Who Does Really Run Things? Seriously.

My wife is Chinese. When she showed up one day toting a copy of a book, in Chinese, called Currency Wars, I was encouraged. Perhaps this meant we could have discussions about one of my favorite topics, how China manages its currency and what that means for its economy. Of course I knew nothing about the book itself.

It turns out that Currency Wars -- a bestseller in China -- is one of those far-fetched, conspiracy theorist takes on U.S. finance: According to the author, there is a cabal of powerful bankers and banks that controls America's financial policy behind the scenes. I’m sure he includes in his cast of villains quite a few hook-nosed Jews who like to salivate over the clink of gold coins. When my wife began describing the contents, I just began to laugh.

Now my laughter feels a little hollow. Not about the stereotype of the wicked Jew; that’s clearly ludicrous. (Accused Ponzi schemer Allen Stanford is about as Jewish as Mother Theresa, for instance.) But more about the idea that perhaps, just perhaps, a small group of powerful high financiers and companies have managed to capture our supposedly representative government.

It’s the only way I can make sense of the Obama administration’s response to the U.S. financial crisis. No one really dares to call out the bankers, and a culture gone bad, and say, “Guys, you really screwed up. It’s time for you to slip on your hair shirts and do a little penance. You don’t have to hari-kari, but a few apologies writ large would be nice. And you, and your investors, have to start paying the price for your bad decisions.”

Instead, after Obama told Americans their outrage about AIG is justified, he began beating a retreat, damping down his criticism of the financial industry. His economic team (the part that actually makes the decisions anyway) has been Hank Paulson Redux (including Mini-Me Geithner). Save the banks, at all costs. Avoid measures that hurt the shareholders and bondholders (who are, respectively, the owners and creditors -- in other words, the ones who should have been minding the store in the first place). Bankruptcy is unthinkable -- well, for Citigroup and friends anyway (GM, that’s a different story).

How to explain the submissive dog pose the government has struck with Wall Street (the administration pleads with the Street to play ball with the Geithner plan -- look, I’ve got news for you; they’ll show up with their bats and gloves plenty fast if there’s enough profit to be made and not otherwise, all your pleading be damned)? How to explain the arrogance and sense of entitlement that still pervade Wall Street?

Just compare the hardball U.S. government in this New York Times story (bold mine):

The Obama administration will probably extend more short-term aid to General Motors and Chrysler on Monday, but will impose a strict deadline for bondholders and union workers to make concessions that would help the ailing automakers become viable businesses and avert bankruptcy.

President Obama’s auto task force is expected to say that despite its recommendation of more federal assistance for G.M. and Chrysler, bankruptcy could still be a possibility for either company, according to people close to the discussions.

To the apparent patsy in this Bloomberg story:

Bank executives indicated they are willing to hold onto U.S. government aid to help stabilize the financial system and pull the economy out of recession..... (implication: they don’t need it, but oh okay, they’ll keep it as a favor to us.)

TARP “has become a little bit of a scarlet letter,” Jamie Dimon, chief executive officer of JPMorgan Chase & Co., said on CNBC. JPMorgan accepted $25 billion in TARP funds. “At one point we’ll figure out a way to pay it back, Dimon said.... (meanwhile, GM execs would do a full-body grovel to get their hands on some of these “scarlet letter” TARP funds)

If populist outcries over bank compensation continue, no company will touch “any other government program with a ten-foot pole,” Stephen Stanley, chief economist at RBS Greenwich Capital Markets, wrote in a March 19 note. (in other words, taxpayers: just shut up about big bonuses if you know what’s good for you.)

How do you account for the banking industry arrogance, this unabashed display of Tin Ear Syndrome? Well, one answer is the bankers really are in charge. Maybe when Obama took office, someone in a dark suit took him by the elbow and whispered, “Mr. President, please step into this small room with me. We need to have a special talk about how the country is really run and who’s really top dog. Hint: It’s not you, despite what you may think.”

I know, it sounds crazy. But, with each passing day, it’s sounding less and less crazy.