State of Play In The USA: Too Big To Fail, Too Mighty To Nail, Too Puny To Matter

When the term "Too Big To Fail" first reared its head back in 1991 in connection with a congressional report on the economic implications of whether the federal government should intervene to prevent huge financial institutions from failing, it was little noticed.

But by 2008 with the economy hurtling southward and some of those institutions teetering on the brink of collapse, the term was everywhere -- from regulators and politicians with furrowed brows to finger-wagging pundits to acid-penned bloggers.

"Too Big To Fail" became the catch phrase for the idea that the AIGs, Banks of America and GMACs are so huge and so interconnected that the federal government cannot allow them to go under because doing so would have a disastrous effect on the economy. The term was soon applied to General Motors and Chrysler and a few other non-financial sector players that received tens of billions of taxpayer bailout money beyond the hundreds of billions the banks, mortgage companies and insurers continue to suck up like heroin addicts jonsing for their next fix.

Well, a couple more terms need to be added to the lexicon:

'TOO MIGHTY TO NAIL'

Despite ample evidence of criminal behavior at the top of many of those financial institutions, few executives have received little more than a wrist slap, many have golden parachuted to soft landings and barracudas like Bernard Greenberg, who drove AIG into the ground, have emerged to create new firms that siphon off the best and the brightest from their old firms.

Greenberg's feint is especially shameless coming as it does at a time when the Treasury, in a rare bout of sensibility, has sought to limit obscenely high salaries and bonuses at AIG and other companies that receive bailout money, which in the case of AIG will hasten the exodus of its talent . . . into Greenberg's welcoming embrace.

So why, beyond a rogue trader or three like Bernard Madoff, have so few of the people who were instrumental in making the Great Recession the worst economic downturn since the Great Depression had to face the music while millions of us have had our homes foreclosed, our cars repossessed and our dreams of college put on hold?

Because the same financial and regulatory geniuses who were screwing things up with George Bush's acquiescence are doing the same thing with Barack Obama's acquiescence. Absent an opposition save for the occasional Barney Frank outburst and some op-ed page catterwalling, the Henry Paulsons, Timothy Geithners and Lawrence Summers simply do not have the interest or the balls to get to the bottom of what caused the recession, let alone make sure that the biggest perps pay for their sins instead of rolling over into new clover.

'TOO PUNY TO MATTER'

So much for the 1 percent. What about the other 99 percent? In a word, we're screwed and tattooed. (Okay, that's two words.)

Rivers of bailout money continue to flow to Wall Street, where it is supposed to stimulate loans to consumers and businesses but has not. The 3.5 percent increase in gross domestic product heralded last week would seem to be great news, but it's misleading because the increase was driven by bailout dough.

Even institutions like Goldman Sachs and JP Morgan Chase that are doing quite well, thank you, are racking up huge profits not through lending but through some of the same arcane financial instruments that caused the downturn. Once again, the Obama administration seems unwilling to make sure that the long suffering burghers of Main Street be allowed in on this manna.

Meanwhile, stimulus money has done more to keep jobs than create new ones as unemployment still hovers near 10 percent, which brings us to two other terms that are getting a vigorous workout these days even as the economy shows signs of growth -- "Jobless Recovery" and "Joyless Recovery."

It is of little comfort to Joe and Jane Sixpack that Reaganomics -- the voodoo theory that easing the tax burden on the wealthy and deregulating everything in sight would benefit everyone -- was a failure even before the recession.

The greater failure is that policymakers -- from Obama to Paulson-Geithner-Summers to Congress -- have in deed if not word found the 99 percent too insignificant to really matter.

THE BIG SUM-UP

Students of irony -- or is it black humor? -- will note that 18 years after "Too Big To Fail" entered the lexicon, a draft of a financial-reform bill being pushed through the House by that Barney Frank indirectly acknowledges that "To Big To Fail" firms are a fact of economic life but does not confront that reality head on. In fact, the bill was negotiated with the input of foxes in bankers' clothing who assure us that they're guarding the hen house.

As one pissed off economist put it in suggesting that Frank and his advisers have strapped on the knee pads that are such a big part of Washington wardrobe: "You don't employ a bomb squad to sit around and wait for a bomb to explode, you engage them to dismantle it as soon as they find one."