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To Create Jobs on Main Street, We Need to Kill Jobs on Wall Street
By Les Leopold
Author of "The Looting of America"
"Wall Street will remain a big, important part of our economy, just as it was in the '70s and the '80s. It just won't be half of our economy....We don't want every single college grad with mathematical aptitude to become a derivatives trader." -- President Obama, May 2, 2009.
It's time to face up to the essential feature of the Billionaire Bailout Society: It's not a shared society. We're not in it together. What's good for Wall Street is not good for the rest of us. They even get their swine flu shots before we do.
The disconnect couldn't be greater. Goldman Sachs, JP Morgan Chase, Morgan Stanley and others are poised to have record years during the worst economic turmoil since the Great Depression. They get record bonuses while unemployment continues to climb. As of October the narrow, most publicized rate is 10.2 percent. The broader BLS jobless rate (U6) is 17.5 percent. More than 30 million Americans who want full-time work are without jobs or forced into part-time jobs. (See report by Leo Hindery )
The riches on Wall Street are the direct result of bailout funds and the entire financial sector is still totally dependent on government welfare. It's not just TARP. We are guaranteeing all kinds of toxic assets. We are providing low cost liquidity. We are underwriting failed markets.
We have a right to ask the most basic questions about Wall Street's worth: Just what value do those giant financial institutions produce for our people? How are they contributing to reinvestment into our core economy? How are they helping our people find employment?
They aren't. What they do is make money at our expense.
Since the onslaught of deregulation more than three decades ago, high finance has prospered by killing many more jobs than they have created. They financed the leverage buyout boom that ruined solid companies. (See See New York Times ) They financed the shift of jobs abroad that hollowed out our manufacturing economy. And through it all, they were creating the fantasy finance boom and bust that nearly sent us back to the Great Depression.
Oh the profits are handsome. During the three years before the crash, the top firms on Wall Street raked in $300 billion in profits of which about half went to bonuses. Then in a matter of months those profits turned to losses. They were phony profits based on sales of phony financial instruments that turned toxic. (See The Looting of America ) But you can be dead certain that the Wall Street players who walked off with the $150 billion in bonuses based on phony profits did not pay back one penny of it. We did with a $14 trillion bailout. Talk about a leveraged buyout! (See excellent accounting by Nomi Prins )
Even when the economy was drunk on bubbles, it was splitting into two. Billionaires became richer while the average production worker's wage after inflation dropped 18 percent since 1975, And since 1979, we've lost about 8 million manufacturing jobs. The bigger Wall Street grew, the weaker the core of our economy.
President Obama actually had it right when he said that Wall Street needed to shrink. The sooner the better. We need to move resources from the casino towards the creation of useful, sustainable jobs making the things and services we really need - alternative energy, energy conservation, medical advances (with an emphasis on affordable care), improved and expanded education, and so on.
There are so many ways to move in this direction yet we're doing none of them -- a Tobin Tax on financial transactions, a President's which cap which would limit Wall Street compensation to no more than that of the President of the U.S. until unemployment declines to below 5 percent, a windfall profits taxes on all financial firms now living high on the hog on government welfare, the prohibition of exotic derivatives, and the busting up of institutions that are too big too fail.
Regulatory reforms that leave Wall Street intact won't work. Bank lobbyists (using our money) will weaken them. Lawyers and financial engineers will maneuver around them. The Billionaire Bailout Society will become entrenched even further.
Because the government refuses to get the job done, the public is turning on the government. The joke is on all of us: If Republicans make a comeback they will unleash Wall Street yet again, setting us up for the next crash and bailout cycle.
Instead, we should be milking Wall Street to finance massive job creating investments in energy, health care and education. A massive Manhattan Project for alternative energy and a WPA for weatherizing all homes and businesses would be a good start. All it takes is truly caring about the common good. If we really want to create sustainable jobs instead of new fantasy finance games, we need the cut Wall Street down to size, now and into the future.
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