Tag Archives: banking industry

How to Put Wall Street CEOs in Jail

“Forgive me,’’ director Charles Ferguson said in receiving an Academy Award for his documentary Inside Job, “I must start by pointing out that three years after a horrific financial crisis caused by fraud, not a single financial executive has gone to jail — and that’s wrong.”

In New York, Tuesday marked the beginning of the long awaited trial of hedge fund manager Raj Rajaratnam–who ran the $7 billion Galleon Group  and whose personal wealth is estimated at $1.3 billion. He is being prosecuted by the SEC for insider trade deals. Rajaratnam is said to have made $45 million in illegal profits. He has denied the charges and is free on $100 million bond. If he is convicted he could go to prison for as long as 20 years. The SEC historically has been such a handmaiden of the finance business that it’s hard to imagine anything serious coming out of its prosecutions, but one never knows.

Whatever happens to Rajaratnam, it  would be simple enough to prosecute many of the high rollers on first civil, then criminal charges, fining them millions of dollars and taking them out of circulation for up to 20 years.

“Contrary to prevailing propaganda, there is a fairly straightforward case that could be launched against the CEOs and CFOs of pretty much every US bank with major trading operation,” writes Yves Smith in her popular Naked Capitalism blog.  “I’ll call them ‘dealer banks’ or ‘Wall Street firms’ to distinguish them from very big but largely traditional commercial banks.’’ She proceeds to lay out the case, the key points of which I have excerpted below:

Since Sarbanes Oxley became law in 2002, Sections 302, 404, and 906 of that act have required these executives to establish and maintain adequate systems of internal control within their companies. In addition, they must regularly test such controls to see that they are adequate and report their findings to shareholders (through SEC reports on Form 10-Q and 10-K) and their independent accountants. “Knowingly” making false section 906 certifications is subject to fines of up to $1 million and imprisonment of up to ten years; “willful” violators face fines of up to $5 million and jail time of up to 20 years.

The responsible officers must certify that, among other things, they “are responsible for establishing and maintaining internal controls’” and making sure everyone concerned knows about them–and beyond that, for taking steps to have these controls evaluated and reported. Smith continues:

It’s almost certain that you can’t have an adequate system of internal controls if you all of a sudden drop multi-billion dollar loss bombs on investors out of nowhere. Banks are not supposed to gamble with depositors’ and investors’ money like an out-of-luck punter at a racetrack.

Readers may have better suggestions of where to start, but I’d target Lehman. First, it already has a smoking gun: a May 2008 letter written by former senior vice president Michael Lee to senior management, including the CFO Erin Callan. It describes numerous accounting shortcomings, none of which look to be new and many of which look to be Sarbanes Oxley violations. Second, its derivatives books were by all accounts an utter disaster at the time of its collapse: multiple non-intergrated systems, to the point where the bank did not even have a good tally of how many positions it had….

 Naked Capitalism concludes:

Will any of this happen? Of course not. The decision was made at the time of the TARP, and reaffirmed early in the Obama administration when there was serious talk of resolving Citigroup and Bank of America, that no one at the helm of the senior banks would be subject to serious scrutiny, much the less actually expected to be held accountable for actions that wrecked the economy and have imposed serious costs on ordinary Americans. The case we described above is relatively simple to explain to a jury and has the advantage of being the sort where the plaintiffs could build on their experience in one action in subsequent cases.

But that sort of truth, that most, probably all, of the major Wall Street banks were engaged in the same sort of misconduct and the violations extended to the very top of the firms, would expose numerous other parties as complicit. So we’ll permit the cancer in our society to metastasize rather than threaten the power structure. But at least we citizens can make it clear, even if we cannot change the outcome, that we are not buying the canard that nothing can be done to fight this disease.

In other words, the power structure forges ahead, while the poor and middle classes will pay for their own screwing with reduced social security, medical care, and social welfare services of all sorts. All this is being arranged by both Democrats and Republicans, in response to a recession that will only serve to deepen the already enormous divide between rich and poor in American society.

Credit Cards: Another Way for Banks to Take Your Home

READERS WRITE BACK

Alan Mackay, an Oregon reader, sent me an email in response to my recent post describing how banks and other credit card lenders are going after people’s Social Security payments. In McKay’s case, it is his home the bank is going after because of unpaid credit card bills–and it is perfectly legal, according to state law. In 2005, he  and his wife retired, and bought a modest home at Yachats on the Oregon coast. The house was purchased for cash. There was no mortgage, subprime or otherwise, and, says MacKay, they “were debt free.’’ Then there was a medical emergency and they had to use a Bank of America credit card to pay the bills. In a letter he sent to Oregon public officials, he describes what happened next:.

Although we never missed a payment, never paid late, and always paid more than the minimum, our interest rate rose steadily, without notice. At 27.99%, it is now three times what it used to be. There is no way we can continue to pay our monthly bill.

We never agreed to the usurious interest rates that have put us in this predicament, especially not from a bank that has been bailed out by billions in taxpayer money.

We met with an attorney and were stunned to learn that the bank can seize our home and force a sheriff’s sale to collect from us. This is not a foreclosure, since our house is paid for. It is something that can happen to any Oregonian who cannot pay a debt of any kind, including medical.

A sheriff’s sale would spell utter disaster—even homelessness—for us, and we feel certain that the same is true for rapidly growing numbers of our fellow Oregonians, given our state’s current 12.1% unemployment rate. Some are indeed facing foreclosures. Others, like us, could lose their homes because of other debts. In our case, we could be ruined because our bank has decided arbitrarily, unilaterally, and through no fault or failure of ours, to keep raising the amount of our debt.

Oregon’s homestead law reflects decades-old real estate values, making it easy for banks to seize people’s homes for a small fraction of their real worth. This, together with our bank’s deliberate acceleration of debt, cynically violates everything we teach our children about America’s history and character and about the value of hard work and responsibility.

Congress has passed a law that will forbid exorbitant, unwarranted interest rates, and President Obama is working to put this law into effect before its specified July 2010 date. Even if he succeeds, however, the new law will not help Oregonians whose current consumer debt jeopardizes their homes. Only an immediate update of our hopelessly antiquated homestead law can save them from disaster.

We therefore implore you to issue an immediate moratorium on banks’ confiscatory practices and to halt sheriff’s sales at least until new laws can take effect. Oregon’s homestead laws urgently need to be updated to reflect today’s property values.

Bottom line: The exhorbitant–and ever-changing–interest rates on credit cards can prove another route toward banks foreclosing on a home, without ever holding the mortgage.

Crybabies of Wall Street

 The new issue of New York Magazine features a cover story called “The Wail of the 1%.” The piece describes what a bummer it is for rich Wall Street execs to have to put up with all the populist rage that’s being levied against them–just because they helped bring down the world economy, and got paid seven-figure salaries while doing so. It’s especially difficult for the poor bankers and brokers to endure all these bad vibes while they’re having to tighten their own hand-tooled Italian leather belts due to lost jobs and lost bonuses.

This isn’t the first time we’ve heard this sort of peevish lament from the rich–I’ve written about it before on this blog. But the article’s author, Gabriel Sherman, gets some truly shameless quotes out of these guys (most of whom refused to use their names). A few examples:

“No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?” e-mails an irate Citigroup executive to a colleague.

“I’m not giving to charity this year!” one hedge-fund analyst shouts into the phone, when I ask about Obama’s planned tax increases. “When people ask me for money, I tell them, ‘If you want me to give you money, send a letter to my senator asking for my taxes to be lowered.’ I feel so much less generous right now. If I have to adopt twenty poor families, I want a thank-you note and an update on their lives. At least Sally Struthers gives you an update.”

There’s nothing surprising about greed, of course. What’s remarkable is the fact that after all the damage they’ve done, these execs still believe that they were entitled to everything they got, including a multi-trillion-dollar bailout from the very people they screwed. As Sherman notes, their statements reveal 

the belief shared on Wall Street but which few have dared to articulate until now: Those who select careers in finance play an exceptional role in our society. They distribute capital to where it’s most effective, and by some Ayn Rand–ian logic, the virtue of efficient markets distributing capital to where it is most needed justifies extreme salaries—these are the wages of the meritocracy. They see themselves as the fighter pilots of capitalism.  

Now that they aren’t flying so high, these executives see themselves as victims, their wings clipped not by their own incompetence, amorality, or avarice, but by an overbearing government and an envious proletariat. “Why are you being punished for making a lot of money?” one asks.

If you require an antidote (or a barf bag) after reading the article, I suggest this musical response from Gene Burnett. [Warning: Contains (appropriately) strong language.]

The Bailout We Owe to the Developing World

One outcome of the G-20 meeting (as I wrote yesterday) was an agreement to earmark as much as $1 trillion for developing countries, where the economic crisis is having a life-threatening impact. This figure is in line with what the United Nations estimates is needed to “buffer the blows of the global downturn on the most vulnerable.” 

In fact, $1 trillion is the least the rich countries owe to the poor, considering the chaos and suffering our own economic policies and practices have brought upon them. In part, the additional hardships now being experienced by the developing nations result from the recession trickling down in a way that wealth never seems to do. But there’s more to the story than this.

Some of the heightened suffering in the developing world can be traced back to the Clinton and Bush administrations, when a series of legislative and regulatory changes paved the way for rampant speculation on the commodities market. What happened next is explained in a report by the Minneapolis-based Institute for Agriculture and Trade Policy (IATP), the most comprehensive source of information on this subject.

Wall Street went to work and bundled together groups of commodities futures–everything from oil to copper to basic staples like corn, wheat, rice, and soybeans–into commodity index funds, similar to what you find in the mutual fund business. The subsequent explosion of buying and selling by a handful of Wall Street firms (led by Goldman Sachs and AIG) ran the prices of different commodities up and down with little relation to any actual market or to the so-called laws of supply and demand. (James Galbraith describes the process in detail here.) 

In the five years leading up to the recession, commodity index speculation increased by 1900 percent. In this way, Wall Street not only pushed the price of oil through the roof, but directly caused skyrocketing food prices and food shortages around the world. In short, the IATP report concludes:

U.S. government deregulatory steps opened the door for large financial services speculators to make huge “bets” that destabilized the structure of agriculture commodity markets. According to the United Nations, global food prices rose an estimated 85 percent between April 2007 and April 2008. Prices rose for wheat (60 percent), corn (30 percent) and soybeans (40 percent) beyond what could be explained by supply, demand and other fundamental factors, according to the report.

For people in the poorest countries, these changes sometimes meant the difference between subsistence and starvation: In 2007, according to the UN Food and Agricultural Organization (FAO), an “estimated 75 million people were added to the 850 million already defined as under-nourished and food insecure.”

In view of all this, the United States and the other wealthy nations that dominate the world economy owe the developing world more than a bailout. (Such a bailout would, in any case, constitute  a fraction of what we’re giving to the banks–the very institutions that increased world hunger for the sake of profits). We also owe them a reformed global financial system that will prevent such travesties from happening again.

But it doesn’t look like those reforms will be happening any time soon. Bills to regulate commodities exchanges have been floated in both houses of Congress, but according to the IATP, they are progressing slowly and leave a lot to be desired. President Obama’s nominee to the Commodity Futures Trading Commission, Gary Gensler, is a former Goldman Sachs executive who, while working in Clinton’s Treasury Department, backed the very deregulatory moves that allowed commodity speculation to run wild in the first place (as exposed in Mother Jones last year). Senator Bernie Sanders is seeking to block Gensler’s nomination for this reason.

And on the international level, as IATP pointed out in the runup to the G-20, regulation of commodities exchanges was a subject conspicuously absent from the meeting’s agenda—despite its potential life-and-death impact on food and energy security worldwide.

This absence is part of a larger problem, as described in a new report from the Congressional Research Service, which finds that “There seems to be no international architecture capable of coping with and preventing global [financial] crises from erupting.” The report, made public today on FAS’s Secrecy News blog, concludes:

The financial space above nations basically is anarchic with no supranational authority with firm oversight, regulatory, and enforcement powers. There are international norms and guidelines, but most are voluntary, and countries are slow to incorporate them into domestic law. As such, the system operates largely on trust and confidence and by hedging financial bets.

In other words, despite any incremental progress made at the G-20 meeting, what we have is more or less a global version of the Alan Greenspan doctrine, which proclaims that all will be well if we leave the financial markets, and the large institutions that dominate them, to voluntarily “police themselves.” And we all know how well that turned out.

Legacy of Lies: The Great Economic Cover-Up

Remember back in February, when Bill Clinton urged Obama to be more “upbeat” about the economy? Clinton actually implied that the new president could be making the economy worse by being honest about how bad it was, thereby rattling public confidence—and with it, the market. You’d have thought the primary campaign would be enough to convince Obama that nothing good could come from Clinton homme. But the president has clearly taken a page from Clinton’s playbook, largely avoiding statements that might frighten the horses in favor of cheerful declarations that we are at “a turning point in our pursuit of global economic recovery”—while at the same time promoting the latest bank bailout plan, which he says will get us there.

There are plenty of reasons why its wrong to try to buoy up a sinking economy on a raft of positive rhetoric—among them, the fact that it obscures what actually happened in the past, and clouds our judgment about what should be done to “fix” it. In the current issue of Newsweek, Daniel Gross comments on the Orwellian linguistic feat that by the government seeks to rebrand the piles of reeking crap created by our financial system.

Remember those toxic assets? The poorly performing mortgages and collateralized debt obligations festering on the books of banks that made truly execrable lending decisions? In the latest federal bank-rescue plan, they’ve been transformed into “legacy loans” and “legacy securities”–safe for professional investors to purchase, provided, of course, they get lots of cheap government credit. It’s as if some thoughtful person had amassed, through decades of careful husbandry, a valuable collection that’s now being left as a blessing for posterity.

According to this morning’s New York Times, the administration is now taking things a step further by promoting a plan that would let us ordinary folks buy what are being called “bailout bonds”—shares in mutual fund-type bundles of lousy mortgage securities. These are supposed to eventually become profitable, thereby allowing us to share in the wealth. But of course, they could also go the other way. As the Times notes: “If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses.” In other words, having been screwed once by Wall Street, we’re now being asked to bend over for a twofer—which some people just might do, if they believe the rhetoric that happy days are about to be here again.

Another point of view came from William K. Black, who was the chief federal regulator during the S&L crisis, in a long interview with Bill Moyers on Friday. Black calls Bernie Madoff is a “piker” in comparison with the Wall Street giants that committed mass fraud, and are now nonetheless raking in government funds. When Moyers asks Black “why the bankers who created this mess are still calling the shots,” instead of being fired like the auto executives, Black mentions the close relationships between Washington and Wall Street, which applies to Tim Geithner and Larry Summers as much as to Henry Paulson. Then he talks about what he doesn’t hesitate to call a “cover-up”:

WILLIAM K. BLACK: But the other element of your question is, we don’t want to change the bankers, because if we do, if we put honest people in, who didn’t cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up.
BILL MOYERS: The cover up?
BLACK: Sure. The cover up.
MOYERS: That’s a serious charge.
BLACK: Of course.
MOYERS: Who’s covering up?
BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion—a trillion is a thousand billion—$2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have masses losses, and that they’re fine.

Black insists that “the entire strategy is to keep people from getting the facts…about how bad the condition of the banks is.” So instead of closing bad banks, as regulators did after the S&L crisis, the government is simultaneously pumping money into them and covering up their losses, while avoiding any hard-nosed investigation into their past conduct—all based on the idea that “we have to lie to the people to create confidence.”

MOYERS: Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
BLACK: Absolutely.
MOYERS: You are.
BLACK: Absolutely, because they are scared to death. All right? They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits. And we won’t rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it’s foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, “We just can’t let the big banks fail.” That’s wrong….
MOYERS: So, you’re saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
BLACK: That’s right. And it’s particularly a crisis that brings this out, because then the class of the banker says, “You’ve got to keep the information away from the public or everything will collapse. If they understand how bad it is, they’ll run for the exits.”

Promoting this scenario, of course, serves the interests of these same bankers, since it insists that the only way to prevent complete catastrophe is to keep bailing out the big financial institutions, regardless of their credibility and regardless of the cost.

Black believes that the only antidote for this self-serving myth lies in Congress having the wherewithal to launch a real investigation and reveal the facts to the American people—and then base future policymaking on these facts, instead of on a legacy of lies.

Hey—Billionaires Are Victims, Too

My first real job, after graduating from college, was at the Wall Street Journal. I got fired pretty quickly, and for good reason; I didn’t belong there. For a start, I never did fully understand the complicated paper world of finance (even though it was a lot simpler than, in the early 1960s). What’s more, I could neither fathom nor fit in to the culture of Wall Street—an oblique, half-hidden world unlike any other, which not even writers and filmmakers have ever managed to depict with much authenticity. 

Now, though, the financial meltdown is creating cracks in the facade,  allowing bits of that culture  culture pour out—the shallowness, greed, arrogance, and most of all superficiality of the money men. Why did we ever fall for these guys, either as guardians of our life savings, or as icons of American life? When I was growing up in the 1950s, scholars built careers on probing and analyzing the man in the gray flannel suit; a generation later, in the 1980s, the obsession began anew. Now we’re getting some insights into what lies beneath the gray flannel, and it is not a pretty sight….

Just when you thought they couldn’t behave any worse, the now-reviled financial industry executives have taken to depicting themselves as the true victims of the recession. As they come face to face with public rage, few seem to feel the least bit ashamed or contrite about their role in wrecking the world economy, or for their undeserved wealth. Instead, their responses are ranging from peevish to paranoid.

On Tuesday, at a conference on the “Future of Finance” hosted by my old employers, the Wall Street Journal, “Finance executives expressed anger and betrayal at Washington’s latest anti-Wall Street rhetoric,” the Journal reported. Glenn Hutchins of the private equity firm Silver Lake complained (in a triumph of mixed metaphors): “To point the finger at one group means, No. 1, you’re not understanding the problem, two, you’re stretching our social fabric thinly, and you’re throwing the baby out with the bathwater.” Former SEC chair Arthur Levitt decried the “‘us’ and ‘they'” mentality dividing Main Street from Wall Street. “We’re now shifting to the left pretty far in terms of business-bashing,” he said, “and it has reached extremes of incivility that are intolerable.”

“Extremes of incivility” may seem like a charitable response to the small segment of the corporate elite that brought on a global economic collapse, and the far larger segment that were enriched by their treachery. Yet the latter group, at least, is now expressing indignation at what they see as their unjust victimization.

In a now notorious op-ed in Wednesday’s New York Times, AIG executive VP Jack DeSantis offered his resignation, complaining bitterly about the outrage over bonuses. “I never received any pay resulting from the credit default swaps that are now losing so much money,” he insisted, while “The profitability of the businesses with which I was associated clearly supported my compensation.”

The same issue of the Times included a sympathetic story about the psychic pain of laid-off Wall Street execs.

Alden M. Cass, a psychologist who treats Wall Street traders and executives…and other psychologists and researchers who have worked with Wall Street employees say that these workers—often drawn to the intensity and volatility of their profession—are more prone to anxiety, depression, substance abuse, and other mental stresses than the general population. They drive themselves hard. Working 10, 12, 14 hours a day is not only expected; it is also a badge of honor.

In some ways, these experts say, Wall Street types are perhaps better prepared to handle the shock of sudden change than those in more stable professions. But because they are typically measured by the size of their paycheck-bonuses, in particular-their self-worth is deeply threatened when the money evaporates.

“We’re talking about individuals who base their identities and egos on what they do for a living and how much they make,” Dr. Cass said.

Another shrink interviewed for the article reported being “overwhelmed with new clients from Wall Street in recent months.” There’s no mention of the fact that most laid-off workers, lacking seven-figure severance packages and Cadillac COBRA coverage, cannot afford the comfort of psychotherapy, and are “threatened” with the loss of more than their “self-worth.”

Bailed-out companies are also complaining of the physical dangers an enraged public might pose to their executives and employees. After the bonus debacle surfaced, AIG reported receiving death threats, and posted armed guards outside the offices of its Financial Services division. More recently, the Guardian reports, a leaked company-wide memo “warned staff to take special precautions ‘due to a growing sense of public attention fuelled by increased media scrutiny.'”

The memo, posted on the New York website Gawker, urges staff to “avoid wearing any AIG apparel (bags, shirts, umbrellas etc) with the company insignia”. It advises workers to take off identity badges when they go outside, to report the presence of any strangers, and to call the emergency services if they think they are being followed. “At night, when possible, travel in pairs and always park in well-lit areas,” it reads.

Some Wall Street executives, as the New York Times reported recently, have come up with another approach: They simply lie about where they work. “I’d almost rather say I’m a pornographer,” one told the Times. “At least that’s a business that people understand.”

Why Bank Rage Is Not Populism

The cover of Newsweek on the stands today reads “The Thinking Man’s Guide to Populist Rage.” These covers, of course, tend to go for eye-catching hyperbole (six weeks ago, Newsweek’s cover line was “We Are All Socialists Now”). But the issue is filled with serious essays on the subject, by Michael Kazin, Eliot Spitzer, and others. And in this morning’s New York Times, John Harwood makes similar claims, painting people’s anger at Wall Street as part of a populist resurgence. Harwood’s most prominent source is, of all people, Ed Rollins, the Republican strategist whose credentials on the subject consist of working on the campaign of faux-populist Ross Perot.

One person not quoted in these pieces is the original, and still unequaled, historian of populism, Lawrence Goodwyn. He identified the first populist movement—-the agrarian revolt of the 1890s—as the greatest mass movement in American history, and as a largely unfulfilled dream. Goodwyn’s 1978 book The Populist Moment is still in print and well worth reading, both for its stirring history and its insights into what is going on today—-and what isn’t going on.

Goodwyn traces the Populist Movement to its origins in the rural depression after the Civil War, when farmers formed clubs that fought the monopolistic railroad rates set by the big Eastern railroads, to the detriment of Southern and Western farmers. By the 1870s these clubs had grown in number and size, forming themselves into Farmers Alliances, which engaged in all sorts of cooperative action, from catching horse thieves to buying supplies. By the 1890s, the alliances had a combined membership of more than one million people and were in the thick of politics, fighting railroad rates, fighting the big cattle operators, demanding taxes on speculative landholdings, defending local merchants, and demanding paper money to replace the gold standard.

Most significantly, in relation to today’s economic crisis, the alliances believed they needed to wrest control of credit, and of the money supply in general, from the hands of bankers and other blood-sucking plutocrats, and place it in the hands of the farmers and laborers who were the real producers of wealth. Georgia populist leader Tom Watson accused the Democrats of sacrificing “the liberty and prosperity of the country…to Plutocratic greed,” and the Republicans of serving the interests of “monopolists, gamblers, gigantic corporations, bondholders, [and] bankers.” He said that big business didn’t care about ordinary Americans “except as raw material served up for the twin gods of production and profit.”

As an alternative, the populists proposed what they called the “sub-treasury plan,” under which a new monetary system would be created and operated “in the name of the whole people,” and credit would be freely extended to farmers, small producers, and other ordinary citizens. The plan represented a genuine challenge to the commercial banking industry, and to big corporations in general.

In the election of 1890 the movement emerged with substantial blocs—

Kingfisher Reformer (Oklahoma), November 29, 1894

Kingfisher Reformer (Oklahoma), November 29, 1894

52 congressmen, seven state legislatures, a handful of senators and governors–and by 1892, the alliance leaders had created the foundations of a new People’s Party. They got more than one million votes in the elections that year. Cleveland won, and in 1893, rural America fell into deep depression. The populists gained favor, and in 1896, the Democratic Party’s nomination of William Jennings Bryan (who also opposed the gold standard) represented an effort to pull in the People’s Party. 

But the revolt collapsed, for a myriad of reasons: It failed in its efforts to build alliances with industrial labor unions and with black farmers in the South. And it was deprived of its driving force when economic conditions improved. Some rebellious farmers went home to the Republican Party; others splintered off into generally futile local movements. Certain populist ideas were gradually worked into the overall economy-—railroad regulation, some banking reform, direct election of senators, postal savings banks, initiatives and referendums, and an expanded concept of currency.

But in fact, the movement’s co-optation into the mainstream politics of the Progressive Era was what cemented its demise. Goodwyn sees these reforms as “skin-deep parodies of the original ideals.” As he puts it, what happened was “a consolidation of our current political culture, framed by the narrow aspirations of ‘reform,’—-falling within the labels of ‘progressive’ or `liberal.’ No one would ever again challenge the basic structures of the political economy.” As for the farmers, “the noose tightened, with smallholders being swallowed by big enterprises.” It marked the beginning of the movement toward agribusiness, as well as an affirmation of the power of the industrialists, the insurance companies, and above all the banks. The public would push back at that power structure in bad financial times such as the Great Depression, but would never again pose it any serious threat.

What’s going on today bears little resemblance to the great surge of political organizing that began in and spread through the South and West in the 1890s. To begin with, it isn’t now, nor is it likely to become, part of any larger mass movement. It’s directed at the worst excesses of the system, not at the system itself. And it doesn’t offer an alternative vision, beyond a few more progressive “reforms.”

Some of these mild reforms are being earnestly pursued by the Obama Administration, which at the same time clearly has no intention of taking them any deeper. (Contrary to what Rush Limbaugh and Newsweek may say, we are not all socialists now.) They may well succeed in reining in the worst abuses of a system. But the system will survive largely intact and the society it dominates will remain wildly unequal, a far cry from the dreams of those farmers who gathered in barns and grange halls when the nation was much younger than it is today.

Anthony Weekly Bulletin (Kansa), May 4, 1894. Cartoons from web site on Populism created by Worth Robert Miller, Department of History, Missouri State University

Anthony Weekly Bulletin (Kansa), May 4, 1894. Cartoons from web site on Populism created by Worth Robert Miller, Department of History, Missouri State University: http://history.missouristate.edu/wrmiller/default.htm.