One prime cause of the financial collapse is that financial trading
markets have become speculative worlds unto themselves. Instead of
adding efficiency to the real economy, they mainly add risk that the
rest of us now have to pay for.
There are many ways to damp down financial speculation, but a very
effective strategy is to tax it. Given the huge costs of the clean-up
(now being borne mainly by taxpayers) it would make a lot more sense to
require financial markets to pay for their own bailout.
Five years ago, Forbes magazine performed a worthy public service. The right-leaning business publication that dubs itself, "Capitalist Tool," published a set of criteria by which to judge the economic performance of 10 post-war presidencies. It then evaluated each presidency against that set of criteria.
The Wall Street gang is at it again! It's been one year since Wall Street's collapse and bailout took trillions from taxpayers and the sinking economy. The speculative instruments that pulled down the economy were those super-risky sub-prime mortgages, credit default swaps, collaterized debt obligations-you know-Las Vegas East, using other peoples' savings.
As if to elaborate their gigantic con job, the investment banks, guaranteed by you the taxpayers, are now packaging life insurances policies in what sane, on the ground businesses would consider deranged exotic money plays.
President Obama's highly anticipated health care speech started on a totally different subject: The economy.
"When I spoke here last winter, this nation was facing the worst economic crisis since the Great Depression," he told Congress and the people at home. "We were losing an average of 700,000 jobs per month. Credit was frozen. And our financial system was on the verge of collapse."
Great news, America! Having just celebrated Labor Day, we can now bask in the revelation that our long economic nightmare is over. Forget recession, much less a depression, our country is poised to spring into a new era of financial prosperity!
A short time ago, New York Attorney General Andrew Cuomo
released a report focusing on the bank bonuses paid out by the biggest
banks in 2008, the same year they were bailed out by federal taxpayers.
The report notes that in many instances the bank bonuses exceeded bank profits,
the implication being that taxpayer dollars were being used to
subsidize the salaries of the ace banking executives who created the
financial crisis in the first place.
This is perhaps the most important thing I learned over my years working on Wall Street, including as a managing director at Goldman Sachs:
Numbers lie. In a normal time, the fact that the numbers generated by
the nation's biggest banks can't be trusted might not matter very much
to the rest of us.
Winston Churchill supposedly said:
"You can always count on the Americans to do the right thing, after
they have tried everything else." This may prove to be an accurate
description of the response to the foreclosure crisis that has followed
the collapse of the housing bubble.
The folks in Washington
have developed a series of complex mortgage modification schemes
designed to keep people in their homes. George Bush put forward the
first plan in the summer of 2007. It was entirely voluntary for lenders
and came with no government money.
Neil Barofsky, the chief watchdog over the
$700 billion TARP bank bailout program, is one of those rare creatures
in Washington: he takes very seriously his responsibilities of
independent oversight and accountability. A career prosecutor,
Barofsky is a life-long Democrat who donated money to Obama's
presidential campaign.
The following was adapted from a speech on May 2, 2009 at The Progressive’s
100th anniversary conference and originally printed in The
Progressive magazine, August 2009 issue:
