It has been five years since the Lehman Brothers bankruptcy. The aftermath is well known: the Too Big To Fail bailouts, the Too Big To Jail avoidance of guilt by culpable executives, the loss of millions of jobs, the loss of hard-earned life savings, and severe damage to the world economy. One would hope that, five years later, our country would be on the road to economic recovery. Yet many of the worst excesses of Wall Street remain. Regulators make many of the same mistakes they made in the past and the same warning signs are routinely overlooked. Wall Street and the big banks are even bigger, richer and more powerful than they were in 2008 when U.S. taxpayers bailed them out of their self-inflicted crisis. Little of substance has changed -- Wall Street remains largely unshackled, fueled by the same old unrelenting greed and weak government oversight. And Wall Street's continued reckless risk-taking with other peoples money has been setting off alarm bells -- see Gretchen Morgenson's recent column in the New York Times on the disturbingly vulnerable "repo market."
President Obama is clearly aware of the risk associated with Wall Street misbehavior, but he has failed to champion significant reforms. In a speech this week, the president said: "By the time I took the oath of office, the economy was shrinking by an annual rate of more than 8 percent. Our businesses were shedding 800,000 jobs each month. It was a perfect storm that would rob millions of Americans of jobs and homes and savings that they had worked a lifetime to build. And it also laid bare the long erosion of a middle class that, for more than a decade, has had to work harder and harder just to keep up."
Here are several suggestions that the president should consider and evaluate, given his firsthand experience with the devastating aftermath of an unrestrained financial industry. These are all elements of the financial collapse that have not been adequately addressed, rectified or acknowledged by the self-styled "Hope and Change" president.
• Our country has a systemic tax problem -- big corporations are not paying their fair share. Here's a startling fact -- one address in the Cayman Islands is the legal address of thousands of corporate subsidiaries of U.S. companies. A not-so-secret secret, this practice of utilizing offshore tax havens is often a perfectly legal ruse to avoid paying anything to Uncle Sam. Bank of America received $20 billion dollars from the bailout in 2009. They now have about $17.2 billion stored away in offshore tax havens where the federal government cannot touch it.
Even more troubling, some of these giant corporations receive a hefty tax benefit from the federal government on top of their tax avoidance. For instance, in the years 2008-2010, General Electric made over $7 billion in U.S. profit, paid nothing in federal tax, and then took in $5 billion extra from the United States treasury. Why is the U.S. government giving out billions of dollars to hugely successful and profitable companies and asking nothing in return?
It is thanks to crafty corporate tax accountants and attorneys who make their living discovering and taking advantage of every loophole in the tax code. President Obama -- why are big corporations allowed to use our public roads and other crucial infrastructures for free to make their billions without contributing anything back? Why is raising the revenue needed for essential public services left to the small taxpayers?
• American CEO's are the highest paid in the world. In 1980, American CEO pay was, on average, 42 times greater than that of the average worker. As of 2011, corporate CEOs make 340 times more than the average worker -- eight times as much!
Compensation for the top one percent has been steadily increasing for decades. Income inequality is extreme -- the Securities and Exchange Commission recently proposed that public companies must report the ratio of executive compensation to that of their average employee. Such a proposal is encouraging, but much more needs to the done to close the gap between the CEO class and the average worker and return to the level of 1980, at least. We can start by raising the federal minimum wage. Stalled at $7.25 an hour, it is far behind what the minimum wage was in 1968, adjusted for inflation. In 2008, Candidate Obama called for a $9.50 minimum wage by 2011. Today, he calls for $9 by 2015. It's not enough -- if the minimum wage kept pace with its 1968 level, it would be over $10.50 today. (See timeforaraise.org)
• It has been two years since the Occupy Wall Street movement made headlines and helped turned a critical eye on the misbehavior of the big banks. Thousands of young Americans took to encampments around the country to protest the actions of the Wall Street plutocrats. The "99 percent" spoke out over the entrenched greed, power and abuse that has spread like a cancer through our political system.
What was the end result?
Directly, not much -- the status quo has largely returned. The corporate supremacists successfully barricaded themselves in their Wall Street suites and waited out the revolution in the streets. President Obama chose not to capitalize on this rumble from the people and push for major reforms.
But while the Occupy movement has largely ended, its advocates and other fighters for economic justice are still pushing back. Earlier this week, one thousand protesters gathered and marched from the United Nations building in New York City to Bryant Park in support of "the Robin Hood Tax" -- a financial speculation tax. The Inclusive Prosperity Act (H.R. 1579) which was introduced in Congress by Rep. Keith Ellison (D-MN) would establish a small tax (0.5 percent or less) on Wall Street speculators, which could produce hundreds of billions of dollars in revenue a year. These funds could be put towards rebuilding our job intensive public works and civically educating our youngsters while also serving as a deterrent to harmful speculative trading on Wall Street.
National Nurses United, the largest union and professional association of registered nurses in the United States, has taken the lead on pushing for this tax. The support of President Obama would give a significant boost to this important legislation.
• Finally, it's time to crack down on corporate crime and put an end to the two tier criminal justice system that prosecutes individuals but cuts deals with corporations. Corporations have long employed the tactic of weakening and dismantling the policing agencies responsible for keeping watch over them under the guise of "deregulation." Deregulation is simply corporate-speak for making it much more difficult to catch corporate criminals -- when the rules are too difficult to break, change the rules they say. Deregulation and starved enforcement budgets are what led to the global financial collapse in 2008 and one explanation for why no bankers or corporate executives have gone to jail as a result of their organizational misdeeds. By comparison, hundreds of savings and loans officials were convicted and sent to prison during that crisis in the 1980's.
If President Obama wants to get serious on preventing the "erosion of a middle class" there needs to be an effort to update the weak and ill defined federal corporate crime laws. This should coincide with more funding for the Justice Department's minimalist corporate crime division overwhelmed by a continuing corporate crime wave. The Justice Department needs to have the manpower and resources to go after major violators and not be forced to bow out with deferred and non-prosecution agreements.
Five years later, America is as much in need of fresh ideas and bold solutions to longstanding problems as it was back then. Let this somber anniversary serve as a reminder of why we need to put the brakes on the runaway train known as casino capitalism, eroding and destabilizing the "real economy" of productive, real jobs that meet real needs of the people.