Carney lets Obama off too easy here. Not only does Obama leave a corporatist legacy, Obama is himself a corporatist, or more specifically and we’d say more accurately a crony capitalist. Obama used government both passively and actively to enrich his friends (and ultimately himself). The president also sought unceasingly to further entwine business and government so that crony fruit could be plucked by allies in the future. He gave away much to pharma and the health complex in Obamacare. He hooked up the connected greens with his “greenrush.” The auto bailouts were just flat out gifts to the unions. (And executives too.) It goes on and on.
Carney argues also that the bank bailouts constituted something called “financial corporatism.” Well, we suppose. But the bank bailouts are the single biggest and best example of crony capitalism there is. The connected bankers on Wall Street literally called up their friends in Treasury and elsewhere and begged to have their bacon saved. Surprise surprise their butts were pulled out of the fire. Bush hooked up his buddies and then Obama hooked up his, plus made new ones.
Crony capitalism is a broad term but it is also a precise term. (Almost like the word “pornography.” Subject to interpretation to some degree but everyone knows what it is.) If one uses government to enrich oneself and/or allies that is often, almost always, crony capitalism. Fundamentally our monetary system is crony. The Federal Reserve is the prime mover of crony capitalism. We are immersed in crony capitalism. “Corporatism,” though a good term, is too limited a term to define our current situation and even too limited a term to define just the bank bailouts. It was much more than just a too cozy relationship between the banks and the government. In was the merger of banks and government in many ways.
Saying these things, Carney’s column is always worth a read.
(From The Washington Examiner)
Big banks have many virtues. An economy without Bank of America and Wells Fargo, and with a smaller JP Morgan would lack some things. It also might be a financial sector less in danger of systemic meltdown, and with more competition. Geithner probably saw that trade-off, but he thought the liquidity and the particular type of stability provided by the big guys was too important to give up.
Obama and Geithner’s bailouts and regulations helped widen the moat that protects the big guys from competition, and helped make the big banks more or less immortal. It would be easy to call it Wall Street cronyism, but financial corporatism is more precise.