ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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As Between Democracy and Wall Street

As between democracy and Wall Street, the latter is no doubt the stronger.

The Bush administration and Wall Street, having closed ranks in the face of the severe crisis gripping the United States financial system, eventually managed to bring Congress in line. The latter has endorsed the plan under which the US government would mobilise $ 700 billion of public money to buy the bad assets that are plaguing the financial system and thereby bailout/rescue Wall Street. Understandably, there was public opposition to the deal. Should government be buying the junk assets at prices that the Treasury and the Federal Reserve have been silent about (but as George Soros frankly states, “unless the Treasury overpays for the securities, the scheme would not bring relief”) and hand over $ 700 billion of public money to Wall Street in exchange? If Congress did not pass the bill, the former Goldman Sachs boss and now Treasury secretary Hank Paulson had implicitly threatened, it would have to take responsibility for the collapse of the financial system and for plunging the economy into a long and painful recession.

Congresspersons could have bargained hard to set conditions – for instance, to get a whole lot of direct relief for those who are in danger of losing their houses, indeed, for those who have already forfeited their homes. A New Deal era-like Home Owners Loan Corporation could have been in the making, for there is a dire need for an agency that would buy the mortgages from financially distressed low-income households and convert them into obligations that these families could afford to repay. But the fact is that in this neoliberal era of money-driven politics the US state and high fi nance are in a closer symbiotic relation with each other than ever before. In the end the lawmakers endorsed Paulson’s claim that the bailout proposal constituted “decisive action to fundamentally and comprehensively address the root cause” of the financial crisis.

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