Wall Street is its own worst enemy -Robert Reich
Yet capitalism depends on trust. Without trust, people avoid even sensible economic risks. They also begin trading in gray markets and black markets. They think that if the big guys cheat in big ways, they might as well begin cheating in small ways. And they’re easy prey for political demagogues with fast tongues and vacuous solutions.
Tally up these costs and it’s a whopper.
Wall Street has blanketed America in a miasma of cynicism. Most Americans assume the reason the Street got its taxpayer-funded bailout without strings in the first place was because of its political clout. That must be why the banks didn’t have to renegotiate the mortgages of Americans - who, because of the economic collapse brought on by the Street’s excesses, are still under water and many are drowning.
That must be why taxpayers didn’t get equity stakes in the banks we bailed out - as Warren Buffet got when he bailed out Goldman Sachs. So when the banks became profitable gain we didn’t get any of the upside gains; we just padded the Street’s downside risks.
That must be why most top Wall Street executives who were bailed out by taxpayers still have their jobs, have still avoided prosecution, are still making vast fortunes - while tens of millions of average Americans continue to lose their jobs, their wages, their medical coverage, or their homes.
The cost of such cynicism has leeched deep into America, causing so much suspicion and anger that our politics has become a cauldron of rage. It’s found expression in Tea Partiers and Occupiers, and millions of others who think the people in charge have sold us out.
Every week, it seems, we learn something new about how Wall Street has screwed us. Last week we heard from Bloomberg News (that had to go to court for the information) that in 2009 the Street’s six largest banks borrowed almost half a trillion dollars from the Fed at nearly zero cost - but never disclosed it.
In early 2009, after Citigroup tapped the Fed for almost $100 billion, the bank’s CEO, Vikram Pandit, had the temerity to call Citi’s first quarter the best since 2007. Is there another word for fraud?
Finally, everyone knows the biggest banks are too big to fail — and yet, despite this, Congress won’t put a cap on the size of the banks. The assets of the four biggest - J.P. Morgan Chase, Bank of America, Citigroup, and Wells Fargo - now equal 62 percent of total commercial bank assets. That’s up from 54 percent five years ago. Throw in Goldman Sachs and Morgan Stanley, and these six leviathans preside over the American economy like Roman emperors.