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Americans responded to the Great Depression with resolve: Wall Street crooks went to prison, public works programs created jobs, and a new social safety net aided the poor and elderly. By the late 1930s, Democrats held a majority in Congress, which lasted for nearly 60 years. The 2008 financial meltdown nearly equaled the Great Depression. But the political outcome was starkly different: Republicans took back the House in 2010 as public rage shifted from Wall Street to government. Diane talks to author Thomas Frank about what he calls a “hard-times swindle,” which he says fueled an unlikely conservative comeback.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. After the 2008 financial meltdown, pundits predicted conservatives would have to move to the center or face irrelevance, but instead, Republicans retook the House of Representatives in 2010 in the biggest mid-term victory since 1938. In his new book titled "Pity the Billionaire," Thomas Frank argues that the American right pulled off a hard time swindle casting themselves as the champion of the common man. Tom Frank joins me in the studio.
MS. DIANE REHMYou can join us as well, 800-433-8850. Send us your email to firstname.lastname@example.org, join us on Facebook or Twitter. It's good to see you.
MR. THOMAS FRANKIt is my pleasure to be here, Diane.
REHMYou were a Wall Street Journal columnist during the 2008 financial meltdown. You felt the country was really almost sliding into some kind of deep depression. Is that what led you now to write this book?
FRANKYeah. In some ways, it is. I -- this is going to sound really strange to your readers, but all my life I've been really interested in the literature of the 1930s, the Great Depression. One of my heroes is Edmund Wilson who was the literary critic for the New Republic at the time and wrote a famous series of essays about protest movements in America in the 1930s. And when I saw these things happening, the financial crisis, I mean, that looked like right out of 1929, and everybody though at the time that the great sort of left turn of 1932 was at hand, and I myself wanted to go out and do the kind of thing that Edmund Wilson did in his depression essays.
FRANKI wanted to see the protest movements with my own eyes. I wanted to, you know, listen to people who were losing the faith in, you know, the old order as we used to say back in those days, and so that's how I happened to be at the first Tea Party protest in February of 2009, and what I saw there was, on the surface, exactly like what Edmund Wilson wrote about back in those days. But the politics of it were completely the reverse, completely the reverse, and it just went from victory to victory to victory to the point that you mentioned in your -- in the introduction, the great sweeping victory of 2010, and now look at, you know, Iowa and New Hampshire, South Carolina.
REHMHow do you think they did it?
FRANKWell, whether it was -- I don't know whether it was planned or not, but I think the first step that we have to look at is the perversity of the accomplishment. I mean it's an amazing thing that they did for the simple reason that you had this financial crisis that really was the result of many years of sort of bipartisan consensus economic policy about deregulation. And this is something that virtually every account of the financial crisis, and the shadow banking sector, and the predatory lending, and, you know, all the mortgage originators, all that stuff, you go back and read that literature, and I did, and it's a wonderful body of work, but it -- you can see how this was made possible by the deregulatory laissez faire philosophy, and we have never seen, you know, aside from say the collapse of the Soviet Union, we've never seen a more ideologically determined failure than that financial crisis in 2008.
FRANKAnd I thought when that was, I mean, how can you have a political movement that comes around and embraces that very -- the philosophy that lead to that as the solution to the times that we're in, and that's what's happened.
REHMBut I think your thesis is that the working class themselves bought into this and helped the rise of the Tea Party.
FRANKWell, we know statistically that that is true. Now, this is actually a more -- it's a more involved story than that, but that is -- yes. That's, I mean, obviously you can't win elections in this country if you don't have working class people voting for you and we know that that's what happened in places like Wisconsin where you had this huge shift in working-class loyalty from the Democrats to the Republicans.
FRANKNow this has truth be told been going on for a long time, and I've been writing about it for a long time, but it accelerated. You know, what is the famous -- the line -- Hemingway's line about bankrupt, you know, first slowly and then all of a sudden, and that's what happened, you know, to the Democrats. But if you examine the Tea Party movement closely and hang around with them, it's not really a working class movement.
FRANKIt looks like one, it talks like one, but the people who are out there in the parks waving those signs are not, you know, blue collar guys from the local steel mill. That's now who they are. I'll tell you a funny story. I went to a Tea Party rally in Denver and there I met a man who had chosen to show up at this protest rally wearing an ascot. Okay? Now, that's not something that you see very frequently, even here in Washington D.C. That's fairly unusual. In fact, I'd never seen that ever before.
REHMDid a fair number of wealthy people go in to help this Tea Party movement get started?
FRANKWell, absolutely. This is a -- the beginnings of the Tea Party movement are, you know, it's criticized a lot for being phony grassroots. The term they use is Astroturf, and I think that's pretty accurate. That's what it was in the beginning. That first one that I described, the one that I went to in February of 2009, here in D.C., and it had been organized by various pillars of the conservative establishment here in the city, you know, magazines, think tanks, and there are several organizations behind it that are funded by the Koch brothers, my fellow Kansans from Wichita.
FRANKThey are oil billionaires. They have a lot of -- and they've been funding conservative projects for a long -- or I guess I would say Libertarian projects. You know, to make this seem -- to just heighten the perversity and strangeness of it, the whole thing was basically called into being from the floor of the Chicago Board of Trade. Do you remember the famous Rick Santelli rant?
FRANKI don't know if you remember this, but he is a CNBC financial news reporter, and his beat is the, you know, commodities exchange in Chicago. And one day, this was during the bailouts in the early part of 2009, he was very angry about the bailouts as we all were, and he, you know, started yelling at the camera, and went on this very eloquent tirade about, you know, angry at the bailouts, and he was being cheered by the derivatives traders on the floor around him.
FRANKAnd it went viral as they used to say, and people were watching it on YouTube, this clip of Rick Santelli, and in his rant he said we should have, you know, a Boston Tea Party, or I think he said we should have a Chicago Tea Party to show our anger about these things, and that's where the phrase came from. But the fact I want to highlight here is that -- and it sounds very populist. All of this stuff is very populist, but like I mentioned early that I'm from Kansas.
FRANKPopulism was a big deal in Kansas a long time ago, and in the great sort of Populist world view, the Chicago Board of Trade was the very focus of evil in the universe, you know? This is where, you know, these parasites who produced nothing, who made nothing, would rip off the farmer on one side and the consumer on the other side. Populists hated the Chicago Board of Trade. Here you have a Populist movement in our own day, a Populist movement being called into being from the very floor of the Chicago Board of Trade. I always love that little irony.
REHMBut why couldn't Democrats their own successful Populist uprising?
FRANKOh, wow. Well, Diane, that's the big question. I mean, I've been wondering about that all my life. Because this isn't the first Populist revolt on the right. This has been going on since the days of Nixon, when what did he call it, the silent majority. And you've had one after another, you had, you know, the culture wars, you had the new right in the 1970s, you had, you know, the Gingrich revolution. All of these had a Populist flavor to them. The culture wars very Populist.
FRANKAnd the Democrats are never -- they never seem to be able to respond in kind, and it's extremely frustrating to me both as a liberal -- I'm pretty liberal, and just as somebody that wants to see a good ball game, you know. I want to see this...
REHMBut you know...
FRANKI want to see a good fight here.
REHMI think it's also that the Democrats have never had the wordsmiths that the extreme right has or the right has. I think about Frank Luntz. I mean, you talk about silent majority, now where does that go back to? It goes back to Agnew and Nixon. You talk about the way Democrats are described now, there are words that are being used that are so potent...
REHM...as to make the entire Democratic party seem worthless.
FRANKYou're absolutely correct in that regard. But you know there are plenty of people out there on both sides who are equally smart, and I think of, you know, I always go back to Franklin Roosevelt. There's a wordsmith for you.
FRANKI mean, the phrases that he came up with.
FRANKWhat's funny -- you're absolutely right. Well, here's a way of -- here's a way of getting at that. The conservative movement is much better organized, it's more concentrated, it has, you know, they come out of the -- conservatives tend to come out of the business community, so they're very good at organization and at the sort of public relations skills. None of that is a surprise. What is interesting to me is this sort of larger cultural aversion that Democrats have to populism. I'll give you an example.
FRANKThe -- back in the '70s, I mentioned in passing the new right. Well, the new right had a slogan. I've always loved this. Their slogan was one of many slogans, organized discontent. I like that. They would -- organized discontent. And this is, of course, a slogan that they stole from the left, as with many of these. Many of the things that we're gonna be talking about in this hour were swiped from the historical left like the IWW or the Labor Movement. Okay.
FRANKOrganized discontent, and they'd be out there doing that. Making people angry, getting angry people together, you know. The bitter self-made men of America coming together, you know, in fury against, you know, the Washington elites as they love to say, or the nattering nabobs of negativism, you mentioned Agnew. And the Democrats on the other side, on the, you know, for their part are very uncomfortable with organizing discontent.
FRANKNow, they know in the back of their minds that that's where their party comes from. That's, you know, you wouldn't have a Democratic party if it wasn't for, you know, the discontent in the 1930's.
REHMAnd as for the nattering nabobs, let us not forget Bill Sapphire. And short break, and right back.
REHMAnd welcome back. Thomas Frank is with me. He of course wrote the bestselling book "What's the Matter with Kansas?" Now he's got a new one. It's titled "Pity the Billionaire: The Hard-Times Swindle and the Unlikely Comeback of the Right." Go to that phrase, the hard-times swindle and exactly what you're saying.
FRANKIt's like a game of three-card Monty, okay. The nation is upset at the end of the financial crisis, furious. I mean, we're watching the economy slide into what looks like Great Depression Two. And this -- you know, it's like our anger doesn't have a direction. And the conservative movement got out ahead of that anger and said, you know, you're angry at Wall Street. No, no, no, no, you're angry at these guys over here...
REHM...at the government.
FRANK...government, you know. And so our anger was shifted from one target to another.
FRANKWell, the bailouts I think. The bailouts were the big -- that was the turning point. The -- you know, it -- I'll tell you. Take a step back here. You mentioned that I was a Wall Street Journal columnist at the time of the financial crisis. I was. I was a liberal voice on their op-ed page, a regular liberally columnist there. And I tried my best to understand what was going on with the financial crisis. And I remember to this day how extremely hard it was for me to figure out what a credit default swap was, you know.
FRANKYes. The financial crisis was really hard to understand. But the bailouts were very easy to understand. This was an obscenity, an outrage. And it was -- everybody across the political spectrum regarded it as such that our tax money should be used to prop up the bad guys? The guys that did this, that ran us over the cliff?
REHMHow did that happen?
FRANKWell, you have to -- I mean -- you mean technically or politically or...
REHMPolitically. How did that happen?
FRANKIt doesn't surprise me that, you know, Hank Paulson who was the Treasury Secretary at the time, rode to the rescue of Wall Street banks. He was from Wall Street himself and that, I'm sure, made sense to him, not only in an intellectual way that you know you have to keep it -- you have to provide liquidity. Right? That's sort of the slogan, that was the mantra at the time. But it was also those were his friends. And, you know, I don't want to say that it was...
REHMBut surely you're not saying that he felt it was more important to save his friends than save the country?
FRANKI think he thought -- I'm sure he thought he was doing both. And -- but it wasn't just him, of course. This is across the board. The Federal Reserve had signed -- was bailing out with both hands, let us not forget. And they were doing all this before Congress had authorized it. Congress finally weighed in with a TARP and you've got plenty of friends at Wall Street in Congress as well.
FRANKYou know, what did Dick Durbin say? The banks own this place, you know. It's -- look -- but it wasn't just an act of pure cold corruption. They thought they were doing the right thing. Now one -- and then the -- what I feel to be the great political mistake in all this is that when President Obama came in, he chose to continue that policy with almost no changes.
FRANKHe brought in -- in fact, Tim Geithner who had been head of the New York Fed had been the point man and the bailiff made him the new treasury secretary, you know, kept Bernanke on at the Fed and announced that, you know, in the spirit of bipartisanship this is going to continue, the spirit we want to, you know, do the statesmen like thing. And that -- he owned it. That made it his and that made him fair game for the right. And they've ridden that thing ever since.
FRANKNow, the point that I always make when I'm talking about this is that there's more than one way to do a bailout. There's more than one way to rescue a financial sector in distress. And in fact you don't even need to rescue the institutions. You take something like Citi Bank or any of these other too-big-to-fail institutions -- you know, that whole idea of too-big-to-fail should have been massively discredited by all this. Why not unwind these banks in an orderly manner, as the FDIC does with banks every day of the week, you know, all across this country. They do it all the time. We know how it's done.
REHMWho designed the phrase too big to fail?
FRANKI actually know something about this, Diane. That phrase comes from -- in the 1980s it was -- they were talking about Continental Illinois Bank, which was one of the -- the biggest bank failure in U.S. history at the time and was bailed out by the Regan Administration. And this is a very -- I guess you'd say this is an inconvenient piece of knowledge that they -- we, you know, that sort of -- that great -- you know, the paladin of the free market way, Ronald Regan and his administration was bailing out banks as well.
FRANKAnd -- but, yeah, over the years, that phrase sort of caught on and -- but, you know, once upon a time people thought that was a good thing, a bank being too big to fail. But it's a reprehensible thing as we know now.
REHMAnd what about Lehman Brothers? Had it not gone down what would have been the difference?
FRANKWell, that's -- I mean, that's anybody's guess. The question people usually ask is should we have just let the others go down? Should we have let AIG go? And then once AIG had gone, you know, it would've taken everybody with it. And the answer to that is -- I mean, of course you couldn't just allow financial Armageddon to happen. You had to do something. Absolutely you had to do something. But did you have to pay AIG's creditors 100 cents on the dollar? No, certainly not.
FRANKThere's -- the point is this. There's lots of different ways to do a bailout, okay. And we know this from the days of the Hoover and Roosevelt Administration. They both bailed out banks but they did it in two very, very different ways. But it's as though those choices were off the table this time. They were unknown to us.
REHMSo what you're saying is that the anger about all of that turned into anger at the government.
REHMAnd that is how the Republicans won...
REHM...the 2010 elections.
FRANKBy -- yes, by making -- and this is the point that just -- this is the thing that really just blows my mind every time I think about it. So when I saw something like that going on, the bailouts, I was like, you know, it's cronyism. It's lobbyists. It's all the things that we've been talking about for, you know, 20 years. You know, the power of industry over the regulators. But when the right looks at that they say, this is government meddling.
FRANKThe obvious answer is not to retreat from our commitment to deregulation, not to retreat from what we've been doing for the last 30 years, but to go so much further to double down on it, you know, and to just get government out of the picture altogether. That's the only way out of this is by going to...
REHMGet rid of regulation.
FRANKThat's right. And -- well, they're all saying this right now. They're out on the campaign trail -- the Republican candidates swearing, you know, well, you know, my rival here says he's going to return -- he's going to overturn, you know, most of the Obama regulations, new bank regulations. Well, I'm going to overturn all of them and then I'm going to overturn even more. They're trying to one up one another on this. That we've got to completely dismantle or largely dismantle the regulatory state, which is an amazing response, when you think about it, to a crisis brought on by deregulation.
REHMBut they must feel as though the public is with them. You hear people echo those words constantly, well the government is regulating too much.
FRANKThat's right. And the argument also goes that you can't say that free market capitalism failed because it was never tried which is a very interesting phrase. That's something that you used to hear from socialists, right. You can't say that socialism failed. It was never tried. The Soviet Union was, you know, imperfect. And, you know, it was this horrible monstrous dictatorship and all, you know, that argument. And that should clue you into a really eerie similarity. These are both utopian philosophies.
FRANKAnd this is sort of how "Pity the Billionaire" concludes. The second to last chapter is about the free market faith as a kind of utopia, as a kind of idealism. But an idealism so powerful that it is capable of -- and I'm trying to think of a way to put this that's not insulting or stupid -- but it's capable of clouding the minds of its followers in the same way that people on the left were -- say in the 1930s, were capable of overlooking the crimes of the Soviet Union. Things that everybody else could see, that anybody that read a newspaper knew about.
FRANKBut people on the left were like, you know, no, no, no, you know, completely disregarded it. You know, thought it was all propaganda. And this is sort of what you see on the right today.
REHMHere's an email from Jennifer who says, "In his earlier book 'What's the Matter With Kansas?,' Mr. Frank insisted race was not relevant to the blue collar support of the rightwing agenda. Of course, the book was published before the election of Mr. Obama. Is Mr. Frank still convinced that race is not a part of the reason for white working class hostility to moderate liberal political agenda?"
FRANKI wouldn't -- I think that's probably a misunderstanding. What I -- the argument in "What's the Matter with Kansas?" was that a lot of the rightwing populism began as pretty much straight up racism in the '60s. I mean, the father of all this stuff was George Wallace. You know, he was the sort of great inventor of a lot of these themes that we've been following. All the culture war stuff, he really originated it. And remember, Richard Nixon swiped it from him and this was called the Southern Strategy. Do you remember this?
FRANKAnd that's -- that really is where it came from. But my argument was that over the years it became sort of secularized and the racism was drained out of it. And so today you have a movement that's saying the same things but their -- one of their heroes just about a month ago was Herman Cain, you know. So they're able to say these -- you know, these arguments. They're able to reiterate these themes that definitely had a racist beginning. But in service of -- I think it's that racism is not as important today as it was then.
FRANKNow, you know, I think that what motivates the people with this sort of extreme hostility to Barack Obama that you see -- and I'm sure that racist part of that equation, absolutely. But you know, when I'm writing about these people it's -- I think it's only fair to the Tea Party movement and the other people that I write about to consider what they actually say rather than what I suspect they feel in their innermost heart of hearts. And yes there are a handful of outrageous racist incidents. And I've mentioned some of them in the book. But by and large, you know, 99 percent of what they talk about is not -- it's other things.
REHMYou profiled Glenn Beck as one of the standard bearers of the hard time swindle. Why do you single him out?
FRANKOh, he fascinates me. He's -- remember he was on the cover of Time Magazine. When was that? It was in '09. That was when his star was on the rise. And I thought he, more than anybody else, any other public figure at the time, captured the sensibility I'm talking about, speaking to this kind of hard-times anger. I mean, he was really a man -- like me I think -- who's immersed in a lot of '30s culture, although he never says that but he talks about it all the time.
FRANKOne of his heroes, as he says in his first book, is Orson Wells, you know, the great sort of boy genius of the 1930s. And Beck started something called the 9/12 project. This was gonna be his version of the Tea Party movement. And after I -- you know, I studied this and watched his TV shows announcing it and that sort of thing. And it suddenly dawned on me that this was basically lifted right out of a Frank Capra movie, "Meet John Doe." It's similar in all these really curious ways.
FRANKSo anyhow, he's an interesting figure for me because he -- you know, he is very definitely speaking to the hard time sensibility. And, you know, people in the country were afraid, scared, you know, angry. And that was what he was all about. You know, he had been around on radio and TV before the recession began -- before the great recession started. But it was only when panic set in that he suddenly caught on.
REHMTom Frank. His new book "Pity the Billionaire" and you're listening to "The Diane Rehm Show." What about Rush Limbaugh?
FRANKHe's -- I talk about him as well but he isn't as important to me -- I mean, he doesn't have a TV show anymore. Well, neither does Glenn Beck for that matter. But, you know, Rush Limbaugh is obviously a hugely important figure when you're -- when you study the right, which I do. I'll tell you a funny story. So I had a friend, a newspaper -- a fellow journalist from France. And he came over and he wanted to write about America and its great shift to the right. And he would say, you know, I come over to your country every four years. And every four years it's moved further to the right and I don't understand it.
FRANKYou know, let's -- I want to -- I want you to help me look into this. And so we drove all around West Virginia talking to people. And I made him listen to Rush Limbaugh constantly in the car. You know, I'll never forget this. We would drive over a mountain and Rush Limbaugh's voice would fade out. The radio station would fade out and he'd be like, oh it's over. And I'd be like, no. And I'd push the button, the next radio station also playing Rush Limbaugh.
FRANKAnd everywhere you go, you know, I -- everywhere you go in places like Kansas, Rush Limbaugh is this presence. You know, he's giving you the talking points. And your local café will have a Rush room where, you know, people get together and talk about the wonderful wisdom that they've heard on Rush Limbaugh. And there is no leftwing equivalent. There is no presence. This sort of my kind of critique of, you know, political economy does not have a presence in those small towns and those West Virginia valleys. It doesn't exist. And that's very, very important.
REHMAll right. We've got lots of callers who want to join the conversation. We'll open the phones, 800-433-8850. First to Grand Rapids, Mich. Good morning, Tim.
TIMGood morning. Love your show by the way, Diane.
TIMI just wanted to say I feel like the problem is more than the right being more aggressive or successful. It's a corruption that's incredibly widespread between both parties. If you look at where the campaign money comes from and if you look at -- that's basically the jest of it. I mean, Obama, half his money came from the financial industry. It's just we can't have an honest discussion without campaign finance reform.
FRANKYeah, that's exactly right. And well, I don't -- the campaign finance reform, that's, you know, I've been in favor of that for many, many, many years. But what the caller's saying is exactly right, but I wouldn't say -- corruption, I think, is too strong a word. For these people, the word that you want -- and, Diane, you're here in D.C. It's consensus. This is, you know, everybody's all nice and polite here in Washington D.C. and they all agree on everything. And one of the things they agree on is this sort of great, you know, the great turn towards markets that began in the 1980s. This is common sense for these people.
FRANKAnd, you know, Barack Obama's actually was very open about this. There's a passage in his memoir "The Audacity of Hope." He's very frank. Much more forthright than I've ever seen or than I've seen most Democrats be, where he talks about fundraising when he's running for the U.S. Senate seat from Illinois and how he would meet with the kind of people who fund Democratic campaigns.
FRANKAnd they tend to be very wealthy, you know, often in the financial sector. But they're liberal on social issues. But they have zero tolerance for organized labor. They believe in markets almost as, you know, not with the kind of, you know, utopian fervor that the Tea Party does, but they believe in them. And so the differences between them and the right on these sort of critical issues of financial regulation are not very great. That's absolutely true.
REHMHe could have made a big difference, do you think, in what happened after 2008?
FRANKAbsolutely. I mean, he came into office as a kind of Roosevelt figure. You remember those crowds when he was inaugurated? I mean, there -- it was this -- and he had both Houses of Congress behind him and the nation behind him. He could have -- I think he could've done anything he wanted.
REHMTom Frank. The book is "Pity the Millionaire." (sic) Short break and when we come back, more of your calls, your questions. Stay with us.
REHMAnd if you've just joined us, Thomas Frank is with me. Course, he's the bestselling author of "What's the Matter with Kansas?" Now, he's written a new one. It's titled "Pity the Billionaire: The Hard-Times Swindle and the Unlikely Comeback of the Right." One essential element of the hard-times swindle you talk about was the right's ability to manipulate class differences. How did they do it?
FRANKThis is going to sound strange but the conservative movement talks about class all the time. The, you know, the phrase that they like to use is the ruling class. And I mean, they've talked about the liberal elite ever since I was a little kid. And the liberal elite, you know, is doing this, the liberal elite is doing that. But in the course of 2010 they came up with a new way of phrasing this. And this was a, you know, sort of instantly popular thing. The phrase was the ruling class. It started as an article in national review and then was published as a book and was an instant hit on the right.
FRANKAnd it's kind of a version of sort of Marxism for the ruling class, you know. Or what was the Hofstadter's (sp?) phrase, the Marx of the master class. I love that. But it's a, you know, it's a class critique that describes the, you know, the present situation as a war between people who are educated and associated with Washington in some way, with government in some way and then everybody else. And these are the two classes in America and they're having it out in some, you know, Titanic showdown that's going on right now.
FRANKAnd this caught on with the right. And they started expressing -- especially the Tea Party movement and they started expressing everything as, you know, it's a fight with the ruling class. And I remember Richard Viggary (sp?), who's sort of one of the great strategists. You talk about wordsmiths. Here's your man, one of the great thinkers and PR people of the conservative movement. And he had an election night watch party in 2010 called, Out With the Ruling Class. I love that. I mean, well...
REHMHere's an email from Bob in Texas who says, "My objection to government regulation is not that some regulation is not needed, but the fact that our government regulatory agencies are so inefficient and incompetent in applying regulations that, in fact, they do through mistakes, ineffectiveness, agency and cronyism. They do more damage to the economy and the wellbeing of the general populace than good."
FRANKWell, I wouldn't agree with that last sentence, but all the rest of it is correct. I mean, and this is something -- regulatory failure is something you see, you know, again and again and again and again. Okay. Look at -- I mean, how did all of this crazy stuff in the financial sector happen? And do you remember that famous photograph of the head of the office of thrift supervision? One of those, I think, five bank financial regulators in America and that was one of them.
FRANKAnd he was meeting with a bunch of lobbyists and they had all brought garden implements to show how they were going to cut red tape, right? And he brought a chainsaw, the head of the agency, with all these lobbyists. There's a phrase for this. It's regulatory capture, okay. But for some reason, even though we've had regulatory failure after regulatory failure, my liberal friends will not use that phrase. You'd look at what happened with the BP, the oil, you know, drilling platform in the Gulf, you know, another regulatory failure. The agency that was supposed to be overseeing that was partying with the oil drillers.
FRANKYou look at the guys that are supposed to supervise coal mining in this country. You have all those miners that died in West Virginia and then it turns out that the, you know, that the company was totally able to pull the wool over the eyes of the regulators easy as pie, right? Why do these things happen one after another after another? At least the -- you know, President Obama should tell us why or give us a theory, give us some kind of explanation because otherwise the sort of -- almost the natural conclusion that people come to is that it's impossible to regulate. You know, the whole thing is a fool's end.
REHMAnd here's a similar one from Nick who says, "Mr. Frank clearly doesn't understand the situation that took place. The crisis wasn't brought on by deregulation. There were regulations in place. The FCC did not do their job, which caused more problems than a lack of regulations.
FRANKThat's totally correct. But I would include under my term deregulation, which is sort of a catchall for what's been going on, the term that -- I mean, the actual technical term for what happened is called de-supervision. This is when you have the laws in place, you have the agency in place and the laws aren't enforced. And that was going on all through the Bush years. In fact, it was -- I mean, it was -- that was strategy. That was what they did. The Bush Administration delivered de-supervision to these guys.
REHMSo has the Obama Administration not been able to break through?
FRANKWell, there's -- you know, in some ways they've tried but you -- look, this is something -- is a highly technical issue. This is something that the banks themselves pay a lot of attention to but the general public does not. The only way to win a fight like this, if you're on -- if you're a liberal like me is to do like Franklin Roosevelt did and make a huge big deal out of it, you know. Otherwise the public is not interested.
FRANKI mean, these stories that were coming out of the FCC, you know, a few years ago about the guys having to make their photocopies down at Kinkos 'cause there -- they didn't have photocopiers in the offices of the FCC or they were broken. You know, and the lawyers had to do it themselves, had to go down there and stand in line. And they're, by the way, going up against on the other side of the table from them, the best paid lawyers in the Western world, the Wall Street's lawyers.
REHMAnd Frank wants to know, has Occupy Wall Street stolen back the misdirected anger of the hard-times swindle?
FRANKOh, I hope they have but I'll tell you, I mean, you know, that would be -- it would be wonderful but this is just a -- you know, they had a great sort of internet display. The I-am-the--99-percent thing, very powerful. I saw that and it, you know, I thought that was really overwhelming and very convincing and heartbreaking. But I don't know if, you know -- they've got to move beyond camping out in public places. You know, that's great for a start and it drew a lot of attention to their cause, which is also I think my cause. But they've got to go much further.
FRANKThe Tea Party Movement, the right is so far along in their project -- an example. I spent a lot of time -- not a lot but some time out in Wisconsin during the big anti-Scott Walker rallies and I was very inspired by that and I wrote about it for Harper's magazine. But that was a cry of desperation. That was people whose backs are to the wall and who are looking at, you know, their way of life being destroyed. It is the start, you know, maybe but it's -- you know, it's a cry of desperation. It's got to become something much, much bigger than this.
FRANKBut with the Tea Party Movement you're looking at people who have basically been having their way politically for 30 years and now are saying, we've got to go all the way to this sort of utopia, this vision that we have. And we're close to achieving it. That's something very different.
REHMAll right. To Chris in Musa, R.I. Good morning. You're on the air.
CHRISThank you very much and that's Connecticut, Diane.
REHMOh, sorry about that.
CHRISThat's okay. One of the things -- a quick comment and a question. Here in Connecticut, the people that helped form the Tea Party were all racists and they used fear. And what brought on this crisis were changes of the laws that allowed things that brought on the Great Depression that happened again. Derivatives are nothing new. They happened in the '30s. You could basically -- like a casino, you could put a don't come, don't bet on stocks.
CHRISThe thing that gets me, the problem with the president is he sees a company man. If he had got up and said, listen, we need to continue this, but these guys hoodwinked us. They didn't want this money to save the country. They wanted it for their bonuses. My sister lived next to a guy who got $1.3 million in a bonus and his firm went bankrupt.
FRANKYep, that's right, bankruptcy for fun and profit. There's a friend of mine wrote a book called "The Best Way to Rob a Bank is to Own One." And I think we're seeing that more now all the time. But the caller -- you know, you should read this book "Pity the Billionaire." It's gonna -- it's exactly what you're talking about.
FRANKCan I just pile on here a little bit with the critique of the Democrats and what they've done wrong? And one of the chapters in the book is called the "Silence of the Technocrats." And the Democrats have their heart in the right place, in my view. There's a lot of good people in the Obama administration, a lot of people that I really admire. And I think a lot of the things that they did were exactly the right thing. The stimulus, it was exactly right. Some version of national...
REHMWe needed more, a lot of people would say.
FRANKOh, I thought they -- yeah, that's right. I’m -- well, I think they should have done it differently, let's put it that way. They, you know, they had the national -- we had the big debate over national healthcare. That was exactly the right thing to do, but they managed to lose the debate anyways. How do they manage -- and this is -- by the way, this is the genesis of the book. I was driving along in my car listening to the radio and they...
REHMI hope you were listening to NPR.
FRANK...and they were playing a town hall meeting somewhere. And it was a crowd of, you know, the -- in these -- remember the summer of 2009.
FRANKAnd you would have these legislators, typically Democrats, trying to explain, you know, the healthcare proposal to their constituents. And the constituents typically were very angry and were screaming and yelling. And you had some really...
REHMSaying you're taking away my Medicare, you're doing it...
FRANK...yeah, where there's a lot of confusion, yeah.
FRANKA lot of confusion, but also a lot of populaced anger. And a lot of people saying, you know, what about freedom? You know, they sort of -- they wanted to talk about core issues like the most -- they thought that this was a threat to the most basic, you know, American, you know, the things that they valued the most as Americans. And I would listen to this and it would drive me up the wall. I would get so angry, Diane, because why doesn't the Senator or the congressman in question come out and say, no, this will enhance your freedom. This is what free countries do.
FRANKYou know, we as a free people, as a free society can come together and make sure that we have some, you know, basic elements of security here. They never did this, never. Why don't they do it? Why don't they say these -- you know, why don't they explain the stimulus program?
REHMHow do you answer your own question?
FRANKThey always fall back on expertise. And this is not just the failing of Barack Obama, whom I like a lot, and of his, you know, innermost members of his cabinet. This is a failing of the Democratic Party. They aren't the party of working people anymore. I mean, they are. A lot of working people vote for them, obviously. But they think of themselves as the party of professionals and professionalism and the party of expertise. And so they do these things.
FRANKAnd what the Democrat in those town hall meetings would typically say is, the experts say this is the way to do it. They always fall back on expertise. And so we got this huge stimulus bill in 2009. It was the right thing to do. But they defend it by saying, you know, we know this is what we have to do because the economists say this is what we have to do. No. That's not how Roosevelt did it. You don't win the public over by saying economists told us to do it and therefore we're doing it.
REHMHere is a Tweet from Mark. He says, "Your guest suggests the right have fairly taken over radio. Hasn't the left attempted to push counterweights to Rush only to fail?"
FRANKWell, I think he's referring to Air America there. And, yeah, and it did...
REHMAnd Jim Hightower from Texas?
FRANKYeah, and there have been all sorts of failures. You know, and I -- you know, there's -- that is a very interesting question why that happened. I have never actually looked into the reason for that, why there's never been -- the liberal alternatives have failed and failed again. But, I mean, it is true what he's saying. But I don't think it's just simply because, you know, Rush is right or something like that. Sorry I laugh. I shouldn't laugh about that. But because, I mean, it's -- you know, it's a legitimate question, but I've never looked into that. I wish I had.
REHMAll right. Let's go to Tallahassee, Fla. Good morning, John.
JOHNGood morning. Diane, this guest has been talking for almost 50 minutes about the cause of the financial crisis and never once has he acknowledged the housing market, which was the character that took down the tackle. Yes, there was problems with regulations, but the major cause -- every economist will acknowledge the major cause of the crisis was the housing market. And that wasn't because of overregulation.
JOHNThat was because congress -- well, not congress actually. It was the Clinton Administration who actually pushed Fannie Mae and Freddie Mac and Countrywide and all the other banks who were not giving out enough loans to people who had poor credit or bad credit risks. And this led to a dramatic increase and risky loans and risky loan practices. Banks were actually encouraged to take, you know, liar loans and other ways to work their way around...
FRANKOh, that's not correct.
JOHNWell, you could -- look, I myself was approached by banks who were saying, we don't need to have proof of income anymore. How else do you think...
FRANKSure, the banks did that, but that doesn't mean that the government told them to do that. The government doesn't tell...
JOHNNo, the government told them they had to make the loans or they were going to be facing class action lawsuits that were based on racial percentages (unintelligible) ...
FRANKOkay. Now you're talking about -- this is a different myth. This is the Community Reinvestment Act myth. And in fact both of those -- there's been a lot of research done into this. The loans that were guaranteed by -- look, Fannie and Freddie were bad actors, no doubt about it. But they were, if anything, a moderating influence in the housing market. The loans that they guaranteed have actually performed well over time compared to the things handed out by, say, Countrywide or Ameriquest or some of these, you know, a lot more less savory fly-by-night mortgage lenders.
FRANKThe Community Reinvestment Act, which is the other sort of piece of this myth, actually was not enforced. It would've -- if anything, it would've cracked down on predatory lending. And it certainly did not require banks to hand out -- I mean, it had been on the books since 1977. It did not require banks to hand out fraudulent or no doc loans or anything like that. What it was supposed to do is encourage banks to lend in underserved neighborhoods. It outlawed redlining in other words.
REHMAnd you're listening to "The Diane Rehm Show." Finally, to Akron, Ohio. Good morning, David.
DAVIDGood morning, Diane. It's a pleasure talking to you.
DAVIDI love your show.
DAVIDAnd good morning, Mr. Frank.
FRANKHow are you?
DAVIDFine, thank you. I'm a progressive patriot because I believe that the greatest -- some of the greatest accomplishments of America have been our economic and socially progressive, you know, legislation and changes that we've brought about. And the Declaration of Independence and the Bill of Rights are themselves progressive documents, especially for that time. But I think that the initial success of the Tea Party can be attributed to the fact the conservatives have been very successful at demonizing government and saying government is the problem. But actually I think it's corporate dominated government that's the problem...
FRANKThat's exactly right.
REHMBut it was...
DAVID... not government itself.
REHM...it was Ronald Regan who first said government is the problem.
FRANKThat's right. But, you know, he was echoing -- these are themes that go way, way, way back. But of course conservatives don't really hate government. They like having police protection. They like having the U.S. Marines make sure that nobody, you know, invades our country. They like that stuff. It's only certain branches of government, the aspects of government that protect the weak. The aspects of government that make -- you know, that make it difficult to rip people off or something like that. I'm sorry, I'm going too far here. But you see the point I'm trying to make, Diane.
REHMSo if Democrats win the 2012 election, are you going to see strength being demonstrated in another way?
FRANKI'm not sure I follow strength -- you mean...
REHMSpeaking out against this kind of hard-times swindle.
FRANK...the hard-times swindle? I think that's up to them. We'll -- I think that that is something that they need to do if they're going to recover themselves. I mean, you know, look, I'm -- however old I am -- I'm 46 years old and all my life I have watched these guys lose, lose, lose, lose, lose and watched their coalition gradually come apart. Sooner or later, they have to do something to change it.
REHMThomas Frank. His new book "Pity the Billionaire." Good for you. Thanks for listening all. I'm Diane Rehm.
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