One of the most discouraging things about the last two years was seeing swing voters in focus groups, when asked what President Obama's economic strategy was, repeat different versions of "Well, I know he said we needed to save the banks. Beyond that, I'm not sure." When Obama in his first State of the Union gave a vigorous defense of bailing out the banks, saying he knew it about as popular as a root canal, and saying "I get it", it was very memorable to voters. But when his predictions about what would happen when the banks were stabilized -- they would start making loans to businesses, and businesses would start hiring -- didn't happen, and instead the banks gave themselves record breaking bonuses, voters turned on Obama fast. In exit polls on Nov. 2nd, when asked who was most to blame for the bad economy, voters by a wide margin said Wall St. was most to blame, and the voters who said that went Republican by a 14-point margin.
Obviously, saving the banks hasn't been the President's only economic strategy. The stimulus bill, while too small, was an important job creator/saver. Saving the American auto industry was an incredibly important thing to do. Health care reform was in part a long term economic strategy. The infrastructure bank idea is a great potential job creator. Extending unemployment insurance helps keep money in the economy. And all the tax cutting going on is clearly meant to have some stimulative effect, although how much is highly debatable.
However, there have certainly been times where Secretary Geithner, who has been the main driver of the economic strategy, seems to think and act as if helping the big banks and helping the economy amount to the same thing. The tepid reaction to the foreclosure crisis has sure felt that way -- apparently we can't freeze foreclosures or do much to help homeowners because it might "endanger" the banks. In fact, I would argue the exact opposite: that our number one economic strategy right now should be to shift money from the big banks to the real economy, to Main Street businesses and workers and consumers. The big banks are hoarding extraordinary amounts of money, and they are clearly not investing it in job creating businesses. They are speculating with it, they are trading with it, they are investing in complicated financial instruments that do nothing to create jobs- in fact, they are sucking capital out of the real economy that might actually create jobs. These massive financial conglomerates have way too much concentrated wealth and market power, and that is weakening the rest of the economy.
This is one reason why, as I wrote a couple of times last week, it is so important to write down the mortgages of homeowners who are underwater. Taking that money out of the bankers' hands and putting it in the hands of the hard pressed middle class would do more to stimulate the economy than any other thing the President could do right now. This is also why the Federal Reserve's new proposed rule, out last week, on swipe fees is so good. It would generally limit swipe fees to 12 cents per transaction. Right now the average is 44 cents, and with most small businesses it's quite a bit higher. If this rule is upheld, this is money that will go straight from the big banks' profit margins into the main street economy -- all told, probably a $15 billion boost going back to retailers, restaurant owners, taxi cab drivers, and hopefully consumers. $15 billion going from Wall Street, speculative economy into the real economy is a nice lift right now. This is why I have been working with retail business leaders and consumer groups to support this new regulation.
Unfortunately, not all Democrats see it this way. Tom Carper and Mark Warner tried to head off the amendment that made this regulation happen in the Senate, and have been lobbying the Federal Reserve against a strong regulation on the subject ever since they lost the legislative fight. And Barney Frank, who is a great liberal on social issues but spends way too much time with bank lobbyists, was whining on Friday how unfair the proposed rule was to the poor bankers.
Barney, you got this one wrong. Democrats should not be looking out for the bankers, we should be looking for every single opportunity we can to drain the Wall St. swamp. The big banks are hoarding money. They have way too much market power, and when their profits expand, they put that money into the speculative economy rather than the real economy that manufactures goods, sells products and services, and creates jobs. When we take a dollar away from them, and put it into the real economy, there is actually a multiplier effect as people on Main Street spend or invest the money in real products. When mortgages get written down, it helps the real economy. When swipe fees on credit or debit card transactions get lessened, it helps the real economy. If we instituted a transactions tax on every trade made on Wall St, and put that money into a jobs program, that would help the real economy.
The big banks are hoarding our money. Our best economic program right now is to shift money from the banks, and put it into the hands of consumers who might actually buy products and businesses who might actually hire more workers.
"As the only state-owned bank in the nation, our mission, established by legislative action in 1919, is to promote agriculture, commerce and industry in North Dakota. The Bank acts as a funding resource in partnership with other financial institutions, economic development groups and guaranty agencies. We have four established business areas: Student Loans, Lending Services, Treasury Services and Banking Services. BND’s support services and dedicated employees provide you with the best customer service."
All its advantages serve the people of North Dakota and all its profits go back to the state, not in the pockets of predators who send their goons to Washington to bribe our Congress. Bottom line: Interest rates are affordable for all, and importantly, taxes are lowered as a result of the bank's profits (naturally profits go to the state). You might think of this California, not to mention other states. These kinds of banks were the first banks in the U.S. So why continue to let banks be owned and run by grifters who start recessions and depressions?
I think you are confusing inflation with the dollar losing value.
It may surprise you to know this free market capitalist agrees with you 100% concerning the danger too-big-to fail banks pose to our economy. The problem with the $.11 swipe fee limit is that the banks are not going to suffer. They will find another way to charge the customer or limit the use of debit cards. I know I used to work for Merrill Lynch. My book “Secrets of the Skim” explains exactly how these guys operate. These banks must be broken up into smaller banks. Trading floors need to be located in Atlanta and Miami as well as New York. Since two political opposites can agree on this why is nothing being done?! Maybe we are both being hornswoggled! Visit halblackwell.com to see how I am attacking these most powerful institutions from the right. Onward brother!
Thanks, Hal Blackwell
Banks have become monopolies that directly control our Congress.
We could offer banks a choice. Nationalization or a flat rate tax.
Neither would be 'liked' but either would cause a reform and would result in a 'new banking' system that is a service for the people and not just a private piggy bank for the rich and Congress.
What is in it for Wall St? Why buy debt at such a low rate of return? Inflation. The beauty of inflation from Wall St's perspective is that is sucks peoples savings away. Back when people saved in physical assets like gold, silver, copper you didn't have much inflation unless a big new mine or supply was found. Your savings would buy the same amount of stuff year to year and if productivity increased you could even have deflation which meant you could buy more tomorrow with what you saved today.
Inflation ruins all of this. In order to maintain some of your purchasing power you are forced to "invest" in Wall St. Corporate stocks and bonds. The whole system is designed to skim off productive peoples money to pay off the politicians and their banker friends that keep them in office.
Ed Fuchs, PhD
Heredafox