by Thomas Frank
Summers, Larry
supply-side revolution
Susman, Warren
Swados, Harvey
Sweden
Taibbi, Matt
TARP. See Troubled Asset Relief Program
taxes
Tea Party
anti-Obama rhetoric of
Atlas Shrugged and
confusion over ideology of
conservative institutions and
costumes and
health-care reform and
Kochs and
manifesto of 2009
mimicry of left by
Network and
populist anger of
profiteering and
protests of 1930s vs.
rallies by
ruling class and
Santelli rant and
self-segregation by
small business and
social issues and
victimhood and
Tea Party Express
Tea Party Movement, The (Bexley)
Tea Party Patriots
Terkel, Studs
terrorists
Thatcher, Margaret
That’s No Angry Mob (Graham)
Think and Grow Rich (Hill)
Thomas, Norman
Time
“too big to fail”
To Renew America (Gingrich)
To Save America (Gingrich)
Town Hall Summer
trade policy
Trader Monthly
Transcending Time with Thomas Jefferson (Hanson)
Treasury Department
Troubled Asset Relief Program (TARP)
Truman, Harry
Tuccille, Jerome
Twilight of Sovereignty, The (Wriston)
Uhler, Lewis
Ukraine famine of 1932
unemployment
U.S. Army
U.S. Chamber of Commerce
U.S. Congress
U.S. Constitution
U.S. House of Representatives
U.S. News & World Report
U.S. Post Office
U.S. Senate
Vallee, Rudy
Veblen, Thorstein
Verizon
Vietnam War
Viguerie, Richard
Virginia Tea Party Convention (2010)
Voight, Jon
Wachovia bank
“Wallison and the Three De’s” (Black)
Wall Street (financial industry). See also bailouts; banks; bond traders; financial crisis of 2008–9; investment bankers; mortgage industry
bailouts of
blame shifted from, to victims and government
bonuses and
compensation levels
Depression and
deregulation of
Main Street vs.
Obama and
scandals of 1980s and
self-pity and
TARP and
Tea Party as protection for
truculent attitudes of
Wall Street Journal
Walsh, Michael
“War of the Worlds” (radio drama)
Washington, D.C., September 12, 2009 rally. See also 9/12 Project
Washington Mutual
Washington Post
Weekly Standard
Welles, Orson
We Read the Constitution movement
We the Living (Rand)
Weyrich, Paul
What Can I Do? (Crist)
Wilentz, Sean
Williams, Mark
Wilson, Edmund
Wilson, Woodrow
Wizard of Oz (film)
Works Progress Administration (WPA)
World War I
World War II
Wriston, Walter
YouTube
About the Author
THOMAS FRANK is the author of The Wrecking Crew, What’s the Matter with Kansas?, and One Market Under God. A former opinion columnist for the Wall Street Journal, Frank is the founding editor of the Baffler and a monthly columnist for Harper’s. He lives outside Washington, DC.
ALSO BY THOMAS FRANK
The Wrecking Crew
What’s the Matter with Kansas?
One Market Under God
The Conquest of Cool
Metropolitan Books
Henry Holt and Company, LLC
Publishers since 1866
175 Fifth Avenue
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Metropolitan Books® and ® are registered trademarks of Henry Holt and Company, LLC.
Copyright © 2012 by Thomas Frank
All rights reserved.
“Brother, Can You Spare a Dime?” by E. Y. “Yip” Harburg and Jay Gorney
Published by Glocca Morra Music (ASCAP) and Gorney Music (ASCAP) Administered by Next Decade Entertainment, Inc. All Rights Reserved. Used by Permission.
Library of Congress Cataloging-in-Publication Data
Frank, Thomas, 1965–
Pity the billionaire : the hard-times swindle and the unlikely comeback of the Right / Thomas Frank.—1st ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8050-9369-8
1. United States—Politics and government—2009– 2. Political culture—United States—History—21st century. 3. Conservatism—United States—History—21st century. 4. Global Financial Crisis, 2008–2009—Political aspects—United States. 5. Global Financial Crisis, 2008–2009—Social aspects—United States. 6. United States—Economic conditions—2009– 7. United States—Social conditions—21st century. 8. Rich people—United States—Public opinion—History—21st century. 9. Free enterprise—United States—Public opinion—History—21st century. 10. Public opinion—United States—History—21st century. I. Title.
E907.F72 2012
973.932—dc23 2011035346
First Edition 2012
eISBN 978-1-4299-7308-3
* 1. The original backlash of the Vietnam War era, culminating in the election of Richard Nixon. 2. The tax revolts and culture wars of the seventies, climaxing with the Reagan Revolution of 1980. 3. The “Contract with America” and the Gingrich Revolution of 1994.
* Of the hundreds of Tea Party protest signs photographed, selected, and printed by conservatives themselves for the 2010 Tea Party coffee-table book Don’t Tread on Us, only two are concerned with abortion. By contrast, there are easily a hundred suggesting that President Obama or other Democrats are communists or socialists. See Mark Karis, ed., Don’t Tread on Us: Signs of a 21st Century Political Awakening (Los Angeles: WND Books, 2010).
* Of course, 1928 was not a Depression year. But Louisiana was so poor even before the crash, and Huey Long would soon become such an archetypal Depression figure, that we include this episode as an honorary example.
* A curious echo of Mellon’s dictum about hard times forcing people to “live a more moral life” occurs in Robert Bork’s mournful meditation, Slouching Towards Gomorrah, in which he briefly considers “a deep economic depression” as one way of bringing about “moral regeneration.” The idea is immediately discarded for “lacking broad public support.” See Slouching Towards Gomorrah: Modern Liberalism and American Decline (New York: HarperCollins, 2003), p. 336. The Galbraith quote appears in The Great Crash: 1929 (Boston: Houghton Mifflin, 1955), p. 199.
* Then again, maybe they would take it. Patman was a fiery left-wing populist during the Depression, but today his congressional district is represented by Louie Gohmert, a Tea Party favorite who has become famous for proposing a zero percent corporate tax rate and for his trademark fear: that terrorists are planning to have jihadist babies born in the United States. The Patman quotation comes from Terkel, Hard Times: An Oral History of the Great Depression (New York: Pantheon, 1970), p. 285.
* When one trader in a 2010 account of the disaster asks another trader to identify the people buying mortgage-backed securities, he gets this answer: “Stupid Germans. They tak
e rating agencies seriously. They believe in the rules.” Michael Lewis, The Big Short: Inside the Doomsday Machine (New York: Norton, 2010), p. 93.
* In reality, the premise of Newsweek’s “socialism” cover story—that bailing out banks was equivalent to “nationalizing” them, like British coal mines in the forties—was little more than an insult to socialism. You might, however, call what happened “socialism for the rich,” since the state had been used to rescue executives, shareholders, and counterparties of big financial institutions, at the expense of millions of citizens who enjoy no such safety net.
For what it’s worth, here is what the self-identifying, big-S Socialist Norman Thomas had to say in 1936: “There is no Socialism at all about taking over all the banks which fell in Uncle Sam’s lap, putting them on their feet again, and turning them back to the bankers to see if they can bring them once more to ruin.” As quoted in the Progressive, February 15, 1936. (And again in the Progressive, April 2009, p. 39.)
* By contrast, the “Republican Revolution” of 1994 involved a swing of only fifty-four seats.
* Let us compare Rick Santelli’s fears to the reality of the Home Affordable Modification Program (HAMP) as it unfolded over the following years.
As it happens, the HAMP was the subject of considerable journalistic scrutiny. The ProPublica website, in particular, carefully tracked the program’s record, in part by interviewing people the program was supposed to help—the ones Santelli called “the losers.” What ProPublica found was that countless people who could no longer afford their payments were unable to take advantage of the program because their lenders dragged their feet, did not cooperate, or simply denied their requests. It seems the communists in the White House had neglected to supervise the lenders or make sure they complied. (See also the New York Times’ gloomy postmortem on the program, dated March 30, 2011.)
So good news! We’re still in Rick Santelli’s “America”: The law was on the books, but it wasn’t enforced. It was a colossal flop, with “the losers” proceeding to lose their homes, just as God and the Market intended them to.
* The “pursuit of happiness” is a phrase from the Declaration of Independence, not the Constitution.
† The line has a long history on the right. Howard Jarvis made it the rallying cry of the Prop 13 tax revolt in California in the seventies; Arnold Schwarzenegger picked it up from him. Journalists have used some variation of it to summarize the appeal of Ronald Reagan, Newt Gingrich, and Fox News boss Roger Ailes. It has been processed into titles for histories of both the populist Right in the seventies and the Tea Party movement. And about a month after Santelli was widely compared to Howard Beale, Glenn Beck claimed that he, too, had been inspired by the Beale character. See the profile of the star in the New York Times, March 29, 2009.
* Example: Glenn Beck, about a month later, monologuing to the camera just before letting his famous TV tears roll down his cheeks. “Those who screwed up must be allowed to fail, those who broke the law must go to jail.”
* Aside from exhortations to go shopping after 9/11, I can think of no really prominent American politicians who have celebrated consumption in such a crass way. In fact, the only big-league politician I know of who has come close is China’s Deng Xiaoping, who said, “To get rich is glorious.” The quotations are from Glenn Beck’s Common Sense: The Case Against an Out-of-Control Government, Inspired by Thomas Paine (New York: Threshold Editions, 2009), pp. 12, 14.
* ’Twas ever thus. In Age of Greed, the financial journalist Jeff Madrick tells the story of Citibank CEO Walter Wriston, an outspoken free-market zealot (see, for example, Wriston’s book, The Twilight of Sovereignty) who nevertheless demanded and received government bailouts for his bank on several notable occasions. See Madrick, Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present (New York: Knopf, 2011), chapter 1.
* In the course of this same remarkable episode, Beck also implied that Congressman Barney Frank was responsible for the AIG bailout the year before. Beck then went into a “history of AIG,” which was actually a fairly detailed attack on Fannie Mae and Freddie Mac—apparently he had confused the mortgage companies with the insurance giant. (The quotes are from Beck’s TV program for March 17, 2009.)
In point of fact, the initial 2008 AIG bailout was engineered by the Federal Reserve without input from Barney Frank or any other members of Congress; Frank famously criticized the deal the day after it happened. And although nearly everything in high finance is related to everything else, Fannie and Freddie are not the same as AIG, which is an insurance company that acted like a hedge fund, investing in mortgage-related securities and issuing credit default swaps. These were the businesses that got AIG into trouble. It is true that AIG owned a subsidiary that originated subprime mortgages—all the Wall Street playaz did—but to my knowledge no one has ever thought to blame AIG’s travails on that subsidiary.
Government regulations, for their part, never required anyone to make risky mortgage loans and they certainly never forced anyone to invest in securities based on risky mortgage loans. The credit-default-swaps business was almost completely unregulated.
* One of the photos of himself that Beck includes in his first book, The Real America, shows the right-wing showman directing a radio drama while striking virtually the same pose as Welles in one of the photos taken of the latter during his Mars-invasion broadcast.
* This is the “Cloward-Piven Strategy,” a long-ago suggestion by the sociologists Frances Fox Piven and Richard Cloward (academic experts on social movements of the thirties, incidentally) that poor people be encouraged to sign up for state welfare systems on the theory that if enough of them actually claimed the benefits to which they were legally entitled, the systems would run out of funds and stronger poverty-reducing measures would have to be put in place. The lessons Beck took from Cloward and Piven’s 1966 article on the subject, however, were that leftists yearn to “collapse the system,” that leftists have an occult power actually to collapse systems, and that therefore leftists can be blamed whenever any system does, in fact, go astray.
* “Window of opportunity,” “seize power,” and “fundamentally transform” are trademark Beck characterizations of liberal thinking.
* In truth, however, NASA circa 1969 was far more directly run by government than were Fannie Mae and Freddie Mac circa 2007. (It was also unionized.) While there was no profitable reason to send men to the moon, there were all sorts of profit motives at work at Fannie and Freddie. In fact, economists who have studied the two mortgage companies believe their failures arose not from their government-ness but from their leaders’ desire to emulate the profits and bonuses of the private sector. “Fannie and Freddie caused such horrific losses because they were private institutions run by officers who obtained a ‘sure thing,’” writes Bill Black, a professor at the University of Missouri, Kansas City, in his Benzinga column for January 10, 2011—“great wealth through booking high yield in the near term without establishing meaningful loss reserves.”
* Chapter 11 of the Financial Crisis Inquiry Report compares the performance of loans guaranteed by Fannie Mae and Freddie Mac to those issued by private lenders. It concludes that Fannie and Freddie’s loans were far less risky and resulted in far fewer delinquencies than those issued by private companies. This was because Fannie and Freddie, for all their faults, had higher underwriting standards than their private-sector competitors. See in particular the chart on page 218 of the FCIR. On the Community Reinvestment Act, see the note here. (Full disclosure: My wife, Wendy Edelberg, worked for the Financial Crisis Inquiry Commission as well as for the Council of Economic Advisers, whose former chairman I quote below.)
† “Market participants” fully understood that the risky loans they were issuing might result in their companies’ bankruptcy during the housing bubble. They just didn’t care. This was because management had set up incentive systems encouraging the “participants” to issue the bad loans anyway. The
individuals maximized their self-interest even though their companies died.
* A video produced by the Conservative Action Project in February of 2011 claims that its manifesto of the preceding year, the Mount Vernon Statement, “sparked a national movement,” apparently taking credit for the Tea Party protests that had actually commenced an entire year prior to that. The video also includes comically lame footage of Ed Meese and other project leaders droning out the lifeless words of their manifesto. If you want, you can watch it on YouTube: http://www.youtube.com/watch?v=Pl6nJna-bl8.
* “The Tea Party has been a fantastic success across our country due to real everyday people getting involved,” reads the group’s website. “At 912 Citizens, Inc. we believe using that same grassroots effort to promote our commemorative coins is not only a smart move but the right move. By allowing you to take part in our new reseller program you or your organization can use the extra income as a buffer in today’s economic flat line or as a fund raiser to help your organization get the word out.”
* Possibly in order to generate feelings of capitalist solidarity with his audience, Beck also makes much of his role as boss of Mercury Radio Arts, his production company. See in particular The Making of GBTV, a promotional video from June 2011 in which various Mercury personnel speak with reverence about Beck’s entrepreneurial savvy and his idiosyncratic but brilliant way of making business decisions.