Three years ago this summer, the flood tide of Wall Street recklessness began to overtop the weakened levees of restraint erected decades ago to protect our nation from financial disaster. By the fall of 2008, the economy was drowning in a sea of recession, with businesses shuttered and struggling, millions of people tossed out of their homes and their jobs, and the hopes and aspirations of millions more crushed beneath the weight of the financial floodwaters.
One year ago this week, to begin repairing the damage wrought by this avoidable catastrophe and to avert the next financial crisis, President Obama signed the Dodd-Frank financial reform law, enacting sweeping and needed new protections for the marketplace and consumers. The law contained the most significant changes in financial regulation since the 1930s, sensibly so given the magnitude of the calamity we faced.
From the beginning, it was obvious that overhauling the financial system would be no easy task given the power of Wall Street and their political allies and the increasing concentration of wealth and clout that has come to shape our economy and political system. But the fierceness of the resistance to change has been nothing short of breathtaking. Instead of putting all hands on deck to fix the breached levees in the nation's interest, opponents of reform have thrown every roadblock imaginable into the path of the repair crews charged with carrying out the new law.
From the moment the legislation was signed, the agents of its destruction went to work. Wall Street lobbying has intensified, with expenditures of nearly $52 million during the first quarter of this year exceeding the amount spent in the same period last year when the bill was being debated. Congressional Republicans introduced a raft of bills to repeal or eviscerate the newly minted reforms. They have blocked the appointment of key regulators when the nation most needs a steady and strong hand at the financial tiller, including pledging to reject any nominee to head the new Consumer Financial Protection Bureau unless the agency's authority is weakened.
They have slashed at the funding of the Securities and Exchange Commission (SEC) to cripple its ability to pursue financial wrongdoing and to enforce the law. They've done so even though the SEC is funded by fees and fines, not taxpayer dollars, and despite the fact that JP Morgan and Citigroup each spent four times as much on technology upgrades alone last year as the agency's total budget. And, they have repeatedly tried to cut the budget of the Commodities Future Trading Commission (CFTC) to hobble its ability to regulate the $300 trillion plus domestic over-the counter (OTC) derivatives market.
The result: a troubling uncertainty about the ultimate outcome of financial reform. While regulators plow ahead with limited resources against a fierce wall of resistance, much of what led to the financial meltdown remains unchanged. The OTC derivatives market remains without oversight or transparency. Rules on critical matters such as credit rating agencies, consumer protection, and proprietary trading remain to be enacted. All the while business as usual has resumed. Compensation at publicly traded Wall Street firms hit a record $135 billion in 2010, while profits have bounced back. As Sheila Bair, the former head of the FDIC recently noted, "I see a lot of amnesia setting in now."
While opponents of reform have zealously sought a reprieve for the nation's bankers, perhaps what is most striking is that there has been no reprieve for the American families crushed by the financial irresponsibility in which those bankers engaged. Wages as a share of national income have fallen to their lowest level since the Great Depression while the share going to corporate profits has rebounded to pre-crisis levels. From the second quarter of 2009 through the first quarter of this year, 92% of income growth went to corporate profits while none went to wages. The median pay of CEOs soared by 28 percent in 2010, while the average length of unemployment grew to nine months, the highest since record keeping began in 1948. And, young people across the country attending state universities have faced steep tuition hikes as state budgets collapsed in the wake of the meltdown -- with increases since 2007 of 132% in California, 95% in Arizona, and 54% in Florida.
That we would emerge from the financial crisis with bankers resplendent and fighting with their allies to keep the status quo -- while working families are struggling to survive -- should remind us of how far we have to go to right the financial and economic ship of state. And, it should be our clarion call on this anniversary to finish the work before us and to commit ourselves anew to building a financial system and economy that works for all Americans.
Phil Angelides served as Chairman of the Financial Crisis Inquiry Commission, which conducted the nation's official inquiry into the financial and economic crisis.
This blog has been updated since its original publication.