BILL MOYERS: As you know, earlier this week Treasury Secretary Timothy Geithner proposed a vast expansion of government authority that would crack down hard on Wall Street's reckless behavior.
Just in time, it seems. You could almost hear the mob in the streets of Washington as he spoke. Popular anger was beginning to evoke unhappy images among Washington elites of the French Revolution, guillotine and all.
On the Op-Ed page of Sunday's "Washington Post," William Greider, the veteran political reporter of four decades, suggested a glass half full. He wrote that the public's rage "has great potential for restoring a functioning democracy. Timely intervention by the people could save the country from some truly bad ideas now circulating in Washington and on Wall Street."
Perhaps no journalist better understands the intertwining twists and turns of government and money, the collision of capitalism and democracy, than William Greider. He wrote the definitive account of the Federal Reserve system, SECRETS OF THE TEMPLE. In the spirit of Thomas Paine he produced, WHO WILL TELL THE PEOPLE? Followed it with, THE SOUL OF CAPITALISM. And now, COME HOME, AMERICA: THE RISE AND FALL (AND REDEEMING PROMISE) OF OUR COUNTRY.
Bill Greider, welcome back to the Journal.
WILLIAM GREIDER: Thank you, Bill.
BILL MOYERS: We saw Secretary Geithner on Monday. We saw President Obama on Tuesday night. We saw Secretary Geithner again on Thursday. And the storyline seems to be, we're going to get tough on the financial industry. Your old newspaper, "The Washington Post," says, calls it, "A sweeping expansion of Federal authority of the financial system. A rebuke of raw capitalism, and a reassertion that regulation is critical to the healthy function of financial markets." That's the storyline as I read the week, but if you read between the lines, what's missing?
WILLIAM GREIDER: Well, among other things that are missing from that story is that we had the rules and regulations, the agencies created some 80 years ago and afterwards to prevent this sort of catastrophe. And these same political players, Republicans and Democrats holding hands, stripped them away, eviscerated them. The same agencies these reformers want to put in power to prevent this from happening again. Starting with the Federal Reserve, the Securities Exchange Commission, other regulators, utterly failed in their duty to do that. Now, we're going to give them new power.
I'm offering a breath of skepticism toward this grand transformation of government. I don't want to be a cynic, but it feels more to me like trying to restore the old order that failed. And I mean by that these big mega banks that had been liberated by deregulation to do as they pleased and the other rules that were undermined. I think this President, and I'm a big fan of this President, but I think his first priority seems to be to recreate those institutions which, some of which are now insolvent, as healthy again.
And actually it's quite scary, because unless they set about to make much more fundamental changes, I fear we will, sure enough, get this back again.
BILL MOYERS: Were you thinking that when you watched Secretary Geithner yesterday? Thursday, when he presented this, what seems to be a sweeping reform of the regulatory system?
WILLIAM GREIDER: Well, in fairness to the Secretary, you can't really know until he fills in the blanks. And, of course, there were no-- like his earlier pronouncements, there weren't enough details to really actually know quite what he's doing. He said, I'm not going to decide who is in charge of the universe in protecting us from what they call systemic risk. I think it's pretty well understood in Washington that the Administration and the Treasury Secretary would like to give this to the Federal Reserve. The Federal Reserve, as many people know, is a sort of unique cloistered institution of government that is insulated from political accountability. And usually, quite secretive. That's for starters. And my accusation, not just in this book but previously is that it tipped its favor hard in favor of capitalism and against labor over the last 25-30 years. And became a kind of cheerleader, actually, under Allen Greenspan for the all the excesses and so called modernization that are now in ruin. So, just as a matter of logic, why would we want to give more power to a governing institution that was already supposed to defend the quote safety and soundness of the system.
BILL MOYERS: But if the Administration turns to the Fed for help, it means it does not have to go through Congress, right? Because the Fed is not regulation.
WILLIAM GREIDER: Well, that's, I mean, that's one of the attractive qualities about the Fed is that it is this black box of technocratic expertise. And it knows things the rest of us don't know. And it's very expert at what it does. And there's actually some truth to that quality. But it's a political institution. It makes public decisions for the rest of us. And so, to pretend that it's above all, that is nonsense from the beginning. If you're a member of Congress, particularly at this moment. And you're a bit cynical yourself. You want to get this monkey off your back. This financial mess, and all of the scandals that keep recurring from the way the bankers are using our money, keep piling up. So, they want a quick solution that says, let's give it to the Fed. The Central Bank is trusted. It's wise. We'll let them deal with all this stuff. This not new, of course, they did that 100 years ago when they created the Federal Reserve. 1913, it was a kind of compromise between labor and capital. And it said, we'll take the money question, about inflation, deflation, financial crisis, out of the popular debate. And we'll put it in this respected institution. And over a century it worked for some periods. And for other periods the Federal Reserve, because it is so close to the major banks, did what it could to help those financial institutions. And I say, bluntly, betrayed its public obligation.
BILL MOYERS: Which was?
WILLIAM GREIDER: Which was to run the economy in a balanced fashion, protect it against excesses, on both sides. And be an honest decision maker of money and credit supply. Which is the heart and soul of our system. And in the last year- if you look at what happened, you don't have to be an expert on monetary policy to see this. Step back and look at what happened in the last 25 years, 30 years. An explosion of credit and debt and a valuation of everything from the Dow Jones to these exotic financial instruments went through the roof, while the wages incomes of ordinary Americans flat, even falling, but basically stagnant.
BILL MOYERS: In other words, you're saying that the Fed, charged to curb excesses, did not curb those excesses?
WILLIAM GREIDER: That's right.
BILL MOYERS: It just took the governor off.
WILLIAM GREIDER: And to put it more sympathetically, there are good reasons for that. Some of which were not the institution's fault. The mechanisms which it uses to control money and credit through the banking system-- that is the commercial banks, we all know were weakened by the deregulation.
BILL MOYERS: I mean, it was both parties that were saying, "We want to deregulate." So, is it a collective guilt?
WILLIAM GREIDER: It's the first impetus, which was genuine and unquestionable, was inflation in the 1970s.
BILL MOYERS: Paul Volcker came in and-
WILLIAM GREIDER: The Paul Volcker comes in to put a harsh stop to that. And he did, successfully. But taking the limits off interest rates, repealing the law against usury, allowing other firms to get in the game of lending in a much more substantial and uncontrolled way. All of those changes were driven by the laissez-faire ideology of the day. And we know-
BILL MOYERS: Government will be lazy, and everybody else will...
WILLIAM GREIDER: Will fair badly.
BILL MOYERS: Right. Right.
WILLIAM GREIDER: Well, yeah, and Democrats, not all of them, but in many ways-
BILL MOYERS: Not all Republicans, either.
WILLIAM GREIDER: Nor all Republicans, but both parties, on the whole, bought into this. And we- no need to question their sincerity. They bought into it. You might observe, in passing, that it also matched the desires of their patrons.
BILL MOYERS: Well-
WILLIAM GREIDER: Who were the big financial contributors to their campaigns. But even leaving that aside, this logic was, you know, compelling to lots of people. Some of us are, were sort of bag ladies on the street corner, waving our placards, "No, no, no, don't do this."
BILL MOYERS: As I listen to Secretary Geithner, I heard him say, well, Treasury's going be a tough cop on the beat. We're not just turning to the Fed. We're going to make this Treasury Department a champion of the people's interest, of the public interest. And we're going be a really tough cop on the beat. Do you believe him?
WILLIAM GREIDER: Unfortunately, Secretary Geithner, has a record- which we know about. When he was President of the New York Federal Reserve Bank. And he was at the table, in many of the bailout transactions. First Bear Stearns then A.I.G. and others. And this is, again, not my opinion, but people on Wall Street talk about it all the time. He got spun around again and again by the big Wall Street players. The bailout of Bear Stearns was really about protecting J.P. Morgan Chase.
The story was told backwards in the press, basically, because it's a story the government told that J.P. Morgan came in to buy Bear Stearns at the behest of the government. But in fact, if Bear Stearns had gone down, J.P. Morgan Chase was vulnerable itself to a wave of derivative crashing crisis. When they bailed out A.I.G., the chief executive of Goldman Sachs was in the room. Why was he in the room? Well, because he had big exposure to- through derivatives, to A.I.G. So, when they pump money into A.I.G., it sends the same dollars out and buys back these derivative contracts at par value, not even discounted, to the banks and others who hold them. Goldman Sachs gets $12 billion out of that transaction. This is another scandal waiting to surface. And I trust good, smart reporters are already on the case. And following the dollars that moved around among the leading financial institutions in ways that politicians could not have not known about it. It defies reason to think that Washington didn't know this was happening.
BILL MOYERS: "The New York Times" on Thursday had this remarkable full page graph, based upon the excellent work of the Center for Responsive Politics, a nonpartisan group you're familiar with-
WILLIAM GREIDER: Yeah.
BILL MOYERS: That monitors money and politics. They said, where Wall Street trades in political currency, and if you look at this you realize that political connections may be the new currency for deal makers. Right? And it shows which of the financial elites have contributed to which elite politicians.
WILLIAM GREIDER: Oh, this is nice.
BILL MOYERS: What do ordinary citizens do about this? How do they break this grip that money has- the patrons have on the politicians?
WILLIAM GREIDER: They trust themselves. I read a wonderful book about the Civil Rights Movement and SNCC and others in the South, in Mississippi, the most treacherous, backward place you could go, bring the issue of racial equality.* And they said the organizers first goal was to learn to listen to these people, that they were poor blacks in Mississippi. The second goal was to convince themselves and these poor people to act like citizens even if- even though they knew they weren't citizens. And you think about that. That's kind of the mystery of democracy. People get power if they believe they're entitled to power.
BILL MOYERS: I read just this morning that there's a nation wide grassroots protest planned for April 11th.
WILLIAM GREIDER: I know some of those kids.
BILL MOYERS: You do?
WILLIAM GREIDER: Yeah, no, I'm excited by it.
BILL MOYERS: They're young people who want to take on banking reform, and reform the financial systems, as a campaign, an ongoing witness.
WILLIAM GREIDER: I know. They call themselves A New Way Forward.
BILL MOYERS: New Way Forward.
WILLIAM GREIDER: And you can find them online. But I actually knew a couple of the organizers. I've been talking to them, for some years. And they're full of, you know, just...
Young people are part of my optimism. They smart kids, want to be engaged in their times, see the injustices of their society. And they don't quite trust the great, big existing organizations. And with some good reason, as you know. And particularly, they're not totally sold on the Democratic Party as the vessel of reform.
So they're now engaged in putting together the 11, 12, I'm sure they'd like to have 50, little bonfires around the country. These demonstrations. There's going be one in Washington and one in Wall Street, and a number of other cities. I think if people do those things with or without any help from big organizations, that collectively becomes the voice that tells Washington, we're on to your silly ideas that Wall Street wants you to do about reform. We see through them. And we have some ideas of our own. And we're going to come talk to you, and if you decline to talk to us, we're going to come after you. That's the voice of democracy speaking. When people say that.
BILL MOYERS: I hear that. But I also read your piece on "The Washington Post" last Sunday, in which you wrote, "Obama told us to speak out. But is he listening?" You ask. Well, is he?
WILLIAM GREIDER: I think he's... And I've been very enthusiastic about his opening as President. He did the stimulus package and a number of other things that's fulfilling his promise. On this, he does seem absolutely committed to restoration of the old order. There's no other way to say it. And this- these things Secretary Geithner is saying this week and others have been putting out, all confirm that.
I think that's A) a huge mistake, financially. I don't- because I think these things are not going to work. And will, in fact, blow up in his face. Maybe a month from now. Or maybe six months, I don't know. But the handing out of government guarantees and capital to hedge funds and private equity funds. Financial institutions founded on secrecy, by the way. They're don't even pretend to be transparent. They're closed shops. Hands out that money, and then somewhere down the road people are going to learn that the investors, so called, are reaping 20 double digit returns on this money with almost no risk at all to themselves. And whether that works or not, people will be outraged. Again, as the returns come in. And I think should be. And outrage right now might just get the Congress to slow down a bit, calm down, we want reform, but we want it done right. And we want it done for the public interest, not for the old order.
BILL MOYERS: So, Obama, this week, has opened the hotline, one might say, the online hotline, to the White House. And said, give me your questions and we'll answer them. As of now over 100 thousand people have responded. Do you take that as an indication of what?
WILLIAM GREIDER: Popular anger.
BILL MOYERS: Popular anger?
WILLIAM GREIDER: Yeah. People get confused about this. Americans overwhelmingly want our President to succeed. And so do I. But that's not- the nature, is not, of democracy, authentically, is not simply supporting from the bleachers, and saying, gee, we hope you win the game. It's being on the field, engaged in whatever small or large way is possible. And expecting those elected representatives, including the President, to at least hear what you're saying, and if, and rightly, responding to it in some ways. That's the dynamic of a democratic society. And we know everybody knows in this country that this has now been, for some years not exclusively, but mainly a top down society. And you go into workplaces and hear the same things said as you hear about politics. Well, I know what's wrong here, but they won't listen to me. I don't have any voice in the matter. Or investors, small investors, putting their money in mutual funds. Well, they're not listening to me. Look who they're giving this money to. You know, you can go on and on. And that's what democracy is- would break.
BILL MOYERS: And I know that one of your deep concerns about the Fed, turning so much power over to the Fed, is that it is cozy with the big institutions. And that the smaller, entrepreneurial organizations and businesses that do not have access to the inner circle are excluded.
WILLIAM GREIDER: President Obama and if the Democratic leaders in Congress follow along, he'll put the Democratic Party on the wrong side of history. At this critical moment. What we ought to be seeking, the goal of reform, and government aid, is creating a new financial and banking system, of many more, thousands more, smaller, more diverse, regionally dispersed banks and investment firms. That's first obligation is to serve the economy and serve society. Not the other way around. What the administration's approach may be doing is consecrating too big to fail, for starters. Which, of course, everybody in government denied was the policy until the moment arrived. And secondly, and this will sound extreme to some people, but I came to it reluctantly. I fear what they're doing, not intentionally, but in their design is setting the crown for a corporate state.
BILL MOYERS: A corporate state?
WILLIAM GREIDER: A corporate state. And by that I mean a rather small but very powerful circle of financial institutions the old Wall Street banks, famous names. But also some industrial corporations that bought banks. Or General Electric, which is already half of big financial capital, GE Capital. And that circle will be our new Wall Street club. Too big to fail. Yes, watched closely by the Federal Reserve and others in government, but also protected by them. And that's a really insidious departure. To admit that and put it into law. And then think of all those thousands of smaller banks. How are they going to perform against these behemoths that have an inside track to the government spigot? And for just ordinary enterprise in general? Before you even get to the citizens. How are citizens supposed to feel about that? And I-- my point is, in this situation, with if the leading banks and corporations are sort of at the trough, ahead of everybody else in Washington, they will have the means to monopolize democracy. And I mean that literally. Some of my friends would say, hey, that already happened.
BILL MOYERS: Yeah, the corporate state is here.
WILLIAM GREIDER: The corporate state is here. And I'd say, let's not argue over that. The fact is, if the Congress goes down the road I see them going down, they will institutionalize the corporate state in a way that will be severely damaging to any possibility of restoring democracy. And I want people to grab their pitch forks, yes, and be unruly. Get in the streets. Be as noisy and as nonviolently provocative as you can be. And stop the politicians from going down that road. And let me add a lot of politicians need that to be able to stand up. Our President needs that to be able to stand up.
BILL MOYERS: In this essay last week in "The Washington Post," you describe President Obama as quote "trapped between the governing elites who decide things and the people who are governed." When does he finally have to choose sides?
WILLIAM GREIDER: I think he has to choose as this story keeps unfolding, because I don't think it's going to change dramatically with these new plans announced. In fact, the anger will be stoked.
BILL MOYERS: No, we do forget Bill, that he keeps trying to remind us. We do forget that he walked into a house that was burning.
WILLIAM GREIDER: Yeah, that's true.
BILL MOYERS: And his job is to put it out and rebuild it.
WILLIAM GREIDER: Here's my take on the New Deal and the history of what actually happened. And it conveniently fits my deeper prejudices about the country and how progress is achieved in America. That is, people in the streets or churches or wherever found their voice and made it happen by agitating and informing the higher authorities. In the early '30s, Franklin Roosevelt had a set of things he thought he could do to right the ship of the Depression. He tried some of them. They didn't work very well. Meanwhile, organized labor, others, were all over the country lighting bonfires for bigger changes. Social security came out of that. Labor rights, the first attempt to give people the right to organize their own voices in a company came out of that. A whole bunch of other reforms that we now take for granted. And Roosevelt didn't stand athwart and try to stop them. But he let them roll him. And he- and I think that's what, I hope for now. That people of every stripe will stand up and say, we love you Mr. President, but you don't have it right yet. And we're going to bang on your door until you get it right.
BILL MOYERS: The book is "Come Home America: The Rise and Fall (and Redeeming Promise) of Our Country." Bill Greider, thanks for being with us.
Thanks very much, Bill.
*C. Wesley Hogan's MANY MINDS, ONE HEART, University of North Carolina Press, 2007.