To Create Jobs on Main Street, We Need to Kill Jobs on Wall Street
"Wall Street will remain a big, important part of our economy, just as it was in the '70s and the '80s. It just won't be half of our economy....We don't want every single college grad with mathematical aptitude to become a derivatives trader." -- President Obama, May 2, 2009.
It's time to face up to the essential feature of the Billionaire Bailout Society: It's not a shared society. We're not in it together. What's good for Wall Street is not good for the rest of us....They even get their swine flu shots before we do.
The disconnect couldn't be greater. Goldman Sachs, JP Morgan Chase, Morgan Stanley and others are poised to have record years during the worst economic turmoil since the Great Depression. They get record bonuses while unemployment continues to climb. As of October the narrow, most publicized rate is 10.2 percent. The broader BLS jobless rate (U6) is 17.5 percent. More than 30 million Americans who want full-time work are without jobs or forced into part-time jobs. (See report by Leo Hindery )
The riches on Wall Street are the direct result of bailout funds and the entire financial sector is still totally dependent on government welfare. It's not just TARP. We are guaranteeing all kinds of toxic assets. We are providing low cost liquidity. We are underwriting failed markets.
We have a right to ask the most basic questions about Wall Street's worth: Just what value do those giant financial institutions produce for our people? How are they contributing to reinvestment into our core economy? How are they helping our people find employment?
They aren't. What they do is make money at our expense.
Since the onslaught of deregulation more than three decades ago, high finance has prospered by killing many more jobs than they have created. They financed the leverage buyout boom that ruined solid companies. (See See New York Times ) They financed the shift of jobs abroad that hollowed out our manufacturing economy. And through it all, they were creating the fantasy finance boom and bust that nearly sent us back to the Great Depression.
Oh the profits are handsome. During the three years before the crash, the top firms on Wall Street raked in $300 billion in profits of which about half went to bonuses. Then in a matter of months those profits turned to losses. They were phony profits based on sales of phony financial instruments that turned toxic. (See The Looting of America ) But you can be dead certain that the Wall Street players who walked off with the $150 billion in bonuses based on phony profits did not pay back one penny of it. We did with a $14 trillion bailout. Talk about a leveraged buyout! (See excellent accounting by Nomi Prins )
Even when the economy was drunk on bubbles, it was splitting into two. Billionaires became richer while the average production worker's wage after inflation dropped 18 percent since 1975, And since 1979, we've lost about 8 million manufacturing jobs. The bigger Wall Street grew, the weaker the core of our economy.
President Obama actually had it right when he said that Wall Street needed to shrink. The sooner the better. We need to move resources from the casino towards the creation of useful, sustainable jobs making the things and services we really need - alternative energy, energy conservation, medical advances (with an emphasis on affordable care), improved and expanded education, and so on.
There are so many ways to move in this direction yet we're doing none of them -- a Tobin Tax on financial transactions, a President's which cap which would limit Wall Street compensation to no more than that of the President of the U.S. until unemployment declines to below 5 percent, a windfall profits taxes on all financial firms now living high on the hog on government welfare, the prohibition of exotic derivatives, and the busting up of institutions that are too big too fail.
Regulatory reforms that leave Wall Street intact won't work. Bank lobbyists (using our money) will weaken them. Lawyers and financial engineers will maneuver around them. The Billionaire Bailout Society will become entrenched even further.
Because the government refuses to get the job done, the public is turning on the government. The joke is on all of us: If Republicans make a comeback they will unleash Wall Street yet again, setting us up for the next crash and bailout cycle.
Instead, we should be milking Wall Street to finance massive job creating investments in energy, health care and education. A massive Manhattan Project for alternative energy and a WPA for weatherizing all homes and businesses would be a good start. All it takes is truly caring about the common good. If we really want to create sustainable jobs instead of new fantasy finance games, we need the cut Wall Street down to size, now and into the future.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.
Follow Les Leopold on Twitter: www.twitter.com/les_leopold
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If the problem are the big banks. Well, people, transfer you money and credit cards to local Credit Unions or local Banks. It might not help in the long run but it might send a message.
Citibank, Chase, Bank of America, Wachovia, etc
The funny thing is that in a country like Brazil, where they have tight control and regulations over the banking system, the economy is going well....Also, if a bank fails, the executives there are liable for the downfall and will loose everything, that motivates responsibility from their part. Executives in American corporations have 'carte blanche' to do pretty much anything they want, thus, the lack of responsibility to the workers....the people that really make the money.
White collar unions might be the solution, since manufacturing has just about expired in this country of ours.
It was recently reported in the WSJ that the financial services sector "sucked up" only 2% of our entire GDP in the mid-80's. In 2007, the financial services sector made up 40% of GDP.
When industry averages 10 to 15% profits for most businesses, it is not hard to see what really happened in America. The financial services sector has quite literally sucked the life-blood out of our national economy.
I keep on saying, that you need a political power base outside the traditional parties, that both are far to the right of anything we have in Europe.
There is only one possible and realistic base for the time being, and that is the unions, because the rest of the system is rigged against you.
Join the unions and make them strong. They actually form the only democratic,realistic and viable base for political change.
I know that the wealthy for many years have propaganded against the unions, and with good reasonbecause they fear them. In the north-west European welfare states the unions and their political parties (social democrats)was an is a crucial factor in their foundation and function.
That political power base secured a balanced development, and that is not in the interrests of the wealthy.
So get going. Join your unions better today than tomorrow.
there was a reason Raygun set out to destroy the unions...the decent paying jobs were easy to destroy once the unions fell...now we have cheap labour everywhere in the USA
Wall Street isn't only killing Main Street, it's killing democracy. Let's not just kill Wall Street, let's blow it up! I think that would get their attention.
While I agree with your premise, Wall Street is certainly bad for Main Street and job creation ... I don't necessarily agree with your solution.
Jobs come from successful businesses. Who starts successful businesses? Without adaquate capital, starting a business in America has become a nghtmare.
My business can't compete with Wal Marts ability to stock infinite product.
My business can't cope with McDonalds ability to hire and fire massive employees without concern.
My business can't possibly take on the devastating impact of a lawsuit.
Capital isn't available because ALL the money in the entire system is OWED back to the Federal Reserve which is OWNED by the private banks. This never ending cycle of debt ensures that the capital markets are never outside the control of a very few select banks. Those same banks now have an implicit guarantee from the government that they wont go bankrupt.
Having lost the Rule of Law, what can we expect?
With no consequence to risk for Wall Street, Main Street is paying taxes to make sure that they can't ever be competitive with the Wall Street banks.
End the Federal Reserve. Our government pays billions to banks to borrow US Dollars. Why? The government is the implicit owner of the currency ... not private bankers. Stop borrowing money and just print the dollars the government needs to create whatever insane socialist garbage you want.
We have a fiat currency ... take it away from the private bank, called the Federal Reserve.
When we come out of this crisis, people are obviously going to pick right up where they left off. They'll pack their garages with cars and their suburban houses with plasma tvs. They'll pay $100/mo for cable tv. They'll drive to the corner store when gas costs anywhere less than $4/gallon. They'll vote again and again to lower property taxes, deny gay people their rights, cut services to the homeless and spend public transit money to repair highways.
We are irresponsible and self-righteous twits.
Les Leopold for President!
So how come Obama is doing none of that? I will never forgive him for giving the banks the money first and asking for the concessions afterward. He had to know he was dealing with a bunch of rapacious people. It was NOT an innocent mistake. So they make billions and we get the high hard one.
Sounds good to me. But this is common sense talk--American leadership doesn't follow common sense. Greed rules. It is a major human trait. We all possess it, but people with good intentions fight the urge to be greedy. Wall Street certainly has no good intentions. Many of the most powerful in America have no good intentions. But when America implodes, the Wall Street crowd and other big players will finally implode as well. As smart as the Super Wealthy think they are, they ultimately are nothing without the masses that they screw continuously. It is a shame it will evidently take the demise of this Republic to make everyone, powerful or not, realize this.
Don't worry, the Federal Reserve's Ben Bernanke will kill Wall Street for us. Thanks Ben. Right now the dollar's Trade Carry is causing Wall Street to rise, but when the Bernanke raises interest rates and he will, Wall Street will collapse, big time. The Federal Reserve will do to Wall Street what it did for Main Street. Economic Destruction for everyone. Yea
Thank YOU LES! Thank YOU VERY MUCH!
Thank you Joseph Cao! Thank YOU!
"I refuse to live in a Country LIKE THIS and I am NOT LEAVING (MM)!"
Signed, Every American on Main Street and in Urban Centers!
It is Time to DOWNSIZE G0LDMAN, M0RGAN, JPM, BofA, and C!tigroup!
"Too B1G and EV1L TO FAIL" is a thing of the PAST!
I don't disagree with the article or the President that the financial sector has probably grown too large. The article seems too demagogic though; a sophisticated financial sector does have benefits (e.g. Napoleonic Britain) and it's too easy to denigrate bankers and traders as producing nothing "real" (as the Chinese did for much of their history).
I question the article's uniform condemnation of LBOs: there are plenty of examples of countries where sclerotic companies were not broken up (e.g. Japan). And almost certainly Wall Street had very little to do with outsourcing trends. I would also note that investment bank executives actually make much less than hedge fund managers, who seem to attract much less opprobrium, so blaming Wall Street greed for current problems seems insufficient.
Finally, I would suggest the financial sector's excessive growth relative to the economy is actually a symptom of the decline of other more "fundamental" sectors -- not unlike early 20th century Britain. One problem with stimulating the growth of energy, healthcare, and education sectors is that these are mostly service-oriented sectors, so (a) productivity growth is more difficult to come by and (b) the products are generally not exportable and hence will not help close our large trade deficit.
Nonsensical wandering conmanservitive blog. Typical of the nonsolutions and irrelevance of Republican analysis. You think we ought to deregulate? Yeah, I thought so.
What America needs to strive for is an economy based more on production--not consumption. Heavy consumption with borrowed money has been fuel of economic growth in recent years and it was, of course, unsustainable. When people are doing well and feeling good, the future negative results are ignored until met head-on as has, of course, happened. America needs to produce things again and be paid good, living wages and salaries to do so.
I just became a fan of this blogger. That makes 1 to date.
I am not an expert but it seems to me we have come full circle back to the practices that caused the crash of '29. Wall street can still make huge side bets that can destroy the entire economy.
Obama talks about reform, that's all that guy does is talk. He represents Wall Street interests more or less at the same level as Bush and Clinton.
I do not agree with this headline. The Fall Street bankers need to "re-direct" efforts to invest in America again. Look around at each Continent on the planet. Decide where the best place to invest really is. Do it. Take the gambling element out of Fall Street and put more into real investments again.
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