Last week, a few prominent Vermonters offered strikingly different views on the nation’s financial crisis and what it means for the future of capitalism in the United States.
Sen. Bernie Sanders, who has spent his 25-year career in public office warning of the inherent inequity and instability of the American economy, blames financial deregulation, initiated during the Clinton era, that’s been carried too far by an “extremist right-wing” administration.
In an interview, Sanders, an Independent, said President George W. Bush willfully deceived the country about the state of the economy. While many Americans struggled to make ends meet, the president’s supporters on Wall Street “were getting richer and richer.” Meanwhile, the loosening of regulatory controls on banks and investment firms fueled “an incredible climate of greed.
“When you deregulate,” Sanders said, “you allow these financial wheeler-dealers, these ‘masters of the universe,’ to play around with trillions of dollars.”
But to James Gatti, a business professor at the University of Vermont, the crisis was caused by too much government meddling in the markets. Greed, he said, had nothing to do with it. “I hate the word ‘greed’ because it’s so loaded,” Gatti said. “Greed is always a factor in economic decision-making. People are always acting in their own economic self-interest. Congress is greedy, too — for power, not necessarily for money.”
Gatti, who took part in a UVM panel discussion last week on the roots of the government’s $700 billion bailout of the financial industry, blames misguided liberalism for the subprime-mortgage debacle, which led to the current crisis on Wall Street. He said congres- sional Democrats used their political power to force government-sponsored lenders Fannie Mae and Freddie Mac, as well as some private lenders, to write millions of dollars in risky mortgages to boost home ownership in the U.S.
Sanders was one of 25 senators who voted against the bailout package. He noted the irony of massive government intervention in the financial markets by an administration that “has been telling us for years that government is the problem.”
While the details of the bailout are still being worked out, Sanders said many Americans are outraged by the government’s rapid response to the needs of wealthy bankers and investors.
“They see that the feds can come up with $700 billion on a moment’s notice,” he continued, “but can’t make sure every American has the right to health care, can’t ensure that every kid can afford to go to college, can’t end the disgrace of childhood poverty in the richest nation on Earth.”
Art Woolf, a UVM economist who took part in last week’s panel discussion, said the Wall Street rescue marked a “fundamental change” in relations between the federal government and the private sector. But, while he supports the Bush administration’s $700 billion package for Wall Street because the economy hangs in the balance, Woolf said it would be “totally inappropriate” for the feds to bail out other industries.
Some new regulations will be necessary to prevent the chaos of recent weeks, Woolf acknowledged, although it’s “very likely the ones we’ll get will be counterproductive.”
Gatti likewise expects “an overreaction” to the crisis in the form of increased financial regulations. But, he also agrees that those new rules won’t last, and that there won’t be any deep, lasting changes to American capitalism as it currently exists.
For his part, Sanders has promised new rules to “re-regulate” Wall Street and break up large financial institutions to limit the scope of future banking failures. But such reforms can only be achieved if a powerful progressive movement arises in the United States, he said. Even if Barack Obama becomes president, he will be “besieged by big-money interests” and by conservative Democrats, who, citing the $11 trillion federal debt, will demand deep spending cuts.
The question, Sanders said, is whether Obama will maintain the status quo or take his cue from Franklin Delano Roosevelt, who, upon his election in 1932, initiated unprecedented reform of the nation’s financial system.
“Obama is very, very smart and does seem to have a good sense of history,” he said. “But he’s got to be pressured by progressives to do what needs to be done.”