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But the entertainment is escapist only up to a point. What went down in the Land of Lincoln is just the reductio ad absurdum of an American era where both entitlement and corruption have been the calling cards of power. Blagojevich’s alleged crimes pale next to the larger scandals of Washington and Wall Street. Yet those who promoted and condoned the twin national catastrophes of reckless war in Iraq and reckless gambling in our markets have largely escaped the accountability that now seems to await the Chicago punk nabbed by the United States attorney, Patrick Fitzgerald.
The Republican partisans cheering Fitzgerald’s prosecution of a Democrat have forgotten his other red-letter case in this decade, his conviction of Scooter Libby, Dick Cheney’s chief of staff. Libby was far bigger prey. He was part of the White House Iraq Group, the task force of propagandists that sold an entire war to America on false pretenses. Because Libby was caught lying to a grand jury and federal prosecutors as well as to the public, he was sentenced to two and a half years in prison. But President Bush commuted the sentence before he served a day.
Fitzgerald was not pleased. “It is fundamental to the rule of law that all citizens stand before the bar of justice as equals,” he said at the time.
Not in the Bush era, man. Though the president had earlier vowed to fire anyone involved in leaking the classified identity of a C.I.A. officer, Valerie Plame Wilson — the act Libby tried to cover up by committing perjury — both Libby and his collaborator in leaking, Karl Rove, remained in place.
Accountability wasn’t remotely on Bush’s mind. If anything, he was more likely to reward malfeasance and incompetence, as exemplified by his gifting of the Presidential Medal of Freedom to George Tenet, L. Paul Bremer and Gen. Tommy Franks, three of the most culpable stooges of the Iraq fiasco.
Bush had arrived in Washington vowing to inaugurate a new, post-Clinton era of “personal responsibility” in which “people are accountable for their actions.” Eight years later he holds himself accountable for nothing. In his recent exit interview with Charles Gibson, he presented himself as a passive witness to disastrous events, the Forrest Gump of his own White House. He wishes “the intelligence had been different” about W.M.D. in Iraq — as if his administration hadn’t hyped and manipulated that intelligence. As for the economic meltdown, he had this to say: “I’m sorry it’s happening, of course.”
If you want to trace the bipartisan roots of the morally bankrupt culture that has now found its culmination in our financial apocalypse, a good place to start is late 2001 and 2002, just as the White House contemplated inflating Saddam’s W.M.D. That’s when we learned about another scandal with cooked books, Enron. This was a supreme embarrassment for Bush, whose political career had been bankrolled by the Enron titan Kenneth Lay, or, as Bush nicknamed him back in Texas, “Kenny Boy.”
The chagrined president eventually convened a one-day “economic summit” photo op in August 2002 (held in Waco, Tex., lest his vacation in Crawford be disrupted). But while some perpetrators of fraud at Enron would ultimately pay a price, any lessons from its demise, including a need for safeguards, were promptly forgotten by one and all in the power centers of both federal and corporate governance.
Enron was an energy company that had diversified to trade in derivatives — financial instruments that were bets on everything from exchange rates to the weather. It was also brilliant in devising shell companies that kept hundreds of millions of dollars of debt off the company’s bottom line and away from the prying eyes of shareholders.
Regulators had failed to see the iceberg in Enron’s path and so had Enron’s own accountants at Arthur Andersen, a corporate giant whose parallel implosion had its own casualty list of some 80,000 jobs. Despite Bush’s post-Enron call for “a new ethic of personal responsibility in the business community,” the exact opposite has happened in the six years since. Warren Buffett’s warning in 2003 that derivatives were “financial weapons of mass destruction” was politely ignored. Much larger companies than Enron figured out how to place even bigger and more impenetrable gambles on derivatives, all the while piling up unseen debt. They built castles of air on a far grander scale than Kenny Boy could have imagined, doing so with sheer stupidity and cavalier, greed-fueled carelessness rather than fraud.
The most stupendous example as measured in dollars is Citigroup, now the recipient of potentially the biggest taxpayer bailout to date. The price tag could be some $300 billion — 20 times the proposed first installment of the scuttled Detroit bailout. Citigroup’s toxic derivatives, often tied to subprime mortgages, metastasized without appearing on the balance sheet. Both the company’s former chief executive, Charles O. Prince III, and his senior adviser, Robert Rubin, the former Clinton Treasury secretary, have said they didn’t know the size of the worthless holdings until they’d spiraled into the tens of billions of dollars.
Once again, regulators slept. Once again, credit-rating agencies, typified this time by Moody’s, kept giving a thumbs-up to worthless paper until it was too late. There was just so much easy money to be made, and no one wanted to be left out. As Michael Lewis concludes in his brilliant account of “the end” of Wall Street in Portfolio magazine: “Something for nothing. It never loses its charm.”
But if all bubbles and panics are alike, this one, the worst since the Great Depression, also carried the DNA of our own time. Enron had been a Citigroup client. In a now-forgotten footnote to that scandal, Rubin was discovered to have made a phone call to a former colleague in the Treasury Department to float the idea of asking credit-rating agencies to delay downgrading Enron’s debt. This inappropriate lobbying never went anywhere, but Rubin neither apologized nor learned any lessons. “I can see why that call might be questioned,” he wrote in his 2003 memoir, “but I would make it again.” He would say the same this year about his performance at Citigroup during its collapse.
The Republican side of the same tarnished coin is Phil Gramm, the former senator from Texas. Like Rubin, he helped push through banking deregulation when in government in the 1990s, then cashed in on the relaxed rules by joining the banking industry once he left Washington. Gramm is at UBS, which also binged on credit-default swaps and is now receiving a $60 billion bailout from the Swiss government.
It’s a sad snapshot of our century’s establishment that Rubin has been an economic adviser to Barack Obama and Gramm to John McCain. And that both captains of finance remain unapologetic, unaccountable and still at their banks, which have each lost more than 70 percent of their shareholders’ value this year and have collectively announced more than 90,000 layoffs so far.
The Times calls its chilling investigative series on the financial failures “The Reckoning,” but the reckoning is largely for the rest of us — taxpayers, shareholders, the countless laid-off employees — not the corporate and political leaders who led us into the quagmire. It’s a replay of the Iraq equation: the troops, the Iraqi people and American taxpayers have borne the harshest costs while Bush and company retire to their McMansions.
As our outgoing president passes the buck for his failures — all that bad intelligence — so do leaders in the private and public sectors who enabled the economic debacle. Gramm has put the blame for the subprime fiasco on “predatory borrowers.” Rubin has blamed a “perfect storm” of economic factors, as has Sam Zell, the magnate who bought and maimed the Tribune newspapers in a highly leveraged financial stunt that led to a bankruptcy filing last week. Donald Trump has invoked a standard “act of God” clause to avoid paying a $40 million construction loan on his huge new project in Chicago.
After a while they all start to sound like O. J. Simpson, who when at last held accountable for some of his behavior told a Las Vegas judge this month, “In no way did I mean to hurt anybody.” Or perhaps they are channeling Donald Rumsfeld, whose famous excuse for his failure to secure post-invasion Iraq, “Stuff happens,” could be the epitaph of our age.
Our next president, like his predecessor, is promising “a new era of responsibility and accountability.” We must hope he means it. Meanwhile, we have the governor he leaves behind in Illinois to serve as our national whipping boy, the one betrayer of the public trust who could actually end up paying for his behavior. The surveillance tapes of Blagojevich are so fabulous it seems a tragedy we don’t have similar audio records of the bigger fish who have wrecked the country. But in these hard times we’ll take what we can get.