Lloyd Blankfein, CEO of Goldman Sachs gives congressional testimony with other heads of banks: James Dimon (JPMorgan Chase), John Mack (Morgan Stanley), and Brian Moynihan (Bank of America)

THE TIMING couldn't have been better for the Financial Crisis Inquiry Commission, which held its first public hearings on January 13-14.

With their top employees set to enjoy huge bonuses thanks to taxpayer bailouts, the CEOs of the country's big banks should have been in the hot seat for their role in the financial panic of 2008. The Obama administration's proposed levy on banks seemingly would have upped the pressure, too.

Instead, the bankers got away with a few sharp words and some finger-wagging by commission members. Commission Chair Phil Angelides, a Democrat and former state treasurer of California, sparred a bit with Goldman Sachs CEO Lloyd Blankfein and hectored other bank executives. But Angelides was only posturing. His commission has failed to make use of the few tools that it has to investigate the banks reckless practices that helped cause the meltdown.

Even the New York Times editorial board was taken aback by the commission's failures:

[T]he commission--which is supposed to file a final report by December 15--has not issued a single subpoena for documents. Instead, investigators have apparently been relying on voluntary cooperation, public records and information-sharing agreements that have been negotiated with federal agencies. A thorough investigation requires source documents that reveal what people were thinking and doing at the time of the events, and that illuminate, buttress or contradict testimony.

Instead of a serious inquiry, Angelides settled for giving the bankers a tongue-lashing, even as his party quietly tends to Wall Street's interests.

That's in keeping with the Democrats' approach to the financial crisis since it broke in the fall of 2008. It was the Democratic Congress that worked with the Bush administration to pass the $700 billion Troubled Asset Relief Program (TARP) bill that funded the bank bailout.

And it was Treasury Secretary Tim Geithner, then head of the Federal Reserve Bank of New York, who insisted that the nationalized insurance company AIG pay its debts at 100 cents on dollar--which meant that tens of billions in U.S. taxpayer money flowed through AIG into the coffers of big U.S. and European banks. AIG paid $12.9 billion of taxpayer money to Goldman Sachs--and now, Goldman is set to pay out around $22 billion in bonuses.

But the AIG-Goldman scam is only the most obvious of the Obama administration's giveaways to Wall Street. So far, the U.S. government has loaned or guaranteed up to $13 trillion to financial institutions and other businesses--a figure nearly the size of the entire annual economic output of the U.S.

The rationale for this aid, we were told, is that it would prevent a total economic collapse and get credit flowing to businesses and consumers once again. The bailouts did pull the financial system back from the brink. Thanks to near-zero interest rates set by the U.S. Federal Reserve, the banks can borrow cheaply and use the money to finance investments where a higher return seems certain.

For example, some banks are borrowing from the government at virtually no interests and buying U.S. Treasury bills that pay much higher interest. That is, the banks are borrowing from one part of the U.S. government and profiting by lending it back to another part of the government at a much higher rate. Many financial institutions are also using funds borrowed from the Fed to invest in foreign currencies to gain higher returns--the so-called carry trade.

But when it comes to helping hard-pressed working people, the bankers aren't interested. Despite a ballyhooed government program to spur banks to help homeowners who are underwater on their mortgages, the federal Home Affordable Modification Program has permanently helped only 66,000 homeowners out of 4 million that may be eligible--even as foreclosures rise from 2.8 million in 2009 to an expected 3 million in 2010.

Instead, the banks are using government money to pad their balance sheets and help them absorb losses resulting from risky investments in complex financial instruments tied to mortgages.

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GIVEN THE banks' egregious role in the crash and their hoarding of government cash amid the recovery, one might have expected that financial reform legislation would be inevitable. Instead, Wall Street lobbyists have spread enough money around both sides of the aisle in Congress to kill any meaningful reform. Even the weak proposed consumer financial protection agency has been pronounced dead.

As journalist Chris Hedges put it:

These corporations don't make anything. They don't produce anything. They gamble and bet and speculate. And when they lose vast sums, they raid the U.S. Treasury so they can go back and do it again.

Never mind that $50 trillion in global wealth was erased between September 2007 and March 2009, including $7 trillion in the U.S. stock market and $6 trillion in the housing market. Never mind that the total amount of retirement and household wealth trashed was $7.5 trillion, or that we saw $2 trillion in 401(k)s and individual retirement accounts evaporate. Never mind the $1.9 trillion in traditional defined-benefit plans and the $2.6 trillion in non-pension assets that went up in smoke. Never mind the job losses, the foreclosures and the 35 percent jump in personal and small-business bankruptcies.

There are bundles of new money, taken again from us, to make deals and hand out outrageous bonuses. And when these trillions run out they will come back for more until our currency becomes junk.

So what about President Barack Obama's plan to squeeze the banks with a special tax to recover $117 billion from the bailout?

At first glance, it seems like a delayed, but welcome, bid to claw back taxpayer funds. But the proposed tax would be just a 0.15 percent levy on assets beyond the banks' core capital--and it would be paid over a decade. All that does is turn a taxpayer giveaway into a loan at rock-bottom interest rates. As the Washington Post noted, "At a projected $9 billion per year, the fee would be a mere sliver of the banks' estimated quarter-trillion-dollar pre-tax profits."

Congressional Democrats, who are already panicking over their prospects in the November elections, will pick up the banner of Obama's proposed bank tax to try to get in front of voters' anger. But the Wall Street-White House axis has already provided the Republicans with an incredible political gift.

Suddenly, right-wing politicians who usually serve as a mouthpiece for big business are railing against the injustice of bailing out bankers while working people have nowhere to turn. Of course, these Republican hacks are only playing to the right-wing populist "tea party" crowd. They'd never seriously challenge the business agenda.

But thanks to the Democrats' devotion to the bankers, the Republicans can loudly denounce government bailouts to big business even as they further Corporate America's agenda.

Whichever party is in office, the bankers win.

Socialist Worker