At a retreat this last weekend sponsored by the Roosevelt Institute on financial reform issues (I have to take a break from health care every once in a while to keep my sanity), I met a very impressive guy named Bill Black, who as a regulator was a major reason why the Savings and Loan fraud of the 1980s got discovered and prosecuted. When I got home, I discovered this incredibly smart piece Bill just posted, along with another terrific piece, this one by Bob Creamer, posted earlier that day. Everybody who wants to know how important the battle for financial reform is should real these posts.
The bottom line for me of these articles is that there should be one central goal that drives all policy and legal initiatives for progressives in the coming fights over financial policy- that the biggest banks on Wall Street should have less economic and political power. These companies are already responsible for wrecking our economy, not just in the big economic collapse of last year but in all the ways Black describes regarding the impact on the real economy. If left unchecked, they will continue to drain jobs and income from the rest of the economy, and they will--sooner rather than later, within a few years not a generation or two--cause another major economic collapse, this one almost certainly worse than 2009 because our economy has already been so weakened.
The mammoth power of these financial companies is overwhelming both our political system and our economic system. Black's statistic that 40% of our economy's total profits come out of the financial sector is mind numbing and should terrify all of us, but what is even more terrifying is the overwhelming political power they still have in Washington, DC. In spite of the center left party having the White House and big majorities in the House and Senate,and in spite of wrecking the worldwide economy and taking trillions of dollars in government assistance in the last year, they still have the power to stop, weaken and/or slow down even the most moderate of legislative reforms being proposed. That is a testament to the bone crushing power of these banks, which by the way are also the single most unpopular institution in America. A pollster I know who has warned me in the past against making overly broad swipes at corporate America recently did a poll showing that 75-85 percent of Americans think the big banks wrecked our economy, are greedy, and have too much power, Those are worse numbers than any other group, constituency, corporation or entity of any kind in America. Yet their power to dominate DC lives on.
Let me mention one other thing the big bankers have huge sway over: traditional media. A classic story came out in the New York Times on October 13th. Andrew Ross Sorkin was writing about the $23 billion dollar (yes, you read that right, 23 BILLION, another new record) in bonuses Goldman Sachs is likely to give its executives this quarter and asked the question: "So should we be upset about the bonuses?" He admitted that all this money they are making can be infuriating, but then wrote:
"But we can't have it both ways, either, At one moment, many in the nation crossed their fingers hoping Goldman and the rest of Wall Street would be saved to halt the country's downward spiral. But when the banks finally get up on their feet we want them to fall flat again. Mr. Blankfein (Goldman's CEO) can't win."
So I guess our hearts really should bleed for the poor folks at Goldman Sachs. All of us mean liberals beating up on them for finally, after their long arduous struggle, pulling themselves up by their own bootstraps and once again climbing back up on their feet.
I weep for them.
Seriously, how does anyone write stuff like that with a straight face? After taxpayers bailed out the entire financial system, after Ben Bernake pumped trillions into loans to these banks at virtually no interest, after we actually haven been subsidizing the Too Big to Fail banks at the expense of the smaller independent bankers--after all that, we are supposed to sympathize with these guys?
We need to disempower these bankers. The Justice Department's Anti-trust division should be opening up legal action against the five biggest banks. A modern version of Glass-Steagall should be passed. Elizabeth Warren and the Obama Administration's consumer protection agency for financial products need to be passed. A tax on financial transactions, with special penalties for the biggest frauders should be put into effect. The bill making it more difficult to file class action financial lawsuits against these kinds of companies that was passed over Clinton's veto in the late '90s should be repealed. All of these things and more should be moved on quickly.
Most important of all, though, the DOJ and various regulatory agencies should be going after these big banks who created this bubble and then sold financial products they knew would fall quickly in value. This is the control fraud Bill Black talked about in his post, and what he helped prosecute successfully in the Savings and Loans industry in the 1980s. Some of these traders broke the law, and they should be going to jail. The fact that Bernie Madoff is the only high profile banker going to jail is a disgrace.
Now some will say that this all is politically impossible, that these banks are too powerful. But Black reminded me what the 1980s looked like: Reagan was in the White House and had just deregulated the Savings and Loan industry, both parties with plenty of Congresspeople and Senators helping the Savings and Loan execs do their dirty deeds (don't forget four of the five "Keating 5" Senators were Democrats), the Savings and Loan trade association was ranked in a survey as the third most powerful lobby in America. But the control fraud scammers ripping off widows and orphans who were Savings and Loan customers did go to jail.
And remember this: these big bankers are really arrogant, and the anger at them is building. We can take these bankers down, too. America needs to storm the Bastille that is Wall Street, and rebuild both our economy and our democracy in the process.