5th January, 2010

Sorry about the delay in posting, but this is my latest blog for the Huffington Post.

“One is president of a country of about 300,000 people — Iceland — a country about the size of Virginia, President Olafur R. Grimsson. The second is president of a country of about 300,000,000 people, the United States. President Obama.

Both their presidencies have been scarred by the financial crisis. Both have had to balance the interests of their people against the interests of their bankers.

President Obama has allowed that balance to tilt in favor of the bankers.

President Grimsson yesterday took a stand against bankers and international creditors, including the British and Dutch governments.

Instead, he stood up to defend the interests of his people.

He vetoed legislation agreed to by the parliament under which Icelandic taxpayers were due to shoulder the burden of losses incurred by a collapsed private Icelandic bank. The matter will now be put to a referendum and the President Grimsson’s action will likely be endorsed by the people.

His courage stands in stark contrast to that of President Obama.

Americans woke up on September 15, 2008 to find their economy on the brink of systemic failure.

While the crisis was averted by massive taxpayer-funded bail-outs, the burden of losses was transferred on to the shoulders of middle class Americans. Unemployment and foreclosures rocketed, and the government deficit ballooned.

To avoid systemic economic failure, and in defiance of the dogma of the Chicago School of Economics, private Wall St. losses were nationalized and bankers were not just protected but cosseted.

After September 15, 2008, Icelanders woke up to find their banks failing, their currency devalued, and their economy effectively bankrupted. Many citizens and all of their bankers faced massive losses.

What happened next? Well, both countries held elections, and both elected progressive politicians as leaders. But now the paths followed by the leaders of these two countries have diverged. One has stood up to the bankers, and refused to nationalize private losses. The other faces a precipitous decline in political support as he bows to the bankers, and effectively victimizes taxpayers.

Unsurprisingly, Wall St. profits and bonuses have soared under Obama’s watch and that of Fed Chairman Bernanke, while the monopolization of Wall St. has intensified. Worse than that, the bankers have been invited in — to both the Treasury and the Congress — to stall and undermine proposed regulation of the sector.

This concession of huge power has, naturally, gone to their heads.

Far from being grateful for the president’s continued support, for his administration’s kid-glove handling of the finance sector, and for the generosity of government guarantees, bankers have, like many disillusioned Americans, become contemptuous of the American Presidency. After all, they, not the elected president, are the real governors of the country.

So contemptuous are they that Lloyd C. Blankfein, the chief executive of Goldman Sachs, John J. Mack, chairman of Morgan Stanley; and Richard D. Parsons, chairman of Citigroup failed to turn up to a meeting President Obama had especially convened on the 14th of December.

This in contrast to the way they turned up early at the Paulson Treasury last year, after less than 24 hours notice, to collect $10 - $25 billion of taxpayer money.

Where will this all lead?

We can expect further financial turbulence in Iceland, but President Grimmson can be sure of one thing: popular political support for his stand against the bankers. Support that will stiffen the spines of legislators and regulators, and ultimately subordinate the interests of finance to the interests of the Icelandic people.

Next November the opposite is likely to occur in the United States. President Obama will lose political support and his enemies will gain from his administration’s failure to stand up for the people, and against the bankers.

As for Wall St? They will be cooking up the next financial crisis with which to undermine a popular, elected American president.”