By Elaine Magliaro
Back in 2012, David Stockman sat down with Bill Moyers on Moyers & Company and discussed crony capitalism in the United States. The two men talked about “the tight connection between Wall Street and the White House…” Stockman served as the Director of the Office of Management and Budget under President Ronald Reagan from 1981-1985 and is most well-known for being the chief architect of Reagan’s supply-side, or “trickle-down” economic policies.
In the following video clip from the Moyers and Company program, Stockman says that today’s Republicans have taken their anti-tax campaign too far, explains why he believes that capital gains/carried interest taxes are too low, and that crony capitalism is the ethos that dominates both of the major political parties.
Excerpt from the transcript of the program:
BILL MOYERS: The Bush administration leaped to the rescue of some of the county’s largest financial institutions, to the tune of 700 billion tax-payer dollars.
DAVID STOCKMAN: We elect a new government because the public said, you know, “We’re scared. We want a change.” And who did we get? We got Larry Summers. We got the same guy who had been one of the original architects of the policy in the 1990s, the financialization policy, the too big to fail policy.
Who else did we get? We got Geithner as Secretary of the Treasury. He had been at the Fed in New York in October 2008 bailing out everybody in sight. General Electric got bailed out. Morgan Stanley, Goldman Sachs, all of the banks got bailed out, and the architect of that bailout then becomes the Secretary of the Treasury. So it’s another signal to the financial markets that nothing ever changes. The cronies of capitalism are in charge of policy.
BILL MOYERS: You name names in your writing. You identify several people as the embodiment of crony capitalism. Tell me about Jeffrey Immelt.
DAVID STOCKMAN: He is the poster boy for crony capitalism. Here is GE, one of the six triple-A companies left in the United Sates, a massive, half-trillion dollar company, massive market capitalization. I’m talking about the eve of the crisis now, in September, 2008.
Suddenly, when the commercial paper market starts to destabilize and short-term rates went up. He calls up the Treasury secretary with an S.O.S., “I’m in trouble here. I need a lifeline.” He had recklessly funded a lot of assets at General Electric Capital in the overnight commercial paper market. And suddenly needed a bailout from the Treasury. Within days, that bailout was granted.
And therefore, General Electric was able to avoid the consequence of its foolish lend long and borrow short policy. What they should have been required to do when the commercial paper market dried up — that was the excuse. They should’ve been required to offer equity, sell stock at a highly discounted rate, dilute their shareholders, and raise the cash they needed to pay off their commercial paper.
That would’ve been the capitalist way. That would’ve been the free market way of doing things. And in the future they would’ve been less likely to go back into this speculative mode of borrowing short and lending long. But when we get to the point where the one triple-A, a multi-hundred billion dollar company gets to call up the secretary, issue the S.O.S. sign and get $60 billion worth of guaranteed Federal Reserve and Treasury backup lines, then we are, you know, our system has been totally transformed. It is not a free market system. It is a system run by powerful, political and corporate forces.
BARACK OBAMA: Thank you. Thank you.
BILL MOYERS: So when you saw that President Obama had appointed Jeffrey Immelt, as the head of his Council on Jobs and Competitiveness, what went through your mind?
DAVID STOCKMAN: Well, I was in the middle of being very disgusted with what my own Republican Party had done and what Bush had done and the Paulson Treasury. And then when I saw this, I got the title for my book, “The Triumph of Crony Capitalism.”
David Stockman on Crony Capitalism (Bill Moyers)
David Stockman (Bill Moyers)