"Meltdown": How "Hope and Change" led to MAGA
Interview with David Sirota, creator of the new Audible podcast series about the aftereffects of the 2008 financial crash, produced by Oscar-winner Alex Gibney's Jigsaw Productions
“What’s really cool is I have very few friends in DC,” says Meltdown podcast creator David Sirota. “When this comes out, I’ll have absolutely none.”
Meltdown, released on Audible yesterday, is an investigative audio series that’s been an obsession of my friend David’s for years. He developed it in conjunction with Oscar-winning documentarian Alex Gibney, of Taxi to the Dark Side and Client 9 fame. The subject is one of the great taboos in modern mainstream media, which makes the sheer breadth of the series all the more satisfying: the Democratic Party’s botched response to the Great Financial Crisis of 2008, and the political consequences that followed.
I consulted on the project and you’ll hear my voice on several of the episodes, along with contemporary witnesses like Neil Barofsky, the former Inspector General of the TARP bailout. In the interview below, you’ll hear the Useful Idiots interview of David about the series. But first, a few words about Meltdown, whose central themes I covered for nearly a decade in Rolling Stone, and in books like Griftopia and The Divide.
When Barack Obama was elected on November 4th, 2008, America’s political landscape appeared altered permanently. Obama’s “realigning” victory put his party in full control of the state, armed with a whopping 78-seat advantage in the House and a 59-41 edge in the Senate. Conventional wisdom held that the combination of massive youth and minority turnout and Obama’s re-conquest of so-called “Reagan Democrat” districts was a knockout blow to Republicans from which they’d never recover. The demographic picture was only going to get less white going forward, leaving Republicans, as the New York Times put it on Election Night, “contemplating where they now stand in American politics.” Pundits were convinced merely competent leadership by Obama would leave Democrats with a permanent supermajority.
What happened over the course of the next eight years, when the dream of forever-rule evaporated and the Democrats found themselves having to explain being vanquished by a foul-mouthed game show host, is the subject of Meltdown. To this day, the all-but-mandatory explanation for the Democrats’ 2016 disaster is a combination of racist reaction and Russian interference. Though race certainly played a significant role, the deeper explanation, still taboo, is the perception that the Obama administration’s handling of the 2008 crash was both corrupt and profoundly disillusioning. When the SS America struck an economic iceberg, the country watched Democrats fill the lifeboats with guilty bank CEOs, then waved from the horizon as everyone else went down with the ship.
Readers of mine are familiar with the gory details: reversed campaign promises, rigged bailout schemes, an absence of high-level prosecutions of financial criminals, failure of pittance-level foreclosure relief programs, toothless Dodd-Frank reform, formalization of such concepts as Too Big to Fail and Too Big to Jail, and so on, and so on.
Meltdown not only tells that story, it connects it to the Democrats’ political present and future. Sirota describes how the party’s misplaced faith in a Solomonesque business model — take money from Wall Street donors and deliver big for them on policy, while making gestures of sympathy toward the wider base of voters — opened the door for a canny political opportunism of Donald Trump. The psychology of the Democratic Party is to believe it’s always enough to be a little better, a little more sane, a little less craven than Republicans, but voters don’t see it that way. In a crisis, a leader in full control of the government has to act decisively, and be seen doing so, or risk being replaced by someone promising such action.
Trump hammered Obama on corruption and favoritism, painted Hillary Clinton as the sequel agent of Wall Street, and won making promises of sweeping action. This, Sirota says, is how “hope and change became MAGA and mayhem.” In an interview with Useful Idiots, he explained how the series was intended to be a wakeup call for Democrats, who continue to head off real examinations of their recent past, inviting, perhaps, repeats of the same self-inflicted disaster.
Excerpts from the discussion Katie Halper and I had with Sirota, to be released on video in the next days:
Matt Taibbi: Starting at the very beginning, where do we first see a discrepancy between what the Democratic Party is saying about its crisis response and what it actually does?
David Sirota: Let’s remember, Barack Obama played a really big role in forging the TARP program. In the sense that remember, people forget this. He flew back. It was during the end of the campaign. He came back to Washington. It was this big moment where he, McCain and Bush were at the White House. And Obama essentially urged passage of the Troubled Asset Relief Program, which was the giant bank bailout.
There was some progressive skepticism of that bailout, and there was some right-wing skepticism of that bailout, but ultimately, they managed to pass it, on the second vote. It went down on its first vote, which shows that there was really skepticism there. Then he gets into office and his first win was to release the second pot of money in that bailout.
He had at least partial ownership of that bailout. And what we really see is that that bailout ended up being a very top down bailout. Even, by the way, the Obama administration officials in our series admit that, that it was a top down bailout, lots of money given to a handful of financial institutions. And the party had been saying, “We’re going to deliver help to regular people.” But it was a very trickle-down policy. And where I think things, at the start of the Obama presidency, really began to unravel, was in the whole scandal over the AIG bonuses. Which is a tempest in a teapot. But I think because it represented something bigger, it became a huge scandal.
MT: Can you refresh everyone’s memory on the AIG bonus mess?
David Sirota: The basics of that were that the Democrats were passing their stimulus bill. And they made a big thing about, “Hey, we’re going to make sure that bailout money, at least at the minimum, isn’t subsidizing the giant bonuses of the Wall Street people who created this problem.” And then what we ended up finding out was that it became a huge story.
Glenn Beck and all these folks fan the flames of it. The Republicans pretended to be upset about that the Democrats had slipped in language into their own stimulus bill, basically saying that AIG, which was one of the central players in the financial crisis, that AIG could use the money, tens of billions of dollars, that it had been given. It could use some of that money to pay executive bonuses.
What ended up happening was three months after the election, the Republicans, who had just gotten their asses kicked, got themselves a political bailout. They got to stand up there and say, “Hey, why is the Obama administration going to bat for AIG? And look at AIG, which gives money to some of these Democrats who orchestrated this, people like Senator Chris Dodd.”
That was the first sign that the Democrats were not necessarily serious about fulfilling their promises.
MT: It wasn’t just AIG, it was AIGFP, the tiny financial products division of AIG that was basically patient zero of the financial crisis. Those specific people got bonuses, paid with public money.
David Sirota: Right. I should say it could have been an isolated incident. It could have been, “Look, we screwed up, we put this thing in. We didn’t realize the timing of it.” But the problem was, it was the beginning of something. What happened moving forward was that ultimately, what unfolded, the Democrats didn’t prosecute any of these people. The Dodd-Frank bill was watered down.
There was a very explicit promise. And we talk about this. This is the one that blows my mind. Was the whole situation over something called cramdown. I don’t know if people remember this. Obama on the campaign trail, made this very explicit promise and he got all into it. He got populist about it. There’s this quote, I’m paraphrasing here, but he said, “It doesn’t seem to me that it’s fair that millionaires and billionaires can get bankruptcy protection on their second home, their third home, their fourth home, their yachts. But people who are in their first home, who are now underwater on their mortgages, they can’t get any bankruptcy protection from lenders, from the big banks. This seems ridiculous. We got to change the bankruptcy laws.”
He made an explicit promise and he’s right. And this is mind-blowing, but in our laws, our bankruptcy laws still today say that bankruptcy judges, if you walk into bankruptcy court and you say, “Hey, listen, I can’t pay my bills,” the bankruptcy judge can take a look at all your debts. And the bankruptcy judge is not allowed to shield you from the debts on your primary residence. But it can shield you on other things. And it can shield millionaires and billionaires.
And worth adding, this problem was exacerbated, by the way, by Joe Biden. That the bankruptcy bill of 2005, that he pushed forward on behalf of the credit card companies made sure that credit card companies are supposed to be paid back first, before you even pay back your mortgages. There was a Fed study that said that that bill actually increased foreclosures, because people had to pay back their credit card debt first, before they paid their home mortgage payments. Which meant that ultimately, lots of people got foreclosed on.
MT: Tell us about “foaming the runway.”
David Sirota: There’s a quote from Neil Barofsky, the inspector general of the TARP program. He said at one point he was in a meeting with treasury secretary, Tim Geithner. And he was lecturing Barofsky and Elizabeth Warren, who was then one of the people policing the bailout. Said, “Listen, you don’t get it. The bailout, all of these policies, they’re designed to foam the runway for the banks.” That was the phrase, foam the runway.
That essentially, human beings, people in their homes, were the foam on the runway so that the banks could land comfortably:
And so again, these stories are shocking and horrifying, but our point is, is that it’s not just about the history. That this is exactly the kind of politics and betrayal that harmed millions of people.
And guess what? That anger, that feeling of frustration ended up having a political expression in the political arena. And I want to be clear. I’m not saying, I think Donald Trump deserved to win or the Tea Party was being honest about its being outraged about these things. It was all opportunistic. But the point is, is that if you do not deliver for people, then guess what? There’s an opportunist waiting around the corner to try to seize power and seize on your failings.
Katie Halper: How does that relate to what’s happening today?
David Sirota: I think there’s a direct line. The Democrats got elected, I’m talking about 2020 now, promising to help people. We got to get Donald Trump out of here because he’s not helping people. We’re going to help people. Right. And what you’ve seen. And by the way, at the beginning of Biden’s presidency, some synapse in his brain, I think he got that. He promised $2,000. It was only $1,400, but at least it was like, “We got to get help out to people.” And guess what? That was popular. It was a popular thing.
“I’m just helping people.” Right. Not a top down bailout. His first rescue bill was a good first step. The child tax credit helped lots of people. But now, in the reconciliation debate over the anti-poverty, the healthcare programs, the housing programs, you see this horrible process where the Democratic Party is backing away from its explicit, most popular proposals.
I mean, here’s a mind-blowing thing, a story that came out this week. Democrats are now looking to water down or excise their drug pricing provisions, in order to get a final deal.
And you start thinking about it: “So in order to get a final deal with your own party, you’re going to cut out the thing that in polls, the one thing in polls that people say they most want?” Literally, that. Allowing Medicare to negotiate lower prices is the number one polling initiative in the Reconciliation Bill. The number one thing that people say they want. In order for the party to get a deal on legislation, a deal with its own party, apparently it has to cut out the thing that people most want.
We have to understand that this connects to the crisis of democracy. This is not just a situation that is about the economy. I mean, obviously, the healthcare system is horrible. Obviously, drug companies are ripping people off. Obviously, the economy has become a neo-feudal economy. That’s all obvious.
What’s less obvious, but really important, is that if people keep voting for change and you, the Democratic Party, keep promising change, and then you get into power and you shield for your corporate donors who don’t want that change, and you choose your corporate donors and you betray your promises to voters — what you’re saying to voters is democracy doesn’t matter.
And if you do that, if you gut that agenda and then you think you’re going to run for reelection or in a midterm election, saying, “Hey, maybe you’re mad about betrayals. Maybe you don’t like that, but we’ve got to protect democracy. We’ve got to protect democracy from the insurrectionists and the like.” There will be a lot of voters who’ll say, “Look, I just voted for you. I just used democracy to put you in power. You’re saying I’ve got to support you only because of democracy. But you’re proving to me that democracy doesn’t matter.”
Sending that message over and over and over again is part of the crisis of democracy.
Matt Taibbi: Here’s an uncomfortable question. Why is it necessary to do Meltdown now? It feels like a lot of this had to do with the press refusal to look at these issues specifically in 2016, where it almost became taboo to even look at this subject.
David Sirota: I think the reason to do it now is precisely because of what you just said, which is this is a story that the corporate media has at best not been interested in. At worst, it has been hostile to it. I think that the corporate media got so obsessed with Donald Trump’s antics and ridiculousness and blatant cartoonish corruption that a story like this, just there was no room for it. I also think, and this is really important, that the Democratic Party and liberals don’t want to own up to reality. That the Democratic Party wants to blame every single thing other, and do everything other than look at itself and its own corruption and its own inherent conflicts. The conflict of the Democratic party is that it is a party that is trying simultaneously to appease its corporate donors, and look like it is delivering help to people who are being screwed by those same corporate donors.
That creates a party that is often incoherent because those goals are often at odds with each other, mutually exclusive. You can enrich your donors. You can enrich the pharmaceutical companies by not letting Medicare negotiate lower prices for drugs as a specific example. Or, you can make your pharmaceutical donors mad, and let Medicare negotiate lower prices for drugs, and make voters happy and deliver on your promises to voters. You can’t do both. With those two things, you’ve got to make a choice. And if you try to not make a choice, you sound incoherent. And if you ultimately side with your corporate donors, guess what? Voters are going to be pissed off. The reason to tell this story is because it’s a story that hasn’t been told.
It’s not a story, by the way. These are facts. In 2016, you had Steve Bannon tell New York Magazine that the financial crisis, the “legacy of the financial crisis is Donald Trump.” That’s a direct quote. The legacy of the financial crisis is Donald Trump. Steve Bannon said that. You could say he’s a liar and a demagogue and an evil person or whatever, but that tracks. That is absolutely true. And if that is not recognized right now, then history will repeat itself.
One other point on the media stuff. Part of the reason why this story hasn’t been told in media is because media was complicit. Corporate media doesn’t want another story told. Corporate media fell down on the job in reporting on the lead up to the financial crisis. From CNBC just cheering on the bubble and all that stuff, on down. They fell down on the job when reporting on what was happening after the financial crisis and fell down on the job in terms of how the response to the crisis was not only ineffective, but was in many cases a corrupt sellout to the Wall Street donors who had bankrolled Obama’s campaign and created the crisis.
Meltdown just came out and there were folks on Twitter like, oh, you’re just blaming the Democrats for everything. You don’t want to blame the Republicans. But the point is, if you can’t acknowledge that when the Democrats were in power, that they did these things, and if you can’t acknowledge that right now, they are in power and have a chance to make a different decision. If you can’t acknowledge that, and you just want to blame the Republicans, then you’re not living in the real world.