It is often remarked that people have short memories when it comes to financial crises, that the lessons of Enron and Worldcom and the Dotcom boom quickly receded. This is how political will resurfaces to begin the process of winding back regulation. It is how companies whose reputations became rightly and severely tarnished during a crisis arise fiery and Phoenix-like from the dirt into which they were trampled.
Now we can see the shortening of memory taking place in real time, thanks to an article in the New York Times: "Wall St. Hiring in Anticipation of an Economic Recovery".
There is much that the article gets right:
- That the recovery experienced by the bank follows their rescue by Washington
- That while Wall St is hiring, the employment prospect across the rest of the US remains bleak
- That the recovery in banking is not reflected in other sectors where jobs are not returning - like manufacturing, where since June 2008 the NYT notes employment fell by 14 percent compared to 8.5 percent in the financial sector nationwide.
These caveats, however, cannot compete in the memory against the more breathtaking assertions:
- That the rebound of the biggest banks after being pumped with billions of dollars in taxpayer money is somehow a "remarkable recovery"
- That the fact that Wall St employment never fell below the level to which it fell after the Dotcom bust (in which no one was bailed out) means "it actually weathered this recession -- the worst since the Depression -- better than the previous one".
Hogwash.
The most jarringly unqualified assertion of all is that the recovery in Wall St jobs is actually good for the local economy. As the paper reminds us:
"New York City is cutting services like day care and adult literacy programs to help balance its budget, while Albany is facing a $9.2 billion deficit in the state budget this year."
And notes that:
"Each job in the securities sector generates two additional positions in New York City, according to the federal Bureau of Economic Analysis. In part, that is because the average salary is much larger, with Wall Street employees earning an average of $392,000, compared with $63,875 for other workers in the city."
The New York Times has a difficult line to straddle here. As a New York paper it knows that the state of New York's economy took a direct hit when the banks ran into trouble. Wall St generates 20 percent of the state's tax base, albeit an increasingly volatile revenue that translates into volatile public service capacity.
But as a national paper that aspires to be a paper of record, it has to look beyond the interests of the local population if it is to provide appropriate context to its coverage.
Nationally, employment in the US in June 2010 was down 4.8 percent on pre-crisis levels, because of a crisis with its roots on Wall St. No recovery in employment on Wall St is going to be of benefit to these others.
Globally, of course, the situation is even worse: there are 33 million people more unemployed than there were on the eve of the financial crisis -- an unprecedented increase.
Then of course there are the other more severe global repercussions of Wall Street's crisis:
- 64 million people will have been shunted into extreme poverty (i.e. living on less than1.25 per day) by the end of 2010;
- 82 million people are going hungry who would not otherwise have done so;
- 1.2 million babies and children under five are forecast to die by the end of 2015 who would not have died but for the crisis.
Until it is clear that the Street has accepted its responsibility for the crisis and accepted hard-wired constraints that will prevent it from happening again, how can those with good memories join in the celebrations when Wall St starts rehiring?
And as Paul Volcker opined in an article published July 9th in the New York Times itself, the financial reform legislation recently passed by Congress fails to get close to evading that prospect, the result of a remorseless firestorm of Wall St lobbying and influence.
Next up: how to forget about sleep.