Say goodbye to 2009, the worst economic year since the Great Depression.
Say hello to the billionaire bailout society in which the super-rich gamble, lose and get bailed out by the rest of us.
To save the system from total collapse we poured trillions of dollars into the financial sector. The result? Banks still are refusing to lend. Thirty million Americans are looking for full-time jobs and 49 million are skipping meals including one out of four children. But Wall Street again is reaping record profits and bonuses.
Not only are we richly rewarding those who wrecked our economy, but also, we have to put up with hundreds of fabrications about how the big banks got us here. Here is my biggest, fattest lies list for 2009:
1. "Government programs for low-income home buyers caused the financial crash." Wall Street defenders were quick to blame the Community Reinvestment Act, which urges banks to loan money in minority communities. In fact, almost none of the CRA loans are sub-prime and the vast majority are doing well, thank you. Blaming government programs deflects us from the real cause: Wall Street's incredibly reckless creation, marketing, selling and trading of "innovative" new securities that supposedly removed the risk from pools of risky debt. It didn't work. Wall Street, not the poor, crashed our economy.
2. "Income inequality is good for everyone." Lord Brian Griffiths, Vice-Chairman of Goldman Sachs at least had the nerve to say what so many of the super-rich really believe:
"We have to accept that inequality is a way of achieving greater opportunity and prosperity for all."
Unfortunately, the facts suggest otherwise. There is a high correlation between the mal-distribution of income and economic crashes. The last time our wealth and income distribution was as skewed as it is today was 1929, and that's not an accident. When too much money is in the hands of the few it runs out of real world investment and gravitates towards speculative investments. This inevitably creates asset bubbles and crashes. Record pay and bonuses on Wall Street and high unemployment are connected. (See The Looting of America Chapter 11).
3. "The rising number of billionaires is a sign of economic health." It's accepted media wisdom that the more billionaires the better. China with 130 billionaires now trails only the US, which has 359, according to Forbes magazine. But in our billionaire bailout society, the rising number of billionaires signals a collapsing middle class. Ponder this statistic: In 1970 the ratio of the compensation of the top 100 CEOs compared to the average production worker was 45 to 1. By 2006 it was an astounding 1,723 to one. Does that look healthy to you?
4. "Paying back TARP means banks are no longer on government welfare." Bank after bank is rushing to repay TARP funds during the worst economic year since 1937. They want to get out from under the Pay Czar (not that he's been sufficiently tough on the banks under his purview.) Banks that were insolvent only a few months ago now say they have the financial strength to refund tens of billions of dollars to the government. Where did all that money come from? Much of it comes from other government welfare programs for Wall Street (over $12 trillion worth) that aren't publicized. (See Nomi Prins's excellent accounting.) It may be the case that our banks are paying us back with our own money. Now that's financial innovation.
5. "Wall Street's freedom to innovate must be protected." Congressional leaders are tripping all over themselves to say new regulations will not discourage Wall Street innovations, something they claim is vital to our economy. Oh really? Do those "innovations" add anything useful to our country other than new casino games for the super-rich? Former Federal Reserve Chairman, Paul Volker, recently blew the whistle on this fabrication:
"I hear about these wonderful innovations in the financial markets and they sure as hell need a lot of innovation. I can tell you of two - Credit Default Swaps and CDOs - which took us right to the brink of disaster: were they wonderful innovations that we want to create more of?
.... I wish that somebody would give me some shred of neutral evidence about the relationship between financial innovation recently and the growth of the economy, just one shred of information....The most important financial innovation that I have seen in the past 20 years is the automatic teller machine... How many other innovations can you tell me of that have been as important to the individual?" ("What Has Financial Innovation Done for You?")
6. "To retain critically needed talent, Wall Street must be free to pay top salaries and bonuses." Where would they flee if they just got paid like normal people rather than like gods? The British are putting in place a 50 percent tax on bonuses. Also, compensation is much, much lower in the European Union. But the real lie is that we need such "talent" in the first place. That kind of "talent" just crashed our economy. That kind of "talent" is widely overpaid - no way should bond traders receive 10 to 100 times what is earned by the best neurosurgeons in the world. Something is really wrong and it starts with the lie of banking "talent."
7. "Overpaid American workers are the real cause of unemployment." The New York Times writers who concocted this argument didn't think they were lying. But this is one of the most preposterous ideas put forth during 2009. ("American Wages out of Balance" New York Times November 11, 2009) Edward Hadas, Martin Huchinson and Antony Currie informed us that:
"American manufacturing workers should take average real wage cuts of as much as 20 percent to get into global balance."
They don't mention that the average non-supervisory worker has already taken an 18 percent cut in real wages between 1973 and 2007. What's worse, they claim that if workers don't take these additional cuts, these "overpaid" working stiffs will be the cause of another Great Depression. They write:
"But if American wages get stuck above global market-clearing levels, as in the 1930s, the result could well be something approaching Depression-era levels of unemployment."
Not a word is mentioned about how Wall Street's gambling caused all of this unemployment and how the continued failure of Wall Street banks to lend is stalling job growth, right now.
8. "I'm doing God's Work." Lloyd Blankfein, Chairman of Goldman Sachs said what too many Wall Street leaders truly believe: that they are so privileged and entitled that it seems as if the heavens bless their work. Why else are they earning hundreds of millions of dollars? Mr. Blankfein believes he is creating a virtuous circle by raising capital for corporations who create jobs and help our society prosper. But Goldman Sachs, JP Morgan Chase, Morgan Stanley and the rest of the apostles helped to bring the entire world economy to its knees. Does that mean God likes unemployment and widespread hunger?
9. "We're out of money." Who's we? Yes, the middle class is tapped out but the super-rich haven't even begun to pay their fair share for the mess they created. Yet the top 400 richest Americans alone are sitting on $1.27 trillion or so in wealth. Here's a dangerous thought. What if we had a very steeply progressive wealth/income tax that reduced the net worth of the super-rich to "only" about $100 million each? You wouldn't be suffering if you had $100 million kicking around. Now do the math: The 400 richest x $100 million each would equal $40 billion. That would leave about $1.23 trillion to help pay back the country for the Wall Street meltdown that we, our children and their children will be subsidizing.
10. "We are becoming a socialist economy." Somewhere between 68 and 78 percent of the US GDP is private sector activity, the highest among developed nations. And much of the government expenditures go to private contractors as well. But there's a kernel of truth in the socialist scare: What do you call a society that encourages the private accumulation of wealth without limit, and then when the super-wealthy get into serious trouble, we bail them out with taxpayer funds - largely from a declining middle-class? That's not free-enterprise. That's not socialism either. It's something new and it deserves to be called the billionaire bailout society.
Here's hoping that in 2010 we can begin to undo it.
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. u
Follow Les Leopold on Twitter: www.twitter.com/les_leopold
Unfortunately, your writing style is TOO UNDERSTATED for these times, when we need to PORTRAY the MALFEASANCE of financial fraud as the THEFT, ROBBERY, CORRUPTION, & (congressional) BRIBERY it is, as the "Looting" in your book's title indicates.
For examples:
< #4. Paying back TARP means banks are "NO LONGER ON government WELFARE."
Banks that were insolvent only a few months ago now say they have the financial strength to refund tens of billions of dollars to the government. Where did all that money come from? Much of it comes from other government welfare programs for Wall Street (over $12 trillion worth) that aren't publicized. banks are paying us back with OUR...money. >
this is far too understated - this is PURE FLIM-FLAM ACCOUNTING FRAUD, with THE COMPLICITY of the White House & Congress! The White House ALLOWS the banks & hedge funds to PRETEND to Pay Back "IN FULL," some lousy twenty billion dollars each - when we know that GolddamnSachs, alone, was the recipient of some $40- to $80 BILLION in bailouts, alone, NOT counting the TRILLIONS of bailouts PUMPING UP the value of GS's stock investments & portfolio.
It is simply INEXCUSABLE that the Government is HELPING the banks PERPETRATE the FICTION that even $100 billion in "PAID BACK" funds is ANYWHERE CLOSE to the amount the Congress & Fed HAVE GIVEN AWAY to the banksters.
I like Volcker - he is one of the few voices of reason in the finacial world.
however besides the ATM as a technology innovation - I would counter that it dehumanised the banking process, made it too easy for people access funds for frivalent and impuslive spending, and became another way for banks to profit off the fees and reduced labor costs.
I rmember the days when banks paid interest on savings that outpaced inflation, and gave you a free toaster for opening an account
today its all about fees and interest that is below the real inflation rates - anything to make buck rather than serve customers
seriously people, those who have even a small amount of money should move it out of any big box bank. take it to a local credit union or a local bank at the very least. anyone with a comfortable amount of many should consider giving micro loans. any one needing small amounts should consider getting micro-loans. there are answers and they are not even hard to find.
http://www.huffingtonpost.com/2009/12/30/move-your-money-tell-us-a_n_407297.html
"Hamilton's financial system had then passed. It had two objects; first, as a puzzle, to exclude popular understanding and inquiry; second, as a machine for the corruption of the legislature. ... And with grief and shame it must be acknowledged that his machine was not without effect; that even in this, the birth of our government, some members were found sordid enough to bend their duty to their interests, and to look after personal rather than public good."
There really is nothing new under the sun...
(signed) President (and serially LYING 2008 "Change!" pledging candidate) Barack Obama
The most shocking issue to me is this: "In 1970 the ratio of the compensation of the top 100 CEOs compared to the average production worker was 45 to 1. By 2006 it was an astounding 1,723 to one."
It is shocking at the rampant greed that has become acceptable to some. They have ruined the rest of us for their own selfish riches.
We need to clawback those ill-gotten riches and put that money back to work for us, and rebuild our industries, our economy, and our jobs.
No man is worth that much more than another man.
"who will fool them one last time"
Or ....
Also, as Greenspan has noted, it was the securitization of the loans that was a major problem. Once a mortgage broker made the loan, he was off the hook, as they were packaged and sold to investment banks as securities. With his profit, he walked off into the sunset.
Finally, the ratings agencies, Moody's and S&P, make money from the same businesses that they rate. Lehman Brothers had a prime rating until a few days before they collapsed. This conflict of interest has to be addressed. The ratings business is a sham.
don't dispair
here is a list of plenty of American made shoe makers.....spread the word
http://www.americansworking.com/shoes.html
They spoke.
I'm tired of being lied to.