Wall Street bonus season has begun again, with billions handed out in bonus pay as banks and investment firms report gigantic 2009 profits. These banks have received trillions of dollars in bailout money. Due to their monopolistic size and influence over several aspects of the U.S. and global economies they have been deemed “too big to fail”.
Only five investment banks, those most responsible for creating the housing market bubble through high-risk mortgages and selling derivatives, have survived the financial crisis, merging or buying one another up for pennies after the collapse. Instead of using bailout money to expand credit and restore the economy, these institutions moved quickly to protect themselves.
Then, to push back calls for new financial regulations, Wall Street spent $344 million on lobbying in the first three quarters of '09, giving to both Democrats and Republicans to keep all bases covered. (Center for Responsive Politics, opensecrets.org) To “retain competitive employees,” the kind who make profits through risky derivatives and the like, Wall Street banks and firms are paying out over $150 billion in bonuses. (MSNBC, 1/14/2010)
For the rest of us, help from the government has not been as forthcoming. While our taxes bought up Wall Street's bad debt, allowing it 40% higher profits over 2008, foreclosures rose by 21% in 2009, with 1 in 45 U.S. housing units receiving at least one foreclosure. The official unemployment rate also continued to rise in 2009, from 7.7% in January to 10% in December, with real unemployment nearer to 18%. Falling state revenues have caused massive budget crisis in many states, forcing cuts to education, health care, and other public programs.
The Obama administration has failed to provide any legislation to allow mortgage owners to renegotiate their loans, so that they might be able to find better payment plans and keep their homes. Over 10 million jobs have been lost in the past 2 years but there have been no real programs to create jobs on the scale that is needed. “Stimulus” funds have been limited and unsuccessful in even keeping up with current infrastructure needs, much less creating new permanent jobs. Instead, the government has decided to save big business, and hope that they decide to save us.
President Obama, aware of the public anger, is attempting to appear tough on the banks by recently calling on Congress to reclaim “every dime” of bailout money with a new tax on banks with over $50 billion in assets. In reality, this tax amounts to fees that will recover only $90 billion to $120 billion of the $700 billion given in TARP money, over 10 years, the rest being paid back as the banks see fit to do so themselves. Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion. (Wall Street Journal, 7/21/09)
The President promised that this tax would help return taxpayers’ money, but this assumes no future meltdowns of the financial system even as new unsustainable financial bubbles are inflating. But even if true, this means that banks will receive a decade-long, interest-free loan, while credit is still extremely limited for small businesses. All in all, the Obama administration has already promised Wall Street another bailout if they need it, so the president's strong words lack real substance.
So what is the real solution? These big banks have flagrantly profited off the public interest. They should be publicly owned and democratically controlled for the public interest. The public already owns the bad debt of these banks, purchased with bailout money, so why should the profits made remain in private control? Why should these banks be allowed to make risky bets with the economy, at our expense, for their gain?
Unfortunately, nationalizing Wall Street to the interest of working people isn't on the agenda of either big business party. The Democratic and Republican parties will only continue to protect the banks, and allow them to repeat the same mistakes that caused our economic crisis. Any nationalizations they put forward are only to temporarily stabilize them, before then returning them to private ownership and further speculative activity. Calling for halts on foreclosures, subsidized low-income housing, and homelessness relief are total taboos for the Democrats and Republicans.
What we need now are programs to create millions of living wage jobs. These could easily be funded by taxing the rich and corporate profits. But this is another position not supported by either big business party. Big business parties will only continue to let Wall Street control our economy for their interests.
Only an independent, anti-corporate party of working people can provide economic relief for those who actually need it. Such a party could demand creation of living wage jobs with union benefits through public works projects to end unemployment.
We need massive investment in green growth projects to provide jobs that at the same time protect our environment. These projects could create mass transit, rent-controlled community housing, renewable energy and other infrastructure needs. We need a freeze on home foreclosures. Fully funded community and social service programs, and fully funded education would begin to help those hit hardest by the recession regain stability.
We must demand federal funding for free higher education. We can’t shut out the next generation of workers from high education. Reverse the cuts now being planned at a state level. We need a single payer health care system to guarantee health care for all, while saving billions by eliminating for-profit insurance companies.
The needs of working people can be met, but the rich will do all they can to make sure their interests are met first. We need an economy run in the interests of the working class majority, not run in the interest of profit and distorted by the logic of capitalism. To achieve that, we must run independent candidates against the two parties of the rich and big business, and organize a party of and for working people.
