Subscribe to Common Dreams News Updates
Most Popular This Week
Popular content
Today's Top News
Fighting Off Looters in the Ruins of Wall Street
SEATTLE - Reckless greed on Wall Street is a dog-bites-man story. Still, the renewed feeding frenzy of the alpha dogs of finance in the embers of the bonfire of their own vanities has inspired amazement and disgust across the political spectrum.
The investment bank Goldman Sachs, popularly dubbed "Goldman Calf", reportedly gave its employees some 13 billion dollars in bonuses for 2009. (Credit:Peter Costantini/IPS) Despite the damage it yet may cause, though, the
spectacle does seem to be helping to disarm some of the banksters'
ideological weaponry. In the debate over why the financial system
collapsed and how to rebuild it, economic assumptions that have enjoyed
hegemony for the past 30 years are being questioned, and a swelling
chorus is supporting a return to stronger regulation.
David Stockman, President Ronald Reagan's director of the Office of Management and Budget, recently weighed in: "The baleful reality is that the big banks, the freakish offspring of the Fed's easy money, are dangerous institutions, deeply embedded in a bull market culture of entitlement and greed."
Stockman welcomed President Barack Obama's proposed tax on banks because its message is that "big banking must get smaller because it does too little that is useful, productive or efficient."
While the United States economy remains mired in a weak, jobless recovery, the financial sector has used its political clout and government largesse to once again go for the gusto. In the third quarter of 2009, according to economist Dean Baker, finance grabbed 34 percent of all U.S. corporate profits, a far bigger share than at the peak of the housing bubble.
In the political arena, too, Wall Street is back in force. As Congress debates proposals for financial re-regulation, the financiers have cried "Havoc" and let slip the canines of K Street against the reforms.
At Goldman Sachs, the leader of the pack, any embarrassment over the savaging of the global economy is well-hidden. The investment bank, popularly dubbed "Goldman Calf", reportedly has given its employees some 13 billion dollars in bonuses for 2009. That nearly triples its largesse in 2008 when, according to the Wall Street Journal, 953 employees received bonuses of over one million dollars each.
The bank reported earnings of 13.4 billion dollars for 2009, nearly matching the 15 billion dollars combined total of the five other biggest banks. Its net profit margin was 23.85 percent.
Goldman received 10 billion dollars in funds from the U.S. government's Troubled Asset Relief Program in 2008, which it paid back with interest in 2009. The firm also benefited from other forms of government generosity, including an estimated 12.9 billion dollars as a counterparty of AIG.
The failed insurance behemoth used bailout funds to pay off credit default swaps and other complex wagers on bond markets at allegedly inflated values to Goldman and several other U.S. and European financial giants. For some time before the crash, GS had reportedly been betting against the mortgage market.
The apotheosis of Goldman Sachs has relied on a revolving door between the firm and lofty precincts of the federal government. Henry Paulson, the George W. Bush administration's secretary of the Treasury responsible for TARP, formerly served as the firm's CEO. Robert Rubin, Treasury Secretary under President Bill Clinton, and many other power brokers in both major parties are also alumni.
A long year after the industry's near-death experience, Goldman's glass is either full or overflowing, depending on how you look at it. So is popular anger against it. Rolling Stone magazine writer Matt Taibbi celebrated the investment bank as "a giant vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
Satirist Andy Borowitz reported tongue-in-cheek that Goldman was in talks to buy the Treasury Department. He quoted an apocryphal Treasury spokesman as saying that the merger would create efficiencies for both because of the high volume of employees and money already flowing back and forth between them. The only hard part, the spokesman said, "is trying to figure out which parts of the Treasury Department we don't already own."
Belatedly, Obama and the Democrats seem to have decided that popular anger on the right and the left churned up by the financial industry may be a political wave they can ride.
In December, the House of Representatives passed a bill that would create an independent financial protection agency for consumers, a measure long lobbied for by Harvard law professor Elizabeth Warren, director of the Congressional Oversight Panel for the bank bailout.
The legislation would also increase banks' capital requirements and limit their leverage, the extent of their reliance on borrowed funds. And by requiring lenders to hold on to some proportion of the loans they make, the law would restrict securitization, the practice of bundling mortgages into complex derivatives that frequently have turned toxic, dragging down financial institutions that hold them.
In the Senate, though, prospects for 60 votes to break a potential filibuster look dubious. Republicans appear to be nearly unanimous in their opposition to the reforms.
In the wake of the loss of a Democratic Senate seat in Massachusetts, Obama has gone on the offensive on the issue. The president urged the Senate to approve the financial consumer protection agency, and proposed a new tax of 0.15 percent on the non-deposit debts of the biggest financial conglomerates, to recover all taxpayer losses from the bailout.
In a Jan. 21 speech, he called for structural reforms of the financial system, including limiting the size and financial risk-taking of banks.
On Jan. 31, Paul Volcker, chair of his Economic Recovery Advisory Board, vigorously championed the president's proposals in an opinion piece in the New York Times.
Volcker, chairman of the Federal Reserve Bank under Presidents Carter and Reagan, reached back two centuries to recall that Adam Smith had advocated for keeping banks small. He proposed regulations to eliminate the possibility of a few banks growing "too big to fail." And he echoed the president's complementary proposal to once again restrict commercial banks from involvement in high-risk activities such as hedge funds, private-equity funds and proprietary trading.
An earlier firewall between commercial and investment banks, first erected by the Glass-Steagall Act of 1933, was eliminated by the Gramm-Leach-Bliley Act of 1999.
Volcker also called for a public "resolution authority" with the power to step in when major financial institutions are in imminent danger of failure, take over, and arrange an orderly liquidation or merger.
Although the proposal didn't address some remaining dangers such as the "potentially viral network of derivatives contracts," according to financial columnist Gretchen Morgenson, it "moves us closer to resolving pieces of the 'moral hazard' issue, that uncomfortable state of affairs that occurs when companies don't worry about bet-the-ranch risks because they know that someone (usually the taxpayer) is waiting in the wings to save them if they blow it (as they so often do)."
Financial regulation in one country, even the home of the dollar, risks being circumvented by globe-spanning players. Recognizing this, other governments are contemplating similar curbs on financial excesses and discussing joint action.
The City of London has given Wall Street a run for its money in the insolvency sweepstakes. Surveying the wreckage, U.K. financial officials are weighing a levy on banks for an insurance fund to cover future cleanups and a tax on financial transactions to limit excessive speculation. France, too, has supported raising international capital requirements for banks.
On a global scale, the International Monetary Fund is contemplating the creation of an insurance fund into which it would require banks around the world to pay.
"The financial sector is creating a lot of systemic risks for the global economy," Managing Director Dominique Strauss-Kahn told The Telegraph. "It is fair that such a sector should pay some of its resources to help mitigate the risks they are creating."
41 Comments so far
Show AllWall street will destroy America by undermining the currency with derivatives and speculation. Stop it? Can you regulate the FED? You know, the private manager of the US money supply.
By not letting banks full of graft, grift, and lies fail they've continued on their merry way, pillaging the incomes of the working class. Oh sure, inflation isn't obvious, and neither is a weak dollar. But eventually you'll see a tipping point resulting in currency collapse, unless we stop MAKING money. By that, I mean making money out of thin air by leveraging, borrowing, and amortizing arcane financial documents, whose net result is transferring money from the working class into the stealing class. (And not just today's money, their promissory notes have sold your grandchildren too.)
Sorry, but the definition of Greed is not knowing when to stop, to keep going until you destroy yourself. I don't see anyone standing up and stopping the greed destroying this country.
Don't think much of your definition of greed. Greed is a lust. It is not an intellectual failing. To get rid of greed you have to get rid of the greedy.
>>David Stockman, President Ronald Reagan's director of the Office of Management and Budget, recently weighed in: "The baleful reality is that the big banks, the freakish offspring of the Fed's easy money, are dangerous institutions, deeply embedded in a bull market culture of entitlement and greed."<<
Oh my God, even a Reaganite can see the issue squarely, so why can't the Republicans? They are supposed to be the party of fiscal responsibility after all; if they weren't hypocritical frauds they OUGHT to be leading the changes, instead of stubbornly opposing them.
AS for Democrats wishy-washy on the changes, minimal as they are, get with it and listen to the anger of the people if you want to keep that cushy seat you inhabit PRESENTLY.
People are royally pissed at Wall Street, as they damned well should be -- they ARE a bunch of greedy ridden vampires sucking the fiscal blood and treasure of the United States.
Gary
"It's a question of discipline," the little prince told me later on. "When you've finished washing and dressing each morning, you must tend your planet.""
-~ Antoine de Saint-Exupéry, The Little Prince, (1943) translated from French by Richard Howard
As long as our politicians have their hands out to these corporations we will not see any changes.
Talking about it will not stop the greed. As The man says, It will go until it destroys itself or us. As of today we are hearing only talk, which is geared to getting re-elected.
Has anyone else heard anything else?
Please tell me . . . . .
James D. Scurlock quotes Dee Hock in his book 'Maxed Out':
'If we choose to engage in .... economic violence, social violence spiritual violence and psychic violence how can we expect to live free of physical violence'
JUBILEE, for one.
Minor reforms like a .15% tax on non-deposit debts, partial restiction on loan-selling, increased capitalization, and insurance funds (funded how?) for future collapses just are not enough at this point.
The whole underlying Friedmanist economic philosophy must be dumped and a return to a practical-not-idealistic framework must be commenced.
Also, the limitations placed on the actions of individual governments by Globalism demonstrates clearly that either Globalism must be abandoned or it must be matched by some form of limited Global Governance.
Why should we stop at "cooperation agreements" between treasury officials from "leading" countries?
Why not go the whole yard and set up real institutions of Global Democracy?
-matti.
Exactly.
"Who (or What) Can Stave
The Greed of Wall Street?"
Who? All the people
What? The referendum (the Swiss type, not California's)
Back in the 20's and 30's Elliot Ness of the FBI used to hunt bank robbers down with machine guns.
Those bank robbers were working class blokes who turned to small crime to fight back against the big crime of the banksters that caused the '29 crash. Among average Americans they were heroes. If Elliot Ness had gone after the JP Morgans instead of the Pretty-boy Floyds (that's if he "bit the hand that feeds"), we would have a very different world now.
there is no "who" to stave the greed.
the "what" is heads rolling off shoulders.
Public ownership of banking and finance will stop the greed. What's more, based on China's 4th quarter growth of 5.9 percent, public ownership could give the U.S. economy the lift that it needs. That's not to say that there wouldn't be any greed in a nationalized system, just that this can be minimized by the built-in transparency that's possible in a public system but not in present-day corporate America. Annual salary of the Bank of China's CEO, for example, is "only" $300,000 U.S., so one could expect that the billions of dollars in bonuses that these banksters now give to themselves and their minions could be redirected towards socially useful purposes, such as preventing homes from being foreclosed, creating jobs, rebuilding the infrastructure, education and universal health care. What to do with the banksters whose criminal actions brought on this killer recession? Some will be tried in a court of law, found guilty as charged and end up in the hoosegaw, and won't that tbe nice?
The Golden Rule: "If it benefits the little guy, then it is of absolutely no use to the elite and therefore it has zero chance of being implemented."
Always remember that and act accordingly. Look out for yourself because they are not going to look out for you.
Perhaps it is time to think about getting rid of money altogether. And I don't mean going back to barter. I mean transiting into an economic system that does not utilize any medium of exchange whatsoever. As it is within the family unit. You simply contribute to the good of all. Imagine what this would mean for crime, corrupt governments, health care, terrorism, media coverage, old age security, population growth, and on and on. People do not work in arms factories to hurt other human beings, they do it to provide for themselves and their families. Think about it. Not only does the US financial sector rake in 34% of all corporate profits, it accounts of over 30% of the entire Gross Domestic Product. And for what? Talk about a systemic change. Talk about real freedom. Money is not a natural occurrence, it is only an idea based on the fear that what you have to give will not come back to you and it is time we dumped it. It would create a cooperative society; a cooperative economy. My two cents.
Zeitgeistmovement.com // The Venus Project
A created society that functions very well without money.
/cm
Your two cents count for nothing in your non-moneyed world. Your words are good enough for me. Thanks.
Congratulations. You managed to set out the socialist economic system without once mentioning socialism.
It would be nice to start with an audit of the FED.
We gotta start somewhere... let them call it Socialism.... then we can call it Justice.
Is it true that the bankster's bonuses would have been enough to pay off all the foreclosures in the US?
Paul Craig Roberts has his interesting take on it all at
http://counterpunch.org/roberts02032010.html
Roberts' essay was very interesting. But I quote one very important passage:
"If the dollar is abandoned, then the result is likely to be bilateral settlements in countries’ own currencies, as Brazil and China now are doing. Alternatively, John Maynard Keynes’ bancor scheme could be implemented, as it does not require a reserve currency country. Keynes’ plan is designed to maintain a country’s trade balance."
Roberts doesn't address what the repercussions to the USA would be if bilateral settlements across the globe and/or a bancor scheme that puts an end to the need for a reserve currency (in this case the American dollar) were implemented. In this respect, his op-ed falls short.
Someone once said that capitalism will provide the seeds of its own destruction???
As for the title to this post, there are the criminal laws and for the who, there is law enforcement or congress, but either of these can be or are being 'paid off' to not do their job.
I'm sorry, but nothing will stave off the greed of these people. That is their modus operandi, their reason for living, what they've sold their souls for. There is only one way to handle these people and that is to kill them. Someone has to assume the responsibility for murdering these murderers. They are a special case, unlike other kinds of murderers, who should be branded and shunned.
As much as I am angered by the actions of these souless criminals, I shudder to think that we would devolve into such thnking. I am sure that Scott Roeder felt completely justified ending George Tiller's life while he was attending church services, no less. Murder for good is an oxymoron. These greatly over priviledged fat cat banksters need to be relieved of their wealth and have to work in the crappiest jobs in the filthiest cities to enjoy what they greatly assited in the creation of. That would be true justice.
Eliminate Capitalism. Problem solved.
Raise their taxes. What was our top rate that paid for WWII? The bottom 90% are broke.
A principle role of government is regulation, yet this govt of ours fails to regulate, fails to investigate and fails to prosecute. Attorney General Holder has been frustrated by the President and his advisers ( read Rhamm Emmanuel principally) and not allowed to do what he is there to do, enforce the laws.
#1 David Stockman, the corporate rat that brought us supply side economics under Reagan is now calling the pot black!
#2 There is nothing wrong or immoral about taxing wealth. Lets set a limit of say 3 million dollars a year will be taxed at the current 35%. ANY COMPENSATION above 3 million a year, (That means money, stocks, property etc.) will be taxed at 90%. So if Robert Rubin makes 14 million dollars total compensation this year he gets to keep a total of 3 million. If somebody can't live off 3 million dollars a year, they should find themselves a very tall building and jump!
For all the blue collar idiots who seem to think that it's a crime to tax the rich, just remember the government takes 33% to 40% of everything you make after 40 hours.
It is time that the rich pay their share of the country's bills. For the working people who are still not convinced (those who love to vote against their own interest all the time) the rich and their large corporations use the commons, ie. water, gas, electric, roads, waterways, police/fire and the courts a lot more than the common citizen ever does. It is only fair that they pay taxes proportional to their use of the commons!
Let's not forget that the so-called elites also are the exclusive beneficieries of all the military action. It is only fair that they provide 100% of the funding for this.
"Who (or What) Can Stave The Greed of Wall Street?"
What? That's like asking "Who can stave the crimes of the Gambino crime family?" or "Who can stave the militarism of the Pentagon?"
As crime is to a crime family and militarism is to a military complex, greed is to Wall Street. Were it not for greed, there would be no Wall Street!
Let's start asking some relevant questions. May I suggest, "How do I, personally, model a life that isn't ruled by greed?"
Maybe one person found out:
"Austrian businessman Karl Rabeder is giving away his entire $4.5 million fortune, including a villa in the Alps, a farmhouse in Provence, planes, luxury cars and antiques. His plan is to give all the money to his microfinance charities in Latin America and live in a small wooden hut in the mountains.
“My idea is to have nothing left. Absolutely nothing,” he told The Daily Telegraph. “Money is counterproductive–it prevents happiness to come."
http://blogs.wsj.com/wealth/2010/02/09/millionaire-says-money-prevents-happiness/
And while I make no assumptions about anyone else, I know I have more than I need. And so, I too will begin on my road to a more austere and sane life.
Three additions to the comments I've seen here:
1) Increasing income tax on the rich is good but don't forget the corporations. I don't have the numbers but if you look at the percent of Federal revenue that came from corporate income tax as late as the '60's compared to today you will be astonished at the decline. Where do you think that money comes from now?
2) Someone remarked that greed is the MO of Wall Street, that it cannot be stopped. This is true, that's why you regulate. Regulation can curtail the worst abuses.
3) No one should have millions or billions as long as children die from the affects of poverty. The UN tells us that 30,000 children die each DAY from poverty. Think about that. Some die from the lack of a $.05 pill for dysentery.
NNW, At one time corporations in this country paid about 50% of all taxes! Guess what? They prospered, so did their employees and so did the country. Go figure.
FYI, up until the civil war the federal government paid it's bills by collecting tariffs. (Protecting our manufacturing base)
Up until the Civil War tariffs paid about 50% of the cost of govt. There was a time when tariffs shouldered the entire burden, but that time was long before 1865.
Convert a TeaBagger?
MISSION IMPOSSIBLE
End Capitalism?...
CAPITALISM IS OVER!
(it just wasn't televised))
>>>>>Belatedly, Obama and the Democrats seem to have decided that popular anger on the right and the left churned up by the financial industry may be a political wave they can ride.
Of course they think they can ride it out. The American people are like a swarm of gnats, only less dangerous, circling around the power players in DC. What do you do when a swarm of gnats start irritating you? You wave them aside and continue with your business. Sure they're a nuisance. But is anyone really surprised that the finance industry sees them as no threat?
not: "Too big to fail"
actually: "Too big to stop"
Bring on the revolution. Signed, formerly a Republican for thirty years.