Bush and Obama, Wars and Economy: Power and People in an Age of Limits and Loss 575America bought out Merrill Lynch, other banks began to discuss mergers, and
investment houses ran to the Treasury and the Fed looking for handouts like
the homeless men and women of the 1930s went to soup kitchens. Given its
stake in the banking industry, the world’s biggest insurance company, AIG, was
on the verge of collapse until the Fed rushed in with almost $100 billion to
keep it on life support. Rumors abounded that even Goldman Sachs, arguably
the most influential investment bank in the world, was in trouble. The
Secretary of the Treasury met with bankers, politicians, even presidential can-
didates Barack Obama and John McCain, and developed a massive govern-
ment bailout plan to buy up “toxic assets.” Capitalism, a “private” enterprise
economic system had to be saved with public money. In that period and for
years thereafter, the Fed and other government institutions injected perhaps
$7 trillion into Wall Street to keep it “stable.” As for homeowners, perhaps 2
million Americans lost their houses, and the government did nothing to come
to their aid. The U.S., and Capitalism, had survived, barely, its worst crisis since
the Great Depression, but it could no longer be debated that American power
was on the decline.
Indeed, as U.S. power waned, other countries rose. Foreign treasuries,
especially in Asia, were the main beneficiaries of the Bush-Obama borrowing
frenzy. China’s foreign exchange reserves now stand at $3.3 trillion, about 60
percent of which in in U.S. dollars. Though unlikely, these figures do raise the
specter of China’s “nuclear option” if it wants to stagger the U.S. economy by
cashing in huge amounts of its dollars, especially as American investments are
not at their traditional rates and commercial money is tighter than ever. And,
even though both wars are “winding down,” or at least Obama has said they
are, the biggest factors in America’s economic crisis have been Iraq and
Afghanistan. The wars cost about half a billion dollars daily at their peak, and
Linda Bilmes and Joseph Stiglitz, two of the more reputable economists in the
world, estimate, conservatively they say, that the war itself and the subsequent
costs of rebuilding, caring for the wounded, paying benefits to vets, and other
expenses. will grow to over $3 trillion dollars. And those dollars are weaker
than ever, with the Euro going for somewhere around $1.40 to $1.50. At the
same time, U.S. spending on arms and other military equipment has soared,
contributing both to global unrest and the debt. Back in September 2008, as
congress members pontificated about the Wall Street bailout of $700 billion,
the house and senate passed, with only passing debate and little dissent, a