So it is not just Rahm Israel Emauel who has divided loyalties as a dual citizen of the U.S. and Israel. It’s also one of Barack Obama’s other recent appointments–a woman who could likely have divided loyalties between Wall Street and Main Street. As is clear from yesterday’s press conference (in spite of the odd salivating emanating from the media over it) as well as some of the news about who is leading Barack Obama’s economic team that he’s not so much interested in change with respect to the economy either. I first got an email yesterday sharing with me one member of Obama’s economic team (thanks Qui Qui):
Indian-American Sonal Shah, an eminent economist who heads Google’s philanthropic arm, has been appointed an advisory board member by US President-elect Barack Obama to assist his team in smooth transition of power….
Prior to joining Google, she was Vice President at Goldman, Sachs and Co. and developed and implemented its environmental strategy. She has also served as the Associate Director for Economic and National Security Policy at the Centre for American Progress, where she worked on trade, outsourcing and post-conflict reconstruction issues.
Correct me if I’m wrong, but isn’t Goldman, Sachs one of the banks being bailed out right now? Do we really want to have someone on board with the economic future of the U.S. someone whose interests may be more aligned with those on Wall Street than on Main Street? But it gets worse. Vijay Prashad illustrates precisely why Shah is a dangerous person to bring to the White House–not only for her economic background, but also for her ties to Hindu fundamentalism:
Shah, a product of the University of Chicago, shined her corporate shoes at Anderson Consulting (who was Enron’s accountant), which probably made it easier for her to go into Clinton’s Treasury Department, where she helped Robert Rubin put a U. S. stamp on the post-1997 Asian economic recovery. The corporate side was balanced with an interest in the ideology of “giving back.” When Bush took office, Shah went to the Center for Global Development, and while there joined her brother Anand in forming Indicorps. Knowing full well the desire among many South Asian Americans to give back to their homeland, the Shahs created an organization to help them go and volunteer in India, to do for them what the Peacecorps did for young liberals in the 1960s. Shah left the CAP to work for Goldman Sachs, and then went to Google. Shah’s story is not unlike that of most of the CAP fellows, many of whom honed their dexterity at trying to reconcile the irreconcilable, capital and freedom, private accumulation and human needs.
But there is a less typical side to the Shah story. Born in Gujarat, India, Shah came to the United States as a two-year old. Her father, a chemical engineer, first worked in New York before moving to Houston, and then moving away from his education toward the stock market. The Shahs remain active in Houston’s Indian community, not only in the ecumenical Gujarati Samaj (a society for people from Gujarat), but also in the far more cruel organizations of the Hindu Right, such as the Vishwa Hindu Parishad (VHP), the Overseas Friends of the BJP (the main political party of the Hindu Right) and the Ekal Vidyalaya. Shah’s parents, Ramesh and Kokila, not only work as volunteers for these outfits, but they also held positions of authority in them. Their daughter was not far behind. She was an active member of the VHPA, the U. S. branch of the most virulently fascistic outfit within India. The VHP’s head, Ashok Singhal, believes that his organization should “inculcate a fear psychosis among [India’s] Muslim community.” This was Shah’s boss. Till 2001, Shah was the National Coordinator of the VHPA.
Chicago School? VHPA? Is this really the sort of person we want in the White House? Is this really the sort of adviser who will bring about change? Henry Paulson, the current Secretary of the Treasury, is also a former employee at Goldman Sachs and look how well this has turned out.
Noami Klein, as usual, warns us about what it has meant to have divided loyalties working in or with the White House of late and its consequences for Americans in contradistinction to how this banking fiasco has been handled in the UK:
It might be possible to set aside concerns about divided loyalties if it were clear that Simpson Thacher is helping Treasury to wrangle the best deals possible for U.S. taxpayers. But the firm’s first test — the deal to give $125 billion to the nine big banks to ease the “credit crunch” that is crippling the economy — wasn’t exactly reassuring. Secretary Paulson promised that the banks won’t just “hoard” the money — they will quickly “deploy it” through the economy in the form of badly needed loans. There is just one hitch: Neither Paulson nor Simpson Thacher got that “deploy” part in writing — nor did they put in place any mechanism to require the banks to spend their taxpayer billions. Apparently, the part about lending the money to homeowners and small businesses was sort of implied.
“There is no obligation for banks to lend the money one way or the other,” Jennifer Zuccarelli, a Treasury spokeswoman, tells Rolling Stone. “But the banks have the understanding” that the money is intended for loans. “We’re not looking to control their operations.”
Unfortunately, many of the banks appear to have no intention of wasting the money on loans. “At least for the next quarter, it’s just going to be a cushion,” said John Thain, the chief executive of Merrill Lynch. Gary Crittenden, chief financial officer of Citigroup, had an even better idea: He hinted that his company would use its share of the cash — $25 billion — to buy up competitors and swell even bigger. The handout, he told analysts, “does present the possibility of taking advantage of opportunities that might otherwise be closed to us.”
And the folks at Morgan Stanley? They’re planning to pay themselves $10.7 billion this year, much of it in bonuses — almost exactly the amount they are receiving in the first phase of the bailout. “You can imagine the devilish grins on the faces of Morgan Stanley employees,” writes Bloomberg columnist Jonathan Weil. “Not only did we, the taxpayers, save their company…we funded their 2008 bonus pool.”
It didn’t have to be this way. Five days before Paulson struck his deal with the banks, British Prime Minister Gordon Brown negotiated a similar bailout — only he extracted meaningful guarantees for taxpayers: voting rights at the banks, seats on their boards, 12 percent in annual dividend payments to the government, a suspension of dividend payments to shareholders, restrictions on executive bonuses, and a legal requirement that the banks lend money to homeowners and small businesses.
In sharp contrast, this is what U.S. taxpayers received: no controlling interest, no voting rights, no seats on the bank boards and just five percent in dividend payouts to the government, while shareholders continue to collect billions in dividends every quarter. What’s more, golden parachutes and bonuses already promised by the banks will still be paid out to executives — all before taxpayers are paid back.
No wonder it took just one hour for Paulson to convince all nine CEOs to accept his offer — less than seven minutes per bank. Not even the firms’ own lawyers could have drafted a sweeter deal.
What really makes this all so shocking–Obama’s choices for his current economic team of advisers–is that unless he works to create a durable, viable solution (not that bailout plan he voted for as Senator, which he clearly stated yesterday that he still supports and will make sure it goes through as his first agenda item when he takes office) how on earth can he ever even begin to come through on all the promises he made during his campaign? It’s like political suicide. Klein, of course, has some answers and it would be far better if someone like Klein were on his team:
This is why the stakes of the bailout are so high: Unless we get a good deal, there will be nothing left over after the banks are done feeding to pay for the meager services now provided in exchange for taxation, let alone for the more ambitious initiatives promised on the campaign trail. The spiraling cost of saving Wall Street from its bad bets is already being used as an excuse for why we can’t solve our many other crises, from health care to climate change.
There is a better way to fix a broken financial system. Treasury’s plan to buy up the toxic debts never made sense and should be immediately scrapped — a move that would also handily get rid of most of the crony contractors. As for purchasing equity in banks, the next round of deals — and there will be more — has to start from the premise that the banks are bankrupt and will therefore accept whatever terms we choose to impose, including real regulatory oversight. The possibilities of what could be done if a chunk of the banking system were genuinely under public control — from a moratorium on home foreclosures to mandatory investment in green community redevelopment — are limitless.
But it seems that instead of doing something that will actually help ordinary working people Obama is more interested in helping those large corporations who funded his campaign and helped him get elected. It’s business as usual as Ralph Nader pointed out on The Real News earlier this week. Really, someone, please tell me: where is the change?