Seven Reasons Why We All Need to Pick up a Pitchfork

Since the financial near-collapse of 2008, we’ve inaugurated a new president, bailed out big banks, and seen Congress fumble an attempt to reform healthcare. Most recently, we’ve seen our Supreme Court rule that corporations have a right to free speech. None of this sounds outrageously shocking. What’s the big deal?

The big deal is a shift in business as usual. Here are seven reasons YOU should be raising Cain with your Congressperson, no matter your party:

1) THE SHEER MAGNITUDE OF THE BAILOUT. It’s fairly well-understood that the financial crisis was very bad. So bad that the government had to enact unprecedented emergency funding of private enterprise followed by a substantial stimulus effort to keep the economy from plummeting into a 1930s-like depression. The cost to the taxpayers? ELEVEN TRILLION DOLLARS. Debt that will take decades to repay.

2) THE DISTORTION OF FREE-MARKET THEORY. What began as a return in the Reagan era to what some people (mostly conservatives) consider to be a bedrock philosophy here in the US: a belief in the righteousness of free-markets, has turned instead into the dark-side of Objectivist Randianism. Investment banks broke zero laws while dragging the entire world’s credit markets into the gravel by profit-raiding under the guise of re-selling debt. Our entire financial system nearly collapsed, and now our economy struggles in a deep recession, while the big bankers and clever investment guys lobby Congress against regulation, because we all know, regulation is un-American and anti-free-market. Regulation is bad, but relying on bailouts from government is okay?!? These guys mean business. From the NY Times:

The nine biggest participants in the derivatives market — including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America — created a lobbying organization, the CDS Dealers Consortium, on Nov. 13, a month after five of its members accepted federal bailout money.

To oversee the consortium’s push, lobbying records show, the banks hired a longtime Washington power broker who previously helped fend off derivatives regulation: Edward J. Rosen, a partner at the law firm Cleary Gottlieb Steen & Hamilton. A confidential memo Mr. Rosen drafted and shared with the Treasury Department and leaders on Capitol Hill has, politicians and market participants say, played a pivotal role in shaping the debate over derivatives regulation.”

Derivatives, of course, being the most profitable “instrument” in a financial institutions arsenal. And a large cause of the crisis.

3) LOBBYING IS PREVENTING EFFORTS TO REGULATE THE BIGGEST BANKS. The Senate banking committee is hearing testimony about whether or not to adopt policy called “the Volcker Rules” after ex-Federal Reserve Chairman Paul Volcker, who believes in a return to a separation of investment firms (higher risk) and traditional commercial banking (lower risk, or should be!). President Obama recently came out in support of the Volcker Rule. From Business Week:

The White House defines proprietary trades as those not done for the benefit of customers, a senior administration official said when the Volcker plan was announced. Regulators would have the power to ask banks whether certain trades are related to client business, the official said. If they’re not, the regulators could order firms to exit the positions.”

In other words, if the banks are risking YOUR money for their own private benefit, it’s not allowed. Due to heavy lobbying by the financial industry, the Volcker Rules will likely not pass in the Senate.

4) THOSE BIG, FAT BONUSES. Not only are bankers once again pulling down nauseatingly huge bonuses, they are currently testifying to Congress that regulation will hamper financial innovation. Hello? Didn’t financial “innovation” cause this entire problem? Gerald Corrigan, the Managing Director of Goldman Sachs, testified that he has always believed that banks are “special” and that he could agree to the pre-crisis rule where banks do not enjoy the discount window “so long as Section 13 lending remains a possibility in extreme circumstances.” In other words, as long as they could have a bail-out loans from the Fed if they needed one, lending previously reserved for traditional banks only, not bank holding companies like Goldman Sachs.

One commenter put it this way:

They [Goldman Sachs] were hours, if not minutes, from going the way of the dodo, and yet, 16 months later they are rolling in ill-gotten gains, denying ever having been in trouble, consolidating power, and flipping the bird to anyone who bothers to raise the subject. Chutzpah? Cojones? Sociopathic behavior? It probably doesn’t matter at this point. The predator class seems to hold all the cards, those being: recalcitrance, obfuscation, entitlement… When you have money, power, and are unwilling to “play well with others”, it is quite easy to dig in your heels, threaten to shut off the money supply to incumbent politicians, and sit back and watch your dreams (our nightmares) come true.”

5) WE ALL LOST IN THE RECESSION WHILE THE BANKS SCORED BIG. According to Simon Johnson, former chief economist of the IMF:

As a result of the crisis and various government rescue efforts, the largest 6 banks in our economy now have total assets in excess of 63 percent of GDP. This is a significant increase from even 2006, when the same banks’ assets were around 55 percent of GDP, and a complete transformation compared with the situation in the US just 15 years ago– when the 6 largest banks had combined assets of only around 17 percent of GDP.”

Assets in excess of 63 percent of GDP?!?!?! Meet your new overlords.

6) THE FINANCIAL INDUSTRY OWNS CONGRESS. Congress has little incentive to fight against this oligarchy of investment bankers. Because, many congressional representatives are in effect paid to protect business and profit.

From a paper cited in the blog of Mark Thoma, Dept of Economics of the University of Oregon: “By going through individual lobbying reports, we identify all lobbying activities by financial institutions related to the regulation of mortgage lending and securitisation. During the period of the boom from 2000 to 2006, we find 16 pieces of federal legislation aimed at enhancing the regulation of predatory lending practices, none of which ever became law. The amounts spent on lobbying in relation to these laws were substantial and were spent mostly by large financial institutions.” Emphasis added. Because this means that the crisis happened because lobbyists from financial firms influenced legislation AGAINST regulation. The authors further found that institutions that lobbied harder took more risks and fared worse in the crisis than banks that did not invest in lobbying. The authors concluded:

Recent reports show that financial institutions intensified their lobbying efforts in 2009 to fight against an overhaul of derivatives regulation and legislation. Johnson argues that substantial reform will fail unless the political power of the finance industry is weakened.”

7) THE SUPREME COURT JUST SIDED WITH BIG BUSINESS OVER VOTERS. Enter the Supreme Court with the Citizens United v. Federal Elections Commission (FEC). According to a press release from Feb 5, 2010: “The Federal Election Commission today announced that, due to the Supreme Court’s decision in Citizens United v. FEC, it will no longer enforce statutory and regulatory provisions prohibiting corporations and labor unions from making either independent expenditures or electioneering communications.” So there goes that nice idea that maybe we need to limit money’s influence on the political process. Thanks Supreme Court.

So we have two choices as average citizens. Either we make some noise, make some calls to Congress and work to pass some regulation and reforms (like the Fair Elections Now Act), or we sink into apathy and watch the “free market”continue to reward the grotesquely wealthy. I may be a progressive, but this storm of recent events should give even a staunch libertarian the shivers. Our government bailed out massive banks with taxpayer money leaving us with staggering debt. Now those same banks are arguing against regulation so they can do it all again. And the Supreme Court just exacerbated the problem by encouraging the influence of big business in our democratic process. Angry yet?

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February 5, 2010 | Filed Under Perfect World 

Comments

One Response to “Seven Reasons Why We All Need to Pick up a Pitchfork”

  1. busbus on February 8th, 2010 5:49 am

    Agree with you 100%.

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