Everybody keeps talking about the Great Depression in the U.S. as the crucial model for understanding what's happening, but how about something more recent?
Matt Taibbi has an article in Rolling Stone called "The Big Takeover: How Wall Street Insiders Are Using the Bailout to Stage a Revolution" about the secrecy of Fed handouts to financial institutions.
As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system - transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.
He doesn't mention Russia in the 1990s in the article, but Taibbi was there. The Boston-raised Taibbi played professional (?) baseball and basketball in various godforsaken outposts of the ex-Soviet Empire, such as Mongolia, and then co-founded The Exile in Moscow in 1997 with Mark Ames. In Taibbi's retelling, Goldman Sachs sounds a lot like the American equivalent of the KGB: the best-connected insiders who expect to wind up with the eventual winners of the carve-up of the country.
Somebody else who had a lot of experience with Russia in the 1990s is Obama's chief economic adviser, Larry Summers. As you'll recall, Larry got in all sorts of trouble with the press over some plausible speculation of his about sex differences in cognitive abilities. But a much more genuine Summers scandal that got almost no coverage outside David Warsh's Economic Principals column involved his costing Harvard a huge amount of money in fines and legal fees over his defense of his best friend, prominent Harvard economist Andrei Shleifer.
It’s as good a time as any, though, to review why Geithner is at the Treasury and Summers is not.
Exhibit A is the Harvard Russia scandal – a chain of events that played a key role in Summers’ dismissal from the Harvard presidency. It is a black mark that, for some reason, rarely is taken into account when relating the key events of his career. It hasn’t become part of the record. It’s not mentioned in Scheiber’s New Republic piece, for example. But then neither did it come up in the Newsweek or Time accounts of Summers’ return to Washington, either. Not even David Leonhardt, economics columnist of The New York Times, brought it up when he explained The Return of Larry Summers last fall, though he had to ignore his newspaper’s own clips.
And yet it did happen – a story straight out of a Tom Clancy novel. EP readers don’t need to be reminded of how Summers’ protégé, Andrei Shleifer, was hired by the US Agency for International Development to head a Harvard mission to provide advice to the Russian government of Boris Yeltsin, but quietly went into business for himself in violation of his contract, got caught and fired, but retained the sympathy and protection of his mentor, even as Summers served as Treasury Secretary and president of Harvard. A US District Court judge ultimately found Shleifer and Harvard to have committed fraud. The episode has become a standard item in Russia’s anti-American lore. ...
This is by no means to accuse Summers personally of corrupt involvement in the Rape of Russia. The real issue is that this kind of stuff seldom comes up in the press for criticism. I type "lawrence summers russia" into Google and the first page is by Mark Ames and the second one is by ... me.
Did Larry learn anything from his heavy involvement with Russia in the 1990s? Few seem to have asked him. Here's a Pontius Pilatey comment Larry left on Martin Wolf's blog about America's Yeltsin policy, full of lines like:
Was loans-for-shares a necessary price for Yeltsin to pay when he paid it for winning against the communists/staying afloat? What were the right alternatives at the time?
Strobe Talbott claims Larry opposed Yeltsin's "loans-for-shares" sellout of the country's natural resources in return for campaign loans in 1996. A young banker named Khodorovsky, for example, was assigned to auction off Yukos Oil, which owns 2% of the world's reserves. He set a minimum bid of $150 million, accepted one bid (for $159 million) and declared Yukos to be sold — to himself. Presumably the extra $9 million was his six percent commission for running the auction.
So, maybe Larry would look out for our interests. Or maybe not. Did anybody even ask him about the Rape of Russia?