While there are many technical explanations for the current recession, the underlying cause is the pervasive ideology of self-interest that has guided President Bush’s Administration and permeated mainstream American ethics.
While George Bush ran for President as a born-again Christian and “compassionate conservative,” his behavior indicated he was guided not by the principles of Jesus but rather by a narcissistic morality of personal advantage. While making a revealing documentary about the 2000 Bush campaign, filmmaker Alexandra Pelosi asked the candidate why she should vote for him; Bush replied. “It’s in your interests.” Pelosi observed, “He didn’t push my country’s interest—but rather, my own.” Bush’s primary consideration was what’s in it for me?
As President, Bush conflated his personal interests — strengthening his power — with those of the United States and political considerations governed all White House decisions. In late 2001, after leaving his appointment as head of the White House Office of Faith-Based and Community Initiatives, John DiLulio observed: “There is no precedent in any modern White House for what is going on in this one: a complete lack of a policy apparatus. What you’ve got is everything, and I mean everything, being run by the political arm.”
Presidential decisions were determined by the toxic alchemy of power and greed. Major legislative initiatives—energy and healthcare—were written by corporate lobbyists to benefit their interests at the expense of average Americans. And the president’s self-centered attitude influenced both Main Street and Wall Street.
Bush promoted a national culture of profligacy. After 9/11, when asked how Americans should respond, he advised us to “go shopping.” Rather than call on our patriotism, the president appealed to consumerism; citizens responded by running up huge credit card debts and dipping deeply into their home equity. During the Bush administration, Americans borrowed $6.2 trillion, doubling their debts and causing the US to have a negative savings rate.
At the same time, the president expressed absolute confidence in the wisdom of the free market and expanded the dangerous deregulation begun during the Clinton era. Among the consequences of Bush’s extreme laissez-faire ideology were the accelerated flight of decent-paying jobs from the US and pillaging of the environment. As Americans shopped until they dropped, financial-sector profits surged: by 2007 the finance industry represented a record 25% of US stock-market capitalization.
Aided by the loosening of regulations, banks such as Citgroup, broadened their scope of business and began to engage in a wide variety of financial activities. With this expansion came problems of control and oversight. The increased size of financial institutions made them more difficult to manage as executives were pressed to make profits beyond the range historically associated with banks.
At Citigroup, earning pressure caused bond traders to increase their participation in risky markets, particularly collateralized debt obligations (CDOs), which repackaged mortgages—notoriously sub-prime mortgages — for resale to investors. The expansion of this niche business was fueled by its profitability — fees were unusually high and, therefore, traders made million in bonuses — and the lack of oversight. Because of deregulation, there was no Federal oversight of the CDO marketplace. Financial industry supervision supposedly came from rating agencies, such as Moody’s and Standard and Poor’s, but they failed to exercise the required due diligence. So did internal auditors, such as Citigroup “risk managers;” who were impeded both by the Byzantine nature of CDOs and their perceived value as major earnings generators.
As the credit bubble grew, two pernicious moral propositions blinded top managers at Citigroup and other greedy banks to the ever-increasing probability of calamity: everyone else is doing it, so it must be okay and the ends justify the means. Over the course of the Bush administration, the worldwide CDO market grew to near $500 billion, resulting in gigantic executive bonuses and corporate earnings. Understandably, none of the participants was eager to jump off the gravy train.
Lurking behind this frenzied momentum was a naïve faith in the wisdom of the marketplace: the belief that whenever excesses occurred, the market would gracefully adjust. Recently, financier George Soros criticized “the prevailing theory of financial markets, which ... holds that financial markets tend toward equilibrium and that deviations are random and can be attributed to external causes.” He observed: “This theory has been used to justify the belief that the pursuit of self-interest should be given free rein.”
The president of the United States has a dual responsibility to make key decisions and set a moral tone. By promoting a climate of unfettered self-interest, George Bush precipitated the current economic meltdown. American’s eagerness for the onset of the Obama presidency indicates our need for a leader who will establish a public morality that emphasizes the common good.
Bob Burnett is a Berkeley, Calif., writer. Email bobburnett@comcast.net
From The Progressive Populist, December 15, 2008
Subscribe to The Progressive Populist