The Power of Finance and a New, New Deal

  February 25, 2013

The Power of Finance and a New, New Deal

On the 80th anniversary of the election of FDR and the New Deal, Jennifer Taub and John Weeks discuss the prospects for a serious reform of the banking system
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The Power of Finance and a New, New DealPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. We're continuing our discussion about the 80th anniversary of the election of FDR.

Now joining us again, first of all, from London is John Weeks. He's a professor emeritus at the University of London School of Oriental and African Studies.

And in Vermont, Jennifer Taubs, an associate law professor at the Vermont Law School.

Thanks for joining us.

JAY: So, Jennifer, is a New Deal possible? A lot of people have been talking about the need for a new New Deal. Some people call it a new green deal. But given the state of America--economy, politics--I guess mostly I'm talking about the tremendous power of finance now as compared to Rooseveltian times--it wasn't that they weren't powerful then, but it seems to me the power they have now is in a whole different league--is such a thing possible?

JENNIFER TAUB, ASSOC. PROF., VERMONT LAW SCHOOL: I think it is, Paul. What we're seeing now is a convergence of folks on the progressive left and the right with an interest in breaking up the banks. It's not every day where you have people like Simon Johnson speaking at an AFL-CIO event talking about a George Will column that he agrees with. And so there you have Richard Fisher from the Dallas Fed, Tom Hoenig, who's now at the FDIC board, and many others in academia and in policy and, you know, asking for and recognizing that these banks are too big, that they have an implicit guarantee, and that they're interfering with democracy.

JAY: But you can't even pass the flimsiest regulation against these banks right now. I mean, they tried to pass position limits, a weak, weak version, watered-down version of position limits at the Commodity Futures Trading Commission. They couldn't get it. They passed some regulatory legislation, and it's all left for regulation. By the time the lobbyists are finished with the regulation, there's next to nothing left. I'm talking about the real political power of finance. How are you going to break them up?

TAUB: That's why you have to do it structurally. And there are many of us who watched how Dodd-Frank kind of rolled out with so much authority delegated to the agencies for rule-making. What we know now, which people suspected, is, you know, that when these rules get litigated in the D.C. circuit, the D.C. circuit is going to object, strike them down. And that basically makes regulators more shy about using the authority they have.

And so what really needs to happen: I think that--exactly what you're talking about, that regulation, in terms of saying that we're not going to have hard structural changes, regulation is too subject to the whims of who may be in power at an agency, and also who may be in the courts. So there needs to really be true change, which means basically changing the size of these institutions back down to the size they were in the 1990s--not something truly radical, but it would make a huge difference.

JAY: John, what do you make of the same question? I guess what I'm saying is that there needs to be something entirely new now.

JOHN WEEKS, PROF. EMERITUS, SCHOOL OF ORIENTAL AND AFRICAN STUDIES: I think that like you I'm skeptical to the point of despair, but I take a slightly different form for my skepticism. I think that the--as Jennifer was saying, there are a lot of recognition that there's something desperately in the wrong with the banks, and there are a lot of people who want something done about it and would be prepared to vote for people who want something done about it. I mean, after all, we have to remember, despite all the money that went in to support Romney, Obama--people voted for him. And they didn't vote for him because finance bought them. Finance had bought Obama.

Now, what worries me is that I think the reactionaries have a plan. Their plan is to limit democracy, limit voting rights, try to create a situation so there is no danger. See, we're worried that nothing can be done. They're worried that something can be done, and their answer to their worry is to try to restrict voting rights (and we see a lot of that going on), have a Supreme Court which will strike down any progressive legislation, and a whole other range of antidemocratic measures in order to ensure that reactionaries continue to be elected even though they represent a minority of the vote. We have a House of Representatives now which has a majority of reactionaries even though a majority of Americans voted for Democrats, not for Republicans, in the House of Representatives.

JAY: People voted for Democrats, and they voted for kind of the promise, 'cause in the election campaign you hear rhetoric that sounds New Deal-ish. But do you actually see when in office that the Obama administration has anything in common, really, with the New Deal?

WEEKS: No. But what I think is that bit by bit, as people's anger rises, it also rises against Obama and the Democratic Party--or at least let's [incompr.] The sad reality is that progressive change will come through the Democratic Party, because the U.S. electoral system makes it almost impossible to create a third party. And is it possible? Well, I think we should not rule it out completely.

JAY: Jennifer, do you see any Rooseveltian New Deal-ishness in the Obama administration? It seems on the regulatory side, if anything--you know, to some extent, not that they've been good, but if anything, the Senate's been a little ahead of Obama on this. On many issues, the administration seems far less willing to regulate, and he certainly surrounds himself with Wall Street people.

TAUB: I'm glad you mentioned the Senate, because I see FDR in four senators: Elizabeth Warren, our new senator from Massachusetts; Bernie Sanders of Vermont; Sherrod Brown of Ohio; and Jeff Merkley of Oregon. Those are the folks who are the progressives. And they're--I'm sorry if I'm missing others, but these are the ones who are sticking with what they think is right, notwithstanding the tremendous pressure coming at them from the financial services sector.

JAY: So in other words you're saying yes? 'Cause when I look at the Obama administration, they don't seem very interested in regulation that's actually effective.

TAUB: I don't see Obama as the next FDR, no.

JAY: So--go ahead, John.

WEEKS: I don't either, but I think that he's a bit better than Clinton. Now, that doesn't mean we've got a chin, but it does suggest that progressives have had some impact. And, of course, there's the horrendous depression that we're in. That's had some impact too, such that you now have some Democratic politicians--Jennifer mentioned them, one from her own--the most outstanding one, of course, is Bernie Sanders from her own Vermont. I used to live in Vermont. I knew Bernie. I think, you know, we would--the world would be much--the U.S. would be much worse off without him, but he's only one senator. But a few senators make a difference. And now there's several of these progressive women who have been elected.

So I think that we're seeing the possibility of a Democrat being nominated for presidency who is not completely owned by financial interests.

JAY: Where do you see that?

WEEKS: Well, I see it with these senators that are--these progressive senators that have been elected. I mean, they can run in primaries. I don't know which one will. Obviously, Bernie Sanders can't; he's not a Democrat. But we've now--ten years ago I found it hard to imagine who a progressive candidate would be, you know, who could stand--who would be the--well, I could mention some names nobody would have ever heard of. Who would be the Fred Harris or the George McGovern of this generation, I couldn't come up with a list of names. Now there are a few names that could possibly do that.

JAY: I guess what I'm getting at is that there's something at the structural level that finance has become so dominant now and such an enormous proportion of the GDP (and I can't remember the number; what is it, like, more than 40 percent of profit in the American economy was in finance; correct me if I'm wrong, but I think it was some very, very high number like that), that structurally finance is in a position now that the old way of thinking of how things might change, it simply has to be given up on, that there--you know, like, for example, if there's going to be demands made, it's about public banking, it's about things that change the paradigm, because the way things are structured now, you can't not do it through the current system.

WEEKS: Well, I also like Jennifer's views on that, 'cause I think that that's quite pessimistic. I think we look back--.

JAY: I'm not pessimistic about that happening. I'm very pessimistic about it happening through the current paradigm. I'm not pessimistic that people could fight for something else.

WEEKS: Let me just say--let's just go back to 1920s just for a moment. Election of 1928, who did the Democrats nominate? They nominated Al Smith, a reactionary Democrat from New York who would later denounce Roosevelt. Both parties were parties of business in 1928.

Comes 1932, Roosevelt is nominated; you have a different paradigm.

There were tremendously powerful businessmen--they happened to be industrialists, they happened to own railroads and factories and things such as that. The fact that we have the economy run by a handful of people is nothing new. John D. Rockefeller, who controlled--basically, his stocks were something like 20 percent of the stocks on the U.S. stock market, or he's buying and selling. I mean, we should not think that the concentration of power we see now is anything new.

JAY: Go ahead, Jennifer.

TAUB: Yeah. I mean, I think my optimism springs from a great deal of pessimism or despair, and I think about that as the next generation. As you probably know, student loan debt is about $1 trillion. Unemployment and underemployment for folks getting right out of college or out of high school is tremendously high. And so these forces will converge.

And, you know, the next generation is more progressive and has an expectation of a society that nurtures each person to achieve what they--their best and not where a few syphon away all the profits. I mean, if you talk to people in their, you know, 20s and 30s, that is--you know, the vast majority have those views. But they also have that much debt. And to some degree, one might think that the debt would--if employment were higher, then the debt would only encourage people to, you know, take jobs and go along to get along. But I think at this point, when you look at the Occupy movement, for example, which continues, there is a growing sense that radical transformation is necessary. And so I think that that is what makes me more optimistic.

JAY: Okay. Well, we're going to continue this discussion. This is obviously something we can go on about.

If you'd like to get in on it, you can write us--contact (at) therealnews (dot) com. Or you can Twitter me. My Twitter is @PaulJay_TRNN. Give us your thoughts on this, your questions, and we'll bring these guests and other guests back, and this will be a ongoing discussion about what's next.

Thank you both for joining us.

WEEKS: Thank you, Paul. It was a pleasure to be on Real News again.

TAUB: Thank you, Paul.

JAY: And thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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