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Trouble in Great Britain likely means trouble everywhere
July 9, 2012 - Mike Maneval
Former U.S. Secretary of Labor Robert Reich, writing for Great Britain's Guardian newspaper Sunday, examines extensive crime in British finance that likely will have devastating effects on the U.S. and world economies. "Wall Street will almost surely be implicated in the scandal," Reich predicts, and the figurative tip of the iceberg, the British financial giant Barclay's, is cooperating with the U.S. Justice Department in a deal to avoid the most vigorous prosecution, a deal Reich believes indicates Barclay's is providing evidence of American firms' involvement in crime or wrong-doing. "Fireworks in the U.S. can be expected," Reich also predicts.
The scandal involves manipulating interest rates, both to keep them artificially low, with the intent to hid the increasing levels of risk to which Barclay's and other financial and banking firms had subjected themselves, and to guarantee the banks' investments in derivatives would produce profits, which Reich describes as "insider trading on a gigantic scale ... A rip-off of almost cosmic proportions."
Reich rightfully is cynical that either political party in the U.S. is capable or willing to address this potential criminality, observing that "not a single top financial executive has been charged with a crime in connection with the excesses that led to the near-meltdown of 2008," and also the tepid weakness of the final version of Dodd-Frank financial reform laws. And yet Reich holds out hope that the fallout from this scandal, when its full impact reaches Americans' wallets, will lead American voters to demand action.
In explaining - or rationalizing - his hopes for voter outrage, Reich notes that both the tea party movement and the occupy movement built upon outrage over the bank bailouts of 2008 and 2009. I fear he is wrong - both the tea party and occupy movements found their critics' barbs easily amplified by cultural distinctions and concerns far less important than the damage done by the climate of bank bailouts. But I hope he is right, because if any issue deserves to unify tea partiers and occupiers and middle America, its the rewarding of secrecy and elitist entitlement embodied by the vaunted, untouchable status of the West's financial titans.
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