IS THIS THE STAKE THROUGH NEO-LIBERALISM'S HEART?

by Alexander Cockburn

What exploded last week was an economic credo that has been rolling along since the early 1970s: neo-liberalism. By all rights, this last crisis has brought us to the crossroads where neo-liberalism should be buried with a stake through its heart.

We've had 30 years worth of deregulation -- the loosening of public controls on Wall Street and the banking industry. This has been the neo-liberal mantra preached by both major parties, the whole of the establishment press and almost every university economics department in the country. It is central to the current disasters. And if you want to identify symbolic figures in the legislated career of deregulation, there are no more resplendent culprits than the man at McCain's elbow, Phil Gramm, and the man standing at Obama's elbow at his press conference, Robert Rubin.

Gramm is a prime exhibit in any list of the architects of the current economic mess. At the behest of the banking industry, he wrote the laws that enabled the huge balloons of funny money debt that exploded this year. The deregulatory statutes bearing his name, eagerly signed by Bill Clinton, prompted Wall Street's looting ogres and the subprime thievery.

But is Gramm Exhibit A among the miscreants? No. That honor should surely go to Bill Clinton's Treasury Secretary, the former Goldman Sachs bond trader Robert Rubin, and to the economic course he set for his boss. Gramm has been the hireling of the banking industry. Rubin is at the beating heart of Wall Street finance, and he and Lawrence Summers at Clinton's Treasury, were the guiding forces for financial deregulation. The gang that successfully got out of Dodge in time was the Clinton-Rubin-Summers gang, just before the last bubble -- the stock market bubble -- burst in March of 2001. They knew what was coming.

The Republicans hoped that the roof wouldn't fall in on their watch, and the crisis could be deferred to 2008 and then blamed on the Democrats. But their insurance policy was that if the roof did cave, as it has now, the rescue policy would be identical in both cases. That's why Obama has collected more money than McCain from the big Wall Street houses.

Now, as in the final reel of the old-fashioned Hollywood cliffhangers, it's a race against time. Will Congress stiffen its spine, face down Paulson's blackmail and tell him there'll be no $700 billion on his terms?

Will a decisive chunk of the American electorate decide that between a half-mad former POW tormented with PTSD and dying of melanoma and a stable, centrist, Harvard-educated half-black man, they'd better trust their basic instincts and go with the all-white nut who might well blow up the planet?

Americans have been living in a casino economy for years. It's a style of life ingrained in the national psyche. But at the prospect of a long-term losing run, they are getting frightened and angry, fast. Congress knows it could be facing voters who can see what's coming over the horizon when the Treasury bails out Wall Street.

Obama has fired up the young people with appeals to hope. But as he polls higher than 50 percent for the first time on day three of the bailout hearings, he clearly deems it too rash to try to ignore a populist constituency. His proposed conditions on the bailout have been very tame. He's frightened of setting a match to the tinder of public outrage and thinks it's seemly to have Rubin, Summers and Volcker stand next to him. Those are his natural instincts, anyway.

The irony is that it's McCain's demagoguery about hanging the chairman of the SEC that's shoved Obama a bit to the left. In extremis McCain will say and do anything. He put Sarah Palin on the ticket. Maybe now he'll propose an FDR-type New Deal and Obama will have to raise the ante and start sounding like a real leader who can seize the opportunity presented by this crisis, which the gods have offered him with such perfect timing.