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The Iraq war hits Wall Street

Barack Obama squandered the chance to lead with an alternative plan to the Wall Street bailout. Instead both Obama and McCain pushed for a plan that’s not only deeply unpopular but potentially as costly as a new Iraq war. Too busy slinging mud at each other, both campaigns are ignoring the enormous significance and wide-ranging repercussions of the financial crisis, which British scholar John Gray defines as the US equivalent of the fall of the Soviet Union.

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Story Transcript

PEPE ESCOBAR, SENIOR ANALYST, TRNN: As the electoral college stands today, Barack Obama would win this election. According to the Machiavelli from Texas himself, Karl Rove, he would even win across the river in Northern Virginia, once a Republican stronghold, and now communist country, according to John McCain’s brother Joe. Rather blue. Voters are flocking to the Obama camp during the biggest state intervention in US history—biggest if we don’t count another monster state intervention, the soon-to-become trillionaire war in Iraq. The Wall Street $110 billion-and-counting bailout is being interpreted by millions of Americans as a class struggle weapon of mass destruction. It may cost US taxpayers over $2 trillion after we add real interest payments. Yes, this is a second Iraq. Even the initial Bush-Paulson numbers—do you remember those $700 billion that came from nowhere? As a US Treasury spokesman told Forbes, "It’s not based on any particular data point. We just wanted to choose a really large number." So Americans will soon be listening to the sound not of music but of over $1 trillion of their future taxpayer earnings being vacuum-cleaned by Goldman Sachs, Citibank, Bank of America, and JPMorgan Chase. The Bank of China will also collect. There is no guarantee any of these banks will put the money back into productive US investments. So the US Treasury, that is, Hank Paulson, [formerly of] Goldman Sachs, will print money like crazy, just like during the Latin American crisis of the 1980s. And who is the Treasury hiring to decide which banks and which debts to buy up? Wall Street experts. So this is a new Iraq in more ways than one. In Iraq, Washington subcontracted the war to private military outfits like Blackwater, for instance. Now it’s time for Wall Street to pull a Blackwater. Did Congress make at least an effort to appoint a group of independent experts to analyze all this mess? No, it didn’t. The bailout ballet was staged to perfection. Representative Marcy Kaptur, Democrat from Ohio, pretty much nailed it.

REP. MARCY KAPTUR (D-OH): Let’s play Wall Street bailout. Rule 1: Rush the decision. Time the game to fall in the week before Congress is set to adjourn, and just six weeks before an historic election so your opponents will be preoccupied, pressured, distracted, and in a hurry. Rule 2: Disarm the public through fear. Warn that the entire global financial system will collapse and the world will fall into another Great Depression. Control the media enough to ensure that the public will not notice that this bailout will indebt them for generations, taking from them trillions of dollars they earned and deserve to keep. Rule 3: Control the playing field and set the rules. Hide from the public and most of the Congress just who is arranging this deal. Communicate with the public through leaks to media insiders. Limit any open congressional hearings. Communicate with Congress via private teleconferencing calls. Heighten political anxiety by contacting each political party separately. Treat members of Congress condescendingly, telling them that the matter is so complex that they must rely on those few insiders who really do know what’s going on. Rule 4: Divert attention and keep people confused.

ESCOBAR: Representative Brad Sherman, Democrat from California, warned that martial law would be imposed in the US if the bailout did not pass.

REP. BRAD SHERMAN (D-CA): The only way they can pass this bill is by creating and sustaining a panic atmosphere. That atmosphere is not justified. Many of us were told in private conversations that if we voted against this bill on Monday, that the sky would fall, the market would drop two or three thousand points the first day, another couple of thousand the second day. And a few members were even told that there would be martial law in America if we voted "no."

ESCOBAR: The Economist, the voice of the city of London, says that economists are mostly Barack Obama cheerleaders. But what was Obama doing before the bailout was approved? Both Obama and McCain were frantically calling House representatives to change their nay into a yay. Were there other options apart from the biggest redistribution of wealth—this one towards the top and not towards the bottom—since the 1917 October Revolution in Russia? Of course there were. Here’s one offered by two respected Yale economists. Essentially, it involves, and I quote, "Pay off all the delinquent mortgages." (Jonathan G.S. Koppell and William N. Goetzmann, The Washington Post, October 1, 2008.) Instead, Obama bought the bailout hook, line, and sinker. [inaudible] is explaining it in the campaign trail.

SEN. BARACK OBAMA (D-IL): This is not a plan to just hand over $700 billion of your money to a few banks on Wall Street. If this is executed the right way, then the government will temporarily purchase the bad assets of our financial institutions so that they can start lending again, and then sell those troubled assets once the market settles down and the economy recovers. In other words, if this is managed correctly, we will hopefully get most or all of our money back, possibly even turn a profit on the government’s investment.

ESCOBAR: Obama may be leading the polls, but this has more to do, according to The Washington Post, with, I quote, "negativity about the country’s financial prospects" than an Obama Plan B to deal with the financial crisis. Obama was not proactive; he was reactive to the Bush-Paulson plan, which then became the Bush-Paulson-Pelosi-McCain-Obama bailout plan. Obama could have called dozens of economists to educate him about the financial crisis in Mexico in 1997, Brazil in 1999, and Argentina in 2001. It could have learned how Sweden dealt with its own crisis in 1989. Yes, they pay more taxes, but they have one of the highest standards of living in the whole world. And this when Paulson, Mr. Goldman Sachs himself, revealed that the first bad debts would be bought up only after the November 4 election. So American voters won’t even see if the bailout worked before they elect Obama or McCain and their new House representatives. So there was no national debate. Could it be because those who voted yay had received 41 percent more money from financial sector over their congressional careers than those who voted nay, according to the Non-Partisan Center for Responsive Politics? As the center points out, and I quote, "Election after election, the finance, insurance, and real estate sector has been the top campaign contributor in federal politics, giving more than $2 billion to federal candidates and political parties since 1989." Whoever is elected, Obama or McCain, will inherit the whole Bush administration mess, which includes the biggest fiscal and foreign deficits in US history and no control of monetary policy. These are some of the questions that Obama is not answering at the moment. How deep will the recession be? Will the US invent another bubble? And if that is the case, will that be an industrial-military-complex bubble or a disaster-capitalism bubble? And what is the McCain campaign strategy in face of all this? More sleaze. In the words of a McCain adviser, if we keep talking about the economic crisis, we’re going to lose. Both campaigns are not even trying to debate the seriousness of it all. John Gray from the London School of Economics, one of Europe’s most brilliant intellectuals—of course Bush, McCain, neocons, they all hate intellectuals—he totally nailed it. He writes, "Having created the conditions that produced history’s biggest bubble, America’s political leaders appear unable to grasp the magnitude of the dangers the country now faces." Mired in their rancorous cultural wars and squabbling among themselves, they seem oblivious to the fact that American global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where America is only one of several great powers facing an uncertain future it can no longer shake.

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