Somebody call up Pat Robertson! Goldman Sachs CEO Lloyd Blankfein is going around claiming he's "doing God's work."
That's exactly what he's quoted as saying last week in an interview for the Times of London. A group of around 200 protesters gathered outside the company's Washington headquarters Monday to say that while the company may have enough power to wreck the United States economy, that doesn't place it on the side of God.
As one protester pointed out Goldman Sachs is, in the words of Rolling Stone journalist Matt Taibbi, "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
Goldman Sachs did its ungodly work by engaging in such manipulative, shadowy practices as credit default swaps and by extensive short-selling in mortgage-backed securities when the subprime mortgage bubble began to burst in 2007. In other words, Goldman Sachs profited from the very practices that led to record foreclosures, collapsing property values and the resulting slashes of state and local goverment programs. Blankfein justified the "God's work" comment by saying the company benefited the nation by effectively allocating capital to make the economy function properly. However, Federal Reserve Chairman Ben Bernanke pointed out on Monday that banks haven't been doing such a good job lately in making the economy work. In fact, Bernanke said that the banks are the reason for continued high unemployment:
Banks' reluctance to lend will limit the ability of some businesses to expand and hire. Because smaller businesses account for a significant portion of net employment gains during recoveries, limited credit could hinder job growth.
The banks instead have been engaging in merely sucking capital out of the real economy and into the liquor cabinets of their yachts. As Campaign for America's Future fellow Dave Johnson pointed out in his study of a bank that pulled the plug on a project that could have created 2,000 jobs, "$140 Billion for Bonuses, Zero for America's Future":
Wall Street and the financial economy are supposed to be to supporting the real economy by playing the role of middleman, connecting sources of money with companies needing that money to allocate capital where it is needed. This is supposed to be a constructive process that helps We, the People fund innovative startup companies, build factories and schools,allocate capital for company expansion and fund other large-scale projects that require a pooling of resources and dilution of risk. That is their essential role in the economy.
But there is a problem with the way Wall Street has been and is operating. Instead of playing a background role supporting the real economy, Wall Street has been dominating the economy, influencing the government and running quick-buck schemes, creating bubbles, speculating up prices on commodities and generally running wild. Before the financial meltdown Wall Street was not allocating capital productively, it was allocating capital destructively. In the companies-as-buy/sell-commodities posts I have been exploring how Wall Street's practices has been destroying companies, eliminating jobs and generally wrecking our economy while making a very few vastly wealthy. The company-buyout game turns good companies into debt-ridden, job-shedding shells. The greed-based drive for ever-higher returns tries to destroy companies like Costco because they are "overly generous" to their customers and employees. Wall Street has turned into a machine that grinds up jobs and communities, forcing wage cuts, dehumanization of workplaces, and corruption of our democracy.
When the financial sector broke down as a result of quick-buck risky investments (that didn't allocate capital), massive leveraging (that didn't allocate capital), Ponzi-like scams (that didn't allocate capital), outright but not-yet-prosecuted fraud (that didn't allocate capital), etc., our government stepped in to rescue the sector. But instead of fixing the system, Wall Street still is not allocating capital where it is needed. They are, however, taking huge profits and giving out huge bonuses.
Getting capital flowing back into the real economy will require capturing these outrageous profits while reducing risky speculation on Wall Street. A good way to do this would be to impose a small financial transaction tax on all profitable stock transactions. A study by Dean Baker's Center for Economic and Policy Research show that a tax as small as .25 percent per stock transaction would raise $140 billion dollars for the government. Millions of jobs can be created by investing that money in projects and programs that would put people to work: jump-starting the green economy, rebuilding our infrastructure, assisting struggling manufacturers, and aiding struggling states so they aren't forced to lay off teachers, firefighters and police officers. Also, according to Baker, a financial transaction tax would severely limit greed-induced speculative practices:
A small increase in trading costs would be a very manageable burden for those who are using financial markets to support productive economic activity. However, it would impose serious costs on those who see the financial markets as a casino in which they place their bets by the day, hour, or minute. Speculators who hope to jump into the market at 2 o'clock and pocket their gains by 3 o'clock would be subject to much greater risk if they had to pay even a modest financial transaction tax.
A financial transaction tax would both raise money necessary to rebuild our economy while at the same time reducing the speculative practices of Wall Street.
The idea of a transaction tax is not a new one. The United States had a transfer tax from 1914 to 1966 which levied a 0.2 percent tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help financial recovery and job creation during the Great Depression.
It's time that Wall Street start working again for Main Street after all that Main Street has done for Wall Street. Main Street's bailout of Wall Street has been so effective that Wall Street is now profitable. Now it's time for Wall Street to bail out Main Street. A financial transaction tax is a way to do it.