Michael Hudson: A public option in banking will be a structural answer to the power of finance
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. And in Washington, Occupy Washington has started. Occupy New York continues. And occupy many cities across the United States and Canada and other parts of the world is spreading. Now joining us to talk about the significance of this movement is Michael Hudson. Michael is a professor of economics at the University of Missouri-Kansas City. Thanks for joining us again, Michael.
MICHAEL HUDSON, ECONOMICS PROFESSOR, UMKC: Thank you, Paul.
JAY: So what do you think of what started in New York and the sort of significance of it and sort of–. There’s been a critique that there’s no demands. There’s been a critique there’s too many demands. What’s your sense of it?
HUDSON: I think it’s a very strong point that they haven’t made specific demands. There’s been a lot of discussion over what to do, and their worry is, if you make specific demands, then the media and the other people are going to go and make these particular demands the issue. That’s not the issue. The sense is that the financial system is dysfunctional as a system. Now, that means you can’t make a technocratic demand like fix this or give a consumer protection law or appoint Elizabeth Warren to the commission. It’s much bigger than that. There’s an awareness that the whole financial system has been dysfunctional. And the other similar demonstrations that are occurring abroad, from Iceland to Greece, are that the government is in the hands of the financial lobbyists. That’s why it’s called Occupy Wall Street, because Wall Street is what essentially has bought the electoral campaigns and bought the Obama administration. And I can tell you that there was an absolute disgust yesterday and today after Mr. Obama’s attempts to hijack the Occupy Wall Street demonstration by saying, here’s what I’m trying to do to help, and then he gave a couple of lobbying statements written by his Wall Street financial lobbies, as if these guys are lobbyists for Wall Street trying to make more profits for the banks. They’re disgusted with the Obama administration. They’re disgusted with the Bush administration and the Republicans. They’re disgusted with politics being for sale to the highest lobbyist. And they’re disgusted with the debt overhead. They’re disgusted with the administrators. The system doesn’t work. And they don’t want to reduce this to a set of technocratic little fix-its and paste-its, and if you do just one or two or three or four [incompr.]
JAY: Right. Well, in Europe the protests are quite specific, in the sense that there’s a real attempt to shift the crisis onto workers, especially public sector workers, and people are fighting the austerity measures. And you had this, certainly, in Wisconsin, a fight over some very specific issues–again, layoffs or pushing things, in terms of cost, onto public sector workers. I mean, at some point, doesn’t this have to get concrete, even if some of the demands are more systemic?
HUDSON: Yes. But at the current point, they’re trying to say to focus on the system. They don’t want to prematurely focus. Of course they’re developing a set of demands that are common principles, but they’re a little concerned about the fact that a number of different people have all come out with ostensible lists of their demands saying, here’s a list they want, and then somebody else will come out with a different list they want, and they don’t want to be hijacked.
JAY: Now, there’s a lot of–by focusing on Wall Street and the finance system, certainly the financial system and Wall Street are, you know, one of the dominant players in the American economy and politics, but they’re not the only one. And it kind of leads to, like, you know, policy fixes which are to do with–and a lot of the people being interviewed at the occupation are talking about this–financial transaction taxes, sort of more regulation, maybe things you would suggest are tinkering. One of the demands that some people have raised there is the idea of actually a kind of public bank or a nationalizing bank as a way–some banks, as a way to deal with the finance sector, which is more of a structural demand. What do you make of that?
HUDSON: I think the demand isn’t simply to make a public bank. It’s to treat the banks generally as a public utility, just as you’d treat electric companies as a public utility. The key about public utilities is their rate of return is guaranteed and the rules in which they operate under are guaranteed. Just as there was pressure for a public option in health care, there should be a public option in banking. There should be a government bank that offers credit card rates without punitive 30 percent interest rates, without penalties, without raising the rate if you don’t pay your electric bill. This is how America got strong in the 19th and early 20th century, by essentially [incompr.] public infrastructure, just like you’d have roads and bridges. And essentially the idea of public infrastructure was to lower the cost of living and lower the cost of doing business. You’re not going to do that if you let Citibank write the rules and to use bailout money from TARP to bribe congressmen to write the rules to give Citibank even more money, and abolishing the regulation, to let Citibank charge whatever it wants. You need a real public option. That’s what they meant, not simply that the government’ll start a bank going along and following the lead of Citibank and being just as exploitative but in the public interests. They want a public option.
JAY: So are you see this, if you imagine this twofold, which is a bank as a public option with a public interest mandate? [sic] But do you see other sections of private banking also treated like a public utility, in other words, with far more regulatory authority, as you said?
HUDSON: [incompr.] the rate of return, you should never–you should regulate the terms of their lending. You should never have let them get into derivatives, period. You should let never let them give zero interest loans, period. You should enforce a fraudulent conveyance act, where if a bank makes a loan without any idea of how the debtor can pay, as you have on the books in New York, the loan is simply wiped off the books. It’s nullified as a fraudulent conveyance. You have the leading banking sectors in America–Bank of America is a fraudulent enterprise. It’s a gang. Let’s be straight about it. It’s a crime gang. Citibank, a crime gang. Wells Fargo, a crime gang. None of these guys are put in jail. Now, the fact that they’re not put in jail, and the fact that today the former securities and exchange regulatory commission was told by the judge, you’re not allowed to fine violators who you have said committed crimes, you’ve said are criminal organizations, you’re not allowed to regulate them, this just shows that what essentially the Obama administration is backing is a long-term Republican and Democratic decriminalization of fraud. Now, how are you going to recriminalize fraud like you used to do? You used to throw these guys in jail. You don’t anymore. That’s why I say the problem goes so deep and is so corrupt–. One of the demands on Wall Street, for instance, that everybody agreed in the Occupy Wall Street is that Tim Geithner, who’s a bank lobbyist, should not be in charge of the Treasury. You have the US Treasury run by a bank lobbyist whose job is to give away free lunches to bank and say the government can give all the money it wants to the banks but it can’t give [a penny] to the workers, it can’t give a penny to increased jobs for the workers. And then you have, today, Mr. Obama going on television saying, I want to create jobs. He doesn’t want to create jobs. His intention is to reduce wages by 30 percent. He knows that this is going to happen. He knows that he’s giving a public relations speech, just as the Republican [incompr.] said. I hate to support the Republicans in this, because I’m certainly not, but this was a speech where Obama knows that the Senate and House will not go along with his law. And then there’s an automatic reflux to the commission that he appointed, the commission of about 13, where he stuffed with opponents of Social Security, opponents of Medicare. And the idea is that if they can’t come to an agreement, then his own commission is going to cut back Social Security, cut back social spending, and give the money to Wall Street. That’s why these people are so angry, because of–the hypocrisy that you’re having in Washington now rivals that that you’re having Greece, rivals that of Iceland, England, and the other countries where the situation is exactly the same.
JAY: Thanks very much for joining us, Michael.
JAY: And thank you for joining us on The Real News Network.
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