A view on Syria from the US: Obama's enemies scent blood

How did Obama find himself in such a rococo mess, pinned between haters in the House and his KGB rival?

Barely a week ago, when Barack Obama asked Congress to approve the degradation of Bashar al-Assad’s poison gas stocks, he became the hostage of obstructionist Tea Party members hell-bent on his downfall and of his own pacifist base, incapable of voting for war. The vote in Congress was heading for certain defeat. In an effort to rescue his rash gambit, Obama toured the talk shows and was billed to address the nation on television. What could he possibly say to turn back the tidal wave against war?
 
Enter the least likely character to save the US president from embarrassment, Vladimir Putin. A stray or perhaps not so stray remark by Secretary of State John Kerry that Syria could avoid attack if it surrendered its poisongas arsenal triggered a hectic Russian initiative to oblige Assad to do just that. Obama’s broadcast, a forlorn last chance to persuade Americans to live up to their responsibilities, turned out a damp squib: another passionless plea for military action, a delay to the congressional vote, and the granting of time for the Russians to strong-arm Syria.
 
In terms of high drama, no complaints so far. But how did Obama find himself adrift in such a rococo mess, pinned between haters in the House and his KGB rival? When it comes to big gestures it is best to ask questions only if you know the answer. When Obama invited Congress to share in the decision to bomb Syria, he must have known the House would oppose him. Not since he appeared vacant and distracted during his first presidential election debate with Mitt Romney has his judgement caused such consternation and despair among Democrats. What could he have been thinking?
 
The appeal to Congress remains a gamble. Until the Russian deal has run its course and Congress has, or perhaps has not, been asked to endorse military action, the presidency remains in severe jeopardy. A defeat in Congress would amount to a personal vote of no confidence on perhaps the most important decision any president can make: when to act to defend the nation’s safety. In his 10 September address Obama repeated that failure to act in Syria would lead to a proliferation of poison-gas attacks that put US national security directly at risk. As commander-in-chief, he does not need congressional consent to act in such circumstances, so the wonder is he has not already fired the cruise missiles. Which is what most of his allies wish he had done at the beginning of this month.
 
Instead, Obama chose the stony path. Some of his reasoning appears to be constitutional: he believes that the executive has too often ignored the legislature when making decisions about war and he, a Harvard constitutional law scholar, felt obliged to go through the niceties, whatever the risk of failure. Part of the reason, too, was the pivotal stance he took against the Iraq war that set him apart from Hillary Clinton in the 2008 primary debates. He believes Congress should play a key role in going to war.
 
There was, however, a recklessness about throwing the vote to Congress, which, since he lost the House in the midterm elections of 2010, has hampered him at every turn. The president has long lectured recalcitrant members of the House on playing chicken with America’s financial prestige – in order to keep America solvent by lifting the debt ceiling and by passing taxes to fund public spending. The vote for war is a similar test. Would Republicans risk harming America’s international reputation to satisfy their visceral dislike of him? Obama must have concluded that they wouldn’t dare, which is a bet few others would make.
 
By inviting the vote, Obama placed his tormentors in a torment of their own. Lawmakers have not thanked Obama for asking them to share the Syria decision. Americans are suffering war fatigue and the thought of another attack, however surgical, is unpopular in red and blue states alike. Being forced out into the open when opinion is so strongly against war is uncomfortable for a congressman. Best for those hoping to avoid an awkward primary to dodge the issue rather than be seen defying the will of the people.
 
For a couple of days Congress wriggled on the hook. In the Republican Party, mutating from a conservative to a libertarian movement, fiscal hawks now outnumber defence hawks. The old-school neocons and centrists such as John McCain and Lindsey Graham, who have ruled the roost on defence matters for the past decade and are backing the president, have been reduced to a handful. Many Republicans who had happily backed the unnecessary Iraq war are scrambling to find reasons to deny Obama the sanction to bomb Syria. For the sake of their president, Obama Democrats who opposed Iraq from the start are struggling to smother their pacifism and back another war.
 
Obama’s gamble has thrown everything in the air, but at enormous risk to his future authority. When a president finds his fate lies in the hands of the Tea Party and of Putin, he is in trouble. He faces opposition from a majority in the House of Representatives, almost half the Senate, and four out of every five Americans. His broadcast on Tuesday will not have changed minds. Like members of Congress who grabbed the Russian deal to save face, Obama must now hope that Putin can force Assad to keep his word.
 
The alternative for Obama is horrible. A failed Russian deal would reinstate the vote in the House and the Senate. If Congress rejects the measure, Obama will be profoundly weakened at home and in the eyes of the world – unless he bombs Syria anyway. The president might justify such an action by saying that Congress was asked to be wise and was found wanting.
 
Congress may reply that for a president to contradict a clear message from Congress is an impeachable offence. 
Hack or hostage? By mistiming and misdirecting the decision on a response to use of chemical weapons, Obama has put himself at the mercy of Putin.

Nicholas Wapshott’s Keynes Hayek: the Clash That Defined Modern Economics is published by W W Norton (£12.99)

This article first appeared in the 16 September 2013 issue of the New Statesman, Syria: The deadly stalemate

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation