As president of the second largest bank in the world (Chase National) when the stock market crashed in 1929, Albert Wiggin had the vice president of the New York Stock Exchange go to the floor of the exchange on “Black Thursday” and very publicly buy large blocks of shares in major American corporations for more than their market price. The move temporarily stabilized the market and Wiggin was called a hero. What nobody knew was when the Great Depression began that October, he had been short-selling Chase stock and made himself about $4 million in about four months. I don’t begrudge anyone their right to earn a living, but on Main Street, anyone who makes money from the misery of others is a poverty pimp. On Wall Street, he’s a role model. People like Albert Wiggin, who profited as the country slid into a depression represent Barack Obama’s biggest problem in keeping us out of one.

I’ve been on the Obama train longer than any writer in America, and whenever anyone had doubts during the election season, I always told them the same thing. “All he’s done so far is everything right. I have no reason to believe this will be the thing he gets wrong.” And he hasn’t let me down yet. He said he’ll close Guantanamo, restored Habeas Corpus, gave equal pay to women, will end “don’t ask, don’t tell,” provided health care for poor kids, laid out a plan to provide health care for everyone, put an end date on the Iraq occupation, passed an economic stimulus package with almost no Republican support, and ended the ban on federal funding for embryonic stem cell research. Not bad for two months’ work. But he still hasn’t solved the “banking crisis,” and I know exactly why not. He’s got to put the Albert Wiggins of today of out of business first.

The root of the problem is investment banks made trillions of dollars worth of bets on mortgage-backed securities that have lost or are losing value because of the high rate of default and/or foreclosure. The fact that those bets don’t seem very safe right now means the commercial banks which own (or are owned by) these investment banks — as well as the companies that provide insurance against those bets not paying off — are also exposed. This gunky stew of risk is the sludge that is slowing our economic engine. When that engine backfired and the exhaust fumes cleared, we found out that there is so much money in MBS’s that they had to be referred to by the perfectly Bushian oxymoron, “toxic assets.”

Remember there are two different kinds of banks: commercial and investment. Many investment banks have taken on too much risk and are turning to the federal government for money on the premise that they are so important that we can’t let them go under. For the last three decades, every administration has had to embrace that idea. From the savings and loan crisis in the late ‘80s and early ‘90s, to the hedge fund long term capital management in the late ‘90s, to Enron in the early part of this decade, to Citigroup and AIG now — and every president before Obama has caved in and bailed them out. Barack’s playing a high-stakes poker game with the world’s leading financial institutions with $350 billion in chips on the table with a marker for another $250 billion in his back pocket, and it looks like he’s going to call Wall Street’s bluff.

On one side of the table, the commercial banks control lines of credit to businesses and individuals who need to borrow to make payroll or to finance major purchases like cars and appliances. They have these “toxic assets” (otherwise known as “liabilities”) that they want the government to be stupid enough to buy at inflated prices. They’d like to make a deal sooner rather than later so the Dow/Jones can stabilize. Then they can stop worrying about whether or not mortgage payments are being made and get back to the business of earning profits.

On the other side is our president. He controls $600 billion in taxpayer money he can spend to keep the economy from drifting toward recession. He would like the banks to allow credit to flow to those businesses and individuals, but he’s not stupid enough to pay for those “assets.” He’s in no rush to make a deal because the voters have given him two years to get things turned around, there are ways to make credit available without the big commercial banks, and he knows the foreclosure rate will eventually force the investment banks to take whatever is offered to get those “assets” off their books.

These people, our Albert Wiggin, took risks they shouldn’t have taken believing that if it all went wrong, we’d bail them out because they’re “too big to fail.” Barack Obama is about to teach them that when you are entrusted with things like peoples’ retirement and life savings, failure is not an option — no matter how “big” you think you are.

Kenny Mack is a multi-platform content provider living in Santa Monica who is shopping his book, “Word In Edgewise: The Collected Opinions Of America’s Smartest Columnist” to forward-thinking publishers. He can be reached at

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