by Kirstin Kelley, Graduate Assistant Editor
Nomi Prins’ recently published book, All the Presidents’ Bankers: The Hidden Alliances That Drive American Power, covers 100 years of banking and political history in the United States. Reading the book is eye opening. My mother, a high school teacher, constantly quizzed my brother and me on the Constitution, the wars, and significant historical events. Yet, we had a blind spot when it came to understanding how the government works in reality as opposed to how it is supposed to work in theory.
I turned 18 in 2008, the year of the most recent economic collapse. Coming of age in uncertain economic times has led me to understand why the economy is the way it is and what we can do to increase our stability and sense of security in the future. I have read all of Nomi Prins’ books. While each one has added to my understanding of the systematic social injustices codified in our legislation, All the Presidents’ Bankers is her best work yet, in this respect. I had the opportunity to interview Nomi Prins, which I found exhilarating.
She describes our current economic crisis as having been in the making for more than a hundred years, and tells me “since we have had no meaningful reforms, it is 100 percent likely we will have future crises of this nature, or larger.”
When I asked Prins if there was one pivotal moment during which this crisis could have been avoided, she cites, in particular, the repeal of the Glass-Steagall Act and the mergers it unleashed. This provided the Big Six banks with “more concentrated capital and political financial power than ever before.”
Was building a close relationship between bankers and presidents crucial for building the political powerhouse that is the USA?
Yes, it absolutely was. Mutual dependency and reinforcement of power were concepts that both big bankers and presidents instinctively understood and grasped as necessary to the building of America as a global super-power. Presidents wanted and needed the most elite private bankers and their financial strength to achieve super-power status; and likewise, big bankers needed American military strength to protect their growing international interests.
Between the period of the Great Depression, World War II, and the Cold War until the early 1970s, bankers balanced their expansionary desires with supporting the national interest at home. Their practices were subsequently more subdued and less risky.
But by the 1970s, this dynamic began to change for the worse with respect to the public. Bankers discovered that Middle-East oil provided an excellent source of financial independence from the US government’s domestic initiatives. With Chase and Citibank leading the pack, and Bank of America in the mix, US bankers aggressively recycled "petrodollars" into Latin American loans. This lending exuberance snowballed into the 1980s Third World Debt Crisis, during which the bankers needed and got the Reagan-Bush governments to bail them out. From then on, and through the deregulation acts (The Gramm-Leach-Bliley Act in particular) passed under the Clinton administration, bankers increased their risk-taking and further diverged from supporting the public interest. Bankers became more rapacious in terms of global speculation and presidents didn’t even try to hold them accountable or promote restraint.
The culmination of this prevailing ideology to retain “American Competitiveness” requires an unconstrained US banking system in the eyes of the big bankers, the Presidents, their Treasury Secretaries, and the people running the Federal Reserve.
What inspired you to tell this story of the relationship between the presidents and the banking industry in the United States?
It started with my reflecting on a scene of a true event that I described in my historical novel, Black Tuesday, which was about the Crash of 1929 and how it impacted one immigrant woman and a Morgan Banker. At noon on Black Thursday, October 24th, six bankers - the “Big Six” of the time - met at the Morgan Bank, cattycorner from the New York Stock Exchange, to discuss how they would “save” the buckling stock market in which they all had personal and business interests. In twenty minutes, they decided to buy up certain stocks, using 'other people's money' - their depositors' funds. At first, they were heralded as heroes, but the bravado was short lived, and the move failed as the stock market lost 90 percent of its value over the following few years.
Today’s Big Six banks are largely combinations of the family and institutional legacies of those Big Six banks. I wanted to explore how those men and their legacies and the leaders at both poles of America power – those that are elected to the White House and those that govern over its finances from unelected positions– have interacted. I discovered that for the past century, highly symbiotic and deeply personal relationships amongst the political-financial elite families and their close associates drove American domestic and foreign policy more than any individual president or party. Every president, from Teddy Roosevelt through Barack Obama, has had private ties of various degrees of closeness with the most influential bankers of his term, some lasting for decades. In addition, many of the key players are related through blood, intermarriage or various protégé-mentorship arrangements, comprising a genealogy of American power that operates more on behalf of its elite members, than the public.
Can the electorate actually change the way politics work in the United States?
As my book points out, leaders at the top of the political ladder have shown themselves to be on the same page philosophically and from a policy perspective as the Big Six Chairmen. This alliance has deep family and societal roots, impacting policy. There are some senators working to mitigate the concentration of power and risk of the banking system, like Elizabeth Warren, Bernie Sanders, and Maria Cantwell, but we need all of them to be considering the dangerous implications of a political-financial system that concentrates so much power in the hands of a few players.
Moreover, we need White House leadership that demands accountability from the bankers.
Congress should at minimum reenact the Glass-Steagall Act to separate our deposits from speculative bank activities. We need the Department of Justice to hold big bank leaders legally responsible for what their firms have done to the country. Meanwhile, voters must garner awareness of how power in American really works and build our own alliances. We must support community and local commerce and banks in such a manner that fortifies our country from the ground up.
You talked about several interesting people. Whom did you most enjoy researching?
I was fascinated by the inner turmoil of Woodrow Wilson, who possessed some real emotional demons as well health problems. He didn’t come from the eastern elite establishment per se, but he did socialize with the Morgans when he was President of Princeton University and with National City Bank executive, Frank Vanderlip, a close friend. Wilson used his personal connections with elite banking families to help finance Princeton, during his election campaign, and through World War I. He also tried to do the right thing for peace globally and for the country, often with many political and physical obstacles in his path. As a literature character, he’d be quite compelling.
You end the book with “Our choice is simple, either we break the alliances or they will break us.” What is the first step we need to take to break these alliances?
When Judge Louis Brandeis first wrote in his opus, Other People’s Money in 1910, that we had to break the Money Trusts, or the Money Trusts would break us, he was referring to the infused concentration of wealth and power and influence in the hands of a few financiers, at the helm of which was J.P. Morgan. Even Brandeis did not know then the extent of Morgan’s personal relationship with Teddy Roosevelt during the Panic of 1907.
Now, a century later, with bank bailouts an integral part of domestic policy, the Big Six banks have more concentrated influence than the money trusts did. From the Penn Central and Lockheed Martin bailouts in the mid-1970s to the 1980s Third World Debt Crisis, the 1994 Mexican Peso crisis, the late 1990s Asian crisis, and the recent subprime crisis, the political-financial history of alliances has promoted a policy determined to save the big banks at the expense of the people of any nation.
In other words, our government financially and philosophically subsidizes flawed big banks because of the decades of relationships between the two sets of men and their legacies that run the White House and Wall Street.
If we don’t break these dangerous alliances or at least their current modus operandi, they will break us through more acute economic crisis periods and financial inequality. How do we break them? Well, on the one hand, we can’t actually and that’s the cold truth. As my book shows, there’s over a century of family and class connections behind America today. We cannot force Obama not to pick up a call from Jamie Dimon in a crisis. But, we can move our money to smaller places, start local alliances, support community establishments, and endorse regional banks on a broad public scale in the same manner as the power elite have done for themselves. We diminish their alliances by fortifying our own. This is not simple to accomplish in great scope, or to be honest, even likely any time soon. But it should be our goal if we truly want to live in a fair democracy, rather than an oligarchy.