Just a few links to articles showing how fed up folks are getting with Wall Street.
- The NY Times with a column from a former corporate lawyer calling for a windfall profits tax on Goldman Sachs
- Salon telling Wall Street to “just shut up” and advocating limits to lobbying by financial firms
- A new regulatory manifesto by a fed up investment banker
- And just for fun, an attack on private equity’s quest for capital gains tax treatment
It’s starting to look like enough people are fed up that something might happen. Of course, the financial industry has already spent $350 million this year on lobbying, setting a record, and we know that politicians listen to money more than they listen to voters.
Not from me, but from Breakingviews.com, which as a specialized business newsletter has more credibility than I do. Their site is subscription only, but the NY Times reprinted the letter here. The basic gist: hey CEOs, instead of paying obscene bonuses, you should use your current profits to build strong balance sheets so the taxpayers don’t need to bail you out again.
If you have the time, I recommend reading this Rolling Stone article. It places Goldman Sachs at the center of every financial bubble since the Great Depression, and details how the firm has profited greatly from the travails of the average investor. I don’t necessarily agree with the author’s focus on Goldman. I think all the big investment banks have been doing this; Goldman just does it biggest and best. But I do think that the banks have been manipulating prices and selling securities that they knew were crap. And, as mentioned by John Talbott and Simon Johnson in my new favorite article, if there were just one criminal investigation that started to subpoena internal emails, we would see all kinds of nefarious behavior exposed. In fact, just yesterday the Commodity Futures Trading Commission came out with a study that blamed last year’s crazy oil prices on financial speculators, rather than on operating supply and demand.
In the wake of the financial meltdown there has been continued tension between Main Street and Wall Street; between the working class (and the politicians who represent them) and the financiers (and the lobbyists who represent them). Despite the commentary from populists such as me who have been railing against Wall Streeters continuing to pay themselves huge bonuses, some of this tension has been between legitimate positions of free markets versus genuine concern about greed and income inequality.
But now the financiers have gone too far. First was an article last week saying that some big banks are looking at participating in the government’s PPIP (Public Private Investment Program) in order to buy their own toxic assets. Wait…so they are going to borrow cheap money from US taxpayers, and then use it to buy their own assets, with US Treasury backstopping on their losses? That is appalling without even considering the obvious conflict of interest regarding what price the assets are sold for. You have got to be kidding me.
Then today’s NY Times reports about the extensive lobbying effort that the big NY banks have launched to limit regulation of derivatives. You remember derivatives – the financial “weapons of mass destruction” that were a huge cause of the meltdown? The big banks make a ton of money on derivatives, and they don’t want that gravy train derailed. And since when they lose money, the taxpayers bail them out, they are clearly in support of the status quo. So they formed a lobbying organization and hired a big-name lawyer to lead the charge, paying him over $400,000 for four months of work. Now they are lobbying Congress to water down any sort of regulation of derivatives.
For banks that received taxpayer bailouts to now be spending money lobbying to avoid regulation on the very products that caused them to require bailouts? No way. It is time for Congress, and for the Obama administration to say “Fuck you, Wall Street.” The big banks make billions in profit on unregulated derivatives? Too damn bad. So maybe some traders will only make $2 million per year instead of $10 million. Tough shit. The Treasury Department-Wall Street axis of greed has to stop, and it has to stop now. President Obama, it’s time you step up to the plate on this.
Added bonus links: 1) Paul Krugman on how Reagan-era decisions on deregulation set the stage for financial catastrophe; and 2) a hilarious piece on Harvard Business School students taking a pledge to serve “the greater good” instead of their “narrow ambitions.” The money paragraph is the last one, with a quote about principles from a woman who is taking a job at Goldman Sachs, one of the leaders of the lobbying effort excoriated above. Oh, HBSers, it’s such a shame that you don’t understand irony.