrest and use lethal force.

Therefore, when government institutions are captured by a president, such as Molares in Bolivia, it is a mistake to look to police or the military to use their threat of lethal force beyond their sphere of authority; their power is too much to rely on their discretion. When a democracy has succumbed to a dictator, the People, who together are the popular sovereign, have a duty to restore their democracy. In a representative democracy, the People are the font of sovereignty, whereas governmental sovereignty is delegated. The duty is not rightly preempted by the will of the police or military, because, as parts of a government, they are below the popular sovereign and its elected representatives. To be sure, the weaponized machinery of the state could fall under the control of the People as they make progress, but the movement would not be led by the police or military. Put another way, the police and military would no longer be so as individuals from those departments decide to join the People against the state. In a democracy, the People, acting as the popular sovereign, are the foundation. For the will of the People to be preempted by the wills of the police or military is itself dictatorial rather than democratic. Even if the heads of the police and military have good intentions in getting rid of a corrupt government, doing so lies with the People even if doing so is extraordinarily difficult.

In conclusion, protecting a democracy, such as against violations of term limits or, moreover, against a dictator generally, is the right and duty of the People acting as the popular sovereign. This duty is particularly pressing when no checks and balances exist within and between the three branches of government, such as when a dictator controls the legislature and judiciary. This does not mean that police or a military share that duty, for they are not only artifacts of government, but also given to the temptation for absolute power owing to the power of the threat of arrest and their use of guns. Also, enforcing criminal law does not extend to assuming a political role, especially if it is partisan. The U.S. Department of Justice, which houses the FBI, is thus not supposed to do the president’s political bidding. It would be ludicrous for the head of the Justice Department to join the opposition party in “requesting” that the president step down; to use the FBI to enforce the “request” would violate the constitutional language that puts the president as the head of the executive branch, as well as the fact that Congress, made up of elected officials, makes the case for impeachment and determines whether the president is to be removed from office. Otherwise, the president’s political opposition could simply call the FBI or even the local police to have the president arrested. The same logic pertains to the military, as if it could legitimately detain or remove its commander-in-chief, thereby violating the constitutional language on impeachment and removal from office as a political matter. The sovereign state of Bolivia violated its democratic system even in how Morales was removed from office in 2019.

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[1] Kay Guerrero and Dakin Andone, “Bolivian President Evo Morales Steps Down Following Accusations of Election Fraud,” CNN.com, November 10, 2019 (accessed on November 12, 2019).

[2] Ibid.

[3] The American Convention of Human Rights, Art. 23, sec 1.

[4] Ibid.

[5] Guerrero and Andone, “Bolivian President Evo Morales Steps Down Following Accusations of Election Fraud.”

Perception-Based Healthy Reputational Capital as a Strategic Competitive Advantage: The Case of CVS Health

In 2014, CVS drug-stores stopped selling tobacco products. The strategic choice rendered CVS Health more internally consistent on wellness. To be sure, the company continued to sell alcohol products, such as wine and hard liquor, which are harmful to human health. Yet the incremental correction was significant both in regard to the short-term hits to the bottom-line and the salubrious contribution to the health of customers. If the share of revenue (and profit) from the sale of alcohol increased in the meantime to make up the difference, the net effect on the bottom-line could have been zero or even positive, and the net impact on the health of customers and the company’s healthy image could also have been nugatory or even negative. Writing in 2019, however, Larry Merlo, President and CEO of CVS Health, saw a perfect convergence of the long-term bottom-line and making a contribution to society even at the expense of short-term revenue.

In his editorial at CNN, Merlo claims that an increasing number of businesses were “incorporating purpose into the values and operating models of their organizations.”[1] The implication that purpose only pertains to social performance ignores the fact that boards and managers act with purpose in manufacturing and selling widgets that are of value to customers. Presumably products and services are purchased because they reduce the suffering of customers or increase their happiness. What Merlo means by purpose is to have a positive societal impact (albeit by considering the best interests of stakeholders rather than society as a whole) besides the impact of the products or services sold. Hence balancing purpose and profit “can lead to better companies that are motivated to do what is right for all stakeholders—customers, employees, suppliers, communities, and, yes, shareholders.”[2] The owners of the wealth known as CVS Health (i.e., the company’s owners) come last on this list, but not least. Even so, if a management hired by stockholders (via their board representatives) unilaterally decides to orient the company to other stakeholders, the property right is subordinated and thus violated. Hence, the shareholders should decide whether their company’s mission is to be extended beyond the stockholder-default. Merlo makes no mention of any such stockholder involvement in the decision.

To be sure, the CEO points to the positive impact on the company’s brand as being centered on health. In his words, the sale of tobacco was “a barrier to the future growth of the company as a trusted health care provider.”[3] No longer selling tobacco products “helped validate CVS’s evolving role in the health care marketplace.”[4] In other words, the “fact that companies and consumers now see us as a convenient and affordable point of access for quality health care creates longer-term growth opportunities for our business,” Merlo claims.[5] This led to the company’s acquisition of Aetna. The combined company could have a competitive advantage that (presumably) a cigarette-selling CVS could not have. I’m skeptical on this point because CVS Health still sold alcohol and yet could acquire Aetna and claim to have a health-centered brand-image.

Not having analyzed it, I have no reason to doubt a 2017 study published in the American Journal of Public Health, which claims that “smokers purchased nearly 100 million fewer packs of cigarettes in states where a CVS Pharmacy had a 15% or greater share of the retail pharmacy market.”[6] Merlo cites this study to make the point that CVS no longer selling tobacco likely has had positive health effects societally (taken here narrowly as customers).  It is the purity of the company’s reputation for furthering health, and thus the impact of the reputation on the company being able to make forays further into health-care that I question. As a regular CVS customer over the years, I have noticed increasing shelf-space being devoted to the sale of alcoholic beverages. As of 2019, a customer could walk down an aisle—typically a front aisle—with such wine and liquor stocked on both sides, and see still more bottles near the cashiers’ area. In his essay, Merlo only lightly touches on the short-term hit to the bottom line. Perhaps CVS merely substituted one ill for another—perhaps with alcohol selling at a higher premium than cigarettes—such that only a slight drop in revenue during the transition was all that the company had to sacrifice in increasing its reputational capital? If so, the company could play off the societal perception that alcohol is less toxic than cigarettes.

To be sure, CVS became a less hypocritical company in refusing to sell tobacco products, especially relative to Walgreens, whose slogan “Wellness at Walgreens” near the pharmacy area was at odds with the liquor and cigarettes highly visible at the front end of the stores. Admittedly, such egregious hypocrisy may bother only the ethically-sensitive customer while leaving little or no financial trace because the vast majority of customers do not notice the hypocrisy or simply don’t care. An interesting question, however, is whether CVS actually reduced its hypocrisy if alcohol got more shelf-space (and was more profitable!) to make up for the loss of revenue from tobacco. The enhanced reputational capital could be based on an illusion, yet interestingly even that may helped the company acquire Aetna.

Of course, the hypocrisy may be in us; it may even be a societal norm. We may compartmentalize our healthy and unhealthy practices just as Walgreens had “Wellness at Walgreens” painted in very large print above the pharmacy area in at least some stores in 2019, while alcohol and cigarettes were salient in the front half of the stores. If so, customers would not even notice the store-level hypocrisy, so little benefit could come to the company simply by reducing the hypocrisy within a store. Instead, a company’s brand-image could be solidified by advertising nonetheless, and the resulting reputational capital could aid in attracting potential acquisitions.

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[1] Larry Merlo,”CVS Chief: Getting Rid of Tobacco Taught Us an Important Lesson. We Hope Our Journey Inspires Other Businesses,” CNN.com, November 5, 2019.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

Democracy Held Hostage: The Case of a Street Name

Claims of systemic racism can also be attacks on democracy itself. In fact, if overdone, such claims may themselves be racist. The situation would then be that of racists holding democracy ransom in the mistaken belief that the whole must be consistent with the interests of one of its parts to be legitimate; otherwise, the democratic principle of majority rule is itself presumed to be invalid. The case of the change of a street's name in Kansas City, Missouri, can serve as a case study.

On November 5, 2019, voters in Kansas City voted overwhelmingly (nearly 70%) in favor of restoring the name of a street to The Paseo (inspired in 1899 by Mexico City’s mayor, Paseo de la Reforma). A mere two months before the vote, the City Council had changed the street name to honor Martin Luther King, Jr, an American civil-rights leader in the turbulent 1960s. Members of the Save the Paseo movement said that their motive was historical preservation rather than racism. According to one member, the Paseo was “historical I people’s memory” rather than just on paper.[1] The members “were upset that the council [had] made the change without input from those who [lived] along the street.”[2] A city statute required such input, according to the members. The mayor admitted that the city had not engaged with “enough different community members.”[3] The key word here is different, for the campaign to change the street’s name to that of the civil-rights leader had been led by black pastors. So the city council made the change based on the advocacy of a segment of the population with a vested interest in the change, rather than reaching out to first ascertain whether the sort of unity that Martin King had preached could be achieved on the measure. In short, the council had put a part ahead of the whole.

For its part, the part, represented by Rev. Vernon Howard, president of the Southern Christian Leadership Conference of Greater Kansas City, claimed that racism was the main motive of the opposition to retaining the King name. “This is a white-led movement that is trying to dictate to black people in the black community who our heroes should be; who we honor; where we honor them and how we honor them,” Howard said. “This is the pathology of white privilege and that is the epitome of systemic structural racism,” he added.[4] In other words, the pathology of white privilege is the epitome of systemic structural racism. Had the reverend sought to provide a religious rather than a psychological account, he might have claimed that certain social structures are evil whereas others are sacred. A Unitarian minister in my hometown had once insisted to me that certain social structures (i.e., egalitarian systems) are sacred. I countered that a human claiming that a human artifact is divine constitutes self-idolatry.[5] He dismissed my counter-claim instantly, as if he presumed that he could not be wrong whereas I must be so. Had he also insisted that societal structures that contain inequality are pathological, I would have pointed to the over-reach of his religious basis onto psychology.

I submit that in dismissing the meaningfulness of The Paseo to people generally in Kansas City, Howard’s reductionism to racism is erroneous. Essentially, he was claiming that cases in which majority rule does not dovetail with his interpretation of black interests, the democratic principle itself is culpable as part of systemic structural racism and thus is pathological in nature. In other words, the particular interests of one segment of the whole must be consistent with the majority for the democratic principle of majority rule to be devoid of the stain of racism and thus valid.

Furthermore, in so closely relating “white privilege” to systemic racism, the reverend overlooked or dismissed outright the racism in the black community. On the morning following the vote, for example, I endured fifteen minutes of racist insults from a black woman on a local bus in Phoenix, Arizona. Her voice could be heard throughout the bus as she claimed that “whites are ugly when they age, whereas black people age good.” Furthermore, whites are red-necks whose “dominance will end someday.” As she declared herself to be a racist, I noticed that the driver, also a black women, was refusing to stop the woman. Such passive aggression can be considered tacit racism. That was not the only instance in which I had observed black racism on a Phoenix bus. Once a driver had decided not to intervene as a black woman shouted insults at a Caucasian man until the woman called the driver a racist for not having kicked the man off the bus! The reputation of the local bus drivers in the phoenix metro, including Tempe, was sordid in terms of their attitudes and bad in terms of their driving, and accountability at least regarding the latter was deliberately obstructed by First Trans, a sub-contractor of Valley Metro. The subcontractor was in denial concerning the role of its pathetic hiring of people with bad attitudes to drive the buses. Such a flawed system enabled black racism (as well as reckless driving, such as in going from 40 or 50 mph to zero in a turn lane). Put another way, systemic structural racism can be due to black privilege (and facilitated or enabled by a corrupt, incompetent organization).

The reverend’s partial account can be taken as confirmation of being a part within a whole not reflecting the whole or its interests. Holding majority rule subject to such a partial perspective is not in itself in the interests of a whole. In Kansas City, the municipal government followed a flawed process (of input) in changing the street to Martin Luther King Jr Blvd. Such a flaw is not racist even if the segment that benefitted from the flaw no longer benefits once the flaw has been corrected by the voters. In fact, for an electorate to correct its delegated government is laudable from a democratic standpoint, as the People, as the popular sovereign, is the basis of a republic. For that basis to somehow be held ransom by a part thereof undermines the foundation of democracy, whether direct or representative.

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[1] William Cummings, “Kansas City Voters Overwhelmingly Approve Mesure to Drop Martin Luther King Jr.’s Name from Street,” USA Today, November 6, 2019.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] See the last chapter of my book, God’s Gold, for an elaboration on self-idolatry.

Goldman Sachs' Revolving Door: Regulatory Capture

In July 2012, Andrew Williams, a former spokesman for U.S. Treasury Secretary Timothy Geithner, announced plans to head over to Goldman Sachs at the end of that month.[1] Williams was the second of the Secretary’s spokesmen to head to theWall Street bank. Such moves may reflect a standing policy at the bank to have a revolving door. The previous U.S. Treasury Secretary, Henry Paulson, had been the CEO at Goldman. This suggests that the revolving door was to include populating high offices in government, presumably not out of a sense of civic duty, but, rather, to see that Goldman's interests would be protected and even promoted through public policy. Hence President Obama was said to have had a Wall Street government with respect to positions bearing on Wall Street. I submit that deconstructing such a revolving door would be very difficult. 

From the standpoint of a government official being hired by Goldman, the prospect of becoming wealthy is a large incentive to make the jump. Such an official would typically have scruples about using his contacts in government to pull strings for the bank. Mired in scandal following the financial crisis of 2008, Goldman’s leadership no doubt understood the value in hiring good PR men. Such hires could even put a good face on the cozy relationship between the bank and people still in government.

The “revolving door” dynamic is also difficult to break up because it contributes toward the capture of regulators by the regulated. This is known as regulatory capture. The regulated companies supply information that regulators need in order to devise regulations; the companies can use this reliance to their advantage even just in providing tainted, self-serving data. Moreover, the revolving door can make it easier for the managements of the regulated companies to get even high government officials to put political pressure on the regulatory agencies to go soft on regulating. In the case of Goldman Sachs, it is reasonable to expect that Henry Paulson would have bent to the bank's request for lax regulatory oversight from the SEC, which of course had no idea how many subprime-mortgage-derivative bonds Wall Street had been producing and selling up to the financial crisis of 2008. 

 

The SEC can be soft on Wall Street and point to insufficient staffing as the reason, while the reality is far more sordid in terms of the relationship between the regulators and the powerful regulated. 

Legislated restrictions on former government financial officials going to Wall Street banks could of course be circumvented, given the incentives described above, though prohibiting employment (or financial enrichment, such as by consulting) in the industries related to an official's area for many years seems possible. Even if Goldman Sachs could not hire away Treasury or SEC offiicals, the bank could still count on ex-Goldman folks who occupy key offices in the U.S. Government. 

Generally speaking, the financial and related political power of such huge aggregations of wealth such as a Wall Street bank has (and is) naturally overpower weak governments, by which I mean governments that depend on or do not have the will to resist the allure of money (or threats) from entities subject to the government. A government whose elected officials must rely on large sums of donated money just to get reelected is ripe for succumbing to corporate offers with strings attached. A strong government is insulated, whether by law, will, or power generally from such strings. A government that has many points of access (of influence) is likely to be weak in not only rebuffing pressure to reduce taxes and spend more, but also standing up to large corporations. A government in a pro-business society is likely to be weak with respect to the power of business, other things equal. Even more significant than these variables, however, is the tenuous basis of representative democracy amid Wall Street bewindowed towers. 

1. Bonnie Kavoussi, “Andrew Williams, Ex-Treasury Spokesman,Headed to Goldman Sachs,” The Huffington Post, July 12, 2012. 

Members of Congress Secretly Lobbied the Fed

As of late September 2012, more than one hundred members of Congress had lobbied the Federal Reserve and other regulatory agencies on the Volcker Rule, the part of the Dodd-Frank Financial Reform Act of 2010 that prohibits banks from operating like casinos (e.g., trading with proprietary funds, rather than those of customers).[1] The rule stems from the importance of banks in our financial system. In September 2008, the world nearly witnessed the collapse of that system when banks stopped trusting each other (e.g., via commercial paper market) because of the risks that some of the big ones had been taking with mortgage-backed derivative securities and the related insurance swap securities. Awash in healthy-seeming fees, the banks purchased risky subprime mortgages and bundled them into bond-like securities that could be sold to investors.
Congress passed the Dodd-Frank Act, so it makes sense, and indeed is positive from the standpoint of accountability, that lawmakers remain involve as the relevant regulators (who are not elected) translate the broad legislative language into specific rules for banks. However, the newspaper’s report points to a less-than-salubrious practice wherein members of Congress contact regulatory agencies in private and before even the period for public comment. This raises the possibility that Wall Street was using its connections in Congress to weaken the public safeguards in the bill—essentially putting a narrow private interest in front of the public interest that the bill was designed to protect.

The access purchased comes not only from having information that the regulatory agencies need; banks (and American corporations in general) could contribute unlimited amounts of money from the corporate treasury (rather than from contributions from executives and employees) to “social welfare” non-profit organizations that can spend money on political ads in support of friendly candidates (and against their opponents) without having to divulge the identities of the donors. So Wall Street banks can furtively promote U.S. Senate candidates who support the repeal of the Dodd-Frank Act without any of us knowing it. In fact, the “social welfare” (54c) groups can in turn contribute directly to a candidate’s campaign without divulging the names of the donors. Not even the IRS, which has been concerned about whether the donors pay the required gift tax, bothers the “social welfare” organizations for donor lists after complaints from several U.S. Senators. Nor has the SEC pushed corporations to divulge to their respective stockholders how the political donations have been spent. I suspect that senatorial influence lies behind this inaction too.
It is not as though there were some uncertainty regarding the need for disclosure in a democracy. Even though eight of the nine U.S. Supreme Court justices in Citizens United stress in their opinions the necessity of disclosure, corporations, no doubt well-connected in the halls of power in Washington from the donations already given, have a way to evade the transparency. Political and corporate democracy are both undercut as banks and business corporations can spend unlimited amounts (out of their respective profits) to help “pro-business” candidates for public office. Rather than being speech itself (and thus subject to free-speech constitutional protection), money is power that can be used to skew or otherwise limit the contours of public debate. After the election, the continued influence of the money is also stealth, such as when members of Congress lobby the Federal Reserve to weaken regulation meant to safeguard our financial system from a repeat of the near-collapse in 2008. For deregulation to be urged so soon after a near-depression gives us an indication of how dangerous “money as invisible speech” is to the public good, even if such influence is in the corporate interest.
As creatures of the state, corporations should not have a share in governance, for that function subverts the causal relationship between Creator and creature. That is to say, a corporate management (or board) presuming to influence members of Congress can be likened to the self-idolatry of a creature supposing itself to be God. Interestingly, as going concerns, corporations are immortal, legally speaking. As for us mere mortals, Rousseau reminds us that we are born free but live in chains—only we are under the delusion that we are still free because the confining elements are subterranean qua the furtive influence of great concentrations of private wealth. I suppose one question is whether finite bundles of subjectivity can somehow become aware of that which has been designed to be outside of our awareness, and, if so, whether a society can so move to protect its good in a viable republic.

1. Ben Protess, “Behind the Scenes, a Lawmaker Pushes to Curb the Volcker Rule,” The New York Times, September 21, 2012.

Is the U.S. Congress Too Beholden to the Financial Industry?

That financial deregulation had any traction at all following the financial crisis of 2008 in the U.S. is stunning, for the implication is that Wall Street money has tremendous influence in the U.S. Governent even after Wall Street banks have screwed up (even in triggering a financial crisis!). 

According to Gary Gensler, head of the Commodity Futures Trading Commission in 2012, Congress stood with the big banks in the struggle to shield Americans from the risks and excesses of Wall Street even after the financial crisis of 2008. He pointed in particular to a proposal from the U.S. House’s Appropriations Committee to cut his agency’s funding by 12 percent.[1] The CFTC had been given expanded powers by the Dodd-Frank Act in 2010. Doubtless the proposed budget-cut had something to do with that. It is astonishing that such a proposal would come in the wake of a financial crisis caused in large part by Wall Street bankers taking too many risks. That the agency was then tasked with regulating the problematic $700 trillion market on derivatives—a task that dwarfed the agency’s regulatory power over futures—suggests that the decision to cut the agency's budget after the financial crisis was especially agrevious, being based, I submit, in Wall Street's denial over its harmful role in triggering the financial crisis in which subprime-mortgage-based bond derivatives collapsed in value even as banks including Goldman Sachs were trying to unload the "crap" as good values. 

CFTC Chairman Gary Gensler staring down the big banks

That an industry with a vested interest in rolling back financial regulations could have any influence at all over elected representatives reflects the general ignorance or naivity concerning conflicts of interest. In a COI, a private interest predominates even if the good of the whole is being estolled. A bank-rolled member of Congress can used the espoused public-interest rationale advanced by the banking industry as cover to hide the cosy relationship. For example, a bank's public affairs department could put out the word that increased financial regulation, even after a financial crisis, is really socialism. The bank-rolled members of Congress could then use the socialism scare-tactic on their respective constituents while quietly accepting the large campaign-contributions from the banks. Meanwhile, the American people feel secure that such representatives are protecting them from a threat rather than enabling one.

1. Alexader Eichler, “CFTC Head Gary Gensler: Congress ‘Sides With Wall Street’,” The Huffington Post, June 8, 2012. 

For more on the conflicts of interest in the financial sector (and others), see: Skip Worden, Institutional Conflicts of Interest, available at Amazon.

On the Role of Socialism in American Political Polarization

In a stunning upset in the 2012 Republican U.S. Senate primary in Indiana, Indiana's Treasurer, Richard Mourdock, beat incumbant veteran Richard Lugar by 22 percent (61-39%). Even though Lugar's 36 years of experience in the Senate had seasoned him into a statesman in foreign policy, the Tea-Party-backed Mourdock was able to portray the aged senator as out of touch and too willing to compromise with Democrats. Mourdock had no intention of extending any hand across the aisle. Is such polarization worth the loss of experience in international relations? Moreover, what is the role of socialism in the political polarization? 

"While Lugar advised in his concession speech . . . that Mourdock would need to work together with lawmakers in the Senate, the new nominee stuck to the belligerent tone he [had] maintained in the campaign, warning that Democrats and socialists were destroying the nation."[1]  Even if Democrats were for government ownership of the means of production (i.e., companies), which is socialism, it does not follow that those Democrats were also attempting to sabatage the U.S. in its foreign relations. Especially given Lugar's expertise in that area, working across the iasle would only make sense. Nevertheless, Mourdock saw a link. 
"Today," he said, "we see the Obama White House and we see a Senate chaired by Harry Reid that's doing everything it can -- though perhaps not intentionally -- to turn our dreams, to turn our great national hope and our dream into the nightmare of ever-growing government, to make us that … western European-style nation,’ Mourdock said. ‘Just yesterday, France elected a socialist,’ he continued. ‘There are those I'm sure in the administration and in the left side of the Democratic Party that were cheering for that. But we're not going to stand for that in Indiana because the supporters of Barack Obama are not going to win!”[2] In other words, Mourdock expected the Democrats to cheer on and perhaps even aid "socialist" governments around the world, the spread of which could isolate the U.S. and the related interests of private property. In 2019, for example, the World Trade Court ruled against the E.U. for having unduly (i.e., unfairly, in terms of free trade) subsidized Airbus. The government ownership of a company goes beyond such subsidization of a corporation like Airbus, which, as of 2019, was owned by EADS, which in turn was owned by a mix of private companies and a few E.U. states. 

What about those supposed socialist countries? To be sure, Francois Hollande ran under the Socialist Party banner. However, the “socialist” policies that he had campaigned on were redistributionist. He did not advocate that the state own more of the means of production. Hollande was redistributionist in that he suggested that la dette (government debt) that Sarkozy had doubled should not be cut only by austerity (i.e., budget-cuts), which hurt the poor disproportionately; rather, the rich should be taxed what they had been taxed before the top tax rate was lowered. 
In fact, Hollande was in a position fresh from his victory to push for federal (i.e., E.U.) economic stimulus spending to complement the federal austerity programs in debt-ridden states, including Greece, Spain, Portugal and Ireland. Using tax increases and budget cuts to reduce government debt is hardly socialism. 
So, Mourdock's lack of knowledge on socialism as an economic system as well as on European governments, combined with his refusal to reach across the aisle, were misplaced, and thus not worth the loss of Lugar's expertise in foreign policy. 

1, Michael McAuliff, “Dick LugarLoses to Tea Party’s Richard Mourdock in Indiana Republican Senate Primary,” The Huffington Post, May 9, 2012. 
2. Ibid.