“Lowlife grave dancers like me will make a fortune,” chimes billionaire J. Christopher Flowers, former golden boy of Goldman Sachs, quoted in the May 6 New York Times, speaking about the breaks the current banking crisis gives to wealthy opportunists. “The government has all the downside and we have all the upside.”
Since the collapse and near-collapse of a number of financial institutions last year, private equity managers like Flowers and the Carlyle Group are snapping up small national banks in hopes of getting their hands on charters that will enable them to take over the larger struggling banks—with the federal government’s help, if possible.
Looks like another instance of “disaster capitalism,” to borrow Naomi Klein’s phrase for the manipulation (and perhaps instigation) of global catastrophes in order to reap immeasurable profits.
Such ventures are much easier when the capitalists are in bed with government decision makers, of course, as anyone associated with the Carlyle Group could tell you.
The Carlyle Group, as you may know, is a global private equity investment firm based conveniently in Washington, D.C., close to the vein it likes to tap. Its assets include doughnuts (Dunkin’ Donuts), rental vehicles (Hertz), ice cream (Baskin Robbins), and missile launchers (United Defense Industries).
Carlyle’s United Defense took $1.8 billion in government contracts in the first year of the Iraq war. Altogether, Carlyle-owned companies won $9.3 billion in government contracts without placing a bid. Coincidentally, employees and board members of the Carlyle Group include representatives of the key families in recent world history—Bush, Bin Laden, Sarkozy—along with former British Prime Minister John Major and former Time magazine editor-in-chief Norman Pearlstine.
Now its predatory eyes are set on small banks.
“Morganization” is the more flattering name sometimes applied to such grave dancing, after John Pierpont Morgan, the railroad tycoon who, during what Mark Twain and Charles Dudley Warner unflatteringly nicknamed the “Gilded Age,” took over insolvent businesses (including banks) and found ways to make them profitable again.
When the Federal Treasury faltered in the final decade of the nineteenth century—the infamous decade of the robber barons and the (depending on whom you read) collapse or near-collapse of American capitalism—President Grover Cleveland picked Morgan to save the day, procuring heavy investments from the Bank of England and the Rothschilds in Europe, plus helping to think up the neat trick (so controversial at the time it lost Cleveland a third term) of replacing the gold standard with fiat currency (i.e. cash based not on gold but just on the fact that the government accepts it as payment).
Just three months ago, Morgan’s namesake J.P. Morgan Worldwide Securities Services was selected by the Federal Reserve to oversee the mortgage-backed securities (MBS) purchase program. Plus ça change, plus c'est la même chose.
Back in the day, Morgan’s fingers were in a lot of pies. Morgan was instrumental in the development of business consolidation and the modern concept of the corporation, as well as the early globalization of the marketplace. Morgan was also the principal financier of Nikola Tesla’s pioneering experiments in electricity. But whereas Tesla’s vision was to provide free power to all, Morgan accurately predicted the windfall that privatized energy would be in the twentieth century and formed General Electric instead. (Tesla, more or less a footnote to history now, still inspires some sympathy—or contempt—as the idealistic genius who tore up a contract with Westinghouse that would have made him, like Morgan, a billionaire.)
Even to mention such debacles draws accusations from the corporate mass media and its minions that one is engaging in class warfare. Of course, the charge is made only when the underdogs are snapping back at the top dogs. Top dogs, of course, can profit from actual bombs-and-missiles warfare, sacrificing countless lives on both sides, usually the lives of underdogs, and the media continue to paint them as national benefactors, no matter how many graves they boastfully dance on.
Right now, according to the New York Times article linked above, all that blocks the private equity firms is federal law, which would be more encouraging if it weren’t dreadfully clear by now that corporate interests and fantastically wealthy individuals can sway American lawmakers with just an arched eyebrow, while the media paint them as humbly beseeching the American people’s mercy and good favor in a time of national crisis—same old same old.
Now there’s a great push by private equity managers to get Washington to change the law that technically forbids ownership of banks by nonfinancial companies, law inspired in reaction against some of the excesses and strong-arm tactics, way back when, of men like Morgan and John D. Rockefeller—whose personal wealth bolstered crumbling U.S. banks against an array of panics stretching back to the end of the Civil War, to these speculators’ own considerable profit and some weakening of antitrust laws.
But blocking the way of the would-be grave dancers are (1) Secretary of Treasury Timothy Geithner, a man sometimes described as enthralled by (and probably to) the financial industry, and (2) the Federal Reserve, the two-headed (private and public) U.S. banking system, which Dennis Kucinich recently quipped was no more “federal” than Federal Express. This gives me small hope, indeed.
It would seem, as best as I can tell, that the odds favor the fantastically wealthy, again; and, as J. Christopher Flowers exulted four months ago, the government will get the shitty end of the stick (the part we non-billionaire taxpayers get to hold for all our heroic efforts at “saving the economy") and the weasels will get “all the upside.”