Can the Political-Financial Power Complex be Redeemed?

Back in the eighteenth century, Voltaire wrote that, “With Great Power, there must also come Great Responsibility.” Stan Lee echoed the sentiment in his first Spiderman comic book in 1962. Recent financial leaders have shown no such affinity toward responsibility. Instead, the Big Six bank leaders exercise a historically dangerous power while enjoying Washington’s full ideological and financial support with no strings attached. Lax regulators, politicians eager for lucrative private sector jobs after public service and we taxpayers, subsidize them. Their firms’ fraudulent practices transcend borders.
During the past three decades, America’s most elite bankers have worked strategically to bend the banking system, the laws, and the federal government to support their supremacy. Their avarice for private gain shows such contempt for the public good, that it’s hard to imagine a time when humbler heads prevailed. So, did bank leaders always exhibit such morally bankrupt tendencies as they appear to do today? The answer is no.
As I was surprised to discover while investigating presidential archives for my book All the Presidents’ Bankers, there actually were several key points during the past century, when bankers’ aspirations aligned with the goals of elected politicians – and both of poles of American power were able to balance broad economic stability and greater equality with their expansionary plans, resulting in a fairer environment for everyone.
When President Franklin Delano Roosevelt sought to restore national confidence in the banking system during the Great Depression — he called upon Chase (now JPM Chase) chairman and Aldrich-Rockefeller family member Winthrop Aldrich to help him pass the 1933 Glass-Steagall banking reform bill. Not only did Aldrich comply, but he advocated the regulations through public channels like the New York Times and private ones like the White House corridors. He persuaded Congress to pass stricter reforms than even Senator Carter Glass had first envisioned. He led by example, vowing to break up his bank before the legislation was passed. During World War II, Aldrich supported the welfare of others, by spending long months in Europe aiding food drives and raising money for war bonds in the US; these moves were not entirely selfless to be sure, but they had the effect of helping his bank and his country.
Upon leaving Chase in 1953, Aldrich became President Eisenhower’s UK Ambassador, a position in which he helped diffuse what would have been a larger Suez Canal crisis through diplomacy. Similarly FDR’s Assistant War Secretary, John McCloy, who ran Chase during the 1950s, subsequently became President John F. Kennedy’s disarmament advisor, negotiating for arms reduction with the Soviet Union. During the 1960s, Chase and National City Bank (now Citigroup) heads George Champion and George Moore openly supported President Lyndon B. Johnson’s Great Society efforts, albeit in return for LBJ’s hands-off policy toward banking regulation. The idea of the public good and sense of compassion for less fortunate members of society, was put into action by these wealthy bank chiefs.
However, soon after that, the path of bankers and presidents diverged in a manner that had grave economic consequences for the country and its citizens. Since the early 1970s, the idea of balancing private power with public interest at first gradually, and then more rapidly, died. This social detachment coincided with a new breed of bankers who simply used the government to support their goals, as opposed to working together to support joint goals on behalf of themselves and the nation. Bankers pushed President Nixon to abandon the gold standard so that they could more freely compete in the global markets without being hampered by having to reserve gold against their activities. In the mid 1970s, bankers decided their fortunes lay in oil, sparked by the zeal of Chase Chairman David Rockefeller to penetrate the Middle East OPEC countries for profit. This new pool of “petrodollar” money was independent from any national or societal allegiance. Plus, it could be recycled into Latin America in the form of excessive debt – a strategy that led to the 1980s Third World Debt crisis, and a slew of associated Wall Street bail out policies by the Reagan and Bush administrations, at the bequest of their Wall Street friends.
During the 1990s, the last vestiges of the Glass-Steagall Act that had curtailed banks’ ability to speculate with federally-insured depositors’ money were obliterated. This action marked the culmination of a two decade push by the likes of Reagan’s Treasury Secretary and former Merrill Lynch CEO, Don Regan through to President Clinton’s Treasury Secretary and former co-CEO of Goldman Sachs, Robert Rubin, alongside s host of Wall Street CEO’s including Sandy Weill of Travelers-Salomon Brothers and John Reed of Citibank, the duo that created the first post-Glass Steagall goliath, Citigroup.
After Glass Steagall was repealed, a spate of mega-mergers immune to antitrust caused the field of banks to become fewer in number and greater in power. The new behemoths absorbed financial services from securities creation to trading to insurance to asset management — in the process, monopolizing power over citizens’ capital with the blessing of Democrat and Republican presidents and Congress people alike.
By the 2000s, bankers no longer debated economic policy in private correspondences with Presidents, nor did they feel any responsibility to a common good or a broad economic stability. They didn’t care whether the public had confidence in their practices, because they had been nourished by deregulation to become bigger and shielded from losses through bailouts spun as being necessary for our own good. Bankers lost their moral compass along the way. Top bankers still frequented the White House (more so under President Obama than President George W. Bush), but their efforts are now blatantly self-serving. It would be unimaginable for JPMorgan Chase chairman Jamie Dimon to spend months running a food drive for people in war-torn countries or to negotiate disarmament plans. He is too busy presiding over complex derivatives trades.
It’s tempting to romanticize the past, to elevate the period when CEOs didn’t make hundreds of times their employees’ pay, when one salary bought a modest home, and when universities and health care were affordable. The past was not perfect. But even with its flaws, it contained the concept that the “common good” should be nurtured by the most powerful members of society — for everyone’s sake.
Alas, a different mentality pervaded the political-financial power complex then. The idea of excess betting being supported by public funds was considered dishonorable. Bank CEOs in the mid-1900s weren’t like current Goldman Sachs Chairman, Lloyd Blankfein; they didn’t claim to be doing God’s work. But they did finance the building of the country and its middle class without concocting substantial amounts of fraudulent assets that crushed the general economy. Those past leaders showed a conscience for customers and the population that has been lost in the haze of mega bonuses and unpunished crimes.
But why shouldn’t the powerful have principles or great responsibility in the spirit of Voltaire? Why should we stand by and allow them not to be held unaccountable on every level: morally, ethically and financially? It would be remarkable if a half a century from now, people could romanticize about 2015 and say: that was the year the power balance was restored in the favor of the population. Sadly though, our current path shows no indication of taking us in this direction, quite the opposite. We can look to our past for lessons that can be applied to the future regarding restraint and moral and societal obligation from politicians and financial leaders. They lie imbedded in our history. For, without a significant correction, it’s more likely people will say, we lost our way for good.
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Nomi Prins is a journalist, speaker and author of six books, including her most recent All the Presidents’ Bankers: The Hidden Alliances that Drive American Power. She is a distinguished Senior Fellow at the non-partisan public policy think-tank, Demos, and a former Wall Street banker.