The AIG debacle is an ultimate example of bipartisan disgrace and misgovernment. The scandal will no doubt result in a massive disillusionment in the electorate with both Democrat and Republican Presidents, past and present, and members of Congress. Conditions are now ripe for the emergence of a 21st century version of a "populist demagogue" – and the perfect example and prototype of such an individual can be found in the life and career of Huey Long.
The origin of the AIG disaster rests with the two following policies of the Clinton administration: 1) expanding the market of subprime mortgages to people who could not afford to repay them; and 2) refusing to regulate credit default swaps, which are at the core of the AIG meltdown. The key players in the implementation of this new subprime mortgage policy were the then Secretary of Housing and Urban Development Andrew Cuomo and his Congressional cohorts Senator Chris Dodd (D-Connecticut) and Representative Barney Frank (D – Massachusetts).
As to the refusal to regulate credit default swaps, the decision was the result of the advice and efforts in 1998 of the then Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin, and the then Deputy Secretary of the Treasury Larry Summers – who now acts as Barack Obama's economic czar. Thus were created the twin cancers of unaffordable subprime mortgages and unregulated credit default swaps.
In 2008, these two financial malignancies resulted in the fall of both Bear Stearns and Lehman. When faced with the AIG request for Troubled Assets Relief Program (TARP) funds, Bush administration Treasury Secretary Hank Paulson made the catastrophic decision to extend to AIG bailout funds of $85 billion – and the amount has now increased to $173 billion, as the company continues to descend into an inevitable bankruptcy.
The American public is rightfully outraged at the $165 million of bonuses paid largely to executives of the AIG financial products unit, whose actions regarding credit default swaps resulted in the company's collapse. These bonuses were granted without detection by the key public official charged with arranging the conditions of the AIG loan in the fall of 2008, the then president of the New York Federal Reserve Bank and now Treasury Secretary Timothy Geithner. As if this were not bad enough, these bonuses were protected by the insertion into the federal stimulus package bill of language agreed to by the aforementioned Senate Banking Committee Chair Chris Dodd – the leading recipient of AIG-related source campaign contributions in the 2008 campaign cycle.
We are now witnessing the shameless spectacle of the public officials who, along with Hank Paulson did the most to create this disaster – Dodd, Summers, Frank, and Geithner – now grandstanding about the need to abrogate the bonuses and control the course of the AIG bailout. The final decisions about AIG, however, rest with Barack Obama, whose Presidential campaign was the second leading recipient of AIG-related source campaign contributions in the 2008 campaign cycle.
Therefore, the AIG mess is certain to intensify the cynicism that the electorate feels about both Republican and Democrat national leaders. In such a climate, a populist demagogue who inveighs against corporate and banking special interests stands a strong likelihood of astounding electoral success. Anybody who studies American history can find a perfect example of this in the life and career of the late Louisiana Governor and U.S. Senator Huey "Kingfish" Long, whose effort to run against President Franklin D. Roosevelt for the Democrat nomination in 1936 was thwarted only by his assassination by Dr. Carl Weiss in New Orleans in September, 1935.
The definitive book on Long is Huey Long, by the late Louisiana State University professor T. Harry Williams, one of the leading 20th century American historians. There are few works of history that are more relevant to our present political climate than this book.
Long is best remembered for his "Share Our Wealth" campaign, advocating a massive redistribution of money from America's wealthy to the less affluent. He vehemently denounced such corporate targets as the banking house of J.P. Morgan and Standard Oil Company, as well as the Federal Reserve System. If a 21st century politician wants to emulate Long, he need only substitute the names of AIG and Bear Stearns for J.P. Morgan and Standard Oil.
Not everything about Huey Long was evil. He rejected the anti-Semitism of his allies in the Share Our Wealth Campaign, Father Charles Coughlin and Gerald L.K.Smith – in fact, the "Kingfish" was actually something of a philo-Semite. Furthermore, although Long was a racist segregationist, like virtually all southern governors and senators of his era, he was actually ahead of his time in the South in terms of advocating an economic safety net and opportunity for African-Americans. As Governor of Louisiana, he vastly improved transportation infrastructure and education.
Long was, however, a man capable of flagrant abuses of power. He was not, as he has often been inaccurately charged, either a dictator or a fascist. He was best defined by Williams as "…a man of great power, with the capacity within him to bring about large and even revolutionary change, and to do much good – or evil."
Huey Long's plan, as also described by Williams, was to run against FDR for the Democratic Presidential nomination in 1936, knowing he would lose. Then after the convention, Long would announce the formation of a third party offering an alternative to what he defined as the big business-dominated Democrat and Republican parties. The candidate of this third party would be Long himself or somebody else of his choosing, and the hope was that this third party candidate would draw enough votes from Roosevelt to result in the election of the GOP presidential candidate. Then, in 1940, Long would have a clear path to the Democrat Presidential nomination – and the White House itself.
It is impossible to assess even in retrospect what were the chances of Long attaining his White House dream had his life not been cut short at the age of 42 by an assassin's bullet. There is no doubt, however, that FDR was truly frightened of the prospects of a Long candidacy in 1936. Even before his inauguration in 1933, Roosevelt had identified Long and Douglas MacArthur as the two most dangerous men in the country and the individuals most likely to achieve political success if the crisis of the Depression was not met.
The America of 2009 is looking to Barack Obama to lead us out of our present economic crisis, just as the America of 1933 sought such leadership from FDR. Although I vehemently disagree with President Obama's economic policies, I hope he is right and I am wrong. His task is made much more difficult, however, by the overwhelming alienation of the electorate from national leaders of both political parties resulting from the AIG scandal.
As Washington Post columnist David Ignatius put it in his column of March 12, 2009, "the public is demanding action, and if this set of politicians doesn't provide it, they may turn to a scarier bunch." And that "scarier bunch" may well include a political leader who is the 21st century version of Huey Long.
Alan J. Steinberg served as Regional Administrator of Region 2 EPA during the administration of former President George W. Bush. Region 2 EPA consists of the states of New York and New Jersey, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and seven federally recognized Indian nations.