Statistics are boring, but it's important to wrap your head around this latest one from the Federal Reserve as the definitive epitaph for the American dream. Wall Street's financial shenanigans, the banking games that made some fat cats outrageously wealthy as they turned home mortgages into toxic securities, wiped out 20 years of growth in American families' net worth.
"Americans saw wealth plummet 40% from 2007 to 2010, Federal Reserve says," is how the Washington Post headlined the startling news that all of the economic gain of the past two decades had been destroyed by the banking meltdown. And with housing values -- the bulk of middle-class savings --indefinitely moribund, the situation will not get better anytime soon.
"The recession caused the greatest upheaval among the middle class," the Post noted. "... Their median net worth... suffered the biggest drops. By contrast, the wealthiest families' median net worth rose slightly."
That outcome, disastrous to the American ideal of a nation of mostly middle-class stakeholders competing on a relatively equal economic playing field, was preordained. When tens of millions lost their jobs and homes as a result of financial swindles that the Federal Reserve failed to prevent, this ostensibly public agency, with strong bipartisan support in the White House and Congress, adroitly directed the flow of public funds to save the bankers while abandoning their victims.
On Tuesday Sen. Bernie Sanders, acting under authority of the Dodd-Frank financial regulations, released the conclusions of a Government Accountability Office report showing that "[d]uring the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve."
One of those Fed directors, Jamie Dimon, chairman and CEO of JPMorgan Chase, who has been on the New York Fed board since 2007, testified before Congress on Wednesday that he was sorry his company lost billions in risky trading even after all of the warnings concerning too-big-to-fail banks.
Dimon -- whose company last year paid him $24 million, compared to the $45,800 median U.S. family income -- testified that the bank could manage its own affairs. But that is hardly reassuring given that the Fed provided JPMorgan Chase $391 billion in total assistance as well as paying the bank to administer the government's emergency lending program. It was the Fed that back in March of 2008 made $29 billion available to Dimon's bank so it could acquire beleaguered Bear Stearns; the Fed also agreed to purchase Bear Stearns' most toxic assets before the merger.
Such sweetheart deals are the norm, and they are further illustrated by the case of Stephen Friedman, chairman of the New York Fed board, on which Dimon serves. Friedman simultaneously was a director at Goldman Sachs when the N.Y. Fed allowed Goldman to become a bank holding company and thereby become eligible for cheap Fed loans. Thanks to a plea by then-New York Fed President Timothy Geithner that Friedman be granted a waiver from conflict-of-interest rules, he continued to own and buy additional Goldman stock. Friedman ended up with $13 million in stock whose value was bolstered by Fed assistance to Goldman totaling $814 billion. And Geithner ended up becoming President Barack Obama's treasury secretary.
The Fed backed the bailout of Citigroup, the result of deals dreamed up by Dimon, who before his JPMorgan days had teamed with Sanford Weill to merge privately held investment firms with government-insured commercial banks, which would have been illegal under the Glass-Steagall law. Weill succeeded in getting President Bill Clinton to back the reversal of Glass-Steagall, and as a consequence Citigroup soon became too big to fail. Weill was on the Fed board on the eve of a crisis that would lead to Citigroup receiving more than $2.5 trillion in Fed financial assistance.
The GAO list includes Jeffrey Immelt, the CEO of General Electric, who was on the N.Y. Fed board from 2006 to 2011, a period during which the Fed refused to even consider a moratorium on mortgage foreclosures or any other serious effort to help homeowners survive the mortgage crisis the banks had created.
One of those banks is GE Capital, which was started by GE and was a major contributor to the banking disaster. The government came to GE's assistance by purchasing GE Capital and giving GE an additional $16 billion in low-cost financing. Immelt, whose company now has shipped two out of three of its jobs abroad, is the head of the President's Council on Jobs and Competitiveness.
Geithner's stewardship of the bailout of AIG is perhaps the most egregious example of the Fed's preoccupation with the welfare of the banks as opposed to the well-being of the ordinary folk the Federal Reserve was created to protect.
The Fed has been run like an elite club, handsomely rewarding its banker directors while sacrificing the homeowners and families who most need safeguarding.
If we want change, the Glass/Stegal Act re-instated, the banksters held accountable, voice it with your vote against the Dem or Repub rulers. Vote out the two party system. There are alternatives if you check them out. Look up Rocky Anderson---what do you have to lose---more of the same if we keep these rapists of our wealth in office?!
You forgot to mention that Sandford Weil sold his NY CPW condo for 80 million dollars a few months ago to a Russian Heiress.
And Llyod Blankfein, "we're doing G'd's work" left the hearings to be chauffeured out to his South Hampton Gin Lane country club, to swim laps for charity.
When Angelo Mazzulo walked scott-free, after dumping millns in stock, and a host of other illegal deeds, we knew no one would go to jail. Bernie Madoff must be sitting there, thinking, "come on, where is everybody?"
The more things change, the more they stay the same.
Pay attention and quit fabricating excuses for the criminals.
Right now we are down but as Obama is saying this election is between two choices. I am prepared. No debt and savings. So if the republicans win, here comes Greece, England and Spain. I suspect about 20% of those who voted for republicans will come to regret their vote.
Tax cuts, no government is pure republican marketing. If only people did their research and looked at reality instead of wanting the easy way out. Just look at hong kong a pure capitalistic system. No middle class, large poor and super rich. This is the republican reality, that's the choice. Simple as that.
On this article: A lot of us have known and written for years that the job of the Fed is to establish corporate control over the government by creating a huge debt owned by the banksters. The ability of the privately run Fed to issue currency to their buddies in the American taxpayer's name was key to this effort. A conservative (not corporatist!) commentator, Gary Allen, warned us about this back in the 1970's and I know he opened my very progressive eyes.
What I would like to see you write about is the Icelandic "bankruptcy" and how investigation showed so much of their national debt was shifted from Icelandic banksters' private books to the taxpayers. I'd be VERY interested in your commentary.
Kidding...
Caused!
NOBODY can pick a winner all the time, but JPM made serious progress moving forward, unlike OBAMA did cutting our debt, and creating a profitable economy for ALL.
Why Not just congratulate JPM for their multi billion dollar tax contribution from these profits unlike the 14 billion tax- free profit via GE?
This lost didn't cost us taxpayers anything substantial, unlike Solyndra and Union Stimulus that protected their jobs, unlike private sector middle class workers.
Sadly our president cares far more about the Union Class and non-contributing Class voters, than our MIDDLE CLASS private sector taxpaying class, which appears struggling, and are on their own
http://online.wsj.com/article/SB10001424052702303768104577462650268680454.html?mod=googlenews_wsj
>Pull the plug, completely, on lobbyists and their connection to Congress
>Most, if not all of the Wall ST senior execs who were part of this scheme should be in prison for life
>Immediately revoke the "personhood" status for corporations
If there was anyone wiling to run on that platform, they would win by the largest landslide in history.
I know, it's just a silly dream - but those are the required solutions
No relief for the working class in 2012.
Labor Party 2016.